competition in airline industry


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this ppt is gives details about indian airlines industry and the market structure

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  • competition in airline industry

    1. 1. Indian Aviation Industry<br />Framework Size: <br />75 million passengers<br />5.6 billion dollars<br />Growth:<br />Around 15 % in last 10 years<br />Growth in current year ( 2009) O.7%<br />Vision: 280 million customers by 2020<br />
    2. 2. PHASE 1<br /><ul><li>In 1932 JD TATA founded TATA AIRLINE
    3. 3. Air India International Company-Joint Sector-Govt. Of India- June 8, 1948 IN 1953
    4. 4. Air line sector not opened for Private players</li></li></ul><li>Types of Air Services<br /><ul><li>Scheduled Air Transport Service
    5. 5. Non-Scheduled Operation
    6. 6. An air cargo service</li></li></ul><li>Factors affecting Aviation Industry<br /><ul><li> Political
    7. 7. Economic
    8. 8. Technological
    9. 9. Demographic
    10. 10. Natural Environment</li></li></ul><li>Political<br /><ul><li>Deregulations in different spheres</li></ul>Open Sky Policy<br /><ul><li> FDI limits :</li></ul> 49 % for airlines <br /> 100% for airports<br />
    11. 11. Demographic and Natural<br /><ul><li> Changing pattern of consumers
    12. 12. Highest percentage people of group 20-25
    13. 13. Educational environment
    14. 14. High energy cost</li></li></ul><li> DETERMINANTS OF PRICING<br />ATF<br />ATF refers to air turbine fuel which is used by airlines in its operations.<br />ATF contributes to the 40 % of operation cost<br />It includes freight charges from gulf to India ,<br />Customs Duty, Domestic Transportation and various taxes.<br />India usually Pay higher ATF charges as compared to other countries.<br />
    15. 15. Lease Rental<br />Private operators except Air India have leased aircraft from USA and Europe.<br />They pay on average $375000 to $500000 per month depending on the aircraft<br />They contribute almost 33 % of operational cost.<br />They generally have to pay their rents in dollar terms. <br />
    16. 16. Airport Charges<br />It is the basic fees that is charged by airports from airlines<br />This include parking fees, landing fees , stop paging fees and aero bridge expenses<br />New airport charges more than established one to cover up all the cost incurred.<br />
    17. 17. Other factors<br />Advertising and Promotional Expenses<br />Technology employed by the airlines<br />Current Financial position<br />Prices set by other airlines competing in the present environment.<br />Pilot fees<br />Government regulation.<br />
    18. 18. Phase II (1986-2003)<br /><ul><li>Granting scheduled status to six private airlines
    19. 19. Till 1998
    20. 20. ONLY TWO AIRLINES (i. E jet airways and air Sahara) SURVIVED WHILE OTHERS SHUT BUSINESS
    21. 21. RESULTING A DUOPLY OF PRIVATE AIRLINES</li></li></ul><li>AirFare<br />WAR<br />
    22. 22. INDIAN AIRLINES<br /><ul><li> Indian Airlines came up with a new apex fare slab for purchase of tickets in eight sectors, 28 days in advance — two days less than </li></ul> those offered by Air Sahara and Jet Airways. <br /><ul><li> The D-28 fares would be available for sale on one way or round trips as against round trip fares offered by Air Sahara.</li></li></ul><li>JET AIRWAYS<br /><ul><li> Frequent Flyer Scheme
    23. 23. APEX pricing Scheme
    24. 24. Cash Back Offer
    25. 25. Jet Privilege Scheme : Extended its points partnerships to Accor Hotels and Langham Hotels International.
    26. 26. Internet Auction</li></li></ul><li>What is Apex?<br /> Apex IS ADVANCE PURCHASE EXCURSION FARE. It is a non-cancellable return fare offered at a heavy discount on the conditions:<br /><ul><li> Tickets are purchased at least 21 days in advance
    27. 27. Minimum gap between departures range from one to six weeks.
    28. 28. Maximum gap between departures is 12 to 24 weeks.
    29. 29. There are no stopovers.</li></li></ul><li>Effects of APEX<br /><ul><li>Led to increase in the number of customers.
    30. 30. Loss of airline companies minimized as with the increase of passengers the aircraft ran to their full capacity.
    31. 31. It brought a veritable boom in tourism sector.
    32. 32. It was able to lure the middle class people who preferred to travel by trains.</li></li></ul><li>AIRSAHARA<br /><ul><li> First Airlines to start innovative Pricing model rather than APEX Model.
    33. 33. Sixer and Super Sixer Schemes in 2002 – Six refers to the six zones for 25k.These schemes offered more to the customers than their competitors.
    34. 34. Square Drive Scheme – ( Family Pack) 4k-2.5k
    35. 35. “Steal a Seat” - Bidding process started from Base price – Re 1/- </li></li></ul><li>Defining relevant market<br />Business travelers<br />Time sensitive<br />Opportunity cost of time is high<br />Leisure travelers<br />Price elasticity of demand very high<br />Responsive to price changes<br />
    36. 36. Change in travel preferences will continue to drive growth……<br />CAPA Indian Domestic Market Forecast:<br />Business vs Leisure/VFR<br />
    37. 37.
    38. 38.
    39. 39. PHASE INTRODUCTION OF LCC (a shift to Monopolistic Competition)<br />AIR DECCAN introduced Low Cost Airlines in India in Sept-2003.<br /><ul><li>Carved a niche for passengers travelling in train
    40. 40. Fares down by 17%
    41. 41. Initially started with 20,000 seats per day
    42. 42. Planned to increase 800 seats per day every month
    43. 43. Fleet strength initially of 35
    44. 44. Plans to take it to 112 by 2012</li></li></ul><li>The trend then followed by…..<br />May 2005<br />May 2005<br />Oct 2005<br />Oct 2005<br />Aug 2006<br />
    45. 45. Key characteristics of low cost airlines<br />High seating density and load factors<br />Uniform aircraft types (usually the 737-300)<br />Direct booking (internet/call centre - no sales commissions)<br />No frills such as “free” food/drinks, lounges or ‘air miles’<br />Simple systems of yield management (pricing)<br />Use of secondary airports to cut charges and turnaround times<br />
    46. 46.
    47. 47. Increase in passenger traffic<br />
    48. 48. Phase 4: Merger & Acqusition<br /> On 20 th April , 2007 Jet acquired 100% stake in Air Sahara for INR 14.5 billion<br />Re brand Sahara as “Jetlite” which would operate as a value carrier<br />
    49. 49. KINGFISHER AIRLINES AND AIR DECCAN<br />On 31st May 2007 Kingfisher Airlines bought a 26% stake for Rs.550 crores in Air Deccan <br />Post merger Combined Market Share : 30%<br />
    50. 50. AIR INDIA AND INDIAN AIRLINES<br />The two state run carriers entered into a merger in April, 2007 in a bid to consolidate and optimize the use of the assets of the two public sector airlines. <br />The will help the two airlines to synergize their operations.<br />
    51. 51. Major Players (Market Share)<br />
    52. 52.
    53. 53. SWOT ANALYSIS<br />Strengths<br />Liberal environment<br />Modern Fleet<br />High Quality<br />Signs of economic growth<br />Political Stability<br />
    54. 54. Weakness<br />Airport infrastructure<br />Airways Infrastructure<br />High Cost Structure<br />Skilled Resources<br />
    55. 55. Opportunities<br />Market Growth<br />Geographic Location<br />Lower costs, higher Quality<br />
    56. 56. Threats<br />Aggressive approach of Railways<br />Slowdown in the economy affecting the tourism<br />
    57. 57. CONCLUSION<br />The price cutting schemes will be feasible as long as external factors for pricing are under control<br />Government should encourage private participation<br />