CHAPTER 1:

INTRODUCTION
_______________________________________

1
1.1: BACKGROUND OF THE STUDY:

I
t is a very well-known fact that aviation sector not only brings immense benefits to
communities and economies around the globe, but also is a key catalyst to economic
growth, social development and tourism. The Indian transportation system is mainly
partitioned among roads, highways, railways, civil airways and waterways. India was
currently the 3rd aviation market handling
approximately 152 million domestic and 70 million
international passengers before the pandemic
(since2020).

It was on 18th February, 1911 that the first civil

aviation flight in India took place, between

Allahbad and Naini, a distance of 6miles (roughly 9.6kms) when Henri Piquet carried
6500mails on a Humber biplane. At the very beginning the civil aviation was a
government owned industry but the picture changed with time.

In the recent times it has been seen that the civil aviation industry in India has emerged as
one of the fastest growing industries in the country during the last three years. India has
become the third largest domestic aviation market in the world and is expected to overtake
UK to become the third largest air passenger* market by 2024.India’s aviation industry is
largely untapped with huge growth opportunities, considering that air transport is still
expensive for majority of the country’s population.

Currently India has 487airports and airstrips, out of which AAI (Air India Authority)
manages a total of 137 airports which includes 24 International airports, 10 Customs
airports and 103 Domestic airports, as per the AAI. The Airport Authority of India is a
statutory body working under the jurisdiction of Directorate General of Civil Aviation,
Ministry of Civil Aviation, Government of India is responsible for creating, maintaining
and upgrading and managing civil aviation infrastructure in India.

2
1.2: LITERATURE REVIEW :

THE MINT: Rhik Kundu

The Union budget has left India’s civil aviation industry disappointed with executives saying
that the government has failed to address most of its expectations.

The industry has been one of the worst hit by the pandemic and related restrictions on mobility
that has severely hit operations, according to airline executives. This is in addition to high
operating costs, especially due to rising oil prices.

“While the industry was not expecting a financial aid from the government, making provisions
for tax breaks and eligibility for input tax credit would have gone a long way in helping the
sector that has been under huge financial stress due to the pandemic," a senior airline executive
said on the condition of anonymity. “The government hasn’t addressed the concerns of the
sector at all in the budget," the official said.

.. Ratings agency Icra has forecast India's aviation industry to report a net loss of 25,000-26,000₹
crore and its debt levels rising to $1.2 trillion this financial year. About 7,900 employees in the
aviation sector have lost jobs in the last one year.

1.3: OBJECTIVES OF THE STUDY :

Below mentioned are some of the objectives of the study:-

❖ To understand the competitiveness of different airlines in the aviation sector in
India using comparative study
❖ To evaluate short term financial position of airlines in Indian civil aviation sector
❖ To evaluate long term financial position of airlines in Indian civil aviation sector
❖ To know the contribution of aviation sector in India’s GDP

3
1.4: RESEARCH METHODOLOGY :

The methodology adopted in conducting the present study are as follows:

Data collection: The study on Aviation sector in India was done on the basis of
SECONDARY DATA. Secondary data has contributed in a significant way to understand
the scope as well as it helped in developing the conceptual framework. The data has been
collected from various articles and websites for the completion of this project.

Representation of data: We have used simple graphs, pictures and tables to analyze
and to represent the collected data.
Time: Data has been collected for the past 7 years ranging from 2016-17 to 2023-24 and
has been shown in this project.

1.5: LIMITATIONS TO STUDY :

The study has been completed under certain limitations:

❖ Lack of detailed study on this sector due to secondary source prospective.

❖ The accuracy of the data collected.
❖ Some of the data analysis on this sector are kept for its private members only so
presentation of such was not possible.
❖ Lack of data availability on website.

4
CHAPTER 2:
CONCEPTUAL
FRAMEWORK
_______________________________________

5
2.1 REGULATORY FRAMEWORK OF INDIAN CIVIL
AVIATION SECTOR

T he civil aviation structure of India has regularly developed and expanded over the period
of time. With the intentions to advise the market participants, the federal government of
India has expeditiously spoke back to developing needs through making new or amending
the existing regulatory framework. The governing bodies responsible for the safety and security
of civil aviation in India are:

AERA(Airports Economic Regulatory Authority of India): Airports

Economic Regulatory Authority of India (AERA) AERA, was
established by the Government of India vide notification No. GSR
317(E) dated 12th May 2009 as a statutory body of Government of
India. The functions of AERA is to determine the tariff for aeronautical
services taking into consideration the capital expenditure incurred and timely investment in the
improvement of airport facilities. The service provided, its quality and other relevant factor, the
cost for improving efficiency, Economic and viable operation of major airports.
AAI (Airport Authority of India): The Airports Authority of India or
AAI is a statutory body (created through the Airports Authority of India
Act, 1994) working under the jurisdiction of Directorate General of Civil
Aviation, Ministry of Civil Aviation, Government of India is responsible
for creating, upgrading, maintaining and managing civil aviation
infrastructure in India. It provides Communication Navigation
Surveillance / Air Traffic Management services over Indian airspace and
adjoining oceanic areas.
Directorate General of Civil Aviation: The Directorate General of Civil
Aviation (DGCA) is the regulatory body in the field of Civil Aviation,
primarily dealing with safety issues. It is responsible for regulation of air
transport services to/from/within India and for enforcement of civil air
regulations, air safety, airworthiness standards and licensing of pilots,
aircraft maintenance engineers and flight engineers, and conducting
examinations and checks for that purpose.
TERMS :
❖ FUEL COST RATIO:

( Fuel cost / Net Sales)*100

❖ LEASE RENTAL COST:

(Lease rental cost/ Net Sales)*100

6
 ❖ NET PROFIT RATIO:

(Net profit/ Net sales)*100

❖ CAGR:

∑Percentage growth / Number of year

2.2: NATIONAL SCENARIO:

Growth of passenger traffic in India has been impressive. In the period 2023; passengers
carried by domestic airlines were 15.2 crore as compared to 12.5 crore in 2022, showing a
jump of 8.4%, the Directorate General of Civil Aviation (DGAC) stated in its monthly
statement.
Through the National Civil Aviation Policy 2016 (NCAP) the government plans to take flying to
the masses by enhancing affordability and connectivity. It promotes ease of doing business,
deregulation, simplified procedures, and e-governance.
The Regional Connectivity Scheme or UDAN (‘Ude Desh ka Aam Nagrik’) is a vital
component of NCAP 2016. The scheme plans to enhance connectivity to India's unserved and
under-served airports and envisages to make air travel affordable and widespread. Under the
scheme 10 airports were operationalized, 335 routes awarded covering 33 routes and more than
3500000 passengers were flown in 2023. In third phase of UDAN, the civil aviation ministry
introduced seaplane operations from water aerodromes. So far 14 water aerodromes have been
identified in the states of Gujarat, Assam, Telangana, Andhra Pradesh, Andaman and Nicobar
Islands and Lakshadweep.
The civil aviation sector in India has witnessed a series of amendments. The aviation sector has
turned from government sector to private sector in the last few decades. The government adopted
various measures for the expansion of this sector. The luminous changes implemented in this
sector include implementation of Air Corporation Act and Open Sky Policy, Entry of Low Cost
Carriers, Merger and Acquisitions and Privatization of airlines. The airlines have been facing all
these problems from a couple of years, inspite of this ,the sector has been grown up which is
being reflected in the enlarged passengers as well as the potential demand of Indian aviation
sector worldwide. Air traffic has been increasing day by day which is due to the entry of LCCs,

7
better life styles and overall economic development. Therefore, the aviation sector at present is
going through a period of rapid growth.

2.3: GLOBAL SCENARIO :

The civil aviation sector in India is amongst the top 10 international aviation market in the world.
Public-private partnership model was adopted in this industry in the 11th five year
plan(2007-2012).With the help of this model, four international airport projects were
completed. It also gave birth to five Indian carriers on international routes. As per the DGCA
handbook on civil aviation statistics (2016-17) compiled from AAI, there are 137total airports
in India out of which 24 are authorized as international airport, 10 as custom airports and103
as domestic airports. The airports in India are being positioned among the top airports in the
world.
In the near future, the aviation industry in India is going to become an aviation hub. The
reasons behind this tremendous growth are development of tourism industry, low prices
offered by the low 27 cost carriers, the increasing purchasing power, better services,
privatization of airlines and ultimately the overall economic growth of India.

GLOBAL AIR INDUSTRY OPERATING MARGIN

8
 TABLE 1

GROWTH IN PASSENGER TRAFFIC CARRIED BY SCHEDULE CARRIERS

(2013-14 to 2023-24)
Year Domestic Growth International Growth Total
Passengers Rate (%) Passengers(Million) Rate (%) Passenger(Million)
(Million)
2016-17 128.60 20.92 69.65 22.79 198.25
2017-18 148.45 15.43 84.92 21.92 233.37
2018-19 172.20 15.99 98.76 6.27 270.96
2019-20 103.70 -39.77 54.70 -44.61 158.40
2020-21 89.91 -13.30 8.52 -84.42 98.43
2021-22 137.55 29.36 20.63 46.45 140.18
2022-23 148.14 17.14 54.71 55.12 202.85
2023-24 176.51 20.17 68.89 20.59 245.40
Mean 124.24 55.72727 178.3373
CAGR(%) 11.23 6.636364
Source: Data Compiled from DGCA Traffic Report

PASSENGER GROWTH IN INDIA(MILLION)

300

250

200

150

100

50

0
2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

DOMESTIC INTERNATIONAL TOTAL

AIR TRAFFIC IN INDIA

9
CHAPTER :3
PRESENTATION OF
DATA ANALYSIS AND
FINDINGS.
_______________________________________

10
3.1: ANALYSIS OF OPERATIONAL EFFICIENCY:

T he operational efficiency refers to the evaluation of a business organization’s

ability to generate sales revenue and to control cost. It helps in finding the
efficiency of profit earned as a function of operational costs. It simply means the
transactions which are operated with high margins or to cut down the cost to earn high
profits. Usually, every business organization aims at maximization of revenue to survive
and grow in the market. It may be improved by economies of scale. An organization is
generally considered to be operationally efficient when circumstance exists allowing them
to have transactions and provide services at a price which provides them fair returns to the
actual cost incurred by them. When an organization is operationally efficient then it has
the scope to allocate the capital without excessive cost. Economic efficiency is also
connected with operating efficiency. The concept of economic efficiency refers to an
economic condition in which every resource is optimally allocated. It means every unit of
resource is utilized in its best way with the aim to minimize the wastage of resources and
maximize the efficiency. In nutshell, the services are provided at their lowest possible
cost.

3.1.1: FUEL COST RATIO OF SELECTED AIRLINES

INDIGO AIRLINES- The following table represents the descriptive statistics including
mean, annual growth rate and CAGR values of power & fuel and net sales of Indigo
Airlines. It measures the operating efficiency of Indigo Airlines with the help of power
and fuel cost ratio.

The detailed description is given below:

TABLE 2: FUEL COST RATIO OF INDIGO AIRLINES

Year Fuel Cost Growth Net Sales Growth Fuel Cost

(₹ crores) rate(%) (₹ crores) Rate(%) Ratio(%)

2016-17 6,431.51 -- 18440.07 -- 34.38

2017-18 7,760.14 22.37 22,500.52 22.01 34.44
2018-19 11942.79 53.89 28165.22 25.17 42.40
2019-20 12453.79 4.27 35638.86 25.57 35.21
2020-21 3831.28 -70.36 14209.90 -59.93 26.96
2021-22 7512.39 48.95 23421.21 39.35 32.07
2022-23 9439.51 20.45 30512.10 23.24 30.94
2023-24 14965.41 37.60 37215.57 22.94 40.21
Mean 9,292.10 26262.9313 34.57625
CAGR(%) 16.73857 14.05

11
 Indigo Fuel Cost Ratio(%)

42.4 40.21
34.38 34.44 35.21
32.07 30.94
26.96

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

SPICE JET- The analysis on power and fuel cost ratio of Spice Jet, measured in terms of
percentage has been presented in the table below:
TABLE 3: FUEL COST RATIO OF SPICE JET

Year Fuel Cost(₹ Growth Net Sales(₹ Growth Fuel Cost

Crores) Rate(%) Crores) Rate(%) Ratio(%)
2016-17 1,855.24 -- 6,101.33 -- 30.41
2017-18 2,343.63 20.84 7,723.41 21.00 30.34
2018-19 3,455.25 32.17 8,886.36 13.09 38.88
2019-20 4,616.20 25.15 11,989.61 25.88 38.50
2020-21 3,696.33 -24.89 5,326.41 -125.10 69.40
2021-22 2,187.69 -68.96 5,897.57 9.68 37.09
2022-23 3,678.41 40.53 6,987.34 15.60 52.64
2023-24 3,984.52 7.68 7,001.25 0.20 56.91
Mean 3,227.16 7,489.16 44.27
CAGR(%) 4.65 -5.66

SpiceJet Fuel Cost Ratio(%)

69.4
52.64 56.91
38.88 38.5 37.09
30.41 30.34

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

12
3.1.2: AIRCRAFT LEASE RENTAL COST RATIO OF
SELECTED AIRLINES:
A lease rate is the amount of money paid over a specified time period for the rental of an asset,
such as real property or an automobile. The lease rate—the amount the lessor earns from
allowing someone else to use their property—compensates them for not being able to use that
property during the term of the lease. The terms of the lease will spell out the time period that the
lease rate applies for and may also spell out incremental increases in the lease rate over multi-
year leases. A lease rate is an amount paid by the lessee to the lessor for use of an asset for a set
period of time. When the requirement or demand for certain equipment is considered to be a long
term purpose, owning or ownership is the best decision. Also, in the case of real estate, the value
appreciates, which can add value to the initial investment made.

The lease rate is very important to understand and estimate the overall payment, which needs to
be made for the lease or else the lessor can easily add few extra amounts, and the lessee will not
even come to know about it. A small extra amount added every month unknowingly can turn out
to be a big number at the end of the lease period. Thus the lease rate helps us to understand the
overall cost of leasing.

INDIGO AIRLINES -The evaluation of operating efficiency of Indigo Airlines with the help of
Lease Rental Ratio measured in terms of percentage has been given below in table
TABLE 4: AIRCRAFT LEASE RENTALS RATIO OF INDIGO

13
 Indigo Aircraft Lease Ratio(%)
2023-24 21.55

2022-23 23.65

2021-22 21.45

2020-21 31.47

2019-20 17.94

2018-19 26.75

2017-18 16.04

2016-17 17.44

0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00

SPICE JET-The below table exhibits the analysis of operating efficiency of Spice Jet with the help
of lease rentals ratio measured in terms of percentage:

TABLE 5: AIRCRAFT LEASE RENTALS RATIO OF SPICE JET

Year Aircraft Lease Growth Net Sales(₹ Growth Lease Cost

Rental (₹ Rate(%) Crores) Rate(%) Ratio(%)
Crores)
2016-17 1,451.36 -- 6,101.33 -- 23.79
2017-18 1,669.99 13.09 7,723.41 21.00 21.62
2018-19 2,080.21 19.72 8,886.36 13.09 23.41
2019-20 1,530.46 (35.92) 11,989.61 25.88 12.76
2020-21 892.29 (71.52) 5,326.41 -125.10 16.75
2021-22 1,524.82 41.48 5,897.57 9.68 25.86
2022-23 1,784.62 14.56 6,987.34 15.60 25.54
2023-24 1,796.36 0.65 7,001.25 0.20 25.66
Mean 1,591.26 7,489.16 21.92
CAGR(%) (2.56) -5.66

14
 SpiceJet Lease Cost Ratio(%)

25.86 25.54 25.66

23.79 23.41
21.62

16.75

12.76

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

3.1.3: NET PROFIT RATIO

Net profit ratio defines the relationship between net profit and sales. Net profit is the source of
income for shareholders of the company and they always closely watch this ratio. If the net
profits of the company are low or negative, it creates a numerous problems ranging from
decreasing sales to poor customer experience. The higher the net profit ratio, the better it is. A
high ratio indicates the well managed affairs as well as the operating efficiency of the company.
An increase in the ratio over the earlier years is an indication of improvement in overall
operating efficiency and profitability of the concern. It helps in ascertaining how profitably the
assets have been used during the given period.

Table 6: Net Profit Ration Of Indigo Airlines

Net
Net Sales(₹ Net Profit
Year Profit/Loss(₹ Growth Rate(%) Growth Rate(%)2
Crores) Ratio(%)
Crores)
2016-17 1,659.15 -- 18,440.07 -- 9.00
2017-18 2,242.32 35.15 22,500.52 18.05 9.97
2018-19 157.25 -92.99 28,165.22 20.11 0.56
2019-20 -233.69 -248.61 35,368.86 20.37 -0.66
2020-21 -5,806.43 2384.67 14,209.90 -148.9 -40.86

15
 2021-22 -396.27 -93.18 23,736.91 40.14 -1.67
2022-23 -3,318.69 -737.48 25,741.36 7.79 -12.89
2023-24 -3,569.27 -7.55 29,687.45 13.29 -12.02
Mean -1,158.20 24,731.29 -6.07
CAGR(%) 177.15 -4.16

Indigo Airlines NP Ratio(%)

20

10

0
2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
-10

-20

-30

-40

-50

SPICE JET- Table 7 is related with the Spice Jet under which the operating efficiency of
the airline is measured with the help of net profit ratio:

Table 7: Net Profit Ratio Of Spice Jet Airlines

Year Net Growth Net Sales(₹ Growth Net Profit

Profit/Loss(₹ Rate(%) Crores) Rate(%) Ratio(%)
Crores)
2016-17 392.17 -- 6,101.33 --
6.43
2017-18 566.65 30.79 7,723.41 21.00
7.34
2018-19 (252.62) 324.31 8,886.28 13.09
(2.84)
2019-20 (934.76) 72.97 11,989.61 25.88
(7.80)
2020-21 (998.76) (6.41) 4,948.74 (142.28)
(20.18)

16
 2021-22 (245.37) (307.04) 3,974.11 (24.52)
(6.17)
2022-23 (687.98) (335.67) 6,934.87 42.69
(9.92)
2023-24 (658.22) (4.52) 6,239.40 (11.15)
(10.55)
Mean (15.81) 7,099.72 (5.46)
CAGR(%) 36.94 (10.75)

SpiceJet Airlines NP Ratio(%)

10

0
2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
-5

-10

-15

-20

-25

3.2 COMPARITIVE ANALYSIS

Table 8: COMPARATIVE ANALYSIS OF FUEL COST RATIO

Year Indigo Fuel Cost Ratio(%) SpiceJet Fuel Cost Ratio(%)

2016-17 34.38 30.41
2017-18 34.44 30.34
2018-19 42.4 38.88
2019-20 35.21 38.5
2020-21 26.96 69.4
2021-22 32.07 37.09
2022-23 30.94 52.64
2023-24 40.21 56.91

17
 Comparatative Analysis of Fuel Cost Ratio of
Selected Airlines
80
70
60
50
40
30
20
10
0
2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

Indigo SpiceJet

Table 9: Comparative Analysis Of Aircraft Rental Lease Ratio

Year Indigo Lease Cost Ratio(%) SpiceJet Lease Cost Ratio(%)
2016-17 17.44 23.79
2017-18 16.04 21.62
2018-19 26.75 23.41
2019-20 17.94 12.76
2020-21 31.47 16.75
2021-22 21.45 25.86
2022-23 23.65 25.54
2023-24 21.55 25.66

Comparatative Analysis of Lease Cost Ratio of

Selected Airlines

30
20
10
0
-10 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

-20
-30
-40
-50

Indigo SpiceJet

Table 10: Comparative Analysis of Net Profit(NP) Ratio

Year Indigo NP Cost Ratio(%) SpiceJet NP Cost Ratio(%)
9
2016-17 6.43

18
 9.97
2017-18 7.34
0.56
2018-19 -2.84
-0.66
2019-20 -7.8
-40.86
2020-21 -20.18
-1.67
2021-22 -6.17
-12.89
2022-23 -9.92
-12.02
2023-24 -10.55

Comparative Analysis Np ratio of Selected

Airlines
20

10

0
2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
-10

-20

-30

-40

-50

Indigo NP Cost Ratio(%) SpiceJet NP Cost Ratio(%)

3.3: CONTRIBUTION OF AVIATION SECTOR TO INDIA’S GDP:

In the last decade, the airline industry has faced barriers, including rising ATF costs,
discontinued airlines, and over-saturated airports. But the industry has started to develop
its inherent growth potential. The growing population of the middle class and increased
disposable income have led to a substantial increase of passenger traffic. This increase in
the number of persons travelling every year resulted in demand for services in civil
aviation. This demand has been addressed in several ways by the Central Government. It
did not only elevate the FDI limit allowed for the industry but also allowed foreign airlines
finally to invest in the airlines segment of India.

19
In the context of the aviation sector, a report said that Rs 133,000 crore, or 5 percent of
India's GDP, currently contributes and supports 1.7 million employment in the country,
besides the creation of much-needed critical assets.

It is expected that this contribution will further increase, as the sector will recuperate after
a number of difficult years, in which many companies suffered losses, because of the
contributions of RS 87,500 crore to social security and tax. Another Rs 16900 crore in
government revenue has been estimated by the study to measure the economy in India
through taxation via indirect and induced channels.

Through its direct output the sector also contributed Rs 14,700 crores and Rs 10,700 crores
through the supply chain indirectly. In addition, the Oxford University joint venture
provided a further Rs 58,200 crore for catalytic benefits through tourism, increasing its
overall Rs 91,200 crore or 1.5 percent GDP consultancy. It also said that it supported
employment of another 7,1 million people by catalytic effects, such as tourism, and
supported 276,000 jobs directly, another 841,000 indirectly via their supply chain and a
further 605,000 jobs through spending by sector employees.

Recognizing the Indian airline carries 71% passengers and 77% freight they flowed
through the indian economy, generating multiplying effects on Indian National revenue or
GDP, wages , profits and tax revenue generated by Indians.

3.4: FINDINGS :

This chapter comprises of key findings of the study based on detailed analysis. The
findings of the study from this chapter as follows:

1. FUEL COST RATIO:

• The above table exhibits that the airline's expenditure on fuel increase data very fast
rate in the year 2023-24, the increase in the amount of net sales has been decent in
the same year which indicates that the increase in the net sales of Indigo Airlines
resulted in the increase of expenditure on fuel in the same year. The study shows
that the CAGR of fuel is less as compared to the CAGR of net sales of Indigo

20
 Airlines. This may be due to the decrease in the price of crude oil in the international
market during the study period. The data fuel cost ratio of Indigo Airlines depicts
that the ratio Increased from 30.94 to 40.21 percent during the study period; it
means the fuel cost is nearly thirty percent of net sales in 2023-24, which is
relatively not good.

• The above table exhibits the increase in the amount of fuel expenditure of Spice Jet
which has been highest in the year 2023-24, similarly the amount of net sales has
increased in a high rate the same year. It is also seen in table that the amount of fuel
expenditure as well as amount of net sales has decreased in the last two years of the
study period. The data for growth rate depicts that the CAGR of fuel expenditure of
Spice Jet has been more as compared to the CAGR of net sales which signifies that
increase in the amount to fuel is more in comparison of increase in the amount of
net sales. The fuel cost ratio of Spice Jet increased up to 52.64 percent in 2022-23
and Increased to 56.91. The fuel cost ratio had been highest in the year 2020-21
despite the fact that the sales have been increased in the following year 2019-20 that
implies the proportion fuel to net sales has been more as compared to other years of
study period.

2. LEASE RENTAL COST RATIO:

• The above table shows concerning the growth of lease rentals expense that the
airline has decreased its spending over lease rental ratio in the year 2016-17, despite
this, the number of net sales has increased this year. The data for growth rate depicts
that Indigo Airlines has spent heavily on lease rental expenses in the year 2018-19,
as the percentage increase in the spending this year is more as compared to the other
years, but also the amount of sales has increased at the rate at which airline is
expected to have till 2023-24. The CAGR of net sales of Indigo Airlines is more as
compared to the CAGR of lease rentals expense which means the airline has
obtained a good amount of sales. The average amount of lease rental ratio of Indigo
Airlines is around ten percent of net sales. It may be concluded here that the airline
has spent less amount on lease rentals expense in the first few years of the study

21
 period; the airline has increased these expenses with the increase in net sales or vice
versa.
• It is analyzed from the data that the increase in the number of net sales, as well as
lease rentals cost, has been high in the same- year i.e. The CAGR and average
amount of lease rental cost of Spice Jet is less as compared to CAGR and the
average amount of net sales. The lease rental cost ratio of Spice Jet increased from
2.56 to 5.66 percent. It signifies that the airline could not achieve the required sales
at the beginning of the study period even after spending a good amount on lease
rentals expenses. It may be concluded here that the lease rentals expenses ratio of
Spice Jet has been comparatively low in the last few years of the study period since
the number of net sales, as well as the lease, has been reduced during these years.

3.NET PROFIT RATIO:

• The amount of net profit was not consistent during the period of study ranging from
higher to lower. The number of net sales increased during the study period but the
rate of increase has fluctuated. Based on the compound annual growth rate, it is
analyzed that the net profit increased at a slower rate as compared to the
percentage increase in net sales since the compound annual growth rate of net sales
is higher than the compound annual growth rate of net profit. The airline did perform
well at the beginning of the study period, slowly it started getting reduced and
hence the ratio got decreased.
• The percentage growth of net profit of spice jets has not been consistent during the
years of analysis. It may be stated that the airline has been efficient in increasing
the sales but has been inefficient to increase the net profits. It is seen in the above
table that the Spice Jet has incurred huge losses at the ending years of the study
period resulting in a negative mean value of net profit for this airline.

22
CHAPTER :4
CONCLUSION,
RECOMMENDATIONS
AND BIBLIOGRAPHY

23
4.1: CONCLUSION :

I
ndia is third largest civil aviation market in terms of domestic operations and third
largest aviation market overall. Aviation industry support about 7.1 million jobs in
India both directly and directly including the catalyst effect of tourism. The global
pandemic resulted in stagnation of air traffic, resulting in losses for many air line
companies.
The continuous high rate of growth and increase in per capita income of people in the
country is resulting in the need for fast and dependable transportation system in the
country. Moreover, entry of operators is forcing the air transporters to deliver cost efficient
air transportation system in the country. The Indian Aviation Sector is among the most
vibrant and fastest growing sectors in the world. The government also permitted private
players to operate as air taxi drivers. The civil aviation industry was deregulated by the
government to promote economic development and to get better airline services. But even
then a large number of airlines turned into sick units. Some of the airlines have been
defunct even just after their incorporation rather some airlines are in queue. There is a
large gap between the operational airlines and defunct airlines in Indian civil aviation
sector

India has seen an increase in passenger traffic during the study period, excluding the period
of the global pandemic. Increase in passenger traffic also results in increase of revenue.
Aviation industry in India is not a stable sector as losses can be seen in many years of the
study period. It was also found out that the Government has decided to privatize Air India
for making good of losses.

Although with the increase in revenue, airlines are not capable in turning in huge profits.
This may be due to various factors, such as oil prices, expenditures the companies has to
incur and also because of providing economic rate to customers to increase sales.
The industry stakeholders should engage and collaborate with policy makers to implement
efficient and rational decisions that would boost India’s civil aviation industry. With the
right policies and relentless focus on quality, cost and passenger interest.

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4.2: RECOMMENDATIONS :
The Indian aviation market has grown rapidly in the past decades in terms of passenger traffic,
number of airports, number of flights and investor’s base. However, the domestic scheduled
airlines have been facing some funds problems over the decades and have been unable to survive
in the market in terms of profitability. The following are the recommendations to the domestic
scheduled airlines to survive in the market and to create profits:

• The study indicates that the airlines have to spend heavily on power and fuel
expenditure. The cost of power and fuel depends upon the price of petroleum products
in the international market. It may not be possible for the airlines to make efforts for
controlling the cost under this head. But if the capacity utilization of the airlines
improves and number of aircrafts are added, may be the airlines are in a position to
reduce the cost of power and fuel in future.
• It is observed from the study that airlines have been unable to cover the operating
expenses hence resulted into operating losses. Therefore these airlines should focus on
effective utilization of the cost incurred in terms of operating expenses.
• Domestic carriers including Indigo and Spice Jet obtained huge net losses in most of
the years of study period. Apart from this, the results on average net profit to sales
ratio `of all the selected airlines is not found satisfactory. There is a need to improve
the financial performance of theses airlines hence may be struck off from the market.
• The increase in per-capita income and shortage of time among the working class is
another important factor that will boost airlines’ business in the long run.
• Although air travel has been currently reduced do the pandemic airline companies
should take this opportunity to bring up some cost effective ideas to cut down losses
other than removing employees to reduce cost to company.
• Developing more routes for the destinations which at present are not connected
through airlines will also offer a chance to increase their revenue and thus profitability.

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4.3: BIBLIOGRAPHY:

4.3.1 : Annual reports

❖ IndigoAirlines
❖ SpiceJet

4.3.2 :Websites

❖ www.google.com
❖ www.wikipedia.in
❖ www.goindigo.in
❖ www.spicejet.com
❖ www.telegraph.co.uk
❖ www.hindustantimes.com
❖ www.livemint.com

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