The Airline Industry: Tata Airlines (Now, Air India

Indian airlines industry, which started in 1932, with Tata Airlines (Now, Air India), has come a long way since then, and is now one of the fastest growing industry. There are more than 1091 registered aircraft and about 450 airports in India. The Airport Authority of India (AAI), which is controlled by Ministry of Civil Aviation, is responsible for managing the Aviation sector in India.

The growth of the industry is evident from the fact that Passenger output increased from 73 million in 2006 to over 175 million in 2013. The Indian civil aviation industry is ranked in the top 10 globally with the size of industry being estimated at around US $16 billion, and according to different reports has the capacity to be the 3rd largest aviation industry

Till Independence, several small aircraft companies started operating in India. But after independence, government of India decided to nationalize the aircraft industry by introduction of Air Corporation Act.

Governments brought a share of 49% in Tata airlines, and also kept an addition investment option of 2% with it, but allow Tata Airlines to operate in India, by the name of India Airlines for Domestic and Air India International for International flights and made it the official airlines of the country. Thus, till 1990’s both the airlines dominated the Indian Aviation industry and enjoyed their monopoly power, but after 1991, with the introduction of liberalization policies, the Indian aircraft industry started to witness rapid changes.

The industry become open to private players, with this, private player started their operation and the result was that from 15000 passengers in 1990, the carriage increase to around 2,50,000 by 1992. A large number of private players like Jet Airways, Modiluft, East West Airlines, Air Sahara entered the Indian aircraft market. All the restrictions related to type of aircraft used, seats capacity, non-ownership of land were removed by

Any oligopoly form of Market is where there is large number of buyer but few sellers present. They are selling a homogeneous or unique product. There are barriers to entry and exit in such type of a market form. Also, since barriers to entry are high, firm can earn super normal profit in the long run. Also the firms in oligopoly are Price setter, and not Price takers. Since there are very few firms, or few firms with large share, the action of one firm can have an impact on other. These types of firm often compete on other things like advertising, schemes, discount, service rather than price.

The Indian Airline Industry is an Oligopoly because of having the above mentioned features in it, which we will be explaining in detail. The industry has small number of dominant players like Air India, Spice Jet, Indigo, GoAir. Have barriers to entry and exit, evident from the example of Kingfisher airlines, which find it difficult to exit the market. Also, most of them compete on different schemes, rather than pricing, which is evident from the fact of recent schemes of by SpiceJet, IndiGo, Air