CASE STUDY

AIRASIA INDIA: CLASH FOR THE INDIAN SKIES

Apoorva SharmaAnoop Kumar SharmaAdarsh ChhajedRahul GuptaRushikesh N. C.

Presentation Outline Evolution of Indian Aviation News statements Indian Aviation Industry (overview) Macro Environmental factors Porters 5 forces SWOT Analysis PEST Analysis

Recent in News “Despite having started at least a decade later than Jet Airways,

IndiGo accounts for the lion's share in the domestic market” “The dogfight to watch in Indian skies will be between three players

(IndiGo, Spice jet and Air Asia)” “Indian skies are for LCC who have gained market share from their

fatter FSC cousins and will continue to down so going forward” “There is little to distinguish between LCCs and FSC economy class

products” “India’s domestic aviation has shifted to an almost 100%

low fares market” “Conditions may support the launch of new long haul LCC based in

India, AirAsia may be the first to take advantage” “GoAir could become India's first hybrid carrier, making it more

attractive to a potential foreign airline investor”

Indian Aviation Industry India’s domestic traffic up 13.9% year-on-year and international

traffic up 9.0% IndiGo market share soared to 36.4% by the end of the financial

year, widening the gap between itself and the second largest carrier, Jet Airways, which had a market share of 25.4%

Total international traffic to/from India grew at 9.0% in FY2015, Jet’s growth rate was around twice that at 20.6%, with the airline accounting for close to 75% of the incremental international traffic carried on Indian airlines.

New start-ups, which include an FSC (Vistara), an LCC (AirAsia India) and a regional carrier (Air Costa) all performed below expectations.

Macro Environmental factors

INDIAN AVIATION – SPREADING ITS WINGSI

Indian Aviation Industry

Players

Government IndiGoSpiceJetGoAirFuel SuppliersAirport authority

Strategy models

LCCFSCHybrid`

Porter’s Five Forces of IndustryThreat of New Entrants (High)-Saturated industry hence there is hardly any space for a new comer-High cost of entry-High Operating cost. (Fuel, Taxes, fees, Airport charges)-High cost of buying & leasing Aircraft.-Strong existing player

Threat of substitute (Low)-No perfect substitute for international carriers.-Domestic airlines can be substituted by cars, buses, trains & video call service

Bargaining power of supplier (High)-Aircraft is dominated by Boeing & Airbus.-Very less number of manufacturers of Boeing & Airbus-Aviation fuel is a commodity

Porter’s Five Forces of IndustryBargaining power of Buyer (High)-Large No. of players competing for same set of customers.-Large No. of players provide huge option for buyers

Rivalry (High)-Many Players -Intense price competition -High fixed cost-Low Marginal cost-Homogeneous product-Excess capacity

AirAsiaAirAsia Berhad

World’s best LCC Operates 22 countries spanning 100+ destinations

AirAsia IndiaGot the permit in March 2014Plan to offer travel at 35% cheaper than competitionWill Achieve Aircraft Utilization Rate of 16 hours & Turn-around time of 20minutes

SWOT AnalysisStrengthEffective top management Strong strategy and execution – plan on fuel hedging, buying low cost airbuses Strong brand name and joint venture with TATA, reputed name in INDIA Low cost model Single type fleet

WeaknessLimited human resourceHeavy reliance on ITRising fuel costRising labor cost

OpportunitiesLow PriceVast population/Strong DemandEnormous size and growing middle classCan target one million people traveling by train

ThreatsPolitical & Economical Factor Regulatory uncertainty of Indian govt.Competitor

PEST AnalysisPolitical

Open sky policy/ deregulation (+)FDI limits(+)Unstable government policies (-)

Economical

Growing middle class income (+)Expected GDP growth (+)Hike in average income (+)Growth in tourism 9% (+)Rising ATF price (-)

Socio – cultural

Growing middle class (+)Domestic leisure travel (+)Foreign tourist (+)Status symbol (+)Security issue and terrorism (-)

Technological

Modernized airports (+)Greenfield airports (+)Online ticket booking (+)Video conferencing (-)

Can AirAsia replicate the success story in Indian Skies?

Thank You!Thank You!

NOW EVERYONE CAN FLYNOW EVERYONE CAN FLY

LCC and FSC Low Cost Carrier (LCC) is an airline that has low fares and fewer

comforts. e.g. Indigo, SpiceJet and GoAir Full Service Carrier (FSC) is an airline that offers more comforts such

as in-flight entertainment, checked baggage, meals, more seat recline and legroom in the ticket price. e.g. Air India and Jet Airways

Estimated Profitability:

19

Market Share

Financial PerformanceI