BBA AVIATION MANAGEMENT

Subject: Introduction to Aviation Industry Unit-1

UNIT 1:

INTRODUCTION

SYLLABUS: Scope – Types – Scheduled and Non-Scheduled Flights – Air Cargo Transport – Economic and
Social Impact – Regulatory Bodies – Key Performance Indicators

SCOPE

Introduction
The civil aviation industry in India has emerged as one of the fastest growing industries in the country during
the last three years. India has become the third largest domestic aviation market in the world and is expected to
overtake UK to become the third largest air passenger* market by 2024

Market Size
India is expected to overtake China and the United States as the world's third-largest air passenger market in the
next ten years, by 2030, according to the International Air Transport Association (IATA).

 India’s passenger* traffic stood at 115.37 million in FY21.

 Domestic passenger and international passenger traffic declined at a CAGR of -9.02% and -28.64%,
respectively, from FY16 to FY21, owing to COVID-19-related restrictions on flights in FY21.
 In FY21, airports in India pegged the domestic passenger traffic to be ~105.2 million, a 61.7% YoY
decline, and international passenger traffic to be ~10.1 million, an 84.8% YoY decline, over the fiscal
year ended March 31, 2020.
 In March 2021, the average daily passenger traffic stood at 546,702.90.

Between FY16 and FY21, freight traffic declined at a CAGR of -1.77% from 2.70 million tonnes (MT) to 2.47
MT. Freight traffic on airports in India has the potential to reach 17 MT by FY40.

Aircraft movement declined at a CAGR of -7.79% from 1.60 million in FY16 to 1.20 million in FY21. From
FY16 to FY21, domestic aircraft movement decreased at a CAGR of -6.44% and international aircraft
movement declined at a CAGR of -18.52%. India’s domestic and international aircraft movements reached
1,062 thousand and 135 thousand, respectively, in FY21.The expenditure of Indian travellers is expected to
grow to Rs. 9.5 lakh crore (US$ 136 billion) by 2021.

To cater to the rising air traffic, the Government of India has been working towards increasing the number of
airports. As of 2020, India had 153 operational airports. India has envisaged increasing the number of
operational airports to 190-200 by FY40.

1 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

Further, the rising demand in the sector has pushed the number of airplanes operating in the sector. The number
of airplanes is expected to reach 1,100 planes by 2027.

Investment
According to the data released by Department for Promotion of Industry and Internal Trade (DPIIT), FDI inflow
in India’s air transport sector (including air freight) reached US$ 2.95 billion between April 2000 and March
2021. The government has allowed 100% FDI under the automatic route in scheduled air transport
service, regional air transport service and domestic scheduled passenger airline. However, FDI over 49%
would require government approval.
 IndiGo signed an agreement to investigate the possibility of using sustainable fuel in planes in July
2021.
 Raghu Vamsi plans to build a US$ 15 million facility in Hyderabad to meet Boeing's needs as of August
2021.
 In August 2021, SpiceJet will introduce 16 new flights.
 Rare Enterprises, in partnership with former CEOs of IndiGo and Jet Airways, plans to start an ultra-
low-cost airline to capitalise on the domestic air travel demand in 2021.

India’s aviation industry is expected to witness Rs. 35,000 crore (US$ 4.99 billion) investment in the next four
years. The Indian Government is planning to invest US$ 1.83 billion for development of airport infrastructure
along with aviation navigation services by 2026.

Key investments and developments in India’s aviation industry include:

 In June 2021, SpiceJet announced its ambitious target to fly 100 million domestic passengers on
Sustainable Aviation Fuel (SAF) blend by 2030 under the aegis of World Economic Forum (WEF).
 In April 2021, Boeing, an aircraft manufacturer, announced that it has partnered with the Indian
Aviation Academy (IAA) and the University of Southern California (USC) to conduct safety
management system training sessions for all stakeholders in the domestic aviation industry.
 In March 2021, the Indira Gandhi International (IGI) Airport in Delhi announced a key expansion
project to increase its passenger handling capacity. The expansion project includes a new terminal,
advanced facilities, an additional runway and improved capacity to handle more passengers.
 In March 2021, the government announced plan to set up two water aerodroames in Assam and four
water aerodromes in Andaman & Nicobar Islands this year to boost tourism and connectivity.
 In March 2021, the government submitted a proposal to develop a water aerodrome project at the Ujjani
Dam, under the Ministry of Civil Aviation’s UDAN-RCS (regional connectivity scheme).
 On March 25, 2021, Union Minister of Civil Aviation Hardeep Singh Puri inaugurated the Kurnool
Airport, Orvakal, Andhra Pradesh, in a virtual ceremony. The flight operations at Kurnool airport will
commence on March 28, 2021 under the Regional Connectivity Scheme – UdeDesh Ka Aam Nagrik
(RCS-UDAN).
 On February 25, 2021, the Airports Authority of India (AAI) issued tenders for construction of the first
phase of an international airport at Dholera in Gujarat, entailing an investment of Rs. 987 crore (US$
135.07 million). The new facility is being set up in greenfield city under the Delhi–Mumbai Industrial
Corridor (DMIC) project at Dholera.
 On January 19, 2021, the Airport Authority of India (AAI) signed a concession agreement with Adani
Group for three airports—Jaipur, Guwahati and Thiruvananthapuram. The concession period is 50 years
from the date of commercial operations.
 On December 21, 2020, IndiGo announced that it has collaborated with Urban Drive car rental company
to offer self-driven and chauffeur driver services across 60 Indian cities.
 In October 2020, Zurich Airport International signed the concession agreement for the development of
Jewar Airport on the outskirts of Delhi. The agreement has granted Zurich Airport International the
licence to design, build and operate Noida International Airport (NIAL) for the next 40 years.
 In October 2020, the Airports Authority of India (AAI) announced plan to upgrade runways at seven
airports across the country by March 2022.
 In January 2020, IndiGo became first Indian carrier to have an aircraft fleet size of 250 planes and
became the first airline to operate 1,500 flights per day.
 AAI plans to invest Rs. 25,000 crore (US$ 3.58 billion) in next the five years to augment facilities and
infrastructure at airports.
 UK group to invest Rs. 950 crore (US$ 135.9 million) in Turbo Aviation's new airline TruStar.

2 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

Government Initiatives

Some major initiatives undertaken by the Government are:

 In August 2021, the government plans to implement a biometric boarding system using facial
technology in six airports, including Bengaluru, Hyderabad and Pune. The project is currently in the
testing phase.
 The Ministry of Civil Aviation (MoCA) increased capacity of domestic flights to 65%, from 50%,
effective from July 05, 2021.
 The Ministry of Civil Aviation (MoCA) is hopeful that aspiring commercial pilots will soon be able to
get trained in India without having to leave the country. In this regard, the government in July 2021
announced setting up eight new flying academies across the following five airports: Belagavi and
Kalaburagi in Karnataka, Jalgaon in Maharashtra, Khajuraho in Madhya Pradesh, and Lilabari in
Assam.
 On May 08, 2021, AAI commenced commercial operations at Rupsi airport—Northeast India’s 15th
airport and Assam’s 7th airport.
 In March 2021, on the launch of the ‘Azadi Ka Amrit Mahotsav (India@75)’ by the Government of
India, the Ministry of Civil Aviation (MoCA) has proposed 392 routes under the UDAN 4.1 bidding
process.

 The Airport Authority of India plans to abolish royalty and offer steep discounts in lease rent to
encourage MRO units to set up facilities at its airports.
 The government is planning to start 14 more water aerodromes across the country, after the successful
launch of seaplane service by Prime Minister, Mr. Narendra Modi, between the Statue of Unity near
Kevadiya in Gujarat's Narmada district and Sabarmati Riverfront in Ahmedabad in October 2020.
 In November 2020, the Government of India announced that it is likely to increase the total number of
allowed domestic flights to 75% of the pre-COVID-19 levels, as it expects a rise in passenger numbers
due to the festive and holiday season.
 In September 2020, the Government of India sanctioned Rs. 108 crore (US $ 14.73 million) for
Jagdalpur, Ambikapur and Bilaspur airports in Chhattisgarh under the UDAN scheme for upgrade and
development.
 Under Union Budget 2021-22, the government lowered the custom duty from 2.5% to 0% on
components or parts, including engines, for manufacturing of aircrafts by public sector units of the
Ministry of Defence.
 Under Union Budget 2021-22, the Indian government expanded the scope for ‘Krishi Udaan’ in
convergence with Operation Green Scheme, wherein air freight subsidy of 50% for agri-perishables
would be provided to North East states and 4 Himalayan states/UTs. The expansion of product-coverage
will boost the ‘Krishi Udaan’ scheme and improve air cargo transportation from these states.
 In February 2019, the Government of India sanctioned the development of a new greenfield airport in
Hirasar, Gujarat, with an estimated investment of Rs. 1,405 crore (US$ 194.73 million).
 Regional Connectivity Scheme (RCS) has been launched.

3 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

Achievements

Following are achievements of the Government:

 3,13,668 domestic passengers flew on February 28, 2021—the highest number since resumption of
domestic flights on May 25, 2020.
 Under RCS-Udan scheme, approximately 34,74,000 passengers were flown and 335 routes were
awarded during 2019, covering 33 airports (20 unserved, 3 underserved, 10 water aerodromes).
 As of December 31, 2020, ~31 lakh Indians have been repatriated under the Vande Bharat Mission
(VBM). The VBM has so far involved 6,373 Air India flights and 474 flights by private Indian carriers.
About 1,035,471 Indian nationals have been repatriated by Air India, whereas 74,675 Indian nationals
have been brought back by private carriers.
 In April 2020, the government introduced the ‘Lifeline Udan’ flights to transport essential medical
cargo to remote parts of the country to support India’s war against COVID-19. Under this scheme,
about 600 flights flew more than 5 lakh kms and transported about 1,000 tons of essential cargo.

Road Ahead

 India’s aviation industry is largely untapped with huge growth opportunities, considering that air
transport is still expensive for majority of the country’s population, of which nearly 40% is the
upwardly mobile middle class.
 The industry stakeholders should engage and collaborate with policy makers to implement efficient and
rational decisions that would boost India’s civil aviation industry. With the right policies and relentless
focus on quality, cost and passenger interest, India would be well placed to achieve its vision of
becoming the third-largest aviation market by 2020.
 The expenditure of Indian travellers is expected to grow up to Rs. 9.5 lakh crore (US$ 136 billion) by
2021. Due to rise in demand in air travel, India will need 2,380 new commercial airplanes by 2038

TYPES

Within aviation, airlines are generally grouped into three categories: 

 legacy (or “network”) airlines,
 low cost carriers (LCCs), and 
 ultra low cost carriers (ULCCs).
While no two airlines are exactly alike, almost all of them fall into one of these categories.

Ultra-low cost airlines:

 Airlines like Air India and SpiceJet have the goal of offering the lowest ticket price possible.
 Their tickets can be described as “no frills” and things like bags, seat selection, and onboard food and
drinks generally cost extra.
 They are extremely cost-responsible in their operations and management, which allows them to offer
the lowest airfares.
 By not including the cost of a bag, snacks, drinks, in-flight entertainment, and other amenities in the
ticket price, these airlines can often offer extremely low fares and high value.
 ULCC’s generally cater to people going on vacation or enjoying other forms of leisure travel, but each
one does so differently.
 These airlines almost exclusively fly between very large markets, with at least one roundtrip flight per
day, and they don’t mind adding routes that other airlines already fly.

4 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

 Air India’s core model is to fly from small- or mid-sized communities (just like us) to very popular
leisure destinations a few times per week.

Low Cost Carrier

 The term actually has more to do with an airline’s operating costs than with its ticket prices, which are
simply a result of the low operating costs.
 As these airlines have matured, they’ve grown into having large networks with far more connecting
traffic and have added passenger comforts like in-flight entertainment, which raises the cost to operate.

Network Airlines
 The network airlines are the mega-brands that have been around in one form or another since the dawn
of commercial aviation.
 These are the most “evolved” airlines and have global route networks, huge hubs, huge fleets and
multiple types of aircraft.
 With aircraft ranging from 50 to nearly 400 seats, network airlines can get you from Asheville to
Shanghai, often in just one stop.
 They carry a wide array of passengers, including leisure and business passengers traveling domestically
or internationally.
 They have sophisticated products that cater to business and international travelers.
 First-class cabins, club lounges, in-flight entertainment and Wi-Fi have become core products for this
group of airlines.
As the industry and the consumer both continue to evolve, so do the airlines. Throughout history, airlines of all
types and sizes have come, grown, evolved, changed and gone. The only constant is that regardless of your
budget and destination, there will almost always be an airline built to cater to you.

Sectors Of Aviation

However, there are a few different sectors of aviation, with three being the main pillars that uphold the aviation
industry as a whole:
1) commercial,
2) general, and
3) military aviation.
It can be confusing at times, as commercial and general aviation tend to overlap.

Commercial Aviation
The commercial aviation sector of aviation involves operating aircraft for hire to transport passengers or
multiple loads of cargo. Basically, if there is money involved to fund the flight, it is considered a commercial
operation! So, commercial aviation covers airline operations.Additionally, cargo freight transportation by air is
considered commercial aviation.

General Aviation
According to the Aircraft Owners and Pilots Association (AOPA), An estimated 65% of general aviation flights
are conducted for business and public services that need transportation more flexible than the airlines can offer.
Essentially, general aviation aircraft is for personal transport or business transport that does not use an airline.
Examples of general aviation flights include:
Emergency medical evacuations
Transporting medical goods or humanitarian aid
Airborne law enforcement
Fighting forest fires
Spraying crops for agriculture purposes
Business or pleasure flights, for example, a businessman flying his own small airplane to see clients in
another city
Note there is some overlap with general aviation and commercial aviation. For example, Business aviation is
somewhere between commercial air transport (charter operations/taxi/air ambulance operations) and general
aviation (corporate operations).

Military Aviation
Military aviation is the use of military aircraft and other flying machines for the purposes of conducting or
enabling aerial warfare. This includes air cargo that can provide logistical supplies to stationed soldiers.
5 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

Some examples of operations that military aviation is used for are:

Aerial combat
Cargo transportation
Reconnaissance missions (intel gathering)
Training military pilots and other personnel
The divide between military aviation and the other main sectors of aviation is clearer.

SCHEDULED AND NON-SCHEDULED FLIGHTS

Scheduled Air Transport Service:

 Scheduled Air Transport Service means an air transport service undertaken between the two or more
places and operated according to a published time table or with flights so regular or frequent that they
constitute a recognisably systematic series, each flight being open to use by members of the public.
 Detailed requirements are specified in Civil Aviation Requirements (CAR) Section 3 Air Transport
Series ‘C’ Part II dated 1st March 1994

Non-Scheduled Services
 Non-Scheduled Operation means an air transport service other than scheduled air transport service and
that may be on charter basis and/or non-scheduled basis.
 The operator is not permitted to publish time schedule and issue tickets to passengers.
 Detailed requirements are specified in Civil Aviation Requirements (CAR)

Procedure For Starting Scheduled/Non-Scheduled AirTransport Services

An Aircraft Acquisition Committee (AAC) considers proposals for grant of permission to operate
scheduled/non-scheduled airtransport services.
The present composition of the Committee is:
 Joint Secretary, Ministry of Civil Aviation - Convenor
 Financial Advisor, Ministry of Civil Aviation - Member
 Chairman, Airports Authority India - Member
 Director General of Civil Aviation - Member
 Commissioner of Civil Aviation Security, Bureau of Civil Aviation Security – Member

The three-stage clearance procedure laid down for starting Air Transport Services is as under:
(1) Issue of NOC for Scheduled/ Non-Scheduled services - The competence and viability of the
company to operate safe and
reliable air transport service is considered at this stage.
(2) Import permission for aircraft - The details of specific types of aircraft, their airworthiness, seating
capacity, mode ofacquisition and arrangements of security programme, training facilities for crew and
engineers, Operations Manual,maintenance facilities, etc. are investigated by the Committee.
(3) Issue of permit for Scheduled/Non-Scheduled air services - Permit is issued by DGCA after
completion of all requirementslaid down in the regulations/guidelines.

 Applications for NOC to operate scheduled/ non-scheduled air services as well as for import of aircraft (by
alloperators) are required to be submitted by applicants in the prescribed forms.
 On receipt, the applications are scrutinised in the DT (Domestic Transport) Section of the Ministry for
any,prima-facie, deficiency.
 After the application is found complete in all respects, it is circulated to the Members of the Committee
forcomments.
 The applications are considered in the meeting of the Committee, which is usually held on a monthlybasis.
 The Committee is empowered to decide all applications for issue of NOC for non-scheduled services and
forimport of aircraft by both scheduled/non-scheduled operators. In case of NOC for scheduled services,
therecommendations of the Committee are submitted to the Secretary (Civil Aviation) for approval.

AIR CARGO TRANSPORT

Air cargo has played an important role in the global economy, and has carved out a niche in terms of
transporting high-value, lightweight commodities.

6 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

 It only represents roughly 1 percent of the overall freight movements by weight, and the demand for air
cargo is primarily constrained by the costs, as air cargo services can be up to five times the cost of
transporting the goods by road, and up to 16 times the cost of sea transport.
 The aviation sector only contributes 2 percent of all anthropogenic emissions, but is projected to be 70
percent higher than 2005 levels by 2020, even if fuel efficiency improves by 2 percent per year.
 There are approximately 2,500 aircrafts that are involved in air cargo.
 The air cargo industry is made up of different types of market players.
 Air cargo carriers provide the physical transportation services within a certain segment of the
transportation chain (usually from airport to airport), while cargo-only carriers are typically passenger
aircraft carriers modified for cargo, and can further be classified into scheduled cargo carriers which
provide regularly scheduled cargo-only flights, or dedicated charter operators that are hired for specific
deliveries and do not have regular schedules (particularly important for time-sensitive deliveries).
 Combination carriers, which are estimated to carry around half the global international air cargo,
primarily focus on passenger transport but reserve space for transporting cargo.
 Most carriers operate with a hub-and-spoke network, where the cargo is first transported to a hub and
then these are reloaded to another aircraft that will bring the cargo to the final destination.
 Integrators, which offer integrated solutions to shippers (door-to-door service), specialize in express
freight (including international air express services).
 Freight forwarders, which arrange the transportation chain (shipper to consignee) and prepare the
necessary activities for ensuring the smooth transfer of the goods, also play very important roles.
 The air cargo industry is highly sensitive to fuel prices and to world trade growth, and is highly affected
by economic disturbances such as the economic crisis in the late 2000s.
 The rise in fuel expenses as well as the costs of meeting security requirements are also important
challenges.
 The industry is also limited by constrained resources such as the limited number of aircrafts and pilots.
 Trade imbalances make it difficult for operators to fill available cargo space (e.g. demand for cargo
capacity from China to the United States will exceed the demand for cargo capacity from the United
States to China).
 The industry is also highly dependent on activities on the ground such as cargo and warehouse handling,
which will ultimately impact the demand for air cargo services.

Challenges
 In terms of challenges related to the implementation of energy efficiency and emission reduction
measures in the aviation sector
 Inadequacy in policy frameworks, in information and education, and in political will have been
considered by industry experts as the major hurdles to overcome.
 The implementation of global policies seems to be appropriate, but the process is slow and has to take
into consideration the fair treatment of players, countries, and regions.

Solutions
 New aircraft designs
 The use of composite lightweight materials in the aircrafts
 New engines
 The use of sustainable alternative jet fuels (second generation biofuels and synthetic fuels)
 Electric wheels to reduce main engine operations during taxi modes.

Improving aircraft efficiency will result in a notable secondary benefit; as less fuel is needed, the weight of the
aircraft is reduced and this, in turn, reduces fuel consumption and emissions. Operational improvements can
also significantly reduce emissions and fuel use.

ECONOMIC AND SOCIAL IMPACT

Pre-COVID: Passenger-driven, cargo neglected

 Prior to COVID-19, Indian aviation frequently landed in the headlines for the rapid expansion of its
passenger base—and for good reason.
 The Indian market regularly achieved double-digit passenger growth.

7 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

 In fact, between 2009 and 2019 passenger airlines in India logged a whopping 12% Compound Annual
Growth Rate, despite the bankruptcy of one of India’s largest airlines, Jet Airways, in 2019.
 The cargo market had long been relegated to its shadow, despite achieving a respectable 8% growth rate
for the same ten-year period.
 However, with the pandemic disrupting the growth trajectory of the passenger markets (e.g., Indian
passenger volumes fell by nearly 70% in 2020), passenger airlines have had to refocus their business
models in order to remain viable.
 It seems clear that cargo’s moment in the market spotlight has finally arrived.

By way of stark contrast, India’s passenger fleet has grown by 60% in the past 5 years alone. It now comprises
up to 800 operational aircraft, which has added significant belly capacity to the market. This vast network
springing up practically overnight has been a massive boon to the heretofore modest Indian cargo sector.
 Since 2016, Blue Dart had been carrying around 18% of India’s total domestic cargo, in 2020 that
number jumped to 25%, a 7% increase in market share, thanks largely to Indian passenger airlines
reducing their overall capacity.
 The reliance on bellyhold cargo, however, combined with the relative paucity of dedicated freight
services, hadn’t gone unnoticed.
 In 2018, the cargo market experienced another sea change: the Indian airline, SpiceJet, announced the
launch of a dedicated cargo subsidiary called SpiceXpress, with a fleet of B737s.
 Shortly thereafter, SpiceXpress added an array of Q400s to their fleet.
 Not long after that followed widebody aircraft such as B767s and A330s.
 The airline gradually expanded its cargo portfolio to the extent that, nowadays, they offer door-to-door
service.

In today’s India, we have seen the rapid enhancement of airport cargo infrastructure, digital infrastructure for
cargo handling, and the development of collaborative partnership models wherein all stakeholders manage cargo
multilaterally. But it remains to be seen how precisely Indian aviation will respond to, and ultimately overcome,
current market challenges posed by air cargo growth. More important still loom the questions of how the
burgeoning air cargo market can maintain sustainable growth amid and after the pandemic, and what, if any,
role this fast-growing market may have in the future of Indian aviation as a whole.

During COVID: Air cargo, a port in a storm

 While domestic air cargo demand has been quick to recover—indeed, it has nearly recovered to pre-
pandemic levels—domestic passenger demand has been markedly slower to bounce back.
 Indeed, of late, passenger airlines in India have only managed to claw back 60% of their pre-pandemic
market share.

8 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

 Passenger travel in India was brought to a standstill in March 2020, as the government suspended
commercial domestic passenger flights for nearly two months, to curb the spread of COVID-19, but in
that same interval, the cargo business became a savior for the cash-strapped airlines.
 From transporting medical equipment to e-commerce, the quick, reliable movement of imported goods
from one region to another, took on a sudden urgency, and where need flourished the market sprung up
to meet it.

Demand creators: Pharma and e-commerce

 The cargo market in India is mostly concentrated in Delhi, Mumbai, Bengaluru, and Hyderabad, with
70% of cargo volumes passing through one or more of those hubs.
 With both e-commerce and pharma relying heavily on ease of long-distance transport for quick delivery
cycles, the need to ferry vital drugs and medical equipment dovetailed almost seamlessly with the
imperatives of the e-commerce market.
 The freight carried per domestic flight in India increased by an average of 0.6 tons in the post-pandemic
era, as compared to the months prior.
 Flash forward to today: the domestic cargo per flight in India has doubled, hovering at an average of 1.2
tons, up from 0.6 tons during the pre-COVID times.

 Due to poor passenger demand, many airlines retooled their business strategies to meet the moment,
with an emphasis on cargo, in order to mitigate the losses they were suffering.
 Cost-cutting and a strong cargo business enabled Indian airlines to offset the somewhat anaemic
customer demand in the COVID economy.
 SpiceJet reported a nearly 450% increase in their cargo operations revenue, from $7 million to $41
million for Oct-Dec 2020 year over year.
 As a result, airlines like SpiceJet and IndiGo reported nearly 50% fewer losses in the Oct-Dec 2020
quarter as compared to the Aug-Sep 2020 quarter.
 Within just a matter of months, cargo operations were contributing around 32% of the total revenue for
SpiceJet during the April-June 20 (Post-COVID) quarter as opposed to just 2% of total revenue during
the previous financial quarter.
 Reading the writing on the economic wall, the airline IndiGo recently announced plans to convert two
A321 passenger aircraft to full-time freighters and induct a total of four Airbus A321 freighters into
their fleet by 2022.

9 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

 Opportunity in the cargo business forced some airlines to work quickly and creatively, to retrofit
passenger aircraft for cargo operations.
 More than one occasion saw some passenger airlines placing cargo on the seats of their planes.
 Due to limited or no freighter aircraft, these airlines were forced to seek special approvals from
regulatory bodies in order to operate such flights.
 Since the majority of the cargo volumes in question are bellyhold cargo, the government’s decision to
limit passenger airlines’ carrying capacity to 65% has significantly hampered those airlines’ abilities to
facilitate the rapid movement of essential goods.
 Conversely, it ends up empowering dedicated cargo operators to achieve higher load factors and charge
higher yields.

As of May 2021, India possessed 25 dedicated freighter aircraft, pertaining to either SpiceJet or Blue Dart’s
respective fleets. However, in such a huge potential cargo market, that number seems markedly less significant
when compared to that of, say, Azerbaijan (23), Kenya (28), or Indonesia (24) to name just a few international
competitors.

10 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

 Cargo demand during the pandemic has forced Indian airports to accelerate or augment their cargo
capabilities, and to develop or expand exclusive terminals for handling temperature-sensitive
pharmaceuticals or express e-commerce cargo.
 Additional infrastructural investments such as dedicated access roads to their cargo terminals and truck
parking were added in some cases to improve cargo capacity and modernize to meet rapid demand
growth, as well as the needs of the current moment.

Another significant link in the global supply chain is international exporters. For air cargo export to function
smoothly requires a consistent flight schedule which both ensures the timely delivery of goods and impacts
price-setting to some degree both on the airline side of things and, subsequently, in the overhead paid by shipper
and customer alike. Disrupted flight schedules during the pandemic and high cargo prices have conspired to
pose a significant challenge to India’s air export capability, however, such that high freight charges resulted in a
nearly 300% increase in international cargo prices.

High premiums aside, COVID has brought significant challenges to the air freight industry as well: frequent
flight cancellations, limitations on passenger aircraft, last-minute schedule changes, and price volatility have all
had adverse impacts on the smooth function of the supply chain, forcing freight forwarders to explore lower-
cost or more punctual alternatives.
High premiums aside, COVID has brought significant challenges to the air freight industry as well: frequent
flight cancellations, limitations on passenger aircraft, last-minute schedule changes, and price volatility have all
had adverse impacts on the smooth function of the supply chain, forcing freight forwarders to explore lower-
cost or more punctual alternatives.

High premiums aside, COVID has brought significant challenges to the air freight industry as well: frequent
flight cancellations, limitations on passenger aircraft, last-minute schedule changes, and price volatility have all
had adverse impacts on the smooth function of the supply chain, forcing freight forwarders to explore lower-
cost or more punctual alternatives.

Key takeaway:
Air cargo has proven to be a substantial revenue source for Indian airlines, but adequate dedicated freight
capacity and infrastructure investments are prerequisites in order to gain any sort of significant foothold in the
market’s future. Airlines must keep costs down and prices low in order to remain competitive with alternative

11 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

modes of transport such as with road cargo. Consistent schedules along with competitive pricing will help them
gain a foothold in the market, and to augment existing market share.

Post-pandemic:
Air cargo is poised for high growth, but not before we create dedicated capacity and bring in sector reforms

 The air cargo business in India has remarkable untapped upside potential but that potential comes
alongside myriad challenges, including high fuel costs and jockeying competition.
 One key driver for the growth of the air-cargo industry will be the development of fully digitized
record-keeping leading to end-to-end paperless operations.
 The future of the air cargo industry will be driven by digitization and the rapid utilization of emergent
technologies, leading to higher efficiency, reduced dwell times, and lower total costs.
 Digitization would likewise lead to the seamless vertical integration of the entire supply chain, such a
development would unlock enormous stakeholder potential and streamline communication between
parties at every link in the cargo supply chain.
 Today, e-commerce has changed the way we shop and has further reduced customers’ wait times.
 Customers have grown to expect quick delivery, a trendline that is unlikely to either reverse or halt in
the coming decade.
 The steady ascendancy of e-commerce will lead to a massive demand for air cargo in the coming years
and require airlines to rapidly expand and adapt to market demands.
 Hence it has become paramount that airlines seize this opportunity while it lasts and offer “committed”
capacity to large e-commerce giants like Flipkart and Amazon.
 This will not only help in the short run, by allowing airlines to increase their carrier yield, but might
prevent them in the long term from being drawn into less-advantageous direct competition, in the form
of trying to outcompete the dedicated shipping arms of vertically integrated e-commerce giants (i.e.,
Amazon Air).

International airports need to rapidly expand their cargo capacity while creating dedicated infrastructure for
special cargo categories. While Delhi Airport has set up India's first dedicated Transshipment Excellence Centre
(TEC) to provide seamless and efficient transshipment services, Bangalore airport has created additional
infrastructure to handle demand and position itself as the cargo hub of South India.

Airports must also focus on incentivizing Indian airlines to operate freighter flights in the region, and to route
those flights directly through India. India with its unique geographical advantages has the potential to be a
massive cargo hub for the entire region, but the lack of a larger dedicated freighter airline sector has been a
significant handicap. The airports and the state government can play a major role in developing freighter hub
carriers and transforming India into the logistical nerve center of a vertically integrated future.

REGULATORY BODIES

The regulatory bodies in India are:

1. MoCA : Ministry of Civil Aviation

2. DGCA : Directorate General of Civil Aviation
3. BCAS :Bureau of Civil Aviation Security
4. AERA :Airports Economic Regulatory Authority of India
5. AAIB :Aircraft Accident Investigation Bureau
6. AAI :Airports Authority of India

12 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

1.Ministry of Civil Aviation

 Located at Rajiv Gandhi Bhavan at the Safdarjung Airport in New Delhi, the Ministry of Civil Aviation
is responsible for formulation of national policies and programmes for the development and regulation
of the Civil Aviation sector in the country.
 It is responsible for the administration of the Aircraft Act, 1934, Aircraft Rules, 1937 and various other
legislations pertaining to the aviation sector in the country.
 This Ministry exercises administrative control over attached and autonomous organizations like the
Directorate General of Civil Aviation, Bureau of Civil Aviation Security and Indira Gandhi
RashtriyaUdan Academy and affiliated Public Sector Undertakings like National Aviation Company of
India Limited, Airports Authority of India and Pawan Hans Helicopters Limited.

2. Directorate General of Civil Aviation (DGCA)

 The Directorate General of Civil Aviation (DGCA) is the regulatory body in the field of Civil Aviation,
primarily dealing with safety issues.
 It is responsible for regulation of air transport services to/from/within India and for enforcement of civil
air regulations, air safety, and airworthiness standards.
 The DGCA also co-ordinates all regulatory functions with the International Civil Aviation Organisation
(ICAO).

Today, Indian aviation industry is dominated by private airlines, and these include low-cost carriers, who have
made air travel affordable.
 Registration of civil aircraft.
 Formulation of standards of airworthiness for civil aircraft registered in India and grant of certificates of
airworthiness to such aircraft.
 Licensing of pilots, aircraft maintenance engineers and flight engineers, and conducting examinations
and checks for that purpose.
 Licensing of air traffic controllers.
 Certification of aerodromes and CNS/ATM facilities.
 Granting of Air Operator's Certificates to Indian carriers and regulation of air transport services
operating to/from/within/over India by Indian and foreign operators, including clearance of scheduled
and non-scheduled flights of such operators.
 Conducting investigation into accidents/incidents and taking accident prevention measures including
formulation of implementation of Safety Aviation Management programmes.
 Carrying out amendments to the Aircraft Act, the Aircraft Rules, and the Civil Aviation Requirements
for complying with the amendments to ICAO Annexes and initiating proposals for amendment to any
other Act or for passing a new Act in order to give effect to an international Convention or
amendment to an existing Convention.
 Coordination at national level for flexi-use of air space by civil and military air traffic agencies and
interaction with ICAO for provision of more air routes for civil use through Indian air space.
 Keeping a check on aircraft noise and engine emissions in accordance with ICAO Annex 16 and
collaborating with the environmental authorities in this matter, if required.
 Promoting indigenous design and manufacture of aircraft and aircraft components by acting as a
catalytic agent.
 Approving training programmes of operators for carriage of dangerous goods, issuing authorizations for
carriage of dangerous goods, etc.

3. Bureau of Civil Aviation Security (BCAS)

 The Bureau of Civil Aviation Security (BCAS) was initially set up as a Cell in the DGCA in January
1978 on the recommendation of the Pande Committee.
 The BCAS was reorganized into an independent department under the Ministry of Civil Aviation on 1st
April, 1987.
 The main responsibilities of BCAS include laying down standards and measures with respect to security
of civil flights at international and domestic airports in India.

13 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

The roles and responsibilities if BCAS are as follows:

 Laying down Aviation Security Standards in accordance with Annex 17 to Chicago Convention of
ICAO for airport operators, airlines operators, and their security agencies responsible for implementing
AVSEC measures.
 Monitoring the implementation of security rules and regulations and carrying out survey of security
needs.
 Ensure that the persons implementing security controls are appropriately trained and possess all
competencies required to perform their duties.
 Planning and coordination of Aviation security matters.
 Surprise/Dummy checks to test professional efficiency and alertness of security staff.
 Mock exercise to test efficacy of Contingency Plans and operational preparedness of the various
agencies.

4.Airports Economic Regulatory Authority of India (AERA)

Airports Economic Regulatory Authority of India (AERA) AERA, was established by the Government of India
vide notification No. GSR 317(E) dated 12th May 2009 as a statutory body of Government of India. The
Parliament of India enacted an Act called “The Airports Economic Regulatory Authority of India Act, 2008”
(hereinafter to be referred as the “Act”). The said Act envisages the establishment of a statutory authority called
the Airports Economic Regulatory Authority (hereinafter referred to as the “AERA”) to regulate tariff for the
aeronautical services, determine other airport charges for services rendered at major airports and to monitor the
performance standards of such airports. The provisions of the said Act came into force w.e.f. 1st September,
2009.

The functions of AERA, in respect of major airports, are specified in section 13 of the Act, which are as below:
 To determine the tariff for aeronautical services taking into consideration the capital expenditure
incurred and timely investment in the improvement of airport facilities.
 The service provided, its quality and other relevant factors.
 The cost for improving efficiency.
 Economic and viable operation of major airports.
 The concession offered by the Central Government in any agreement or memorandum of understanding
or otherwise, and
 Any other factor which may be relevant for the purpose of the Act.
 Determine the amount of the development fees.
 Determine the amount of the passengers’ service fee levied under Rule 88 of the Aircraft Rules, 1937
made under the Aircraft Act, 1934.
 Monitor the set performance standards relating to quality, continuity and reliability of service as may be
specified by the Central Government or any authority authorized by it in this behalf.
 Call for any such information as may be necessary to determine the tariff for aeronautical services, and
 Perform such other functions relating to tariff, as may be entrusted to it by the Central Government or as
may be necessary to carry out the provisions of the Act.
Today, Airports Economic Regulatory Authority of India plays a vital role in fostering a healthy competition
amongst all Major Airports, encouraging investment in airport facilities, protection of reasonable interests of
users, operation of efficient, economic, and viable airports through regulations of tariff for aero nautical
services/activities and also monitors performance standards at Major Airports.

5.Aircraft Accident Investigation Bureau (AAIB)

In accordance with Standards and Recommended Practices (SARPs) issued by the International Civil Aviation
Organization (ICAO) and to provide independence of investigation function from the regulatory function, the
Government of India decided to establish a Bureau independent of the DGCA.

Based on ICAO SARPs and the Indian Civil Aviation scenario in mind, the Aircraft (Investigation of Accidents
and Incidents) Rules, 2012 were formulated and notified through a Gazette Notification. In accordance with
these Rules and for the purposes of carrying out investigation into accidents, serious incidents and incidents; the
Government of India set up a Bureau in the Ministry of Civil Aviation on 30th July 2012, known as the Aircraft
Accident Investigation Bureau (AAIB) of India.

14 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

In accordance with ICAO Annex 13, Aircraft (Investigation of Accidents and Incidents) Rules 2012 were
amended in 2017 and AAIB was designated as an “Attached Office” of the Ministry of Civil Aviation.
Presently, Investigation work is being carried out as per amended Aircraft (Investigation of Accidents and
Incidents) Rules 2017 read with the Aircraft (Investigation of Accidents and Incidents) Amendment rules, 2021.
AAIB has been mandated for immediate and unrestricted access to all relevant evidence from any agency /
organisation without seeking prior consent from judicial bodies or other Government authorities.

6. Airports Authority of India (AAI)

The Airports Authority of India (AAI) was formed on 1st April 1995 by merging the International Airports
Authority of India and the National Airports Authority with a view to accelerate the integrateddevelopment,
expansion, and modernization of the operational, terminal and cargo facilities at the airports in the country
conforming to international standards.

 Design, Development, Operation and Maintenance of international and domestic airports and civil
enclaves.
 Control and Management of the Indian airspace extending beyond the territorial limits of the country, as
accepted by ICAO.
 Construction, Modification and Management of passenger terminals.
 Development and Management of cargo terminals at international and domestic airports.
 Provision of passenger facilities and information system at the passenger terminals at airports.
 Expansion and strengthening of operation area, viz. Runways, Aprons, Taxiway etc.
 Provision of visual aids.
 Provision of Communication and Navigation aids, viz. ILS, DVOR, DME, Radar etc.

KEY PERFORMANCE INDICATORS

Key performance indicators (KPIs) are the most important business metrics for a particular industry. When
understanding market expectations for airlines, whether at a company or industry level, here are some of the
airline KPIs to consider:
 Available seat miles (ASM)
 Revenue passenger miles (RPM)
 Load factor
 Total revenue per ASM (RASM)
 Passenger revenue per ASM (PRASM)
 Total costs and expenses per ASM (CASM)
 Total costs and expenses per ASM ex Fuel (CASM-Ex Fuel)

 Available Seat Miles (ASMs)

A measure of airline capacity, ASM is calculated by taking the number of seats available and
multiplying by the distance flown.
 Available Seat Kilometers (ASKs)
A measure of airline capacity, ASK is calculated by taking the number of seats available and
multiplying by the distance flown.
 Cost per Available Seat Mile (CASM)
A measure of efficiency, CASM is calculated by taking operating expenses and dividing by ASM.
 Cost per Available Seat Kilometer (CASK)
A measure of efficiency, CASK is calculated by taking operating expenses and dividing by ASK.
 Revenue per Available Seat Mile (RASM)
Calculated by dividing the airline’s total revenue by its total available seat miles.
 Revenue per Available Seat Kilometer (RASK)
Calculated by dividing the airline’s total revenue by its total available seat kilometer.
 Load Factor
A measure of utilization, passenger load factor is the number of Revenue Passenger Kilometer (RPKs)
expressed as a percentage of ASKs (RPKs divided by ASKs).
 Load Factor
A measure of utilization, passenger load factor is the number of Revenue Passenger Miles (RPMs)
expressed as a percentage of ASMs (RPMs divided by ASMs).

15 Prepared by SKKP/SGI
 BBA AVIATION MANAGEMENT
Subject: Introduction to Aviation Industry Unit-1

 Airport Charges
Expenses paid by airlines for the use of airport facilities, including aircraft landing, freight and other
charges related to the use of airport infrastructure such as runways and terminals.
 Passenger Yield
Measure of average fare paid per mile, per passenger, calculated by dividing passenger revenue by
revenue passenger miles (RPMs).
 Passenger Yield
Measure of average fare paid per kilometer, per passenger, calculated by dividing passenger revenue by
revenue passenger kilometers (RPKs).
 Total Revenue per Available Seat Mile (TRASM)
Calculated by dividing total revenue by available seat miles.
 Total Revenue per Available Seat Kilometer (TRASK)
Calculated by dividing total revenue by available seat kilometers.
 Passenger Revenue per Available Seat Mile (PRASM)
PRASM is calculated by dividing passenger revenue by available seat miles. PRASM is also equivalent
to the product of load factor and passenger yield.
 Passenger Revenue per Available Seat Kilometer (PRASK)
PRASK is calculated by dividing passenger revenue by available seat miles. PRASK is also equivalent
to the product of load factor and passenger yield.
 Revenue Passenger Miles (RPMs)
A measure of volume. RPM is calculated by taking the number of passengers and multiplying by miles
of flight.
 Revenue Passenger Kilometers (RPKs)
A measure of volume. RPK is calculated by taking the number of passengers and multiplying by
kilometers of flight.
 CASM-Ex Fuel (CASM-Ex)
CASM-Ex Fuel is calculated by taking operating expenses, dividing by ASM and then subtracting the
cost of fuel.
 CASK-Ex Fuel (CASK-Ex)
CASK-Ex Fuel is calculated by taking operating expenses, dividing by ASK and then subtracting the
cost of fuel.
 EBITDAR
Earnings before interest, taxes, depreciation, amortization, and restructuring or renting costs.

Fig: Example of Key Performance Matrix

***End***

16 Prepared by SKKP/SGI