what is the growth of private sector in the aviation industry in india?

how is the economy affected by the private aviation industries?

the answer must be somewhat in economic and commercial terms.

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  • 1 decade ago
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    Growth of private sector in aviation industry in India:

    Within less than 15 years since private sector was allowed entry in Indian civil aviation industry, it has grown remarkably fast and faster than the public sector has achieved in the past. The private sector airlines together share much more than the public sector. And, this growth has come in the most stiff competitive market and many hurdles put up by govt. agencies in the way of growth of private airlines.

    Revolutionized by liberalization, the aviation sector in India has been marked by fast-paced change in the past few years. From being a service that few could afford, the sector has now graduated to being a fiercely competitive industry with the presence of a number of private and public airlines and several consumer-oriented offerings.

    India is the second largest aviation industry of the world

    India is in third place in the Top 10 list of countries with the highest number of additional flights in May this year, behind only China and the US.

    The history of civil aviation in India began in December 1912. This was with the opening of the first domestic air route between Karachi and Delhi by the Indian state Air services in collaboration with the imperial Airways, UK, though it was a mere extension of London-Karachi flight of the latter airline. Three years later, the first Indian airline, Tata Sons Ltd., started a regular airmail service between Karachi and Madras without any patronage from the government.

    At the time of independence, the number of air transport companies, which were operating within and beyond the frontiers of the company, carrying both air cargo and passengers, was nine. It was reduced to eight, with Orient Airways shifting to Pakistan. These airlines were: Tata Airlines, Indian National Airways, Air service of India, Deccan Airways, Ambica Airways, Bharat Airways and Mistry Airways. In early 1948, a joint sector company, Air India International Ltd., was established by the Government of India and Air India (earlier Tata Airline) with a capital of Rs 2 crore and a fleet of three Lockheed constellation aircraft. Its first flight took off on June 8, 1948 on the Mumbai (Bombay)-London air route. At the time of its nationalization in 1953, it was operating four weekly services between Mumbai-London and two weekly services between Mumbai and Nairobi. The joint venture was headed by J.R.D. Tata, a visionary who had founded the first India airline in 1932 and had himself piloted its inaugural flight.

    The years 2004-05, 2005-06 and 2006-07 have been years of record growth in air traffic in India. During the period April-September, 2006, international and domestic passengers recorded growth of 15.8 per cent and 44.6 per cent, respectively, leading to an overall growth of 35.5 per cent. During the same period, international and domestic cargo recorded growth of 13.8 per cent and 8.7 per cent, respectively, resulting in an overall growth of 12.0 per cent.

    The Indian fleet, which comprised 170 aircraft in May 2005, is now almost twice that now, with 312 units. With the scheduled 2007 additions of 54-55, this number will rise to just under 370 by the end of the year. And growth is expected to continue apace: the Centre estimates that India’s fleet will reach approximately 500-550 aircraft by the end of 2010.

    In the same period, the domestic market size will cross 60 million and international traffic 20 million. Aircraft manufacturer Airbus pegs India's demand at 1100 aircraft, worth US$ 105 billion, over the next 20 years. According to Civil Aviation Minister Praful Patel, the country will need 1,500 to 2,000 passenger planes in 10 years, up from 260 now.

    India continues to show steady year on year growth, with a 7 per cent increase in the number of flights into and out of India (an additional 835 flights and more than 200,000 seats a month). The number of flights has virtually doubled from 6,800 in May 2001 to 13,200 in May 2007.

    In fact, India is in third place in the Top 10 list of countries with the highest number of additional flights in May this year, behind only China and the US.

    India's civil aviation passenger growth, at 20 per cent, is among the highest in the world. The sector is slated to cruise far ahead of other Asian giants like China or even strong economies like France and Australia. The number of passengers who will be airborne by 2020 is a whopping 400 million. Between April and September 2006, however, amid a flurry of new entrants to the sector, domestic traffic growth accelerated to more than 45 per cent. The Centre for Asia Pacific Aviation (CAPA) predicts that domestic traffic will grow at 25 per cent to 30 per cent a year until 2010 and international traffic growth by 15 per cent, taking the overall market to more than 100 million passengers by the end of the decade. Indian carriers have 480 aircraft on order for delivery by 2012, which compares with a fleet size of 310 aircraft operating in the country today.

    As pointed out by Minister of Civil Aviation, Praful Patel, presently, the number of air travelers is about 0.8 per cent of the population. By the time even 10 per cent of the population begins to fly, India will need about 5,000 aircraft.

    More diverse businesses in non-metropolitan regions are creating new demand for air services. Airlines are bulking up on capacity -- 10 Indian carriers placed orders for 400 aircraft worth US$ 15 billion.

    Upgrading Airport Infrastructure

    By 2020, Indian airports are estimated to handle:

    * 100 million passengers * Including 60 million domestic passengers * Cargo in the range of 3.4 million tonnes per annum

    Several improvements are envisaged to sustain this tremendous growth in the civil aviation sector. The Government’s airport modernisation plan proposes investments of US$ 9 billion by 2010. In January 2006, joint venture companies with 74 per cent private sector participation won contracts to upgrade New Delhi and Mumbai airports. The Airports Authority of India has got the contract to upgrade Kolkata airport and the Government is also planning to upgrade the Chennai airport.

    The Government plans to develop around 300 unused airstrips across India - a move that has raised projections for jets required for regional connectivity. Boeing and Airbus, along with Embraer (Brazil), Bombardier (Canada), Sukhoi (Russia), ATR (France) and BAE System (UK) are keen to tap the emerging regional jet market in the country.

    International no-frills budget carriers, especially Asian low-cost carriers (LCCs) are also making a beeline for India. Already, Iran’s Jazeera Airways and Sharjah-based Al Arabia have registered their presence here. Other airlines planning to enter the market are: Tiger Air (a joint venture between Temasek Holdings and Singapore Airlines), Thailand-based private carrier Nok Air, Indonesia’s Lion Air, United Arab Emirates’ Ras Al Khaima (RAK) Airlines, Malaysia’s Air Asia and Saudi Arabia’s Sama Airway.

    Increased activity in the maintenance and repair operations (MRO) sector has attracted many foreign companies. Lufthansa has tied up with GMR Hyderabad International Airport Limited (GHIAL) to open an MRO facility for which it intends to invest US$ 23 million. Similarly, Boeing intends to invest US$ 100 million in a facility in Nagpur.

    With airport infrastructure being upgraded, non-aeronautical revenues (from malls, bookshops and entertainment centres) are expected to contribute almost 50 per cent to revenue of airports.

    Of late, the domestic market is witnessing a trend towards consolidation. In a bid to augment capacity and grab market share, the sector is witnessing a consolidation as well as rationalization of resources. Accordingly, Jet Airways has acquired Air Sahara, Air-India and Indian are to merge, Kingfisher Airlines has entered into a strategic relationship with Air Deccan, and Paramount Airways is talking to two airlines for a possible takeover.

    With the sector expanding at a fast pace, the number of aircraft being used is on the rise and so is the need for pilots. Not surprisingly, aviation school is the latest buzzword among students as India would require 7,500-8,000 pilots and an equal number or more air cabin crew by 2010. Heavy pay packets are awaiting pilots with a commercial pilot license (CPL). To take advantage of this situation, several pilot shops are being set up across the country:

    * Airbus has decided to set up an aviation school in Bangalore to train 1,000 pilots a year * Rajeev Chandrasekhar's Jupiter Aviation is looking to set up a similar venture in Bangalore or Hyderabad * Aviation consultant Praveen Paul has set up his own aviation school * Many more are in the offing including Deccan Aviation's venture with ATR, and Jet Airways and budget carrier UB Group planning to set up training centres.

    Airlines on a buying spree

    With such rapidly growth in the sector, manufacturers like Boeing and Airbus are filling their order books fast.

    Boeing has received a US$ 1.5 billion order for 10 aircraft from Jet Airways, India's largest private airline. Airbus plans to invest more than US$ 1 billion in the Indian aviation industry in the next 10 years. Bombardier Aerospace, a Canada-based company that manufactures regional aircraft and business jets, is looking to tap the growing regional market in India for flight services. SpiceJet has ordered 10 next-generation Boeing 737-800 aircraft valued at a list price of more than US$ 700 million.

    One of the great beneficiaries of the development of competitive airlines industry has been the class of MPs and MLAs: they are now becoming now increasingly becoming addicted to business and first class costly air travel with the tax payers' money, irrespective of whether they represent the rightist socilists or the leftist communists parties.

    How has the Economy affected by the private sector airlines:

    The Ailines have contributed in a significant way to India's economic growth in the last few years:

    1. Airlines have enhanced the efficiency and reduce the costs for productive business activities. The spped with small and large businesses are able to interact and conclude business transactions and deals have increased.

    2. Airlines have significantly eased the transport bottlenecks for tourists, business and trade travellrs as well as other trvalleros including doctors. patients, engineers, doctors, pateints, etc. between and among far flung smaller cities and towns and the metropolitan cities as weell as foreign cities of business and tourist importance, thereby reducing unnecessary delays and prompt response. This has enbled the efficiency and productivity of the Indian economy to grow.

    3. The competitive Airlines industry has reduced the airfares considerably to enable the middle income families and students to save on time by travelling on air. This has also eased the pressure of passanger traffic load on the overworked railway system and forced the Rialways to improve its efficiency and control fair hikes. The monopoly exploitation of the passangers by public sector Indian irlines and Air India has been largely stopped by competition from private airlines.

    4. The private airlines have attracted lot of investments in the country with consequentil positive impact on income generation.

    5. There has been a very sharp and large increase in employment in the airlines sector, besides associates activities like ticketing agencies, air traffic control, airlines food supply agencies, airlines staff training/ pilot training, airport coach and taxi service agencies, etc.

    6.The airlines industry growth has also an expansionary positive impact on the growth of both domestic tourism and foreign tourism in India.

    7. The courteous behavior imparted to airlines staff has improved the quality of behavior among the people in general.

    Foe details read on: With the dismantling of Govts' oppressive control and entry of private sector airlines have made a considerable positive impact on the development of aviation industry in India. The full fare air ticket costs have stopped rising the way it had been in the public sector monopoly days. Many low cost airlines with substantially low fares have been introduced. The punctuality of arrival and departue of planes have improved dramatically, except in the last one year because of Govt. delays in privatisation of airports and continued public sector monopoly of the Airport Authority of India, resulting in inordinate delays in construction of new terminations, expansion of airports infrastructure and modernisation of airports, resulting in traffic congestion , delays in arrival and landing, unnecessaru burning of costly aviation fuel as air crafts queue up in the air for landing and in the bay for take off. The number of flights between metrocities have increased 5 to 10 folds in the last 10-15 years and further expansion is getting constrained by slow modernisation of airports by public sector Airports Authority of India. The number of flights between small cities and their connections to metro cities have expanded like anything. The number of passangers have increased dramatically because of more flights, lower cost fares, discounts, higher economic activity and comvenient flight timings throughout the day. More and more people are visting abroad on business, pleasure and holidays. The number of foreign destinations now connected by regular/ daily flights from different cities in India has increased manifold. Customer services by the airlines have dramatically improved due to competition. The private airlines are deploying smart and agile young men and women to serve customers at ticket reservation centres, baggage sreening, checking in counters as also in the flights. There is a discernible attitude to please customers and look after their comfort unlike the shabby treatment provided by public sector airlines during their monopoly days. But for the shortage of proper infrstructure at airports, thanks to the delay in investment in airport modernisation and expansion by the Govt. of India and the public sector monopoly Airport Authorities of India, the airlines staff would have provided much better customers service and customer care at airport lounges, The most modern aircrafts have been deployed to carry passangers. The growth of aviation industry has been very rapid and qualitatively a great jump. The future potential of grwoth of this industry and its impact on creation of new employment opportunities is huge, but for some time will be constrained by the slow pace of airport facilities expansion and modernisation.

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    4 years ago

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