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Indian Aviation Industry 2011


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Indian Aviation Industry 2011

  1. 1. Strategy for a new entrant in the Indian aviation industry
  2. 2. Aviation Support Airlines Aerospace Services Design &Passenger Cargo Group handling Training Catering Manufacturing MRO
  3. 3.  Airways (India) Ltd; Bharat Airways; Himalaya Aviation Kalinga Air Lines Deccan Airways Air India Air Services of India Indian National Airways The Air Corporations Act of 1953
  4. 4.  Open Sky Policy 1991 East-West Airlines (India) Media Obsessions  1.Bollywood  2. The Indian Cricket  3. Aviation ( India)
  5. 5. Source: Market Access for Goods and Services: Overview of the Results, GATTSecretariat, Geneva, November 2004
  6. 6. Low Cost High Service
  7. 7. 1953: NATIONALISATION OF AIRCRAFT 1986: Private Sector Players permitted asINDUSTRY Air taxi operators. Jet, Air Sahara, etc startedAssets of 9 existing companies transferred to service.two entities in the aviation sector controlled by 1994: Private Carriers permitted to operatethe Government in scheduled services. Six operators granted Indian Airlines, primarily serving domestic license, however only Jet and Air Sahara ablesectors to service. Air India, primarily serving the 2003: Entry of low cost carriers. Air Deccan,international sectors Spice Jet, Go Air, Indigo. IMPLICATIONSIMPLICATIONS  Aviation is now affordable with check fares Aviation became a preferred mode of and discount schemes.transport for elite class  Various Operators with different business Restricted Growth of Aviation Industry model. High Cost structure  Huge growth foreseen in Aviation Underdevelopment of infrastructure
  8. 8.  1953- all airlines have been merged. East west airline and Modiluft have been stopped. In April 2007, Jet Airways took over Air Sahara for Rs. 1,450 crore. on 19 December 2007, Kingfisher acquired an initial 26% stake in Air Deccan for Rs. 550 crore. 1 March 2007, The government-owned Air India and Indian Airlines have joined to form the National Aviation Corporation of India Ltd. (NACIL). "Low-cost carriers (LCCs) such as IndiGo and SpiceJet also have significant capital requirements and will need further flows of funding ...The next round of consolidation is therefore most likely to occur in the LCC sector."
  9. 9. Ministry of Civil AAI DGCA Aviation• manages 127 airports • "Enable the people of • Endeavour to in the country, which India to have access to promote safe and include 13 safe, secure, efficient Air international airports, sustainable and Transportation 7 custom airports, 80 affordable air services through regulation domestic airports and with world class civil and proactive safety 28 civil enclaves. aviation". oversight system.• There are over 450 airports and 1091 registered aircrafts in the country.
  10. 10. Source : DGCA report nov-2011
  11. 11. AIRCRAFT DEPARTURES 600000 500000Total departures 400000 300000 200000 100000 0 Passenger carried 50000000 45000000 40000000 No Of Passengers 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 Source : DGCA Report 2010
  12. 12. Source : DGCA report nov-2011
  13. 13. Source : DGCA report nov-2011
  14. 14. Source : DGCA report nov-2011
  15. 15. Source : DGCA report nov-2011
  16. 16. Source : DGCA report nov-2011
  17. 17. Source : DGCA report nov-2011
  18. 18. (Source: ICRA report, Civil Aviation 2010)
  19. 19. Source: Index mundi November 2011
  20. 20. 2009-10 Revenue Expense P/L (Rs Rs. Rs Million) Millions MillionsJet 103672.6 101666.5 2006.1Jetlite 16812.6 16203.2 609.2Kingfishe 50679.2 61845.8 (11166.6)rSpicejet 21810.8 21204.8 606GoAir 8961.2 9088 (126.8)Indigo 26015 21548 4467
  21. 21. 30000000 25000000 Total Passengers 2010 Total Passengers 2009 20000000 15000000 10000000 5000000 0Source : IATA
  22. 22. Source: OAG Max Online for w/c 5 December 2011
  23. 23.  Skytrax best low cost airlines 2007,2009,2010 and 2011 Head quarter Malaysia operating cost $0.035 /seat- km First airlines for ticket less air travel 106 routes – Flies international
  24. 24.  World no 2 low cost airlines Subsidiary of Qantas Flight entertainment system using i-pad Flies international Has a business class
  25. 25. India has a population of 1.1 billion with an estimated middleMarket Size class of 300 million. 50% of the population is <25 years old. Therefore, the size of theDemographics economically active segment will continue to grow for a number of decades (unlike the developed countries and even China). Average GDP growth of 6% p.a. sustained since 1991 andEconomic accelerating thereon.Growth India has an increasingly open economy, with strong growth inTrade & international trade, healthy foreign exchange reserves andInvestment increasing foreign direct investment.
  26. 26.  Indias domestic aviation market expansion has been the strongest in the world – IATA report India is currently the ninth largest aviation market in the world, according to a RNCOS report “ it is expected that the civil aviation market will register a compound annual growth rate (CAGR) of more than 16 per cent during 2010-2013. Passenger traffic has grown at 18 per cent year on year (y-o-y) basis and the year 2010 closed at 90 million passengers both domestic and international. India is the fastest growing aviation market and expected to be within 4-5 big aviation markets by 2020 and 3rd in terms of domestic market after US and China. During the last two decades from a fleet of only about 100, the scheduled operators now have reached 435 aircrafts connecting the nation and the world.
  27. 27. Million Source : IATA projections based on goldman sachs projection
  28. 28. On December 9, 2010, SpiceJet made Go Air places order for 72 aircrafta firm order for 15 Bombardier Dash 8 worth Rs. 32,400 croreQ400 and took options to purchase afurther 15.[20th, Nov 2005 On 30th Dec-2005, Air Indias purchaseKingfisher Airlines orders 20 new order for 111 aircraft involvingRs67,000ATR72-500 Aircraft worth US$350 crore.MillionOn 12th Jan-2011, Indian budget airline Jet Airways has entered into a purchaseIndiGo has signed an agreement to buy agreement with Boeing to acquire 30180 Airbus A320 aircraft, the European 737-800s to be delivered by 2015 and 10plane maker said, in a record sale worth Boeing 787-8s to be delivered by 2014.USD 16.4 billion.
  29. 29. The Reserve Bank of India (RBI) announced that foreign institutional investors might have shareholdings more than the limited 49% in the domestic sector. Airports  Foreign equity up to 100% is allowed by the means of automatic approvals pertaining to establishment of Greenfield airports  Foreign equity up to 74% is allowed by the means of automatic approvals pertaining to the existing airports  Foreign equity up to 100% is allowed by the means of special permission from Foreign Investment Promotion Board, Ministry of Finance, pertaining to the existing airports  100 per cent tax exemption for airport projects for a period of 10 years. Air Transport Services  Up to 49% of foreign equity is allowed by the means of automatic approvals pertaining to the domestic air transport services  Up to 100% of NRI investment is allowed by the means of automatic approvals pertaining to the domestic air transport services  74 per cent FDI is permissible in cargo and non-scheduled airlines.
  30. 30. Changing regulation policiesThe government is planning to raise the foreign direct investment (FDI) limit to 74% for non-scheduled airline operations, helicopter services and regional airlines using small aircraft. Thecurrent FDI ceiling for airline services is 49%.Increased privatization of airportsIn 1997 the Government of India published a policy document to open up existing airports todomestic and foreign private investors in order to meet the significant costs involved indeveloping India’s airports to keep pace with the growth in air traffic. In Sep 2003, Govt leasedout Delhi and Mumbai airports to the private sector as part of its extensive modernisation andgrowth plan for the sector.
  31. 31. Growing Infrastructure developmentsMumbai Airport - Planned investment of US$1.6 billion by 2020, of which US$1.3 bn willtake place by 2014Delhi Airport - Planned investment of US$764 million by 2014 and USD$.7 billion by 2020Kolkata Airport - Modernisation will be led by the Airports Authority of India. Total projectcost is estimated at US$360 million.Hyderabad & Bengaluru Airports - Total investment of US$1.1 billion dollars. Both airportshave commenced commercial operations in April 2008.
  32. 32. 35Non-Metro Airports - Development of 35 non-metro airports will proceed at an estimatedcost of US $ 1.2 billion. City side development will require a further US$350 million, with themodernisation process to be completed by 2009.North East Region - Development of following airports :• Pakyong Airport, Gangtok, Sikkim• Cheithu Airport, Kohima, Nagaland• ItanagarOther Greenfield Airports –• Mopa, Goa• Navi Mumbai. Planning Commission discussing 3rd Mumbai Airport.• Chakan/Rajguru, Pune, Maharashtra; Halwara, Punjab• Kannur, Kerala.• Hassan & Gulbaraga, Karnataka.
  33. 33.  Pure Low Cost: Air travellers want more value for their money North American Hub and Spoke: Not enough distance between airports Point to Point only: Inefficient Regional Jet Feeder: Not enough critical mass Therefore , a unique model needs to be developed.
  34. 34. Marketing Operations Finance• Proper STP • Operate on • More equity• Frequent flyer routes with high • Use of FCCBs programs seat factor • Low interest –• Tie ups with • Quick Turn around long term loans. corporate time• Holiday packages • Red eye• Dynamic pricing operations• Focus on • Optimal mix of Branding ATR & jet aircrafts • Leasing of Aircraft