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India's Airlines

Essay by   •  April 1, 2013  •  Case Study  •  1,374 Words (6 Pages)  •  1,316 Views

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Strengths

Liberal Environment: India's airlines operate in a liberal environment in both the domestic and international spheres. With three major airline groups and four smaller carriers all operating domestic routes. Carriers are free to operate any domestic routes without seeking permission from the government, and without restriction on pricing.

On the international front, the Indian government has pursued an increasingly liberal approach to bilateral air services agreements with key overseas markets, resulting in greater access for foreign carriers. Emirates for example gulf countries being Indians first preference, the largest foreign carrier by capacity into India, will operate 185 weekly frequencies to ten cities across the country by the end of 2009. India's carriers have a combined international capacity share of just over 36% but face strong competition from foreign carriers, both full service and low cost.

Modern Fleet: In light of the fact that much of the growth in Indian aviation has occurred in the last five years, the country's airlines operate a relatively young and modern fleet, ensuring a high quality passenger experience, improved safety and good operational reliability.

High Quality: India's airlines offer a good quality product in each of the operating models in existence. Jet Airways and Kingfisher Airlines are competitive in terms of their inflight service against the leading carriers in the world. Kingfisher for example (Before being downgraded) is one just half a dozen global carriers such as Singapore Airlines and Cathay Pacific, with a Skytrax 5 star rating. In fact it could be argued that the full service product on domestic routes is excessive for the sector lengths involved and results in a higher cost structure, which the passenger does not necessarily see value in paying for Until a couple of years ago, Air Deccan was one carrier that had developed a reputation for poor on-time performance, flight cancellations and overbooking.

Economic Growth: Economic growth has historically been the primary driver of air traffic, and the relationship has generally been even stronger in developing countries. India enjoyed four years averaging 8-9% per annum GDP growth. This slowed to 6.5% in 2012, however against the background of a global economic recession, this was a creditable performance.

Weaknesses

Airport Infrastructure: The rapid growth in air traffic over the last few years exposed the deficiencies of airport infrastructure across the country. After decades of neglect, many of India's airports were forced to operate well above design capacity. The resulting congestion in the terminals and on the runways delivered a poor experience for the passenger and a costly, inefficient operating environment for the airlines. However, although a weakness today, it is also fair to say that it is becoming less so, as the airport modernisation program starts to deliver results, with new airports in Bangalore and Hyderabad, and improving facilities at Delhi and Mumbai. The upgrade of non-metro airports remains behind schedule so it may be another 3-4 years before we see good quality facilities across the country, but there are tangible signs of improvement.

Airways Infrastructure: Although congestion on the ground is relatively visible, another current area of weakness is the limited investment that has taken place in improving infrastructure for air traffic management. This too results in expensive aircraft holding patterns, indirect flight paths and sub-optimal use of runways.

National Carrier: The state-owned carrier, Air India, is in a dire situation. The carrier is estimated to have posted losses of close to USD1 billion, and morale within the workforce is at a lower level. With no clear direction, management instability at the top and continuing issues with the integration of Air India and Indian Airlines, the carrier is in need of radical restructuring. It is imperative that the government develops a turnaround strategy for Air India as an urgent priority.

Large Debt: Over the last three years, India's carriers have accumulated billions of dollars in losses and debt. Ironically, a characteristic that would normally be considered a strength - namely deep pockets - has resulted in carriers remaining afloat that would perhaps in other circumstances have failed. With the backing of either the government or large corporations, several carriers have been able

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