INDIAN AVIATION INDUSTRY WINGS Presented By: Sheetal Kumbhare Ayush 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………. 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 1953: NATIONALISATION OF AIRCRAFT INDUSTRY 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 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

1953: NATIONALISATION OF AIRCRAFT INDUSTRY

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

IMPLICATIONS

Aviation became a preferred mode of transport for elite class

Restricted Growth of Aviation Industry

High Cost structure

Underdevelopment of infrastructure

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 play ers : Omega Air, Magic Air, Premier Star Air & MDLR Airlines.

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 play ers : 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.

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 of customers. Quality of the service. First airline to have new fleet of airbuses. WEAKNESSESS: High Ticket prices.

STRENGHTS:

Strong Brand value & Reputation in the minds of

customers.

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.

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.

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 & chairman Started Indian commercial airline operations in May 1993. In April 2007, they acquired Air Sahara .

Naresh Goyal is the founder & chairman

Started 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.

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 Airline Kingfisher is the latest Airline in India. Overall loss in June 2009 of $500 ml. Kingfisher acquired 46% in Air Deccan Jet airways is a experienced Airline in India. Jet airways had a slight profit in the 1st quarter of 2009. Jet acquired Air Sahara

Kingfisher is the latest

Airline in India.

Overall loss in June 2009 of $500 ml.

Kingfisher acquired 46%

in Air Deccan

Jet airways is a

experienced Airline in India.

Jet airways had a slight profit in the 1st quarter of 2009.

Jet acquired Air Sahara

Jet Airways- Marketing Strategies Jet Airways has partnered with UTV to launch the online contest 'Cannes Calling', wherein winners will get a chance to attend the Cannes Film Festival 2009 along with a companion. Jet is trying to highlight its product superiority.

Jet Airways has partnered with

UTV to launch the online contest 'Cannes Calling', wherein

winners will get a chance to attend

the 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.

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 Crisis Around 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] .

Financial Crisis

Around 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] .

Strengths 1. Strong brand name 2. Oldest Airline 3. Monopoly in certain international routes 4. Government backup 5. Rights to travel 96 destinations. 6. Established infrastructure 7. It has prime parking space/slots.

Strengths

1. Strong brand name

2. Oldest Airline

3. Monopoly in certain international routes

4. Government backup

5. Rights to travel 96 destinations.

6. Established infrastructure

7. 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

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 drive Aviation Growth……. Market Size Demographics Economic Growth 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 & Comparison STRENGHTHS: Liberal Environment Modern Fleet High Quality Economic Growth Growing Tourism WEAKNESSESS: Airport Infrastructure Airways Infrastructure National Carrier Deep Pockets High Cost Structure Skilled Resources

STRENGHTHS:

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

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 2025 Passenger traffic in Africa forecasted to increase by at- least 7% and Asia –Pac by 6.8% a year, respectively, by 2010 Asia will be the world’s largest aviation market by 2025 40% of satisfied customers switch suppliers without hesitation 65% to 85% of customers who choose a new supplier claim to be satisfied and very satisfied with former supplier 85% 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 passenger complaints

Global 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 by 6.8% a year, respectively, by 2010

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

40% of satisfied customers switch suppliers without hesitation

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

85% 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 passenger 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 3 rd Mumbai Airport. Chakan/Rajguru, Pune, Maharashtra; Halwara, Punjab Kannur, Kerala. Hassan & Gulbaraga, Karnataka.

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 3 rd Mumbai Airport.

Chakan/Rajguru, Pune, Maharashtra; Halwara, Punjab

Kannur, Kerala.

Hassan & Gulbaraga, Karnataka.

EXPECTATIONS OF THE INDUSTRY FROM GOVERNMENT… The industry’s wish list includes : 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. 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. Extending exemption of withdrawal tax on lease rentals of aircraft Relaxing fringe benefit tax (FBT) Removing service taxes on first and business-class travellers. 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 71 million domestic passengers In 2006/07, posting growth of almost 40% year-on-year, and over 25 million international passengers, up approx 15%. Growth is underpinned by economic expansion, increased capacity and price stimulation resulting 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”

India’s airports handled 71

million domestic passengers

In 2006/07, posting growth of

almost 40% year-on-year, and

over 25 million international

passengers, up approx 15%.

Growth is underpinned by

economic expansion, increased

capacity and price stimulation

resulting from increased

competition.

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 aviation services 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.

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 aviation

services 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 Aviation The 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