CHAPTER: 2

INDIAN AVIATION SECTOR:

AN OVERVIEW
2.1 INTRODUCTION

Air transportation happens to be one of the world‟s most important industries. Its
development and its technical as well as service achievements make it one of the
greatest contributors to the advancement of modern society. It is one of the most
fascinating industries in the world, with roots going back to the earliest years of the
twentieth century. Not long after the Wright brothers flew successfully for the first
time in 1903, interest in aviation, both for military and commercial purposes, began.
The interest of the scientists, researchers and early adventurers provided major
impetus to aviation in its younger days. The two world wars, which happened during
the first half of the twentieth century, provided a boost to the development of newer
types of aeroplanes and other aviation infrastructure. This, indirectly, had a profound
effect on the steady growth of the air transportation industry all across the globe.
Since its inception, the industry has continued to expand. It has weathered crises and
demonstrated long-term resilience, becoming an indispensable means of transport.
Historically, air transport has doubled in size every 15 years and has grown faster than
most other industries (“Aviation Benefits”, 2018)1.

Commercial aviation has changed the world immeasurably by making the world a
more connected place. It is considered to be one of the most „global‟ industries,
connecting people, cultures and businesses across continents. It has become an
integral part of the today‟s society as it affects the lives of citizens living in every
corner of the globe in some way or the other. Aviation happens to provide the only
rapid worldwide transportation network, which makes it essential for global business.
It plays a very vital role in today‟s global economy by facilitating international trade,
commerce, creating jobs and helping in mobilisation of resources. This industry has

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had a substantial economic impact, both through its own activities and also as an
enabler of other industries. Its contributions include direct, indirect and induced
impacts, which are related to the total revenues of the air transport industry. The
aviation industry supports US$ 2.7 trillion (3.6%) of the world‟s gross domestic
product (GDP). Every day, around 100,000 flights transport over 10 million
passengers and around US$ 18 billion worth of goods (“Aviation Benefits”, 2018).
The world‟s airlines carry over four billion passengers a year and nearly sixty-two
million tonnes of freight. For providing these services, the airline industry generates
10.2 million direct jobs within the air transport industry and contributes US$ 704.4
billion to global GDP. Indirectly, its GDP contribution is measured at US$ 637.8
billion. These include employment and activities of suppliers to the air transport
industry – for example, aviation fuel suppliers, construction companies that build
airport facilities, suppliers of sub-components used in aircraft, manufacturers of goods
sold in airport retail outlets, and a wide variety of activities in the business services
sector such as call centres, information technology and accountancy. (Value to the
Economy, n.d.).2

India has been witness to some of earliest aviation experiments that took place in
the later stages of the nineteenth century, and happens to be one of the first countries
in the world where commercial air travel began. The country, being geographically
dispersed, the importance of an efficient civil aviation sector cannot be
overemphasised. India is presently the world‟s third largest civil aviation market (“In
the next 6-8 months”, 2018).3 Indian civil aviation industry is presently one of the
fastest growing aviation industries of the world. In this backdrop, the present chapter
focuses on the origin and evolution of civil air transport in India, and also provides an
overview of the scheduled civil airline sector of the country since its nationalisation.

2.2 ORIGIN OF AVIATION IN INDIA: MYTHOLOGICAL &

PRACTICAL PERSPECTIVES

Humans have dreamt of flying in the air since time immemorial. In the Indian
mythologies, as in those of other civilisations like Greek, Egyptian, Persian and
Chinese, several instances of air travel are found. In Greek mythology, there is the
story of Daedalus, a cunning craftsman, who flew from Crete to Haly with his son
Icarus, by means of wings fastened to their shoulders by wax.4 In the Bible, there are

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evidences of flying machines like giant wheels or other celestial chariots.
Mythologically, the Indian civilisation too has had many references to transportation
by air. In Hindu mythology, we come across the story of Puhpak Vimana, the flying
chariot which originally belonged to Kuvera, the Yaksha chief.5 Some of the other
references to air travel include the demon Ravana, king of Lanka (present day Sri
Lanka) travelling to India on this flying chariot, Lord Rama returning from Lanka in
Pushpak Vimana6, the Hindu God Vishnu travelling on Garuda, his flying vahana (i.e.
living carrier). As per the Hindu mythology, it is claimed that passenger air travel
began in Bharatvarsha (present day, India) with the Flying Gandharvas in the ancient
times7.

Aviation, in practical sense, had its humble beginnings in the flight of a hot air
balloon built by Montgolfier in France and first flown in 1783. There was very little
progress for a century till Renard, another Frenchman, in 1884 applied power to a
balloon and made it a dirigible airship. A few years later „heavier-than-air‟ models
began to develop in the glider experiments of Ader, Montgomery, Lilienthal, Pilcher,
Chanute, Horring and Wright brothers, followed by experiments on powered models
by Strongfe and Langley. The history of aviation for practical purposes began in 1903
when the Wright brothers, Orville and Wilbur, on December 16 made a successful
flight in a power driven heavier-than-air machine of 750 pounds driven by a 12 horse-
power motor, for 12 seconds. After repeated efforts, the brothers were able to stay in
the air for 59 seconds covering 852 feet. With many improvements, in September
1905, they flew 11 miles at 35 m.p.h. Soon after, Santos-Dumont and Henry Farman
started flying on their own airplanes in France. In 1907, Glen Curtiss, with a group of
engineers, formed the Aerial Experimental Association in America to construct
several experimental planes. The next year witnessed several improvements in both
Europe and America. At the first Aeronautical Salon in Paris more than a dozen full-
sized machines were presented. Thus the ultimate success of aviation as a certainty
was established.8

However, the journey of Indian aviation in modern sense started in the year 1877
when the first balloon flight in India was made by Mr. Joseph Lyna on November 27,
1877 from Lalbagh Gardens, Bombay (present day Mumbai)9. It is known to have
ascended to an altitude of about 7,500 feet and landed at Dadra. In the years that
followed, there was a tremendous development of air transportation in India as in

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many other countries due to technological advances and co-operation from the
Government.10

2.3 EVOLUTION OF CIVIL AVIATION IN INDIA

The journey of Indian aviation industry, since its inception, can be said to have
been influenced by two major happenings in the regulatory front. Firstly, the
nationalisation of the airline industry during the 1950s which transformed an open
sector to a fully regulated, government controlled sector. Secondly, with the opening
up of the economy in the early years of the 1990s, the airline sector in India was once
again deregulated. Accordingly, for the purpose of the logical discussion and
understanding, the evolution of airline operations in India can be discussed under
three broad periods – namely the „Pre-Regulated Era‟, the „Regulated Era‟ and the
„Post- Regulated Era‟.

2.3.1 Evolution during the Pre-Regulated Era (1877 to 1953)

The development of civil aviation in India during the pre-regulated era can be
discussed under two broad headings – Age of Experiments (1877 to 1944) and Post-
War Developments (1945 to 1953).11

A] Age of Experiments (1877 to 1944)

Joseph Lyna‟s trip from Lalbagh to Dadra in 1877 marked the beginning of the
Age of Experiments in India. Twelve years later, in the year 1889 Pereival Spencer
gave a demonstration flight at the then capital of India – Calcutta (present day,
Kolkata) with the financial assistance from the public for preparing his balloon named
„Express India‟. He took several other flights subsequently with some people
including foreign adventurers. Thus, a number of experiments on the Indian soil were
made by foreign adventurers, and thus they generated a good deal of interest in
aviation among the people of India.12 It was in the year 1910 that the first air-display
took place in India at the Tollygunge Club, Calcutta (present day, Kolkata) on
December 28.13

The first commercial flight in India took place on 18th of February, 1911 when a
Frenchman Mr. Henry Monseigneur Piquet, flying a Humber bi-plane, carried mails
by arrangement with the local postal authorities from the exhibition grounds at
Allahabad to Naini Junction, some six miles (approximately ten kilometres) away.

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This happened to be the world‟s first air mail service and occurred about four months
before the first mail flight took place in England from Hendon to Windsor Castle as
part of the celebrations for the coronation of King George V. This commendable piece
of pioneering enterprise on the part of the Indian postal authorities, coupled with the
passing in the same year of an Act regulating, in considerable detail, flight of aircraft
over the Indian territory, at a time when motor car was considered to be a novelty in
the country, shows that the Government of India was at that time one of the most air-
minded Governments in the world.14 However, this service could not be continued
due to lack of interest on the part of the then British Government of India. 15 With this
piece of pioneering enterprise on the part of the Indian postal authorities, there was a
dearth of major aviation activities in India in the immediately following years (due to
the First World War) and nothing remotely connected with air transportation
happened in India until after the First World War. The only development during this
period which deserves mention is that on October 1, 1915, the British Government of
India sanctioned the setting up of a Central Flying School at Sitapur (in the present
day state of Uttar Pradesh) under the control of the army headquarters. Thus, it might
be referred that during the infancy of the Indian aviation sector, the then British
Government of India showed some kind of vulnerable and rigid syndrome while
planning its development.

After the end of First World War, the first international flight to India took place
by Captain Ross in 1918 who flew from Cairo (in Egypt) to Karachi (in present day
Pakistan, then a part of undivided India). The first England – India flight was made by
Squadron Leader Maclaren in a four-engined Handly Page Bomber between the 13th
and 16th of January 1919.16 Soon after the First World War, the British Government
presented about a hundred surplus airplanes to India. With these planes, the Royal Air
Force started a regular air mail service between Karachi (in present day Pakistan, then
a part of India) and Bombay (presently called Mumbai) from January 24, 1920 with a
night stop at Rajkot.17 However, this service got suspended after six weeks of
operation due to the incurrence of financial losses. The year 1920 also witnessed the
formation of the Indian Air Board, an advisory committee of senior officials of the
Government of India. It was formed to advice on ways of assisting and encouraging
civil aviation in India, and was entrusted with the task of formulating governmental
policy pertaining to the establishment and development of air transport within and

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outside the subcontinent of India.18 The Indian Aircraft Rules was passed in 1920
which imposed certain conditions with regard to customs aerodromes and custom
officers, arrival and departure, import and export of goods, procedure for arrival in
India, prohibition of signals in certain cases and forced landing. The detailed rules
regarding registration of aircrafts, licensing of personnel etc. were also promulgated
in the year 1920. In December 1920, the government of British India created a post of
Chief Inspector of Aircrafts.19

Things were pleasantly quiet for a few more years till 1924 when the government
initiated construction of civil aerodromes at three locations, namely Dumdum in
Calcutta (presently called Kolkata), Bamrauli in Allahabad and Gilbert Hill in
Bombay (presently called Mumbai).20 In 1925, the British Air Ministry, for the first
time, entered into a regular contract with the Imperial Airways Britaini for the
operation of regular air services between London and Karachi.21

In 1926, the Indian Air Board (formed in 1920) submitted to the Government of
India a remarkable memorandum entitled “The Past History and Future Development
of Civil Aviation in India”. This memorandum made a number of specific
recommendations, aimed at ensuring the rapid development of civil aviation within
India and its participation in external air services. These included among others,
proposals for:

(a) establishment of landing ground and other ground facilities;

(b) the whole-time appointment of a Director of Civil Aviation;

(c) a systematic survey of main trunk routes; and

(d) the inauguration of an air service between Calcutta (presently called, Kolkata)
and Rangoon (presently called, Yangon) and the grant of a subsidy to the
company was entrusted for its operation.

These recommendations, as put forward by the Board, were approved by the

Government and the Indian Legislative Assembly in February 1927, and a separate
Department of Civil Aviation came into existence in April 1927. The Civil Aviation
Department in India was thus formed and Lieut. Col. Francis C. Shelmerdine (later Sir
Francis C. Shelmerdine and D. G. C. A. in England) took charge as the first Director

i
Imperial Airways Britain was incorporated on March 31, 1924.

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of Civil Aviation in India. He, with suitable help of the Finance Department, was able
to secure the acceptance of the organisation of the trans-India route from Karachi to
Rangoon. On the 9th of May, 1928, the first flying club was set-up at Bombay.22 It
was, indeed, by accident that scheduled air transport came to India, when towards the
end of second decade of the twentieth century, the imperial powers of Europe, namely
the British, the French and the Dutch – extended their empire air services to and
across the subcontinent of India.23 The first scheduled air service from London to
Karachi was inaugurated in March 1929 by the Imperial Airways. This move
motivated the Government of India as well to start „Indian State Air Service‟, as a link
between Karachi and Calcutta. However, due to heavy losses it was abandoned later
(in the year 1931). Thereafter, on December 30, 1929 a weekly charter air service was
inaugurated by the Imperial Airways between Delhi and Karachi.24 This weekly air
service did not prove satisfactory, and on the expiry of the agreement, the Delhi
Flying Club was entrusted with this responsibility.25 Thus, the Delhi Flying Club
happened to provide the first indigenous air transport operation in India which started
operating flights between Karachi and Delhi in 1932.26 However, it was only
responsible for carrying mails, while the transport of the passengers by air was
discontinued for the time being.27 They operated for a period of about eighteen
months.28

The eastern extension of London-Karachi service was never an Indian operation

except during the brief Delhi Flying Club episode. Indian scheduled air services, in
the real sense began in 1932. They had their origin in the lone vision and efforts of a
far-sighted and immensely able man whose name was Nevill Vintcent. After a fine
career in the Royal Air Force, Vintcent and an associate, J. S. Newall, came to India
in 1929 in two First World War D.H.9‟s on a barnstorming tour, in the course of
which they flew over the greater part of India and surveyed a number of possible air
routes. Vintcent realised from the start the immense potentialities of commercial
aviation in India and, in order to get the necessary backing for his scheme, he joined
the firm of the Tatas. In 1932, the Aviation Department of Tata Sons Ltd., which later
assumed the name of Tata Airlines secured approval from the Government for the
Karachi-Ahmedabad-Bombay-Bellary-Madras mail service without any guarantee for
mail revenue or subsidy. This service was inaugurated on October 15, 1932. Thus,
Tata Airlines was the first airline to operate scheduled air services in India on a

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permanent basis. Tata Airlines, during its first year of operation, flew 160,000 miles
with an unbroken record of regularity.29 In May 1933, Indian National Airways, a
company based in Delhi was launched and it happened to be the second domestic
carrier in the country.30 It was formed with the dual purpose of operating services of
its own and participating along with the Government of India in the Indian Trans-
Continental Airways. It began operations on its own on December 1, 1933, when they
inaugurated a weekly passenger, mail and freight service between Calcutta and
Rangoon, and between Calcutta and Dacca. A third airline, Air Services of India ,
came on the scene in 1937 to operate passenger services between Bombay and some
of the Indian States in Kathiawar and between Bombay and Kolhapur to the south-
east. Its fares were too low to cover its costs and its services were closed down within
two years.31

An important milestone in the development of aviation in India was the

introduction of the Empire Air Mail Scheme on February 28, 1938. This initiative
envisaged rapid transportation of mail among the commonwealth countries served by
the U.K.32 In 1938, the Government of India entered into fifteen year contracts with
the Tata Airlines and Indian National Airways for carriage of mail on their respective
routes under the Empire Air Mail Scheme. This Scheme stepped up the frequency of
services of Tata Airlines and Indian National Airways, and gave them an opportunity
for their development. Thus, between 1932 and 1938, civil aviation in India made a
greater headway and by then, the two pioneering companies – Tata Airlines and
Indian National Airways had firmly laid the foundation for scheduled air transport in
India.33

The Second World War broke out in September 1939 and consequently the
Empire Air Mail Scheme got suspended. During this period, all air transport
operations were directed for meeting the war requirements as a consequence of which
air services were run only for Government and Defence Services. Thus, while the war
disrupted and curtailed some services, in a way, it also created opportunities for
expansion and diversification.34 The development of air transport during the war
period was phenomenal and proved very useful for many coming years.35 The Air
Services of India, which was closed down in 1939, was purchased by the Scindia
Steamship Navigation Company in 1941, and became known as the Scindia Line.36

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 With a view to draw up a plan in anticipating the post-war needs for civil air
transport, the Government of India appointed, in 1943, the Reconstruction of Air
Services Committee under the chairmanship of Captain Frederick C. Tymmsii. The
Committee, in September 1943, submitted a series of carefully thought out papers on
all aspects of post-war aviation.37 Amongst other proposals, Tymms Report advised
Government to regulate entry into air carriage through the agency of an air transport
licensing board. Accepting this basic recommendation of the Tymms Report, the
Government appointed a Committee in 1944 under the Chairmanship of Sir
Mohammad Ushman to follow up the Tymms Plan. After critical examination of the
developments, the Committee suggested certain measures which included –
construction of new aerodromes, development of new air routes, establishment of
international air service, introduction of a system of licensing air carrier companies
etc. However, it had not suggested any ceiling on the number of such licenses.38

B] Post-War Developments (1945 to 1953)

Accepting the recommendations of these two Committees, the Government of

India made a policy declaration in 1945, which among other things provided for
development and operation of air transport services by reliable and sound private
enterprises purely on commercial principles, regulations of their operations through a
system of licensing. Thereafter, the Aircraft Act, 1934 was amended in March 1944.
The Act as amended, amongst other things, provided for the licensing of air transport
undertakings, creation of an Air Transport Licensing Board, granting of licenses by
the Board only after taking into account factors like air transport needs of the public,
adequacy of financial and technical resources of the applicant company and the
potential traffic on particular routes etc.39 In 1945, a new commercial airline, Deccan
Airways Limited was founded. It was a joint venture between Nizam Government of
Hyderabad State and Tata Airlines.40

Moreover, on May 3, 1946, the Scindia Line (erstwhile Air Services of India)
resumed its services.41 Tata Airlines was converted into a public limited company on
July 29, 1946 and was named the Air India Limited. By the end of July 1946, there
were only four air transport companies viz. Air India (formerly Tata Sons Private Ltd.
1932, converted into public limited, 1946), Indian National Airlines (1933), Scindia

ii
Captain Tymms had succeeded Sir Francis C. Shelmerdine as Director of Civil Aviation in 1931.

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Line (formerly Air Services of India, 1937), and Deccan Airways (1945) which
constituted the commercial air transport industry of India.

The Air Transport Licensing Board (ATLB) was set up in the first few months of
42
1946 and within the first six months of the constitution of the ATLB, it received
over a hundred applications. Out of these, twenty-one airline companies were issued
licenses, which included Bharat Airways (August 1945), Airways India (September
1945), Indian Overseas Airlines (January 1946), Dalmia Jain Airways (July 1946),
Orient Airways (October 1946), Ambica Airlinesiii (January 1947), Jupiter Airwaysiv
(June 1948).43

The Government of India wanted to establish external air services and with this
vision, on March 8, 1948, a joint sector company was set up by the Government of
India, namely Air India International Limited in collaboration with Air India Limited
(erstwhile Tata Airlines).44 The Government also introduced night-air-mail service
scheme in February 1949.45 As a result of liberal granting of licenses by the ATLB,
many of the airline start-ups got liquidated in the first few years of their formation.
The few surviving airlines such as Air India, Airways India, Bharat Airways, Deccan
Airways, Kalinga Airways, Scindia Line (erstwhile Air Services of India) and Air
India International, made an effort at self-regulation, and formed the Air Transport
Association of India (ATAI) which remained in existence until 1953.46 The financial
position of the airline companies were not in a good state. On February 8, 1950, the
Government of India appointed the Air Transport Inquiry Committee (ATIC) under
the chairmanship of Justice Rajadhyksha to investigate the working of air transport
companies and to recommend measures for improving their efficiency. The
Committee submitted its report in September 1950 recommending a number of
measures for the proper development of air transport industry in India. The
recommendations included:

(a) Air transport companies should be integrated into four with their bases at
Bombay, Calcutta, Delhi and Hyderabad;

(b) Licenses already granted to certain companies should be renewed;

iii
Liquidated in February, 1949.
iv
Liquidated in October, 1948.

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 (c) Routes of certain companies should be redistributed to eliminate wasteful flying
hours;

(d) Air transport should be reorganized, the rates and fares were to be increased, and
the number of aircrafts were to be reduced and the superfluous staff need to be
retrenched;

(e) Rates and fares should be standardised;

(f) Government should continue to give financial assistance;

(g) Non-scheduled operators should not be allowed to operate on the routes already
covered by scheduled companies;

(h) External services should be reorganised and these should be under the control of
one organisation only;

(i) Nationalisation of air transport should be postponed by atleast five years to

begin with; and

(j) In case of nationalisation of air transport companies, they should be entrusted to

a single statutory corporation formed for the purpose.

The expectations of the ATIC did not, however, turn out to be realistic in the
sense that, the airline companies did not voluntarily get merged into three or four
airlines only. Thus, with the primary objective of having fewer air transport
companies, the Government of India after much discussion and deliberation decided
to nationalise the civil air transport scheduled carriers and moved forward with the
objective of having a corporation for operating internal air services and another
corporation for operating external air services. Thus, it proceeded to create two
monopoly corporations in the public sector. As such, to nationalise the air transport in
India, the Air Corporations Bill was introduced in the Parliament on March 21, 1953.
The Parliament passed the Air Corporations Act, which had received the assent of the
President of India on May 20, 1953. The main provisions of the Act were that:

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 “there shall be transferred to and vested in:

1. Indian Airlines, the undertaking of all the existing Air Companiesv (other
than Air India International Limited) and

2. Air India International, the undertaking of the Air India International

Limited (AIIC)”.

2.3.2 Evolution during the Regulated Era (1953 – 1993)

The second phase of Indian civil aviation sector started with the passing of the Air
Corporations Act, 1953 by the Government of India. The Act was enacted for
specifying policy of Air India and Indian Airlines and general regulatory power of
Government of India regarding civil aviation and domestic scheduled air service
policy. The Government segmented the aviation sector into two parts – domestic
sector and the international sector. The Government of India formed a single domestic
airline service operator called the „Indian Airlines‟ by integrating the eight existing
privately owned domestic airline service providers, namely Air India, Airways India,
Bharat Airways, Deccan airways, Himalayan Aviation, Indian National Airways,
Kalinga Airways and Scindia Line (erstwhile Air Services of India). On the other
hand, the international air-services were to be provided by Air India International
Limited. On August 1, 1953, the Indian Airlines Corporation took over, as a going
concern, the assets and business of all services in India and between India and nearby
countries, while the Air India International Corporation took over Air India
International Limited. The implementation of nationalisation opened a new and more
orderly chapter in the history of Indian air transport during which only two
corporations provided air transportation services. The reasons that had motivated the
Government of India for public ownership of the civil aviation industry were the fact
that it was an infant industry which needed adequate protection, the scale of finances
required, control over import of aircraft and subsequent resolution of foreign
exchange problems, acquisition of new aviation technology, airline safety, promotion
of tourism, meeting requirements of national defence and promotion of overall
national interests.

v
They were: (1) Air India, (2) Airways India, (3) Bharat Airways, (4) Deccan Airways, (5)
Himalayan Airways, (6) Indian National Airways, (7) Kalinga Airways, and (8) Scindia Line
(erstwhile Air Services of India).

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 Moreover, apart from nationalizing the scheduled airlines services, during this
period, the Government also took steps to extend its control over the airport authority
by enacting the National Airport Authority Act in 1986, thus nationalising the
Airports Authority where all domestic airports were to be administered by one
authority namely National Airports Authority of India (NAAI).

2.3.3 Evolution during the Deregulated Era (1994 to The Present)

The third phase in the evolution of Indian aviation sector started when the waves
of liberalization, privatisation and globalization (LPG) came and swept the Indian
aviation sector. As a consequence of this, the civil aviation sector in India got
deregulated. The Government repealed the Air Corporations Act of 1953 and
instituted the Air Corporations (Transfer of Undertakings and Repeal) Act of 1994
and thus converted the two Government-owned corporations – Air India and Indian
Airlines into public limited companies. In addition, domestic scheduled services,
which was till then a monopoly of those two national carriers, were opened up to
private commercial carriers as well. The deregulation of the airline industry was part
of the larger process of economic liberalization agenda adopted by the Government of
India. However, in Indian aviation sector, this led to the entry and participation of
private commercial operators after almost four decades. During the early years of this
post-deregulation period, quite a few private airline operators started providing
scheduled airline services in India. But within a few years most of these companies
went out of business except for two private operators, namely Jet Airways and Sahara
Airlines (later renamed as Air Sahara). Thereafter, a few years later in the year 2003 a
new breed airliner, called the low cost carriers (led by Air Deccan), entered the Indian
civil aviation market. This added a totally new dimension to the existing domestic
scheduled airline market in India.

Table 2.1: Indian Aviation Sector: Landmark Events at a Glance

1877 First balloon flight in India by Mr. Joseph Lyna from Lalbagh Gardens,
Bombay.
1910 First air-display took place in India at the Tollygunge Club, Calcutta
1911 First commercial flight in India by Mr. Henry Piquet who carried air mails
from Allahabad to Naini Junction
1918 First international flight to India by Captain Ross who flew from Cairo to
Karachi

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 1919 First England – India flight was made by Squadron Leader Maclaren.
1927 Formation of Department of Civil Aviation of India
1929 First scheduled air service to India (from London to Karachi) by the
Imperial Airways
1932 First indigenous air transport operation in India (operating flights between
Karachi and Delhi) provided by Delhi Flying Club.
1932 Launch of Tata Airlines, the first airline to operate scheduled air services in
India.
1946 Setting up of the Air Transport Licensing Board (ATLB).
1953 Nationalisation of civil air transport industry by passing of the Air
Corporation Act, 1953 by the Government of India.
1986 Formation of National Airports Authority of India (NAAI).
1994 Deregulation of civil air transport industry by repeal of the Air Corporations
Act of 1953.
2003 Launch of Air Deccan, the first low cost carrier of India.

2.4 STATUTORY BODIES OF THE INDIAN CIVIL AVIATION

SECTOR
Aviation industry is one of the fastest growing industries with long-term outlook.
It is a modern industry, which is related with air transport activities, namely –
operational, infrastructure and regulatory activities. As such, the efficient functioning
of this industry requires the involvement of different entities participating in each of
these roles. The primary participant in the industry happens to be the airline
companies which transport passengers and cargo from one place to another. However,
these airline companies cannot operate in isolation and require support from some
recognised bodies viz. regulatory agencies, airport authorities etc. For the smooth and
efficient functioning of the civil aviation sector, Government of India had established
certain statutory institutions and bodies. Presently, the civil aviation sector in India
comes under the purview of the Ministry of Civil Aviation and consists of inter-alia
Directorate General of Civil Aviation, Bureau of Civil Aviation Security, and Airports
Authority of India. An overview of each of these institutions and/ or bodies has been
briefly discussed in this section:

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2.4.1 Ministry of Civil Aviation

The Ministry of Civil Aviation (MCA) of Government of India is the nodal

Ministry responsible for the formulation of national policies and programmes for
development and regulation of civil aviation in India. Its responsibility also includes
devising and implementing schemes for the orderly growth and expansion of civil air
transport in India. Its functions extend to overseeing airport facilities, air traffic
services and carriage of passengers and goods by air. The Ministry is under the charge
of a Union Minister, who is assisted by a Minister of State. The Secretary, an IAS
officer, is the administrative head of the Ministry and is assisted by one Additional
Secretary and 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.

2.4.2 Directorate General of Civil Aviation

The Directorate General of Civil Aviation (DGCA) is the central governmental

regulatory body for civil aviation under the Ministry of Civil Aviation of Government
of India. The Directorate‟s vision is:

“Endeavour to promote safe and efficient Air Transportation through regulation

and proactive safety oversight system.” vi

It is primarily responsible for governing the safety aspects of civil aviation in

India. The DGCA renders various important functions, some of which are in respect
of:

 registration of civil aircraft;

 formulation of standards of airworthiness for civil aircraft registered in India and

grant of certificates of airworthiness to such aircraft;

 licensing of pilots, aircraft maintenance engineers and flight engineers, and

conducting examinations and checks for that purpose;

 certification of aerodromes;

 maintaining a check on the proficiency of flight crew, and also of other

operational personnel such as flight dispatchers and cabin crew;

vi
http://dgca.nic.in/dgca/record-ind.htm

Page | 73
  granting of Air Operator‟s Certificates to Indian carriers and regulation of air
transport services operating to/from/within/over India by Indian and foreign
operators, including clearance of scheduled and non‐scheduled flights of such
operators;

 granting approval to aircraft maintenance, repair and manufacturing

vii
organizations and their continued oversight.

The head quarters of the DGCA are located at Sri Aurobindo Marg, New Delhi.
Presently, it has got fourteen Regional Airworthiness Offices at Delhi, Mumbai,
Chennai, Kolkata, Bengaluru, Hyderabad, Kochi, Bhopal, Lucknow, Patna,
Bhubaneshwar, Kanpur, Guwahati and Patiala. It has also five Regional Air Safety
Offices located at Delhi, Mumbai, Chennai, Kolkata and Hyderabad. It has a Regional
Research and Development Office located at Bengaluru and a Gliding Centre at Pune.

2.4.3 Bureau of Civil Aviation Security

Bureau of Civil Aviation Security (BCAS) is the regulatory authority for civil
aviation security in India. The Bureau is attached to the Ministry of Civil Aviation in
India. It was initially set up as a Cell in the Directorate General of Civil Aviation
(DGCA) in January 1978 on the recommendation of the Pande Committee, which
was constituted in the wake of the hijacking of the Indian
Airlines flight on September 10, 1976. The role of the Cell was to coordinate,
monitor, inspect and train personnel in Civil Aviation Security matters. The Cell was
reorganized into an independent department (namely, Bureau of Civil Aviation
Security) on April 1, 1987 under the Ministry of Civil Aviation as a sequel to the
Kanishka Tragedy in June 1985.47

The responsibilities of BCAS include:

 laying down standards and measuresviii in respect of security of civil flights at

international and domestic airports in India;

 monitoring the implementation of security rules and regulations and carrying out
survey of security needs;

vii
http://dgca.nic.in/dgca/func-ind.htm
viii
Aviation Security Standards in accordance with Annex 17 to Chicago Convention of ICAO for the
airport operators, airlines operators, and their security agencies responsible for implementing
aviation security measures.

Page | 74
  ensure that the persons implementing security controls are appropriately trained
and possess all competencies required to perform their duties;

 planning and coordination of aviation security matters;

 conducting surprise/dummy checks to test professional efficiency and alertness

of security staff;

 conducting mock exercise to test efficacy of contingency plans and operational

preparedness of the various agencies.

It is headed by an officer of the rank of Director General of Police and is

designated as Commissioner of Security (Civil Aviation). The Commissioner of
Security (Civil Aviation) is responsible for the development, implementation and
maintenance of the National Civil Aviation Security Programme. The Headquarters of
the Bureau of Civil Aviation Security is located at Janpath Bhavan, Janpath, New
Delhi. It has got eight Regional Offices located at International airports i.e. Delhi,
Mumbai, Kolkata, Chennai, Amritsar, Ahmedabad, Guwahati and Hyderabad. Each
Regional Office is headed by an officer of the rank of Deputy Commissioner of
Security (Civil Aviation).

2.4.4 Airports Authority of India

The Airports Authority of India (AAI) is a statutory body of the Government of

India that is primarily responsible for management of civil aviation infrastructure in
India. Airports Authority of India was constituted by an Act of Parliament and came
into being on April 1, 1995 by merging erstwhile National Airports Authority and
International Airports Authority of India. In the year 1972, the Government of India
constituted the International Airports Authority of India to manage the country's
international airports, while the National Airports Authority was constituted in 1986
to look after the domestic airports. These two organisations were merged in April 1,
1995 by an Act of Parliament, namely, the Airports Authority of India Act, 1994. This
new organisation was made responsible for creating, upgrading, maintaining and
managing civil aviation infrastructure both on the ground and air space in the country.

The important functions of AAI include:

 design, development, operation and maintenance of international and domestic
airports and civil enclaves.

Page | 75
  control and management of the Indian airspace extending beyond the territorial
limits of the country, as accepted by ICAO.

 construction, modification and management of passenger terminals.

 development and management of cargo terminals at international and domestic
airports.
 provision of passenger facilities and information system at the passenger
terminals at airports.
 expansion and strengthening of operation areas viz. runways, aprons, taxiways
etc.

At present, the AAI manages 125 airports, which include 18 international airports,
07 customs airports, 78 domestic airports and 26 civil enclaves at defence airfields.
AAI provides air navigation services over 2.8 million square nautical miles of air
space.

2.5 AIRLINE OPERATORS OF INDIAN CIVIL AVIATION

SECTOR
The primary players in a civil aviation sector happen to be the airline operators. In
India, over the past eight decades many airliners have started their operations. These
airliners provide air transportation service across the length and breadth of the country
and also to foreign destinations. Various kinds of airline companies of different scales
and scopes have operated and provided their services. The scale and scope of airline
companies range from a single airplane carrying mail or cargo, through full-service
airlines operating hundreds of airplanes of various types. These companies can be
classified into different categories on different basis viz. on the basis of pre-
determined operating time schedule, there are classified as scheduled airline operators
and non-scheduled airline operators. Scheduled airlines may be either domestic airline
or international airline on the basis of the destinations they serve. Non-scheduled
operators include the charter operators and the air taxi operators. Again, on the basis
of the primary item transported, the carriers can be classified as passenger carriers and
cargo carriers. The cargo operators transport freight and mail from one place to
another, may be on scheduled or non-scheduled basis, while the passenger carriers
primarily carry passengers along with freight and mail. Furthermore, on the basis of
the geographical area of operations, the airline companies can be either international
carriers, national carriers or regional carriers.

Page | 76
 The Indian civil airline sector had witnessed many entry and exit of airline
operators since its inception. As already discussed, prior to nationalisation of the
airline sector in 1953 there were many private airline operators which provided
scheduled airline service. However, the Air Corporations Act of 1953 had
nationalised the sector and brought an end to all the existing private operators. During
this era of regulation, the domestic air service within the country was provided by the
Indian Airlines, and the international service was provided by Air India International.
Thus, the number of scheduled airline service operators in India after the
nationalisation was two. This continued for about next four decades till the sector got
liberalised in the early years of the 1990s.

The Air Corporations (Transfer of Undertakings and Repeal) Act of 1994 was a
major landmark in the history of Indian aviation. This statute converted the two
existing corporations – Indian Airlines and Air India into public limited companies,
and allowed private operators to provide scheduled airline services. During the early
years of deregulation, a number of private players commenced domestic operations
which included East West Airlines, Jet Airways, Air Sahara, Modiluft Airlines,
Damania Airways and NEPC Airlines. During this period, the Government owned
carriers also expanded the number of players from two to three through establishment
of a regional airline, namely Alliance Air on April 1, 1996 which started operations
on June 21, 1996.

However, within a few years many of the newly launched private airline operators
went out of business and only two private players, namely Jet Airways and Air
Saharaix could sustain their operations. This resulted in a sudden fall in the number of
airline operators flying over the Indian sky, bringing the number of scheduled airline
operators to five during 1999-2000 from nine scheduled operators during the period
1995 to 1997.

The number of scheduled airline operators in India, thereafter, remained stable for
the next four years. The next big leap in the number of scheduled airline operators in
the Indian aviation sector happened with the introduction of low cost carriers in the
Indian sky. Air Deccan was the first low cost carrier to start operations in October
2003. During the next three years, five new scheduled airline operators entered the

ix
Air Sahara was taken over by Jet Airways and rebranded as JetLite on April 16, 2007.

Page | 77
Indian aviation market namely, SpiceJet Airwaysx, Kingfisher Airlinesxi, Paramount
Airwaysxii, Go Airxiii and Indigoxiv. Following the shut-down of some of these
operators, there were no new entrants for the next few years. The next new entry
happened in the year 2013-14 when Air Costa entered in civil aviation market. This
was followed by the entry of four new players over the next two years namely, Air
Asia Indiaxv, Vistaraxvi, Air Pegasusxvii and TruJetxviii. Thus, as on March 31, 2017
there are eleven scheduled airline operators providing scheduled passenger service
operations in Indian civil aviation sector.

Thus, it can be observed that at present there exists variations in the types of
airline companies, their operating scope and the routes they serve. However, some
patterns have emerged over the last seven decades. The general model of ownership
of the airline carriers has gone from government owned or supported to independent,
for-profit public companies. This had occurred as the government felt the need for
more competition and the regulators permitted greater freedom.

x
SpiceJet Airways started operations in May 2005.
xi
Kingfisher Airlines started operations in October 2005, but was wound up in September 2012.
xii
Paramount Airways started operations in October 2005, but was wound up in August 2010.
xiii
Go Air started operations in November 2005.
xiv
Indigo started operations in August 2006.
xv
Air Asia India started operations in June 2014.
xvi
Vistara started operations in January 2015.
xvii
Air Pegasus started operations in May 2015, but was wound up in August 2016.
xviii
TruJet started operations in July 2015.

Page | 78
 14

12
No. of Scheduled Airlines
10

1992-93
1995-96
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69
1971-72
1974-75
1977-78
1980-81
1983-84
1986-87
1989-90

1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17
Figure 2.1: Number of Indian scheduled airline operators
Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

Figure 2.1 gives an overview of the number of scheduled airline operators in India
since nationalisation. From the Figure, it can clearly be observed that there have been
few phases of new entrants to hit the market. These actually coincide with the
liberalisation of the sector in early years of the 1990s, the entry of low cost carriers
almost a decade later and the gradual stabilisation of the market.

2.6 OVERVIEW OF DIFFERENT PARAMETERS OF INDIAN

CIVIL AVIATION SECTOR
This section provides an overview of the Indian civil aviation sector since its
nationalisation in 1953-54. For this purpose, the relevant variables representing the
different dimensions of civil aviation industry have been studied under the seven
different parameters namely, airline resources, airline capacity, aircraft operations,
passenger operations, cargo operations, airline capacity utilised and financial
measures over a sixty-four year period ranging from 1953-54 to 2016-17.xix Under
each of the selected parameters, relevant variables have been studied and presented
graphically.

xix
Three variables of namely, Fleet Size, Staff Strength and Aircraft Departures have not been
analysed over the period of sixty-four years (1953-54 to 2016-17). This is due to unavailability of
the data of these variables since 1953-54.

Page | 79
2.6.1 Overview of Airline Resources
The airline industry requires a variety of resources for the purpose of rendering its
services. However, the two primary resources that are utilised by the airline operators
happen to be the aircrafts (reported as fleet size) and the human resources (reported as
staff strength).

A] Overview of Fleet Size

The aircrafts happen to be the primary capital equipment that are utilized for the
purpose of rendering services (viz. passenger, cargo and mail carrying) by an airline
operator. The number of aircrafts available with the scheduled carriers represents their
service rendering capacity and performance capability.
Figure 2.2 shows the total number of aircrafts put to use by the scheduled airline
operators at the end of each financial year. From the figure, a clear increasing trend
can be observed with regard to the number of aircrafts used for airline operations by
the scheduled airline operators. The fleet size of the scheduled airline operators
increased from 73 aircrafts in 1970-71xx to 492 aircrafts as on March 31, 2017. The
minimum number of aircrafts used was 59 during the two financial years 1974-75 and
1975-76, whereas a maximum of 492 aircrafts were used for scheduled airline
operations during 2016-17. This implies sustained growth in the primary operating
asset, and as a result higher carrying capacity in the airline sector.

600

500

400
Fleet Size

300

200

100

0
1970-71
1972-73
1974-75
1976-77
1978-79
1980-81
1982-83
1984-85
1986-87
1988-89
1990-91
1992-93
1994-95
1996-97
1998-99
2000-01
2002-03
2004-05
2006-07
2008-09
2010-11
2012-13
2014-15
2016-17

Figure 2.2: Fleet Size of Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1970 to 2017)

xx
Data regarding fleet size of scheduled Indian carriers could be gathered from the year 1970-71
onwards at the DGCA office (Data accessed during September 2013).

Page | 80
B] Overview of Staff Strength

The work-force forms the backbone of any industry, more so for the service
oriented sectors like the airline sector. Different types of employees, specialized as-
well-as general, are required in the aviation sector such as pilots, co-pilots, other flight
personnel, maintenance and overhauling staff, ticketing and sales personnel etc.

Figure 2.3 shows the total number of employees employed by the scheduled
airline operators at the end of each financial year. The data regarding staff strength is
available from the year 1971-72xxi upto 2016-17. It increased from 23,170 staff
members in 1971-72 to 52,428 staff members in 2016-17, peaking at 57,607
employees in 2010-11. From Figure 2.3, it can be observed that there has been a
gradual and steady increase in the number of employees employed by the Indian
scheduled airlines over the period, thus implying availability of more labour hours
and increased service potential of the sector.

60000

50000

40000
Staff Strength

30000

20000

10000

0
1983-84

1987-88

1991-92

1995-96
1971-72
1973-74
1975-76
1977-78
1979-80
1981-82

1985-86

1989-90

1993-94

1997-98
1999-00
2001-02
2003-04
2005-06
2007-08
2009-10
2011-12
2013-14
2015-16

Figure 2.3: Staff Strength of Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1971 to 2017)

2.6.2 Overview of Available Capacity

The capacity of any industry refers to its total output generating or service
rendering capability. The capacity of the airline sector is represented by two variables,
namely Available Seat Kilometers (ASK) and Available Tonne Kilometres (ATK).

xxi
Data regarding staff strength of scheduled Indian carriers could be gathered from the year 1971-72
onwards at the DGCA office (Data accessed during September 2013).

Page | 81
A] Overview of Available Seat Kilometres (ASK)

Available Seat Kilometres is a measure of an airline's passenger carrying capacity.

It captures the total passenger capacity of an airline in kilometres. It is ascertained by
multiplying the total number of seats available for scheduled passengers and the total
number of kilometres flown. It is used to measure an airline‟s capacity to transport
passengers.

The total seat kilometres made available by the scheduled Indian carriers since the
period of nationalisation (i.e. 1953-54 to 2016-17) has crossed 2,432,200 million seat-
kilometres. From Figure 2.4, it can be observed that since nationalisation of Indian
aviation sector in 1953-54, there has been a manifold increase in the passenger
carrying capacity of the scheduled India carriers. The passenger carrying capacity of
the Indian aviation sector increased from being negligible in 1953-54 to 196,146
million seat kilometres in 2016-17. However, it is to be noted that such increase has
not been uniform over this period. The increase in passenger capacity (in absolute
terms) has been much higher in the post-deregulation era (since 1994-95) as compared
to the pre-deregulation period (1953-54 to 1993-94).

250000

200000
ASK (in millions)

150000

100000

50000

0
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69
1971-72
1974-75
1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17

Figure 2.4: ASK of Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

Page | 82
B] Overview of Available Tonne Kilometres (ATK)

Available Tonne Kilometres is a measure of an airline’s overall carrying capacity.

It captures the total carrying capacity of an airline in kilometres. It is ascertained by
multiplying the total carrying capacity available (in tonnes) and the total distance
travelled in kilometres. An available tonne-kilometre is the fundamental unit of
carrying capacity of an airline. It is used to measure an airline‟s capacity to carry
revenue load (passenger, cargo and mail).

The total tonne-kilometres made available by the scheduled Indian carriers since
the period of nationalisation (i.e. 1953-54 to 2016-17) has crossed 300,000 million
tonne-kilometres. From Figure 2.5, it can be observed that since nationalisation of
Indian aviation sector in 1953-54, there has been a manifold increase in the overall
carrying capacity of the scheduled India carriers. It increased from 107 million tonne-
kilometres in 1953-54 to 22,990 million tonne-kilometres in 2016-17, peaking in
2015-16 at 26,311 million tonne-kilometres. However, it can be observed that the rise
has been more in the post-deregulation period (since 1994-95) as compared to the pre-
deregulation period (1953-54 to 1993-94).

30000.00

25000.00
ATK (in millions)

20000.00

15000.00

10000.00

5000.00

0.00
1965-66
1953-54
1956-57
1959-60
1962-63

1968-69
1971-72
1974-75
1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17

Figure 2.5: ATK of Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

2.6.3 Overview of Aircraft Operations

The aircraft operations of the scheduled airline operators can be gauged from the
different operating variables associated with aircraft operations. The most significant

Page | 83
variables that provide a measure of the aircraft operations are number of aircraft
departures, aircraft hours flown and aircraft distance flown.

A] Overview of Aircraft Departures

The number of aircraft departures refer to the number of take-offs of aircrafts

during a particular period. The number of aircraft departures during a given period
happens to be an important variable which indicates the scale of airline operations.
The total number of registered aircraft departures performed by the Indian scheduled
carriers during the period 1969 to 2017 exceeded 12 million. xxii

1200000

1000000
Aircraft Departures

800000

600000

400000

200000

2015-16
1969-70
1971-72
1973-74
1975-76
1977-78
1979-80
1981-82
1983-84
1985-86
1987-88
1989-90
1991-92
1993-94
1995-96
1997-98
1999-00
2001-02
2003-04
2005-06
2007-08
2009-10
2011-12
2013-14

Figure 2.6: Aircraft Departures by Indian scheduled airline operators

Source: Compiled from World Bank Air Transport Statistics (1969 to 2017)
From Figure 2.6, it can be observed that during the last five decades there has
been more than nine-fold increase in the number of registered carrier departures in
India. The number of registered departures increased from 97,500 departures in 1969-
70 to 1,029,961 departures during 2016-17. However, it is to be noted that such
increase has not been uniform over this period. The number of registered carrier
departures shows lesser variation during the pre-deregulation period (upto 1993-94).
However, a massive improvement in the scale of operations with regard to the number

xxii
Data on registered aircraft departures in India has been collected from World Bank Database. This
data is available from 1969-70 onwards.
https://data.worldbank.org/indicator/IS.AIR.DPRT?locations=IN&view=chart[Accessed on:
December 8, 2017]

Page | 84
of scheduled aircraft departures can be observed during the post-deregulation era
(since 1994-95).

B] Overview of Aircraft Hours Flown

This variable measures the total hours flown by all Indian scheduled airlines
during a given period. It is another variable which indicates the scale of operations of
the airline sector of a country. From Figure 2.7, it can be observed that there has been
a tremendous increase in the aircraft hours flown by scheduled carriers in India. The
annual aircraft hours flown have reportedly increased from 129,163 hours in 1953-54
to 18,17,779 hours during 2016-17. The total aircraft hours flown by the scheduled
Indian carriers since the period of nationalisation (i.e. 1953-54 to 2016-17) has been
approximately 25 million. It can be observed that the increase in this operating
variable has been more in the post-deregulation period (since 1994-95) as compared
to the pre-deregulation period (1953-54 to 1993-94).

2000000
1800000
1600000
Aircraft Hours Flown

1400000
1200000
1000000
800000
600000
400000
200000
0
1959-60

1989-90
1953-54
1956-57

1962-63
1965-66
1968-69
1971-72
1974-75
1977-78
1980-81
1983-84
1986-87

1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17

Figure 2.7: Aircraft Hours Flown by Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

C] Overview of Aircraft Distance Flown

This variable measures the total distance flown by all scheduled airline operators
during a given period. It is also an important indicator of the scale of operations of the
airline sector of a country. From Figure 2.8, a substantial increase in the aircraft
distance flown (in Kilometers) by Indian scheduled carriers can be observed. The total

Page | 85
aircraft kilometers flown by the Indian scheduled airline operators since the period of
nationalisation (i.e. 1953-54 to 2016-17) has exceeded 14 million kilometers. The
annual aircraft distance flown has increased from approximately 35,000 kilometers
flown during 1953-54 to more than 1.1 million kilometers during 2016-17. It can be
observed that the increase in this operating variable has been more during the post-
deregulation period (since 1994-95) as compared to the pre-deregulation period
(1953-54 to 1993-94).

1200000
Aircraft Distance Flown (in Km)

1000000

800000

600000

400000

200000

0
1974-75
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69
1971-72

1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17
Figure 2.8: Aircraft Distance Flown by Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

2.6.4 Overview of Passenger Operations

The primary function of the civil aviation sector of a country is to provide

passenger service to its population. This is the most important function for which a
scheduled civil airliner is operated. An overview of the passenger service operations
of the Indian aviation sector can be had by studying three important variables
associated with passenger operations. These variables are number of passengers
carried, passenger-kilometres performed and passenger tonne-kilometres performed.

A] Overview of Number of Passengers carried

This variable measures the total number of revenue passengers carried by

scheduled Indian airline carriers. From Figure 2.9, it can be observed that there has
been a tremendous increase in the number of passengers carried by the Indian
scheduled carriers. The total number of passengers carried by the scheduled Indian

Page | 86
carriers since the period of nationalisation (i.e. 1953-54 to 2016-17) has exceeded 1
billion (specifically 1,187,133,157 passengers). The annual number of passengers
carried by the Indian scheduled airliners has increased from 464,831 passengers in
1953-54 to 120,516,662 passengers in 2016-17. The increase in overall carrying
capacity has been much higher in the post-deregulation era (since 1994-95) as
compared to the pre-deregulation period (1953-54 to 1993-94).

14000000

12000000
Passengers Carried

10000000

80000000

60000000

40000000

20000000

0
1971-72

2010-11
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69

1974-75
1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08

2013-14
2016-17
Figure 2.9: No. of Passengers carried by Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

B] Overview of Passenger-Kilometres performed

A passenger-kilometre is a measure of traffic for an airline flight. This variable is

calculated by multiplying the number of revenue passengers carried on each flight
stage by the stage distance flown. A passenger-kilometre is performed when a
passenger is carried over a distance of one kilometre. The resultant figure is equal to
the number of kilometres travelled by all the passengers. From Figure 2.10, a steady
and accelerated increase in the passenger-kilometres performed by the Indian
scheduled carriers can be observed. The total passenger-kilometres performed by the
scheduled Indian carriers since the period of nationalisation (i.e. 1953-54 to 2016-17)
has exceeded 1.75 million passenger-kilometres. The increase in overall carrying
capacity has been much higher in the post-deregulation period (since 1994-95) as
compared to the pre-deregulation period (1953-54 to 1993-94).

Page | 87
 180000
160000

Passenger-Kms (in millions)

140000
120000
100000
80000
60000
40000
20000
0
1956-57

1983-84
1953-54

1959-60
1962-63
1965-66
1968-69
1971-72
1974-75
1977-78
1980-81

1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17
Figure 2.10: Passenger-Kilometres performed by Indian scheduled airline
operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

C] Overview of Passenger Tonne-Kilometres performed

A tonne-kilometre is a weighted measure of traffic carried by an airline. Passenger

tonne-kilometre is calculated by multiplying the weight of revenue-paying passengers
aboard the aircraft on each flight stage by the stage distance flown. A passenger
tonne-kilometre is performed when one tonne of passenger weight is carried over a
distance of one kilometre. From Figure 2.11, it can clearly be observed that there has
been a definite increase in the passenger tonne-kilometres performed by the Indian
scheduled carriers. The total passenger tonne-kilometres performed by the scheduled
Indian carriers since the period of nationalisation (i.e. 1953-54 to 2016-17) is
approximately 155,450 passenger tonne-kilometres. It increased from almost being
negligible at the beginning years to 14,241.98 million tonne-kilometres in 2016-17.

Page | 88
 16000.00

Passenger Tonne-Kms (in millions)

14000.00
12000.00
10000.00
8000.00
6000.00
4000.00
2000.00
0.00

1965-66
1953-54
1956-57
1959-60
1962-63

1968-69
1971-72
1974-75
1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17
Figure 2.11: Passenger Tonne-Kilometres performed by Indian scheduled
airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

2.6.5 Overview of Cargo Operations

An incidental activity of the scheduled civil airline operators is carrying of cargo

from one place to another. An overview of the cargo-related operations of the
scheduled Indian carriers can be had by studying from two important variables
associated with cargo service operations. These variables are quantity of cargo carried
and freight tonne-kilometres performed.

A] Overview of Quantity of Cargo carried

This variable measures the total quantity of cargo carried by scheduled Indian
airline carriers. From Figure 2.12, it can be observed that there has been a gradual
increase in the quantity of cargo carried by the Indian scheduled carriers, with minor
fluctuations during some interim periods. The total quantity of cargo carried by the
scheduled Indian carriers since the period of nationalisation (i.e. 1953-54 to 2016-17)
is close to 14 million tonnes (specifically 13,772,087 tonnes). The increase in quantity
of cargo carried has been much higher in the post-deregulation era (since 1994-95) as
compared to the pre-deregulation period (1953-54 to 1993-94). The annual quantity of
cargo carried by the Indian scheduled airliners increased from 57,923 tonnes in 1953-
54 to 792,640 tonnes in 2016-17.

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 900000
800000
700000
Cargo Carried (in Tons) 600000
500000
400000
300000
200000
100000
0
1959-60
1953-54
1956-57

1962-63
1965-66
1968-69
1971-72
1974-75
1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17
Figure 2.12: Cargo carried by Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

B] Overview of Freight Tonne-Kilometres performed

A freight tonne-kilometre is a weighted measure of cargo carried. It is calculated

by multiplying the weight of revenue-paying cargo aboard the aircraft on each flight
stage by the stage distance flown. A freight tonne-kilometre is performed when one
tonne of cargo is carried over a distance of one kilometre. From Figure 2.13, it can be
clearly observed that there has been an increase in the freight tonne-kilometres
performed by the Indian scheduled carriers, with minor fluctuations during some
interim periods. The total freight tonne-kilometres performed by the scheduled Indian
carriers since the period of nationalisation (i.e. 1953-54 to 2016-17) is approximately
33,400 million tonne-kilometres. It increased from almost being negligible in 1953-54
to 1,841 million tonne-kilometres in 2016-17.

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 2000
1800

Freight Tonne-Kms (in millions)

1600
1400
1200
1000
800
600
400
200
0

1977-78
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69
1971-72
1974-75

1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17
Figure 2.13: Freight Tonne-Kilometres performed by Indian scheduled airline
operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

2.6.6 Overview of Airline Capacity Utilisation

Load factor is an important airline metric that measures how much of an aircraft‟s
capacity has been used. There are two measures of load factor, namely passenger load
factor and weight load factor, which are reported by airline operators.

A] Overview of Passenger Load Factor

The Passenger Load Factor (PLF) of an airline industry is a measure of utilization

of the airline sector‟s passenger carrying capacity. It is measured by expressing
passenger-kilometers flown as a percentage of available seat-kilometres. This is an
important measure of efficiency of an airline and is used to describe the performance
regarding passenger transport. From Figure 2.14, a clear increasing trend can be
observed in the passenger load factor over the years. However, this increasing trend
has not been uniform. It can be seen that for most of the period it was between 60%
and 70% level. It was only during the 1960s it hovered below the 60% level. It is
worth noting that, since 2015-16 the passenger load factor had crossed the 80% level.

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 90.00
80.00

Passenger Load Factor (PLF)

70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00

1983-84
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69
1971-72
1974-75
1977-78
1980-81

1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17
Figure 2.14: Passenger Load Factor of Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

B] Overview of Weight Load Factor

The Weight Load Factor (WLF) of the airline industry is a measure of utilisation
of the airline sector‟s weight carrying capacity. It is measured by expressing tonne-
kilometres flown as a percentage of available tonne-kilometres. This is an important
measure of efficiency and is used to describe the performance of an airline regarding
transportation of cargo. From Figure 2.15, a more or less uniform trend can be
observed in the weight load factor over the years. It can be observed that for the entire
period of the study the weight load factor was between 50% and 70% level (except
during 1977-78 when it peaked at 77.3%).

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 90
80

Weight Load Factor (WLF)

70
60
50
40
30
20
10
0

1980-81

2004-05
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69
1971-72
1974-75
1977-78

1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02

2007-08
2010-11
2013-14
2016-17
Figure 2.15: Weight Load Factor of Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

2.6.7 Overview of Financial Parameters

The broad overview of the financial performance of the scheduled airline

operators can be had by studying three significant financial variables, namely
operating revenue, operating expenses and operating result.

A] Overview of Operating Revenue

The operating revenue of a scheduled airline operator refers to the revenue earned
from its regular course of operations. The constituents of the gross operating revenue
of a scheduled airline operator include revenue from scheduled services (including
revenue from passengers, excess baggage, freight and mail carriage), revenue from
non-scheduled services and other operating revenue. From Figure 2.16, it can be
observed that the operating revenue of the scheduled Indian carriers has been
continuously increasing, except for some minor decreases during some interim
periods. It was very low for a major part of the time period under study. It started to
rise at an increasing rate since the 1980s, but the primary increase in the rate of
operating revenue occurred since the mid-1990s. But it can be clearly observed that
the primary increase in the rate of operating revenue occurred during the present
millennia.

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 800000.00

Operating Revenue (in Rs. millions)

700000.00
600000.00
500000.00
400000.00
300000.00
200000.00
100000.00
0.00

1968-69
1953-54
1956-57
1959-60
1962-63
1965-66

1971-72
1974-75
1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17
Figure 2.16: Operating Revenue of Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

B] Overview of Operating Expenses

The operating expenses of a scheduled airline service provider are those expenses
that are incurred by the airline service provider in the regular course of its operations.
The constituents of the gross operating expenses of a scheduled airline operator
include expenses on flight operations, maintenance and overhaul, depreciation and
amortization, user charges and station expenses, passenger services, ticketing, sales &
promotion expenses, general & administrative expenses and other operating expenses.
From Figure 2.17, it can be observed that the operating expenses of the Indian
aviation sector have been continuously increasing except for some minor decreases
during some interim periods. It was very low earlier years, but it started to rise at an
increasing rate since the mid-1970s. But it can be clearly observed that a major
increase in the rate of operating expenses occurred during the present millennia.

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 800000

Operating Expenses (in Rs. millions)

700000
600000
500000
400000
300000
200000
100000
0

1977-78

2004-05
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69
1971-72
1974-75

1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02

2007-08
2010-11
2013-14
2016-17
Figure 2.17: Operating Expenses of Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

C] Overview of Operating Result

The operating result of an airline refers to the excess of its operating revenue
earned over the operating expenses incurred by the airline service provider. It is an
absolute measure of income of an airline operator from the regular course of its
operations. Operating result is an indicator of the financial performance of the airline
service operator. From Figure 2.18, it can be observed that the operating profit curve
was very close to the horizontal axis (implying low margins) till the mid-1990s. The
variation in operating result was very low during the pre-deregulation era (till 1993-
94). However, the operating result curve started fluctuating during the post-
deregulation era. A major fall can be observed during the period 2006-07 to 2008-09.
However, some signs of recovery can be observed in the recent years (since 2015-16).

Page | 95
 60000

40000

Operating Result (in Rs. millions) 20000

1968-69
1953-54
1956-57
1959-60
1962-63
1965-66

1971-72
1974-75
1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17
-20000

-40000

-60000

-80000

-100000

Figure 2.18: Operating Result of Indian scheduled airline operators

Source: Compiled from DGCA Air Transport Statistics (1953 to 2017)

2.7 CONCLUSION

From the discussions set forth in this Chapter, it can be observed that the idea of
flying has been a part of Indian mythology and epics since the ancient times.
However, in the modern times, aviation reached the Indian sky during the era of the
British Raj. This country, being one of the most important colonies of the British Raj,
had been witness to the unfolding of various significant aviation-related incidents
during the early decades of the twentieth century. Moreover, its strategic location
amongst the British colonies of the east also contributed to its participation in various
aviation related exercises taken up by the British Raj during that period. The Indian
entrepreneurs did not lag much behind and embarked on the journey of commercial
aviation during its early years. This led to launch of the many privately owned airline
operators in India in the pre-independence years. However, a few years after gaining
independence from British rule, the Government of India decided to bring the aviation
industry in its fold and thus nationalised the Indian aviation industry in 1953. During
this period only Government-owned scheduled carriers provided air transportation
services and the Government set up various authorities and agencies for ensuring the
smooth functioning of the industry. Since the nationalisation of this sector, a slow and
gradual progress can be observed in this regulated industry. After nearly four decades

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of total Government control, the Government of India decided to bring an end to this
regulatory regime. In the yearly years of the 1990s the industry was liberalised and
private participation and investment was permitted to be made in this sector. This
resulted in change in the dynamics of this industry, and notable changes were
observed in the various parameters. This provides the opportunity to discuss and
analyse the impact that deregulation and liberalisation has brought about in this
industry. In this backdrop, the following chapter discusses the various facets of
deregulation of the airline industry in India.

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In next 6-8 months, we expect to get bids for Air India: Jayant Sinha. Retrieved from:
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Ibid, p. 6.
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Rao, D. P. and Rao, G. V. (1997). Indian Airlines – A Study of its Performance, Inter-
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Rao, D. P. and Rao, G. V.: op. cit., p. 70.
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Ibid., p.71.
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Tata, J. R. D.: op. cit., p. 1.
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Rao, D. P. and Rao, G. V.: op. cit., p. 71.
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Ahmed, D.: op. cit., p. 20.
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Sangeetha, S. M. (2012). History of Indian Civil Aviation AD 1911 – 2003 (Doctoral
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Ibid., p.20.
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Kaushik, N. (2008). Customer Satisfaction in Indian Aviation Sector: An Analytical
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Gibbs-Smith, C. H. (1960). The Aeroplane: A historical survey of its origins and
development. p. 94.
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Bhatt, S. (1997). The New Aviation Policy of India: Liberalisation and Deregulation. p.
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Nawab, A. W. (1967). Comparative Evolution of World Air Transport. National
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24
Jain, J. K. (1973). Transport economics. Chaitanya Publishing House, Allahabad.
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Gidwani, B. S. (1954). History of Air Transport. Suneja Book Centre.
26
Bhatt, S.: op. cit., p. 10.
27
Gidwani, B. S.: op. cit.
28
Rao, D. P. and Rao, G. V.: op. cit., p. 72.
29
Tata, J. R. D.: op. cit., p. 5.
30
Bhatt, S.: op. cit., p. 10.
31
Tata, J. R. D.: op. cit., p. 6.
32
Rao, D. P. and Rao, G. V.: op. cit., p. 73.
33
Maggu, N.: op. cit., p. 12.
34
Rao, D. P. and Rao, G. V.: op. cit., p. 74.
35
Maggu, N.: op. cit., p. 15.
36
https://en.wikipedia.org/wiki/Air_Services_of_India
37
Tata, J. R. D.: op. cit., p. 8.
38
Rao, D. P. and Rao, G. V.: op. cit., p. 75.
39
Ibid. p. 76.

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40
https://en.wikipedia.org/wiki/Deccan_Airways_Limited
41
https://en.wikipedia.org/wiki/Air_Services_of_India [Accessed on 21.7.2017]
42
Maggu, N.: op. cit., p. 15.
43
Rao, D. P. and Rao, G. V.: op. cit., p. 77.
44
Ibid. p. 79.
45
Ibid. p. 76.
46
Ibid. p. 79.
47
http://www.bcasindia.nic.in/aboutus/aboutus.html [Accessed on: Jan. 16, 2018]

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