Art & Culture
- Sexual Harassment Charges against Chief Justice of India Ranjan Gogoi
- All You Need to know about Electoral Bonds
- Electoral Bonds controversy
- NaMo TV controversy
- General Elections 2019
- RBI Governor bats for a Permanent Status to Finance Commission
- PM Modi’s Mission Shakti Speech & Model Code of Conduct
- Sadhvi Pragya Thakur’s latest Controversy
- Rafale deal document controversy
- Should SC Judges be under RTI ambit?
- Supreme Court Judgement on Tainted Candidates
- VVPAT verification
Governance & Social Justice
- Candida Auris : Drug- resistant fungi
- Candida auris infection
- Healthcare System for India, Difference in USA & European healthcare model?
- Lateral Entry in Civil Services explained
- Model policy for Women in Police
- NIRF India Rankings 2019 declared
- Quality Assurance Scheme
- Sex on false promise of marriage is rape
- Survey 2019 Ambitions Beyond Growth report by UNESCAP
- World Health Statistics Overview 2019 report on Life Expectancy
- World Press Freedom Index 2019
- Supreme Court compensation order on Bilkis Bano case
- WHO guidelines on physical activity for children under 5 years of age
- Global Talent Competitive Index 2019
- Algeria Political Crisis
- EU’s new Copyright Law, Will it change Web Worldwide?
- India Pakistan Kartarpur Corridor Talks
- India to Become NATO Ally?
- Japan Starts a New Era
- Julian Assange Arrested
- Sudan Political Crisis
- Trump designates Islamic Revolutionary Guard Corps of Iran
- United Nations Has to Pay India $38 Million
- US labels Revolutionary Guard of Iran a terror organisation
- US Mexico border wall controversy
- Why is UAE Important for India?
- Why is Chile Important for India?
- India Pakistan Conflict De-escalation Mechanisms
- India suspends cross LoC trade with Pakistan
- What is Arab Spring 2.0?
- India to stop buying Oil from Iran
- Trump withdraws from UN arms treaty
- Asian Development Outlook 2019
- China’s growth after slowdown
- Foreign Investment in India
- India’s 20th Livestock Census
- India’s transition to Renewable Energy from conventional sources
- Indian Army Builds The Longest Bridge of India Over Indus In Leh
- India Energy Modelling Forum by NITI Aayog & USAID
- National Common Mobility Card launched
- Rise and fall of Private Airlines in India
- Rise in Global Crude Oil prices & weakening Rupee
- Slowdown in Industrial Growth & rising Inflation
- Supreme Court order on EPFO
- Supreme Court quashes RBI’s 12 February Circular on NPA
- What are Junk Bonds?
- What is Fixed Maturity Plans?
- What is GDP deflator? Is it more comprehensive compared to WPI and CPI?
- What is Trader’s Credit Card Scheme?
- What is Wholesale Price Index?
- 1st Bimonthly Monetary Policy review – April 2019
- National Rubber Policy 2019
- Sensex hits 7 months high, History & Functions of Bombay Stock Exchange
- Supreme Court orders RBI on RTI
- What is Dedollarisation?
- Asian Tea Alliance
- Pepsico vs Farmers Issue
Defence & Security
Science & Technology
- Dhanush Artillery Guns
- Combat Casualty Drugs
- The Indian Museum of the Earth (TIME)
- EMISAT Satellite Launched
- Faster Adoption & Manufacturing of Hybrid & Electric
- First Ever Image of a Black Hole
- India to Buy MH60 Romeo Helicopters
- Nepal and Sri Lanka Launch Their First Satellites Raavana 1 & NepaliSat-1
- Nirbhay Missile Successfully Tested
- High Bacteriophages in Ganga River
- Army invokes Emergency Powers for Missile Deal
- Cell Based Meat
- INS Imphal Guided Missile Destroyer
- Draft Indian Forest Act 2019
- Gujarat Fishermen’s victory in US Supreme Court
- Humpback Mahseer Fish included in Critically Endangered list by IUCN
- India Cooling Action Plan (ICAP)
- Jammu & Kashmir Environment Issues
- Madras High Court order on Chennai Salem Highway
- Monkey declared Vermin in Himachal Pradesh
- Neelakurinji Flower under Severe Threat
- Solar eWaste
- Special Postal Stamp on Ice Stupas released
- State of Global Climate report 2018
- What is Green Finance Ecosystem?
- Wind turbines are impacting ecology in Western Ghats
- All about Wild Food Plants
Spice of the Month
- GS 3 || Economy || Infrastructure || Transportation
Title: Rise and fall of Private Airlines in India – Why most of the Airlines except Indigo are struggling?
Why in news?
- The suspension of operations at Jet Airways — at one time India’s largest private airline — follows the troubles at Kingfisher, Air Deccan, and Sahara.
- National monopoly: For four decades after eight independent domestic airlines — Deccan Airways, Airways India, Bharat Airways, Himalayan Aviation, Kalinga Air Lines, Indian National Airways, Air India (formerly Tata Airlines), and Air Services of India — were merged to create state-owned Indian Airlines in 1953, India’s aviation sector remained a national monopoly.
- Policy changes came in the 1990s — and liberalisation and economic reforms gave the private aviation industry new wings of hope.
- Private players: Several of the private airlines that took off during that decade were to hit air pockets soon, however — and in the years that followed, the sector saw the entry of quite a few new players even as the businesses of others collapsed or were taken over.
- Founder promoter Naresh Goyal’s Jet Airways was one of the first private airlines in newly liberalised India.
- In 1993, a year after its launch, Jet got an air-taxi operator’s permit, which meant it could fly, but without a schedule.
- A flight schedule allows a carrier to estimate costs and revenues for six months, the period of a single schedule in India.
- Less than two years later, Jet got permission to fly as a scheduled airline after the government abolished The Air Corporation Act, 1953, which gave the state-owned carriers the monopoly to operate as scheduled airlines.
- Besides repealing The Air Corporation Act, the government announced an Open Skies policy in 1992, liberalising rules and regulations to open up the commercial aviation market.
- This led to the birth, over the next decade or so, of private sector players including ModiLuft, Damania Airways, Air Sahara, and East-West Airlines.
- Most of these new players, however, folded up soon or were merged — Jet Airways in contrast, stood out as an efficient private sector operator, gaining market share with each passing year.
- The real expansion of the private airlines, and the number of domestic flyers in India, started in the 2000s.
- In 2003, Captain G R Gopinath started the country’s first low-cost carrier Air Deccan, which was followed by the launch of SpiceJet, IndiGo and GoAir.
- All these carriers followed the model of no-frills, cheaper tickets, and higher passenger load factors.
- The LCC (low-cost carrier) model revolutionised the Indian aviation sector, pushing the country’s annual passenger growth rate to double digits.
- Alongside the LCCs, Kingfisher Airlines started operations in 2005, pitching itself in the middle of a no-frills and a full-service carrier.
- These new airlines posed a formidable challenge to Jet Airways, which had so far operated largely in a duopoly with state-owned carriers Air India and Indian Airlines (which were merged in 2011).
- Air Deccan faced extreme financial difficulties and was bought by Kingfisher in 2007. However, Kingfisher itself went belly-up in 2012, while SpiceJet faced intermittent headwinds.
- Jet, which had a 44% share of the domestic passenger market in 2003-04, steadily lost ground — in February this year, the deeply troubled airline had only 10% of the domestic market share, fourth behind IndiGo (43.4%), SpiceJet (13.7%) and Air India (domestic, 12.8%), according to government data.
- In all these years, IndiGo stood out as the only carrier that improved its market share and financial performance.
2004 – Policy change
- 5/20 rule: In December 2004, the government announced a major policy change, allowing Indian scheduled carriers with a minimum five years’ continuous operations and a minimum of 20 aircraft (the so called 5/20 rule) to fly international routes. Jet was the key beneficiary of this policy change.
- 0/20 rule: In 2016, the government scrapped the 5/20 rule and replaced it with 0/20, enabling SpiceJet, IndiGo and GoAir to launch international flights in the following years.
- Fastest growth: Over the last four years, India’s aviation market has grown at a yearly average rate of 20%, among the fastest in the world.
- More and more Indians are flying; paradoxically though, nearly all the major players are in dire straits financially.
- Factors of success: Apart from operational and managerial efficiencies, one of the key determinants of an airline’s success or failure is the price of crude oil.
- ATF: Fuel costs account for roughly 40 per cent of a carrier’s operating cost. Steep taxes on aviation turbine fuel (ATF) in India — one of the highest in the world — make Indian carriers less competitive against global players.
- The launch of the LCCs disrupted the business model of the full-service players, eating into their market share, and creating stress in the market.
- The wafer-thin margins, and heavy competition and government taxes, results in airlines turning commercially unsustainable from time to time, and they require constant infusion of funds to stay afloat.
- What ails the aviation industry in India? Suggest measures to revive the ailing industry.