Indian Civil Aviation Sector: Future Directions

In the last five years a virtual revolution has been noticed in Indian aviation sector, with international traffic having doubled and domestic travel tripled since 2002-03. Apart from the traffic growth, the structure of India's domestic airline market has changed dramatically in the last few years, from just three airlines to a much more fragmented industry with more than ten carriers in early 2007. But the things never remain same and it is the fact that the aviation industry has also been the main target of the recent economic meltdown. After 5 years of unprecedented expansion, 2008 has seen a contraction in traffic. At a time when fuel prices are pushing the break-even load factor higher, carriers have reduced capacity by 10-20% in domestic markets. This environment is expected to result in combined airline industry losses of approximately USD 1.5 billion for the 12 months period ending in 31^st March 2009. Apart from fuel prices, the situation in India is exacerbated by high taxation, the cost for operating new airports.