Air Deccan: The First Low Cost Airline in India

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Case Details:

Case Code : BSTR134
Case Length : 20 Pages
Period : 2003 - 2004
Organization : Air Deccan
Pub Date : 2004
Teaching Note :Not Available
Countries : India
Industry : Aviation

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Indian Civil Aviation Industry

The history of Indian aviation industry dated back to the early 1930s, when one of the leading Indian business houses, the Tatas established Tata Airlines. There was limited activity in the sector over the next two decades despite of eight more private companies entering the airline industry.

In 1953, the Air Corporations Act came into force and all the assets of the then existing nine airline companies were transferred to two corporations - Indian Airlines Corporation (IA) and Air India International (Air India).

While Air India offered international air services, IA offered domestic services. The Air Corporations Act 1953 prohibited any person or company to operate any scheduled air transport services from, to or across India. Therefore, two corporations enjoyed a monopoly status in the scheduled air transport services market. In 1962, Air India International was renamed as Air India Limited. In 1986, the winds of change blew and private airlines were allowed to operate chartered and non-scheduled services under an 'Air Taxi' scheme.

The scheme was introduced to boost tourism and augment domestic air services. The carriers were however, not allowed to publish time schedules or issue tickets to passengers. The government's aviation policy was progressively liberalized in the early 1990s.

In 1993, the Air Corporations Act 1953 was abolished, which put an end to the monopoly of IA and Air India in the scheduled air transport services market. After the abolition of the Act, there was a considerable change in the India government's aviation policy.

From March 1994, the market was opened to any company that fulfilled the statutory requirements of scheduled airline services (Refer Exhibit I statutory requirements). The government approved eight private carriers to start domestic operations. They were Jet Airways (JA), Air Sahara (Sahara), Indian International, Archana Airways, East West Airlines, NEPC Airlines, Modiluft and Damania Airways.

While Indian International was the first licensee after the open skies policy came into force, East West was the first scheduled airline to take off from the ground.

In 1995, the Airports Authority of India (AAI) was formed after the merger of the National Airports Authority (NAA) and the International Airport Authority of India (IAAI). The AAI offered infrastructure facilities to all airlines. There were five international airports – Delhi, Mumbai, Kolkata, Chennai and Thiruvananthapuram – for scheduled international operations by Indian and foreign carriers...

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