Operational restructuring of the Indian aviation industry: A demand?efficiency model

Abstract

This paper studies the growth of the Indian Civil Aviation Industry right from independence till the present day. It analyzes the policy issues involved in development of the aviation industry as it developed till 1994 after which the skies were opened up and the impact of the liberalisation. The problems that are being faced by the Indian Domestic Civil Aviation sector have been delineated and studied in the light of traffic data for the past three years. Some of the problems have been clearly demonstrated by the numbers. Following that, a number of options were looked into and evaluated using criteria that would be used by the Government, AAI, private and public airlines as well as customers. At the end of this analysis one of the options was found most suited to tackle the situation and it requires the incorporation of a partial hub and spoke model of operation for twenty three selected airports which have shown remarkable growth (even in the face of a recession) in the past few years. This model has been prepared keeping in mind the necessity to match demand with supply and increase efficiency of the system. It will be able to remedy three most pressing problems of the sector namely, congestion at the major airports, low load factors and high waiting time for smaller airports. It will also provide business travelers the option to travel during night and work during the day. However for the model to be implemented it has to be brought forward through a policy by the central government and the development of a central hub will have to be handled by the AAI. On the other hand, certain larger airliners, like Jet or Kingfisher who have the capability as well as infrastructure to run on the trunk routes as well as smaller routes could implement the model on their own, partially if not fully. A plan for such an implementation has been prepared in the later half of the analysis. Overall, the civil aviation sector does face a number of serious issues and some action, either in terms of operational restructuring or alternative policy implementation, will have to be taken.