aviotech_thought leadership_series_airport_security_market_assessment_october 2011

Airport Security Market Assessment

India

Thought Leadership Series

October, 2011

Aviotech is an India focussed Aerospace, Defense and Security advisory and investments practice working with firms and their senior management throughout the value chain of enterprises, ranging from OEMs, Component Manufacturers, Private Equity / Venture Capital firms, Law Firms to Research and Advisory Bodies. Our offerings comprise: Strategic Roadmaps for market & products Manufacturing Advisory Offset and Policy Advisory Aerospace & Defense Investment Advisory (buy and sell side) Aerospace & Defense Regulatory insights and compliance Market Assessment, mapping and Evolution insights Sector specific thought leadership research Our services are delivered by a sector specialist team with extensive experience in the Indian Aerospace, Defense and Security sector and international markets. To know more about how Aviotech can help you and your organisation leverage the opportunity offered by Indian Aerospace, Defense and Security opportunity, please visit www.aviotech.com or write to [email protected] .

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Udit Narula +91 (0) 965 445 2626

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Airport Security Market Assessment

Synopsis Airport security is a key component of Critical Infrastructure Protection

which is a subset of the larger Homeland Security spend for India. The Homeland Security spend annually in India (across central government, state governments and private industry) is anticipated at more than $38 Bn The projections for the next 5 years are anticipated to be several folds more Of the Homeland security spend the Critical Infrastructure Protection

contribution is anticipated at 16% Airport security contributes to approximately $800 mn as an annual

opportunity. This trend is seen to have a strengthening uptick in spending over the next 2-3 years as key airports of India are progressively modernised alongwith the inception of new ones Aviotech anticipates the market for Airport Security in India to be a

cumulative opportunity of $6 Bn over the next 5 years

Indian Security Market

Source: Aviotech Research

Aerospace and Defense Update


Defense Advisory & Investments

The first step in analyzing the Critical Infrastructure Protection market is defining what constitutes “Critical Infrastructure”

Critical infrastructure is a term used by governments to describe assets that are essential for the functioning of a society and economy. Thus if the consequential aspect of failure of an infrastructural facility is taken into account, a large and diverse set of sectors fit into the framework of “Critical infrastructure”

Key threats to Critical Infrastructure include:

Terrorism and internal security

New forms of cyber crime

Natural hazards

Increasing overall infrastructural spends are cascading into larger capital outlays for Critical Infrastructure in specific and security market in general. Total spend by the government on Critical Infrastructure security in India over the next 5-6 years is anticipated to be around $32 Bn

The key focus areas of Critical Infrastructure Protection include integrated security systems, disaster management equipment, emergency response forces and physical manning of installations

Airport security is one of the major sub components of Critical Infrastructure Protection. Thus this report is an attempt to provide an overview of the Critical Infrastructure security market through a detailed mapping of the airport security market in India

The same exercise when performed individually for all the other components of Critical Infrastructure security will give us a fair idea of the overall market

Detailed Assessment - Critical Infrastructure

Critical Infrastructure Protection - Components

Critical Infrastructure market in India

Key areas of focus

Integrated security systems Disaster

management equipment Emergency

response forces Physical manning of

installations

Projected market

$32 Bn in the next 5-6 years

Share out of the overall security market

16%






India's domestic aviation market continues to expand significantly:

Passenger traffic increased from 40 mn in 2000-01 to 124 mn in 2010-111

Cargo handled has expanded by 18% year on year1

Investment of Rs. 12,900 Crores envisaged on creating new airport facilities in the 12th five year plan2

Currently there are 50 operational airports in the public domain and 15 in the private domain. This number is expected to increase significantly4

The need for security equipment, therefore, is growing in tandem with the growth in the number of airports and travellers. The core areas of high-tech equipment, such as digital surveillance technology, perimeter control equipment, access control and emergency response have captured the attention of all airport operators (both private and government)

The Indian airport security market is expected to present an opportunity to the tune of $6 bn till 2015-16. This will include upgradation of existing airports, replacement of equipment as well as procurement for the Greenfield airports planned

Detailed Assessment - Airport Security in India

Number of Airports: Projected rise

Public-Private partnership projects

12 airports (till 2014)

Modernization of metro airports


Modernization of non metro airports


Airport development in Eastern states


No frills/Low cost airports


Private/Merchant airport development


Airport Authority of India’s projection for 2020

500 airports

Airport Security in India - Classification


Source: Position paper on the airports sector in India by the Department of Economic Affairs, Ministry of Finance, Government of India

*Source: 1Creating World Class Infrastructure by Ministry of Civil Aviation, GoI

215th Annual Report, Airport Authority of India 3 List of Licensed Aerodrome (as on 31st August, 2011) by the DGCA




Focus areas for capacity building in airport security will be upgradation and integration. As an illustration, the future may be defined by systems which integrate perimetric security equipment with surveillance equipment which will further generate triggers to activate response principles and control mechanisms

The process of upgradation of equipment at the existing airports and new installation at the planned airports has been set into motion with the following emerging trends:

Airport security equipment market in India

Airport Security Infrastructure: Key Roles

Overseer Airport Authority of India

Regulator Bureau of Civil Aviation Security

Buyer Airport Operator (Private or Government)

Implementer Central Industrial Security forces

Assumptions for projecting market size for each equipment class: • The classification used in the figure “Airport Security in India – Classification” and

contains the same sub components • The airports for public use were divided into bigger airports in terms of footfalls (Delhi,

Mumbai, Bangalore etc.) and smaller airports (Bhubaneswar, Chandigarh etc./). • The number of existing/projected equipment researched through sources at each

airport was plugged in accordingly • The rate at which the government buys the listed equipment was as the benchmark

price of equipment • All the security equipment was assumed as getting replaced once every three years on

account of wear & tear or technology obsolescence, all the services an yearly cycle of contract renewal

• Integration and installation as well as service and maintenance have each been taken 50% of the cost of equipment

• The total market was projected accordingly

All figures in $ mn and over a 3 year horizon






The responsibility lies with Central Industrial Security Force, although many private airport operators have now started complementing it with private security

About 4000 personnel for the larger airports and 500 for the smaller airports are employed for airport security

This sub-segment addresses about $300 mn of the airport security market each year

Largest opportunity is seen to lie in bullet proof jackets, hand held weapons and light armored vehicles

Airport Security Spend : Physical Manpower


Constantly evolving technologies and rapid obsolescence ensure quick turnaround of the equipment necessary

Major sets of opportunities are:

Scanners: Including X ray Baggage Scanners, Hand held metal Detectors, Hand Baggage Scanners and Door Frame Metal Detectors (about $120 mn)

Surveillance equipment: Including CCTV System & surveillance monitors, IP surveillance cameras (about $80 mn)

Perimetric access: Bollards, Tyre killers, Boom barriers, Electrical Fencing, Alarms and sensor systems for fencing and Turnstiles (about $50 mn)

Largest opportunity is seen to lie in X ray baggage scanners, hand baggage scanners, CCTV systems and electrical fencing and sensor systems

Airport Security Spend : Perimetric Security

Major components as a percentage of the total physical manpower security market

Major components as a percentage of the total Perimetric Security market







Major sets of opportunity are:

Bomb detection and disposal: Including Explosive Vapour Detector, Improvised Explosives Device (IED) Detector, Liquid bomb detector, Non linear Junction Detector, Water Jet Disruptors, Bomb Disposal Kit, Bomb disposal blankets, IED Jammers and Bomb Disposal Suits (about $45 mn)

Disaster response Vehicles: Police vehicles, ambulances, communication vehicles and fire tenders (about $155 mn)

Including Fire fighting equipment: Including smoke detectors, fire extinguishing systems and hand held extinguishers (about $10 mn)

Largest opportunity is seen to lie in IED detectors & jammers and emergency vehicles

Airport Security : Disaster Management & Emergency Response


Largest opportunity is seen to lie in smart card readers, iris recognition equipment and doorphones/intercom

Identification/Access Control

Major components as a percentage of the total Disaster Management market

Major components as a percentage of the total Identification / Access Control market



DISCLAIMER

DISCLAIMER: This note has been prepared by Aviotech on the basis of publicly available information, information provided by various sources, neither which have been independently verified by Aviotech. Aviotech or its employees shall in no circumstances whatsoever be liable or responsible for any inaccuracies, omissions, mistakes or errors in this paper and for any economic or any other loss or damage, incurred or suffered by the reader/ user or any other person, arising (whether directly or indirectly) out of or in connection with such information. This note has been prepared without prejudice. Any and all information contained herein is based on good faith assumptions and is provided for general information purposes only. This information does not constitute an offer, promise, warranty, or guarantee of performance. This document should not be used or relied upon for any purpose other than as intended by Aviotech. Opinions expressed herein are subject to change without notice. Aviotech undertakes no obligation to provide the recipient with access to any further information or to correct any inaccuracies or omissions which may become apparent.

Aviotech does and seeks to do business with companies covered in its research reports. As a result, investors

should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Analyst Undertaking: The Research Analyst(s) (marked with a (*) on the front cover of this report certifies (or,

where multiple research analysts are primarily responsible for this report, with respect to each security that the research analyst covers in this research) that; 1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject companies and their securities; and 2) no part of any of the research analyst's compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed by the Research Analyst(s) in this research report.

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aviotech_thought leadership_series_airport_security_market_assessment_october 2011

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