INDUSTRY OVERVIEW

Air travel remains a large and growing industry. It facilitates economic growth, world
trade, international investment and tourism and is therefore central to the globalization
taking place in many other industries.

In the past decade, air travel has grown by 7% per year. Travel for both business and
leisure purposes grew strongly worldwide. Scheduled airlines carried 1.5 billion
passengers last year. In the leisure market, the availability of large aircraft such as the
Boeing 747 made it convenient and affordable for people to travel further to new and
exotic destinations. Governments in developing countries realized the benefits of tourism
to their national economies and spurred the development of resorts and infrastructure to
lure tourists from the prosperous countries in Western Europe and North America. As the
economies of developing countries grow, their own citizens are already becoming the
new international tourists of the future.

Business travel has also grown as companies become increasingly international in terms
of their investments, their supply and production chains and their customers. The rapid
growth of world trade in goods and services and international direct investment have also
contributed to growth in business travel.

Worldwide, IATA, International Air Transport Association, forecasts international air

travel to grow by an average 6.6% a year to the end of the decade and over 5% a year
from 2000 to 2010. These rates are similar to those of the past ten years. In Europe and
North America, where the air travel market is already highly developed, slower growth of
4%-6% is expected. The most dynamic growth is centered on the Asia/Pacific region,
where fast-growing trade and investment are coupled with rising domestic prosperity. Air
travel for the region has been rising by up to 9% a year and is forecast to continue to
grow rapidly, although the Asian financial crisis in 1997 and 1998 will put the brakes on
growth for a year or two. In terms of total passenger trips, however, the main air travel
markets of the future will continue to be in and between Europe, North America and
Asia.

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Airlines' profitability is closely tied to economic growth and trade. During the first half of
the 1990s, the industry suffered not only from world recession but travel was further
depressed by the Gulf War. In 1991 the number of international passengers dropped for
the first time. The financial difficulties were exacerbated by airlines over-ordering
aircraft in the boom years of the late 1980s, leading to significant excess capacity in the
market. IATA's member airlines suffered cumulative net losses of $20.4bn in the years
from 1990 to 1994.

Since then, airlines have had to recognize the need for radical change to ensure their
survival and prosperity. Many have tried to cut costs aggressively, to reduce capacity
growth and to increase load factors. At a time of renewed economic growth, such actions
have returned the industry as a whole to profitability: IATA airlines' profits were $5bn in
1996, less than 2% of total revenues. This is below the level IATA believes is necessary
for airlines to reduce their debt, build reserves and sustain investment levels. In addition,
many airlines remain unprofitable.

To meet the requirements of their increasingly discerning customers, some airlines are
having to invest heavily in the quality of service that they offer, both on the ground and in
the air. Ticketless travel, new interactive entertainment systems, and more comfortable
seating are just some of the product enhancements being introduced to attract and retain
customers.

Deregulation is also stimulating competition, such as that from small, low-cost carriers.
The US led the way in 1978 and Europe is following suit. The EU's final stage of
deregulation took effect in April 1997, allowing an airline from one member state to fly
passengers within another member's domestic market. Beyond Europe too, 'open skies'
agreements are beginning to dismantle some of the regulations governing which carriers
can fly on certain routes. Nevertheless, the aviation industry is characterized by strong
nationalist sentiments towards domestic 'flag carriers'. In many parts of the world, airlines
will therefore continue to face limitations on where they can fly and restrictions on their
ownership of foreign carriers.

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Despite this, the airline industry has proceeded along the path towards globalization and
consolidation, characteristics associated with the normal development of many other
industries. It has done this through the establishment of alliances and partnerships
between airlines, linking their networks to expand access to their customers. Hundreds of
airlines have entered into alliances, ranging from marketing agreements and code-shares
to franchises and equity transfers.

The outlook for the air travel industry is one of strong growth. Forecasts suggest that the
number of passengers will double by 2010. For airlines, the future will hold many
challenges. Successful airlines will be those that continue to tackle their costs and
improve their products, thereby securing a strong presence in the key world aviation
markets.

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 Aviation industry in India
The Indian aviation industry is one of the fastest growing aviation industries in the world
with private airlines accounting for more than 75 per cent of the sector of the domestic
aviation market (as of 2006). The industry is growing at a compound annual growth rate
(CAGR) of 18 per cent. The country has 454 airports and airstrips, of which 16 are
designated as international airports.
Mr Praful Patel, Union Civil Aviation Minister has stated that the Indian aviation sector
will become one of the top five civil aviation markets in the world over the next five
years. Currently, India ranks ninth in the global civil aviation market.
Passengers carried by domestic airlines from January-June 2010 stood at 25.71 million as
against 21.1 million in the corresponding period of 2009—a growth of 22 per cent—
according to data released by the Directorate General of Civil Aviation (DGCA). In terms
of market share, private carrier Jet Airways was the market leader with 26.5 per cent
share, followed by Kingfisher Airlines with 21 per cent, Air India with 16.9 per cent,
Indigo with 16.4 per cent, SpiceJet with 13.3 per cent and GoAir with 5.8 per cent during
the month of June 2010.
Leading aircraft manufacturers Airbus and Boeing have expressed optimism over the
growth of the civil aviation industry in India. As per Airbus, the country would need
1,032 new aircrafts worth around US$ 138 billion by 2028. On a similar note, Boeing has
also predicted that the sector would require 1,150 commercial jets worth US$ 135 billion
in the next 20 years.
The Hyderabad International Airport has been ranked amongst the world's top five in the
annual Airport Service Quality (ASQ) passenger survey along with airports at Seoul,
Singapore, Hong Kong and Beijing. The Hyderabad International Airport is being
managed by a public-private joint venture of the GMR Group, Malaysia Airports
Holdings Berhad and the State Government of Andhra Pradesh along with the Airports
Authority of India (AAI).
Timothy J Roemer, the US Ambassador to India has said that the US will work with the
Indian government and the domestic private sector to make the country an aviation hub.

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Speaking at India Aviation 2010, Roemer said that the public-private initiative, US-India
Aviation Programme, would work together with the DGCA on helicopter aviation
security.
The AAI is set to spend over US$ 1.02 billion in 2010, towards modernisation of non-
metro airports. AAI is planning the city-side development of 24 airports, including those
at Ahmedabad and Amritsar. Additionally, 11 new greenfield airports have been
identified to reduce passenger load on existing airports, according to Praveen Seth,
member-operations, AAI.
AAI also plans to spend around US$ 3.07 billion in the next five years for developing,
upgrading and modernising metro and non-metro airports.
With the growth in the industry, airport retailing has also gained pace in the recent times.
Development of new terminals and airports such as the recently inaugurated T3 in New
Delhi has provided added impetus to this segment. The highest margin earners in this
segment are food and beverages, beauty product, electronic items, apparel etc. It has been
predicted that airports would provide around 300,000-400,000 square feet retail space by
2015. Many companies are also planning to leverage on this growing segment by
launching specific products for air travellers. For instance, French premium skincare
brand L'Occitane is planning to develop a special range to cater to the airport retailing
segment.
Investment Policy
The consolidated document on FDI policy was released on March 31, 2010.
Currently, for the civil aviation sector (Airports):
• FDI up to 100 per cent is allowed under the automatic route for greenfield
projects.
• For existing projects, FDI up to 100 per cent is allowed; while investment up to
74 per cent under the automatic route and beyond 74 per cent under the government
route.
Government initiative
As per a new Civil Aviation Requirement (CAR) issued by the DGCA, airlines would
have to mandatorily pay a compensation for delay or cancellation of flights or in case the

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passengers are denied boarding although possessing a confirmed ticket. The regulation
would come into effect from August 15, 2010.
The Road Ahead
Investment opportunities of US$ 110 billion are being envisaged up to 2020 with US$ 80
billion towards new aircraft and US$ 30 billion towards the development of airport
infrastructure, according to the Investment Commission of India.
GE Aviation and Air India will jointly invest US$ 90 million to set up a maintenance,
repair and overhaul (MRO) facility in Mumbai.
Indocopters Private Ltd, distributor for Eurocopter helicopters in India, is planning to set
up a helicopter MRO facility in Bhubaneswar, the company’s fourth service centre in the
country.

History of Airlines in India

1910: The first Indian, or maybe even Asian, to have an airplane is the young Maharaja
of Patiala, Bhupinder Singh, who has a keen interest in aviation. Singh sends his Chief
Engineer to Eurpoe for a study with orders to buy three planes, including a Bleriot
monoplane and Farman biplanes, which arrive in the Punjab later that year.

1911: Domestic commercial aviation is born in India when on February 18, Henri Piquet,
flying a Humber biplane, carries mall from Allahabad to Naini Junction, some six miles
away.

1927: The world first officially christened airline, Britain Imperial Airways extends to
Empire Routes to India, connecting India with the outside world for the first time through
an air network. A de Havilland Hercules flies the Cairo-Basra-Karachi-Jodhpur-Delhi
route. It is also the first domestic passenger flight to be operated in India. Passengers
could be for the first time fly from Karachi to Jodhpur and to Delhi on Imperial Airways.

1929: Athe Aga Khan offers through the Royal Aero Club, a special prize of 500 for a
solo flight completed within six weeks from the date of starting. The prize will remain
open for one year from January 1930.†ﾝ There were three contestants an eager

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JRD Tata, Man Mohan Singh, a civil engineer graduating from Bristol who had learnt to
fly in England, and Aspy Merwan Engineer (later the Chief of the Indian Air Force). The
three men set out flying single-engine, light aeroplanes with simple instruments and
without radio. Man Mohan Singh took off from Croydon airport, south of London, in a
Gypsy Moth which he called Miss India; Aspy Engineer followed the same route while
JRD Tata, also in a Gypsy Moth, started his journey in the reverse direction. After
Croydon, Man Mohan Singh flew on to Lympne, Le Bourget (Paris), Dijon, Marseillers,
Rome, Naples, Catania, Tripoli and Sirle. From Gaza, he flew eastwards to India, with
Engineer trailing a day behind. Singh finally landed at Drigh Road, Karachi on 12 May
1930, winning the historic air race. Engineer landed the next day and, though he came
second, due to a technicality, was eventually declared the winner, which Singh accepted.

On February 10, JRD Tata is awarded India first pilot licence, Pilot Licence No.1 by
Federation. Aeronautique International signed by Sir Victor Sasoon on behalf of the Aero
Club of India and Burma.

1932: Urmila K Parikh becomes the first woman to get a pilot licence when she is given
an licence by the Aero Club of India and Burma.

1932: JRD Tata launches India first scheduled airline, Tata Airlines, by piloting the first
flight himself from Karachi to Mumbai via Ahmedabad on a single-engine. Puss Moth
with a load of airmail. Nevill Vintcent, a former Royal Air Force pilot and JRD collegue,
flies the plane to Chennai via Bellary thus completing the flight.

1933: In its first year of operation. Tata Airlines flies 160,000 miles, carries 155
passengers and 10.71 tonnes of mail. In the next few years, Tata Airlines continues to
rely for its revenue on the mail contract with the Government of India for carriage of
surcharged mail, including a considerable quantity of overseas mail brought to Karachi
by Imperial Airways.

Tata Airlines launches its longest domestic flight: Mumbai to Trivandrum with a six-
seater Miles Merlin.

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1945: India second domestic airline, Deccan Airways, is founded Seventy-one per cent is
owned by the Nizam of Hyderabad, 29 per cent by Tata Sons. Deccan Airways is the first
of a bunch of new airlines to serve domestically in India. It flies in the Hyderabad region,
using a fleet of 12 Douglas DC-3s. The first services began in July 1946.

1946: Tata Airlines changes its name to Air India. In 1947, Air India signs an agreement
with the government of India to operate international services under a new company
called Air India International Ltd. Established as a joint sector company with a capital of
Rs 2 crore and a fleet of three Lockheed constellation aircraft. The new name is
inaugurated on March 8, 1948. Three months later on June 8, Air India International
inaugurated its international services with a weekly flight from Bomabay to London via
Cairo and Geneva. The airline is nationalized in 1953.

1951: Prem Mathur becomes the first woman commercial pilot. She flies planes owned
by Deccan Airways.

1953: Indian Airlines and Air India International are set up after legislation comes into
force to nationalize the entire airline industry in India. Eight former independent
domestic airlines; Deccan Airways, Airways India, Bharat Airways, Himalayan Aviation,
Kalinga Air Lines, Indian National Airways, Air India, Air Services of India, are merged
to from the domestic national carrier. Air India International takes over the international
routes. Indian Airlines Corporation inherits a large fleet of 74 DC-3 Dakotas, 12 Vikings,
3 DC-4s and various smaller craft.

1956: Durba Banerjee is inducted as the first woman pilot of Indian Airlines.

1960: India enters the jet age when Air India begins operating its first Boeing 707-437. It
also marks the year in which USA is first connected to India by an Indian airliner.

1984: Squadron Leader Rakesh Sharma, a 35-year-old Indian Air Force pilot becomes
the first Indian cosmonaut and the 138th man in space, when he spends eight days in
space abroad Salyut 7.

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1985: Captain Saudamini Deshmukh commands the first all-women crew flight on an
Indian Airlines Fokker Friendship F-27 on the Calcutta-Silchar route. She also commands
the first Boeing all-women crew flight on September 1989 on the Mumbai-Goa sector.

1989: Indian Airlines becomes one of the earliest airline in the world to induct the
revolutionary fly-by-wire A320s made by France Airbus Industrie into its fleet. The
airline first pure-jet was a Caravelle, inducted in 1964.

1990: East West Airlines becomes the first national level private airline to operate in the
country after 37 years, after the government decided to end Indian Airlines monopoly
over domestic civil aviation.

Capt Nivedita Bhasin of Indian Airlines at 26 becomes the youngest pilot in civil aviation
history to command a jet aircraft when she pilots IC-492 on the Bombay-Aurangabad-
Udaipur sector on January 1. Bhasin also becomes the country first woman check-pilot on
an Airbus A300 aircraft.

Air India is commended in the Guinnes Book of World Records for the largest evacuation
effort by a civil, when it flew over 111,000 people from Amman to Mumbai in 59 days,
operating 488 flights just before the first Gulf War.

1992: The Indian Air Force (IAF) decided to recruit women pilots. It advertises for eight
vacancies and receives 20,000 applications. The first pilots enter service in July 1994.

1997: A group of army aviation professionals gets together to set up Deccan Aviation,
which will soon grow to become India largest privately owned helicopter charter
company.

1998: Dr Kalpans Chawla becomes the first Indian-born woman to fly to space, as part of
a NASA team.

1999: Flying Officer Gunjan Saxena, who was among the first women pilots in the IAF,
becomes the first woman to fly in a Combat Zone when she takes part in air operations
during the Kargil war.

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2003: Air Deccan, India first ever budget airline begins operations on 25th August. The
first flight is from Bangalore to Mangalore.

2004: On August 26, Air Deccan turns into the first truly national budget carrier with the
launch of its A320 flights on the Delhi Bangalore route.

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 TYPES OF AVIATIONS

1. Civil aviation

Civil aviation is one of two major categories of

flying, representing all non-military aviation,
both private and commercial. Most of the
countries in the world are members of the
International Civil Aviation Organization (ICAO) and work together to establish common
standards and recommended practices for civil aviation through that agency.

Civil aviation includes two major categories:

• Scheduled air transport, including all passenger and cargo flights operating on
regularly-scheduled routes; and
• General aviation (GA), including all other civil flights, private or commercial

Although scheduled air transport is the larger operation in terms of passenger numbers,
GA is larger in the number of flights (and flight hours, in the U.S. In the U.S., GA carries
166 million passengers each year, more than any individual airline, though less than all
the airlines combined.

Some countries also make a regulatory distinction based on whether aircraft are flown for
hire:

• Commercial aviation includes most or all flying done for hire, particularly
scheduled service on airlines; and
• Private aviation includes pilots flying for their own purposes (recreation, business
meetings, etc.) without receiving any kind of remuneration.

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All scheduled air transport is commercial, but general aviation can be either commercial
or private. Normally, the pilot, aircraft, and operator must all be authorized to perform
commercial operations through separate commercial licensing, registration, and operation
certificates.

2. Private aviation
Private aviation is the part of civil aviation that does
not include flying for hire. In most countries, private
flights are always general aviation flights, but the
opposite is not true: many general aviation flights
(such as banner towing, charter, crop dusting, and
others) are commercial in that the pilot is hired and
paid. Many private pilots fly for their own enjoyment,
or to share the joys and convenience of general aviation with friends and family.

In private flight the pilot is not paid, and all aircraft operating expenses are generally paid
by the pilot. In some countries such as the United States, aircraft operating expenses for a
flight may optionally be divided with any passengers up to a pro rata amount. For
example, if aircraft operating expenses total $120 for a flight with pilot and three
passengers, each of the three passengers could pay not more than $30 (one fourth) of the
expenses with the remainder paid by the pilot.

In many countries, private aviation operates to less strict standards than commercial
aviation. For example, in Canada and the United States, aircraft owners are allowed to
perform basic maintenance tasks (such as oil or tire changes) on their own privately-
registered aircraft, but only licensed mechanics may perform those tasks on
commercially-registered aircraft.

3. Commercial aviation

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Commercial aviation is the part of civil aviation (both general aviation and scheduled
airline service) that involves operating aircraft for hire to transport passengers or cargo.
In most countries, a flight may be operated for money only if it meets three criteria:

• the pilot must hold a valid commercial pilot's certificate

• the aircraft must hold a valid commercial registration
• the operator must hold a certificate or some other authorization for commercial
operations

There are some exceptions — for example, a flight instructor is normally allowed to fly
for money in a private aircraft owned by the student — but the above requirements hold
for most flights where money changes hands.

Typically, a commercial certificate or registration requires higher standards than a private

one. For example, a commercial pilot may have to demonstrate more maneuvers to a
higher standard, and may need to pass more frequent medical examinations. A
commercially-registered plane may require more frequent or more extensive
maintenance.

It is the purpose of the flight, not the type of aircraft or pilot, that determines whether the
flight is commercial. For example, a two-seat Cessna 150 towing a banner for money
would be a commercial flight, while a large jet flown by its owners for a private vacation
would not be, even if the pilots were commercially certificated and the jet were
commercially registered.

4. General Aviation

General aviation (GA) is one of the two categories of civil aviation. It refers to all
flights other than military and scheduled airline and regular cargo flights, both private
and commercial. General aviation flights range from gliders and powered parachutes to
large, non-scheduled cargo jet flights. The majority of the world's air traffic falls into this
category, and most of the world's airports serve general aviation exclusively.

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General aviation is particularly popular in North America, with over 6,300 airports
available for public use by pilots of general aviation aircraft (around 5,300 airports in the
U.S., and over 1,000 in Canada. In comparison, scheduled flights operate from around
600 airports in the U.S. According to the U.S. Aircraft Owners and Pilots Association,
general aviation provides more than one percent of the United States' GDP, accounting
for 1.3 million jobs in professional services and manufacturing.

General aviation covers a large range of activities, both commercial and non-commercial,
including private flying, flight training, air ambulance, police aircraft, aerial firefighting,
air charter, bush flying, gliding, skydiving, and many others. Experimental aircraft, light-
sport aircraft and very light jets have emerged in recent years as new trends in general
aviation.

MAJOR COMPONENTS OF AIRLINES

INDUSTRY

1. Cargo airline
Cargo airlines (or airfreight carriers, and derivatives of these
names) are airlines dedicated to the transport of cargo. Some
cargo airlines are divisions or subsidiaries of larger passenger
airlines.

Usage of large military airplanes for commercial purposes, pioneered by Ukraine's

Antonov Airlines in 1990s, has opened new types of cargo for aerial transportation,
redesigning world logistics market.

Logistics

Air transport is a vital component of many international logistics networks, essential to

managing and controlling the flow of goods, energy, information and other resources like
products, services, and people, from the source of production to the marketplace. It is

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difficult or nearly impossible to accomplish any international trading, global
export/import processes, international repositioning of raw materials/products and
manufacturing without a professional logistical support. It involves the integration of
information, transportation, inventory, warehousing, material handling, and packaging.
The operating responsibility of logistics is the geographical repositioning of raw
materials, work in process, and finished inventories where required at the lowest cost
possible.

2. Charter airline
A charter airline, also sometimes referred to as an air taxi, operates aircraft on a charter
basis, that is flights that take place outside normal schedules, by a hiring arrangement
with a particular customer. These flights are often more expensive, but allow the
customer the convenience of flying at a more suitable time. Most scheduled airline
companies also operate charter flights but are not considered or classified as charter
airlines.

In the context of mass tourism, charter flights have acquired the more specific meaning of
a flight whose sole function is to transport holidaymakers to tourist destinations. Such
charter flights are contrasted with scheduled flights, but they do in fact operate to regular,
published schedules. However, tickets are not sold directly by the charter airline to the
passengers, but by holiday companies who have chartered the flight (sometimes in a
consortium with other companies).

Although charter airlines typically carry passengers who have booked individually or as
small groups to beach resorts, historic towns, or cities where a cruise ship is awaiting
them, sometimes an aircraft will be chartered by a single group such as members of a
company, a sports team, or the military.

Many charter flights are sold as part of a package holiday in which the price paid includes
flights, accommodation and other services. At one time this was a legal requirement (or
one enforced by the airlines' cartel), but this is no longer the case, and so-called "flight-
only packages" can be bought by those who merely want to travel to the destination. Such

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packages are frequently cheaper than regular schedule airline fares. Furthermore charter
airlines frequently operate on routes, or to airports, where there is no scheduled service..

3. Air taxi

An air taxi is an air charter passenger or cargo aircraft which operates on an on-demand
basis.

4. Air ambulance
An air ambulance is an aircraft used for
emergency medical assistance in situations where
either a traditional ambulance cannot reach the
scene easily or quickly enough, or the patient
needs to be transported over a distance or terrain
that makes air transportation the most practical
transport. These and related operations are referred to as Aeromedical. Air ambulance
crews are supplied with equipment that enables them to provide medical treatment to a
critically injured or ill patient. Common equipment for air ambulances includes
ventilators, medication, an ECG and monitoring unit, CPR equipment, and stretchers.

5. Police aircraft
A police aircraft is an airplane, helicopter or blimp used
in police operations. They are commonly used for traffic
control, ground support, search and rescue, high-speed
car pursuits, observation, air patrol and riot control. In
major cities in the United States, police helicopters are
also used as air transportation for SWAT personnel.
Key players in Indian Airlines

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KEY PLAYERS IN AIRLINE INDUSTRY

S.No Airlines
1. Indian Airways
2. Kingfisher
3. Air India
4. Air Deccan
5. Lufthansa India Airlines
6. Indigo
7. Alliance Air
8. Paramount Airways Private Limited
9. Jet Airways

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 SWOT ANALYSIS OF AVIATION INDUSTRY

Strengths:

1. Growing tourism: Due to growth in tourism, there has been an increase in number of
the international and domestic passengers. The estimated growth of domestic passenger
segment is at 50% per annum and growth for international passenger segment is 25%

2. Rising income levels: Due to the rise in income levels, the disposable income is also
higher which are expected to enhance the number of flyers.

Weaknesses:

1.Under penetrated Market : The total passenger traffic was only 50 million as on 31st
Dec 2005 amounting to only 0.05 trips per annum as compared to developed nations like
United States have 2.02 trips per annum.

2. Untapped Air Cargo Market: Air cargo market has not yet been fully taped in the
Indian markets and is expected that in the coming years large number of players will have
dedicated fleets.

3. Infrastructural constraints: The infrastructure development has not kept pace with
the growth in aviation services sector leading to a bottleneck. Huge investment
requirement for physical infrastructure for airports.

Opportunities:

1.Expecting investments: investment of about US $30 billion will be made.

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2. Expected Market Size: Average growth of aviation sector is about 25%-30% and the
expected market size is projected to grow upto100 million by 2010.

Threats
Huge investments are expected to take place in aviation sector in near future. It is
estimated that by 2012.

1. Shortage of trained Pilots: There is a shortage of trained pilots, co-pilots and ground
staff which is severely limiting growth prospects.

2. Shortage of Airports: There is a shortage of airport facilities, parking bays air traffic
control facilities and takeoff and landing slots.

3. High prices: Though enough number of low cost carriers are already existing in the
industry, majority of the population is still not able to fly to other destinations.

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 CHALLENGES FACED BY AIRLINE
INDUSTRY

After a period of drastic growth, Indian Airlines is now gripped with challenges that are
also impacting the industry across the globe, including high Aviation Turbine Fuel (ATF)
prices, rising labor costs, shortage of skilled labor, excess capacity, huge debt burden and
intense price competition.

1. High Aviation Turbine Fuel (ATF) Prices

ATF prices now form around 80% of the total operating costs of Airline Industry. The
industry across the world continues to be plagued with high ATF prices which have
demonstrated the inverse relationship between airline stock prices and fuel prices. ATF
prices have almost doubled over the last year. Almost all Indian carriers are also feeling
the heat and are desperately resorting to measures like cutting routes, increasing fuel
surcharge, promoting the use of e-tickets and charging for food items to reduce their
losses. Skyrocketing ATF prices, depreciating rupee coupled with global recession has
directly impacted the Indian Airline Industry. The industry reported a $10.4 billion loss in
the last year. Increasing air fares have worked against the logic of increasing profits, as it
has resulted in decreased air traffic. Besides focusing on designing fuel efficient engines,
aircraft manufacturers like Boeing and Airbus, along with OEMs are developing
sustainable bio-fuels which will give them some relief from the vulnerability of profits
due to consistently rising fuel prices.

2. Excess Capacity

Driven by the drastically increasing passenger traffic over the last 3 years, almost all
Indian airlines build their capacity assuming the growth would continue over the next few
years. Several new aircrafts were bought within a short span of time which resulted in

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excess capacity of around 15% to 20%. Aircrafts ordered during good times are being
delivered during recession. According to industry experts, around 17% of the current fleet
(around 4,000 aircraft) are scheduled for delivery during the next 3 years. Even though
the industry grew above 40%, almost half of the growth was primarily stimulated due to
low fares. Maintaining such low levels of fares will be difficult due to excess capacity,
especially during the ongoing global slowdown. Consolidation therefore seems to be the
next logical step to get rid of this excess capacity problem.

3. Hugh Debt Burden

Healthy profits and increasing passenger traffic saw airlines raising significant amount of
capital from Financial Institutions and Banks to fund their aggressive expansion plans.
Banks also were liberal in lending airlines. The top three airlines including Air India,
Kingfisher Airlines and Jet Airways are now carrying a cumulative debt burden of
approximately $8 billion. Incidentally, this is almost equivalent to the losses of $8.5
billion posted by all global carriers. Restructuring this huge amount of leverage will be a
challenge as resorting to equity capital will also be equally difficult during economic
slowdown.

4. Poor Infrastructure

Infrastructure continues to be a major constraint for Indian Airline Industry today, which
has been aggravated further due to excess capacity created during good times.
Maintenance and Air Traffic Control (ATC) infrastructure are grossly inadequate if the
industry expects to grow any further. While steps are being taken on this front to upgrade
major airports in Mumbai, Delhi and Hyderabad, security concerns still remain to be
addressed. Attracting investments from private sector will go a long way to develop and
maintain the infrastructure which is crumbing due to the built-up excess capacity.

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 SCOPE AND GROWTH OF AVIATION
INDUSTRY IN INDIA
The Indian aviation industry has shown continued growth in recent years with key drivers
being positive economic factors (including high GDP growth), industrial performance,
corporate profitability/expansion, higher disposable incomes and growth in consumer
spending as well as wider availability of low fares.

Current scenario:

The current growth rate in domestic and international travel exceeds 25%, the highest in
the world. In the period April-September 2006, the total aircraft movements witnessed an
increase of 29.6% year-on-year to 494.92 thousand aircraft movements, as compared to
318.89 thousand during April-September 2005.

The Indian domestic market grew at almost 50% in the first half of 2006. On average, full
service carriers are shedding a remarkable 1.5% of market share every month to low cost
carriers.

-Growth Prospects of Indian Aviation Sector

Future scenario:

The aviation industry is expected to grow at a compounded annual growth rate of 25% till
2010. Also, by 2010 Indian airports will be handling between 90 and 100 million
passengers per year, as against the current 34 million passengers. It is expected that
nearly 80% of this growth will be driven by the low cost carrier segment (LCC). By
2008, the LCCs would capture 65% of the direct on-line air ticket market from 61% in
2005.

22
 International Domestic Total
No. in Percentage No. in Percentage No. in Percentage
millions growth millions growth millions growth
1999- 13.29 2.90% 25.74 6.90% 39.04 5.5%
00
2000- 14 5.40% 28.01 8.80% 42.02 7.70%
01
2001- 13.63 (-)2.7% 26.36 (-) 5.9% 39.98 (-)4.9%
02
2002- 14.82 8.80% 28.9 9.60% 43.72 9.40%
03
2003- 16.65 12.30% 32.04 10.09% 48.69 11.40%
04
2004- 19.45 17.00% 40.1 25.00% 59.54 22.30%
05
2005- 22.36 15.10% 50.98 27.90% 73.34 23.70%
06

23
WELCOME ABOARD AIR
INDIA

24
 ABOUT AIR INDIA

Air India (Hindi: एअर इंिडया) is a state-owned flag carrier of the Republic of India. It
operates a fleet of Airbus and Boeing aircraft serving Asia, Europe and North America. It
is India's oldest and largest airline. Its corporate office is located at the Air India Building
at Nariman Point in South Mumbai. It is the 16th largest airline in Asia.

Air India has two major domestic hubs at Delhi and Mumbai respectively and one
international hub at Frankfurt. London acts as a focus city for the airline.

Star Alliance announced on 13 December 2007 that it had invited Air India to join as a
member. Air India is set to become a full Star Alliance member by March 2011.

Air India is a part of the Indian government-owned National Aviation Company of India
Limited (NACIL).

COMPANY PROFILE

Organization

Air India has two subsidiaries and two affiliated carries. Together Air India, Air India
Cargo, Air-India Express, Indian Airlines and Air India Regional form the National
Aviation Company of India Limited.

Subsidiaries

Air India Cargo

In 1954, Air India Cargo started its freighter operations with a Douglas DC-3 Dakota
aircraft, giving Air India the distinction of being the first Asian airline to operate

25
freighters. The airline operates cargo flights to many destinations. The airline also has
ground truck-transportation arrangements on select destinations.

A member of IATA, Air India carries all types of cargo including dangerous goods
(hazardous materials) and live animals, provided such shipments are tendered according
to IATA Dangerous Goods Regulations and IATA Live Animals Regulations.

At the warehouse in Mumbai, Air India has developed a system of inventory management
for cargo handling of import/export functions. This takes care of the entire management
of cargo, supports Electronic Data Interface (EDI) messages with Indian Customs and
replaces to a great extent existing paper correspondence between Customs, Airlines, and
the custodians. This also replaces manual handling and binning of cargo at the warehouse
in Mumbai by Air India.

Air-India Express

Air-India Express is the airline's low-cost subsidiary which was established in 2005
during the aviation boom in India. It operates scheduled passenger services primarily to
the Gulf and South East Asia. Air-India Express is currently the only airline in NACIL
which posts profits. It operates a fleet of Next Generation Boeing 737-800 aircraft.

Affiliated Carriers

Indian Airlines

Indian Airlines which is based in Delhi and focuses primarily on domestic routes, along
with several international services to neighbouring countries in Asia

Air India Regional

Air India Regional (formerly known as Alliance Air) serves mainly on Regional routes.
Its main hub is Delhi's Indira Gandhi International Airport.

26
Livery

1970–2007 Livery

Air India's livery was mostly painted in red and white colours. The
bottoms of the aircraft remain metal and unpainted but the upper
portion is given a white background along with the airline's name
written in red. The name is in Hindi on one side and in English on the other. The painted
on red palace style carvings on the outside of the windows refer to their slogan "your
palace in the sky" which is written on the back of the aircraft. Near the noses of Air India
aircraft, the air plane is given a name. Most planes are named after powerful Indian kings
or landmarks. Finally, the tail is mostly red with again, the carrier's name written in Hindi
on one side and English on the other.

In 1989, to supplement its "Flying Palace" livery, Air India introduced a new "sun" livery
that was mostly white with a golden sun on a red tail. Only applied to around a half of Air
India's fleet, the new livery did not succeed, as the Indian flying public complained about
the phasing out of the classic colours. The livery was dropped after two years and the old
scheme was returned.

Pre-merger Livery

On 15 May 2007, Air India refreshed its livery, making the Rajasthani arches along the
windows slightly smaller, extending a stylized cheatline from the vertical tail of the
aircraft to the nose, and painting a small portion of the underbelly red. Additionally,
engine nacelles are now deep red, and a gold-colored version of the airline's stylized
Konark trademark now adorns both the vertical tail and engine nacelles.

27
Post-merger Livery
On May 22, 2007, Air India and Indian Airlines unveiled
their new livery. The logo of the new airline is a Flying Swan
with the Konark Chakra placed inside it. The Flying Swan
has been morphed from Air India’s characteristic logo, ‘The
Centaur’ whereas the ‘Konark Chakra’ is reminiscent of
Indian’s logo.

The new logo features prominently on the tail of the aircraft. Individually the Konark
Chakra also features on all the engines of the aircraft. The choice of colours namely red
for “Flying Swan” and orange for “Konark Chakra” are meant to signify vigour and
advancement. Further the colours also have a strong association with two carriers thereby
retaining the earlier imagery of traditional hospitality and service.

While the aircraft is ivory in colour, the base retains the red streak of Air India. Running
parallel to each other is the Orange and Red speed lines from front door to the rear door,
subtly signifying the individual identities merged into one.

Destinations

Air India serves 11 domestic destinations and 18 international destinations in 11 countries

across Asia, Europe and North America.

Services

Flying Returns

Flying Returns is Air India's frequent flyer programme. The

programme is also shared by Indian Airlines and all other
NACIL carriers.

28
Maharaja Lounge

Air India's Maharaja Lounge at New York City's John F. Kennedy International Airport

Maharaja Lounge means "Emperor's Lounge", and is offered to

First and Business class passengers. Air India shares lounges
with other international airlines at international airports that do
not have a Maharaja Lounge available. There are five[16]
Maharaja Lounges, one at each of the five major destinations of
Air India, which are as following:

India

• Delhi and Mumbai

International

• London-Heathrow and New York-JFK

29
 MARKETING MIX OF AIR INDIA

1. Product – The air transport service

2. Pricing – Variety of structured price bands categorized on the basis of the various
combinations of routes (Short/long distances and number of halts etc.) and categories (i.e.
Business class, Economy class).

3. Promotions – Point of purchases i.e. ticketing counters at traveling agencies,

online options (E.g. Membership promotions, couple tickets, Tourist packages for
agencies and various other individual and corporate offers)

4. Place – Ticketing counters delivering services

5. People – A team of skilled & professionally trained pilots, ground staff, flight
attendants, freight movers and packers, security personnel, management decision makers
and most importantly, customers.

6. Process – To avail of the air service, there is online or manual booking of tickets
followed by confirmation at security desks on arrival at the airport at least 2 hrs before
the scheduled commencement of the journey. After boarding the aircraft, basic after sales
services are provided to those who avail of the range of services available. Besides,
arranging for passenger travel post landing to the convenient destination, arrangements
made if flights are delayed or rescheduled etc are some of the value additions that the
airline offers to provide improved customer satisfaction.

7. Physical Evidence – The service itself

30
 MARKETING STRATEGIES

1. Free Baggage allowance for travel from London Travel

Passengers holding tickets for travel originating London effective 22July09 are entitled to
the following free baggage allowances for adult and child.
2. Maharaja Scholars' Offer Jun 05, 2009
Air India salutes the country's brightest young minds and offers them a host of ‘core
benefits that really matter’ on their international travel.

Air India consistently offers the best value-for-money fares across its vast network,
including USA, Canada, UK, Europe, South East Asia, Far East Asia, Australia, Middle
East and Africa.

The offer is available to students starting their international journey from India and
travelling on a valid student/student exchange visa (F1/J1/I20/DS2019 etc.) between 05-
Jun-09 and 31-Dec-09.

To USA and Canada, in addition to the regular baggage allowance, 1 free piece of
baggage is permitted, with a maximum weight of 23kgs and the sum of the linear
dimensions 62 inches, which is valid to all interior points.

3. Online booking

4. Web check in

31
5. Special offers are given to corporates, additional baggage
allowances, Air India holidays

6. Customers can join premium clubs to avail benefits

7. Tie up with i-mint

i-mint is a unique rewards program that lets you earn points for the things you do daily,
like refueling, using your mobile phone, traveling, shopping, eating out, watching
movies, flying etc..

You can earn points irrespective of how you make the payment be it cash, cheque, credit
or debit card.

Points earned can be redeemed against a never before collection of fabulous rewards.

8. Air India - ABN AMRO Bank Debit Card

Air India (IC) ABN AMRO Bank Maestro@ co-brand debit card gives you an
opportunity to save on your flight ticket expenses and also enables you to leverage your
debit card usage to enjoy free flights. The attractive privileges that can be enjoyed on this
card have been extended for 2 years i.e. Up to 22nd April 2010:

 10% discount permitted on normal published full fare (economy / business) tickets on
IC code flights and AI code flights.
 10% discount on Air India flights for tickets purchased for up to 3 companions using
this card (The tickets are required to be purchased for the same sector and cardholder
should be a member of the traveling party at least on the first leg of journey)
 Two Upgrade Voucher for travel in business class, on domestic network on IC code
flights, will be permitted on enrolment

32
 One free return economy class award ticket (two coupons) on IC code flight, to the
card member for every Rs 2 Lakhs spent, within a period of six months by the card
member for purchase of Air India tickets through the co-brand debit.

• The award ticket will be valid for travel on any domestic sector on IC designated
flight.
• This offer will be available from 1st May, 2008 to 31st December, 2008 only.
• The applicable Government taxes/ Fuel Surcharge/ any other levy will, however
be borne by the card member.

 Triple reward points are offered by ABN AMRO on purchase of Air India tickets
using the co-brand debit card.
 200- Bonus reward points (equivalent to 100 AOMPs) are offered by ABN AMRO,
on sign up for the co - brand card.
 Free membership to the Flying Returns.
 Transfer of Reward (MR) points to the FFP points
 Other privileges as part of Flying Returns Membership

9. Bid & Fly

Indian Airlines and Indiatimes Auctions has launched Bid & Fly. Auctions for air tickets
just one week in advance. Now bidding and flying is easier than ever. We have 100's of
flights everyday on auction at huge discounts.

To bid just follow the following directions:

1 Choose the flight you want to fly on.
You would need to choose the following:

From where do you wish to fly

What is your destination
Which date you wish to fly on

33
2 Choose the time of the flight you wish to fly on.
In case there is more than one flight for that sector in a day then you can choose the flight
most convenient to you.

3 Enter the amount you wish to bid and the number of tickets you wish to bid for.
You can maximum bid for two tickets at a time on a flight.

4 Enter your passenger details.

Also enter the city you would be picking up the tickets in and which for of identification
you would wish to carry with you to collect the tickets.

5 If you are outbid you would receive a mail from Indiatimes Auctions asking you to
modify your bid.
If you win, all your details would be available online in the My Auctions section.

10. Frequent Flyer Programme

Air India has a Frequent Flyer Programme branded "Flying Returns”. Members of the
Flying Returns Programme (FRP), the most attractive FRP for the Indian traveller, can
accrue mileage points while flying on Air India, Lufthansa and flights of Air India’s code
share partners, and redeem them for award tickets on Air India or Lufthansa. Through tie-
ups with leading hospitality-associated organisations in India, members can earn
additional mileage points to redeem their tickets faster. "Flying Returns" has a
membership of nearly 6,00,000 in India, the Gulf, UK, USA, Canada and South-East
Asia.

11. E-Ticketing

For online destinations

Electronic tickets are available for travel between the following online points in India :
Mumbai, Delhi, Hyderabad, Bangalore, Ahmedabad, Kolkata, Chennai, Kochi and
Thiruvananthapuram; and online points in the USA – New York, Newark and Chicago.

34
Significant improvements introduced in all areas of Air India's operations on an on-going
basis, reinforces the airline's commitment to quality and insistence on high standards. Air
India has in tune with the times, emerged as a progressive forward looking airline, eager
to satiate the growing needs and expectations of the discerning jet-age traveller of
today.

12. Air India, GE tie up for service facility

With an eye on opening up new avenues for revenue and enhancing employee
productivity, Air India has entered into a pact with GE Aviation to set up an engine
maintenance, repair and overhaul (MRO) facility in Mumbai. Air India’s engineering
shop at the Mumbai airport would be upgraded with fresh
investment and technology from GE.

The parties have signed a GE Branded Services Agreement (GBSA) under which GE
Aviation would provide technical and financial support to Air India, which would offer
MRO services for the GEnx-1B engine in India. This would be the second such facility in
the world to service GEnx- IB engines that power Boeing 787s.

35
 SWOT analysis of AIR INDIA

Strengths of AIR INDIA

• Air India has been the largest air carrier in India in terms of traffic volume and
company assets.

• It owns the most updated fleet and competent repairs and maintenance expertise.

• Its information systems are advanced and compatible with its operation and
service.

• It has a good reputation in both international and domestic markets, quality

service and the age-old Goodwill that has still kept it alive in the interests of the
rescue operators.

• Has financial backing of the Government

Weaknesses of AIR INDIA

• Air India is operating across broad international and domestic markets competing
with world leading giant airlines as well as local small operators. This lack of
clarity on the strategic direction largely dilutes its capabilities and confuses its
brand within markets.

• Low profitability and utilization of capacity.

• Growing Competitor base and entry of Low-Cost Carriers (LCC’s)

• The airline’s high-cost structure and the compulsions of being a public sector unit
are the reasons and it had been making a loss and shall continue to make losses
for some more quarters.

Opportunities of AIR INDIA

36
 • India airline industry is growing faster and will continue to grow as the GDP
increases, and the trend is predicted to continue once the slowdown recedes.

• Worldwide deregulations make the skies more accessible; the route agreement is
easier to be achieved. The number of foreign visitors and investors to India is
increasing rapidly.

• Complementary industry like tourism will increase demand for airline service.
The Civil Aviation Ministry’s strong regulation and protection provides
opportunities for consolidation and optimization.

• Customers are getting wealthier, tend to be less price-conscious and prefer to

choose quality service over cost.

• Best time for introducing LCC’s

Threats for AIR INDIA

• Air India faces imminent aggressive competition from world leading airlines and
price wars triggered by domestic players.

The Indian Railway Ministry has dramatically improved speed and services in their
medium/long distant routes, attracting passengers away from air service, with prices
almost at par with the low cost

37
 SCOPE OF GROWTH

As a part of its overall restructuring plan, the debt ridden Air India, the national carrier of
India will start low-cost domestic operations. The airline is banking on employees to do
the turnaround for the air career and restore it to past glory. This actually can translate
into good news for customers who will be able to benefit from new affordable fares from
Air India.

As Kingfisher Airlines and Jet Airways have made a significant impact with their low
cost airlines, Air India has plans to offer stiff competition. Air India has recognized that
there is tremendous scope for growth in domestic sector and will now be thinking
seriously to improve its strength in the domestic arena with the launch of low-cost
service.

38
References

1. www.airindia.com
2. www.scribd.com
3. www.airlinesindia.org
4. www.ezine articels.com
5. www.travelinternetindia.com
6. www.google.com

39
Table of contents

I. introduction
 industry overview

 aviation industry in India

 history of…

 types of…

 civil

 priv….

major compone….
Cargo
Charter…
Key players …..
II. swot…
III. challen…
high aviation…

IV. scope for growth…

V. case study
about airindia
company profile
marketing mix
product…
marketing strategies
swot
scopefor growth

40
VI. references

41