Introduction To Indian Aviation Industry Tourism Essay

Published Date: 23 Mar 2015

Indian Aviation Industry is one of the fastest growing airline industries in the world. The history of Indian Aviation Industry started in December 1912 with its first domestic air route between Karachi and Delhi. It was opened by the Indian Air Services in collaboration with the UK based Imperial Airways as an extension of London-Karachi flight of the Imperial Airways. Tata Sons Ltd., the first Indian airline, started a regular airmail service between Karachi and Madras three years later without any backing from the Indian government.

During the period of independence, 9 air transport companies were carrying both air cargo and passengers in the Indian Territory. In 1948, the Indian Government and Air India set up a joint sector company, Air India International to further strengthen the Aviation Industry of India. As part of nationalization in 1953 of Indian Airlines (IA) brought the domestic civil aviation sector under the purview of Indian Government. Later till the mid 1990's government-owned airlines dominated Indian aviation industry. When the government adopted the Open-sky policy in 1990 and other liberalization policies the Indian Aviation Indian made underwent a rapid and dramatic transformation.

By the year 2000 several private airlines have entered into the aviation business in succession and many more were about to enter into the arena. Indian aviation industry today is dominated by private airlines and low-cost carriers like Deccan Airlines, GoAir, and SpiceJet, etc. And Indian Airlines, the giant of Indian air travel industry, gradually lost its market share to these private airlines. According to the report of CAPA, these budget carriers are likely to double their market share by 2010 -- one of the highest in the world.

 Brief Introduction 

Indian Aviation Industry has been one of the fastest-growing aviation industries in the world with private airlines accounting for more than 75 % of the sector of the domestic aviation market. With a compound annual growth rate (CAGR) of 18 % and 454 airports and airstrips in place in the country, of which 16 are designated as international airports, it has been stated that the aviation sector will witness revival by 2011.

In 2009 with increase in traffic movement and increase in revenues by almost US$ 21.4 million, the Airports Authority of India seems set to accrue better margins in 2009-10, as per the latest estimates released by the Ministry of Civil Aviation.

This is being primarily attributed because of the increase in the share of revenue from Delhi International Airport Limited (DIAL) and Mumbai International Airport Limited (MIAL). Passengers carried by Indian domestic airlines from January-February 2010 stood at 8,056,000 as against 6,761,000 in the corresponding period of 2009-a growth of 19.2 %, according to a report released by the Ministry of Civil Aviation.

Today Hyderabad International Airport has been ranked amongst the world's top five in the annual Airport Service Quality (ASQ) passenger survey along with airports at Seoul, Singapore, Hong Kong and Beijing. This airport in Hyderabad is managed by a public-private joint venture consisting of the GMR Group, Malaysia Airports Holdings Berhad and both the State Government of Andhra Pradesh and the Airports Authority of India (AAI).

The Indian aviation sector can be broadly divided into the following main categories:

Scheduled air transport service includes domestic and international airlines.

Non-scheduled air transport service consists of charter operators and air taxi operators.

Air cargo service, which includes air transportation of cargo and mail.

Scheduled air transport service: It is an air transport service undertaken between two or more places and operated according to a published timetable. It includes:

Domestic airlines, which provide scheduled flights within India and to select international destinations. Air Deccan, Spice Jet, Kingfisher Airline and IndiGo are some of the domestic players in the industry.

International airlines operate from scheduled international air services to and from India.

Non-scheduled air transport service: It is an air transport service other than the scheduled one and may be on charter basis and/or non-scheduled basis. The operator is not permitted to publish time schedule and issue tickets to passengers.

Air cargo services: It is an air transportation of cargo and mail. It may be on scheduled or non-scheduled basis. These operations are to destinations within India. For operation outside India, the operator has to take specific permission of Directorate General of Civil Aviation demonstrating his capacity for conducting such an operation.

PRODUCT PROFILE

The objective of the aviation industry is to provide better service to their customers. So service is the primary product of the industry.

This project will accomplish to provide better the service quality to the passengers. These Flying services of the Indian airlines are divided into three stages-(pre-fight, in-fight, Post-fight services) and I found that the passengers of the Indian airlines has satisfied with service quality of Indian airlines. The aim of the company to provide the better services quality to passengers and the management in particular is very much responsible for this. Through passengers of the airlines the management is getting proper information about the services which are providing at pre-fight, in-fight, post-fight. And to find out the areas where the company needs to improve to service quality of the airlines.

From this study, Indian airlines have come to know about the passengers has satisfied with services.

From this study the passenger perceptions of service quality of airlines.

To assess the level of satisfaction of passengers on exiting passengers facilities provided by airlines.

To provide an effective marketing scheme to passengers. 

This information is a good guide to management as it brings out the strengths of the company and the areas where the company needs to improve the service quality.

SERVICE QUALITY

The concept of services quality its importance has grown in recent years for years for two main reasons. Firstly, we are starting to understand the total concept of service more and are now better able to define what is meant by quality of service. Secondly, researchers are determining ways that service quality can actually be quantified or measured.

Measuring service quality gives marketers a tangible tool to use when developing strategies for marketing services.

The concept of Quality is very important to marketers because quality drives the development of all marketing strategies. This means that quality must also be a major focus of all marketing strategies for service.

The service quality can be measured on the following five dimensions:

Reliability:   The ability to perform the promised service dependably and accurately.

Tangibles:     The appearance of physical facilities, equipment, personnel and communication materials.

Responsive- :  The willingness to help passengers and provide promptness service.

Assurance:  The knowledge and courtesy of employees and their ability to convey trust and confidence.

Empathy   :  The caring, individualized attention provided to the passenger.

 SERVICE QUALITY MODEL

Effective services marketing is a complex undertaking involving many different skills and tasks. Executives of services organizations have long been confused about how to complicated topic in an organized manner. This text was designed around one approach: viewing service in a structured, integrated way called service quality model.

The gaps model position the key concepts, strategies and decisions in services marketing in a manner that begins with the passenger and builds the organization's tasks around what is needed to close the gap between passenger expectation and perceptions.

The central focus of the gaps model is the passenger gap, the difference between passenger expectation and perceptions. Firms need to close this gap-between what passengers expect and receive-in order to satisfy their passenger and build long-term relationships with them. To close this all-important passenger gap, the model suggests that four other gaps-the provider gaps-need to be closed.

The following four provider gaps, shown below the horizontal line in fig. are the underlying causes behind the passenger gap: 

Gap 1: Between management perception and passenger's expect

Gap 2: Between Passenger-driven service design and standards and Company perceptions of passenger expectation

Gap 3: Between service delivery and external communications

Gap 4: Between perceived service and expected service

Gap5: Between Service delivery and Passenger-driven service design and standards.

PASSENGER EXPECTATION OF SERVICE QUALITY

Passenger expectations are beliefs about service delivery that function as standards or reference points against which is judged. Because passenger compare their perceptions of performance with these reference points when evaluating service quality, thorough knowledge about passenger expectations is critical to service marketers. Knowing what passenger expects is the first and possibly most critical step in delivering quality service. Being wrong about what passenger want can mean losing a passenger's business when another company hits the target exactly. Being wrong can also mean expending money, time, and other resources on things that don't count to the passenger. Being wrong can even mean not surviving in a fiercely competitive market.

Among the aspect of expectation that need to be explored and understood for successful services marketing are the following:

What types of expectation standards do passengers hold about services?

What factors most influence the formation of these expectations?

What role do these factors play in changing expectations?

How can a service company meet or exceed passenger expectations?

Objectives are to:

Recognize that passengers hold different types of expectation for service performance.

The sources of passenger expectations of service, including those that are controllable and uncontrollable by marketers.

Acknowledge that the types and sources of expectations are similar for end passengers and business passengers, for pure service and product-related service, for experienced passengers and inexperienced passengers.

Delineate the most important current issues surrounding passenger expectations.

PLAYERS IN THE INDUSTRY

At present, there is decent number of players compared to the one man army scenario prior to 1990's. They are as follows:

I. Air India

The history of Air India is the History of Indian Aviation. It is one of the oldest and the largest airline of India. Air-India was founded by J.R.D. Tata in July 1912 as Tata Airlines. Founded as a small, private, domestic carrier in 1932, Air-India is now owned by government. It operates only on International routes and has negligible presence in the domestic traffic.

II. Indian Airlines

Indian and Air India were born with nationalization of Air Transport in 1953 by way of Air Corporation Act, 1953. Indian Airlines emerged as a merger of 8 domestic carriers. It caters mainly to domestic routes and in some nearest nations.

The two national carriers have enjoyed sole monopoly in the air transport segment over a long period of time as private carriers were debarred from entering the segment under the Air Corporation Act, 1953. The private players like Jet, Sahara and others were made to enter the segment only after the New Economic Policy, 1991 came into existence. Another major turning point has come in the history of the Air Industry when Air India was granted permission from the GOI (Government of India) to merge with Indian Airlines, the two national carriers of India. This Mega Merger marked the first marriage in the Indian skies which was followed by other mergers. The name of the new airline remained Air India, since it is known worldwide.

III. Jet Airways

In May 1974 Jet air (Private) Limited was founded. In 1991, as part of the ongoing diversification programme of his business activities, Naresh Goyal (founder of Jet Airways) took advantage of the opening of the Indian economy and the enunciation of the Open Skies Policy by the GOI, to set up the company for the operation of scheduled air services on domestic sectors in India. It started its International Operations in the year 2004 and carries more than 7 million passengers per annum. In May 2007, Jet Airways took 100% stake in Air Sahara.

IV. Air Sahara

Like Jet, Sahara also began its operations in the year 1993 after the domestic Air Market was opened by the GOI in 1990's. It is owned by the diversified Sahara India Parivar group. Now Air Sahara is being taken over by Jet Airways and it is being renamed as "Jet Lite". Jet has intensions of converting Air Sahara in sync with LCC model to reach every segment of air travelers.

V. Air Deccan

India's first budget carrier arrived in the Air Industry in the year 2003. It is headed by Captain Gopinath, Air Deccan redefined the accessibility to the Indian Skies with new model and concept in the aviation sector. It injected competitive spirits into the system and gave common man wings by reducing airfares which matched the first Class Railway Fares. The third wedding in skies was marked when Vijay Mallya of Kingfisher Airlines picked up 26 % stake in Air Deccan.

Air Deccan is the Nano of the Airline sector; what Tata - Nano plans to do to the automobile industry (converting two wheelers into four wheelers) Air Deccan has done to Aviation industry (shifting people from rail travel to travel by air). Presently, there is a new segment of travelers; the leisure customers. Yet another segment is introduced and that is the first time travelers.

Air Deccan introduced the concept of dynamic pricing which means selling at a higher price during high season (tourist season) and selling cheap during the off-seasons. Therefore, everyday the price would change depending upon the kind of competition and also the load factor. Also it introduced various schemes and programmers.

VI. Kingfisher

The King Fisher initiated its operations in May, 2005. It is a major Indian luxury airline operating an extensive network to 34 destinations, with plans for regional and long-haul international services. Kingfisher Airlines, through one of its holding company UB holdings Ltd has acquired 26% stake in the budget airline Air Deccan.

VII. GoAir

GoAir is an Indian low-cost airline based in Mumbai. It was established in June 2004, the airline started its operations in October 2005 with a fleet of 20 leased Airbus A320 aircraft.

VIII. Indigo

IndiGo Airlines commenced its operations in 2006 and went on to swiftly establish itself as one of the premier budget airlines in the country. IndiGo Airways soon added IndiGo flights and destinations to its network. The unimpeachable services and timely performances of IndiGo flights added to the popularity of the airline.

IX. SpiceJet

SpiceJet, a rebirth of ModiLuft marked its entry in service by offering fares priced at Rs.99 for the first 99 days since its inception in 2005. The carrier is giving tough competition to Railways.

MARKET SHARE

India's domestic aviation market expansion has been the strongest in the world - tripling in the past five years, according to IATA's report.

India is currently the ninth largest aviation market in the world, according to a RNCOS report "Indian Aerospace Industry Analysis". The Government's open sky policy has attracted many foreign players to enter the market and the industry is growing in terms of both players and the number of aircrafts. Given the strong market fundamentals, it is expected that the civil aviation market will register a compound annual growth rate (CAGR) of more than 16 per cent during 2010-2013.

India's domestic air traffic grew at a rate, which is the second highest after Brazil, according to global figures for June 2011, compiled by IATA. The country's domestic traffic grew by 14 percent in the same period as against Brazil's 15.1 percent.

Indian airlines reported a continuous growth trend and a strong domestic passenger growth rate of 22.3 percent in July 2011. Passenger traffic has grown at 18 per cent year on year (y-o-y) basis and the year2010 closed at 90 million passengers both domestic and international. India is the fastest growing aviation market and expected to be within 4-5 big aviation markets by 2020 and 3rd in terms of domestic market after US and China.

In July 2011, airlines in India handled 5 million domestic passengers, according to data released by the DGCA on September 12, 2011, marking the 11th consecutive month of double-digit growth. India's domestic market has witnessed passenger growth for 26 consecutive months now. In July 2011, India's airlines handled 1.3 million international passengers, an increase of 8.5 per cent y-o-y, according to DGCA.

Passengers carried by domestic airlines during Jan-Aug 2011 were 39.63 million as against 33.41 million during the corresponding period of previous year thereby registering a growth of 18.6 per cent, according to data released by DGCA.

India is expected to cross the 450 million mark of domestic passengers by 2020. During the last two decades from a fleet of only about 100, the scheduled operators now have reached 435 aircrafts connecting the nation and the world.

Private carriers are anticipated to post a combined profit of US$ 350-US$ 400 million for the fiscal years2011-12, as reported by CAPA India, in its 2011-12 - Aviation Industry outlook. Domestic capacity is also projected to grow by 12-14 per cent for the assessment period.

Market share of key players in the Indian aviation sector

Name of the players

Market Share

Kingfisher Airlines and Kingfisher Red (previously Air Deccan)

28 %

Jet Airways and JetLite (previously Air Sahara)

25 %

Air India and Indian (previously Indian Airlines)

16 %

IndiGo

14 %

SpiceJet

12 %

GoAir

3 %

DISTRIBUTION CHANNEL IN THE AVIATION INDUSTRY

Distribution is the process of making a product or service available for use or consumption by a consumer or business user, using direct means, or using indirect means with intermediaries.

Airline Reservation System is one of the intermediaries of the distribution channel in the aviation industry. An airline reservation system is part of the so-called passenger service systems (PSS), which are applications supporting the direct contact with the passenger.

Airline reservations systems contain airline schedules, fare tariffs, passenger reservations and ticket records. An airline's direct distribution works within their own reservation system, as well as pushing out information to the GDS. A second type of direct distribution channel is consumers who use the internet or mobile applications to make their own reservations. Travel agencies and other indirect distribution channels access the same GDS as those accessed by the airlines' reservation systems, and all messaging is transmitted by a standardized messaging system that functions on two types of messaging that transmit on SITA's HLN [high level network]. These message types are called Type B [TTY] for remarks-like communications and Type A [EDIFACT] for secured information. Message construction standards are set by IATA and ICAO, are global, and apply to more than air transportation. Since airline reservation systems are business critical applications, and their functionally quite complex, the operation of an in-house airline reservation system is relatively expensive.

Prior to deregulation, airlines owned their own reservation systems with travel agents subscribing to them. Today, the GDS are run by independent companies with airlines and travel agencies as major subscribers.

As of February 2009, there are only three major GDS providers in the market space: Amadeus, Travel port (the merged World span and Galileo systems), Sabre and Shares. There is one major Regional GDS, Abacus, serving the Asian marketplace and a number of regional players serving single countries, including Travel sky (China), Infini and Axess (both Japan) and Topas (South Korea).

Inventory management

An airline's inventory contains all flights with their available seats. The inventory of an airline is generally divided into service classes (e.g. first, business or economy class) and up to 26 booking classes, for which different prices and booking conditions apply.

Inventory data is imported and maintained through a schedule distribution system over standardized interfaces. One of the core functions of the inventory management is the inventory control. Inventory control steers how many seats are available in the different booking classes, by opening and closing individual booking classes for sale. In combination with the fares and booking conditions stored in the Fare Quote System the price for each sold seat is determined.

In most cases inventory control has a real time interface to an airline's Yield management system to support a permanent optimization of the offered booking classes in response to changes in demand or pricing strategies of a competitor.

Availability display and reservation (PNR)

Users access an airline's inventory through an availability display. It contains all offered flights for a particular city-pair with their available seats in the different booking classes. This display contains flights which are operated by the airline itself as well as code share flights which are operated in co-operation with another airline. If the city pair is not one on which the airline offers service it may display a connection using its own flights or display the flights of other airlines.

The availability of seats of other airlines is updated through standard industry interfaces. Depending on the type of co-operation it supports access to the last seat (last seat availability) in real-time. Reservations for individual passengers or groups are stored in a so-called passenger name record (PNR). Among other data, the PNR contains personal information such as name, contact information or special services requests (SSRs) e.g. for a vegetarian meal, as well as the flights (segments) and issued tickets. Some reservation systems also allow storing customer data in profiles to avoid data re-entry each time a new reservation is made for a known passenger. In addition most systems have interfaces to CRM systems or customer loyalty applications (aka frequent traveler systems).

Before a flight departs the so-called passenger name list (PNL) is handed over to the departure control system that is used to check-in passengers and baggage. Reservation data such as the number of booked passengers and special service requests is also transferred to flight operations systems, crew management and catering systems. Once a flight has departed the reservation system is updated with a list of the checked-in passengers (e.g. passengers who had a reservation but did not check in (no shows) and passengers who checked in, but didn't have a reservation (go shows)). Finally data needed for revenue accounting and reporting is handed over to administrative systems.

Fare quote and ticketing

The Fares data store contains fare tariffs, rule sets, routing maps, class of service tables, and some tax information that construct the price - "the fare". Rules like booking conditions (e.g. minimum stay, advance purchase, etc.) are tailored differently between different city pairs or zones, and assigned a class of service corresponding to its appropriate inventory bucket. Inventory control can also be manipulated manually through the availability feeds, dynamically controlling how many seats are offered for a particular price by opening and closing particular classes.

The role of the ticketing complex is to issue and store electronic ticket records and the very small number of paper tickets that are still issued. Miscellaneous charges order (MCO) is still a paper document; IATA has working groups defining the replacement document the electronic multipurpose document (EMD) as at 2010. The electronic ticket information is stored in a database containing the data that historically was printed on a paper ticket including items such as the ticket number, the fare and tax components of the ticket price or exchange rate information. In the past airlines issued paper tickets; since 2008 IATA has been supporting a resolution to move to 100% electronic ticketing. So far, the industry has not been able to comply due to various technological and international limitations. The industry is at 98% electronic ticket issuance today although electronic processing for MCOs was not available in time for the IATA mandate.

KEY ISSUES & CURRENT TRENDS

India is set to experience a transformational growth profile.

The challenges are becoming much greater as the size of the industry increases.

2000‐2010: Indian aviation had to cope with an additional 84m pax,at times, this truly stretched the system;

2010‐2020: Indian aviation may have to handle an incremental 300‐320m pax;

In absolute terms the challenge ahead will dwarf recent history.

Long term planning in line with a clear vision is imperative. We require imagination, strong commitment, a clear and robust regulatory framework and capital.

Is Indian aviation ready to meet this challenge?

How do we create the appropriate framework for the long term?

What kind of regulation do we want -government as regulator or independent regulator?

Independent regulation requires that government does not have stakes in airlines/airports.

Is the industry ready for complete deregulation as in the UK/EU?

Do we want rapid or gradual change?

After reaching agreement on these issues, the roadmap for regulation must be documented.

CAPA believes that India has a clean‐sheet opportunity to create an effective new frame work, that supports industry viability and is focused on security, safety, skills and sustainability.

Key Success Factors for the Next Decade

1. National Agenda: A long term, structured national plan (as part of a broader transportation plan) with an appropriate policy framework is necessary to attract capital.

2. Regulator: A modern, unified, professional regulator, with enhanced expertise.

3. PSUs: Air India and the AAI need to be gradually privatized, while corporatization of air navigation services is essential.

4. HR & Training: World class education & training infrastructure is essential for safe and efficient aviation.

5. Safety: Implementation of safety systems and culture which are comprehensive, enforced and collaborative.

6. Liberalisation: Market access should be liberalized but there must be a level playing field for Indian operators.

7. Taxation: A less punitive fiscal regime -particularly sales tax on fuel -which recognizes that airlines must be viable, is imperative.

8. Investment: Private sector capital should be encouraged in airport development.

9. Profile: Enhanced profile and recognition of aviation within government. And state governments must be educated on the role that aviation plays economic competitiveness

10. Vision: Ministry to concentrate on policy and providing strategic leadership.

PEST ANALYSIS

OVERVIEW:

Air travel has grown in the past decade. Travel grew strongly for both Leisure and business purposes. India will have nearly 800 to 1000 airplanes by2023, it was estimated by Airbus. In spite of growth between 30 to 50 per cent in Indian aviation industry, losses of approximately 2200 core is estimated for the current year.

During 1991-1992, Modiluft, East West and Damania went bankrupt. Air Sahara and Jet Airways survived along with government own Indian Airlines because they had the capability to bear losses. Globalization and privatization had a major impact on aviation industry. Indian aviation industry was deregulated by the government in 1990s. As a result now 14 airlines are operating today in Indian sky. Now, collaboration with international organization and foreign direct investment are welcome to improve infrastructure and technology. Today people who cannot afford high prices of Full Service Carriers (FSC) can travel by Low Cost Carriers (LCC) or budget airlines. Air Deccan was India's first LCC started in 2003. It flies to several metro and non-metro destinations. All airlines have three major fixed costs i.e. fuel costs, financing or aircraft lease and labour cost. But LCC costs are 10 to 15per cent lower than FSC. This is because of three reasons. Firstly, saving on distribution cost as passenger's book tickets on the internet. Secondly, no frills are offered on board. Thirdly, to accommodate additional seats, catering and cabin crew space in these aircraft has been used. So these aircraft have 40 seats more than the FSC.

INDUSTRY ANALYTICS:

PEST analysis of any industry sector investigates the important factors that are affecting the industry and influencing the companies operating in that sector. PEST is an acronym for political, economic, social and technological analysis. Political factors include government policies relating to the industry, tax policies, laws and regulations, trade restrictions and tariffs etc. The economic factors relate to changes in the wider economy such as economic growth, interest rates, exchange rates and inflation rate, etc. Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, changes in tastes and buying patterns, etc. The technological factors relate to the application of new inventions and ideas such as R&D activity, automation, technology incentives and the rate of technological change. The PEST Analysis is a perfect tool for managers and policy makers; helping them in analyzing the forces that are driving their industry and how these factors will influence their businesses and the whole industry in general. Our product also presents a brief profile of the industry comprising of current market, competition in it and future prospects of that sector.

POLITICAL FACTORS:

In India, one can never over-look the political factors which influence each and every industry existing in the country. Like it or not, the political interference has to be present everywhere. Given below are a few of the political factors with respect to the airline industry:

1. The airline industry is very susceptible to changes in the political environment as it has a great bearing on the travel habits of its customers. An unstable political environment causes uncertainty in the minds of the air travelers, regarding traveling to a particular country.

2. Overall India's recent political environment has been largely unstable due to international events & continued tension with Pakistan.

3. The government's inability to control the unbalanced internal situations like the Gujarat riots have also led to an increase in the instability of the political arena.

4. The most significant political event however has been September 11. The events occurring on September had special significance for the airline industry since airplanes were involved. The immediate results were a huge drop in air traffic due to safety & security concerns of the people.

5. International airlines are greatly affected by trade relations that their country has with others. Unless governments of the two countries trade with each other, there could be restrictions of flying into particular area leading to greater loss of potential air traffic (e.g. Pakistan and India)

6. The development of freedom of movement and trade in the European Union has led to greater levels of competition on European routes coupled with increased movement of people.

7. With the liberalization of the Indian aviation sector, the 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 per cent share of the domestic aviation market. Indian carriers currently have a fleet size of 310 aircrafts, but have 480 aircrafts on order, scheduled for delivery by 2012. Increasing liberalization and deregulation has led to an increase in the number of private players.

8. Price of aviation turbine fuel (ATF) crashed drastically in December 2008, hitting US$ 0.665- US$ 0.789, which is its lowest level since the last four to five years. With this move, airlines are likely to prune their airfares considerably. Jet Airways, the country's largest private carrier, has slashed domestic fares by 40per cent and national carrier Air India has announced that it will cut basic fares anywhere between 45 per cent and 60 per cent in February 2009 following a drop in ATF prices.

9. Modernization of Airports: The Ministry of Civil Aviation has decided to modernize and upgrade 35 non - metro airports across India. Leading airport developers are readying to participate in bids to win the right to construct and operate commercial property at these airports. Apart from this, the government is also planning to build Greenfield airports at Navi Mumbai (Maharashtra),Kunnur (Kerala), Hassan and Gulbarga (Karnataka), Ludhiana (Punjab), GreaterNoida ( NCR), Paykong (Sikkim), Cheithu (Nagaland) and Chakan (near Pune,Maharashtra).

10. Entry Barriers for New Players: Stung by the competition unleashed by lowcostplayers like Air Deccan and Spice Jet, bigwigs of the Indian aviation industry have unleashed a hushed campaign for introduction of stiff entry barriers which will prevent competition from intensifying. The current demand is to increase the minimum investment level for scheduled airlines to Rs 250 crore as compared to the current Rs 30 crore. The ministry has also been urged to increase the minimum fleet strength to 10 instead of the current five.

SOCIAL FACTORS:

Social factors relate to pattern of behavior, tastes, and lifestyles. A major component of this is a change in consumer behavior resulting from changes in fashions and styles. The age structure of the population also alters over time (currently we have an ageing population). An understanding of social change gives business a better feel for the future market situation. Increased popularity of foreign travel leading to a boom in demand for air travel. However, this has been adversely affected by international terrorism.

1. For many years in India air travel was perceived to be an elitist activity. This view Arose from the ―Maharajahâ€- syndrome where, due to the prohibitive cost of air travel, the only people who could afford it were the rich and powerful. Indecent years, however, this image of Civil Aviation has undergone a change and aviation is now viewed in a different light - as an essential link not only for international travel and trade but also for providing connectivity to different parts of the country.

Aviation is, by its very nature, a critical part of the infrastructure of the country and has important ramifications for the development of tourism and trade, the opening up of inaccessible areas of the country and for providing stimulus to business activity and economic growth.

2. India witnessed record 9.4% GDP growth in FY07, and has continued the strong growth by recording 9.3% growth in Q1FY08, characterized mainly by strong performance in industry and service sectors. Explosive growth in wages during this period has led to significantly higher disposable income, bringing about a distinct change in the life style of the middle and upper class population, which essentially is the target market of aviation sector. Over the years, airline passenger revenue, as a percentage of private final consumption expenditure (PFCE) on transport services, has grown from about 7.8% in FY03to about 9.8% in FY06. There is an expectation for this to increase to 12% byFY10.

3. Employment Opportunities: India is one of the fastest growing aviation markets in the world. The Airport Authority of India (AAI) manages total of127 airports in the country, which include 13 international airports, 7 custom airports, 80 domestic airports and 28 civil enclaves. There are over 450 airports and 1091 registered aircrafts in the country. This huge and very fast growing sector provides large number of employment opportunities

4. Globally aviation industry is under the scanner because it is the fastest growing cause for global warning; and EU aircraft emissions alone have risen by87% since 1990. The amount of carbon dioxide emitted by air travel doubled between 1990 and 2004; and with huge expansion in air traffic forecasted in both Asia and Europe, predominantly driven by low cost leisure travel, the trend is expected to continue. It is also pertinent to note the high altitude nature of carbon and other airline emission make air travel potentially more damaging than most other forms of transport

It is a phase of rapid growth in the industry with estimated growth of domestic passenger segment at 50% per annum. This has led to intense price competition due to which full service carriers like Jet Airways, Indian Airlines and Air Sahara are giving discounts of up to 60-70% for certain routes to match the new entrants' ticket prices. The customer has thus gained enormously as a result of liberalization of the sector.

ECONOMIC FACTOR:

Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions.

1. Investments in the Sector: The government estimates that the country will need US$400m in private investment in these 35 non - metro airports, while the state - run Airports Authority of India will also have to spend an equal amount. Demand for air travel is growing in India as a result of economic development, globalization, and regulatory liberalization and declining passenger fares. We expect air travel to grow 16% CAGR (14.7% for domestic and 16.5% for international passengers) over the next four years until FY10. This growth in passenger traffic will drive a far larger growth of 20% in airline revenues. Civil Aviation Minister Praful Patel today said the government was considering foreign direct investment (FDI) of up to 25 per cent in Indian carriers by foreign airlines. (Business standard January 14 2009.

2. Rising GDP and increasing per capita income is positively impacting the airlines industry. Another major driver is the booming tourism industry in India. However, the low cost airline segment is facing challenges of increasing competition, rising fuel prices and inadequate infrastructure.

3. Global economic slowdown reflects the impression of hard time in airline sectors of India too. The most popular airlines (Jet Airways, Kingfisher Airlines) which providing their operations in India are facing a tough time in festive seasons. The situation had become so worse that the management of various airlines services was forced to begin sacking of their employees as the aviation industry facing big loss. The whole world witnessed the dramatic scene of firing of 1900 employees of Jet Airways those were taken back under the political pressure. Kingfisher Airlines which is principal rival of Jet Airways also declared some deduction in their number of employees. The situation forced to sign an operational alliance between these two airline flights Jet Airways and Kingfisher Airlines. Just a few days ago all things were going well. Kingfisher Airlines had demanded for new air crafts also a few days ago but all of sudden the whole scene is changed and the airline postponed their decision of including new air crafts in the airline. The various airlines blame the high cost of air fuel in this year in India as compared to the rest of the market for this.

4. Lower interest rates have meant that people have more disposable income to spend on luxuries like long distance air travel.

5. Privatization of International Airports is in offing through Joint Venture route. Three Greenfield airports are getting developed at Kochi, Hyderabad and Bangalore with major shareholding of private sector. The work on Bangalore and Hyderabad airports are already done. Few selected non-metro airports are likely to be privatized. 100% foreign equity has also been allowed in construction and maintenance of airports with selective approval from Foreign Investment Promotion Board. In the context of a multiplicity of airlines, airport operators (including private sector), and the possibility of oligopolistic practices, there is a need for an autonomous regulatory authority which could work as a watchdog, as well as a facilitator for the sector, prescribe and enforce minimum standards for all agencies, settle disputes with regard to abuse of monopoly and ensure level playing field for all agencies.

The CAA was commissioned to maintain a competitive civil aviation environment which ensures safety and security in accordance with international standards, promotes efficient, cost-effective and orderly growth of air transport and contributes to social and economic development of the country.

6. Low-cost Airlines Raise Demand for Aircraft Manufacturing: The entry of several low cost carriers like Air Deccan, Spice Jet etc is increasing the demand for aircraft manufacturing. The demand for helicopters is also likelyto increase with more emphasis on heli-tourism, adventure sports etc.

TECHNOLOGICAL FACTORS:

Over the years, airlines have been straddled with legacy business processes with hardly any effort at re-engineering innovative solutions. With IT industry providing a commendable backbone, airlines can now emerge from the inefficiency they have been restrained with. Innovative strategies and new technologies may well offer cost savings, but at the same time they can be hard to implement given the cost.

1. Modern aircraft are safer and more economic to run than in the past making possible cheap air travel.

2. Growth of Electronic Ticketing: while industry is reducing its exposure to brokers/ travel agents, online ticketing and direct bookings are of late witnessing an increase trend as is clear from the below chart

3. Technical Cooperation with EU: In 2004, India and the EU upgraded their already strong overall relationship into a strategic partnership. This strategic partnership is underpinned by an agreed Joint Action Plan in which civil aviation plays a key enabling role. Since the adoption of the Joint Action Plain September 2005, co-operation in the area of civil aviation has been given new impetus. As a first significant step, the two sides agreed to restore legal certainty to all the bilateral air services agreements between India and EU Member States.

Therefore, it was agreed that a ―horizontal agreement will be finalized as a matter of priority. The aim of the "horizontal agreement" will be to amend certain provisions in the bilateral agreements thereby bringing these into conformity with Community law thus restoring legal certainty to these agreements and the operators flying under them. Secondly, building on the very successful results achieved under the1999-2006 ―EU-India Civil Aviation Co-operation Projectâ€-, Messrs. Prepared a Joint Action Plan that will set out the key priorities for strengthening future technical and technological co-operation.

The Joint Action Plan will identify the main priority areas for future technical cooperation which will cover aviation safety (including strengthening the cooperation with the European Air Safety Agency (EASA)), security, airport infrastructure, air traffic management, environmental policy, economic regulation, training and industrial cooperation. At the EU-India Aviation Summit, India was also invited to become associated in major EU technological programs such as GALILEO, the satellite navigation program, and SESAR, the air traffic management project.

THE RUNWAY AHEAD

According to recent estimates by The International Air Transport Association (IATA), India is likely to be a significant player in the global civil aviation business, which was estimated at US$ 5.6 billion in 2008.The Indian Civil Aviation market grew at a compound annual growth rate (CAGR) of 18 percent, and was worth US$ 5.6 billion in 2008. The government is planning to upgrade 45 big and small airports across India. For Greenfield airports, foreign equity up to 100 percent is allowed through automatic approvals. For upgrading present airports, foreign equity up to 74percent is allowed through automatic approvals and 100 percent through special permission (from FIPB).

The Centre for Asia Pacific Aviation(CAPA) has forecast that domestic traffic will increase by 25 percent to 30 percent till 2010 and international traffic growth by 15 percent, taking the total market to more than 100 million passengers by 2010. India's civil aviation passenger growth, presently at 20percent, is one of the highest in the world, and is expected to surpass countries like China, France and Australia. By 2020, 400 million Indian passengers are likely to be airborne. By 2020, Indian airports are expected to handle more than100 million passengers including 60 million domestic passengers and around3.4 million tonnes of cargo per annum.

Domestic air traffic is likely to more than double and touch 86.1 million passengers by 2010, up from 32.2 million passengers in 2007, states the market research firm PhoCus.Moreover, significant measures to propel growth in the civil aviation sector are on the anvil. The government plans to invest US$ 9 billion to modernize existing airports by 2010. The government is also planning to develop around300 unused airstrips, and subsequently, Boeing and Airbus, along with Embraer(Brazil), Bombardier(Canada), Sukhoi(Russia), ATR(France) and BAESystem (UK) are now looking at foraying into the Indian jet market.

CLEAR SKIES AHEAD: The Indian aviation sector is likely to see clear skies ahead in the years to come. Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA), has called on India to give direction to the efforts in shaping future aviation policies, including environment and commercial freedoms. "In a few years, Asia Pacific will be the largest single aviation market. India is a key driver of that growth. India's enormous size makes it an important market." With a growth rate of 18 percent per annum, the industry will see rapid expansion in terms of players as well as the number of aircrafts. The strength of the Indian fleet is projected to be 500-550 by 2010.

• Cargo transportation is likely to touch 3.4 million tonnes in 2010.

• 480 aircrafts will be delivered by 2012.

• The number of passengers to touch 400 million by 2020.