Inidian aviation sector

MADE BY:
Sunny Dagar
SANKET KANADE
 Indian
Aviation
Introduction
The Indian aviation sector is a rapidly Sector
growing market, currently ranking as the world's
third-largest for domestic passenger traffic. Deregulation in the 1990s fueled its rise, and
today a mix of private and public airlines dominate the skies. With a focus on innovation
and affordability, the industry is poised for continued growth and could even become the
number one aviation market globally.

A growing middle class with more disposable income sees air travel as an increasingly
attractive option. Government initiatives like the UDAN scheme further boost passenger
numbers by connecting underserved regions. Low-cost carriers like IndiGo and SpiceJet
make air travel a viable alternative to trains for many.

To handle this surge, the government is ambitiously developing new airports to improve
connectivity. IndiGo remains the leader in domestic traffic, followed by SpiceJet and Air
India. New entrants like Akasa Air are also making their presence felt.

However, challenges loom. High operational costs due to expensive jet fuel and airport
charges can squeeze airline profits. Despite the UDAN scheme, congestion at major
airports can cause delays. Balancing rapid growth with robust safety standards is crucial
for the industry's long-term success.

Key Aspects of the Aviation Sector in India

 Revenue
The Indian aviation sector, although hit hard by the COVID-19 pandemic with substantial
financial losses, has displayed resilience and recovery. The future holds promise, with
forecasts suggesting India will become the third-largest aviation market in the upcoming
period.
Long-term projections are even more optimistic, with the potential for the aviation
industry to contribute up to $1 trillion annually to the Indian economy by 2043. This
growth is underpinned by a large population, rising income, a robust economy, and
substantial investments in infrastructure and technology.
  New Orders
The Indian aviation sector has witnessed substantial changes recently, marked by record-
setting aircraft orders from airlines. Air India and IndiGo made historic orders of 470 and 500
planes, respectively, in early 2023, reflecting growing confidence in the industry. Akasa Air
and Jet Airways are also planning significant fleet expansions.
Consultancy CAPA India anticipates 1,300 more orders from Indian airlines in the coming
years, signaling strong post-COVID-19 recovery. The Indian aviation market is poised for
further growth, with expectations of exceeding 1,200 narrowbody aircraft orders, driven by
rising demand, low-cost carriers, and government initiatives.

 Net Profit
In the last 2-3 years, a significant reduction in aggregated net losses was expected, thanks to
a resurgence in passenger volumes and stable fuel and foreign exchange costs.
The industry is anticipated to return to profitability in the upcoming period, with passenger
traffic surpassing pre-pandemic levels and higher pricing.

 Research and Development

Research and development in India's aviation sector have surged up with ongoing trends
pointing towards more growth. The country has expanded its airport count from 74 in 2013-
2014 to an expected 220 by 2024-2025.
Collaborating with the private sector, the government is investing substantially in
infrastructure, aiming to employ a few hundred thousand people over the next decade.
Passenger numbers are on the rise as well.
The future holds promise, with significant growth expected in international travel and cargo.
Government schemes, like UDAN, have boosted regional connectivity, while technological
advancements, such as AI and automation, promise efficiency and cost savings.

 Attrition
Over the past few years, the aviation industry has seen more news about attrition than any
other industries.
Airlines like Air India and Indigo have struggled financially, requiring cash infusions. SpiceJet
faced safety and financial problems, leading to reduced operations. Infrastructure
constraints, regulatory hurdles, a skills gap, high costs, and environmental concerns further
challenge the sector.

Market Analysis:

 India is expected to overtake China and the United States as the world's third-largest
air passenger market in the next ten years, by 2030, according to the International
Air Transport Association (IATA).

 Passenger traffic stood at 327.28 million and aircraft movements reached 2.5 million
in FY23.

 During April-October 2023, the domestic passenger traffic stood at 175.42 million,
registering a 19.4% increase, and international passenger traffic stood at 38.55
million, a 26.2% increase, as compared to the same period the previous year.

 According to the data released by the Department for Promotion of Industry and
Internal Trade (DPIIT), FDI inflow in India’s air transport sector (including air freight)
reached US$ 3.79 billion between April 2000-September 2023.

 In October 2022, Prime Minister Mr. Narendra Modi laid the foundation stone of the
C-295 Aircraft Manufacturing Facility in Vadodara, Gujarat.

 In the Union Budget 2023-24, Rs. 3,113.36 crore (US$ 376 million) was allocated to
the Ministry of Civil Aviation.

 The government will spend about Rs. 98,000 crore (US$ 12 billion) by 2025 to boost
regional connectivity.
  In June 2023, Union Civil Aviation Minister Mr. Jyotiraditya Scindia said that 200-220
more airports, heliports, and water aerodromes will be built in the country over the
next five years.

 In October 2021, Tata Sons won the bid to acquire state-run Air India by offering Rs.
18,000 crore (US$ 2.4 billion) to acquire 100% of shares.

 The AAI has announced a few developments in Indian Airports - construction of a

new airport on a greenfield site in Hollongi (Arunachal Pradesh) by November 2022,
new integrated passenger terminal building expansion of Tiruchirappalli & Pune
Airport (March 2022), Guwahati International Airport (June 2022), Maharaja Bir
Bikram Airport (Early 2021) and a major expansion of Surat Airport (December 2021).
On May 08, 2021, AAI commenced commercial operations at Rupsi Airport—
Northeast India’s 15th airport and Assam’s 7th airport.

 Investment to the tune of Rs. 42,000-45,000 crore (US$ 6-6.5 billion) is expected in
India’s airport infrastructure between 2018-2023.

Opportunities in India:
Synopsis of Aviation Industry in India

 The Indian aviation sector is soaring towards a promising future. Key factors driving
growth include rising incomes, low-cost carriers, increased investments, and a
growing GDP.

 The sector's contribution to GDP and job creation is substantial. As India charts its
course to becoming the world's third-largest air passenger market, it's clear that
the Indian aviation industry has a bright future ahead, with opportunities for further
expansion and development on the horizon.

Case Study on Jet Airways & Reasons for Shutdown

History
 Naresh Goyal started Jet Airways with 4 leased Boeing 737 aircraft in 1993. The airline
was the paragon of success for domestic carriers in India. There were rumblings of
trouble brewing within Jet Airways in August of 2018 when the company deferred the
second quarter results of that year.

 The government watchdogs got a sniff of discrepancies in the airline's financials. In the
same month, the DGCA (Directorate General of Civil Aviation) conducted a financial
audit of Jet Airways. It was based on the reasoning that the deferment of employees’
salaries ought to affect their morale and attitude.

 The same month, Jet Airways posted a loss of INR 1323 crores.
 In September of 2018, the Income Tax department surveyed the Delhi and Mumbai
offices of Jet Airways. The company was then alleged of financial misappropriation.
Naresh Goyal, who was then the Founder-Chairman of Jet Airways, also came under
the radar of the government and its law enforcement agencies. He and his wife, Anita
Goyal stepped down from the Jet Airways' operations on March 25th, 2019, after the
financial crisis that the airline company was in, came in front of everyone.

 Jet Airways founder Naresh Goyal and his wife Anita, were stopped from leaving India
by immigration authorities at Mumbai airport. They were offloaded from a Dubai-
bound Emirates flight, which was called back after it had reached the taxiway at
Mumbai airport on May 25, 2019, since then, he was stopped from flying out of India.

 There were charges of money laundering and foreign exchange violation against
Naresh, and this led the Enforcement Directorate to question him in September 2019.
He was detained and questioned again by the ED in 2020. As far as the recent reports
dated April 22, 2022 go, the Central Bureau of Investigation (CBI) would likely file a First
Information Report (FIR) against Naresh Goyal for defrauding banks and
misappropriating the bank-sanctioned loans. The banks and their officials who granted
him the loan, also came under the scanner this way.
Downfall
 Jet Airways shut down its operations temporarily on 17 April 2019. The last flight was
from Amritsar to Mumbai. The shutting down of the company affected 20,000
employees and more than 60,000 people indirectly. The company is reportedly in a
debt of a billion dollars. NAG (National Aviator’s Guild) appealed to the PMO (Prime
Minister’s office) and then-Civil Aviation Minister Suresh Prabhu to help the company
and its employees.
 The government on the other hand reportedly asked the banks to save the company
without pushing it to bankruptcy. With unemployment being a major electoral issue for
the government, an addition of 20000 to the list of jobless Indians will only give more
substance to the opposition. The Government is therefore pulling out all the stops to
prevent Jet Airway's insolvency.
 Consequences have been of such an unprecedented level that an employee of Jet
Airways committed suicide in Mumbai. Shailesh Singh was a cancer patient and was on
a break from his job as a senior technician at Jet Airways. He jumped from his building
due to depression on 27 April 2019.

Reasons behind Bankruptcy

o Merger
The merger between Sahara Airlines and Jet Airways was a mistake on Jet Airways' part. Sahara
was acquired by Jet Airways for $500 million which was way above what the airline was
actually worth.

o Rebranding Sahara Airlines

Jet Airways renamed Sahara Airways as Jet Lite. Sahara at the time was a powerhouse with its
name on every Indian's tongue. The rebranding cost Jet Airways a major chunk of its
customers; flyers who were attracted towards the Sahara brand image couldn't resonate with
Jet Lite.

o Full-Service Airline
Full-service airlines offer passengers the choices of economy, business class, premium
economy, and first class on their flights. The company was operating as a full-service airline.
Operating as a full-service airline in India is not an easy task.

The Future Plans of Jet Airways

Jet Airways appointed Sanjiv Kapoor as its new CEO on March 4th, 2022, which certainly means
that the popular airline company that went defunct in 2019, would again be resuming its
operations under the ownership of the Kalrock-Jalan consortium. It is currently going through a
court-monitored restructuring and plans to return with a hybrid of premium and no-frills
services. The flights of the revived Jet Airways, which will be helmed by Kalrock and Jalan,
would have a two-class configuration where the business class passengers would be offered
premium services including free meals, whereas the economy class of Jet Airways would be
operating similar to the low-cost carriers, where the passengers would pay for their own meals.

Case Study on Go First Airlines & its Failure

History
 Go First, previously known as GoAir, was a budget airline in India with a rollercoaster
ride of a history. Launched in 2005 with a single Airbus, it quickly grew into a major
player with budget-friendly fares. They faced competition from other budget airlines
like IndiGo and SpiceJet, often resorting to price wars.

 Around 2019, problems arose with the Pratt & Whitney engines powering their
A320neo fleet. A significant portion of the aircraft were grounded due to engine
faults, crippling their operations and finances. They accused P&W of failing to deliver
parts and replacements, leading to a legal battle.

 The grounded fleet combined with high costs resulted in a severe cash crunch. In
May 2023, Go First filed for bankruptcy. The National Company Law Tribunal is
currently deciding their fate, with possibilities ranging from revival with a new
investor to complete liquidation.
  Go First's story highlights the challenges airlines face in a competitive market.
Maintaining a reliable fleet, managing finances effectively, and navigating industry
dynamics are all crucial for survival.

A Competitive Landscape:
 The Indian aviation market is fiercely competitive, with budget airlines like IndiGo
and SpiceJet vying for market share.
 GoAir often participated in price wars to attract customers, putting pressure on
profit margins.
 This environment made it difficult to build a financial buffer for unforeseen
circumstances.

Major Reason for its Downfall

Engine Troubles and Financial Strain (2019-2023):

 Around 2019, reports surfaced of increasing issues with Pratt & Whitney (P&W)
engines powering GoAir's A320neo fleet.
 The airline grounded a significant portion of its aircraft due to engine faults,
impacting operations and revenue generation.
 GoAir accused P&W of failing to deliver necessary parts and replacements, leading to
a legal dispute that further complicated matters.
 The grounded fleet coupled with high operational costs resulted in a severe cash
crunch, making it difficult to meet financial obligations.

Downfall and Uncertain Future (2023-present):

 In May 2023, Go First filed for bankruptcy due to its financial struggles.
 The National Company Law Tribunal (NCLT) is currently deciding its fate.
 Possible scenarios include revival with a new investor, asset sales to other airlines, or
complete liquidation.

Conclusion
 It exposes the vulnerability airlines face due to dependence on external factors like
specific engine manufacturers. The grounding of a significant portion of their fleet
 due to engine issues crippled Go First's operations and finances. This highlights the
importance of fleet diversification and strong relationships with suppliers.

 Financially, Go First's downfall underscores the need for responsible debt

management and long-term financial planning. Price wars and aggressive expansion
must be balanced with building a buffer for unforeseen challenges.

 Finally, the case study points to the importance of strong leadership and strategic
planning. Frequent leadership changes and a lack of long-term vision may have
hampered Go First's ability to proactively address issues. The aviation industry
demands a multi-pronged approach that balances growth with operational
efficiency, sound financial management, and a proactive response to potential
challenges.

Case Study on Indigo Airlines : Reaching New Heights

History
2006
 Founded in 2006 by Rakesh Gangwal, an NRI, and Rahul Bhatia, the head of Inter Globe
Enterprises the stakes were split with Inter Globe having a share of 51% and the rest
49% shares belonging to Gangwal. IndiGo submitted a firm request for 100 Airbus
A320-200 airplanes in June 2005 with plans to start tasks in mid-2006.
 IndiGo took conveyance of its first Airbus airplane on 28 July 2006, from New Delhi to
Imphal via Guwahati after one year in the wake of putting in the request.
2007
 By the end of 2006, IndiGo had 6 airplanes and by the end of 2007 9 more airplanes
were added increasing the total count to 15.

2010
 Before the finish of 2010, IndiGo previously had 17.3% of the portion of the overall
aviation industry, supplanting the state-run airline Air India as the third aircraft in India,
behind Kingfisher Airlines and Jet Airways.

2011
 In 2011, IndiGo submitted a request for 180 Airbus A320 airplanes in an arrangement
worth US$15 billion. In January 2011, in the wake of finishing five years of tasks, the
carrier got authorization to dispatch worldwide flights.
 The first international service was between New Delhi and Dubai followed by flight
services from New Delhi and Mumbai to Bangkok, Singapore, Muscat, and Kathmandu.
2012
 August 2012 marked as a turning point for IndiGo, when it surpassed Jet Airways in
terms of market shares (a whopping 27%) and became the largest airline in India
IndiGo works over 647 day-by-day trips to 39 destinations, 34 in India and 5 global.

2017
 In 2017, IndiGo turned into the primary Indian transporter to work 1000 flights per day
and, with the conveyance of the 31st Airbus A320neo airplane, an armada of 150
airplanes.
 IndiGo additionally took conveyance of its first ATR 72 600 airplanes in December.

2018
 In 2018, IndiGo kept on extending its worldwide course organization to 15 objections,
adding everyday direct trips to Hong Kong, Doha, Phuket, and Istanbul.
 IndiGo won the ‘Best Low-Cost Airline in Central Asia & India’ award for nine
consecutive years till 2018.
 IndiGo abides by three values: punctuality, pocket-friendly airfare, and quality
experience.

Reasons for its Success

 Low-Cost Focus:

 Simple fare structure: IndiGo offers a single class (economy) which simplifies
operations and reduces costs.
 Efficient fleet management: IndiGo maintains a young fleet with a focus on a single
aircraft type (Airbus A320 family). This reduces maintenance complexity and training
requirements for pilots and crew.
 Cost-conscious approach: From bulk fuel purchases to negotiating favourable lease
deals, IndiGo prioritizes cost savings throughout its operations.
 Operational Excellence:

 On-time performance: IndiGo consistently ranks high in on-time performance, which

is a major selling point for business and leisure travelers.
 Focus on technology: The airline leverages technology for efficient scheduling,
maintenance, and customer service, leading to smoother operations.
 Large and well-trained workforce: IndiGo invests in training its staff, ensuring high-
quality service and efficient operations.

 Market Strategy:

 Widespread network: IndiGo boasts a vast network covering major and minor cities
in India, catering to a broad range of travelers.
 Focus on affordability: IndiGo's competitive fares make air travel accessible to a
wider segment of the Indian population, driving up demand.
 Customer service: While a budget airline, IndiGo strives to provide courteous and
hassle-free service, fostering customer loyalty.

 Early Mover Advantage:

 IndiGo entered the market in 2006, capitalizing on the rising demand for affordable
air travel in a rapidly growing economy. This first-mover advantage allowed them to
establish a strong brand presence and secure lucrative routes before competitors
fully emerged.

 Strategic Alliances:

 IndiGo has forged strategic partnerships with other airlines like Turkish Airlines,
providing passengers with seamless connections to international destinations. This
broadens their reach and attracts a wider customer base.
Conclusion

 IndiGo's success story goes beyond just being a budget airline. Their core strengths
in cost-efficiency and operational excellence are undeniable, but it's the combination
of these factors with strategic planning and a focus on people that has truly
propelled them to the top.
 IndiGo capitalized on the growing Indian market early on, forging a strong brand and
securing key routes. They understand the value of partnerships and a motivated
workforce, constantly adapting to industry trends and customer needs. By
prioritizing good corporate governance, they've built trust and positioned
themselves for long-term success. IndiGo's story serves as an example of how a well-
rounded strategy, adaptability, and a commitment to both cost-efficiency and
customer satisfaction can lead to remarkable achievements in the competitive airline
industry.