21546858 effect-of-inflation-deflation-on-aviation-sector

1. IMPACT OF INFLATION
AND DEFLATION ON
AVIATION INDUSTRY

2. Inflation & Deflation

3. Causes of Inflation
 Demand Pull Inflation
 Cost Plus Inflation

5. Causes Of Deflation
DECREASING MONEY SUPPLY
INCREASING SUPPLY OF
GOODS
DECREASING DEMAND FOR
GOODS
INCREASING DEMAND FOR
MONEY

6. OverviewOverview

7. Reasons For Boom
 Foreign equity allowed
 Low entry barriers
 Attraction to foreign shores
 Rising income levels and demographic profile
 Untapped potential of India's tourism
 Glamour of the airlines

8. Trends In the Aviation Industry
 Past trends
 Present trends
 Future trends ?

9. Type of InflationType of Inflation
 SECTORAL INFLATIONSECTORAL INFLATION - The sectoral
inflation takes place when there is an increase in
the price of the goods and services produced by
a certain sector of industries.

10. Inflation in the Aviation Industry
 Oil prices - Aviation Turbine Fuel (ATF)Oil prices - Aviation Turbine Fuel (ATF)
1. India imports 70% of its oil
2. Increase in expenditure
o Distortionary taxesDistortionary taxes
1. Excise duty of 8 per cent
2. Local sales taxes ranging from 4 per cent to 39 per cent
3. Price of ATF in India is 60-70 per cent higher than international
benchmarks.

11.  Domestic traffic slow down &Domestic traffic slow down &
Airlines pile up lossesAirlines pile up losses
 Higher operational and overheadHigher operational and overhead
costs for the airlines.costs for the airlines.
 Restriction towards expansionRestriction towards expansion

12.  Short haulShort haul
flights trafficflights traffic
dropdrop
 Cost cuttingCost cutting

13. Due to the hike in the oil prices the whole airlineDue to the hike in the oil prices the whole airline
industry is facing an additional burden of Rs 2220industry is facing an additional burden of Rs 2220
crore and the rest because of a rise in sales taxcrore and the rest because of a rise in sales tax
imposed by states, route navigation and landingimposed by states, route navigation and landing
charges and the fluctuation of the Indian rupee. Thischarges and the fluctuation of the Indian rupee. This
has lead to a proposed 18-20 per cent increase in fareshas lead to a proposed 18-20 per cent increase in fares
of major airlines.of major airlines.

14. Deflation in aviation industryDeflation in aviation industry
 Main effect of deflation is that it gives people a huge incentivehuge incentive not
to buy goods.
 Layoffs and closuresLayoffs and closures - deflationary spiral (vicious cycle of
unemployment)
 Decrease in the salaryDecrease in the salary (the pay packets are slashed, incentives
reduced, extra benefits reduced) leading to decrease in level of
motivation.
 Decreased standard of livingDecreased standard of living
 No job generationsNo job generations

15.  No expansion projectsNo expansion projects
1. Leading to more unemployment , less money, less demand and more deflation.

16. Suggestion
 Expansion of capacity at existing airports
 Up gradation / modernization of Metro and
Non-metro airports
 Development of new Greenfield Airports
 Up gradation of CNS/ATM facilities

17.  Private investment encouraged –both in
Airlines as well as Airports
 Foreign Direct Investment
 Air Cargo Market

18. ConclusionConclusion
 High growth
 Infrastructure - Current and future demand
 Huge opportunity for private players

19. Thank You.