Upto 2000 domestic airlines of India was dominated by Air India group.

But the
entry of low cost barriers has tremendously changed the landscape of the domestic
low-cost airline industry in India. Ever since, the airline industry in India has been
under continuous turmoil. The regular price wars, along with changing cost of
operations (primarily oil) has to profitability pressures for many low-cost carriers.
After immense competition, there are only 5-6 players left following the exit of
Kingfisher airlines. The competition again escalated with the entry of new players
such as Air Costa, Vistara and Air Asia.
The past decade also saw the steep increase in the domestic traffic owing to the
affordable ticket prices and increasing surplus income.

Load Factor:
This factor is used to understand the efficiency of proper utilization of public
transport services to generate revenue. The average load factor of the major
companies has increased in the past decade. Spice Jet and Indigo have constantly
maintained a high Load Factor. Kingfisher saw a declining load factor before it was
shut down. The new players also see the rise in the load factor. The constant rise in
per capita income has led to the rise in the demand for airline transportation. With
increasing income at their disposal, people are choosing airlines over train & other
transport and have been flying more frequently.

Playerwise PLF
(per cent) 2009- 2010-11 2011-12 2012-13 2013-14 2014-15 2015-
 10 16

SpiceJet 77 81 74 74 72 82 92

Jetlite 75 79 78 75 73 80 79

Indigo 80 85 82 81 76 79 84

GoAir 78 80 77 75 74 79 84
Jet
72 75 75 73 71 77 81
Airways
Air India 59 62 63 69 72 73 74

Air Asia - - - - - 75 80

Air Costa - - - - - 74 81

Vistara - - - - - 53 69
Air
- - - - - - 78
Pegasus
Trujet - - - - - - 80

Kingfisher 73 83 79 64 - - -
Paramoun
87 86 - - - - -
t
Note:
(i) Air India data includes Indian Airlines, Alliance and Air India

(ii) Kingfisher domestic operations were suspended in October 2012

(iii) Paramount discontinued operations from September 2010

Source: DGCA

Oligopoly Equilibrium
Indian Airlines can be classified into oligopoly. However, vying for the larger
customer share, the airlines are locked in fierce price competition. It also becomes
important to attain the equilibrium state by different airlines to remain operational.
Airplane terminals that have absolutely or halfway regular catchment ranges vie for
withdrawing or arriving travelers. At the point when a potential traveler is choosing
flying from one airplane terminal on the other hand from another, she considers as
an imperative the time she will take to and from the airplane terminal, which
incorporates the separation and holding up time, this last contingent upon
frequencies and timetables. This time has an expense for her so she will pick the air
terminal where she can be locally available all the more rapidly, which implies all
the more efficiently. However, the expense of time is not by any means the only
element that impacts her choice. The value she pays for a carrier ticket is likewise a
vital element of her choice. At that point she will like to leave from the airplane
terminal where the entirety of her flight admission and the expense of time to go
the air terminal is littler. What's more, it regularly happens that diverse aircrafts
charging distinctive passages work in contending air terminals to the same
destinations. In spite of the fact that it might happen, it is improbable that the same
carrier works courses from contending air terminals to the same destinations with
the same passage.
As per many research conducted by using advanced economics techniques, it can
be established that the airline industry set their prices as per Nash Equilibrium.
However, more often than not, Indian airline industry see constant price war. In this
price war, the equilibrium state established by Nash equilibrium over time, is
disturbed and other players are also forced to join the bandwagon.
The most critical variable is advertisers consider cost to be something that can be
played and later returned to once its motivation is accomplished. This is utilized to
rapidly build the piece of the overall industry. However, what they pass up a great
opportunity is it frequently prompts ruthless estimating by opponents as well. This
prompts unique economic situations consequently; however with less benefit for
industry and to the people.
Shoppers consider air go to be a product - that is a method of transport from point A
to point B. There is not really the idea of dedication in aircraft industry; spare some
business explorers for whom Air miles are vital. We can explain this phenomenon by
Bertrand Nash Equilibrium.
Regardless of the fact that a player wouldn't like to be required in a price war,
consequent activities by the competitor will compel him/her to enter. There is a
consistent war among the operators in Airline Industry due to diving edges, high
information costs and new players coming in. They would be under enormous
weight to build piece of the overall industry to meet their objective; however the
government and the industry must incorporate the bigger picture-the health of the
airline industry.