AirAsia India Economic Prospects

8/11/2019 AirAsia India Economic Prospects

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Entry of Air Asia in airline sector in India

How it would change the business dynamic

"Now Everyone Can Fly".


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Participants Group 9

Gaur Hari (39) Abhinav Garg (19)

Samit Daragari (09)

Rohit Sarangi (49)

Shweta Thapliyal (59)

Sumedh (29)


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Overview

Indian Aviation Industry Evolution Air Asia and its entry to India

Key Strategies of Air Asia

Porters Chart Analysis

Business Opportunities of Air Asia

Impending Challenges

Change Dynamics & Conclusion


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Indian Aviation industry-Evolution


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Indian Aviation Industry

India is currently the 9th largest aviation mar

Handling 121 million domestic and 41 million

international passengers

More than 85 international airlines operate to

Indian carriers connect over 40 countries.


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Market share concentration


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Market Structure and Implications

Oligopoly market structure

Small number of large firms

Identical or differentiated products

Industry has significant barriers to entry

Firm is a price-setter

Strategy dependent on individual rival firms behavi


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A differentiated Oligopoly


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AirAsia: How did it start?

From two ageing aircraft and a USD11mil (MYR 40 million)becoming the worlds best low-cost airline

It started in 2001 with 2 old aircrafts, having bought the themaking AirAsia from its Malaysian owner DRB-Hicom, for a t

MYR1 (USD0.25 cents) and MYR40 million (USD11 million) i


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How did they do it?

a) Low faresi. Committed to low fares

Their service targets guests who can do without the frills of service airlines in exchange for low fares


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ii. 25-minute turnaround

Less time on the ground and more time in the air means themost of every flight through high aircraft utilisation, lower cogreater airline and staff productivity


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b) Low cost carrier model

i. Self automation The more we DIY (self check-in), the more they save on ope

coststhat means lower fares for us

ii. No frills

Pay only for what you want (Just essentials). If you want addflight comfort, just add-on


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iii. Cost-saving innovations

Constantly on the lookout for the latest advancement in savare the first airline to use the new Airbus A320 aircraft insta

sharklet wing tipsto lower wind drag and provide better fconsumption


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180 single class seats (No business class), hence more guestshare the cost of the flight

Operating on one aircraft type allows for streamlinedmaintenance

Board and disembark guests with steps instead of an aero-


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Joint Venture in India

Announced on 19 February 2013, the airline is a joint ventuAsiaBerhad holding 49% of the airline, TataSons holding 30Telestra Tradeplace taking up the remaining 21% in the airlin
http://en.wikipedia.org/wiki/Air_Asiahttp://en.wikipedia.org/wiki/Tata_Grouphttp://en.wikipedia.org/wiki/Tata_Grouphttp://en.wikipedia.org/wiki/Air_Asia


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Why India? The Indian market certainly has potential. Less than 3% of In

as a major LCC in this region, entry into India is a natural cho

Indias market size is projected to multiply in the next ten yecurrent 60 million to 450 million passengers

Indias smaller cities are underserved

There is a lack of innovation in pricing and strategy, and 20%empty on most flights


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Streamline Operations:

Making processes as simple as possible

Lean Distribution System:

Wide and innovative range of distribution channels

Point to Point Network:

Applying the point-to-point network keeps operatio

Safety First:

Partnering with most renowned maintenance provid

Complying with safety standards of airline operation

Key Strategies

K S (C )


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High Aircraft Utilization:

Fastest turnaround of only 25 minutes

Low Fare, No Frills:

Choice of customizing services

Using one type of aircraft.Smaller inventory, Better purchasing power.

Reduction in training time

It also cut down the learning curve.

Eventually reducing cost.

Key Strategies (Continue..)


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Porters Chart


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Air Asia 5 Forces AnalysisRivalry among existing competitors:

As Portersgeneric strategies (1985), Airline operation can divide into two kinds of styles: differentiation and cost leadership. So

provide a good service to reach differentiation and the others will atte-mpt to reduce the price and Air

Asia is position as them. So industry rivalry is moderately high

as the price competition is really popular in the airline industry.

Threat of new entrants:

Medium. Vistara , a JV between Tata sons & Singapore airlines. It will further divide the market and might lead to price war amo

Bargaining of Suppliers:

Fairly High. Boeing & Airbus are its sole airplane provider. Uncertainty in global price of Airplane Turbine Fuel (ATF)

Bargaining of Buyers:

Threat of Substitute Services:

The power of buyer is moderately high due to almost no switching cost for customers. Customers can compare each airline by th

information about the price and service is quite clearly

Risk of losing Passengers especially those travelling by economy class to shift to 1st/2nd AC train travel.


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Air Asia's USP is in its low fares all year round.

AirAsia's unit costs are significantly lower than Indian carriers due to use of low cost term

distribution costs, single aircraft type operation and higher aircraft utilization amongst otcosts or cost per available seat kilometer (CASK) refers to expenses incurred on flying or empty) over a kilometer

No domestic carrier can fly international before completing five years of operations in domarket.

Advantages of Air Asia Challenges in India

Relatively very low cost structure and tax High cost structure and taxesAir Asia's unit costs are significantly lower Indian carriers unit cost are more by a

30%

They dont leave any major cities in the countries

they operate

Mumbai and Delhi airport operators b

fees are very high

Air Asia's unit costs are significantly lower than Indian carriers due to use of low cost terminal

distribution costs, single aircraft type operation and higher aircraft utilization amongst others.cost per available seat kilometer (CASK) refers to expenses incurred on flying a seat (filled or e

kilometer

No domestic carrier can fly international before completing five years of operations in domest


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I di A i ti i d t


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Marketgrowth

Expansion potential

Economic growth

Large untapped IndianmarketTier 2 andTier 3 cities

Geographicallocation

Crossroads bEurope, Mid

Asia Pacific

Lowercosts,higherquality

Improvement in airportsand airspaceinfrastructure

Indigenous training and

maintenance facilities

Indian Aviation industry -opportunities


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BY 2020

121 MILLION 336 MILLION

41 MILLION 85 MILLION

Domestic Passengers

International Passengers

According to International Air Transport Associations (IATA) Airline Industry F2012-2016, India's domestic air travel market would be among the top five gexperiencing the second highest growth rate at CAGR of 13.1%.


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AirAsia India - Opportunities

Indians prefer

budget airlinescost conscious

Growing middle

class

Long haul flightsExpand on short

haul international

routes

One stop service tovarious

destinations acrossAsia


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Changing Dynamics AirAsia (India), Quickjet Cargo Airlines, Ligare Aviation and LEPL Projects (Air

are given permits

Giving permission to new airlines will mean a lot of capacity being added bynext fiscal.

Without addressing key issues that impact the viability of running airlines, gadditional capacity will further deteriorate industry financials and hurt the esystem

Entry of New airlines will make conditions for existing players more difficult


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Flip Side of this Traffic is going to increase in the years to come which will be able to accom

more airlines

Traffic at all Indian airports will shoot up..

By 5.3 per cent in terms of passengers carried and

By 4.3 per cent in terms of aircraft movements

The gap between the potential and current air travel penetration is huge in

Indias air trips per capita a year ratio is 0.04

Emerging economies like China and Brazil (0.3 air trips).


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Conclusion Industry dynamics are best left to market forces.

Some of the new airlines may prove to be trailblazers

Others may simply fold up or get acquired by larger players

AirAsia India Economic Prospects

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