indian aviation industry 2011
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Group- 9
Strategy for a new entrant in the Indian aviation industry
Aviation Industry :
Aviation
Airlines
Passenger
Cargo
Support Services
Group handling
Training
Catering
Aerospace
Design & Manufactu
ringMRO
Nature :
The Wright Brothers
December 17, 1903.
Indian Aviation History :
15 October 1932
25 August 1953
What happened in 1953 ?
Airways (India) Ltd; Bharat Airways; Himalaya Aviation Kalinga Air Lines Deccan Airways Air India Air Services of India Indian National AirwaysThe Air Corporations Act of 1953
LPG effect :
Open Sky Policy 1991East-West Airlines (India) Media Obsessions
1.Bollywood 2. The Indian Cricket 3. Aviation ( India)
Traffic Impact post Liberalization
Source: Market Access for Goods and Services: Overview of the Results, GATT Secretariat, Geneva, November 2004
Paradigm shift
Low CostHigh
Service
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
Consolidation Phase
1953- all airlines have been merged. East west airline and Modiluft have been stopped. In April 2007, Jet Airways took over Air Sahara for
Rs. 1,450 crore. on 19 December 2007, Kingfisher acquired an initial
26% stake in Air Deccan for Rs. 550 crore. 1 March 2007, The government-owned Air India and
Indian Airlines have joined to form the National Aviation Corporation of India Ltd. (NACIL).
"Low-cost carriers (LCCs) such as IndiGo and SpiceJet also have significant capital requirements and will need further flows of funding ...The next round of consolidation is therefore most likely to occur in the LCC sector."
Government Agencies :
AAI•manages 127 airports in the country, which include 13 international airports, 7 custom airports, 80 domestic airports and 28 civil enclaves. •There are over 450 airports and 1091 registered aircrafts in the country.
Ministry of Civil Aviation •"Enable the people of India to have access to safe, secure, sustainable and affordable air services with world class civil aviation".
DGCA•Endeavour to promote safe and efficient Air Transportation through regulation and proactive safety oversight system.
Key Statistics ( Nov-2011)
Source : DGCA report nov-2011
Key Statistics :
Source : DGCA Report 2010
1999
-00
2000
-01
2001
-02
2002
-03
2003
-04
2004
-04
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
0
100000
200000
300000
400000
500000
600000
AIRCRAFT DEPARTURES
1999
-00
2000
-01
2001
-02
2002
-03
2003
-04
2004
-04
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
05000000
100000001500000020000000250000003000000035000000400000004500000050000000
Passenger carried
No O
f P
assengers
Tota
l depart
ure
s
Key Statistics : ( Nov-2011)
Source : DGCA report nov-2011
Key Statistics : ( Nov-2011)
Source : DGCA report nov-2011
Key Statistics : ( Nov-2011)
Source : DGCA report nov-2011
Key Statistics : ( Nov-2011)
Source : DGCA report nov-2011
Key Statistics : ( Nov-2011)
Source : DGCA report nov-2011
Key Statistics : ( Nov-2011)
Source : DGCA report nov-2011
Cost Structure
(Source: ICRA report, Civil Aviation 2010)
Fluctuations in the price of ATF
Source: Index mundi November 2011
Competitor Analysis :
2009-10
Revenue Rs. Millions
Expense Rs Millions
P/L (Rs Million)
Jet 103672.6
101666.5
2006.1
Jetlite 16812.6
16203.2
609.2
Kingfisher
50679.2
61845.8
(11166.6)
Spicejet
21810.8
21204.8
606
GoAir 8961.2 9088 (126.8)
Indigo 26015 21548 4467
Busiest Airports by Passenger traffic
DELBOM
MAABLR
CCUHYD COK
AMDLK
OCJB
PNQ
TRV
CCJGAU JA
IGOI
NAG
0
5000000
10000000
15000000
20000000
25000000
30000000
Total Passengers
Total Passengers
2010
2009
Source : IATA
Most Competitive Routes
Source: OAG Max Online for w/c 5 December 2011
Skytrax best low cost airlines 2007,2009,2010 and 2011
Head quarter Malaysia operating cost $0.035
/seat-km First airlines for ticket
less air travel 106 routes – Flies
international
Air Asia ( Malaysia )
World no 2 low cost airlines
Subsidiary of Qantas Flight entertainment
system using i-pad Flies international Has a business class
Jet Star Airlines :
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.
India has an increasingly open economy, with strong growth in international trade, healthy foreign exchange reserves and increasing foreign direct investment.
Macroeconomic Factors
India Growth Story :
India's domestic aviation market expansion has been the strongest in the world – IATA report
India is currently the ninth largest aviation market in the world, according to a RNCOS report “
it is expected that the civil aviation market will register a compound annual growth rate (CAGR) of more than 16 per cent during 2010-2013.
Passenger traffic has grown at 18 per cent year on year (y-o-y) basis and the year 2010 closed at 90 million passengers both domestic and international.
India is the fastest growing aviation market and expected to be within 4-5 big aviation markets by 2020 and 3rd in terms of domestic market after US and China.
During the last two decades from a fleet of only about 100, the scheduled operators now have reached 435 aircrafts connecting the nation and the world.
Forecast :
Traveler Segmentation :
Source : IATA projections based on goldman sachs projection
Million
Capacity Expansion plan :
On December 9, 2010, SpiceJet made a firm order for 15 Bombardier Dash 8 Q400 and took options to purchase a further 15.[
20th, Nov 2005
Kingfisher Airlines orders 20 new ATR72-500 Aircraft worth US$350 Million
On 30th Dec-2005, Air India's purchase order for 111 aircraft involvingRs67,000 crore.
On 12th Jan-2011, Indian budget airline IndiGo has signed an agreement to buy 180 Airbus A320 aircraft, the European plane maker said, in a record sale worth USD 16.4 billion.
Go Air places order for 72 aircraft worth Rs. 32,400 crore
Jet Airways has entered into a purchase agreement with Boeing to acquire 30 737-800s to be delivered by 2015 and 10 Boeing 787-8s to be delivered by 2014.
FDI Policy The Reserve Bank of India (RBI) announced that foreign institutional
investors might have shareholdings more than the limited 49% in the domestic sector.
Airports Foreign equity up to 100% is allowed by the means of automatic
approvals pertaining to establishment of Greenfield airports Foreign equity up to 74% is allowed by the means of automatic
approvals pertaining to the existing airports Foreign equity up to 100% is allowed by the means of special
permission from Foreign Investment Promotion Board, Ministry of Finance, pertaining to the existing airports
100 per cent tax exemption for airport projects for a period of 10 years.
Air Transport Services Up to 49% of foreign equity is allowed by the means of automatic
approvals pertaining to the domestic air transport services Up to 100% of NRI investment is allowed by the means of automatic
approvals pertaining to the domestic air transport services 74 per cent FDI is permissible in cargo and non-scheduled airlines.
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.
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.
Growing Infrastructure developments
Drivers and Challenges :
Which Airline Model must be Adopted in India?
It Certainly is NOT…
Pure Low Cost: Air travellers want more value for their money
North American Hub and Spoke: Not enough distance between airports
Point to Point only: Inefficient Regional Jet Feeder: Not enough critical
mass
Therefore , a unique model needs to be developed.
Our Strategy :
Marketing
• Proper STP• Frequent flyer programs• Tie ups with corporate• Holiday packages• Dynamic pricing•Focus on Branding
Operations
• Operate on routes with high seat factor•Quick Turn around time •Red eye operations• Optimal mix of ATR & jet aircrafts•Leasing of Aircraft
Finance
• More equity •Use of FCCBs• Low interest – long term loans.
Thank You
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