India's economy has been growing at a rate of around 8% in past three years. The total passenger traffic was only 116 million as on March 31, 20014, amounting to only 0. Trips per annum, per capita. Air cargo has not yet been fully tapped in the Indian markets.
India's economy has been growing at a rate of around 8% in past three years. The total passenger traffic was only 116 million as on March 31, 20014, amounting to only 0. Trips per annum, per capita. Air cargo has not yet been fully tapped in the Indian markets.
India's economy has been growing at a rate of around 8% in past three years. The total passenger traffic was only 116 million as on March 31, 20014, amounting to only 0. Trips per annum, per capita. Air cargo has not yet been fully tapped in the Indian markets.
Strengths 1. Booming economy: Indian economy, which has been growing at a rate of around 8% in past three years, has a direct cause-effect relationship with the logistics industry. The industrial growth and growing service sector are also fuelling the logistics demand, which drives the demand for aviation services. Strong economy translates to strong logistics demand. 2. Rising income levels: Due to the rise in income levels, the disposable income is higher. This is expected to enhance the number of travellers, flying for various purposes like business, tourism and leisure. 3. Growing tourism: Due to growth in tourism, there has been an increase in number of the international and domestic passengers. India, with its numerous tourist destinations, is attractive to both domestic and international tourists. The World Travel and Trade Council estimated that Indian tourism demand has continued to grow at an average of 8.8% between 2004 and 2013, making India the world's third fastest growing tourist market. This complements the growth of the aviation industry. Weaknesses 1. Underpenetrated market: The total passenger traffic was only 116 million as on March 31, 20014, amounting to only 0.11 trips per annum, per capita, when compared with developed nations such as the US (2.02 trips per annum, per capita). It is also a matter of concern that the trunk routes (major routes) are not fully exploited. One of the reasons for inability to realise the full potential of the trunk routes is the prevalence of unfair competition among players. 2. Untapped Air Cargo Market: Air cargo has not yet been fully tapped in the Indian markets. Although ranked among top 30 major air cargo transporters, Indias volume of 1.71 million tonnes in 20013-14 is insignificant compared with the US and China. However, it is expected that large number of players will have dedicated fleets for cargo operations in the future. 3. Infrastructural constraints: The infrastructure development has not kept pace with the growth in aviation services sector leading to a bottleneck. Airport and air traffic control (ATC) infrastructure is inadequate to support growth. Almost all airports have limited terminal capacity which results in congestion. Most of airports lack modern
ground-handling facilities, night-landing systems or cargo handling facilities which
stems from the lack of space, lack of facilities, lack of cleanliness, lack of runway space, lack of aircraft parking space, poor service, inordinate delays etc. and all these form a part of airport infrastructure. Opportunities 1. Expecting investments: Aviation industry is a capital-intensive industry. Government of Indias efforts to bring in private players in aviation infrastructure development, air transportation services, allowing FDI in areas like Greenfield airport development and MRO establishment will bring in more capital. Indian aviation industry has received an FDI worth Rs.8.86 billion from April 2000 to March 2008, which forms 0.36% of total FDI received by India during the period. Huge investments are expected to take place in aviation sector in the near future. 2. Phenomenal growth of the industry: Aviation industry has witnessed a CAGR of around 19.14% in terms of RPK from 2007-08 to 2013-14; the cargo traffic also recorded a CAGR of 9.83% during the period. The industry is expected to maintain its growth pace, amounting to passenger traffic of 289.92 million and cargo traffic of 2.77 million in 2013-14. The ongoing expansion plan of airliners to meet this demand is indeed a big opportunity. 3. Mergers and acquisitions: Recent mergers and acquisitions in Indian civil aviation industry are expected to bring in the benefits of consolidation. The recent mergers and acquisitions are Jet Airways-Air Sahara and Air India-Indian Airlines. These moves are aimed at resources optimisation and attaining the economies of scale. These developments would contain the losses and revive the prospects of profitability. Threats 1. Shortage of trained pilots and other skilled personnel: There is a shortage of trained pilots, co-pilots and ground staff, which is severely limiting the growth prospects. Indian civil aviation industry is estimated to require 5,000 additional pilots for scheduled operations and 1,000 pilots for non-scheduled and private operations. The industry falls short of around 1,000 qualified pilots, particularly for wide-bodied passenger jetliners. Indian flying schools are currently producing 150 pilots annually, which is far behind the requirement. The shortage of trained and skilled human resources leads to cut-throat competition for employees, which in turn, is driving the
wages to unsustainable levels. Moreover, the industry is unable to retain talented
employees. 2. Shortage of airport facilities: The shortage of airport facilities like parking bays, air traffic control facilities and take-off and landing slots are severe growth limiting factors, considering the present growth of the industry. 3. Spiralling fuel prices: Due to heavy taxation on ATF, its price is around 80% higher compared with ATF in countries like Malaysia and Singapore. The price of ATF is Rs. 70,000 per kilo litre as of June 2008 compared with Rs. 36,000 per kilo litre in January 2006. As ATF forms major cost component of the airlines, the continually increasing prices further constrain the industry. 4. Declining yields: LCCs commanded a market share of around 39% in 2014. The legacy carriers are being forced to match LCC fares during a time of escalating costs, in order to survive in price-sensitive Indian market. Increasing growth prospects have attracted and are likely to attract more players, which will lead to more competition. All this has resulted in lower returns for all operators.[11]