Case Study of the Indian Aviation Sector: Soaring High or Turbulence Ahead

Takeoff from Modest Beginnings: The Evolution of the Indian Aviation Sector

The Indian Aviation sector is poised to take off and soar high in an unprecedented manner. Indeed, the Aviation sector in India has come a long way from the humble beginnings in the pre-independence era where the legendary JRD Tata, pioneered the industry and introduced a small turboprop plane as the first connection to the outside world by air.

Now, the Aviation sector is a stage where it boasts of world-class airports, best in the breed airlines, and an enviable safety record, though minor skirmishes are reported often. From being a preserve of the rich to the present where the Aam Admi is the focus of the airline industry, the aviation sector mirrors the development and evolution of the Indian Economy over the decades.

Added to this is the fact that successive Indian Governments since the 1990s when the Indian Economy was liberalized have actively encouraged the development of the sector by providing subsidies and establishing world-class airports, though at a tardy pace given the inherent complexities of the Indian political and socioeconomic landscape.

Thus, it can be said that the Indian Aviation sector is both poised to take off as far as the future is concerned and is soaring high as far as the present is concerned.

Factors Dragging the Sector Down

Having said that, there are a few bottlenecks or chokepoints that have stymied the development and the growth of the Indian Aviation Sector. Prominent among these is the capacity addition in the airports across India where the present infrastructure is unable to support the ambitious expansion plans of the various airlines.

Indeed, even after building gleaming and glittering airports in all the Metros under the PPP or the Public Private Partnership model, airlines are routinely denied landing rights and parking bays for want of capacity.

Further, the fact that the blistering pace of growth in the sector means that despite adding capacity in a quick manner, airports are unable to handle the ever-increasing load of footfalls in terms of arrivals and departures.

Though the Indian Government has put in place policies such as the UDAAN Scheme, the Regional Connectivity Scheme, and various others aimed at persuading and incentivizing airlines to connect to remote locations, the pathetic state of the infrastructure in such areas means that such schemes would take time to fructify.

Of course, the massive push to develop Tier 2 and Tier 3 airports is clearly a right step in the direction of broadening the base of the infrastructure pyramid so that flyers from rural areas can benefit as well.

However, this push is succeeding in states where the state governments are actively encouraging such developments whereas in other regions, the initiative is lagging the former.

How the Indian Aviation Sector Became World Class

Having said that, it is also the case that the crowning glory of the Indian Aviation sector lies in the dirt cheap prices that are offered to the passengers and which are among the lowest in the world as far as LCC or Low Cost Carriers are concerned.

Talking about LCCs, the Indian Aviation sector was among the first in the developing world to take the LCC route with Capt Gopinath launching Deccan Aviation or Air Deccan which had the logo of the famous cartoonist, RK Lakshman’s common man flying.

Though it is another matter that Air Deccan was acquired by the now defunct Kingfisher airlines, whose high flying promoter, Vijay Mallya, went bankrupt a few years ago, the fact remains that the LCC concept caught on among other airlines s well.

Talking about the personalities and the airlines that have dominated the Indian Aviation sector, it is the case that most of the Airlines which took advantage of the liberalized Indian Economy in the 1990s were essentially one person shows meaning that the promoters or the CEOs often had a larger than life presence.

Indeed, people such as Mallya, Naresh Goyal of Jet Airways, the promoters of Spicejet, and others straddled the scene. However, many Industry experts have pointed out that the Indian Aviation sector can be more professionally managed as far as both airport and airline management is concerned.

Already, a start has been made here with the construction of the modern airports in Bengaluru, Mumbai, Delhi, and Hyderabad by a consortium of Indian and Foreign players. Also, airlines such as Indigo are professionally managed without personality cults or run by the whims and fancies of a single individual.

Moreover, with the reentry of the venerable TATA group through tie-ups and partnerships, the Indian Aviation sector looks to be on its way to First World status.

Cautious Optimism Instead of Hyped Hope

As the title of this case study indicates, what the future holds for the Indian Aviation Sector can be characterized as cautious optimism instead of unrealized hopes. For instance, the growth in the passenger traffic has been dizzying over the last few years.

Further, the increase in the number of airlines and the concomitant capacity addition in terms of infrastructure and airports built has also been high. Thus, there is scope for ambition, though it has to be tempered with realism.

This is mainly on account of the various problems besetting the Indian Aviation Sector such as overcrowding both in terms of handling arrivals and departures in the airports as well as the very real problem of flights having to wait inordinately for landings and takeoffs. Indeed, despite the capacity addition, except for New Delhi and Mumbai International Airports, no other airport in India has two runways.

Even in these airports, sometimes the number of arrivals and departures are so high that despite the two runways, aircraft have to wait to take off and land. This compares poorly with the major airports in the world where it is routine for air traffic controllers or ATCs to handle hundreds of aircraft movements each hour. Indeed, if India aspires to join the ranks of developed countries, there can be no better way to do so than by showcasing its Aviation Sector.

From Ambani to Aam Admi: How the Indian Aviation Sector became Egalitarian

Talking about the last point, the Indian Aviation Sector has long been a study in contrast where the predominantly poor India meets the glitzy and emerging as well as arriving (literally and metaphorically) India. This has led to frequent criticism by those who point to the anomaly and contradiction of a poor country investing in its airports when the money can instead be used to better the lives of the poor.

Indeed, this was the reason why the Indian Aviation Sector did not takeoff during the 1970s and the 1980s when the dominant ideology was socialism.

As with many things that happened after the liberalization of the Indian Economy in the 1990s, the Aviation Sector too took wings and began to soar high. However, even in the 1990s and the early 2000s, there were many rules and regulations that stymied the growth of the sector as well as stunted the development of the same.

Indeed, it was not until a few years ago that the Indian Government permitted international tie-ups and it was only recently that the permission for domestic airlines to fly to international destinations was accorded. Thus, it can be said that it is only now that the Indian Aviation Sector can dream of soaring high.

Turbulence Ahead

Having said that, it is also the case that safety standards seem to be lax these days as evidenced b the number of aircrafts reporting defects and botched takeoffs and landings. While it is true that the Indian Aviation Sector does not have any major accidents as a blot on its operations, it is always better to be safe than sorry and hence, it is time for the regulators and other stakeholders to take passenger safety seriously.

What is also worrying is the casual attitude towards passengers especially when they are boarding or deplaning. Indeed, while the Indian Media does tend to sensationalize the incidents, the repeated instances of airline crew and staff being rude to the passengers and worse, becoming violent with them does not any good to the Image of the Indian Aviation Sector.

Moreover, the way in which the long queues at the booking counters and the security checkpoints tend to become irritating and indeed, painful for the passengers does not bode well for the future of the Indian Aviation Sector. It is for these reasons that we believe that there can be turbulence ahead for the sector.

Premier to Poor: The Air India Saga

No case study on the Indian Aviation Sector is complete without a discussion on the national carrier, Air India, the merged entity representing the erstwhile Air India and Indian Airlines, the domestic carrier.

While it is now routine for commentators to lampoon Air India, it needs to be remembered that it was the premier Indian carrier in the post Independence era until the liberalization of the Indian Economy.

Having said that, the wheel has come full circle and hence, its present status as a loss-making entity that is depending on governmental bailouts to stay afloat means that perhaps it is time to privatize it.

Indeed, its portfolio of landing rights and code share agreements as well as its fleet, though ageing, makes it attractive to foreign and domestic players alike who can convert these advantages into their own and at the same time, restructure it in such a manner that it becomes possible for it to become profitable again.

Thus, it needs to be watched as to what decision the political masters take in this regard. It can be said that politics plays a major role in determining the fate of Air India since there is the aspect of emotional and sentimental reasons as well.

Impact of Politics on the Indian Aviation Sector

Talking about politics and the future of the Indian Aviation Sector, it needs to be mentioned that the sector has grown with and without political interference. In other words, while in some cases, the political decisions helped the sector, in other cases, it grew despite the politicians meddling with it.

Indeed, in all cases, the sector has grown to live with both the adverse and the beneficial political decisions. For instance, a long pending demand of the sector has been to lower the high prices for Aviation and Turbine fuel.

In times when oil prices are at record lows, it makes sense for the government to cut the prices of ATF or Aviation Turbine Fuel. However, this has not happened and hence, airlines continue to grumble and at the same time, carry on with their operations.

Also, capacity addition and more landing rights are to be dealt with as well. On a more controversial note, the bilateral agreements between the Indian and the Foreign Governments about seat allocations or the number of passengers flying to and fro between Indian and Foreign Destinations seems to be taken with a view to favor some airlines over others.

Conclusion

It goes without saying that there are some measures that would minimize the path ahead for the sector. To start with, the present agreement on not having two airports within 150 Kilometers of each other can be reviewed especially where Bangalore and Hyderabad are concerned.

In both these cities, the airports in operation earlier have been mothballed despite massive investments in them mainly because the new airports and their owners specified the agreement on distance.

By reopening the old airports, significant capacity can be added thereby both lessening the load on the new airports as well as furthering the growth. To conclude, it can be said that it is a mixed bag as far as the Indian Aviation Sector is concerned wherein it is soaring high but also faces turbulence ahead.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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