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Indian Aviation sector analysis Indian Aviation sector analysis Document Transcript

  • [Type text] [Type text] [Type text] Long Report on Industry analysis- Aviation sector Scheduled Air Transport Services 12/20/2012 GROUP 6 Rohit Kumar Jaitly(92) Sulagna Dutta (93) Mohit Arora(97) Praveen Kumar (99) Monika Bansal(119) SUBMITTED TO: Prof Vijayeta James Prof Pankaj Chauhan
  • Aviation Industry Analysis _ Group 6_Section B Page 2 Table of Contents EXECUTIVE SUMMARY............................................................................................................................3 Porters 5 forces Model .......................................................................................................................3 Industry Overview...................................................................................................................................4 Brief Introduction................................................................................................................................4 Top Leading Companies..................................................................................................................5 Highlights ........................................................................................................................................5 Classification of Indian Aviation Sector...............................................................................................7 Industry Market Size and Value..............................................................................................................9 TREND ANALYSIS...............................................................................................................................12 Trends in Aviation Industry...............................................................................................................12 Recent Initiatives and Developments...............................................................................................12 Government Initiatives .................................................................................................................14 COMPETITIVE LANDSCAPE....................................................................................................................15 Key Leading Players...........................................................................................................................15 AIR INDIA.......................................................................................................................................15 Star Alliance members reject Air India, invite Jet Airways. Air India should choose oneworld .........18 INDIGO ..........................................................................................................................................18 Jet Airways ....................................................................................................................................20 Future Outlook......................................................................................................................................23 Significant cost challenges, especially sustained high fuel and a weak Rupee.................................23 BIBLIOGRAPHY ......................................................................................................................................25
  • Aviation Industry Analysis _ Group 6_Section B Page 3 EXECUTIVE SUMMARY Porters 5 forces Model Industry analysis is a type of investment research that begins by focusing on the status of an industry or an industrial sector. Porter’s 5 forces framework identifies the strength of all five market levers (Suppliers, Customers, Competition Rivalry, Substitutes and New Entrants) of an industry. Understanding each of these market forces allows businesses to make wise decisions which can maximize return in any industry. Threat of New Entrants is low The airline industry is so saturated that there is hardly space for a newcomer even to squeeze its way in. The main concern for this is the cost of entry. The airline industry is one of the most expensive industries, due to the cost of buying and leasing aircrafts, safety and security measures, customer service and manpower. Another major barrier to entry is the brand name of existing airlines and it is really difficult to lure customers out of their existing brands. Power of Suppliers is low. The airline suppliers are mainly aircraft manufacturers, airports, fuel companies and there isn't a lot of cutthroat competition among suppliers. Also, the likelihood of a supplier integrating vertically is rare. Power of Buyers is medium to and increasing The cost involved with switching airplanes is decreasing as customers can access internet easily to compare and buy air tickets online nowadays. With emerge of budget airlines like Jetstar, Spicejet, Indigo and AirDeccan, more customers including travel agents and individuals prefer to take the budget airlines rather than full service airlines Availability of Substitutes is low For international airlines, the threat is quite low as airline is the only way for travelling to long destinations. eg- From India to USA. For national airlines, the threat might be a little higher than international carriers as passengers can use ground travel like train or bus as substitute. Time, money, personal preference is also needed to be considered. Competitive Rivalry is high Airline industry is completely saturated. There are more service providers than needed in both local as well as international markets. The various airlines are competing for the same customers. The airlines are continually competing against each other in terms of prices, technology, in-flight entertainment, customer services etc. Highly competitive industries generally earn low returns because the cost of competition is very high.
  • Aviation Industry Analysis _ Group 6_Section B Page 4 Industry Overview Brief Introduction Indian Aviation Industry has been one of the fastest-growing aviation industries in the world with private airlines accounting for more than 75 % of the sector of the domestic aviation market. With a compound annual growth rate (CAGR) of 18 % and 454 airports and airstrips in place in the country, of which 16 are designated as international airports, it has been stated that the aviation sector will witness revival by 2011. In 2009 with increase in traffic movement and increase in revenues by almost US$ 21.4 million, the Airports Authority of India seems set to accrue better margins in 2009-10, as per the latest estimates released by the Ministry of Civil Aviation. This is being primarily attributed because of the increase in the share of revenue from Delhi International Airport Limited (DIAL) and Mumbai International Airport Limited (MIAL). Passengers carried by Indian domestic airlines from January-February 2010 stood at 8,056,000 as against 6,761,000 in the corresponding period of 2009-a growth of 19.2 %, according to a report released by the Ministry of Civil Aviation.
  • Aviation Industry Analysis _ Group 6_Section B Page 5 Today Hyderabad International Airport has been ranked amongst the world's top five in the annual Airport Service Quality (ASQ) passenger survey along with airports at Seoul, Singapore, Hong Kong and Beijing. This airport in Hyderabad is managed by a public-private joint venture consisting of the GMR Group, Malaysia Airports Holdings Berhad and both the State Government of Andhra Pradesh and the Airports Authority of India (AAI). Top Leading Companies Players in Indian aviation industry can be classified into three groups: Public players Private players Start up players Public players - Air India, Indian Airlines and Alliance Air Private players - Jet Airways, Air Sahara, Kingfisher Airlines, Spice Jet, Air Deccan and many more Start up players - The starts up players are those planning to enter the markets. Some of them are Omega Air, Magic Air, Premier Star Air and MDLR Airlines Highlights The Indian airlines industry had total revenues of $14.2 billion in 2011, representing a compound annual growth rate (CAGR) of 8.5% between 2007 and 2011. Industry volumes increased with a CAGR of 7.9% between 2007-2011, to reach a total of 79 million passengers in 2011. The performance of the industry is forecast to accelerate, with an anticipated CAGR of 18.1% for the five-year period 2011 - 2016, which is expected to drive the industry to a value of $32.7 billion by the end of 2016. India has released its first ever detailed Aviation Carbon Footprint Report for 2011, which states that CO2 emissions from Indian scheduled airline operations as well as from foreign airlines to international destinations represent less than 1 per cent of the country's total CO2 emissions, which is significantly lower than the global average contribution of airlines.
  • Aviation Industry Analysis _ Group 6_Section B Page 6 Delhi's Indira Gandhi International (IGI) Airport has been ranked the second-best airport in the world for 2011 by the Airports Council International. The airport scored this distinction in the category of airports with 25-40 million passengers per annum. Last year, it had been ranked fourth in the same category. India's domestic aviation market has tripled in the past five years, according to a latest report of the International Air Transport Association (IATA). India posted a strong domestic growth at 25.6 per cent in the aviation sector, and continuing its trend of high-speed growth for a robust market India is the 9th largest aviation market in the world as per a report, Indian Aerospace Industry Analysis, published by research firm RNCOS. The Indian Aviation sector grew around 13.6 per cent year-on-year in FY 2010, which was amongst the highest globally. The rapidly expanding aviation sector handles 2.5 billion passengers across the world in a year; moves 45 million tonnes of cargo through 920 airlines, using 4,200 airports and deploys 27,000 aircraft. Today, 87 foreign airlines fly to and from India and five Indian carriers fly to and from 40 countries. Passengers carried by domestic airlines during Jan-Sep 2012 (first three quarters of calendar year) were 438.39 lakhs, according to the latest data released by the Directorate General of Civil Aviation (DGCA). Centre for Aviation and Airports Authority of India (CAPA India) expects domestic traffic growth of 17-18 per cent, possibly as high as 20 per cent. International passenger numbers, which grew by about 10 per cent last year, are expected to increase towards the upper end of a 10-12 per cent range over the next 12 months. According to the Department of Industrial Policy and Promotion (DIPP), the FDI inflow into air transport (including air freight) has been US$ 438.23 million from April 2000 to May 2012 Currently, the aviation industry is responsible for 0.5 percent of India’s GDP and supports more than 1.7 million jobs. However, Indian travellers on average only make 0.1 trips by air per year, compared to 1.8 trips per year in the US, reflecting that there is still a lot of potential unexplored. At present, fuel makes up a total of almost 45 percent of operating costs for Indian carriers due to a combination of excise duty (8.24 per cent) and state fuel taxes (30 per cent), while the global average stands at 32 per cent of operating costs.
  • Aviation Industry Analysis _ Group 6_Section B Page 7 The total number of airports or airfields recognisable from the air is 352 The number of scheduled passenger airline operators has grown to 15 and the number of aircraft in their fleet has risen to more than 400. International flights have increased to 706 flights per week. Due to enhanced opportunities for international connectivity, 69 foreign airlines from 49 countries are flying into India Classification of Indian Aviation Sector The Indian aviation sector can be broadly divided into the following main categories: 1. Scheduled Air Transport Services- It includes domestic and international airlines. 2. Non-scheduled air transport service - It includes charter operators and air taxi operators. 3. Air cargo service - It includes air transportation of cargo and mail. Scheduled air transport service: It is an air transport service undertaken between two or more places and operated according to a published timetable. It includes: 1. Domestic airlines, which provide scheduled flights within India and to select international destinations. Air Deccan, Spice Jet, Kingfisher Airline and Indigo are some of the domestic players in the industry. 2. International airlines, which operate scheduled international air services to and from India. At present, there are many scheduled private airlines like (Jet Airways, Spice Jet, Air Sahara etc.), which provide regular domestic air services along with Indian Airlines. Non-scheduled air transport service: It is an air transport service other than the scheduled one and may be on charter basis and/or non-scheduled basis. The operator is not permitted to publish time schedule and issue tickets to passengers. In addition there are 47 non-scheduled operators providing air-taxi/non-scheduled air transport services.
  • Aviation Industry Analysis _ Group 6_Section B Page 8 Air cargo services: It is an air transportation of cargo and mail. It may be on scheduled or non-scheduled basis. These operations are to destinations within India. For operation outside India, the operator has to take specific permission of Directorate General of Civil Aviation demonstrating his capacity for conducting such an operation.
  • Aviation Industry Analysis _ Group 6_Section B Page 9 Industry Market Size and Value
  • Aviation Industry Analysis _ Group 6_Section B Page 10
  • Aviation Industry Analysis _ Group 6_Section B Page 11
  • Aviation Industry Analysis _ Group 6_Section B Page 12 TREND ANALYSIS Trends in Aviation Industry 1. Consolidation in aviation sector: In aviation industries the rise in the number of alliances will help in promote the growth of aviation sector in India. Example of the Jet-Sahara merger is just the beginning. Indian aviation industry is looking forward to more consolidations. 2. The number of passengers travelling by air is on the rise: By 2025 passenger boarding expected to double and by the same time aircraft operations are expected to triple, the number of passengers travelling by air is on rise. 3. For the travelling public, price is paramount in choosing a carrier: Airfares are fully transparent to the public and travellers are choosing the lowest price option because of the Internet and round-the-clock search facility. Even business travellers, who have been less price-sensitive, are resisting fare increases. Travellers are not giving preference to brand but the only premiums they are willing to pay for are time-of –day and direct flights. 4. Capacity is growing without much constraint: The new aircraft have been ordered by Indian carriers for delivery in the coming period, without clear plans to retire older planes. Significant numbers of regional jets are also adding by them. 5. Cost structures will continue to handicap legacy carriers as they compete with newer airlines, as well as with overseas carriers: Great threats are being posed by the low cost carriers to legacy carriers, as a result of which they are reshuffle, their pricing policies. Apart from this, they are also facing competition from overseas players. 6. Outsourcing: Private airlines are famous to hire foreign pilots, get expatriates or retired personnel from the Air Force or PSU airlines, in senior management positions. Airlines are also famous to take on contract employees such as cabin crew, ticketing and check-in agents. Recent Initiatives and Developments Toward modernization of non-metro airports the Airports Authority of India (AAI) is planning to spend over US$ 1.02 billion in 2010. There are even plans of the city-side development of 24 airports, including airports at Ahmedabad and Amritsar. There are even
  • Aviation Industry Analysis _ Group 6_Section B Page 13 additionally, 11 new Greenfield airports which are in pipeline which have been identified to reduce passenger load on existing airports. The government has formed National Aviation Company Ltd (NACIL) by merging national carriers Air India and Indian Airlines into a single entity. The blue print was prepared by the civil aviation ministry to convert Delhi airport into an international hub for passenger airlines and has been done so recently. Modernization of Airports Airports Authority of India (AAI) manages the development and modernization of all 35 non- metro airports in the country simultaneously and work is due to be completed by the year end of 2010. Wholly owned subsidiaries of AAI are being created for betterment of these airports. According to the AAI there are work orders for terminal buildings at 13 airports, and for airside development, including runway, taxiway, apron, fire station, control tower and isolation bay, at 19 airports. Policy on Merchant Airports Indian Aviation Industry will allow 100 % foreign direct investment (FDI) in the development of airport infrastructure, the Government is fast moving towards finalizing a policy on merchant airports. Under this new concept, merchant airports will be built entirely by private parties with their own resources, without any government funding. Growth in MRO Segment Indian Aviation with the advent of low-cost airlines & ever-increasing passenger traffic there is a fleet expansion. There is an Initiation of the whole new business avenue for global aircraft companies in maintenance, repair and overhaul (MRO). This MRO facility provides major and minor maintenance, refurbishment and repairs of aircraft. The gaint players like Boeing and Airbus have announced their plans for MRO facilities in India. Foreign Equity Participation in Air Transport Services Recently the Government in India has approved the Domestic Air Transport Policy which provides for foreign equity participation up to 49% and also investment by Non-Resident
  • Aviation Industry Analysis _ Group 6_Section B Page 14 Indians (NRIs) up to 100% in the domestic air transport services. As the government plans to fix a higher foreign direct investment (FDI) ceiling for five sub-sectors of the industry in days to come the flow of foreign investment into aviation is likely to get smoother. Government Initiatives To create world class airports, the government has recognised the need for the involvement of private players in the development of airport infrastructure. Development of airports at Delhi and Mumbai has been taken up under Public Private Partnership (PPP) mode The capital expenditure is funded through private equity, borrowings, and internal resources of joint venture companies. The development work of Mumbai airport is likely to be completed by 2012 whereas the work of a new terminal (Terminal 3) at Indira Gandhi International Airport at Delhi got completed in July 2010. The development work of Kolkata and Chennai International airport has been taken up by Airport Authority of India whereas Bangaluru and Hydrabad international airports have been developed on PPP mode as greenfield airports. The AAI has taken up the development of 35 non metro airports at an estimated cost of US$ 777.80 million The Government has also developed a model concession agreement to develop greenfield airports under the PPP mode. The government has also allowed 100 per cent FDI, under the automatic route, for greenfield airports. FDI up to 49 per cent is allowed in the domestic airlines sector under the automatic route. Recently, the Government has relaxed rules to allow foreign carriers to buy up to 49 per cent stake in Indian airlines The adoption of Open Sky Policy has resulted in the entry of several new privately owned airlines and increased frequency / flights for international airlines.
  • Aviation Industry Analysis _ Group 6_Section B Page 15 COMPETITIVE LANDSCAPE As: • Few big players controlling the market • Entry to the market difficult • Huge capital at their disposal • Low level of competition Key Leading Players AIR INDIA Air India Ltd. (Air India) is a state owned airline service provider in India, offering passenger and cargo transportation services. The company operates with a fleet of 135 passenger aircraft and nine cargo carriers. It serves 63 domestic destinations within India and 33 international destinations across five continents. It also serves more than 10 destinations through its code share agreement with Aeroflot, Air Mauritius, Austrian Airlines, Lufthansa and Singapore Airlines. The company principally focuses on its international network covering Kuwait, Oman, United Arab of Emirates, Qatar and Bahrain in West Asia. It operates its route system through two major hubs in Mumbai and Delhi, along with secondary hubs in Calcutta and Chennai. Air India is headquartered in Mumbai, Maharashtra, India.
  • Aviation Industry Analysis _ Group 6_Section B Page 16 SWOT analysis of AIR INDIA Strengths of AIR INDIA Air India has been the largest air carrier in India in terms of traffic volume and company assets. It owns the most updated fleet and competent repairs and maintenance expertise. Its information systems are advanced and compatible with its operation and service. It has a good reputation in both international and domestic markets, quality service and the age-old Goodwill that has still kept it alive in the interests of the rescue operators. Has financial backing of the Government Weaknesses of AIR INDIA Air India is operating across broad international and domestic markets competing with world leading giant airlines as well as local small operators. This lack of clarity on the strategic direction largely dilutes its capabilities and confuses its brand within markets. Low profitability and utilization of capacity. 12,400.00 12,600.00 12,800.00 13,000.00 13,200.00 13,400.00 13,600.00 13,800.00 14,000.00 14,200.00 14,400.00 2008 2009 2010 2011 2012 Air India Revenue
  • Aviation Industry Analysis _ Group 6_Section B Page 17 Growing Competitor base and entry of Low-Cost Carriers (LCC’s) The airline’s high-cost structure and the compulsions of being a public sector unit are the reasons and it had been making a loss and shall continue to make losses for some more quarters. Opportunities of AIR INDIA India airline industry is growing faster and will continue to grow as the GDP increases, and the trend is predicted to continue once the slowdown recedes. Worldwide deregulations make the skies more accessible; the route agreement is easier to be achieved. The number of foreign visitors and investors to India is increasing rapidly. Complementary industry like tourism will increase demand for airline service. The Civil Aviation Ministry’s strong regulation and protection provides opportunities for consolidation and optimization. Customers are getting wealthier, tend to be less price-conscious and prefer to choose quality service over cost. Best time for introducing LCC’s Threats for AIR INDIA Air India faces imminent aggressive competition from world leading airlines and price wars triggered by domestic players. The Indian Railway Ministry has dramatically improved speed and services in their medium/long distant routes, attracting passengers away from air service, with prices almost at par with the low cost carriers Current News Air India threatens to stop operations to North East airports
  • Aviation Industry Analysis _ Group 6_Section B Page 18 Flights within the northeastern region may be hit from New Year, with Air India threatening to stop its operations to airports like Tezpur, Lilabari and Shillong following non-payment of funds by the North East Council (NEC). Loans taken by Air India now stand at Rs. 47,226 crore Air India has a loan of over Rs. 47,000 crore and 95 services of the national carrier were not even meeting the cash cost of the operations Star Alliance members reject Air India, invite Jet Airways. Air India should choose oneworld The Star Alliance, a global grouping of 27 airlines, has rejected the application of national carrier Air India to join the group. In over 14 years, and 28 applicants, this is the first time the application of any airline has been rejected because of the mountainous losses of Air India, and its crashing brand value, especially due to the recent pilots' strike. OneWorld having weak connection in the Indian and South Asian market. Along with Air India, oneworld can bridge this gap and gain a commanding presence in the Gulf to South-East Asia geography with the upcoming entries of Malaysia Airlines, and Sri Lankan Airlines. Air India used to provide good inflight service, and with the assistance of oneworld and the backing of respected airlines like British Airways and Cathay Pacific would hopefully allow Air India to re-shape itself as an excellent service provider. INDIGO IndiGo is a private, low-cost airline based in Gurgaon, Haryana, India. It was established in 2005 as a subsidiary of Interglobe Enterprises. The airline started operations in August 2006 and by August 2012 was the largest low cost carrier in India and was India's largest carrier by market share. As of March 2012 it is the only airline in India making profits. IndiGo operates to 33 destinations in India and abroad with 373 flights each day. Unlike most low cost carriers, IndiGo uses a hub and spoke model used by full service airlines where the airline flights to different destinations are routed through its hub.It plans to serve 100 cities in India, South East Asia, Middle East and China by 2025. It plans to acquire 125 new aircrafts by 2025.
  • Aviation Industry Analysis _ Group 6_Section B Page 19 SWOT Analysis of IndiGo Airlines Strengths • IndiGo is the only profitable airlines running in India in low cost carriers segment • It is backed by young and talented management team • It is one of the very few airlines that incorporates the best technology, human resource and service at an affordable cost to the customer • IndiGo’s growth is ahead of aviation’s overall industry growth in India • IndiGo covers 32 destinations covering all major cities in India • IndiGo is the second largest airline in India in terms of market share • The company had a profit of Rs.650 cr in the FY 2011 Weakness • It doesn’t have its presence in international market • IndiGo has to focus more on branding • Concentrates only on middle class society • Customers are not happy with inflight catering services • It has to focus on proper baggage handling and improve the seating comfort level Opportunities • IndiGo has attracted many loyal customer of other airlines and converted into IndiGo flyers in a very short span of time • Competitors in the aviation market are not running good show and hence it is time for Indigo to grab the opportunity to go ahead • It has good opportunity to go abroad markets • IndiGo has shown tremendous growth both terms of market share and profits in the recent years • It witnessed a rapid expansion by buying new A320S airbus • Expanding economy class fliers Threats • Rising fuel costs has increased operational cost of LLC airlines • The companies are cutting their air travel due to the economic crisis • It faces competition from other LLC airline like spicejet, jetkonnect etc • Increasing airport fees, declining rupee value, high taxes add woes to the industry
  • Aviation Industry Analysis _ Group 6_Section B Page 20 Current News IndiGo Air makes Rs 88cr operating loss in 2011-12 IndiGo, the countrys largest air carrier by passengers carried, had an operating loss of Rs 88 crore after operating revenue of Rs 5,552 crore last year Jet Airways Jet Airways is a major Indian airline based in Mumbai, Maharashtra. It is India's largest airline and the market leader in the domestic sector. It operates over 400 flights daily to 67 destinations worldwide. Its main hub is Chhatrapati Shivaji International Airport, with 0 5000 10000 15000 20000 25000 30000 35000 40000 2008 2009 2010 2011 2012 Indigo Airlines Revenue (in Million Rs.) Indigo Airlines Revenue (in Million Rs.)
  • Aviation Industry Analysis _ Group 6_Section B Page 21 secondary hubs at Delhi, Chennai, Bengaluru, Pune and Kolkatta. It has an international hub at Brussels Airport, Belgium. Jet Airways is owned by Naresh Goyal. Jet Airways was incorporated as an air taxi operator on 1 April 1992. It started Indian commercial airline operations on 5 May 1993 with a fleet of four leased Boeing 737-300 aircraft. In January 1994 a change in the law enabled Jet Airways to apply for scheduled airline status, which was granted on 4 January 1995. It began international operations to Sri Lanka in March 2004. The company is listed on the Bombay Stock Exchange, but 80% of its stock is controlled by Naresh Goyal (through his ownership of Jet’s parent company, Tailwinds). It has 10,017 employees (as at March 2007). SWOT Analysis of Jet Airways Strength of Jet Airways 1. Has created a good image among the Indian fliers 2. Trusted Airline by the Corporates 3. One of the biggest Indian airline companies with over 13,000 employees 4. Operations in over 75 Indian cities and over 400 daily flights 5. Top of the mind brand due to excellent operations and marketing 6. It also has international destinations in nearly 20 countries Weakness of Jet airways 1. Competition from the LCCs and other competitors means market share growth is tough 2. Presence of other airlines on international routes making it difficult to have significant market share Opportunities for Jet Airways 1. Strongly positioned in the International routes 2. Has presence in every segment
  • Aviation Industry Analysis _ Group 6_Section B Page 22 3. Increasing number of people opting to travel by airlines Threats for Jet Airways 1. LCCs eating up the marketshare 2. Rising Fuel Costs and Labour Costs 3. Unfavorable Govt policies and aviation regulations Current News Jet Airways introduces Cash on Delivery Jet Airways, India’s premier international airline, has announced the introduction of “Cash on Delivery”, an additional form of payment, exclusively on the airline's website at www.jetairways.com. This convenient payment option allows guests to book their tickets online and pay by cash later. Jet Airways first to introduce new short-haul One Fare Pass For domestic travel Jet Airways, India’s premier international airline, today announced the introduction of a 4 coupon “ONE FARE PASS” booklet for facilitating increased and convenient travel on Jet Airways and JetKonnect flights in regional domestic markets. Jet Airways implements proactive fog preparedness plan 0.00 2,000.00 4,000.00 6,000.00 8,000.00 10,000.00 12,000.00 14,000.00 16,000.00 2008 2009 2010 2011 2012 Jet Airways Revenue
  • Aviation Industry Analysis _ Group 6_Section B Page 23 Jet Airways, India’s premier international airline, and its low fare brand JetKonnect, have undertaken steps to minimize guest inconvenience in the likelihood of flight disruptions and cancellations on account of fog this winter season. Future Outlook Indian aviation is facing its most uncertain phase in more than a decade. After reporting an estimated record loss of just over USD2 billion[1] in the 12 months ended 31-Mar-2012, India’s airlines sare facing an equally challenging year ahead. Weak balance sheets, increasing costs, regulatory uncertainty, a sluggish Indian economy and a difficult global environment will continue to pile the pressure on airlines, especially the poorer performing carriers. However, this may in turn create market opportunities to exploit for those that are better positioned. Some of the key highlights of the CAPA India Outlook 2012/13 include CAPA estimates that domestic passenger traffic will grow by 8-10% in FY12/13 and more likely towards the lower end of the range. Much will depend upon the impact of oil prices and other input costs on airfares. In the 12 months ending 31-Mar-2013, Air India is once again expected to be the worst performer in the industry and to report a loss of INR70 billion (USD1.3 billion). Kingfisher Airlines is projected to lose INR12-14 billion (USD220-260 million). However, the remaining four private carriers combined could post a modest profit of approximately INR11 billion (USD200 million). Although the troubles facing Air India and Kingfisher Airlines have been positive for all of the other carriers, Jet Airways has been, and will continue to be, the largest beneficiary. Kingfisher’s dramatic contraction from 66 to 16 operational aircraft, of which half are regional ATR aircraft, has left the domestic business market open for Jet Airways. Similarly, the temporary industrial action on Air India’s long-haul international routes has driven North American and UK traffic to Jet Airways. Significant cost challenges, especially sustained high fuel and a weak Rupee India’s carriers will face a deteriorating cost environment in FY2012/13 on a number of fronts. These include:
  • Aviation Industry Analysis _ Group 6_Section B Page 24 1. Fuel prices: A high, and more importantly sustained high, oil price environment. There remains a possibility that oil prices could rise substantially with effect from Jul- 2012 should the European Union proceed with plans to introduce an embargo on oil supplies from Iran; 2. Weak currency: Further depreciation of the Rupee, which has already fallen more than 20% in the last 12 months, thereby pushing up the price of dollar-denominated costs such as fuel, aircraft leases, maintenance and offshore interest obligations; 3. Airport charges: The regulator has already approved a 334% increase in charges at Delhi Airport, with Mumbai expected to be allowed to raise fees by an even higher amount of up to 500%. Combing these additional levies is likely to have the impact of increasing Delhi-Mumbai airfares by 15-20% which will have a negative impact on traffic. Increased airport charges are expected to be progressively introduced at other airports such as Chennai and Kolkata to fund the modernisation programmes; 4. Service tax: The extension of the service tax regime on economy class airfares from a fixed amount to an ad valorem percentage will increase the absolute level of the impost on most sectors.
  • Aviation Industry Analysis _ Group 6_Section B Page 25 BIBLIOGRAPHY  http://egov.eletsonline.com/2012/09/  http://www.docstoc.com/docs/29471588/Competitive-Analysis-of-Airline-Industry- using-porter-five-forces-model  http://centreforaviation.com/analysis/kingfisher-airlines-shrinks-to-becomes-indias- smallest-domestic-carrier-in-mar-2012-71975  http://www.oifc.in/sectors/infrastructure/aviation  http://centreforaviation.com/analysis/dgca-report-blunder-compounds-indias-airline- industry-problems-65968, 15 december’2012  http://info.shine.com/Industry-Information/Aviation/140.aspx,referred on 10 december 2012  http://articles.economictimes.indiatimes.com/2012-09-15/news/33862924_1_indian- carriers-low-cost-airline-foreign-carriers  http://www.ibef.org/industry/indian-aviation.aspx referred on 15 december  http://in.reuters.com/article/2012/11/15/india-aviation-fdi- idINDEE8AE0AA20121115  http://www.travelbizmonitor.com/breaking-the-cartel-will-help-indian-aviation- industry-grow-capt-gopinath-18239  http://edition.cnn.com/2011/11/29/business/india-aviation-industry/index.html  http://centreforaviation.com/analysis/india-domestic-passenger-growth-slows-to-8-in- dec-2011-with-growth-to-slow-from-2011-rate-of-166-66992  http://www.deloitte.com/assets/Dcom- India/Local%20Assets/Documents/aIndian%20Aviation.pdf  http://www.business-standard.com/india/news/a-taletwo-airlines-kingfisher-vs- indigo/465252/  http://mospi.nic.in/Mospi_New/upload/Infra_stat_2010/5.ch_Air%20_transport.pdf Other Sources: 11th Five Year Plan Working Commission Report on Aviation Sector Annual Report 2007-08, Ministry of Civil Aviation, India Presentation on “An Overview of India’s Airports: Vision 2020” by K N Srivastava, Jt. Secretary, Ministry of Civil Aviation