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“A STUDY ON INNOVATIVE PRACTICES IN INDIAN AVIATION MANAGEMENT”

Mr.S.Mohammed Ashiq Ali


Student of Business Administration, VELS University, Pallavaram, Chennai-117.
&
Mr.A.Ramkumar MBA., DOASP, NET.,(Ph.D)
Assistant Professor, School of Management Studies & Commerce,
Department of Business Administration,
VELS University, Pallavaram, Chennai-117.

ABSTRACT

The basis of this project was to analyze aviation management in detail and to
suggest ideas and thoughts to develop aviation sector. We have analyzed various
methods to bring forth developments in aviation management. The techniques
we created in order to maximize the profit of the industries through various
unique techniques. Our overall approach was to reduce the losses due to
improper management techniques in aviation sector. Upon completion of the
assignment, we found the ideas to be useful for the betterment of aviation sector.

KEYWORDS; Aviation, Sector, Management, Cost


INTRODUCTION

India’s civil aviation industry is on a high-growth trajectory. India aims to become


the third- largest aviation market by 2020 and the largest by 2030.

The Civil Aviation industry has ushered in a new era of expansion, driven by
factors such as low-cost carriers (LCCs), modern airports, Foreign Direct
Investment (FDI) in domestic airlines, advanced information technology (IT)
interventions and growing emphasis on regional connectivity. India is the ninth-
largest civil aviation market in the world, with a market size of around US$ 16
billion. India is expected to become the third largest aviation market by 2020#.

“The world is focused on Indian aviation – from manufacturers, tourism boards,


airlines and global businesses to individual travellers, shippers and businessmen.
If we can find common purpose among all stakeholders in Indian aviation, a bright
future is at hand” said Mr. Tony Tyler, Director General and CEO, International Air
Transport Association (IATA)

OBJECTIVES OF STUDY

 To analyze the position of Indian aviation industry


 To find out the effectiveness of Indian aviation companies
 To provide ideas for the betterment of the industry
 To provide the suggestions for the development of Indian aviation

SCOPE OF STUDY

This projects analyses the best ideas that can be applied to aviation management
through this analyses profit of the industries will be maximized and there will be
less chance for losses in the industry.
DATA ANALYSIS AND INTERPRETATION

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
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

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.

Indigo Jet Airways Jet Lite SpiceJet Air Costa Air India Go Air

9%
35%
18%

1% 16%

19%

2%

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.
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.

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.

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.

Comparison of the major players of different factors

Price of the ticket.


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
the ticket Journey during the day
carrier
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 4
Included
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 2017


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

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.

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
entertainment
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

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

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.

Analysis of the Survey carried during the project.


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)
Analysis of the survey:
Following things have been found from the survey carried out:

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

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


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

iii. People are conscious about service quality and promotions.


iv. On time flight is most preferred for Indigo followed by the ease of
booking.
v. Food is the most hated thing on the flight and ambience is least hated
thing. People want better food followed by better service.
vi. Most of the young consumers look for better cabin crew and least look
for the leg room.

SWOT ANALYSIS OF THE INSDUTRY


REASON FOR LOSSES IN THE INDUSTRY
Overly regulated industry

Indian aviation industry is believed to be over regulated and highly taxed, which is
reflected in the industry’s lack of competitiveness at the global level (KPMG,
2014). There are rules and regulations which create bottlenecks and delays,
ultimately adding inefficiency to the system. Acts like Aircraft Act (1934) along
with Indian Aircraft Rules (1937) which govern the industry are outdated and fail
to take into account the changes in the industry.

High operational costs

Airlines in India operate in a high cost environment- huge taxes on ATF,


congestion in airports, shortage of licensed pilots and inflexible labour laws.
Overall the cost of capital is substantially high (Ray et al. 2012). Airport congestion
is created by excess flights and limited runway capacity. The traffic at Indian
airports increased exponentially due to development of low cost airlines but the
airport infrastructure was not equipped to welcome this addition. Often flights
are delayed after take-off because of “congestion at the airport.” During peak
hours, planes hover overhead awaiting a landing slot or, wait for their turn to take
off, adding to the fuel and maintenance cost of airlines.

High fuel costs

Along with numerous regulations Indian air carriers bear some of the highest fuel
cost in the world. India imports a huge percentage of ATF (aviation turbine fuel)
which is priced by government-owned companies excluding competition from
private sources. Further, different states in India levy surcharge on fuel varying
between 4 and 30 percent, adding to the high operation costs of the airlines
(Metzger 2014). ATF cost in India is up to 50 percent more than in any other Asian
or European countries. Even when foreign airlines refill their fuel tanks in India
they have to pay 16 percent more than the global average (Business Standard,
2011). ATF accounts for nearly half of operating costs of airlines in India
compared to 20-25 percent globally.

The debt trap

Airlines require more funds in the race to capture maximum market share and to
manage their working capital requirements. In India, their financing needs for
operations and expansion gradually outgrew their current market cap and hence
they are turning more and more towards loans. Recently Air India in order to
expand its long haul operations was in need of more funds. But it already has
unpaid debts falling between Rs 4,000 and Rs 6,000 crores as of 2014 (Nambiar &
Kundu 2015). Kingfisher and SpiceJet faced similar struggles with meeting day to
day operating costs. These airlines have been making losses for a decade or so
and further additions on the loans have made them fall into a debt trap. With
higher interest payment burden on their shoulders banks are unwilling to extend
and recast loans. Airlines need significant equity infusion for long term
sustainability and improving their financial position (Mishra 2015).
High taxes on fuel added to the worries of the low cost airlines

The increasing number of airlines create intense fare wars, forcing them to slash
prices in a bid to attract customers. Initially Deccan Airlines came in India with the
low cost carrier (LCC) model in 2003. LCC model stands out by not providing in-
flight services, operating from secondary airports, higher number of seats, selling
of tickets through internet, use of similar aircrafts and reduced number of
employees per plane, etc. Following the success of Deccan, airlines like SpiceJet,
Go Air, and Indigo came into existence. Further, Kingfisher and Jet Airways which
initially only operated on full services model, started extending LCC services as
well. But the viability of this model became questionable because airlines faced
higher taxes on fuel and infrastructure for relying on secondary airports was
lacking. This model further added to the plight of the airlines as many airlines
jumped into the business but could not sustain its challenges or reap any
extraordinary benefits, thus only adding competition to make the matters worse
(Ray et al. 2012). Air travel costs dipped, domestic passenger traffic grew. Growth
of the aviation sector was not planned and therefore, appropriate regulatory
policies were not made at that time to facilitate the growth. Hence, there is an
urgent need to develop, expand and modernise the airports for the smooth
functioning of the aviation industry.

Amidst these difficulties, the only airline which has risen above all, registering
profits consistently from 2009 to 2015 is Indigo Airlines (Raja & Prabhakar 2013).
Indigo is a no-frill airline like many others, but what differentiated it from others
was that it maintained discipline and showed superior management. The flights
are generally on time, earning them a reputation of punctuality. Apart from that
the airlines charged higher than many competitors like Jet airways and Air India
on many routes.
Another interesting strategy that helped the airline make money is the sale and
lease-back strategy. In this the airline buys an aircraft of its choice and sells it off
to a leasing company. Also it takes the same aircraft on lease. The advantage of
doing this is the cost selling and taking it on lease is lower than purchasing it for
full time from aircraft makers like Boeing or Airbus (Raja & Prabhakar 2013).
Following Indigo, debt-laden airlines Air India and Jet Airways also made use of
this strategy to increase their cash inflows and repay some of their debt. But they
are still not half as successful as the former.

A STUDY ON INDIAN AVIATION INDUSTRY

With many of the private players like SpiceJet, Jet Aiirways and Kingfisher making
huge losses and the Government of India requiring to spend a huge amount to
bail out Air India, it is evident that there is a need for strategic changes in the
policies and a requirement of substantial infusion of equity to make the sector
viable in the long run. The government is encouraging foreign aircraft companies
to invest strategically in domestic airlines to help them stay in business in difficult
times. Also this can help bring global practices into the Indian aviation industry.

Up-to 49 percent FDI was allowed in Indian civil aviation industry since 2012 (Zee
News, 2012). As a result foreign investors planned strategic investments in
domestic airlines. In 2013 the Jet Airways-Etihad Airways deal was signed in
which Etihad purchased 24 percent stake in Jet Airways (Lalatendu 2013). Also,
the Ministry of Civil Aviation in India has thus far been unfocussed without a clear
policy vision. But, now the government is keen on making some positive changes
to make the industry sustainable. It is trying to reduce the regulations and taxes,
and quickly issuing No-Objection Certificates for long pending airline license
applications. The Central Government has been pressuring different states to
reduce sales tax on fuel (CAPA Aviation experts 2015). Such structural changes, if
implemented on time, are expected to bring about a much-needed relief to
India’s choked aviation industry.

IDEAS TO INCREASE PROFIT OF THE INDUSTRY

 Spend less on airlines by placing large orders which can provide discounts
 Newest planes are more fuel efficinet
 Having one type of plane can help to train all the ground staff, Mechanics,
Pilots In a single plane to spend time and money more efficiently
 Avoiding Luxuries such as ;
 Reclining seats must be avoided in order to reduce the purchasing cost of
seats and saving the time of flight attenders while cleaning or checking
 flight attenders must be in the beginning of their career’s they have
required safety training but minimal hospitality training
 MULTI TASKING:
 Some flight attenders check tickets while others clean the plane Using this
method two or three positions and their salaries are neglected.
 Flight attenders are also responsible for food and drinks which are almost
never free
 Food and drinks are excellent ways to earn money
 AIRPORTS:
 Choosing different times of landing can reduce the landing fees (E.G
Landing at midnight is comparatively cheaper than landing at early
morning)
 Aircrafts must be flying all day non-stop by scheduling only 30 to 45min
between landing of one plane and take-off of an another plane. Through
this Airlines are making money throughout the day
 Avoiding stops to reduce expenditure and ground clearance
 Sale of tickets only by online and the whole check-in process must be
conducted by machines. By this way the salary for more three(3) members
is neglected
Avoidance of jet ways to enter airplanes as they are expensive instead,
steps can be used.
Using this strategies budget airlines can make about 27.98% profit.

SUGGESTIONS AND RECOMMENDATIONS

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.

CONCLUSION:

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

BIBILOGRAPHY

Websites:

http://www.bangaloreaviation.com/2014/08/tata-sia-launches-new-full-service-
airline-vistara.html

http://en.wikipedia.org/wiki/Vistara

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