Pest Analysis In Aviation Industry

4. FDI in Aviation Sector in India

Indian airlines are passing through competitive phase where both the FSC’s and the LCC’s are engaged in fierce competition which has resulted in:

1. Adding of capacity,

2. Adding routes,

3. Adding features & products

4. Dropping prices.

The aggressive expansion plans of the Indian carriers have resulted in excessive supply over a deficient infrastructure. FDI allowance in airlines in India would only deteriotiate the situation for already bleeding home grown airlines.

Foreign investment in airlines should be a two Way Street where if one country offers access and makes foreign ownership allowance, other country should also extend the courtesy to the host country. While Open skies is a long-term

PEST Analysis of the Indian Aviation Industry

PEST is a technique for analyzing the external environment for an industry. PEST analysis seggrates environment in to four areas:

1. Political

2. Economic

3. Social

4. Technological.

This analysis helps to understand, how each of the elements impacts the industry. Therefore, PEST analysis is used as a tool to carry out analysis of the Indian Aviation Industry.

6.1 Political

Government policies has a huge impact on commercial aviation in a country. Government is responsible for improvig aviation infrastruture & create an environment for growth and sustainibility. Some of the political factors affecting are as follows:

1) Liberalization of the aviation sector : The government has opened FDI in all aviation activities such as :

i. Air Transport Services ii. Airports iii. Ground handling services iv. MROs and Training institutes

2) Political instability:.Volatility in the oil producing countries determines the oil prices & as India depends largely on oil imports,aviation sector in India is directly affects.

3) 5/20 Rule and Bilaterals: This rule is discriminatory as for new & smaller airlines can not fly international sectors, whereas foreign airlines have been allowed to fly to several airports in

2) High Airport Charges: Indian airports are the most expensive in the world.

3) Underserved Market: By 2020, India will be the 3rd largest aviation market. IATA has estimated that the current aviation market of 150 million passengers would increase to 450 million passengers by 2020.

4) Economic Slowdown: India & the rest of the world are emerging from economic slowdown.

5) Competition between Carriers and Overcapacity: The Indian domestic aviation is already experiencing intense competition. With the entry new airlines such as: Air Asia, Vistara, Air Costa & Air Pegasus there are almost 10 schedule airlines.

6) Rupee Volatility: Operating costs for an airlines in India, include components such as:

i. Aircraft fuel expenses ii. Aircraft lease rental costs iii. Staff costs iv. Selling costs

v. Administrative costs vi. Airport charges vii. Maintenance charges

An estimated 70% of the total costs are linked to the USD, in India. The Rupee has weakened against the USD in recent times directly affecting the operating costs of an airlines. This puts an additional pressure on the airline’s