INDIAN AVIATION

INDEX
Industry Overview

Indias economy before 1991

Aviation Industry before 1991

Liberalization policies/Government initiatives

Impact of Liberalisation Policy

Growth Story

SWOT Analysis

Reasons for current losses by Indian LCC and Govt. measures

Conclusion
INDUSTRY OVERVIEW
India is currently the Worlds 9
th
largest market
Scheduled services available from to/fro 115 airports, which
includes 23 civil enclaves
Bilateral with more than 100 countries
Enhanced connectivity 72 foreign airlines of 49 countries
14 scheduled airlines operating exclusively in passenger
sector
Presently contributes to less than 1% of GDP and it is
expected to double in the next 5-7 years

History of Aviation in India
1912: Indian
State Air
service and
Imperial
Airways, UK
collaborate
to ply on first
domestic
route,
between
Delhi and
Karachi.
1915:
Tata Sons
start
airmail
service
between
Delhi and
Madras.
1932:
Tata
Aviations
establish
ed. It
goes to
Colombo
in 1938.
1948:
Designated
as flag
carrier
under the
name Air
India
Internationa
l with 49%
govt.
control.
1953: Indian
Airlines
Corporation
formed
through Air
Corporation
Act, 1953, by
nationalizing
Air India and
Indian
National
Airways.
1994: Air
Corporatio
n Act. 1953
repealed
and thus
allowed
private
players to
come.
2003
Entry of
low cost
carriers.
Air
Deccan,
Spice Jet,
Go Air,
Indigo.
HISTORY
Completed 100 years in the year 2011

February 18, 1911 - First commercial plane between
Allahabad & Naini carrying mails
During Independence - 09 Companies
Tata Airlines, Indian National Airways
Air service of India, Deccan Airways
Ambica Airways, Bharat Airways
Mistry Airways.

Inaugural flight of Air India International Ltd - June 8, 1948
Mumbai-London
Nationalized in 1953 - Private airlines not allowed
Transport for elite class
Restricted Growth
High Cost structure
Underdevelopment of infrastructure





ECONOMIC REFORMS POST 1991
Policies
Liberalisation - Private Players ( A relaxation of previous government
policies)

Open Sky: It is an international policy concept that calls for the
liberalization of the rules and regulations of the international aviation
industry - in order to create a free market environment for the airline
industry.

FDI Domestic Services Sector

Airports control - Airports Authority of India (AAI)

Green Field Airport It is a project that lacks any constraints imposed by
prior work.





IMPACT OF LIBERALIZATION

The Air Corporation Act, 1953 introduced

Opening up of the domestic sector
Disinvestment of the two public sector airlines
New privately owned domestic airlines

Open Sky

Allow foreign airline of any country or ownership to land at
any port on any number of occasions and with unlimited seat
capacity.

Foreign Direct Investment

Up To 49% Of Foreign Equity & 100% Of NRI investment is
allowed Pertaining to the Domestic Air Transport Services






IMPACT OF LIBERALIZATION

Private Carriers permitted to operate scheduled services
75% share in domestic aviation
Entry of low cost carriers
City side development of non-metro airports
Allowing Indian carriers to compete on international routes
Reduction in Landing charges.
Fleet expansion plans of Air India
Restructuring of Delhi and Mumbai airport and development
of Greenfield airports at Bangalore and Hyderabad
undertaken













IMPACT OF LIBERALIZATION

Up gradation/ expansion/ development of airports
undertaken depending upon traffic potential, requirement of
airline operators and need of air passengers

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










Passenger Flow
Figure in Millions
The Market Share
Government Initiatives
Reduction of high Aviation Turbine Fuel (ATF) cost and review
of its Tax structure

Multi - Model Connectivity by building expressways to
facilitate advantage of air transportation by reducing the
total travel time

Promotion of Regional Airlines by the way of liberal policy
and provision of better infrastructure facilities

Development of MRO (Maintenance, Repairs and
Operations)



Government Initiatives

Merger of Air India and Indian Airlines to optimize fleet
acquisition and to leverage the asset base

100% FDI is permissible for existing airports; approval
required for FDI beyond 74%

100% FDI under automatic route is permissible for
Greenfield airports

100% tax exemption for airport projects for a period of
10 years

Growth of The Industry

The growth of airlines traffic in Aviation Industry in India is almost four
times above international average.

Domestic airlines passengers traffic in increasing at the rate of 25%.

India ranks fourth after US, China and Japan in terms of domestic
passengers volume.

The number of domestic flights grew by 69 per cent from 2005 to 2008.

The domestic aviation sector is expected to grow at a rate of 9-10 per cent
to reach a level of 150-180 million passengers by 2020.

The industry witnessed an annual growth of 12.8 per cent during the last 5
years in the international cargo handled at all Indian airports.
Growth of The Industry

Further, there has been an increase in tourist charter flights to
India with around 686 flights bringing 150,000 tourists.
It is predicted that international passengers will grow up to 50
million by 2015
Aviation is now affordable with check fares and discount
schemes.
Various Operators with different business model.
Regional connectivity Tier II & Tier III cities


Contribution to GDP

Present Contribution < 1%.

Poised to grow at 5% contribution to GDP by 2030
SWOT ANALYSIS
STRENGTHS
Rapidly Growing Economy
Growing population of middle class
Dispersed tourist attraction
Good safety record

Weaknesses
Limited Infrastructure
High cost of operation
Lack of R & D: foreign dependence
Inadequate trained manpower



SWOT ANALYSIS
Opportunities

Development of India as a prime tourism destination
Cross country travel by students

Threats

Global terrorism
Congestion of air space

CHALLENGES
Employee shortage
Regional connectivity
Rising fuel prices
Declining yields
Gaps in infrastructure
High input costs


Problems that Affected the
Airline Industry
Exposure to intense competition with the advent of a low-cost
airline - Air Deccan back in 2003. The success of Air Deccan
spurred the entry of other LCCs like Spice Jet, Indigo, Go Air and
subsequently low fare offerings from Jet airways and Kingfisher
Airlines.
Aviation Turbine Fuel (ATF) costs contributes 30-45% of overall
operating costs for Full Service Carriers (FSCs) & 40-55% for
Low Cost Carriers (LCCs)
Domestic ATF prices are linked to fluctuation in crude oil prices
and movement in rupee(INR) vs. dollar($)
Problems that Affected the
Airline Industry
Significant congestion at major domestic airports increases fuel
costs considerably.( (half an hour hovering at major airport could
increase fuel costs by Rs.60,000 to Rs. 115,000 depending on
aircraft, besides impacting aircraft utilizations)

High airport charges, dearth of experienced commercial pilots and
their demand of salaries in dollars, inflexible labor laws and overall
higher cost of capital.

While the passenger traffic growth has been steady (averaging 14%
in 2010-12), intense competition has impacted yields and forced
airlines back into losses in an inflated cost base scenario.

CONCLUSION
The success of the open sky policy in the first phase of
economic reforms in the domestic aviation sector, international
cargo, airport infrastructure.

The opening of the Airports sector with new Green field
Airports to the private sector, has been a step forward.

The disinvestment of shareholding in the public sector
airlines still remains to be completed.

Reforms like allowing foreign airlines to buy stake in domestic
carriers and rationalization of central and state levies on ATF
implemented for a sound sustained growth.



THANK YOU
By:
Akash Ranjan (MBA/10027/2014)
Fahad Qaisar Pall (MBA/10048/2014)
Madhu Kumari (MBA/10047/2014)
Rashmi Lata (MBA/10045/2014)
Utkarsh Verma (MBA/ 10049/2014)