Indian Aviation Sector: Looking Beyond Profits!
Indian aviation sector has experienced tremendous growth in previous one decade in terms of infrastructure and air traffic. As per the current DGCA report on domestic air traffic for the month of December 2015, the passenger traffic in India has seen a growth of 20.34% (comparing passengers carried in January–December 2015 with January–December 2014) and 19.71% increment month on month passenger traffic(comparing passengers carried in December 2015 with December 2014). In addition, the international air traffic has recorded 8% year-on-year growth for the year 2015–16.
Structure of the Industry
The Indian aviation sector can be divided into the following three main categories:
• Scheduled air transport service includes domestic and international airlines
•..............
Evolution of Indian Aviation Sector
Indian aviation sector started in December 1912, with its first flight between Karachi and Dubai by Indian Air services in collaboration with UK based Imperial Airways. After independence, we had various small players operating in this sector like Tata Airlines, Indian National Airways, Air Service of India, Deccan Airways, Ambica Airways, Bharat Airways, Orient Airways and Mistry Airways. Amongst them Orient Airways shifted...........
Current Scenario
In a recent development, Air India became the member of one of the major global alliances i.e., star alliance in July 2014, which will help them in increasing their market share. On the other side, after increase up to 49% in FDI investment, in aviation sector in September 2012, various new players tried their luck in the new market. Air Asia India has commenced its operations in June 2014 on a smaller scale and is expected to operate full-fledged from early 2015.............
Challenges Faced by Aviation Sector
• Rupee Depreciation
The depreciation of Indian rupee from INR62 in 2014-15 to INR66 in 2015-16 has caused a huge increase in the operating costs of airlines, as over 60% of their operating costs..............
• High Fuel Cost and Varied Taxation Structure
Aviation Turbine Fuel (ATF) constitutes around 40% of total operating costs of an airline. Only public sector companies, namely.......................
..........................
The Task!
To survive in this hyper competitive market, they have to look beyond profits and analyze their capacity, production, efficiency, cost, revenue etc. Apart from the financial statement analysis......
Exhibits
Exhibit I: Evolution of Indian Aviation (2002–2015)
Exhibit II: Existing Players* Market Share for the First Half of 2015-16 (based on RPKM) (in %)
Exhibit III: Available Seat Kms (Domestic and International)
Exhibit IV: Total Income and Expenditure of Domestic Airlines
