Anubhav Singh IJIKMC

International Journal of
Innovative Knowledge
Concepts
ISSN: 2454-2415
Volume 2, Issue 4, April, 2016
Available online at www.ijikc.co.in 92
A study of Current Scenario of Aviation Sector in India
Anubhav Singh
Junior Research Fellow, Faculty of Commerce,
Department of Applied Economics
University of Lucknow, Lucknow, Uttar Pradesh, India-226001
Assistant Professor, School of Business,
Lovely Professional University, Delhi-Jalandhar NH-1,
Phagwara, Punjab, India-144411, Ph-917275333303
Abstract
The research Paper investigates the airline industry’s present and future states in relation to growth and
customer satisfaction in India. The approach of investigation is secondary data based analysis. The sample of
the data is collected from various sources from official websites to books and scholarly journals. The
airlines, Airports, BCAS, DGCA Concern person are included in the data for analysis because of their
knowledge and expansion globally. I also concentrate on the Airlines which has been Merged or liquidated
in early days. Since the NDA government came in Existence, Indian Aviation Industry rapidly grown up just
because of Initiatives taken by GOI.
Since the airline deregulation took place in the year 1994, a new business model has emerged in the Indian
aviation industry. It has caused a shift in the way people travel within India. With the launch of private
airlines and increase in number of Aircrafts, the need for aviation maintenance has increased. Also the Low
cost carrier model of commercial aviation has opened up avenues for third party independent maintenance,
repair and overhaul facilities (MRO). The low cost carrier business model includes only line maintenance to
be done in-house and all other maintenance jobs are outsourced to the Independent MROs. As the aircrafts
get older, the need for maintenance would increase, thus creating opportunities for entrepreneurs to enter into
Independent aviation maintenance business. The competition amongst the airlines and charter operators, has
forced these operators to consider cost cutting measures. Maintenance being one of the major cost in the total
operation of an Aircraft, local or nearby MROs would be preferred to save the aircraft ferrying, crew and
fuel costs.
The deregulation also opened up the skies for small business jets to fly across the length and breath of the
country, which created opportunities for Air Charter business in India. With the emergence of rich business
class in last 2 decades, air charter has seen steady demand and business travel has shifted from flying by
commercial airlines to traveling by private jets. Traveling by Charter or Private aircraft, not only gives
luxury and privacy, but also saves time and effort. The upcoming successful businessmen prefer to hire a
charter plane than owning one, due to the regulatory and operational hassles involved in it. It also gives them
the flexibility of hiring different types of charter planes as per their travel needs and the airports at which
they intend to land.
Keywords: Airline Industry, AAI ,BCAS, DGCA, Customer Satisfaction, Future Growth,
Introduction
Air Traffic: The Airport Authority of India (AAI)
manages total 125 Airports in the country, which
include 11 International Airports, 94 domestic
airports and 28 civil enclaves. Top 5 airports in the
country handle 70% of the passenger traffic of
which Delhi and Mumbai together alone account
for 50%. Passenger and cargo traffic has growth at
an average of about 9% over the last 10 years.
Growth: Estimated domestic passenger segment
growth is at 17% per annum. Anticipated growth
for International passenger segment is 9% while the
growth for International Cargo is likely to grow at a
healthy rate of 14%.
Privatization: Privatization of International
Airports is in offing through Joint Venture
route. Three Greenfield airports are getting
developed at Kochi, Hyderabad and Bangalore with
major shareholding of private sector. Few selected
non-metro airports are likely to be privatized.100%
foreign equity has also been allowed in
construction and maintenance of airports with
selective approval from Foreign Investment
Promotion Board.

A study of Current Scenario of Aviation Sector in India Anubhav Singh
International Journal of Innovative Knowledge Concepts, 2(4) April, 2016 93
Six major airlines operate in the country
Six major airports in the country
Projected Domestic and International Traffic Upto 2016-2017*
Domestic
Passengers (In
lakhs)
Percent increase International
Passengers (In
lakhs)
Percent increase
2001-2002 190.60 *8.5% 149.90 *6.0%
2002-2003 206.80 158.89
2003-2004 224.38 168.42
2004-2005 243.45 178.53
2005-2006 250.50 *7.0% 188.35 *5.5%
2006-2007 278.73 198.71
2007-2008 298.24 209.64
2008-2009 319.12 221.64
2009-2010 341.46 233.33
2010-2011 365.36 246.16
2011-2012 390.93 259.70
2012-2013 414.39 *6.0% 272.43 **4.9%
2013-2014 439.25 285.78
2014-2015 465.61 299.78
2015-2016 493.54 314.47
2016-2017 523.16 329.88

With the momentum of a rollercoaster racing along
the tracks, the industry has blossomed as a new raft
of air carriers have brought competition to local
skies and ended many monopolies in international
markets. There have been winners and losers along
the way, the most recent being the high profile
collapse of Kingfisher Airlines, but what is for sure
is that with a home market of over one billion
people, and the airline business only really still in
its infancy in a country where rail travel still
dominates, there is enormous potential for future
growth.
The first tranche of low-cost airlines have now
become experienced operators and a new batch are
set to emerge to bring additional competition and
the private sector is set to further underpin the
growth of the country’s aviation sector following
the Government’s decision last year to open the
door to foreign invest in the country’s airlines. An
earlier privatisation of the airports in Bangalore,
Hyderabad, Mumbai and New Delhi has led to a
sustained period of modernisation and expansion of
these key gateways under the auspices of Indian
multinational corporations GVK and GMR and
similar is now expected in the airline business to
allow the country’s carriers to better compete in the
global market.
In terms of numbers, first, let’s look in greater
detail at India’s domestic market. After a period of
relative steady growth there was a notable increase
in capacity in 2006 and 2007 with available seats
up 37.4 per cent and 36.2 per cent. Although there
has been mixed fortunes over subsequent years
overall seat capacity almost tripled during the
2000s from around 25 million seats to nearly 75
million. For the last two years (201q – 2012) there
have been more than 80 million available seats in
domestic skies as the local population has become
more mobile.
Research Methdology:-
Objective of the study
 To find out the total growth ,investment of
this Sector
 To find out the challenges faced by
entrepreneurs in Aviation Industry
Data Collection
Secondary Data
Research Design
Descriptive
Key Challenges faced by the Players
1. AAI DOMINATES, BUT PRIVATE
SECTOR PARTICIPATION IS
RISING
 Until 2013, AAI was the only major
player involved in developing and
upgrading airports in India
 Post liberalisation, private sector
participation in the sector has been
increasing
 Private sector investment is expected to
increase to USD9.3 billion during the
Twelfth Five Year Plan from USD5.5
billion in the previous plan

MAJOR LOSS RESULTING FACTORS
1. Rising Fuel Prices: Aviation Turbine Fuel
(ATF) prices in India are higher than the
global market. The ATF price accounts for
almost 45% of the operational expenses.
The industry’s operational cost component
is dominated by the cost of the ATF. A
10% increase in fuel price would push up
costs by at least 4%, thus affecting the
financial health of an airline business.
2. Congestion: Presently capacity limitations
are there at many airports like Delhi and

Mumbai airports. Overcrowding leads to a
huge wastage of fuel. It is estimated that if
a flight hang around in the sky for an
additional half an hour due to delay in
allocation of landing slot, it can consume
between 25 to 30 percent extra fuel
thereby increasing the operational cost of
the airline. Half an hour of overing costs
an airline anywhere over Rs. 50,000 /-.
3. High Airport (aeronautical) Charges: The
airport charges payable at the International
airports are higher than those payable at
the airports nominated as Domestic
airports or domestic flights. As an
outcome, the domestic airlines in India are
incurring additional costs at the
international designated airports without
benefiting any additional facilities. The
airport charges levied by the Indian
airports are amongst the highest in the
Asian and the Gulf countries.
4. Cut-throat Competition faced by
Premium Airlines on their Pricing: The
arrivals of LCCs lead to wearing down the
market share of the premium airlines. To
moderate the decline in market share, the
premium airlines were forced to reduce
their fares and this in the long run lead to a
pricing war amongst the airlines with the
single objective of increasing their market
share.
Present Growth and future prospectus of the
Aviation Sector in India
1. Aviation sector in India has been
transformed from an over regulated and
under managed sector to a more open,
liberal and investment friendly sector
since 2004.
2. Entry of low cost air transporter, higher
disposable incomes, strong economic
growth, increased FDI inflows, swelling
tourist inflow, increased cargo movement,
and supporting government policies are
the major drivers for the growth of
aviation sector in India.
3. Indian Air space offers opportunities in
the areas of aircraft manufacturing, airport
infrastructure, airport & ground support
equipment, MRO facilities, ground
handling services, fuel hedging,
aerotropolis along with tapping the non
aeronautical revenues.
Healthy Growth of Passenger Traffic
• Total passenger traffic stood at a 106.45 million in FY 2016*.
• Passenger traffic increased by 12.47 per cent in FY 2015.
• Growth in passenger traffic has been strong since the new millennium, especially with rising incomes and
low-cost aviation passenger traffic expanded at a CAGR of 3.8 per cent over FY 2006–16*.

Increase in Freight Traffic
• Freight traffic is expected to be five times the
current level by the end of the next two decades. It
is expected to be 11.4 million tonnes by 2032.
• Growth in import and export in India will be the
key driver for growth in freight traffic as 30 per
cent of total trade is undertaken via airways.
Drivers to Growth of the Indian Aviation Sector
 Increase in Consumerism
 Increasing Tourists Travel
 Increasing Business Travel
 Entry of Low Cost Carriers
 Untapped Market
 Rising Disposable incomes
 Rising Middle Class Population
 Increasing Competition
 Government Reform Measures
FINDINGS
NOTABLE TRENDS IN THE AIRPORTS
SECTOR
Rising private participation and Investments
• Currently, five international airports have been
completed successfully under PPP mode
• Investment made by the private sector during the
Twelfth Five Year Plan (2012–17) is expected to
increase by 69.1 per cent to USD9.3 billion over
that during the Eleventh Five Year Plan
• Four existing airports and two greenfield projects
will be offered on PPP basis which is expected to
attract investments from private players
Greater use of nonscheduled airlines
 Rising business activity leading to higher
demand for non-scheduled airlines
 122 operators with combined fleet of 406
aircrafts in FY15
User development fees
• Increasing use of development fees by airport
developers and operators
• Airport Development Fee: Delhi, Mumbai
airports to fund expansion
• User Development Fee: Hyderabad, Bengaluru
airports for maintenance
Conclusion
In light of the growth in aviation industry,
specifically in the MRO and Air charter sectors,
this study becomes important due to the fact that
people are traveling more frequently and wish to do
so quicker and more efficiently. With businesses
growing faster than before, the need for Air Charter
is increasing day by day and hence a study of the
evolution and challenges faced by the
entrepreneurs engaged in Air Charter would add
value to the industry.
The challenges faced by MROs which is a limiting
factor in the growth of this sector, would create a
problem for the Airlines in the near future.
According to the Industry sources 85% of the
aviation maintenance is still outsourced to the US
and Europe or their subsidiaries out side India.
Hence a study was past due in the area of aviation
MRO, to evaluate the challenges, which if
addressed at the industry level could give impetus
to the development of this sector.
Investment, Regulatory, Control by the
manufacturers, human and technical challenges
have been investigated. This study has sought to
identify the major factors, which affected the
evolution of entrepreneurs in these two sectors. On
the basis of factors which affected the evolution of
entrepreneurs, an endeavor has been made to study
the impact of these evolutionary factors on the
sustenance of entrepreneurs.
The research also examines the structure of the
aviation industry in India and the entrepreneurial
challenges that it has thrown up. It also discusses
the sweeping changes that have radically changed
the face of the aviation industry, the general
economic conditions that have deeply influenced
the industry, gradual process of liberalising of air
services, entrepreneurial interest and growth of new
airlines, allocation of capacity at airports, reforms
in the ground handling markets and other related
issues. Further, it describes in detail the new
regulatory problems thrown up by liberalisation, as
well as measures taken
by entrepreneurs to overcome them.
However, on the other hand, low-cost carriers in
India have mushroomed in both the markets
because of their effective marketing strategies.
However, it must be noted that major airlines’ as
well as low-cost carriers’ future is unpredictable
and many see both of them in danger because of
increasing oil prices ,government taxes ,increased
in duties and all Overall, the growth chances for
low-cost carriers are much higher in both India .i
would more concentrate and will have ask the
question to the Air-India because it’s Local
Airlines of Government of India. It is the major
airlines from both the settings that are seen to be
facing critical challenges in the recent future. For
which supply and demand is one single area that
must be taken into serious consideration by these
airlines because it is this area that has been
historically overlooked by major airlines. Third
largest aviation market by 2020 By 2020,

passenger traffic at Indian airports is expected to
increase to 421 million from 106.45 million in
2016* The travel & tourism industry is forecast to
grow 12.79 per cent to USD475.43 billion in 2025
from USD142.65 billion in 2015 Spending on
business travel is estimated to increase to
USD36.53 billion in 2025 from USD19.34 billion
in 2015, while that on leisure travel is forecast to
rise to USD192.83 billion in 2025 from USD97.20
billion in 2015
GLOSSARY
1. MRO Maintenance repair and overhaul
facility
2. OEM Original Equipment manufacturer
3. TAT Turn around time
4. ACI: Airport Council International
5. w.r.t With respect to
6. FOREX Foreign exchange
7. DGCA Director general of civil aviation
8. LCC Low cost carrier
9. FBO Fixed base operator
10. FY: Indian Financial Year (April to March
11. AME Aircraft maintenance engineer
12. CMM Component maintenance manual
13. USP Unique selling proposition
14. PMA Part manufacturers approval
15. BCAS Bureau of Civil Aviation security
16. AAI Airport Authority of India
17. ROI Return on investment
18. PPP: It could denote two things
Purchasing Power Parity (used in
calculating per-capita GDP- GROWTH
DRIVERS)
Public Private Partnership (a type of joint
venture between the public and private
sectors)
19. BAAI Business Aviation Association of
India
20. CAPA Center for Asia Pacific Aviation
21. ICAO International Civil Aviation
organization
22. IATA The International Air Transport
Association
23. FICCI Federation of Indian chamber of
commerce
24. INR: Indian Rupee
25. FDI: Foreign Direct Investment
26. GOI: Government of India
27. CAGR: Compound Annual Growth Rate
28. BCAS Bureau of civil aviation
29. DGFT Direction General of Foreign
trade
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