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Aviation: industry overview

The combined fleet size of 158 aircraft in the financial year 2003-2004 increased to 243 in 2005-2006, and is now 300...Challenges faced | Quirky facts

india Updated: Mar 30, 2008 22:42 IST
Lalatendu Mishra

Four years ago, only the rich could fly in India. Air Deccan founder Captain GR Gopinath arrived with a dream to fly a billion common Indians at a low cost, and changed the way we travel.

The figures collated from the Directorate General of Civil Aviation (DGCA) and the industry sources confirm it. The combined fleet size of 158 aircraft in the financial year 2003-2004 increased to 243 in 2005-2006, and is now 300. An additional 480 aircraft would be procured by 2012. The number of passengers carried per day increased from 55,259 in 2003-2004 to 86,992 in 2005-2006. Now this figure has gone up to 1.3 lakh passengers a day.

"Fares became much more affordable with the advent of low cost carriers in 2003. In three years, domestic passenger numbers have doubled," said Kapil Kaul, CEO, India, Centre for Asia Pacific Aviation (CAPA), a global aviation consultancy. "For seven months till October 2007, the growth was 30.2 per cent and by year end, 45 million passengers should fly. We expect a growth of 25 per cent in 2008-2009."

Minister Praful Patel's liberalised policies, entry of cash rich players like Vijay Mallya, Bhupendra Kansagra, Rahul Bhatia, Jeh Wadia, GVK and GMR and a continuing bull run of the Indian economy helped this non-core sector to achieve double-digit growth.

Analysts expect this sector to grow continuously till 2010-2011 with a compounded annual growth rate of 16 per cent.

Airline revenues will also go up by 20 per cent, as more people would fly because of growing disposable incomes.

But airline profitability will be a distant dream. In the last three years, our airlines have lost about Rs 4,500 crore.

Another Rs 2,000 crore could sink in 2008-2009 because of continued pressure on margins on account of higher jet fuel prices, employee costs and excess capacity in the system.

CAPA estimates that in 2008, Indian carriers would suffer a loss of $400 million to $500 million as against $700 million in 2007.

"Aviation is extremely competitive and capital intensive. Though there is potential for demand, excess capacity in certain sectors is causing a problem," said S Venkat, executive Director (Finance), Air India. "Aviation has a strong multiplier effect for creation of jobs but costs need to be trimmed at all levels to stay afloat."

Currently, Indian aviation provides direct employment to more than one lakh people including 33,000 by Air India, 14,000 by Jet Airways-JetLite and 21,000 by airport operators. This figure will double by 2012, according to estimates made for the 11th Five Year Plan. One direct job created in aviation generates seven indirect jobs.

Steady growth in air cargo, general aviation, helicopter services and maintenance, repair and overhaul segments and training will create jobs.

In a price-sensitive market like India, low-cost airlines will dominate the scene. DGCA data says of the total 94.8 lakh additional passengers who travelled between 2003 and 2006, 41.6 lakh (44 per cent) were carried by low-cost carriers.