thesis - finally[1]

THE INDIAN INSTITUTE OF PLANNING & MANAGEMENT

Introduction

“The mastery of the turn is the story of how aviation became

practical as a means of transportation. It is the story of how the

world became small.”

Aviation Industry in India is one of the fastest growing aviation

industries in the world. With the liberalization of the Indian aviation

sector, aviation industry in India has undergone a rapid

transformation. From being primarily a government-owned industry,

the Indian aviation industry is now dominated by privately owned

full service airlines and low cost carriers. Private airlines account for

around 75% share of the domestic aviation market. Earlier air travel

was a privilege only a few could afford, but today air travel has

become much cheaper and can be afforded by a large number of

people.

History

Pre Independence Era

The origin of Indian civil aviation industry can be traced back to

1912, when the first air flight between Karachi and Delhi was started

by the Indian State Air Services in collaboration with the UK based

Imperial Airways. It was an extension of London-Karachi flight of the

Imperial Airways. In 1932, JRD Tata founded Tata Airline, the first

Indian airline. At the time of independence, nine air transport

companies were carrying both air cargo and passengers. These

were Tata Airlines, Indian National Airways, Air service of India,

Deccan Airways, Ambica Airways, Bharat Airways, Orient Airways

and Mistry Airways. After partition Orient Airways shifted to

Pakistan.

1P G P / S S / 0 8 - 1 0 IIPM/SS/08-10/MUM/MKT/41


Post Independence & Pre Liberalisation Era (1948 – 1990)

In the early 1948, Government of India established a joint sector company, Air India

International Ltd in collaboration with Air India (earlier Tata Airline) with a capital of

Rs 2 crores and a fleet of three Lockheed constellation aircraft. The inaugural flight of

Air India International Ltd took off on June 8, 1948 on the Mumbai-London air route.

The Government nationalized nine airline companies vide the Air Corporations Act,

1953. Accordingly it established the Indian Airlines Corporation (IAC) to cater to

domestic air travel passengers and Air India International (AI) for international air

travel passengers. The assets of the existing airline companies were transferred to

these two corporations. This Act ensured that IAC and AI had a monopoly over the

Indian skies. A third government-owned airline, Vayudoot, which provided feeder

services between smaller cities, was merged with IAC in 1994. These government-

owned airlines dominated Indian aviation industry till the mid-1990s.

Post Liberalisation Era (1991 – Present Date)

In April 1990, the Government adopted open-sky policy and allowed air taxi-

operators to operate flights from any airport, both on a charter and a non charter basis

and to decide their own flight schedules, cargo and passenger fares. In 1994, the

Indian Government, as part of its open sky policy, ended the monopoly of IA and AI

in the air transport services by repealing the Air Corporations Act of 1953 and

replacing it with the Air Corporations (Transfer of Undertaking and Repeal) Act,

1994. Private operators were allowed to provide air transport services. Foreign direct

investment (FDI) of up to 49 percent equity stake and NRI (Non Resident Indian)

investment of up to 100 percent equity stake were permitted through the automatic

FDI route in the domestic air transport services sector. However, no foreign airline

could directly or indirectly hold equity in a domestic airline company.

By 1995, several private airlines had ventured into the aviation business and

accounted for more than 10 percent of the domestic air traffic. These included Jet

Airways, Sahara, NEPC Airlines, East West Airlines, ModiLuft Airlines, Jagsons

Airlines, Continental Aviation, and Damania Airways. But only Jet Airways and

Sahara managed to survive the competition. Meanwhile, Indian Airlines, which had



dominated the Indian air travel industry, began to lose market share to Jet Airways

and Sahara.

Today, Indian aviation industry is dominated by private airlines and these include low

cost carriers such as GoAir, SpiceJet etc, who have made air travel affordable.

An Overview of the Indian Aviation Industry in the 21st

Century

The next big change in the industry came in late 2003 with the emergence of India’s

first no-frill airlines, Air Deccan. It revolutionized the industry, offering fares as low

as INR 500 (USD 10 roughly), compared with Full Service fares offered by the

incumbents, averaging about INR 3000 or more. Since then, Spice Jet (restructured

Royal Airways and ModiLuft), Go Airways and Kingfisher Air also entered the

industry. Paramount Airways was another player, though it positioned itself on the

other end of the spectrum, as an ‘all business class’ airline. With the further advent of

online ticket sales through companies such as makemytrip.com, prices have crashed

and tickets are available for as little as INR 0.99. In fact, now many airline tickets can

be bought for a price comparable to an upper class railway ticket for the same route.

In December 2004, Indian scheduled carriers with a minimum of 5 years of

continuous operations and a minimum fleet size of 20 aircraft were permitted to

operate scheduled services to internationals destinations. On January 11, 2005 the

government designated four scheduled Indian carriers (Air India, Indian Airlines, Jet

Airways and Air Sahara) to operate international services to and from Singapore,

Malaysia, Thailand, Hong Kong, the UK and the USA.

However, in mid-2006, many airline operators announced large losses. Analysts

opined that a combination of factors such as high aviation turbine fuel (ATF) prices,

rising labor costs and shortage of skilled labor, rapid fleet expansion, and intense price

competition among the players were responsible for the losses in this sector. The

problem was also compounded by new players entering the industry even before the

existing players could stabilize their operations. It was estimated that the industry as a

whole could face losses of over Rs. 22 billion in 2006-07. Some experts expect the



industry to consolidate in the near future. The government also was keen to restrict the

losses in this sector by closer scrutiny of the business plans of new entrants,

conducting quarterly financial audits, etc.

Aviation has undergone a change and aviation is now viewed in a different light as an

essential link not only for international travel and trade but also for providing

connectivity to different parts of the country. Aviation is, by its very nature, a critical

part of the infrastructure of the country and has important ramifications for the

development of tourism and trade, the opening up of inaccessible areas of the country

and for providing stimulus to business activity and economic growth. Until less than a

decade ago, all aspects of aviation were firmly controlled by the Government.



Low Cost Carriers ( LCC’s ) – Revolution or Delusion

The low cost airline industry has changed the definition of airlines that air travel is a

luxury and it is only for the upper segment of the population. The key objective of

low cost carriers is to increase their reach and provide the services to a large segment.

In India, low cost carriers came into existence in 2003 when Air Deccan launched its

first low cost airline and that was the first move to open the doors of the airlines

industry for middle class.

LCC’s has not only ended the monopoly of the regular airlines, but it has also given

the Indian Railways a run for their money. The middle class and the upper middle

class are slowly getting inclined towards air travel as their preferred mode of travel.

The increasing level of disposable income in this segment has also been an important

contributor to the change in preference of the Indian consumers towards air travel.

Another major driver is the booming tourism industry in India. However, the low cost

airline segment is facing challenges of increasing competition, rising fuel prices and

inadequate infrastructure.

However, the LCC’s have regularly been questioned in regards to their sustainability

in the long run. The LCC model started off very brightly but despite of its bright start,

it has taken a beating in terms of profitability in the past few years. Even the LCC

model is not recession proof was clearly proven during the dark slowdown periods.

Low cost carriers have made heavy losses and many mergers and takeovers have

taken place. These airlines also constantly complain of being over burdened by the tax

levels and serious doubts have been cast over their future as the poor infrastructure in

terms of airports is also not helping their cause.



Kingfisher Red (formerly Air Deccan) is the market leader, holding the maximum

share in LCC market, followed by Jetlite, Air India Express, GoAir, and Indigo, who

are making the competition stiffer. Kingfisher Red enjoys the first mover advantage in

terms of access to a large number of overnight parking spaces and landing & take-off

slots during the peak period.

The Players of the Indian LCC Market are as follows.

Kingfisher Red

Indigo Air

Spice Jet

Go Air

Jet Lite

Indian (formerly Indian Airlines) is also contemplating entry into the LCC

segment.



Indian Aviation – Story of the Survivor of the Fittest

THE JOURNEY SO FAR

PRESENT INDIAN SCENARIO

The Indian economy has been booming over the past few years this is because of the

rising foreign exchange reserves, increasing inflow from FDI and FII due to which the

growth rate reached to almost 9 % a year for the last three years. However this

buoyancy was curbed by rising oil and commodity prices which led to slowdown the

growth rate with inflation touching at the sky height. Due to this the outlook has

changed from overjoyed to caution.

The aviation Industry has been mirroring the trends in the economy. Propelled by the

growth of the economy, the sector has experienced an extraordinary growth in the last

few years. The year 2007 can be considered as the good year for the sector as the

growth was steady but the year 2008 numbers suggest the slowdown of the growth.

The year 2009 was the year of consolidation for the aviation industry and hence things

are looking up in 2010. The growth in the economy has led to rising passenger and

cargo services however, underinvestment in the Indian airports network has resulted

in massive infrastructure gaps, leaving several expectations unfulfilled.

It is a phase of rapid growth in the industry due to huge build-up capacity in the LCC

space, with capacity growing at approximately 55% annually. This has induced a

phase of intense price competition with the incumbent full service carriers (Jet,

Indian, and Air Sahara) discounting up to 60-70% for certain routes to match the new

entrant’s ticket prices. This, coupled with costs pressures (a key cost element, ATF



price, went up approximately 75% in last year, while staff costs are also rising on the

back of shortage of trained personnel), is exerting bottom-line pressure.

The growth in supply is overshadowed by the extremely strong demand growth, led

primarily by the conversion of train/bus passengers to air travel, as well as by the fact

that low fares have allowed passengers to fly more frequently. There has, therefore,

been an increase in both the width and depth of consumption. However, the regulatory

environment, infrastructure and tax policy have not kept pace with the industry’s

growth.

Enactment of the open sky policy between India and Saarc countries, increase in

bilateral entitlements with the EU and the US, and aggressive promotion of India as

an attractive tourism spot helped India attract 3.2 million tourists in 2004-05. This

market is growing at 15% per annum and India is expected to attract 6 million tourists

by 2010. Also, increasing per capita income has led to an increase in disposable

incomes, leading to greater spend on leisure and holidays and business travel has risen

sharply with increasing MNC presence. Smaller cities are also well connected now.

Passenger traffic has increased and over 21 million seats have been sold, resulting in a

growth of over 50%.

MAPPING THE DEVELOPMENT

Indian airports have come a long way

since the Airports Authority of India

(AAI) decided to liberalize the rules for

private sector participation. The Airport

infrastructure development has been

undertaken via the Public Private

Partnership (PPP) route in some major

metro cities such as Delhi, Mumbai,

Bangalore and Hyderabad. Greenfield

airports at Bengaluru and Hyderabad

have been developed with increased

passenger capacity and plans for further



expansion. Existing airports such as

Delhi and Mumbai are seeing an

expansion in the passenger capacity to be

able to better cope with the expected rise

in volumes. Capacity creation is seen as

a key focus area and work is underway at

several airports to achieve this as shown

in the table.

Efforts are also being made to improve the facilities at the airports, including the

services delivery to passengers, beefed up security arrangements, larger numbers of

check-in and immigration counters etc. Human resources initiatives such as employee

communication and training have also proved to be helpful. Despite this there is still

some way to go before Indian airports provide services at par with their global

counterparts such as the Dubai airport and the Singapore airport. However, the

airports are making efforts in the right direction.

The Government controlled body AAI (Airports Authority of India) manages 127

airports in the country comprising 15 international airports, 7 restricted international

airports, 80 domestic airports and 25 civil enclaves at defence airfields.

The government of India has recognized the need to improve the aviation

infrastructure in the country. Airports account for 40 per cent of India's trade by value

and 95 per cent of international travel to and from India takes place through this

mode. The ministry of civil aviation estimates that there is a need for an investment of

Rs 260 - Rs 360 billion. The government has also decided to modernize 25 airports in

non-metro cities. Improvement of another 55 airports is also on the anvil.

PASSENGER TRAFFIC

“Air travel has now increasingly become a way of life rather than a luxury”. The

growth in passenger traffic figures so far has been driven by greater air connectivity,

affordable air travel due to the emergence of low cost carriers and increased air

capacity. However the industry has seen a few dark clouds looming over its growth



story in recent times. Both full service and budget carriers have seen a dip in

passenger growth. This slowdown in the recent period is attributed to the rise in ATF

costs, which has led to a hike in the fuel surcharges being levied, thus increasing the

air fare.

However it is expected that once the oil prices stabilize, in the long run the passenger

traffic will continue to maintain its momentum. A decline in the footfalls at the airport

shall hurt the airport developers' revenues.



Domestic passenger traffic for the month of July 2008 stood at 3.1mn as against

3.5mn passenger that flew during July 2007, decline of 12.7% on year on year basis.

Air India, Jet Airways, Deccan Aviation, Spice Jet and Paramount Airways Showed a

decline in passenger carried in July on year on year basis. Even though the capacity in

July has decreased by 12-15% over June, but is still higher than the July 2007

capacity because of additional capacity that was added post July 2007. Year 2009 data

in the month of Jan and Feb shows that things on the domestic front are steadily

improving. Domestic passenger traffic has gone up almost 20% in the same months in

2010 on a year on year basis. The year 2008 shows that about 7 crore passengers

travelled the Indian skies, a number which increased to about 11 crore in 2009.

Domestic Airlines are estimated to carry 20 crore domestic passengers by the year

2012.

AIR CARGO

Fuelled by a surging economy the share of air cargo traffic is on the rise. The advent

of dedicated cargo aircrafts at international and domestic routes is projected to reduce

the share of traffic transported by railways and ships. Also economic expansion,

robust commercial activity and a rapidly growing food processing sector have helped

drive the surge in cargo traffic. The government has further allowed foreign carriers to

take up to 74 percent stake in cargo airlines.

Despite the measures adopted to boost air cargo traffic, there still remain some

obstacles to be overcome to give this sector the boost it requires. Some of these are:

i. Lack of facilities for transshipment of imports and exports

ii. Absence of integrated cargo infrastructure

iii. Requirement of trained, knowledgeable and qualified staff

Air India is the market leader in the air cargo segment while Blue Dart is a dedicated

private air cargo airline giving tough competition to AI. Players entering the air cargo

environment include Safexpress, Quikjet, Aryan Cargo Express and Flyington

Freighters. Kingfisher has launched its Cargo service – Kingfisher Express which is



one of the only Cargo services which promises a same day delivery service anywhere

in India. Indian airports not only have the potential to place India as an important

international air trade hub but also develop the domestic air freight market

significantly.

LEADING PLAYERS

Most Indian airlines have reported healthy revenue growth over the years, but the high

cost of fuel continued to eat into their bottom lines. As airlines struggled to keep cost

check, some trimmed capacity, raised airfares, suspended less profitable routes and

resorted to job cuts. In the past the Indian airline industry was dominated largely by

Indian Airline and Air India, but the scenario what was earlier has completely

changed with the entry of low cost carries into the industry. The low cost airline

industry has changed the definition of airlines that air travel is a luxury and it is only

for the upper segment of the population. The key objective of low cost carriers is to

increase their reach and provide the services to a large segment. In India, low cost

carriers came into existence in 2003 when Air Deccan (now Kingfisher Red) launched

its first low cost airline and that was the first move to open the doors of the airlines

industry for middle class. Kingfisher Red is the market leader, holding the maximum

share in LCC market, followed by Indigo, SpiceJet, Air India Express, and Go Air,

who are making the competition stiffer. Kingfisher Red (formerly Air Deccan) enjoys

the first mover advantage in terms of access to a large number of overnight parking

spaces and landing& take-off slots during the peak period.



MACRO ENVIRONMENT ANALYSIS

Macro environment analysis refers to study of those factors which affect an

organization but are beyond the control of an organization. These factors are

uncontrollable. Macro environment consist of following six broad areas:

• Political environment

• Economic environment

• Social environment

• Technological environment

• Demographic environment

• Natural environment

POLITICAL ENVIRONMENT: Indian political scenario has, is and

will undergo various changes. Following are the various policy changes which might

have an impact on aviation industry in coming years:

Open Sky Policy



India had this agreement with 40 countries and lately it signed the policy with UK,

USA and European Union. According to this policy, the signatories are allowed to fly

over the skies of India. Under this arrangement, airlines from EU member nations will

be allowed to operate flights to India from any of the 25 EU nations regardless of the

carrier's country of origin.

Effect: Tourist arrivals in India are expected to grow exponentially, especially due to

the open sky policy between India and the SAARC countries and the increase in

bilateral entitlements with European countries, and the US. The increase in number of

international tourists will percolate down to increase in domestic passengers.

Deregulation

Prior to 1991, aviation was nationalized and heavily regulated. In 1953, the Air

Corporation Act, 1953, changed the landscape of the airline industry in India. It was

in 1994 that the Air Corporation Act was repealed and thus this allowed private

operators to operate in the domestic airline and aviation industry. Requirements to

become a scheduled operator air carrier in India have being reformed, the reduced

restrictions on foreign direct investment is 49% for flights and 100% for airports.

Effect: Entry into the air travel industry is not only cheaper, but also affordable to

new operators.

Modernization of Airports:

The Indian Cabinet had approved a proposal mandating the state-run airport operator

to modernize 35 airports in second-tier cities within the next two years. The

modernization process will cost the government between Rs. 70 to 80 billion. Delhi

(Rs.8,700 cr) to GMR and Mumbai Airport Modernization (Rs.6,400 cr)to GVK are

two biggest investment projects . Total investment on hand in airport infrastructure



crossedRs.35,000 crore in the quarter ended January 2006.This investment was spread

over 89 projects. Up gradation of Kolkata and Chennai airports is on anvil.

Simultaneously, 20 non-metro airports will be developed. Two biggest active projects

are the Bangalore International Airports Authority Ltd (Rs.1.5 crore) and GMR

Hyderabad International Airport Ltd (Rs.1.5 crore).

Effect: Improved infrastructure would lead to rise in the number of travellers and

also would encourage more operators.

Abolishment of Taxes:

Foreign Travel Tax (FTT) Rs500 and 15% inland air travel tax (IATT) charged on

Basic airfare has been abolished by the government w.e.f from January 9, 2004 to

reduce fares.

Reduction on Excise Duty:

From January 9, 2004, the excise duty on ATF was reduced from 16 to 8 percent. The

average domestic price of ATF is 99 per cent higher than prices in foreign countries

and affects domestic airlines drastically as ATF accounts for 30 to 40 per cent of

operating costs

Effect: It would lead to low fares thus giving a boost to air travel. The government

has reduced the average age of aircraft being imported into India for commercial

airline operations by five years.

Effect: It would lead to increase in imports of aircraft thus can discourage more

operators coming in and improve services.

Landing Charges Abolished:

Landing charges for aircraft with less than 80 seats were abolished and landing

charges for larger aircraft have been reduced by 15% with effect from February 11,

2004.



ECONOMIC ENVIRONMENT



India, ranked tenth in the world in 2004, is expected to be holding eighth rank in the

world by 2014 and fourth rank in next years with a GDP of $1.15-1.4 trillion and

$2.1-3 trillion respectively, and a projected growth rate of 6-8%.

Effect: This rise in income levels along with introduction of no-frills flights will lead

to

• Rise in no of travellers

• More investments in aviation

• More competition

• Rise in industrialization leading to more need of air transport

SOCIO-CULTURAL ENVIRONMENT

Change in Lifestyle Average income of middle class household is expected to rise to

194000 Rs by 2010 from 169000 Rs in 2001-02.No of households projected to be

43.6million in 2010. Effect: So there is going to be change in lifestyle and spending of

people Due to this change people will prefer Low cost airlines instead of Railways

first air-conditioned thus rise in air traffic.



Rise in Leisure travel Tourism industry grew 8.8 per cent over 2003- highest growth

rate in the world. 3.2 million Foreign tourists visited India last year. There has been an

increase in leisure travel by tourists of 15% in 2004.

Effect: It will lead to a rise in no. of tourist passengers thus more encouragement for

new operators.

TECHNOLOGICAL ENVIRONMENT

Introduction of Airbus A380

The double deck Airbus A380 is the most ambitious civil aircraft program yet was

launched in December 2000. An all new design Superjumbo, the Airbus A380 is the

world’s first twin-deck, twin-aisle airliner. It could be outfitted for special passenger

uses such as sleeper cabins, business centres or even child care service. In a one-class

configuration, the A380 could accommodate as many as 840 passengers advantages of

the A380 include lower fuel burn per seat and lower operating costs per seat. Airbus

states the A380 will use 20% less fuel and will fly quieter, cheaper and more

environmentally friendly than the 747.

ILS-Instrument Landing System

Instrument landing system (ILS) facilities are a highly accurate means of navigating

to the runway under low visibility conditions various runway environment lighting

systems serve as integral parts of the ILS system to aid the pilot in landing when using

the ILS, the pilot determines aircraft position by instruments. ILS is classified

according to capabilities of the ground equipment. Category I ILS provides guidance



information down to a decision height (DH) of not less than 200 ft. Improved

equipment (airborne and ground) provide for Category II ILS approaches. (DH of not

less than 100feet)

DEMOGRAPHIC ENVIRONMENT

Changing Structure of Consumers

Middle class population of India was 300 million in 2005 and is projected to be 400

million for 2010.



Effect: For aviation, this growth is a remarkable achievement and a sign that the

industry can only expand as more people gain the ability to purchase airline travel,

supported by introduction of low-cost carriers.

High percentage of young population

India has highest percentage of people in age group of 20-50, with high earning

potential. Also younger segment has more mobility needs due to education or work,

so it shows high probability of rise in Domestic air travel.

Higher number of literates

Due to rise in education awareness, there has been rise in no. of graduates and those

pursuing higher studies which translates into higher earning potential and higher

spending on travel in future.

Nuclear Families

Due to lesser number of joint families and increasing nuclear families, there would be

rise in air travel by children to meet their grandparents.

NATURAL ENVIRONMENT

The average domestic price of ATF is 99 per cent higher than prices in foreign

countries and affects domestic airlines drastically as ATF accounts for 30 to 40 per

cent of operating costs after a fall in ATF in Nov and Dec by 2%, and 11%, for the

2nd consecutive month, ATF

Price in February soared by 3.5% to the price prevailing in Jan 2006. (From Rs.35 a

litre to Rs.36.2 a litre.)

Earlier, under the fuel pricing mechanism the subsidy given to Kerosene/diesel was

loaded onto ATF. While this has been phased out, States are now levying heavy Sales

Tax on ATF which made it costly.

Effect: Due to high factor costs, short haul operations are rendered unviable. It would

lead to low profits thus discouraging new operators.



AIRLINES ON INTERNATIONAL ROUTES

AIR INDIA is the national flag carrier airline of India with a network of

passenger and cargo services worldwide. It is one of the two state-owned

airlines in the country, the other being Indian Airlines. Air India has 44 world-

wide destinations. The airline has been profitable in most years since its

inception. In the financial year ending March 31, 2006, Air India has made a

net profit of Rs.97 million; earned revenue of Rs.87, 480 million -

representing a growth of almost 15 per cent over the previous year.

INDIAN AIRLINES (Now Indian) is India's state owned primarily domestic

airline, under the federal Union Ministry of Civil Aviation. The Company was

formerly known as Indian Airlines. On December 7, 2005 the company was

rebranded as Indian as a part of a program to revamp the company image in

preparation for an IPO. Indian Civil Aviation Minister, Praful Patel,

announced Government of India's plan to merge Air India and Indian into one

giant airline consisting of 130-140 aircraft.



JET AIRWAYS a “regular” airline which offers normal economy and

business class seats. Jet Airways, along with Air Sahara, is the only airline

which survived the dismal period of 1990s when many private airlines in India

were forced to close down. Jet Airways is an airline based in India serving

domestic and international routes. The airline operates over 300 flights to 43

destinations across the. It currently controls about 32% of India's aviation

market. Jet is India's large privately owned airline and has the highest market

share of Indian domestic traffic. This domestic carrier’s market share in Aug

’04 was over 43%. It has emerged as India’s largest private domestic airline

and has been acclaimed by frequent travelers as the most preferred carrier

offering the highest quality of comfort, courtesy, standards of in-flight and

ground services and reliability of operations. The airline links 44 destinations,

including two international cities, Colombo and Katmandu, with over 1,924

flights weekly.

KINGFISHER AIRLINES is an airline based in Bangalore, India. Services

started on 9 May 2005, following the lease of 4 Airbus A320 aircraft. It initially

operates only on domestic routes. The airline promises to suit the needs of air

travelers and to provide reasonable air fares. Kingfisher were pushing for an

amendment of the present Indian government rule which requires an airline to

fly a minimum of five years on domestic routes before it can start flying

overseas and hence it found an alternative route of doing so. It offered to buy

out Air Deccan which had completed 5 years of operations but did not have the

resources to fly overseas. Hence in the deal of the century in the aviation

business, Kingfisher took over Air Deccan and renamed it Kingfisher Red.

Today Kingfisher flies to an array of overseas destinations, London being the

most prominent one.

AIRLINES ON DOMESTIC ROUTES

SPICE JET is a low-cost airline. There marketing theme “offering low,

everyday spicey fares “and great guest services to price conscious travelers".



Their aim is to compete with the Indian Railways passengers traveling in AC

coaches. SpiceJet has been one of the most consistent LCC’s in terms of solid

market share. Currently it occupies second place in the LCC segment after

Indigo with a 12% market share.

KINGFISHER RED (formerly AIR DECCAN) is an airline based in

Bangalore, India. It was India's first low-cost carrier, and as of May 2006,

connects 55 cities within India. Kingfisher Red has grown rapidly since it first

started air operations in 2003, and despite its almost disastrous maiden

inaugural flight (which caught fire), it continued to grow. The growing Indian

economy and the increasing number of middle-class people in India have

greatly helped its growth. India's first and leading discount operator,

Kingfisher Red flies most large Indian cities and a number of small cities in

the southern states of Karnataka, Tamil Nadu, Andhra Pradesh and Kerala.

Kingfisher Red used to be a no-frills operator with free seating on the flights,

no drinks or refreshments on board, but now it serves a small meal in the flight

to keep a high value proposition. It has first-come-first-served seating, neither

business class nor frequent flier mileage bonuses. Air Deccan connects smaller

towns, short-haul routes in the south Indian states of Tamil Nadu, Karnataka

and Andhra Pradesh. Kingfisher Red passengers can print out their tickets and

exchange them for a boarding pass when checking in. Air Deccan became the

first private operator in India to fly Airbus aircraft in July 2004, when it

received the first of five leased A320s. It currently flies three leased Airbus

A320s on services among Indian cities. Two more leased A320s plus two

ordered A320s are due to join its fleet in February and September 2005,

respectively.

GO AIR - The People’s Airline, a low cost carrier promoted by the Wadia

Group is a domestic budget airline based in Mumbai, India established in June

2004. It’s a relatively small player as compared to other low cost airlines. Still

in its nascent stage, Go Air is quietly making a place for itself. It does not

however cover all the sectors like all the other big airlines. But for a start they



have covered quite a big sector.

JET LITE (formerly AIR SAHARA) - They have been in the business for

over a decade and have made a secure place for themselves in the domestic

airlines industry. Take a look at the number of fleet they have. If you want a

career with them, find out what vacancies they have. You can easily view the

facilities they provide for their flyers and also all the special offers that they

give. Jet Lite are still trying to find competitiveness and are now starting to

threaten the increasing dominance of the other established LCC’s.

PARAMOUNT AIRWAYS - This domestic airline plies all over south India.

So if you are traveling anywhere between Bangalore and Vishakapattanam

don’t forget to check out their flight details. It is a dominant player in the

south. It claims to be the airline dedicated to Southern India, but now its share

is being eaten into by Kingfisher Airlines.

Regular Domestic Airlines VS LCC’s

(Features, Services & Comparison)

Discount or no-frills airlines, low-cost carriers offer flights fraction of the

price charged by more traditional airlines

Take the no-frills concept at its most literal sense and provide the most basic

of amenities onboard flights - while charging passengers for anything extra

they might require.

Fees for services can range from travelers having to pay for in flight meals if

they don't want to take their own food onboard, to charges for seat

reservations, baggage handling, check-in and other airport services.

Budget airlines save money by using smaller airports with lower costs than the

bigger hubs and offering one passenger class - i.e. economy - instead of two or

three.


http://www.bestindiansites.com/airlines/domestic-airlines.html


Low-cost flights are still snapped up by holidaymakers looking for the

cheapest break possible.

Low-cost airlines tend not to have the same agreements for making alternative

travel arrangements via air for passengers when a flight needs to be re-routed

as their full-price counterparts do.

Low-cost airline is likely to struggle with offering discounted transatlantic

flights because the main carriers generally make their money on these routes

through the people who choose to pay extra to fly business or first class.

Some airlines reportedly refuse to provide appropriate assistance and hotel

accommodation, or even to refund passengers. Low-cost carriers, usually

operating from regional airports, often struggle with the obligation to provide

assistance.

Budget airlines make their money somehow - one way of doing this is through

fees and charges that are not always advertised along with the headline airfare

on advertisements.

As low-cost carriers tend to choose out-of-the-way regional airports to take off

from and land at due to the lower cost to the airline, these fares escalate more

often with no-frills flights than with other types of services.

Some low-cost airlines are to charge a relatively low price for the outbound

flight while hiking up the fare for the return flight. So the final cost of your

seemingly bargain ticket may turn out to be significantly higher.

Low-cost airlines tend to offer a very limited range of options when it comes

to flying long-haul. Short-haul services are plentiful, but the few long-haul

discount airlines in existence tend to be based overseas and offer few choices

compared with traditional carriers.



Traditional carriers have much to offer the traveler disillusioned with the

world of no-frills flights. Clean, comfortable cabins, friendly staff, meals and

often superb in-flight entertainment systems are all inclusive in the price of the

ticket. Customer can also skip the dubious pleasure of racing to the plane to

bag a prime seat and instead walk on at a leisurely pace, safe in the knowledge

that the seat is fully reserved.

Major Happenings in 2010 in the Indian Airline Industry

Jet Airways becomes No. 1

Domestic airlines carried 3.86 million passengers during February, Jet Airways

(including JetLite) taking the top position with 26.1 percent market share, followed by

Kingfisher Airlines at 22.7 per cent and national carrier Air India at 17.2 per cent.

The market share of low-cost carriers during January was IndiGo (14.9 per cent),

SpiceJet (12 per cent) and GoAir (5.5 per cent). Airlines in India carried 4.08 million

passengers during January and 4.48 million passengers during December 2009.

According to the civil aviation ministry, Jet Airways carried 1.08 million passengers

during February 2010, Kingfisher 877,000, Air India 663,000, Paramount 62,000

while low-cost carriers IndiGo 577,000, SpiceJet 465,000 and GoAir 211,000.

The overall on-time performance of scheduled domestic airlines for January was 71.3

per cent.



Domestic airlines see 17% traffic growth in February

2010

Domestic air traffic continued to soar with airlines flying 39.15 lakh passengers in

February, up 17% over the same period last year, suggesting a better financial outlook

for the loss-ridden aviation industry. The two major low-cost carriers IndiGo and

SpiceJet filled over 80% of their seats during this period, signaling passenger shift

towards no-frill air travel, according to reports released by the DGCA.

While traffic numbers in February are below that of January, aviation industry experts

claimed, the growth is more real and sustainable. The domestic airline industry had

seen nearly 23% jump in passenger numbers in January this year over the same month

last year.

This growth seems to be real and brings rational amount of profit with it. It’s better to

have a 17% growth and a good yield rather than a profitless growth of 30%. Estimated

growth is being targeted at 10-12% in air traffic this year. Airlines reported losses of

about Rs 8,000 crore in 2008-09, which are expected to widen further in the current

year.

As per DGCA, domestic airlines carried 80.86 lakh passengers in the first two months

of the calendar year against 67.61 lakh in the corresponding period last year,

registering a growth of 19.2%. The domestic air traffic is estimated to grow to about

49 million in 2010 from 43 million last year.

Flying to South-East Asia – The LCC way

It’s a new turf for low-cost carriers (LCCs) where they are setting the rules of the

game offering never-before rates with a lot more flight options.



South-East Asia is the second-largest market for airlines from India — with 30% of

the total international travel coming from this market — is set to witness a shakeout of

sorts with LCCs challenging the dominance of traditional full-service network carriers

like Singapore Airlines, Cathay Pacific and Thai Airways.

A virtually non-existent LCC market had helped these carriers garner more than 50%

of the market share from India till now. But with Malaysian and Singapore-based low-

cost carriers eyeing the void in the Indian market, the dynamics are bound to change.

And, it’s only natural that when players like Air Asia, with its budget long-haul

service Air Asia X, announced flights from Mumbai to Kuala Lumpur at rock-bottom

prices established players like Jet Airways, Cathay Pacific and Malaysian Airlines

were forced a re-look at their Indian operations.

In fact, the below cost pricing offered by Malaysian carriers forced the Indian

regulator to intervene and sternly warn airlines on the price war and that they cannot

sell at the offered prices. For example, a ticket from Mumbai to South-East Asian

destinations like Hong Kong, Singapore and Kuala Lumpur is between Rs 14,500 and

Rs 18,000 on Cathay Pacific, Malaysian Airlines or Jet Airways. Air Asia has rattled

the market with an offer price of Rs 9,000 to Kuala Lumpur. Air Asia and a lot of

other south Asian LCC’s are bullish about India. Air Asia plans to increase its flights

to India from 78 to 140 per week.

Indian low-cost carrier SpiceJet, which is soon to launch operations to the South East

Asia region, is cautious to lay its cards on the offerings it has, but the budget carrier is

not ruling out the impact of Air Asia on pricing. “Almost 70% of domestic Indian

passengers fly the low-cost product. There is rationale to pick that traffic up and Spice

Jet’s focus is South-East Asia and the SAARC region. They are aware that Air Asia is

adding lot of flights and they have factored that in Spice jet’s plans.

Currently, Indian carriers pick 25% traffic from here and with Kingfisher (flies 28

flights weekly to Southeast Asia) adding flights to Hong Kong and Bangkok and Air

India Express (49 flights per week to the region) also watching how the fare wars

unfold, it will be interesting what the offerings will be like for travelers. Kingfisher,



which currently flies a wide body to the region, is likely to deploy narrow body low-

cost product on the route.

Aviation experts claim that the boom time for LCCs in the region is just around the

corner as there are a host of Airlines waiting in the wings to launch operations to the

region.

“Jetstar Airways, Tiger Airways (Singapore-based low-cost airline), Jetlite (low-cost

subsidiary of Jet Airways) and also Ryanair (Irish low-cost carrier) will all launch

flights to South-East Asia as 70% of the world’s population lives within the flying

distance of four to five hours, most suitable to the aircraft type of budget carriers. But

the LCCs are yet to ruffle feathers of seasoned players like Hong Kong-based Cathay

Pacific, which flies 35 flights per week out of India.

SpiceJet will take on AI, Jet with international

operations

Low-cost carrier SpiceJet will launch its international operations in June with flights

to Kathmandu, Colombo and Dhaka, a move that could spark off a fare war in these

lucrative sectors. The Delhi-based airline will take on full-service carriers Air India

and Jet Airways along and the latter’s no-frills subsidiary JetLite that operates to these

destinations.

The airline would serve its foreign network with its current fleet of B737s. Currently a

return ticket on most of these flights costs upwards of Rs 12,000, but SpiceJet’s entry

could be a game changer.

India receives nearly 15% of its about 5.4 million foreign tourists from Bangladesh

and Sri Lanka. A good number of people from Nepal come to India for work.

Increasing trade ties between the Saarc countries in recent years have seen a spurt in

business travel as well. Air traffic in these routes has been growing at 13-14%.

SpiceJet will complete five years of operations in May. As per rules, domestic carriers



can fly overseas if it has completed five years of operations in the domestic market

and have a fleet of at least 20 aircraft. Naresh Goyal controlled Jet Airways was the

first private carrier to operate international routes after the government opened up

international routes in 2003-04. Airlines usually offer attractive prices when they start

operations on new routes.

AI's passenger revenue surged to Rs 2,585 crore on

higher demand

National carrier Air India — which is struggling to cash in on improved economic

conditions even as it seeks a bailout from the government, has managed to increase

the money it makes from its passengers by Rs 235 crore in the three months beginning

November 2009.

The government-owned airline has managed to earn Rs 2,585 crore from fliers in the

period November 2009 to January 2010, compared with Rs 2,350 crore in the same

period last year, mainly due to a rise in demand as more people switch back to air

travel in the wake of an economic upturn. It has also shown a surge in the so-called

passenger yield - the average price at which tickets are sold - by about 10% in the

same period. The airline’s load factor — passengers carried as compared to capacity

— has gone up by 10 percentage points to 74% in January.

The national carrier, which racked up huge losses in the recent past due to lower air

traffic and higher fuel charges is hardly out of the woods. It has an eye-popping

cumulative loss of Rs 7,774 crore for the past two years, while the deficit for the

current fiscal is estimated to be Rs 5,400 crore. It is likely to receive funding from the

government, but with riders that stipulate better operational performance.

The company has also been able to reduce its operating deficit by about Rs 1,300

crore in the period between April 2009 and January 2010, mainly due to capacity

rationalization and increased utilization of its planes. During the same period, the

operating cash surplus on domestic routes was Rs 43 crore, while international routes

have seen lower operating losses.



The trend for Air India is reflective of buoyancy in the sector and also of an uptrend in

load factors and cash realization. For the industry as a whole, passenger traffic has

grown by 25% in the past three months.

The airline is also likely to increase its capacity by 10% on the domestic routes for the

summer months, to meet an increased demand due to the Commonwealth Games in

Delhi. For its summer schedule, Air India will add more direct flights from Delhi to

Dehradun, Coimbatore, Calicut and Mangalore with smaller aircraft for optimum

utilization. Flights will also be added from Delhi to metros such as Bangalore,

Chennai and Kolkata. Air India, with a paid-up capital of just Rs 145 crore, has a debt

burden of over Rs 14,000 crore. The losses for the current fiscal ending March 2010

are pegged at Rs 5,400 crore. The government has said it will pump in Rs 800 crore of

fresh equity into the airline in two installments, but with riders.

Currently, Air India is being advised by consulting firm Booz & Allen on how to

reduce its costs and by Accenture for merger-related issues. The government recently

appointed four independent directors on the board of Air India, including Mahindra &

Mahindra vice-chairman Anand Mahindra, as part of a programme to boost the

company. Air India merged with Indian Airlines, its domestic arm, but the merger is

widely regarded as having been unsuccessful. In its merged avatar, the company is

referred to as Air India.

'Merger pushed AI, Kingfisher Airlines deeper into

red'

The merger of Air India with Indian Airlines and that of Kingfisher Airlines with Air

Deccan has resulted in a massive increase in their losses, according to official figures.

The losses for the National Aviation Company of India Ltd (NACIL), which runs Air

India, more than doubled from Rs 2,226.16 crore in 2007-08 to Rs 5,548 crore in

2008-09.



Similarly, Kingfisher's losses rose almost four times from Rs 408.91 crore to Rs 1,602

crore during the same period, the figures have shown. The 2008-09 losses for liquor

baron Vijay Mallya's airline were recorded after its merger with low-cost carrier Air

Deccan.

Likewise, the combined losses of Jet Airways and its fully-owned subsidiary JetLite

or erstwhile Air Sahara rose from Rs 695.10 crore to Rs 1,032.7 crore.

Besides merger, very high fuel costs, the global economic downturn and

comparatively low yields due to heightened competition also contributed to the rise in

their losses, which have been estimated by the International Air Transport Association

(IATA) to account for one-third of the losses of the global aviation industry.

But the government has defended its decision for merging the two state-owned

carriers saying that the combining their critical mass or size would be a key factor in

helping them survive and prosper amid a fierce global and domestic competition.

SWOT Analysis of the Indian Airline Industry

India's aviation industry presents some considerable opportunity, but has been

dragged down by red tape and, more recently, excessive airline capacities amid

the downturn in the global economy. Steps are being taken to address the

shortcomings, but the industry does face a considerable test over the next 12-18

months.

Strengths

Liberal Environment: India's airlines operate in a liberal environment in both

the domestic and international spheres. With three major airline groups and

four smaller carriers all operating domestic routes, there is no shortage of

competition, although this factor combined with excess capacity has tended to

depress yields. Nevertheless, carriers are free to operate any domestic routes

without seeking permission from the government, and without restriction on



pricing. One condition that airlines find onerous however, is the requirement

to operate a proportion of their operations to remote and underdeveloped

regions of the country. On the international front, the Indian government has

pursued an increasingly liberal approach to bilateral air services agreements

with key overseas markets, resulting in greater access for foreign carriers.

Modern Fleet: In light of the fact that much of the growth in Indian aviation

has occurred in the last five years, the country's airlines operate a relatively

young and modern fleet, ensuring a high quality passenger experience,

improved safety and good operational reliability.

High Quality: India's airlines offer a good quality product in each of the

operating models in existence. Jet Airways and Kingfisher Airlines are

competitive in terms of their in-flight service against the leading carriers in the

world. Kingfisher for example is one just half a dozen global carriers such as

Singapore Airlines and Cathay Pacific, with a Skytrax 5 star rating. In fact it

could be argued that the full service product on domestic routes is excessive

for the sector lengths involved and results in a higher cost structure, which the

passenger does not necessarily see value in paying for. The LCCs too, by and

large, offer a comfortable, efficient and reliable service. Until a couple of

years ago, Air Deccan was one carrier that had developed a reputation for poor

on-time performance, flight cancellations and overbooking, however since

being acquired by Kingfisher, most of these operational issues appear to have

been resolved.

Economic Growth: Economic growth has historically been the primary driver

of air traffic, and the relationship has generally been even stronger in

developing countries. Between 2004 and 2007, India enjoyed four years

averaging 9% per annum GDP growth. This slowed to 6.5% in 2008, however

against the background of a global economic recession, this was a creditable

performance. The increased business confidence following the general election

result in May 2009 has eased concerns that growth may slow further. The

stock market has soared 25% in the last month and the outlook for growth and

consumption has improved, which is a positive for the aviation industry.


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Political Stability: The re-election of the Congress Party, with a stronger

majority is expected to allow the new administration to push ahead with

further economic reforms, which had to date been blocked by coalition

partners. The prospect of a government which has the ability to last its full

term and pursue its agenda is extremely encouraging. In addition, Minister

Praful Patel, who was the architect of the dramatic transformation of the

aviation sector, has retained the portfolio, which brings experience and

stability to the aviation industry.

Weaknesses

Airport Infrastructure: The rapid growth in air traffic over the last few years

exposed the deficiencies of airport infrastructure across the country. After

decades of neglect, many of India's airports were forced to operate well above

design capacity. The resulting congestion in the terminals and on the runways

delivered a poor experience for the passenger and a costly, inefficient

operating environment for the airlines. However, although a weakness today, it

is also fair to say that it is becoming less so, as the airport modernization

program starts to deliver results, with new airports in Bangalore and

Hyderabad, and improving facilities at Delhi and Mumbai. The upgrade of

non-metro airports remains behind schedule so it may be another 3-4 years

before we see good quality facilities across the country, but there are tangible

signs of improvement.

Airways Infrastructure: Although congestion on the ground is relatively

visible, another current area of weakness is the limited investment that has

taken place in improving infrastructure for air traffic management. This too



results in expensive aircraft holding patterns, indirect flight paths and sub-

optimal use of runways.

National Carrier: The state-owned carrier, Air India, is in a dire situation.

The carrier is estimated to have posted losses of close to USD1 billion in

2008/09, and morale within the bloated workforce is at a low. With no clear

direction, management instability at the top and continuing issues with the

integration of Air India and Indian Airlines, the carrier is in need of radical

restructuring. It is imperative that the government develops a turnaround

strategy for Air India as an urgent priority.

Deep Pockets: Over the last three years, India's carriers have accumulated

billions of dollars in losses and debt. Ironically, a characteristic that would

normally be considered strength - namely deep pockets - has resulted in

carriers remaining afloat that would perhaps in other circumstances have

failed. With the backing of either the government or large corporations,

several carriers have been able to access funding that they might have been

denied on a strictly commercial basis as standalone airlines. As a result of the

intense competition which has been perpetuated, airlines have struggled to

raise fares to break-even levels.

High Cost Structure: India's airlines operate in a relatively high cost

environment, primarily due to the punitive taxation structure. The greatest

impact is felt in the area of sales taxation on fuel, which can increase the cost

to 60% above the international benchmark. The limitations of airport

infrastructure also increase costs due to the fact that carriers are unable to

schedule fast turnarounds, resulting in reduced aircraft utilization. In addition,

the fact that high quality ancillary services such as MRO and training are not

currently available in India, which means that aircraft and personnel have to be

sent overseas.

Skilled Resources: Domestic air traffic in India tripled in the five years to

2008, while international passengers doubled. This rate of growth far

outstripped the capacity to develop skilled technical and management


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personnel. The gap was partly addressed by employing expatriates,

particularly as pilots, and by learning on the fly. This means there is a lack of

in-depth experience and knowledge at all levels. Furthermore, there is an

absence of high quality training infrastructure in-country to deliver the

resources to support future growth. This lack of personnel affects the

government as well and the FAA has expressed its concern at the shortage of

qualified safety inspectors within the Directorate General of Civil Aviation

(DGCA). India has been put on notice that unless this issue is addressed, it

may be relegated to a Category II nation, which would mean that Indian

carriers would not be permitted to increase services to the US.

Opportunities

Market Growth: Despite the rapid expansion of recent years, India has only

just scratched the surface of the potential for the aviation sector. Trips per

capita remain low even by the standards of other developing countries. China's

domestic market is more than four times the size of India's 40 million

passengers. Even, Australia, a country with a population of just 21 million,

compared with India's 1.1 billion, has a market 25% larger. Similarly on the

international front, less than 1% of Indians travel overseas each year. Inbound

visitor numbers at 5.4 million in 2008 for the entire country, were less than for

Dubai or Singapore. It is not difficult to see the expansion potential from such

a low base as economic growth continues apace.

Geographic Location: India is ideally positioned as a major aviation hub at

the crossroads between Europe, the Middle East and Asia Pacific. The fact that

aviation was a neglected sector for so long has allowed airports such as Dubai

and Singapore to effectively establish themselves as offshore hubs for Indian

passengers, and they now have a significant head start. However, as India's


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airports improve, and its airlines receive international awards for their service,

there may be an opportunity to leverage its huge home market to compete with

these longer established hubs.

Lower Costs, Higher Quality: India has already managed to develop a

dynamic aviation sector despite, and not because of, its environment. The

improvements in airport and airspace infrastructure, the development of

indigenous training and maintenance facilities and the potential for fiscal

reform, all point to the potential for Indian aviation to increasingly operate in a

lower cost, higher quality and more efficient manner. This could in due course

lead to an opportunity for India to develop as a global outsourcing hub in areas

such as aerospace manufacturing, MRO and training.

Threats

Middle East Aviation: The carriers of the Gulf are aggressively expanding in

India, with high frequencies from multiple destinations to their hubs, from

where passengers can access extensive global networks. The ability for a

passenger for example to travel one-stop from Ahmedabad to Hamburg, or

multiple daily frequencies from Mumbai to London, connecting at an

attractive hub, is a strength which Indian carriers simply cannot match at

present. It will take time and the question is how far ahead will the Middle

East carriers be by that stage.

Terrorism: India has seen frequent terrorist activity in recent years. The

country has shown great resilience in bouncing back after each attack,

however inbound international traffic in particular is sensitive to such events.

Similarly the potential for India to develop as a global traffic and services hub

is contingent upon it being seen as a safe and attractive destination.



Michael Porter’s Five Force Analysis

Michael Porter’s five forces model has been used as a framework to analyze the

Indian airline industry and its attractiveness to new and existing players



1. THREAT OF NEW ENTRANTS

Huge capital requirement: Capitalization of minimum Rs.30Cr without which it is

not allowed to takeoff.

Expected retaliation: Market is concentrated in the hands of a few players thus any

new player would to face stiff competition.

Legislation or government action: Along with the equity restrictions for floating an

airline they also compel the airlines to operate on uneconomical routes.

Inadequate airport infrastructure: Difficult for the existing airlines to function

smoothly and thus deters new ones.

Shortage of pilots and high fuel costs

Exit barriers

2. BARGAINING POWER OF CUSTOMERS

General Indian traveller is extremely value conscious.

Growing awareness has increased expectations for punctuality, safety and service.

Minimal switching cost and alternatives are available.

There is no differentiation among the players in the same segment e.g. the differences

between Air Deccan and Spice Jet is minimal.

Transparent Web based comparisons in fare structures are available which increases

the power of the customer to choose the best deal.

Role of intermediaries like travel agents is diminishing.

3. BARGAINING POWER OF SUPPLIERS



High fuel costs - Fuel accounts for nearly 35% of the total cost and the cost of fuel is

increasing rapidly posing a threat to the company’s profits.

Aircraft suppliers enjoy in a duopoly and fiercely control their market shares.

Acute shortage of pilots which makes the industry dependent on them

Forward integration: Airlines also face a threat of forward integration as the

suppliers have or know about most or the technical aspects of the industry.

Airbus and Boeing have two radically diverse views on the future needs of civil

aviation and this is reflected in their new product developments. Boeing has focused

on medium capacity long haul aircraft (expecting that demand will grow for smaller

aircraft that can fly more frequently offering a wide choice of departures in flight

schedules). Airbus has made huge investments in the A380 which is its new large

capacity-long range super jumbo (expecting that demand will grow for larger more

fuel efficient and luxurious aircraft that can accommodate more people per flight).

4. THREAT OF SUBSTITUTES

Product for product substitution- Consumers have various options in terms of airlines

to choose from. They may also switch to other modes of transport such as road and

rail.

Substitution for need - With the advent of technology options such as video

conferencing and conference calls reduces the need to travel thus the option of

substitution of need in present but it is marginal as it is not possible to totally do away

with travelling.

5. POWER OF COMPETITORS



Intense Competition amongst low cost airlines and the full service airlines, apex fares

and promotional schemes offered by all the full service carriers, offering prices at

lower or similar to the low cost ticket fares are a tremendous competitive force.

Entry of additional players.

Mergers and acquisitions take place here too which increases competitive rivalry

between airlines.

Low level of differentiation between the services offered by the different airlines

increases the risk of switching.

High fixed costs and input constraints also add to the competitive pressures in the

industry.

INDUSTRY OUTLOOK

LOW COST STRUCTURE SUITS INDIA

Air Deccan entered the Indian market in FY04 with its low cost strategy, and within a

year of its operation took away market share from FSCs. Since then, there have been

five low cost carriers in the country, with each of them clocking better load factor

than FSCs. Clearly, there has been a shift in customer taste towards LCCs. However,

many customers have been let down by some of these LCCs due to poor service.

While the business class and the elite continue to prefer FSCs, the mass market in

India is expected to favour LCCs that can deliver a requisite level of service. It can be

clearly stated that FSC are losing their grip from the Indian aviation industry and the

newly emerged LCCs are slowly and steady dominating the market in the country.

Another major driver is the booming tourism industry in India. However, unlike FSC,

the low cost airline segment is also facing challenges of increasing competition, rising

fuel prices and inadequate infrastructure.



FLEET PURCHASES

Boeing and Airbus expect airline companies in India to purchase nearly 1,000 new

planes over the next 20 years. Boeing has orders for a total of 100 planes from India

to be delivered in the next six to seven years, according to the Economic Times,

India’s leading business publication. The plane maker announced in April that it

would deliver more long-range, wide-body 777 aircraft to India next year. In May,

Indian start-up carrier Star Aviation confirmed an order for up to ten Embracer 170

regional jets, with the first to be delivered in 2009. India’s largest private carrier Jet

Airways plans to expand its fleet by 40% to 117 planes over the next three years. The

carrier is spending about US$2 billion on wide-body planes that it will use for its

growing international operations. And last December, Jet Airways exercised an option

to purchase five more Airbus A330-200s, as it replaces its fleet and add new routes.

Low-cost airlines, too, have devoted billions of dollars to buying new aircraft, to

support their aggressive expansion plans. India’s Kingfisher Airlines was in talks this

year with Airbus for 40 planes, worth approximately US$7.3 billion. Another Indian

budget airline, Spice Jet, announced on January 22 that it would purchase ten Boeing

737-800s, for delivery from 2011 onwards. Orders placed with Airbus, Indian

Airlines' order is intended at replacing its ageing fleet, while Indigo has ambitious

plans to increase its fleet size to 100. Indian carriers have collectively ordered for

approximately 380 aircrafts through 2012 against their current fleet size of 280

aircrafts. Over 135 aircrafts were added in the last two years alone for scheduled

services, with another 50 being added for general aviation services. Over the next 12

months, Kingfisher Airlines is expected to be the most aggressive in terms of fleet

expansion.

Orders placed by Indian carriers:

CUSTOMERS AIRBUS BOEING TOTAL

Air India 11 8 19

Indian Airline 84 0 84

Jet Airways 10 22 32



Kingfisher 56 0 56

Deccan aviation 62 0 62

Go Air 11 0 11

Indigo 100 0 100

Air Sahara 0 10 10

CONDUCIVE POLICY ENVIRONMENT

The government is attempting to reform the domestic aviation industry, as it assumes

increasing importance in a globally connected world. Aviation contributes to nearly

95% of all international arrivals and nearly 40% of EXIM trade by value. Increased

air connectivity is therefore vital for trade, business and tourism. As per conservative

estimate made by International Civil Aviation Organization (ICAO) planners, for

every Rs100 spent on air transport, the expenditure triggers Rs300- 350 to be spent

additionally in the economy. This presents ample opportunity for the aviation industry

to participate in India’s rapid economic progress. In view of such a possibility, the

government has put in place certain policy framework, under which it has given

ample leeway to airlines to grow. The current guidelines stipulate:

1. 100% FDI permissible for existing airports; FIPB approval required for FDI

beyond 74%

2. 100% FDI under automatic route is permissible for Greenfield airports

3. 49% FDI is permissible in domestic airlines under the automatic route, but not

by foreign airline operators

4. 100% equity ownership by Non-Resident Indians (NRIs) permitted

5. AAI Act amended to provide legal framework for airport privatization

6. 100% tax exemption for airport projects for 10 years

7. The government's 'open sky' policy and rapid growth in air traffic have

resulted in the entry of several new privately-owned airlines and increased

frequency/flights for international airlines.

INFRASTRUCTURE TRAVAILS WILL REDUCE



The ministry of civil aviation has decided to modernize and upgrade 35 non-metro

airports across India. Leading airport developers are readying to participate in bids to

win the right to construct and operate commercial property at these airports.

Apart from this, the government is also planning to build Greenfield airports at

Mumbai (Maharashtra), Kannur (Kerala), Hassan and Gulbarga (Karnataka),

Ludhiana (Punjab), Greater Noida, Paykong (Sikkim), Cheithu (Nagaland) and Chaka

(near Pune, Maharashtra).

The government estimates that the country will need US$400m in private investment

in these 35 non-metro airports, while the state-run Airports Authority of India (AAI)

will also have to spend an equal amount. The move to modernize and the setting up of

new airports would reduce congestion prevalent in existing airports. This would lead

to reduction in operational cost of carriers (due to lesser fuel consumption) as well as

on-time performance by players.

POLICY AND REGULATORY ENVIRONMENT

STATE REGULATIONS

The presence of an Independent Infrastructure Development Act enables a state to set

up industrial areas, develop PPP (public private partnership) projects, fund initiatives

at a state level and also leverage concession benefits to private development towards

the provision of industrial infrastructure all over the state for planned and systematic

industrial development. A few states have actively leveraged their state infrastructure

acts to facilitate airport expansion. The Government of Karnataka aims to achieve a

high growth in the infrastructure sector by encouraging private sector investment and

upgrading technology. PPP are to be considered for both new infrastructure projects

and in managing existing infrastructure projects. The exception can be projects in

backward areas, or projects with high social relevance, but which are prima-facie not

financially viable. The Orissa government recognizes the importance of the PPP



approach for the development of infrastructure and has developed a policy to put an

effective framework to facilitate PPPs in place. A High Level Clearance Authority

(HLCA) under the chairmanship of Chief Minister shall be constituted for all

infrastructure projects being undertaken via PPP. Other states which have shown a

keen interest in involving the private sector for development of airport infrastructure

include Andhra Pradesh, Gujarat, Punjab, Rajasthan, UP and Maharashtra. Looking at

the growth of the sector the policies are also changing to promote the growth of the

sector. Some of the key developments in the civil aviation are as followed:

1. Opening of India – Gulf route

2. Overseas route

3. FDI

FINANCING OF AIRPORT

Modernization and development of airports through the PPP route and ancillary

activities have seen significant interest from the private players. Various Brownfield

and Greenfield airports are currently under various stages of consideration. The

development of these airports requires a considerable amount of investment and

private players seek these funds from several options at their disposal. The key

financing trends that were observed in this sector are:

1. Over the last two years we have seen a number of infrastructure markets

accessing foreign currency loans with the intention of accessing low interest

rate funds. However, this could be a shortsighted approach as it exposes the

project to significant foreign currency risk which in the current environment is

cause of worry. Nonetheless, airports projects are better suited than other

infrastructure projects to manage this risk given that a portion of their

revenues is in foreign currency. Going forward the airport sector will continue

to see a mix of domestic and foreign currency borrowing in its financing plans.



2. Future airport financing projects shall have to manage their return expectations

arising from city side development programme. For the new projects

expected to arise due to the 35 non-metro projects, a note of caution about the

overall return projection is necessary for those being delivered through city

side development. In line with the current downward movement in real estate

prices across the board, this city side development plan will be under pressure

and sponsors can find it to be limiting their fund raising exercise.

AIRPORT SEZ

In the context of a contemporary Greenfield airport, a SEZ plays a pivotal role. With

the metamorphosis of an airport from a passenger hub to an integrated logistics hub,

an airport-based SEZ can sometimes be a crucial value driver. Apart from an airport

based SEZ, an SEZ near the airport can also create significant value. In a country like

India where efficient locality connectivity is still a pipedream due to inadequate road

and rail infrastructure, an airport, even though expensive, can act as a crucial

connectivity bridge for the locality SEZs. SEZs by nature are duty free enclaves

designed to promote exports from India. In general, the SEZ law prescribes minimum

area requirements for an area to be designated as an SEZ. For a comprehensive multi-

product SEZ that will encompass all products and services, the minimum area

requirement is 1000 hectares. However, for airport based multiproduct SEZs (i.e.

SEZs which are part of an airport), the area requirement has been relaxed to 100

hectares of contiguous land. By law, a multiproduct SEZ could encompass almost all

products and services. However, given the fact that land today is a precious resource,

allocation of the available land to different sectors (and therefore development of

required facilities and infrastructure) is of paramount importance. Furthermore

industries, which would not be impacted by air freight cost, should be planned in the

SEZ. Given these airport-based SEZs could be most suitable for industries such as

high value precision engineering, warehousing, perishable products' processing,

import-export processing and packaging, airport services, high value knowledge based

industries such as research and development etc.

Key fiscal benefits and provisions:



i. Income tax exemption for a period of ten years out of a block of 15 years for

the developer of an airport based SEZ

ii. Income tax exemption for a period of 15 years on a graded basis for the

entrepreneurs ('units') setting up operations in the SEZ

iii. Customs duty and excise duty exemption on capital equipments, raw materials

and inputs brought into the SEZ

iv. Service tax exemption on input services provided in respect of the SEZ

v. Other state and local tax exemptions

vi. Units need to be net foreign exchange positive over a stipulated period

vii. Domestic sale from the SEZ in India treated as imports

Initiative of such kind taken by the government will surely boost the morale of the

companies in the industry as they are already hit the financial recession, and secondly

the ever fluctuating crude oil price , due to which their loss are not yet covered even

though the price is below $40. A SEZ would help the industry to grow and also to

recover from the losses which the industry players are facing in the present scenario.

TAXATION

The Income-tax Act, 1961 provides a tax holiday for the infrastructure facilities

(including airports) for a period of ten year to attract investors in this space. The

airport operators are also eligible to claim concessional rate of customs duty in case of

selected items specified under the Customs Act. The term 'new infrastructure facility'

would in common parlance refer to a Greenfield project. Therefore the issue for

consideration is substantial modernization; up-gradation, redevelopment etc would be

eligible for the deduction referred to above. This is especially relevant in the case of

airports as substantial investments are being made towards up-gradation of these

facilities. Clarity is needed regarding whether in the case of expansion of the

infrastructure facility, the eligibility for claiming tax holiday period for the expanded

portion should be combined with the existing facility or should it be looked on a

standalone basis for claiming the tax holiday. The tax holiday is in respect of income

derived by an undertaking from the business of developing and operating an airport.



The term 'derived from' has been interpreted by the courts to mean a direct nexus with

the eligible business. Typically, the revenue model of the airports comprises of a very

substantial part of non-operational revenues comprising of real estate development

and retail concessions. The Non operational income for tax holiday also needs to be

clarified especially in light of the intense litigation on this issue in the context of

various eligible businesses.

THE ROAD MAP AHEADSkyrocketing aviation turbine fuel (ATF or jet fuel) prices have hit the airline industry

hard and they are now forced to find ways to cut costs, and also to increase ticket

fares.

In fact, there has been a 20% drop in the weekly flight schedule - from 10,922 flights

a week in March 2008 to 8,778 flights this month. That’s not all; Even the passenger

growth witnessed a decline by 12% last month as compared to July 2007. According

to reports, domestic airlines are facing an estimated loss of $2 billion in fiscal 2009,

while international carriers may post a combined loss of $6.1 billion for the year.

Domestic airlines are trying to rationalize the capacity deployed on various routes.

The reduction in the flight schedule is clear fallout of this exercise. India’s loss-

making aviation sector should be ready to accept rising ATF prices as a way of life at

a time when global oil prices are touching record highs. Instead of exiting the sector,

the carriers should get their act together and begin getting leaner so that they can rake

in profits.

In fact, to counter this threat, airlines have kicked into survival mode. Deccan is

cutting back on capacity induction, rationalizing routes and reviewing the need to

deploy additional capacity on certain sectors. Another major player Kingfisher is

canceling deliveries of new aircraft due this year. Spice Jet has cut 17 flights on

various routes and plans to sub-lease its six Boeing aircraft due for delivery this year.

“Most airlines, which are suffering losses in millions of dollars every day, are now

waking up to this reality and are trying different measures to counter the spiraling fuel

prices. The airlines which will survive this period of high oil prices are those with fuel



efficient aircraft, substantial cash balances, low net debt and capable management

who can increase efficiency”.

Globally, in the past couple of months alone, ATF has caused 24 carriers to go

bankrupt. Over the past 60 years, the industry has made $11.5 trillion in revenues, but

$32 billion in profits - a margin of just 0.3%. Since 2001, fuel efficiency improved

19% and non-fuel unit costs dropped 18%. The International Air Transport

Association (IATA) has forecast a loss of $2.3 billion for the global airline industry in

2008 and warned that this year’s losses could even reach $6 billion.

Owing to the large number of participants and the scale of investment involved airport

development in India faces several challenges. The industry is striving to bring its

facilities and standards at par with international benchmarks so that it can compete on

a global platform. With consolidation in the domestic skies cheaper fares almost

vanished being offered by budget airlines such as Spice Jet, IndiGo and Deccan

almost vanished. Mounting losses mainly on account of high fuel price and excess

capacity also forced airlines to keep tariff high. Air-carriers also started rationalizing

their operations by reducing capacity.

Financial health of domestic carriers has, however, started improving now as fuel

prices have come down nearly 54% since September last year. After initial resistance

to bring down fare, airlines have now started passing on the benefits of lower fuel

price to customers. National carrier Air India slashed its basic fare in the range of

35% to 82% across various domestic sectors. Other airlines such as Kingfisher, Spice

Jet and IndiGo also followed suit later. But airlines are saying that people are not

flying even though ticket prices have been cut drastically. Business sentiment is very

down due to a downturn in the economy. Mumbai terror attack has also affected the

traffic to some extent.

Aviation industry other then facing the problem of the fluctuating oil prices have

many other challenges which the industry need to sort it out problem such as

economic slowdown, skilled manpower shortage, development gap in infrastructure

etc. This are the obstacle aviation industry is going to face in the near future.



The airport industry in India currently has significant potential as the development of

airports opens new avenues for participation. Several opportunities exist for players to

successfully participate in this development. In accordance with the policy of

liberalization in the civil aviation sector and with a view to attract more foreign

passengers, the Government has adopted as overall liberal approach in the matter of

grant of traffic rights under bilateral agreements with various foreign countries. This

would lead to more flights and better connectivity from foreign countries to India and

also provide more commercial opportunities for all operating carriers. Up-gradation

and modernization of the non-metro airports offers significant opportunity for

participation by the private players and the interest of the bidders. Greenfield airports

offer substantial scope for participation by the private players through the PPP route

right from the development of the airports to its maintenance and operations. Players

have shown a significant interest in being a part of these projects.

Indian aviation industry is going to have a better connectivity as many airports are

expected to get on the air map and airlines’ plans to become full-fledged international

carriers. New LCC startups are likely to dip the airfares. But, the soaring fuel prices

and the airports, whose committed expansion projects have no time frame for

completion, might go against the growth. Meanwhile, the government is evaluating

various options including dismantling the monopoly of public sector oil companies in

the supply of turbine fuel to rationalize the fuel prices. It has also proposed a uniform

sales tax at 4% across the states to bring down the aviation fuel cost in the domestic

market.



Research Objective and

Methodology

Research Objective:

To understand the change in people’s perception in travelling by

air.

To analyze the changing trends in air travel.

To understand what people think of LCC’s

To compare regular and LCC’s.

To know which is the most preferred mode.

Hypothesis:



The advent of LCC’s has changed the way air travel is perceived in

India.

Need and Importance of the Study:

This topic needs to be studied because there is a changing trend in

the way people are travelling in India. It is necessary to understand

how people perceive travelling by low cost carriers.

Research methodology:

This research would be a Quantitative research and it would be

studied through questionnaires and interviews. These

questionnaires would be given to the people that travel by air and

people at the airport will be interviewed.

Sampling:

Samples are used in research projects for one or both of the

objectives estimation and testing of hypothesis .It makes it easier to

form inferences about a population on the basis of information from

a sample .There are two basic requirements for the sampling

procedure to fulfil - a sample must be representative and it must be

adequate.

Sample size:

At the inception of this study, it was envisaged that about 200 – 300

individuals will be chosen would respond to the questionnaires and

interviews. The sample size proved to be adequate for the research

and respondents answered satisfactorily.



Data- Collection Method:

Data has been collected from primary sources via the questionnaire

method.

The questionnaire method has been selected for its versatility,

objectivity, speed and lower cost. The questionnaire designed is

structured and non-disguised type. In other words it has a formal list

of questions that asks the respondent about the concerned issues

directly.

The questions are formulated to address the specific requirement of

the research objectives. A combination of open-ended, multiple

choice and dichotomous questions have been used.

ANALYSIS

Chart 1.



Analysis – The Target audience was targeted in sync. All types of income groups

were a part of research. It has been seen that professionals and people in the service

category seem to travel more than the other categories.

Chart 2.


Self Employed 25%

Student 20%

Professional 25%

others30%

By profession you are ?


Analysis – Research showed that on an average people travel every 3 months. But

that is different for professionals and service class individuals who tend to travel more

frequently than that.

Chart 3.


Once a week 10%

Once a month 15%

Quarterly 30%

Once in six months

10%

Occasionally 35%

How frequently do you travel by air?


Analysis – Nearly one third of the individuals travel by economy class, as there is no

option of Business class in a low cost carrier airline. The general mindset of traveling

in luxury has not gripped the Indian public’s mind.

Chart 4.


Economy63%

Business37%

Do you fly by economy or business

class?


Analysis – Majority of the working individuals said they mostly travel for business

reasons as well as personal reasons because of their high disposable income. The

house wife and the students obviously traveled for personal reasons.

Chart 5.


Personal 25%

Work 30%

Both45%

Do you travel by air for personal or business reasons


Analysis – The Indian Traveler is clearly value driven and wants the most out of

every rupee. Even the service class and the self employed individuals answered in

favour of PRICE being the dominant factors when it comes to choice of various

airline services. Brand loyalty was also one factor that the consumers considered.

Chart 6.


4

70

10 6 10

0

10

20

30

40

50

60

70

80

Advertisements andhoardings

Prices In flight Services Brand Loyalty Connectivity

Which of these factors influence you the most to

purchase a airline services


Analysis – There has clearly been a shift in the way people book their ticket now-a-

days. Gone are the days of the travel agent being flocked by customers. Online

booking services and Phone booking are the preferred choice in today’s world.

Chart 7.


Travel Agents32%

Online Booking43%

Phone Booking11%

Over the Counter

14%

How do you usually prefer to book your air tickets?


Analysis – Although all the people chosen were air travelers, some clearly drew a line

as to when they opt to travel by air and when by rail. On the other hand many also

said that the introduction of LCC’s is a welcome break to them from the tiresome and

lengthy journeys by rail.

Chart 8.


Yes62%

No38%

Has the introduction of Low Cost

Carriers ever influence you to travel

by air instead of the Railways?


Analysis – Although, respondents felt that the airline fares have gone up over the last

2 years, they did not seem to complain. They realized that cost of fuel has increased

and the burden of taxation has also increased, but a fall in fares will be welcomed.

CONCLUSION


Yes80%

No20%

Do you think that airfares have increased significantly in the last 2 –

3 years?


The Indian economy has been booming over the past few years this is because of the

rising foreign exchange reserves, increasing inflow from FDI and FII due to which the

growth rate reached to almost 9 % a year for the last three years. However this

buoyancy was curbed by rising oil and commodity prices which led to slowdown the

growth rate with inflation touching at the sky height. Due to this the outlook has

changed from overjoyed to caution.

The aviation Industry has been mirroring the trends in the economy. Propelled by the

growth of the economy, the sector has experienced an extraordinary growth in the last

few years. The year 2007 can be considered as the good year for the sector as the

growth was steady but the year 2008 numbers suggest the slowdown of the growth.

The growth in the economy has led to rising passenger and cargo services however,

underinvestment in the Indian airports network has resulted in massive infrastructure

gaps, leaving several expectations unfulfilled.

Owing to the large number of participants and the scale of the investment involved

airport development in India faces several challenges. The industry is striving to bring

its facilities and standard at par with international benchmark. But the interference

from different states hampers the growth; Numbers of state owned airports are not

operational or are operational only for limited purposes. The next is the volatility of

regulatory body, and the problem of economic slowdown. This is some of the

challenges which the industry would face and affect the growth of the industry.

Food and in-flight entertainment are irrelevant; on-time performance and flight safety

are hygiene factors. Price and availability are thus the only factors that will induce

travellers to fly with one carrier over the other. In sum, the player with the lowest

costs and the strongest balance sheet will endure over the long term. Supply had

created its own demand as fares were brought down to fill seats. However, with the

substantial increase in fuel costs (from 1st Jan 2008, aviation turbine fuel has

increased by 43%), airlines have increased fares. Airlines now face an impossible task

to fill seats while increasing fares. Train fares have remained almost static while air

fares have increased (on account of the fuel surcharge).Thus the differential between

LCCs and rail fares have increased.

Paradox of higher fares and higher discount : The differentials between full service

and low-cost carrier fares continue to narrow. Essentially, FSCs have cut base fares



(and increased fuel surcharges) while LCCs have hiked surcharges. Amid this, there

are some carriers that are now offering base fares as low as Rs 0- 500 on certain

routes. This is an attempt to buttress short-term cash flows, while sacrificing medium-

term profitability.

Off the Frying Pan but into the Fire: The current state of affairs of the aviation

industry can be best described as "out of the frying pan but into the fire" though the

dwindling crude oil prices as 2008 draws to a close is a blessing indeed but the

looming recession is another "headache" to deal with. Airlines are forecast to incur

US$5bn in losses this year and thanks to the slide in crude oil prices as the losses are

expected to decline to US$2.5bn next year. "Recession is now the biggest threat to

airlines' profitability". Financial health of domestic carriers has, however, started

improving now as fuel prices have come down nearly 54% since September last year.

After initial resistance to bring down fare, airlines have now started passing on the

benefits of lower fuel price to customers. National carrier like Air India and jet

airways slashed its basic fare in the range of 35% to 82% across various domestic

sectors. Other airlines such as Kingfisher, Spice Jet and IndiGo also followed suit

later.

In terms of the number of flights Jet Airways secures the top position with 8,168

flights operating till June 2008. Indian Airlines is in second position with 7,562

flights. Sahara (3,225 flights), Air Deccan (2,889 flights), Spice Jet (483 flights) and

Kingfisher Airlines (267 flights) come thereafter in the list of domestic and national

carrier operators.

Indian aviation industry which is going through tough period firstly with the oil prices

at the sky height and now when it has reduced by around 65% at that time now the

industry is facing the problem of global recession. In this battle of survivor of the

fittest, I think JET AIRWAYS would win this battle because of its earlier capacity to

bear the crude oil prices and other reasons like their healthy balance sheet, expansion

of their fleets, Introduction of the low cost carrier (Jetlite) and lastly their services.

RECOMMENDATIONS



Concrete actions towards long term sustainability should be taken.

Unnecessary mergers and takeovers should be discouraged and the Government

should not give its blessings to such moves as they have proven to be disastrous in the

long run to both the parties.

The Airlines should not be over burdened with high taxation, as they have to already

bear the brunt of a volatile oil market.

Air travel should be encouraged and better infrastructure should be provided not only

to metro cities but also to Tier 2 & 3 cities.

Air cargo seems to be an upcoming and profitable business and hence should be

properly exploited.

Indian carriers have to pay a hefty sum to foreign pilots who work for them. There are

not many good pilot training academies in India. Hence the government with the joint

efforts of the Airlines should create an alternative solution to produce more home

grown talent.

Crude oil price volatility is also one of the factors that deter smooth and profitable

functioning of an airline, hence the government should hedge oil contracts when they

are on a sustainable level t maintain stability.

Code sharing should be encouraged between airlines to enable minimal wastage of

seats on the not so sought after routes.

Newer marketing schemes should develop to maximize revenue and encourage the

public to divert from railways and roadways to airways as their preferred choice of

travel.

LCC as a system of low frill travelling is proving to be an effective one. There are

problems that they are facing, but the ministry should give special benefits to them to

ensure that they can work with freedom and flexibility.



Domestic airline do not operate on a full throttle basis in the night hours, special night

fares should be encouraged so that a new segment is developed for those who prefer

travel at odd timings but at highly affordable rates.

Lastly, the long term sustainability of this industry depends on the joint efforts of the

players and the ministry. They should work together to tackle the problems that this

industry faces and work towards a better and sustainable system of working.

REFERENCES



Books and Journals

Open Sky Magazine

The Sunday Indian

Business & Economy

Aviation Today

Simply Fly – Captain Gopinath

Websites

Economictimes.com

Dgca.gov

Indianaviationnews.net

Thirtythousandfeet.com

APPENDICES



Questionnaire

1. By profession you are

a) Self Employed

b) Student

c) Salaried

d) If Other ______________

2. How frequently do you travel by air?

a) Once a week

b) Once a month

c) Quarterly

d) Once in six months

e) Occasionally

3. Do you travel by air for personal or business reasons?

Personal Work Both

4. Do you fly by economy or first class?

Economy First

5. Which of these factors influence you the most to purchase a airline services

(RANK the factors from 1-5. 1 being the best rank & 5 being the worst).

Advertisements and hoardings

Prices

In-flight Service

Brand loyalty to Airline

Connectivity

6. How do you usually prefer to book your air tickets?

Travel Agents Online Phone bookings



7. Has the introduction of Low Cost Carriers ever influence you to travel by air

instead of the Railways?

Yes No

8. Do you think that airfares have increased significantly in the last 2 – 3 years?

Yes No

RESPONSE SHEETS



Response Sheet: 1

Name: Vinay Dingwaney

ID NO: IIPM/SS/08-10/MUM/MKT/41

Questionnaire: In progress, will be given in the next response.

Date when the Guide was consulted: 10th Jan 2010

The outcome of the discussion:

Had a detailed discussion as to how things will have to gone

around

To collect articles and references and which sources have to be

used

The Progress of the Thesis:

Collecting more articles relating to the topic and forming a

questionnaire.



Response Sheet: 2



Questionnaire: Is roughly prepared, but some changes will

have to be made

Date when the Guide was consulted: 15th Jan 2010


The changes that have to be made in the questionnaire.


Forming the final questionnaire.



Response Sheet No: 3



Questionnaire:

1. By profession you are

e) Self Employed

f) Student

g) Salaried

h) Other

2. How frequently do you travel by air?

f) Once a week

g) Once a month

h) Quarterly

i) Once in six months

j) Occasionally

3. Do you travel by air for personal or business reasons?

Personal Work Both

4. Do you fly by economy or first class?

Economy First

5. Which of these factors influence you the most to purchase a airline services

(RANK the factors from 1-5. 1 being the best rank & 5 being the worst).

Advertisements and hoardings



Prices

In-flight Service

Brand loyalty to Airline

Connectivity

6. How do you usually prefer to book your air tickets?

Travel Agents Online Phone bookings

7. Has the introduction of Low Cost Carriers ever influence you to travel by air

instead of the Railways?

Yes No

8. Do you think that airfares have increased significantly in the last 2 – 3 years?

Yes No

Date when the Guide was consulted: 1st Feb 2010


The final questionnaire was approved.


Will start talking to candidates and asking about their view on

the topic.






Questionnaire: Ready and research is being carried out

Date when the Guide was consulted: 24th Feb 2010


The final questionnaire is ready and approved.

Questionnaire is given to various travellers and has also been

taken to the domestic airport.


Collecting more articles on the topic and putting them all

together.






Questionnaire: As given in the 3rd Response sheet.

Date when the Guide was consulted: 25th March 2010


The Questionnaires are taken and the analysis has been started.

Project is on track.


The final project report is in progress.






Questionnaire: As given in the 3rd Response sheet.

Date when the Guide was consulted: 7th April 2010


The analysis is done.

The final copy is ready and approved by madam.


The final project report printing is to be done.


thesis - finally[1]

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