The Indian aviation industry: Road ahead for the low cost carriers

Abstract

The intent of this project was to analyze the scope for low cost airlines in the fast growing Indian aviation market and to find out the factors that can help them to have distinct sustainable competitive advantage in the long run. Also, the project aimed to focus on future strategies that can be followed by these airlines. For the purpose of this analysis, the scope of the project was limited to the private airlines operating in India. Initially, the focus was to analyze the attractiveness of the industry per se in terms conducible environment. Also, the key macroeconomic factors like regulatory environment and infrastructure unavailability which affect the profitability of airlines were analyzed. An analysis of all the individual players put forth the strategies that are currently being played upon by them. For the low cost carriers, the measures that are adopted by them to reduce their expenses and cultivate operational excellence were identified. For these airlines, the cost components of their total operating expenditures were determined on the basis of secondary research data and this was compared to the international standards for low cost carriers. It was found that power and fuel expenses were the major source of competitive disadvantage for Indian companies. In addition, key indicators of the airline industry were compared to arrive at their operational efficiencies as compared to the other players in the industry. These findings showed that due to several constraints put in place by the system as well as their own operational factors, the airlines were not able to manage their expenses and the system called for more effective resource management. To this end, consolidation seems to be the most viable option in front of the airlines where they can pool in their back office resources to improve efficiencies while competing in the market. There are already some steps in this direction being taken by the industry. If and when such a measure is adopted by the industry, there are certain pitfalls that they should guard against for successful implementation which the paper points out.