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interview with union minister of civil aviation p 10

NCAP: TRANSFORMING INDIAN AVIATION p 13

regional connectivity: UDAN LAUNCHED p 16

AIRBUZ

December 2016-January 2017

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A n E x c l u s i v e M a g a z i n e o n C i v i l Av i at i o n f r o m I n D I A

RNI NUMBER: DELENG/2008/24198

2016 highlights

Architects of Growth! Indian Civil Aviation Minister P. Ashok Gajapathi Raju along with Jayant Sinha, Minister of State, R.N. Choubey, Secretary, and the entire team at the Ministry of Civil Aviation ensured that 2016 goes down as a landmark year in the history of civil aviation in India. An SP Guide Publication

RELENTLESS JOURNEY OF EXCELLENCE SINCE 1964

table of contents

2016 / aviation roundup

From negative growth rate in 2012 to making India, the land of consistent 20 per cent growth, NDA Government is truly transforming India

Cover: The entire team at the Ministry of Civil Aviation ensured that 2016 goes down as a landmark year in the history of civil aviation in India. Cover Image: PIB

INTERVIEW WITH UNION MINISTER OF CIVIL AVIATION P 10

NCAP: TRANSFORMING INDIAN AVIATION P 13

REGIONAL CONNECTIVITY: UDAN LAUNCHED P 16

AIRBUZ

DECEMBER 2016-JANUARY 2017

`100.00 (INDIA-BASED BUYER ONLY) VOLUME 9 • ISSUE 6 WWW.SPSAIRBUZ.COM

A N E X C L U S I V E M A G A Z I N E O N C I V I L AV I AT I O N F R O M I N D I A

2016 HIGHLIGHTS

RNI NUMBER: DELENG/2008/24198

P7 FROM NEGATIVE TO POSITIVE GROWTH, AVIATION SOARS

ARCHITECTS OF GROWTH! Indian Civil Aviation Minister P. Ashok Gajapathi Raju along with Jayant Sinha, Minister of State, R.N. Choubey, Secretary and the entire team at the Ministry of Civil Aviation ensured that 2016 goes down as a landmark year in the history of civil aviation in India. AN SP GUIDE PUBLICATION

SP's AirBuz Cover 06-2016.indd 1

31/12/16 1:43 PM

exclusive 2016 / Civil aviation minister P10 NEW POLICY AWAITING CABINET NOD

Jayant Baranwal, Editor-in-Chief of SP’s AirBuz in an exclusive rendezvous with the Union Minister of Civil Aviation, P. Ashok Gajapathi Raju, during the second half of January this year.

2016 / NCAP P13 TRANSFORMING INDIAN AVIATION

“Civil Aviation Policy gives an impetus to affordability, regional connectivity, safety, infrastructure—all vital for transforming India”. — Prime Minister Narendra Modi

P19 2016 / regional connectivity The other dimension of regional connectivity in India P21 2016 / RCS udan very positive for growth P22 2016 / airsewa airsewa app and portal launched exclusive P24 2016 / irish minister ireland & india P26 2016 / engines IN PURSUIT OF PERFECT POWER P29 2016 / aviation services Ground Handling & MRO – Key Aspects

2016 / RCs P16 ‘udan’ launched

The primary objective of RCS is to facilitate/stimulate regional air connectivity by making it affordable.

exclusive interview / embraer P3 John Slattery, President & CEO of Embraer Commercial

departments P2 A word from Editor P4 NEWS BRIEFS P32 FInally SP’S AIRBUZ • ISSUE 6 • 2016 • 1

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s we bid adieu to the year 2016 and stand at the cusp of 2017, it is time to look back at the arduous but rewarding journey of the Indian civil aviation industry during the last 12 months, a period that has seen profound change, consolidation and transition. The Indian civil aviation industry has been on a reasonably high growth trajectory during the year gone by and assessment by professional agencies are that India has the potential to become the third-largest aviation market in the world by 2020 and even the largest by 2030. While these projections may appear somewhat overpitched and unrealistic to a conservative audience, the Indian civil aviation industry is optimistic about its future prospects and continues to relentlessly forge ahead. What is reassuring for all stakeholders in the industry is that they have the required support from the Narendra Modi-led government at the Centre. Besides, the government has taken a number of steps during the year such as permitting foreign direct investment up to 100 per cent by non-airline entities into the Indian airline industry and promulgation of the new integrated National Civil Aviation Policy that is structured to address a wide range of issues related to the Indian civil aviation industry. The major thrust of the National Civil Aviation Policy is to provide the much needed impetus to boost regional aviation. This will necessitate large-scale development of aviation infrastructure especially in remote areas not currently linked by aerial connectivity. The government has plans to build a number of new airports over the next three years out of which at least ten would be operational by 2017. Also, the Airports Authority of India has plans to revive and operationalise around 50 airports across the country over the next ten years to improve regional and remote air connectivity. In the budget for the financial year 2016-17, the government introduced various proposals for maintenance, repair and overhaul (MRO) including exemption of customs and excise duty on tool kits used in MRO services. The government has also done away with the rule laying down a limit of one year for utilisation of duty-free parts apart from allowing import of unserviceable parts by MROs for exchange. As per revised norms, foreign aircraft brought into India for availing MRO services would now be permitted to stay in the country for a period up to six months or as extended by aviation regulator Directorate General of Civil Aviation (DGCA). Such foreign aircraft henceforth would also be permitted to carry passengers in the flights at the beginning and end of its period of stay in India. For the Indian civil aviation industry to prosper and grow at the rate projected, it would be necessary for all the stakeholders of the industry to maintain constant interaction and dialogue with the agencies of the government responsible for policy formulation and implementation. For the nation to rise to the top echelons of the global aviation market, it will be necessary to formulate the right and progressive policies, maintain stringent quality standards and elevate interests of customers to the highest priority. This issue of SP’s AirBuz has a collation of articles published in the previous issues in 2016 focusing on the major aspects of the Indian civil aviation industry. Welcome aboard and we look forward to a rewarding year ahead! We wish all our readers a Very Happy New Year!!

A pp l i e d f o r 2 • SP’S AIRBUZ • ISSUE 6 • 2016

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B.K. Pandey Editor

Exclusive Interview

embraer

exclusive

PHOTOGRAPH: Embraer

Embraer achieved 1,000 E-Jets delivery in less than 10 years post its entry into service. The company recently reached another milestone in its E-Jets programme, delivering the 1,300th aircraft from its stables, an E195, to China’s Tianjin Airlines. Today, the E-Jets fleet has accumulated more than 19 million flight hours, redefining the traditional concept of regional aircraft by operating across a range of business applications. SP’s AirBuz Editor-in-Chief Jayant Baranwal speaks to John Slattery, President & CEO of Embraer Commercial on this occasion.

Jayant Baranwal (JB): How do you perceive this milestone? John Slattery (Slattery): We dedicate this milestone to all our operator and lessor partners who embrace the E-Jets philosophy. Without each of them, we would never have achieved such success with the programme. The milestone of the 1,300th delivery is a testament to how rightsizing makes sense. The E-Jets E2; the second generation of the E-Jet programme, takes us to the next chapter in this compelling story, offering unrivalled economics with an already global and highly successful franchise, ensuring a winning combination for both airline and passenger.

ment, production, commercialisation and support of civil aircraft to airlines around the world, Embraer is uniquely positioned in terms of experience to provide airlines the confidence they need for acquiring efficient products and services. Support and services is also a cornerstone of our investment philosophy. We support more than 2,000 commercial aircraft via a worldwide network of owned and authorised service centres, including a 24-hour customer care facility in Brazil. I’m expecting that these investments and product innovations will keep us one step ahead well into the next decade.

Relevance of this 1,300th E-Jet milestone for India: We have seen multiple ‘success stories’ across the globe, demonstrating how airlines have used E-Jets to profitably stimulate traffic in secondary and tertiary cities. Tianjin Airlines operates their fleet of E190s to develop routes to and from cities like Tianjin, Xi’an, Urumqi (west China) and Hohhot (northern China). Similarly, we believe the E-Jets will have a central role to play in supporting India in achieving its regional connectivity goals, and this should include building on the existing air links at existing airports where new routes can be developed or route frequencies can be increased. It’s a fleetsmart solution for airlines. We believe this opportunity is real and that introducing the E-jets into the Indian airspace now will drive profitable growth of the industry and the economy in India. Based on Embraer’s studies, two-thirds of underserved markets within India are too thin in passenger demand for traditional narrow-body (B737 or A320) aircraft operations and more than 80 per cent of these markets have stage lengths too long for viable turboprop operations. It is forecast that by 2020, there will be more than 120 underserved markets with an average stage length of more than 1,000 km. These markets are more optimally served by 80- to 130-seat jets offering the ideal capacity size to match thin passenger demand and with the adequate range capabilities. Being the world’s leading 70- to 130-seat aircraft family, we aspire to having the E-Jet being the aircraft of choice in these regional markets.

JB: Can you comment on some of the past milestones? Slattery: When we launched the clean sheet E-Jet design just over 10 years ago it was to create an all new market segment. From the first deliveries, in March of 2004, to LOT Polish Airlines and US Airways, the programme grew steadily until achieved this 1,300 produced E-Jet right today. Even with one of the biggest economic crises in the world, Embraer achieved 1,000 E-Jets delivery in less than 10 years post its entry into service. Today, the E-Jets fleet has accumulated more than 19 million flight hours, redefining the traditional concept of regional aircraft by operating across a range of business applications.

JB: How do you position Embraer in the changing world today? Slattery: With almost 50 years’ experience in design, develop-

JB: If you can elaborate on the transformation process, i.e. ERJ to E-Jet journey, for example? Slattery: The introduction of the ERJ family, in 1996, represented the beginning of the commercial jets era for Embraer. However, the ERJs were more concentrated in the US and Western Europe. The E-Jets programme was a bold decision that represented a technological leap for Embraer in terms of design, aircraft size and avionics. Also, with the E-Jets, Embraer expanded its customer base worldwide, reaching airlines everywhere, from Mexico to Australia, including regions like Eastern and Central Europe and Africa, apart from the US and Western Europe. In fact, today, EJets are being operated by 70 airlines in 50 countries. This customer base gives the E-Jets E2 a strong tailwind of momentum given the established global footprint. We’re expecting to capture new operators in the coming years given the substantial operational cost savings the E2s will bring compared to some larger currentproduction jets as airlines rightsize to improve their yields. Again, it is now proven; the E-jets are a fleetsmart solution! SP SP’S AIRBUZ • Issue 6 • 2016 • 3

quently, what elevated the business jet from a luxury toy to what is increasingly seen as a vital corporate tool? In the US, hundreds of Fortune 500 companies now flaunt their own aircraft, with companies arguing that this vital conveyance saves time and boosts productivity. A recent CNN report quoted

NewsBriefs

( AIRLINE NEWS Additional Budgetary Support for Air India

neither am I going to commit the taxpayers’ money for eternity.” He said the Centre was willing to help the airline “pull up its socks as they have done India proud on several occasions”. The airline needs to survive and a strategy to that end will be put in place.

Corporate Excellence 2016 Award for IndiGo

In the current financial year i.e. 2016-17, the national carrier Air India will get only `80 crore as additional budgetary support from the government. This is much less than the airline’s demand of `2,200 crore. Air India is on a bailout package of `30,000 crore sanctioned earlier by the government of which the airline has received `23,993 crore in equity including `1,713 crore investment so far. The allocation this year has been curtailed despite the fact that Ashwani Lohani, Chairman and Managing Director of Air India, had written to the government that on account of the airline’s huge debt burden, reduced funding by the government might derail the turnaround process of the airline and put its expansion plan in jeopardy. The national carrier has a debt burden of `46,000 crore and has annual interest liability of around `4,000 crore. The challenge before the airline is reducing the debt burden. High interest and maintenance expenses have resulted in the airline posting a net loss of `3,837 crore in FY16.

Centre Considering Recasting Air India’s Debt

The Ministry of Civil Aviation is exploring ways and means of restructuring the debt of the national carrier Air India. The government is willing to talk to those who are interested in picking up a stake in the airline. Air India has been posting losses for years now and its debt burden now stands at `46,000 crore. “There is an idea circulating that Air India will do better if its debt is restructured,” Union Civil Aviation Minister P. Ashok Gajapathi Raju told the media. However, he also stressed the need to evolve a consensus on the matter within his own Ministry. “Once you convince yourself, it is easier to convince the others.” The Minster made it clear that Air India cannot expect support from the government all the time. “I am not someone who will indulge in ‘Air India-bashing’, but 4 • SP’S AIRBUZ • ISSUE 6 • 2016

At the ET Awards for Corporate Excellence held in Mumbai recently, the country’s youngest, largest and growing low-cost carrier, IndiGo Airlines, was conferred the prestigious award in the category of “The Emerging Company of the Year 2016”. The jury at the ET awards described IndiGo’s growth trajectory in the words: “When you lead the industry to greater heights and do it when you are just ten years old, it is more than success. It is corporate excellence”. Bestowing this honour on IndiGo, the jury said, “Even though InterGlobe Aviation is a young company, it has set new standards for on-time service and quality in the industry. No wonder it flies more than four million passengers every month and alone handles more than half of the total bookings amongst all Indian operators. Its market capitalisation dwarfs the nearest competitors many times over and it has become one of the five largest low-cost carriers in the world. This is what makes InterGlobe Aviation our emerging company of the year.”

Registrations under UDAN

For providing air connectivity to unserved and underserved airports as well as to make air travel more affordable to the masses, ‘Ude Desh ka Aam Naagrik’ (UDAN) was launched recently. With the domestic aviation sector on the upswing, the government today said the regional connectivity scheme has got off to a very strong start and the bidding under UDAN has already seen as many as 20 registrations from air operator permit holders by mid-November, Civil Aviation Secretary R.N. Choubey said. Besides, the government is working on ways to increase capacity at airports to cater to rising demand as the domestic aviation sector has been growing at over 20 per

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cent for the past many months. Under the scheme, fares would be capped at `2,500 for one-hour flights while various incentives would also be provided to the airline operators. Regional air connectivity, ensuring air travel is comfortable and convenient and expanding capacity of airports are the priorities, he added. Domestic aviation sector is expected to see more than 20 per cent growth in the next three years which also poses challenges, Choubey said. “We have to be ahead of the growth curve,” he added. According to him, the 23 per cent growth seen in the domestic aviation sector, which is also highest in the world, is “not a flash in the pan”. Minister of State for Civil Aviation Jayant Sinha said that UDAN was “off to a very strong start”.

Kingfisher Airlines Limited to be Wound Up

In yet another jolt to beleaguered liquor baron Vijay Mallya, the Karnataka High Court has ordered winding up of his nowdefunct Kingfisher Airlines (KFA) Limited for non-payment of dues to a UK-based firm. Pronouncing the judgement, Justice V. Kothari observed that since KFA did not pay up dues to Aerotron, the court was ordering winding up of the airline company. “Admittedly the said amount has not been paid within the time provided in the agreement between the contending parties or even thereafter. Thus, satisfied that KFA was unable to pay its debts, the court orders the winding up of the airline company,” Justice Kothari said. As much as `35 crore was due to be paid by KFA to Aerotron, for which an agreement was entered into between the two companies on February 24, 2012, whereby KFA had acknowledged its liability to pay the outstanding amounts in installments spread over several months between March and October 2012.

( AIRLINE FINANCE Airlines Likely to be Profitable in 2017: IATA

As per assessment made by the International Air Transport Association (IATA), commercial airlines are projected to collectively generate a record net profit of $35.6 billion in 2017. Forecast made earlier in June 2016 of a profit of $39.4 billion has been revised downward attributing the reduction to slower growth in global gross domestic product and rising operational costs.

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NewsBriefs

Events Calendar MRO Latin America

25–26 January, 2017 Cancun, Mexico http://mrolatinamerica.aviationweek.com

MRO Middle East

8–9 February, 2017 Dubai World Trade Centre, Dubai, UAE http://mromiddleeast.aviationweek.com

Aero India 2017

14–18 February, 2017 Air Force Station Yelahanka, Bengaluru www.aeroindia.in

HAI HELI-EXPO 2017

6–9 March, 2017 Kay Bailey Hutchison Convention Center, Dallas, Texas, USA http://heliexpo.rotor.org

However, even if the $35.6 billion profit is achieved, it would be the highest absolute profit ever generated by the global airline industry. According to IATA, higher oil prices will have the biggest impact in 2017. In 2016 oil prices averaged $44.60 per barrel and this is forecast to increase to $55 per barrel in 2017. This will push average jet fuel prices from $52.10 in 2016 to $64.90 per barrel next year. Fuel is expected to account for 18.7 per cent of the industry’s cost structure in 2017, which is significantly below the recent peak of 33.2 per cent in 2012-13. The strongest financial performance is being delivered by airlines in North America. Net post-tax profits will be the highest at $18.1 billion in 2017 although down slightly from the $20.3 billion expected in 2016. European airlines are projected to generate a net profit of $5.6 billion in 2017, a drop from the $7.5 billion in 2016 and Asia-Pacific carriers are expected to generate $6.3 billion next year, a drop from the $7.3 billion figure in 2016. In 2017, IATA is also projecting airlines to take delivery of 1,700 new aircraft.

Levy on Key Routes Will Jack Up Airfare The government’s decision to levy up to `8,500 per flight on major routes to fill the viability gap for strengthening regional connectivity would result in increased fare on the busiest routes like Delhi-Mumbai, DelhiBengaluru, Bengaluru-Mumbai, etc. This would amount to subsidisation by those flying on trunk routes who would pay more

for the benefit of passengers on short hauls. This would be done through a Regional Connectivity Fund (RCF) of `500 crore of which `400 crore has to be contributed by the levy on the long haul flights and the rest by the state governments. As per the details shared by Civil Aviation Secretary, RCF would have contributions from the airlines, (read passengers) and the states where the regional connectivity would be implemented. The viability gap which is being bridged by RCF should eventually be giving way to efficient business models. As such cross subsidy cannot be sustained over long period of time even though it is being used as a take-off tool for UDAN under which the fares of half of the seats operated in a specific flight would be capped at `2,500 for one hour flying time. The airlines must also match and mix their flying routes and the aircraft fleet in a manner that should make for a smart business model. It cannot be assumed as if flying to the north-eastern states would be a losing proposition for all times to come. Likewise, there is no guarantee that the Delhi-Mumbai route would always remain lucrative not to necessitate alternative revenue sources. Different aviation stakeholders including the regulators must consider ways to make the sector grow in a sustainable manner.

( INDUSTRY NEWS Increase in Domestic Air Traffic

The domestic aviation sector continues to be on a growth trajectory with latest figures showing a growth of 23.10 per cent in air traffic till November 2016 compared with the same period last year. Low-cost carrier SpiceJet continued to lead in the regime of seat occupancy while IndiGo garnered 42.1 per cent market share. IndiGo, the market leader for years, has crossed the 40 per cent mark for the third consecutive month while SpiceJet has topped the list of seat occupancy for the past 19 months. According to statistics released by the Directorate

General of Civil Aviation (DGCA), domestic carriers flew 903.36 lakh people in the first 11 months of 2016 compared with 733.82 lakh during the corresponding period in 2015. November alone witnessed a 22.45 per cent rise in the number of fliers, 89.66 lakh against 73.22 lakh in the same month last year. This is the 28th consecutive month that the domestic traffic has registered a double-digit growth. All the airlines recorded a marginal decrease in seat occupancy. SpiceJet was the leader in this area with 92.5 per cent against 91.9 per cent in October 2016.

Plans for Jet Airways Hub at Bengaluru

India’s largest private full-service carrier Jet Airways has revealed its intention to make Bengaluru its third hub in the country, after Mumbai and Delhi, in a bid to make the most of the burgeoning opportunities here. While the airline has not yet announced the exact timeline for this plan, it has reposed more faith in the Bengaluru airline market. “Bengaluru’s rise as a prominent global investment destination, apart from its large young working population, has resulted in significant growth in aviation traffic, both inbound and outbound, domestic and international. Today, the city houses India’s third busiest airport, which hopefully, will rise to at least the second position in future,” Jet Airways Vice President, Commercial, India Sales, Praveen Iyer said that with this view, the airline intends to make its presence felt here and to turn it into a hub sometime in the months to come. Airline hubs or hub airports are used by an airline to concentrate passenger traffic and flight operations at that given airport, which in turn, serves as transfer or stop-over points to get passengers to their final destination. “The ratio of traffic to population in Bengaluru stands at a robust 1.6. Bengaluru has a population of 12 million, recording annual air traffic of 19 million and this is continuously growing,” he said. The Bengaluru market, which is growing at 30 per cent year-on-year, has the ability to take on more departures, considering that the other metros are largely SP’S AIRBUZ • ISSUE 6 • 2016 • 5

NewsBriefs

appointments BOEING

In November 2016, Boeing Chairman, President and CEO Dennis Muilenburg announced the following appointments: l Kevin G. McAllister as President and CEO of Boeing Commercial Airplanes, succeeding company Vice Chairman Ray Conner in that role. l Stanley A. Deal as President and CEO of Boeing Global Services, a new business unit to be formed from the customer services groups within the company’s existing commercial airplanes and defence, space and security business units. l Ray Conner, 61, to continue to serve as Boeing Vice Chairman through 2017.

saturated. Also, it provides a gateway to regional points, apart from links to metros and Tier-II cities.

Airliners from Boeing for Iran Air

Boeing and Iran Air have signed an agreement for 80 airliners that includes 50 737 MAX 8s, 15 777-300ERs and 15 777-9s, valued at $16.6 billion at list prices. Based on its memorandum of agreement (MOA) with Iran Air announced in June, the contract was reached within the terms of the US Government licence issued to Boeing in September. Boeing coordinated closely with the US Government throughout the process leading up to the sale and continues to follow all licence requirements as it moves forward to implement the sales agreement. The agreement will support tens of thousands of US jobs directly associated with production and delivery of the 777-300ERs and nearly 1,00,000 jobs in the US aerospace value stream for the full course of deliveries. The first airplanes under this agreement are scheduled for delivery in 2018. The 737 MAX incorporates the latest technology CFM International LEAP-1B engines, Advanced Technology winglets and other improvements to deliver the highest 6 • SP’S AIRBUZ • ISSUE 6 • 2016

DASSAULT AVIATION

Dassault Aviation has appointed Damien Farret, Director Customer Relations and Field Service.

DASSAULT FALCON JET

Dassault Falcon Jet recently promoted Rodrigo Pesoa to the position of Vice President of Sales for Latin America.

RAFAEL ADVANCED DEFENSE SYSTEMS LTD In December 2016, Rafael Advanced Defense Systems Ltd announced the appointment of Brigadier General (Res) Pini Yungman, to the position of Executive Vice President and Head of the company’s Air Superiority Systems Division. The appointment will take effect in the summer of 2017.

efficiency, reliability and passenger comfort in the single-aisle market. The 737 MAX will be 14 per cent more fuel-efficient than today’s most efficient Next-Generation 737s. The first 737 MAX is scheduled to enter service in 2017. The 777-300ER is the most fuel and cost-efficient airplane in its class as well as the most reliable twin-aisle aircraft in the world. It also has the highest cargo capacity of any passenger airplane. To date customers worldwide have ordered more than 800 777-300ERs. The 777X builds on the passenger-preferred and market-leading 777, as well as offering more market coverage and revenue capability than the competitors. The 777X will include new engines, an all-new composite wing and will leverage technologies from the 787 Dreamliner. The first 777X is scheduled to enter service in 2020.

( GENERAL AVIATION Maiden Flight by Robot Flying Ambulance

An autonomous flying ambulance has successfully completed its maiden flight, offering a potential solution for challenging search and rescue missions. Completing such missions in rough terrain or combat zones can be tricky, with helicopters currently offering the best transportation option in most cases. However, these vehicles need clear areas to land and in the case of war zones, helicopters tend to attract enemy fire. Now an Israeli company has completed the test flight for an automated flying vehicle, dubbed the Cormo-

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rant that could one day go where helicopters cannot. The vehicle is designed to eventually carry personnel or equipment without a pilot onboard. In place of propellers or rotors to fly, the Cormorant uses ducted fans that are effectively shielded rotors, which means the aircraft does not need to worry about hitting a wall and damaging the rotors. Another set of fans propels the vehicle forward. The vehicle is effectively a decision-making system that can figure out what to do if there is a problem in the inputs from the sensors, the company, Urban Aeronautics, said. If the Cormorant detects a potential issue, the drone’s robotic brain can decide whether to return to base, land and wait for further instructions or try a different flight path.

( INFRASTRUCTURE Plan to Double Airports

As per the Minister of State for Civil Aviation, Jayant Sinha, the government plans to double the number of airports in India over the next two to three years in a bid to serve the largely untapped domestic aviation market which has seen an increase in passenger traffic. “Our party in its 2014 election manifesto announced the UDAN scheme, under which we have to expand the number of airports. The fact is we have 75 airports with scheduled services. We want to double that number in the next two to three years,” he said. The government on July 1, 2016, had unveiled a draft UDAN scheme to make flying affordable for citizens. The Minister said the government would raise `400 crore to run the UDAN air connectivity scheme. The government was asking airlines to bid for these routes that provide connectivity to other major airports. Airlines that bid with the lowest rates would be awarded the route, he said. The scheme was aimed at developing regional routes that are “underdeveloped” with increased profitability, he said. “When bids are finally given out in January 2017, we will create an entirely new regional market,” he said. Stating that 14 crore people take flights, compared with 13 crore people who use airconditioned rail coaches every year, he said that air passenger growth in India averaged around 10-11 per cent over the last decade. On expansion of airports, he said that most airports across India face “capacity challenges”. “We are working towards Chennai to be a global airport. Along with Chennai, we are looking at Bengaluru and Kolkata. SP

2016

aviation roundup

FROM NEGATIVE TO POSITIVE GROWTH, AVIATION SOARS From negative growth rate in 2012 to making India, the land of consistent 20 per cent growth, NDA Government is truly transforming India

PHOTOGRAPHs: karthik Kumar / SP Guide Pubns

by R. Chandrakanth

SP’S AIRBUZ • Issue 6 • 2016 • 7

2016

Aviation roundup

016 will be a milestone year in the history of Indian civil aviation. It is in 2016, the NDA (National Democratic Alliance) Government took decisive and forward-looking steps that are expected to change the course of civil aviation, with civil aviation becoming a critical input in the nation’s economic progress. The National Civil Aviation Policy (NCAP) and the Regional Connectivity Scheme (RCS) are going to be the cornerstones of this civil aviation momentum which will catapult India into third place, after China and US, in terms of civil aviation market. That is a steep ascent, thanks to the leadership role of the Prime Minister Narendra Modi and some of his cabinet colleagues, including the Minister of Civil Aviation P. Ashok Gajapathi Raju.

Prime Minister aviation tweets prop up sector. The Prime Minister, not just in a series of tweets but on many occasions underscored the importance of civil aviation. He has tweeted “A new aviation policy has been released under this Government. It looks at growth of the aviation sector.” “Connectivity is becoming very important in this century. Air connectivity is vital from the point of view of tourism sector growth.” “Better air connectivity means more tourists and this means better economic growth.” The NCAP and RCS, along with a proactive government, is going to radically transform the sector which at present is the ninth-largest civil aviation market with a market size of around $16 billion. The growth numbers are all there. We look at three broad parameters of growth in 2016 — airline; airports and general/ business aviation. Airlines in expansion mode. As per the Directorate General of Civil Aviation (DGCA), there are 16 scheduled operators (including airline subsidiaries and freighters) having 472 aircraft. A new regional commuter airline — Zoom Air — was expected to take flight in November, but is yet to get its air operator certificate. It is hoped that it will take off in January 2017, in a way, indicating that airlines in India are going to zoom into a expansion mode, considering the highly encouraging passenger and freight numbers. 100 million passengers soon. The passenger traffic growth has been phenomenal. The data provided by DGCA shows a continuous upward movement. From January to November 2015, the total passenger traffic was 733.82 lakhs which this year has climbed to 903.36 lakhs, registering a 23.10 per cent growth. Low-cost carrier, SpiceJet had the highest passenger load factor in November 2016 at 92.5 per cent, followed by IndiGo (88 per cent) and GoAir (87.3 per cent). The foreign tourist arrivals from January to November 2016 were 78.53 lakhs with a growth of 10.4 per cent as compared to 71.14 lakhs the previous year for the same period. The reasons attributed to this growth have been low fares, fuelled by drop in aviation turbine fuel; improved connectivity; new destinations and a surge in first-time air travellers. Indian domestic air traffic is expected to cross 100 million passengers in 2017, compared to 81 million passengers in 2015. With such encouraging trends, airlines have already set themselves in an expansion mode. The national carrier Air India is embarking on ‘great expansion plans’, according to its Chairman and Managing Director Ashwani Lohani. In 2017 it has planned to add six new international destinations. Air India which turned 8 • SP’S AIRBUZ • Issue 6 • 2016

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operationally profitable in the last financial year, is working on ways to revive its fortunes. It is ramping up the fleet with more fuel-efficient A320neo (new engine options) planes. Presently, Air India has a fleet of 135 aircraft, including nearly 70 from Airbus. Jet Airways (India) Ltd had indicated in 2015 that it would be buying 75 fuel-efficient Boeing 737 MAX aircraft at a list price of $8 billion. The delivery of the planes is expected from mid-2018. “Incorporating the latest design and technology features, the highly efficient 737 MAX will allow us to drive our operational efficiency and reaffirms our commitment to providing a best-in-class full-service travel experience to our guests,” said Naresh Goyal, founder-Chairman of Jet Airways. “This order is an endorsement of our confidence in the long-term prospects of the Indian aviation sector, which reflects the positive forecast for the country’s economy and offers tremendous potential for growth and development.” The Jet Airways group currently operates a fleet of 116 aircraft comprising Boeing 777-300ERs, Airbus A330-200/300, Next Generation Boeing 737s and ATR 72-500/600s. In Q2 FY17, the airline carried 6.77 million passengers up from 6.37 million in Q2 FY16. The group had a profitable quarter with a profit of `85 crore for the period ending September 30, 2016, despite a traditionally ‘lean’ quarter and domestic yields being under pressure. The Tata-Singapore Airlines venture, Vistara, has proposed to invest `250 crore in the airline, signalling a major expansion plan. At present, it operates 11 Airbus A320 aircraft and has a market share of 2.4 per cent. The airline will increase its fleet to 13 next month and according to its initial plans, it will have 20 aircraft by June 2018. Low-cost carriers continue to rule. The lowcost carrier which is almost getting everything right is IndiGo. Having found success in narrow-body aircraft, the airline is now opting for bigger aircraft in the single-aisle segment as it steps up overseas expansion plans. It recently tweaked its aircraft order of converting 20 Airbus A320neo planes to A321neos, the latter will have additional seating capacity of 230, up from 180. IndiGo has a total of 422 planes on order, a whopping number that has surprised the aviation world. IndiGo has a record of eight consecutive years of profitable operations. As of November 2016, its market share was 42.1 per cent. It has a fleet of 125 aircraft including 13 new generation A320s. Airbus has confirmed that it will deliver 24 fuel-efficient A320neo aircraft by March 2017. Similarly, all the other airlines are in an expansion mode. SpiceJet had disclosed plans in November last to buy over 150 planes. It recently added three Bombardier Q400 aircraft to expand regional services in the North East. The airline has 14 Q400 aircraft in ser-

The National Civil Aviation Policy and the Regional Connectivity Scheme are going to be the cornerstones of this civil aviation momentum which will catapult India into third place, after China and US, in terms of civil aviation market

2016

Aviation roundup

RELENTLESS JOURNEY OF EXCELLENCE SINCE 1964 Freight slowly catching up. Passenger traffic is certainly adding joy to the airlines, while freight which has been lagging behind has also showed signs of considerable growth. Freight traffic is expected to be five times the current level by the end of the next two decades. It is expected to be 11.4 million tonnes by 2032. The Indian air cargo sector has a highly untapped potential. Growth in e-commerce and government initiatives are expected to boost the air cargo business in India. Amidst challenges, the Indian air cargo sector throws innumerable opportunities. As per an Airports Authority of India (AAI) report, the international and domestic freight traffic have shown growth of 8.1 per cent and 7 per cent respectively resulting into overall increase of 7.7 per cent in total freight traffic during the period April-September 2016-17 as compared to April-September 2015-16. Focus on airport infrastructure. With passenger and freight traffic growing at phenomenal pace, it is only time for airport development to catch up. Presently, there is a problem of capacities, but the government has plans to invest massively in airport infrastructure development. AAI has plans to make investments of `15,000 crore over the next five years, including `10,000 crore on upgradation and expansion of 20 airports. Consultancy firm CAPA has said India needs to build 50 new airports at an investment of `2,72,000 crore to handle the growing air traffic. Presently, there are 125 airports managed by AAI and only 69 of them receive commercial flights. Now with the NCAP and RCS, the focus is going to be on developing no-frills airports to connect the hinterland. CAPA in its report titled ‘India’s Airport Capacity Crisis’ has listed that six airports — Delhi, Mumbai, Bengaluru, Chennai, Kolkata and Hyderabad — receive around 66.5 per cent of India’s total air traffic. And that these six cities themselves would need new airports by 2025-26 to handle the traffic growth. The pressure to develop secondary airports and also airports in Tier-II and -III cities is building up.

Leading from the Front: Minister of Civil Aviation P. Ashok Gajapathi Raju

vice from its original order. Another low-cost airline, GoAir has chosen Airbus for its further expansion plans by signing a memorandum of understanding (MoU) for 72 A320neo aircraft. Regional airline Air Costa, which recently got pan-India licence allowing it to operating flights to any part of the country, has on order 50 E2 E-Jets from Embraer, deliveries of which is expected to commence from mid-2018. Presently it has a fleet of four 112-seater Embraer 190 aircraft. AirAsia India, owned jointly by Tata Sons and Malaysia’s AirAsia Berhad, is expanding its fleet to 20 aircraft, which would allow it to fly abroad. Its Board of Directors approved new funding into the airline this month. “We are at seven aircraft and want to get to 20 at the earliest. We are not going to stop at 20,” Amar Abrol, Chief Executive Officer at AirAsia India, has said. Another regional player, Hyderabad-based TruJet which operates three ATR 72-500s has become a new ATR 72-600 operator, having leased the same from Dubai Aerospace Enterprise. The airline which connects Hyderabad, Aurangabad, Bengaluru, Chennai, Kadapa, Goa, Nagpur, Rajahmundry, Tirupati and Vijayawada has announced that it would expand services to more cities in the months to come.

General Aviation following aviation trends. According to PricewaterhouseCoopers, the general aviation (GA) market in India is expected to grow at 10 per cent per annum to cross `1,600 crore by FY-2017. Industry estimates show that around 300 business jets, 300 small aircraft and 250 helicopters are expected to be added in the current GA fleet by FY-2017. As per the report by the Working Group of the Twelfth Five Year Plan, a total investment of more than `20,000 crore in GA is expected during the plan period. This underlines the fact that today business jets are no longer seen as a luxury but as a tool for enhancing productivity. The helicopter market in India is equally promising, with growing requirements in tourism, mining, corporate travel, air ambulance, homeland security, etc. The surge of tourist traffic into India has been a key driver of the growth of the general aviation sector in the country. Alongside, as support to the aviation industry, the opportunity to provide maintenance, repair and operations (MRO) activities will grow with the industry. India’s MRO segment is estimated to grow at 10 per cent and reach $2.6 billion by 2020. The picture looks highly optimistic. The present government has shown keenness in promoting the aviation sector, of course along with other sectors too. From negative growth rate in 2012 to making India, the land of consistent 20 per cent growth, NDA Government is truly transforming India. SP SP’S AIRBUZ • Issue 6 • 2016 • 9

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exclusive

PHOTOGRAPH: Neetu Dhulia / SP Guide Pubns

Industry is Welcome: Union Minister of Civil Aviation P. Ashok Gajapathi Raju during the interaction

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RELENTLESS JOURNEY OF EXCELLENCE SINCE 1964

Jayant Baranwal, Editor-in-Chief of SP’s AirBuz (accompanied by Neetu Dhulia) had an exclusive rendezvous with the Union Minister of Civil Aviation, P. Ashok Gajapathi Raju, during the second half of January this year. The interaction included wide ranging subjects pertaining to India’s civil aviation scenario. Some of them were the growth factor, 5/20 rule, regional connectivity, general and business aviation, cargo business and also the upcoming National Civil Aviation Policy. Excerpts:

current scenario

targeting healthy growth

Jayant Baranwal (Baranwal): Could you give a quick perspective on the growth pace of our civil aviation industry? Civil Aviation Minister (Minister): The growth is reported to be around 20 per cent over the previous year; actually it’s a good growth. I think it is a reflection of the economy and it also gains from the economy. Civil aviation has benefited in the past one year. Of course, there are many factors and one factor that, I think, which is fairly important is the price of ATF (aviation turbine fuel) coming down, and that has been a stimulus.

Baranwal: The DGCA (Directorate General of Civil Aviation) is yet to emerge as a progressive organisation as per the sentiments of the overall industry. What steps are being taken to make it more conducive to industry’s healthy growth? Minister: You see, the DGCA is a regulator and most regulators don’t endear themselves to people, but they can be transparent in their actions. Generally regulators don’t endear themselves to trade because it will become a compromise in safety. They are opaque and they need to become transparent and they need to be faster and conducive to growth. A regulator is necessary. You can’t throw a baby out of the bath water once the bath water goes, the clean baby remains so, and that is how we would like to see the DGCA as a cleaner organisation. Those are the kinds of steps we are taking there to try to see the organisation modernises its thinking and pulls itself up.

Baranwal: But in that case if ATF goes up, then what do you think? Minister: I don’t think it will go up now. It does not look as if it will go up. Baranwal: But there could be a possibility that it will eventually go up? Minister: You see, once you are born, death is eventual, but every day you don’t really think about it. The trends don’t show as if it will go up that way in the foreseeable future. You could say probably in this year, for instance, definitely, the trends don’t look in that direction. I am no expert there, so generally, I think there will be growth in passenger traffic. Cargo is literally miniscule in our country and so it has scope not only for exports but also within the country. We have so many agro climatic zones and good markets, so probably if we can get the industry and the trade entrusted, I think transport can help there, that’s good if it happens, because I see an opportunity there. Baranwal: But don’t you want cargo industry to grow well? Minister: Yes, cargo industry needs a push, needs incentives and infrastructure. The world over, most airlines don’t make money from transportation of people, whatever they make it is from cargo. Baranwal: So that offsets the losses they are bearing? Minister: We hope they don’t go under losses. The world over that is happening in a lot of places and we can see that it can happen here.

“as far as the 5/20 rule, I think this is an impediment to the growth of Indian aviation. No other country in the world ever has this type of regulation.”

the 5/20 rule: DOESN’T LOOK RATIONAL Baranwal: Air India has now withdrawn its objection on the 5/20 rule. Does this pave way for faster growth of India’s airline business? Minister: It’s okay some airlines object, some don’t. Ultimately, it’s the government to take a decision. Now why 5/20 was brought? What is the logic behind five years in 20 aircraft and who does it pull down? You can’t regulate foreigners, you only regulate yourself, for what purpose? It is a decision that did come out of the Cabinet, so any change it has to go back to them. Now politically speaking, almost no political party’s manifesto, regional or national, has ever talked about aviation. There is a sentence in the BJP’s manifesto on regional connectivity, so we are trying to keep the regional connectivity thing as sacrosanct, building the policy around it. Of course, as far as the 5/20 rule is concerned certain people after sometime will get used to a particular thing, it gives a comfort level or call it a discomfort level. I think this is an impediment to the growth of Indian aviation. No other country in the world ever has this type of regulation. I am individually convinced and I hope to convince my colleagues further. Baranwal: And this will enable much faster growth on the domestic front. Minister: I think so, because impediments are removed. Now what is this that they are calling level playing field. I went through hell so another fellow has to also go through hell, otherwise it’s not a level playing field because I went through hell and he is not going through hell. I don’t think that should be acceptable logic here, we need to see that this industry grows. Someone will benefit, someone won’t benefit that’s okay, but for eternity I don’t think we can doom the things. That’s what I feel and everybody knows that I am SP’S AIRBUZ • Issue 6 • 2016 • 11

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not for the 5/20 individually; I have voiced this at various forums too. So if I am able to convince my colleagues then it can go. mro will bring industry to india Baranwal: MRO — I believe the draft policy sounded very friendly to the industry – what all have been the plans to enable the growth in this area? Minister: MRO is one place where India has a lot to benefit. If we are able to bring in the policy, we will get the industry into India. Right now $700 million of Indian business is going to Singapore, Dubai, Sri Lanka and when you interact with them they are giving few things, one is the service tax and customs for the Government of India. We interacted with the finance and customs; they wanted time for spare parts to be changed to three years instead of one year right now. Currently, they get it, and if they consume it within one year and they don’t have to pay the duty. They are asking for three years time and in informal consultations, they seem to understand the problem. Also, the states will have to come out with their VAT problem, so if the Government of India does that, then probably this industry might move to states which are friendly. In Delhi, everyone is trying to bring down the ATF, the Delhi Government has hiked it to five per cent. So like that you do have things happening. MRO will help us to get back business to our country, with it our ‘Make in India’ will become more vibrant, we are working on that. ga/ba open to discussions Baranwal: It will save lot of money outflow from the country. Regarding general aviation and business aviation, the industry still feels that they are being treated as a stepchild? Minister: General aviation is interesting; we got some of their reactions. Why is it that, what is it they want, what is it we can do? Like if they say I want parking in a place like Mumbai, it is already congested. Like they say I don’t mind parking in a place like Bhopal, for instance, you have 12 aircraft you can park simultaneously, no problem 12 big ones. What is this they exactly want? Neetu Dhulia (Dhulia): If they come up with requisite solutions, would you be open to it? Minister: My god! I will welcome everybody. Why should I say no for it? Dhulia: Would you welcome if the industry jointly wants to come and voice their thoughts? Minister: You see voicing is okay, I even put the draft policy on

regional connectivity is what you are thinking. The Airports Authority has about 30 airports unserved, which are nonperforming assets. we want them to become performing assets because they will contribute to the economy.

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the Internet and requested, please respond whether you agree or disagree. We can always agree on something and disagree on another thing, but we have to understand your problem. Dhulia: If they raise the problem and seek the support, would the government look into it addressing the issues? Minister: Why not if they can raise anything and I am sure we will look into it. Dhulia: Could we be instrumental and bringing them together to have a discussion with them? Minister: If you are willing to send the ideas across we can try to understand them and then if we find it necessary we can always interact, after all we are Indians, we are not different countries warring with one another. So general aviation feels like a stepchild, why is that I need to know? GA/BA taxation Baranwal: The level of taxation they say on the aircraft is very high unlike any country in the world. Minister: Yes, that must be there, because generally scheduled airlines are given benefit because they are understood to be the common man’s way of transport. General aviation has probably given this impression that it is only rich man’s t ransport and that impression stays. So anyway whatever it is, they might be having other applications also, and we need to look at that. Baranwal: Yes other applications, the business expansion, moving from one point to the other, like a business tool, contributing back to the economy. Minister: Ultimately, aviation benefits from the economy. It also gives back to the economy. In that sense, aviation in general terms is that. Because, the economy appears to have behaved, your growths are there, otherwise it would not have been. the `2,500 cap Minister: Regarding “Regional Connectivity”, I told you already that this one is in the manifesto, we are kind of looking at it like a sacrosanct thing. That is why it’s in the policy we are looking at the certain suggestion which excited the thinking of many people, won’t it be possible to pay for an hour of flying at `2,500. Baranwal: There has been some debate on that `2,500 cap. Minister: It’s not a cap, it’s not a floor, it’s a suggestion. Caps and floors are dangerous. Regional connectivity is what you are thinking. The Airports Authority of India (AAI) itself has about 30 airports unserved even today. Now how do you start a service there? Otherwise, it’s a non-performing asset; we want them to become performing assets because they will contribute to the economy. How to do that, that’s the thing anyway, the work is going there. date of new civil aviation policy Baranwal: When can we expect the new policy? Minister: The new policy has now come to an advanced stage. One or two things that we are trying to iron out, then, it will go to the inter-ministerial consultation and then the Cabinet because certain decisions have come out from the Cabinet in the past. We would like to push it soon. SP

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TRANSFORMING INDIAN AVIATION “Civil Aviation Policy gives an impetus to affordability, regional connectivity, safety, infrastructure — all vital for transforming India”. — Prime Minister Narendra Modi

by R. Chandrakanth

irst and foremost, no Prime Minister of India has taken as many development initiatives in just two years into one’s term like the way Prime Minister Narendra Modi has. Coming to power on the plank of development, Prime Minister Modi, along with his team, has been assiduously working hard to transform India into a major economic power. And that cannot happen without civil aviation which has the capability of providing a multiplier effect to development. In the history of independent India, this is the first time an integrated civil aviation policy has been put in place to provide an ecosystem for the harmonised growth of the different aviation subsectors — airlines, airports, cargo, maintenance, repair and overhaul (MRO) services, general aviation, aerospace manufacturing and skill development. On June 15, 2016, soon after the Union Cabinet approved the National Civil Aviation Policy, the Prime Minister said that it will “transform” the aviation sector and “greatly benefit passengers”. On Twitter, he said, “Civil Aviation Policy gives an impetus to affordability, regional connectivity, safety, infrastructure — all vital for transforming India.” 300 Million Air Travellers. The policy has a road map to support 300 million air travellers in five years and steps to make air travel affordable and convenient. The premise is that if every middle class Indian takes just one flight in a year, it would result in a sale of 350 million tickets, a big jump from 70 million tickets sold in 2014-15 in the domestic sector. This would fructify only if flying was made affordable and accessible. The policy objectives are: l Take flying to the masses by making it affordable and convenient. l Establish an integrated ecosystem which will lead to significant growth of civil aviation sector to promote tourism, employment and balanced regional growth. l Enhance regional connectivity through fiscal support and infrastructure development. l Enhance ease of doing business through deregulation, simplified procedures and e-governance. Regional Connectivity Scheme. One of the high points of the policy is the emphasis on regional connectivity. No other government has spelt out such elaborate plans of networking India. The Regional Connectivity Scheme (RCS) is to come

into effect in the second quarter of 2016-17 and the key feature is cap on airfare — `2,500 for a one-hour flight. This will be implemented by way of: l Revival of airstrips/airports as no-frills airports at an indicative cost of `50 crore to `100 crore. l Demand-driven selection of airports/airstrips for revival in consultation with state governments and airlines. l Viability Gap Funding (VGF) for airline operators. l RCS only in those states which reduce VAT on ATF to one per cent or less, provide other support services and 20 per cent of VGF. The policy stipulates concessions that will be provided by the stakeholders and they include: l There will be no airport charges. l Reduced service tax on tickets on 10 per cent of the taxable value for one year initially. l Reduced excise duty at two per cent on ATF picked at RCS airports. l State government will provide police and fire services without charge and power, water and other utilities at concessional rates. l Creation of Regional Connectivity Fund for VGF through a levy of `8,000 per departure on all domestic flights other than Cat II/Cat IIA routes, RCS routes and small aircraft below 80 seats. l VGF to be shared between the Ministry of Civil Aviation (MoCA) and state governments in the ratio of 80:20 and in the case of North-eastern states, the ratio is 90:10. While the Union Government has spelt out the policy in clear terms, it is now up to the state governments to transform the policy into action. Currently, around 75 out of 450 airstrips/airports have scheduled operations and revival of the remaining airstrips and airports will be ‘demand-driven’. Scheduled Commuter Airlines, New category. The policy has categorised commercial operations into three main categories — Scheduled Air Transport Operator (domestic and international); Scheduled Commuter Operator and Non-Scheduled Operator. With regard to the first and the third categories there are no changes in the existing provisions. With focus on enhancing regional connectivity, the policy has introduced the category of Scheduled Commuter Operator that will operate aircraft having a maximum All Up Weight (AUW) not exceeding 40 tonnes. The minimum equity capital requirements would be on the basis of number and size of SP’S AIRBUZ • Issue 6 • 2016 • 13

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aircraft in the fleet. Commuter operators will predominantly provide connectivity on regular basis on domestic routes. There would be a prescribed minimum number of aircraft with such operators to maintain the regularity of operations. Operators whose principal business is to carry out commuter operations, may additionally carry out domestic charter operations provided the schedule of operations of principal business is not affected. They would be permitted to have codeshare with other airlines, both domestic and international. Route Dispersal Guidelines. The route dispersal guidelines (RDG) which was introduced in 1994 to provide air connectivity to Jammu and Kashmir, North East region, Andaman & Nicobar Islands, Lakshadweep, Tier-II and Tier-III cities, by way of internal cross-subsidy by airlines using their revenues on the trunk routes (12 in number) has been rationalised. Category I routes will be rationalised once in five years, by adding more routes based on transparent criteria. The criteria proposed for a Cat I route are it should have flying distance of more than 700 km, average seat factor of more than 70 per cent and annual traffic of five lakh passengers over two full schedules (i.e. summer and winter).The traffic to be deployed on Cat II and IIA routes expressed in terms of a percentage of Cat I traffic will remain the same. However, routes to Uttarakhand and Himachal Pradesh will be included in Category II. For Cat III routes, it is 35 per cent of Cat I traffic in view of the fact that RCS is being implemented for a similar purpose. For the purpose of meeting the RDG requirements, the Scheduled Airlines will be permitted to trade available seat kilometres (ASKM) of helicopters and other small aircraft (maximum AUW not exceeding 40 tonnes) operating under RCS to extend the last-mile connectivity seamlessly to underserved or unserved areas. Finally 5/20 Rule Goes. The much talked about 5/20 rule has been modified and now airlines can commence international operations provided that they deploy 20 aircraft or 20 per cent of total capacity (in term of average number of seats on all departures put together), whichever is higher for domestic operations. The 5/20 rule was approved by the government in December 2004 to protect national carrier Air India. IndiGo, launched in 2006, had to wait till 2011 to commence operations on international routes and SpiceJet had to wait till 2010 to do so. Having gone through the wait period, these airlines were opposing the government’s move to scrap the 5/20 rule. With the amendment, new airlines can venture into international skies. Vistara, set up in January 2015, has 11 planes presently and plans to expand its fleet to 20 by June 2018. AirAsia India, which began operations in June 2014, operates eight aircraft and is keen to grow. Bilateral Traffic Rights. India has Air Service Agreements (ASA) with 109 countries covering aspects relating to the number of flights, seats, landing points and code-share. The gov-

Indian aviation is gaining altitude and speed to become one of the top three aviation markets in the world soon!

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ernment plans to liberalise the regime of bilateral rights leading to greater ease of doing business and wider choice to passengers. The government will enter into an ‘Open Sky’ ASA on a reciprocal basis with SAARC countries and countries with territory located entirely beyond a 5,000-km radius from New Delhi. Unlimited flights above the existing bilateral rights will be allowed directly to and from major international airports within the country as notified by the Ministry from time to time. For countries partly or fully within 5,000-km radius, where the designated carriers of India have not fully utilised 80 per cent of their capacity entitlements, but foreign carriers/countries have utilised their bilateral rights and are pressing for increase in capacity, a method will be recommended by a committee headed by the Cabinet Secretary for the allotment of the additional capacity entitlements. Code-Share Agreements. Indian carriers will be free to enter into domestic code-share agreements with foreign carriers to any point in India available under the respective ASA. For the designated Indian carriers international code-share arrangements with foreign carriers will be liberalised and no prior approval from MoCA will be required. Fiscal Support. To provide fiscal support to MRO facilities, ground handling, cargo and ATF infrastructure collocated at an airport, (including heliport) are covered under the ‘Harmonised List of Infrastructure’ and will get the benefit of ‘infrastructure’ sector. Airports Development. The Ministry will continue to encourage development of airports by the state governments or the private sector or in public-private partnership (PPP) mode. To ensure uniformity and level playing field across various operators future tariffs at all airports will be calculated on a ‘hybrid till’ basis unless otherwise specified for any project being bid out in future. 30 per cent of non-aeronautical revenue will be used to cross-subsidise aeronautical charges. In future, concessions/development of airports, it will be necessary to ensure a minimum level and standard of cargo facility at the airport. Airports Authority of India. Out of 125 airports of AAI, about 95 are operational of which 71 have scheduled commercial operations as of January 1, 2016. AAI will take up development of greenfield or brownfield airports subject to: l Project should be financially viable with non-zero IRR, except for no-frills airports developed under RCS. l State/Central Government will provide VGF to AAI if the project is strategically important but financially unviable. l Land will be provided free of cost and free from all encumbrances by state government without treating it as equity. l Land will include sufficient space on city side for commercial use as per applicable law. Focus on Helicopters. India currently has less than 300 civilian helicopters which is very low as compared to other developing nations. In order to boost helicopter deployment, the DGCA will be formulating separate regulations for helicopters. The government will facilitate the development of at least four heli hubs initially. The DGCA will bring out regulations exclusively for hospital emergency medical services (HEMS) wherein these helicopters will not require any operational clearance, including landing at accident and emergency sites from any agency except Air Defence clearance. There will be no landing charges and RNFC for HEMS operations.

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NCAP

While the Union Government has spelt out the policy in clear terms, it is now up to the State Governments to transform the policy into action Importantly, helicopters will be free to fly from point-to-point without prior ATC clearance in airspace below 5,000 feet and outside controlled airspace, prohibited and restricted ones, Temporary Segregated Areas (TSAs) and Temporary Restricted Areas (TRAs) after obtaining the Air Defence clearance. Creating MRO Hub? The MRO business of Indian carriers is around `5,000 crore, 90 per cent of which is currently spent outside India — in Sri Lanka, Singapore, Malaysia, UAE, etc. The government is keen to develop India as an MRO hub in Asia, attracting business from foreign airlines. In the union budget the following provisions were made: l The tools and toolkits used by the MRO have been exempted from customs duty. l MROs were required to provide proof of their requirements of parts or orders from their client airlines. The process for the clearance of the parts has been brought in line with that of the toolkits for a one-time certification by DGCA approved Quality Managers in MROs. l To enable economies of scale, the restriction of one year for utilisation of duty free parts has been extended to three years. l To allow import of unserviceable parts including aircraft components like engines and landing gears by MROs for providing exchange/advance exchange, the notification has been revised to enable advance export of serviceable parts. l Foreign aircraft brought to India for MRO work will be allowed to stay for the entire period of maintenance or up to six months, whichever is lesser, provided it undertakes no commercial flights during the stay period. The aircraft may, however, carry passengers in the flights at the beginning and end of the stay period in India. To give fillip to MRO sector, the Ministry said it would persuade state governments to make VAT zero-rated on MRO activities. In future airport/heliport projects, provision would be made for adequate land for MRO service providers and also for air cargo operations. Airport royalty and additional charges will not be levied on MRO service providers for a period of five years from the date of approval of the policy. Ground Handling. The airport operator will ensure that there will be three Ground Handling Agencies (GHA) including Air India’s subsidiary/JV at all major airports as defined in the Airports Economic Regulatory Authority of India Act of 2008 to ensure fair competition. Non-major airports are exempted from minimum number of ground handlers. All domestic scheduled airline operators including helicopter operators will be free to carry out self-handling at all airports Boosting Air Cargo. Currently, air cargo volumes in India are very low as compared to other leading countries due to high charges and high turnaround time. Within the air cargo

RELENTLESS JOURNEY OF EXCELLENCE SINCE 1964 ecosystem, Express Delivery Services (EDS) has a distinct operational nature and is becoming pivotal especially in the light of double-digit growth in e-commerce. An Air Cargo Logistics Promotion Board (ACLPB) has been constituted to promote growth in air cargo by way of cost reduction, efficiency improvement and better inter-ministerial coordination. The Board and the industry will submit a detailed action plan, with the objective of reducing dwell time of air cargo from ‘aircraft to truck’ to below 48 hours by December 31, 2016, and to 24 hours by December 31, 2017, by reduction in free time and other measures. For exports, dwell time will be reduced to 12 hours by December 31, 2016, and eight hours by December 31, 2017. Skill Development in Aviation. The growth of civil aviation in the country has been hamstrung by the shortage of appropriate skills required in different sectors of civil aviation. According to certain estimates, the incremental human resource requirement of the civil aviation sector by 2025 would be in the region of 3.3 lakh. The government will create the necessary ecosystem and architecture for ensuring full utilisation of the skill development capacities. After obtaining a commercial pilot licence (CPL), it is necessary to get type-rated to get employment in an airline. This puts an enormous financial burden on the pilot having CPL as typerating costs can be of the order of `25-30 lakh. There are nearly 8,000 pilots holding CPL but are unemployed. There are plans to develop a scheme for providing financial support for type-rating of pilots. The detailed scheme will be worked out separately either by setting up the facility at the Indira Gandhi Rashtriya Udaan Academy or Air India or in PPP mode. It is truly a comprehensive policy which the government has assiduously formulated and it is now for the industry and the sate governments to get their act together. Not to mention the bureaucracy which has to get out of its inertia and help accelerate development. Giving Wings to Aviation Dreams. Kudos to the government for an exhaustive National Civil Aviation Policy, 2016. It covers the entire gamut of civil aviation and is expected to catapult the sector to astounding heights, provided the stakeholders realise the intent of the government — to give wings to aviation dreams. It goes to the credit of the Narendra Modi Government to give definite direction to networking India. One of the pointers of the government’s intent ‘Sabka Saath, Sabka Vikas’ (Together with all, Development for all) can be seen in the NCAP which lays emphasis on regional and remote area connectivity. Announcing a slew of incentives for operators flying into unserved and underserved destinations, the government is playing a catalytic role. The introduction of the Scheduled Commuter Airline category has to be seen in this perspective and it is now for the industry to take the bite. The cap on airfares, along with enhanced regional connectivity, will bring in new passengers to the airline industry, which is expected to give substantial traction to economic growth. Recently, the Ministry also announced a slew of measures to protect the travelling public and it is hoped that the airline industry acknowledges that a ‘happy customer’ translates into a ‘healthy airline’. Indian aviation is gaining altitude and speed to become one of the top three aviation markets in the world soon! SP SP’S AIRBUZ • Issue 6 • 2016 • 15

2016

RCS

‘Udan’ Launched

Illustration: MOCA

The primary objective of RCS is to facilitate/stimulate regional air connectivity by making it affordable by R. Chandrakanth

he Indian civil aviation landscape is in the process of major transformation and the Ministry of Civil Aviation took another giant leap towards that — by launching the Regional Connectivity Scheme under the name of ‘UDAN’ which means flight. UDAN seeks to get more people to fly from smaller towns and cities, from unserved and underserved areas to the metros, connecting India like never before. Launching UDAN, the Minister of Civil Aviation, P. Ashok Gajapathi Raju, said: “We will target the first flights under UDAN to take off by January 2017.” The crux of the scheme is to make fly16 • SP’S AIRBUZ • Issue 6 • 2016

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ing accessible and affordable to the vast majority of people living in the hinterland. UDAN is also an acronym in Hindi ‘Ude Desh ka Aam Naagrik’ (the common man of the country will fly). Echoing this view, the Minister of State Jayant Sinha said the scheme is “to get those wearing hawai chappals on to an aircraft. We have tried to make costs of flying lower to serve underserved and other routes.” UDAN is said to be the first of its kind globally wherein it would jumpstart the regional aviation segment in India. “We are very hopeful of a positive response from the industry but our thinking is that with the scheme, we will in fact be jump-starting regional aviation,” Sinha said while exuding

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RCS

confidence that the scheme would be “quite attractive” for consumers, carriers, small and regional airlines, lessors and other players in the ecosystem. The government would create a new category of scheduled commuter operators to enable people to enter and get started in the regional space, he added. The Civil Aviation Minister tweeted “Growth rates in civil aviation encouraging; intend to keep the momentum.” RCS is one of the key elements of NCAP 2016, which envisions domestic ticketing of 30 crores by 2022 and 50 crores by 2027. RCS as well as NCAP 2016 would eventually promote growth of the entire civil aviation sector. The objectives, he said, were to l Affordability — take flying to the masses. l Connectivity — revive more than 50 underserved and unserved airports in small and medium cities. l Growth — to promote tourism, encourage balanced growth and increase employment opportunities in the hinterland. The Civil Aviation Secretary R.N. Choubey said that it was unfortunate that in a country of 1.3 billion people domestic ticketing stands at 80 million. “We hope to have flights to 50 more airports in the next four years through the Regional Connectivity Scheme. Under the scheme, airlines will have complete freedom to enter into codesharing with larger airlines for connectivity.” Also, regional connectivity flights will be exempted from various airport charges. Airlines will get exclusive rights for three years to fly on a particular regional route. Airfares will be capped at `2,500 for an hour’s flight for regional flights under the scheme. “We want to make sure entry and exit barriers are kept reasonably low. Airline can withdraw from the scheme after one year,” the Aviation Secretary said. Viability gap funding. Choubey said Viability Gap Funding (VGF) will be provided to airlines for three years under the UDAN scheme. The bidding for airlines to get subsidy under the scheme will take place twice a year beginning today. The government has appointed MSTC Limited to carry out reverse auction (airlines asking for lowest subsidy amount wins). “We don’t agree with airlines’ opposition to put a levy on

We will target the first flights under UDAN to take off by January 2017. — P. Ashok Gajapathi Raju, Minister of Civil Aviation

We are very hopeful of a positive response from the industry but our thinking is that with the scheme, we will in fact be jump-starting regional aviation. — Jayant Sinha, Minister of State, MoCA

So we looked at these visible business models around the world and we have done a very detailed calculation with various different operators getting their actual numbers in India as well as with OEMs, experts and consultants. — R.N. Choubey, Secretary, Ministry of Civil Aviation

them to fund the scheme,” according to Choubey. The new levy on airlines will be announced by October 31, he added. VGF will be provided for RCS flights for a period of three years from the date of commencement of operations of such RCS flights (tenure of VGF support). It may be recalled that earlier this year the Ministry of Civil Aviation had released the National Civil Aviation Policy (NCAP), 2016. One of the objectives of NCAP 2016 is to “enhance regional connectivity through fiscal support and infrastructure development.” As per an ICAO study “Economic Benefits of Civil Aviation: Ripples of Prosperity”, the output and employment multipliers of aviation are 3.25 and 6.10 respectively. This implies that every 100 rupees spent on air transport contributes to 325 rupees worth of benefits, and every 100 direct jobs in air transport result in 610 jobs in the economy as a whole. In fact, the study attributes over 4.5 per cent of the global gross domestic product (GDP) to civil air transport. As the Indian economy grows, consumption-led growth in populated metros is expected to spill over to hinterland areas. This is also expected to be on account of factors of production (land, labour, etc.) becoming costlier in the densely populated metro cities. In this scenario, air connectivity can provide required impetus to the economic growth of regional centres (towns/cities). In this context, one of the key objectives of NCAP 2016 is to “establish an integrated ecosystem which will lead to significant growth of civil aviation sector, which in turn would promote tourism, increase employment and lead to a balanced regional growth.” Scheme objective. The primary objective of RCS is to facilitate/ stimulate regional air connectivity by making it affordable. Promoting affordability of regional air connectivity is envisioned under RCS by supporting airline operators through (1) concessions by Central Government, state governments (reference deemed to include union territories as well, unless explicitly specified otherwise) and airport operators to reduce the cost of airline operations on regional routes / other support measures and (2) financial (Viability Gap Funding) support to SP’S AIRBUZ • Issue 6 • 2016 • 17

2016

RCS

meet the gap, if any, between the cost of airline operations and expected revenues on such routes. State Government concessions. The state governments’ buy-in and support to determine eligibility: To minimise the cost of operations for air transport operators to the extent possible through concessions from state governments.

Airfare Cap under RCS Airfare cap to be considered for respective stage lengths / flight duration are as follows: AIRFARE CAP FOR FIXED-WING AIRCRAFT Stage length (in km)

Airfare cap per RCS seat (in `)

151-175

1420

Operational only in States which support. RCS is accordingly to be made operational only in states and at airports / helipads (irrespective of ownership by AAI / state governments / private entities / Ministry of Defence) which demonstrate their commitment and support to regional air transport operations by providing concessions / support as required under the scheme. The RCS has listed out the concessions / support that need to be offered by the respective state governments at RCS airports within their states: l Reduction of VAT to 1 per cent or less on aviation turbine fuel (ATF) at RCS airports located within the state for a period of ten years from the date of notification of this Scheme. Upon transition to the goods and services tax (GST), rates will be applicable as determined under GST and exemptions / concessions shall be given as permissible so that such a reduced level of taxation could ideally be continued. l Coordinating with oil marketing companies for provision of fuelling infrastructure on best effort basis. l Provision of minimum land, if required, free of cost and free from all encumbrances for development of RCS airports and also provide multi-modal hinterland connectivity (road, rail, metro, waterways, etc.) as required. l Provision of security and fire services free of cost at RCS airports through appropriately trained personnel and appropriate equipment as per applicable standards and guidelines by relevant agencies. l Provision of, directly or through appropriate means, electricity, water and other utility services at substantially concessional rates at RCS airports. l Provision of a certain share (20 per cent) towards VGF for respective RCS routes (pertaining to the state), provided the share of states in the north-eastern region of India and union territories would be (10 per cent).

176-200

1500

201-225

1580

226-250

1670

251-275

1750

276-300

1830

301-325

1920

326-350

2000

351-375

2080

376-400

2170

401-425

2250

426-450

2330

451-475

2420

476-500

2500

501-525

2500

526-550

2590

551-575

2680

576-600

2770

601-625

2860

626-650

2950

651-675

3050

676-700

3140

701-725

3230

726-750

3320

751-775

3410

775-800

3500

>800

3500

Concessions to offered by the airport operators: Airport operators (whether under the ownership of the AAI, state governments, private entities or the Ministry of Defence) shall not levy landing charges and parking charges or any other charge subsuming a charge for such aspects in future on RCS flights. l Selected airline operators shall be allowed to undertake ground handling for their RCS flights at all airports. l AAI shall not levy any terminal navigation landing charges (TNLC) on RCS flights. l Route navigation and facilitation charges (RNFC) will be levied by AAI on a discounted basis @ 42.50 per cent of normal rates on RCS flights. Normal rates refer to applicable rates specified by the AAI on its website from time to time without any discounts or concessions. As provided for in NCAP 2016, air freighter operations at RCS airports shall be entitled to the following under the Scheme for a period of up to 10 years from the date of notification of this scheme. The excise duty at the rate of 2 per cent shall be levied on ATF drawn for air freighter operations at RCS airports for a period

Flight duration (in minutes)

Airfare cap per RCS seat (in `)

00-30

2,500

31-35

2,900

36-40

3,350

41-45

3,750

46-50

4,150

51-55

4,600

56-60

5,000

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AIRFARE CAP FOR HELICOPTERS

Source: Ministry of Civil Aviation

of three years from the date of notification of this scheme. Upon transition to GST, rates will be applicable as determined under GST and exemptions/ concessions shall be given as page 12 of 46 permissible so that such a reduced level of taxation could ideally be continued. There are other concessions too but VGF support shall not be provided for cargo operations. SP

2016

Regional Connectivity

The Regional Connectivity Scheme is poised to make a significant difference in India, enabling more people, in currently ‘remote’ locations, to have access to air links at an affordable price. This initiative by the government has energised the nation and is a major development for people mobility, country infrastructure and aviation in India. However, if we are looking to improve air connectivity as a whole, we should also not overlook the existing markets that are currently underserved. Going from Point A to B requires air travellers in India to make an often lengthy transit through Point C. Such markets have existing passengers who would immediately benefit from improved connectivity, leading to further demand stimulation and growth. People will always prefer direct connectivity and it also allows the airlines to maximise yield by offering a better network. by Mark Dunnachie, Vice President, Embraer Asia-Pacific

The other dimension of regional connectivity in India

T PHOTOGRAPHs: Embraer

he Regional Connectivity Scheme (RCS) that was recently rolled out is the government’s push to increase connectivity in India particularly targeting underserved and unserved airports, while promoting the use of smaller aircraft, of up to 80 seats, to do so. We applaud this initiative that will make air links accessible to more people when airlines in India take up the challenge. We also understand, however, the hesitation that airlines have on the RCS, as the capped airfares may not always make economic sense. In this article, we offer an additional avenue for airlines to pursue, which will improve connectivity for travellers, and enable airlines to grow their operations whilst in turn fulfilling the government’s desire to enhance travel for all. Build on the potential of underserved markets. When we look at existing airports with existing air links, we see that much more can be done to enhance connectivity and frequency in secondary and tertiary cities. Based on IATA data, underserved markets have substantial passenger demand for direct (no stopover) and for more scheduled services. Leveraging the existing infrastructure at these airports allows airlines to fur-

ther introduce new routes between cities that currently require transit to get there or cities that have a low number of scheduled flight frequency (typically less than a daily frequency flight). The introduction of a direct flight benefits not only the passenger by reducing total travel time, but also enables the airline to realise improved yields, in some cases up to 15 per cent, on such routes. This is of course the classic Blue Ocean, Red Ocean concept where opportunity lies in underdeveloped or untapped markets. One example of such a market is Chennai-Dharamshala, where the current way to travel between those two cities is via a 10-hour stopover at Delhi; travelling from Hyderabad to Amritsar via a three-and-a-half hour stopover at Mumbai is another of the many examples. One might ask, if such an obvious opportunity exists, what is holding back airlines from seizing this opportunity? The type of ‘tool’ matters. The current fleet profile of the Indian aviation market is heavily focused on narrow-body aircraft such as the Airbus A320 family and Boeing B737 family that have a seat capacity of 140 seats and above. On the other end of the capacity spectrum, three of the four largest airlines have turboprop aircraft (ATR 72 and Dash 8), which have a seat capacity limited to 80 seats and below where the product is largely only viable for sectors with less SP’S AIRBUZ • Issue 6 • 2016 • 19

2016

Regional Connectivity

than 500 km. In between this spectrum, there are only a handful of 80to 130-seat jet aircraft (CRJ700 in Air India and E190 at Air Costa), and this represents an untapped opportunity. Based on Embraer’s studies, two-thirds of underserved markets within India are too thin in passenger demand for narrow-body aircraft operations and more than 80 per cent of these markets have stage lengths too long for viable turboprop operations. It is forecast that by 2020, there will be more than 120 underserved markets with an average stage length of more than 1,000 km. These markets are more optimally served by 80- to 130-seat jets offering the ideal capacity size for thin passenger demand and with the adequate range capabilities. We have seen multiple ‘success stories’ across the globe, showing how airlines have used E-Jets to stimulate traffic in secondary and tertiary cities. In China, for example, Tianjin Airlines have been operating their fleet of E190s to develop routes to and from cities like Tianjin, Xi‘an, Urumqi (west China) and Hohhot (northern China). Japan Airlines’ subsidiary J-Air uses E190s and E170s to rightsize capacity in order to maximise frequency on routes or complement larger gauge aircraft at off-peak times to enhance market connectivity.

What benefits do Embraer’s 80- to 130-seat E-Jets offer? More cargo and onboard service capabilities. Due to the low yield environment in India, it is important that airlines generate revenue streams away from passenger fares — ancillary cabin services being one source, but even more importantly, cargo revenue. Unlike other aircraft, whether turboprop or jet, in the 80- to 130-seat category, the E-Jets can accommodate more cargo volume and weight, typically offering up to two tonnes capacity on top of checked baggage. This is a substantial revenue stream. Lower CASK even compared to turboprops. Although current ATR 72 and Dash 8 aircraft fill the segment of an 80-seat aircraft, the aircraft range is a limitation to their effectiveness in delivering increased connectivity. In contrast, Embraer E-Jets offer a range that covers India end-toend. From an economic standpoint, with an average network stage length of 550 km, and a utilisation of 11.7 block hours per day per aircraft, the cost per available seat kilometre (CASK) of a 100-seat Embraer E190 aircraft can be 12 per cent to 15 per cent lower than that of an ATR 72 which has levies on fuel price VAT.

By 2020, there will be more than 120 underserved markets with an average stage length of more than 1,000 km

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The second-generation of E-Jets, the E-Jets E2, designed to provide better fuel economy, will offer even greater cost advantage through the all-new Pratt & Whitney geared turbofan engine and a reduction in direct maintenance costs. This cost advantage that the E-Jet and E-Jet E2 family can deliver will bring about lower fares for travellers and higher profits for airlines, making the entire aviation ecosystem a healthier and more sustainable environment. Better productivity and lower maintenance costs than turboprops. As aviators say: an aircraft can only make money when it is flying. Being a jet-powered aircraft, the E-Jets can fly faster and their typical high service reliability enables them to fly with higher frequency and more sectors than the turboprop or other 80- to 130-seat aircraft. Fuji Dream Airlines, an all E-Jet operator in Japan, recently achieved a 12-month service reliability average of 99.83 per cent — the highest among all E170 and E175 operators. On top of that E-Jets have less maintenance down time than other aircraft types. E-Jets have longer intervals between Heavy Checks as the aircraft does not have a calendar limit on Heavy Checks, unlike the B737, CRJ and the Dash 8 turboprop that has a 36-month limit. The A320 and ATR turboprop are even shorter with a 24-month limit between Heavy Checks. Furthermore, coupled with the E-Jet superior flight hour (FH) limits for Heavy Checks, assuming a typical annual utilisation of 2000FH, the E-Jets require only two Heavy Checks as compared to three to five Heavy Checks for the other aircraft types in a 10-year period. The result is lower maintenance costs for E-Jets with less down time and Heavy Checks, and greater revenue opportunities with the higher productivity of E-Jets. Conclusion. There are many avenues for regional connectivity in India to flourish, and this should include building on the existing air links at existing airports where new routes can be developed or route frequencies can be increased. We believe that this opportunity is real and that this will drive the profitable growth of the industry and the economy in India. It is important to remember however that to harness this opportunity, the right tools will be needed. In our case, we see that as being through the world’s leading 70- to 130-seat aircraft, the E-Jet family. SP

2016

RCS

udan very positive for growth The ongoing efforts of the Indian Government to develop regional aviation will have a very positive impact on the economic and social development of the country by Tom Anderson, ATR

PHOTOGRAPHs: ATR

ir connectivity can follow the development of the economy, but most importantly, it can be a driver that prepares the ground for economic development. It is intricately correlated with and contributes to GDP growth, foreign direct investment, employment level, social development and tourism. We observe that air connectivity has been following similar development patterns in various countries. Rapid economic development is initially driven by major cities, with creation of international airports, connected together. India is no exception and the connectivity between metro cities is high, with an intense competition driving airfares down. As this development reaches a mature stage, the pace slows down and regional connections and development are necessary to sustain economic growth. We typically observe the development of hub and spoke models to connect large cities to smaller ones. Indian carriers significantly increased capacity between metros and Tier-II or -III cities and many actually exceed the minimum capacity requirements set in the 1994 Route Dispersal Guidelines. This needs to extend further to create better connections between smaller communities. Now, regional connectivity is becoming paramount. Development path of large countries has historically taken a decentralised approach and markets like the United States, Canada, Brazil, Europe, China and Japan have strengthened their economies by connecting regional centres together rather than only towards few main business hubs. Moreover, if there is too much emphasis on connecting smaller cities to large ones, it can often translate into a higher attractiveness of the metros at the expense of smaller, less developed towns. The new UDAN scheme aims at facilitating and stimulating regional air connectivity by making it affordable to an increasing number of Indian citizens. This is a very positive initiative, and a major guideline must be to encourage sustainability of operations in the long-term. In that respect, aircraft selection will be crucial for the success of the proposed scheme.

Large single-aisle aircraft are efficient and offer low costs per seat but will be hard to fill on thin markets. Furthermore, they require runways, terminals and ground support equipment that may not be available in smaller airports. This will result in severe operating losses for the airlines, with or without the support of a Viability Gap Funding. Very small commuter aircraft (less than 20 seats) may have lower costs per trip but a substantially higher cost per seat. Operators flying these airplanes will require a significant amount of subsidies — beyond what is currently proposed. In both cases, the main objectives of the UDAN scheme — to stimulate regional connectivity, make it affordable and sustainable — will be missed. Under the proposed UDAN scheme, the ATR 72-600 requires less than 30 passengers to generate a profit, making it the right equipment to develop new routes, offer passengers enhanced services and airlines an access to new markets. Most importantly, as demand builds up and reaches levels observed on more mature regional routes, ATR aircraft will not require subsidies and the operations will eventually become viable without any form of government support. With about 90 per cent of the Indian domestic capacity deployed on routes serving metros and an unprecedented growth of the aviation market, it is the right time to encourage the development of regional air transport. Since 2010, ATR aircraft have contributed to the creation of 100 new routes every year worldwide. The ATR aircraft have explored new markets, stimulated demand and offered the right complement to larger airplanes at off-peak times. ATR estimates that 3,000 routes will open and sustainably develop with turboprops over the next 20 years. No doubt many of these will be in India. This is why the ongoing efforts of the Indian Government to develop regional aviation will have a very positive impact on the economic and social development of the country. ATR is looking forward to support at its own level such sustainable growth. SP —The writer is Senior Vice President, Commercial and Customer Support, ATR SP’S AIRBUZ • Issue 6 • 2016 • 21

2016

AirSewa

AirSewa app and Portal launched

P. Ashok Gajapathi Raju, Minister of Civil Aviation, launching the AirSewa web portal and mobile app in the presence of Jayant Sinha, Minister of State, MoCA, R.N. Choubey, Secretary, MoCA, and other dignitaries

We want a meaningful redressal of these grievances. Grievance by nature is not delightful but redressal of them can push up the satisfaction level. A complaint if attended to in a reasonable time frame and the person who has the grievance gets a response, it will go down well with everyone.

PHOTOGRAPHs: Anoop Kamath

— P. Ashok Gajapathi Raju, Minister of Civil Aviation by Rohit Goel

he Indian Minister of Civil Aviation P. Ashok Gajapathi Raju said that his Ministry is committed to provide a hassle-free and comfortable air travel experience to people. To do this, he said, it is necessary to recognise the pattern of problems that people face while travelling, and make suitable systemic improvements in the working by all concerned. At a glittering function in New Delhi attended by all stakeholders in the civil aviation sector, the Minister launched the AirSewa portal and mobile application. AirSewa is an initiative of the Ministry to offer people a convenient and hassle-free air travel experience. It can be operated through an interactive web portal as well as through a mobile app for both Android and iOS platforms. The portal will include a mechanism for grievance redressal, back-office operations for 22 • SP’S AIRBUZ • Issue 6 • 2016

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grievance handling, flight status/schedule information, airport information and FAQs. Starting the launch function, R.N. Choubey, Secretary, Ministry of Civil Aviation (MoCA), said that this is the start of a completely new chapter in the civil aviation sector. “Ours is a service industry and we have very responsible players in this sector but it was felt that the Ministry should take this initiative in putting together a unified integrated platform which could provide for a very quick interaction between the service providers and the users of those services.” Thanking both the Ministers for their tremendous initiative in making this happen, the Secretary added that the inspiration for this came from the Prime Minister who very sincerely had said that unless we provide this kind of service from the service delivery departments of the government, we will not be doing justice to our role. Secretary Choubey assured all

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AirSewa

“When you analyse a complaint, it might throw up a pattern. If it throws up a pattern, it is easier to work and solve that pattern. We have started now and will see how it goes. Scope of improvement is a continuous process. We need to harness it. The idea is good that we would like to address our complaints and try and improve.” — P. Ashok Gajapathi Raju, Minister of Civil Aviation

“Problems that air travellers are facing today need to be responded in a systematic rather than an ad hoc manner. AirSewa is an attempt to provide such a systematic approach to redressing passenger grievances.” — Jayant Sinha, Minister of State for Civil Aviation

the users of this service that the Ministry shall take this forward with the cooperation of all the service providers and will provide a seamless service for all the users. “We welcome your feedback so as to improve this service in times to come.” To discuss and to get the perspectives of various stakeholders from the industry, a panel discussion was organised with Ashok Gajapathi Raju; Jayant Sinha, Minister of State for Civil Aviation; Ashwani Lohani, Chairman and Managing Director, Air India; Hari Marar, President of Airport Operations at the Kempegowda International Airport Limited; and Deep Kalra, Chairman and CEO, MakeMyTrip; as participants. Highlighting the requirement of such a service, Jayant Sinha said that flight delays, problem in refunds, long queues, lack of proper facilities at airports and complaints of lost baggage are the most common problems that air travellers are facing today. He stressed upon the need to respond to these problems in a systematic rather than an ad hoc manner. He said that AirSewa was an attempt to provide such a systematic approach to redressing passenger grievances. Jayant Sinha further added that although it was a major challenge to get the various players who are a part of the civil aviation ecosystem on to a common platform, this has been achieved through AirSewa. During the panel discussion, Minister Raju also weighed in with his own thoughts, “Complaints will always be there. There is no family without complaints. How you address them is the point. One can be pleasant, one can be nice, one can analyse it. Probably, when you analyse a complaint, it might throw up a pattern. If it throws up a pattern, it is easier to work and solve that pattern. We have started now and will see how it goes. Scope of improvement is a continuous process. We need to harness it. The idea is good that we would like to address our complaints and try and improve. Most passengers have something else in mind. The whole aviation process should make their life more pleasant.” With the launch of AirSewa, passengers will be able to register their grievances through the mobile app or on the web

“The Ministry should take this initiative in putting together a unified integrated platform which could provide for a very quick interaction between the service providers and the users of those services.” — R.N. Choubey, Secretary, Ministry of Civil Aviation

portal. The users will have the facility to upload voice or video along with an elaborate description of their issues. They will be given a unique reference number for each of their reported grievances which would also be communicated through an e-mail as well as a SMS. Users can then track the status and response to these grievances through the mobile application as well as the web application based on the reference number provided. Once the grievance is closed, the complainant has an option to provide his feedback and rate the overall experience and satisfaction. Nodal officers have been selected for all stakeholder agencies who will address the grievance in a time bound manner. Each grievance shared will be directed to the responsible nodal agency for resolution based on the grievance category chosen by the complainant. The dashboard shall be divided into three categories consisting of grievances pending within timeline, grievances pending beyond timeline and closed grievances. Each grievance shall have a resolution timeline defined for initial response as well as final resolution. Each communication made by the nodal officer will be sent through an alert by e-mail and SMS. In addition to posting of complaints and grievances, the travellers will also have an option to check the flight status and schedule between any of airports. Flights can be searched on the basis of flight number or for all flights to a particular airport. Airport information will display basic weather information and connecting flight details from the airport. Airport information will include basic details and contact information regarding airport services like wheelchair, transport/parking, rest and relax, Wi-Fi services, etc. Minister Raju called upon all service providers to adopt the spirit of continuous improvement so that the collaborative platform of AirSewa can make air travel truly enjoyable for people. SP To watch the video of the launch, log on to: http://www.spsairbuz.com/news/?id=721 SP’S AIRBUZ • Issue 6 • 2016 • 23

2016

Irish Minister

exclusive

Ireland & India

Pat Breen, Ireland Minister of State for Employment

Ireland has been a pioneer of sorts in aviation and aircraft leasing industry due to the full support from its government. With expertise in all aviation related activities, Ireland is offering business opportunities to India. In an exclusive interview with SP’s AirBuz Editor-in-Chief Jayant Baranwal, the Ireland Minister of State for Employment and Small Business, Pat Breen, states that Ireland and India have so much to share. Patrick Edmond, Group Strategy Director, Shannon Group Plc and Managing Director, International Aviation Services Centre, also participated in this discussion.

PHOTOGRAPH: SP Guide Pubns

and Small Business

Jayant Baranwal (JB): Could you tell us how Ireland has reached the peak in aviation and in how much time? Pat Breen (Breen): Ireland being an island nation, there are only two ways to get out, either by air or by sea. Our geographic location is such, the most westerly countries in Europe, airlines en route to Europe have to stop by. Airlines in the early days stopped off in Ireland en route to Europe. Of course, the early pioneers also stopped in Ireland, as in the first Trans Atlantic flight crossed to Europe. Our history of being pioneer in aviation is something special to us. Our airports started gathering momentum in Dublin, Shannon, Cork airports. So I suppose this has come from a number of entrepreneurs and pioneers in aviation and I go back to somebody like Dr Tony Ryan who started off Guinness Peat Aviation (GPA). And then there is the growth of Aer Lingus, our national carrier. So we had a lot of expertise and entrepreneurs working with GPA. At one time in the 1980s, GPA was the largest leasing company of aircraft in the world. Back in the 1970s, flying and aviation was quite expensive and Dr Ryan had the vision to start this company and he was joined by a number of very dynamic and young people who wanted to excel themselves in the aviation sector, people like Michael O’Leary who founded Ryan air. Out of Guinness Peat Aviation came Ryan Air which was called after Dr Tony Ryan. Of course, Ryan Air started as a very low-cost airline, based on the South-Eastern model in the US. Low-cost was very new at that time, a lot of the traditional airlines had their cartel charging whatever they liked. In those years, to cross to the UK it used to cost 400 pounds, today you can get it for as little as 20 pounds each way that is what has happened with competition. That is how low-cost carriers have made a big difference to us and that model was copied by carriers in Europe. So where are we now? The Irish aviation business is at a very strong point, strong not just in leasing. We lease over half the aircraft in the world from companies like GE Capital Aviation Services (GECAS), Aercap and various other smaller leasing companies and of course Avolon which had Domhnal Slattery, a very good friend of mine from my own county who was the CEO. The tradition was there, the entrepreneurship was there. Our other area of expertise has been in the maintenance of aircraft and painting of liveries. We have 24 • SP’S AIRBUZ • Issue 6 • 2016

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Shannon MRO, Shannon Aerospace and they are doing extremely well. We have got very good skilled workers. We get aircraft from all over the world, for maintenance and painting livery. Qatar Airways, American Airlines among others get work done here. At the moment the aviation sector is going through a transition. We have Patrick from Shannon Airport Authority on this delegation. We have made that airport independent. It operates on its own. Shannon airport had the first duty-free shop in the world; the first Irish coffee was made at the airport; and the first custom free zone in the world is here. From this point of view it makes us experts in aviation. Aer Lingus is now part of the International Airlines Group. We are a small country it is difficult for a national carrier to survive, so Aer Lingus merged. In the 1990s and 2000, there were mergers and consolidation of Lufthansa, AFI, KLM, Aer Lingus, etc, with different groups. As we come out of our downturn in the economy and start growing again, we find that we are one of the fastest growing economies in Europe and aviation is an important sector to grow. We are strong in aircraft maintenance, leasing, aircraft parts, soft-

WE OFFER TAX INCENTIVES FOR AIRCRAFT TO SET UP AIRLINE LEASING COMPANIES, TO SET UP MAINTENANCE AND OTHER AIRCRAFT RELATED COMPANIES. WE SEE THAT IS IMPORTANT TO GROW, CLUSTER GROWTH FROM BOTH THE US SIDE AND THE ASIAN SIDE. — Pat Breen, Ireland Minister of State for Employment and Small Business

2016

Irish Minister

ware for aircraft. We have developed a cluster for aviation in the Midwest region of Ireland where Shannon Airport is and companies are in the process of starting off new aviation related industries there. We are here in India to showcase this and to bond a friendship and relationship between Ireland and India which is practically a huge country, needing connectivity. JB: In what ways can you help India? Breen: There are a number of ways. We are leasing a lot of airline companies. We lease aircraft from Irish companies. JB: What kind of support has there been from the government to your airlines, to your entrepreneurs as that could be good benchmark for India? Breen: First of all, government support to entrepreneurship is extremely important. In the area of science and technology we have invested to train apprenticeship, graduates and we have encouraged our universities to link up with aviation courses. This is how we are going to move forward. We want Ireland to be a centre of excellence for aviation and the government is spending money on science and technology, in university courses, and also encouraging airports, providing tax incentives, etc. JB: What kind of tax incentives? Breen: Tax incentives for aircraft to set up airline leasing companies, to set up maintenance and other aircraft related companies. We see that is important to grow, cluster growth from both the US side and the Asian side and that is why we are looking at India. We have invited the Indian Civil Aviation Minister to visit Ireland and see what we have to offer, not just for the ICT sector but also the aviation sector. JB: You said today it costs 20 euros, does it allow profitability at such low fares? Patrick from Shannon Airport (Patrick): It does, because airlines like Ryan Air and other carriers are extremely competitive, extremely price focused. We see that happening in the Indian market as well. What it means is that they look very closely at all parts of their costs, airport costs very aggressively, staff costs very aggressively, and they take each of these slices of the pie and squeeze each of them and that has this result. Breen: The airlines will make up this with expensive seats as well with last minute bookings. Patrick: If I have to travel tomorrow I will not get the 20-euro fare. Also I will get coffee for 20 euro and my suitcase will be charged. Breen: Also the fare during certain times of the day are different, early morning flights for business people going out are not cheaper, so also late night flights into London. They have revolutionised the whole costs and brought down costs. There is fierce competition on the Irish routes to London. It is not just with the two airlines from Ireland. We have British Airways flying in and also a number of smaller airlines flying into the regional area as well as UK. Patrick: This has big impact on airports and the many incumbent airports are being challenged. Many of the airlines have started flying into these smaller secondary airports which maybe 50 miles (80 km) away and the consumers have been educated. Breen: That has put challenges on Shannon Airport to bring down their airport costs too. JB: The airports are much friendly in terms of costs... Patrick: They have got to be, they are not monopoly suppliers of airports.

RELENTLESS JOURNEY OF EXCELLENCE SINCE 1964 One of the reasons for our industry to be successful is due to the enlightened government policy and to a very pragmatic aviation regulator. Our aviation regulator has been very supportive of the industry. — Patrick Edmond, Shannon Airport Breen: They have to depend on other sources of revenue, besides airlines, leasing of shops, charging for car park, etc, it is a combination of issues. Patrick: You were asking how Ireland can help India. Some of the ways we can help is bring leasing business, can help aircraft availability through leasing to the Indian market. Some of the other areas we are strong in is aviation education, technical training, training engineers, pilot training and so on. JB: Quality training is crucial, zero compromise in training is a must. Breen: We get crew training from all over the world. We are a centre of excellence in that area. There is very successful company in Dublin which makes seats for aircraft, also software for aircraft. We want to help out in countries as well and to grow and it is an area we are developing and formulating a policy. Patrick: One of the reasons for our industry to be successful is due to the enlightened government policy and to a very pragmatic aviation regulator. Our aviation regulator has been very supportive of the industry. Safety is absolute top priority and they are commercially aware and they help the industry. For example, India is planning to build a civil aircraft under ‘Make in India’ and Ireland could help in many ways and the Irish regulator can help in certifying the aircraft. Breen: Our skills are very important that is why we are so successful in aircraft maintenance. Even though we are not a low-cost economy, we have a lot of airlines coming to us because of the good job we do. JB: How is the business aviation doing in Ireland? Breen: Business aviation is small. We have a number of operators but they are small. JB: Does it contribute to your regional connectivity? Breen: It does. For regional connectivity, we are subsidising. The government gives the industry subsidies to fly in to western region, north-east, south-east. We fly smaller turboprop aircraft into those regions. JB: What kind of aircraft? Patrick: Like the ATR 72. Breen: We have to maintain regional balance and ensure that these regions are not disadvantaged. So we have the PSO subsidy and it is quite expensive for the government, but it is good for regional development. SP To watch the full interview, log on to: http://www.spsairbuz.com/news/?id=718 SP’S AIRBUZ • Issue 6 • 2016 • 25

2016

ENGINES

CFM LEAP uses advanced lightweight composite materials such as carbon fibre fan blades, achieving what it calls ‘the ultimate refinement of the traditional turbofan engine’

IN PURSUIT OF PERFECT POWER SABRE is a hybrid rocket and jet, billed as ‘the biggest breakthrough in aerospace propulsion technology since the invention of the jet engine’ by Joseph Noronha

PHOTOGRAPH: CFM

odern jet engines are arguably among the most complex machines ever made. Years of toil and billions of dollars go into designing and developing these devices that are worth their weight in silver. And since commercial engines must keep expensive airliners with hundreds of passengers flawlessly flying, they have no room for error. Indeed, jets are built not just at Six Sigma quality standards (3.4 defective features per million instances), but when possible, even better. Engine technologists strive to machine thousands of components to precise specifications using ever lighter and tougher materials, and packing them into the smallest possible space. Their aim is to deliver ultimate levels of power and efficiency. However, power comes at a price. Aviation fuel is now much cheaper than in the mid-2014, when it constituted almost half an airline’s operating cost. But the airlines know that another sharp rise is 26 • SP’S AIRBUZ • Issue 6 • 2016

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certain, sooner or later. That is why there is no slackening of demand for new and even more fuel-efficient engines like Pratt & Whitney’s PurePower PW1000G, a geared turbofan engine that entered commercial service in January this year and CFM International’s Leading Edge Aviation Propulsion (LEAP) turbofan that should follow in July. Power also needs to be ‘purified’ because of concerns over climate change. According to the influential Air Transport Action Group (ATAG), aviation produced 770 million tonnes of CO2 in 2015 out of over 36 billion tonnes generated by human activity. Although commercial aviation is responsible for just two per cent of worldwide CO2 emissions, these may have a substantial impact on the atmosphere because they are released at high altitude. Therefore, pressure is mounting on the industry to achieve perceptible progress in improving fuel efficiency and reducing emissions and noise. And it has set an ambitious target: to slash net carbon emissions to half of their 2005 level by 2050. This requires huge investments and a massive leap in technology.

2016

ENGINES

RELENTLESS JOURNEY OF EXCELLENCE SINCE 1964

PHOTOGRAPH: PurePower

A cutaway view of PurePower PW1000G engine

Fanning Frenzy. For the first few decades of aviation, it was the piston engine coupled with the whirring propeller that provided power for flight. The Jet Age dawned in the early 1950s with fuel-guzzling turbojets. Then turbojets morphed into turbofans in the 1960s and it took only a short period for these fuelefficient engines to power practically every commercial jet. In a turbofan, most of the cold air is sent around the engine while a small proportion flows through the core. This is because it is more efficient to accelerate a large amount of air a little than a small amount a lot. The proportion of air flowing around the core against that passing through it is called the ‘bypass ratio’. Over the years, air intakes have become ever larger to accommodate larger and better fans. And modern turbofans have bypass ratios of up to 9:1 — one measure of their ultra-efficiency. But the longer fan blades mean their tips are now moving at close to the speed of sound. And that is not heartening because the resulting shock waves could trigger potentially dangerous vibrations. Pratt & Whitney believes that conventional engines have practically reached their limit of improvement and new thinking is necessary. It spent about 30 years and over $10 billion to develop its PurePower brand. PurePower engines use large fans (81 inches in diameter on the Airbus A320neo), but a special gearbox makes the fan turn slower than the turbine. This is possibly the biggest advance in propulsion philosophy since the arrival of the turbofan. The gearbox keeps the efficiency of each component at its peak and increases the bypass ratio to 12:1. Overall, the A320neo’s PurePower engine promises 15 per cent lower fuel consumption than the standard A320 as well as a dramatic reduction in engine noise — up to 75 per cent lower on the ground. Naturally there is a price to pay — increased weight and aerodynamic drag. And the gearbox adds complexity to the engine, heightening the risk of something going wrong some day. Apart from being offered as one of two options on the A320neo, variants of Pratt’s PurePower engine will also be installed in Bom-

bardier’s CSeries regional jets, the Mitsubishi Regional Jet (MRJ) and Embraer’s E-Jets E2 regional jets. It will also be offered as an option on Russia’s Irkut MC-21, a 150- to 212-seat narrow-body airliner. CFM International, owned by Safran and General Electric, prefers the tried and tested route. It feels it can make a better engine than PurePower using conventional turbofan architecture, without the added weight and drag of a gearbox, not to mention its complexity. The CFM LEAP is a high-bypass turbofan, offered as an option for the A320neo and as the exclusive engine for the Boeing B737 MAX as well as the Commercial Aircraft Corporation of China’s new COMAC C-919 airliner. LEAP has more than 4,000 different parts and some are subjected to temperatures of approximately 2,700 degrees Celsius while turning at 2,400 RPM. CFM copes with these harsh conditions by using advanced lightweight composite materials such as carbon fibre fan blades, achieving what it calls ‘the ultimate refinement of the traditional turbofan engine.’ The turbine shroud, another highly stressed portion, is made from ceramic matrix composites (CMC). CMCs have been around for decades but only recently has the technology matured enough to make it practical to use in jet engines. All in all, the PurePower and LEAP are technological marvels that seem set to power the bulk of the global commercial fleet for a decade or more. As to which will fare better in the market, airline head honchos are notoriously conservative and usually prefer icecream in “any variant of vanilla”. That is perhaps why the LEAP has more than 10,500 firm orders and commitments against over 7,000 orders and options for PurePower. However, these are early days and the rivals are yet to prove themselves in commercial conditions. GE9X: Biggest and Best? Since narrow-body planes dominate aviation, technologists mostly concentrate on developing new and better engines to power these. For the big jets, the underdevelopment Rolls-Royce Trent 7000, designated the exclusive SP’S AIRBUZ • Issue 6 • 2016 • 27

PHOTOGRAPH: Reaction Engines

2016

ENGINES

engine for the Airbus A330neo, has a 112-inch fan diametre and 10:1 bypass ratio. General Electric is also going all out to incorporate advanced technologies in the underdevelopment GE9X power plant. It claims the GE9X will be its most fuel-efficient engine ever, with a bypass ratio of 10:1. It will have a significant fuel burn savings: 10 per cent better specific fuel consumption (SFC) than the GE90-115B engine that powers the Boeing B777-300ER and five per cent better than any comparable engine in service in 2020. It generates thrust of 1,05,000 pounds (467 kN). Its fan is 133.5 inches in diametre — a world record. This helps draw in more Cutaway of the SABRE engine and (inset) air using less energy and operating Skylon in flight showing the SABRE engine quieter. The engine uses CMC materials in its core for the fan case and fan blades. CMCs have twice the strength and better thermal capabilities than their metal counterparts yet lift, so smaller wings can support the aircraft’s weight and a weigh just a third. The GE9X, that will power the Boeing B777-8 lighter landing gear and smaller tail will suffice. In turn, smaller and B777-9 airliners, has already attracted over 700 orders and is engines and less fuel capacity will be needed. The twin engines scheduled to enter service around 2020. will be integrated with the fuselage for a clean high-aspect-ratio wing with low drag. Mounted at the rear end, they will re-energise Double Bubble. Jet engine technologists like to do their the slow-moving boundary layer flow over the fuselage and prothing — making complex machines deliver the most power with mote boundary layer ingestion (BLI) which increases efficiency. the greatest efficiency — working independently. At the same This too means smaller engines, which reduces weight and fuel time, airframe designers separately strive to build aerodynami- carriage even more. Indeed, it is a classic virtuous circle and may cally efficient structures and worry about the power plant only at endow the D8 with hard-to-beat efficiency. However, the D8 will the appropriate time. In fact, they usually offer two or three differ- not happen in a hurry because numerous technological chalent engines as options to customers. For instance, the standard lenges remain to be overcome. It is expected only around 2035, a A320 may be powered either by CFM International’s CFM56 or timeframe that NASA calls ‘N+3 generation’. Beyond that, what? by the V2500 from International Aero Engines. Inevitably, when airframe and engine are married up, there is a drop in predicted Sabre Rattling. Modern jets satisfy the human need for performance which is inconsequential. However, now that fuel- speed over short distances, but for longer journeys, time in the air efficiency is a burning issue, aviation technologists have realised can be rather irksome. For instance, despite Emirates’ efforts to that today’s tube-and-wing design is nearing its limit of exploita- make its passengers comfortable, how many would fancy spending tion and integrated engine-airframe design is indispensable. 17 hours 15 minutes to cover 14,203 km on its Auckland to Dubai Integration is what the Massachusetts Institute of Technol- Boeing B-777-200LR flight? In a couple of decades, the same trip ogy’s D8 future aircraft design concept is all about. It is similar in may be accomplished in a fraction of the time, thanks to SABRE. size to the Airbus A320/Boeing B-737 and claims to offer potenUK’s Reaction Engines is developing a reusable space plane, tially huge benefits like 71 per cent reduction in fuel burn, 60 Skylon, powered by a Synergetic Air-Breathing Rocket Engine effective perceived noise level in decibels (EPNdB) less noise and (SABRE). SABRE is a hybrid rocket and jet, billed as “the big87 per cent reduction in landing and take-off (LTO) cycle emis- gest breakthrough in aerospace propulsion technology since sions of nitrogen oxides (NOx) compared with a B-737-800 air- the invention of the jet engine.” Although SABRE will provide an craft. Every part of the airframe and engine will be meticulously economical way to place satellites in orbit, it can also function as reconfigured to maximise efficiency and minimise operating a commercial airliner. The first full ground-based engine test is costs. The fan will be large and feature an impressive bypass ratio scheduled for 2020 and the first unmanned test flight should hapof 20:1. The wide ‘double-bubble’ fuselage will generate increased pen about ten years from now. The UK Government has invested £60 million towards this next-generation engine that is likely to make low-cost high-speed flight feasible. Unlike rocket engines that must carry their own oxygen thus The PurePower and LEAP are significantly increasing weight and drag, SABRE will ‘breathe’ air from the atmosphere. It will feature two operating modes: initially technological marvels that the air-breathing mode cruising at Mach 5 through the atmoseem set to power the bulk of sphere; then if required, using stored oxygen and hitting Mach 25 as the global commercial fleet a conventional rocket in space. A SABRE-powered airliner will take off from a runway, reach any point on the earth in less than four for a decade or more hours and land on a runway. Now that is near-perfect power! SP 28 • SP’S AIRBUZ • Issue 6 • 2016

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2016

Aviation services

Ground Handling & MRO – Key Aspects With the new civil aviation policy, India could well achieve self-sufficiency in ground handling and then work towards the laudable objective of becoming an MRO hub for Asia

Illustration: Vimlesh Yadav

by Group Captain A.K. Sachdev

new civil aviation policy (NCAP) was released in June 2016 and a Regional Connectivity Scheme (RCS) drawing inspiration from it and circulated in draft form, is awaiting finalisation. While national policies cannot be expected to provide full satisfaction to all stakeholders, a beginning has been made by way of policy, something that has not happened since liberalisation of civil aviation in the 1990s and emergence of private of airline in

the 1990s and again since 2003. Constant invocation is repeated ad nauseum in aviation events, of the cheering projection of India becoming the world’s third largest aviation market by 2020. However, skeptics are beginning to have doubts about it. An apt parable here is of a strong man lifting an elephant calf off the ground and triumphantly declaring that he would do so every coming day. The story would end on a despondent note the day the creature’s mass overwhelms the lifter’s might. Indian civil aviation is optimistically projected to grow like the calf; but the SP’S AIRBUZ • Issue 6 • 2016 • 29

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Aviation serviceS

supporting infrastructure appears to be constrained in achieving commensurate incremental strength to support the inexorable enlargement of its burden. So is the Indian system doomed to never match its civil aviation pretensions of growing to a third place or is there hope? This article covers two aspects of related infrastructure — ground handling and maintenance, repair and overhaul (MRO). Is Ground Handling Off the Ground Yet? On August 9, 2016, the CEO of Cambata Aviation, India’s oldest private ground handling company, wrote to its employees not to report for work. The action was the culmination of a troublesome period the company had witnessed as it progressively lost business to competition and had problems disbursing salaries. Its 1,000 employees threatened hunger strike unless they were paid their dues. This turbulence was a symptom of the woes ground handling has had in India for almost 15 years now. In May 2003, for security reasons, the Home Ministry made it mandatory for ground handling at airports to be carried out by firms floated by Indian Airlines, Air India and the Airports Authority of India (AAI) while turning down a proposal by the Ministry of Civil Aviation (MoCA) to permit domestic airlines to continue self-ground handling at airports. Adversely affected were the over 40 ground handling agencies across the country employing 20,000 personnel whose protests were countered by the government with assurance that it would induct trained manpower into the new ventures being floated by the government firms. Airlines and ground handlers promptly pointed out the fallacy that if the personnel who were going to work for the government firms were largely the same as were working for private ones, how would enhanced security levels be achieved by the change? A similar question on security was raised about joint ground handling ventures which both Indian Airlines and Air India were contemplating with Singapore Airlines and Singapore Airport Terminal Services (SATS), both foreign entities. Eventually, the Home Ministry relented in June 2003, permitting private domestic airlines to carry out self-ground handling only to overturn that ruling in 2007 by disallowing self-handling by domestic carriers at metro airports. The alternatives offered were three entities, the airport operator or its subsidiary, a subsidiary of Air India or Indian, and a ground handler selected through a competitive bidding process. After prolonged and unsuccessful parleys, private airlines moved the Supreme Court in 2011. Their main concerns were lowered efficiency of turnaround, reduction in service quality, and huge losses on account of the investments in ground equipment and training of personnel. Though the apex court did not pronounce judgement on the issue, it directed an interim order in this regard be followed, allowing airlines to self-handle their aircraft even at metro airports. In September 2015, private airlines operating at Chandigarh airport were denied ground handling services and five private airlines filed a petition against the contract awarded by AAI to Air India Air Transport Services Limited (AIATSL) to handle ground operations. The High Court allowed private airlines to manage ground handling services against the decision of AAI. Against this backdrop the new civil aviation policy enshrines what it calls “a new framework”. From the point of view of scheduled airlines, the most cheering stipulation is that all domestic scheduled airline operators including helicopter operators, are free to carry out self-handling at all airports using equipment owned or taken on lease and also through a subsidiary, through own employees or employees of their own subsidiary taken on regular employ30 • SP’S AIRBUZ • Issue 6 • 2016

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ment. Hiring of employees through manpower supplier is not permitted; but hiring of equipment without manpower is allowed. As far as airport operators are concerned, major airports are required to ensure that there are at least three ground handling agencies (GHA) including Air India’s subsidiary/joint venture (JV) while small airports are exempted from this minimum number of ground handlers, leaving it to the airport operator to decide the number, based on the traffic, airside extent and terminal building capacity. Air India’s subsidiaries/JVs are required to match the royalty/revenue share offered by other GHAs. In the event of multiple GHAs, Air India is to match the lowest royalty/revenue offered by the other GHAs. Detailed functions for airlines and airports are expected to be notified separately while a loosely worded clause asks airlines and agencies allowed to carry out ground handling services at airports to “ensure compliance with security provisions as required under the law”. Unless subsequent fine print takes away some of the munificence of the policy, this is good news for airlines. MROs. The second biggest component of an aircraft operator’s expenditure is on maintenance of his fleet, the first being aviation fuel. The Directorate General of Civil Aviation (DGCA) website lists 55 approved foreign MROs to which Indian operators can take their aircraft. The majority of heavy maintenance is carried out by foreign MROs. Thus, a domestic strength in the MRO arena would mean succour by way of lower maintenance costs. Unfortunately, Indian MRO industry has had an under-nourished growth and is far from attaining the status required to serve a civil aviation market touted to reach third position in a few years. The new civil aviation policy makes the right noises about remedying this state, declaring the government’s intent to develop India into an MRO hub for Asia. Some steps were taken in this direction through provisions in the union budget 2016-17 by way of exemptions and regulatory relaxations. Other steps proposed in the policy include making it easier for foreign aircraft to use Indian MRO facilities, exhortation to state governments to impose no VAT on MRO facilities, provision of land for MRO in all future airports and relaxation of airport royalties and additional charges for five years from the policy approval date. The $100-million MRO facility in Nagpur built by Boeing consequent to an agreement between Boeing and Air India after it placed a huge order for Dreamliners in 2006, was inaugurated by Union Minister Nitin Gadkari in June 2015. However, for some reasons, it failed to take-off. In February 2016, Air India invited bids from private players to take over and operate the facility. It is understood that SpiceJet has signed up with Air India for use of that facility for major servicing of their aircraft. Private sector MROs have been more successful with Air Works India leading the market. In existence since 1951, the company and proudly claims to be “the largest independent MRO facility in India”. Some other players are Deccan Charters, Reliance Aerospace Technologies and Indamer Aviation. For helicopters, MRO facilities are negligible. There are over 300 helicopters flying in India but MRO support has been negligible so far and only now Pawan Hans Helicopters Limited is planning to set up four MRO firms as a part of its diversification plan; the first two are to come up in Delhi and Juhu, with Guwahati and an as yet unnamed station in the South. It remains to be seen whether the iterations in the policy document actually get translated into meaningful regulations. If they do, India could well achieve selfsufficiency for its own airlines and then work towards the laudable objective of becoming an MRO hub for Asia.

2016

RELENTLESS JOURNEY OF EXCELLENCE SINCE 1964

Aviation serviceS

General Aviation Left Generally Unhappy. As is evident from the foregoing, the ground handling policy and MRO excludes non-scheduled operators and business aviation from its scope. While the policy was still being finalised, Delhi International Airport Limited (DIAL) issued eviction notices to all the general aviation aircraft operators, some of whom are carrying out their maintenance activities under existing agreements and within the ambit of existing rules and regulations, ordering them to vacate the hangar spaces so far leased to them. This step was a prequel to DIAL entering into agreements with two fixed-base operators (FBO)/MRO (Bird Worldwide Flight Services — ExecuJet and Indamer — Mjets) for a duopolistic and what turned out to be oppressive regime allowing only these two entities to handle flights and carry out maintenance activities for general aviation operators based at Delhi. Business Aircraft Operators Association (BAOA) appealed in Delhi High Court; but was told by the court that the members affected

by the DIAL notification would have to file cases separately. Affected companies have reached working compromise with the designated service providers and currently no litigation is in progress. However, BAOA has got the court to permit it to reserve the right to file a case in the future. Conclusion. Ground handling and MRO expenses are substantial shares of an aircraft operator’s overall outflow of payments and any saving therein would help bottom lines. For over a decade, policy-related woes have affected the prosperity of Indian civil aviation. All stakeholders in civil aviation wait with bated breath to see how the new civil aviation policy is transmuted into processes and practices. If civil aviation has to flourish, the government will have to not just be content with having framed a policy but also throw its weight behind consummating the spirit of the policy and cajole state governments into doing so. At the moment, future projections can at best be speculative. SP

Lufthansa Technik in Asia-Pacific

Photograph: Lufthansa Technik

ufthansa Technik is a leading provider of maintenance, repair and overhaul (MRO) and modification services in the civil aviation industry. In the Asia-Pacific region Lufthansa Technik is engaged for over 30 years, offering several thousand jobs in the region and serving more than 130 customers.

component division of Lufthansa Technik in the India, Bangladesh, Sri Lanka and Maldivian markets. LTSI’s main focus is regional component service for Airbus aircraft of the types A319, A320, A321, A330/A340 as well as for Boeing aircraft of the types 737NG and 777.

Lufthansa Technik in China. Lufthansa Technik has important commercial interests and several highly visible projects in China, Ameco: Based in Beijing, Aircraft Maintenance and Engineering Corporation (Ameco) is a joint venture of Lufthansa (25 per cent) and Air China (75 per cent), founded in 1989. Ameco specialises in MRO of aircraft, engines and components. With about 11,000 employees, Ameco is the biggest provider of technical support services in China. Currently, it possesses maintenance licences from almost 30 countries including CAAC, FAA and EASA. It has over 160 maintenance stations worldwide, forming a large maintenance network. Lufthansa Technik Shenzhen Co. Ltd: It is a joint venture of Lufthansa Technik (80 per cent) and Beijing Keilan (20 per cent). Operational since 2002, it provides MRO services for airframe related components (ARC) and aircraft components (COM), including modifications, spares supply and engineering support.

Lufthansa Technik in Malaysia. Airfoil Services Sdn. Bhd. (ASSB) is a joint venture between MTU Aero Engines (50 per cent) and Lufthansa Technik (50 per cent). ASSB specialises in the repair of blades from major aircraft engine types, including GE, CFMI and IAE. At ASSB’s factory in Selangor, Malaysia, engine airfoils for low-pressure turbines and highpressure compressors are repaired.

Lufthansa Technik Services India (LTSI). Founded in 2005 and based at Bengaluru, LTSI is a subsidiary of Lufthansa Technik AG. As the successor to One Stop Airline MRO Support Pvt. Ltd., the company operates a pool of components and provides materials management, customer service and spares provisioning services for the Indian and South East Asian customers of Lufthansa Technik AG. LTSI also manages material stock for customers in India and in some cases holds inventory for them at Bengaluru and offers warehouse services for aviation and non-aviation companies. LTSI represents the

Lufthansa Technik in Philippines. Founded in 2000 as a joint venture between Lufthansa Technik AG (51 per cent) and MacroAsia Corporation (49 per cent), Lufthansa Technik Philippines (LTP) offers aircraft MRO services. Specialising in base maintenance for the A320 family, A330, A340 and A380 aircraft types, LTP offers line maintenance services, engine, component and back-shop support, and personnel assignment. LTP recently completed a hangar expansion project which extends two existing bays to accommodate a second A380 and another wide-body for base maintenance. Equipped with versatile docking systems, mezzanines and linking bridges, it is able to fit current and future aircraft types such as the A330, A350, B777 family and B787. Lufthansa Technik sales organisation in Asia. In Asia, Lufthansa Technik’s sales activities are headed by a Senior Vice President for Corporate Sales, Asia-Pacific. In 2015 Lufthansa Technik regionalised its sales organisation to offer the region’s aircraft operators a focal point of contact in an effort to bring the wide-ranging services and capabilities of Lufthansa Tecnik closer to its customers. SP

SP’S AIRBUZ • Issue 6 • 2016 • 31

Finally

A Promising Future! The Indian civil aviation industry is indeed fortunate that it is endowed with leadership that is proactive, decisive and forward looking

PHOTOGRAPH: Karthik Kumar / SP Guide Pubns

he year 2016 has indeed been truly eventful for the Indian civil aviation industry and it will certainly go down in its history as one that ushered in a new dawn for the industry that had for the major part of its existence, been engaged in a relentless struggle for survival. It was for the first time in the history of the nation since its independence that in the month of June this year, the Government of India came up and implemented an integrated National Civil Aviation Policy that was crafted to provide an ecosystem for the harmonised growth of the different subsectors of the Indian civil aviation industry namely the airlines, airports, air cargo, maintenance, repair and overhaul (MRO) services, business and general aviation, aerospace manufacturing and skill development. The major focus of the National Civil Aviation Policy however was on regional aviation, a segment of the industry that had the potential to provide the next phase of growth; but had thus far remained largely neglected. The new policy has provided for what has been termed as the Regional Connectivity Scheme to make available the facility of air travel to the large segment of the population that resides in the hinterland and the remote areas of the country not easily accessible by surface transport. This scheme also branded as ‘Ude Desh ka Aam Naagrik’ or UDAN for short, envisaged creating massive infrastructure by upgrading capacity of airports, building low-cost greenfield airports and activating the large number of airstrips currently not in use. The scheme also catered for ensuring financial viability through Viability Gap Funding (VGF) for regional carriers who opt to be a part of the scheme and operate to regional destinations. The response from the regional carriers has so far been encouraging. Under the new government led by Prime Minister Narendra Modi, the Indian civil aviation industry is indeed fortunate that it is endowed with leadership that is proactive, decisive and forward looking. Headed by the dynamic and proactive Minister of Civil Aviation P. Ashok Gajapathi Raju, duly supported by the Minister of State for Civil Aviation Jayant Sinha and a very com32 • SP’S AIRBUZ • ISSUE 6 • 2016

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petent and result oriented Secretary, Ministry of Civil Aviation, R.N. Choubey, it is probably for the first time that the political and bureaucratic leadership has been interacting with the captains of the Indian civil aviation industry and are prepared to not only listen to their problems, but genuinely appreciate their difficulties and take appropriate steps to resolve issues. Abrogation of the controversial 5/20 rule is one vivid example of their resolve to set things right in the industry. And of course creating the resources to support regional carriers through VGF is another. One issue that has been pending for long is the privatisation of the national carrier Air India. In a recent interview, the Minister of Civil Aviation Gajapathi Raju indicated that the government was exploring ways and means of easing the massive debt burden of the national carrier Air India. In order to achieve this, the government is even willing to talk to parties that might be interested in picking up stake in the airline. While complete privatisation of the only state-owned airline in the country may still be a distant dream, the Ministry of Civil Aviation appears inclined to involve the private sector in the management of this lossmaking national carrier and effectively complete the turnaround of the airline initiated a few months ago. The effort by the Ministry of Civil Aviation to transform the Indian civil aviation industry has produced results that are evident in the sustained rate of growth of passenger traffic which has been in the region of 20 per cent per annum. The government aims to propel the Indian civil aviation market from its current position of ninth to the third largest in the world in the next few years. Passenger traffic is also expected to grow from the current level of 150 million per annum to 500 million per annum. With an enlightened and aggressive leadership and sustained effort by all the stakeholders in the industry, the objectives set for it to achieve are not beyond the realm of possibility. In conformity with the vision of the Modi-led government, the Indian civil aviation industry too may finally witness good days ahead! SP — B.K. Pandey

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