Aviation is considered to be one of the most flamboyant and happening industries among all. The aviation industry has taken its sweet time to spread its wings in India due to lack of infrastructure, lack of passengers or lack of players in the industry. Currently, passengers using flights for commutation has grown to 18% compared to the 99.88 million who flew in 2016. In 2017 around 117.18 million people used airline service compared to 59.87 million who used the services in 2011.
Currently, flights are almost flying full around 86.1% times in comparison to 75.5% in 2011. There has been a steady growth in the industry as people are becoming more welcoming to use aircraft for traveling. The industry has also seen the entrance of many new players and has made the industry a highly competitive one to survive. Jet airways the market leader in the sector during 2011 with the lion share of 27% is in the verge of a merger with Tata group as it is not able to stand alone due to heavy losses and saw shrinkage in its market share which reached to 18%. Many other airlines like Kingfisher, Paramount, and Air Costa had to go out of business as they were not able to meet their expense and heavy competition.
India is one of the most price sensitive countries you could ever find and to succeed here you have to play carefully with your pricing. Indigo who is the current market leader of the sector with a share of 38% has found the essence of it giving low prices and not providing any complementary food on board, which has actually benefited them on a huge scale helping to gross good profit from the onboard food sales. On the other hand, giving complementary food on board was one of the main reasons which dragged Jet airways to losses.
Currently, the aviation industry contributes Rs912 billion to the GDP of India. India has also entered an open sky agreement with Australia and Japan which allows the countries involved in the agreement to operate an unlimited number of flights between the involved countries. Airport Authority of India is going to invest Rs 15,000 Cr to expand the existing airport terminal and to build 15 new ones. The government has exempted aircraft manufacturing, overhauling and repairing service providers from customs and other countervailing duties as most of the repair work of the aircraft is done outside India. A new scheme known as Udan Yojana has been brought to spread the reach of aviation into tier 2 and 3 cities providing flights at a cheaper and affordable rate to customers. The aim is to operationalize 50 underutilized airports while reserving 50% of the seats in the flights under the Udan Yojana.
Currently, India has 500 planes in service and has given the order for another 800 more planes keenly making its moves to become the world’s third largest aviation market by the year 2025 by overtaking the United Kingdom who is currently in the third position. China decorates the first position followed by the United States of America in the second position in terms of the world aviation industry.
The main issues faced by the Indian aviation industry is lack of infrastructure, aircraft parking bay in some of the most important and high traffic attracting airports. The main villain of all these would be the constantly rising fuel prices. Oil prices make about 30 to 40 % of the operational cost of the aircraft. As the crude oil prices’ skyrocketing with Brent crude oil reaching $80 per barrel doesn’t give a good sign to the industry. They would not be fully able to transfer the burden of rising fuel prices to their customers if they try to do so their current customer base could shrink in no time.
In a situation like this, we need innovative ideas to rely on. Spice Jet one of the players in the aviation sector took the initiative to test the strength of biofuel. Powering their flight with biofuel to shuttle between Dehradun to Delhi. The flight was successful and the representative’s of the ministry of civil aviation was also present who have announced that they will be bringing in new laws in concern with the use of biofuel in the aviation industry. By this India has become one of the few nations who have used biofuel to power their flights. The fuel used contains 75% of aviation turbine fuel and 25% of biofuel. The new fuel is assumed to provide better fuel efficiency and fewer carbon emissions compared to the old fuel. If this fuel is accepted by the whole world it could help us reduce the contribution of the aviation industry to the global greenhouse gas emission which currently is 2 %.
The focus should be on providing low fare carriers because if the fare prices increase the customers will opt out. This trend was clearly seen when the fares from Delhi to Mumbai which usually range from Rs 4500 to Rs 5500 raised to Rs 6500 to Rs 7500 and customers were reluctant to buy the tickets.
The sad reality is that even the aviation sector seems to grow at a steady rate and the air traffic has also been increased compared to the past years but most of the companies in the sector are continuously posting losses. The market leader Indigo is also not free from losses; this is mainly due to their low pricing strategy to increase their customer base and to penetrate more into the market. They currently don’t care about the losses they are making and are only focused on acquiring customers. Indigo doesn’t provide business class seats they only provide economy class it’s a very calculated move to attract the masses and to make a connection to the masses to show their loyalty to towards their customers. This is one of the reasons because of which Indian airlines companies are one the highest purchasers of single-aisle aircraft from Airbus SE and Boeing Co.
Future of the aviation industry seems to be grandeur. Whatever happens, it will surely be beneficial for the customers as the numbers of players in the industry are increasing and everyone is trying to outsmart each other by bringing competitive pricing and other freebies such as loyalty program to customers.
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