Liberalisation of the airline industry in India

Abstract

In the post-World War II period, India nationalised its airline industry but it began to relax these controls in 1986. It has found no shortage of new entrants willing to add capacity into a system where supply-side constraints are regarded as the main impediments to a boom in airline travel. However, many of these new ventures have failed within a few years and the remaining carriers, including Indian Airlines, have had to increase fares in an attempt to improve their financial performance. This paper documents the changes in the regulatory system and analyses the strategies adopted by the airlines. It is concluded that inappropriate policies are constraining development of the industry, particularly the requirement imposed by the Government for the airlines to allocate their capacity on a mix of profitable and unprofitable routes.