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A visionary partnership was formed in the 1970’s. GE and Snecma created CFM International*. With eyes clearly focused on tomorrow, that highly successful partnership has now been extended through 2040. We look forward to the future. To setting industry-leading reductions in fuel burn and emissions. To delivering the next-generation engine for narrow-body aircraft. Be far-sighted. Visit www.cfm56.com/agreement now. *CFM, CFM56 and the CFM logo are all trademarks of CFM International, a 50/50 joint company of Snecma and General Electric Co. SP.CIV.AVI_267x210_Eyetest.indd 1 4/9/08 11:57:57 CIVIL Special INDIAN SCENARIO Present TenseDULL SENSE OF EXPECTATION PERVADES THOSE WATCHING THE TenseINDIAN AVIATION SCENE. Among these observers is one section that is perversely and morbidly on the lookout for the first airline to fold up. Oth- ers, the majority, would like to believe that the current state of aviation is by a passing phase and that the right decisions and actions will propel the industry to a level of vibrant enthusiasm prevalent during 2003-04. Group Captain A.K. An overview of Indian aviation per force must be in the context of Sachdev, Bangalore Athe global aviation state of affairs. Worldwide, at least 30 airlines have 4 . SP’S AVIATION . Issue 9 . 2008 WWW.SPSAVIATION.NET Civil Special INDIAN SCENARIO Advent of a slew of LCCs perhaps led to over-capacity, under-pricing and a tariff cold war that set the scene for the current haemorrhage in the industry. Further bloodshed has been caused by the fuel price rise. Sieving through the turmoil, here’s a close look at the survival and growth strategies adopted by some of the key sectors— airlines, cargo and MRO. shut down since 2008—the According to a recent report prepared by Ernst and Young, reasons have been variegat- global passenger volumes are expected to under perform the ed but rising fuel prices and, predicted Cumulative Annual Growth Rate (CAGR) of 5.4 per more recently, the burn down cent during 2008. Even gloomier is the prediction that across in US economy, have been 2009-2011, CAGR may drop to 5.1 per cent. These figures major contributing factors for need to be seen in the context of the growth between 2006 some disturbing quantitative (4,381 million) and 2007 (4,796 million)—a rise of 9.47 per trends. Funding for airlines cent. Global cargo figures are predicted to grow at a lower has become harder to access, CAGR of 4.8 per cent as compared to the expectation of 5.0 per fuel hedging has suddenly be- cent for 2008. On a brighter note, Asia Pacific region and the come dangerously speculative, Middle East are slated to be the main growth geographies. and thus unattractive as a risk In India, the passenger traffic CAGR over the period 2009- management option, insur- 2012 is expected to be 19 per cent. However, the Indian avia- ance and re-insurance for air- tion industry has been struggling against losses since the lat- craft and other airline assets ter half of 2005. According to the International Air Transport has become more speculative, Association (IATA), India’s aviation growth slowed from 33 and customer confidence in per cent in 2007 to 7.5 per cent in the first half of 2008, and airline stocks has displayed reached a negative in the latter half. The summated losses for mild tremors. On an aside, the the current financial year are estimated by IATA to be around rupee—hit by risk aversion $1.5 billion (Rs 6,965 crore). However, a more pessimistic fig- and bank actions—posted a ure of $2 billion (Rs 9,290 crore) also finds place in aviation huge fall down to around Rs literature. This figure gives India the dubious distinction of be-