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 Service Sector Management
 | `ivil Aviation
 
 |rof. Ashok Bhise
 |



àroup members Roll nos.
Yukti Marwah 46
Namrata Dedhia 13
 p


  




 mhe origin of Indian civil aviation industry can be traced

back to 1912, when the first air flight between Karachi
and Delhi was started by the Indian State Air Services
in collaboration with the UK based Imperial Airways.
 In early 1948, àovernment of India established a joint
sector company, Air India International Ltd in
collaboration with Air India (earlier mata Airline)
 àovt. had a complete monopoly over this sector until
mid- 1990¶s.
 By 1995, several private airlines had ventured into the
aviation business and accounted for more than 10
percent of the domestic air traffic, but only Jet Airways
and Sahara managed to survive the competition.
 Meanwhile, Indian Airlines, which had dominated the
Indian air travel industry, began to lose market share
to Jet Airways and Sahara. moday, Indian aviation
industry is dominated by private airlines and these
include low cost carriers such as Deccan Airlines, àoAir,
SpiceJet etc, who have made air travel affordable.
 India is one of the fastest growing
aviation markets in the world.
 mhe Airport Authority of India (AAI)
manages a total of 127 airports in the
country, which include 13 international
airports, 7 custom airports, 80 domestic
airports and 28 civil enclaves.
 mhere are over 450 airports and 1091
registered aircrafts in the country.
 In 2006, the private carriers accounted
for around 75% share of the domestic
aviation market
 ?
  
 mhe estimated growth of domestic passenger
segment is at 50% per annum and growth for
international passenger segment is 25%.
 mhe international cargo is likely to grow at a rate
of 12%.
 During the period April-September, 2008,
international and domestic passengers recorded a
growth of 15.8 per cent and 44.6 per cent
respectively, leading to an overall growth of 35.5
per cent.
 Moreover, the international and domestic cargo
recorded growth of 13.8 per cent and 8.7 per cent
respectively, resulting in an overall growth of 12.0
per cent
 î
p 
 By 2010, India's fleet strength will stand
at 500-550.

 It is also estimated that the domestic

market size will cross 60 million and the
international traffic will reach 20 million in
the same period.

 By 2020, Indian airports are estimated to

handle 100 million passengers, including
60 million domestic passengers.

 mhe amount of cargo handled will fall in

the range of 3.4 million tonnes per annum
`

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2
 
    

     

       

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 |layers in Indian aviation industry can be
categorized in three groups:
 |

 -Air India, Indian Airlines and
Alliance Air.

 |
 
 - mhe private players include 2 
Airways, Air Sahara,|aramount airways, ào Air
Airlines, Kingfisher Airlines, Spice Jet, Air Deccan
and many more.

 ? 
 
 - mhe start up players are those
which are planning to enter into the markets.
Some of them are Omega Air, Magic Air, |remier
Star Air and MDLR Airlines.

      ? 

 mhe Indian aviation sector can be broadly

divided into the following main
categories:
1. Scheduled air transport service, which
includes domestic and international
airlines.
2. Non-scheduled air transport service,
which includes charter operators and air
taxi operators.
3. Air cargo service, which includes air
transportation of cargo and mail.
 ?   



  It is
an air transport service undertaken
between two or more places and operated
according to a published timetable. It
includes:

 "   

 , which provide
scheduled flights within India and to
select international destinations. Air
Deccan, Spice Jet, Kingfisher Airline and
Indiào are some of the domestic players
in the industry.

 • 
 
 , which operate
scheduled international air services to and
from India.
 V   



 
It is an air transport service other than
the scheduled one and may be on charter
basis and/or non-scheduled basis. mhe
operator is not permitted to publish time
schedule and issue tickets to passengers.
 „


  It is an air
transportation of cargo and mail. It may
be on scheduled or non-scheduled basis.
mhese operations are to destinations
within India. For operation outside India,
the operator has to take specific
permission of Directorate àeneral of `ivil
Aviation demonstrating his capacity for
conducting such an operation.
à  
    ? 
 î
 

- mhe aviation industry is expected to grow
at a compounded annual growth rate of
25% till 2010.
- Also, by 2010 Indian airports will be
handling between 90 and 100 million
passengers per year, as against the
current 34 million passengers.
- It is expected that nearly 80% of this
growth will be driven by the low cost
carrier segment (L``).
- By 2008, the L``s would capture 65% of
the direct on-line air ticket market from
61% in 2005.
  
      

   
     
     
 

           
 
   
   
 
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 " î
     Foreign equity up to 49
per cent and NRI (Non-Resident Indian) investment up
to 100 per cent is permissible in domestic airlines
without any government approval. However, the
government policy bars foreign airlines from taking a
stake in a domestic airline company.

 •
 




 Nowadays, venture capital of
$10 million or less is enough to launch an airline.
|rivate airlines are known to hire foreign pilots, get
expatriates or retired personnel from the Air Force or
|SU airlines in senior management positions. Further,
they outsource such functions as ground handling,
check-in, reservation, aircraft maintenance, catering,
training, revenue accounting, Im infrastructure, loyalty
and programme management. Airlines are known to
take on contract employees such as cabin crew,
ticketing and check-in agents.
 9 „
 

 Jet and Sahara have
gone international by starting operations, first to
SAAR` countries, and then to South-East Asia, the UK,
and the US. After five years of domestic operations,
many domestic airlines too will be entitled to fly
overseas by using unutilised bilateral entitlements to
Indian carriers.

 Ý     


 
mhough India's àD| (per capita) at $3,100 is still very
low as compared to the developed country standards,
India is shining, at least in metro cities and urban
centres, where Im and B|O industries have made the
young generation prosperous. Demographically, India
has the highest percentage of people in age group of
20-50 among its 50 million strong middle class, with
high earning potential. All this contributes for the boost
in domestic air travel, particularly from a low base of
18 million passengers.
 d      

`urrently India attracts 3.2 million tourists every
year, while `hina gets 10 times the number.
mourist arrivals in India are expected to grow
exponentially, especially due to the open sky
policy between India and the SAAR` countries
and the increase in bilateral entitlements with
European countries, and US.

 ô 
  
  No industry other than
film-making industry is as glamorous as the
airlines. Airline tycoons from the last century, like
J. R. D. mata and Howard Hughes, and Sir Richard
Branson and Dr. Vijaya Mallya today, have been
idolized. Airlines have an aura of glamour around
them, and high net worth individuals can always
toy with the idea of owning an airline. All the
above factors seem to have resulted in a "me too"
rush to launch domestic airlines in India.

     
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 Airport and air traffic
control (Am`) infrastructure is inadequate to support
growth. While a start has been made to upgrade the
infrastructure, the results will be visible only after 2-3
years.

ô 

  It is also a matter of concern that
the trunk routes, at present, are not fully exploited.
One of the reasons for inability to realize the full
potential of the trunk routes is the lack of genuine
competition. mhe entry of new players would ensure
that air fares are brought to realistic levels, as it will
lead to better cost and revenue management,
increased productivity and better services. mhis in turn
would stimulate demand and lead to growth.

$ %   Apart from the above-mentioned

factors, the input costs are also high.
&