OVERVIEW - M

Indias civil aviation industry is on a high-growth trajectory.. India is the ninth-largest civil
aviation market in the world, with a market size of around US$ 16 billion.
Over the next five years, domestic and international passenger traffic are expected to
increase at an annual average rate of 15% and 12%, respectively, while domestic and
international cargo are estimated to rise at an average annual rate of 12 per cent and 10
per cent, respectively.
The airlines operating in India are projected to record a collective operating profit of
USD1.29 billion in fiscal year 2016.

VISION- L
India aims to become the third-largest aviation market by 2020 and the largest by
2030.
The Civil Aviation industry has ushered in a new era of expansion, driven by factors
such as low-cost carriers (LCCs), modern airports, Foreign Direct Investment (FDI) in
domestic airlines, advanced information technology (IT) interventions and growing
emphasis on regional connectivity The world is focused on Indian aviation from
manufacturers, tourism boards, airlines and global businesses to individual travellers,
shippers and businessmen. If we can find common purpose among all stakeholders in
Indian aviation, a bright future is at hand, said Mr. Tony Tyler, Director General and
CEO, International Air Transport Association (IATA).

PLAYERS IN INDIAN MARKET- M

India is one of the fastest growing air markets in the world. After new foreign policy of
investment in the aviation industry, lots of new airlines have been started or invested in
India. There are many private airlines which increased their presence in India by
expanding their fleets and destinations. We have compiled a list of the largest airlines in
India according to their market share.
Indigo: It is one of the fastest growing airlines in India which has a market share of more
than 27% and ranked at 1st position. Indigo Airlines is wholly owned by inter-globe
enterprises and serves in all major destinations of India.The fleet size of Indigo currently
is over 102 aircrafts which served to more than 5 million passengers in 2015.

Jet Airways: Jet airways is the 2nd largest airline in India with a market share of over
25%. It was established on 1st April 1992 and started its operations on 5 th May 1993.
Terminal 3 of Mumbai Airport is the main hub of Jet Airways. The revenue of Jet Airways
is USD 3.1 billion as of 2015.. It is one of the largest employers in airlines sector in
INDIA with more than 14000 employees. The fleet size of Jet Airways is over 116
Aircrafts.
Spice jet: It is another budget airline company in India with a market share of around
20%. It was founded in 1993 as Modiluft but ceased operations in 1996. Keeping in
mind (Inception and Expansion) in 2004, raised funds and restarted operations as the
new name Spicejet on 18th May 2005. It serves in key cities of India with around 290
daily Take-offs. The fleet size of spicejet currently is over 42 Aircrafts.
Air India: It is one of the oldest airline companies in India with presence in all the major
as well as small cities of India. It was founded In July 1932 as the TATA Airlines and
started operations in 29th July 1946, It was found by one of the great industrialists JRD
TATA. It has a market share of more than 18% and has a Fleet size of more than 110
Aircrafts.
Go AIR: It is one of the most popular budget airlines in India. It is owned by Bombay
DYING and Britannia industry and became operational on November 2005. The fleet
size is over 19 Aircrafts and serves in more than 22 Destinations with daily 140 takeoffs. It is headquartered in Worli, Mumbai with a slogan FLY SMART.
Some other popular airlines in India are:
Air India Express
Air ASIA
Air COSTA
VISTARA AIRLINES
INVESTMENT OPPURTUNITIES- L
According to data released by the Department of Industrial Policy and Promotion
(DIPP), FDI inflows in air transport between April 2000 and June 2015 stood at US$
573.12 million.
Key investments and developments in Indias aviation industry include:
Airbus, one of the top two aircraft manufacturers in the world, plans to open
aircraft maintenance and repair overhaul (MRO) facility in India.

Airbus, the worlds leading aircraft maker, expects Indias aviation industry to
grow at over 10 per cent annually in the next decade, almost double the average
growth rate of the global aviation industry.
Indigo plans to file documents for an IPO within the next two months to raise US$
400 million by selling 10 per cent stake.
Spice Jet plans to enter a deal with Boeing Co. and Airbus Group to buy 80-120
jet airplanes which would help to expand their fleet and rebuild its business .
300 business jets, 300 small aircraft and 250 helicopters are expected to be
added to the current fleet in the next five years.
150 Greenfield and brownfield airports.
The development of new airports the AAI aims to bring around 250 airports
under operation across the country by 2020

Government Initiatives- M
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.
The (DGCA) Directorate General of Civil Aviation has given its approval to Air
Indias(MRO unit) maintenance, repair and overhaul.
The Government plans to form a committee comprising bankers, aviation experts
and technocrats to help turn around and privatize the national airline, Air India.
The Government has also 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 SECTION 5/20 norms for domestic airlines in this new policy.

FOREIGN DIRECT INVESTMENT- L

100% Foreign Direct Investment (FDI) is permitted for Greenfield airport projects.
Up to 74% FDI is permitted for existing airport projects.
Up to 49% FDI is permitted in domestic scheduled passenger airlines.
Up to 100% FDI is permitted in helicopter services and seaplanes
Up to 49% FDI is permitted in ground handling
Up to 100% FDI is permitted in maintenance and repair organisations; flying
training institutes; and technical training institutes.
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.
FOREIGN INVESTORS- L

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)

ROLE OF AVIATION INDUSTRY IN INDIAN ECONOMY- M

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
With the entry of the private operators in this sector and the huge cut in air
prices, air travel in India is becoming popular.
Air traffic has grown enormously and expected to have a growth which would be
above 20% 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 twice th global
average.
Aviation Industry in India have placed the biggest order for aircrafts globally

AIRLINE BUSINESS STRATEGIES-L

Strategic planning is a continual process for airlines. Plans must take into account the
challenging and ever-changing competitive environment as well as how passengers
define value.
Service time and the corresponding price is a focal point for strategic planning. For
example, business travellers are sensitive to flight times and expect a high level of
service. Short-haul business travellers tend to be more sensitive to ticket prices than
long-haul business travellers. Leisure travellers are more sensitive to price but less
demanding about service levels.
Deregulation has had a significant impact on airline strategies during the past several
decades. As regulations on commercial aviation have been relaxed, airlines have
gained freedom to vary fares in response to competition and demand, develop network
and schedule planning are the aspects of airline business. Deregulation has helped
stimulate traffic and network growth, and the resulting competition provides increased
choice to travellers. Airline business models continue to evolve in order to adapt to the
dynamic marketplace.

Market penetration-In the highly competitive airline industry, a me-too carrier in an

established market has little chance of success. Questions that might arise include:
what is the launch airline bringing to the market that the market doesnt already have?
Low fares?
Of course, one can normally expect an aggressive response from an incumbent; he is
likely to match or potentially even undercut an introductory low fare. Even though a
new entrant can obtain presence in many third-party distribution systems, the incumbent
will have a huge advantage in knowing the habits and having experience of frequent
travellers.
PRICING STRATEGY - L
Let's say you're an airline executive focused on maximizing profit. Do you aim to fill
every seat on each flight? Or do you raise fares, knowing that a few seats -- or even
more -- might go empty.
For most airlines, the emphasis is on the latter. The goal, almost always, is to make the
most money. Even If that means not every seat is taken.
Chuck Schubert, vice president of American Airlines says. "If I could sell all my tickets
for $10, I am certain I could fill the plane. But I'm also certain I could not make money.
It's about balancing the load factor of the plane with the yields, or what people are
willing to pay."
Airline industry all around the globe usually follows dynamic pricing model. In dynamic
pricing, the price is not firmly set. Instead it changes based on changing circumstances,
such as increases in demand at certain times, type of customer being targeted or
changing marketing conditions. This type of pricing strategy is especially common in
certain types of business, particularly those providing a service, such as airlines, but
can also be used with product pricing.
Segmented PricingIn segmented pricing, some customers are charged more based on
their willingness to pay more for a given service or product. For example,
businesspeople may be willing to pay a higher price for an airline ticket that allows them
to fly mid-week. Some customers may be willing to pay more for faster service, higher
quality or more features. For example, a product may be sold at one price with a
warranty and a lower price without a warranty.
Peak User PricingPeak user pricing is a strategy common in transportation
businesses. For example, airlines and train companies often charge a higher price to
travel during rush hour on Monday through Friday than at other times and on weekends.
Utility companies also set prices based on peak times. For example, they may charge
higher fees for phone calls made, or electricity used, between 9 a.m. and 6 p.m.

Service TimeAnother dynamic pricing strategy is to charge more for faster service. For
example, same-day dry cleaning would cost more than overnight cleaning. This strategy
can increase customer loyalty without sacrificing profit margin.

Time of PurchaseSome dynamic pricing strategies offer customers different prices

based on when they buy. If travellers have learned anything in the past three decades, it
is that they should book as quickly as possible. Late-booking business travellers then
get stuck with the high fares, while leisure passengers pay less.
But this system is not perfect. The travel website Kayak studied roughly 1 billion airfare
searches. It found that the sweet spot for domestic travel is 21-35 days prior to
departure, while, for international flights, the best time is within three months. That
means booking too early before airline analysts have had a chance to monitor supply
and demand and set ticket prices accordingly -- can actually hurt customers.
Changing ConditionsUsing dynamic pricing strategies can boost profits more under
certain market conditions, according to research conducted, researchers found that
dynamic pricing for products works best when there is a lot of uncertainty in the market-for example when the product may have a very short life span, as is the case with movie
tie-ins. Sellers can maximize profits by lowering prices as sales fall, then raising prices
again as demand increases.

LIMITATIONS- M
Low profit marginsThe airline industry is hampered by slim profit margins, forcing
carriers to focus on both cost reduction and revenue growth through better customer
interactions.
In the commercial aviation sector, just about every player in the value chain airports,
airplane manufacturers, jet engine makers, travel agents, and service companies, to
name a few turns a tidy profit. Yet its one of the enduring ironies of the industry that
the companies that actually move passengers from one place to another, the most
crucial link in the chain, struggle to break even.
That is largely due to the complex nature of the business, manifested in part by the
significant degree of regulation (which minimizes consolidation), and the vulnerability of
airlines to extreme events that happen with great regularity, such as security concerns,
volcanic eruptions , and infectious diseases. But on-going price pressure is also a
factor; the airline industry is one of the few sectors that have seen prices fall for
decades. Since the 1950s, airline yields have consistently dropped.

Given these unique circumstances, airlines must continue to focus on top-line growth
because their limited profitability depends almost solely on revenue gains, while
increasing productivity in order to shore up and perhaps even increase margins. The
way individual commercial airlines react to and navigate several trends playing out
across the globe will determine carrier performance in the coming years.
Increasing consumer expectationsPeople have grown accustomed to seeing
significant improvements in their experiences with things they buy. Large and small
products are more reliable and more user-friendly than ever before. Consider how cars
have progressed even in the past decade, with upgraded safety and entertainment
features, and far better handling and fuel consumption. Yet air travel has not followed
this pattern. It remains for many a disappointing, grumble-worthy experience.
Consumer disaffection is challenging for carriers to address because upgrading the
hard product the aircraft is an expensive way for airlines to differentiate
themselves, and the payback could be long in coming. Enhancing the soft product
through a welcoming and seamless customer experience across all aspects of air travel,
from reservation to touchdown is cheaper, but often more difficult to implement.
Growing pressure to reduce costs and improve operational efficiencyAirlines need
to make large and on-going improvements to operate more efficiently. With few
exceptions, the most successful airlines are those with the most strict cost controls. The
biggest lever to reduce costs lies in fuel efficiency, as jet fuel typically accounts for 4050% of operating expenses. Carriers due to insufficient funds have been unable to
modernize their fleet with more fuel-efficient aircrafts. Cost reduction can also be
achieved through enhancements in organizational structure, operating model, and work
practices. In particular, legacy airlines have often built up complex processes over
decades that cost far more than the streamlined processes of the LCCs.
Shifting airline landscapeThe rapid growth of air travel in developing markets,
especially in Asia, is shifting the industrys centre of gravity. Middle Eastbased carriers
such as Emirates, Etihad Airways, and Qatar Airways are taking a large slice of the
formerly profitable EuropeAsia traffic from those continents legacy airlines.
The Middle East carriers are highly dependent on connecting traffic, because their
home markets are limited by the smaller population of their region. Yet their unique
geographic positioning most of the worlds population is within eight hours flying time
means they are able to capture a disproportionate share of long-haul market growth.

RECOMMENDATIONS- R
In response to these trends, we believe that airlines must take several specific
measures to remain competitive.
Get to know your customers better. As is true in other industries, understanding
individual customers preferences and consumer-related activities is essential to
delivering personalized service and targeted offerings.
The benefits of greater customer knowledge and, hence, intimacy are an improved
passenger experience and targeted offerings. As a result of such an approach, airlines
gain a greater chance to generate ancillary revenue, and through loyal customers
a higher percentage of sales coming through direct channels
Use digitalization to reduce operating costs. Airlines must also use new technology
internally to streamline their operations and reduce costs. For example, systems that
can enable real-time resource planning and allocation drive greater utilization. Such
measures can reduce downtime and greatly improve performance, driving down costs
while also bolstering passenger satisfaction through more frequent on-time arrivals and
departures.
Cut the fat, not the muscle. In reducing expenses, airlines must determine not only
how far to cut, but also where to cut. A critical part of the process is identifying the set of
essential capabilities that differentiates them from their rivals in the view of customers.
In many cases, those capabilities may require renewed investment. Yet management
needs to be ruthless in cutting costs in all other areas that are not relevant to safety,
reputation, branding, or customer value.
Partner strategically. Finally, airlines should continue to seek partnerships that can
complement and even improve what they do best, as well as close glaring gaps. In most
cases, these partnerships will be more targeted and synergistic than the traditional
alliances that now dominate.
Jet airways, which was already part of the one world alliance, recently forged such a
targeted partnership with Etihad airways. Jet airways did not have the traffic to fly
profitably to multiple cities in Europe, yet that was a significant demand among its loyal
customer base. Etihad, by contrast, had sufficient demand to access a large number of
destinations in Europe, but it did not have a loyal base of local customers in India. The
new partnership gives jet airways access to many more destinations in Europe, and it
gives Etihad access to an extremely loyal base of customers .

Conclusion

The airline industry has long struggled with margins, but the current growth phase in
most markets, coupled with evolving technology and customer preferences, offers a real
opportunity. By adopting the measures described here, carriers can forge better
relationships with customers, cut costs selectively, and improve their financial
performance in a sustainable way either alone or with the right set of partners.

STRATEGIC ALLIANCES- L
Advantages
An extended network
Cost reduction from sharing of sales offices, maintenance facilities, operational
facilities, operational staff, investments and purchases.
Traveller benefits can include lower prices, more departure time, more
destinations, and shorter travel times, a wider range of airport lounges shared
with alliance members, faster mileage rewards, and round-the-world tickets for a
relatively low price.
Disadvantages for the traveller

Higher prices when competition is erased on a certain route.

Less frequent flights: for instance

ROAD AHEAD- M
Indias aviation industry is largely untapped with huge growth opportunities, considering
that air transport is still expensive for majority of the countrys population, of which
nearly 40 per cent is the upwardly mobile middle class.
The industry stakeholders should engage and collaborate with policy makers to
implement efficient and rational decisions that would boost Indias civil aviation industry.
With the right policies and relentless focus on quality, cost and passenger interest, India
would be well placed to achieve its vision of becoming the third-largest aviation market
by 2020 and the largest by 2030.

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