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Indian aviation industry






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Indian aviation industry Presentation Transcript

    as service sector
    Presented by:
  • 2. Flow of presentation
    Liberalization and history
    Industry characteristics
  • 3. Indian Aviation liberalization
  • 4. Industry characteristics
  • 5. Competitive Pressure
    Full Service
    Low cost Carriers changing the game
    Capacity expansion and competitors
  • 6. 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
  • 7. Aviation policy
  • 8. Demand drivers
  • 9. 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
  • 10. STP
    - HNI People .& others
    -Bollywood Stars
    -Foreign Tourists
    -Oil exploring companies
    Chartered air service –
    Statement -
  • 11.
  • 12. 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
    Cessane luxury 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
  • 13. Physical evidence - Aircrafts
    People - Pilots
    Productivity /process - Giving convenience in travelling
    Place – Metros & capitals
  • 14.
  • 15. Declining yields
    Building on cost efficiencies
    High input costs
    Gaps in infrastructure
  • 16. 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
  • 17. 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
  • 18. 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
  • 19. 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
  • 20. Opportunities
    A large & growing potential market
    Developing alternative revenue streams
    Air cargo operations
    Airframe, engine & component overhaul
    Ground handling
    Leveraging the internet
    Access to new markets
  • 21. 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
  • 22. 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
  • 23. 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
  • 24. 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
  • 25. 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
  • 26. 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.
  • 27. 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.
  • 28. 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
  • 29. 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
  • 30. THANK YOU