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Aviation refers to activities involving man-made flying devices (aircraft), including the people, organizations, and regulatory bodies involved with them. In general means; 1: the aggregation of a country's military aircraft, 2: the operation of aircraft to provide transportation, 3: the art of operating aircraft, 4: travel via aircraft. Aviation also applies to the mode of travel provided by aircraft as carriers of passengers and cargo, and as such is part of the total transportation system. Aviation also describes the employment of aircraft in such fields as military aviation. The world of the airplane, including the people who manufacture, market, and repair aircraft or who work in allied industries, is frequently spoken of as aviation.
Aviation is broadly grouped into three classes: general aviation, air transport aviation, and military aviation. General aviation comprises all aviation not included in military or air-transport aviation. General aviation covers a huge range of activities, both commercial and non-commercial, including private flying, flight training, air ambulance, police aircraft, aerial firefighting, air charter, bush flying, gliding, and many others. Experimental aircraft, light-sport aircraft and very light jets have emerged in recent years as new trends in general aviation.
Military aviation includes all forms of aviation in military activities. Military aviation is the use of aircraft and other flying machines for the purposes of conducting or enabling warfare, including national airlift (cargo) capacity to provide logistical supply to forces stationed in a theater or along a front. Air power includes the national means of conducting such warfare including the intersection of transport and war craft. The wide variety of military aircraft includes bombers, fighters, fighter bombers, transports, trainers, and reconnaissance aircraft. These varied types of aircraft allow for the completion of a wide variety of objectives. Air-transport aviation is primarily the operation of commercial airlines essentially as a public utility for the movement of persons and commodities.
The Aviation industry in India began with the birth of Tata Airlines, through the business relationship between Mr. Nevill Vintcent, a Royal Air Force pilot and Mr. JRD Tata, the first Indian to get an A-license.
Aviation in India
Tata Airlines became Air India in August 1946. In 1953, the Air Corporation Act nationalized all existing airline assets and established the Indian Airline Corporation and Air India International for domestic and international air services respectively.
These two companies enjoyed monopoly power in the industry until 1991, when private airlines were given permission to operate charter and non scheduled services under the ‘Air Taxi’ scheme to boost tourism. These carriers were not allowed at the time, to fly scheduled flights or issue air tickets to passengers. As a result, a number of private players including Jet Airways, Air Sahara, Modiluft, Damania Airways, NEPC airlines and East West Airlines commenced domestic operations. In 1994, following
the repeal of the Air Corporation Act, private players were permitted to operate scheduled services. Ultimately the carriers with more efficient operations and strategies survived and by 1997, only Jet Airways and Air Sahara made the cut from the original group.
The next big change in the industry came in late 2003 with the emergence of India’s first no-frill airlines, Air Deccan. It revolutionized the industry, offering fares as low as INR 500 (USD 10 roughly), compared with Full Service fares offered by the incumbents, averaging about INR 3000 or more.
Since then, Spice Jet (restructured Royal Airways and Modiluft), Go Airways and Kingfisher Air have also entered the industry. Paramount Airways is another player, though it is positioned on the other end of the spectrum, as an ‘all business class’ airline. With the further advent of online ticket sales through companies such as makemytrip.com, prices have crashed and tickets are available for as little as INR 0.99. In fact, now many airline tickets can be bought for a price comparable to an upper class railway ticket for the same route. In December 2004, Indian scheduled carriers with a minimum of 5 years of continuous operations and a minimum fleet size of 20 aircraft were permitted to operate scheduled services to internationals destinations. On January 11, 2005 the government designated four scheduled Indian carriers (Air India, Indian Airlines, Jet Airways and Air Sahara) to operate international services to and from Singapore, Malaysia, Thailand, Hong Kong, the UK and the USA. Aviation Industry in India is one of the fastest growing aviation industries in the world. With the liberalization of the Indian aviation sector, aviation industry in India has undergone a rapid transformation. From being primarily a government-owned industry, the Indian aviation industry is now dominated by privately owned full service airlines and low cost carriers. Private airlines account for around 75% share of the domestic aviation market. Earlier air travel was a privilege only a few could afford, but today air travel has become much cheaper and can be afforded by a large number of people. The sector contributes 0.2% to the country’s GDP
(at 1999-2000 prices). Domestic air cargo traffic has been growing at CAGR of 11.23% from 2002-03 to 2007-08, whereas international air cargo traffic has been moving at CAGR of 12.16% during the same period.
Ministry of Civil Aviation (India)
The Ministry of Civil Aviation, India is responsible for the regulation of civil aviation in India. The Ministry of Civil Aviation is the nodal Ministry responsible for the formulation of national policies and programmes for development and regulation of Civil Aviation and for devising and implementing schemes for the orderly growth and expansion of civil air transport. Its functions also extend to overseeing airport facilities, air traffic services and carriage of passengers and goods by air. The Ministry also administers implementation of the Aircraft Act, 1934 and is administratively responsible for the Commission of Railways Safety.
Composition of the Ministry
The ministry is under the charge of a Minister of State for Civil Aviation and Praful Patel is the present incumbent. The Secretary is the head of the Ministry and is assisted by one Additional Secretary & Financial Adviser, three Joint Secretaries, seven officers of the level of Director / Deputy Secretary / Financial Controller and ten officers of the level of Under Secretary. It is located at Rajiv Gandhi Bhavan, Safdarjung Airport, New Delhi. The Ministry has under its purview the following organizations: Autonomous/Attached Organizations Directorate General of Civil Aviation Bureau of Civil Aviation Security BCAS Commission of Railway Safety Indira Gandhi Rashtriya Uran Akademi Air Carriers Air India Indian Airlines Pawan Hans Helicopters Ltd. Airports Airports Authority of India
Players in Indian aviation industry can be categorized in three groups: Public players Private players Start up players There are three public players: Air India, Indian Airlines and Alliance Air. The private players include Jet Airways, Sahara, Paramount, Go Air Airlines, Kingfisher Airlines, Spice Jet, Air Deccan and many more. The startup players is those which are planning to enter into the markets. Some of them are Omega Air, Magic Air, Premier Star Air and MDLR Airlines. Rankings in Aviation Sector
Company Jet Airways Air India (NACIL) Kingfisher Airlines British airways Air Deccan Luftansa GoAir SpiceJet Indigo Paramount Airlines
Score 136.9 132.7 131 131 129.3 127.7 126.2 123.8 121.2 119
Ranks 1 2 3 4 5 6 7 8 9 10
Aviation Operating Costs
Following are the operational costs involved in aviation sectors; Labor: Human factors are the basic requirement of any industry. Approximately 36% of cost is incurred on labor.
Fuel: It’s an important requirement of aviation sector. It’s the fuel that drives the aviation industry. About 11.7% cost is incurred on fuel.
Passenger food: 3.5% Passenger traffic commission: 10% Landing fees: 2.2% Advertising & promotion: 1.6% All others: 35%
Current Business Scenario is considered as Recession. Recession is a contraction phase of Business cycle. An Economic slowdown during which trade & industrial activities are reduced is termed as ‘Recession’. During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes and business profits all fall during recessions. Current Recession is an outcome of US Economy. Official economic data shows that a substantial number of nations are in recession as of early 2009. The US entered a recession at the end of 2007, and 2008 saw many other nations follow suit.
Causes of recessions: Crisis theory Tendency of the rate of profit to fall Currency crisis Energy crisis War Under consumption Overproduction Financial crisis
Effects of Recession: Unemployment Bankruptcies Credit crunches Deflation (or disinflation) Foreclosures
Impact of current scenario on Aviation
Causes for affected Aviation: Fuel Prices Decreasing in Passengers Turnover Competition Low Investments Acquiring more Loans
Country's domestic aviation sector has been facing huge losses, in the tune of about Rs 10,000 crore, due to excess capacity, irrational pricing & under utilization of resources. Airlines are now shifting flights to low-cost platforms to increase traffic and reduce costs. The ongoing recession is expected to result in severe losses for airlines in 2009, particularly for the private players, which comprise 75 per cent of the domestic aviation market. ``Most players are going through unacceptable levels of losses. Markets are under extreme price competition. Bulk of the growth has come from low price points, but disappeared when airlines attempted to raise fares to break-even,’’ said Gilbert George, senior general manager, Jet Airways.
Industry body, International Air Transport Association (IATA), expects cargo traffic to fall 13 per cent, passenger traffic to go down by 5.7 per cent and airline revenues to decline by 12 per cent or $63 billion in 2009. ``The Indian aviation industry transformed from being a regulated and poorly managed sector to an open, friendly and strategically important industry for the country’s economy. However, rapid growth resulted in resource crunch and infrastructure is not in line with expansion,’’ said Aajay K Mehra, managing director, South Asia, Airbus.
Air travel is all set to go cheaper with the country’s leading full-service carriers working on ideas to revive demand across recession hit aviation sector by cutting air fares. Though low fares resulted in higher traffic it also led to lower yield, which combined with higher input cost put severe strain on airlines finances. Most of the newly launched airlines were running in losses, even the more established airlines were finding it hard to make profit regularly. Towards the end of 2006, mounting price war, financial losses and rapidly expanding capacity created a situation where an imminent catastrophe of closure of several airlines looked real enough. If Indian aviation in 2007 has to be described in a single word then ‘consolidation’ would be the right term to use. After a fiercely fought price war in 2006, that saw several airlines coming dangerously close to bankruptcy. Analysts expected that the impact of these consolidations would be felt in 2008; while in the case of Air India-Indian Airlines merger infusion of new funds was not expected, in the case of Deccan-Kingfisher merger a significant infusion of funds was thought to be inevitable in the light of the poor financial health of Air Deccan. Passenger traffic continued to grow at a healthy rate in 2007. This prompted nearly all the airlines to place orders for buying new aircraft, undeterred by the fact
that they posted combined losses of about Rs 2,000 crore largely on account of rising fuel costs. While yields slid, operation costs mounted. Airline CFOs were reported to claim that more than 80 percent of the cost had become "uncontrollable". These included wage and fuel costs (60 percent of all expenses) and higher depreciation and interest charges. These were taking a toll on the financial health of all airlines. The airlines seemed to believe that if they could garner a fair share of the market then profit would automatically follow. This was obviously based on an inadequate understanding of basic economics. In a competitive market an enterprise can become a price setter if and only if it establishes a dominant position (thumb rule - a market share of over 50%), failing that the enterprise has to remain a price taker. For example, as recently as in late 2007 in order to gain market share GoAir positioned its fares around 30 per cent lower than most airlines and on a clogged sector like Mumbai-Delhi, where a Kingfisher ticket cost Rs 2,000 as basic fare a GoAir ticket went as low as Rs 500. Jet Airways and Kingfisher Airlines, which between them have about 60 per cent of the domestic market, agreed on an alliance to cut costs through code-sharing, sharing of ticketing, ground services, joint fuel management, crew training and utilization.
Impact on Employees
The turmoil of financial crisis is on and it is now showing up its sign on the Indian Aviation industry. With many firms around the globe laying-off its workforce in order to cut cost. The most happening airline company of India, Kingfisher Airlines, has decided to go for a massive layoff. Due to volatile fuel prices burining a hole in the pocket of Airline companies, they are forced to go for cost cutting measures. In the aviation industry, Vijay Mallya-promoted Kingfisher
Airlines is cutting 300 jobs, besides returning surplus aircrafts.
India’s largest careet Air India is in move to temporary layoff of 15,000 staff. Air India said it is considering a plan to give 3-5 years leave without pay to about 15,000 of its staff, but it would be voluntary action on the employees part.
Top private airline, has laid off about 850 employees due to falling air travel and soaring costs. This is one of the largest lay-offs in the history of Indian aviation. Jet Airways, in a statement, said it would reduce probationary and temporary workers in other areas, including management and pilots, as it planned to cut flights by about 15 per cent over winter.
GOAIR is yet to clear the final salary settlement of its 500 ex-employees, 300 of whom were asked to leave between May & September to cope
with a severe cash crunch.
Jet Airways is an airline based in Mumbai, India. It is India's third largest airline after Air India and Kingfisher Airlines. It operates over 400 daily flights to 64 destinations worldwide. Its primary base is Mumbai's Chhatrapati Shivaji International Airport with secondary hubs at Brussels, Chennai, Delhi and Ahmedabad, Bangalore, Hyderabad, Kolkata, Pune as focus cities. Jet Airways has come a long way since its first flight in 1993. It's one of the fastest growing airlines in the world, and now it's all set to change the way you fly for the better! Jet Airways operates flights to 20 international destinations, offering you a better choice in the skies.
Jet Airways Domestic Operations Statistics Aircraf % Passeng Cargo t er seat carried Increase/De Flown (in crease factor (Block tons) (in Cargo) (%)
% Year Passenger Increase/Decr RPK ended s ease
April-05 to March06 April-06 to March-
- 7,875 105,173
▲8.62% 8,538 117,946
07 April-07 to March08 April-08 to March09
▼1.15% 8,565 114,240
▼18.54% 6,884 85,046
Jet Airways International Operations Statistics Aircraf % Passeng Cargo t Increase/De er seat carried Flown (in crease factor (Block tons) (in Cargo) (%)
% Year Passenger Increase/Decr RPK ended s ease
April-05 to March06 April-06 to March07
▲87.22% 3,770 23,846
April-07 to 1,641,930 March08
▲98.80% 8,350 51,517
April-08 to 3,107,278 March09
Bottom of Form
Vertical Balance Statement (Rs crore)
Mar ‘ 09 Mar ‘ 08 Mar ‘ Mar ‘ 07 06 Mar ‘ 05
Sources of funds
Owner’s fund Equity share capital Share application money Preference share capital Reserves & surplus 86.33 1,208.3 2 86.33 1,765.4 2 86.33 2,018. 48 86.33 2,057. 53 86.33 1,664. 56
Secured loans Unsecured loans Total 4,775.9 2 11,547. 61 17,618. 18 1,612.7 5 10,402. 29 13,866. 79 742.46 206.02 60.00 5,313. 84 8,161. 11 4,689. 58 7,039. 46 2,904. 84 4,715. 73
Uses of funds
Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 18,763. 74 1,862.3 0 2,501.8 0 14,399. 64 16,591. 09 2,699.9 0 2,506.9 2 11,384. 27 1,223.2 583.17 8 1,745.0 1,475.3 0 5 5,713. 4,312. 5,162. 83 07 79 132.44 162.02 259.27 2,416. 34 3,165. 05 3,994. 52 68.93 2,249. 58 1,900. 47 2,725. 66 187.23 2,593. 46 2,310. 06 71.32 1,595. 73
Net current assets
Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total 4,350.7 0 3,460.3 3 4,091. 31 1,865. 21 2,226. 890.37 -216.11 932.61 10 17,618. 13,866. 8,161. 7,039. 4,145.6 7 4,361.7 8 3,402. 32 2,469. 71 2,156. 27 1,417. 65 738.62 4,715.
Mar ‘ Mar ‘ Mar ‘ Mar ‘ Mar ‘ 09 08 07 06 05 18 79 11 46 73
Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lacks) 1,645.0 1,465.0 0 0 100.02 10.35 69.01 190.06 -
1,603. 68 16,325. 14,284. 6,624. 9,736. 3,097. 90 97 43 40 06 863.34 893.34 893.34 863.34 863.34
Profit Loss account (Rs crore)
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Operating income 11,571. 8,811. 7,057. 5,693. 4,338.0 15 10 78 73 1
Material consumed Manufacturing expenses Personnel expenses Selling expenses Administrative expenses Expenses capitalized Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Nonrecurring items Other non cash adjustments Reported net profit 7,446.4 8 1,410.5 0 1,098.1 7 1,017.5 4 10,972. 69 598.46 112.27 710.73 5,129. 92 1,205. 18 63.12 71.96 3,667. 2,456. 1,622.3 20 60 0 938.55 567.81 374.74
982.86 800.85 774.02 559.06 739.24 616.12 420.02 269.89 8,057. 6,022. 20 72 1,035. 753.90 06 115.23 90.36 1,125. 869.13 42 1,056. 909.70 03 777.80 414.10 4,281. 57 1,412. 16 77.36 1,489. 52 2,897.9 5 1,440.0 6 51.57 1,491.6 3
1,450.8 6 899.81 1,639.9 964.70 4 22.21 160.73 1,662.1 803.97 5 331.48 522.01 928.33 28.90 -402.34 253.06
691.24 461.31 406.41 457.00 -
391.87 573.32 198.38 23.42 270.22 190.14
121.65 383.18 221.80 225.25 289.38 -10.01 24.49 41.01 18.82 27.94 452.04 391.99
Earnings before appropriation Equity dividend Preference dividend Dividend tax Retained earnings
Mar ' 09 -261.44 -261.44
Mar ' 08 208.91 208.91
Mar ' 07 525.37 51.80 8.80 464.77
Mar ' 06 601.71 51.80 7.27 542.64
Mar ' 05 273.98 25.90 3.63 244.45
Operating margin (%) Gross profit margin (%) Net profit margin (%) Adjusted cash margin (%) Adjusted return on net worth (%) Reported return on net worth (%) Return on long term funds (%) 5.17 -2.60 -3.44 -6.52 128.38 -31.07 -1.41 8.55 -0.27 -2.83 -0.29 14.66 8.79 0.39 2.69 24.80 17.66 7.83 9.15 33.19 22.66 8.93 19.14 21.88 22.38 21.93
-43.41 -10.53 5.67 -13.66 1.32 0.74 9.53 21.08 16.80
Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio 9.33 12.61 7.34 0.62 5.63 6.49 13.35 0.53 2.75 2.88 25.79 1.28 2.21 2.28 30.45 1.38 1.69 1.69 37.12 0.84
Current ratio Current ratio (inc. short term loans) Quick ratio Inventory turnover ratio 1.26 0.37 1.09 7,370. 16 0.95 0.60 0.77 2,143. 82 1.38 2.19 1.52 1.07 1.66 1.52 1.18 1.97 1.21 5,601.4 4,951.0 7,111.49 1 7
Mar ' 09 Profit before tax Net cashflow-operating activity Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 -469.62 -412.59 51.36 722.26 582.13 -376.30 862.66 687.46 607.48 1,355.0
Mar ' 09
Mar ' 08
Mar ' 07
Mar ' 06 4
Mar ' 05
Net cash used in investing activity
1,153.6 6,176.8 2,471.5 1,779.9 786.08 5 0 6 2 1,242.1 5,123.2 1,587.8 732.33 915.33 2 2 3 -287.83 -190.92 633.71 -276.25 490.43 670.55 861.47 227.76 504.01 13.58 382.72 670.55 861.47 227.76 504.01
Netcash used in fin. activity Net inc/dec in cash and equivalent Cash and equivalent begin of year Cash and equivalent end of year
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