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Proposal Submission on
Sustainability and operating viability of Indian airlines in the future
INDEX
Abstract .................................................................................................................................................. 3
Introduction. ........................................................................................................................................... 4
Stakeholder Analysis5
BOT Graph..6
Literature Review ................................................................................................................................... 7
Research objective and research questions ........................................................................................... 12
Explanation of the proposed methodology ........................................................................................... 12
References
Exhibits
ABSTRACT
This paper examines the reasons responsible of increasing number of debt ridden airlines in
India, various factors that impact the operational cost of the airlines and the stringent civil
aviation policies existing in the system. Initial problem structuring is done using the analysis of
behaviour over time of main variables and incorporated stakeholder analysis using a systems
approach. Role played by each stakeholder is thoroughly understood by performing Stakeholder
analysis. In understanding the reasons for increasing number of debt ridden airlines, future
actions that can be taken to revive the beleaguered aviation sector will also be established.
Proposed methodologies are carried out using primary and secondary research which would be
apt to come up with solutions for the research problem.
INTRODUCTION
Presently, India is the ninth largest aviation market in the world with a passenger growth of 13.3
% and is expected to attain 3rd rank by 2020. The number of passengers has increased from 58
million in 2005 to 120 million in 2012 and is expected to increase to 160-180 million passengers
by 2021. Post liberalisation in 1994 witnessed emergence of many airlines but only Jet Airways
and Sahara could survive. Currently, the domestic airlines industry is dominated by full service
airlines like Air India and Jet Airways and Low Cost Carriers (LCCs) like Indigo,Spice
Jet,GoAir etc.
Performance of some of the airlines explains the pathetic situation of the airline industry.
Jet Airways, announced its biggest ever quarter loss (Rs 891 crore) for the second quarter of
2013/14. Consultancy Centre for Asia Pacific Aviation (CAPA) estimates that Indian airlines
collectively lost more than Rs 3,000 crore in that quarter. Between 2007 and 2013, they lost Rs
53,648 crore, and losses for 2012/13 are pegged at Rs 10,429 crore.
Airlines are facing significant operating (slowing growth, rising fuel costs) and nonoperating (interest costs, rupee depreciation) challenges as evident in the quarterly performance
trends of listed airline companies (Exhibit 4). Some of the stringent civil aviation policies
including the FDI limit of 49 % of civil aviation sector stands as hindrance to new foreign
entrants into this sector.
India aviation industry promises huge growth potential due to large and growing middle class
population, favourable demographics, rapid economic growth, higher disposable incomes, rising
aspirations of the middle class, and overall low penetration levels (less than 3%). However, this
has changed rapidly over the last decade with the sector showing explosive growth supported by
structural reforms, airport modernizations, entry of private airlines, adoption of low fare - no
frills models and improvement in service standards.
STAKEHOLDERANALYSIS
Certificatio
n
companies(
DGCA,FAA,
EASA)
Suppliers
(Lessor
companies
of aircrafts
)
Financial
institutions
Aviation
Sector
Governme
nt
Passengers
Domestic/For
eign investors
Employees
Stakeholder Map
Stakeholder
Conflicting/Supporting
Government
Certification (DGCA,FAA,EASA)
Suppliers
Employees
Customers(Passengers)
Domestic /Foreign investors
Financial institutions
Stake
Power
Formal or voting
Economic
Political
Equity
Economic
Influencers
Foreign investors,
Financial Institutions
Domestic investors
Employees
Suppliers, Passengers
Government,
Certification companies
Profit of airlines
Time
LITERATURE REVIEW
This section presents a brief overview of some of the important studies conducted in India and
abroad in the context of approaches used to measure the performance of airlines.
1.
Entrepreneurial Trends in Liberalised Civil Aviation Sector in India: Paradigm Shifts Beyond
1990s (Vippan Raj Dutt, Aligarh Muslim University, Aligarh & S C Bansal, Indian Institute of
Management, Lucknow ) examines the scenario of Indian aviation sector post liberalisation era. It
discusses the sweeping changes that have radically changed the face of the aviation industry, the
general economic conditions that have deeply influenced the industry, gradual process of liberalising
of air services, entrepreneurial interest and growth of new airlines, allocation of capacity at airports,
reforms in the ground handling markets and other related issues. The future challenges faced by the
new carriers and the present LCCs are also discussed. A market research in the form of survey has
been conducted to study the passenger response with regards to their views on new low cost carrier
models.
2. The article, Research study of Civil Aviation sector in India (by Nathan Economic
Consulting India pvt. Ltd) will be used to study the current civil aviation policy existing in
the system and policy recommendations that will minimize and, in some cases eliminate,
certain prevailing barriers to competition for eg to reduce artificial barriers to entry such as
fleet and equity requirements, a policy which should have clear delineation between
regulatory authorities that oversee activities in this sector, which would result in clear and
predictable regulatory outcomes. Furthermore, the article also talks about framework for
monitoring anticompetitive pricing behaviour within the sector and creating a more level
competitive field between Indias private, national and foreign carriers.
3. The journal, International Journal of Aviation Management (ISSN print: 1755-9901 by
Prof. Dr. Andreas Wald) addresses major management issues facing the air transport industry
7
today. The journal offers practitioners and academics a forum for analysis and discussion in
the field of aviation management. Environmental issues, forecasting methods and revenue
management are also discussed.
4. Aviation & Sustainability (ICAO: Vol. 66, No. 6) helps in analysing the complex
environmental, economic and social impacts that are defining aviations future. In this
special submission for the ICAO Journal, the International Transport Forum (ITF) highlights
the many issues involved and points out the difficulties of finding agreement on emissions
trading systems, European or global.
5. International Journal of Aviation Technology, Engineering and Management
(IJATEM) (ISSN: 2155-6962) analyses analyzes and discusses current developments and
solutions in information technology pertaining to aeronautics technical knowledge,
administration, and engineering. IJATEM is seeking emerging, cutting-edge technologies,
advanced engineering methods, human performance optimization strategies, machine
knowledge-based components, and flight safety management programs, such that continuous
improvements in Air Operations can be realized.
6. Using Regulation: An International Comparative Study of the Civil Aviation Industry
in Britain and Spain (European Journal of Industrial relations) explains how liberalisation
has not closed the regulatory space. The paper examines how liberalisation has created new
regulatory opportunities that have been mobilized to influence the pace and course of
economic restructuring. This comparative study of the civil aviation industry in Britain and
Spain shows how organized labour has used regulation to influence the economic
restructuring programmes of the respective national flag-carriers, British Airways and Iberia.
7. E-Governance in Indian Aviation Industry A Comparative Study between Public Vs
Private Sector (International Journal of Computer Applications) reviews the
8
9. The article, Report of Working group on civil aviation sector (Ministry of Civil aviation)
analysed on the investment requirements in the aviation sector. Foreign airlines may be
interested in taking strategic stakes due to their deeper business understanding, longer
investment horizons and overall longer term commitment towards the global aviation
industry.
10. The International journal, A Study On Service Quality And Passenger Satisfaction On
Indian Airlines (ISSN 2231 5780) examines the underlying forces of service quality
influences on passengers satisfaction in aircraft transport. It concludes that Airline service
dimensions (in-flight service, in-flight digital service and back office operations) were found
to have significant and positive influences on airline image and passengers satisfaction
intentions. Thus giving considerable importance to service quality can increase the air traffic.
11. The article, An Investigation of IT Adoption Propensity in Civil Aviation Sector
examines how IT helps in information dissemination for enhancing the effectiveness of
business processes and also about different airlines which has implemented IT for more
effective business process. It has also studied the effectiveness based on the data of many
respondents.
12. The international journal of Sustainable Aviation, focuses on the sustainability of civil
aviation as aircrafts are considered as major sources of noise and air pollution. It also offers
innovative solutions to the challenges that is faced by aviation industry. It also suggest green
aircraft and airlines, renewable energy sources, alternative/green aviation fuels, propulsion
technologies for aerospace vehicles, combustion instabilities and innovative combustion
technologies.
13. The journal of European Public Policy, the United States and the external aviation policy
of the EU, studies the existing policies and deregulation in US and EU. The problem faced
by European airlines is also discussed. In this article, it has been argued that deregulation is
considered as domestic phenomenon.
14. The Journal of Aerospace Sciences and technologies - Time for No frill airports
examines the reasons for LCC in India for not performing well compared to foreign LCCs
like South West airlines, Air Asia etc. Comparison of both LCC models have been carried
out. Importance of Low Cost airports is mentioned and the absence of no frill airports in
India which is the main reason for increase in operational cost for airlines.
15. The article, Economic Benefits of airline Alliances and joint ventures By IATA examines
the reduction in airfares and many other benefits like economics of density, efficiency gains
and also the elimination of horizontal double marginalization etc. for an alliance compared
to an interline fare between non alliance airlines.
16. The journal of Transport Economics and Policy, Factors influencing operating cost in
the airline industry examined the statistical inference approach to understand the
10
of
Air
transport
Management
addresses
major
economic,
management and policy issues facing the air transport industry today. It also covers key
industry developments and trends, such as changes in government thinking towards air
transport; evolving competitive environments and new industry structures; emerging and
maturing markets and changing customer needs; sustainability and security challenges.
20. Journal of Services marketing: International service variants - airline passenger
expectations and perceptions of service quality examines variation of customer perception
with respect to nationality using SERVQ. It also determines whether the relative importance
attributed to service quality dimensions in domestic settings can be replicated internationally.
11
Research Objective To analyze the current scenario of aviation industry and the debt ridden
airlines in India. To suggest strategies and possible government policies that could revive the
beleaguered Indian aviation industry.
Research Questions:
1. What is the present situation and examine the plight of debt- ridden airlines in India?
2. What are the factors which have an impact on the operational cost of airlines?
3. What are the civil aviation policies formulated by the government to ensure systematic,
sustainable and orderly development?
4. Comparison of condition of airline industry in other countries with respect to Indian airlines
5. What are the environmental, economic and social impacts of airlines?
6. What are the customer expectation and perceptions about the service and quality of airlines?
7. What are the economic benefits of joint ventures and alliances?
8. Comparison between public and private sector entry into airlines sector.
Proposed Methodology
It would be a combination of primary and secondary research.
Primary research: In-depth interview with key policy and decision makers will be
conducted. Surveys of passengers can be conducted to understand their perceptions and
attitudes towards full service and low cost carriers to capture the future potential of those
airlines.
Secondary research :
rights of airline carriers, number of destinations from India to the rest of the world, level of
code hire operations, quality of cargo services and type of aircrafts used) can be assessed
against another successful aviation industry i.e. the US/Britain. Secondary research could
12
be used for this comparison. This would give a clear cut idea about the reasons for not so
well performing Indian aviation industry.
In case of secondary research, an airline company which has experienced bankruptcy due to
certain managerial and operational glitches would also be analysed(For instance
:Kingfisher airlines)
As many foreign airlines are entering into Indian aviation market through Joint ventures
(Tata-AirAsia, Tata-Singapore, Spice Jet Tiger Air, Jet-Etihad),investment data for
domestic and international investors would be gathered to understand
the sentiment
13
REFERENCES:
1. Entrepreneurial Trends in Liberalised Civil Aviation Sector in India: Paradigm Shifts Beyond 1990s
(Vippan Raj Dutt, Aligarh Muslim University, Aligarh & S C Bansal, Indian Institute of Management,
Lucknow )
2. Research study of Civil Aviation sector in India (by Nathan Economic Consulting India
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
pvt. Ltd)
International Journal of Aviation Management (ISSN print: 1755-9901 by Prof. Dr.
Andreas Wald)
Aviation & Sustainability (ICAO: Vol. 66, No. 6)
International Journal of Aviation Technology, Engineering and Management
(IJATEM) (ISSN: 2155-6962)
Using Regulation: An International Comparative Study of the Civil Aviation Industry
in Britain and Spain (European Journal of Industrial relations)
E-Governance in Indian Aviation Industry A Comparative Study between Public Vs Private
Sector (International Journal of Computer Applications)
The Economics of Indian Aviation Sector (Dr. K.V.Damodaran)
Report of Working group on civil aviation sector (Ministry of Civil aviation)
A Study On Service Quality And Passenger Satisfaction On Indian Airlines (ISSN 2231
5780)
An Investigation of IT Adoption Propensity in Civil Aviation Sector
The international journal of Sustainable Aviation,
The Journal of Aerospace Sciences and technologies - Time for No frill airports
Economic Benefits of airline Alliances and joint ventures By IATA
The journal of Transport Economics and Policy, Factors influencing operating cost in the
airline industry
Journey of aviation technology and engineering - A Gap analysis of Airport Safety using
ICAO SMS Perspectives
The journal of European Public Policy, the United States and the external aviation policy of
the EU
The journal of Engineering Manufacture, State-of-the-art of Lean in the Aviation
Maintenance Repair Overhaul Industry
Journal of Air transport Management
Journal of Services marketing: International service variants - airline passenger
expectations and perceptions of service quality
14
EXHIBITS:
15
16