1.

LITERATURE REVIEW
2.1 Aviation Industry in India
The first commercial flight in India was made on February 18, 1911, when a French pilot.
Monseigneur Piguet flew airmails from Allahabad to Naini, covering a distance of about 10
km in as many minutes$Tata %er!ices became Tata Airlines and then Air&India and
spread its wings as Air&IndiaInternational$ The domestic a!iation scene, howe!er, was
chaotic$ 'hen the American TenthAir Force in India disposed of its planes at throwaway
prices, 11 domestic airlines sprang up,scrambling for traffic that could sustain only two or
three$ In 19(), the go!ernmentnationali*ed the airlines, merged them, and created Indian
Airlines$ For the ne+t ( years -./Tata remained the chairman of Air&India and a director
on the board of Indian Airlines$ After-./ left, !oracious unions mushroomed, spawned on the
por# barrel 0obs created by politicians$ In 1999, A&I had "" employees per plane2 today
it has 33 whereas other airlinesha!e )("$- . / Tata the first Indian ci!ilian to fly a 0et, -une
1938 4In 19)" a gentleman from India, PurshottamMegh0i5abali , too# deli!ery of %partan
6T&AAT7cn )1, with the intention of flying the aircraft home to India$Mr$ 5abali is
belie!ed toha!e been the first Indian pilot and subse:uently went on to fly for ;Air %er!ices of
India<td;,which operated /ragon .apides and /c&)s in the forties and early fifties before
merginginto Indian Airlines =orporation in 19()$Mr 5abali was attempting a !ery long flight
in a!ery small aeroplane at a time when such flights were still far from commonplace$ >e
namedthe aircraft ;Feather of the /awn; and a religious ceremony was carried out at
=roydonAirport before departure
.
For many years in India air tra!el was percei!ed to be an elitist acti!ity$ This !iew arosefrom
the ?Mahara0ah@ syndrome where, due to the prohibiti!e cost of air tra!el, the only people
who could afford it were the rich and powerful$ In recent years, howe!er, this image of =i!il
A!iation has undergone a change and a!iation isnow !iewed in a different light & as an
essential lin# not only for international tra!el and trade but also for pro!iding connecti!ity to
different parts of the country$ A!iation is, by its !erynature, a critical part of the infrastructure
of the country and has important ramifications for

the de!elopment of tourism and trade, the opening up of inaccessible areas of the country
andfor pro!iding stimulus to business acti!ity and economic growth$ ntil less than a decade
ago, all aspects of a!iation were firmly controlled by theBo!ernment$ In the early fifties, all
airlines operating in the country were merged into eitherIndian Airlines or Air India and, by !
irtue of the Air =orporations Act, 19()2 this monopolywas perpetuated for the ne+t forty
years$ The /irectorate Beneral of =i!il A!iation controllede!ery aspect of flying including
granting flying licenses, pilots, certifying aircrafts for flightand issuing all rules and
procedures go!erning Indian airports and airspace$ Finally, theAirports Authority of India
was entrusted with the responsibility of managing all national andinternational air ports and
administering e!ery aspect of air transport operation through theAir Traffic =ontrol$ 'ith the
opening up of the Indian economy in the early ineties, a!iationsaw some important
changes$ Most importantly, the Air =orporation Act $A!iation Industry in India is one of the
fastest growing a!iation industries in the world$ 'iththe liberali*ation of the Indian a!iation
sector, a!iation industry in India has undergone arapid transformation$ From being primarily
a go!ernment&owned industry, the Indian a!iationindustry is now dominated by pri!ately
owned full ser!ice airlines and low cost carriers$Pri!ate airlines account for around (C
share of the domestic a!iation mar#et$ Darlier airtra!el was a pri!ilege only a few could
afford, but today air tra!el has become much cheaperand can be afforded by a large number of
people$The origin of Indian ci!il a!iation industry can be traced bac# to 191, when the first
airflight between 5arachi and /elhi was started by the Indian %tate Air %er!ices
incollabouration with the 5 based Imperial Airways$ It was an e+tension of
<ondon&5arachiflight of the Imperial Airways$ In 19), -./ Tata founded Tata Airline, the
first Indianairline$ At the time of independence, nine air transport companies were carrying
both aircargo and passengers$ These were Tata Airlines, Indian ational Airways, Air ser!ice
ofIndia, /eccan Airways, Ambica Airways, Eharat Airways, rient Airways and
MistryAirways$ After partition rient Airways shifted to Pa#istan$In early 1938, Bo!
ernment of India established a 0oint sector company, Air IndiaInternational <td in
collabouration with Air India 7earlier Tata Airline with a capital of .s crore and a fleet of
three <oc#heed constellation aircraft$ The inaugural flight of Air IndiaInternational <td too#
off on -une 8, 1938 on the Mumbai&<ondon air route$ The Bo!ernment

nationali*ed nine airline companies !ide the Air =orporations Act, 19()$ Accordingly
itestablished the Indian Airlines =orporation 7IA= to cater to domestic air tra!el
passengersand Air India International 7AI for international air tra!el passengers$ The assets
of thee+isting airline companies were transferred to these two corporations$ This Act ensured
thatIA= and AI had a monopoly o!er the Indian s#ies$ A third go!ernment&owned
airline,6ayudoot, which pro!ided feeder ser!ices between smaller cities, was merged with IA=
in1993$ These go!ernment&owned airlines dominated Indian a!iation industry till the
mid&199"s$In April 199", the Bo!ernment adopted open&s#y policy and allowed air ta+i&
operators tooperate flights from any airport, both on a charter and a non charter basis and to
decide theirown flight schedules, cargo and passenger fares$ In 1993, the Indian Bo!ernment,
as part of its open sky policy, ended the monopoly of IA and AI in the air transport ser!ices by
repealing the Air =corporations Act of 19() and replacing it with the Air
=orporations7Transfer of nderta#ing and .epeal Act, 1993$ Pri!ate operators were
allowed to pro!ideair transport ser!ices$ Foreign direct in!estment 7F/I of up to 39 percent
e:uity sta#e and .I 7on .esident Indian in!estment of up to 1"" percent e:uity sta#e were
permittedthrough the automatic F/I route in the domestic air transport ser!ices sector$ >owe!
er, noforeign airline could directly or indirectly hold e:uity in a domestic airline company$Ey
199(, se!eral pri!ate airlines had !entured into the a!iation business and accounted formore
than 1" percent of the domestic air traffic$ These included -et Airways %ahara,
DP=Airlines, Dast 'est Airlines, Modi<uft Airlines, -agsons Airlines, =ontinental A!iation,
and/amania Airways$ Eut only Jet Airways and sahara managed to sur!i!e the
competition$Meanwhile, Indian Airlines, which had dominated the Indian air tra!el industry,
began to losemar#et share to -et Airways and %ahara$ Today, Indian a!iation industry is
dominated by pri!ate airlines and these include low cost carriers such as /eccan Airlines,
BoAir,%pice-etetc, who ha!e made air tra!el affordable$Airline industry in India is plagued
with se!eral problems$ These include high a!iationturbine fuel 7ATF prices, rising labour
costs and shortage of s#illed labour, rapid fleete+pansion, and intense price competition
among the players$ Eut one of the ma0or challengesfacing Indian a!iation industry is
infrastructure constraint$ Airport infrastructure needs to beupgraded rapidly if Indian a!iation
industry has to continue its success story$ some steps hate

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