Aviation industry

The aviation industry in India is one of those sectors that saw a constant pace of growth among the other industries in the world over the past many years. The open sky policy of the government has helped a lot of overseas players entering the aviation market in India. From then, it has only been growing in terms of players and the number of aircrafts. At present, private airlines account for around 75% portion of the domestic aviation market. The 9th largest aviation market in the world is India. Taking the help of the statistics from the Ministry of Civil Aviation, approximately 29.8 million passengers traveled to/from India in 2008, showing a surge of 30% from 2007. The prediction stated that international passengers will touch 50 million by 2015. More opportunities in the aviation industry in India are likely to make way for about 69 foreign airlines from 49 countries. Growth of Indian Aviation industry The Indian Civil Aviation market grew at a CAGR of 18%, being valued round US$ 5.6 billion in 2008. Further statistics revealed that the air traffic in August 2009 was a double digit figure. The domestic airliners flew 3.67 million passengers in August 2009, as against 2.92 million in the corresponding period of 2007, up by 26%. The Centre for Asia Pacific Aviation (CAPA) has estimated that the domestic traffic will go up by 25% to 30% till 2010 along with a surge in the international traffic by 15%. There would be more than 100 million passengers by 2010. Then again by 2020, Indian airports will in all probability handle over 100 million passengers every year. The investment plans to the tune of US$ 9 billion has been made by the Aviation Ministry for modernizing the existing airports by 2010. In terms of domestic passengers' volume, US have always been the leader with followers in the league like China, Japan and India. The number of domestic flights went up by 69% from 2005 to 2008, with the domestic aviation sector growing at 9-10%.
S.W.O.T Analysis of the Industry

Key Attractions:

o o o o

Low entry barrier Attraction of foreign shores Foreign equity allowed Rising income levels and demographic profile

Key Problems:

o o o o

Crippling Oil Shock Absence to Institutionalized Funding Acute shortage of trained Pilots, severely limiting growth prospects. Unplanned location of Airports.

o o o o o o o

Key Developments that may Influence the future: Average growth of about 25%-30% Air Freight segment is growing faster than the Passengers segment. Duties slashed on ATF and IATT. Pilot license applications have tripled. Expecting investments - US $30 billion by 2012 and about US $50 billion by 2015. Expected Market Size is projected to be about 50 million by 2010.

Market share of key players in the Indian aviation sector Name of the players Kingfisher Airlines and Kingfisher Red (previously Air Deccan) Jet Airways and Jet Lite (previously Air Sahara) Air India and Indian (previously Indian Airlines) IndiGo SpiceJet GoAir Paramount Airways MDLR Airlines Market Share 28% 25% 16% 14% 12% 3% 2% 0.004%

Future of Airlines industry in India The challenges of the Indian aviation industry are cited below:

Passenger traffic is estimated to grow at a CAGR of over 15% in the coming few years. The Ministry of Civil Aviation would handle around 280 million passengers by 2020. US$ 110 billion investment is envisaged till 2020 with US$ 80 billion solely for new aircraft and US$ 30 billion for developing the airport infrastructure.

Industry is divided in to two groups1) High cost or premium airlines 2) Low cost or budget airlines

Low cost or budget Airlines.

Main players in the low cost airlines segment are

Indigo: Indigo is a utilitarian low-price domestic airline which offers feasible flying alternatives for millions. The airline was facilitated by the Air Passengers Association of India (APAI) as the Best Low-Fare Carrier in India for the year 2007. Indigo has 120 daily departures and a fleet of 19 Airbus A320. The airline covers 17 destinations namely, Agartala, Bangalore, Bhubaneshwar, Ahmedabad, Delhi, Chennai, Guwahati, Hyderabad, Goa, Imphal, Kolkata, Mumbai, Vadodara, etc.

Go Air Airlines: Like SpiceJet, a Go Air airline is also a low price airline endorsed by the Wadia group. It was inaugurated in Mumbai in June 2004. It operates in 11 cities with 61 daily departures. It has started its functions in Ahmedabad, Chennai, Bangalore, Coimbatore, Goa, Cochin, Jaipur, Mumbai, Pune, Delhi, Srinagar, etc.

S.W.O.T Analysis Market Share: 2% Strengths

o o

LCC promoted by The Wadia Group GoAir FreeFares

Weaknesses

o o o

Small network : flights in southern & western India with the first nine A320s Small Fleet Structure Small Load Efficiency compared to Air Deccan & Spice Jet

Opportunities

o o o

Future Fleet expansion will increase its Market Share. Flight network extension Attractive fares and up to date quality service will generate a huge customer base comprising Frequent Flyers.

Threats

o o o o

High Attrition rate The Threat of New Entrants into (LCC) segment esp. GoAir, Indigo and Jagson Airlines High Risk Perception

Kingfisher Red: It is the one and only 5-star airline in India which offers excellent first class service on domestic itineraries also. A part of UB group, Kingfisher Airlines has received 30 awards for its novelty and customer satisfaction. After its tie-up with Deccan, the airline covers 64 cities and has 484 daily departures.

S.W.O.T Analysis Market Share:21.2% Strengths

o o o o o

Highest load efficiency. Flies to destinations in the Hinterland A 'Lean-and-Mean' approach to staffing Expanded operations into Sri Lanka Leader in LCC segment, first to target the Middle Class Weaknesses

o o o o

Focuses almost exclusive on south Indian markets. Image plagued by frequent breakdowns and near misses Very limited advertising Already reached the threshold of cost efficiency

Opportunities

o o o o

Extensive network to exploit the booming Air cargo business. Plenty of scope for expansion of operations Could start Contractual Employment Strengthen its position in the Chartered Flight segment. Threats

o o o o

High Attrition rate The Threat of New Entrants into (LCC) segment esp GoAir, Spice Jet, Indigo and Jagson Airlines High Risk Perception

Spice Jet: Spice Jet is basically a low cost airline which incorporates many Boeing 737-800 airplanes in its fleet. It covers 14 destinations in India.

S.W.O.T Analysis Market Share: 6%

Strengths

o o o o

Entered with Rs. 99 fares for first 99 days Offering low everyday spicey fares Aim: Compete with Indian Railways AC sgment Fleet of 6 Boeing 737-800 with 189 seats. Weaknesses

o o o

Small fleet structure Concentrating at only North-West-South Indian Sectors Small Load Efficiency compared to Air Deccan

Opportunities

o o

Future Fleet expansion will increase its Market Share. Attractive fares and up to date quality service will generate a huge customer base comprising Frequent Flyers.

Threats

o o o o

High Attrition rate The Threat of New Entrants into (LCC) segment esp. GoAir, Indigo and Jagson Airlines High Risk Perception