This paper reviews the civil aviation industry in India with the focus on innovation and corporate governance, and how innovation and corporate governance are contributing to the success of the Indian aviation companies both on commercial and social front. We start by looking at the evolution of aviation in India and identify key players to evaluate from innovation and corporate governance perspective. We also identify the aspects of innovation and corporate governance that contribute to the success of the airlines. Further, we define success factors and then evaluate each of the aviation players against these factors based on secondary research. We have selected NACIL, Jet Airways, Kingfisher Airlines, Indigo Air and Paramount Airways for the purpose of evaluation in this paper. The paper concludes by outlining a model for airlines to follow in terms of innovation and corporate governance to achieve success.
Table of Contents
History of the Indian Airline Industry4
Innovation in Civil Aviation Industry in India5
Use of Technology6
Key Performance Measures of Corporate Governance9
Board and Independent Directors10
Financial Transparency and Information Disclosure10
Internal control procedures11
Top Management Compensation11
Introduction of Players12
Analysis of the Indian Airline Companies13
History of the Indian Airline Industry
Civil aviation in India started on February 18, 1911 with the first commercial flight from Allahabad to Naini, a now seemingly short but historically important flight of mere six miles. Civil aviation continued to be on the sidelines until JRD Tata launched Tata Airlines, the first scheduled airline in 1935 which was later renamed to Air India in 1946. After the launch of Tata Airlines, a few domestic players such as Deccan Airways, Airways India and Kalinga Airlines mushroomed but these airlines remained niche players, primarily plying short distances.
The year of 1953 proved to be a watershed year for the private players when the Indian government nationalized civil aviation. All the existing private players were nationalized and merged into Air India. Under JRD Tata’s stewardship, Air India was rated among the best airlines in the world. Within a few years of nationalization, Air India was rated amongst the worst airlines in the world, alongside airlines from the poorest nations in Africa. For the next couple of decades civil aviation continued to suffer from government control, corruption and policy issues.
In 1990, the government ended its monopoly over airlines in the domestic civil aviation sector and allowed private airlines to ply domestic routes. However, severe restrictions private airlines put them at a severe competitive disadvantage against Indian Airlines, the government owned domestic airline. The privately owned airlines were given unprofitable flying routes, inconvenient gates and aircraft parking locations. Eventually, these disadvantages led to the demise of most private airlines in the next couple of years. Jet Airways and Sahara Airlines, the only survivors, grew substantially year after year post-1991 as the restriction on private players were either significantly diluted .
In the past decade more airlines have taken to the skies and have followed interesting strategies to entice the increasingly discerning flyer. Air Deccan, pioneered the budget...