5. PEST Analysis: Conducive Factors Political Economic Social Technological National and airport security Income for salaried class up : 14 to 16 % Increasing travelling lifestyles IT revolution FDI : 49 % in Airlines, 100 % in airports GDP growth of 8 % - 9 % in last 5 years Increasing business travelling Online Ticketing Freedom to determine fares Nil Import tariff on Aircraft Growing Middle class Best price shopping services Level playing field Seat inventory Pricing LCC as mass Transport medium Uniform aircraft types Up gradation of airport infrastructure Oligopoly structure of the market – Customer View Air travel: from luxury towards necessity. Safety Measures
6. PEST Analysis: Limiting Factors Political Economic Social Technological Bureaucracy Tax & Tariffs: 8 % Import duty and 25 % - 33 % state sales tax on ATF Lack of Skilled Manpower (In-flight staff Night Landing facilities International routes after 5 years Pricing Strategy dependent on individual firm’s behaviour Customer Service Operation during Winter No clear policy for state carriers International Petroleum Prices Safety Concern (9/11, Sars) Capital Intensive Technology
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12. Threat of New Entrants Buyer power Supplier power Substitutes Internal Rivalry Capital intensive industry - Long gestation period Little differentiation between LCCs No control over ATF (Aviation Turbine fuel) prices Videoconferencing and other telecommunication technologies Competitive and over-crowded market Over-crowded low cost airline market Price conscious -little or no customer loyalty. Favourable deals with most of their suppliers Super fast trains for short haul flights Commoditized nature of product Dearth of aviation professionals Low switching costs Leased aircrafts Competition with conventional carriers Limited infrastructure facilities Limited number of manufacturers Consolidation in the market Price wars against newcomers. High fuel costs (contributes to 30% of the operating cost) Aggressive pricing strategies
14. Market Share as on 31st March 2008 Source: Ministry of Civil Aviation, India - http://civilaviation.nic.in/
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19. Cost Comparison : Domestic Peers Cost leadership gives Spicejet an edge over peers Available Seat Kilometres (ASKM) : Represents the aircraft seating capacity multiplied by the number of kilometres the seats are flown