Aviation industry
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This document discusses the Indian aviation industry. It notes that the industry accounts for 0.5% of India's GDP and supports 1.7 million jobs. Key points mentioned include that passenger traffic has grown to 159 million and the fleet size is projected to double to 1000 aircraft by 2020. It also summarizes the market structure, major players like IndiGo, Jet Airways, and SpiceJet, and developments in the industry.
Aviation industry
- 1. GROUP 5 Rishi Malhotra Rohit Ghosh Arpit kulshreshtha Sukhvinder Singh Deogan Peeyush Mittal INDIAN AVIATION INDUSTRY
- 2. Industry Overview Aviation industry in India accounts for 0.5% of the India’s GDP and supports 1.7 million jobs. Indian civil aviation industry is amongst the top 10 globally with a size of USD 16 billion. India's current MRO market size is estimated to be around USD 700 million. Presently, there are about 437 airports and 1091 registered aircrafts in India.
- 3. Growth of the Sector Historical Growth ◦ India’s domestic aviation market has tripled in last five years posting growth at 25.6%. ◦ Passenger traffic has increased to 159 million and cargo to 2.19 (MMT), CAGR of 13 per cent and 10 per cent respectively over the period FY 2003–2013. ◦ The scheduled commercial fleet has grown from 119 aircraft in 2000 to 437 today, representing an investment of US$16 billion. Projected growth ◦ Indian airport system is estimated to handle 336 million domestic and 85 million international passengers by 2020. ◦ Indian carriers are expected to double their fleet size by 2020 to 1000 aircraft. ◦ The non-metro airports presently account for only about 30% of the total
- 4. Passenger traffic in India Total passenger traffic stood at a 159.3 million during FY13 Aircraft movement in India Total aircraft movement recorded CAGR of 8.4 per cent over FY06-13.
- 5. Market Structure Differentiated oligopoly. Large number of consumers both passengers and cargos. Few firms who control significant share of the market . High cost barriers to market industry. Regulatory barriers. High degree of concentration within the industry where India’s four firms hold more than 80% of market share.
- 6. Leading Market Share IndiGo is a low cost carrier and the largest airline in India with a market share of 31.7% as of May 2014. IndiGo is one of the fastest growing low cost carriers in the world. With its fleet of 80 new Airbus A320 aircraft, the airline offers 528 daily flights connecting to 36 destinations.
- 7. Other Player’s with their Share • Jet Airways Jet Airways is a major Indian airline based in Mumbai. It is the second largest airline in India, both, in terms of market share and passengers carried, after IndiGo. Jet Airways (Jet+JetLite) had a market share of 24.6%. • NACIL NACIL is the aviation company of India which operates India’s oldest airlines i.e. Indian Airlines, Air India and Air India Express with market share of 20.3%. • SpiceJet SpiceJet is another budget airline company in India with market share of 17%. It was acquired by media king Kalanithi Maran with Rs. 750 crore. • GoAir GoAir is an Indian low-cost airline based in Mumbai. It commenced operations in November 2005. It is the aviation foray of theWadia Group. As of January 2014, it is the fifth largest airline in India by market share with 10.1%.
- 8. Market Players Market Share IndiGo 30 Jet Airways 24 NACIL 20 SpeiceJet 16 GoAir 10 IndiGo 30% Market Share Jet Airways 24% SpeiceJe t 16% GoAir 10% NACIL 20%
- 9. Developments and Litigation Case Bengaluru International Airport Limited (BIAL) has filed case Vijay Mallya-led Kingfisher airlines for non-payment of user development and passenger service fees. The spokesperson declined to divulge any further details relating to the case. However, sources say the case is relating to payment of user development and passenger service fee collected by airlines from its passengers between 2008-12 to BIAL. Kingfisher collected Rs. 208 crore from 2008 to 2012 which was due to BIAL. King Fisher Jet Airways GoAir IndiGo Recent Developments (Industry Competition) High Operating Cost Low Operating Cost Low Operating Cost Low Operating Cost Unprofitable Route Focused Routes Good Marketing Focused Routes More turn around More turn around More turn around More turn around time time time time Diversified Aircrafts Standard Aircrafts Standard Aircrafts Standard Aircrafts
- 10. Effect of Industry Structure on Output Price and Quantity A dominant firm may indulge in price discrimination by charging different prices to different customers, do overpricing in certain routes by taking advantage of dominant position. Cartelization: Firms may make an agreement to fix prices. Restricts level of production and output Eliminates fair competition. Results in artificially inflated prices.
- 11. Mergers: A merger with a large market share may indulge in collusion to control price along busy routes by virtue of control over time May also result in removal of vigorous competitor from the market. Merger also raises the issues of predatory pricing. Predatory pricing may lead to Price wars. Price Parallelism: Closer the time of the departure of the flights, greater is the price parallelism. This may also lead to price collusion which may further lead to overpricing.
- 12. Initiatives Taken by Competition Commission of India or SEBI Commission concluded that since there are no evidences on record to suggest that the airline operators raise the air fares and/or withdrew their promotional fares across all sectors because of some agreement among them during the periods under investigation, the proceedings in the case to be closed. The Commission observes that fares of all airlines generally move together and there would be a case of price parallelism. However, the Commission holds that this on its own cannot be said to be indicative of any ‘practice’ being carried.
- 13. The practice of shifting seats to higher price bucket rather than being an anti-competitive practice is a business model of pricing which is followed not only in India but internationally. References www.cci.gov.in www.hindubusinessline.com www.lakshmishri.com www.airtrends.com www.wikipedia.com