Aviation industry

Aviation industry profile 

India is one of the fastest growing aviation markets in the world. The Airport

Authority of India (AAI) manages a total of 127 airports in the country, which include

13 international airports, 7 custom airports, 80 domestic airports and 28 civil

enclaves. There are over 450 airports and 1091 registered aircrafts in the country. The

genesis of civil aviation in India goes back to December 1912 when the first domestic

air route between Karachi and Delhi became operational. In the early fifties, all

airlines operating in the country were merged into either Indian Airlines or Air India.

And, by virtue of the Air Corporations Act 1953, this monopoly continued for the

next forty years. 

The Directorate General of Civil Aviation(DGCA) controlled every aspect

of aviation, including granting flying licenses, pilots, certifying aircrafts for flight and

issuing all rules and procedures governing Indian airports and airspace. Finally, the

Airports Authority of India (AAI) was assigned the responsibility of managing all

national and international airports and administering every aspect of air transport

operation through the Air Traffic Control.

In 1990s, aviation industry in India saw some important changes. The Air

Corporations Act was abolished to end the monopoly of the public sector and private

airlines were reintroduced. With the liberalization of the Indian aviation sector, the

industry has witnessed a transformation with the entry of the privately owned full

service airlines and low cost carriers. In 2006, the private carriers accounted for

around 75% share of the domestic aviation market. The sector has also seen a

significant increase in the number of domestic air travel passengers. Some of the

factors that have resulted in higher demand for air transport in India include the

growing middle class and their purchasing power, low airfares offered by low cost

carriers like Air Deccan, the growth of the tourism industry in India, increasing

outbound travel from India, etc.

 

Increasing liberalization and deregulation has led to an increase in the

number of private players. The aviation industry comprises of three types of players:

Full cost carriers

Low cost carriers (LCC)

Other start-up airlines

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It is a phase of rapid growth in the industry with estimated growth of domestic

passenger segment at 50% per annum.. This has led to intense price competition due

to which full service carriers like Jet Airways, Indian Airlines and Air Sahara are

giving discounts of up to 60-70% for certain routes to match the new entrants' ticket

prices. The customer has thus gained enormously as a result of liberalization of the

sector. 

Sector Overview

The Indian aviation market is booming. The estimated growth of domestic

passenger segment is at 50% per annum and growth for international passenger

segment is 25%. The international cargo is likely to grow at a rate of 12%.  

During the period April-September, 2006, international and domestic

passengers recorded a growth of 15.8 per cent and 44.6 per cent respectively, leading

to an overall growth of 35.5 per cent. Moreover, the international and domestic cargo

recorded growth of 13.8 per cent and 8.7 per cent respectively, resulting in an overall

growth of 12.0 per cent. 

According to Ministry of Civil Aviation, India will need 1,500 to 2,000

passenger planes in next 10 years. Over 135 aircrafts have already been added in the

last two years alone. By 2010, India's fleet strength will stand at 500-550. It is also

estimated that the domestic market size will cross 60 million and the international

traffic will reach 20 million in the same period. By 2020, Indian airports are estimated

to handle 100 million passengers, including 60 million domestic passengers. The

amount of cargo handled will fall in the range of 3.4 million tonnes per annum.

 

 

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Airlines: Current fleet and acquisition & investment plans

Airlines Current

fleet

Acquisition

plans

Investment in US

$billion)

Jet Airways 62 30 by 2012 2

Air Deccan 43 79 by 2010 2.7

Kingfisher 11 100 by 2012 4.5

Spice Jet 6 38 by 2010 1.9

GoAir 4 33 by 2008 2.4

Classification of Indian Aviation Sector

The Indian aviation sector can be broadly divided into the following main

categories:  

1. Scheduled air transport service, which includes domestic and international airlines. 

2. Non-scheduled air transport service, which includes charter operators and air taxi

operators. 

3. Air cargo service, which includes air transportation of cargo and mail.  

Scheduled air transport service: It is an air transport service undertaken between

two or more places and operated according to a published timetable. It includes: 

1. Domestic airlines, which provide scheduled flights within India and to select

international destinations. Air Deccan, Spice Jet,kingfisher airline and Indigo are

some of the domestic players in the industry.

2. International airlines, which operate scheduled international air services to and

from India.  

Non-scheduled air transport service: It is an air transport service other than the

scheduled one and may be on charter basis and/or non-scheduled basis. The operator

is not permitted to publish time schedule and issue tickets to passengers. 

Air cargo services: It is an air transportation of cargo and mail. It may be on

scheduled or non-scheduled basis. These operations are to destinations within India.

For operation outside India, the operator has to take specific permission of Directorate

General of Civil Aviation demonstrating his capacity for conducting such an

operation.  

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At present, there are 2 scheduled private airlines (Jet Airways and Air Sahara),

which provide regular domestic air services along with Indian Airlines. In addition

there are 47 non-scheduled operators providing air-taxi/non-scheduled air transport

services.  

 

Apart from this, the players in aviation industry can be categorized in three

groups:

Public players

Private players

Start up players  

There are three public players: Air India, Indian Airlines and Alliance Air.

The private players include Jet Airways, Air Sahara, Kingfisher Airlines, Spice Jet,

Air Deccan and many more. The start up players are those planning to enter the

markets. Some of them are Omega Air, Magic Air, Premier Star Air and MDLR

Airlines.

Growth

You would be surprised to know the influence that the air transport sector has

on the economy. Indeed, this industry affects almost all other sectors of the economy.

To cite a few of those influenced by any good or bad movements in the air transport

industry are surface transport, tourism, accommodation, catering, recreation,

entertainment, financial services, information technology services and even retail

trade.

A more in depth study of the industry reveals that this is truly a sector for the

“many”, not just an elite few. No other industry can boast of a more direct or indirect

influence on so many aspects of the economy as air transport does. One only has to

visit smaller countries around the region such as Malaysia, Singapore or Thailand to

witness the tremendous growth that has been achieved through a well developed and

efficient air transport sector. All boast national carriers of world class standing and

have made substantial investments in airport infrastructure that has attracted increased

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air transport traffic to their countries. But can air transport really help to accelerate

economic development?

There is sufficient evidence to suggest a close relationship between airline

activity and economic growth. It is said that growth in air transport drives economic

progress and in turn benefits from it. A study by ICAO of Global GDP and air

transport activity as measured by Revenue Passenger Kilometers over the 20-year

period from 1975 to 1995 showed a positive correlation between this sector and

global prosperity.

Again, in a paper on the effects of the 1995 US-Canada “Open Skies”

agreement, it was reported that the bilateral agreement triggered traffic growth of a

million passengers in the first year alone, a growth of 15%.

This was a five-fold increase over the historical annual growth rate of about

3 per cent. Increased air transportation between the two countries was expected to

boost economic activity to the tune of US$ 15 billion and create thousands of jobs in

both countries. Strong evidence indeed of synergy between air transport and economic

growth. Such correlation can even lead one to conclude that the extent of increase in

air transport activity can provide a useful indicator of the level of economic growth

taking place in a country.

Increase in tourist arrivals: Tourists bring “spending dollars” boosting the

country’s foreign exchange reserves. They create demand for accommodation,

transportation, shopping, sight-seeing and a host of travel related services.

Growth Prospects of Indian Aviation Sector

The Indian aviation industry has witnessed remarkable growth in recent years,

with key drivers being positive economic factors, including high GDP growth, good

industrial performance, and corporate profitability and expansion. Other factors

include higher disposable incomes, growth in consumer spending, and availability of

low fares. 

As of May 2006, private carriers accounted for around 75% share of the

domestic aviation market. During April-September 2006, the total aircraft movements

witnessed an increase of 29.6% year on year to 494.92 thousand aircraft movements,

as compared to 318.89 thousand during April-September 2005. The total air passenger

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traffic in September 2006 has shown an increase of 31.1%, as compared to 2005.

Centre for Asia Pacific Aviation (CAPA) predicts that domestic traffic will grow at 25

per cent to 30 per cent a year until 2010 and international traffic will grow by 15 per

cent, taking the overall market to more than 100m passengers by the end of the

decade. Indian carriers have 480 aircraft on order for delivery by 2012, which

compares with a fleet size of 310 aircraft operating in the country today.

Scope

The Indian aviation industry has shown continued growth in recent years with

key drivers being positive economic factors (including high GDP growth), industrial

performance, corporate profitability/expansion, higher disposable incomes and growth

in consumer spending as well as wider availability of low fares.

Current Scenario  

The current growth rate in domestic and international travel exceeds 25%, the

highest in the world. In the period April-September 2006, the total aircraft movements

witnessed an increase of 29.6% year-on-year to 494.92 thousand aircraft movements,

as compared to 318.89 thousand during April-September 2005

The Indian domestic market grew at almost 50% in the first half of 2006. On average,

full service carriers are shedding a remarkable 1.5% of market share every month to

low cost carriers.

Future Scenario

The aviation industry is expected to grow at a compounded annual growth rate of

25% till 2010. Also, by 2010 Indian airports will be handling between 90 and 100

million passengers per year, as against the current 34 million passengers. It is

expected that nearly 80% of this growth will be driven by the low cost carrier segment

(LCC). By 2008, the LCCs would capture 65% of the direct on-line air ticket market

from 61% in 2005.

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Challenges for Aviation Industry

The growth in the aviation sector and capacity expansion by carriers have

posed challenges to aviation industry on several fronts. These include shortage of

workers and professionals, safety concerns, declining returns and the lack of

accompanying capacity and infrastructure. Moreover, stiff competition and rising fuel

costs are also negatively impacting the industry.

 

1. Employee shortage: There is clearly a shortage of trained and skilled manpower in

the aviation sector as a consequence of which there is cut-throat competition for

employees which, in turn, is driving wages to unsustainable levels. Moreover, the

industry is unable to retain talented employees.

2. Regional connectivity: One of the biggest challenges facing the aviation sector in

India is to be able to provide regional connectivity. What is hampering the growth of

regional connectivity is the lack of airports. 

3.Rising fuel prices: As fuel prices have climbed, the inverse relationship between

fuel prices and airline stock prices has been demonstrated. Moreover, the rising fuel

prices have led to increase in the air fares

 

4.Declining yields: LCCs and other entrants together now command a market share

of around 46%. Legacy carriers are being forced to match LCC fares, during a time of

escalating costs. Increasing growth prospects have attracted & are likely to attract

more players, which will lead to more competition. All this has resulted in lower

returns for all operators.

5. Gaps in infrastructure: Airport and air traffic control (ATC) infrastructure is

inadequate to support growth. While a start has been made to upgrade the

infrastructure, the results will be visible only after 2 - 3 years. 

6. Trunk routes: It is also a matter of concern that the trunk routes, at present, are not

fully exploited. One of the reasons for inability to realize the full potential of the trunk

routes is the lack of genuine competition. The entry of new players would ensure that

air fares are brought to realistic levels, as it will lead to better cost and revenue

management, increased productivity and better services. This in turn would stimulate

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demand and lead to growth. 

7. High input costs: Apart from the above-mentioned factors, the input costs are also

high. Some of the reasons for high input costs are:- 

Withholding tax on interest repayments on foreign currency loans for aircraft

acquisition. Increasing manpower costs due to shortage of technical personnel.

Number Of Companies

1. Indian Airways

2. Kingfisher

3. Air India

4. Air Deccan

5. Lufthansa India Airlines

6. Air Sahara

7. IndiGo

8. Alliance Air

9. Paramount Airways Private Limited

10. Jet Airways

11. Air Charters India

12. Go Airlines (India) Private Limited

13. Multi Track

14. Sabena airlines in India

15. Sam Aviation Private Limited

16. TajAir Limited

17. Gujarat Airways

18. NEPC Airlines

19. KLM India

20. Directorate General of Civil Aviation

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Top Players

Players in Indian aviation industry can be categorized in three groups:

Public players

Private players

Start up players

 

There are three public players: Air India, Indian Airlines and Alliance Air.

The private players include Jet Airways, Air Sahara, Paramount airways, Go Air

Airlines, Kingfisher Airlines, Spice Jet, Air Deccan and many more. The start up

players are those which are planning to enter into the markets. Some of them are

Omega Air, Magic Air, Premier Star Air and MDLR Airlines 

1. Air India Limited 

Air India Ltd. was established in 1953 with its headquarters at Mumbai.

With 34 aircrafts Air India operates 46 destinations. The number of employees in

Air India as on October 31, 2006 is 15,136. The airline has been profitable in most

years since its inception. In the financial year ending March 31, 2006, Air India has

made a net profit of Rs.9.7 crores, and earned a revenue of Rs.87,480 million which

represents a growth of almost 15 per cent over the previous year. The number of

passengers carried during the same year was 4.86 million. 

 

Air India Fleet 

Type of Air Craft Number

Boeing 747-400 8

Boeing 747-400 Combi 1

Boeing 747-300 Combi 2

Airbus 310-300 19

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Boeing 777-200 4

Total 34

2 Indian Airlines

The airlines started its operation on 1st August, 1953. Today, together with its

fully owned subsidiary Alliance Air, it is one of the largest regional airline systems in

Asia with a fleet of 70 aircrafts.

  The airlines network spans from Kuwait in the west to Singapore in the East

and covers 76 destinations - 58 within India and 18 abroad. The Indian Airlines

international network covers Kuwait, Oman, UAE, Qatar and Bahrain in West Asia,

Thailand, Singapore, Yangon and Malaysia in South East Asia and Pakistan, Nepal,

Bangladesh, Myanmar, Sri Lanka and Maldives in the South Asian sub-continent.

Indian Airlines Fleet 

Type of Air Craft

Number

Airbus A300 3

Airbus A320 47

Boeing 737 11

Dornier D-228 2

Airbus A319 3

ATR-42 4

Total 70

  

Indian Airlines is presently fully owned by Government of India and has

total manpower strength of around 19,300 employees. Its annual turnover, together

with that of its subsidiary Alliance Air, is well over Rs.6000 crores (around US$ 1.4

billion). Together with its subsidiary Alliance Air, Indian Airlines carries a total of

over 7.5 million passengers annually.

3: Jet Airways 

Jet Airways commenced its operations on May 5, 1993. It has emerged as

India's largest private domestic airline. It has a market share of 25%. Jet Airways'

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current fleet consists of 62 aircraft. It operates 340 flights daily to 50 destinations.

During 2005, it introduced medium and long-haul international operations. 

Key Stats & Ratios

  Quarterly  

(Dec '06)

Annual 

(2006)

Annual 

(TTM)

Net Profit Margin 1.97% 7.37% 2.23%

Operating Margin 3.05% 11.77% 2.23%

EBITD Margin - 23.45% 12.54%

Return on Average Assets - 5.90% -

Return on Average Equity - 20.95% -

...  

4: Spicejet Airlines 

SpiceJet airlines aims to be a low cost airline. Its fleet consists of several

Boeing 737-800 aircrafts only. This single aircraft type fleet allows efficiency in

maintenance. It operates in 14 destinations.

Careers: 

Currently, Spice Jet is recruiting for the following openings:

Aircraft maintenance engineer

Trainee aircraft maintenance engineer

Manager-aircraft appearance and condition

5:Air Deccan

Air Deccan began its operations in August 2003 with 1 aircraft and 4 flights a

day and is today the fastest growing airline flying over 300 flights a day. Air Deccan

is presently operating a fleet of 43 aircraft over 64 destinations. Air Deccan provides

affordable air travel at very low costs. The number of passengers carried during 2006-

07 was 9 million.

Boom In Indian Aviation

Aviation sector in India is growing at a whopping 25% per annum, creating a

large number of jobs. There is presently a shortage of trained pilots. The industry is

expected to add 130 airliners to its current fleet of 270 airliners, which would, in turn,

increase manpower demand. The job opportunities include that of flight dispatchers,

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cabin crew, airline managers, airport managers and ground handling personnel. The

industry would create 2,00,000 jobs by 2017.

There is already a shortage of pilots in the sector and so is that of commanders

and captains. Currently, 2,500 pilots are working with airlines in India, of which 475

are expat pilots. The doors of the cockpit are now open to the women as well. The

number of women joining aviation sector is on the rise. From one or two women in a

batch of 100 students, the number has now increased to 10 or 12. Indian currently has

76 women pilots, and the number is rising with every new batch. As per the statistics,

forty of Air Deccan's 496 pilots are women. Kingfisher, which has 26 women from a

total of 390 pilots, also got its first woman captain just recently. Even though more

and more women are opting for this career, the shortage still continues. Due to this

paucity of pilots, airlines in India are largely dependent on expatriate pilots.  

 

 

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Income & expenditure

Air Transport Services            

Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

             

Total income 13745.48 15714.64 19056.37 25171.07 31494.1 26730.24

Sales 13281.06 15303.39 18632.05 24061.19 29096.25 24320.28

Industrial sales 7.52 39.43 39.46 84.08 159.68 54.95

Income from non-financial services 13273.54 15263.96 18592.59 23977.11 28936.57 24265.33

Income from financial services 214.84 215.27 118.51 184.37 479.66 658.19

Interest 134.57 79.6 76.55 110.22 156.79 133.46

Dividends 23.6 4.13 6.2 2.35 3.47 11.98

Treasury operations 56.67 120.99 20.09 55.19 301.44 500.13

Other income 46.4 38.13 29.61 45.84 192.95 242.47

Prior period income & extraordinary income 203.18 157.85 276.2 879.67 1725.24 1509.3

Change in stock 0 0 0 0 0 0

             

Total expenses 14124.7 15357.67 18523.64 25270.25 33686.08 28851.15

Raw material expenses 670.77 763.91 1003.22 965.74 868.35 459.51

Packaging expenses 0 0 0 0 0 0

Purchase of finished goods 0 0.51 0.85 0.5 0.55 0.55

Power, fuel & water charges 2996.46 3418.8 5167.76 8367.83 11463.41 10336.3

Compensation to employees 2488.99 2674.57 2936.48 3431.12 4449.74 3503.37

Indirect taxes 11.53 13.25 22.28 35.58 99.01 136.27

Royalties, technical know-how fees, etc. 4.25 4.24 0 100.01 159.97 159.97

Lease rent & other rent 267.72 408.6 380.12 516.01 751.87 558.14

Repairs & maintenance 697.98 814.64 801.97 1080.7 1851.99 1397.38

Insurance premium paid 369.51 288.71 254.67 298.45 358.45 216.13

Outsourced mfg. jobs (incl. job works, etc.) 0 0 0 2.6 0 0

Outsourced professional jobs 13.56 13.17 24.99 69.43 115.78 99.11

Directors' fees 0.03 0.03 0.06 0.2 0.7 0.31

Selling & distribution expenses 998.46 1032 1239.72 1651.47 1970.26 1791.01

Travel expenses 285.63 364.2 402.96 574.09 726.14 768.53

Communication expenses 174.76 186.93 204.34 253.83 321.46 296.34

Printing & stationery expenses 14.85 16.66 19.56 24.3 30.62 22.71

Miscellaneous expenses 115.37 104.17 105.47 166.05 269.57 316.62

Other operational exp. of indl. enterprises 3.1 7.37 7.36 0 0 0

Other oper. exp. of non-fin. service enterprises 3285.79 3511.04 4214.2 5513.48 7707.59 6893.28

Share of loss in subsidiaries/JVs,etc. 0 0 0 0 0 0

Lease equalisation adjustment 0 0 0 0 0 0

Loss on securitisation of assets/loans 0 0 0 0 0 0

Fee based financial service expenses 2.79 3.51 8.39 56.57 65.7 67.97

Treasury operations expenses 4.25 0.43 14.8 50.44 9.35 0.03

Total provisions 69.23 77.06 52.02 93.87 108.18 55.74

Write-offs 0.92 25.81 53.56 30.7 82.33 53.51

Less: Expenses capitalised 7.16 6.38 3.69 58.76 427.48 324.65

Less: DRE & expenses charged to others 0 0 0 0 0 0

Prior period & extraordinary expenses 142.74 198 75.18 70.7 144.09 68.85

             

PBDITA 1133.95 1793.41 2070.1 1876.16 366.47 -146.74

Interest paid 253.53 171.89 126.58 446.18 1149.27 1292.94

Financial charges on instruments 0 0 0 0 0 0

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Aviation industry

Expenses incurred on raising deposits/debts 0 0 0 0 0 0

PBDTA 880.42 1621.52 1943.52 1429.98 -782.8 -1439.68

Depreciation 1265.79 1289.2 1214.44 1177.25 1261.16 1311.35

Amortisation 6.8 7.68 12.83 30.46 79.2 26.62

PBT -392.17 324.64 716.25 222.27 -2123.16 -2777.65

Provision for direct taxes -12.95 -32.33 183.52 321.45 68.82 -656.74

PAT -379.22 356.97 532.73 -99.18 -2191.98 -2120.91

             

No of companies 15 18 18 21 20 17

           

Assets

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Aviation industry

Air Transport Services            

Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

             

Gross fixed assets 18289.98 18194.56 18624.59 23799 31064.01 33164.97

Land & building 430.65 427.97 432.2 439.99 866.81 2164.26

Plant & machinery 549.32 653.26 591.24 826.19 900.85 699.61

Transport & comm. equipment/infrastructure 16044.84 16069.45 16127 15659.14 18687.23 23112.73

Furniture,amenities & other fixed assets 939.6 977.94 1151.39 845.89 901.58 425.27

Capital work-in-progress 324.12 51.61 270.76 5830.59 9455 6491.97

Intangible assets 1.45 13.88 51.55 195.16 228.87 247.59

             

Net pre-operative expenses pending allocation 0 0 0 0.04 0.04 0.04

Net lease reserve adjustment 0 0 0 0 0 0

Less: Cumulative depreciation 8927.71 10167.51 11337.88 11571.48 11408.66 7152.01

Less: Arrears of depreciation 0 0 0 0 0 0

             

Net fixed assets 9362.27 8027.05 7286.71 12227.52 19655.35 26012.96

Investments 128.55 299.85 1661.8 280.56 248.02 1568.33

Equity shares 71.69 71.86 72.68 102.97 108.79 1212.19

Preference shares 0 0 0 0 0 340

Mutual funds 64.22 236.81 1599.35 189.09 152.05 10.76

Debt instruments 9.32 7.86 6.45 7.96 6.63 6.63

Approved securites (slr/statutory req.) 0 0 0 0 0 0

Assisted companies 0 0 0 0 0 0

Others 2.78 2.78 2.78 0 0.01 0 Less: Provision for dimunition in value of investments 19.46 19.46 19.46 19.46 19.46 1.25

             

Group companies 61.11 62.82 63.55 92.87 93.64 1537.72

Non-group companies 84.12 253.71 1614.93 207.15 173.83 31.86

             

Market value of quoted investments 100.43 275.4 1652.79 227.9 195.06 47.71

             

Deferred tax assets 606.13 710.18 556.59 243.22 677.74 1381.49

             

Current assets 4757.98 4849.96 6333.44 10194.33 11484.38 9619.56

Cash & bank balance 1136.06 1189 2131.99 3408.23 3507.06 2221.66

Inventories 877.87 888.22 881.11 1117.67 1536.45 1469.9

Receivables 2698.85 2716.32 3200.7 5521.45 6113.31 5570.52

Expenses paid in advance 45.2 56.42 119.64 146.98 327.56 357.48

             

Loans & advances 379.6 286.08 300.65 484.6 1638.17 1471.74

Deferred revenue expenditure 26.24 29.35 40.14 71.23 69.18 54.58

Total assets 15260.77 14202.47 16179.33 23501.46 33772.84 40108.66

No of companies 15 18 18 21 20 17

Liabilities

Air Transport Services            

Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

             

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Aviation industry

Net worth -82.35 126.97 1826.98 2851.27 1945.57 3441.37

Authorised capital 1528.65 1585.1 2143.1 2548.6 3271.91 2446.95

Issued equity capital 734.87 759.56 784.47 1489.49 1828.75 1290.44

Paid up equity capital (net of forfeited capital) 725.05 744.49 769.4 1489.29 1828.75 1290.44

Forfeited equity capital 0.91 0 0 0 0 0 Paid up preference capital (net of forfeited capital) 69.83 70.48 0.5 97.15 148.9 438.9 Capital contibution, suspense and application money 0 0 0 0 340 50

             

Reserves & surplus -878.14 -688 1057.08 1264.83 -372.08 1662.03

Free Reserves 859.3 1056.81 2085.67 3018.88 3707.1 3270.34 Security premium reserves (Net of deductions) 141.04 152.98 1575.23 2072.24 2881.27 2869.08

Other free reserves 718.26 903.83 510.44 946.64 825.83 401.26

Specific Reserves 732.15 583.33 632.92 643.29 646.87 77.82

Revaluation Reserves 540.87 387.57 259.27 162.02 132.44 2699.9

Less Accumulated losses 3010.46 2715.71 1920.78 2559.36 4858.49 4386.03

             

Total borrowings 7301.45 5705.3 5342.51 11418.5 20499.3 26575.67

Bank borrowings 1646.64 1089.39 1290.79 6202.82 12071.91 11133.21

Short term bank borrowings 1533.64 930.01 1081.17 3687.46 8562.83 8401.98

Long term bank borrowings 113 159.38 209.62 2515.36 3509.08 2731.23

Financial institutional borrowings 2.59 65.95 65.95 56.05 95.56 62.52

Central & state govt. (usually sales tax deferrals) 15.97 23.67 23.67 23.67 23.67 23.67

Debentures / bonds 0 4.2 10.7 4.2 1.91 0

Convertible 0 0 0 0 0 0

Non-convertible 0 4.2 4.2 4.2 0 0

Fixed deposits 0 0 0 0 0 0

Foreign borrowings 1838.94 1217.08 772.45 2077.63 2495.39 2793.28

Of which : euro convertible bonds 0 0 0 0 0 0

Borrowings from corporate bodies 325.04 108.13 107.75 181.46 1219.54 1431.2

Group / associate cos. 23.24 18.82 18.36 103.98 1180.66 1360.44

Borrowings from promoters / directors 1.74 1.75 3.58 5.4 0.3 0.3

Commercial paper 0 0 0 0 0 0

Hire purchase borrowings 2958.46 2841.57 2570.73 2178.87 2546.54 9326.75

Deferred credit 0 0 0 0 0 412.5

Other borrowings 512.07 353.56 496.89 688.4 2044.48 1392.24

             

Secured borrowings 5200.96 4385.7 3832.14 5909.5 9179.91 16844.69

Unsecured borrowings 2100.49 1319.6 1510.37 5509 11319.39 9730.98

Current portion of long term debt 1160.84 1130.78 1448.87 656.9 3142.9 2136.06

             

Current liabilities & provisions 7031.34 7329.8 8014.68 8415.25 10137.07 8902.39

Sundry creditors 3052.05 2727.91 3041.31 3173.71 4120.13 4012.29

Acceptances 71.29 0 0 0 0 75.08 Deposits & advances from customers & employees 1144.05 1358.89 1459.87 1151.56 1912.29 2390.69

Interest accrued 508.22 381.93 43.93 45.69 82.25 120.87

Share application money 0 0 0 0.04 0.04 0.03

Other current liabilities 1370.31 1653.33 2154.34 2888.04 2817.18 1583.39

Provisions 885.42 1207.74 1315.23 1156.21 1205.18 720.04

             

Deferred tax liability 1010.33 1040.4 995.16 816.44 1190.9 1189.23

             

Total liabilities 15260.77 14202.47 16179.33 23501.46 33772.84 40108.66

             

Net worth (net of reval & DRE) -649.46 -289.95 1527.57 2618.02 1743.95 686.89

Contingent liabilities 1354.78 2109.38 12889.3 71191.1 67056.53 70854.77

16APGMS, rajampet.

Aviation industry

No of companies 15 18 18 21 20 17

           

Investments

Air Transport Services            

Rs. Crore (Non-Annualised)Mar-

03 Mar-04 Mar-05Mar-

06Mar-

07 Mar-08

             

Investments 128.55 299.85 1661.8 280.56 248.02 1568.33

In equity shares 71.69 71.86 72.68 102.97 108.79 1212.19

Group companies 61.11 62.82 63.55 92.87 93.64 1197.72

17APGMS, rajampet.

Aviation industry

Other than group companies 10.58 9.04 9.13 10.1 15.15 14.47

In preference shares 0 0 0 0 0 340

Group companies 0 0 0 0 0 340

Other than group companies 0 0 0 0 0 0

In debt instruments 9.32 7.86 6.45 7.96 6.63 6.63

Other than government debentures/bonds 9.32 7.86 6.45 7.96 6.63 6.63

Group companies 0 0 0 0 0 0

Other than group companies 9.32 7.86 6.45 7.96 6.63 6.63

In bonds/debentures of government/local bodies 0 0 0 0 0 0

In mutual funds 64.22 236.81 1599.35 189.09 152.05 10.76

Group companies 0 0 0 0 0 0

Other than group companies 64.22 236.81 1599.35 189.09 152.05 10.76

In others 2.78 2.78 2.78 0 0.01 0

Less: Provision for diminution in value of investments 19.46 19.46 19.46 19.46 19.46 1.25

Non-provisioning of diminution in investments 0 0 0 0 0 0

Book value of quoted investments 6.53 2.07 2.05 188.16 152.97 11.57

Market value of quoted investments 100.43 275.4 1652.79 227.9 195.06 47.71

Marketable securities 66.23 238.88 1601.4 190.01 152.97 11.57

Investment lodged as security 0 0 0 0 0 0

No of companies 15 18 18 21 20 17

           

Profits

Air Transport Services            

Rs. Crore (Non-Annualised) Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

PBDITA 1133.95 1793.41 2070.1 1876.16 366.47 -146.74

Depreciation 1265.79 1289.2 1214.44 1177.25 1261.16 1311.35

Amortisation 6.8 7.68 12.83 30.46 79.2 26.62

PBIT -138.64 496.53 842.83 668.45 -973.89 -1484.71

Interest paid 253.53 171.89 126.58 446.18 1149.27 1292.94

18APGMS, rajampet.

Aviation industry

Financial charges on instruments 0 0 0 0 0 0 Fee based financial services expenses 0 0 0 0 0 0

PBT -392.17 324.64 716.25 222.27 -2123.16 -2777.65

Provision for direct tax -12.95 -32.33 183.52 321.45 68.82 -656.74

Corporate tax 17.9 41.82 74.62 153.15 25.52 1.75

Deferred tax 11.94 222.07 228.77 152.65 260.92 235.05 Less: Deferred tax assets / credit 43.08 296.25 120.24 18.47 250.66 919.01

Other direct tax 0.29 0.03 0.37 34.12 33.04 25.47

Fringe benefits tax 0 0 0.15 33.88 32.79 25.23

PAT -379.22 356.97 532.73 -99.18 -2191.98 -2120.91

PAT (as reported by the Co.) -384.73 352.7 525.78 -105.72 -2195.16 -2119.79Prior period & extra-ordinary income 203.18 157.85 276.2 879.67 1725.24 1509.3Prior period & extra-ordinary expenses 142.74 198 75.18 70.7 144.09 68.85Net prior period & extraordinary transactions -60.44 40.15 -201.02 -808.97 -1581.15 -1440.45

             

PBDITA net of P&E 1073.51 1833.56 1869.08 1067.19 -1214.68 -1587.19

PBIT net of P&E -199.08 536.68 641.81 -140.52 -2555.04 -2925.16

PBT net of P&E -452.61 364.79 515.23 -586.7 -3704.31 -4218.1

PAT net of P&E -439.66 397.12 331.71 -908.15 -3773.13 -3561.36

Distribution of profits (%)            

PBDITA 100 100 100 100 100 100

Depreciation & Amortisation 112.226289 72.3136371 59.2855418 64.3713756 365.748902-

911.796375

Financial charges 22.3581287 9.58453449 6.11468045 23.7815538 313.605479-

881.109445

Tax-

1.14202566-

1.80271104 8.86527221 17.1334001 18.7791634 447.553496

PAT-

33.4423916 19.9045394 25.7345056-

5.28632952-

598.133544 1445.35232

Non--provisions for: 56.45 64.46 0.33 0 11.75 14.43

Diminution in investement 0 0 0 0 0 0

Sundry debtors 0 0 0 0 8.14 8.14 Loans & advances including NPAs 0 0 0.33 0 3.61 6.29

Loans & advances to group cos. 0 0 0 0 0 0

Interest expenses 56.45 64.46 0 0 0 0

Power expenses 0 0 0 0 0 0

Gratuity 0 0 0 0 0 0

Others 0 0 0 0 0 0

No of companies 15 18 18 21 20 17

Tools of Analysis

1. Cost structure

Fixed Charges Cost Structure = -------------------------

Value Added2. Operating Performance

    Operating profit     Operating Performance = ----------------------- *100

Net assets

19APGMS, rajampet.

Aviation industry

3. Financial Performance

Net Profit Financial Performance = --------------------*100

Net Worth4. Correlation Analysis

Correlation is the degree of association between two variables and it is

represented in terms of a coefficient known as correlation. The range of the

correlation coefficient it is in between -1and+1. If the correlation coefficient is

negative, then the variables are inversely proportional and maximum when it is-1; if

the coefficient is 0, there is no association between the variables. If the coefficient is

positive then the variables are associated directly and it is maximum when it is+1.

_ _

∑(x- x) (y-y) r = ………………….. _ _

√ ∑(x- x)2 √∑ (y-y)2

5. Trend Analysis

Y = a+bx

6. Growth Analysis:

Growth Rate Pn = Po (1+r) n

1. Cost structure

Fixed Charges Cost Structure = -------------------------

Value Added

S.No Particulars 2003 2004 2005 2006 2007 2008

1 Net sales 13281.06 15303.39 18632.05 24061.19 29096.25 24320.28

2 Raw materials

expenses

0 0.01 0.06 0 0.01 0.01

20APGMS, rajampet.

Aviation industry

3 Power fuel water

changes

2996.46 3418.8 5167.76 8376.83 11463.41 10336.3

4 Compensation to

employees

2488.99 2674.57 2936.48 3431.12 4449.74 3503.37

5 Interest paid 253.53 171.89 126.58 446.18 1149.27 1292.94

6 Depreciation 1265.79 1289.2 1214.44 1177.25 1216.16 1311.35

7Value added (1-2-3)

10284.6 11884.5 13464.23 15693.36 17632.83 13983.97

8Fixed charges(4+5+6)

4008.31 4135.66 4277.5 5054.55 6860.17 6107.66

9 Fixed charges 0.38 0.34 0.31 0.32 0.38 0.43

Interpretation: From the above table it is observed that the fixed charges /value

added is showing fluctuation during the study period (2003-2008).Expect in the year

2005 power fuel & water charges are increased. Increase in the sales and fixed

charges effects the cost structure. 

2. Operating Performance

    Operating profit     Operating Performance = ----------------------- *100

Net assets (Rs in Crores)

Year EBIT Net assets EBIT/Net assets

21APGMS, rajampet.

Aviation industry

2003 -138.64 9362.27 -1.4

2004 496.53 8027.05 6.1

2005 842.83 7286.71 11.5

2006 668.45 12227.52 5.4

2007 -973.89 19655.35 -4.9

2008 -1484.71 26012.96 -5.7

Interpretation: From the above table.2, it is observed that the operating performance

of aviation industry showing many fluctuations during the study period (2003-

2008).The EBIT of the aviation industry show negative values in the years 2007 &

2008 because of increase in interest paid.

3. Financial Performance

Net Profit Financial Performance = --------------------*100

Net Worth (Rs in Crores)

22APGMS, rajampet.

Aviation industry

Year PAT Net worth PAT/Net worth

2003 -379.22 -82.35 461.57

2004 356.97 126.97 281.1

2005 532.73 1826.98 29.15

2006 -99.18 2851.27 -3.47

2007 -1291.98 1945.57 -66.4

2008 -2120.91 3441.37 -61.6

Interpretation: From the above table ,it is observed that the financial performance of

aviation industry have many fluctuations during the study period(2003-2008).In the

year 2006-2008 the net profit of the company was decreased with that the financial

performance of the industry has decreased.  

4. Trend Analysis

Estimation of Sales

Y = a+bx

23APGMS, rajampet.

Aviation industry

(Rs in Crores) 

Year(x) Sales(y)

2003 13281.06

2004 15303.39

2005 18632.05

2006 24061.19

2007 29096.25

2008 24320.28

2009* 30982.76

2010* 33897.15

2011* 36811.543

  *Indicates estimated values

Interpretation: The forecasted sales for the year 2009 is Rs.30982.76

2010 is Rs.33897.15, and 2011 is Rs.36811.54.

5. Trend Analysis

Estimation of Net profit

Y = a+bx

24APGMS, rajampet.

TREND ANALYSIS

0

5000

10000

15000

20000

25000

30000

35000

40000

1 2 3 4 5 6 7 8 9

YEARS

SALES

Aviation industry

(Rs in Crores)

Year(x) Net profit

2003 -379.22

2004 356.97

2005 532.73

2006 -99.18

2007 -2191.98

2008 -2120.91

2009* -8336.81

2010* -5498.78

2011* -2659.87

* Indicates estimated values

Interpretation:The forcasted net profit for the year 2009 is Rs. -8336.81

2010 is Rs.-5498.78, and 2011 is RS. -2659.87.

6. Trend Analysis

Estimation of Capital employed

Y = a+bx

25APGMS, rajampet.

TREND ANALYSIS

-10000

-8000

-6000

-4000

-2000

0

2000

1 2 3 4 5 6 7 8 9

YEARS

NET PROFIT

Aviation industry

(Rs in Crores)

Year(x) Capital employed

2003 6340.96

2004 5144.27

2005 8226.57

2006 15534.60

2007 22072.79

2008 31679.07

2009* 33311.47

2010* 38591.01

2011* 43870.55

*Indicates estimated values

Interpretration:The forecasted Capital employed   for the year 2009 is Rs

33311.07,2010 is Rs 38591.01 and 2011 is Rs 43870.55.

7. Trend Analysis

Estimation of Total cost

Y = a+bx

26APGMS, rajampet.

TREND ANALYSIS

0

10000

20000

30000

40000

50000

1 2 3 4 5 6 7 8 9

YEARS

CAPITAL EMPLOYED

Aviation industry

(Rs in Crores)

Year(x) Total cost

2003 14124.7

2004 15357.67

2005 18523.64

2006 25270.25

2007 33686.08

2008 28851.15

2009* 36172

2010* 40039.54

2011* 43907.08

* Indicates estimated values

Interpretation: The forecasted total cost for the year 2009 is Rs.36172, 2010 is

Rs.40039.54 and 2011 is Rs.43907.08.

8. Growth rate of sales  

                   Pn = P0 (1+r)n 

27APGMS, rajampet.

TREND ANALYSIS

0

10000

20000

30000

40000

50000

1 2 3 4 5 6 7 8 9

YEARS

TOTAL COST

Aviation industry

(Rs in Crores)

Year Sales Growth rate (in%)

2003 13281.06 -

2004 15303.39 0.152

2005 18632.05 0.217

2006 24061.19 0.291

2007 29096.25 0.209

2008 24320.28 0.164

 Interpretation: From the above table it is observed Growth rate of sales aviation

industry was increased from the year 2003-2007, because of increase of sales year

after year. But in the period 2008 the growth rate is in negative because of decreasing

of sales. When compared with before year 2008 sales.  

9. Co-efficient of correlation between total income& total

expenditure

28APGMS, rajampet.

Aviation industry

∑(x- x) (y-y) r = -------------------------

√ ∑(x- x) 2 √∑ (y-y) 2

Years Total income Total Expenditure

2003 13745.456 14124.7

2004 15714.64 15357.67

2005 19056.37 18523.64

2006 25171.07 25270.25

2007 31494.1 33686.08

2008 26730.24 28851.15

 

CO-efficient Of Correlation=0.995

It is evident from the above table there is a strong relationship between the

total income & total expenditure. Because of 1% change in total expenses

that must be lead to 0.995% change in total income. It showing positive

relationship between total income & total expenditure.

10. Coefficient of correlation between Total sales and PAT

∑(x- x) (y-y)

29APGMS, rajampet.

Aviation industry

r = ------------------------- √ ∑(x- x) 2 √∑ (y-y) 2

Years Total sales profit

2003 13281.06 -379.22

2004 15303.39 356.97

2005 18632.05 532.73

2006 24061.25 -99.18

2007 29096.25 -2191.98

2008 24320.28 -2120.91

CO-efficient Of Correlation=-0.030

From the year 2003 to 2007 the sales of coefficient was increased in the

year 2008 sales was decreased. The net profit of the coefficient was

negative in the years 2003, 2006, 2007& 2008.The Co-efficient of

correlation between Total sales & PAT is -0.030 which shows a negative

relationbetweenthetwo. 

 

11. Number of Companies

Year Number of Companies

2003 15

30APGMS, rajampet.

Aviation industry

2004 18

2005 18

2006 21

2007 20

2008 17

 

The number of companies in the aviation Industry increased year by year

from 2003-2006. Because of growing tourism & rising income levels will

leads to increase in number of companies. From the year 2007-2008 there

is decrease in number of companies from 20-17 because of shortage of

trained pilots shortage of airports & high prices. 

SWOT ANALYSIS

Strengths

1. Growing tourism: Due to growth in tourism, there has been an increase in number

of the international and domestic passengers. The estimated growth of domestic

passenger segment is at 50% per annum and growth for international passenger

segment is 25%.  

31APGMS, rajampet.

Aviation industry

 

2. Rising income levels: Due to the rise in income levels, the disposable income is

also higher which are expected to enhance the number of flyers. 

Weaknesses

 

1.Under penetrated Market : The total passenger traffic was only 50 million as on

31st Dec 2005 amounting to only 0.05 trips per annum as compared to developed

nations like United States have 2.02 trips per annum.  

 

2. Untapped Air Cargo Market: Air cargo market has not yet been fully taped in the

Indian markets and is expected that in the coming year’s large number of players will

have dedicated fleets.  

 

3. Infrastructural constraints: The infrastructure development has not kept pace

with the growth in aviation services sector leading to a bottleneck. Huge investment

requirement for physical infrastructure for airports.  

 

Opportunities  

 

1.Expecting investments: investment of about US $30 billion will be made. 

 

2. Expected Market Size: Average growth of aviation sector is about 25%-30% and

the expected market size is projected to grow upto100 million by 2010. 

Threats

32APGMS, rajampet.

Aviation industry

Huge investments are expected to take place in aviation sector in near future. It is

estimated that by 2012.  

 

1. Shortage of trained Pilots: There is a shortage of trained pilots, co-pilots and

ground staff which is severely limiting growth prospects.  

 

2. Shortage of Airports: There is a shortage of airport facilities, parking bays, air

traffic control facilities and takeoff and landing slots.  

 

3. High prices: Though enough number of low cost carriers are already existing in

the industry, majority of the population is still not able to fly to other destinations. 

 

     

 

 

 

 

 

 

 

 

Findings

The fixed cost as a proportion of value added has fluctuation during the study

period 2003-2008.In the year 2003 it is of 38% & 43% in the year 2008.The

value addition is increased because of more increase in sales & less increase in

the cost of fuel & water charges the fixed charges also increased year by year

due to the increase in compensation to employees.

33APGMS, rajampet.

Aviation industry

The operating performance of Aviation Industry is showing fluctuation during

the study period of 2003-2008.This is due to the fluctuation in EBIT. In the

year 2005 it was very high (11.5) due to increase in net assets & EBIT. In the

year 2008 it was very low due to the decrease in EBIT.

The financial performance of Aviation Industry is showing fluctuation during

the study period of 2003-2008.This is due to the fluctuation PAT & Net worth.

In the year 2004 it was very high (281.1) due to increase in PAT & Net worth.

In the year 2008 it was very low, due to the decrease in PAT of Aviation

Industry.

The trend analysis of Aviation Industry was increased year by year during

fluctuation study period of 2003-2008 because of fluctuation increase of sales.

That there is a strong relationship between total income & total expenses.

Because 1% change in total expenses that must be lead to 0.995% charge in

total income. It showing positive relationship between total income & total

expenses.

That there is a week relationship between total sales & PAT, Because 1%

change in total sales that must be lead to -0.030% change in PAT .It showing

negative relationship between total sales & PAT.

The growth rate in total income of Aviation Industry was increased year by

year during fluctuation study period of 2003-2007.In the year 2008 the growth

rate is in negative because of decreasing of sales when compared with before

year.

34APGMS, rajampet.

Aviation industry

Conclusion

The growth rate of sales & estimated values of sales are increasing when compared to

the present values of sales & from the cost structure also it is observed that the cost of

the industry is minimizing from year to year during study period.

35APGMS, rajampet.

Aviation industry

Hence it can be concluded that the domestic demand for Aviation Industry is

increasing in India.

36APGMS, rajampet.