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Aviation sector

Bachelors of Commerce (University of Calcutta)

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PROJECT REPORT

(Submitted for the Degree of B.Com. Honours in Accounting &

Finance under the University of Calcutta)

TITLE OF THE PROJECT:

“Aviation Sector of India”

SUBMITTED BY

Name of the Candidate :

Registration No:

CU University Roll No. :

Name of the College:

College UID No:

SUPERVISED BY

NAME OF THE SUPERVISOR :

NAME OF THE COLLEGE:

MONTH & YEAR OF SUBMISSION:

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June 2023

SUPERVISOR’S CERTIFICATE

This is to certify that a student of B.com Honours in Accounting & Finance,

under the University of Calcutta has worked under My supervision and
guidance for her Project Work and prepared a Project Report with the title
“Aviation Sector of India” which she is Submitting, is her genuine and
original work to the best of my Knowledge.

Signature:
Name:
Designation:
Name of the college:

Date:

Place:

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STUDENT’S DECLARATION

I hereby declare that the Project Work with the title “Aviation Sector of India”
submitted by me for the partial fulfilment of the Degree of B.com Honours in
Accounting & Finance under the University of Calcutta is my original work and
has not been submitted Earlier to any other university/institute for the fulfillment
or Requirement of any course of study. I also declare that no chapter of this
manuscript as a whole or in part has been incorporated in this report from any
earlier work done by others or by me. However extracts of any literature which
has been Used for this report has been duly acknowledged providing details of
such literature to the references.

Signature:

Name:

Registration No:

Name of the college:

Date:

Place:

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ACKNOWLEDGEMENT

I take this opportunity to express my sincere gratitude to my project Supervisor,

for her invaluable support, guidance and Encouragement throughout the course
of this project, right from Selection of the topic to successful completion of the
same within the Limited time. I would like to thank my college, The
Bhawanipur Education Society College for providing me with the platform and
the opportunity to Work on a project on the topic “Aviation Sector of India”
which facilitated Learning research and presentation skills. I would also like to
thank my parents and friends for directly or indirectly helping me in the project

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CONTENTS

SL NO. PARTICULARS PAGE NO.

INTRODUCTION 6-7
1.1 Background of the study 7-9
1.2 Literature Review 9-10
CHAPTER 1 1.3 Need of the study 10-11
1.4 Objective of the Study 11
1.5 Limitation of the study 11-12
1.6 Research Methodology 12-20

CONCEPTUAL FRAMEWORK 21
2.1 Overview 22-26
CHAPTER 2 2.2 National Scenario 27
2.3 international Scenario 28

CHAPTER 3 Presenatation of Data Analysis & Findings 29-45

CHAPTER 4 CONCLUSION AND RECOMMENDATION 46-49

CHAPTER 5 Bibliography 50-51

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CHAPTER 1:
INTRODUCTION

INTRODUCTION
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Aviation plays an essential role in economic progress of a nation as it is viewed as a

necessary link not only for international voyage and trade but also for providing connectivity
to different parts of the country. It is a one of the vital part of the infrastructure of the
country and has outcome 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.. According to the ―Indian Aerospace Industry Analysis in terms of
passenger traffic, India is currently the ninth largest aviation market in the world. With
regards to air cargo tonnage, India leads the South Asian region -consisting of Afghanistan,
Bangladesh, Pakistan, Sri Lanka and etc. Currently, India has 132 airports -including 15
international airports. Over the past ten years the Indian civil aviation sector grew by 14.2%
in terms of domestic passengers and 7.8% in terms of air cargo (in CAGR - compound
annual growth rate). Indian domestic scheduled operators carried 81.1 million passengers in
2015; an increase of 20 per cent over 2014.Further growth of the aviation sector between
2019-2020 is estimated at 13.24%.

1.1 BACKGROUND
I. Indian Aviation Sector (till 1986):
On February 18, 1911 India‘s first commercial airplane flew between Allahabad and Naini. In Dec
1912, the first domestic air route was unwrapped between Delhi and Karachi by the Indian State Air
Services (in collaboration with Imperial Airways of the UK).
In 1932, J.R.D. Tata flew an air mail service airplane, after which Tata Airlines ventured into
scheduled 10 air transport services. Tata Airlines was renamed as Air India in 1946. To further
strengthen the national aviation sector, the Government of India and Air India set up a joint sector
company, Air India International Ltd. In 1953, the government nationalized the airlines via the Air
Corporations Act, 1953, which gave birth to Indian Airlines and Air India.

II. Aviation from 1986-2003

In this period, the private sector players were granted permission to operate as air taxi operators.
These private players who were allowed to operate as air taxi operators included Air Sahara, Jet
Airways, Damania Airways, East West Airlines, Modiluft and NEPC Airways.

III. Aviation from 2003 – 2006

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By 2003, only two private carriers survived to see the sunrise of the new century, i.e. Jet and Sahara.
But the duopoly of Jet and Sahara as private carrier was challenged in 2003 by Air Deccan.
Air Deccan gave India its first Low Cost Carrier (LCC). On witnessing the success of LCC Model,
other airlines including; Kingfisher; Indigo; Paramount; Go Air which began operations in India.

IV. Aviation from 2006-2010:

In the year 2006, the merger of Jet-Sahara & IA-AI was announced but it materialized only in 2007.
After this, the Indian aviation sector has witnessed a series of M&A of airlines namely: Indian-Air
India; the Jet Sahara Deal; the Kingfisher-Deccan Deal.

V. Aviation from 2010 -2012

Air Asia India and Vistra Airlines were formed during this period. While, Kingfisher airlines lost it its
license to fly. Air traffic in India continues to register significantly higher rates of growth, averaging
18.5 percent in the last seven years. Domestic passenger traffic handled at Indian airports reached
108.1 million during January-November 2011.

VI. Aviation in 2012-2013

The air transport including air freight in India has attracted foreign direct investment (FDI)
worth US$ 448.40 million from in the year 2012, as per the data released by the Department
of Industrial Policy and Promotion (DIPP).

VI. Aviation in 2013-2014

Singapore-based Tiger Air has entered into an interline agreement with Spice jet,India second
largest low-cost carrier. Inter- Globe Enterprises and CAE, a Canadian civil and military
aviation simulation training firm, have jointly launched India largest pilot simulation training
facility in Greater Noida.

VI. Aviation in 2014 -2016

India is the 9th largest aviation market in the world with a size of around US$ 16 billion and is poised
to be the 3rd biggest by 2020. India aviation industry promises huge growth potential due to large and
growing middle class population, rapid economic growth, higher disposable incomes, rising
aspirations of the middle class and overall low penetration levels.
Civil aviation industry in India is experiencing a new era of expansion driven by factors such as low
cost carriers, modern airports, foreign direct investments in domestic airlines, cutting edge
information technology interventions and growing emphasis on regional connectivity. Civil aviation

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sector has been growing steadily registering a growth of 13.8% during the last 10 years. The air
transport in India has attracted FDI of over US$ 569 million from April 2000 to February 2015.
The Indian airports have a combined capacity to cater to 220.04 million passengers and 4.63 million
tonnes cargo per annum and handled 168.92 million passengers and 2.28 million tonnes cargo in
2013-14. As per estimates, passenger traffic at Indian Airports is expected to increase to 450 million
by 2020 from 159.3 million in 2012-2013.
Looking at future air transportation requirements and desire to become a global player in
developing/commercializing aerospace technologies, India is rapidly building capabilities to emerge
as a preferred destination for manufacturing of aerospace components.

1.2 LITERATURE REVIEW

Introduction
By 2034, India is expected to be among the top five air domestic travel
markets globally, in terms of additional passengers per year, according to
the International Air Transport Association (IATA).The civil aviation industry
in India has witnessed a new era of expansion driven by factors such as
low-cost carriers (LCC), modern airports, foreign direct investments (FDI)
in domestic airlines, cutting edge information technology (IT)
interventions and a growing emphasis on regional connectivity. Simply
going by the market size, the Indian civil aviation industry is amongst the
top 10 in the world with a size of around US$ 16 billion."The world is
focused on Indian aviation - from manufacturers, tourism boards, airlines,
global businesses to individual travelers, shippers and businessmen... If
we can find common purpose among all stakeholders in Indian aviation, a
bright future is at hand," as per Mr Tony Tyler, Director General and CEO of
International Air Transport AGovernment Initiatives

Government Initiatives

Government agencies have projected that around 500 airports in all, both
brownfield and Greenfield, would be required by 2020. The private sector

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is sought to be involved in a big way through different PPP models, with

substantial involvement of state support in terms of financing,
concessional land allotment, tax holidays and other incentives.
Some of the major initiatives taken by the government are as follows:
• The Government of India plans to form a committee comprising
bankers, aviation experts and technocrats to help turn around
and look at privatizing national airline Air India.
• The Government of India has launched tourist visa on arrival
(TVoA) enabled by electronic travel authorization (ETA) to 43
countries.
• The Ministry of Civil Aviation plans to list Airports Authority of
India and Pawan Hans Ltd on the stock exchanges.
• The Government of India has approved the construction of five
budget airports to improve regional connectivity and work on
them will start from FY15.
• Indian authorities plan to roll out a pilot of fingerprint scanners at
airport entry points that will be linked to the country’s Aadhaar
unique ID number project. From January 2015, passengers with
an Aadhaar number can place his or her fingerprint on a
biometric kiosk at airport entry gates in Bengaluru’s
Kempegowda International Airport, with the details then checked
against details held by the Central Industrial Security Force.
• The Government of Odisha has signed a Memorandum of
Understanding (MoU) with the Airports Authority of India (AAI) for
developing an airport at Jharsuguda in western Odisha at a cost
of Rs 210 crore (US$ 34.09 million).ssociation (IATA).

1.3 NEED OF THE STUDY

The main purpose of doing this project was to know about the aviation sector of india and its
functioning. This helps to know in details about aviation industry right from its inception
stage, growth and future prospects.
It also helps in understanding the aviation sector.

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The project study was done to ascertain the market structure, growth associated with the
aviation industry. Ultimately this would help in understanding the aviation sector in India.

1.4 OBJECTIVE OF THE STUDY

Aviation plays an essential role in economic progress of a nation as it is viewed as a
necessary link not only for international voyage and trade but also for providing connectivity
to different parts of the country. It adds to Tourism industry , manufacturing sector and the
most important it links the different cultures of the world. At present majority of the airlines
are running in a loss because of the many reason. Because of their loss ,they borrow fund
from the market, in order to survive -----thus effecting the allocation of fund especially in
the developing economy like India where a huge fund is needed in developing stage ,and that
fund can be utilized in other productive areas (like production sector &etc.).
This study give brief idea of the aviation sector of India like their cost structure, dwindling
profitability, consumer perception ,loss incurring factor , Government initiatives { like
Foreign direct investment(FDI) ,Direct air turbine fuel(ATF) imports &etc }.

1.5 LIMITATION
•Political Environment
There are several limitations in aviation infrastructure in India for instance parking bays,
gates to board passengers, landing slots etc are in short supply. This often leads to massive
delays, cancellation and major losses in revenue for many LCCs. The government aims to set
up joint venture to operate these airports and offered 74 per cent stakes. Foreign direct
investment (FDI) can hold up to 49 per cent in this transaction, while 25 per cent must be
held by private Indian companies. Remaining 26 per cent to be held by Airport Authority of
India (AAI) and other government PSUs. At present government is providing sops to planes
which are less than an 80 seater. Under this new policy airline don’t have to pay landing
charges, even route navigational charges are much lower than other aircraft. To encourage
regional connectivity, government is now willing to offer some sops to airlines which fly on
category two and three route.

•Economic Environment
In Indian economy, there is a robust growth of 8.9 per cent GDP, in first quarter of the current
year. The aviation industry is at boom, where growth ranged between 30-50 per cent. The

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growth in aviation has been possible because of liberal policies in civil aviation, robust
growth in tourism and exports. Few years back domestic market was dominated by three
domestic carriers they were Indian Airlines (government owned), Jet Airways and Air Sahara
(private players). Government has proposed to open an aviation academy in Gondia to train
pilots. It will be a joinventure in which private parties holding a majority stake i.e. 60 per cent
along with management control. Central and Maharashtra government will hold remaining 40
per cent, they will play facilitating role. These projects will help in long way to cope with the
growing shortage of pilots in India.

•Social Environment
Private equity players and venture capitalists find aviation sector a dicey bet. They hesitate to
invest in this sector. Although they prefer to take huge risk and are willing to invest in other
sectors like telecom and technology. As after long-time period, the returns on these two
sectors are huge as compared to aviation sector. According to Damera of travelguru,
worldwide the ROC (return on capital) of pharma industry is 55 per cent. For IT sector it is
35 per cent, but for airlines it stands only at 3 per cent. On the other hand, for financier
lenders it is a safe zone because lease of aircraft stands as collateral. In case of defaults, laws
concerning recovery are tight.

•Technological Environment
Airports Authority of India in collaboration with Indian Space Research Organization (ISRO)
is developing a new satellite-based navigation called Gagan. India is still far behind in e-
ticketing. The International Air Transport Association (IATA) has set a goal to stop printing
the 350 million paper tickets (that are used today) and to achieve 100 per cent e-ticketing by
the end of 2007. 30 per cent global e-ticketing penetration was their target by the end of 2005
and they have passed 33 per cent. Nearly 30 per cent in Asia Pacific but it is just 5.4 per cent
in India.

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1.6 REASEARCH METHODOLOGY

RESEARCH DESIGN:-

A) TYPE OF RESEARCH
There are so many types of research but we mostly use i.e.
Exploratory Research
Descriptive Research
The design chosen for this project was “DESCRIPTIVE RESEARCH DESIGN”. Which is
used when the purpose of the research is to?
Describe the characteristics of the certain groups.
Estimate the proportion of the people in a specified population who behave in a certain way.
Make specific predictions.

B) DATA COLLECTION
SECONDARY RESEARCH
The secondary data means the data which is available publicly and can be used for the study.
The data is secondary data and it is collected from the financial statements, the annual report
of the company, some books and the website of the company.
For secondary data collection the research instruments are:
 Published material are on internet
 Annual report of Jet Airways
 Reports and record
 Books

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INDUSTRY PROFILE
TOP 7 AIRLINES IN INDIA
1. INDIGO AIRLINES

Courtesy: https://www.indiatvnews.com/news/india/indigo-bomb-scare-mangaluru-
mumbai-flight-delayed-by-6-hours-over-suspicious-message-on-passenger-phone-
2022-08-15-800228

Indigo Airline is an Indian Low-cost airline company headquartered at Gurgaon, India. The
airline offers more than 633 daily flights connecting to 38 destinations including 5
international destinations with its primary hub at Indira Gandhi International Airport, New
Delhi. It presently operates a fleet of 97 aircraft belonging to the Airbus A320 family. In
2014, Indigo carried 21.4 million passengers in the domestic sector.

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2. AIR INDIA

Courtesy:-https://www.fortuneindia.com/polemicist/air-india-sale-making-impossible-
possible/106041

Air India is the flag carrier airline of India owned by Air India Limited (AIL), a
Government of India enterprise. It is the third largest airline in India (after Indigo and Jet
Airways) in domestic market share, and operates a fleet of Airbus and Boeing aircraft
serving various domestic and international airports. It is headquartered at the Indian
Airlines House in New Delhi.

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3. SPICE JET

Courtesy:-https://www.businesstraveller.com/business-travel/2022/06/28/spicejet-
starts-hajj-flights-from-srinagar/

Spice Jet is an Indian low-cost airline headquartered in Gurgaon, India. It is the country’s
fourth largest airline by number of passenger carried with market share of 12.3% as of July
2021. The airline operates more than 270 daily flights to 41 destinations, including 34
Indian and 7 international cities.

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4. GO AIR

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Courtesy: https://skytraxratings.com/airlines/goair-rating

Go Air is an Indian Low cost carrier based in Mumbai. It commenced operations in

November 2005. It is the aviation foray of the Wadia Group. As of January 2014, it is the
fifth largest airline in India by market share. It operates domestic passenger services to 22

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cities with over 140 daily flights and approximately 975 weekly flights. Its hubs are at
Chhatrapati Shivaji International Airport, Mumbai.

5. JET LITE

Courtesy:- https://www.thehindu.com/news/national/cloud-over-dues-of-jet-airways-
subsidiary-staff/article66174997.ece

JetKonnect, is a low-cost brand of Jet Airways an airline based in Mumbai, India. owned
by Jet Airways. It was originally their low-cost subsidiary calledJetlite, but started using
the name JetKonnect after merging with Jet Airways’ other inhouse low cost brand in
2012. It is currently undergoing a process of integration with Jet Airways and flies for them
as code share i.e. Jet Airways flights operated by JetKonnect, till the two are merged
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completely. All ground and onboard services are as on Jet Airways, and aircraft are being
repainted in its livery.

6. AIR ASIA

Courtesy:- https://indianexpress.com/article/cities/kolkata/air-asia-flight-makes-emergency-
landing-after-passenger-claims-carrying-explosives-6212803/

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AirAsia India is an Indo-Malaysian low cost carrier headquartered in Chennai, India. The
airline is a joint venture with Air Asia Berhad holding 49% of the airline, Tata Sons holding
40.06% and TelestraTrade place having the remaining 10% in the airline. The joint venture
would also mark Tata’s return to aviation industry after 60 years. Air Asia India
commenced operations on 12 June 2014 with Bangalore as its primary hub.AirAsia is the
first foreign airline to set up a subsidiary in India.

7. VISTARA

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Courtesy:- https://thehardcopy.co/how-the-vistara-brand-identity-was-created/

Vistara is an Indian airline based in Gurgaon with its hub at Delhi-Indira Gandhi
International Airport. The carrier, a joint venture between Tata Sons and Singapore Airlines,
commenced operations on 9 January 2015 with its inaugural flight between Delhi and
Mumbai and had carried a total of 500,000 passengers by August 2015. As of September
2015, the airline operates 251 weekly scheduled passenger services across 10 domestic
destinations within India with a fleet of 6 Airbus A320-232 aircraft. Vistarawas the first
airline to introduce premium economy seats on domestic routes in India.

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CHAPTER 2:
CONCEPTUAL
FRAMEWORK/NATIONAL/
INTERNATIONAL SCENARIO

2.1 Overview
MARKET STRUCTURE
1.) Few numbers of firms contributing to majority of the market share.
A small number of large carriers such as IndiGo, Jet airways, Air india, Spice Jet, and
Go air dominate this industry. This type of market concentration can be defined as a tight
oligopoly, where India‘s four firms hold more than 60% of the market share.

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MARKET SHARE IN 2020

8.00% INDIGO AIRLINES

JET AIRWAYS
3.00% 1.00% 1.00% AIR INDIA
12.00% 39.00% SPICE JET
GO AIR
JETLITE
AIR ASIA
VISTARA
16.00%

20.00%

2.) Product are differentiated in terms of service quality and offerings.

India‘s civil aviation sector is a differentiated oligopoly with a few firms providing services
different enough - in terms of quality, frills offered, and frequent flyer programs.

3.)Entry Barriers –
Barriers to market entry in India‘s civil aviation sector include a high mortality rate within
the airline business with respect to both regular and low cost private carriers. Other important
barriers to entry include capacity and investment constraints, as well as the absence of a level
playing field or competitive neutrality with respect to the national carrier which impedes the
private carriers‘freedom to compete on a route.

4.) Firm is a price – setter

In the Airline sector firms go in for third degree price discrimination &
segment the market charging a higher price to the market with a
relatively Inelastic demand (such as fares between business & economy
class travelers or between emergency travel & leisure travel by provding
apex fares).

5.)Long run profit > = 0

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6.)Strategy dependent on individual rival firm’s behavior.

OPEN SKIES POLICY:-

Meaning :-
It means unrestricted access by any carrier into the sovereign territory of a country without
any written agreement specifying capacity , ports of call or schedule of service.In other words
an open skies policy would allow the foreign airline of any country or ownership to land at
any port on any number of occasion & with unlimited seat capacity.

Need :-
In order to promote Travel & Tourism, India should adopt an open skies policy. The current
policy restricts the access of foreign airlines.As a result potential tourist are not offered a
choice of airline or seats when travelling to india.The situation get worse during Holiday
season when it is difficult to get a seat either into the country or out of it.

MARKET OPPORTUNITIES:

1. An investment of over US$ 12 billion required during the Twelfth Five Year Plan
2. Airlines are expected to operate about 1000 aircraft's by 2020, up from the present 450
3. Investment to the tune of US $4 billion required for General Aviation aircrafts by 2017
4. Air Navigation Services entails investment worth US$ 7 billion in Twelfth Five Year Plan
5. FDI up to 49% allowed in domestic airlines by the foreign carriers
6. Foreign equity up to 100% allowed in airport development
7. Domestic and international passenger traffic expected to grow at annual average rate of
12% and 8% in next five years
8. Annual average rate of growth of domestic and international cargo estimated to be 12%
and 10% during next five years
9. MRO industry to triple in size from INR 2250 crore in 2010 to INR 7000 crore by 2020
10. Around 3, 50,000 new employees are essential to facilitate growth in the next decade

BILATERAL TREATIES:-

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However almost 99% of member of the International Aviation Organisation follow the
system of negotiated bilateral treaties determining the aviation relation between two
sovereign contracting parties.It is considered as the fundamental basis for a disciplined &
regulated aviation system between the nations of the world.It provides not only regularity of
operation through scheduled service but also stipulates the basis of ownership , no of seats to
be utilized,type& certification of aircraft & visiting ports of call.

Indian Bilateral Treaties

India has signed over 180 Bilateral Agreement with different countries. In 2002 the total
number of seats available was 38.09 million.Of this capacity operated was approximately
19.174 million seats.

FACTOR INPUTS:-

Air fares in India are among the highest in the world.For instance, a typical Delhi-Banglore
round trip costs Rs 18,000 – the same as it would from Delhi to Singapore.

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Courtesy:- https://www.slideshare.net/shubhamsachan3/a-new-game-to-reign-the-skies

Major Factor Influencing Price :-

1.) LABOUR :- The labour (including wages, salaries & working conditions) accounts
for 36% of the total Airline cost.

2.) FUEL :-Aviation Turbine Fuel is the major cost for domestic carriers accounting for
30% of the total cost in india,which is much higher than around 10-15% for airlines
worldwide.

3.) OPERATING COSTS :- Operting cost accounts for 20.3% of the total
cost.Operating cost includes - Passenger traffic commission (10.0), passenger
food(3.5),Interest (3.0), Landing fees(2.2), Advertising & promotion (1.6)

PASSENGER TRAFFIC:

Healthy Growth of Passenger Traffic

•Total passenger traffic stood at a 190.1 million in FY 2020
•Passenger traffic increased by 12.47 per cent in FY 2020

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•Growth in passenger traffic has been strong since the new millennium, especially with rising
incomes and low-cost aviation; passenger traffic expanded at a CAGR of 11.16 per cent over
FY2006–15.

Courtesy:- https://pt.slideshare.net/ManasKj/macroeconomic-analysis-of-indian-aviation-
industry

NATIONAL AND INTERNATIONAL SCENARIO

2.2 NATIONAL SCENARIO
It is a phase of rapid growth in the industry due to huge build-up of capacity inthe LCC
space, with capacity growing at approximately 45% annually. Thishas induced a phase of
intense price competition with the incumbent fullservice carriers (Jet, Indian, Air Sahara) dis-
counting up to 60-70% for certainroutes to match the new entrants ticket prices. This, coupled

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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
demandgrowth, led primarily by the conversion of train/bus passengers to air travel, aswell as
by the fact that low fares have allowed passengers to fly morefrequently. There has, therefore,
been an increase in both the width and depthof 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, increasein
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 in2004-05. This market is
growing at 15% per annum and India is expected toattract 6 million tourists by 2010. Also,
increasing per capita income has led toan increase in disposable incomes, leading to greater
spend on leisure andholidays and business travel has risen sharply with increasing MNC
presence.Smaller cities are also well connected now. Passenger traffic has increased andover
21 million seats have been sold, resulting in a growth of over 50%. TheIndian travel market is
expected to triple to $51 billion by 2011 from $16.3 billion in 2005-06.

2.3 INTERNATIONAL SCENERIO

At the macro-economic level Asia Pacific growth is impressive. India andChina are growing
between 8 and 10% each year. China is now the world's 4thlargest economy. Excluding
Japan, Asian economic growth was 7%—doublesthe world average of 3.5%. Global airline
traffic is expected to rise steadilyuntil 2008 in line with an anticipated good performance by
the worldeconomy, according to the United Nations'(UN) aviation agency. The

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UNInternational Civil Aviation Organization found in its medium-term forecast that airline
traffic would grow 6.1 per cent in 2006, 5.8 per cent in 2007, and5.6 per cent in 2008.

And strong economic growth will continue. But growthmeans nothing if the bottom line is
red. Globally airlines lost US$6 billion in2005. US carriers lost US$10 billion. European
carriers made about US$1.3 billion. Asian carriers led profitability with US$1.5 billion. Even
within Asiait is a mixed picture. Some carriers are among the most profitable. Othershowever
are struggling. In the region operating margins averaged less than

72%, still the best performance in the world. Most are below the 7 to 8%needed to cover the
cost of capital and give investors an acceptable return.

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CHAPTER 3:
PRESENTATION,
ANALYSIS AND
FINDINGS

COMPANY PROFILE

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JET AIRWAYS
Founded 1st April 1992
Commenced operations 5th May 1993
Hubs ChhatrapatiShivaji International Airport (CSIA)

Frequent Flyer Program Jet Privilege

Airport lounge Jet Lounge
Subsidiaries JetKonnect
Fleet Size 116
Destinations 74
Company slogan The Joy Of Flying
Headquarters Mumbai, India
Key People NareshGoyal (Founder & Chairman)
GaurangShetty, CEO
Revenue 20908 crore, 2020

Profit -1813.7crore, 2020

Employees 13,945

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NET PROFIT OF JET AIRWAYS IN CRORE

0
2016 2017 2018 2019 2020

-500

-1000

-1500

-2000

-2500

-3000

-3500

-4000

OPERATING PROFIT OF JET AIRWAYS

2000

1500

1000

500

0
2016 2017 2018 2019 2020

-500

-1000

-1500

-2000

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MAJOR LOSS RESULTING

FACTORS:
Rising Fuel Prices

Aviation Turbine Fuel (ATF) prices in India are higher than the global market.The ATF price
accounts for almost 45% of the operational expenses. A 10% increase in fuel price would
push up costs by at least 4%, thus affecting the financial health of an Airline business. Until
April 2001 ATF prices in India were determined by Government through an Administered
Price Mechanism (APM). In April 2001, the APM was dismantled and the Oil Companies
given freedom to price ATF based on input costs &world market prices. Thereafter ATF
prices in India have fluctuated widely depending on movements in world prices.

Congestion

Presently capacity limitations are there at many airports like Delhi and Mumbai airports.
Overcrowding leads to a huge wastage of fuel. It is estimated that if a flight hang around in
the sky for an additional half an hour due to delay in allocation of landing slot, it can
consume between 25 to 30 percent extra fuel thereby increasing the operational cost of the
airline. Half an hour of hovering costs an airline anywhere over Rs. 50,000 /-. Suppose, all
the flights coming on Mumbai and Delhi have an average circling time of 30 minutes each,
around Rs 40 lakhs of fuel is wasted in a day.

High Airport (aeronautical) Charges

The airport charges payable at the International airports are higher than those payable at the
airports nominated as Domestic airports for domestic flights. Asan outcome, the domestic
airlines in India are incurring additional costs at the international designated airports without
benefiting any additional facilities. The airport charges levied by the Indian airports are
amongst the highest in the Asian and the Gulf countries. India at present does not have any
secondary airports for LCCs and the Indian LCCs have to shell out comparatively higher
airport charges than its international peers.

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Substitutes Availability

Indian Railways:

With the emergence of the Low Cost Carriers (LCC), the passengers who would have
traveled in I / II class AC via rail considered the option of LCCs advantageous owing to
marginal cost difference as compared to the rail travel.
The Indian Railways took few measures to compete with LCC and to retain and improve its
position and passenger base namely,

 Faster trains between short to medium distances

 Improving connectivity & maintaining on-time schedules
 Introducing entertainment amenities
 Re-structuring the rail fares
 Providing a reliable e-ticketing facility and
 Improving the overall quality of services offered.
Given the provision of such improved rail facilities and with the recent increase in air fares,
the price conscious passengers who would have weighed the option of traveling in a LCC
are again opting for rail travel.

Cut-throat Competition faced by Premium Airlines on their Pricing

The arrivals of LCCs lead to wearing down the market share of the premium airlines. To
moderate the decline in market share, the premium airlines were forced to reduce their fares
and this in the long run lead to a pricing war amongst the airlines with the single objective of
increasing their market share. Thus, it was a lose-lose situation to all concerned and bleeded
the air carriers.

FDI in Aviation: Feasibility and Impact Analysis for various stakeholders

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FDI Proposal: The Civil Aviation Ministry is expected to soon circulate a proposal before the
union cabinet to consider allowing up to 49% equity investment by foreign carriers in
domestic airlines. In case of listed airlines, if the proposal does not get a waiver from SEBI’s
Takeover Code, foreign carriers may have to first make an open offer of 26% stake to public
shareholders and later acquire up to 23% stake (from promoters or fresh equity), such that
their stake remains within the 49 % cap.

Indian Carriers: The FDI proposal, if approved, would certainly be an important milestone
in the aviation sector and may provide much-needed relief to the domestic aviation industry
reeling under the pressure of mounting losses and rising debt burden. Besides, the move will
help bring global expertise and best industry practices over the medium term.

Foreign Carriers: It will not just provide entry into one of the fastest growing aviation market
globally but also an opportunity to establish India as their hub for connections between
US/Europe and South-East Asian countries. While full-service airlines could help them
further consolidate their market position on international routes (and improve connectivity
within India), acquisition of low-cost airlines could help them compete in a market where
travelers are highly price sensitive.

Consumers: New players could enter the market as they could now have a strategic foreign
player with deep pockets to support the airline in difficult times. Besides, it would provide
more flexibility in international travels when one travels through the same airline
domestically as well as internationally. Overall, this could increase competition, offer more
alternatives, reduce tariffs and improve customer service standards over the medium term.
Factors that are not in favor of investments.

 Aviation economics are not favorable in India

Higher taxes on ATF and airport charges continue to be key headwinds for the sector; besides higher
cost base, airlines in India are also mandatorily required to fly on certain unviable routes
 Inadequate Infrastructure
Development of airport infrastructure has not kept pace with demand, thereby resulting in delays
and higher costs for airlines
 Poor financial health of most airlines

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Intense competition, sharp fluctuation in ATF prices and high debt burden continue to weigh on the
financial performance of Indian airlines; foreign exchange fluctuation and lack of adequate hedging
mechanism (for fuel) have added to the woes

Factors that support investments in Indian Aviation Sector

 Strong growth prospects

Passenger traffic growth has grown at a CAGR of 16% in India over the past 10 years
 Relative underpenetrated market
Penetration of air travel at <3% is significantly below benchmarks in other markets
 An opportunity to create India as an hub
An opportunity for foreign airlines to create India as their hub for international traffic
between Europe and South East Asia; Additionally offer better connectivity within India with
international destinations
 An opportunity to create India as an MRO Centre.
Foreign airlines could also look at leveraging on India’s low-cost arbitrage by setting up
MRO facilities in India

SWOT Analysis of Industry

Strengths: Weakness:
* Growing tourism * Under penetrated Market
* Rising income levels * Untapped Air Cargo Market
* Liberal Environment * Infrastructural constraints
* Modern Fleet * Airport Infrastructure
* High Quality * Airways Infrastructure
* Economic Growth * National Carrier
* Political Stability * Deep Pockets
* High Cost Structure
* Skilled Resources
Opportunities: Threats:
* Expecting investments * Shortage of trained Pilots
* Expected Market Size * Shortage of Airports
* Market Growth * High prices
* Geographic Location * Middle East Aviation
* Lower Costs, Higher Quality * Terrorism

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Recent Initiatives and Developments

Government agencies project that around 500 brownfield and Greenfield airports would be
required by 2020. The private sector is being encouraged to become actively involved in the
construction of airports through different Public Private Partnership models, with substantial
state support in terms of financing, concessional land allotment, tax holidays and other
incentives.
Some major initiatives undertaken by the government are:
The Airports Authority of India (AAI) plans to revive and operationalize around 50 airports in
India over the next 10 years to improve regional and remote air connectivity.
The Government of India, in its draft civil aviation policy released for inputs from
stakeholders, has proposed raising Foreign Direct Investment (FDI) limit in domestic airlines
from the current 49 per cent to over 50 per cent, along with other reforms such as tax
incentives for airlines, incentives for travellers to fly to small towns at affordable rates, and
easing the norms for domestic carriers to operate abroad.
Gujarat is expected to get a second international airport at Dholera. The state government has
formed Dholera International Airport Co. Ltd. and is obtaining approvals from the union
government. The Directorate General of Civil Aviation (DGCA) has given its approval to Air
India’s maintenance, repair and overhaul (MRO) unit.

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The Government of India has decided to award airports in Kolkata, Chennai, Jaipur and
Ahmedabad on management contract. AAI has issued the ‘Request for Qualification’
document for these four airports.
The Government of India plans to form a committee comprising bankers, aviation experts and
technocrats to help turn around and privatize the national airline, Air India.
The Government of India approved a proposal to set up a second airport in the National
Capital Region.
The Government of India expects to finalize the new aviation policy and revised international
flying norms for domestic carriers soon; the government may remove the ‘5/20’ norms for
domestic airlines in this new policy.

REASONS TO INVEST
 India is one of the fastest growing aviation markets and currently the ninth largest
civil aviation market in the world.
 India is projected to be the third largest aviation market by 2020.
 Total passenger traffic stood at 163.06 Million during 2013. India is one of the least
penetrated air markets in the world with 0.04 trips per capita per annum as compared
to 0.3 in China and more than 2 in the USA.
 Indian carriers plan to increase their fleet size to reach 800 aircraft by 2020.
 The Indian aviation sector had likely to see investments totaling USD 12.1 Billion
during 2012-17; USD 9.3 Billion is expected to come from the private sector.

GROWTH DRIVERS
 Five international airports (Delhi, Mumbai, Cochin, Hyderabad, Bengaluru) have
been completed successfully under Public Private Partnership (PPP) mode.
 Greenfield airport at Navi Mumbai, Mopa (Goa) and some brownfield airports of
Airports Authority of India (AAI) and 50 airports under the low-cost model are to be
developed all over the country, including under PPP.
 Indian aviation is experiencing dramatic growth across the board, from the emergence
of LCC/new carriers to a growing middle-class ready to travel by air as well as
growth in business and leisure travel.
 India’s middle-income population had increase from 160 Million in 2011 to 267
Million by 2019.

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 Greater focus on infrastructure development; increasing liberalization – Open Sky

Policy; AAI driving modernization of airports, Air and Navigation Systems.
 Growth in aviation accentuating demand for MRO (maintenance, repair and overhaul)
facilities.
 Large scale collaborations/M&A deals – Etihad Airways & Jet Airways; Tata Group &
Singapore Airlines, Tata Group & AirAsia.
 India plans to increase the number of operational airports to 250 by the year 2030.

FDI POLICY

 100% Foreign Direct Investment (FDI) is permitted for Greenfield airport projects
under the automatic route.
 Up to 74% FDI is permitted for existing airport projects under the automatic route,
above 74% and up to 100% permitted under government approval route.
 Up to 49% FDI is permitted in domestic scheduled passenger airlines under the
automatic route. 100% permitted for NRIs. Up to 49% FDI under the automatic route
is permitted in Non-Scheduled Air Transport Service. FDI above 49% and up to 74%
is permitted under Government approval route. 100% FDI permitted for NRIs.
 Up to 100% FDI is permitted in helicopter services and seaplanes under the automatic
route.
 Up to 49% FDI is permitted in ground handling services under the automatic route.
FDI above 49% and up to 74% is permitted under government approval route. 100%
FDI permitted for NRIs.
 Up to 100% FDI is permitted in maintenance and repair organisations; flying training
institutes; and technical training institutes under the automatic route.
 Investments are subject to relevant regulations, approvals from DGCA and security
and other conditions. Foreign airlines are also, henceforth, allowed to invest in the
capital of Indian companies, operating scheduled and non-scheduled Air Transport
Services, up to the limit of 49% of their paid-up capital. Investments will be subject to
government route.

SECTOR POLICY
 The AAI is responsible for developing, financing, operating, and maintaining all
public sector airports. New airports are permitted under the Greenfield Airport Policy
2008. Investment in airports is encouraged under the PPP Policy of the Government
of India.

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 Regional Air Connectivity Policy offers attractive incentives in the form of exemption
of landing, parking and navigation fees to airlines operating at designated airports in
non-metro areas.

FINANCIAL SUPPORT
 Aircraft engines and parts thereof are eligible for duty exemption when imported for
servicing, repair or maintenance of aircraft used for scheduled operations.
 The budget envisages the development of new airports in Tier I and Tier II cities.
The Income Tax Act provides presumptive taxation under Section 44AE in respect of
assesses who are engaged in the business of plying, hiring or leasing goods carriages.
The bill proposes to increase the amount of presumptive income to INR 7,500 per
vehicle for all types of goods carriage vehicles.
 Exemptions under the Income Tax Act for infrastructure development under section
80 IA.
 Basic customs duty exemption is available for parts and testing equipment used for
the maintenance, repair and overhaul of aircraft.
 Budgetary support is provided to the AAI for the development of airport infrastructure
in the North-eastern states of India.

INVESTMENT OPPURTUNITIES
 300 business jets, 300 small aircraft and 250 helicopters are expected to be added to
the current fleet in the next five years.
 Growth in aviation is accentuating demand for MRO facilities.
 Greenfield airports under PPP at Navi Mumbai and Mopa (Goa).
 The development of new airports – the AAI aims to bring around 250 airports under
operation across the country by 2020.
 The North-east region – the AAI plans to develop Guwahati as an inter-regional hub
and Agartala, Imphal and Dibrugarh as intra-regional hubs.
 The AAI has spend USD 1.3 Billion on non-metro projects between 2013 and 2017,
focusing on the modernization and up-gradation of airports.
 Indian airports are emulating the SEZ Aerotropolis model to enhance revenues, focus
on revenues from retail, advertising and vehicle parking, security equipment and
services.

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FORIENG INVESTORS
 Airbus (France)
 Boeing International Corporation (USA)
 Air Asia (Malaysia)
 Rolls Royce (UK)
 Frankfurt Airport Services Worldwide (Germany)
 Honeywell Aerospace (USA)
 Malaysia Airports Holdings Berhad (Malaysia)
 GE Aviation (USA)
 Airports Company South Africa Global (South Africa)
 Alcoa Fastening Systems Aerospace (USA)

AGENCIES
 Ministry of civil aviation
 Directorate General of Civil Aviation
 Bureau of Civil Aviation Security
 Airports Economic Regulatory Of India
 Air India Limited
 Pawan Hans Limited
 Airport Authority Of India

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Study of Consumer Demand in the industry

I conducted a survey in order to find the consumer perception about Airlines.The following
result have been culled out from the survey of 50 individuals. The sampling method was a
mix of purposive & stratified random sampling & attempted to duplicate the general
consumer profiles of the population (as based on preliminary secondary data).The Age group
of the samples was between 18 & 58,across gender, location & socio-economic class.The
region-wise spilt up of the samples is as follows:

REGION-WISE BREAK-UP OF THE SAMPLE

35%

30%

25%

20%

15%

10%

5%

0%
Howrah Grish park Tollygunge Ballygunge khiderepore Others
REGION-WISE BREAK-UP OF THE SAMPLE

The areas covered in the survey are –

1.) Brand Awareness
Indian Airlines rank number 1 in brand awareness. This could be attributed to
its long stay in the market & continued support from the government. Jet
Airways ranks 2nd, indigo ranks 3rd, & Spice jet ranks 4th.

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BRAND AWARENESS
100
90
80
70
60
50
40
30
20
10
0
Indian Airlines Jet Airways indigo Spice jet
BRAND AWARENESS

2.) Usage of Airlines

Indian Airlines, mostly used by Government employees, recorded the highest
usage followed by Jet Airways. Although most consumers rated Jet airways high
on price, it still ranks 2nd and this could be attributed to its excellent service&
promotion schemes. Indigo ranks 3rd, Air Asia 4th & Spice jet 5th.

Airline Usage
35
30
25
20
15
10
5
0
indian Airlines Jet Airways Indigo Air Asia India Spice Jet
Airline Usage

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3.) Frequency of usage

As indicated in the graph below, a majority of the population flies relatively
infrequently. Passengers travelling on business were found to be more frequent
user, while those flying on holidays & emergencies.
NOTE – As purposive sampling was undertaken at Kolkata Airport, the sample
population of ‘never’ is not representative of the population.

4.) Flight Class & Occasion of Use

Although the occasion of use indicates that maximum usage is for business, the
flight class graph indicates that the portion travelled by business class is very
small in comparison to that travelled by economy class. This indicates that
most business travelers are flying Economy class as well. Further the second
important occasion of usage is for emergencies & time –critical travels.

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FLIGHT CLASS Occasion of Use

ECONOMY CLASS BUSSINESS CLASS

others;
11.00% Business;
28.07% 25.00%
Emergencies;
24.00%
usual;
20.00%
71.93% Holidays;
20.00%

5.) Circuit Flown

The most frequently flown circuit is that between major metros, followed by other states
capitals & Delhi-Mumbai airports accounts for roughly half of passenger flown, and metros
airports account for 66% of the passenger flown.

6.) Scheme Preference

With the entry of new players in the market, airlines are competing for passenger on -price
parameters. This increases the product differentiation in order to decrease elasticity of
demand in the market. Given the key differentiators that substitute for price, consumer have
rated Apex fares as their most preferred scheme. Next most preferred to Apex fares is the
frequent flyer program, a trend noticed predictably in the high frequency repeat users& those
travelling for business.

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Scheme Preference
100
80
60
40
20
0
Frequent flyer Sector Discount Apex Fares Price Auction
Scheme Preference

Factors affecting consumer perception

I have identified the following factor that make the demand function of consumer.
Based on our hypothesis a choice parameter weight was arrived at by asking the
sample to rank the following parameters on a Liker scale –

a) Price
b) Service
c) Promotional Schemes
d )Loyalty programmes
e) Flight schedules
f) Comfort with the Brand

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CHAPTER 4:
CONCLUSION
&SUGGESTIONS

CONCLUSION
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The Indian Aviation Industry has been going through a turbulent phase over the past several
years facing multiple headwinds – high oil prices and limited pricing power contributed by
industry wide over capacity and periods of subdued demand growth. Over the near term the
challenges facing the airline operators are related to high debt burden and liquidity
constraints - most operators need significant equity infusion to effect a meaningful
improvement in balance sheet. Improved financial profile would also allow these players to
focus on steps to improve long term viability and brand building through differentiated
customer service. Over the long term the operators need to focus on improving cost
structure, through rationalization at all levels including mix of fleet and routes, aimed at cost
efficiency. At the industry level, long term viability also requires return of pricing power
through better alignment of capacity to the underlying demand growth

While in the beginning of 2008-09, the sector was impacted by sharp rise in crude oil
prices, it was the decline in passenger traffic growth which led to severe underperformance
during H2, 2008-09 to H1 2009-10. The operating environment improved for a brief period in
2010-11 on back of recovery in passenger traffic, industry-wide capacity discipline and
relatively stable fuel prices. However, elevated fuel prices over the last three quarters coupled
with intense competition and unfavorable foreign exchange environment has again
deteriorated the financial performance of airlines. During this period, while the passenger
traffic growth has been steady (averaging 14% in 9m 2011-12), intense competition has
impacted yields and forced airlines back into losses in an inflated cost base scenario.

SUGGESTIONS
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Reduce labour costs

All major carriers need to win significant concessions from their workers. Low labour outlays
would consist of a mix of reduced wages, more flexible work rules and trimmed benefits
including pension.

Simplify flight operations

Low-cost carriers use just a few types of aircraft, a strategy that cuts training and
maintenance expenses. Larger airlines who fly internationally, to more remote destinations
require varied fleets of large and small planes. However, they can and should work toward
streamlining the types of planes they fly.
Another way to simplify operations is modifying the hub-and-spoke model, which uses
designated headquarter airports for transfers. Traditionally, the big airlines have sent many of
their flights through hub airports at peak business-travel hours. That way, since carriers
typically charge heaps more for business fares, they can get more revenues per flight. But
many experts argue that it's time to give up on that model - especially as low-cost carriers
increase service along heavily travelled routes.
Experts like the idea of so-called rolling hub operations, where flights are scheduled
throughout the day so that an airline's assets - from employees to planes to hangars - can be
used more efficiently. In a traditional hub system, planes and workers spend more time
waiting for connecting flights to come in at peak operating times. With rolling hubs, travellers
may end up waiting a little longer to get a connecting flight, but planes end up in the air for
more hours of the day.

Offer more transparent pricing

The legacy carriers have long had an exotic, almost incomprehensible pricing system.
However, these days, with the Internet allowing travellers to shop for the cheapest tickets
easily, and low-cost airlines offering uncomplicated set prices, traditional carriers have to
follow suit or risk losing more and more passengers.

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Get smart on fuel

With oil near $50 a barrel, airlines must be smarter about how they incorporate its price into
their costs. Discount carriers such as Southwest hedge as much as 80% of their jet-fuel costs.
Essentially, that means that they lock in prices on future fuel when the price drops. Small
wonder Southwest is one of the few success stories in the airline business.

Stop chasing market share

Airlines need to be savvier about capacity. At the start of 2004, many planned to add more
flights amid signs of an improved economy. When it became clear that demand wasn't as
strong as originally forecast, most carriers still wouldn't retrench from their plans for fear of
losing out if the market snapped back. Rather than scrambling to add seats in fear of missing
out on the party, airlines would do well to take a more cautious approach and focus on
efficiency and margins.

From bailouts to government partnership

Although the Indian airline industry was largely deregulated in 1990, plenty of lingering rules
and regulations have made it nearly impossible for carriers to be efficient. Many believe that
restrictions on foreign ownership and labour laws have kept the industry from innovating. So
instead of lobbying for protective measures like bailouts, airlines need to work with
government to tackle longer-term projects like building more runways, running airports more
efficiently, and reining in labour costs.

A new model for premium pricing

Most of the industry's improvement efforts have focused on whittling down costs. However,
boosting revenues also needs to be a priority. After all, people are willing to pay more if they
believe they're getting more value. Legacy carriers still offer certain advantages, especially to
the business traveller including airport lounges and more comfortable seating.

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CHAPTER 4:
BIBLOGRAPHY

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BIBLIOGRAPHY

1. http://india-aviation.in/
2. http://www.moneycontrol.com
3. http://www.ibef.org/industry/indian-aviation.aspx
4. Indian Transportation Infrastructure Blueprint
5. Discounted IA fares to take on no-frills Deccan Times of India
6. Business line
7. Transport Corporation of India limited website
8. Airport Authority of India website
9. Research and innovative Technology Administration(RITA), US
Department of transportation
10. http://www.makeinindia.com/sector/aviation
11.Images sources given under images.

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