What is the economic standing of the civil aviation industry in India?



What is the economic standing of the civil aviation industry in India?


The civil aviation industry in India is a highly underpenetrated market. The total number of aircraft in India is only 673 which serves a population of 133crore. On the other hand, only a single airline in the US such as American Airlines and Delta Airlines have 932 and 878 aircraft respectively. The total number of aircraft in the US is 7628 which serves a population of 33 crores. The figures clearly tell that there is a lot of scope for the aviation industry in India.



Also if you consider the biggest airports in India, such as Delhi airport and Mumbai airport, they have 3 operational runways and 1 operational runway respectively. And keep in mind, these airports are built recently. If we compare this with airports in Dallas or Los Angeles or even San Francisco, then you would find that they were built in the 1960s and '70s but still have 6-7 runways.


The airports need to be more equipped and therefore a heavy expenditure is being made by all the responsible authorities. Some of the expenditures are:


1.    The Airport Authority of India planned to spend 15000 crores on the expansion of existing terminals and constructing 15 new ones.
2.    The government of India sanctioned the development of a greenfield airport in Hisar, Gujarat with an estimated investment of 1405 crores.

The Government of India accepted the proposal to manage 6 AAI Airports. under public-private partnerships and also hosted a global aviation summit in Mumbai which was visited by delegates from 83 countries. Also, it is working on a blueprint to promote domestic manufacturing of aircraft and financing the same.

India's passenger traffic growth from 2006 to 2018 has been 12.72% (CAGR). The domestic traffic grew by 18.28% in 2018. The Government of India plans to increase the number of aircraft to 1100 by the year 2027. Now knowing all these facts, we can conclude that the aviation industry in India is still very far from its potential and that the increasing per capita income is only going to make things better for the aviation industry. However, a question should pop in your head, if everything is going so good then why did Jet Airways shut down. The next paragraph focuses on that very question.

Why did Jet Airways shut down?

In the aviation industry, usually, whenever there is a merger, the companies witness a downfall because the synergies are not achieved. Some examples would be Kingfisher and Air Deccan, Air India and Indian Airlines, and finally Jet Airways and Sahara. These airlines were not able to withstand the merger difficulties and witnessed a downfall thereafter. Jet Airways also started witnessing losses after spending $500 million on Sahara. The losses escalated so much that Jet Airways didn't even have money for operating its aircraft.

Also, Jet Airways has full-service aircraft as opposed to companies like Indigo which have low-cost carriers. Since the expenditure on full-service aircraft are much higher than low-cost carriers and also the employees required per aircraft are more for full-service aircraft, Jet had to incur more expenditure on salaries. Since the price offered were the same to customers but the expenditure incurred were more by full-service aircraft, Jet couldn't pay the employees salaries which had a direct impact on customer safety and therefore had to eventually shut down. So in the same economic front in the country one company (Jet Airways) shuts down and one company(Indigo) still keeps on hiring and earning profits.

So yes, the low-cost carrier airlines have understood the Indian mentality and have successfully converted the 2nd AC and 3rd AC railway customers into airline passengers.

 Follow @rdhmfinance on instagram for latest updates.

Thanks for reading!
Please comment on any financial query you had like me to address. I will try to post something worthwhile. 

Coming up Next: What is the Islamic Banking and how do the Islamic banks earn profits?

Comments

Post a Comment

Popular posts from this blog

What is a marketing funnel and how can you implement it in your business to increase sales?

Image
What is a marketing funnel and how can you implement it in your business to increase sales? "Yo dude, you need to increase your funnel size". Today, we will understand what does this phrase mean when some entrepreneur asks you to increase your funnel size. There are various ways of marketing available to capture potential customers, some being more effective than the other. A business's objective includes selling its product or service to maximum number of customers possible in order to garner the benefit of economies of scale and increase the revenue as well as the profit. Now, coming straight to the topic, a marketing funnel is a journey of any person who is the ultimate buyer of your product or service. The marketing funnel is so important that companies like Amazon, Ford, Bigbasket and Reliance Jio also use it. Observe the image below carefully that the funnel narrows down as you go down i.e. with each level of filtering the number of potential purchasers reduce. The ...
Read more

What factors to consider when taking a health insurance?

Image
What factors to consider when taking a health insurance? The following are the factors that need to be considered when taking a mediclaim or health insurance. Pre and post expenses:  The policies usually have a time frame under which the expenses are covered. You should see for how many days prior to diagnosis of illness and for how many days post diagnosis the expenses are covered. A good policy will cover 30 days pre-illness to around 90 days post illness expenses for a claim. Premium: There are many companies that offer these insurance policies, however you will notice that the premiums for the same sum assured will vary from company to company. Therefore, you should do a prior research about the premiums and then look for where you can save money. Bed or per day room charges: There are policies that will mention that we cover the hospitalisation expenses only if you use the general ward, however, better services are provided to people with private rooms. So, read the documents ...
Read more

Top 30 things to keep in mind when trying to start your first business?

Image
Have you been thinking of starting a business, but you get bogged down by the process, then you have landed to the right article. Listed below are the top 30 things to keep in mind when trying to plan and start your dream company: Product/Service: The first and foremost thing is to decide on what you plan to sell or provide to your clients. Basically, it is the idea that you want to implement. The way successful entrepreneurs approach this aspect is to solve a mass real life problem or a mass real life convenience that people didn't know they needed. Since business is something that you plan to do for a long period of time, choose a product or service that you are passionate about. This way your work doesn't feel like work but its fun to see things coming together. Sourcing of product/service: There are two options that you can either make your own product or ask a supplier for the same, but even if you are going to make your own product, in most cases you will have to get ra...
Read more