Air Deccan revolutionalized low cost air travel and created
the low cost carrier subcategory in Indian aviation through
innovations in operations and marketing. However, in spite
of gains in market share, the airline is incurring losses
which has led to equity injection by Kingfisher airlines
and repositioning of the airline from low cost to premium
low cost by the new management. The case outlines the challenges
in becoming profitable and the internal and external managerial
issues related to the same. Even though there was an improvement
in the performance improvement indicators, financial and
operational achieved by the carrier post acquisition, the
issue of sustainable profitability still remains.
The Aviation Industry in India is one of the fastest growing
sectors in the world. The Indian aviation sector was characterized
by a high degree of government control prior to 1990. There
were only two players in the Indian aviation sector—Air
India and Indian Airlines—both of which were owned
and controlled by the Indian government. Indian Airlines
provided services within India and to some international
destinations while Air India catered only to international
destinations.
The liberalization of the aviation sector began in 1990
with the private players being allowed in the market. The
Indian Union Cabinet changed the aviation policy on December
29, 2004 and permitted Indian scheduled carriers with a
minimum of five years of continuous operations and with
a minimum of 20 aircrafts in its fleet, to operate scheduled
services to other international destinations (this policy
is under review currently). By 1995, private airlines like
Jet Airways, Sahara, NEPC Airlines, East West Airlines,
ModiLuft Airlines, Jagsons Airlines, Continental Aviation,
and Damania Airways controlled more than 10% of the domestic
air traffic of which only Jet Airways and Sahara managed
to survive while Indian Airlines, the government controlled
domestic carrier, which was the market leader in the Indian
air travel industry, started to lose market share to Jet
Airways and Sahara.
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