Aviation Industry

The Airline Industry provides transportation services for passengers as well as cargo through
scheduled air routes. The aviation industry derives its revenues from regular ticket fees and
freight charges. Other major components of the aviation sector include:

 Air traffic control

 Helicopter and private charter service 

 Airport management 

 Express delivery service

History of the Airline Industry

The pioneers of the airline industry, the Wright Brothers invented the first airplane in 1903. The
first modern airliner, Boeing 247, was launched in 1933. It traveled at 155 miles per hour and
had a capacity of ten passengers. Boeing 747 was launched by Pan Am in 1969. This highly
sophisticated aircraft had four engines and a seating capacity of 450. The airline industry initially
fell under the category of a public utility service, with government agencies establishing the air
routes and prices. However, with the Airline Deregulation Act of 1978, the industry became
market driven.

Aviation is defined as the design, manufacture, use, or operation of aircraft - in which the term
aircraft refers to any vehicle capable of flight. Aircraft can either be heavier-than-air or lighter-
than-air: lighter-than-air craft including balloons and airships, and heavier-than-air craft
including airplanes, autogiros, gliders and helicopters.
An overview of Aviation sector in India

The aviation sector in India has registered an estimated increase in domestic passenger sector by
50% per annum in the recent years, while the growth in international passenger section is
estimated as 25%. Experts foresee future growth in international cargo by 12%.

As per the prediction of the Ministry of Civil Aviation, India in the coming decade will require
1,500 to 2,000 passenger aircrafts out of which 135 planes have already been added. It is also
predicted that India's aircraft capacity will stand at 500-550.

In the year 2010, as estimated by the ministry, the domestic market will exceed 60 million and
the international traffic will achieve 20 million. And in 2020, Indian airports will be effective
enough to support 100 million passengers, which would include 60 million domestic passengers.
The quantity of cargo managed by the airport is estimated to decline in the range of 3.4 million
tonnes per year.

From a totally government owned sector, aviation today is a highly competitive market with
private players like Jet Airways, Kingfisher, Spice Jet, etc, giving tough competition to the state-
owned Air India. In 2009-10, passenger traffic carried by domestic carriers reach 58 million,
growing by more than 250% over the decade; and over the next few years, it is expected to reach
100 million mark.

However, in order to achieve these targets, India will have to resolve issues like bad airport
infrastructure, regional connectivity, safety and global standards, training a highly skilled
workforce, among others.

Off late, Indian government has also started showing interest in developing the sector and
expects investments of around US$10 billion in aviation infrastructure. Foreign direct
investments up to 100% are allowed in the airlines and in airport infrastructure projects. Airports
are being developed using the pubic-private partnership model, attracting many private
developers in the sector.

There is a tremendous potential for MRO services in the country, with total market estimated to
reach US$1 billion by 2013.

Analysts believe that next decade will see India, establishing itself as a regional hub and will be
an important global market presenting opportunities not only for airlines, but also for aircraft
component manufacturers, air cargo companies, along with infrastructure developers.
Demand and Supply Drivers of the Airline Industry

The demand drivers of the airline industry include:

o Ticket prices

o Passenger income levels

o Access to and suitability of other modes of transportation

o Frequency of services

o Safety

o Random factors such as terror threat

The supply drivers of the aviation industry are:

o Behavior of competition

o Government regulation

o Cost of resources (fuel, labor, maintenance, technology) .

Top 10 Aviation Company in India.

 Air Charter Services Pvt Ltd: Air Charter Services Pvt. Ltd. performs its business
operations with private business aircrafts, executive and corporate air charters, helicopter
tours, VIP charter flights, and photo and video flights. Its client list incorporates VIPs,
corporate firms, tour co-ordinators, travel agents and air medical evacuation
professionals. It provides services such as relief, VIP, air ambulance and privacy services.

 Air Charters India: Air Charter India is owned by the STIC Travel Group and has
around 100 airplanes in India. It covers several international destinations with an
unmatchable logistics support. The aviation company has 40 offices with a highly skilled
manpower of above 1000 people. It offers services like heli-skiing, charter flights for
pilgrimage in India, heli-sightseeing, corporate jets, executive jets, etc. Air Charter India
provides airplanes such as helicopters, business aircrafts, aircrafts for corporates,
individuals and group travelers.

 Air India: National Aviation Company of India Limited (NACIL) was the first Indian
aviation company which led the way for other companies in the aviation sector. It was
initiated before the India gained its independence. Later it collaborated with Indian
Airlines and gained the reputation of being the largest airline in South Asian airline. Air
India Cargo, Air India Express and Air India Regional are its subordinates in aviation
market. It offers First class, Executive class and Economy class services and has code
sharing pacts with companies like Air France, Austrian Airlines, Aeroflot, Air Astana,
Emirates Airline, Air Mauritius, Kuwait Airways, etc.

 Aviation India: Aviation India provides services like cargo services, flight operation, air
charter services, passenger services, freight control, advisory and consultancy, aircraft
preservation and renovation, international flight operation, air supervision and helipad
engineering, etc. The airlines has skilled workforce and offers total control and functional
back-up to several international schedule / non-schedule operations.

 Indian Airlines: Indian Airlines was inaugurated on 1st August, 1953 and in
collaboration with its fully governed subordinate in aviation market Alliance Air, it takes
pride in being recognized as one of the biggest regional airline systems in Asia. It has a
fleet of 70 airplanes and covers 76 destinations, 58 Indian destinations and 18 foreign
destinations. Globally it covers Oman, UAE, Kuwait, Qatar, Singapore, Yangon,
Pakistan, Maldives, Bangladesh, Sri Lanka, etc.

 Deccan Aviation Ltd.: The aviation company has its presence in 8 places namely,
Mumbai, Ranchi, Surat, Hyderabad, Bangalore, Katra, Colombo (Sri Lanka) and Delhi. It
has 350 daily departures and covers 65 destinations in India. It offers the benefit of no-
cost travel to infants, ticketing counters, lavish aircraft interiors and ticketing flexibility.
 Indigo: Indigo is a utilitarian low-price domestic airline which offers feasible flying
alternatives for millions. The airline was facilitated by the Air Passengers Association of
India (APAI) as the “Best Low-Fare Carrier in India for the year 2007”. Indigo has 120
daily departures and a fleet of 19 Airbus A320. The airline covers 17 destinations
namely, Agartala, Bangalore, Bhubaneshwar, Ahmedabad, Delhi, Chennai, Guwahati,
Hyderabad, Goa, Imphal, Kolkata, Mumbai, Vadodara, etc.

 Paramount airways: Paramount Airways is a business class airline which has its base in
India and headquarters at Chennai. Endorsed by Madurai-based Paramount Group and
Paramount Railways was inaugurated in 19th October 2005. Its fleet comprises 5 aircrafts
and it operates in 8 destinations.

 Go Air Airlines: Like SpiceJet, a Go Air airline is also a low price airline endorsed by
the Wadia group. It was inaugurated in Mumbai in June 2004. It operates in 11 cities with
61 daily departures. It has started its functions in Ahmedabad, Chennai, Bangalore,
Coimbatore, Goa, Cochin, Jaipur, Mumbai, Pune, Delhi, Srinagar, etc.

 Kingfisher Airlines: It is the one and only 5-star airline in India which offers excellent
first class service on domestic itineraries also. A part of UB group, Kingfisher Airlines
has received 30 awards for its novelty and customer satisfaction. After its tie-up with
Deccan, the airline covers 64 cities and has 484 daily departures.

 Spice Jet: Spice Jet is basically a low cost airline which incorporates many Boeing 737-
800 airplanes in its fleet. It covers 14 destinations in India.

 Air Sahara: Air Sahara was inaugurated on December 3, 1993 with a fleet of only two
Boeing 737-200s. Now it comprise of 27 aircrafts, 135 daily departures and availability
of 16500 seats on regular basis. It reaches various Indian destinations like Bangalore,
Kolkata, Delhi, Lucknow, Mumbai, Chennai, etc.

 Jet Airways: Jet Airways was established on May 5, 1993. It earns yearly revenue of Rs
2502.89 and total income of approx Rs. 117868.8 Million. At present it id India's biggest
private domestic airline with 62 aircrafts and a market share of 25%. It covers 50
destinations with 340 regular departures. Jet Airways has pacts with foreign airlines, such
as Lufthansa, Swiss, Gulf Air, Austrian Airlines, Qantas and Thai.
Growth of Indian Aviation industry

The Indian Civil Aviation market grew at a CAGR of 18%, being valued round US$ 5.6
billion in 2008. Further statistics revealed that the air traffic in August 2009 was a double
digit figure. The domestic airliners flew 3.67 million passengers in August 2009, as
against 2.92 million in the corresponding period of 2007, up by 26%. The Centre for Asia
Pacific Aviation (CAPA) has estimated that the domestic traffic will go up by 25% to
30% till 2010 along with a surge in the international traffic by 15%. There would be more
than 100 million passengers by 2010. Then again by 2020, Indian airports will in all
probability handle over 100 million passengers every year.

The investment plans to the tune of US $ 9 billion has been made by the Aviation
Ministry for modernizing the existing airports by 2010.

In terms of domestic passengers & apos; volume, US have always been the leader with
followers in the league like China, Japan and India. The number of domestic flights went
up by 69% from 2005 to 2008, with the domestic aviation sector growing at 9-10%.

Market share of key players in the Indian aviation sector

Name of the players Market

Share
Kingfisher Airlines and Kingfisher Red (previously Air 28%
Deccan)
Jet Airways and Jet Lite (previously Air Sahara) 25%
Air India and Indian (previously Indian Airlines) 16%
IndiGo 14%
SpiceJet 12%
GoAir 3%
Paramount Airways 2%
MDLR Airlines 0.004%
Future of Airlines Industry in India

The challenges of the Indian aviation industry are cited below:

 Passenger traffic is estimated to grow at a CAGR of over 15% in the coming few years.
 The Ministry of Civil Aviation would handle around 280 million passengers by 2020.
 US$ 110 billion investment is envisaged till 2020 with US$ 80 billion solely for new
aircraft and US$ 30 billion for developing the airport infrastructure.

Role of Aviation Industry in India GDP

The Role of Aviation Industry in India GDP in the past few years has been phenomenal
in all respects. The Aviation Industry in India is the most rapidly growing aviation sector of
the world. With the rise in the economy of the country and followed by the liberalization in
the aviation sector, the Aviation Industry in India went through a complete transformation in
the recent period.

Role of Aviation Industry in India GDP-Facts

 With the entry of the private operators in this sector and the huge cut in air prices,
air travel in India were popularized
 On February 18, 1911, the first commercial flight was made from Allahabad to Naini
by a French pilot named Monseigneur Piguet

Role of Aviation Industry in India GDP-Growth Factors

 The growth in the Indian economy has increased the Gross Domestic Product above
8% and this high growth rate will be sustained for a good number of years.
 Air traffic has grown enormously and expected to have a growth which would be
above 25% in the travel segment
 In the present scenario around 12 domestic airlines and above 60 international airlines
are operating in India
 With the growth in the economy and stability of the country India has become one of
the preferred locations for the trade and commerce activities
 The growth of airlines traffic in Aviation Industry in India is almost four times above
international average
 Aviation Industry in India have placed the biggest order for aircrafts globally.
 Aviation Industry in India holds around 69% of the total share of the airlines traffic in
the region of South Asia
Role of Aviation Industry in India GDP-Future Challenges

 Initializing privatization in the airport activities

 Modernization of the airlines fleet to handle the pressure of competition in the aviation
industry
 Rapid expansion plans for the major airports for the increased flow of air traffic
 Immense development for the growing Regional Airports

Role of Aviation Industry in India GDP-FDI Policy

The Reserve Bank of India (RBI) announced that foreign institutional investors might have
shareholdings more than the limited 49% in the domestic sector.

 Airports
 Foreign equity up to 100% is allowed by the means of automatic approvals
pertaining to establishment of Greenfield airports
 Foreign equity up to 74% is allowed by the means of automatic approvals
pertaining to the existing airports
 Foreign equity up to 100% is allowed by the means of special permission from
Foreign Investment Promotion Board, Ministry of Finance, pertaining to the
existing airports

 Air Transport Services

 Up to 49% of foreign equity is allowed by the means of automatic approvals
pertaining to the domestic air transport services
 Up to 100% of NRI investment is allowed by the means of automatic
approvals pertaining to the domestic air transport services
Growth of China Aviation Industry

China aviation market has been growing rapidly; there was one hundred sixty millions of
passengers in 2006, and one hundred and eighty six millions in 2007.  Although there was global
financial crisis in 2008, China aviation market still recorded a growth to one hundred and ninety
three millions of passengers. In 2009, the figure reached two hundred and thirty million of
passengers and by the end of 2010, it reached to two hundred and sixty seven millions, almost
double of the figure in 2005.  It is predicted the figure of passengers will reach seven hundred
millions in 2020.

This summit will invite the industry to address their views on ATM development -
including regulators, airlines, airports, ATM associations, ATC, global industry leaders,
providers of equipment and services, meteorological service providers and so on. It will bring a
platform to the delegates to share their views on the future of China air traffic management.

As of the end of 2008, China has a total of 898 general-purpose aircraft, 70 airports,
general aviation pilots about 3076 or so, from the absolute view, are lagging far behind European
and American countries. The world's Population of 1 / 5, while the share of general aircraft less
than 1 / 400, from which, on the one hand the developing countries and China in the primary
stage of socialism, general aviation is also still at an initial stage; the other hand, indicates that
China on general aviation has a huge space for development. According to professional
organizations predicted that China's general aviation industry will usher in a rapid stage of
development, the next decade, demand in China the total value of general aircraft will reach 15.5
billion U.S. dollars.

Domestic passenger air traffic soared by 43 percent in August year on year, despite the
slump facing the global air transport industry, China's top civil aviation official said. He also said
that China's gross domestic product grew 6.1 percent in the first quarter of the year and 7.9
percent in the second. Besides the good figures in the domestic air transport market, the
international travel sector is also recovering, as the international passenger traffic into and out of
China grew in August. The industry expects a bigger growth in the coming few years.
Future of Aviation Industry in China

Gleaming with confidence in the wake of its success in space, China is emerging as a global
commercial aviation player. Its ambitions in commercial aviation are one facet of a broader
vision to develop a modern, world-class, and integrated national air and surface transportation
system. Over the decades, China’s economy has expanded despite an underdeveloped
infrastructure. However, authorities in Beijing are becoming increasingly aware that further
sustainment of its economic development requires an efficient system to move goods and people
across the land mass of China. Over the next 20 years, Chinese airlines are expected to spend
U.S. $340 billion on 3,400 new airplanes, of which 1400 are large-sized “jumbo jet” aircraft.

China's civil aviation sector looks set to grow considerably in the coming years as tourism
expands and amid general economic expansion. The General Administration of Civil Aviation of
China (the CAAC) has forecast strong growth for the country's airline industry. The CAAC
predicts average annual increases in Chinese airline traffic of around 10%, which is based on an
estimated 7% economic growth per year. The CAAC also anticipates that by 2020 annual
revenue tone kilometers for the country's airlines are expected to reach 84 billion, compared with
16.2 billion in 2002, ranking China's air transport market second in the world.

The country's freight traffic is also expected to grow faster than passenger traffic in the years
ahead as the volume of the country's imports and exports increases. Growth will come primarily
from the export of consumer and high-tech goods, and the import of capital equipment and high-
value manufacturing components, which has increased as a result of foreign direct investment.

Aviation: India vs. China

 India has roughly 300 commercial planes registered with airlines with a middle class of
roughly 300-400 million willing to fly.

 Compared to china whose middle class is slightly higher and will reach around
700million by 2020 has around 2000 registered commercial planes.

 Both are mixed market economies with a certain degree of control over the market.
 The aspects that china beats India in would be infrastructure, governance and work
culture.

 China has a huge landmass and hence a large number of airports to serve as compare to
India.

 Even if India had 2000 airplanes there will be very few airports to serve them ( in
comparison to China ).