Source http://qna.indiatimes.com/General/Why_our_Avation_industry_is_in_deep_trouble%3F.html

Ans 2 Indian aviation industry has been under pressure ever since oil prices started spiraling upwards in 2006-07. With intense competition in the market, they were not able to increase the prices of their tickets. They were thus forced to suffer losses, and raise fuel surcharge to reduce them. This had detrimental impact on the number of passengers. Many people switched back to the railways and other means. This started worsening the situation for airline players. the situation went from bad to worse with the onset of the global slowdown, which is still not yet over.

With India showing relatively better signs of a quicker economic recovery, coupled with low oil prices, seemed bringing back better times for the carriers, but upwards curve of oil prices has come as dampener once again. ATF price have hiked by close to 12 percent, and consequently, Kingfisher and Jet Airways have decided to raise fuel surcharge. Air India is supposed to follow. Passenger load factor of planes are not as desired, and is quite unimpressive for the largest player Air India. Situation is grim, and the Indian aviation minister Prafulla Patel did ask the airline companies to change their business models to adjust to the new environment.

 However, there is one insider who does not feel all hell have broken loose on the aviation sector. The man is the chief executive officer of SpiceJet Sanjay Aggarwal. He has been quoted saying in a media report that typically aviation sector globally grows at 1.2 to 1.8 times that of GDP. It mans aviation sector should grow at anything around 13 percent. But it was growing at 25-30 percent, something Aggarwal says was unable to sustain in the long run.

Aggarwal says the industry should continue growing at 13-14 percent, and when industry grows at this rate, low cost carriers like SpiceJet would grow at 16-17 percent.

He has been quoted saying: "The sky is definitely not falling."

Sky should not be falling, but aviation sector seems definitely not in good shape. Salaries of the staff of Air India have been delayed to ensure the carrier has funds in its kitty to sustain its daily operations. Jet Airways is planning to shelve some employees and raise some resources through leasing off its aircraft. Almost all players (perhaps except Air India) has postponed plans for taking the delivery of new aircraft. Kingfisher is desperately looking to raise new resources, and is lobbying hard to allow foreign carriers to buy stakes in the Indian ones.

Perhaps the cue should be taken from what the Minister said about revamping of business  models. Paramount Airways, for instance, remained healthy despite toughest of times. Probably, SpiceJet CEO is already working on new business models. This is, in a way, visible the way the carrier has increased its market share from 8 percent in 2007  to over 12 percent in 2008. Perhaps this gives him confidence even in this hour of crisis. Aviationplayers must realize they need their flights at maximum capacity to make a profit. At the moment this is not happening. They need to strike a balance of ensuring people come in more numbers. The day they get it, it will be the "business model" they should adopt.