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The Aviation Industry of India
8. 7. 6. 2. 5. 3. 1. Topic Introduction Through the Years The Present Situation Indian Aviation SWOT Analysis Challenges and Opportunities Future of the Aviation Industry Conclusion Bibliography Page No.Sr. No. 4. 3 4 5 6 9 12 13 14 Page | 2 .
It provides air transport services for travelling passengers and/or freight. Let us now have a look at how it all began and what opportunities and speed bumps came in its way to make it the 9th largest aviation market in the world and what will it take to become the best. 1911 the first commercial civil aviation flight took place in India between Allahabad and Naini. This is considered to be the world’s first airmail service and the beginning of civil aviation in India. India was one of the first few countries to embrace civil aviation. On 18th February. It hit rock bottom but also reached its peak. Page | 3 . Since then the ride hasn’t been very smooth. The mistakes of the past are now being rectified to improve its present but the future is still full of surprises.Introduction Airline is a very relevant part of the service sector.
Tata Sons Ltd. Today the Indian aviation industry is dominated by private airlines and low-cost carriers like Deccan Airlines. And Indian Airlines. the Indian Government and Air India (earlier Tata Airline) set up a joint sector company. the first Indian airline. SpiceJet etc. GoAir. started a regular airmail service between Karachi and Madras three years later. The adaptation of Open-sky policy in 1990 and other liberalization policies of Indian Government on aviation sector made the industry undergo a rapid and dramatic transformation. gradually lost its market share to these private airlines. nine air transport companies were carrying both air cargo and passengers in the Indian Territory. During the time of independence. To further strengthen the aviation sector of India. Later the government-owned airlines dominated Indian aviation industry till the mid-1990s.. Air India International in early 1948. KINGFISHER JET LITE GO AIR INDIGO AIR INDIA JET AIRWAYS SPICEJET 14% 13% 7% 20% 8% 18% 20% Major Market Players Page | 4 .Through The Years The first domestic air route between Karachi and Delhi was in December 1912. the giant of Indian air travel industry. Without any backing from the Indian government. And the nationalization of Indian Airlines (IA) in 1953 brought the domestic civil aviation sector under the purview of Indian Government. It was opened by the Indian Air Services in collaboration with the UK based Imperial Airways as an extension of London-Karachi flight of the Imperial Airways. Several private airlines have ventured into the aviation business in succession and many more are about to enter the arena.
as reported by Centre for Asia Pacific Aviation (CAPA) India. India's domestic air traffic grew at a rate.Aviation Industry outlook. We also have over 449 airports and airstrips located in India. according to global figures for June 2011. Given the strong market fundamentals. Indian airlines reported a continuous growth trend and a strong domestic passenger growth rate of 22. They are flights that provide fewer comforts at lower costs.The Present Situation India's domestic aviation market expansion has been the strongest in the world .1 per cent. the scheduled operators now have reached 435 aircrafts connecting the nation and the world. Low Cost Carriers (LCC) have given an opportunity to a lot of people to travel by flight. Private carriers are anticipated to post a combined profit of US$ 350–US$ 400 million for the fiscal years 2011-12. it is expected that the civil aviation market will register a compound annual growth rate (CAGR) of more than 16 percent during 2010-2013. During the last two decades from a fleet of only about 100. which is the second highest after Brazil. Private airlines account for almost 75% share of the domestic aviation market. according to the “Indian Aerospace Industry Analysis” report. The Government's open sky policy has attracted many foreign players to enter the market and the industry is growing in terms of both players and the number of aircrafts. Page | 5 . compiled by IATA.3 per cent in July 2011. Passenger traffic has grown at 18 per cent year on year (y-o-y) basis and the year 2010 closed at 90 million passengers both domestic and international. according to the International Air Transport Association’s (IATA) report. India is the fastest growing aviation market and expected to be within 4-5 big aviation markets by 2020 and 3rd in terms of domestic market after US and China.tripling in the past five years. The country's domestic traffic grew by 14 per cent in the same period as against Brazil's 15. India is currently the ninth largest aviation market in the world. India is expected to cross the 450 million mark of domestic passengers by 2020. They have proven to be a boon in our industry as it is now possible for a lot more people to use air transportation. in its 2011-12 .
The country’s airline operates a relatively young and modern fleet. Ever growing population with an ever growing business environment.Indian Aviation SWOT Analysis A strong GDP growth. Opportunities and Threats of the Indian Aviation Market. High Quality: India's airlines offer a good quality product in each of the operating models in existence. No shortage of competition. Let us now briefly analyse the Strengths. High quality passenger experience. a young population and the expansion of India’s vibrant middle class is expected to see India achieve some of the fastest growth of any aviation market in the world over the next 20 years. Weaknesses. and without restriction on pricing. Economic Growth: Continuous increase in GDP has had a direct impact on the growth of the airline industry. Improved safety and good operational reliability. And if costs can be continually brought down and competition remains strong. Indian government has pursued an increasingly liberal approach to bilateral air services agreements with key overseas markets. STRENGTH Liberal Environment: Liberalisation in both domestic and international spheres. Page | 6 . Carriers are free to operate any domestic routes without seeking permission from the government. low fares should serve to stimulate new demand and draw millions of passengers away from the extensive rail network to faster and more comfortable air services. Modern Fleet: Maximum growth has occurred in the past 5 years. resulting in greater access for foreign carriers.
Page | 7 . Airport modernisation program is way behind and is delivering late results. There is an absence of high quality training infrastructure in-country to deliver the resources to support future growth. indirect flight paths and suboptimal use of runways. Inefficient operating environment for the airlines. High Cost Structure: India's airlines operate in a relatively high cost environment. resulting in reduced aircraft utilisation. Sales taxation on fuels has increased costs by almost 60% of the international benchmark. Skilled Resources: This rate of growth far outstripped the capacity to develop skilled technical and management personnel. Airways Infrastructure: Limited investment that has taken place in improving infrastructure for air traffic management. The limitations of airport infrastructure also increase costs due to the fact that carriers are unable to schedule fast turnarounds. Forced to operate beyond design capacity. primarily due to the punitive taxation structure.WEAKNESSES Airport Infrastructure: Congestion in the terminals and on the runways delivered a poor experience for the passenger. Leading to expensive aircraft holding patterns. As a result of the intense competition which has been perpetuated. There is a lack of in-depth experience and knowledge at all levels. Deep Pockets: India's carriers have accumulated billions of dollars in losses and debt. airlines have struggled to raise fares to breakeven levels.
THREATS Terrorism: India has seen frequent terrorist activity in recent years. High taxes on aircraft lease rentals. Similarly the potential for India to develop as a global traffic and services hub is contingent upon it being seen as a safe and attractive destination. The country has shown great resilience in bouncing back after each attack. however inbound international traffic in particular is sensitive to such events. Slow growth in development of infrastructure has created a problem in the development of the aviation industry as a whole.OPPORTUNITIES We’ll be looking at opportunities later in greater detail. Gaps In Infrastructure: Airport infrastructure inadequate to support growth. Page | 8 . High taxes and interest on repayments on foreign currency loans for aircraft acquisition. Higher Input Costs: Increasing man power costs due to shortage of technical personnel. Development plans have not gone according to the way it was expected to.
Economic growth and the increasingly close ties with global companies have led to a dramatic increase in passenger numbers. Huge Debt: In order to raise healthy profits and increase passenger in the face of the airlines large amounts of capital is required from financial institutions and banks in order to finance its aggressive expansion plans. The increase in ticket prices have worked against the logic of increasing profits. The industrial world continues to fighting with the high price of ATF. Maintaining these low rates is difficult because of excess capacity. Overcapacity: Driven by the increase in passenger traffic over the last 3 years all Indian carriers have acquired new aircrafts in order to accommodate the growing demand which will continue in the coming years. But still the current global economic downturn and the dramatic rise in fuel prices to reduce our impact on the aviation industry worldwide. has a direct impact on the airline industry in India. this may lead to a decline in air travel.Challenges and Opportunities Last decade has seen the industry grow. GoAir. While the industry grew by over 40%. The banks are liberal when it comes to airline loans. almost half of the growth was driven primarily by low prices. The industry has seen a dramatic increase in passenger numbers due to the privatization of the airline industry and the introduction of low cost carriers such as airlines Deccan. Jet Airways and Kingfisher Airlines now carry a burden of accumulated debt of around 8 billion dollars. Also on the design of efficient motors. especially during the continuation of the global downturn. etc. Almost all Indian companies are also feeling the heat and are desperate measures such as cutting sections place increased fuel surcharges on the use of electronic tickets and prices of food products to promote in order to reduce their losses. ATF prices almost doubled last year. rupee depreciation is associated with the global recession. the inverse relationship between stock prices and airline fuel prices showed. India’s at a rapid pace. Restructuring of this huge leverage is a challenge for the companies in these times of economic downturn. ATF price rise.The first three airlines Air India. Challenges Faced By the Airline Industry High aviation fuel (ATF) price: ATF prices are now around 80% of the total cost of ownership of the airline industry. aircraft manufacturers like Boeing and Airbus have helped tackle this problem. Poor infrastructure: Page | 9 . SpiceJet.
Opportunities Available Role of Indian Aviation Industry in GDP Aviation industry has played a phenomenal role in the Gross Domestic Product (GDP) of India. Page | 10 . With large number of domestic and international airlines operating in India. It is not difficult to see the expansion potential from such a low base as economic growth continues apace. Delhi and Hyderabad there still remains security concerns.Infrastructure remains a major obstacle for the airline industry in India today. Let us look into a few more now. We’ve already looked at a few of the opportunities available. While steps are taken on this front in order to upgrade the major airports of Mumbai. concentrating instead in the subways and the reallocation of the current fleet of routes where the demand to help airlines manage their excess capacity. High labour costs. India has only just scratched the surface of the potential for the aviation sector. rapid fleet expansion and intense price competition are some more reasons that this industry faces. Attracting private sector investment will go a long way in the development and maintenance of the infrastructure. the Middle East and Asia Pacific. Regional connectivity: Although the industry is burdened with excess capacity. Freight carriage in India has grown at the rate of 15% in the past 2 years. Maintenance and air traffic control (ATC) infrastructure is completely inadequate. if the industry is expected to grow further. which was aggravated further due to the excess capacity created in good times. the country has become one of the most sought after location for commercial and trade activities. mainly because of lack of infrastructure. It also has a good scope for employment opportunities. shortage of skilled labour. Geographical Location: India is ideally positioned as a major aviation hub at the crossroads between Europe. regional connectivity continues to be poor. Market Growth: Continuous increase in population and businesses has lead to an increase in demand for air transportation. Industry experts speculate that the increase in regional networking. The GDP of India has increased over 8% following the growth of the Indian economy.
Expanding Tourism Industry: This ever growing tourism industry has had a direct impact on the aviation industry. Also. This leads to increased competition. FDI up to 74 per cent is allowed for nonscheduled and cargo airlines. the air navigation service comes under the Airports Authority of India (AAI). Foreign Investment: Due to liberalisation of the aviation sector in India private companies are investing in this industry at an unimaginable rate. The Government has taken various steps towards structural policy reforms and is coming out with new policies which are liberal and will encourage public-private partnerships (PPP): Government allows 100 per cent foreign direct investment (FDI) via the automatic route for the green field airports. India has also signed the Bilateral Aviation Safety Agreement (BASA) with the USA. Complete tax exemption is also granted for 10 years About 49 per cent FDI is allowed for investment in domestic scheduled passenger airlines and investment up to 100 per cent by non-resident Indians (NRI) via the automatic route. Lower Costs. foreign investment up to 74 per cent is permissible through direct approvals while special permissions are required for 100 per cent investment Private investors are allowed to set up general airports and captive airstrips while maintaining a distance of 150 km from the existing ones.New Markets: Increase in airports and increase in the number of airlines has helped connect to various parts of the world. higher quality and more efficient manner. all point to the potential for Indian aviation to increasingly operate in a lower cost. low prices and growth in demand. A continuous demand in domestic and international tours has helped increase the demand for air transportation. Page | 11 . Government Initiatives: Air traffic control (ATC) operations will start functioning as a new entity from April 2012. the development of indigenous training and maintenance facilities and the potential for fiscal reform. Higher Qualities: The improvements in airport and airspace infrastructure. At present. the state-owned airport operator.
The low-cost carrier recently announced its regional service with Hyderabad as hub. added Zaidi.Future of the Aviation Industry Passenger traffic growth in the Indian domestic market is expected to continue through October 2011. Page | 12 . The Indian aviation sector is a major economic driver for prosperity. especially in the southern part of the country. according to Civil Aviation Secretary Dr. marking the largest year-on-year increase in flights. The sector with a growth of 18 per cent in domestic market is expected to generate approximately 2.6 million jobs in the next one decade. India is poised to emerge as the third largest aviation market in the world by the end of this decade. Government incentives could motivate more airlines to enter into regional routes. The company manages a string of 125 airports in the country.750 weekly domestic services as airlines expand their domestic networks and schedules. The Vision 2020 announced by the Ministry of Civil Aviation conceives of building infrastructure to support 280 million customers. Nasim Zaidi. The winter schedule will reportedly see 14. The AAI (Airports Authority of India) has already agreed upon various proposals to increase connectivity across the smaller towns. The AAI (Airports Authority of India) has recently been on a modernisation drive to set up around 35 non-metro airports and two major airports in Kolkata and Chennai. development and employment. Massive investments in airport infrastructure have led to world class airports which have become the symbol of India’s growth story. with domestic airlines being expected to operate almost 30 per cent more flights as compared with October 2010 levels.
Once owned by the Government. the aviation sector of India is now privately owned with full service airways and affordable carriers. It has undergone huge transformation following the liberalization of the aviation industry in India. This industry is going to help take India to the world literally and figuratively. air travel is now cheap and can be availed by many. Earlier viewed as a costly means of transportation. afforded by few. Page | 13 .Conclusion The Indian Aviation Industry is among the world’s fastest growing industries.
centreforaviation.php?option=com_content&task=view&id=3431&Itemid=59 http://www.com/articles/2525/indian-aviation-industry.google.ibef.org/challenges-faced-by-indian-airline-industry http://www.com/?p=527 http://www.ibef.org/industry/aviation.luggageguides.Bibliography http://blog.com/2010/11/19/indian-aviation-industry-how-high-is-india-flying/ http://www.html http://www.com/2011/03/09/aviation-industry-of-india/ http://business.com/analysis/capa-india-expects-private-indian-carriers-to-reportusd350-400-million-profit-49480 http://www.cedarmesa.org/artdispview.mapsofindia.aspx http://www.com/profiles/countries/india http://indiaaviation.co.in/search?q=opportunities+aviation+industry+in+india&btnG=Search+Books &tbm=bks&tbo=1 http://technazar.entrepreneurswebsite.centreforaviation.com/aviation/ http://www.mapsofindia.aero/news/index.aspx?in=5&art_id=29909&cat_id=503&page=2 Page | 14 .
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