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The Indian Perspective

ALLIANCES, JVs & REGULATORY HURDLES IN AVIATION INDUSTRY KOCHHAR & CO. Indo-US Resurgence Summit, IACC December 2013 . The Indian Perspective. Hurdles . Infrastructure Bureaucracy / red- tapism Weak State-owned airline Kingfisher debacle (confidence of investors has taken a tumble) Taxation

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The Indian Perspective

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  1. ALLIANCES, JVs & REGULATORY HURDLES IN AVIATION INDUSTRYKOCHHAR & CO.Indo-US Resurgence Summit, IACCDecember 2013

  2. The Indian Perspective

  3. Hurdles • Infrastructure • Bureaucracy / red-tapism • Weak State-owned airline • Kingfisher debacle (confidence of investors has taken a tumble) • Taxation • Fuel Prices • Airport Charges 3

  4. Sector-specific Legislative Framework • Archaic set of laws • Aircraft Act, 1934 • Aircraft Rules, 1937 • Civil Aviation Requirements & Aeronautical Information Circulars • Bilateral Treaties 4

  5. Upside • Untapped potential - currently, under 5% of India’s 1.2 billion people travel by air (IATA) • Open Sky • 49% FDI permissible in airlines by international airlines • Proposed reduction in ATF cost and review of tax structure • 100% FDI permissible in existing airports (approval required for FDI beyond 74%) • 100% FDI under automatic route for Greenfield airports • 100% tax exemption for airport projects for 10 years • Proposed multimodal connectivity to facilitate air transportation • Regional connectivity – Tier II and Tier III cities • Encouragement for development of MRO hub 5

  6. And thus, emanating from the ‘upside’, we have…

  7. Alliances & JVs Galore • Airlines • SQ / Tata • Air Asia / Tata • Ethiad / Jet • SpiceJet… • Airports • Delhi Airport – JV b/w GMR, Malaysia Airports Holding & Fraport • Hyderabad Airport – JV with Malaysia Airports Holding • Bangalore Airport – Siemens Project Ventures, Germany • MRO • Airbus / NACIL – MRO facility in Delhi • Boeing - JVs with • Air India MRO facility - Nagpur • Tata for manufacture of floor beams for Dreamliner • IISc and IT firms for development of aerospace-related apps 7

  8. Looking within the region…

  9. Asian perspective … • Traditionally export oriented…increasingly becoming reliant on neighbourly trade and tourism • Growth in China and India largely on back of respective domestic consumption • Apart from China and India, countries in the South East Asian region (Malaysia, Thailand, Indonesia, Vietnam, Cambodia and the Philippines) are also surging towards greater economic strength 9

  10. Asia’s Growth Potential * Thailand, Vietnam, Cambodia, Philippines & Malaysia Source: World Economic Outlook, January 2013 10

  11. Effect on aviation industry • Extraordinary growth in Asia, has a profound effect on global trade and on the aviation industry in particular • To sustain the growth and profitability, the region’s carriers are vying for the largest order books with aircraft manufacturers 11

  12. Innovative Measures, JVs and Alliances • In addition to large aircraft orders, Asian carriers have introduced certain innovative measures to sustain growth: • Economically sustainable long-haul low-cost operations • Independent cross-border JV LCCs • Undermines foreign ownership constraints • Flattens regulatory barriers • Circumvents bilateral proscription against right of establishment • Establishing low-cost subsidiaries of FSCs 12

  13. The way ahead The innovative JVs and alliances in the aviation industry in Asia are disrupting the global status quo 13

  14. Thank you! Kochhar& Co. Piyush Gupta (T): +91.124.4545222 (E): piyush.gupta@kochhar.com 14

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