Presented by:

Ranish shah
Vineet kumar
Santosh kumar
as service sector
INDUSTRY
INDIAN AVIATION
 Flow of presentation
 Liberalization and
history
 Industry
characteristics
 Capacity
 PESTEL
 STP
 7p
 Opportunity
 Challenges
 Summation/conclusi
on/recommendatio
n
 Indian Aviation liberalization
1953: Nationalization of Aircraft Industry
Consequently, assets 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
Implication
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
Players including Jet, Air Sahara, NEPC,
East West, Modiluft,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
Implication
Aviation has become affordable with check fares and
discount schemes
Various Operators with different business model
Huge growth foreseen in the Aviation Industry
 Industry characteristics

HUGE POTENTIAL CONSTRAINTS

Under penetrated Market Infrastructure Constraints
- Total Passenger Traffic only 50 mn as on 31st Dec 2005 amounting Shortage of airport facilities, parking
to only 0.05 trips per annum as compared to bays,air traffic control facilities and
developed Nations like United States have 2.02 trips per annum takeoff and landing slots
- High Level of potential demand with growth in Indian economy - Continued growth might be hampered
Untapped Air Cargo Market Relatively Limited Reach
- Air Cargo has not yet been fully taped in the Indian markets and is Only 454 airports with less than 100
expected that in the coming years
large no of players would have dedicated fleets airports having more than one daily
What this means… service
- Build up of capacity by existing players and entry of new players
 Capacity expansion and
competitors
Competitive landscape

Huge Growth- Huge Plans

Fleet Acquisition
New Fleet Orders -More than 500
Fund Requirement- USD 50-55 bn approx
Competitive
Order Book – New Players Pressure
Indigo 100
Air India 68

Full Service
Air Deccan 60
Kingfisher 50
Indian Airlines 43
Jet airways 40
Go Air 36
Spice Jet 20 Low cost
Expected to grow to 125 from 7 by 2025 Carriers
changing
the game Indigo

Price
Sector structure/Market size
 With a growth rate of 18 per cent per annum, the
Indian aviation industry is one of the fastest
growing aviation industries in the world.


 Today, private airlines account for around 75 per

cent share of the domestic aviation market.




 India has jumped to 9th position in world's

aviation market from 12th in 2006
Aviation policy
 Demand drivers

DEMAND DRIVERS Government Liberal Policy to allow private

GDP Growth has been more than 7% in the carriers and entry of Low Cost Carriers has
last 4 years lead to a increase in demand in passenger
The rising middle class of more than 300 mn traffic
is fuelling the growth Domestic Tourism and International
The Increase in Consumerism and Business Travel and Tourism has also
Affordability of Air travel greatly fuelled the rise of Indian aviation
sector
 PESTEL
 Political – Govt.is not stable
 Economy – Disposable income is increasing .
 GDP grow is more than 9%.
 Social -- Status conscious
 -- Awareness is increasing
 -- Increase in Entrepreneurship
 Technology – Indigenous technology is coming for aircrafts & airports.
 Legal -- Flexibility in entry .
 The five year stringent law towards flying abroad .
 Environment – Stiff competition for hiring pilots (poaching)
 Easy FDI(49%) through secondary market

 STP
 SEGMENTATION
 - HNI People .& others


 TARGET
 -VPs,CEOs
 -Bollywood Stars
 -Politicians
 -Foreign Tourists
 -industrialists
 -regular
 -Oil exploring companies


 POSITIONING
 Chartered air service –
 Statement -

Services/product –Hell Skiing, Leisure channels flights,
Charter flight for pilgrimage,
 Hiring Jet/Chopper film shooting ,Air
ambulance. On shore service


 Price -- Epic jet (7seater) - Rs 167,000/hr

 Cessaneluxury jet(7seater) - Rs 217,000/hr
 Robinson chopper(5seater) - Rs 35,000/hr
 Honda Chopper(Medical) - Rs 50.000/ hr


 Promotion – Strategy - Advertising in all leading

corporate/travelling magazines
 Tie-up with corporate/Travel
Agencies

  Physical evidence - Aircrafts
 Helicopters


 People - Pilots
 Engineers


 Productivity /process - Giving convenience in

travelling

 Place – Metros & capitals
 Challenges

 Declining yields

 Building on cost efficiencies

 High input costs

 Gaps in infrastructure


 Declining yields
 LCCs and other new entrants together
now command a market share of
around 46%
 Legacy carriers forced to match low LCC
fares, during a time of escalating costs
 Increasing growth prospects have
attracted & likely to attract more
players
 More players – more competition – lower
fares – a continuous cycle
 The bottom-line – lower yields for all
operators

 Building on cost efficiencies
 Low yield regime to continue
 Airlines have to build on their cost efficiencies & drive down costs
below the yield that their product will fetch, to return to profits
 For an industry that is estimating losses of US$ 500-550 million by end
of current fiscal, this is a daunting challenge
 Yet, airlines have no control on external input costs

 Contd..

 High input costs

 ATF prices in India continue to be far higher than global rates, making ATF account
for 35-40% of operating cost, as against global average of 20-25%
 High basic rates aggravated by high taxes imposed by State Govt.’s
 ATF cost / kilolitre :

◦ US$ 755 in Delhi

◦ US$ 780 in Mumbai
◦ US$ 455 in Singapore
◦ US$ 497 in Dubai
 High input costs
 Witholding tax on interest repayments on foreign currency loans for aircraft
acquisition
 Witholding tax proposed on aircraft lease rentals for leases concluded after 1st
April’07.
 Increasing manpower costs due to shortage of technical personnel
 Gaps in Infrastructure
 Airport and ATC infrastructure inadequate to support growth
 Airlines paying for these strategic gaps in many ways
◦ Higher fuel consumption - long holding times, on ground and in the air
◦ Lower utilisation of aircraft - slot constraints and air traffic congestion
◦ Sub-optimal route network strategies, due to lack of night parking stands
at major airports and navigational aids at many of the smaller airports
◦ Increased passenger facilitation costs
 While a start has been made to upgrade infrastructure, the results
will be visible only after 2 – 3 years

 Opportunities
 A large & growing potential market
 Developing alternative revenue streams
◦ Air cargo operations
◦ Airframe, engine & component overhaul
◦ Ground handling
◦ Training
◦ Leveraging the internet
 Access to new markets

 Air Cargo
 Freight carriage in India currently around 4200 tons per day
 CAGR of 15% over the past 2 years
 Fuelled by a fast growing economy, supported by a strong
industrial base
 Forecast to grow at 11.4% p.a. till 2011-12

 Ground Handling
 Ground handling business in India estimated at Rs. 1074 crores
 Expected to grow at 15% CAGR till 2011-12
 Opportunity lies in 3rd party handling as well as entering into service
contracts with private airports / AAI to offer comprehensive ground
handling solutions, e.g. AI – CIAL at Cochin

 Training

◦ Airlines in India will need training for pilots,

engineers, cabin crew, load & trim, etc.
 Projected requirement for 3600 additional pilots in the
short to medium term
Cabin crew, engineers, technicians will also be required to
support aircraft being inducted

◦ Opportunity for simulator training establishments

◦ IA already has a Central Training Establishment at
Hyderabad, with facilities for most categories /
types of trainings on A320

 Leveraging the internet
◦ Increasing numbers are booking directly from the airlines’
websites
 Traditional sales channels with paper tickets cost airlines ~10% of
ticket price
 Comparatively, e-ticket sales from own website cost an airline only
~3% of ticket price
 For every direct booking from their website, airlines save an
estimated US$ 4 plus 5% agency commission

◦ Airlines can also turn their websites into one stop shops for all
travel related services, generating additional revenue


 Access to new markets
 As airlines complete 5 years of domestic operations, those with 20+
aircraft will get international access
◦ Access to new revenue streams
◦ Help even out the seasonality factor of domestic operations
◦ Spread the risk of downturn in a single market
 The opportunity for some will be a challenge for the existing
international players
 The risk – cycle of increased competition, low yields, and growth
transferred to the international arena


 Current scenario of Indian aviation
industry
 The Indian aviation industry Is one of the fastest growing aviation industries in the % share of
the world.

 India has 454 airports and airstrips; of these,16 are designated international airports.
 With the liberalization of the Indian aviation sector, aviation industry in India has undergone
a rapid transforamtion.priavate airline account for around 75% share of the domestic
aviation market

 Being primarily a govt-ownwed industry ,the Indian aviation industry is now dominanated by
privately owned full service airlines and low cost carriers.
 Market size
 Domestic and international traffic is up 45% and 15.1
%,respectively.
 Over 135 aircraft have been added in the past two year alone.
 Center for Asia pacific aviation (CAPA) estimates domestic
traffic to grow 25-30 % annually and international traffic
15%untill 2010.
 Summation
 Indian Aviation has seen high growth on account of sustained Indian socio economic growth and
liberalized Government initiatives

 Airport Infrastructure needs to improve significantly to meet the current and future demand of
the Indian Aviation Sector
 Authorities have initiated various steps to implement modernization, reconstruction and
development of airport infrastructure to implement infrastructure development plan

 Provides a huge opportunity for private players operating in Aerospace and allied industries
 Significant opportunity for foreign companies as Indian companies not technologically equipped
to cater to requirements


 In sum……
 Despite a growing market, airlines in India are fighting for
survival in a highly competitive environment
 A host of initiatives are required to be taken by all concerned,
to tide over the current situation
◦ Control Costs
◦ Improve quality of service
◦ Develop a large pool of skilled / technical manpower
◦ Attract more professionals to manage the aviation industry
◦ Develop infrastructure to match growth plans
◦ Liberalise rules & regulations governing civil aviation, without
compromising on safety & security
◦ Reduction in ATF prices and taxation on ATF and lease rentals

THANK YOU