Globalisation Process is been a universal force. Factors contributing to globalization include market, production, culture, labour, technology, environment and regulation. Globalization provides huge potential profits to companies and nations.
Air travel is a large and growing industry. Economic growth, world trade, international investment and tourism is been facilitated by Airline Industry.
Various improvements regarding the air travel both commercial including government and private airlines have grown. Introduction of a few airlines from Boeing like Boeing 747 have increased the capacity of passengers to carry and have made it affordable for people to travel with luxury and comfort. Improvements and contribution from government has increased the development of resorts and infrastructure to attract lure tourists from the prosperous countries in Western Europe and North America.
With the growth of economies of developing countries their own citizens are becoming the new international tourists of the future. The rapid growth of world trade in international direct investment has also contributed to growth in business travel.
Worldwide, IATA, International Air Transport Association, forecasts international air travel to grow by an average 6.6% a year to the end of the decade and over 5% a year from 2000 to 2010. Airlines industry has been raised by up to 9% a year and is forecast to continue to grow rapidly, although the recession has hit the market in these years. The main air travel markets of the future will continue to be in and between Europe, North America and Asia in terms of total passenger. Example, Airbus and being the current upcoming airlines in commercial with new technological changes.
CURRENT TRENDS:
The current trends in India as well as other big players in the market based on the regulations are as follows:-
The growth of the airline industry is tree having “n” number of branches irrespective of private or public sector.
There has been 7% growth of air travel per year for both business and leisure purposes which grew strongly worldwide. The Scheduled airlines carried 1.5 billion passengers last year.
As far as the leisure market is concerned introduction of Boeing 747 made it convenient and affordable for people to travel for new and exotic destinations.
Net operating revenues in the quarter were under $2 billion, a 19% increase has resulted in strong anticipated payments volume, cross border volume and process transaction growth worldwide.
Down from 7.4 per cent in 2007 IATA exects a passenger Growth at 5% in 2008.
The government have merged the Air India and Indian Airlines into one Airline, which will be taken over other private airlines further as per the market demand.
The airline’s has low stock with the public, but now that there are a host of private airlines, customers are no longer willing to do so. The result is that the flag carrier has been losing both market share and public goodwill.
The investment in the private industry is increasing as these days the public sector is been dominated by the private sector.
CURRENT SITUATION:
Mergers: Mergers have had a great impact as far as the Indian airline industry is concerned. Mergers have either enhanced the economy growth or have reduced it. As far as Indian market is concerned mergers within the public sector have taken place where by the upcoming results are not satisfactory.
Expansion: The expansion has created new options for travellers, but it has not significantly affected Airlines position. For example, Air Canada estimated that it had a 90% share of Canadian travel agency in 2001 and sales and share of 75% seat capacity in the domestic market. After Air Canada gained control of CAI, it became the sole carrier on the majority of the top 200 domestic routes.
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Approval of major decision: Unlike the private airlines the approval of civil aviation for major decision concerning the officialdom and the other legal formalities and the well being of the industry and the things accompanying it.
Private sector investment: As in many other fields like banking or insurance where government allowed private sector entry, the state-owned entity has suffered on the same scale. Firstly the labour under bureaucratic procedures has result in long-delays in operational matters like purchase of aircraft, choice of routes, and sale of bilateral. Profits jump from 40% -50% as far as sales are concerned.
OPPORTUNITIES AND THREATS
The opportunities and threats basically imply the various opportunities that the airline industry is facing and going through whereas, the threats imply the rivalry, the new entrance and substitutes which in turn illustrates the way the progress of the industry or the business is going.
Airlines and the allocation and maintenance cost.
The airlines are one big industry with huge cost and investment where the allocation cost and the maintenance cost servers as the major factors for the industry. The cost as per as the price is concerned fluctuating market prices are a big threat to the airline industry as ression hits this area and the economy downfall would cut down on the financial part of the airlines to fit the things as per their budget. Like most other industries at this stage, airlines have not been immune to the global economic downfall. At the end of 2008 cargo traffic bottomed out, posting a dismal 25% may decline. Many airlines, particularly in the U.S., responded with aggressive capacity adjustments and an four quarter loss was served.
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The number of aircraft taken out of service exceeded the number of new aircraft delivered in the end of the year 2008. The expansion of fleets, which forced the airlines to drastically reduce capacity by cutting both flight frequencies and uneconomic routes. Adding to the weak aircraft utilization, defined as the percentage of revenue ton-miles divided into available ton-miles, resulting in disastrous fall in yield by 20%. Though 2009 contained high economies for the airline industry. International cargo traffic improved by 12% over from 2009 till present.
Rising demand, shrinking capacity
It includes two type of demand namely, the requirement for the flights are high by the passengers but the airlines having their flights are very less as compared to the demand. Due to the economy downfall the visa versa is happing a lot these days. The current ample space available onboard for most aircraft is quite less, though the capacity has been cut out. The market of airlines industry is expected to grow at 13%, and continue to grow at a progressive rate till 2012 as can be predicted.
Regulatory pressure
There is also increased awareness by industry and additional scrutiny given by FDA and other national regulatory bodies. The Regulations as per the government as to the directions and ways are still pressure and intervention from the private airlines.
GOVERNMENT POLICIES AND ITS EFFECT:
The response of government to various issues as faced by the airlines industry and the way the it affected the economy:
Strikes: The strikes have been faced a lot when it comes to the airlines industry. As per the recent records to the policies given by the government of removal of workers from “jet airways” in India due to the recession crisis created a strike problem. As there was over staffing of employees jet decided to remove a few employees.
Being private airlines the workers could not make a change in the decision and hence ended up with a strike. Finally government took a stand and the process was stopped accordingly.
Conflicts: The conflict between airlines and the airlines with the government has many aspects relating to it. As Boeing 737-800 less than two minutes after take-off crashed on May 5, 2007 in the midst of a thunderstorm, but the report said poor weather or mechanical error and the government had nothing to do with it.
Kenya Airways is hence fighting against Ethiopia Airlines, Fly540 as well as South African Airlines for control of Africa’s airspace with safety. The government thus came forward with it and a better management of its weather forecast and other aspects were asked to take care off. Also, Sahara and Jet airways were supposedly to become rivals as Sahara wanted to take over Jet but without having any liability. Hence, the later was taken an off as the deal did not crack out.
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Taxes: The government imposes several taxes as far as airlines industry is concerned. The tax starts from the upbringing of these airlines in various sectors. Thus, the government has imposed passenger’s tax for about landing in international airports. Thus an increase in the taxes has a negative impact on the economy though nothing can be done in this context, lest the price is increased considerably.
Turnover: The turnover for the airline industry has been quite a subjective matter as in the past two years the economic downfall has removed many employees from their respective jobs, though government airlines are still not under the amount of pressure as per the private ones but a cut down in a salary is the problem they face.
The growth in terms of the GDP has been progressing in the airline industry. They differ from country to country. As the highest GDP forecast is for Qatar Airways, Briatin and the least for Iceland. The industry is one with huge investment and huge outcome resulting in dominating a major portion of the economic industry.
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Mergers: The mergers that include the contract between two companies or industries under the same footnote to come and serve as one influencing the other or improving the current scenario. The government are many times in support of the mergers depending upon the situation and the outcome of the merger. Currently as far as India is concerned the merger or takeover of the government airlines by a private one is been talked about. As the situation of Air India these days is been going verse as not sufficient airplanes to carry and Boeing have certain destinations and areas as per the government rule as to where the flights can operate and others. Hence, the government will cooperate if the mergers are for the well being of the economy else it will be of no benefits for the other.
Findings:
The expansion of the airline industry is on hype. The growth of the airline industry is having a positive impact on the economy as they in turn are the inflow of cash for various other activities.
In general for the airline industry are to be meet when a decision concerning the same is been taken into consideration. As the civil flying standards are to be meet.
The current trends or recession has hit the airline industry to a less extent as compared to the others. And hence, it still serves its purpose and is least affected by the economic downfall, effect was seen only on the initial stages where a lot of flights were cut down and those relating to the less economic places had no longer flight schedules.
Difficulty is faced when a new player gets into the airline industry due to huge infrastructure and much because of the government rules and policies. Once the airline industry requires huge some of investment as well as a favourable balance to carry out the rest.
Private sector has been dominating the airlines and future can be seen as the private players are the market leaders and the government intervention has been quite reduced.
New techniques of constant improvement as far as the technical aspect of airlines is concerned and Boeing has made a few major changes in its airlines and technology has been improved for the better.
Constant updating for comfort and luxury are taking the upmost priority and the cost are been kept into the budget of the current public scenario.
Highly complicated set off recruitments and processes for talking the employees have been faced as far as the private airlines are concerned and government strictness over the official commercial airlines too have maximised.
Cut throat competition have been faced with in the several companies of airlines, where by options for talking over the other is been the best outcome to reduce the competition.
RECOMENDATION
The regulations pertaining to the airline industry are quite transparent and need less scope of improvement.
The target market should soon hit the lower income groups as well though efforts are been done for the same but not internationally.
As per the flights schedules, weather and other environmental factor the frequency of flights should be increased.
Negotiate long-term contracts with service providers to lock-in incremental fees and surcharges as such.
Evaluate the feasibility of ocean freight and for some portion of international deliveries which hold importance.
Establish and develop high Quality Agreements between appropriate stakeholders
Develop a “Plan B” which means to hit the target market and serves the industry well.
Further scope of improvement from the government of motivating the online booking strategy.
Government intervention should be slightly reduced and proper taxes should be charged and reviewed.
Strengthen and change the impact and regulation wherever necessary.
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