Avistion Industry In India

Aviation Industry In India

Overview

The history of civil aviation in India began in December 1912. At the time of independence, the number of air transport companies, which were operating within and beyond the frontiers of the company, carrying both air cargo and passengers, was nine.

In early 1948, a joint sector company, Air India International Ltd., was established by the Government of India and Air India (earlier Tata Airline) with a capital of Rs 2 crore and a fleet of three Lockheed constellation aircraft. Its first flight took off on June 8, 1948 on the Mumbai (Bombay)-London air route. At the time of its nationalization in 1953, it was operating four weekly services between Mumbai-London and two weekly services between Mumbai and Nairobi. The joint venture was headed by J.R.D. Tata, a visionary who had founded the first India airline in 1932 and had himself piloted its inaugural flight.

Current Trend in Civil Aviation Industry in India

It is a phase of rapid growth in the industry due to huge build-up of capacity in the LCC space, with capacity growing at approximately 45% annually. This has induced a phase of intense price competition with the incumbent full service carriers (Jet, Indian, Air Sahara) dis-counting to 60-70% for certain routes to match the new entrants ticket prices. This, coupled with costs pressures (a key cost element, ATF price, went up approximately 35% in recent months, while staff costs are also rising on the back of shortage of trained personnel), is exerting bottom-line pressure.

The growth in supply is overshadowed by the extremely strong demand growth, led primarily by the conversion of train/bus passengers to air travel, as well as by the fact that low fares have allowed passengers to fly more frequently. There has, therefore, been an increase in both the width and depth of consumption. However, the regulatory environment, infrastructure and tax policy have not kept pace with the industry's growth.

Enactment of the open sky policy between India and Saarc countries, increase in bilateral entitlements with the EU and the US, and aggressive promotion of India as an attractive tourism spot helped India attract 3.2 million tourists in 2004-05. This market is growing at 15% per annum and India is expected to attract 6 million tourists by 2010. Also, increasing per capita income has led to an increase in disposable incomes, leading to greater spend on leisure and holidays and business travel has risen sharply with increasing MNC presence.