AIRLINE

INDUSTRY IN
INDIA

Presentation By Group VIII

AGENDA
 Objective

 Current Scenario

 Factors Driving Growth

 Factors Obstructing Growth

 The Scope Ahead

 Key Learnings
OBJECTIVE

Analysis of The Airline Industry:

 Growth Factors

 Impediments
CURRENT SCENARIO
 Growing vigorously at a rate of 25-30% and is expected to continue

 International Players making a beeline to enter this emerging market

 Carriers operating in India has grown from two state-owned players

in 1991 to more than ten today

 Numbers of Flights operating: 2500 per day

Growth in Domestic Passenger
Traffic
Year ended 31 March Domestic Sector Year-on-Year
Passenger Growth
(millions)
1996 10.4
1997 11.2 7.7%
1998 11.5 2.7%
1999 12.0 4.3%
2000 12.7 5.8%
2001 13.7 7.9%
2002 12.8 -6.6%
2003 13.9 8.6%
2004 15.7 12.9%
2005 19.9 26.8%
2006 25.5 27.9%

Source: Airport Authority of

India
Some Major Players…
Factors Driving Growth

 Wider Availability of Low Fares

 Higher Disposable Income and Growth in Consumer Spending

 Lifestyle Changes

 Growth from Tier II Cities

 Tourism

 Government Policies
 Wider Availability Of Low
Fares
 Large entry of Low Cost Carriers

 Costs have become comparable to A.C. Train

fares
Indian Rupees (INR)

Sector Rail Fare (Return) Air Deccan fare (Return)

2 AC - Sleeper Journey time 3 months 2 months

1 month 3 days
Journey time

Delhi-Mumbai 4100 17 hours 4256 5452 64481hr. 45 min.

Delhi-Bangalore 5700 35 hours Re 1 6656 8248 96482hr. 30 min.

Mumbai - Bangalore 3000 23 hours 3656 4952 54481hr. 35 min.

Source: Air Deccan Advertisement

High Disposable Income
 Growth in Income Level:

At 01-02 prices
50 43.6 200

40 190
194
180
30 27.0

Rs '000
22.1
mn

170
20
169 160
163
10
150

0 140
1998-99 2001-02 2009-10

Urban middle class households (LHS) Avg middle class household income (RHS)
 Increase in Leisure Travelers for the past few years; 5 years back
85% were business travelers
Lifestyle Changes
 Younger Population (70% below 35 years)

 Growth in Software/Manufacturing Industry

 Air Travel no longer a luxury

Growth From Tier II Cities
 Government plans to modernize 35 non-metro
airports
 IT/Manufacturing companies plan to set up base
 According to CRISIL - Traffic at non-metro airport
to exceed metro airports by 2010:
 Non Metro Airports = 74 million passengers
 Metro Airports = 19 million passengers
 This calls for investment of around Rs. 6000
crores
Tourism As a Growth Sector
 High rate of growth in Tourism Industry
 2004-05 had a 25% growth rate and is growing
 De-seasoning of various destinations (e.g. Goa,
Kerala)
 320 million domestic tourists
 International tourism increasing but domestic is
going to be the biggest impact
Government Policies
 Liberalization of the Aviation Industry (Open Sky
Policy):
 Ended monopolies of state carriers
 Increased number of players in the market:
 Pre 1991 – Two

 Currently – More than Ten

 Increased FDI limit in Air Transport Services

 74% in Airports
 49% in Airline Carriers
 Government Policies
(contd…)
 Restructuring and development of Airports
 Privatization of Airports

Airport Status Operator Investment (USD

million)
Hyderabad Under Construction - to be GMR-Malaysia Airports 300
commissoned in 2008
Bangalore Under Construction - to be Siemens, L&T, Unique 300
commissoned in 2008 Zurich
Delhi Concession awarded - modernisation GMR-Fraport 1,750
and upgradation
Mumbai Concession awarded - modernisation GVK-Bidwest 1,750
and upgradation
Kolkata To be privatised
Chennai To be privatised
Total 4,100
Source: Airport Authority of India
Impediments To Growth
 Lack of Infrastructure

 High Input Costs

 Lack of Human Resources

Lack Of Infrastructure

 Not enough operational Airports – only 89 out of 450

are operational
 Not enough night parking
 Shortage of runways
 Poor facilities for passengers – restrooms,
restaurants, parking, etc
 Baggage system needs urgent upgrade
 Need for more Maintenance Repair and Overhaul
(MRO) Centers
High Input Costs
 Fuel Costs:
 70% higher than International standards.
 Fuel bill - 40% of Operating Cost
 Annual industry bill - USD 1.7 billion.

 Aviation Turbine Fuel (ATF) prices in India is

around Rs. 37,800 per kilo litre against Rs.
21,800 in the Average International Markets

 20% of the Operational Budget is spent on

training pilots

 Landing and Parking Charges: 78% higher than

the International Average
Inadequate Human
Resources
 Shortage of Skilled Manpower:
 Pilots
 Cabin Crews
 Ground Staff

 Shortage of Air Traffic Controllers:

 Currently 1000 ATCs handling 89 Airports
 Requirement of 2500 ATCs
SCOPE AHEAD…
 25.5 million Domestic Travelers by next 12
months

 Airline Industry to be worth Rs. 35000

crores by 2010

 Growth to exceed that of China, France

and Australia
KEY LEARNINGS
 Macro-Environmental Factors affecting the
industry:
 Growth Factors
 Obstructing Factors

 If all hindrances can be addressed then,

SKY IS NOT THE LIMIT…
THANK YOU…