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Effect of Inflation & Deflation On Aviation Sector

The document discusses the impact of inflation and deflation on the aviation industry. Inflation in the aviation industry is caused by increasing oil prices, as the industry is heavily dependent on jet fuel. Rising fuel costs have resulted in airlines facing additional costs of Rs. 2220 crore and increasing fares by 18-20%. Deflation decreases demand as people have less incentive to purchase goods, which can lead to layoffs, unemployment, lower salaries, and decreased standards of living in the aviation industry. Both inflation and deflation present challenges to the growth and stability of the aviation sector.

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2K views

Effect of Inflation & Deflation On Aviation Sector

The document discusses the impact of inflation and deflation on the aviation industry. Inflation in the aviation industry is caused by increasing oil prices, as the industry is heavily dependent on jet fuel. Rising fuel costs have resulted in airlines facing additional costs of Rs. 2220 crore and increasing fares by 18-20%. Deflation decreases demand as people have less incentive to purchase goods, which can lead to layoffs, unemployment, lower salaries, and decreased standards of living in the aviation industry. Both inflation and deflation present challenges to the growth and stability of the aviation sector.

Uploaded by

KVJ
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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IMPACT OF

INFLATION AND
DEFLATION ON
AVIATION
INDUSTRY
Inflation & Deflation
Causes of Inflation

 Demand Pull Inflation

 Cost Plus Inflation


Causes Of Deflation

DECREASING MONEY
SUPPLY

INCREASING SUPPLY OF
GOODS

DECREASING DEMAND FOR


GOODS

INCREASING DEMAND FOR


MONEY
Overview
Reasons For Boom

 Foreign equity allowed

 Low entry barriers

 Attraction to foreign shores

 Rising income levels and demographic


profile
 Untapped potential of India's tourism

 Glamour of the airlines


Trends In the Aviation Industry

 Past trends

 Present trends

 Future trends ?
Type of Inflation

 SECTORAL INFLATION - The sectoral

inflation takes place when there is an increase in


the price of the goods and services produced by
a certain sector of industries.
Inflation in the Aviation
Industry
 Oil prices - Aviation Turbine Fuel (ATF)
1. India imports 70% of its oil

2. Increase in expenditure

o Distortionary taxes
1. Excise duty of 8 per cent
2. Local sales taxes ranging from 4 per cent to 39 per cent
3. Price of ATF in India is 60-70 per cent higher than international
benchmarks.
 Domestic traffic slow down &
Airlines pile up losses

 Higher operational and overhead


costs for the airlines.

 Restriction towards expansion


 Short haul
flights traffic
drop

 Cost cutting
Due to the hike in the oil prices the whole airline
industry is facing an additional burden of Rs 2220
crore and the rest because of a rise in sales tax
imposed by states, route navigation and landing
charges and the fluctuation of the Indian rupee. This
has lead to a proposed 18-20 per cent increase in fares
of major airlines.
Deflation in aviation industry
 Main effect of deflation is that it gives people a huge incentive not

to buy goods.

 Layoffs and closures - deflationary spiral (vicious cycle of

unemployment)

 Decrease in the salary (the pay packets are slashed, incentives

reduced, extra benefits reduced) leading to decrease in level of


motivation.

 Decreased standard of living

 No job generations
 No expansion projects
1. Leading to more unemployment , less money, less demand and more deflation.
Suggestion

 Expansion of capacity at existing airports

 Up gradation / modernization of Metro and Non-metro airports

 Development of new Greenfield Airports

 Up gradation of CNS/ATM facilities


 Private investment encouraged –both
in Airlines as well as Airports

 Foreign Direct Investment

 Air Cargo Market


Conclusion
 High growth

 Infrastructure - Current and future


demand

 Huge opportunity for private players


Thank You.

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