Thursday, August 23, 2018

Privatisation takes off in India’s airline industry

India commenced the process of privatising its state-owned enterprises (SOEs) in the late 1980s and early 1990s. The deregulation of air transport was part of a broader economic liberalisation agenda that opened many industries to private domestic and foreign investment. Three decades later, the private sector now contributes more than 80 per cent of India’s GDP.

In 2016, S&P Global Ratings reported that India’s top 200 companies — and particularly the top private companies — outperformed their Chinese peers in several financial indicators despite India’s infrastructure bottlenecks. The relative size of the Indian private sector is much larger than the Chinese private sector. Private firms account for 75 per cent of the net debt and earnings before interest, taxes, depreciation and amortisation of the top 200 companies in India, while this figure is less than 20 per cent for the top 200 Chinese companies.

India’s civil aviation industry has been on a high-growth trajectory for the last decade. Between April 2008 and March 2009, Indian airports handled 109 million passengers. This number was 309 million in the 2017–18 financial year — an increase of 184 per cent. With such a dramatic growth rate, it is expected that India will become the third-largest aviation market by 2020 after the United States and China.

India’s airline sector leads the privatisation and internalisation of Indian industry. The domestic market is now dominated by private carriers. Major private carriers like Jet Airways, SpiceJet, IndiGo, Vistara, AirAsia India and Go Air control a market share of more than 85 per cent in India. Since the introduction of competition from private carriers in the 1990s, India’s national carriers have lost ground to their private counterparts. The national carrier, Air India, only commands a market share of about 12–13 per cent today.

23/08/18 Yahua (Shane) Zhang, University of Southern Queensland, Anming Zhang, University of British Columbia, Kun Wang, University of International Business and Economics/East Asia Forum

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