AVIATION INDUSTRY IN INDIA

HISTORY OF THE AVIATION INDUSTRY IN INDIA:

Indian Aviation Industry is one of the fastest growing airline industries in the world. The
history of civil aviation in India began in December 1912. This was with the opening of
the first domestic air route between Karachi and Delhi by the Indian state Air services in
collaboration with the Imperial Airways, UK, though it was a mere extension of London-
Karachi flight of the latter airline. Three years later, the first Indian airline, Tata Sons
Ltd., started a regular airmail service between Karachi and Madras without any
patronage from the government.

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. It was reduced to eight, with Orient Airways shifting to Pakistan.
These airlines were: Tata Airlines, Indian National Airways, Air service of India, Deccan
Airways, Ambica Airways, Bharat Airways and Mistry Airways.

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-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 in1932 and had also piloted its inaugural flight.

PERFOMANCE OF THE AVIATION INDUSTRY:

PASSENGER AIRLINES- “THE BIG PLAYERS”

1) IndiGo
Introduction- IndiGo is an Indian low-cost airline headquartered at Gurgaon, Haryana,
India. It is the largest airline in India by passengers carried and fleet size, with a 49.9%
domestic market share as of April 2019. It is also the largest individual Asian low-cost
carrier in terms of jet fleet size and passengers carried, and the seventh largest carrier in
Asia with over 46 million passengers carried in 2017. The airline operates flights to 66
destinations – 51 domestic and 15 international. It has its primary hub at Indira Gandhi
International Airport, Delhi.

History- IndiGo was founded in 2006 as a private company by Rahul Bhatia of

InterGlobe Enterprises and Rakesh Gangwal, a United States based NRI. InterGlobe had
a 51.12% stake in IndiGo and 47.88% was held by Gangwal's Virginia-based company
Caelum Investments. It commenced operations on 4 August 2006 with a service from
New Delhi to Imphal via Guwahati. By the end of 2006, the airline had six aircraft and
nine more aircraft were acquired in 2007.

Performance (As on March 2019):

PARTICULARS AMOUNT (IN Rs. Crore)

Sales 5101.98
Other Operating Income 0.00
Operating Profit 591.36
Other Income 376.54
EBITDA 967.90
Interest 132.58
Depreciation 218.52
Tax 27.21
Net Profit 589.59
EPS 15.32

2) SpiceJet
Introduction- SpiceJet is an Indian low-cost airline headquartered in Gurgaon, India. It is
the second largest airline in the country by number of domestic passengers carried, with
a market share of 13.6% as of March 2019. The airline operates 312 daily flights to 55
destinations, including 47 Indian and 7 international destinations from its hubs at Delhi,
Kolkata, Mumbai and Hyderabad.

History- The origins of SpiceJet can be tracked back to March 1984 when the company
was established by Indian industrialist S. K. Modi to provide private air taxi services. On
17 February 1993, the company was named as MG Express and entered into technical
partnership with the German flag carrier Lufthansa. The airline provided passenger and
cargo services under the name of Modiluft before ceasing operations in 1996. In 2004,
the company was acquired by Ajay Singh and the airline planned to restart operations
as SpiceJet following the low-cost model.

Performance (As on March 2018):

PARTICULARS AMOUNT (IN Rs. Crore)

Sales 2004.78
Other Operating Income 24.60
Operating Profit 65.11
Other Income 60.41
EBITDA 125.52
Interest 25.88
Depreciation 59.13
Tax 0.00
Net Profit 40.51
EPS 0.68

3) GoAir
Introduction- GoAir is an Indian low-cost airline based in Mumbai, India. It is owned by
the Indian business conglomerate Wadia Group. In October 2017 it was the fifth largest
airline in India with an 8.4% passenger market share. It commenced operations in
November 2005 and operates a fleet of Airbus A320 aircraft in all economy
configurations. As of May 2019, the airline operates over 230 daily flights to 28
destinations, including 24 domestic and 4 international destinations, from its hubs at
Mumbai, Delhi, Bangalore, Kolkata and Kannur.

History- GoAir was founded in Nov 2005 by Jeh Wadia, son of Indian industrialist Nusli
Wadia. The airline is a wholly owned subsidiary of the Wadia Group. GoAir commenced
its operations using an Airbus A320 aircraft and operated its inaugural flight from
Mumbai to Ahmedabad on 4 November 2005. The airline initially operated with a single
aircraft to four destinations including Goa and Coimbatore with plans to induct 36
aircraft by 2008.

Performance- Wadia group-owned airline GoAir has realigned its growth plans owing to
rising fuel price, troubles with new plane engines and shortage of pilots. The airline has
charted a modest expansion in the world’s fastest-growing aviation market and is
simultaneously looking to lease out some of its old planes, as fuel cost is hurting profit.
For the financial year 2019, the revenue of GoAir was Rs.3513 crore and it earned a
profit of Rs. 190 crore
4) Vistara
Introduction- Vistara is an Indian domestic airline, based in Gurgaon, with its hub at
Indira Gandhi International Airport. Vistara is a joint venture of Tata Sons Limited and
Singapore Airlines Limited (SIA), wherein Tata Sons holds 51% stake in partnership and
Singapore Airlines owns 49% stake. The airline has a 3.3% share of the domestic carrier
market, making it the 6th largest domestic airline.

History- The airline was founded in 2013 as a joint venture between India's
conglomerate Tata Sons and Singapore Airlines (SIA). It commenced operations on 9
January 2015 with its inaugural flight between Delhi and Mumbai. The two companies
had made a bid in the mid-1990s to launch a full service carrier in India that was
unsuccessful, being denied regulatory approval by the Indian government. With India
opening up its airline sector for 49 percent foreign direct investment (FDI) in 2012, Tata
and SIA once again decided to float a JV airline company in India. The company unveiled
its brand identity "Vistara" on 11 August 2014.

Performance- Premium carrier Vistara’s annual net loss shrunk to Rs. 431.30 crore in
FY18 from Rs. 518.45 crore a year ago on improved performance but the airline is some
distance from profitability. The airline, a joint venture between Tata Sons and Singapore
Airlines, posted a 54% rise in revenues to Rs 2,137 crore during the year. The value of
net reserves and surplus at Vistara depleted to a negative of 1,556.44 crore in fiscal
2018 from a negative of 1,125.34 crore during fiscal 2017, according to the documents.
The airline’s total current and non-current liabilities increased to 812 crore at the end
of March 2018, compared to 753 crore at the end of March 2017.Net cash flows stood
at a negative of 393 crore for fiscal 2018.

5) Air India
Introduction- Air India is the flag carrier airline of India, headquartered at New Delhi. It
is owned by Air India Limited, a government-owned enterprise, and operates a fleet of
Airbus and Boeing aircraft serving 94 domestic and international destinations. The
airline has its hub at Indira Gandhi International Airport, New Delhi, alongside several
focus cities across India. Air India is the largest international carrier out of India with an
18.6% market share.

History- Air India had its origin as Tata Air Services later renamed to Tata Airlines
founded by J. R. D. Tata of Tata Sons, an Indian aviator and business tycoon. In April
1932, Tata won a contract to carry mail for Imperial Airways and the aviation
department of Tata Sons was formed with two single-engine de Havilland Puss Moths.
On 15 October 1932, Tata flew a Puss Moth carrying air mail from Karachi to Bombay
(currently Mumbai) and the aircraft continued to Madras (currently Chennai) piloted by
Nevill Vintcent, a former Royal Air Force pilot and friend of Tata.
Performance- The loss-making Air India is estimated to have a debt burden of over Rs.
48,000 crore and the government's efforts for strategic disinvestment of the carrier
failed in May last year. While Air India's passenger count rose by only 4 per cent in the
December 2018 quarter, its revenue from passengers increased by 20 per cent from Rs
4,615 crore in third quarter of 2017-18 to Rs 5,538 crore in third quarter of 2018-19 on
the back of better aircraft utilization. Air India has been making losses since the merger
with Indian Airlines in 2007. What they are working on now is a robust revival plan for
Air India that will position it well for being a strong competitor in the near future.

CURRENT SCENARIO OF THE AVIATION INDUSTRY IN INDIA:

The Indian Aviation Industry is currently one of the fastest growing aviation industries in
the world. It has a compound annual growth rate of 18%. There are 449 airports and
airstrips in India, of which more than 20 are designated as international airports.

India’s civil aviation industry is not only growing rapidly but also seems to have become
a more mature market than at any time in the past. The number of players in the
industry still remains fairly large but these are now the ones that will be there for the
long run. The big changes expected in the current year are the strategic sale of public
sector giant Air India and the emergence of numerous regional airports that will
increase connectivity tremendously across the country. In addition, policy changes like
allowing foreign direct investment in domestic airlines has changed the market
landscape. Passenger traffic is also rising by leaps and bounds as consumers are shifting
from rail to air in large numbers.

Air Travel Growth Doubles

The latest data released by aviation regulator Directorate General of Civil Aviation
(DGCA) reveals that domestic air traffic nearly doubled to 117 million passengers in
2017 with 100 flights taking off every hour compared with 67 in 2011. As against 59.87
million passengers in 2011, there were 117.18 million passengers in 2017. There was
also an 18% growth in passenger traffic in 2017. In addition, flights were operating at
fuller capacity than in the past, from 75.5 per cent full in 2011 to 86.1 per cent full in
2017.
As of 2019, IndiGo dominates the skies with a nearly 49.9% market share. SpiceJet is at
13.6%, Air India 18.6%, GoAir 8.4%, AirAsia and Vistara at 3.3%. Kingfisher Airlines, Jet
Airways, Paramount Airways and Air Costa have disappeared from the scene. Vistara,
AirAsia India and TruJet are the new entrants.

India to be Third Largest Aviation Market

The country is now poised to become the third largest aviation market by 2025,
overtaking the UK, according to the International Air Transport Association (IATA). It will
follow China and the US. The existing aircraft fleet stands at 548 and another 920
aircraft are on order and will arrive by 2025.

The inflow of foreign investment has led to acceleration in the industry’s growth over
the last seven years. According to data released by the Department of Industrial Policy
and Promotion (DIPP), FDI inflows in air transport (including air freight) between April
2000 and September 2017 stood at $1.59 billion. According to Morgan Stanley, the
country will witness an investment of $25 billion in the next decade in the airports
sector, and traffic growth of 13 per cent. It has projected that the share of air travel in
air and rail travel combined in the country will grow to 15.2 per cent by 2027 from 7.9
per cent now.

CASE STUDY OF A DEFUNCT AIRLINE- KINGFISHER AIRLINES:

Kingfisher Airlines Limited was an airline group based in India. Kingfisher Airlines was
established in 2003. It was owned by the Bengaluru based United Breweries Group. The
airline started commercial operations on 9 May 2005 with a fleet of four new Airbus
A320-200s operating a flight from Mumbai to Delhi. Its registered office was located
in UB City, Bangalore.

Ever since the airline commenced operations in 2005, it reported losses. The acquisition
of loss-making Bangalore-based Air Deccan in 2007 made matters worse. It was believed
that Vijay Mallya and his team failed to follow due diligence with the airline and that it
was this deal that brought down his empire. On 15 November, 2011 the airline released
poor financial results, indicating that it was "drowning in high-interest debt and losing
money". Mallya indicated that his solution was for the government to reduce fuel and
other taxes. The government was engaged in assessing whether to bail out the company
and other airlines or let market forces determine which survived.

In December 2011, for the second time in two months, Kingfisher's bank accounts were
frozen by the Mumbai Income Tax department for non-payment of dues. It owed 700
million to the service tax department at the time

By early 2012, the airline accumulated losses of over 70 billion with half of its fleet
grounded and several members of its staff going on strike. Kingfisher's position in top
Indian airlines on the basis of market share had slipped to last from 2 because of the
crisis. Mallya was looking for buyers for the Vile Parle Kingfisher House. With the
freezing of the bank accounts of the airline by the Indian Income Tax Department, the
airline was in financial disarray.
On 20 October 2012, Kingfisher's license was suspended by the Directorate General of
Civil Aviation after it failed to address the Indian regulator's concerns about its
operations. On 25 February 2013, its international flying rights and domestic slots were
scrapped by the Indian aviation authorities.
In July 2014, Kingfisher Airlines' indebtedness appeared as the country's state-owned
banks' top non-performing asset after failing to repay loans of over 40 billion.
On 2nd March, 2016 after nearly three years of the bankruptcy of Kingfisher Airlines, the
consortium of 13 Indian Banks led by State Bank of India moved the Debt Recovery
Tribunal to recover its dues which included Rs.9000 crores owed by its promoter Vijay
Mallya. By that time Mallya had left India for the UK despite court proceedings by Indian
banks initiated against him. Two years later the British Courts ordered extradition of
Mallya after a prolonged legal battle and Mallya could be brought back to India if his
appeal against the court order is not turned down.

Performance (2009-13):
Standalone Profit & Loss A/C ------------------- in Rs. Cr. -------------------

Mar 13 Mar 12 Mar 11 Mar 10 Mar 09

INCOME

Revenue From Operations [Gross] 501.38 5,493.41 6,233.38 5,067.92 5,269.17

Revenue From Operations [Net] 501.38 5,493.41 6,233.38 5,067.92 5,269.17

Other Operating Revenues 0.00 0.00 126.26 0.00 0.00

Total Operating Revenues 501.38 5,493.41 6,359.64 5,067.92 5,269.17

Other Income 182.08 330.50 135.92 24.36 836.43

Total Revenue 683.46 5,823.91 6,495.56 5,092.27 6,105.60

Total Expenses 4,984.58 9,270.00 8,016.35 7,210.39 8,023.28

Profit/Loss Before Tax -4,301.12 -3,446.09 -1,520.78 -2,118.12 -1,917.67

Total Tax Expenses 0.00 -1,118.08 -493.38 -700.00 -546.38

Profit/Loss After Tax And Before

-4,301.12 -2,328.01 -1,027.40 -1,418.11 -1,371.29
Extraordinary Items

Prior Period Items 0.00 0.00 0.00 31.28 0.00

Extraordinary Items 0.00 0.00 0.00 -357.65 -237.54

Profit/Loss For The Period -4,301.12 -2,328.01 -1,027.40 -1,744.49 -1,608.83