RCS 2.0: Taking Flying to the Masses

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RCS 2.0: Taking Flying to the Masses RCS 2.0: Taking Flying To The Masses Presented to: Shri P. Ashok Gajapathi Raju November Hon'ble Minister of Civil Aviation Shri Jayant Sinha 2017 MoS Civil Aviation TITLE RCS 2.0: Taking Flying to the Masses YEAR 2017 AUTHOR AUCTUS ADVISORS COPYRIGHT No part of this publication may be reproduced in any form by photo, photo print, microfilm or any other means without the written permission of AUCTUS ADVISORS Pvt. Ltd. This report is the publication of AUCTUS ADVISORS Private Limited (“AUCTUS ADVISORS”) and so AUCTUS ADVISORS has editorial control over the content, including opinions, advice, statements, services, offers etc. that is represented in this report. However, AUCTUS ADVISORS will not be liable for any loss or damage caused by the reader’s reliance on information obtained through this report. This report may contain third-party contents and third-party resources. AUCTUS ADVISORS takes no responsibility for third part content, advertisements or third-party applications that are printed on or through this report, nor does it take any responsibility for the goods or services provided by its advertisers or for any error, omission, deletion, defect, theft or destruction or unauthorized access to, or alteration of, any user communication. Further, AUCTUS ADVISORS does not assume any responsibility or liability for any loss or damage, including personal injury or death, resulting from use of this report or from any content for communications or materials available on this report. The contents are provided for your reference only. The reader/ buyer understands that except for the information, products and services clearly identified as being supplied by AUCTUS ADVISORS, it does not operate, control or endorse any information, products, or services appearing in the report in any way. All other information, products and services offered through the report are offered by third parties, which are not affiliated in any manner to DISCLAIMER AUCTUS ADVISORS. The reader/ buyer hereby disclaims and waives any right and/ or claim, they may have against AUCTUS ADVISORS with respect to third-party products and services. All materials provided in the report is provided on “As is” basis and AUCTUS ADVISORS makes no representation or warranty, express or implied, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title or non – infringement. As to documents, contents, graphics published in the report, AUCTUS ADVISORS makes no representation or warranty that the contents of such documents, articles are free from error or suitable for any purpose; not that the implementation of such contents will not infringe any third-party patents, copyrights trademarks or other rights. In no event shall AUCTUS ADVISORS or its content providers be liable for any damages whatsoever, whether direct, indirect, special, consequential and/ or incidental, including without limitation, damages arising from loss of data or information, loss of profits, business interruption, or arising from the access and/ or use of content and/ or any service available in this report, even if AUCTUS ADVISORS is advised of the possibility of this loss. AUCTUS ADVISORS Pvt. Ltd. PHD Chamber of Commerce & Industry Manish Chheda Yogesh Srivastav Managing Director Director [email protected] +91 9971 998 934 [email protected] CONTACTS Abhilash Singh Director +91 9999 024 157 [email protected] 2 CONTENTS 1. Introduction ...................................................................................................................................... 15 2. Overview Of Global Aviation Industry .............................................................................................. 17 2.1 Global Macro-Economic Indicators ............................................................................................. 17 2.2 Global Aviation Industry Overview ............................................................................................. 18 2.3 Region-wise Overview ................................................................................................................. 21 3. Overview of Indian Aviation Industry ............................................................................................... 24 3.1 Domestic Macro-Economic Indicators ........................................................................................ 24 3.2 Indian Aviation Industry Overview .............................................................................................. 26 3.3 Growth in Indian Aviation Market .............................................................................................. 28 4. Regional Connectivity Scheme (UDAN) ............................................................................................. 34 4.1 Key Constructs of the Scheme .................................................................................................... 35 4.2 First Round of Bidding ................................................................................................................. 35 4.3 Second Round Bidding ................................................................................................................ 38 5. Viability of Operations Under RCS Policy .......................................................................................... 40 5.1 Analysis of Round 1 of Bidding for RCS ....................................................................................... 40 5.2 Need of Smaller Aircraft for RCS operations ............................................................................... 41 5.3 Case in Point: Inclusion of RCS Aircraft Financing in Priority Sector Lending ............................. 43 5.4 Case in Point: VGF Support for Small Aircraft ............................................................................. 45 6. Enhancing Reach of RCS: Proposed Solutions ................................................................................... 46 Appendix: Global Case Studies ............................................................................................................. 54 Essential Air Services – US ................................................................................................................ 54 Public Service Obligation – EU .......................................................................................................... 56 Regional Aviation Access Program (RAAP) – Australia ..................................................................... 58 Remote Connectivity Regulations in Canada .................................................................................... 59 Direct Subsidy Program in China And Russia .................................................................................... 61 14 1. INTRODUCTION Civil Aviation has a strong correlation with growing at 15%+ (compared to similar period economic growth and development of a last year). With the positive outlook of macro- country. On one hand, economic development economic factors, low ATF prices and industry- of the nation can create demands for and friendly government policies, India is expected promote the development of civil aviation. On to become the third largest aviation market by the other hand, civil aviation can satisfy the 2025, a year earlier than as predicted by IATA potential demands of social tourism, logistics in 2016. industries and so on, and boost the Even with the high growth rate in the last development of the national economy. An decade, India’s air travel penetration is just ICAO study attributes over 4.5% of global GDP 0.08 air trips per capita per annum, much to the air transport component of civil aviation. lower than developed countries like the U.S. Improvements in connectivity contribute to and Australia (22-35x India’s air travel the improvement in the overall level of penetration) and even developing countries productivity through two main channels: like China and Brazil (4-7x India’s air travel through the effects on domestic firms of penetration). Over the next decade, rising increased access to foreign markets, and disposable incomes are expected to increased foreign competition in the home significantly enhance the penetration of air market, and through the freer movement of travel in India. investment capital and workers between countries. In line with the increasing passenger traffic in India, Boeing projects India's demand for The last decade has witnessed significant aircraft to touch 2,100, valued at USD 290 Bn, expansion across passenger and freight traffic, over the next 20 years. In addition, Boeing number of operational airports and aircrafts, projected a worldwide demand for 41,030 new and investments in the sector. The first half of airplanes over the same time period, with India the last decade saw the Indian Aviation passenger carriers needing more than 5.1 per Industry being bogged down by a period of cent of the total global demand. high fuel prices, effects of a global financial crisis and limited pricing power which Following are the main demand side drivers contributed to industry wide over-capacity. supporting traffic growth: However, during the later part of the decade, supported by the strong macro-economic • Increase in demand due to growing middle indicators the sector has emerged stronger. class and improvement in the overall This part also saw the industry environment business sentiment leading to increase in becoming more conducive, with low
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