Aviation industry

Subject: Strategic Management Group No. 9 Presented By:

Pradnya Hinge Rajnikant Kumar Dipali Wadhavane Abhishek Jain Jayashree Shinde

(69) (81) (93) (105) (117)

Presented To: Prof. Shirish Bhakare 24.09.2011

INTRODUCTION TO AVIATION INDUSTRY

One of the fastest growing sectors globally. It facilitates economic growth, world trade, international investment and tourism and is therefore central to the globalization taking place in many other industries. Origin of Indian civil aviation industry-1912 The first Indian airline-1932

Market Size

India's domestic aviation market has tripled in the past five years. India is currently the ninth largest aviation market in the world. Passengers carried by domestic airlines during January - May 2011 were 24.5 million as against 21 million.

Domestic traffic in a month has registered 5.5 million passengers carried with three airlines viz. Jet Airways, Kingfisher Airlines and IndiGo carrying more than 1 million passengers each in May 2011.

Private carriers are anticipated to post a combined profit of US$ 350 400 million for the fiscal 2011-12.

Segmentation
There are five segments in the aviation industry:

Passenger airlines Helicopters and personal jets

Cargo logistics

Training

Maintenance and Repair

Contd
Passenger airline:

Today, only two per cent of India has access to airline transport.
In India, the number of air tickets purchased annually is 50 million.

Compare this with other countries:

In America, there are 700 million tickets purchased every year. In Ireland, the tickets sold are 25 million. In Malaysia, the tickets sold are 16 million.

Contd
Cargo logistics

China today has 100 cargo aircrafts.

In the US, Fedex and UPS have 1, 700 aircrafts but India has only 16.

Helicopters and personal jets

There will be an explosion of growth. This is because the number of rich people in India is growing. Many of India's very rich personal own jets already.

Contd
Training

There is huge growth in this sector which includes pilots, technicians, air hostesses, electrical and electronic engineers.

Maintenance and Repair

Whether it is in manufacturing of components or building aircraft, whether as supplier or otherwise, there is a lot of scope.

Growth Rate
General aviation has experienced over 10 years of rapid growth in all kinds of economies.

10% annual growth in US for last 30 years 8% annual growth in Canada for last 30 years; 6% annual growth in Brazil for last 30 years and rapid growth in Australia for last 40 years

In the next ten years, the compound growth rate of Chinas general aviation aircraft demands will exceed 20%

General aviation aircrafts for aerial works, 1,415 aircrafts for training and private flying, a 21% compound growth rate

Market Players
GoAir, 3% Paramount Airways, 2%

SpiceJet, 12% IndiGo, 14%

Kingfisher Airlines, 28% Jet Airways and Jet Lite , 25%

Air India , 16%

Value Chain
FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT -Financial Policy - Accounting-Regulatory Compliance Legal - Community Affairs Flight, route and yield analyst training Pilot Training Baggage Handling Safety Training Training Agent Training Product Development Market Research In-flight Training Baggage Tracking System

Computer Reservation System, In-flight System Flight Scheduling System, Yield Management System

PROCUREMENT

Information Technology Communications

Route Selection Ticket Counter Baggage Passenger Service Operations System System Gate Operations Flight Yield Management Aircraft Connections System (Pricing) Operations Rental Car Fuel On-board Service and Flight Scheduling Baggage Handling Crew Scheduling Ticket Offices Hotel Facilities Planning Reservation Aircraft Acquisition System INBOUND LOGISTICS OPERATIONS OUTBOUND LOGISTICS Promotion Advertising Advantage Program Travel Agent Programs Group Sales Lost Baggage Service Complaint Follow-up

MARKETING SERVICE AND SALES

Competitors Analysis

Proliferation of Airlines and several other low-fare carriers. Major carriers compete for passengers over their respective hub-and-spoke networks. Low fare carriers include Spice jet, Go air, Go indigo are giving stiff competition to major airlines like Kingfisher airline, jet airways, Indian airlines etc. Even corporate world in order to decrease there expenditure are now booking tickets in these low cost carriers. Indian railway High net individuals clients also prefer Rajdhani, Duronto.

Customers Key buying factors

Contd..

The whole value offering leading to customer retention. Buying factors include : Availability of seats Convenient time schedule Punctuality of airplanes Level of safety in airlines Quality of food specially in long distance travel

1.

2.
3. 4. 5.

Entry barriers
High startup costs or obstacles that prevent new entrants from easily entering a particular industry. In the airline industry, there are a number of barriers to entry that affect new entrants: Risk High costs that tend to be fixed in relation to revenues. Load factors or fare increases may affect revenue. Slots Since 1969, the Federal Aviation Administration has limited the daily number of takeoffs and landings at key airports such as the Chicago O'Hare, Ronald Reagan Washington National and New York's JFK and LaGuardia. As a result of new airlines entering the market, the demand for access at these airports increased. This increase made it difficult for the takeoff and landing slots to be equally divided. Therefore, government intervention has been minimized to allow airlines to buy and sell these slots to each other. Marketing Strategies Booking incentives Frequent flier programs.

Supplier Analysis

As the supplier industry is dominated by Boeing and Airbus the concentration undermines the ability of airlines such as Kingfisher to exercise control over suppliers and earn higher profits.
Since Kingfisher has a fleet of 53 Boeing 737 aircraft its supplier has a high bargaining power over Kingfisher. The bargaining power of suppliers depends on supplier concentration, substitute supplies, switching costs, threat of forward integration and buyer information . Suppliers who work with the airline such as the providers of on board snacks do not have the same bargaining power as they are a larger industry which allows for Kingfisher to have a choice over who they are purchasing from. Kingfisher will purchase their on board snacks from the supplier which is the most economic so Kingfisher can make a higher profit margin from the goods when they are sold. Suppliers also include petroleum industry which is the backbone of airline industry . In India companies like BPCL, HPCL and many other companies have specially designed plans for airlines as they form there large customer base.

COMPANY PROFILING

About Kingfisher Airlines

Kingfisher Airlines is part of The UB Group which is one of India`s largest conglomerates with diverse interests and a global presence Kingfisher Airlines is India`s favorite airline and the only one to offer

a premium first class service on domestic routes in-flight entertainment on every seat in the domestic skies LIVE TV with 16 channels of live & exciting content. Kingfisher Airlines has received over two dozen awards for innovation, customer responsiveness and was voted the Best New Airline of the Year within months of its launch.

Kingfisher Airlines flies to 32 cities and offers over 200 flights daily with a fleet of 31 brand new aircraft.
With its significant investment in Air Deccan, the Kingfisher-Air Deccan Group is India`s largest domestic airline connecting 69 cities and offering over 550 flights daily with a fleet of 75 aircraft.

CORPORATE STRUCTURE

Vijay Mallya (Chairman & MD Subhash Gupte (Vice Chairman)

Piyush Mankad (Director)

A.K. Ravi (Director)

Vijay Amritraj (Director)

Anil Kumar Ganguly (Director)

Ghyanendra Baj[pal (Director)

Marketing Aspects
Product Domestic & International Air Transport Service. 74 domestic destinations & 3 international destinations in 3 countries across Asia & Europe. Place The metro cities or the tier 1 cities in India.

People Hospitality industry, Interpersonal skills, Aptitude test.

Contd..
Promotion Events & advertisements Loyalty & frequent flyer programs are also carried out Price Higher income group as well as the middle class background Sec A, sec B+ socio economic class mainly in the age group of 25-45 years

Contd.
Physical Evidence Exclusive lounge space, Gourmet cuisine, World class cabin crew Process Online booking, Tele-booking , Kingfisher outlet

Products & Brands

Kingfisher airlines offers a range of aircraft that includes the Euro copter EC155, Business Jets and Airbus Corporate Jets. For a group charter Airbus 321, Airbus 320, Airbus 319, ATR 72-500 and A TR 42-500 aircraft

SWOT Analysis
Strengths:
Kingfisher Airlines have targeted the Indian domestic luxury segment, therefore operating in a niche market. Kingfisher Airlines has a strong financial support from the parent company UB Group and Kingfisher itself is a well established brand. The customer service provided on Kingfisher is extremely exceptional for a domestic airline, hence providing an ultimate flying experience. Kingfisher Airlines is well known for its highly trained and attractive staff.

Weakness:

The company is unable to generate expected returns on the investments done. Loads are lesser than that of its competitor Jet Airways which is a reflection of its marketing and sales capabilities. The main weakness of the company is the overspending of funds.

Contd.
Opportunities:
The Indian aviation industry is a growing industry with a growth rate of nearly 24%. There are a large number of domestic untapped routes. There has being a growth in the disposable income of the people especially in the middle class, therefore more people can afford to fly by a luxury airline. The air cargo market is still untapped.

Threats:

Fierce competition from other airlines such as Jet Airways Cost cutting is become a prime need in the aviation industry, hence pressurising a lot of airline companies . Infrastructure constraints the major
rises in fuel prices

Segmentation: Classes of status conscious air traveler, SEC A and B+, HCI 25K+, Professional. Target audience- SEC A, SEC B+ (socio-economic class) in the age group of 25-45 years of age. Targeting: Executives and their family. Who are not really economy conscious but seeking an airline commensurate with their standing/status Price insensitive A pleasurable in-flight ambience and experience. Position: The airline is deliberately positioned as A never before experience and Funliner.

OPERATIONS

Competitive Analysis

Kingfishers only strong obstacle proves to be Jet Airways, since Jet has control on both ends of the market and secondly it has penetrated into the international market as well. Benchmarking against Jet Airways, Kingfisher Airlines has acquired Air Deccan - which was one of the most profitable low cost airlines, hence kingfisher too has entered in the lower end of the market but bearing in mind that they havent changed the name Deccan to Kingfisher Airlines so that the brand doesnt lower. Kingfisher is also going to start non-stop flights to US so as to foray into the international market.

Kingfishers strategy to take on Major competitor, Jet Airways:

Kingfisher Airlines, positioning itself as a budget airline has announced fares for the Bangalore-Mumbai sector, which are 35 per cent lower than those of Indian Airlines and Jet Airways but lower than those offered by Air Deccan. However, unlike Air Deccan, which is purely a low-frills airline, Kingfisher promises frills like in-flight entertainment with television sets for individual seats and professional models as flight attendants.

Kingfisher's lowest fare is Rs3,900 for the Bangalore-Mumbai sector, with the next highest being Rs4,900 and the highest at Rs5,900.

Third quarter FY2010/11 financial results for Indias three large airline groups Air India, Jet Airways and Kingfisher Airlines and domestic LCC, SpiceJet, show mixed results at the net profit level, as two of the four carriers increased their revenues, while all four experienced traffic growth. There are still challenging times ahead in 2011 for all four carriers to reach a stabilisation in yields and increase their revenues, as traffic continues to recover.

Benchmarking Financial Analysis

www.moneycontrol.com

www.moneycontrol.com

Supply Chain Analysis

Kingfisher Cargo offers a wide range of services to its customers by way of General Cargo and Courier as well as various other customized air logistic products which are tailor made to benefit its clients. The array of products and services offered by Kingfisher Cargo includes General Cargo Services that cater to all types of general cargo like garments, textiles, spare parts, computer chips, electronic items and foodstuff. Customer-focused innovations and initiatives for this segment include guaranteed capacity, flown-as-booked`, personalized service, special storage areas and security escorts for handling special types of cargo. In addition to this, Kingfisher Cargo caters to the On-Board Courier Segment with a phalanx of special on- board services especially customized for sending smaller consignments which are time-sensitive in nature.

Recommendations for Kingfisher Airlines

Needs to change brand perception Currently perceived as Lifestyle slogan Red color of crew :Reflects Royalty Over dependence on brand image of Mr. Mallaya

Advertisement reflecting Value for Money

Gain operational efficiencies through alliances. Leverage Upon: New fleet, Unmatched flight service Innovative ideas-LIVE TV with 16 channels Air Boutique, in Kingfisher Airlines

Future Scope
Indian Aviation - Road Ahead

The Indian aviation sector is a major economic driver for prosperity, development and employment. Massive investments in airport infrastructure have led to world class airports which have become the symbol of Indias growth story. India is poised to emerge as the third largest aviation market in the world by the end of this decade, according to Civil Aviation Secretary Dr Nasim Zaidi. Zaidi said that the sector, with a growth of 18 per cent in domestic market, is expected to generate approximately 2.6 million jobs in the next one decade. The Vision 2020 announced by the Civil Aviation Ministry conceives of building infrastructure to support 280 million customers

bibliography
www.wikipedia.org www.flykingfisher.com www.moneycontrol.com www.asiapacificaviation.org

Thank You.