Indian Aviation Industry

Trends in Indian Aviation Industry

1. Consolidation in aviation sector:
The rise in the number of alliances in aviation industry will help in further growth of
aviation sector in India. The Jet-Sahara merger is probably just the beginning. The recent 26% stake acquisition by the Dr. Vijay Mallya (United Breweries group) in the low-cost carrier Deccan Aviation is further confirmation that the Indian aviation industry is looking forward to more consolidations.

2. The number of passengers traveling by air is on the rise:
With passenger boardings expected to double by 2025, and aircraft operations expected to triple by the same time, the number of passengers traveling by air is on rise.
3. For the traveling public, price is paramount in choosing a carrier.
Due to the Internet and round-the-clock search capability, airfares are fully transparent to the
public and travelers are choosing the lowest price option. Air travel is now a commodity business, and legacy carriers will have to adapt further to a low-cost/low-fare environment in order to survive. Even business travelers, who have been less price-sensitive, are resisting fare increases. The only premiums that travelers are willing to pay for are time-of-day and direct flights, not the brand.

4. Capacity is growing without much constraint.
Indian carriers are placing orders for new aircraft for delivery in the coming period, without clear plans to retire older planes. They are also adding significant numbers of regional jets. The air taxi fleet is also expanding rapidly. Kingfisher Airlines has already ordered 5 Airbus A380 aircrafts that will operate on international routes.

5. Cost structures will continue to handicap legacy carriers as they compete with newer airlines, as well as with overseas carriers.
Low cost carriers are posing great threats to legacy carriers, as a result of which they are restructuring their pricing policies. Apart from this, they are also facing competition from overseas players.

6. Oil prices are not expected to fall.
The public sector oil marketing companies (OMCs) have raised the prices of Aviation Turbine Fuel (ATF) by 3.5 per cent, in line with the rise in international oil prices. This is likely to trigger a marginal increase in airfares.

7. Outsourcing:
Private airlines are known to hire foreign pilots, get expatriates or retired personnel from the Air Force or PSU airlines, in senior management positions. Further, they outsource such functions as ground handling, check-in, reservation, aircraft maintenance, catering, training, revenue accounting, IT infrastructure, loyalty and programme management. Airlines are known to take on contract employees such as cabin crew, ticketing and check-in agents.