International Journal of Case Studies in Business, IT, and Education SRINIVAS
(IJCSBE), ISSN: 2581-6942, Vol. 4, No. 2, November 2020 PUBLICATION
An Overview of the Aviation Industry in India
with Special Emphasis on Privatization
Pavithra Kumari* & P. S. Aithal**
*Research Scholar, College of Management and Commerce, Srinivas University, Mangalore-
575001, India
ORCID: https://orcid.org/0000-0003-4541-4242, E-mail:
[email protected] **Professor, College of Management & Commerce, Srinivas University, Mangalore – 575001,
India
ORCID: https://orcid.org/0000-0002-4691-8736; E-mail:
[email protected]Area of the Paper: Business Management.
Type of the Paper: Research Case Study.
Type of Review: Peer Reviewed as per |C|O|P|E| guidance.
Indexed In: OpenAIRE.
DOI: http://doi.org/10.5281/zenodo.
Google Scholar Citation: IJCSBE.
How to Cite this Paper:
Pavithra Kumari & Aithal P. S. (2020). An Overview of the Aviation Industry in India with
Special Emphasis on Privatization. International Journal of Case Studies in Business, IT, and
Education (IJCSBE), 4(2), 220-228. DOI: http://doi.org/10.5281/zenodo.
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A Refereed International Journal of Srinivas University, India.
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International Journal of Case Studies in Business, IT, and Education SRINIVAS
(IJCSBE), ISSN: 2581-6942, Vol. 4, No. 2, November 2020 PUBLICATION
An Overview of the Aviation Industry in India with Special
Emphasis on Privatization
Pavithra Kumari* & P. S. Aithal**
*Research Scholar, College of Management and Commerce, Srinivas University, Mangalore-
575001, India
ORCID: https://orcid.org/0000-0003-4541-4242, E-mail:
[email protected] **Professor, College of Management & Commerce, Srinivas University, Mangalore – 575001,
India
ORCID: https://orcid.org/0000-0002-4691-8736; E-mail:
[email protected] ABSTRACT
Aviation industry in India is presently an expeditious growing industry in India visually perceived
according to the report in the last three years. So, India is well-known as the third largest domestic
aviation market in the world and is foreseen to be the third largest air passenger market by the end of
2024. To work toward the requirements of the flyers, Government of India is working toward
incrementing the number of airports. In 2019, India is reported to have 103 operational airports, with
a considerable increase in the airplanes too. The Indian government has plans to invest more to
develop the aviation industry with various strategies. Although tremendous achievements are seen
recently, still more gaps in development have to be filled. With the increased demand in air travel,
India’s aviation industry by 2038 might need 2,380 new commercial airliners.
Keywords: Aviation industry, Airports, Air travel, Developmental strategy in aviation.
1. INTRODUCTION :
Globalization has topped as the key mechanism in the development of tourism, which has stepped in almost
all areas like promotion of products, job enhancement, health sector and tourism. We witness the huge
connectivity in the International markets in the present situation. This has marked the history in the aviation
market. India currently is found to be the 9th largest in aviation Industry, which is managing 41 million
International passengers and 121 million national passengers. This owes to the fact that India is operating more
than 85 International airlines with more than 40 countries [1]. Discussing the Industry of Aviation, it is
understood that it has presently become the essential link for national and International travel and trade, which
was once the elitist activity due to the cost. Hence aviation industry is especially important, for the economic
development of the Nation because of the opportunity to increase business activity.
2. OBJECTIVES & METHODOLOGY :
The main objectives of this paper are:
1. Understand the functioning of aviation industry in India.
2. To know the growth and development of civil aviation in India
3. To make ABCD analysis of PPP model
4. The contribution of the PPP model towards the future growth of aviation industry.
3. AVIATION INDUSTRY IN INDIA :
The history of Indian Aviation states back to 1912, December, when the first domestic flight flew between
Karachi and Delhi. It commenced when the Indian Air facilities collaborated with the UK predicated imperial
airways as an extension of London Karachi flight of the Imperial Airways. Hence three years the provision
commenced with the designation of Tata Sons Ltd, the first Indian airline from Karachi and Madras. There
was no backing from the Indian government [2].
In 1953, under the purview of the Indian Government Indian Airlines served the domestic civil aviation. During
independence time, 9 air convey companies carried air cargo and the passengers within India. In 1948, the
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Indian regime and Air India together set up a company. Till the mid of 1990’s government possessed airlines
controlled Indian aviation industry. In 1990, the government of India implemented the open-sky policy and
followed the liberalization rules. This paved the road to expeditious transformation in aviation industry.
If we analyze the market size of the aviation industry in India, it is seen that the passenger traffic rated at
341.05 million in fiscal year 2016. The compound yearly growth rate of 11.13 percent in the course of 2016
to 2020. As per the report, the air traffic increased at a compound annual growth rate of 5.32% from the fiscal
year 2016 to 2020. It is assumed to reach to 7.27 % in 2023. The aircraft movement increased in the rate of
9.83% in domestic aircraft and 3.57% in international aircraft from FY16 to FY20.
Hence this development required a need of extra infrastructure, hence, in 2019, India had 103 operational
airports. More airplanes operating in the sector is also a rising demand. With the increase in the infrastructure,
the investment also was demanded. So according to the statistics produced by the Department for Promotion
of the Industry and Internal Trade (DPIIT) [2], Overseas Direct Investment grown up to US$2.75 billion amidst
April 2000 and March 2000. The regime has promoted 100% FDI under the automatic route in scheduled air
travel facilities, regional air travel service and national scheduled passenger airline. This venture is assumed
to reach 35,000 crores in the subsequent four years. So, it is planned by the government of India, to invest US$
of 1.83 billion to develop the airport infrastructure along with the aviation navigation services by 2026.
4. RELATED WORK :
A scholarly journal is a journal that contains papers written by experts in a specific area of study.
It contains authoritative information and may include extensive records of research, data, overviews, expert
opinions on topics or topics. Table 1 lists a number of key academic publications and issues related to various
sectors of the airport industry and its operations.
Table 1: Publications by various scholars on various Airport issues
Sl. Area Issues Reference
No.
1 Aviation Aimed to encourage PPP model in Viswanath A. et al. (2008) [3]
industry India for the futuristic growth of
airports.
2 Process A current scenario of aviation Anubhav Singh, (2016) [4]
industry in India.
3 Strategy Airbus A380-800, its role as full- Glenn Baxter, et al. (2018) [5]
service network carrier’s
commercial operations and its
design of route network.
4 Service Study on service qualities Ipseeta Satpathy, et al. 2017 [6]
Quality provided in different air ports in
India
5 Privatization Study made to know that the Hans-Arthur Vogel, (2011) [7]
privatization adds financial value
to the economy.
6 Strategy Discovering the Social, Economic Ashutosh Kolte, et al. (2009) [8]
and Technical Condition of
Indian Aviation Industry.
7 Aviation PPP model development. A Sambrani, V. N. (2014) [9]
industry perspective for infrastructure
development in an airport.
8 Strategy In a service-oriented sectors Anuradha Yadav. (2013) [10]
Indian Aviation Industry is
becoming economically growing
industry.
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9 Strategy Information Communication Deepthi Shanker. (2008) [11]
Technologies playing major role
in tourism.
10 Aviation Implementing the PPP model to Soliño, A. S. et al. (2009) [12]
industry elongate subways.
11 Perception Adaptation of passengers' Jin-Woo, P. et al. (2011) [13]
perceptions of airport for
improvement of service quality.
12 Aviation Adoption of PPP model for the Rajan, T. A. et al. (2009) [14]
industry Greenfield airport development.
13 Aviation Investment opportunities in the Raghunath, S. (2010) [15]
industry next phase of development
through privatization of airports
in India.
14 Privatization Economic regulation for healthy D.P. Singh, et al. (2015) [16]
competition amongst government
owned, PPP-based & Private
Airports in India.
15 Perception PPP model is more suitable for Riess, Armin. (2005) [17]
public service sector in terms of
cost saving rather than another
sector.
16 Infrastructure PPP model concentrate more on Suat Teker, et al. (2012) [18]
infrastructure development and
help to attract more tourist.
17 Infrastructure To provide more facility to the Sharad Kumar (2018) [19]
customer PPP model helpful to
work with AAI.
18 Airline Involvement of private sector Carlos Oliveira Cruz, et al. (2011)
Operator operators on airport platform help [20]
the airlines to focus on core
business.
19 Aviation PPP of Airport. Generates 2 Eduardo Engel, et al. (2018) [21]
Industry sources of Revenue i.e.
aeronautical and non-
aeronautical.
20 Aviation Private sector will be capable of Tae H. Ouma, et al. (2006) [22]
Industry more financing and investing in
order to improve the service
efficiency.
21 Business Applying ABCD Model for a Aithal, P. S. (2016) [25]
Strategy successful Business Model.
5. GOVERNMENT PROGRAMS TO DEVELOP THE AVIATION INDUSTRY :
The growth of the aviation Industry in India was tremendously in rise both economically and socially. With
the increase in the air flyers, the economic growth was also witnessed. Development and investments in the
industry was in increase, within these recent years. In 2019, AAI set up plans to start the first three water
airports in Andaman & Nicobar. It was additionally observed in 2020, January, just afore the outbreak of
COVID-19, IndiGo was promulgated to be the first Indian air carrier to increase the aircraft fleet size of 250
planes, which was venerated to operate 1500 flights per day. With the increase in the aircrafts, Indian Aviation
industry had to invest US$ 150 million [23] for the aircraft maintenance, repair and Overhaul unit to render
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quality service to the customers in December 2019. This service was completely exempted from the customs
and countervailing duties.
In November 2019 the Competition Commission of India permitted Adani Properties private Limited to
acquire the shareholding in Mumbai International Airport Limited. To cater to all these requirements of the
Aviation Industry, AAI has a long-term five-year plan, so to expand amenities and infrastructure at the airports,
it invested nearly 25,000 crores. To develop Guwahati as an inter-regional hub and Agartala, Imphal and
Dibrugarh as intra-regional hubs it also undertook a strategy to accomplish this. The services rendered by the
aviation Industry was highly notes. In the year 2020, the air traffics was recorded to be 341.05 million [23]
with the compound annual growth rate of 11.13 percent. National passenger circulation also added to this
development by having 274.50 million in FY20 with 66.54 million and the compound growth rate of 5.01
percent. The international aircraft movement reached 2,155 thousand in FY20. So, to cater to these
developments, there were 103 operational airports in India, which increased 190–200 in FY20. It was observed
that It was also observed that air transport sector of India reached US$ 2.75 billion in the middle of April 2000
and March 2020. The government has permitted 100 percent FDI under the automatic route in planned air
transport service, regional air transport facility and national scheduled passenger airline. But the government
approval is required for FDI over 49 percent. Aviation Industry of India is likely to witness Rs 35,000 crore
(US$ 4.99 billion) investment in the next four years. The aviation industry in India should witness a Rs 35,000
crores (US$4.99 billion) investment over the next four years. For the expansion of airport infrastructure along
with aviation navigation services, India's Government is also planning to invest US$ 1.83 billion by 2026.
Accordingly, Indian Government has taken many Initiatives to further develop the aviation industry. Under
‘Lifeline Udan’ an initiative by India's Government flights was operated for the transportation of essential
medical cargo to distant parts of the country to support India’s war against COVID-19. As of May 05, 2020,
Air India, Alliance Air, IAF including private carriers operated 465 flights. The government also introduced
'Krishi Udan Scheme' both on national and international routes to aid farmers in transporting agricultural
product and improving product value. This scheme was introduced in Union Budget 2020–21. Government of
India is also promoting aircraft financing and leasing activities under the Union Budget 2019–20 to make
Indian aviation market self-reliant. T0 develop the new greenfield airport in Hirasar, Gujarat, the Government
of India In February 2019 sanctioned with an estimated investment of Rs 1,405 crore (US$ 194.73 million). In
January 2019, the Government of India was working on an overarching plan to promote domestic aircraft
manufacturing and financing in the country. In January 2019, Government organized the Global Aviation
Summit in Mumbai, which witnessed participation of over 1,200 delegates from 83 countries. In January 2019,
the Government of India released its 2019 National Air Cargo Policy Overview that envisioned making Indian
air cargo and logistics the most efficient, transparent and profitable across the globe by the end of the next
decade.
The Regional Connectivity Scheme (RCS) is being rolled out. All these improvements made by the
Government brought in lot of economic development. Hence Under the RCS-Udan program, about 34,74,000
passengers were carried and 335 routes were assigned in 2019, covering 33 airports (20 unserved, 3
underserved, 10 water aerodromes). In order to improve the promotion of the environment a great deal of work
has been done. As a result, as of October 2019, 55 IAA airports have been reported as single-use plastic-free
airport terminals. It was expected that India would have the most aircraft flying on its regular airlines by
December 2019.
6. ACHIEVEMENTS AFTER THE INITIATIVES TAKEN BY THE GOVERNMENT :
With the various initiatives taken by the Government of India, huge promotions in the Aviation Industry was
seen. So, the number of passengers flying increased to 34,74,000 in 335 routes, which covered 33 airports. In
addition, to be environmentally friendly, close to 55 IAA airports reported single-use non-plastic airport
terminals.
7. FUTURE OF THE AVIATION INDUSTRY IN INDIA AFTER PRIVATIZATION :
In order to avail flight facilities to the majority of the country’s population who are unable to get the flight
services due to economic constraints, the aviation industry need to tap several resources. This will cater to the
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40% development. Industry stakeholders must also be engaged and collaborated with policymakers to
implement effective and rational decisions that would stimulate India's civil aviation industry.
Should this strategy be pursued, India would reach the third largest aviation market by 2020. Expenditures by
Indian travellers are projected to increase to 9.5 Lakh crore ($136 billion) by 2021. The growing demand for
air travel means that India will need 2,380 new commercial aircraft by 2038. This will promote the economy
of the Nation indirectly and also will improve the standard of living of the people. This would position India
as the third largest aviation market by 2020. If the economy moves forward and ends the current global
pandemic, Indian travellers should grow to Rs. 9.5 lakh. This may necessitate an increase in demand for air
transport. This means that India needs about 2,380 new commercial aircraft by 2038 [24].
8. ABCD ANALYSIS OF PPP MODEL OF AVIATION IN INDIA:
ABCD analysis is a framework for qualitative and quantitative analysis of systems, concepts, technology,
ideas, and strategies developed in the year 2015 [25-29]. This framework suggests identifying advantages (A),
benefits (B), constraints (C), and disadvantages (D) of the system. Here, we have identified advantages,
benefits, constraints, and disadvantages of PPP model in India [30].
Table 2: ABCD analysis based on PPP model
Sl. No Organization Customer Employees Society Cargo sector
Advantages 1. Airport 1. To provide 1. Better 1. Economic 1. Increased
expansion service with training. development. cargo business.
2. Increased international 2. Support of 2.Increased 2. Main
infrastructure. standards. updated revenues under mechanism for
3. More revenue 2. Faster technology. the procurement.
generation. service to International 3. Faster
4. Competent to save time. Service delivery of
investment. 3. Handling Standard. cargo.
5. Increased of baggage 3.Community 4. Quality
demand for non- with due development. storage system
aeronautical care. for cargo.
service.
Benefits 1. Improvised 1. Increased 1. Better 1. Increased 1. More
standard of customer incentive to the employment revenue.
service. 2. satisfaction. best performer. opportunities. 2. Economic
Increased 2. Increase in 2. Standard 2. Economic growth.
passengers. number of facility is development.
3. Increased flyers. provided. 3. More
airlines. 3.Comfortabi 3.Transportation educational
4. Target of lity in facilities on free institutions.
more airport. of cost. 4. More CSR
destination. 4. Good activities.
facilities 5.Flow in a
provided. greater number
of tourists.
Constraints 1.Unsafe 1.Rigid 1. High work 1. More 1. Increased
airports. policies. Load. tourist. policies.
2. Financial 2. Security 2. Target. 2. Limitation 2. High charge
constraints. threat. 3. Low pay. of entry to the for storage and
3. Lack of 3. expensive 4. High stress. terminal handling of
public support. service. building. cargo.
4. Difficulty in 4. High 3. Increased 3. Too much
land acquisition charge for cost of of restrictions
parking, advertisement on cargo.
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for expansion of facilities and & rents of
the airport. other utility shops.
5. Government services. 4. Gap
Policies. 5. Fines to between the
the customer. public and
company.
Disadvantag 1. Increase in 1. 1.Work pressure. 1. Western 1.Increased air
es unsafe flying. Aggression 2. Less human influence on traffic.
2. Decrease in behavior of resource. the culture. 2. Too much
development of employees. 3. Stringent 2. Conflict of congestion in
the airport. 2. Too policies. interest cargo airport.
3. Lack of expensive between public 3. Security
public support service. and threat.
4. Political 3. Not organization.
interference. reachable to
5. Too much the
government economically
interference. poor people.
6. Rotation of 4.Strict
employees. custom
7. Lack of policies.
previous
experience in
handling
airports.
9. CONCLUSION :
(1) There are currently 91 international carriers in India, including 5 Indian carriers and 86 foreign carriers,
reflecting the development of the aviation industry in India. With this connection with major countries of the
world, the revenue passenger Kilometer in domestic airline demand growth in 2018 was 18.6% [31] which is
three time the global RPK growth of 6.5%.
(2) IAA has 125 airports and runways out of a total of 464, and manages about 78% of domestic passenger
traffic and 22% of international passenger traffic. The cargo traffic share in promoting economy was higher as
68.5% [32] in International cargo and 31.5% in domestic cargo traffic. Together with this the maintenance,
repair is expected to grow annually.
(3) Major achievement like the IGI airport in Delhi enhances safety and efficient in air transport management
service due to the advanced and highest air traffic control tower. Hence Indian aviation sector is the highest
contributor to Indian economy being the contribution of GDP of $72 [33].
(4) It contributes to the economy indirectly by promoting globalization, where the fliers increased to 79 million
in 2010 to 158 million in 2017. This may increase in the coming years. It also supports 7.5 million employment
and 6.2 million in tourism. The cargo market also shows largest in UAE. Where, Delhi and Mumbai contribute
highest to cargo market. Government is also aware that the privatization will make the modification on
structural change in service provided by the airport and economically viable and sound [34].
(5) As it was noted that the customers always demand greater service from the airport and airlines after
spending money [35]. So, PP model is one of the best models to meet the needs of the customer in systematic
way. There are lot of challenges for the aviation industry. Presently the pandemic faced globally will have a
fall on the rise of the aviation industry. With the world bank support the aviation should bring strategies to
sustain its growth. However, the competitiveness of the Travel and Tourism may pressurize the tourism
infrastructure to bring in more strategy for improvement.
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