INDIAN AVIATION INDUSTRY

WINGS

Presented By:Sheetal KumbhareAyush Gupta

Aviation sector…..

The sector deals with the transport of passenger and cargo from one place to another, using the aerial route.

Size :About 75 million Passengers$5.6billion

Growth Around 15% growth in last 10 years. Growth in 2009 : 0.7% Vision 2020 statement predicts handling 280 million customers by 2020

From then to now……….1953: NATIONALISATION OF AIRCRAFT INDUSTRYAssets of 9 existing companies transferred to two entities in the aviation sector controlled by the Government in Indian Airlines, primarily serving domestic sectors Air India, primarily serving the international sectors IMPLICATIONS Aviation became a preferred mode of transport for elite class Restricted Growth of Aviation Industry High Cost structure Underdevelopment of infrastructure

1986: Private Sector Players permitted as

Air taxi operators. Jet, Air Sahara, etc

started service.

1994: Private Carriers permitted to operate

scheduled services. Six operators granted

license, however only Jet and Air Sahara

able to service.

2003: Entry of low cost carriers. Air

Deccan, Spice Jet, Go Air, Indigo.

IMPLICATIONS Aviation is now affordable with check

fares and discount schemes. Various Operators with different business

model. Huge growth foreseen in Aviation

Players in Aviation Industry The players in aviation industry can be

categorized in three groups: Public players : Indian Airlines

Private players : Jet Airways, Kingfisher Airlines, Spice Jet, Air Deccan

Start up players : Omega Air, Magic Air, Premier Star Air & MDLR Airlines.

Major Players (Market Share)

Top 3 Players

Kingfisher

Dr. Vijay Mallya is the Chairman and CEO of Kingfisher Airlines.

Kingfisher launched its airline services in May 2005.

STRENGHTS: Strong Brand value & Reputation in the minds

ofcustomers. Quality of the service. First airline to have new fleet of airbuses.

WEAKNESSESS: High Ticket prices.

OPPORTUNITIES: The expanding tourism Industry.Untapped Air cargo market Under penetrated Domestic Market

THREATS:Competitors. Fuel Price Hike. Economic Slowdown/Recessions.

MARKETING STRATEGIES

Kingfisher Airlines is the first carrier in the country to offer live in-flight entertainment.

Kingfisher Airlines Ltd & Dish TV have joined hands to provide live in-flight entertainment on Kingfisher aircraft .

The service would enable airline’s customers to book air travel ticket after securing ‘ngpay’ application on their GPRS-enabled mobile handsets.

On the promotional front, Kingfisher has

signed up the latest diva of Bollywood

Ms.Deepika Padukone as the Brand Ambassador

Jet Airways Naresh Goyal is the founder & chairmanStarted Indian commercial airline operations

in May 1993.In April 2007, they acquired Air Sahara.

Jet Airways is an airline based in Mumbai. It is India's third largest airline after Air India and Kingfisher Airlines . It operates over 400 daily flights to 64 destinations worldwide. Jet Airways is widely regarded as India's biggest and best airline. It's a privately owned, full service airline that commenced operating in mid 1993. It's now captured almost 23% of the market, and has bases in Delhi, Mumbai, Pune, Kolkata, Hyderabad, Chennai, and Bangalore.

Jet Airways has won many awards for quality service. In particular, the airline is known for its outstanding in-flight service, food, punctuality, and baggage handling. Staff are extremely efficient and courteous, and will go out of their way to ensure that you're comfortable and well looked after.

Jet Airways operates on a code share basis with Kingfisher Airlines.

Kingfisher vs. Jet Airways

Kingfisher Jet AirlineKingfisher is the

latestAirline in India. Overall loss in June

2009 of $500 ml.Kingfisher acquired

46%in Air Deccan

• Jet airways is aexperienced Airline in India.• Jet airways had a slight profit in the 1st quarter of 2009.• Jet acquired Air Sahara

Jet Airways- MarketingStrategies

Jet Airways has partnered withUTV to launch the online contest

'Cannes Calling', whereinwinners will get a chance to

attendthe Cannes Film Festival 2009

along with a companion.Jet is trying to highlight its

product superiority.

Air India

Air India is state-owned, and administered as part of the National Aviation Company of India Limited - which was created in 2007 to facilitate Air India's merger with Indian Airlines. Air India is the 16th largest airline in Asia,[4] serving 25 destinations worldwide, and, with its affiliated carriers, serves over 100 cities.

Financial CrisisAround 2006-07, the airlines began showing

signs of financial distress. The combined losses for Air India and Indian Airlines in 2006-07 was Rs 771 crores. After the merger of the airlines, this went up to Rs 7200 crores by March 2009.[20] This was followed by restructuring plans which are still in progress.[21]. In July 2009, SBI Capital Markets Ltd was appointed to prepare a road map for the recovery of the airline.[22] The carrier cancelled the purchase of six Boeing 777-300ER in July 2009 [23] and sold three Airbus A300 and one Boeing 747-300M in March 2009 for $ 18.75 million to survive the financial crunch[24].

Strengths1. Strong brand name2. Oldest Airline3. Monopoly in certain international routes4. Government backup5. Rights to travel 96 destinations.6. Established infrastructure7. It has prime parking space/slots.

Weaknesses. Poor HR Strategies High Competition, Loss of market share High cost , poor cost control Inefficient usage of resources Bad Reputation, Poor Services Poor Aircraft maintenance Highest manpower ratio to aircraft Low feet size Poor reservation services Corruption in company

Macro Fundamentals that will driveAviation Growth…….

Market Size

Demographics

EconomicGrowth

Trade &Investment

India has a population of 1.1 billion with an estimated middle class of 300 million.

50% of the population is <25 years old. Therefore, the size of the economically active segment will continue to grow for a number of decades (unlike the developed countries and even China).

Average GDP growth of 6% p.a. sustained since 1991 and accelerating thereon. The first quarter of FY06/07 registered 9% growth, and the last Budget has established a target of 10%.

India has an increasingly open economy, with strong growth in international trade, healthy foreign exchange reserves and increasing foreign direct investment.

Rise of the middle class…..A socio-economic revolution is underway as the consumer profile becomes increasingly middle class……

Change in travel preferences will continue to drive growth……

CAPA Indian Domestic Market Forecast:Business vs Leisure/VFR

SWOT analysis & ComparisonSTRENGHTHS: Liberal Environment Modern Fleet High Quality Economic Growth Growing Tourism

WEAKNESSESS:• Airport Infrastructure• Airways Infrastructure• National Carrier• Deep Pockets• High Cost Structure• Skilled Resources

OPPORTUNITIES Market Growth Geographic Location Lower Costs and Higher Quality

THREATS• Middle East Aviation Terrorism

Importance of CRM Global passengers to rise by 5 billion in 2010 and more than 9 billion by 2025Global passengers to rise by 5 billion in 2010 and more than 9 billion by 2025

Passenger traffic in Africa forecasted to increase by at- least 7% and Asia –Pac Passenger traffic in Africa forecasted to increase by at- least 7% and Asia –Pac

by 6.8% a year, respectively, by 2010by 6.8% a year, respectively, by 2010

Asia will be the world’s largest aviation market by 2025Asia will be the world’s largest aviation market by 2025

40% of satisfied customers switch suppliers without hesitation40% of satisfied customers switch suppliers without hesitation

65% to 85% of customers who choose a new supplier claim to be satisfied and 65% to 85% of customers who choose a new supplier claim to be satisfied and

very satisfied with former suppliervery satisfied with former supplier

85% of customers claim to be satisfied, yet willing to switch to other suppliers85% of customers claim to be satisfied, yet willing to switch to other suppliers

In the 12 months before Feb 07, there was a 49.6% increase in the number of In the 12 months before Feb 07, there was a 49.6% increase in the number of

passenger complaintspassenger complaints

New government initiatives to develop India’s potential as the world’s fastest growing aviation market……

Changing regulation policies

Increased privatization of airports

The government is planning to raise the foreign direct investment (FDI) limit to 74% for non-scheduled airline operations, helicopter services and regional airlines using small aircraft. The current FDI ceiling for airline services is 49%.

In 1997 the Government of India published a policy document to open up existing airports to domestic and foreign private investors in order to meet the significant costs involved in developing India’s airports to keep pace with the growth in air traffic. In Sep 2003, Govt leased out Delhi and Mumbai airports to the private sector as part of its extensive modernisation and growth plan for the sector.

CONTINUED………Growing Infrastructure developments

Mumbai Airport - Planned investment of US$1.6 billion by 2020, of which US$1.3 bn will take place by 2014  

Delhi Airport - Planned investment of US$764 million by 2014 and USD$.7 billion by 2020

Kolkata Airport - Modernisation will be led by the Airports Authority of India. Total project cost is estimated at US$360 million. 

Hyderabad & Bengaluru Airports - Total investment of US$1.1 billion dollars. Both airports have commenced commercial operations in April 2008.

Growing Infrastructure developments

35Non-Metro Airports - Development of 35 non-metro airports will proceed at an estimated cost of US $ 1.2 billion. City side development will require a further US$350 million, with the modernisation process to be completed by 2009.

North East Region - Development of following airports :• Pakyong Airport, Gangtok, Sikkim• Cheithu Airport, Kohima, Nagaland• Itanagar

Other Greenfield Airports –• Mopa, Goa• Navi Mumbai. Planning Commission discussing 3rd Mumbai Airport.• Chakan/Rajguru, Pune, Maharashtra; Halwara, Punjab• Kannur, Kerala.• Hassan & Gulbaraga, Karnataka.

EXPECTATIONS OF THE INDUSTRY FROM GOVERNMENT…

Lowering taxes on aviation turbine fuel (ATF) which is 35% of the operating cost of airlines. As per international standards, it is 10-15% of the operating cost.

The industry’s wish list includes :The industry’s wish list includes :

Extending exemption of withdrawal tax on lease rentals of aircraft

Relaxing fringe benefit tax (FBT)

Removing service taxes on first and business-class travellers.

The Indian aviation sector’s double-digit growth has been the fastest in the world. But the airlines have not made much out of the profitless growth, with most players stepped deep in red.

Reduction in landing charges – In India low cost carriers (LCC) pay the same as full service airlines. As per international standards, it is lower for LCCs.

The growth opportunity in Indian Aviation…..

..

India’s airports handled 71million domestic passengers In 2006/07, posting growth ofalmost 40% year-on-year, andover 25 million internationalpassengers, up approx 15%.

Growth is underpinned byeconomic expansion, increasedcapacity and price stimulationresulting from increased competition.

“Centre for Asia Pacific Aviation projects domestic traffic in India will grow 25-30% p.a., and international by 15% p.a. until 2010”

OUTLOOK INDIA 2020……

The growth of India’s aviation sector has the potential to absorb up to US$120 billion of investment by 2020.

However, we must close the gap between the demand for aviationservices and the ability of our aviation system to meet that demand.

India must prepare a blueprint for the expansion of system capacity whilst maintaining safety, security and the environment.

India must develop a roadmap for infrastructure development beyond 2010.

Job in AviationThe boom in the aviation sector is likely to generate nearly 2.5 lakh jobs by the year 2014.

The study says that the civil aviation sector is also set to become a Rs 55,000-crore industry by the same time.

The industry is expected to add 130 airliners to its current fleet of 270 airliners, which would, in turn, increase manpower demand