SlideShare a Scribd company logo
Jet Airways
Agenda



         • About Indian Aviation Industry
         • Market Size, Structure, Growth &
           Segmentation
         • Porter‘s 5 Forces Model
         • About Jet Airways
         • Market Share, Size and Competition
         • Profitability and Ratio Analysis
         • SWOT Analysis
Introduction to Indian Aviation Sector


Sector structure/Market size

 The Indian aviation industry is one of the fastest growing
  aviation industries in the world

 The government's open sky policy has led to many overseas
  players entering the market and the industry has been growing
  both in terms of players and number of aircrafts

 Today, private airlines account for around 75 per cent share of
  the domestic aviation market.
Introduction to Indian Aviation Sector




 India is the 9th largest aviation market in the world. According
  to the Ministry of Civil Aviation, around 29.8 million
  passengers travelled to/from India during 2008, an increase of
  30 per cent on previous year

 It is predicted that international passengers will grow up to 50
  million by 2015

 Further, due to enhanced opportunities and international
  connectivity -Today, 87 foreign airlines fly to and from India
  and five Indian carriers fly to and fro from 40 countries.
Indian Aviation : Market Size

Market Size

• The rapidly expanding aviation sector in India handles 2.5 billion
  passengers across the world in a year; moves 45 million tonnes (MT)
  of cargo through 920 airlines, using 4,200 airports and deploys
  27,000 aircraft

• Passengers carried by domestic airlines during January 2012 was
  recorded at 5.33 million as against 4.94 million during the
  corresponding period of previous year thereby registering a growth of
  8.06 per cent, according to data released by the Directorate General
  Civil Aviation (DGCA)

• The air transport (including air freight) in India has attracted foreign
  direct investment (FDI) worth US$ 429.70 million from April 2000 to
  December 2011, as per data released by Department of Industrial
  Policy and Promotion (DIPP).
Indian Aviation : Evolution




• < 1953 Nine Airlines existed including Indian Airlines & Air India
• 1953        Nationalization of all private airlines through Air
  Corporations Act;
• 1986        Private players permitted to operate as air taxi operators
• 1994        Air Corporation act repealed; Private players can operate
  schedule services
• 1995        Jet, Sahara, Modiluft, Damania, East West granted
  scheduled carrier status
• 1997        4 out of 6 operators shut down; Jet & Sahara continue
• 2001        Aviation Turbine Fuel (ATF) prices decontrolled
Indian Aviation : Evolution




• 2003         Air Deccan starts operations as India‘s first LCC
• 2005         Kingfisher, SpiceJet, Indigo, Go Air, Paramount start
  operations
• 2007         Industry consolidates; Jet acquired Sahara; Kingfisher
  acquired Air Deccan
• 2010         SpiceJet starts international operations
• 2011         Indigo starts international operations, Kingfisher exits LCC
  segment
• 2012         Government allows direct ATF imports, FDI proposal for
  allowing foreign carriers to pick up to 49% stake under consideration
Jet Airways - Strategy
Cost Structure



                                     Aircraft
   Fuel Cost       Employee Cost   Maintenance
                                    Expenses


 Landing, Navig                     Selling &
                       Other
 ation & Airport                   Distribution
                     Expenses
     Charges                        Expenses
Cost Structure


Fuel Cost

 ATF costs contributes
    30-45% of overall operating costs for Full Service Carrier‘s
     (FSC‘s)
    40-55% for Low cost carriers (LCCs)
 Domestic ATF prices are linked to fluctuation in crude oil prices
  and movement in INR vs. $
 High central and state levies translates into a 60-70% higher
  ATF prices in India over the global average
 Significant congestion at major domestic airports increases fuel
  costs considerably
Cost Structure




• Employee
   • Aggressive expansion in the Airline industry
   • Dearth of experienced pilots
   • Foreign pilots command higher salaries
   • Payments made in foreign currency
Cost Structure




• Aircraft Maintenance Costs
   • Developing Aviation industry
   • Imported components
   • Lead times
   • inventory
   • Shortage of Skill in Aircraft maintenance

• Landing Navigation and Airport charges
   • Cost of Technology
Key events in the past


Year Major Milestones
1953 Nine Airlines existed including Indian Airlines & Air India
1953 Nationalization of all private airlines through Air Corporations Act;
1986 Private players permitted to operate as air taxi operators
1994 Air Corporation act repealed; Private players can operate schedule services
1995 Jet, Sahara, Modiluft, Damania, East West granted scheduled carrier status
1997 4 out of 6 operators shut down; Jet & Sahara continue
2001 Aviation Turbine Fuel (ATF) prices decontrolled
2003 Air Deccan starts operations as India’s first LCC
2005 Kingfisher, SpiceJet, Indigo, Go Air, Paramount start operations
2007 Industry consolidates; Jet acquired Sahara; Kingfisher acquired Air Deccan
2010 SpiceJet starts international operations
2011 Indigo starts international operations, Kingfisher exits LCC segment
     Government allows direct ATF imports, FDI proposal for allowing foreign carriers to pick up to
2012 49% stake under consideration
Key events in the past

1953 Nationalization of Aircraft
   Industry

•   Assets of 9 existing
    companies transferred to two
    entities in the aviation sector   1986: Private Sector Players permitted
    controlled by the government         as Air taxi operators. Jet, Air
      Indian Airlines, Primarily        Sahara, etc started service.
        serving domestic sectors      1994: Private Carriers permitted to
      Air India, Primarily              operate scheduled services. Six
        serving the international        operators granted license, however
        sectors                          only Jet and Air Sahara able to
                                         service.
•   Implications                      2003: Entry of low carriers. Air
      Aviation became preferred         Deccan, Spice Jet, Go Air, Indigo.
       mode of transport for elite
      Restricted Growth of           Implications
       Aviation industry               Aviation is now affordable with
      High Cost Structure              check fares and discount schemes.
      Underdevelopment of             Various Operators with different
       infrastructure                   business model.
                                       Huge growth foreseen in Aviation
Regulators



•   Federation of Indian Airlines
•   The Directorate General of Civil Aviation
•   Ministry of Civil Aviation
•   Airport Authority of India
•   The Airport Authority of India Act 1994
•   Civil Aviation Policy
•   Liberalization of Entitlements
•   Open Skies Agreement between India and the US
Key Regulations

1.    Civil Aviation Requirements
2.    Aircraft Act, 1934
3.    Aircraft Rules, 1937
4.    Carriage of Dangerous Goods, 2003
5.    National Convention
6.    Aeronautical Information Circulars
7.    Other Circulars
8.    Aircraft Register
9.    Master Minimum Equipment
10.   Mandatory Modifications
11.   Approved Firms
12.   Accident Summaries
13.   Related Rules
14.   Personal and Medical files of Pilots
15.   Bilateral Agreements with foreign countries
16.   Air Transport and Aircraft Statistics
17.   Service Books of DGCA employees
Indian Aviation – Pros

•   Strong growth prospects
    Passenger traffic growth has grown at a CAGR of 16% in India over the past 10
    years

•   Relative underpenetrated market
    Penetration of air travel at <3% is significantly below benchmarks in other markets

•   An opportunity to create India as an hub
    An opportunity for foreign airlines to create India as their hub for international
    traffic between Europe and South East Asia; Additionally offer better connectivity
    within India with international destinations

•   An opportunity to create India as an MRO centre
    Foreign airlines could also look at leveraging on India‘s low-cost arbitrage by
    setting up MRO facilities in India

•   Low Valuations
    Market valuation of listed airlines in India has suffered due to poor performance
Indian Aviation – Cons

•   Aviation economics are not favorable in India
    Higher taxes on ATF and airport charges continue to be key headwinds for the
    sector; besides higher cost base, airlines in India are also mandatorily
    required to fly on certain unviable routes

•   Inadequate Infrastructure
    Development of airport infrastructure has not kept pace with demand, thereby
    resulting in delays and higher costs for airlines

•   Poor financial health of most airlines
    Intense competition, sharp fluctuation in ATF prices and high debt burden
    continue to weigh on the financial performance of Indian airlines; foreign
    exchange fluctuation and lack of adequate hedging mechanism (for fuel) have
    added to the woes

•   Highly competitive & Price Sensitive traveler base
Growth of Industry
• Passengers carried by domestic airlines
  during January 2012 and corresponding
  period    of    previous   year thereby
  registering a growth of 8.06%.
Growth of Industry

 Domestic     airlines flew 3.67   million
  passengers in August 2009—an increase of
  25 per cent.

 The Centre for Asia Pacific Aviation (CAPA)
  forecasted that domestic traffic will increase
  by 25 per cent to 30 per cent till 2010 and
  international traffic growth by 15 per cent,
  taking the total market to more than 100
  million passengers .

 The government plans to invest US$ 9 billion
  to modernise existing airports . The
  government is also planning to develop
  around 300 unused airstrips.
Growth of Industry

 India ranks fourth after US, China and Japan in
  terms of domestic passengers volume. The number
  of domestic flights grew by 69 per cent from 2005
  to 2008. The domestic aviation sector is expected to
  grow at a rate of 9-10 per cent to reach a level of
  150-180 million passengers by 2020.

 The industry witnessed an annual growth of 12.8
  per cent during the last 5 years in the international
  cargo handled at all Indian airports. The airports
  handled a total of 1020.9 thousand metric tones of
  international cargo in 2006-07.

 Further, there has been an increase in tourist
  charter flights to India in 2008 with around 686
  flights bringing 150,000 tourists. Also, there has
  been an increase in non-scheduled operator permits
  – 99 in 2008 as against 66 in 2007.
Factors impacting the growth



1.   Demand for Air Travel
       -  Growing Purchasing Powder of the Middle class
       -  Lower Air fares
       -  Tourism in India
       -  Growing Outbound Travel in India
       -  Growth Potential
Factors Impacting the Growth


2. Aviation Services in India
        - Liberalization of the Sector
        - Modernization of the Non-Metro Airports
        - Rising Share of Low cost Carriers
        - Fleet Expansion by Airlines Service
        - Service Expansions by State Owned Carriers
        - Development of MRO Market in India
        - The Indian Government Opens Up New International Routes
        - Establishment of New Airports and Restructuring of Old Airports
        - EU-India Civil Aviation Project
Market Demand / Equilibrium
Market Demand / Equilibrium

•   The Cournot model assumes that each firm takes the output of the other firm
    as given. If Indian Airlines output is assumed to stay the same, Jet will
    maximize profits by setting MR=MC. The result is shown. In the Cournot
    framework the equilibrium is at the intersection of the two reaction functions.
    These are just the profit-maximizing conditions rearranged.

•   The revenue of both a competitive firm and of a monopolist depends only on
    the firm's own output: for a competitive firm we assume that the firm's output
    does not affect the price, and for a monopolist there are no other firms in the
    market. For a duopolist, however, revenue depends on both its own
    output and the other firm's output

•   We conclude that the firms' outputs and the price are different in Cournot-
    Nash equilibrium than they are in a competitive equilibrium. As the demand
    curve slopes down, price exceeds marginal cost, so that, as for a monopoly,
    the total output produced by the firms is less than the competitive output. An
    implication is that, as for a monopoly, the Nash equilibrium outcome in a
    Cournot duopoly is not Pareto efficient.
Indian Aviation – A Differentiated Oligopoly
Explanation of Aviation Oligopoly curve



• Each seller in an imperfectly competitive market faces a negatively
  sloped demand curve for his product, permitting him some control of
  the price of his product. In an oligopoly, a few firms produce the
  same product, while in monopolistic competition, many firms produce
  differentiated but similar products. In a differentiated oligopoly, a few
  firms produce products different enough for each firm to have its own
  downward sloping demand curve. As with a perfectly competitive firm
  or a monopoly, the differentiated oligopoly firm produces at a profit
  maximizing level of output where marginal cost equals marginal
  revenue. The firm finds the price it will charge customers at the profit
  maximizing level of output (Qm) from the demand curve, and sets
  price to Pm. As we can see, the firm is earning economic profits since
  price exceeds average total cost at the profit maximizing level of
  output.
Porter’s 5 Forces Model
Indian Aviation : Porter’s 5 forces

 Threat of New Entrants :
   If FDI is cleared then lot of foreign airlines will enter into Indian
  Aviation.
 Bargaining Power of Suppliers :
  The Jet Fuel , Food & Beverage Suppliers etc have strong Bargaining
  Power in this sector.
 Bargaining Power of Customers :
  Since passengers have got the choice to select best price between
  low cost and full service carrier , passengers have a strong bargaining
  power.
 Substitutes:
  Other modes of transportation such Hi- Speed Trains , Luxury Buses
  are substituting for Air travel.
 Intensity of Competition :
  All the players are focused and competing strongly on grounds of
  differentiation and low cost.
Indian Aviation : Attractive or Unattractive ?



• 4/5 forces of Porter‘s Model are strong in the
  aviation industry i.e. Bargaining Power of
  Suppliers , Bargaining Power of Customers ,
  Substitutes and Intensity of competition are
  strong .

•    Hence we can conclude that Indian Aviation
    sector is highly unattractive to compete.
Indian Aviation – Demand & Supply

• Indian carriers seat factor: Dec-2010 V/s Dec-2011
:
Indian Aviation: Segment Analysis




    •   What are the components
    •   Size of Each Segment
    •   Growth of Each Segment
    •   Segment Changes
Aviation Sector : Components
Indian Aviation : Components

• Full Service Carriers :
  Full Services airlines as the name defines provide all
  types of facilities which make the journey comfortable
  and hassle free.
   In full service airline you will get various varieties of
  foods. They provide menu of local as well as
  international cuisines which a passenger can opt
  according to his own taste.
• Low Cost Carriers
   Low cost airline don't provide many options. They
  provide packed food, snacks which you have to
  purchase from the airlines.
Size of each segment
Business Class Vs Economy Class

• Although the occasion of use indicates that
  maximum usage is for business, the flight class
  graph indicates that the proportion travelled by
  business class is very small in comparison to that
  travelled by economy class.

•    This indicates that most business travellers are
    flying Economy class as well.

•    Further, the second important occasion of usage
    is for emergencies and time-critical travels.
Components of Full Service Carriers
Future of Aviation Industry– Key Facts

• India is poised to be among the top five aviation nations in the
  world in the next 10 years.

• The Indian Aviation Industry is exploring opportunities to improve
  connectivity and is also looking at enhancing the number of Indian
  carriers to various countries.

•    It is predicted that in the next 10 years domestic air traffic will
    touch around 160-180 million passengers a year & international
    traffic will exceed 80 million passengers a year.
Future of Aviation Industry - Challenges

 • Aviation policy does not allow foreign airlines to pick up stake in
   Indian carriers.

 • Centre for Asia Pacific Aviation has forecast a record $2.5-3 billion
   loss for all Indian airlines in 2012

 • ATF prices in India are 30 to 40 per cent more than the prices in the
   international market

 • Carriers are now permitted for import of aviation turbine fuel directly
   but most of the carriers do not have the expensive infrastructure
   needed to import and store the fuel

 • The civil aviation space facing troubles due to lack of consistent
   profitability as Crude prices have been rallying following the global
   economic downturn.
Top Players
IndiGo




 IndiGo is a private, low-cost Airline started in 2006.

 IndiGo has the second largest share in India's domestic air travel
  market, only behind Jet Airways.

 It has established itself as one of India's leading airlines using its
  model of efficient, low-cost operations and by attracting customers
  with low fares.

 IndiGo has grown faster than any other low cost carrier in the world.
Air India




  Air India is the flag carrier airline of India. It is part of the
   Government of India owned Air India Limited (AIL).

  Air India has the third largest share in India's domestic air travel
   market. Following its merger with Indian Airlines, Air India has
   faced multiple problems, including escalating financial losses.

  In last 5 years, Air India's domestic market share declined from
   20% to 14%.

  In early 2012, the Indian government granted a bailout package of
   Rs300 billion.
SpiceJet



 SpiceJet is a low-cost airline.

 In 3 years of operation, it became India's second-largest low-cost
  airline in terms of market share.

 One of the few airlines to register profit in 2011.

 With a fleet size of over 40 flights and 34 destinations in India.
Kingfisher Airlines



  Kingfisher Airlines Limited has the lowest market share
   currently among the top players.

  Until it was hit by severe financial crisis in late 2011, Kingfisher
   Airlines had the second largest share in India's domestic air travel
   market.

  After acquiring Air Deccan, Kingfisher suffered a loss of over 1,000
   Crore for three consecutive years. By early 2012, the airline
   accumulated losses of over 7,000 Crore.

  The fleet size got drastically reduced from 64 to only 22.
Jet Airways




 Jet Airways is the largest Indian Airline.

 It operates over 400 flights daily to 76 destinations worldwide.

 Jet Airways bought Air Sahara for INR14.5 billion (US$340
  million). Air Sahara was renamed JetLite, and was marketed
  between a low-cost carrier and a full service airline.

 In August 2008 Jet Airways announced its plans to completely
  integrate JetLite into Jet Airways.
About Jet Airways

Details                  Information
Founded                  1 April 1992
Commenced operations     5 May 1993
Frequent-flyer program   Jet Privilege
Airport lounge           Jet Lounge
Subsidiaries             Jet Lite
Fleet size               101 (+49 Orders)
Destinations             76
Company slogan           The Joy of Flying
Parent company           Tailwinds Limited
Headquarters             Mumbai, India
Revenue                  Rs. 145,225.80 million (US$2,897.25 million)
                         (2010-11)
Profit                   Rs.858.40 million (US$-17.13 million)
Key people               Naresh Goyal, Founder & Chairman , Nikos
                         Kardassis, CEO
                         Ali Ghandour, Director
Jet Airways – History

•   Jet Airways was incorporated as an air taxi operator on 1 April 1992
•   It started commercial 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 from Chennai to Colombo 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 .
•   Naresh Goyal – who already owned Jetair (Private) Limited, which provided
    sales and marketing for foreign airlines in India – set up Jet Airways as a
    full-service scheduled airline to compete against state-owned Indian Airlines.
•   Indian Airlines had enjoyed a monopoly in the domestic market between 1953,
    when all major Indian air transport providers were nationalized under the Air
    Corporations Act (1953), and January 1994, when the Air Corporations Act
    was repealed, following which Jet Airways received scheduled airline status
Jet Airways: Mergers & Acquisitions

• In January 2006 Jet Airways announced that it would buy Air Sahara
  for US$500 million in an all-cash deal, making it the biggest takeover
  in Indian aviation history.

• On 12 April 2007 Jet Airways agreed to buy out Air Sahara for
  INR14.5 billion (US$340 million). Air Sahara was renamed JetLite,
  and was marketed between a low-cost carrier and a full service
  airline.

• In August 2008 Jet Airways announced its plans to completely
  integrate JetLite into Jet Airways.
Jet Airways: Key Strategies


• Keep operations and growth in line with expected Indian
  economy growth which is around 7% – 8% per annum
• Manage risk & short term crisis on account of any global
  financial risks
• Manage short term spike in crude oil prices.
• Minimize passing the fuel price fluctuation to customers.
• Network expansion will be around the key focus specially Gulf
  and Middle east
Jet Airways: Key Strategies


• Focus on improving service, reliability and on time
  performance
• Focus to be the best in ―no frills‖ sector.
• Measures to negate effect of unprecedented increase in prices
  of fuel
• Maintain its leadership position in the Indian aviation industry
• Improve On-time performance it was 88.4% for Jet Airways
  for the financial year 2010-11
• Explore the potential for sustained growth in Indian passenger
  traffic because of low penetration in the medium to long term.
Impact/Results – Key Strategies

• Operating Highlights
Impact/Results – Key Strategies

• Operating Highlights
Impact/Results – Key Strategies

• Operating Highlights
Impact/Results – Key Strategies

• Financial Highlights
Impact/Results – Key Strategies

• Financial Highlights
Market Share
Revenue



                                         Revenue of Top Airlines - 2011              Revenue

                       16000
                                 14523
                       14000


                       12000
Revenue in INR Crore




                       10000


                       8000
                                                 6496

                       6000

                                                              3946
                       4000                                                2961

                       2000


                           0
                               Jet Airways      Kingfisher    IndiGo      SpiceJet
Net Profit/Loss



                                      Net Profit/Loss of Top Airlines - 2011
                            800
                                                                                650
                            600
Profit/Loss in INR Crore




                            400

                            200                                     101

                              0
                                   Kingfisher     Jet Airways     SpiceJet     IndiGo
                            -200                       -86


                            -400

                            -600

                            -800

                           -1000
                                     -1027
                           -1200
Current Scenario

• In October 2008 Jet Airways and rival Kingfisher Airlines announced
  an alliance which primarily includes an agreement on code-sharing on
  both domestic and international flights, joint fuel management to
  reduce expenses, common ground handling, joint utilization of crew
  and sharing of similar frequent flier programs.
• On 8 May 2009 Jet Airways launched its low-cost brand, Jet Konnect.
• The decision to launch a new brand instead of expanding the JetLite
  network was taken after considering the regulatory delays involved in
  transferring aircraft from Jet Airways to JetLite, as the two have
  different operator codes.
• The brand was launched on sectors that had 50% or less load factor
  with the aim of increasing it to 70% and above. Jet officials said that
  the brand would cease to exist once the demand for the regular Jet
  Airways increases.
• According to a PTI report, for the third quarter of 2010, Jet Airways
  (Jet+JetLite) had a market share of 26.9% in terms of passengers
  carried, thus making it a market leader in India.
Jet Airways Subsidiaries : JetLite

JetLite

•   JetLite was a wholly owned subsidiary of Jet Airways.

•   It was established as Sahara Airlines on 20 September 1991 and began
    operations on 3 December 1993 with two Boeing 737-200 aircraft.

•   Initially services were primarily concentrated in the northern sectors of India,
    keeping Delhi as its base, and then operations were extended to cover all the
    country.

•   Sahara Airlines was rebranded as Air Sahara on 2 October 2000. On 12 April
    2007 Jet Airways took over Air Sahara and on 16 April 2007 Air Sahara was
    renamed as JetLite.

•   JetLite operated a fleet of mixed owned–leased Boeing 737 Next Generation
    aircraft and Bombardier CRJ-200ER. JetLite ceased operations on 25 March,
    2012 after merger with Jet Konnect.
Jet Airways Subsidiaries : Jet Konnect
Jet Konnect
• Jet Konnect is the low-cost brand of India-based Jet Airways. It was
   launched on 8 May 2009, and shares the same airline designation as Jet
   Airways. It operates a mixed fleet of ATR 72-500s and Boeing 737-800s.

•    The rationale for launching Jet Airways Konnect was to close down loss-
     making routes and divert the planes to more profitable routes with higher
     passenger load factors. Jet already ran a low-cost airline named JetLite.

•    According to Jet Airways, the decision to launch a low-cost brand instead of
     expanding the existing JetLite was taken to avoid the regulatory delays
     associated with moving excess aircraft and assets from Jet Airways to JetLite,
     which have separate operating codes.

•    Jet Konnect offers a no frills flight where meals and other refreshments have
     to be purchased on board.

•    To identify if the flight is a full service or Konnect the flight numbers for
     Konnect are in the series 9W 2000-2999.Jet Airways merged the JetLite brand
     into Jet Konnect on 25 March 2012.
Jet Airways : Services

Destinations :
• Jet Airways serves 52 domestic destinations and 24 international destinations, a
   total of 76 in 19 countries across southern Africa, Asia, Europe and North America.
   Short-haul destinations are served using Boeing 737 Next Generation.
Domestic & international short haul :

Première:
•   The Première features 40-inch extra-wide seats with a personal Widescreen LCD
   attached to each seat. The Première cabin is configured in a 2-2 abreast pattern.

Economy Class:
•   Jet Airways Economy class on its Boeing 737 Next Generation features 30-inch seat
   pitch with personal Widescreen LCD behind each seat. Jet Airways was the World's
   first airline to introduce in-flight entertainment systems on the Boeing 737 aircraft.

•   The Economy class cabin is configured in a 3-3 abreast pattern on the Boeing 737
    Next Generation and 2-2 abreast pattern on the ATR 72-500.
Jet Airways : Services

International long haul flights:
First Class:
         First class is available on all Boeing 777-300ER aircraft. All seats convert to a fully flat
     bed, similar to Singapore Airlines first class seat but much smaller.
            It was the second airline in the world to have private suites. All seats in First have a
     23-inch widescreen LCD monitor with audio-video on-demand systems (AVOD), BOSE
     noise cancelling headphones, in seat power supply, and USB ports etc.
            Jet Airways is the first Indian airline to offer fully enclosed suites on its aircraft;
     each suite has a closable door, making for a private compartment
Première :
Première on board the Boeing 777-300ER
 Première (Business Class) on the Airbus A330-200 and Boeing 777-300ER international
     fleet has a fully flat bed with AVOD entertainment.
 Seats are configured in a herringbone pattern (1-2-1 on the Boeing 777-300ER, and 1-1-
     1 on the Airbus A330-200), with each seat offering direct access to the aisle.
 Première seats on the A330-200s leased from ILFC are configured differently in a 2-2-2
     non-herringbone pattern.
 Each Première Seat has a 15.4-inch flat screen LCD TV with AVOD.
 USB ports and in-seat laptop power are provided.
 All seats are standard recliner business-class seats with a few newer
 aircraft with electronic recline and massager.
Threat of New Entrants


A lucrative industry is always a target for investors looking at investment. One of
    the foremost factors in consideration while looking at the attractiveness of an
    industry is the threat of new entrants. In the airlines industry, this was a
    major threat a few years ago. The airlines operating in he industry were
    limited and the industry had few players like Indian Airlines and Jet Airways.
    However, as the industry had scope for accommodating more players many
    players joined the fray. The airlines industry however comes with its fair share
    of barriers.
The investment in the airlines is very huge and acts as a major barrier to entry.
    Bundled with it were different permits for running an airline company from the
    civil aviation company and FDI limits. Factors that can limit the threat of new
    entrants are known as barriers to entry. Some examples include:
 Existing loyalty to major brands
    • Incentives for using a particular buyer (such as frequent shopper programs)
    • High fixed costs
    • Scarcity of resources
    • High costs of switching companies
    • Government restrictions or legislation
Bargaining Power of Suppliers




This is how much pressure suppliers can place on a business. If one
supplier has a large enough impact to affect a company's margins and
volumes, then it holds substantial power. In the airlines company there is
certain amount of bargaining power the suppliers have. Firstly, suppliers in
the form of aircraft builders, who very often exceed the time limits. Adding
to it are suppliers of oil who hold the key to running of the airlines. Here
are a few other reasons that suppliers might have power

•   There are very few suppliers of a particular product
•   There are no substitutes
•   Switching to another (competitive) product is very costly
•   The product is extremely important to buyers - can't do without it
•   The supplying industry has a higher profitability than the buying industry
Bargaining Power of Buyers




•   This how much pressure customers can place on a business. If one customer
    has a large enough impact to affect a company's margins and volumes, then
    the customer hold substantial power.
•    Predominantly, in the airlines industry, it has been seen that the civil aviation
    ministry has been in favour of the customer and buyers thus have reasonable
    power.
•   While most airlines companies are running with wafer thin margins, it is pretty
    difficult for companies to increase prices as the capacity utilization will be
    seriously affected. Here are a few reasons that customers might have power:
•   • Small number of buyers
    • Purchases large volumes
    • Switching to another (competitive) airline is simple
    • The airline is not extremely important to buyers; they can do without
    the same brand for a period of time
•   • Customers are price sensitive
Availability of Substitutes




• Availability of Substitutes
• What is the likelihood that someone will switch to a competitive
  product or service? If the cost of switching is low, then this poses a
  serious threat. Most airline companies have similar facilities and are
  listed on website such as makemytrip.com, yatra.com where
  customers choose from the cheapest available tickets. This shows
  that the customer has a lot of options and would not mind shifting to
  a new service. Here are a few factors that can affect the threat of
  substitutes:-n
• The main issue is the similarity of substitutes. All low cost airlines
  have similar facilities.
• • If substitutes are similar, it can be viewed in the same light as a
  new entrants
Intensive Competition



• Competitive Rivalry
• This describes the intensity of competition between existing firms in
  an industry. Highly competitive industries generally earn low returns
  because the cost of competition is high .
• The competition in the airline industry is cutthroat and each player is
  trying to gain an upper-hand based on non price factors.
• A highly competitive market might result from:
• • Many players of about the same size; there is no dominant firm
  • Little differentiation between competitors‗ products and services
  • A mature industry with very little growth; companies can only grow
  by stealing customers away from company.
Jet Airways Versus Competitors
Profitability & Ratio Analysis
Sales Turnover Comparison




                    Sales Turnover (crores)
14,000
12,000
10,000
 8,000                                                     Jet Airways

 6,000                                                     Kingfisher Airlines

 4,000                                                     Spicejet

 2,000
    0
         Mar '07   Mar '08   Mar '09   Mar '10   Mar '11
Income Comparison




                       Total Income (crores)
14,000
12,000
10,000
 8,000                                                     Jet Airways

 6,000                                                     Kingfisher Airlines

 4,000                                                     Spicejet

 2,000
    0
         Mar '07   Mar '08   Mar '09   Mar '10   Mar '11
Expenses Comparison




                     Total Expenses (crores)
12,000

10,000

 8,000
                                                           Jet Airways
 6,000
                                                           Kingfisher Airlines
 4,000                                                     Spicejet

 2,000

    0
         Mar '07   Mar '08   Mar '09   Mar '10   Mar '11
Profit / Loss Comparison



                  Reported Net Profit (crores)
                                Mar '11

                                Mar '10
                                                    Spicejet
                                Mar '09
                                                    Kingfisher Airlines

                                Mar '08             Jet Airways


                                Mar '07

-2,000   -1,500     -1,000   -500         0   500
Investment Valuation Ratios
Profitability Ratios
Liquidity & Solvency Ratios
Debt Coverage Ratios
Management Efficiency Ratios
Critical Success Factors



   Support investments       Not Favor investments

 • Strong growth            • Aviations economics
   prospects                  are not favorable in
 • Relative                   India
   underpenetrated          • Inadequate
   market                     Infrastructure
 • Opportunity to create    • Poor financial health of
   India as an hub            most airlines
 • Opportunity to create    • Highly competitive &
   India as an MRO centre     Price sensitive traveler
 • Low Valuations             base
Jet Airways: Unique Business Model



• Jet Airways India Ltd (Jet) is best placed to capture the 16.5% CAGR in
  domestic passenger traffic and 15.5% CAGR in international passenger
  traffic in FY11-FY15E.
• Jet offers a host of benefits due to flexible business model such as
    Dominant market share in both the domestic (~26%) and
      international market (~36%) allowing it to reshuffle part of its fleet
      depending on the seasonality in demand
    Presence in the FSC (Jet Airways) and LCC segments (JetLite and Jet
      Konnect) which enables to successfully divert part of its fleet based
      on the demand supply scenario, and hence maintain the yields and
      load factors
    Varied fleet type (Boeing and ATR), size (capacity of 777s is 312
      while that of ATR is 65) and ownership making pilot poaching
      difficult, accommodating demand across sectors easier and leasing
      out owned fleet to capitalize on the demand-supply mismatch.
Factors for Sustainable Business Model




A. Presence in domestic as well as international market
B. Presence in the FSC and LCC segment
C. Varied fleet size and type
D. Leasing out owned fleet to capitalize on the demand-supply
   mismatch
Factors for Sustainable Business Model

A. Presence in domestic as well as international market
 The domestic passenger traffic has witnessed a 16.5% CAGR in FY06-FY11
  to 54 mn trips.
 Similar growth trend expected in the future considering a) rising GDP over
  the next five years with a 2.2x multiplier effect, b) improving
  infrastructure with new airports and expansion of existing airports, and c)
  rising per capita income in India and comparatively lower rise in ticket
  prices ,hence improving the affordability of Indian travelers.
 With a 16.5% CAGR in FY11-FY15E the domestic passenger traffic is
  expected to grow to 99 mn trips.
 Ability to reshuffle part of its fleet across geographies : Its presence in the
  international and domestic markets has enabled the company to re-shuffle
  its fleet to international skies based on the seasonal demand and vice
  versa.
 The presence in the international segment has helped improve the block
  hours for the company as well improve revenues with a higher revenue
  per RPKM (yield) seen from the international business.
Factors for Sustainable Business Model

B. Presence in the FSC and LCC segment
    JA is the best bet in the Indian aviation space, to capture the robust
     growth in the domestic passenger traffic due to its presence in both the
     LCC and FSC segment.
    It caters to the lower end of the spectrum with its brands, Jet Konnect and
     JetLite, and to the premium end with its own brand-name, Jet Airways.
    This enables the company to provide a range of ticket prices and is able to
     cater to premium and economy travelers.
    The presence in the LCC segment allows it to capture the relatively strong
     growth in the domestic skies and also leads to improvement in blended
     load factors. On the other hand the FSC segment has helped Jet maintain
     its yields.
    Diverting part of its fleet under the FSC/LCC model : It has a vast
     fleet of 119 aircrafts (19 Jet Lite and 100 Jet Airways ) and has a
     competitive advantage due to operations under FSC and LCC models which
     enables it to divert part of its fleet under the LCC/ FSC model depending
     on the economic scenario.
    Such flexibility places Jet in a better scenario than its competitors and
     hence JA is able to capture a greater share of wallet spend during good
     time as well as maintain its PLF during lean seasons
Factors for Sustainable Business Model

C. Varied fleet size and type
 Jet Airways (standalone) currently has a fleet of 100 aircraft (12 Boeing 777
  series, 12 Airbus A330-200, 56 Boeing 737 series and 20 ATR 72-500
  turboprops).
 Its fleet also comprises of 19 aircraft (10 Boeing 737-700 series and 9 Boeing
  737-80- series) under its fully owned subsidiary Jet Lite (previously Air-
  Sahara).
 Due to the difference in fleet (Boeing for Jet and Airbus for Kingfisher and
  Indigo) poaching of pilots becomes difficult and hence the attrition rate is
  maintained.
 Moreover, a varied fleet size (capacity of Boeing 777s is 312 seats while that
  of ATR is 65 seats) helps to accommodate demand across sectors.
 This has led to JA being able to constantly maintain and improve its load
  factors. The move has also led to better utilization of its fleet as per the needs
  of the sector and the cyclical and seasonal demand JET AIRWAYS
                                                        .
                                                         Type             Size   Capacity
                                                         Boeing 737-700   11     118
                     JET LITE                            Boeing 737-800   43     160
                     Type               Size   Capacit   Boeing 737-900   2      138
                     Boeing 737-700     10     145       ATR 72-500       20     65
                     Boeing 737-800     5      186       Airbus 330-200   12     235
                     Boeing 737-800W    4      186       Boeing 777-300   12     312
Factors for Sustainable Business Model

D. Leasing out owned fleet to capitalize on the demand-supply
mismatch
 With a fleet mix of owned (42) and leased (58) aircraft Jet is able to capitalise
  on the demand supply mismatch and earn additional revenues.

 Such flexibility gives Jet a strong competitive advantage in terms of its ability
  to withstand a downturn in the economy and also makes it best placed to
  capture a growth opportunity during times of revival or during festive seasons.

 Moreover, since 42 of the total 100 aircraft are owned while the remaining 58
  are leased, Jet is able to generate the highest EBITDA margins in the industry
  as lease rentals are low.

    Due to presence of owned fleet the company was able to reduce the downturn
    effect with revenues straight away positively impacting the EBITDA.

 This feature of Jet Airways considered to be one of its strongest edges over
  competitors and make it best poised in times of industry slowdown.
Focus on International Segment – Key Driver
    for Profitability



   Jet Airways is currently the second largest international operator in India.
   The company‘s international business accounts for 46% of its consolidated passenger
    revenues in FY11 and 57% of its consolidated ASKM
   With a strong presence in the international business the company has
    been able to aid growth of the domestic traffic as well due to synergies like
    a) the international passengers acting as a ready customer base to its domestic segment
    b) creating a diversified passenger traffic leading to demand throughout the year
    c) stability of its business model
   Such synergies have ensured that the profitability of international operations remains
    significantly higher than domestic business. The EBITDAR margins too for the
    international business in FY11 were 24% as compared to 15% in the domestic business.
   The international business passenger revenue and EBITDAR is expected to record 17.3%
    and 11.2% CAGR respectively in FY11-14E led by 12% CAGR in RPKM, 7.3% CAGR in
    passenger yields and 21.7% CAGR in fuel cost over the next three years.
Improving Domestic Business : High
Operational Efficiency


   The improvement in operations is clearly highlighted by the rise in PLF to 75.1% in FY11
    as compared to 71.6% in FY10 even as the ASKM rose by 17.5% in FY11.
   Even in Q2FY12 the domestic business has seen load factors rise to 72.1% from 71.4% in
    Q2FY11 as the ASKM grew by 7% Y-o-Y.
   The yields have also seen a rise in the current fiscal with revenue/RPKM rising
    by 10% in Q1FY12 and 1% Q2FY12.
   The operational efficiencies have resulted in a better financial standing with the EBITDAR
    margins having improved from 15% in FY10 to 18% in FY11 and an EBITDA margins
    rising to of 7.8% in FY11 as compared to EBITDA margin of 3% in FY10 and an EBITDA
    loss in FY09.
   The company has successfully managed to improve its operational efficiency over the
    years with a rise in block hours per aircraft and in passengers carried despite the
    reduction in ASKM.
   This has helped improve efficiencies and reduce costs. With refurbished seats and better
    food, the preference for the airline has increased and the 9W code has been put on all Jet
    Lite aircraft to enable it to sell its seats through the GDS system, helping it to achieve
    ~25% of its traffic from the company‘s international network.
   The EBITDA loss has reduced to `762 mn in FY11 as compared to an EBITDA loss of
    `1.01 bn in FY10 as a result of the cost per ASKM falling to `1.65 in FY11 from `1.67 in
    FY10.
Merger of JetLite and Jet Konnect to boost
LCC segment growth


 The company plans to merge its two LCC JetLite and Jet Konnect and operate
  under the brand name of the latter.
 The move to arrest losses and compete with other low-cost airlines had been
  in the management's mind for some time, but the decision has been taken
  now. Though no formal date has been announced regarding the re-branding
  exercise we expect the move to be positive for the company.
 The higher brand perception for Jet Konnect as compared to JetLite, higher
  operating efficiencies by the former, tie-up synergies and improved
  connectivity are some of the benefits that the company would witness with the
  re-branding and merger of JetLite.
 The revenues expected to witness 10.0% CAGR in FY11-13E driven by 4.2%
  CAGR in RPKM and a 5.8% CAGR In passenger yields in the same period.
 However, with a rise in fuel cost of 15.4% CAGR in the same period, the
  profitability of this division will remain under pressure and the EBITDAR will
  witness 0.9% CAGR decline in FY11-FY14E.
Merger of JetLite and Jet Konnect to boost
LCC segment growth


  Highly fixed-cost intensive
  The airline industry is highly fixed-cost intensive with lease rentals,
  maintenance and employee costs remaining fixed. Any reduction in passenger
  traffic can adversely affect the profitability.
 Downturn in the economy
  Any downturn in the economy could lead to relatively low passenger traffic
  growth, which could have a negative impact on load factors, and could
  eventually have a negative impact on profitability.
 External factors
  There are many external factors which can affect profitability, which include
  bad weather conditions, terrorist activities, country and state policies and
  others
Key Risks

 Fuel costs beyond airlines’ control
  Aviation turbine fuel (ATF) prices account for 40-45% of an airline‘s total
  revenues. A sharp increase in the ATF prices have dented margins and led to
  losses across the industry. Any further price rise could result in a significant
  net loss and hence erosion of net worth for the company.
 Change in landing and navigation charge regulations
  Currently, aircraft with less than 80 seat capacity are exempt from airport
  landing and navigation charges. Jet Airways has 20 ATR aircraft, with a seat
  configuration below 80. As these aircraft qualify for exemptions, any change in
  these policies could lead to higher taxes and so affect future earnings.
 Yields stagnating
  Any sharp increase in competitive intensity (in times of low passenger traffic
  or excess expansion by airlines) could adversely affect the load factors and
  passenger yields, reducing margins.
 Rates and currency fluctuations
  A stronger dollar may affect Jet‘s profitability, as a large part of the company‘s
  costs are dollar denominated, like lease rentals, ATF cost and maintenance
  costs. In addition, a major portion of their debt is dollar denominated; hence,
  a stronger dollar could hit earnings.
SWOT – Jet Airways




STRENGTHS: Strong presence & good name in the Indian
Aviation market

WEAKNESSES: Too many players in the ―no frill‖ category

OPPORTUNITIES: Consolidations in the industry & low market
penetration

THREATS: Ongoing economic weakness & Fuel prices
Akshith Reddy
Deepak Sharma
Shaik Mohammad Ali
Shubha Brota Raha
Snigdha Smithahasini
Sujoy Dalal
Sushma Gowda

More Related Content

What's hot

Marketing case study on Indigo Airlines
Marketing case study on Indigo AirlinesMarketing case study on Indigo Airlines
Marketing case study on Indigo Airlines
Neelutpal Saha
 
Spice|Jet Airlines
Spice|Jet AirlinesSpice|Jet Airlines
Spice|Jet Airlines
Thomas Cook Ltd
 
IndiGo Airlines
IndiGo Airlines IndiGo Airlines
IndiGo Airlines
Kannan Knight
 
Indigo airlines
Indigo airlinesIndigo airlines
Indigo airlines
Praveen JayRam
 
Spicejet industry analysis
Spicejet industry analysisSpicejet industry analysis
Spicejet industry analysis
Sana Shariff
 
Air india case study
Air india case studyAir india case study
Air india case study
DEEPAK KUMAR
 
jet airways (Turnaround Strategy of Jet Airways) strategic management
jet airways (Turnaround Strategy of Jet Airways) strategic managementjet airways (Turnaround Strategy of Jet Airways) strategic management
jet airways (Turnaround Strategy of Jet Airways) strategic management
Purva Kini
 
Operations management - Spice Jet
Operations management - Spice JetOperations management - Spice Jet
Operations management - Spice Jet
rawatsumit27
 
Spicejet Complete
Spicejet CompleteSpicejet Complete
Spicejet Complete
Siddharth Pandey
 
Indigo airlines report
Indigo airlines reportIndigo airlines report
Indigo airlines report
Madhu Kiran
 
IndiGo Airlines
IndiGo Airlines IndiGo Airlines
IndiGo Airlines
Kannan Knight
 
Marketing project_Air India
Marketing project_Air IndiaMarketing project_Air India
Marketing project_Air India
Devendra Jaiswar
 
Air deccan case study
Air deccan case studyAir deccan case study
Air deccan case study
Shraddha Tandel
 
Jet Airways case study
Jet Airways case studyJet Airways case study
Jet Airways case study
RUPANJAN NAYAK
 
OPERATIONS MANAGEMENT INDIGO AIRLINES SERVICES
OPERATIONS MANAGEMENTINDIGO AIRLINES SERVICESOPERATIONS MANAGEMENTINDIGO AIRLINES SERVICES
OPERATIONS MANAGEMENT INDIGO AIRLINES SERVICES
Apurva Mittal
 
Airline industry
Airline industryAirline industry
Industry Analysis- Indian aviation industry
Industry Analysis- Indian aviation industryIndustry Analysis- Indian aviation industry
Industry Analysis- Indian aviation industry
Ashish Otwal Rajput
 
Jet Blue Airway: Case Analysis (Strategic Audit)
Jet Blue Airway: Case Analysis (Strategic Audit)Jet Blue Airway: Case Analysis (Strategic Audit)
Jet Blue Airway: Case Analysis (Strategic Audit)
Anna Osmanay
 
Airlines industry
Airlines industryAirlines industry
Airlines industry
Naveen Kumar
 
Vistara Airlines SWOT Analysis
Vistara Airlines SWOT Analysis Vistara Airlines SWOT Analysis
Vistara Airlines SWOT Analysis
Divyae Sherry
 

What's hot (20)

Marketing case study on Indigo Airlines
Marketing case study on Indigo AirlinesMarketing case study on Indigo Airlines
Marketing case study on Indigo Airlines
 
Spice|Jet Airlines
Spice|Jet AirlinesSpice|Jet Airlines
Spice|Jet Airlines
 
IndiGo Airlines
IndiGo Airlines IndiGo Airlines
IndiGo Airlines
 
Indigo airlines
Indigo airlinesIndigo airlines
Indigo airlines
 
Spicejet industry analysis
Spicejet industry analysisSpicejet industry analysis
Spicejet industry analysis
 
Air india case study
Air india case studyAir india case study
Air india case study
 
jet airways (Turnaround Strategy of Jet Airways) strategic management
jet airways (Turnaround Strategy of Jet Airways) strategic managementjet airways (Turnaround Strategy of Jet Airways) strategic management
jet airways (Turnaround Strategy of Jet Airways) strategic management
 
Operations management - Spice Jet
Operations management - Spice JetOperations management - Spice Jet
Operations management - Spice Jet
 
Spicejet Complete
Spicejet CompleteSpicejet Complete
Spicejet Complete
 
Indigo airlines report
Indigo airlines reportIndigo airlines report
Indigo airlines report
 
IndiGo Airlines
IndiGo Airlines IndiGo Airlines
IndiGo Airlines
 
Marketing project_Air India
Marketing project_Air IndiaMarketing project_Air India
Marketing project_Air India
 
Air deccan case study
Air deccan case studyAir deccan case study
Air deccan case study
 
Jet Airways case study
Jet Airways case studyJet Airways case study
Jet Airways case study
 
OPERATIONS MANAGEMENT INDIGO AIRLINES SERVICES
OPERATIONS MANAGEMENTINDIGO AIRLINES SERVICESOPERATIONS MANAGEMENTINDIGO AIRLINES SERVICES
OPERATIONS MANAGEMENT INDIGO AIRLINES SERVICES
 
Airline industry
Airline industryAirline industry
Airline industry
 
Industry Analysis- Indian aviation industry
Industry Analysis- Indian aviation industryIndustry Analysis- Indian aviation industry
Industry Analysis- Indian aviation industry
 
Jet Blue Airway: Case Analysis (Strategic Audit)
Jet Blue Airway: Case Analysis (Strategic Audit)Jet Blue Airway: Case Analysis (Strategic Audit)
Jet Blue Airway: Case Analysis (Strategic Audit)
 
Airlines industry
Airlines industryAirlines industry
Airlines industry
 
Vistara Airlines SWOT Analysis
Vistara Airlines SWOT Analysis Vistara Airlines SWOT Analysis
Vistara Airlines SWOT Analysis
 

Similar to Jet Airways - Strategy

Indian aviation industry
Indian aviation industryIndian aviation industry
Indian aviation industry
marketingdaibs
 
Aviation
AviationAviation
Aviation
rachitsingh12
 
Challenges in aviation industry
Challenges in aviation industryChallenges in aviation industry
Challenges in aviation industry
60ml
 
Aviation Industry analysis
Aviation Industry analysis Aviation Industry analysis
Aviation Industry analysis
Sanket Bharte
 
AVIATION SECTOR
AVIATION SECTORAVIATION SECTOR
AVIATION SECTOR
ChelJo
 
AVIATION SECTOR IN INDIA
AVIATION SECTOR IN INDIAAVIATION SECTOR IN INDIA
AVIATION SECTOR IN INDIA
usfifa
 
aviation assignment
aviation assignment aviation assignment
aviation assignment
Thameen Ahamed
 
Eeb
EebEeb
Aviation Sector In India
Aviation Sector In IndiaAviation Sector In India
Aviation Sector In India
Jatin Tanwar
 
Economic reforms aviation industry
Economic reforms aviation industryEconomic reforms aviation industry
Economic reforms aviation industry
Najam Rao
 
Economic reforms post 1991 aviation
Economic reforms post 1991 aviationEconomic reforms post 1991 aviation
Economic reforms post 1991 aviation
vkkan80
 
Indian aviation industry success and failure
Indian aviation industry  success and failureIndian aviation industry  success and failure
Indian aviation industry success and failure
AASHISHSHRIVASTAV1
 
123
123123
Open sky & emerging airlines
Open sky & emerging airlinesOpen sky & emerging airlines
Open sky & emerging airlines
Najam Rao
 
Aviation in india
Aviation in indiaAviation in india
Aviation in india
SaurabhDubey145
 
Indian Aviation Industry analysis
Indian Aviation Industry  analysis Indian Aviation Industry  analysis
Indian Aviation Industry analysis
shivam patel
 
A indian aviation
A indian aviationA indian aviation
A indian aviation
deepakasyadav
 
Analysis of Financial Statements of Kingfisher
Analysis of Financial Statements of KingfisherAnalysis of Financial Statements of Kingfisher
Analysis of Financial Statements of Kingfisher
Divya Tibrewal
 
Aviation sectorial a division
Aviation sectorial a division Aviation sectorial a division
Aviation sectorial a division
Akshay Bindroo
 
Airlines Indian final [www.writekraft.com]
Airlines Indian final [www.writekraft.com]Airlines Indian final [www.writekraft.com]
Airlines Indian final [www.writekraft.com]
WriteKraft Dissertations
 

Similar to Jet Airways - Strategy (20)

Indian aviation industry
Indian aviation industryIndian aviation industry
Indian aviation industry
 
Aviation
AviationAviation
Aviation
 
Challenges in aviation industry
Challenges in aviation industryChallenges in aviation industry
Challenges in aviation industry
 
Aviation Industry analysis
Aviation Industry analysis Aviation Industry analysis
Aviation Industry analysis
 
AVIATION SECTOR
AVIATION SECTORAVIATION SECTOR
AVIATION SECTOR
 
AVIATION SECTOR IN INDIA
AVIATION SECTOR IN INDIAAVIATION SECTOR IN INDIA
AVIATION SECTOR IN INDIA
 
aviation assignment
aviation assignment aviation assignment
aviation assignment
 
Eeb
EebEeb
Eeb
 
Aviation Sector In India
Aviation Sector In IndiaAviation Sector In India
Aviation Sector In India
 
Economic reforms aviation industry
Economic reforms aviation industryEconomic reforms aviation industry
Economic reforms aviation industry
 
Economic reforms post 1991 aviation
Economic reforms post 1991 aviationEconomic reforms post 1991 aviation
Economic reforms post 1991 aviation
 
Indian aviation industry success and failure
Indian aviation industry  success and failureIndian aviation industry  success and failure
Indian aviation industry success and failure
 
123
123123
123
 
Open sky & emerging airlines
Open sky & emerging airlinesOpen sky & emerging airlines
Open sky & emerging airlines
 
Aviation in india
Aviation in indiaAviation in india
Aviation in india
 
Indian Aviation Industry analysis
Indian Aviation Industry  analysis Indian Aviation Industry  analysis
Indian Aviation Industry analysis
 
A indian aviation
A indian aviationA indian aviation
A indian aviation
 
Analysis of Financial Statements of Kingfisher
Analysis of Financial Statements of KingfisherAnalysis of Financial Statements of Kingfisher
Analysis of Financial Statements of Kingfisher
 
Aviation sectorial a division
Aviation sectorial a division Aviation sectorial a division
Aviation sectorial a division
 
Airlines Indian final [www.writekraft.com]
Airlines Indian final [www.writekraft.com]Airlines Indian final [www.writekraft.com]
Airlines Indian final [www.writekraft.com]
 

More from Shubha Brota Raha

Buying behaviour of working adults towards branded apparel in select indian c...
Buying behaviour of working adults towards branded apparel in select indian c...Buying behaviour of working adults towards branded apparel in select indian c...
Buying behaviour of working adults towards branded apparel in select indian c...
Shubha Brota Raha
 
Content management system
Content management systemContent management system
Content management system
Shubha Brota Raha
 
Understanding Google Analytics
Understanding Google AnalyticsUnderstanding Google Analytics
Understanding Google Analytics
Shubha Brota Raha
 
Google adwords bidding process
Google adwords bidding processGoogle adwords bidding process
Google adwords bidding process
Shubha Brota Raha
 
Data mining & data warehousing
Data mining & data warehousingData mining & data warehousing
Data mining & data warehousing
Shubha Brota Raha
 
Foreign market entry
Foreign market entryForeign market entry
Foreign market entry
Shubha Brota Raha
 
Demand forecasting and its methods
Demand forecasting and its methodsDemand forecasting and its methods
Demand forecasting and its methods
Shubha Brota Raha
 
A study of buying behaviour of working adults towards branded apparels in sel...
A study of buying behaviour of working adults towards branded apparels in sel...A study of buying behaviour of working adults towards branded apparels in sel...
A study of buying behaviour of working adults towards branded apparels in sel...
Shubha Brota Raha
 
Negative Impacts of Nuclear Power
Negative Impacts of Nuclear PowerNegative Impacts of Nuclear Power
Negative Impacts of Nuclear Power
Shubha Brota Raha
 
Reflective Notes - Consumer Behaviour
Reflective Notes - Consumer BehaviourReflective Notes - Consumer Behaviour
Reflective Notes - Consumer Behaviour
Shubha Brota Raha
 
Lawn Care Company - Case
Lawn Care Company - CaseLawn Care Company - Case
Lawn Care Company - Case
Shubha Brota Raha
 
Apparel Retail in India
Apparel Retail in IndiaApparel Retail in India
Apparel Retail in India
Shubha Brota Raha
 
Case Study: CSR Activities by TVS
Case Study: CSR Activities by TVSCase Study: CSR Activities by TVS
Case Study: CSR Activities by TVS
Shubha Brota Raha
 
Diversity Management in Pepsi Co
Diversity Management in Pepsi CoDiversity Management in Pepsi Co
Diversity Management in Pepsi Co
Shubha Brota Raha
 
THE GROWTH OF INDIAN PRINT MEDIA IN THE LAST DECADE AND ITS FALLOUTS
THE GROWTH OF INDIAN PRINT MEDIA IN THE LAST DECADE AND ITS FALLOUTSTHE GROWTH OF INDIAN PRINT MEDIA IN THE LAST DECADE AND ITS FALLOUTS
THE GROWTH OF INDIAN PRINT MEDIA IN THE LAST DECADE AND ITS FALLOUTS
Shubha Brota Raha
 
Waste Management in Garment Industries
Waste Management in Garment IndustriesWaste Management in Garment Industries
Waste Management in Garment Industries
Shubha Brota Raha
 
Brief on Indian Textile and Apparel Industry
Brief on Indian Textile and Apparel IndustryBrief on Indian Textile and Apparel Industry
Brief on Indian Textile and Apparel Industry
Shubha Brota Raha
 
Cost of Quality in Apparel Industry
Cost of Quality in Apparel IndustryCost of Quality in Apparel Industry
Cost of Quality in Apparel Industry
Shubha Brota Raha
 

More from Shubha Brota Raha (18)

Buying behaviour of working adults towards branded apparel in select indian c...
Buying behaviour of working adults towards branded apparel in select indian c...Buying behaviour of working adults towards branded apparel in select indian c...
Buying behaviour of working adults towards branded apparel in select indian c...
 
Content management system
Content management systemContent management system
Content management system
 
Understanding Google Analytics
Understanding Google AnalyticsUnderstanding Google Analytics
Understanding Google Analytics
 
Google adwords bidding process
Google adwords bidding processGoogle adwords bidding process
Google adwords bidding process
 
Data mining & data warehousing
Data mining & data warehousingData mining & data warehousing
Data mining & data warehousing
 
Foreign market entry
Foreign market entryForeign market entry
Foreign market entry
 
Demand forecasting and its methods
Demand forecasting and its methodsDemand forecasting and its methods
Demand forecasting and its methods
 
A study of buying behaviour of working adults towards branded apparels in sel...
A study of buying behaviour of working adults towards branded apparels in sel...A study of buying behaviour of working adults towards branded apparels in sel...
A study of buying behaviour of working adults towards branded apparels in sel...
 
Negative Impacts of Nuclear Power
Negative Impacts of Nuclear PowerNegative Impacts of Nuclear Power
Negative Impacts of Nuclear Power
 
Reflective Notes - Consumer Behaviour
Reflective Notes - Consumer BehaviourReflective Notes - Consumer Behaviour
Reflective Notes - Consumer Behaviour
 
Lawn Care Company - Case
Lawn Care Company - CaseLawn Care Company - Case
Lawn Care Company - Case
 
Apparel Retail in India
Apparel Retail in IndiaApparel Retail in India
Apparel Retail in India
 
Case Study: CSR Activities by TVS
Case Study: CSR Activities by TVSCase Study: CSR Activities by TVS
Case Study: CSR Activities by TVS
 
Diversity Management in Pepsi Co
Diversity Management in Pepsi CoDiversity Management in Pepsi Co
Diversity Management in Pepsi Co
 
THE GROWTH OF INDIAN PRINT MEDIA IN THE LAST DECADE AND ITS FALLOUTS
THE GROWTH OF INDIAN PRINT MEDIA IN THE LAST DECADE AND ITS FALLOUTSTHE GROWTH OF INDIAN PRINT MEDIA IN THE LAST DECADE AND ITS FALLOUTS
THE GROWTH OF INDIAN PRINT MEDIA IN THE LAST DECADE AND ITS FALLOUTS
 
Waste Management in Garment Industries
Waste Management in Garment IndustriesWaste Management in Garment Industries
Waste Management in Garment Industries
 
Brief on Indian Textile and Apparel Industry
Brief on Indian Textile and Apparel IndustryBrief on Indian Textile and Apparel Industry
Brief on Indian Textile and Apparel Industry
 
Cost of Quality in Apparel Industry
Cost of Quality in Apparel IndustryCost of Quality in Apparel Industry
Cost of Quality in Apparel Industry
 

Recently uploaded

Entrepreneurial mindset: An Introduction to Entrepreneurship
Entrepreneurial mindset: An Introduction to EntrepreneurshipEntrepreneurial mindset: An Introduction to Entrepreneurship
Entrepreneurial mindset: An Introduction to Entrepreneurship
Sanjay Joshi
 
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصريشركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
إبراهيم العرجاني
 
TALENT ACQUISITION AND MANAGEMENT LECTURE 5
TALENT ACQUISITION AND MANAGEMENT LECTURE 5TALENT ACQUISITION AND MANAGEMENT LECTURE 5
TALENT ACQUISITION AND MANAGEMENT LECTURE 5
projectseasy
 
Family/Indoor Entertainment Centers Market: Regulation and Compliance Updates
Family/Indoor Entertainment Centers Market: Regulation and Compliance UpdatesFamily/Indoor Entertainment Centers Market: Regulation and Compliance Updates
Family/Indoor Entertainment Centers Market: Regulation and Compliance Updates
AishwaryaDoiphode3
 
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
itnewsafrica
 
The-Three-Pillars-of-Doctoral-Research-What-Why-and-How (1).pptx
The-Three-Pillars-of-Doctoral-Research-What-Why-and-How (1).pptxThe-Three-Pillars-of-Doctoral-Research-What-Why-and-How (1).pptx
The-Three-Pillars-of-Doctoral-Research-What-Why-and-How (1).pptx
Jindal Global University, Sonipat Haryana 131001
 
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
APKs Pure
 
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family FoundationPatrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
Patrick Dwyer Merrill Lynch
 
Transforming the Future of Limo Services.pptx
Transforming the Future of Limo Services.pptxTransforming the Future of Limo Services.pptx
Transforming the Future of Limo Services.pptx
limocaptaincom
 
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in CityGirls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
maigasapphire
 
Discover who your target audience is and reach them
Discover who your target audience is and reach themDiscover who your target audience is and reach them
Discover who your target audience is and reach them
Quibble
 
Navigating Change Strategies for Effective Transition and Operational Plannin...
Navigating Change Strategies for Effective Transition and Operational Plannin...Navigating Change Strategies for Effective Transition and Operational Plannin...
Navigating Change Strategies for Effective Transition and Operational Plannin...
Brian Frerichs
 
A STUDY OF MUTUAL FUND OF BANK OF INDIA .pdf
A STUDY OF MUTUAL FUND  OF BANK OF INDIA .pdfA STUDY OF MUTUAL FUND  OF BANK OF INDIA .pdf
A STUDY OF MUTUAL FUND OF BANK OF INDIA .pdf
rsonics22
 
Managing Customer & User Experience of Customers
Managing Customer & User Experience of CustomersManaging Customer & User Experience of Customers
Managing Customer & User Experience of Customers
SalmanTahir60
 
brojjeddah Home Services Company in Saudi Arabia
brojjeddah Home Services Company in Saudi Arabiabrojjeddah Home Services Company in Saudi Arabia
brojjeddah Home Services Company in Saudi Arabia
brojjeddah
 
Cracking the Customer Experience Code.pptx
Cracking the Customer Experience Code.pptxCracking the Customer Experience Code.pptx
Cracking the Customer Experience Code.pptx
Workforce Group
 
Anton Grutzmache- Ominisient: The Data Revolution in Banking: From Scoring Cr...
Anton Grutzmache- Ominisient: The Data Revolution in Banking: From Scoring Cr...Anton Grutzmache- Ominisient: The Data Revolution in Banking: From Scoring Cr...
Anton Grutzmache- Ominisient: The Data Revolution in Banking: From Scoring Cr...
itnewsafrica
 
Top Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdfTop Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdf
Top IT Marketing
 
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
Aggregage
 
foodgasm restaurant and Bar pune road.docx
foodgasm restaurant and Bar pune road.docxfoodgasm restaurant and Bar pune road.docx
foodgasm restaurant and Bar pune road.docx
PraghyaBhandari
 

Recently uploaded (20)

Entrepreneurial mindset: An Introduction to Entrepreneurship
Entrepreneurial mindset: An Introduction to EntrepreneurshipEntrepreneurial mindset: An Introduction to Entrepreneurship
Entrepreneurial mindset: An Introduction to Entrepreneurship
 
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصريشركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
 
TALENT ACQUISITION AND MANAGEMENT LECTURE 5
TALENT ACQUISITION AND MANAGEMENT LECTURE 5TALENT ACQUISITION AND MANAGEMENT LECTURE 5
TALENT ACQUISITION AND MANAGEMENT LECTURE 5
 
Family/Indoor Entertainment Centers Market: Regulation and Compliance Updates
Family/Indoor Entertainment Centers Market: Regulation and Compliance UpdatesFamily/Indoor Entertainment Centers Market: Regulation and Compliance Updates
Family/Indoor Entertainment Centers Market: Regulation and Compliance Updates
 
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
Andrew Wilmot- Ecentric Payment Systems: Macro Trends Shaping Payments in Afr...
 
The-Three-Pillars-of-Doctoral-Research-What-Why-and-How (1).pptx
The-Three-Pillars-of-Doctoral-Research-What-Why-and-How (1).pptxThe-Three-Pillars-of-Doctoral-Research-What-Why-and-How (1).pptx
The-Three-Pillars-of-Doctoral-Research-What-Why-and-How (1).pptx
 
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
KineMaster Diamond APK v7.3.11.32200 (4K HD, No Watermark)
 
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family FoundationPatrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
 
Transforming the Future of Limo Services.pptx
Transforming the Future of Limo Services.pptxTransforming the Future of Limo Services.pptx
Transforming the Future of Limo Services.pptx
 
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in CityGirls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
Girls Call Kharghar 9910780858 Provide Best And Top Girl Service And No1 in City
 
Discover who your target audience is and reach them
Discover who your target audience is and reach themDiscover who your target audience is and reach them
Discover who your target audience is and reach them
 
Navigating Change Strategies for Effective Transition and Operational Plannin...
Navigating Change Strategies for Effective Transition and Operational Plannin...Navigating Change Strategies for Effective Transition and Operational Plannin...
Navigating Change Strategies for Effective Transition and Operational Plannin...
 
A STUDY OF MUTUAL FUND OF BANK OF INDIA .pdf
A STUDY OF MUTUAL FUND  OF BANK OF INDIA .pdfA STUDY OF MUTUAL FUND  OF BANK OF INDIA .pdf
A STUDY OF MUTUAL FUND OF BANK OF INDIA .pdf
 
Managing Customer & User Experience of Customers
Managing Customer & User Experience of CustomersManaging Customer & User Experience of Customers
Managing Customer & User Experience of Customers
 
brojjeddah Home Services Company in Saudi Arabia
brojjeddah Home Services Company in Saudi Arabiabrojjeddah Home Services Company in Saudi Arabia
brojjeddah Home Services Company in Saudi Arabia
 
Cracking the Customer Experience Code.pptx
Cracking the Customer Experience Code.pptxCracking the Customer Experience Code.pptx
Cracking the Customer Experience Code.pptx
 
Anton Grutzmache- Ominisient: The Data Revolution in Banking: From Scoring Cr...
Anton Grutzmache- Ominisient: The Data Revolution in Banking: From Scoring Cr...Anton Grutzmache- Ominisient: The Data Revolution in Banking: From Scoring Cr...
Anton Grutzmache- Ominisient: The Data Revolution in Banking: From Scoring Cr...
 
Top Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdfTop Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdf
 
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
 
foodgasm restaurant and Bar pune road.docx
foodgasm restaurant and Bar pune road.docxfoodgasm restaurant and Bar pune road.docx
foodgasm restaurant and Bar pune road.docx
 

Jet Airways - Strategy

  • 2. Agenda • About Indian Aviation Industry • Market Size, Structure, Growth & Segmentation • Porter‘s 5 Forces Model • About Jet Airways • Market Share, Size and Competition • Profitability and Ratio Analysis • SWOT Analysis
  • 3. Introduction to Indian Aviation Sector Sector structure/Market size  The Indian aviation industry is one of the fastest growing aviation industries in the world  The government's open sky policy has led to many overseas players entering the market and the industry has been growing both in terms of players and number of aircrafts  Today, private airlines account for around 75 per cent share of the domestic aviation market.
  • 4. Introduction to Indian Aviation Sector  India is the 9th largest aviation market in the world. According to the Ministry of Civil Aviation, around 29.8 million passengers travelled to/from India during 2008, an increase of 30 per cent on previous year  It is predicted that international passengers will grow up to 50 million by 2015  Further, due to enhanced opportunities and international connectivity -Today, 87 foreign airlines fly to and from India and five Indian carriers fly to and fro from 40 countries.
  • 5. Indian Aviation : Market Size Market Size • The rapidly expanding aviation sector in India handles 2.5 billion passengers across the world in a year; moves 45 million tonnes (MT) of cargo through 920 airlines, using 4,200 airports and deploys 27,000 aircraft • Passengers carried by domestic airlines during January 2012 was recorded at 5.33 million as against 4.94 million during the corresponding period of previous year thereby registering a growth of 8.06 per cent, according to data released by the Directorate General Civil Aviation (DGCA) • The air transport (including air freight) in India has attracted foreign direct investment (FDI) worth US$ 429.70 million from April 2000 to December 2011, as per data released by Department of Industrial Policy and Promotion (DIPP).
  • 6. Indian Aviation : Evolution • < 1953 Nine Airlines existed including Indian Airlines & Air India • 1953 Nationalization of all private airlines through Air Corporations Act; • 1986 Private players permitted to operate as air taxi operators • 1994 Air Corporation act repealed; Private players can operate schedule services • 1995 Jet, Sahara, Modiluft, Damania, East West granted scheduled carrier status • 1997 4 out of 6 operators shut down; Jet & Sahara continue • 2001 Aviation Turbine Fuel (ATF) prices decontrolled
  • 7. Indian Aviation : Evolution • 2003 Air Deccan starts operations as India‘s first LCC • 2005 Kingfisher, SpiceJet, Indigo, Go Air, Paramount start operations • 2007 Industry consolidates; Jet acquired Sahara; Kingfisher acquired Air Deccan • 2010 SpiceJet starts international operations • 2011 Indigo starts international operations, Kingfisher exits LCC segment • 2012 Government allows direct ATF imports, FDI proposal for allowing foreign carriers to pick up to 49% stake under consideration
  • 9. Cost Structure Aircraft Fuel Cost Employee Cost Maintenance Expenses Landing, Navig Selling & Other ation & Airport Distribution Expenses Charges Expenses
  • 10. Cost Structure Fuel Cost  ATF costs contributes  30-45% of overall operating costs for Full Service Carrier‘s (FSC‘s)  40-55% for Low cost carriers (LCCs)  Domestic ATF prices are linked to fluctuation in crude oil prices and movement in INR vs. $  High central and state levies translates into a 60-70% higher ATF prices in India over the global average  Significant congestion at major domestic airports increases fuel costs considerably
  • 11. Cost Structure • Employee • Aggressive expansion in the Airline industry • Dearth of experienced pilots • Foreign pilots command higher salaries • Payments made in foreign currency
  • 12. Cost Structure • Aircraft Maintenance Costs • Developing Aviation industry • Imported components • Lead times • inventory • Shortage of Skill in Aircraft maintenance • Landing Navigation and Airport charges • Cost of Technology
  • 13. Key events in the past Year Major Milestones 1953 Nine Airlines existed including Indian Airlines & Air India 1953 Nationalization of all private airlines through Air Corporations Act; 1986 Private players permitted to operate as air taxi operators 1994 Air Corporation act repealed; Private players can operate schedule services 1995 Jet, Sahara, Modiluft, Damania, East West granted scheduled carrier status 1997 4 out of 6 operators shut down; Jet & Sahara continue 2001 Aviation Turbine Fuel (ATF) prices decontrolled 2003 Air Deccan starts operations as India’s first LCC 2005 Kingfisher, SpiceJet, Indigo, Go Air, Paramount start operations 2007 Industry consolidates; Jet acquired Sahara; Kingfisher acquired Air Deccan 2010 SpiceJet starts international operations 2011 Indigo starts international operations, Kingfisher exits LCC segment Government allows direct ATF imports, FDI proposal for allowing foreign carriers to pick up to 2012 49% stake under consideration
  • 14. Key events in the past 1953 Nationalization of Aircraft Industry • Assets of 9 existing companies transferred to two entities in the aviation sector 1986: Private Sector Players permitted controlled by the government as Air taxi operators. Jet, Air  Indian Airlines, Primarily Sahara, etc started service. serving domestic sectors 1994: Private Carriers permitted to  Air India, Primarily operate scheduled services. Six serving the international operators granted license, however sectors only Jet and Air Sahara able to service. • Implications 2003: Entry of low carriers. Air  Aviation became preferred Deccan, Spice Jet, Go Air, Indigo. mode of transport for elite  Restricted Growth of Implications Aviation industry  Aviation is now affordable with  High Cost Structure check fares and discount schemes.  Underdevelopment of  Various Operators with different infrastructure business model.  Huge growth foreseen in Aviation
  • 15. Regulators • Federation of Indian Airlines • The Directorate General of Civil Aviation • Ministry of Civil Aviation • Airport Authority of India • The Airport Authority of India Act 1994 • Civil Aviation Policy • Liberalization of Entitlements • Open Skies Agreement between India and the US
  • 16. Key Regulations 1. Civil Aviation Requirements 2. Aircraft Act, 1934 3. Aircraft Rules, 1937 4. Carriage of Dangerous Goods, 2003 5. National Convention 6. Aeronautical Information Circulars 7. Other Circulars 8. Aircraft Register 9. Master Minimum Equipment 10. Mandatory Modifications 11. Approved Firms 12. Accident Summaries 13. Related Rules 14. Personal and Medical files of Pilots 15. Bilateral Agreements with foreign countries 16. Air Transport and Aircraft Statistics 17. Service Books of DGCA employees
  • 17. Indian Aviation – Pros • Strong growth prospects Passenger traffic growth has grown at a CAGR of 16% in India over the past 10 years • Relative underpenetrated market Penetration of air travel at <3% is significantly below benchmarks in other markets • An opportunity to create India as an hub An opportunity for foreign airlines to create India as their hub for international traffic between Europe and South East Asia; Additionally offer better connectivity within India with international destinations • An opportunity to create India as an MRO centre Foreign airlines could also look at leveraging on India‘s low-cost arbitrage by setting up MRO facilities in India • Low Valuations Market valuation of listed airlines in India has suffered due to poor performance
  • 18. Indian Aviation – Cons • Aviation economics are not favorable in India Higher taxes on ATF and airport charges continue to be key headwinds for the sector; besides higher cost base, airlines in India are also mandatorily required to fly on certain unviable routes • Inadequate Infrastructure Development of airport infrastructure has not kept pace with demand, thereby resulting in delays and higher costs for airlines • Poor financial health of most airlines Intense competition, sharp fluctuation in ATF prices and high debt burden continue to weigh on the financial performance of Indian airlines; foreign exchange fluctuation and lack of adequate hedging mechanism (for fuel) have added to the woes • Highly competitive & Price Sensitive traveler base
  • 19. Growth of Industry • Passengers carried by domestic airlines during January 2012 and corresponding period of previous year thereby registering a growth of 8.06%.
  • 20. Growth of Industry  Domestic airlines flew 3.67 million passengers in August 2009—an increase of 25 per cent.  The Centre for Asia Pacific Aviation (CAPA) forecasted that domestic traffic will increase by 25 per cent to 30 per cent till 2010 and international traffic growth by 15 per cent, taking the total market to more than 100 million passengers .  The government plans to invest US$ 9 billion to modernise existing airports . The government is also planning to develop around 300 unused airstrips.
  • 21. Growth of Industry  India ranks fourth after US, China and Japan in terms of domestic passengers volume. The number of domestic flights grew by 69 per cent from 2005 to 2008. The domestic aviation sector is expected to grow at a rate of 9-10 per cent to reach a level of 150-180 million passengers by 2020.  The industry witnessed an annual growth of 12.8 per cent during the last 5 years in the international cargo handled at all Indian airports. The airports handled a total of 1020.9 thousand metric tones of international cargo in 2006-07.  Further, there has been an increase in tourist charter flights to India in 2008 with around 686 flights bringing 150,000 tourists. Also, there has been an increase in non-scheduled operator permits – 99 in 2008 as against 66 in 2007.
  • 22. Factors impacting the growth 1. Demand for Air Travel - Growing Purchasing Powder of the Middle class - Lower Air fares - Tourism in India - Growing Outbound Travel in India - Growth Potential
  • 23. Factors Impacting the Growth 2. Aviation Services in India - Liberalization of the Sector - Modernization of the Non-Metro Airports - Rising Share of Low cost Carriers - Fleet Expansion by Airlines Service - Service Expansions by State Owned Carriers - Development of MRO Market in India - The Indian Government Opens Up New International Routes - Establishment of New Airports and Restructuring of Old Airports - EU-India Civil Aviation Project
  • 24. Market Demand / Equilibrium
  • 25. Market Demand / Equilibrium • The Cournot model assumes that each firm takes the output of the other firm as given. If Indian Airlines output is assumed to stay the same, Jet will maximize profits by setting MR=MC. The result is shown. In the Cournot framework the equilibrium is at the intersection of the two reaction functions. These are just the profit-maximizing conditions rearranged. • The revenue of both a competitive firm and of a monopolist depends only on the firm's own output: for a competitive firm we assume that the firm's output does not affect the price, and for a monopolist there are no other firms in the market. For a duopolist, however, revenue depends on both its own output and the other firm's output • We conclude that the firms' outputs and the price are different in Cournot- Nash equilibrium than they are in a competitive equilibrium. As the demand curve slopes down, price exceeds marginal cost, so that, as for a monopoly, the total output produced by the firms is less than the competitive output. An implication is that, as for a monopoly, the Nash equilibrium outcome in a Cournot duopoly is not Pareto efficient.
  • 26. Indian Aviation – A Differentiated Oligopoly
  • 27. Explanation of Aviation Oligopoly curve • Each seller in an imperfectly competitive market faces a negatively sloped demand curve for his product, permitting him some control of the price of his product. In an oligopoly, a few firms produce the same product, while in monopolistic competition, many firms produce differentiated but similar products. In a differentiated oligopoly, a few firms produce products different enough for each firm to have its own downward sloping demand curve. As with a perfectly competitive firm or a monopoly, the differentiated oligopoly firm produces at a profit maximizing level of output where marginal cost equals marginal revenue. The firm finds the price it will charge customers at the profit maximizing level of output (Qm) from the demand curve, and sets price to Pm. As we can see, the firm is earning economic profits since price exceeds average total cost at the profit maximizing level of output.
  • 29. Indian Aviation : Porter’s 5 forces  Threat of New Entrants : If FDI is cleared then lot of foreign airlines will enter into Indian Aviation.  Bargaining Power of Suppliers : The Jet Fuel , Food & Beverage Suppliers etc have strong Bargaining Power in this sector.  Bargaining Power of Customers : Since passengers have got the choice to select best price between low cost and full service carrier , passengers have a strong bargaining power.  Substitutes: Other modes of transportation such Hi- Speed Trains , Luxury Buses are substituting for Air travel.  Intensity of Competition : All the players are focused and competing strongly on grounds of differentiation and low cost.
  • 30. Indian Aviation : Attractive or Unattractive ? • 4/5 forces of Porter‘s Model are strong in the aviation industry i.e. Bargaining Power of Suppliers , Bargaining Power of Customers , Substitutes and Intensity of competition are strong . • Hence we can conclude that Indian Aviation sector is highly unattractive to compete.
  • 31. Indian Aviation – Demand & Supply • Indian carriers seat factor: Dec-2010 V/s Dec-2011
  • 32. : Indian Aviation: Segment Analysis • What are the components • Size of Each Segment • Growth of Each Segment • Segment Changes
  • 33. Aviation Sector : Components
  • 34. Indian Aviation : Components • Full Service Carriers : Full Services airlines as the name defines provide all types of facilities which make the journey comfortable and hassle free. In full service airline you will get various varieties of foods. They provide menu of local as well as international cuisines which a passenger can opt according to his own taste. • Low Cost Carriers Low cost airline don't provide many options. They provide packed food, snacks which you have to purchase from the airlines.
  • 35. Size of each segment
  • 36. Business Class Vs Economy Class • Although the occasion of use indicates that maximum usage is for business, the flight class graph indicates that the proportion travelled by business class is very small in comparison to that travelled by economy class. • This indicates that most business travellers are flying Economy class as well. • Further, the second important occasion of usage is for emergencies and time-critical travels.
  • 37. Components of Full Service Carriers
  • 38. Future of Aviation Industry– Key Facts • India is poised to be among the top five aviation nations in the world in the next 10 years. • The Indian Aviation Industry is exploring opportunities to improve connectivity and is also looking at enhancing the number of Indian carriers to various countries. • It is predicted that in the next 10 years domestic air traffic will touch around 160-180 million passengers a year & international traffic will exceed 80 million passengers a year.
  • 39. Future of Aviation Industry - Challenges • Aviation policy does not allow foreign airlines to pick up stake in Indian carriers. • Centre for Asia Pacific Aviation has forecast a record $2.5-3 billion loss for all Indian airlines in 2012 • ATF prices in India are 30 to 40 per cent more than the prices in the international market • Carriers are now permitted for import of aviation turbine fuel directly but most of the carriers do not have the expensive infrastructure needed to import and store the fuel • The civil aviation space facing troubles due to lack of consistent profitability as Crude prices have been rallying following the global economic downturn.
  • 41. IndiGo  IndiGo is a private, low-cost Airline started in 2006.  IndiGo has the second largest share in India's domestic air travel market, only behind Jet Airways.  It has established itself as one of India's leading airlines using its model of efficient, low-cost operations and by attracting customers with low fares.  IndiGo has grown faster than any other low cost carrier in the world.
  • 42. Air India  Air India is the flag carrier airline of India. It is part of the Government of India owned Air India Limited (AIL).  Air India has the third largest share in India's domestic air travel market. Following its merger with Indian Airlines, Air India has faced multiple problems, including escalating financial losses.  In last 5 years, Air India's domestic market share declined from 20% to 14%.  In early 2012, the Indian government granted a bailout package of Rs300 billion.
  • 43. SpiceJet  SpiceJet is a low-cost airline.  In 3 years of operation, it became India's second-largest low-cost airline in terms of market share.  One of the few airlines to register profit in 2011.  With a fleet size of over 40 flights and 34 destinations in India.
  • 44. Kingfisher Airlines  Kingfisher Airlines Limited has the lowest market share currently among the top players.  Until it was hit by severe financial crisis in late 2011, Kingfisher Airlines had the second largest share in India's domestic air travel market.  After acquiring Air Deccan, Kingfisher suffered a loss of over 1,000 Crore for three consecutive years. By early 2012, the airline accumulated losses of over 7,000 Crore.  The fleet size got drastically reduced from 64 to only 22.
  • 45. Jet Airways  Jet Airways is the largest Indian Airline.  It operates over 400 flights daily to 76 destinations worldwide.  Jet Airways bought Air Sahara for INR14.5 billion (US$340 million). Air Sahara was renamed JetLite, and was marketed between a low-cost carrier and a full service airline.  In August 2008 Jet Airways announced its plans to completely integrate JetLite into Jet Airways.
  • 46. About Jet Airways Details Information Founded 1 April 1992 Commenced operations 5 May 1993 Frequent-flyer program Jet Privilege Airport lounge Jet Lounge Subsidiaries Jet Lite Fleet size 101 (+49 Orders) Destinations 76 Company slogan The Joy of Flying Parent company Tailwinds Limited Headquarters Mumbai, India Revenue Rs. 145,225.80 million (US$2,897.25 million) (2010-11) Profit Rs.858.40 million (US$-17.13 million) Key people Naresh Goyal, Founder & Chairman , Nikos Kardassis, CEO Ali Ghandour, Director
  • 47. Jet Airways – History • Jet Airways was incorporated as an air taxi operator on 1 April 1992 • It started commercial 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 from Chennai to Colombo 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 . • Naresh Goyal – who already owned Jetair (Private) Limited, which provided sales and marketing for foreign airlines in India – set up Jet Airways as a full-service scheduled airline to compete against state-owned Indian Airlines. • Indian Airlines had enjoyed a monopoly in the domestic market between 1953, when all major Indian air transport providers were nationalized under the Air Corporations Act (1953), and January 1994, when the Air Corporations Act was repealed, following which Jet Airways received scheduled airline status
  • 48. Jet Airways: Mergers & Acquisitions • In January 2006 Jet Airways announced that it would buy Air Sahara for US$500 million in an all-cash deal, making it the biggest takeover in Indian aviation history. • On 12 April 2007 Jet Airways agreed to buy out Air Sahara for INR14.5 billion (US$340 million). Air Sahara was renamed JetLite, and was marketed between a low-cost carrier and a full service airline. • In August 2008 Jet Airways announced its plans to completely integrate JetLite into Jet Airways.
  • 49. Jet Airways: Key Strategies • Keep operations and growth in line with expected Indian economy growth which is around 7% – 8% per annum • Manage risk & short term crisis on account of any global financial risks • Manage short term spike in crude oil prices. • Minimize passing the fuel price fluctuation to customers. • Network expansion will be around the key focus specially Gulf and Middle east
  • 50. Jet Airways: Key Strategies • Focus on improving service, reliability and on time performance • Focus to be the best in ―no frills‖ sector. • Measures to negate effect of unprecedented increase in prices of fuel • Maintain its leadership position in the Indian aviation industry • Improve On-time performance it was 88.4% for Jet Airways for the financial year 2010-11 • Explore the potential for sustained growth in Indian passenger traffic because of low penetration in the medium to long term.
  • 51. Impact/Results – Key Strategies • Operating Highlights
  • 52. Impact/Results – Key Strategies • Operating Highlights
  • 53. Impact/Results – Key Strategies • Operating Highlights
  • 54. Impact/Results – Key Strategies • Financial Highlights
  • 55. Impact/Results – Key Strategies • Financial Highlights
  • 57. Revenue Revenue of Top Airlines - 2011 Revenue 16000 14523 14000 12000 Revenue in INR Crore 10000 8000 6496 6000 3946 4000 2961 2000 0 Jet Airways Kingfisher IndiGo SpiceJet
  • 58. Net Profit/Loss Net Profit/Loss of Top Airlines - 2011 800 650 600 Profit/Loss in INR Crore 400 200 101 0 Kingfisher Jet Airways SpiceJet IndiGo -200 -86 -400 -600 -800 -1000 -1027 -1200
  • 59. Current Scenario • In October 2008 Jet Airways and rival Kingfisher Airlines announced an alliance which primarily includes an agreement on code-sharing on both domestic and international flights, joint fuel management to reduce expenses, common ground handling, joint utilization of crew and sharing of similar frequent flier programs. • On 8 May 2009 Jet Airways launched its low-cost brand, Jet Konnect. • The decision to launch a new brand instead of expanding the JetLite network was taken after considering the regulatory delays involved in transferring aircraft from Jet Airways to JetLite, as the two have different operator codes. • The brand was launched on sectors that had 50% or less load factor with the aim of increasing it to 70% and above. Jet officials said that the brand would cease to exist once the demand for the regular Jet Airways increases. • According to a PTI report, for the third quarter of 2010, Jet Airways (Jet+JetLite) had a market share of 26.9% in terms of passengers carried, thus making it a market leader in India.
  • 60. Jet Airways Subsidiaries : JetLite JetLite • JetLite was a wholly owned subsidiary of Jet Airways. • It was established as Sahara Airlines on 20 September 1991 and began operations on 3 December 1993 with two Boeing 737-200 aircraft. • Initially services were primarily concentrated in the northern sectors of India, keeping Delhi as its base, and then operations were extended to cover all the country. • Sahara Airlines was rebranded as Air Sahara on 2 October 2000. On 12 April 2007 Jet Airways took over Air Sahara and on 16 April 2007 Air Sahara was renamed as JetLite. • JetLite operated a fleet of mixed owned–leased Boeing 737 Next Generation aircraft and Bombardier CRJ-200ER. JetLite ceased operations on 25 March, 2012 after merger with Jet Konnect.
  • 61. Jet Airways Subsidiaries : Jet Konnect Jet Konnect • Jet Konnect is the low-cost brand of India-based Jet Airways. It was launched on 8 May 2009, and shares the same airline designation as Jet Airways. It operates a mixed fleet of ATR 72-500s and Boeing 737-800s. • The rationale for launching Jet Airways Konnect was to close down loss- making routes and divert the planes to more profitable routes with higher passenger load factors. Jet already ran a low-cost airline named JetLite. • According to Jet Airways, the decision to launch a low-cost brand instead of expanding the existing JetLite was taken to avoid the regulatory delays associated with moving excess aircraft and assets from Jet Airways to JetLite, which have separate operating codes. • Jet Konnect offers a no frills flight where meals and other refreshments have to be purchased on board. • To identify if the flight is a full service or Konnect the flight numbers for Konnect are in the series 9W 2000-2999.Jet Airways merged the JetLite brand into Jet Konnect on 25 March 2012.
  • 62. Jet Airways : Services Destinations : • Jet Airways serves 52 domestic destinations and 24 international destinations, a total of 76 in 19 countries across southern Africa, Asia, Europe and North America. Short-haul destinations are served using Boeing 737 Next Generation. Domestic & international short haul : Première: • The Première features 40-inch extra-wide seats with a personal Widescreen LCD attached to each seat. The Première cabin is configured in a 2-2 abreast pattern. Economy Class: • Jet Airways Economy class on its Boeing 737 Next Generation features 30-inch seat pitch with personal Widescreen LCD behind each seat. Jet Airways was the World's first airline to introduce in-flight entertainment systems on the Boeing 737 aircraft. • The Economy class cabin is configured in a 3-3 abreast pattern on the Boeing 737 Next Generation and 2-2 abreast pattern on the ATR 72-500.
  • 63. Jet Airways : Services International long haul flights: First Class:  First class is available on all Boeing 777-300ER aircraft. All seats convert to a fully flat bed, similar to Singapore Airlines first class seat but much smaller.  It was the second airline in the world to have private suites. All seats in First have a 23-inch widescreen LCD monitor with audio-video on-demand systems (AVOD), BOSE noise cancelling headphones, in seat power supply, and USB ports etc.  Jet Airways is the first Indian airline to offer fully enclosed suites on its aircraft; each suite has a closable door, making for a private compartment Première : Première on board the Boeing 777-300ER  Première (Business Class) on the Airbus A330-200 and Boeing 777-300ER international fleet has a fully flat bed with AVOD entertainment.  Seats are configured in a herringbone pattern (1-2-1 on the Boeing 777-300ER, and 1-1- 1 on the Airbus A330-200), with each seat offering direct access to the aisle.  Première seats on the A330-200s leased from ILFC are configured differently in a 2-2-2 non-herringbone pattern.  Each Première Seat has a 15.4-inch flat screen LCD TV with AVOD.  USB ports and in-seat laptop power are provided.  All seats are standard recliner business-class seats with a few newer aircraft with electronic recline and massager.
  • 64. Threat of New Entrants A lucrative industry is always a target for investors looking at investment. One of the foremost factors in consideration while looking at the attractiveness of an industry is the threat of new entrants. In the airlines industry, this was a major threat a few years ago. The airlines operating in he industry were limited and the industry had few players like Indian Airlines and Jet Airways. However, as the industry had scope for accommodating more players many players joined the fray. The airlines industry however comes with its fair share of barriers. The investment in the airlines is very huge and acts as a major barrier to entry. Bundled with it were different permits for running an airline company from the civil aviation company and FDI limits. Factors that can limit the threat of new entrants are known as barriers to entry. Some examples include: Existing loyalty to major brands • Incentives for using a particular buyer (such as frequent shopper programs) • High fixed costs • Scarcity of resources • High costs of switching companies • Government restrictions or legislation
  • 65. Bargaining Power of Suppliers This is how much pressure suppliers can place on a business. If one supplier has a large enough impact to affect a company's margins and volumes, then it holds substantial power. In the airlines company there is certain amount of bargaining power the suppliers have. Firstly, suppliers in the form of aircraft builders, who very often exceed the time limits. Adding to it are suppliers of oil who hold the key to running of the airlines. Here are a few other reasons that suppliers might have power • There are very few suppliers of a particular product • There are no substitutes • Switching to another (competitive) product is very costly • The product is extremely important to buyers - can't do without it • The supplying industry has a higher profitability than the buying industry
  • 66. Bargaining Power of Buyers • This how much pressure customers can place on a business. If one customer has a large enough impact to affect a company's margins and volumes, then the customer hold substantial power. • Predominantly, in the airlines industry, it has been seen that the civil aviation ministry has been in favour of the customer and buyers thus have reasonable power. • While most airlines companies are running with wafer thin margins, it is pretty difficult for companies to increase prices as the capacity utilization will be seriously affected. Here are a few reasons that customers might have power: • • Small number of buyers • Purchases large volumes • Switching to another (competitive) airline is simple • The airline is not extremely important to buyers; they can do without the same brand for a period of time • • Customers are price sensitive
  • 67. Availability of Substitutes • Availability of Substitutes • What is the likelihood that someone will switch to a competitive product or service? If the cost of switching is low, then this poses a serious threat. Most airline companies have similar facilities and are listed on website such as makemytrip.com, yatra.com where customers choose from the cheapest available tickets. This shows that the customer has a lot of options and would not mind shifting to a new service. Here are a few factors that can affect the threat of substitutes:-n • The main issue is the similarity of substitutes. All low cost airlines have similar facilities. • • If substitutes are similar, it can be viewed in the same light as a new entrants
  • 68. Intensive Competition • Competitive Rivalry • This describes the intensity of competition between existing firms in an industry. Highly competitive industries generally earn low returns because the cost of competition is high . • The competition in the airline industry is cutthroat and each player is trying to gain an upper-hand based on non price factors. • A highly competitive market might result from: • • Many players of about the same size; there is no dominant firm • Little differentiation between competitors‗ products and services • A mature industry with very little growth; companies can only grow by stealing customers away from company.
  • 69. Jet Airways Versus Competitors
  • 71. Sales Turnover Comparison Sales Turnover (crores) 14,000 12,000 10,000 8,000 Jet Airways 6,000 Kingfisher Airlines 4,000 Spicejet 2,000 0 Mar '07 Mar '08 Mar '09 Mar '10 Mar '11
  • 72. Income Comparison Total Income (crores) 14,000 12,000 10,000 8,000 Jet Airways 6,000 Kingfisher Airlines 4,000 Spicejet 2,000 0 Mar '07 Mar '08 Mar '09 Mar '10 Mar '11
  • 73. Expenses Comparison Total Expenses (crores) 12,000 10,000 8,000 Jet Airways 6,000 Kingfisher Airlines 4,000 Spicejet 2,000 0 Mar '07 Mar '08 Mar '09 Mar '10 Mar '11
  • 74. Profit / Loss Comparison Reported Net Profit (crores) Mar '11 Mar '10 Spicejet Mar '09 Kingfisher Airlines Mar '08 Jet Airways Mar '07 -2,000 -1,500 -1,000 -500 0 500
  • 80. Critical Success Factors Support investments Not Favor investments • Strong growth • Aviations economics prospects are not favorable in • Relative India underpenetrated • Inadequate market Infrastructure • Opportunity to create • Poor financial health of India as an hub most airlines • Opportunity to create • Highly competitive & India as an MRO centre Price sensitive traveler • Low Valuations base
  • 81. Jet Airways: Unique Business Model • Jet Airways India Ltd (Jet) is best placed to capture the 16.5% CAGR in domestic passenger traffic and 15.5% CAGR in international passenger traffic in FY11-FY15E. • Jet offers a host of benefits due to flexible business model such as  Dominant market share in both the domestic (~26%) and international market (~36%) allowing it to reshuffle part of its fleet depending on the seasonality in demand  Presence in the FSC (Jet Airways) and LCC segments (JetLite and Jet Konnect) which enables to successfully divert part of its fleet based on the demand supply scenario, and hence maintain the yields and load factors  Varied fleet type (Boeing and ATR), size (capacity of 777s is 312 while that of ATR is 65) and ownership making pilot poaching difficult, accommodating demand across sectors easier and leasing out owned fleet to capitalize on the demand-supply mismatch.
  • 82. Factors for Sustainable Business Model A. Presence in domestic as well as international market B. Presence in the FSC and LCC segment C. Varied fleet size and type D. Leasing out owned fleet to capitalize on the demand-supply mismatch
  • 83. Factors for Sustainable Business Model A. Presence in domestic as well as international market  The domestic passenger traffic has witnessed a 16.5% CAGR in FY06-FY11 to 54 mn trips.  Similar growth trend expected in the future considering a) rising GDP over the next five years with a 2.2x multiplier effect, b) improving infrastructure with new airports and expansion of existing airports, and c) rising per capita income in India and comparatively lower rise in ticket prices ,hence improving the affordability of Indian travelers.  With a 16.5% CAGR in FY11-FY15E the domestic passenger traffic is expected to grow to 99 mn trips.  Ability to reshuffle part of its fleet across geographies : Its presence in the international and domestic markets has enabled the company to re-shuffle its fleet to international skies based on the seasonal demand and vice versa.  The presence in the international segment has helped improve the block hours for the company as well improve revenues with a higher revenue per RPKM (yield) seen from the international business.
  • 84. Factors for Sustainable Business Model B. Presence in the FSC and LCC segment  JA is the best bet in the Indian aviation space, to capture the robust growth in the domestic passenger traffic due to its presence in both the LCC and FSC segment.  It caters to the lower end of the spectrum with its brands, Jet Konnect and JetLite, and to the premium end with its own brand-name, Jet Airways.  This enables the company to provide a range of ticket prices and is able to cater to premium and economy travelers.  The presence in the LCC segment allows it to capture the relatively strong growth in the domestic skies and also leads to improvement in blended load factors. On the other hand the FSC segment has helped Jet maintain its yields.  Diverting part of its fleet under the FSC/LCC model : It has a vast fleet of 119 aircrafts (19 Jet Lite and 100 Jet Airways ) and has a competitive advantage due to operations under FSC and LCC models which enables it to divert part of its fleet under the LCC/ FSC model depending on the economic scenario.  Such flexibility places Jet in a better scenario than its competitors and hence JA is able to capture a greater share of wallet spend during good time as well as maintain its PLF during lean seasons
  • 85. Factors for Sustainable Business Model C. Varied fleet size and type  Jet Airways (standalone) currently has a fleet of 100 aircraft (12 Boeing 777 series, 12 Airbus A330-200, 56 Boeing 737 series and 20 ATR 72-500 turboprops).  Its fleet also comprises of 19 aircraft (10 Boeing 737-700 series and 9 Boeing 737-80- series) under its fully owned subsidiary Jet Lite (previously Air- Sahara).  Due to the difference in fleet (Boeing for Jet and Airbus for Kingfisher and Indigo) poaching of pilots becomes difficult and hence the attrition rate is maintained.  Moreover, a varied fleet size (capacity of Boeing 777s is 312 seats while that of ATR is 65 seats) helps to accommodate demand across sectors.  This has led to JA being able to constantly maintain and improve its load factors. The move has also led to better utilization of its fleet as per the needs of the sector and the cyclical and seasonal demand JET AIRWAYS . Type Size Capacity Boeing 737-700 11 118 JET LITE Boeing 737-800 43 160 Type Size Capacit Boeing 737-900 2 138 Boeing 737-700 10 145 ATR 72-500 20 65 Boeing 737-800 5 186 Airbus 330-200 12 235 Boeing 737-800W 4 186 Boeing 777-300 12 312
  • 86. Factors for Sustainable Business Model D. Leasing out owned fleet to capitalize on the demand-supply mismatch  With a fleet mix of owned (42) and leased (58) aircraft Jet is able to capitalise on the demand supply mismatch and earn additional revenues.  Such flexibility gives Jet a strong competitive advantage in terms of its ability to withstand a downturn in the economy and also makes it best placed to capture a growth opportunity during times of revival or during festive seasons.  Moreover, since 42 of the total 100 aircraft are owned while the remaining 58 are leased, Jet is able to generate the highest EBITDA margins in the industry as lease rentals are low.  Due to presence of owned fleet the company was able to reduce the downturn effect with revenues straight away positively impacting the EBITDA.  This feature of Jet Airways considered to be one of its strongest edges over competitors and make it best poised in times of industry slowdown.
  • 87. Focus on International Segment – Key Driver for Profitability  Jet Airways is currently the second largest international operator in India.  The company‘s international business accounts for 46% of its consolidated passenger revenues in FY11 and 57% of its consolidated ASKM  With a strong presence in the international business the company has been able to aid growth of the domestic traffic as well due to synergies like a) the international passengers acting as a ready customer base to its domestic segment b) creating a diversified passenger traffic leading to demand throughout the year c) stability of its business model  Such synergies have ensured that the profitability of international operations remains significantly higher than domestic business. The EBITDAR margins too for the international business in FY11 were 24% as compared to 15% in the domestic business.  The international business passenger revenue and EBITDAR is expected to record 17.3% and 11.2% CAGR respectively in FY11-14E led by 12% CAGR in RPKM, 7.3% CAGR in passenger yields and 21.7% CAGR in fuel cost over the next three years.
  • 88. Improving Domestic Business : High Operational Efficiency  The improvement in operations is clearly highlighted by the rise in PLF to 75.1% in FY11 as compared to 71.6% in FY10 even as the ASKM rose by 17.5% in FY11.  Even in Q2FY12 the domestic business has seen load factors rise to 72.1% from 71.4% in Q2FY11 as the ASKM grew by 7% Y-o-Y.  The yields have also seen a rise in the current fiscal with revenue/RPKM rising by 10% in Q1FY12 and 1% Q2FY12.  The operational efficiencies have resulted in a better financial standing with the EBITDAR margins having improved from 15% in FY10 to 18% in FY11 and an EBITDA margins rising to of 7.8% in FY11 as compared to EBITDA margin of 3% in FY10 and an EBITDA loss in FY09.  The company has successfully managed to improve its operational efficiency over the years with a rise in block hours per aircraft and in passengers carried despite the reduction in ASKM.  This has helped improve efficiencies and reduce costs. With refurbished seats and better food, the preference for the airline has increased and the 9W code has been put on all Jet Lite aircraft to enable it to sell its seats through the GDS system, helping it to achieve ~25% of its traffic from the company‘s international network.  The EBITDA loss has reduced to `762 mn in FY11 as compared to an EBITDA loss of `1.01 bn in FY10 as a result of the cost per ASKM falling to `1.65 in FY11 from `1.67 in FY10.
  • 89. Merger of JetLite and Jet Konnect to boost LCC segment growth  The company plans to merge its two LCC JetLite and Jet Konnect and operate under the brand name of the latter.  The move to arrest losses and compete with other low-cost airlines had been in the management's mind for some time, but the decision has been taken now. Though no formal date has been announced regarding the re-branding exercise we expect the move to be positive for the company.  The higher brand perception for Jet Konnect as compared to JetLite, higher operating efficiencies by the former, tie-up synergies and improved connectivity are some of the benefits that the company would witness with the re-branding and merger of JetLite.  The revenues expected to witness 10.0% CAGR in FY11-13E driven by 4.2% CAGR in RPKM and a 5.8% CAGR In passenger yields in the same period.  However, with a rise in fuel cost of 15.4% CAGR in the same period, the profitability of this division will remain under pressure and the EBITDAR will witness 0.9% CAGR decline in FY11-FY14E.
  • 90. Merger of JetLite and Jet Konnect to boost LCC segment growth  Highly fixed-cost intensive The airline industry is highly fixed-cost intensive with lease rentals, maintenance and employee costs remaining fixed. Any reduction in passenger traffic can adversely affect the profitability.  Downturn in the economy Any downturn in the economy could lead to relatively low passenger traffic growth, which could have a negative impact on load factors, and could eventually have a negative impact on profitability.  External factors There are many external factors which can affect profitability, which include bad weather conditions, terrorist activities, country and state policies and others
  • 91. Key Risks  Fuel costs beyond airlines’ control Aviation turbine fuel (ATF) prices account for 40-45% of an airline‘s total revenues. A sharp increase in the ATF prices have dented margins and led to losses across the industry. Any further price rise could result in a significant net loss and hence erosion of net worth for the company.  Change in landing and navigation charge regulations Currently, aircraft with less than 80 seat capacity are exempt from airport landing and navigation charges. Jet Airways has 20 ATR aircraft, with a seat configuration below 80. As these aircraft qualify for exemptions, any change in these policies could lead to higher taxes and so affect future earnings.  Yields stagnating Any sharp increase in competitive intensity (in times of low passenger traffic or excess expansion by airlines) could adversely affect the load factors and passenger yields, reducing margins.  Rates and currency fluctuations A stronger dollar may affect Jet‘s profitability, as a large part of the company‘s costs are dollar denominated, like lease rentals, ATF cost and maintenance costs. In addition, a major portion of their debt is dollar denominated; hence, a stronger dollar could hit earnings.
  • 92. SWOT – Jet Airways STRENGTHS: Strong presence & good name in the Indian Aviation market WEAKNESSES: Too many players in the ―no frill‖ category OPPORTUNITIES: Consolidations in the industry & low market penetration THREATS: Ongoing economic weakness & Fuel prices
  • 93. Akshith Reddy Deepak Sharma Shaik Mohammad Ali Shubha Brota Raha Snigdha Smithahasini Sujoy Dalal Sushma Gowda