THE AVIATION
INDUSTRY
(Seminar report)
Submitted to: Submitted By:
Mrs. Deepak Kapoor Sharang ARora
Vaishnavi Garg
Harpreet kaur
Tarush Malhotra
Rohit Arora
TABLE OF
CONTENTS
Introduction
History
Major Players
SWOT Analysis
Trend Analysis
Recent Developments
Introduction to the
Aviation Industry
The Indian aviation industry is one of the fastest growing aviation industries in the world with private airlines
accounting for more than 75 per cent of the sector of the domestic aviation market (as of 2006). The industry is
growing at a compound annual growth rate (CAGR) of 18 per cent. The country has 454 airports and airstrips, of
which 16 are designated as international airports.
MrPraful Patel, Union Civil Aviation Minister has stated that the Indian aviation sector will become one of the top
five civil aviation markets in the world over the next five years. Currently, India ranks ninth in the global civil
aviation market.
Passengers carried by domestic airlines from January-June 2010 stood at 25.71 million as against 21.1 million in the
corresponding period of 2009—a growth of 22 per cent—according to data released by the Directorate General of
Civil Aviation (DGCA). In terms of market share, private carrier Jet Airways was the market leader with 26.5 per
cent share, followed by Kingfisher Airlines with 21 per cent, Air India with 16.9 per cent, Indigo with 16.4 per cent,
SpiceJet with 13.3 per cent and GoAir with 5.8 per cent during the month of June 2010.
Leading aircraft manufacturers Airbus and Boeing have expressed optimism over the growth of the civil aviation
industry in India. As per Airbus, the country would need 1,032 new aircrafts worth around US$ 138 billion by 2028.
On a similar note, Boeing has also predicted that the sector would require 1,150 commercial jets worth US$ 135
billion in the next 20 years.
The Hyderabad International Airport has been ranked amongst the world's top five in the annual Airport Service
Quality (ASQ) passenger survey along with airports at Seoul, Singapore, Hong Kong and Beijing. The Hyderabad
International Airport is being managed by a public-private joint venture of the GMR Group, Malaysia Airports
Holdings Berhad and the State Government of Andhra Pradesh along with the Airports Authority of India (AAI).
Timothy J Roemer, the US Ambassador to India has said that the US will work with the Indian government and the
domestic private sector to make the country an aviation hub. Speaking at India Aviation 2010, Roemer said that the
public-private initiative, US-India Aviation Programme, would work together with the DGCA on helicopter aviation
security.
The AAI is set to spend over US$ 1.02 billion in 2010, towards modernisation of non-metro airports. AAI is
planning the city-side development of 24 airports, including those at Ahmedabad and Amritsar. Additionally, 11
new greenfield airports have been identified to reduce passenger load on existing airports, according to Praveen
Seth, member-operations, AAI.
AAI also plans to spend around US$ 3.07 billion in the next five years for developing, upgrading and modernising
metro and non-metro airports.
With the growth in the industry, airport retailing has also gained pace in the recent times. Development of new
terminals and airports such as the recently inaugurated T3 in New Delhi has provided added impetus to this segment.
The highest margin earners in this segment are food and beverages, beauty product, electronic items, apparel etc. It
has been predicted that airports would provide around 300,000-400,000 square feet retail space by 2015. Many
companies are also planning to leverage on this growing segment by launching specific products for air travellers.
For instance, French premium skincare brand L'Occitane is planning to develop a special range to cater to the airport
retailing segment.
History
The history of civil aviation in India began in December 1912. This was with the opening of the first
domestic air route between Karachi and Delhi by the Indian state Air services in collaboration with
the imperial Airways, UK, though it was a mere extension of London-Karachi flight of the latter
airline. Three years later, the first Indian airline, Tata Sons Ltd., started a regular airmail service
between Karachi and Madras without any patronage from the government.
At the time of independence, the number of air transport companies, which were operating within
and beyond the frontiers of the company, carrying both air cargo and passengers, was nine. It was
reduced to eight, with Orient Airways shifting to Pakistan. These airlines were: Tata Airlines,
Indian National Airways, Air service of India, Deccan Airways, Ambica Airways, Bharat Airways
and Mistry Airways.
In early 1948, a joint sector company, Air India International Ltd., was established by the
Government of India and Air India (earlier Tata Airline) with a capital of Rs 2 crore and a fleet of
three Lockheed constellation aircraft. Its first flight took off on June 8, 1948 on the Mumbai
(Bombay)-London air route. At the time of its nationalization in 1953, it was operating four weekly
services between Mumbai-London and two weekly services between Mumbai and Nairobi. The
joint venture was headed by J.R.D. Tata, a visionary who had founded the first India airline in 1932
and had himself piloted its inaugural flight.
The nationalization of Indian Airlines (IA) in 1953 brought the domestic civil aviation sector under
the purview of Indian Government. Later the government-owned airlines dominated Indian
aviation industry till the mid-1990s.
The adaptation of Open-sky policy in 1990 and other liberalization policies of Indian Government
on aviation sector made the industry undergo a rapid and dramatic transformation.
Several private airlines have ventured into the aviation business in succession and many more are
about to enter the arena. Today the Indian aviation industry is dominated by private airlines and
low-cost carriers, like Deccan Airlines, GoAir, SpiceJet etc. And Indian Airlines, the giant of Indian
air travel industry, gradually lose its market share to these private airlines. According to the report
of CAPA, these budget carriers are likely to double their market share by 2010 -- one of the highest
in the world.
Major Players
Air India
Air Sahara
Air Deccan
Go Air
Indian Airlines
IndiGo
Jet Airways
Spice Jet
Kingfisher Airlines
…and others,all of which will be discussed in
the Seminar.
SWOT
Analysis
WHAT IS A SWOT ANALYSIS?
SWOT analysis is a strategic planning method used to
evaluate the Strengths, Weaknesses, Opportunities,
and Threats
Strengths: characteristics that give it an advantage.
Weaknesses: are characteristics that place the firm at a
disadvantage.
Opportunities: external chances to make greater sales
or profits in the environment.
Threats: external elements in the environment that
could cause trouble for the Industry
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:.
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.
Trend Analysis
Market Share:
The Indian aviation industry is one of the fastest growing aviation
industries in the world. The government’s open sky policy has led to
many overseas players entering the market and the industry has been
growing both in terms of players and number of aircrafts. Today,
private airlines account for around 75 per cent share of the domestic
aviation market.
Indian aviation market had been booming – domestic at 46%(both
private and public), and international at 17%, over the past 2 – 3 years
India is the 9th largest aviation market in the world. According to the
Ministry of Civil Aviation, around 29.8 million passengers traveled
to/from India during 2008, an increase of 30 per cent on previous year.
It is predicted that international passengers will grow upto 50 million
by 2015. Further, due to enhanced opportunities and international
connectivity, 69 foreign airlines from 49 countries are flying into India.
Aviation Industry in India holds around 69% of the total share of the
airlines traffic in the region of South Asia
Market Share
Jet Airways and Jet Lite (previously
27.7%
Air Sahara)
Kingfisher Airlines and Kingfisher
20.7%
Red (previously Air Deccan)
Air India (previously Indian
18.6%
Airlines)
IndiGo 13.6%
SpiceJet 12.4%
GoAir 5.4%
Paramount Airways 1.5%
Jet Airways Kingfisher Airlines Air India
IndiGo SpiceJet GoAir
Paramount Airways
SALES AND REVENUES:
Full service airlines like Jet Airways, the government-
owned Indian and Kingfisher are under pressure from
the low fares being offered by no-frills airlines such as
Air Deccan, SpiceJet and Indigo. Airline stocks have
taken a beating on the Indian bourses, as pressure on
yields combined with high fuel prices make navigation
tough for the airlines. For example, for the latest
quarter ending December 31, 2006, Jet Airways
reported a 34% fall in profits at Rs. 40 crore ($9
million) over that in the corresponding quarter a year
ago. Its revenues in the latest quarter at Rs. 2,030
crore ($456 million) were, however, 35% higher than
the Rs. 1,499 crore ($337 million) in the year-ago
quarter. The LCCs that posted losses include SpiceJet
($8.15 million loss on revenue of $87 million for the
quarter ending November 2006), and Jagson Airlines
($237,000 loss on revenues of $1.9 million for the
quarter ending September 2006).
Profits of the Indian Aviation Industry:
2009 - $300 Million
2008 - $9 Million (Recession)
2007 – $7.8 Billion
Recent Developments
1. NEW CIVIL AVIATION POLICY:
A revised draft Cabinet Note on National Civil Aviation Policy had been
submitted to the Cabinet for approval on 16.5.2007. The Cabinet in its
meeting held on 15th June, 2007 considered the note on National Civil
Aviation Policy from this Ministry and decided to refer to a Group of
Ministers (GoM) for further consideration. The first meeting of GOM was held
on 14th August, 2007.
2. SIGNING OF NEW/REVISED AIR SERVICES AGREEMENT
Signing of a new Air Services Agreement is first milestone to achieve the
purpose of establishing air connectivity with new countries. During the
recent past, a number of new Air Services Agreements were initiated/singed
based on modern practices in civil aviation sector. Air Services Agreement
with some countries were signed way back and needed updating in view of
the changing circumstances and developments in international civil aviation
scenario, and with respect to newer standard and recommended practices.
Some of these countries are USA, UK, Australia, Brazil, New Zealand,
Iceland, Finland, Tunisia and Qatar.
3. PROMOTION OF REGIONAL AIR CONNECTIVITY:
To expand air connectivity on Tier II and Tier III cities and to promote
regional air connectivity a separate category of permit, Scheduled Air
Transport (Regional) Services had been introduced with the approval of
Hon’ble Minister of Civil Aviation. Accordingly, Director General of Civil
Aviation had issued Civil Aviation Requirements (CAR) on Scheduled Air
Transport Regional Services on 23.08.2007.
4. DEVELOPMENT OF AIRPORT INFRASTRUCTURE:
Airport infrastructure has been undertaken through the PPP route in major
metro cities like Delhi, Mumbai, Bangalore and Hyderabad. Modernisation of
the Kolkata and Chennai airports is being undertaken by the AAI. For the
non-metro airports AAI is responsible for the airside development. For this
purpose 35 airports have been selected and the work is in progress. Of these
24 airports would be taken up for city side development through PPP
including maintenance and operation of the terminal buildings, cargo
operations and real estate development. The aim of the Government is to
transform these airports into world-class facilities through this hybrid
mechanism. RFQ for Amritsar and Udaipur has already been issued and while
the bids are yet to be received by next month the initial response from
prospective bidders has been promising.
5. INTERNATIONAL OPERATION BY PRIVATE SCHEDULED AIRLINES ON
INDIA-GULF SECTORS:
The Government has decided to open the India-Gulf route to eligible private
schedule carriers w.e.f. 1st January, 2008 and under this decision Jet
Airways has been permitted to operate international services in certain
India-Gulf sectors from 1st January, 2008.
*These along with others,
will be discussed at the time of Seminar
THANK YOU
