aviation indutry in india

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PRESENTATION DETAILS SUBJECT:- Service Sector Management

TOPIC:-Civil Aviation

ASSIGNED BY:-Prof. Ashok Bhise PRESENTED BY:-

Group members Roll nos.

Yukti Marwah 46

Namrata Dedhia 13


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Evolution of civil aviation in India

The origin of Indian civil aviation industry can be tracedback to 1912, when the first air flight between Karachiand Delhi was started by the Indian State Air Servicesin collaboration with the UK based Imperial Airways.

In early 1948, Government of India established a jointsector company, Air India International Ltd incollaboration with Air India (earlier Tata Airline)

Govt. had a complete monopoly over this sector untilmid- 1990s.

By 1995, several private airlines had ventured into theaviation business and accounted for more than 10percent of the domestic air traffic, but only Jet Airwaysand Sahara managed to survive the competition.

Meanwhile, Indian Airlines, which had dominated theIndian air travel industry, began to lose market shareto Jet Airways and Sahara. Today, Indian aviationindustry is dominated by private airlines and theseinclude low cost carriers such as Deccan Airlines, GoAir,SpiceJet etc, who have made air travel affordable.


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India is one of the fastest growingaviation markets in the world.

The Airport Authority of India (AAI)

manages a total of 127 airports in thecountry, which include 13 internationalairports, 7 custom airports, 80 domesticairports and 28 civil enclaves.

T

here are over 450 airports and 1091registered aircrafts in the country.

In 2006, the private carriers accountedfor around 75% share of the domesticaviation market


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SECTOR OVERVIEW The estimated growth of domestic passenger

segment is at 50% per annum and growth forinternational passenger segment is 25%.

T

he international cargo is likely to grow at a rateof 12%.

During the period April-September, 2008,international and domestic passengers recorded agrowth of 15.8 per cent and 44.6 per centrespectively, leading to an overall growth of 35.5

per cent. Moreover, the international and domestic cargo

recorded growth of 13.8 per cent and 8.7 per centrespectively, resulting in an overall growth of 12.0per cent


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FORESIGHT

By 2010, India's fleet strength will standat 500-550.

It is also estimated that the domesticmarket size will cross 60 million and theinternational traffic will reach 20 million inthe same period.

By 2020, Indian airports are estimated tohandle 100 million passengers, including60 million domestic passengers.

The amount of cargo handled will fall inthe range of 3.4 million tonnes per annum


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CURRENT FLEET AND ACQUISITION

& INVESTMENT PLANS

Airlines Current fleet Acquisition plans Investment in US

$billion)

Jet Airways 62 30 by 2012 2

Air Deccan 43 79 by 2010 2.7

Kingfisher 11 100 by 2012 4.5

Spice Jet 6 38 by 2010 1.9

GoAir 4 33 by 2008 2.4


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Top Players Players in Indian aviation industry can be

categorized in three groups:

Public players -Air India, Indian Airlines and

Alliance Air.

Private players - The private players include JetAirways, Air Sahara,Paramount airways, Go AirAirlines, Kingfisher Airlines, Spice Jet, Air Deccanand many more.

Start up players - The start up players are thosewhich are planning to enter into the markets.Some of them are Omega Air, Magic Air, PremierStar Air and MDLR Airlines.


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Classification Of Indian Aviation Sector

The Indian aviation sector can be broadlydivided into the following maincategories:

1. Scheduled air transport service, whichincludes domestic and internationalairlines.2. Non-scheduled air transport service,which includes charter operators and air

taxi operators.3. Air cargo service, which includes airtransportation of cargo and mail.


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Scheduled air transport service: It isan air transport service undertakenbetween two or more places and operatedaccording to a published timetable. It

includes:

1. Domestic airlines, which providescheduled flights within India and toselect international destinations. AirDeccan, Spice Jet, Kingfisher Airline and

IndiGo are some of the domestic playersin the industry.

2. International airlines, which operatescheduled international air services to and

from India.


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Non-scheduled air transport service:It is an air transport service other thanthe scheduled one and may be on charterbasis and/or non-scheduled basis. The

operator is not permitted to publish timeschedule and issue tickets to passengers. Air cargo services: It is an air

transportation of cargo and mail. It maybe on scheduled or non-scheduled basis.These operations are to destinations

within India. For operation outside India,the operator has to take specificpermission of Directorate General ofCivilAviation demonstrating his capacity forconducting such an operation.


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Growth Prospects of Indian Aviation Sector Future scenario:

- The aviation industry is expected to growat a compounded annual growth rate of25% till 2010.

- Also, by 2010 Indian airports will behandling between 90 and 100 millionpassengers per year, as against thecurrent 34 million passengers.

- It is expected that nearly 80% of thisgrowth will be driven by the low costcarrier segment (LCC).

- By 2008, the LCCs would capture 65% ofthe direct on-line air ticket market from

61% in 2005.


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International Domestic Total

No. in

millions

Percentag

egrowth

No. in

millions

Percentag

egrowth

No. in

millions

Percentag

egrowth

1999-00 13.29 2.90% 25.74 6.90% 39.04 5.5%

2000-01 14 5.40% 28.01 8.80% 42.02 7.70%

2001-02 13.63 (-)2.7% 26.36 (-) 5.9% 39.98 (-)4.9%

2002-03 14.82 8.80% 28.9 9.60% 43.72 9.40%

2003-04 16.65 12.30% 32.04 10.09% 48.69 11.40%

2004-05 19.45 17.00% 40.1 25.00% 59.54 22.30%

2005-06 22.36 15.10% 50.98 27.90% 73.34 23.70%


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Reasons For Boom In Aviation Industry 1.Foreign equity allowed: Foreign equity up to 49

per cent and NRI (Non-Resident Indian) investment upto 100 per cent is permissible in domestic airlineswithout any government approval. However, thegovernment policy bars foreign airlines from taking a

stake in a domestic airline company.

2.Low entry barriers: Nowadays, venture capital of$10 million or less is enough to launch an airline.Private airlines are known to hire foreign pilots, getexpatriates or retired personnel from the Air Force orPSU airlines in senior management positions. Further,

they outsource such functions as ground handling,check-in, reservation, aircraft maintenance, catering,training, revenue accounting, IT infrastructure, loyaltyand programme management. Airlines are known totake on contract employees such as cabin crew,ticketing and check-in agents.


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3.Attraction of foreign shores: Jet and Sahara havegone international by starting operations, first toSAARC countries, and then to South-East Asia, the UK,and the US. After five years of domestic operations,many domestic airlines too will be entitled to flyoverseas by using unutilised bilateral entitlements to

Indian carriers.

4.Rising income levels and demographic profile:Though India's GDP (per capita) at $3,100 is still verylow as compared to the developed country standards,India is shining, at least in metro cities and urbancentres, where IT and BPO industries have made the

young generation prosperous. Demographically, Indiahas the highest percentage of people in age group of20-50 among its 50 million strong middle class, withhigh earning potential. All this contributes for the boostin domestic air travel, particularly from a low base of18 million passengers.


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5.Untapped potential of India's tourism:Currently India attracts 3.2 million tourists everyyear, while China gets 10 times the number.Tourist arrivals in India are expected to growexponentially, especially due to the open sky

policy between India and the SAARC

countriesand the increase in bilateral entitlements withEuropean countries, and US.

6.Glamor of the airlines: No industry other thanfilm-making industry is as glamorous as theairlines. Airline tycoons from the last century, like

J. R. D. Tata and Howard Hughes, and Sir RichardBranson and Dr. Vijaya Mallya today, have beenidolized. Airlines have an aura of glamour aroundthem, and high net worth individuals can alwaystoy with the idea of owning an airline. All theabove factors seem to have resulted in a "me too"rush to launch domestic airlines in India.


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Challenges For Aviation Industry 1. Employee shortage: There is clearly a shortage of trained

and skilled manpower in the aviation sector as aconsequence of which there is cut-throat competition foremployees which, in turn, is driving wages to unsustainablelevels. Moreover, the industry is unable to retain talentedemployees.

2.Regional connectivity: One of the biggest challengesfacing the aviation sector in India is to be able to provideregional connectivity. What is hampering the growth ofregional connectivity is the lack of airports.

3.Rising fuel prices: As fuel prices have climbed, the inverserelationship between fuel prices and airline stock prices has

been demonstrated. Moreover, the rising fuel prices haveled to increase in the air fares.

4.Declining yields: LCCs and other entrants together nowcommand a market share of around 46%.Legacy carriersare being forced to match LCC fares, during a time ofescalating costs. Increasing growth prospects haveattracted & are likely to attract more players, which will

lead to more competition.A

ll this has resulted in lowerreturns for all operators.


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5.Gaps in infrastructure: Airport and air trafficcontrol (ATC) infrastructure is inadequate to supportgrowth. While a start has been made to upgrade theinfrastructure, the results will be visible only after 2-3years.

6. Trunk routes: It is also a matter of concern thatthe trunk routes, at present, are not fully exploited.One of the reasons for inability to realize the fullpotential of the trunk routes is the lack of genuinecompetition. The entry of new players would ensure

that air fares are brought to realistic levels, as it willlead to better cost and revenue management,increased productivity and better services. This in turnwould stimulate demand and lead to growth.

7. High input costs: Apart from the above-mentioned

factors, the input costs are also high.


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Thank You


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aviation indutry in india

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