1. 1. Team : Gray Matter Mayank Agrawal - 9930840608 Ashwin Jain - 9971063087 Tejas Shah - 9833232218 Entry Strategy for Bon Avion The Consigliere 2.0
2. 2. SLIDE NO. SLIDE DETAILS REMARKS FILES 1 Demand & Cost Drivers Demand & Cost Drivers References - DGCA, IATA reports 2 Competitive Landscape Analysis of existing market players CAPA Aviation reports 3 Entry Strategy Details of aviation strategies to be adopted NA 4 Pricing Analysis of Yield Pricing model NA 5 Route Planning Factors affecting Route Planning 6 Scheduled Routes Details of Routes selected for operation NA 7 Income Statement 5 year Income statement with analysis 8 Breakeven Analysis Calculations regarding Breakeven point 9 Airline Launch Plan Five month launch plan NA INDEX
3. 3. Demand and Cost Drivers Competitive Strategy Route Planning Financials Cost drivers - demand for Air Seats Trade Real GDP GDP per capita Labor Force Network Structure Infrastructure Business Model Type of Service Regulatory Environment Tourism Disposable Income Component Costs as % of Total variable costs Driving Factor ATF (Airline turbine fuel) 40-60% Fuel Efficiency, Engine Option Maintenance 20-30% Age of Aircraft Lease Rentals 15-20% Tenure of lease Marketing 2-3% Online/Print Reservation, Online Sales 3-8% Commissions, Systems, ITES Network Upkeep Costs 3-5% Planning Navigation, Flight and routing charges 1-3% Planning HR 2-10% Training, Expat pilots, Outsourcing US Aircrafts 7,000 India Aircrafts 400 Passengers Airlines 84 Million a year Passengers Railways 8.4 Billion a year Market Potential Time taken in train Delhi Mumbai 16 hours Time taken in Flight Delhi Mumbai 02 hours Time taken in train Kolkatta Agartala 60 hours Time taken in Flight Kolkatta Agartala 45 mins. Costs Incurred by airlines
4. 4. Largest International network to support its domestic operations Advantage of being the national airline Highest penetration Large fleet & 108 employees per aircraft Air India Lowest Aircraft Maintenance cost Standard and uniform base fares Point to point model & Single fleet Same day returns Lowest turnaround time Best on time performance Sale & lease back model - procurement Indigo High fuel efficiency Experience and International tie ups Strong and Growing loyalty program Strong corporate tie ups Excellent customer experience Highest leg room and comfortable seat Jet Airways Predatory pricing Highest load factor Spicejet Premium Economy World class experience Full Service Multi cuisine food, other services Vistara Low fares Focus on Tier 2 connectivity Extra charges for Check In Baggage Air Asia Low fares Focus on Tier 2 connectivity Single fleet - 19 Go Air Demand and Cost Drivers Competitive Strategy Route Planning Financials Competitive Rivalry Supplier Power Threat of substitutes Buyer power Entry/Exit Barriers High ATF Fluctuations in international prices Aircraft 2 major players(oligopoly) Labor - Unions Low/Mid Train Bullet Train High Capital Initial Expendi ture Operati on costs Porters Five Forces 1 1 Low/Mid Fewer options Low supply of train tickets
5. 5. Low Operational Costs Leveraging Seasonal Traffic Multi sector flights covering seasonal high traffic destinations Example: Feb to November Delhi Bengaluru Dec to Jan Delhi-Goa-Bengaluru Single Cabin Class Maximum seat capacity 180-189 Minimum time in boarding Low turnaround time. Target 25-30 minutes High Load Factor: >75% Customer Relationship Initially offering free return flights instead of discounting Loyalty Program Strategic industry Tie Ups Standard and uniform fares thereafter Lower base fares on 2/3/4 month advance bookings Recruitment Recruiting staff from point of origin/destination to reduce hotel costs Minimum dependence on Expat pilots Fewer employees per aircraft. Target 95 per aircraft Red Eyed Flights Blue ocean strategy High aircraft utilization rates > 11 hours Covering longer distance routes, 3 hours and above Hub & Spoke - Point to Point Hybrid Model Taking advantage of low airport fee at Tier II/III airports Operating only on profitable routes Ensuring On time performance. Target 90% Single Fleet Low training costs for Pilot/Crew Learning by doing Bulk purchase/Lease discounts Leasing(Dry/Wet) 5 Aircrafts initially to ensure risk minimization. Purchasing aircrafts after 2 years of operations through Sale and Lease Back Model Low Maintenance Costs Young Aircraft Fleet A320 Neo Maintaining average age of aircrafts within 5 years Demand and Cost Drivers Competitive Strategy Route Planning Financials High operational efficiency of Cabin Crew and Ground staff through digitization of manual operations, both in flight and on ground
6. 6. Demand and Cost Drivers Competitive Strategy Route Planning Financials Choice of Aircraft 2/3/4 Month Low fares Last 2 week high prices Based on Number of days before flight 2 weeks 2 months prices BaseFare Number of tickets Tuesday Monday Morning Friday Evening Based on Day and time of the week Friday/Sa turday/S unday Day BaseFare Number of tickets Rest of the week Airbus A320 Neo with CFM LEAP Engine option 20% per seat fuel burn saving (approx. $250,000 a year) Low maintenance costs Capacity of 189 seats with single class configuration Faster deliveries within 2-3 years Pricing - Yield Pricing Limiting to seats to 180 enhance leg room Food and beverages in flight on demand @price 7Kg + 15 Kg Free Baggage Extra Baggage @250 per Kg Competitive pricing for cargo targeting e-tailing cargo companies Demand and Cost Drivers Competitive Strategy Route Planning Financials
7. 7. 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000 9000000 10000000 HYDERABAD KOLKATA CHENNAI BANGLORE MUMBAI DELHI POTENTIALITY MATRIX The strategic importance is gauged by the business activity, tourist destination and potential smart city. This matrix lists tier-2 & 3 cities according to their potential air traffic. The growth is measured in terms of year on year increase in the domestic passengers handled by the airport. These cities can play a role in our hub and scope model. HIGHLY STRATEGIC HIGH GROWTH LOW GROWTH LESS STRATEGIC GOA AHEMDABAD PUNE BHOPAL NAGPUR LUCKNOW AGARTALA VIJAYWADA TIRUPATI VISHAKAPATNAM COCHIN BHUBANESWAR JAMMU AGARTALA INDORE Demand and Cost Drivers Competitive Strategy Route Planning Financials *Data from DGCA Reports Monthly domestic passenger traffic at 6 busiest airports in India Delhi and Mumbai handle the highest number of domestic passengers. Bangalore, Chennai, Kolkata and Hyderabad follow them interchangeably These cities have an ever increasing demand and require a good frequency of cross flights.
8. 8. AIRC RAFT NO. ROUTE TOTAL MONTHLY PASSENGERS JOURNEY S PER DAY AIRCRAFT UTILISATI ON RATE MONTHS OF OPERATION ALTERNATE ROUTE TOTAL MONTHLY PASSENGE RS JOUR NEYS PER DAY AIRCRAFT UTILISATION RATE MONTHS OF OPERATI ON HUB 1 DELHI-MUMBAI- DELHI 472005 2 9.5 hrs Jan,Feb,Mar,A pr,Jul,Sep,Oct, Nov,Dec (9 months) (a)Delhi-Ahmedabad-Mumbai- Delhi (b)Delhi-Nagpur-Mumbai-Delhi (c)Delhi-Bhopal-Mumbai-Delhi 366177 272891 260653 2 2 2 11 hrs 12 hrs 12 hrs May June August Delhi 2 MUMBAI- BANGLORE- MUMBAI 270434 2 8.5 hrs Feb,Mar,Apr,M ay,Jun,Jul,Aug, Sep,Oct,Nov (10 months) Mumbai-Goa-Banglore- Mumbai 248404 3 10 hrs Dec,Jan Mumb ai 3 DELHI-BANGLORE- DELHI 278022 2 12.5 hrs Feb,Mar,Apr,M ay,Jun,Jul,Aug, Sep,Oct,Nov (9 months) (a)Delhi-Goa-Banglore-Delhi (b)Delhi-Pune-Banglore-Delhi 212021 261911 2 2 13.5 hrs 14.5 hrs Dec,Jan May Delhi 4 DELHI-HYDERABAD- DELHI 171440 2 11 hrs Jan,Feb,Mar,A pr,May,Jun,Jul, Aug,Sep,Oct,D ec(11 months) (a)Delhi-Hyderabad-Cochin- Delhi 108640 2 14 hrs Nov Delhi 5 DELHI-KOLKATA- DELHI 147849 2 9.33 hrs Jan,Feb,Mar,A pr,May,,Jul,Au g,Sep,Oct,Nov, Dec (10 months) (a)Delhi-Lucknow-Kolkata-Delhi (b)Delhi-Agartala-Kolkata-Delhi 137466 99717 2 2 10.5 hrs 15 hrs June May Delhi The routes have been selected by analysing the monthwise peaks in passenger traffic according to the DGCA reports for 2014-15 Demand and Cost Drivers Competitive Strategy Route Planning Financials
9. 9. Demand and Cost Drivers Competitive Strategy Route Planning Financials Income Statement 2017-2020 Income Statement For Bon-Avion Particulars-Rs in Crs 2017F 2018F 2019F 2020F Revenue 346.63 693.25 1039.88 1386.50 Operating Cost 329.04 651.14 966.31 1274.55 EBIT 17.59 42.11 73.57 111.95 Non-Operating Cost Marketing 8.77 8.68 12.88 13.60 Reservation, Online Sales 13.16 21.70 21.90 28.89 Network UpKeep cost 13.16 17.36 12.88 22.09 Navigation, Flight and routing charges 4.39 8.68 10.31 11.90 HR 8.77 13.02 14.17 18.69 Total 48.26 69.46 72.15 95.17 Profit -30.67 -27.34 1.41 16.79
10. 10. Demand and Cost Drivers Competitive Strategy Route Planning Financials Breakeven Analysis Bon Avion India 2017F 2018F 2019F 2020F Operating Profit 17.59 42.11 73.57 111.95 Net Profit -30.67 -27.34 1.41 16.79 Calculations for the cost analysis are attached in the Excel
11. 11. December 2015 January 2016 February 2016 March 2016 April 2016 March 2019 8 15 22 29 5 12 19 26 3 10 17 24 29 7 14 21 28 5 12 19 2 9 1 23 Stage 1: Apply for FIPB approval for commencing its operations in India Activity 1: Application Activity 2: Expected Approval grant (recent Vistara, Air Asia) Stage 2: Permission to Schedule Aircraft and transport passengers Activity 1 : Application Activity 2 : Approval & Leasing Stage 3: Incorporate Joint Venture Activity 1: (51% Indian Conglom- erat. 49% Bon Avion) Activity 2: Recruitment Stage 4: Air Operator permit, Test run, Scheduling flights Stage 5: Flights on Offer Stage 6: Breakeven Milestone Bon Avion India Launch Plan
12. 12. Thank You