The situation of the Indian aviation industry

By Parul Goyal on May 13, 2012

Aviation industry of India have radically transmuted from being a highly regulated and poorly managed industry to a more liberal and deregulated sector since 2004 that attracted a lot of private investors. Ever since the aviation sector had been flourishing due to entrance of low cost carriers, rise in the Indian household incomes, steady economic progress, augmented Foreign Direct Investment and more tourists visiting India and raised cargo movement and encouraging government policies (KPMG, 2008).

AAI, in 2009, had estimated that the aviation industry will witness a growth of 16 per cent for international and 20 per cent for the domestic business. The Ministry of Civil Aviation also started to adopt a highly non- interventionist policies for allotment of traffic rights and capacity entitlements. Domestic carriers were granted international licenses; enter into joint ventures with foreign companies which proved to be beneficial for both of them (Delloite, 2009). However, these predictions could not be converted into actual figures. The year 2012 began with most crucial challenges ever since the 2004 sectoral reforms came into existence. The biggest irony of the Indian aviation sector is that it exists in the most promising and steadily growing economy and firms have optimistic approach towards business growth, yet CAPA (2011) have assessed that collectively Indian carriers shall lose around $ 2.5 billion by the end of 2012. This estimation is based on the total revenue of the current year being less than $10 billion, lower than the worst year for the sector, 2008-09, where the air traffic was dropping and fuel prices hobnailed at $150 per barrel. Domestic business is the worst hit with Indian carriers losing $25-30 per passenger per flight. With the downfall of a very prominent Indian carrier, Kingfisher Airlines and the existing turmoil in the industry, the Prime Minister of India, was compelled to make an exceptional interference with a 12 point agenda for the Ministry of Civil Aviation for monthly reporting (CAPA, 2011).

Indian Aviation Sector indeed is experiencing a turbulent time but with the economic growth of the country and international recovery from economic slowdown, Indian carriers can expect the worries to fly away soon.

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