With the Opening up of the Indian Aviation Sector, There Are Opportunities for the Taking

With the opening up of the Indian aviation sector, there are opportunities for the taking.

The global backdrop

Over most of the last two and a half decades, the aviation sector world-wide, has substantially moved away from government control and ownership towards deregulation and private ownership.

The origins of this trend can be traced back to the deregulation of the United States' airline industry in the late 1970s, which led to lower fares and higher improved productivity of assets and capital.

This transformation also subsumed another trend of privatisation of government owned airlines designated by a country's government to operate international air services to and from that country as evidenced in Australia (Qantas Airways), the United Kingdom (British Airways), Germany (Lufthansa) and Japan (Japan Airlines).

The Indian backdrop

The Indian aviation sector was also characterised by a high degree of Government control prior to 1990. The Government of India nationalised the airline industry in 1953 through the enactment of the Air Corporations Act. Pursuant to this Act, there were only two players left in the Indian aviation sector, both of which were owned and controlled by the Indian government.

Indian Airlines was earmarked to primarily serve the domestic sector alongside operations to a few select international destinations while Air India served the international sectors.

Winds of change

The liberalisation of the Indian aviation sector commenced in 1990 with private sector players being allowed to operate as air taxi operators. However, they were not permitted to operate scheduled services. A number of private players commenced domestic operations as air taxi operators including Jet Airways, Air Sahara, Modiluft, Damania Airways, NEPC Airlines and East West Airlines.

In 1994, following the repeal of the Air Corporations Act, private carriers were permitted to operate scheduled services and granted scheduled carrier status upon fulfillment of certain applicable criteria.

However, many of these operators could not sustain their businesses and closed operations by 1997. Among the many private airlines which started operations with the deregulation of the Indian civil aviation sector, only two continue to have operations in the country -- Jet Airways and Air Sahara.

Emergence of 'no-frills' airlines

Following the emergence of no-frills airlines in the United States and Europe and the resultant revolution witnessed therein in the aviation sector, the concept of no frills airlines started generating interest in Asia and a number of no-frills airlines have emerged