Indian Domestic Airlines (industry Analysis)

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INTRODUCTION:

India’s aviation industry is 9th largest aviation industry in the world , untapped with huge growth opportunities, considering that air transport is still expensive for major chunk of the country’s population, of which nearly 40% is the upwardly mobile middle class. In the July-September 2015, domestic air traffic increased to 20 million from 16 million . Total passengers carried in September 2015 increased 13 % on year on year basis to 8.7 mn from the past 7.7 mn in September, 2014. There are issues with operations capabilities, obsolete government policies, unclear taxation and large amount of investment required to start the business. Since 2008 the Indian government has been not able to chalk out a clear vision & direction for the aviation industry. In 2012, a decision was taken to allow investment of foreign airlines in Indian carriers, which was a welcome change except for which no radical initiatives has been designed to address the structural issues concerning the industry. The industry is not getting profit due to the certain challenges, then also it is growing at the rate of 18 percent per year. Many factors are contributing to this growth story such as a rise in disposable income of the population, industrial growth in the country or change in government policies such as FDI.

Industry Definition:

Domestic Airline industry provides air transportation within Indian Territory for:

• Passengers, which can be further classified as – Pleasure travellers, Personal travellers and business travellers
• cargo

The service provided can be either

• Scheduled or
• Non –scheduled (charter)

Using operation model which is either

• Hub and Spoke or
• Point to point

Main Activities:

The important activities of airline industry are:

Scheduled domestic passenger flight

Scheduled domestic cargo/freight transportation

Passenger domestic passenger transportation

Charter domestic commuter transport

Scheduled domestic mail air transport

Similar Industries:

Some of the similar industries are:

• Road and railway transportation for passengers
• Road and railway transportation for cargo and mail
• Shipping service

Market participants:

Suppliers:

• Airplane manufacturers such as-

• Boeing
• Airbus
• ATR
• Bombardier

• Airport Service Provider: There are 125 airports in India which are managed by Airport Authority of India (AAI), a governmental organization. Out of 125 airports 81 are domestic airports
• Jet Fuel producing Companies:

• Indian oil Corporation Limited
• Hindustan petroleum
• Reliance Industries
• Essar
• Air British petroleum
• JV between Shell and MRPL

• Online Ticket Booking Agents:

These are the companies which allow customers to compare prices and avail discounts across many airlines. Some of the leading travel websites are as follows-

• Makemytrip.com
• Cleartrip.com
• Yatra.com
• Goibibo.com

• Air navigation Services: It is a government authority which controls air traffic

• Freight Forwarders/ Cargo Agents: These are the companies which transport goods from customer to the airport or other way round

Airline service providers:

• Scheduled

• Indigo
• Jet Airways
• Spice Jet
• Air India
• Go air

• Cargo

• Blue dart aviation
• Quikjet cargo
• Fedex
• UPS

Customers:

• For Passenger airlines

• Corporates
• Individuals
• Pleasure Travellers

• For Cargo airlines:

• B2B cargo
• B2C cargo
• C2C cargo
• B2B mail
• B2C mail
• C2C mail

Bargaining Power of Market Participants:

Porter’s Five Force Model is used to represent the bargaining power of market participants.

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Key External Drivers

1. Increasing demand

The demand for domestic air travel has increased due to the following factors:

1. Increasing disposable income

There has been a sharp rise in the disposable income of consumers particularly middle class consumers. Also, there has been emergence of LCC (low cost carriers) and other carriers. This has led to increase in propensity to travel thereby increasing demand for air travel