Indian Airline Industry 
v 2.0 / 1.7.2008
Indian Institute of Management Bangalore
The Indian Airline Industry in 2008
By
Rishikesha T. Krishnan
Professor of Corporate Strategy & Policy
1
v 2.0 / 1.7.2008
The Indian Airline Industry in 2008 1
A 19% hike in the price of Aviation Turbine Fuel (ATF) announced by India’s oil companies at the end of May 2008 jolted the Indian airline industry. With this hike, ATF prices had roughly doubled in a year, and tripled in four years. A concerned Civil Aviation Minister, Praful Patel, rushed to the
Finance Minister seeking his support to prevent the industry from turning sick – losses of the airlines in 2007-08 were of the order of Rs. 40 billion and were predicted by some analysts to reach twice that level in 2008 -09. Yet, just three years earlier, the ind ustry was seen as a sunshine industry that would march in step with India’s economic growth. While individual airlines debated their survival strategies, observers wondered how things could have gone wrong so fast.
History of the Indian Airline Industry
At the time of India’s independence from the British in 1947, several small airlines operated in the country. Soon, however, in 1953, the government of India decided to “guide the orderly growth and evolution” of the industry by creating two state-owned national carriers – Air India (for international travel) and Indian Airlines (for domestic travel). Existing carriers (many of which were making losses) were folded into these airlines. In a country of India’s size and diverse topological features, air travel was expected to be an important mode of travel.
The Monopoly Era
Air India and Indian Airlines retained a monopoly over civil aviation in India till 1992. During this time they grew steadily but slowly. Air travel was patronised by the government, business, and rich individuals and otherwise seen as a luxury, with the masses travelling by train or bus.
Till the 1970s, Air India had the reputation of a boutique airline, with gracious
Indian Institute of Management Bangalore
The Indian Airline Industry in 2008
By
Rishikesha T. Krishnan
Professor of Corporate Strategy & Policy
1
v 2.0 / 1.7.2008
The Indian Airline Industry in 2008 1
A 19% hike in the price of Aviation Turbine Fuel (ATF) announced by India’s oil companies at the end of May 2008 jolted the Indian airline industry. With this hike, ATF prices had roughly doubled in a year, and tripled in four years. A concerned Civil Aviation Minister, Praful Patel, rushed to the
Finance Minister seeking his support to prevent the industry from turning sick – losses of the airlines in 2007-08 were of the order of Rs. 40 billion and were predicted by some analysts to reach twice that level in 2008 -09. Yet, just three years earlier, the ind ustry was seen as a sunshine industry that would march in step with India’s economic growth. While individual airlines debated their survival strategies, observers wondered how things could have gone wrong so fast.
History of the Indian Airline Industry
At the time of India’s independence from the British in 1947, several small airlines operated in the country. Soon, however, in 1953, the government of India decided to “guide the orderly growth and evolution” of the industry by creating two state-owned national carriers – Air India (for international travel) and Indian Airlines (for domestic travel). Existing carriers (many of which were making losses) were folded into these airlines. In a country of India’s size and diverse topological features, air travel was expected to be an important mode of travel.
The Monopoly Era
Air India and Indian Airlines retained a monopoly over civil aviation in India till 1992. During this time they grew steadily but slowly. Air travel was patronised by the government, business, and rich individuals and otherwise seen as a luxury, with the masses travelling by train or bus.
Till the 1970s, Air India had the reputation of a boutique airline, with gracious
References: i “Fighting the Aliens”, Business India, June 20 -July 3, 1994, p ii “Flying into the Storm” Business India, June 19-July 2, 1995, p iii “Divorces are made in Heaven” Business India, June 17-30, 1996, pp iv “Will it fly again?” Business India, December 2 -15, 1996, p v “Divorces are made in Heaven” Business India, June 17-30, 1996, pp vi “Attractive Offers” Business India, August 29-September 11, 1994, pp vii “…over my dead body” Business India, January 27 -February 9, 1997. xi United Breweries (Holdings) Ltd., Preliminary Placement Document, December 3, 2007, p xii United Breweries (Holdings) Ltd., Preliminary Placement Document, December 3, 2007, p xiii Paramount Airways Press Note of February 9, 2008 xvi United Breweries (Holdings) Ltd., Preliminary Placement Document, December 3, 2007, p xvii United Breweries (Holdings) Ltd., Preliminary Placement Document, December 3, 2007, p xviii United Breweries (Holdings) Ltd., Preliminary Placement Document, December 3, 2007, p xxi United Breweries (Holdings) Ltd., Preliminary Placement Document, December 3, 2007, p xxii United Breweries (Holdings) Ltd., Preliminary Placement Document, December 3, 2007, p xxiii United Breweries (Holdings) Ltd., Preliminary Placement Document, December 3, 2007, pp