Asian Journal of Pure and Applied Mathematics 1(1): 16-26, 2019; Article no.AJPAM.138 Comparison of Performance of Indian Aviation Service Providers Using Multi-criteria Decision Models Mihir Dash1* 1Department of Quantitative Methods, School of Business, Alliance University, Chikkahagade Cross, Anekal Road, Anekal, Bangalore-562106, India. Author’s contribution The sole author designed, analysed, interpreted and prepared the manuscript. Received: 13 June 2019 Accepted: 14 September 2019 Original Research Article Published: 19 September 2019 _______________________________________________________________________________ Abstract The objective of this study is to compare the performance of players in the Indian aviation industry. The performance indicators for aviation service providers considered in the study include market share, operational efficiency, punctuality, reliability, and customer satisfaction. The study uses the multi-criteria decision models Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS) and Analytic Hierarchy Process (AHP) to benchmark performance in the Indian aviation industry. The sample selected for the study comprise the top seven aviation service providers, viz. Indigo Airlines, Jet Airways, Air India, Spice Jet, Go Air, Air Asia, and Vistara. The results of the analysis would enable the aviation service providers to identify their strengths and weaknesses, and take appropriate steps to improve their performance. Keywords: Indian aviation industry; performance; multi-criteria TOPSIS and AHP. 1 Introduction The Indian aviation industry is classified into three main segments; namely, scheduled air transport services, i.e. services between two or more places operating according to a published timetable (including domestic and international airlines); non-scheduled air transport services, i.e. chartered flights, where the operator is not permitted to publish a timetable or to issue tickets to passengers; and air cargo services, i.e. air transportation of cargo and mail within India, either on a scheduled or non-scheduled basis. The industry is further subdivided into public players and private players. The evolution of the ‘modern’ Indian aviation industry started in the late 1990s, with a rapid and dramatic transformation due to the open-sky policy adopted by the Indian government under Liberalisation. Subsequently, with the entry of private players, Indian Airlines, the dominant player at the time, gradually lost its market share to the private airlines. The Indian aviation industry today is dominated by private airlines such as Indigo, Jet Airways, Spice Jet, and Go Air. _____________________________________ *Corresponding author: E-mail: [email protected], [email protected]; Dash; AJPAM, 1(1): 16-26, 2019; Article no.AJPAM.138 Domestic flights are the largest segment of the airlines industry in India, accounting for 76.9% of the industry's total volume; the international flights segment accounts for the remaining 23.1% of the industry. Further, airlines are classified as low-cost carriers and full-service carriers. Low-cost carriers, also known as discount airlines or low-cost airlines, are airlines that offer lower fares in exchange for fewer passenger comforts. Low-cost carriers have had a great impact on the aviation industry [1]. The deep market penetration of low-cost airlines caused conventional carriers to cut flights, close hubs and even abandon service to some cities. Some of the low-cost carriers in the Indian aviation industry include Indigo, Spice Jet, and Go Air. Full-service carriers, on the other hand, provide a wide range of additional comforts, such as entertainment, food, drinks, and so on. There is room for growth in the full-service carrier segment as increasing prosperity leads to demand for quality in-flight services. Some of the full-service carriers in the Indian aviation industry include Jet Airways, Air India, and so on. Some of the new entrants in the industry include Air Asia, Vistara, and Air Costa. As of Dec’ 2015, the top seven players in the Indian aviation industry were: Indigo Airlines (36.7%), Jet Airways (22.5%), Air India (16.5%), Spice Jet (11.6%), Go Air (8.6%), Air Asia (1.7%), and Vistara (1.3%). The seven-firm concentration index was 98.8%, and the HHI = 0.2335; thus, the market can be considered to be moderately concentrated, i.e. a small number of players dominate the market. 1.1 Macro-environmental factors The Indian aviation industry is one of the fastest growing aviation industries in the world, with a passenger revenue growth of 20.5%, followed by China (12.1%) and Russian Federation (8.8%). Some of the driving factors for the growth and expansion of the Indian aviation industry include the low-cost carriers, modern airports, foreign direct investments in domestic airlines, information technology interventions, and a growing emphasis on regional connectivity. Currently, the Indian civil aviation industry is amongst the top ten in the world, with a market size of around US$16 billion. India has a vision of becoming the third largest aviation market by 2020, and the largest by 2030. The airline industry operates in a highly regulated political environment favouring passengers over the interest of the airlines. This is because passenger safety is paramount, and political establishments have made strict regulations to prevent safety issues and terrorist hijacking. In recent years lawsuits have increased against airline companies from customers as well as workers. International airlines are seriously affected by economic and political relations between countries. If there is high tension and an unstable relationship with other countries, then the air traffic falls due to safety concerns of passengers (e.g. between India and Pakistan). The incidence of terrorist attacks generally adversely impacts air travel; e.g. the 9/11 World Trade Centre bombing and the bomb attacks at several key European airports. Another factor is the spread of infectious diseases such as ebola, SARS (Severe Acute Respiratory Syndrome), and MERS (Middle East Respiratory Syndrome). Further, events such as the recent disappearance of Malaysian airline flight MH370 also tend to adversely affect the global airline industry. Another political factor faced by airline companies is corruption. Getting the requisite permits and licenses involves the payment of bribes, and there is high intervention by the government in this aspect. In fact, the public airlines suffer the most from governmental interference, as they have to make special considerations with respect to selection of routes, free seats to ministers, and so on, which private airlines are not obliged to do. The public airlines are also subject to old labour regulations causing strong labour unions, affecting their flexibility in decision making and quality of service. The government has taken up many initiatives for the aviation industry. The FDI norms have been relaxed to 74% to further stimulate foreign investment in the industry. FDI inflows in air transport stood at US$ 542.55 million during the period 04/2000 - 11/2014. The Airport Authority of India (AAI) is undertaking to develop an estimated number of about 500 airports that would be required by 2020, in collaboration with state governments and private parties through different Private-Public-Partnership models, with substantial state support in terms of concessional land allotment, financing, tax holidays and other incentives. The government has also taken several steps to encourage foreign tourists, including renewing ties with several 17 Dash; AJPAM, 1(1): 16-26, 2019; Article no.AJPAM.138 countries and enabling visa on arrival by digitising the visa process. In the longer term, the government is taking steps to privatise the public airline Air India by forming a committee comprising bankers, aviation experts and technocrats. The aviation industry is highly sensitive to several economic factors. Airlines have to cope with declining passengers, high fuel prices, competition from low-cost airliners, labour demands and soaring operating and maintenance costs. Also, air travel is a highly seasonal business, and is severely impacted by business cycles. During boom periods, there is an increase in the demand of flight travel, so prices tend to rise. However, during recession the demand for flights decreases, forcing airliners to reduce prices to attract customers. This reduction in prices and increasing costs such as operating and maintenance costs, insurance costs, fluctuation in fuel prices, and so on will have negative impact on airline industry. During recession many of the airlines might end up bankrupt or suffer heavy loss if they are not able to manage their costs. Airliners are yet to fully recover from the global financial crisis of 2008-09 and the subsequent global slowdown. There has been a shift in the profile of the passengers travelling in airlines. Due to the reduction in air fares with the entry of low-cost carriers and the increase in income, a larger proportion of air travellers are economy passengers, interested in the basic services only. Thus airlines must analyse this shift and deliver basic services at competitive rates. Additional services, such as food and beverage services, may be provided at a premium. Technology has impacted airline business positively. With the help of internet, many of the airline companies are now providing internet-based services such as online ticket booking, updated flight information, handling