An Examination of Air India's Under Performance in India Aviation Industry
Aviation Industry in India
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Transcript of Aviation Industry in India
AVIATION INDUSTRY IN INDIA
CONTENTS
Background and history of Aviation in India
Rise of Low cost carriers Civil aviation administration and
Airport infrastructure Domestic Airline operating matrix Recent turnarounds in Aviation
industry Suggested Policy Changes
BACKGROUND AND HISTORY
Upto 1986 The first commercial flight in India was made on
Feb 18,1911 Birth of Air India International Ltd There were 8 companies operating within and
outside the country at the time of independence Nationalisation of airlines via the Air Corporations
Act 1953, which gave birth to Indian Airlines and Air India
Indian Airline Industry from 1986 – 2003 Entry of private sector players Air Corporation Act was repealed and in 1995 and
concept of scheduled carriers introducedContd..
BACKGROUND AND HISTORY Indian Airline Industry from 2003 – 2006
Duopoly of Jet and Sahara as private carriers Entry of Air deccan and concept of low cost carriers
(LCC) Entry of new LCC players
LCC Market share
Indian Airline Industry from 2006 onwards 2007 the year of marriages in the Indian skies IA-AI, sahara – jet , Kingfisher and Airdeccan
INDUSTRY EVOLUTION- MAJOR MILESTONES
RISE OF LOW COST CARRIERS International origin of LCC : US Airline
deregulation Act 1978 Entry in Indian context : Air Deccan in 2003 and
later subsequent players like spicejet, Indigo, Go Air, jet airways, kingfisher airlines
The following table shows some of the LCC strategies
CIVIL AVIATION ADMINISTRATION AND AIRPORT INFRASTRUCTURE
The Ministry of Civil Aviation of the Government of India regulates aviation in India.
Directorate General of Civil Aviation investigates aviation accidents and incidents.
Airports Authority of India manages most of the airports in India. The AAI manages and operates 126 airports and 329 airstrips including 16 international airports,89 domestic airports and 26 civil enclaves.
DOMESTIC AIRLINE OPERATING MATRIX - REVENUES
DOMESTIC AIRLINE OPERATING MATRIX – COSTS AND EBIT
RECENT TURNAROUNDS IN AVIATION INDUSTRY
Cost Increasing factors Rising Fuel(ATF) costs Rupee depreciation High interest costs on increased debts High Airport (Aeronautical) charges Poor infrastructureRevenue Pax growth moderation Diminishing margins
RISING COSTS
Fuel CostThe impact of rising fuel cost can be seen from
the following exhibit which is fuel cost as a % of Gross sale for domestic airlines.
RISING COSTS
ATF price trend (Mumbai, Rs/Klitre)
Rupee Depreciation
MODERATING REVENUES Domestic Airlines- Gross sales growth(% YOY)
Reported PAT(% of Gross sale)
FALLING EBITDAR
If we take example of a major domestic carrier Jet Airways the trend in EBITDAR is as follows
SUGGESTED POLICY CHANGES
HOW or WHY ???
SUGGESTED POLICY CHANGES
Direct ATF Import : Benefit of tax differential
ATF tax structure in India
Difficulties in importing ,storing and transporting ATF
Stress on working capital of carriers.
FDI IN AVIATION Factors that support investment in Indian
Aviation sector
FDI IN AVIATION Factors against investment in Indian Aviation
sector
FDI IN AVIATION – CURRENT REGULATIONS
FDI – RISK OF PROMOTER STAKE DILUTION As airline stock have corrected significantly
over last two years ,fresh equity at current valuations will dilute promoters stake
The following graph shows the erosion in market capitalization of major domestic airlines (Rs. crs)
FDI – RISK OF PROMOTER STAKE DILUTION
Hypothetical projections of promoter stake post FDI
OTHER PROPOSALS
Lifting freeze on international expansion of private airlines
Financial assistance to the national carrier
THANK YOU