Ailrlines Sector Analysis

One of the fastest growing aviation industries in the world is Indian Aviation Industry. With the liberalization of the Indian aviation sector, a rapid revolution has undergone in Indian aviation industry. Primarily it was a government-owned industry, but now it is dominated by privately owned full service airlines and low cost carriers. Around 75% share of the domestic aviation market is shared by private airlines. Earlier only few people could afford air travel, but now it can be afforded by a large number of people as it has become much cheaper because of stiff competition.

Unfortunately, most major airline operators in India such as Air India, Indian Airlines, Jet Airways and Kingfisher Airlines have reported large losses since 2006, due to high aviation turbine fuel (ATF) prices, rising labour costs and shortage of skilled labor, rapid fleet expansion, and intense price competition. The problem was also compounded by new players entering the industry even before the existing players could stabilize their operations. As a result of the already weak domestic scenario, the airlines suffered even further when the recession, which exacerbated all these factors, hit. Suffice to say, though that the Indian aviation industry has been more resilient than its global counterparts.

Hardest hit by the economic downturn has been national carrier Air India: It reported annual losses of $1 billion in the fiscal year ending March 31, along with an accumulated debt of $3.5 billion; that debt load is expected to rise to $7 billion by 2012 if it takes delivery of 111 new aircraft already on order. Air India alone accounts for 10% of the total projected losses for the global airline industry this year even though it carries just 0.35% of global traffic.

The Government in India has approved the Domestic Air Transport Policy which provides for foreign equity participation up to 49% and also investment by Non-Resident Indians (NRIs) up to 100% in the domestic air transport services. As the government plans to fix a higher foreign direct investment (FDI) ceiling for five sub-sectors of the industry in days to come the flow of foreign investment into aviation is likely to get smoother.

COMMON-SIZE STATEMENT (Rs. In lakh)

Profit & loss

Particulars Kingfisher airlines Jet airways Spice jet

2011 2010 2011 2010 2011 2010

Income

a. Income from services 623337.9 506791.8 1277683 1046964 287950.8 218107.8

INDEX 95.96% 96.15% 98.65% 98.56% 97.26% 97.28%

b.Other operating income 13592.16 18116.67 17421 15328 8109.6 6101.3

INDEX 2.09% 3.44% 1.35% 1.44% 2.74% 2.72%

c. Duty