Strategic Analysis Of Indian Civil Aviation Industry

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Strategic Analysis of Indian Civil Aviation Industry

Submitted By:-
Jasmeet Kaur Grover(74)
Prerna Parija(89)
Vasudha Narayanan(104)

Indian Civil Aviation Industry
The Indian Civil Aviation Industry is the 9th largest in the world with 15 scheduled operators and 118 non scheduled operators. The anticipated CAGR for 2010-2013 is 16% owing to skilled labor and favorable business environment. The growth of the aviation industry can be attributed to factors such as buoyant economy, higher disposable incomes, increase in corporate travels, growth in spending on leisure tourism-related travels, wider availability of low fares, etc.

However, there are host of factors that hamper the growth of the industry like capacity and infrastructure related constraints, rising fuel cost, taxing the industry, unfair price war between carriers, etc. A number of measures related to the aviation infrastructure has been taken up:- 1) Development of capital intensive greenfield airports under PPP mode 2) Modernization of Delhi and Mumbai as well as non-metro airports, etc to address the infrastructure issues. 3) Consolidation drives in the industry are expected to provide the benefits such as increased economies of scale, rationalization of resources, and prevent further losses in the coming years. 4) Corrective measures such as rationalization of tax on ATF and rationalization of ticket pricing need to be pursued to put the Indian aviation industry on the path of sustainable growth Introduction:

There are 4 Phases in growth of Aviation Industry:-
1) Phase 1(1912-1986) : Government Regulation of Airlines for stability.This phase is explained by the following diagram .

2) Phase 2(1986-2003): Private Air-Taxi controller come into existence. 3) Phase 3(2003-2006):Low Cost Carries change the air-traffic scene.

4) Phase 4(2006-Till Date): The Era of Mergers & Acquisitions.

Current Scenario:
During the last one decade the civil aviation sector has grown at a phenomenal pace and India has emerged as the 9th largest civil aviation market in the world.
The following data shows us the increase in demand for air-travel over the last 10 years:-

(Source: Directorate General Civil Aviation)
Analysis of capacity and demand on a year on year basis showed that there is a yoy increase in both .The growth rate of demand has been consistently higher than capacity growth rate in the year 2010.

The Annualized growth rate has been 14.21%.Infact the number of passengers using domestic airlines increased at the rate of 18.7% from 2009 to reach 520.21 lakh in 2010.

Competition in Civil Aviation:
In order to maintain the high growth trajectory, it is very important that competitive forces must continue to operate with in this sector. The various policies shaping competition in our country are:- 1) Open Sky Policy: Open Sky policy of the Government and rapid air traffic growth have resulted in the entry of several new private airlines in the industry in recent years and also increased frequency of flights of international carriers. 2) FDI Limit: For airlines, FDI allowed in the aviation sector is 49 per cent,but foreign airlines are barred from investing on the grounds of national pride and security.Strenuous lobbying is being done in order to increase this limit. 3) Taxation Policy: There is provision of 100% tax exemption for airport projects for a period of 10 years. As mentioned above there are 15 scheduled airline operators in India today. As per the latest figures, the market share of these airlines is as follows:-

Market Share of different airlines for the year 2010 (Source: Directorate General of Civil Aviation) Some observations from the above data :-

1) Kingfisher is the market leader owing to promising on-board...
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