Aviation

INTRODUCTION
India is one of the fastest growing aviation markets in the world. The Airport Authority of India (AAI)
manages a total of 127 airports in the country, which include 13 international airports, 7 custom
airports, 80 domestic airports and 28 civil enclaves. There are over 450 airports and 1091 registered
aircrafts in the country. The genesis of civil aviation in India goes back to December 1912 when the
first domestic air route between Karachi and Delhi became operational. In the early fifties, all airlines
operating in the country were merged into either Indian Airlines or Air India. and, by virtue of the Air
Corporations Act 1953, this monopoly continued for the next forty years.

The Directorate General of Civil Aviation(DGCA) controlled every aspect of aviation, including granting flying
licenses, pilots, certifying aircrafts for flight and issuing all rules and procedures governing Indian airports
and airspace. Finally, the Airports Authority of India (AAI) was assigned the responsibility of managing all
national and international airports and administering every aspect of air transport operation through the Air
Traffic Control.

Aviation

• Overview
• -Classification of Indian Aviation Industry
• -Challenges For Aviation Industry
• -SWOT Analysis of the Industry
• -Aviation Sector Boom
• SCOPE
• -Growth Prospects of Indian Aviation Sector
• Top Players in Aviation Sector
• Career Opportunities
• -Jobs In Aviation Industry

• Recent Developments

In 1990s, aviation industry in India saw some important changes. The Air Corporations Act was abolished to
end the monopoly of the public sector and private airlines were reintroduced. With the liberalization of the
Indian aviation sector, the industry has witnessed a transformation with the entry of the privately owned full
service airlines and low cost carriers. In 2006, the private carriers accounted for around 75% share of the
domestic aviation market. The sector has also seen a significant increase in the number of domestic air
travel passengers. Some of the factors that have resulted in higher demand for air transport in India include
the growing middle class and their purchasing power, low airfares offered by low cost carriers like Air
Deccan, the growth of the tourism industry in India, increasing outbound travel from India, etc.

Increasing liberalization and deregulation has led to an increase in the number of private players. The
aviation industry comprises of three types of players:
• Full cost carriers
• Low cost carriers (LCC)
• Other start-up airlines

It is a phase of rapid growth in the industry with estimated growth of domestic passenger segment at 50%
per annum.. This has led to intense price competition due to which full service carriers like Jet Airways,
Indian Airlines and Air Sahara are giving discounts of up to 60-70% for certain routes to match the new
entrants' ticket prices. The customer has thus gained enormously as a result of liberalization of the sector.

Top Players

Introduction

Players in Indian aviation industry can be categorized in three groups:

• Public players
• Private players
• Start up players

There are three public players: Air India, Indian Airlines and Alliance Air. The private players include Jet
Airways, Air Sahara,Paramount airways, Go Air Airlines, Kingfisher Airlines, Spice Jet, Air Deccan
and many more. The start up players are those which are planning to enter into the markets. Some of them
are Omega Air, Magic Air, Premier Star Air and MDLR Airlines

Reasons For Boom In Aviation Industry

1.Foreign equity allowed: Foreign equity up to 49 per cent and NRI (Non-Resident Indian)
investment up to 100 per cent is permissible in domestic airlines without any government approval.
However, the government policy bars foreign airlines from taking a stake in a domestic airline
company.

2.Low entry barriers: Nowadays, venture capital of $10 million or less is enough to launch an
airline. Private airlines are known to hire foreign pilots, get expatriates or retired personnel from
the Air Force or PSU airlines in senior management positions. Further, they outsource such
functions as ground handling, check-in, reservation, aircraft maintenance, catering, training,
revenue accounting, IT infrastructure, loyalty and

programme management. Airlines are known to take on contract employees such as cabin crew, ticketing
and check-in agents.

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

4.Rising income levels and demographic profile: Though India's GDP (per capita) at $3,100 is still
very low as compared to the developed country standards, India is shining, at least in metro cities and
urban centres, where IT and BPO industries have made the young generation prosperous.
Demographically, India has the highest percentage of people in age group of 20-50 among its 50 million
strong middle class, with high earning potential. All this contributes for the boost in domestic air travel,
particularly from a low base of 18 million passengers.

5.Untapped potential of India's tourism: Currently India attracts 3.2 million tourists every year,
while China gets 10 times the number. 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 US.

6.Glamor of the airlines: No industry other than film-making industry is as glamorous as the airlines.
Airline tycoons from the last century, like J. R. D. Tata and Howard Hughes, and Sir Richard Branson and Dr.
Vijaya Mallya today, have been idolized. Airlines have an aura of glamour around them, and high net worth
individuals can always toy with the idea of owning an airline. All the above factors seem to have resulted in
a "me too" rush to launch domestic airlines in India.

Challenges For Aviation Industry

The growth in the aviation sector and capacity expansion by carriers have posed challenges to
aviation industry on several fronts. These include shortage of workers and professionals, safety
concerns, declining returns and the lack of accompanying capacity and infrastructure. Moreover, stiff
competition and rising fuel costs are also negatively impacting the industry.

1. Employee shortage: There is clearly a shortage of trained and skilled manpower in the
aviation sector as a consequence of which there is cut-throat competition for employees which, in
turn, is driving wages to unsustainable levels. Moreover, the industry is unable to retain talented
employees.

2. Regional connectivity: One of the biggest challenges facing the aviation sector in India is to be able to
provide regional connectivity. What is hampering the growth of regional connectivity is the lack of airports.

3.Rising fuel prices: As fuel prices have climbed, the inverse relationship between fuel prices and airline
stock prices has been demonstrated. Moreover, the rising fuel prices have led to increase in the air fares.

4.Declining yields: LCCs and other entrants together now command a market share of around 46%.
Legacy carriers are being forced to match LCC fares, during a time of escalating costs. Increasing growth
prospects have attracted & are likely to attract more players, which will lead to more competition. All this
has resulted in lower returns for all operators.
5. Gaps in infrastructure: Airport and air traffic control (ATC) infrastructure is inadequate to support
growth. While a start has been made to upgrade the infrastructure, the results will be visible only after 2 - 3
years.

6. Trunk routes: It is also a matter of concern that the trunk routes, at present, are not fully exploited.
One of the reasons for inability to realize the full potential of the trunk routes is the lack of genuine
competition. The entry of new players would ensure that air fares are brought to realistic levels, as it will
lead to better cost and revenue management, increased productivity and better services. This in turn would
stimulate demand and lead to growth.

7. High input costs: Apart from the above-mentioned factors, the input costs are also high. Some of the
reasons for high input costs are:-
Withholding tax on interest repayments on foreign currency loans for aircraft acquisition. Increasing
manpower costs due to shortage of technical personnel.

SWOT Analysis
Strengths:

1. Growing tourism: Due to growth in tourism, there has been an increase in number of the
international and domestic passengers. The estimated growth of domestic passenger segment is at
50% per annum and growth for international passenger segment is 25%

2. Rising income levels: Due to the rise in income levels, the disposable income is also higher
which are expected to enhance the number of flyers.

Weaknesses:

1.Under penetrated Market : The total passenger traffic was only 50 million as on 31st Dec 2005
amounting to only 0.05 trips per annum as compared to developed nations like United States have 2.02 trips
per annum.

2.Untapped Air Cargo Market: Air cargo market has not yet been fully taped in the Indian markets and
is expected that in the coming years large number of players will have dedicated fleets.

3. Infrastructural constraints: The infrastructure development has not kept pace with the growth in
aviation services sector leading to a bottleneck. Huge investment requirement for physical infrastructure for
airports.

Opportunities:

1.Expecting investments: investment of about US $30 billion will be made.

2.Expected Market Size: Average growth of aviation sector is about 25%-30% and the expected market
size is projected to grow upto100 million by 2010.

Threats Huge investments are expected to take place in aviation sector in near future. It is estimated that
by 2012.

1.Shortage of trained Pilots: There is a shortage of trained pilots, co-pilots and ground staff which is
severely limiting growth prospects.

2.Shortage of Airports: There is a shortage of airport facilities, parking bays,air traffic control facilities
and takeoff and landing slots.

3. High prices: Though enough number of low cost carriers are already existing in the industry, majority of
the population is still not able to fly to other destinations.