Issues and challenges

 Increasing fuel prices

Aviation turbine fuel (ATF) is one of the important parts of the Aviation industry.
The Indian government did not reduce the prices of jet fuel in accordance with the fall
of prices observed in the International crude oil. But whenever there is a rise in crude
oil prices the fuel cost always increases. This increases the overall operation cost of
the Aviation industry. This in turn results in the increased fare prices for the
customers. It is estimated that jet fuel accounts for almost 45% of the operation cost
and for the past 2-3 years ATF prices have increased by nearly 25-30.

Government Interventions:

Many experts consider the frequent government intervention in the Aviation industry
to be a great obstacle. They believe that the government should allow aviation
industry to be free from policy hurdles like regulating affairs & slash taxes, in jet fuel
etc. the Indian aviation industry contribute to 5% of the GDP and thus requires better
infrastructure and air navigation system from the government to enable future growth.

Higher Airport Cost

The Airport charges imposed by the AAI (Airport Authority of India) are very high.
These charges vary for International and Domestic Airports. The domestic airlines in
India are paying additional cost for the international designated airports without
receiving any extra facility. A survey reveals that the airport charges levied by the
Indian Airports are amongst the highest when compared to the Asian and Gulf
countries. This further increase the burden on the Airline industry.

Severe Competition

There is a severe competition when it comes to the aviation industry due to the pricing
of the tickets. Set up Airlines are undermined by minimal effort transporters, which
are gobbling up their market share. To combine their piece of the overall industry, top
premium carriers had to decrease their ticket prices to around 15-20 percent. Such a
cut down in cost will prompt a cost battle over the long haul among the carriers with
the main objective of expanding their market share.

Overcapacity:

Most major airlines in the aviation industry nonetheless face severe competition in getting a
grip at the consistent changes, and lots of companies have been less agile while adapting to
the changing economic situations. As a result of overcapacity, airways have needed to be
afflicted by rock bottom fares, something that would satisfy the flyers, however not the
 aviation industry. These fares immediately cause a revenue problem, that is already affected
by excessive fuel costs.

Impact of lockdown on Aviation Industry:

Aviation is one of the worst affected industries due to Covid-19 pandemic. As per
International Ait Transport Association, the Aviation industry has lost $113 billion globally in
terms of passenger revenue.

Domestic Traffic growth has also been affected with the domestic travellers postponing or
cancelling their travel plans.

Most of the aviation companies were already suffering due to the sever competition but the
advent of the pandemic has their cash reserve running low and many are at the verge of
bankruptcy. This has led to the labour unrest as they had to bear the loss of jobs and Pay
cuts.

The Centre for Asia Pacific Aviation (CAPA) India projected that the Indian aviation industry is bound
to lose between $3.3 and $3.6 billion in the first quarter of Financial Year 2021 alone because of the
coronavirus.

Prospects for Aviation Industry:

India’s Aviation Industry has huge growth opportunities considering the air fares are still too
expensive for most of the population, of which 40% is upward middle class.

The stakeholders and policy maker must collaborate to implement efficient decisions that
could help in boosting the Indian Aviation industry. With proper policies and focus on
customer service, airline costs and quality of service, India could become the 3rd largest
aviation market by 2025.

Centre for Asia Pacific Aviation (CAPA) India said that like every other market the Indian Aviation
Industry could show transformational changes as the after effect of the pandemic. With many
airlines, suppliers and the airport companies could shut down due to the financial stresses and India
may need a greater number of resources to achieve its target of becoming the 3 rd largest Aviation
market. These transformational changes will prepare the Industry to be better equipped to deal with
such crisis in future.