Title - A study of Challenges for Indian Aviation Sector

Title - A study of Challenges for Indian Aviation Sector

I. Rational for the study

1. Abstract

One of the fastest growing aviation industries in the world is indian aviation industry. With the liberalization of the indian aviation sector, a rapid revolution has undergone in indian aviation industry. Primarily it was a 90vernment-owned industry, but now it is dominated by privately owned full service airlines and low cost carriers. Around 75% share of the domestic aviation market is shared by private airlines. Earlier only few people could afford air travel, but now it can be afforded by a large number of people as it has become much cheaper because of stiff competition.

A wide range of services related to air transport such as passenger and cargo airlines, unscheduled service operators --- private jets and helicopters, airport management, and support services like maintenance, repairs and overhaul (mro), ground handling, in-flight catering, and training are being offered by indian aviation industry. Enormous benefit has reaped by the aviation sector from the entry of private carriers, especially from those of the low fare ones.

Still the aviation sector contributes a small part of the travel and transportation services sector in india. In the year 2006-07 about 96 million passengers travelled by airlines annually, while nearly 6 billion passengers were carried by the railways. In 2006-07 the airlines suffered losses of around usd 500 million and the situation is expected to decline in 2007-08. The reasons of these losses were high cost of operations, intense competition, and unsustainably of low fares. Due to the increasing costs aviation industry is facing immense difficulty. India's aviation sector stands up to the crisis and races against its fastest growing global competitors. Enhancement in affordability and connectivity add to the expected improvement in both passengers and cargo traffic. Large public and private investments which are supported by government initiatives in air travel infrastructure are expected to pour in. This paper will discuss about opportunities, issues & challenges faced by aviation industry.

2. Introduction

Indian civil aviation industry was started in the year 1912. It was the year when the first air flight between karachi and delhi was started by the indian state air/2 services in association with the uk based imperial airways. Jrd tata founded the first indian airline -tata airline in 1932. Nine air transport companies were carrying both air cargo and passengers at the time of independence namely tata airlines, indian national airways, air service of india, deccan airways, ambica airways, bharat airways, orient airways and mistry airways. Orient airways shifted to pakistan after partition.

In early 1948, government of india established a joint sector company, air india international ltd in association with air india (earlier tata airline) with a capital of rs 2 crore. According to air corporations act, 1953 the government nationalized nine airline companies. Indian airlines corporation (lac) was established to cater to domestic air travel passengers and air india international (ai) for international air travel passengers. Existing airline companies transferred their assets to these two corporations. According to this act, lac and ai had a monopoly over the indian skies. In 1994, vayudoot, a third government-owned airline, which provided feeder -services between smaller cities, was merged with lac. Indian aviation industry was dominated by these government-owned airlines till the mid-1990s.

In the year 1990, open-sky policy was adopted by the government and it allowed air taxi- operators to decide their own flight schedules, cargo and passenger fares. The monopoly of ia and ai in the air transport services were ended by indian government, as a part of its open sky policies in the year 1994. Monopoly was ended by repealing the air corporations act of 1953 and replacing it with the air corporations (transfer of undertaking and repeal) act, 1994. Now private operators were permitted to provide air transport services. By the year 1995, numerous private airlines had ventured into the aviation business and accounted for more than 10 percent of the domestic air traffic. These included jet airways, sahara, nepc airlines, east west airlines, modiluft airlines, jagsons airlines, continental aviation, and damania airways. But only jet airways and sahara managed to survive the competition. By this time, indian airlines began to lose market share to jet airways and sahara. Today, indian aviation industry is dominated by private airlines such as deccan airlines, goair, spicejet etc; these include low cost carriers who have made air travel affordable. In india, airline industry is plagued with several problems. Reasons are high aviation turbine fuel (atf) prices, increasing labor costs and lack of skilled labor, rapid fleet expansion, and strong price competition among the players. Infrastructure constraint is one of the major challenges facing by indian aviation industry. If indian aviation industry has to continue its success story, airport infrastructure needs to be upgraded. In this direction some steps have already been taken. The future prospects of indian aviation sector look bright.

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