Swot Analysis Of Indian Aviation

1. Government Rules and Regulations

• Requirements of Fleet and Equity

Section 3, Part II & III of India’s Civil Aviation Requirement (CAR) makes it mandatory for an operator to purchase or lease at least five aircrafts in order to provide services along with the minimum Equity requirements of Rs 50 Crore. These equity requirements grow by 20 crore for increment in the fleet by up to 5 planes. These requirements are relaxed for non-scheduled operators under CAR Section 3, Series C, and Part III Section 4.2. They require to possess just one aircraft. In this case, the equity requirements are based on the number of aircrafts owned or leased, the fact that acts as a financial barrier to the entry.

A Brief history of Indian aviation industry

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The sector was opened up slowly and slowly beginning with the ‘Air taxi’ service in 1994 and followed up operation of scheduled air services.

The late 90’s saw several private players entering the market line Eastwest, Damania, Jet, Sahara, Modiluft, etc. The regulatory environment for the industry lacked clarity in the beginning and the industry grew under the shadow of the market leader, Indian Airlines. Owing to the lack clarity in regulatory framework, dominance of national operators and their continued support by the government meant that the Indian aviation industry was never a level playing level field for the private operators. Most of the private operators were not well funded and initial phase didn’t see any significant investment by any major industrial house in the country.

The entry of the private airlines created an additional capacity in the industry, which served the unmet latent demand in the industry. The contrast being offered by the private operators in the country in terms of punctuality, service quality, new connectivity and routing led to the new entrant instantly gaining 24% market size by almost as soon as

The Indian airlines was forced to improve its service levels when confronted by the quality provided by the private operators. For instance, Jet had created a name for itself in punctuality and customer service orientation. It became the preferred carrier for the business class in the country.

Emergence of New Indian Airline industry

The steady growth of the Indian economy at CAGR of ~6% per annum in early 2000’s had changed the entire market landscape for the aviation industry. Emergence of new Indian middle class, information technology boom, had created a demand for both business and leisure travel.

In the year 2003, sensing huge pent up demand (air traveler and per capita use of airline in China being 8 times that of India), the Indian aviation industry kicked off a new phase of development. In spite of the fact the most of the operating cost in the industry is fixed irrespective of business model employed. Most of the new operators choose to use low cost airline as their business model. Hoping to create low cost operating model to make low fares viable.

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