Aviation

Aviation refers to activities involving man-made flying devices

(aircraft), including the people, organizations, and regulatory bodies
involved with them.
In general means;
1: the aggregation of a country's military aircraft,
2: the operation of aircraft to provide transportation,
3: the art of operating aircraft,
4: travel via aircraft.
Aviation also applies to the mode of travel provided by aircraft as
carriers of passengers and cargo, and as such is part of the total
transportation system. Aviation also describes the employment of
aircraft in such fields as military aviation. The world of the airplane,
including the people who manufacture, market, and repair aircraft
or who work in allied industries, is frequently spoken of as aviation.

Aviation is broadly grouped into three classes: general aviation, air

transport aviation, and military aviation.
General aviation comprises all aviation not included in military or
air-transport aviation. General aviation covers a huge range of
activities, both commercial and non-commercial, including private
flying, flight training, air ambulance, police aircraft, aerial
firefighting, air charter, bush flying, gliding, and many others.
Experimental aircraft, light-sport aircraft and very light jets have
emerged in recent years as new trends in general aviation.
Military aviation includes all forms of aviation in military activities.
Military aviation is the use of aircraft and other flying machines for
the purposes of conducting or enabling warfare, including national
airlift (cargo) capacity to provide logistical supply to forces stationed
in a theater or along a front. Air power includes the national means
of conducting such warfare including the intersection of transport
and war craft. The wide variety of military aircraft includes bombers,
fighters, fighter bombers, transports, trainers, and reconnaissance
aircraft. These varied types of aircraft allow for the completion of a
wide variety of objectives.
Air-transport aviation is primarily the operation of commercial
airlines essentially as a public utility for the movement of persons
and commodities.
The Aviation industry in India
began with the birth of Tata
Airlines, through the business
relationship between Mr. Nevill
Vintcent, a Royal Air Force pilot
and Mr. JRD Tata, the first Indian to
get an A-license.

Aviation in India

Tata Airlines became Air India in August 1946. In 1953, the Air
Corporation Act nationalized all existing airline assets and established the
Indian Airline Corporation and Air India International for domestic and
international air services respectively.

These two companies enjoyed monopoly power in the industry until 1991,
when private airlines were given permission to operate charter and non
scheduled services under the ‘Air Taxi’ scheme to boost tourism. These
carriers were not allowed at the time, to fly scheduled flights or issue air
tickets to passengers. As a result, a number of private players including
Jet Airways, Air Sahara, Modiluft, Damania Airways, NEPC airlines and
East West Airlines commenced domestic operations. In 1994, following
the repeal of the Air Corporation Act, private players were permitted to
operate scheduled services. Ultimately the carriers with more efficient
operations and strategies survived and by 1997, only Jet Airways and Air
Sahara made the cut from the original group.
The next big change in the industry
came in late 2003 with the
emergence of India’s first no-frill
airlines, Air Deccan. It
revolutionized the industry, offering
fares as low as INR 500 (USD 10
roughly), compared with Full
Service fares offered by the
incumbents, averaging about INR
3000 or more.

Since then, Spice Jet (restructured Royal Airways and Modiluft), Go

Airways and Kingfisher Air have also entered the industry. Paramount
Airways is another player, though it is positioned on the other end of the
spectrum, as an ‘all business class’ airline. With the further advent of
online ticket sales through companies such as makemytrip.com, prices
have crashed and tickets are available for as little as INR 0.99. In fact,
now many airline tickets can be bought for a price comparable to an
upper class railway ticket for the same route.

In December 2004, Indian scheduled carriers with a minimum of 5 years

of continuous operations and a minimum fleet size of 20 aircraft were
permitted to operate scheduled services to internationals destinations.
On January 11, 2005 the government designated four scheduled Indian
carriers (Air India, Indian Airlines, Jet Airways and Air Sahara) to operate
international services to and from Singapore, Malaysia, Thailand, Hong
Kong, the UK and the USA.

Aviation Industry in India is one of the fastest growing aviation industries

in the world. With the liberalization of the Indian aviation sector, aviation
industry in India has undergone a rapid transformation. From being
primarily a government-owned industry, the Indian aviation industry is
now dominated by privately owned full service airlines and low cost
carriers. Private airlines account for around 75% share of the domestic
aviation market. Earlier air travel was a privilege only a few could afford,
but today air travel has become much cheaper and can be afforded by a
large number of people. The sector contributes 0.2% to the country’s GDP
(at 1999-2000 prices). Domestic air cargo traffic has been growing at
CAGR of 11.23% from 2002-03 to 2007-08, whereas international air
cargo traffic has been moving at CAGR of 12.16% during the same
period.
 Ministry of Civil Aviation (India)
The Ministry of Civil Aviation, India is responsible for the regulation of civil
aviation in India. The Ministry of Civil Aviation is the nodal Ministry
responsible for the formulation of national policies and programmes for
development and regulation of Civil Aviation and for devising and
implementing schemes for the orderly growth and expansion of civil air
transport. Its functions also extend to overseeing airport facilities, air
traffic services and carriage of passengers and goods by air. The Ministry
also administers implementation of the Aircraft Act, 1934 and is
administratively responsible for the Commission of Railways Safety.

Composition of the Ministry

The ministry is under the charge of a Minister of State for Civil Aviation
and Praful Patel is the present incumbent. The Secretary is the head of
the Ministry and is assisted by one Additional Secretary & Financial
Adviser, three Joint Secretaries, seven officers of the level of Director /
Deputy Secretary / Financial Controller and ten officers of the level of
Under Secretary. It is located at Rajiv Gandhi Bhavan, Safdarjung Airport,
New Delhi.

The Ministry has under its purview the following organizations:

Autonomous/Attached Organizations
Directorate General of Civil Aviation
Bureau of Civil Aviation Security BCAS
Commission of Railway Safety
Indira Gandhi Rashtriya Uran Akademi

Air Carriers
Air India
Indian Airlines
Pawan Hans Helicopters Ltd.

Airports
Airports Authority of India
 Major Players
INTERNATIONAL PLAYERS

DOMESTIC PLAYERS
Players in Indian aviation industry can be categorized in three groups:
Public players
Private players
Start up players

There are three public players: Air India, Indian Airlines and Alliance Air.
The private players include Jet Airways, Sahara, Paramount, Go Air
Airlines, Kingfisher Airlines, Spice Jet, Air Deccan and many more. The
startup players is those which are planning to enter into the markets.
Some of them are Omega Air, Magic Air, Premier Star Air and MDLR
Airlines.

Rankings in Aviation Sector

Company Score Ranks

Jet Airways 136.9 1

Air India (NACIL) 132.7 2
Kingfisher Airlines 131 3
British airways 131 4
Air Deccan 129.3 5
Luftansa 127.7 6
GoAir 126.2 7
SpiceJet 123.8 8
Indigo 121.2 9
Paramount Airlines 119 10
 Aviation Operating Costs

Following are the operational costs involved in aviation sectors;

Labor: Human factors are the basic requirement of any industry.

Approximately 36% of cost is incurred on labor.
Fuel: It’s an important requirement of aviation sector. It’s the fuel
that drives the aviation industry. About 11.7% cost is incurred on
fuel.

Passenger food: 3.5%

Passenger traffic commission: 10%

Landing fees: 2.2%

Advertising & promotion: 1.6%

All others: 35%

 Current Scenario
Current Business Scenario is considered as Recession. Recession is a
contraction phase of Business cycle. An Economic slowdown during which
trade & industrial activities are reduced is termed as ‘Recession’. During
recessions, many macroeconomic indicators vary in a similar way.
Production as measured by Gross Domestic Product (GDP), employment,
investment spending, capacity utilization, household incomes and
business profits all fall during recessions. Current Recession is an
outcome of US Economy. Official economic data shows that a substantial
number of nations are in recession as of early 2009. The US entered a
recession at the end of 2007, and 2008 saw many other nations follow
suit.
Causes of recessions:
Crisis theory
Tendency of the rate of
profit to fall
Currency crisis
Energy crisis
War
Under consumption
Overproduction
Financial crisis

Effects of Recession:
Unemployment
Bankruptcies
Credit crunches
Deflation (or disinflation)
Foreclosures
 Impact of current scenario on
Aviation

Causes for affected Aviation:

Fuel Prices
Decreasing in Passengers Turnover
Competition
Low Investments
Acquiring more Loans

Impact
Country's domestic aviation sector has been facing huge losses, in the
tune of about Rs 10,000 crore, due to excess capacity, irrational pricing &
under utilization of resources. Airlines are now shifting flights to low-cost
platforms to increase traffic and reduce costs. The ongoing recession is
expected to result in severe losses for airlines in 2009, particularly for the
private players, which comprise 75 per cent of the domestic aviation
market. ``Most players are going through unacceptable levels of losses.
Markets are under extreme price competition. Bulk of the growth has
come from low price points, but disappeared when airlines attempted to
raise fares to break-even,’’ said Gilbert George, senior general manager,
Jet Airways.
Industry body, International Air
Transport Association (IATA),
expects cargo traffic to fall 13 per
cent, passenger traffic to go down
by 5.7 per cent and airline revenues
to decline by 12 per cent or $63
billion in 2009. ``The Indian
aviation industry transformed from
being a regulated and poorly
managed sector to an open,
friendly and strategically important
industry for the country’s economy.
However, rapid growth resulted in
resource crunch and infrastructure
is not in line with expansion,’’ said
Aajay K Mehra, managing director,
South Asia, Airbus.

Air travel is all set to go cheaper with the country’s leading full-service
carriers working on ideas to revive demand across recession hit aviation
sector by cutting air fares. Though low fares resulted in higher traffic it
also led to lower yield, which combined with higher input cost put severe
strain on airlines finances. Most of the newly launched airlines were
running in losses, even the more established airlines were finding it hard
to make profit regularly. Towards the end of 2006, mounting price war,
financial losses and rapidly expanding capacity created a situation where
an imminent catastrophe of closure of several airlines looked real
enough.

If Indian aviation in 2007 has to be described in a single word then

‘consolidation’ would be the right term to use. After a fiercely fought
price war in 2006, that saw several airlines coming dangerously close to
bankruptcy. Analysts expected that the impact of these consolidations
would be felt in 2008; while in the case of Air India-Indian Airlines merger
infusion of new funds was not expected, in the case of Deccan-Kingfisher
merger a significant infusion of funds was thought to be inevitable in the
light of the poor financial health of Air Deccan. Passenger traffic
continued to grow at a healthy rate in 2007. This prompted nearly all the
airlines to place orders for buying new aircraft, undeterred by the fact
that they posted combined losses of about Rs 2,000 crore largely on
account of rising fuel costs.

While yields slid, operation costs mounted. Airline CFOs were reported to
claim that more than 80 percent of the cost had become "uncontrollable".
These included wage and fuel costs (60 percent of all expenses) and
higher depreciation and interest charges. These were taking a toll on the
financial health of all airlines.

The airlines seemed to believe that if they could garner a fair share of the
market then profit would automatically follow. This was obviously based
on an inadequate understanding of basic economics. In a competitive
market an enterprise can become a price setter if and only if it
establishes a dominant position (thumb rule - a market share of over
50%), failing that the enterprise has to remain a price taker. For example,
as recently as in late 2007 in order to gain market share GoAir positioned
its fares around 30 per cent lower than most airlines and on a clogged
sector like Mumbai-Delhi, where a Kingfisher ticket cost Rs 2,000 as basic
fare a GoAir ticket went as low as Rs 500.

Jet Airways and Kingfisher Airlines, which between them have about 60
per cent of the domestic market, agreed on an alliance to cut costs
through code-sharing, sharing of ticketing, ground services, joint fuel
management, crew training and utilization.

Impact on Employees
The turmoil of financial crisis is on and it is now showing up its sign on
the Indian Aviation industry. With many firms around the globe laying-off
its workforce in order to cut cost.

The most happening airline

company of India, Kingfisher
Airlines, has decided to go for a
massive layoff. Due to volatile fuel
prices burining a hole in the pocket
of Airline companies, they are
forced to go for cost cutting
measures. In the aviation industry,
Vijay Mallya-promoted Kingfisher
Airlines is cutting 300 jobs, besides
returning surplus aircrafts.

India’s largest careet Air India is in

move to temporary layoff of 15,000
staff. Air India said it is considering
a plan to give 3-5 years leave
without pay to about 15,000 of its
staff, but it would be voluntary
action on the employees part.

Top private airline, has laid off

about 850 employees due to falling
air travel and soaring costs. This is
one of the largest lay-offs in the
history of Indian aviation.

Jet Airways, in a
statement, said it would reduce
probationary and temporary
workers in other areas, including
management and pilots, as it
planned to cut flights by about 15
per cent over winter.

GOAIR is yet to clear the final salary

settlement of its 500 ex-employees,
300 of whom were asked to leave
between May & September to cope
with a severe cash crunch.

Jet Airways
Jet Airways is an airline based in Mumbai, India. It is India's third
largest airline after Air India and Kingfisher Airlines. It operates over
400 daily flights to 64 destinations worldwide. Its primary base is
Mumbai's Chhatrapati Shivaji International Airport with secondary
hubs at Brussels, Chennai, Delhi and Ahmedabad, Bangalore,
Hyderabad, Kolkata, Pune as focus cities. Jet Airways has come a
long way since its first flight in 1993. It's one of the fastest growing
airlines in the world, and now it's all set to change the way you fly -
for the better! Jet Airways operates flights to 20 international
destinations, offering you a better choice in the skies.

Statistics
Jet Airways Domestic Operations Statistics

Aircraf
% Cargo % Passeng
t
Year Passenger Increase/Decr carried Increase/De er seat
RPK Flown
ended s ease (in crease factor
(Block
(in PAX) tons) (in Cargo) (%)
Hours)

April-05
to 165,72
9,115,459 - 7,875 105,173 - 73.7%
March- 9
06

April-06 9,900,970 ▲8.62% 8,538 117,946 ▲12.14% 190,91 70.2%

to 1
March-
 07

April-07
to 194,91
9,786,980 ▼1.15% 8,565 114,240 ▼3.14% 70.9%
March- 6
08

April-08
to 181,23
7,972,757 ▼18.54% 6,884 85,046 ▼25.55% 66.9%
March- 2
09

Jet Airways International Operations Statistics

Aircraf
% Cargo % Passeng
t
Year Passenger Increase/Decr carried Increase/De er seat
RPK Flown
ended s ease (in crease factor
(Block
(in PAX) tons) (in Cargo) (%)
Hours)

April-05
to
441,142 - 1,701 10,724 - 17,857 65.0%
March-
06

April-06
to
825,904 ▲87.22% 3,770 23,846 ▲122.36% 36,238 68.0%
March-
07

April-07
to
1,641,930 ▲98.80% 8,350 51,517 ▲116.04% 72,598 67.5%
March-
08
April-08
to 14,55 131,77
3,107,278 ▲89.25% 96,386 ▲87.10% 68.2%
March- 9 5
09

Bottom of Form
 Vertical Balance Statement
(Rs crore)
Mar ‘ Mar ‘ Mar ‘ Mar ‘ Mar ‘
09 08 07 06 05
Sources of funds
Owner’s fund
Equity share capital 86.33 86.33 86.33 86.33 86.33
Share application money - - - - -
Preference share capital - - - - -
1,208.3 1,765.4 2,018. 2,057. 1,664.
Reserves & surplus
2 2 48 53 56
Loan funds
4,775.9 1,612.7
Secured loans 742.46 206.02 60.00
2 5
11,547. 10,402. 5,313. 4,689. 2,904.
Unsecured loans
61 29 84 58 84
17,618. 13,866. 8,161. 7,039. 4,715.
Total
18 79 11 46 73
Uses of funds
Fixed assets
18,763. 16,591. 5,713. 4,312. 5,162.
Gross block
74 09 83 07 79
1,862.3 2,699.9
Less : revaluation reserve 132.44 162.02 259.27
0 0
2,501.8 2,506.9 2,416. 2,249. 2,593.
Less : accumulated depreciation
0 2 34 58 46
14,399. 11,384. 3,165. 1,900. 2,310.
Net block
64 27 05 47 06
1,223.2 3,994. 2,725.
Capital work-in-progress 583.17 71.32
8 52 66
1,745.0 1,475.3 1,595.
Investments 68.93 187.23
0 5 73
Net current assets
4,350.7 4,145.6 3,402.
4,091. 2,156.
Current assets, loans & advances
0 7 32 31 27
3,460.3 4,361.7 2,469.
1,865. 1,417.
Less : current liabilities & provisions
3 8 71 21 65
2,226.
Total net current assets 890.37 -216.11 932.61 738.62
10
Miscellaneous expenses not written - - - - -
Total 17,618. 13,866. 8,161. 7,039. 4,715.
 Mar ‘ Mar ‘ Mar ‘ Mar ‘ Mar ‘
09 08 07 06 05
18 79 11 46 73
Notes:
1,645.0 1,465.0
Book value of unquoted investments - - -
0 0
1,603.
Market value of quoted investments 100.02 10.35 69.01 190.06
68
16,325. 14,284. 6,624. 9,736. 3,097.
Contingent liabilities
90 97 43 40 06
Number of equity shares outstanding
863.34 893.34 893.34 863.34 863.34
(Lacks)
 Profit Loss account
(Rs crore)
Mar ' Mar ' Mar ' Mar ' Mar '
09 08 07 06 05
Income
11,571. 8,811. 7,057. 5,693. 4,338.0
Operating income
15 10 78 73 1
Expenses
Material consumed - - - 63.12 71.96
7,446.4 5,129. 3,667. 2,456. 1,622.3
Manufacturing expenses
8 92 20 60 0
1,410.5 1,205.
Personnel expenses 938.55 567.81 374.74
0 18
1,098.1
Selling expenses 982.86 800.85 774.02 559.06
7
1,017.5
Administrative expenses 739.24 616.12 420.02 269.89
4
Expenses capitalized - - - - -
10,972. 8,057. 6,022. 4,281. 2,897.9
Cost of sales
69 20 72 57 5
1,035. 1,412. 1,440.0
Operating profit 598.46 753.90
06 16 6
Other recurring income 112.27 115.23 90.36 77.36 51.57
1,125. 1,489. 1,491.6
Adjusted PBDIT 710.73 869.13
42 52 3
1,450.8 1,056.
Financial expenses 909.70 691.24 461.31
6 03
Depreciation 899.81 777.80 414.10 406.41 457.00
Other write offs - - - - -
-
- -
Adjusted PBT 1,639.9 391.87 573.32
964.70 198.38
4
-
Tax charges 22.21 23.42 270.22 190.14
160.73
-
- -
Adjusted PAT 1,662.1 121.65 383.18
803.97 221.80
5
Nonrecurring items 331.48 522.01 225.25 289.38 -10.01
Other non cash adjustments 928.33 28.90 24.49 41.01 18.82
-
Reported net profit -402.34 27.94 452.04 391.99
253.06
 Mar ' Mar ' Mar ' Mar ' Mar '
09 08 07 06 05
Earnings before appropriation -261.44 208.91 525.37 601.71 273.98
Equity dividend - - 51.80 51.80 25.90
Preference dividend - - - - -
Dividend tax - - 8.80 7.27 3.63
Retained earnings -261.44 208.91 464.77 542.64 244.45

Ratio Analysis
Profitability ratios
Operating margin (%) 5.17 8.55 14.66 24.80 33.19
Gross profit margin (%) -2.60 -0.27 8.79 17.66 22.66
Net profit margin (%) -3.44 -2.83 0.39 7.83 8.93
Adjusted cash margin (%) -6.52 -0.29 2.69 9.15 19.14
-
Adjusted return on net worth (%) -43.41 -10.53 5.67 21.88
128.38
Reported return on net worth (%) -31.07 -13.66 1.32 21.08 22.38
Return on long term funds (%) -1.41 0.74 9.53 16.80 21.93
Leverage ratios
Long term debt / Equity 9.33 5.63 2.75 2.21 1.69
Total debt/equity 12.61 6.49 2.88 2.28 1.69
Owners fund as % of total source 7.34 13.35 25.79 30.45 37.12
Fixed assets turnover ratio 0.62 0.53 1.28 1.38 0.84
Liquidity ratios
Current ratio 1.26 0.95 1.38 2.19 1.52
Current ratio (inc. short term loans) 0.37 0.60 1.07 1.66 1.52
Quick ratio 1.09 0.77 1.18 1.97 1.21
7,370. 2,143. 5,601.4 4,951.0
Inventory turnover ratio 7,111.49
16 82 1 7

Cash flow
Mar ' Mar ' Mar ' Mar ' Mar '
09 08 07 06 05

Profit before tax -469.62 -412.59 51.36 722.26 582.13

Net cashflow-operating activity -376.30 862.66 687.46 607.48 1,355.0

 Mar ' Mar ' Mar ' Mar ' Mar '
09 08 07 06 05

- - - -
-
Net cash used in investing activity 1,153.6 6,176.8 2,471.5 1,779.9
786.08
5 0 6 2

1,242.1 5,123.2 1,587.8

Netcash used in fin. activity 732.33 915.33
2 2 3

Net inc/dec in cash and equivalent -287.83 -190.92 633.71 -276.25 490.43

Cash and equivalent begin of year 670.55 861.47 227.76 504.01 13.58

Cash and equivalent end of year 382.72 670.55 861.47 227.76 504.01