Porter's Analysis of Indian Aviation Industry

Analysis of the Indian Aviation Industry Using Porter's Five Forces

Competitive Rivalry within the Aviation Industry

The air passenger traffic in India has grown at an impressive rate. But

the problem is that capacity has grown at a much faster pace resulting

in price wars aimed at improving capacity utilization. When in February

last year, Spicejet offered seats at the rate of Rs.2013 every other

airline was forced to join the club .The result is extremely low profit

margins. The fact that none of the airlines operating in India except

Indigo has been able to post a profit in any single quarter in the recent

past adds credence to this claim.

Threat of New Entrants

Although aviation is a capital intensive sector, with the Government

allowing 49% FDI and the potential entry of Air Asia and Ethihad into

the Indian skies, the sector is poised to enter a state of flux. This was

evident in the decline in stock prices of both Spicejet and Jet Airways

following the FIPB approval of Air Asia's joint venture with Tata and

Telestra group. Availability of funds could prove to be the game

changer in the sector given its capital intensive nature. Airlines that are

unable to garner investment, foreign or otherwise could be hit hard in

the long run. DEEPAK MURALI 13P071

Threat of Substitute Products

In the Indian context the greatest threat to the civil aviation industry is

posed by the Railways. The Railways owing to its Government

ownership can afford to sell tickets at dead cheap rates. To put things in

perspective: an air ticket from Bangalore to Delhi booked three months

in advance would cost around Rs 4,500, while an air ticket booked one

day before travel would cost around Rs 1,000 . This makes a huge

distinction to the cost conscious Indian customer and is especially true

of the Indian domestic tourist who would rather spend the extra money

on