Saturday, May 07, 2005

Indian Aviation ready for takeoff

A revolution is underway in the domestic aviation market.

Judging by a slew of new players entering the domestic aviation business it would seem a metamorphosis is forthcoming for this important sector of the economy. Consumers never had it so good, with airfares for some routes being 5oo Rupees($10). Are indian skies headed the same way as the mobile phone industry? It could but there are some serious bottlenecks. Airport Infrastructure in India is one of the worst in the world, which automatically increases the cost of flying. Fuel Prices have been hitting the roof which invariably hits private airlines the hardest. Indian market is still not big enough to support 10 doemstic carriers, so for a first few years most of the new entrants will be loss making enterprises.
Airline business is one of the most competitive business all over the world. Very few players have made profits consistently over the years (only one example comes to mind SouthWest Airline in US). Big Size is a big hindrance in this business , as the examples of American Airlines, United Airlines will amply demonstrate. Only a smaller, nimbler player has the best chance to survive in this highly volatile business. Indian private carriers will do well to learn the dos from the likes of SouthWest, JetBlue etc. and from American, United to learn the donts. In the short term, indian market should see a lot of bloodbath with mergers, acquistions, bankruptcies, consoildation but over the long term future is bright. Indian economy is growing at more than 7% a year so a lot of people are having a lot more money to spend. If airline prices can come close to the second class AC train prices in India, then the market would really explode. All in all future of aviation is really bright in Indian aviation sector. The civil aviation minsiter Prafful Patel has done a marvellous job in his brief tenure so far. Now if only he could make indian airports world class, allow more airlines to fly to India then the prices of ticket to & from India would also fall. This would give a big push to Indian tourism industry and international business. Going by his track record, that must be at top of his to-do list.

An addendum on this topic. How to run a low cost airline in India?

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