22-01-2013, 09:57 AM
A PROJECT REPORT ON CHALLENGES FOR AVIATION INDUSTRY IN INDIA
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Introduction:
The last quarter of the twentieth century has seen vast change in the transport
sectors of many countries, imposing much dislocation on both people and
companies engaged in the provision of transport services. Some of the problems
have resulted from macroeconomic instabilities like the Asian financial crisis of
1997 and 9/11 in 2001 but most have been the product of changes within the
industry. These sometimes-harsh transformations have contributed much to
broader social welfare by strengthening exporters' competitiveness significantly, by making possible improvements in the variety and price of goods available to localconsumers, and by reducing the burden of transport on government budgets.
However, in the Western Hemisphere, North America Airlines have been
brutalized by these 21stcentury changes coupled with External shocks such as oilprice increases and more recently acts of blatant terrorism.
This paper will look at the Airline Transport Industry, worldwide examining trends that many small and large airline have been forced to do in order to survive
The Challenges Of The 21stCentury.
Century Transport Industry:
Transpor has not of course been unique; many other economic sectors have
faced the need for vast adaptation to new trends in the growth of the world
economy. Three underlying forces have been dominant:
• Globalization;
• Government budget constraints;
• Information revolution.
In the USA and the Caribbean many employees have been made redundant as a
result of the scaling down of operations of national and regional carriers. In
addition the rise of the Budget Carrier has forced many major carriers into
bankruptcy and in order to compete, they have had to forma they own budget
subsidiary airlines to compete. In the Far east almost all National and regional
airline have shares in regional budget airlines or own fully.
These forces show no sign of slackening. If the world economy can continue to
adapt successfully to them, then traffic will continue to increase strongly -- and
especially so in the developing and transition economies, reflecting both the huge poverty backlog to be overcome there and the higher GDP growth rates those countries are capable of. Indeed, just as falling relative costs of transport and communication have been a major cause of globalization and the growth it has generated, so the further service improvements that we in the transport sector .
Over half of the US markets are under 1000 miles
2 Sheng-Chen Alex Huang, An Analysis of Air Passenger Average Trip Lengths and Fare Levels in US Domestic Markets, Institute of Transportation Studies University of California a Berkeley, Working Paper UCB-ITS-WP-2000ñ
2. More than 60 percent of passengers have trip lengths under 1000 miles
3. On average, passengers paid 151 dollars for a trip length
4. In general, the number of passengers decreases with increasing trip length.
However, a secondary peak in the distribution occurs in the range between 2200 miles and 2800 miles due to coast-to-coast operationsGLOBAL THINKING RESEARCH & DEVELOPMENT
Air Transport Costs and Competition Regimes:
There is a close relationship between trade costs and the capacity of a country to
increase its exports and to integrate in the world economy. The relevance of
transport costs, as a component of trade costs, has been increasing as liberalization continues to reduce artificial barriers to trade. In many cases, the effective rate of protection provided by transport costs is higher than the one provided by tariffs (Clark et al., 2004; Hummels, 1999).
One of the most important and evident components of transport costs is distance.
In its simplest formulation, the gravity model for trade, introduced by Linnemmann
(1966), states that bilateral trade flows depend positively on the product of the
GDPs of both economies and negatively on the distance between them, which
stands for bilateral transport costs. The impact of distance on countriesí volume of trade is significant: recent estimates of the elasticity of trade volumes with respect to distance indicate that when distance increases by 10 percent, the volume of trade is reduced between 9 and 15 percent (Overman et al., 2003)
We find strong evidence
that investments in airport infrastructure and improvements in the quality of
regulation reduce air transport costs. In our sample, improvements in both
variables from the 2th percentile to the 75th percentile reduce transport costs by more than 20 percent. In addition, we find that a more competitive air transport marketóthrough Open Skies Agreementsó reduces air transport costs by around 8 percent..
During the 1980s and 1990s, many countries engaged in a process of reduction of tariff and non-tariff barriers to trade. As a consequence, the relevance of transport costs as a determinant of the ability of a country to integrate into the global economy increased significantly. At first glance, it could be argued that
governments cannot reduce transport costs because they are, to a great extent,
determined by exogenous factors, mainly distance. Even though it is true that
distance is an important explanatory variable of transport costs.
AIR FREIGHT IN ASIAN MARKETS: BOOM OR BUST?
The Bureau Of Transport Economics (BTE) Of The Commonwealth Of Australia in the year 200 did a detailed analysis of the issue we share some of the highlights of this study with you.
How did the financial crisis of 1997-99, which originated in the Asian region,
affect the supply of air freight capacity for Australian exports to Asian markets?
Did the contraction in passenger markets (and therefore also belly-hold cargo
capacity) leave Australian exporters without adequate air freight access to these markets? What is the outlook for the near-term future? These are the key questions addressed in this study.
The data analyses in this study were completed in August 1999. The analyses used the most recent data available (1998) to examine the impact of the crisis and to construct scenarios for 1999 and 2000. The scenario analyses reflect the outlook for the aviation freight industry from the middle of 1999 to 2000.
The study focused on twelve Asian marketsóHong Kong, Japan, Singapore,
China, Indonesia, South Korea, Malaysia, Philippines, Taiwan, Thailand, India and Vietnam.Export air freight capacity to Asian destinations is predominantly provided in the belly-holds of passenger aircraft. The aggregate supply of capacity to Asian markets is therefore likely to remain subject to the ebb and flow of passenger transport demand. While the financial crisis caused a significant contraction in passenger demand, it appears that most Asian markets are recovering quickly.
An economic analysis of belly-hold versus dedicated freight reveals that most
Australian freight is carried in passenger aircraft because it is cheaper for exporters and profitable for airlines. Passengers generally yield greater revenue than freight, and in most instances the operation of dedicated freighters out of Australia is not economically viable. Revenues from passengers easily cover costs on combination aircraft, allowing flexible pricing of belly-hold capacity.