The Indian Airlines Industry

Prashi Agarwal
Saurabh Goyal
 The Rise & Fall of Maharaja
Maharaja Syndrome Post Maharaja (Liberalization)
 Air travel: an elitist activity  Open skies policy for domestic
 Prohibitive cost of air travel players in 1991
 Air Corporations Act, 1953  Air Corporation Act repealed
– Air India nationalized in 1953  Private airlines reintroduced
– all airlines merged into either  Partial open sky policy for
Indian Airlines or Air India international players only in
– The Directorate General of Civil November 2004
Aviation controlled every aspect of  Full cost carriers, low cost carriers
flying (LCC), start-up airlines (total 21
– Airports Authority of administering today!!)
every aspect of air transport  Nose- diving prices
operation through the Air Traffic
Control.  Privatization of Delhi and Mumbai
airports
 Players 2006
Taking Indians To Places
 State owned domestic airline
 Formerly known as Indian Airlines
 Company rebranded as Indian in
Dec 05 to revamp image in
preparation for an IPO
 GoI’s plan to merge Air India and
Indian into one giant airline
consisting of 130-140 aircraft
 Could take place anytime from
the end 06 to mid 07
 Began on 3 Dec 1993with two
Boeing 737-200 aircrafts as
Sahara Airlines
 Initially services concentrated in
northern India
 Rebranded as Air Sahara on 2
October 2000.
 Uncertainty over the airline's fare
caused domestic markey share to
slide from 11% in Jan 06 to 8.5%
in April
 Set up by J.R.D. Tata
 Nationalised in 1953
 National flag carrier
 44 world-wide destinations
 Profitable in most years since its
inception
 Net profit of Rs.97 m for 2005-06
 Growth of almost 15% over the
previous year.
 “Regular” airline offering normal
economy and business class
seats.
 300 flights, 43 Indian destinations
 Indian market share 32%
 Does not own its brand. Brand
owned by Jetair Enterprises Ltd.
a separate company substantially
owned by Naresh Goyal
 Prevents possible ‘hostile’
takeover bid
 Players 2006
Taking Indians Across India
 Low-cost airline (LCC)
 Began in May 2005
 Entered with Rs. 99 fares for first 99
days
 “Offering low everyday spicey fares”
 Aim: Compete with Indian Railways AC
sgment
 fleet of 6 Boeing 737-800 with 189
seats.
 India's first low-cost carrier
 Started air operations in 2003
 Despite a disastrous maiden flight
which caught fire, Deccan continues
to grow
 Connects 55 cities within India
 Planning a secondary hub at Chennai
International Airport. Due to stock
market downturn Air Deccan's IPO
barely managed to scrape through
 GoAir – The People’s Airline
 established in June 2004
 LCC promoted by The Wadia Group
 GoAir FreeFares
 Relatively small player as compared
to other LCCs
 Initial flights in southern & western
India with the first nine A320s
 Remaining 11 aircrafts being added in
2nd yr
 Services started in May 05
 Initially operates only on domestic
routes.
 Owned by United Beverages Group
under the leadership of Vijay Mallya
 Pushing for amendment of rule which
requires an airline to fly a min of five
years on domestic routes before it can
start flying overseas

Barring such an amendment, first
international flights planned to start in
2010
 Global v/s Indian Scenario
 At the macro-economic level Asia Pacific growth is impressive. India
and China are growing between 8 and 10% each year
 International passenger traffic grew 7.6% where as Asian airlines were
slower—at 6.3%
 Asian freight traffic grew by only 4.2% in comparison to global growth
of 3.2%
 Globally airlines lost US$6 billion in 2005 and in Asia it is a mixed
picture. Some carriers are among the most profitable. Others however
are struggling but still the best performance in the world
 India has moved from 2 state-run airlines to a vibrant industry with
more than 10 players. Indian carriers stole the show in Paris with
US$12 billion of orders
 Huge potential still to be tapped in Indian markets. Only 40 million
people travel by air—4% of the population
 Path forward
Things to Look Forward
Technology Vision 2020
Global airlines traffic to increase in lieu of the good performance
Allowing of Private Participation & FDIs in construction & maintenance of
air traffic infrastructure
Air transport supports US$3 trillion of global economic activity. That is 8%
of global GDP and 29 million jobs

Challenges
Infrastructure
Avian Flu
Tackling the rise in Fuel Price
Waving of Tax Exemption on leasing from government
With the advent of LCC, other airlines too reducing their price
significantly
Costs pressures (ATF Prices & Staff Cost)