Live Project Report on

Research and analysis of Indian

Aviation Industry

Under The Mentorship of:

Rahul Agarwal, Chief Pilot.

Submitted By:

Vijay Satappa Magdum

PGP Student

Indian Institute of Management, Indore

 Acknowledgements
This project involved the collection and analysis of information from a wide variety of
sources and the efforts of many people beyond me. Thus it would not have been possible to
achieve the results reported in this document without their help, support and encouragement.
I would like to express my gratitude to oyesterconnect.com, for giving me opportunity to
work on this project. Without this, this project would not have come to culmination. This project
took me deep inside the topic and helped me to understand various concepts, facts related to
trucking industry.
I also would like to acknowledge the help that I received from IIM Library. Resources
available from various websites, Airport Authority of India, and websites of aviation companies
helped to carry out this project. I thank all of them from the bottom of my heart.
Also I would like to thank all the people related to this project and IIM Indore. Without
their help this would not have been possible.
Vijay S. Magdum

Executive Summary

1
 Indian Aviation Industry research and analysis is a huge topic to study. Indian aviation market
is very competitive. Various players are struggling to fetch the profit. Most of them are facing
various problems. There are issues with operations, government policies, taxation and huge
investment to be brought in to start the business.
From the analyst point of view though this market is facing lot of issues and challenges it is
growing at the rate of 18 percent per year. Many factors are contributing to this growth such as
increase in disposable income of the population, industrial growth in the country or change in
government policies such as FDI. From this perspective Indian market is lucrative.
Since few years most of the Indian population is moving from lower middleclass to upper
middleclass. They are gaining capability to spend and upgrade their lifestyle. This is providing
opportunity for low cost players to tap the market share.
Industry has faced many challenges and still it is going on. Many new players are entering
into this market. Policy change such as 49 percent investment through foreign direct investment
(FDI) is changing the face of the industry.
Major objective of this project is to study overview of the Industry structure, Major players,
new players in the industry and Few major challenges faced by the industry. In addition to this
another objective is to look at these players from the consumer point of view on criteria such as
price, brand recall, time of arrival or departure, ease of booking and service etc.
This project has given me deep insights about the industry.

Table of content

Acknowledgements 1

2
 Executive Summary 2
Glossary 4
1 Overview of the industry:
1.1. Introduction: 5
1.2.Challenges faced by the industry 6
2 Analysis of main players
2.1.Main players in the industry 8
Public Players 8
Private Players 8
2.2.SWOT Analysis of main players: 8
2.3.Market share analysis of the players 9
3 Comparison of the major players of
different factors:
3.1. Price of the ticket. 12
3.2.Comparison on other factors 13
4 Analysis of the Survey carried during the
project.
4.1.Details of the survey: 16
4.2.Analysis of the survey: 17
5 Recommendations 18
6 19
References:

Glossary

AAI Airport Authority of India

3
 GDP Gross Domestic Product
LLC Low Cost Carrier
PPP Public Private Partnership
AERA Airports Economic Regulatory Authority of India
IATA International Air Transport Association
CAPA Center for Aviation
IOCL Indian Oil Ltd
BPCL Bharat Petroleum Ltd

1. Overview of the industry:

1.1 Introduction:
Indian aviation industry is among the top 10 aviation industries of the world. It has shown high
growth trajectory. According to the recent report by KPMG, Currently Indian civil aviation

4
industry has size of 16 Billion US dollars. It is contributing to the 0.5 % of the GDP. Now a days
daily 150 million passengers are transported by air. It is forecasted that by 2020 this number will
raise to traffic of 450 million passengers daily. Total aircraft movements and passenger traffic
has grown with CAGR of 3.3 and 5.5 percent respectively during FY 11 to FY 14. It is estimated
by Airport Authority of India that aircraft and passenger movements at the entire airport are
expected to rise at the rate of 4.2 and 5.3 percent respectively.

There are few factors such as entry of Low costs carriers (LLC), modern airports, vision of the
new government regarding tourism and transportation, foreign direct investments, cutting edge
technology, and vision of regional connectivity are driving the industry towards transformation.

In 11th five year plan (2007-12), four new airports are built in “Public Private Partnership (PPP)”
mode. At present there are around 450 airports still there are no airports in tier 2 and tier 3 cities.
Airport Authority of India manages 125 airports of which 11 airports are international airports, 8
custom airports, 81 domestic airports and 25 civil Enclaves at defense airfields. Tier 2 and 3
cities contribute only 30 percent of the total air traffic. Government of India is planning to
construct more 15 airports under the Greenfield Airport Policy by identifying low cost viable
model for construction of small airports. These airports are expected to improve the connectivity
among these T2 and T3 cities. Along with this AAI is also planning to invest 150 million in
development of non-metro airport in 12th five year plan.

According to report of CAPA Indian Domestic market has shown growth.

1.2 Challenges faced by the industry:

During 2013-14 industry has gone through tough time. The industry was facing major challenges
such as

a. Rising Operational costs

b. Higher air fares

5
These are the major challenges arises because of the following factors:

i. Challenges with policies

ii. Procedures
iii. Taxation

Many factors are responsible for the high operational costs in India.

a. Higher cost of fuel in India

b. High taxation
i. Excise duty
ii. Customs duty
iii. Sales tax
c. High airport fare

These factors are leading to high operational costs. It is observed that in India 35 to 45 percent
operational cost is of fuel. Whereas 20 percent is the global average. Major oil providing
companies in India are Indian oil Corporation Ltd and Bharat Petroleum Ltd. These companies
charge around 16 to 30 percent sales tax on fuel. This results into high price. Along with this
there are different taxes imposed by the government.

Recently new airports are built in PPP mode. These airports are highly modern. This
infrastructure change is also an area of high concern for aviation industries. Investment cost for
these airports is very high. To recover this amount airport holding company charges very high
this directly results into high costs. For example recently Airports Economic Regulatory
Authority of India (AERA) approved to raise tax of Delhi and Mumbai airport to 346 percent and
154 percent respectively in 2012. Chennai and Kolkata also proposed to increase in airport tax to
118 percent and 242 percent respectively. This increased tax will eventually lead to higher price
paid by the aviation companies for landing and parking their flights. This increases the cost of
operation.

Along with this getting aviation license in India is main hurdle for small companies to enter into
the market. The procedure of getting license is bit slow and hectic. This is major hurdle to
growth of the industry. This will responsible in coming years also if not addressed properly.

In 2014 government has taken some initiative such as they have allowed direct import of the
fuel, which will help to save sales tax to be paid to the oil companies in India. Spice Jet is the
first successful company to import oil for its own in September 2013. Also government has
promised to reduce the custom duty charges.

6
 2. Analysis of main players
2.1 Main players in the industry
Indian aviation industry is dominated by the Low Cost Carriers (LCC). These players can be
classified into three major categories.

1. Public Players
i. Air India

7
 ii. Alliance Air- Air India Regional- LLC
2. Private Players
i. Jet Airways
ii. Kingfisher India
iii. IndiGo
iv. Spice Jet
v. Go Air

Also in 2014 the industry has saw entry of five new players. These new players are:

i) JET Etihad deal has been finalized (FDI)

ii) Tata-Singapore airlines Ltd-VISTARA
iii) Air Costa (Part of LEPL Group)
iv) Tata-Air Asia Ltd
v) Air Pegasus Ltd

These are the five new players in the industry. They have different strategies to tackle the market.

2.2 SWOT Analysis of main players:

Attached in the excel document of this project report.

2.3 Market share analysis of the players

Players in Indian Aviation Industry are fighting to gain maximum market share. Domestic market
is dominated by LLCs such as IndiGo and SpiceJet. IndiGo is the only domestic company which
has shown all time profits in its balance sheet. At the time of crisis Indigo sustained itself while
gaining profits. It is India’s most preferred LLC.

According to analysis presented by Business Standards Indigo retained at top position followed
by Jet Airways. This analysis was at the end of November, 2014.

8
 Market Share-Aviation Industry
Indigo Jet Airways Jet Lite SpiceJet Air Costa Air India Go Air
9.39%
18.27% 35.07%

1.04%

1.46%

15.55%
19.21%

Source: http://www.business-standard.com/article/companies/indigo-jet-airways-gain-while-spicejet-loses-market-share-114121801142_1.html

Passenger load factor, or load factor, measures the capacity utilization of public
transport services. Considering passenger load factor analysis, Indigo and Air India has shown
better results. From the data of CAPA we can compare it for the month of April and May 2013.
All the companies are trying to increase load factor to 100 percent. This will directly results into
their profit gain.

9
During the month of May 2013, Spice Jet has shown more capacity deployment than the
mandatory capacity deployment requirements given in the Route Dispersal Guidelines.

Source: DGCA Market report 2014 http://dgca.nic.in/reports/Market.pdf accessed on 6th Feb. 2015

Spice Jet is gaining higher market share. It is spending high in advertising and promotions. Now
a day Spice Jet is providing lowest fare all over India.

10
For example:

SpiceJet is coming with aggressive strategy in low cost market. Problem with this strategy is the
limited routes availability. Spice Jet flight is not available on all the routes. SpiceJet is managing
all the summer days in advance. They are tapping up market way ahead of others. Price
conscious customers are going for these offers and they prefer it.

3. Comparison of the major players of different factors

3.1Price of the ticket.

11
 Comparison of the players on price factor is difficult. Price varies according to time of
the booking as well as the route to be chosen, time of the day etc. Every carrier has
different price strategy. For the sake of convenience I have chosen following parameters
to compare:

i. Route: Delhi to Mumbai

ii. Time duration: 7 pm to 12 am
iii. Time of booking:
a. Immediate booking
b. 3 months prior booking

a. Immediate booking: 14th Feb

Name of Price of Duration of Services Frequency during
the carrier ticket Journey the day
Indigo 6043 2 hours 10 min 1. Paid Meal 16
2. Special
assistance
Spice Jet 4500 2 hours Paid meal only 4
Vistara 4558 2 hours 20 min Free Meal Included 4

Jet 6520 2 hours 10 min Free Meal 37

Airways
Go Air 4578 2 hours 20 min Paid Meal only 9
Air India 4956 2 hours 05 min Free meal 44

Hence Spice Jet is lowest among all. Air India is providing maximum frequency. And
Indigo is better among the all for better service with low price.

b. Prior booking of 3 months- 6th May 2015

Name of the Price of Duration of Services Frequency
carrier ticket Journey during the day
Indigo 3049 2 hours 10 min 1) Paid Meal 17
2) Special
assistance
Spice Jet 3722 2 hours Paid meal only 4
Vistara 5481 2 hours 20 min Free Meal Included 7
Jet Airways 5481 2 hours 10 min Free Meal 29
Go Air 4798 2 hours 20 min Paid Meal only 8
Air India 3263 2 hours 05 min Free meal 38

12
 Hence in prior booking Indigo is providing lowest fare with better services. Followed by
Air India and Spice Jet. Air India is giving maximum frequency which provides better
ease of booking.

Source: www.makemytrip.com accessed on 12th Feb. 2015

3.2 Comparison on other factors

A large survey all over India by “Trip Adviser” following is the findings on scale of 100
percent:

Factors\Name Indigo Jet Air India Go Air Jet SpiceJet

Airways Connect
Value for 44.4 13.2 6.8 2 1.1 6.3
money
Services- food 47.2 47.2 32.2 1.1 2.2 6.9
and
entertainmen
t
Cabin crew 35.8 46.5 3.6 2.7 1.7 9.7
appearance
Cabin crew 36.1 44.9 5.6 2.7 1.6 9.1
quality-
Service
On Time 65.5 18.3 6.8 2 1.1 6.3
performance
Landing & 39.7 31.3 16.9 2.4 1.7 8
Take off
quality
Time taken to 41.2 34.7 9.2 2.7 2.5 7.5
deliver
baggage
Seat Comfort/ 18.2 38.6 34.1 1.9 1.6 5.6
Leg room
Overall 38.8 39.1 12.6 1.7 1.7 6.6
experiance
Source: Survey by Trip-Advisor http://articles.economictimes.indiatimes.com/2013-12-01/news/44596775_1_five-
airlines-fares-air-travellers Accessed on 10th Feb. 2015

Hence most preferred airline is indigo followed by Jet airways and Spice Jet.

13
Also, most of the responded told they need improvement in services such as Meal provided during the journey
followed by improvement in leg room.

For new players in the Industry, most of the respondents prefer to go by TATA SIA i.e. VISTARA
followed by Air Asia.

14
Source: Survey by Trip-Advisor http://articles.economictimes.indiatimes.com/2013-12-01/news/44596775_1_five-
airlines-fares-air-travellers Accessed on 10th Feb. 2015

4. Analysis of the Survey carried during the project.

15
4.1 Details of the survey:
 Survey Respondents: 56
 Link of the survey: https://www.surveymonkey.com/s/HZLRFT9
 Host website of the survey: www.surveymonkey.com
 Duration of the survey conducted: 4 days (8th Feb to 12th Feb, 2015)

4.2 Analysis of the survey:

Following things have been found from the survey carried out:

i. Most of the people (around 60%) prefer Indigo as their favorite airline. Followed by
Jet Airways. Spice-Jet is the third choice of the consumers

ii. Most of them prefer Indigo because of the low price

iii. Around 95% people are looking for the low price carrier.

iv. People are conscious about service quality and promotions.

v. On time flight is most preferred for Indigo followed by the ease of booking.

16
vi. Food is the most hated thing on the flight and ambience is least hated thing. People
want better food followed by better service.
vii. Most of the young consumers look for better cabin crew and least look for the leg
room.

5. Recommendations

17
 India has very high potential in the aviation Industry but still it is going through tough
time. Indian aviation Industry has high growth rate as disposable income of the people is
growing and most of the people tending to upgrade their lifestyle.

Airline industry in India is very competitive and price conscious. Most of the people look
for the price and very least look for the brand. There are very few people who are loyal
customers of the airlines. Also most of these are high class business persons. People follow the
promotional ads of the airline and look for the low price carrier. Now days Spice Jet is offering
tickets at very low price. They are promoting their campaign as “Less than train fare”.

To give lowest price possible these airline companies are looking to cut the costs. Along
with these they have to function at very less margin.

Following are recommendation to improve sustainability of the airline business.

1. Government Policies: Government interventions are one of the common threats for the
private players. They need some liberty.
2. Government Tax: Government of India is imposing many taxes on the airline industry.
This directly results into increase in the ticket price,. Considering airline is one of the
basic transportation systems, government has to revise their taxation policy.
3. Fuel is highly charged because of the taxes on it. Very few companies such as IOCL,
BPCL are providing fuel to aviation companies. These oil companies charge it high due
to taxes. Government needs to subsidies fuel for the airline industry.
4. There is high potential in Tier II and Tier III cities. Airline companies have to explore
these options for better revenue.
5. Indian consumer is addicted for the promotions. Airline companies have to update their
promotional and marketing strategies time to time.

6. References:
 http://www.bangaloreaviation.com/2014/08/tata-sia-launches-new-full-service-
airline-vistara.html
 http://en.wikipedia.org/wiki/Vistara

18
 https://www.airvistara.com/trip/fly/home
 http://centreforaviation.com/analysis/singapore-airlines-tata-joint-venture-
proposal-would-be-a-big-boost-for-sia---and-airasia-129471
 http://www.business-standard.com/article/companies/indigo-jet-airways-gain-
while-spicejet-loses-market-share-114121801142_1.html
 http://dgca.nic.in/reports/Market.pdf
 http://business.mapsofindia.com/aviation/top-aviation-companies.html
 http://articles.economictimes.indiatimes.com/2013-12-01/news/44596775_1_five-
airlines-fares-air-travellers

19