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The article provides an account of the aviation industry in India, its growth before and after liberalization, the various government initiatives and the future for the industry.

Aviation Industry In India

Before Independence
Aviation Industry in India started in 1912 when the first flight took off from Karachi to Delhi. It was initiated by Indian State Air Services in partnership with Imperial Airways UK. But the real initiation for Aviation Industry In India was in 1932 when Mr. JRD Tata started Tata Airline. In 1946 Tata Airlines was renamed as Air India.

After Independence
Just after independence, India had nine air transport companies transporting both cargo and passenger traffic. In 1953 the Indian government nationalized all the existing airline assets. Indian Airline was set up to cater to the domestic market, while Air India was set up to take care of the International sector. Both Indian Airline and Air India enjoyed monopoly over the Indian skies. Service was poor, flights were often delayed and frequent travelers had to face innumerous hardships. But the scenario changed post liberalization.

Post Liberalization
Post liberalization the Aviation industry has witnessed unprecedented growth for both domestic and foreign passenger sector. The monopoly of Indian Airlines and Air India over the Indian skies came to an end. The substantial growth in the Aviation industry post liberalization was due to:
  • The Entry of private players, increased competition ensuring better service to the customer.
  • The entry of low cost carriers like Deccan, Spice jet, Go Air changed the landscape of the aviation industry. The no off first time fliers in both urban and rural India increased dramatically.
The first move towards liberalization was initiated in 1986 when private airlines were given permission to start charter and non scheduled services to all authorized airports under the Air Taxi Scheme. They were also given permission to make their own decisions with respect to fares and schedules. A major step towards liberalization was in 1990 when India initiated an open sky policy for cargo which gave permission for foreign airlines to run cargo flights without restrictions and to charge rate without being controlled by Director General of Civil Aviation (DGCA).

In 1994 Air Corporation act was passed. With this act private service providers could now operate both scheduled and non scheduled services in the domestic sector without any constraints on the size or type of aircraft. But to guarantee passenger safety, security, proper growth of air transport services and overcome infrastructural constraints in many airports, the government gave permission for addition to capacity based on increase in air traffic forecast. In 1994-95 the government gave permission to directly import aviation turbine fuel (ATF).In 1997-98 to take the process of liberalization one step further, foreign equity participation up to 40 per cent (100 per cent for NRI's) was allowed in the domestic airline segment. But International service providers could not take stakes either directly or indirectly without approval from DGCA.

Government Initiative To Promote Aviation Industry
  • FDI in Air Transport Services (Domestic Airlines) has gone up from 40 per cent to 49 per cent. NRI's and Persons Of Indian Origin (PIO) have been allowed 100 % FDI.
  • Private Service providers with five years experience in domestic sector and having fleet size of twenty aircraft were given license to operate in International routes. Jet airways and Kingfisher airlines have started operations to International destinations.
  • The aircraft rules were amended to ensure the Aviation industry keeps pace with international standards and developments.
  • Air India and Indian Airlines were merged to make them more efficient.
  • Greenfield airports at Bangalore and Hyderabad were completed and Delhi and Mumbai airports were restructured.
Entry Of Low Cost Carriers (LCC)
The LCC growth in India was in the form of Low Price Tags, Apex Fares, Internet Auctions, Bulk Purchases and Last Day Fares. The reason for the growth of LCC is:
  • Low Entry Barrier
  • Attraction Of Foreign Shores
  • Increased Permitted Foreign Equity
  • Rising Income Levels And Demographic Profile.
  • High load efficiency.
  • Operations to far flung areas.
  • Low cost and Low Frill business model.
  • Staff strength was kept to a minimum.
  • Operations to neighboring countries like Sri Lanka.
  • Successfully penetrated the rising middle class and first time fliers.
Future Trends
  • The Centre For Asia Pacific Aviation (CAPA) has predicted that domestic traffic will increase by 25 to 30 per cent till 2010 and International traffic growth by 15 per cent by 2010.
  • By 2020 400 million Indian passengers are likely to be flying and Indian airports would be handling more than 100 million passengers.
  • The Aviation industry has to be guarded against foreign carriers especially from the Middle East. The global meltdown and decrease in air travel due to terrorist activity have eroded the profitability of the aircraft operators in India.

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