as service sector

Aviation

Roads

Transportation

Railways

Ports

Air India GoAir Airlines IndiGo Airlines Jet Airways Jet Airways Konnect Kingfisher Airline SpiceJet Airlines JetLite (Air Sahara) Kingfisher Red (Air Deccan)
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SEGMENTATION
- HNI People .& others

TARGET
-VPs,CEOs -Bollywood Stars -Politicians -Foreign Tourists -industrialists -regular

POSITIONING positioning has been focused as a quality & premium traffic airline. 5

Political

Govt.is not stable

Economy Disposable income is increasing . GDP grow is more than 9%.

Social

-- Status conscious -- Awareness is increasing -- Increase in Entrepreneurship

Technology Indigenous technology is coming for aircrafts & airports. Legal -Flexibility in entry . .

Environment Stiff competition for hiring pilots (poaching)

Easy FDI(49%) through secondary market

1953: Nationalization of Aircraft Industry Consequently, assets of 9 existing companies transferred to two entities in the aviation sector controlled by the Government in

1986: Private Sector Players permitted as Air taxi operators Players including Jet, Air Sahara, NEPC, East West, Modiluft,etc started service 1994: Private Carriers permitted to operate scheduled services Six operators granted license however only Jet and Air Sahara able to service 2003: Entry of low cost carriers Air Deccan, Spice Jet, Go Air, Indigo

a) Indian Airlines, primarily serving domestic sectors

b) Air India, primarily serving the sectors international

Implication

Implication

Aviation became a preferred mode of transport for elite Aviation has become affordable with check fares and class discount schemes Restricted Growth of Aviation Industry Various Operators with different business model High Cost structure Huge growth foreseen in the Aviation Industry Underdevelopment of infrastructure

HUGE POTENTIAL Under penetrated Market - Total Passenger Traffic

developed Nations like United States have 2.02 trips per annum - High Level of potential demand with growth in Indian economy

CONSTRAINTS Infrastructure Constraints -Shortage of airport facilities, parking bays,air traffic control facilities and takeoff and landing slots - Continued growth might be hampered

Untapped Air Cargo Market

- Air Cargo has not yet been fully taped in the Indian markets and is Relatively Limited Reach
expected that in the coming years large no of players would have dedicated fleets

-Only 454 airports with less than 100 airports having more than one daily

What this means

- Build up of capacity by existing players and entry of new players

service

Many policies supporting the infrastructure are now in place.

74 per cent FDI is permissible in cargo and non-scheduled airlines. 49 per cent FDI is permissible in domestic airlines under the automatic route, but not by foreign airline companies. 100 per cent equity ownership by NonResident Indians (NRIs) is permitted. 100 per cent tax exemption for airport projects for a period of 10 years.

100 per cent FDI under automatic route is permissible for greenfield airports. For existing airports, FDI up to 74 per cent is permitted through automatic approvals and up to 100 per cent through special permission (from FIPB). Private developers allowed setting up of captive airstrips and general airports 150 km away from an existing airport.

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Declining yields
Building on cost efficiencies High input costs Gaps in infrastructure

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LCCs and other new entrants together now command a

market share of around 46%

Legacy carriers forced to match low LCC fares, during a time of escalating costs

Increasing growth prospects have attracted & likely to

attract more players More players more competition lower fares a continuous cycle The bottom-line lower yields for all operators
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Low yield regime to continue Airlines have to build on their cost efficiencies & drive down costs below the yield that their product will fetch, to return to profits

For an industry that is estimating losses of US$ 500-550 million by

end of current fiscal, this is a daunting challenge

Yet, airlines have no control on external input costs

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High input costs ATF prices in India continue to be far higher than global rates, making ATF account for 35-40% of operating cost, as against global average of 20-25% High basic rates aggravated by high taxes imposed by State Govt.s ATF cost / kilolitre : US$ 755 in Delhi US$ 780 in Mumbai US$ 455 in Singapore US$ 497 in Dubai High input costs Witholding tax on interest repayments on foreign currency loans for aircraft acquisition Witholding tax proposed on aircraft lease rentals for leases concluded after 1st April07. Increasing manpower costs due to shortage of technical personnel
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Opportunities A large & growing potential market Developing alternative revenue streams Air cargo operations Airframe, engine & component overhaul Ground handling Leveraging the internet Access to new markets AirCargo

Freight carriage in India currently around 4200 tons per day CAGR of 15% over the past 2 years Fuelled by a fast growing economy, supported by a strong industrial base

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GroundHandling

Ground handling business in India estimated at Rs. 1074 crores Expected to grow at 15% CAGR till 2011-12 Opportunity lies in 3rd party handling as well as entering into service contracts with

private airports / AAI to offer comprehensive ground handling solutions, e.g. AI CIAL at
Cochin
Leveraging the internet

Increasing numbers are booking directly from the airlines websites

Traditional sales channels with paper tickets cost airlines ~10% of ticket price
Comparatively, e-ticket sales from own website cost an airline only ~3% of ticket price For every direct booking from their website, airlines save an estimated US$ 4 plus 5% agency commission Airlines can also turn their websites into one stop shops for all travel related services, generating additional revenue
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As airlines complete 5 years of domestic operations, those with 20+ aircraft will get international access
Access to new revenue streams Help even out the seasonality factor of domestic operations Spread the risk of downturn in a single market

The opportunity for some will be a challenge for the existing international players The risk cycle of increased competition, low yields, and growth transferred to the international arena

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The Reserve Bank of India (RBI) announced that foreign institutional investors might have shareholdings more than the limited 49% in the domestic sector.

Airports Foreign equity up to 100% is allowed by the means of automatic approvals pertaining to establishment of Greenfield airports Foreign equity up to 74% is allowed by the means of automatic approvals pertaining to the existing airports Foreign equity up to 100% is allowed by the means of special permission from Foreign Investment Promotion Board, Ministry of Finance, pertaining to the existing airports 100 per cent tax exemption for airport projects for a period of 10 years.

Air Transport Services Up to 49% of foreign equity is allowed by the means of automatic approvals pertaining to the domestic air transport services Up to 100% of NRI investment is allowed by the means of automatic approvals pertaining to the domestic air transport services 74 per cent FDI is permissible in cargo and non-scheduled airlines.

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Indian Aviation has seen high growth on account of sustained Indian socio economic growth and liberalized Government initiatives

Airport Infrastructure needs to improve significantly to meet the current and future demand of the Indian Aviation Sector

Authorities have initiated various steps

to implement modernization, reconstruction and

development of airport infrastructure to implement infrastructure development plan

Provides a huge opportunity for private players operating in Aerospace and allied industries Significant opportunity for foreign companies as Indian companies not technologically equipped to cater to requirements

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Despite a growing market, airlines in India are fighting for survival in a highly competitive environment A host of initiatives are required to be taken by all concerned, to tide over the current situation
Control Costs Improve quality of service Develop a large pool of skilled / technical manpower Attract more professionals to manage the aviation industry Develop infrastructure to match growth plans Liberalize rules & regulations governing civil aviation, without compromising on safety & security Reduction in ATF prices and taxation on ATF and lease rentals

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www.icra/indian aviation industry.com Wikipedia/aviation sector www.ecnomic times/aviation sector.com

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