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Current Scenario Of Aviation Industry India Tourism Essay

The under-pricing of tickets due to the intense competition and the increasing number of budget carriers resulted in losses to the budget carriers as well as to the entire aviation sector. Consolidation was looked as the single way out which would lead to less competition and stable fares.

The main reason for the increasing costs and reduced efficiency and flexibility for the Indian aviation sector was poor Airport infrastructure and manpower shortages. In 2007, there were 13 scheduled carriers which was estimated that this number would fall to 8-10 by 2010 in this fragmented Indian domestic aviation sector and the estimation is almost true considering the current scenario of the aviation sector..

April-2007: Jet Airways announced that it would buy Air Sahara for US$500 million

May-2007: Air India and Indian Airlines merged into one entity named NACIL.

2008: Kingfisher-Deccan deal was the third alliance in the Indian aviation sector.

Current Scenario of Aviation Industry

The Indian Aviation Industry is currently one of the fastest growing aviation industries in the world. The aviation industry in India has a compound annual growth rate of 18%. There are 454 airports and airstrips in India, of which 16 are designated as international airports. As of May 2006, private airlines accounted for more than 75% of the sector of the domestic aviation market.

With an increase in traffic movement during December 2009 the Indian aviation sector saw an increase in revenue by almost US$ 21.4 million. Moreover, the Airport Authority of India seems set to accrue better margins in near future as per the latest estimates released by Ministry of Civil Aviation. The better returns so mentioned are being primarily attributed to increase in the share of revenue from Delhi International Airport Limited and Mumbai International Airport Limited. According to a report released by the Ministry of Civil Aviation the number of passengers carried by domestic airlines rose from 67, 61, 000 to 80, 56, 000 for the period January — February 2009 and January — February 2010 respectively. The increase in passenger marked a growth of 19.2% for the aforementioned period. Some of the factors that have resulted in higher demand for air transport in India include the growing purchasing power of middle class, low airfares offered by budget airlines, the growth of tourism industry, increasing outbound travel from India and overall economic growth of India.

Not only this but airports in India are being ranked among the top airports of the world. The Hyderabad International Airport has been ranked amongst world’s top 5 Airports in the annual Airport Service Quality passenger survey along with airports at Seoul, Singapore, Hong Kong and Beijing. There are even talks going on between India and United States to make the country an aviation hub.

The Airport Authority of India is set to spend over US$ 1 billion in 2010, towards modernization of airports. The civil aviation ministry has also converted Delhi airport into an international hub for passenger airlines to help the airport utilize large amounts of additional capacity.

The investment policy of India in aviation industry currently allows FDI up to 100% under the automatic route for green field projects and for existing projects, FDI up to 100 % is allowed; upto 74% under the automatic route and beyond 74% under the government route.

Potential for Growth

Despite the slowdown and slow recovery, Indian Aviation industry sector still continues to look promising. This is primarily due to the burgeoning middle class with increasing massive purchasing power, low cost carriers providing services at very attractive low fares, the growth of Indian tourism and increasing outbound travel from India. In addition, the Government has planned to modernise non-metro airports, phasing out new international routes, putting into place new airports and renovating existing ones. Experts are estimating the growth of industry as high as 25% YoY.

Since 2006, most of the major Indian airline operators such as Air India, Indian Airlines, Jet Airways and Kingfisher Airlines have reported large losses, reason being high aviation turbine fuel (ATF) prices, rising labor costs and shortage of skilled labor, rapid fleet expansion, as weel as intense price competition. Adding to all these problems are the new players entering the industry even before the existing players could stabilize their operations. As a result, all the airlines suffered even further when the recession hit.

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Even then also the Indian aviation industry has been more prone to crisis as compared to their global counterparts and thus, India has the highest passenger growth rate among all the airlines sector in the world including economies like France and Australia.

The number of passengers travelling by air will be a whopping 400 million by 2020.” To meet with this accelerated demand, existing players need to increase fleets and broaden their reach including regional destinations as well. They are also going to get the competition from international low cost airlines like Air Asia (Malaysian) and JetStar Asia (Australian).

Flight into the future

As estimated by the Centre for Asia Pacific Aviation (CAPA), by 2011, the Indian aviation sector is likely to cross the mark of 60 million domestic passengers, whereas the total number of passengers i.e. both domestic and international is expected to cross the 100 million-mark over the next three years.

India is gearing up for heavy investments in the aviation sector of India. Accoding to the Investment Commission of India, Investment opportunities of US$ 110 billion are being envisaged up to 2020 with US$ 80 billion towards new aircraft and US$ 30 billion for the development of airport infrastructure.

Over the next 10 years, the Indian aviation sector will try to cash in on the potential to grow by 25% annually, as said by Praful Patel, the Minister for Civil Aviation. Also it could attract the highest investments among all the industries in India i.e. an amount up to $45 billion.

India needs improvements in services offered, huge number of skilled personnel and to stop already experiencing shortage of pilots and thereby problems like direct and indirect employment. Hence, India can look at this time to play a transforming role in this sector, as it holds great promise for development as well needed for the Indian economy to grow at a faster rate.

Major players in domestic market

Indian

Kingfisher Airlines Ltd. Full Fare Airlines

Jet Airways Ltd.

IndiGo

Jetlite

Budget AirlinesSpiceJet

Paramount Airways

Go Air

Kingfisher Red

Current Market Shares

Jet airways and Jetlite : 25.9%

Ki ngfisher: 21.4%

NACIL: 18.2%

IndiGo : 15.7%

SpiceJet: 12.6%

Go Air: 5.9%

Paramount Airways: 0.3%



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