SYNOPSIS

The business of flying has hit an unprecedented airpocket in the aftermath of the terrorist attacks in the US. The hardening of the global insurance market after the attack -and the earlier LTTE attacks on the Colombo airport --will make life tougher for airlines, says Sunil Arora , chairman and managing director of Indian Airlines.

Already under recession, the global aviation industry is adopting stringent measures to manage the crisisWhile an after-shock was expected, why did the global aviation industry think the way it did in the aftermath of the attacks in the us? The aviation industry is passing through a critical time. There has been a certain slowdown in the industry in the last four months with dipping traffic and corporates tightening their budget. The problem started with blast incident at colombo and hardening of the insurance market. US economy slowdown, triggered by the infotech slowdown, has already has an adverse impact on traffic.

Following the terrorist attack in the us, tourism is also hit with a spate of cancellation and rescheduling of conventions, seminars and conferences. Travel plans of people are in disarray. Unoccupancy in hotel rooms are increasing. So, both tourism and civil aviation industries are feeling the heat.

there is a war premium. Insurance companies also do not have any alternative as their outgo has leap-frogged after the colombo blast and unfortunate disaster in the us. What is the impact of the troubles in the insurance market? The terrorist attack in the us has further aggravated the rising insurance premium problem. This extreme hardening of the insurance market is making life tougher for airlines. attractive holiday . the respective governments should find ways and means to boost domestic tourism. These developments are beyond the direct control of the airlines. Insurance companies are putting surcharge at the rate of $1. asian countries cannot be immune to this turbulence. the centrepoint of action is in the US. The need of the hour is an across-the-board tightening of the belt. So.25 per passenger. The only way to survive is by reduction of cost and overheads. what can the airlines do? By themselves. Along with this. airlines won't be able to absorb this burden of outgo of insurance premium hike. International airlines are also cutting down frequencies and operations to reduce cost. The increase in cost has to be passed on to the consumers.Although.

this will translate into a fare hike. In effect. the fare surcharge will be removed under the flexi-fare policy of IA. aviation companies will have to very carefully watch the developments in atf prices. how will price of aviation fuel behave? There is no definite trend. as lesser international traffic will also have an adverse spillover effect on the flow of domestic traffic. . however. The exact amount of surcharge will be chalked out within this week. There is a possibility to look at the routes to gulf if tension mounts. if insurance war premium and surcharge go away in future. Business for airlines may improve after 3-4 months. How long do you thing this recession in the aviation industry will continue? Developments are taking place without any degree of certainty. Will IA cut operations to manage costs? not really. It's also possible that the situation may ease after some time. The traffic is also down.packages with reduced rates needed to be offered to woo tourists. How is indian airlines going to handle the increased burden of cost? IA can't absorb the increase burden of insurance cost which has been forced upon. the major oil supplying region. creating a scenario of cutting operations to this region. scenario is fluid. Much depends on the ongoing developments in west asia. IA will implement a surcharge on passenger fare equivalent to the increased cost of insurance burden.

However. Lastly. The aviation industry is affected by monetary and fiscal policies in that government decisions to tax airlines eats into their operating costs. Closely linked to fiscal and monetary policy is the issue of wage inequality. some of the negative externalities associated with the industry include emission of noise. . Companies that operate in countries with job losses are likely to witness the same within aviation. Also investments in infrastructure have a large role to play. the aviation industry is affected by elasticity in supply and demand depending on the size of the industry and how long it has been in operation. It can also be asserted that the decision to liberalize the aviation industry can bring about many positive effects into the industry.Conclusion The aviation industry causes positive externalities such as. excessive emission of harmful gasses into the atmosphere thus causing pollution. statistics show that inter-firm disparities in wages are quite high especially with regard to pilots. This could bring about an overall increase in the GDP. However. heightening employment and boosting investment within any one country. encouraging tourism.

....(19-20) The Aviation Industry & Recession……...(9-15) Aviation Industry In India………………….(1-8) History Of Aviation…………………………….........(21-26) Recession In Aviation Industry – What Caused It………………………………………...CONTENTS Company Profile…………..(46-52) Indian Aviation Industry Second Biggest Loser After US………………………………...(53-54) Effects Of Recession On Aviation Industry Careers……………………………………………(55-56) .......……...................(27-45) How Economic Factors Affets The Aviation Industry…………………………………….(15-18) Growth In Indian Aviation Industry.......