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Business Research Methods

Proposal Submission on

“Sustainability and operating viability of Indian airlines in the future”

MEGHA SUSAN ALEX

PGP 17/93

Section B

Indian Institute of Management

Kozhikode

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INDEX

Abstract .................................................................................................................................................. 3

Introduction. ........................................................................................................................................... 4

Stakeholder Analysis……………………………………………………………………………………………………………………………5

BOT Graph…………………………………………………………………………………………………………………………………………..6

Literature Review ................................................................................................................................... 7

Research objective and research questions ........................................................................................... 12

Explanation of the proposed methodology ........................................................................................... 12

References

Exhibits

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ABSTRACT

This paper examines the reasons responsible of increasing number of debt ridden airlines in

India, various factors that impact the operational cost of the airlines and the stringent civil

aviation policies existing in the system. Initial problem structuring is done using the analysis of

behaviour over time of main variables and incorporated stakeholder analysis using a systems

approach. Role played by each stakeholder is thoroughly understood by performing Stakeholder

analysis. In understanding the reasons for increasing number of debt ridden airlines, future

actions that can be taken to revive the beleaguered aviation sector will also be established.

Proposed methodologies are carried out using primary and secondary research which would be

apt to come up with solutions for the research problem.

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INTRODUCTION

Presently, India is the ninth largest aviation market in the world with a passenger growth of 13.3

% and is expected to attain 3rd

rank by 2020. The number of passengers has increased from 58

million in 2005 to 120 million in 2012 and is expected to increase to 160-180 million passengers

by 2021. Post liberalisation in 1994 witnessed emergence of many airlines but only Jet Airways

and Sahara could survive. Currently, the domestic airlines industry is dominated by full service

airlines like Air India and Jet Airways and Low Cost Carriers (LCCs) like Indigo,Spice

Jet,GoAir etc.

Performance of some of the airlines explains the pathetic situation of the airline industry.

Jet Airways, announced its biggest ever quarter loss (Rs 891 crore) for the second quarter of

2013/14. Consultancy Centre for Asia Pacific Aviation (CAPA) estimates that Indian airlines

collectively lost more than Rs 3,000 crore in that quarter. Between 2007 and 2013, they lost Rs

53,648 crore, and losses for 2012/13 are pegged at Rs 10,429 crore.

Airlines are facing significant operating (slowing growth, rising fuel costs) and non-

operating (interest costs, rupee depreciation) challenges as evident in the quarterly performance

trends of listed airline companies (Exhibit 4). Some of the stringent civil aviation policies

including the FDI limit of 49 % of civil aviation sector stands as hindrance to new foreign

entrants into this sector.

India aviation industry promises huge growth potential due to large and growing middle class

population, favourable demographics, rapid economic growth, higher disposable incomes, rising

aspirations of the middle class, and overall low penetration levels (less than 3%). However, this

has changed rapidly over the last decade with the sector showing explosive growth supported by

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structural reforms, airport modernizations, entry of private airlines, adoption of low fare - no

frills models and improvement in service standards.

STAKEHOLDERANALYSIS

Stakeholder Map

Stakeholder Conflicting/Supporting

Government Supporting: As airline industry boost the

economic growth.

Certification (DGCA,FAA,EASA) Conflicting: Looking into the safety aspects, they

put in lot of standards and regulations.

Suppliers Supporting: As there are few buyers, the suppliers

have less bargaining power

Employees Supporting

Customers(Passengers) Supporting : With increasing disposable income,

passengers would go for time consuming

Domestic /Foreign investors Supporting

Financial institutions Supporting

Aviation Sector

Certification

companies(DGCA,FAA,

EASA) Suppliers

(Lessor companies of aircrafts

)

Government

Employees Domestic/Foreign investors

Passengers

Financial institutions

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Power Vs Stake Grid

The stakeholders can be classified broadly under the categories below. Each of these categories

encompasses many stakeholders.

Stake Power

Formal or voting Economic Political

Equity

Economic Foreign investors,

Domestic investors Financial Institutions

Influencers Employees Suppliers, Passengers Government,

Certification companies

BOT (Behaviour Over Time Graph)

Domestic traffic is increasing, Number of aircrafts and airports are increasing, Impetus by

regulatory authorities is increasing BUT Profit of airlines is decreasing

Domestic air traffic

No: of aircrafts and airports

Impetus by regulatory authorities

Profit of airlines

Time

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LITERATURE REVIEW

This section presents a brief overview of some of the important studies conducted in India and

abroad in the context of approaches used to measure the performance of airlines.

1. Entrepreneurial Trends in Liberalised Civil Aviation Sector in India: Paradigm Shifts Beyond

1990s (Vippan Raj Dutt, Aligarh Muslim University, Aligarh & S C Bansal, Indian Institute of

Management, Lucknow ) examines the scenario of Indian aviation sector post liberalisation era. It

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. The future challenges faced by the

new carriers and the present LCCs are also discussed. A market research in the form of survey has

been conducted to study the passenger response with regards to their views on new low cost carrier

models.

2. The article, Research study of Civil Aviation sector in India (by Nathan Economic

Consulting India pvt. Ltd) will be used to study the current civil aviation policy existing in

the system and policy recommendations that will minimize and, in some cases eliminate,

certain prevailing barriers to competition for eg to reduce artificial barriers to entry such as

fleet and equity requirements, a policy which should have clear delineation between

regulatory authorities that oversee activities in this sector, which would result in clear and

predictable regulatory outcomes. Furthermore, the article also talks about framework for

monitoring anticompetitive pricing behaviour within the sector and creating a more level

competitive field between India‘s private, national and foreign carriers.

3. The journal, International Journal of Aviation Management (ISSN print: 1755-9901 by

Prof. Dr. Andreas Wald) addresses major management issues facing the air transport industry

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today. The journal offers practitioners and academics a forum for analysis and discussion in

the field of aviation management. Environmental issues, forecasting methods and revenue

management are also discussed.

4. Aviation & Sustainability (ICAO: Vol. 66, No. 6) helps in analysing the complex

environmental, economic and social impacts that are defining aviation’s future. In this

special submission for the ICAO Journal, the International Transport Forum (ITF) highlights

the many issues involved and points out the difficulties of finding agreement on emissions

trading systems, European or global.

5. International Journal of Aviation Technology, Engineering and Management

(IJATEM) (ISSN: 2155-6962) analyses analyzes and discusses current developments and

solutions in information technology pertaining to aeronautics technical knowledge,

administration, and engineering. IJATEM is seeking emerging, cutting-edge technologies,

advanced engineering methods, human performance optimization strategies, machine

knowledge-based components, and flight safety management programs, such that continuous

improvements in Air Operations can be realized.

6. Using Regulation: An International Comparative Study of the Civil Aviation Industry

in Britain and Spain (European Journal of Industrial relations) explains how liberalisation

has not closed the regulatory space. The paper examines how liberalisation has created new

regulatory opportunities that have been mobilized to influence the pace and course of

economic restructuring. This comparative study of the civil aviation industry in Britain and

Spain shows how organized labour has used regulation to influence the economic

restructuring programmes of the respective national flag-carriers, British Airways and Iberia.

7. E-Governance in Indian Aviation Industry – A Comparative Study between Public Vs

Private Sector (International Journal of Computer Applications) reviews the

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significance of e-Governance in Aviation Industry in general and the Indian scenario in

particular. Primarily, this discusses about the features of e-Governance and the growth that

lay ahead through the electronic media. It also analyses the various stages of development –

in Public as well as Private sector – and, at the end, gives a laconic comparative study.

8. The Economics of Indian Aviation Sector (Dr. K.V.Damodaran) analyses the

contribution of aviation sector to the GDP of the country. It examines the contribution of

airports, its economic benefits, air navigation service, Maintenance Repair and Overhaul,

Ground handling, Cargo and Human Resource requirement.

9. The article, Report of Working group on civil aviation sector (Ministry of Civil aviation)

analysed on the investment requirements in the aviation sector. Foreign airlines may be

interested in taking strategic stakes due to their deeper business understanding, longer

investment horizons and overall longer term commitment towards the global aviation

industry.

10. The International journal, A Study On Service Quality And Passenger Satisfaction On

Indian Airlines (ISSN 2231 5780) examines the underlying forces of service quality

influences on passengers’ satisfaction in aircraft transport. It concludes that Airline service

dimensions (in-flight service, in-flight digital service and back office operations) were found

to have significant and positive influences on airline image and passengers‟ satisfaction

intentions. Thus giving considerable importance to service quality can increase the air traffic.

11. The article, An Investigation of IT Adoption Propensity in Civil Aviation Sector

examines how IT helps in information dissemination for enhancing the effectiveness of

business processes and also about different airlines which has implemented IT for more

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effective business process. It has also studied the effectiveness based on the data of many

respondents.

12. The international journal of Sustainable Aviation, focuses on the sustainability of civil

aviation as aircrafts are considered as major sources of noise and air pollution. It also offers

innovative solutions to the challenges that is faced by aviation industry. It also suggest green

aircraft and airlines, renewable energy sources, alternative/green aviation fuels, propulsion

technologies for aerospace vehicles, combustion instabilities and innovative combustion

technologies.

13. The journal of European Public Policy, the United States and the external aviation policy

of the EU, studies the existing policies and deregulation in US and EU. The problem faced

by European airlines is also discussed. In this article, it has been argued that deregulation is

considered as domestic phenomenon.

14. The Journal of Aerospace Sciences and technologies - Time for No frill airports

examines the reasons for LCC in India for not performing well compared to foreign LCCs

like South West airlines, Air Asia etc. Comparison of both LCC models have been carried

out. Importance of Low Cost airports is mentioned and the absence of no frill airports in

India which is the main reason for increase in operational cost for airlines.

15. The article, Economic Benefits of airline Alliances and joint ventures By IATA examines

the reduction in airfares and many other benefits like economics of density, efficiency gains

and also the elimination of ‘horizontal double marginalization etc. for an alliance compared

to an interline fare between non alliance airlines.

16. The journal of Transport Economics and Policy, Factors influencing operating cost in

the airline industry examined the statistical inference approach to understand the

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operational model of airlines especially taking US into consideration. Existence of

economies of scale has been studied and a set of variables are defined in which each variable

expresses some aspect of the operations of an air carrier.

17. Journey of aviation technology and engineering - A Gap analysis of Airport Safety

using ICAO SMS Perspectives examines comprehensive framework for safety management

at airlines and airports, known as Doc. 9859 Safety Management Manual (SMM) that ICAO

has developed. Using the Delphi Technique and convenient sampling, this research is a case

study of how aviation safety is managed at a major international airport in Taiwan with

respect to ICAO’s SMS standards.

18. The journal of Engineering Manufacture, State-of-the-art of ‘Lean’ in the Aviation

Maintenance Repair Overhaul Industry explains the challenges of MRO in aviation

industry, inaccurate forecasting and uncertainty in operations and adoption of lean and its

importance. Viable and reliable MRO options is essential for sustainable operation of

aviation industry

19. Journal of Air transport Management addresses major economic,

management and policy issues facing the air transport industry today. It also covers key

industry developments and trends, such as changes in government thinking towards air

transport; evolving competitive environments and new industry structures; emerging and

maturing markets and changing customer needs; sustainability and security challenges.

20. Journal of Services marketing: International service variants - airline passenger

expectations and perceptions of service quality examines variation of customer perception

with respect to nationality using SERVQ. It also determines whether the relative importance

attributed to service quality dimensions in domestic settings can be replicated internationally.

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Research Objective – To analyze the current scenario of aviation industry and the debt ridden

airlines in India. To suggest strategies and possible government policies that could revive the

beleaguered Indian aviation industry.

Research Questions:

1. What is the present situation and examine the plight of debt- ridden airlines in India?

2. What are the factors which have an impact on the operational cost of airlines?

3. What are the civil aviation policies formulated by the government to ensure systematic,

sustainable and orderly development?

4. Comparison of condition of airline industry in other countries with respect to Indian airlines

5. What are the environmental, economic and social impacts of airlines?

6. What are the customer expectation and perceptions about the service and quality of airlines?

7. What are the economic benefits of joint ventures and alliances?

8. Comparison between public and private sector entry into airlines sector.

Proposed Methodology

It would be a combination of primary and secondary research.

Primary research: In-depth interview with key policy and decision makers will be

conducted. Surveys of passengers can be conducted to understand their perceptions and

attitudes towards full service and low cost carriers to capture the future potential of those

airlines.

Secondary research : Some of the major indicators of success for airlines (like traffic

rights of airline carriers, number of destinations from India to the rest of the world, level of

code hire operations, quality of cargo services and type of aircrafts used) can be assessed

against another successful aviation industry i.e. the US/Britain. Secondary research could

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be used for this comparison. This would give a clear cut idea about the reasons for not so

well performing Indian aviation industry.

In case of secondary research, an airline company which has experienced bankruptcy due to

certain managerial and operational glitches would also be analysed(For instance

:Kingfisher airlines)

As many foreign airlines are entering into Indian aviation market through Joint ventures

(Tata-AirAsia, Tata-Singapore, Spice Jet –Tiger Air, Jet-Etihad),investment data for

domestic and international investors would be gathered to understand the sentiment

towards India as an investment opportunity. Sample of the international investors would be

interviewed to understand better their concerns and optimisms towards aviation sector

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REFERENCES:

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

(Vippan Raj Dutt, Aligarh Muslim University, Aligarh & S C Bansal, Indian Institute of Management,

Lucknow )

2. Research study of Civil Aviation sector in India (by Nathan Economic Consulting India

pvt. Ltd)

3. International Journal of Aviation Management (ISSN print: 1755-9901 by Prof. Dr.

Andreas Wald)

4. Aviation & Sustainability (ICAO: Vol. 66, No. 6)

5. International Journal of Aviation Technology, Engineering and Management

(IJATEM) (ISSN: 2155-6962)

6. Using Regulation: An International Comparative Study of the Civil Aviation Industry

in Britain and Spain (European Journal of Industrial relations)

7. E-Governance in Indian Aviation Industry – A Comparative Study between Public Vs Private

Sector (International Journal of Computer Applications)

8. The Economics of Indian Aviation Sector (Dr. K.V.Damodaran)

9. Report of Working group on civil aviation sector (Ministry of Civil aviation)

10. A Study On Service Quality And Passenger Satisfaction On Indian Airlines (ISSN 2231

5780)

11. An Investigation of IT Adoption Propensity in Civil Aviation Sector

12. The international journal of Sustainable Aviation,

13. The Journal of Aerospace Sciences and technologies - Time for No frill airports

14. Economic Benefits of airline Alliances and joint ventures By IATA

15. The journal of Transport Economics and Policy, Factors influencing operating cost in the

airline industry

16. Journey of aviation technology and engineering - A Gap analysis of Airport Safety using

ICAO SMS Perspectives

17. The journal of European Public Policy, the United States and the external aviation policy of

the EU

18. The journal of Engineering Manufacture, State-of-the-art of ‘Lean’ in the Aviation

Maintenance Repair Overhaul Industry

19. Journal of Air transport Management

20. Journal of Services marketing: International service variants - airline passenger

expectations and perceptions of service quality

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EXHIBITS:

Exhibit 1:Performance(PAT) of Indian airlines

Exhibit 2: Growing LCC Market share

Exhibit 3: ATF Price trends

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Exhibit 4 : Domestic airlines –Reported PAT (% of sales)