Within a year since the last economic downturn started, the way to full recovery is still long. Other factors excluded, air traffic growth usually follows the growth pattern of real GDP. Because the latest turmoil hit worldwide economies really hard, it is expected that air traffic also will take longer to rebound. It should be also noticed that premium traffic has suffered the most with companies switching to low-cost travel providers. Business customers may be unlikely to pay an extra even when the economy will have fully recovered.
Although first signs of recovery have been spotted in increasing passenger numbers, this may be a completely wrong assumption. In an attempt to stimulate the market, airlines engaged in an across-the-board cost-cutting activity which improved the load factors but at the same time jeopardized the margins resulting in an average 2-5% lower revenues on 5-15% higher load factors.Cost-slashing might have seemed necessary especially for legacy carriers that found their customer base fleeing away to low-cost competition. However, where LCC is possibly still making money, the full-service carrier is already incurring a loss.In India, major domestic airlines engaged in price wars that led to average fare being cut by up to 85%.
Over the years, airline industry proved its resilience and continued growing even after the 9/11.
Asian markets remain the growth leaders with a huge backlog of tapped demand.
The so-called propensity to fly factor for India is nowadays very low with less that 10% of Indian population undertaking air travel. Although it is already a huge market, the potential is enormous both on domestic and international routes. This is the perfect time for investments and network development in India with the result of being an established and renown operation in long-term.
On the domestic market Air India has been consequently losing its market share and now occupies 3rd position (since Jet Airways & JetLite are effectively the same company). All these airlines have plenty of common features which Air India has not: Young, privately owned companies low-cost base attractive networks good value-for-money innovative and with “modern feel” strong brands new fleet no problems with unions
Other Indian: Jet Airways, KingfisherOther Gulf: Air Arabia, Qatar Airways, Saudi Arabian Airlines, OmanAir, Gulf Air, Etihad and Kuwait AirwaysSouth-East Asia: Singapore Airlines, Cathay Pacific, Thai, Sri Lankan and MalaysianEurope: Lufthansa, British Airways, Air France, KLMAir India remains the No.1 international carrier in India despite of its huge losses. However, this is likely to change in the near future due to the Gulf carriers literally marching through Indian skies. Having very limited home customer bases, Emirates & the likes quickly realized India’s potential. Having achieved a foothold especially in regional airports, they are now trying to drive the competition out by capacity increases (but are yet to fly A380s on Indian routes). Air India is not able to compete here in short-term given the Gulf carriers’ service proposition is out of Air India’s reach.
Indian Aviation - Air India - Global Outlook 2009-19
Global Outlook 2009 - 2019<br />Magdalena Anna Fas<br />No. 07023514<br />
KEY TAKE AWAYS:<br /><ul><li>Air India in the global marketplace
The Maharajah - example of cognitive dissonance</li></ul>Brand rebuilding as a mid-term strategy:<br /><ul><li> Necessary to attract and retain large customer base
Brand expectations must be materialized in brand execution
Fostering close bonds with Star Alliance partners</li></ul>Brand restoration is a clue to AI’s future in the face of current brand perceptions:<br />“Why Indians need to get over Air India & recognize Emirates as a national carrier?” <br />(simpliflying.com)<br />
SUBOPTIMAL INFRASTRUCTURE<br /><ul><li>Infrastructure inefficiencies in India
On-going revision of processes</li></ul>Lack of investment in fleet and of pro-environment modification of processes<br />means AI stayed behind technologically & will not be able to cope with <br />costly adjustments should environmental legislation be severed.<br />
introduction of global standards of corporate governance
making the change start happening now</li></ul>Without an immediate implementation of comprehensive modernization <br />and restructuring plans, Air India will slide deeper into unprofitability and<br />stands a good chance of not making it into 2019.<br />
Thank you <br />for your attention<br />Q & A<br />