Entrepreneurial Trends in Liberalised Civil Aviation Sector in India: Paradigm Shifts Beyond 1990s

Abstract

Civil aviation sector is growing at a brisk pace in India. This growth is fuelled by the liberalisation of the industry, increase in investments, emergence of low cost carriers (LCCs), positive impetus by regulatory authorities and improvement in the standards of living in the region in general. Liberalization of the domestic civil aviation industry in India gained pace with the repeal of the Air Corporations Act 1953 on 29th January 1994. A number of private players commenced domestic operations including Jet Airways, Air Sahara, Modiluft, Damania Airways, NEPC Airlines and East West Airlines. 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 still continue to operate-Jet Airways and Air Sahara. With the entry of LCCs, the airline industry in India is in fact presently witnessing the second phase of liberalisation. Leading players in the Indian aviation industry include Air India, Indian Airlines, Jet Airways, Sahara Airlines, Kingfisher, Spicejet, Paramount, IndiGo and Go Air. But the airline industry in India is currently encountering problems related to air traffic management, inadequate infrastructure, cockpit crew shortage, safety issues, rising fuel cost, environmental degradation and low levels of customer satisfaction. The profit margins of network airlines have hit rock bottom owing to low-fare competition, increasing security related costs, and shifts in air travel choice behaviour. The interrelationships between problems outlined above means that there is no single solution to the current industry crisis. The paper examines the structure of the aviation industry in India and the entrepreneurial challenges that it has thrown up. It also discusses the sweeping changes that have radically changed the face of the aviation industry, the general economic conditions that have deeply influenced the industry, gradual process of liberalising of air services, entrepreneurial interest and growth of new airlines, allocation of capacity at airports, reforms in the ground handling markets and other related issues. Further, it describes in detail the new regulatory problems thrown up by liberalisation, as well as measures taken by entrepreneurs to overcome them. The authors have also made an attempt to empirically determine passenger satisfaction levels vis-à-vis changes introduced by new airlines in order to reduce flying costs.