Abstract

India is one of the fastest growing aviation markets in the world. With the liberalization of the Indian aviation sector, the industry had witnessed a transformation with the entry of the privately owned full service airlines and low cost carriers. As of May 2006, private carriers accounted for around 75% share of the domestic aviation market. The sector has also seen a significant increase in number of domestic air travel passengers. Some of the factors that have resulted in higher demand for air transport in India include the growing middle class and its purchasing power, low airfares offered by low cost carriers, the growth of the tourism industry in India, increasing outbound travel from India, and the overall economic growth of India. In addition to these factors, the emphasis on modernization of non-metro airports, fleet expansion by airlines, service expansion by state owned carriers, development of the maintenance, repair and overhaul (MRO) industry in India, opening up of new international routes by the Indian government, establishment of new airports and renovation and restructuring of the existing airports have added to the growth of the industry. However, in mid-2006, many airline operators announced large losses. Analysts opined that a combination of factors such as high aviation turbine fuel (ATF) prices, rising labor costs and shortage of skilled labor, rapid fleet expansion, and intense price competition among the players were responsible for the losses in this sector. The problem was also compounded by new players entering the industry even before the existing players could stabilize their operations. It was estimated that the industry as a whole could face losses of over Rs. 22 billion in 2006-07. Some experts expect the industry to consolidate in the near future. The government also was keen to restrict the losses in this sector by closer scrutiny of the business plans of new entrants, conducting quarterly financial audits, etc.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

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Keywords

India Aviation Industry, Ministry of Civil Aviation , Air Traffic Growth, Jet Airways, Indian Airlines, Low Cost Carriers, Kingfisher Airlines, Airport Infrastructure, Inland Air Travel Tax, Price Wars Competition, Government Policy, Air Deccan, Tourism Travel, Aviation Turbine Fuel, Liberalization, Fleet Expansion