Indian airlines industry, which started in 1932, with Tata Airlines (Now, Air India), has come a long way since then, and is now one of the fastest growing industry. There are more than 1091 registered aircraft and about 450 airports in India. The Airport Authority of India (AAI), which is controlled by Ministry of Civil Aviation, is responsible for managing the Aviation sector in India. The growth of the industry is evident from the fact that Passenger output increased from 73 million in 2006 to over 175 million in 2013.. The Indian civil aviation industry is ranked in the top 10 globally with the size of industry being estimated at around US $16 billion, and according to different reports has the capacity to be the 3rd largest aviation …show more content…
Till Independence, several small aircraft companies started operating in India. But after independence, government of India decided to nationalize the aircraft industry by introduction of Air Corporation Act. Governments brought a share of 49% in Tata airlines, and also kept an addition investment option of 2% with it, but allow Tata Airlines to operate in India, by the name of India Airlines for Domestic and Air India International for International flights and made it the official airlines of the country. Thus, till 1990’s both the airlines dominated the Indian Aviation industry and enjoyed their monopoly power, but after 1991, with the introduction of liberalization policies, the Indian aircraft industry started to witness rapid changes. The industry become open to private players, with this, private player started their operation and the result was that from 15000 passengers in 1990, the carriage increase to around 2,50,000 by …show more content…
What is an Oligopoly and why Indian Domestic Aviation sector is an Oligopoly type of Market structure. Any oligopoly form of Market is where there is large number of buyer but few sellers present. They are selling a homogeneous or unique product. There are barriers to entry and exit in such type of a market form. Also, since barriers to entry are high, firm can earn super normal profit in the long run. Also the firms in oligopoly are Price setter, and not Price takers. Since there are very few firms, or few firms with large share, the action of one firm can have an impact on other. These types of firm often compete on other things like advertising, schemes, discount, service rather than price. The Indian Airline Industry is an Oligopoly because of having the above mentioned features in it, which we will be explaining in detail. The industry has small number of dominant players like Air India, Spice Jet, Indigo, GoAir. Have barriers to entry and exit, evident from the example of Kingfisher airlines, which find it difficult to exit the market. Also, most of them compete on different schemes, rather than pricing, which is evident from the fact of recent schemes of by SpiceJet, IndiGo, Air
This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.
Along these lines, the state of perfect competition that items must be indistinguishable from firm to firm is not met. The restaurant, apparel and shoe commercial ventures all display monopolistic competition. Firms inside those businesses endeavors to cut out their own particular sub industries by offering products or services not copied by their rivals. From numerous points of view, monopolistic competition is nearer than oligopoly to perfect competition. Boundaries to section and exit are lower, singular firms have less control over business sector costs and purchasers, generally, are learned about the contrasts between firm’s products. Monopoly and oligopoly are counterpoints to monopoly and oligopoly. Rather than being comprised of numerous purchasers and couple of buyers. These extraordinary markets have numerous dealers however couple of purchasers. The resistance business in the U.S. constitutes a monopoly; numerous organizations make products and services and endeavors to offer them to a particular purchaser, the U.S. military. A case of an oligopoly is the tobacco
Firms' Incentives to Avoid Price Competition in Oligopoly Markets In the UK a few, large firms dominate most industries. These industries are known as oligopoly markets. Oligopoly markets are an example of imperfect competition. It consists of a market structure in which there is a small number of large firms in the industry hence is relatively highly concentrated. Barriers to entry and exit are also likely to exist.
In lights of the PESTLE model, the political factors bring both opportunities and threats to Jetstar’s new proposal. Since this proposal focus on the Australia-India low price airline market, the analysis conducts involving Australia and India political environments. There are two potential opportunities in this political environment. Firstly, the Australian government has the incentive to boost the development of tourism between the two countries (Tourism Australia 2012). With the support of government, the start of the new route could be easier. For example, American government erects legislation to increase competition of the airport ‘by forcing these airports to increase the availability of scarce facilities’ (Williams 2015). Such legislations and regulations as well as financing investment or subsidies from government could directly help the airline company cut the cost. Similarly, Australian government could also have powerful intervention to influence aviation market. Thus, it is a big opportunity for Jetstar to the new route expansion if it acquires the
Monopolistic competition describes a market structure in which relatively many firms supplies a similar but differentiated product, with each firm having a limited degree of controls over price (Mastrianna, 2013). Monopolistic competition also definition with a large number of seller produces different products (Nordhaus and Samuelson, 2010). Monopolistic competition has many sellers to rival for the same group of customer.The major characteristic of monopolistic competition is product differentiation. Product differentiation means the product have either or imagined characteristics that identify the product as unique with their own brand of the product. For example, personal computers have different character such as speed, memory, hard disk, modem size and weight. Personal computers are differentiated sold; they can sell at slightly different prices in market (Nordhaus and Samuelson, 2010). A monopolistic competition is a free entry market. Firms can enter or exit the market without restriction until the economics profit were driven to zero on the market (Mankiw,
Operating an air - express transportation industry requires large capital investments, and therefore it can impede the entry of new firms into the industry. For one, Airborne has already its own set of aircrafts and even operate its own airport, and it would be hard for a new firm to compete with this.
An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies. Although firms in oligopolies have competitors, they do not face so much competition that they are price takers (as in perfect competition). Hence, they retain substantial control over the price they charge for their goods (characteristic of monopolies).
With only a few large companies across the globe (Boeing, MD, and Airbus), the commercial aircraft industry essentially exhibits the qualities of an oligopolistic competition with intense rivalry. Here is an analysis of competition in the commercial aircraft business using Porter’s Five Forces.
Tom, Y. (2009). The perennial crisis of the airline industry: Deregulation and innovation. (Order No. 3351230, The Claremont Graduate University). ProQuest Dissertations and Theses, , 662-n/a. Retrieved from http://search.proquest.com/docview/304861508?accountid=8364. (304861508).
Kingfisher Airlines (KFA) was founded by Vijay Malaya and he is the chairman of United Breweries group (UB group) in the year 2003. Its first airplane was launched from Mumbai to Delhi in 9th may 2005. It started as a premium business class airline company. The airlines have a tag line “Fly the good times”. At the launch of airline, Vijay Malaya said “we are committed to achieving our ambition of making Kingfisher Airlines, India’s largest private airline both in capacity and market share. The airline ushered in a new era of luxury in India’s domestic aviation sector and its brand new aircraft with stylish red interiors, and smartly dressed crew and ground staff. Kingfisher was the first Indian airline to have in-flight entertainment (IFE) systems”. (Malaya, 2005). Kingfisher airlines are one of the seven airlines which were awarded the rating of five stars by skytrax. It operates 400 flights daily including the regional and international services. In 2009 it gave the highest market share in Indian airlines industries, carrying more than 1 million passengers. The main mistake was lack of understanding of customer requirements and luxurious facilities in airlines. Organizations focus on reducing costs and usually just CEO’S and top level managers prefer business class travel. Rest of the staff mostly travels by economy class. Moreover, buying most expensive business class tickets doesn’t go down well, when seniors aim to project the image of walking the talk. Secondly, the company is facing financial crisis since Mid-2008. After merging with Air Deccan in 2007, it is a low-cost airlines, provides minimum frills to customers at reasonable rates. Th...
In the short run, oligopolies are. able to earn abnormal profits, but in the long run as well they are. able to sustain abnormal profits due to the barriers to entry and exit. Then the s The barriers act as a strong deterrent to firms that want to come in. the industry and " eat into" the abnormal profits and then exit the market.
Air India airline is one of the biggest airline in the India. It was established by the famous company TATA and since its incorporation. It has grown very well and has spread all over the world in the different destinations. It has become the reputable brand in the airline industry with having the operations over 152 destinations. It has link up connection in the 35 countries and it has currently having 137 fleets. This company becomes the public limited company in the 1946. The company has international and the local route and its performance is increasing day by day with the pace of the good growth as compare to the other airlines in the industries in the area and the channels in which this airline is working.
Jet airways India’s second major airline in terms of market shares after Indigo airlines based at Mumbai known as India’s economic capital in addition to being its India’s widest network with 3000 flights a day with 76 destinations worldwide, main operations are handle from Mumbai but secondary hubs are Delhi (Nation Capital of India) Kolkata and Bangalore, It has an international hub at Brussels Airport, Belgium.
Evolution of airline industry in India:- Civil aviation took its roots in India in December 1912 with the launch of the first domestic air route between Delhi and Karachi. In 1915, first Indian airline Tata Sons Ltd, initiated a regular airmail service between Karachi and Chennai. In 1953, the government nationalized the airlines industry, by enacting the Air Corporation Act. Subsequently, assets of nine existing airline companies were transferred to two new corporations - Air India International and Indian Airlines - creating a monopoly that perpetuated right up to 1993. In 1994, with the repeal of the Air Corporations Act, private carriers like Jet Airways were permitted to operate scheduled services, subject to fulfillment of certain criteria. However, some operators could not sustain and exited the business in 1997. The operating environment of the domestic airline industry underwent a substantial change between 1997-98 and 2011-12.
In India, one can never over-look the political factors which influence each and every industry existing in the country. Like it or not, the political interference has to be present everywhere. Given below are a few of the political factors with respect to the airline industry: