1. Aviation Industry
Sectorial Analysis
BY –
Ankit Nayar
Deepti Kher
Dinesh M
Harmeet Arora
Mansi Pathak
Yogesh Kasar
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2. ABOUT THE
AVIATION
SECTOR
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3. Aviation is the design, development, production, operation,
and use of aircraft, especially heavier-than-air aircraft
Civil aviation:
Civil aviation includes all non-military flying, both general
aviation and scheduled air transport.
• Air transport :There are five major manufacturers of civil transport aircraft :Airbus,
based in Europe, Boeing, based in the United States, Bombardier, based in Canada
Embraer, based in Brazil, United Aircraft Corporation, based in Russia.
• General aviation:
General aviation includes all non-scheduled civil flying,
both private and commercial.
Military aviation : Military aircraft have been built to meet ever increasing capability
requirements. Manufacturers of military aircraft compete for contracts to supply their
government's arsenal. Aircraft are selected based on factors like cost, performance, and
the speed of production.
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4. ServicesProvidedbytheAviation
Sector
1. Manufacturing
2. Commercial
3. Customer
4. Airport
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5. AWARDS
IN
AVIATION
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6. Awards in Aviation Sector
1.
2.
3.
4.
5.
6.
ATW Airline Industry Achievement Awards
World Airline Awards
NBAA awards
CAPA Aviation Awards
Annual Laureates Awards
ACI's Airport Service Quality Awards
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7. KEY
SERVICE
CONCEPTS
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8. Service Package
• Supporting facilities: aircraft, layout, areas for terminal support services (such as
airline catering and mechanical equipment maintenance facilities) and airport
maintenance facilities, areas to store ground support equipment, logistics support
infrastructure (goods and waste management)
• Facilitating goods: food items
• Information: information on booking tickets, preference for seat, delays,
cancellation or reschedule details to be prompt.
• Explicit Services: comfortable seats, clean seat covers, organized magazines, smell
inside the aircraft, service provided by the crew members, safety belt.
• Implicit Services: safety instructions, promise by the airlines for safe landing,
belief in the airlines for the adequate training required for the pilots.
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9. Service Recovery
A customer expects 3 shorts of
fairness in case of service recovery:
1. Interaction fairness
2. Procedure fairness
3. Outcome fairness
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10. Global
Scenario
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11. Global Scenario
•Air travel has grown by 7% per year. Travel for both
business and leisure purposes grew strongly
worldwide.
•Airlines carried 1.5 billion passengers last year.
•Business travel has also grown as companies become
increasingly international in terms of their
investments, their supply and production chains and
their customers
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12. The World's biggest Airlines
Airline
Passengers (in
millions) 2010
Passengers (in
millions) 2011
Headquarter/
City
Country
Africa/Middle East
Emirates Airline
27,454
31,422
Dubai
United Arab Emirates
Guangzhou
China
Paris
France
Asia/Pacific
China Southern Airlines
66,279
76,455
Europe
Air France KLM
71,394
71,320
North America
Delta Air Lines
1,61,047
1,62,615
Atlanta
USA
Southwest Airlines
1,01,430
1,06,307
Dallas
USA
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13. Overview Of
Indian Aviation
Industry
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14. INDIAN AVIATION INDUSTRY
• Passenger Growth : The international passenger
growth has been growing at CAGR of over 14%
and domestic growth has been an impressive 22%
for last 6 years.
• Cargo Growth : The domestic cargo is growing at
a CAGR of 13% during the period 2007-2010
while the international cargo is growing at a
CAGR of 14% over the same period. At present
India contributes over 1% of the world air cargo
traffic.
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15. KEY PLAYERS
• Air Charter Services Pvt Ltd: Air Charter Services Pvt.
Ltd. performs its business operations with private
business aircrafts, executive and corporate air charters,
helicopter tours, VIP charter flights, and photo and
video flights.
• Aviation India: Aviation India provides services like
cargo services, flight operation, air charter services,
passenger services, freight control, advisory and
consultancy, aircraft preservation and renovation,
international flight operation, air supervision and
helipad engineering.
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16. • Indian Airlines: It is recognized as one of the biggest regional
airline systems in Asia. It has a fleet of 70 airplanes and covers 76
destinations, 58 Indian destinations and 18 foreign destinations.
• Indigo: Indigo is a utilitarian low-price domestic airline which offers
feasible flying alternatives for millions. The airline was facilitated by
the Air Passengers Association of India (APAI) as the “Best Low-Fare
Carrier in India for the year 2007”. Indigo has 120 daily departures
and a fleet of 19 Airbus A320.
• Spice Jet: Spice Jet is basically a low cost airline which incorporates
many Boeing 737-800 airplanes in its fleet. It covers 14 destinations
in India.
• Air Sahara (Jet Konnect): It comprise of 27 aircrafts, 135 daily
departures and availability of 16500 seats on regular basis.
• Jet Airways: It earns yearly revenue of Rs 2502.89 and total income
of approx 117868.8 Million. At present it is India's biggest private
domestic airline with 62 aircrafts and a market share of 25%. It
covers 50 destinations with 340 regular departures.
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17. We Now Turn Our
Attention To Plethora
Of Issues Facing The
Aviation Sector
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18. ISSUES / CHALLENGES
•
•
•
•
•
•
Shortage of trained employees
Rising fuel prices
Gaps in infrastructure
Regional connectivity
High input costs
Taxes
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19. Best Practices Of INDIGO Airlines
• Money spinner – Sale-and-leaseback transactions
• Exploiting market conditions – Cost cutting
partnership with suppliers
• CRM – On time performance record
• Marketing strategies - Innovative branding
• Focus on basics – Fly more
• International expansion – Expansion in South East Asia
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20. Market
Growth
Drivers
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21. RISING GROSS DOMESTIC PRODUCT (GDP)
• The demand for aircraft is related to air travel, which in turn is linked to
the increasing wealth, increasing per capita income and positive Gross
Domestic Product (GDP)
• An increase in air travel has occurred in the developing economies like
India and China; both of these countries signify robust optimism for the
Aviation segment
• Indian GDP is expected to grow between 4.4% and 4.6% until 2015.
• Best indicator for measuring the performance of the Aviation segment is
the world Gross Domestic Product (GDP).
• Other factors leading to Civil Aviation growth include international trade
and globalization.
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22. Expanding Middle
Income Group
• These income groups drive the
consumption pattern in India
and are primarily concentrated
in urban areas.
• NCAER analysis reveals that
the middle income group
population in 2010 stood at
160 million individuals i.e.
13.3% of the total population,
which is expected to rise to
547 million in 2025 (i.e. 37.2%
of the total population)
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23. Demographic Dividend
• 62% of the population is in the working age group of 15-60 years and this proportion
is set to increase in future indicating a larger employee base, greater business travel
and greater economic activity.
Rising Urban Population
•
Mckinsey Global Institute’s projections state that India’s urban population will be
590 million by 2030 i.e. about 40 percent of the total population of India.
•
The number of million plus cities will increase to 68 by 2030 of which 13 cities will
have more than 4 million and six cities will have more than 10 million persons.
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24. Significant Market Developments
• Low Cost Carrier model which made air travel affordable to common man
• The domestic traffic is rapidly shifting towards the LCC model. Market sources
suggest that this has crossed 67% during 2011-12.
• In India, low-cost carriers SpiceJet and IndiGo continue to grow as they
replace the airlines likes of Air India, JetAirways and Kingfisher Airlines.
• Boeing and Airbus also predicted that he companies will require
approximately 5,200 new airliners in the 100 to 210 seat category, such as the
best-selling A320 family. This increase in demand will be driven primarily by
the growth in fleet size of the LCCs
• IndiGo, SpiceJet and JetLite ordered 46 new aircraft which are to be delivered
by 2014.
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25. Investment in Airport and related Infrastructure
• Opening up of the airport infrastructure to private sector participation fuelled the
growth of the air traffic in India. Total investment made by private airport operators in
the last five years was to the tune of Rs 30,000 crores spread across Greenfield
development of Hyderabad and Bengaluru international airports and modernization of
Delhi and Mumbai international airports29.
• Rapidly expanding air transport network aided by massive investments in the airport
infrastructure could be cited as one of the key reasons for the surge in air passenger
traffic in India.
• Passenger terminal capacity in all airports put together is expected to be 230-240
million by 2012 and by 2017 it would be about 370 million across all airports as per
the investment plans of the operators.
• Cargo growth presently being witnessed will necessitate investment in specialized
cargo terminal and equipments.
• Airlines are highly dependent on the strength of their network to register revenues.
Therefore, they are constantly making efforts to ensure that their routes maintain an
acceptable return for their investment
• Focus on Fuel-Efficient Aircraft: According to the International Air Transport
Association (IATA), jet kerosene prices have doubled since their low point in early
2009, reaching US$113 a barrel in early 2011
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26. OSI
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27. OSI
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28. Rising Tourism
• Tourism in India has displayed
stellar performance during the
last decade.
• Foreign tourist arrivals in to India
and Indian National Departures
grew by 9.2% and 11.5 %
respectively during last decade
• Tourist’s visits within India stood
at 740.2 Million for the year
2010.31 In
• The number of foreign tourist
arrivals in India stood at 5.6
Million in the year 2010 as
against
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29. Trade
Associations
Pertaining In
Aviation Industry
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30. Trade Association Pertaining To Aviation
• IATA International Air Transport Association
• African Airline Association
• Airline Tariff Publishing company
• Canadian Airport Council
• World Tracer
• Regional Aviation Association Of Australia
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31. Business
Strategies
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32. Business Strategies
• Low Cost Carriers (LCCs)
- They have made air travel accessible to the middle class. Some travellers
who were using trains and buses have switched to travelling by LCCs because of the
low fares.
- Indian Airlines and Air India: These two national carriers enjoyed monopoly
power in the industry until the Air Corporations Act was repealed. They enjoyed a
monopoly on domestic services until 1994, had its market share decline from 100% to
17% since.
- Jet Airways and Air Sahara: Jet Airways acquired Air Sahara in April 2007 ,
has since been rebranded as a low-cost carrier, called Jet Lite.
- Air Deccan and Kingfisher Airlines: India's first low-cost carrier, Air Deccan, which
started the low fare boom in India, reported a $43 million loss for the fourth quarter
ending June 2007. To keep afloat, Air Deccan sold 26% of stake to Vijay Mallya's then
two-year-old Kingfisher Airlines. This stake was later increased to 46%
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33. Business Strategies
• Reduced Discounting on ticket rates
• Expand International operations
• Low-haul low cost carrier
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34. Government
Policies
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35. Present Government Policies
• A domestic or foreign company wishing to do
business in the Indian aerospace and defence
industry has to comply with the following
policies:
1. The Foreign Trade (Export/Import) Policy
2. Foreign Exchange Management Act (FEMA)
3. The Civil Aviation Regulations
4. The FDI policy.
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36. The Foreign Trade (Export/Import)
Policy
• The export and import of goods and services in
India is presently governed by the Foreign
Trade Policy 2009-14 (FTP). An export or
import can be made by any person only against
an import export code (IEC) number unless
specifically exempted.
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37. Foreign Exchange Management Act
(FEMA)
• To consolidate and amend the law relating to
foreign exchange with the objective of
facilitating external trade and payments and for
promoting the orderly development and
maintenance of foreign exchange market in
India.
• under this act everything was prohibited
unless specifically permitted
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38. FDI policy
• By foreign airlines into domestic scheduled
and non-scheduled air transport services. FDI
up to 49% was permitted for scheduled air
transport services.
• investment by NRIs was permitted up to 100%
but foreign airlines were prohibited to invest in
this segment.
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39. Civil Aviation Regulations
• The Ministry of Civil Aviation is in the process
of formulating a Civil Aviation Policy and
examining the proposal of having a new Civil
Aviation Act and Civil Aviation Rules to
replace the present Aircraft Act,1934 and the
Aircraft Rules, 1937 framed under the Act.
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40. Growth Retarders
• Ground handling policy : Airlines are subject
to discrimination between how security
functions are handled by domestic airlines
versus international carriers. Airlines are
denied the right to self-handle.
• The User Development Fund (UDF) imposed
increases the ticket cost and is high enough.
The airlines are compelled to pass this on the
consumer.
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41. Growth Retarders
• Complexities of taxes and Airline ATF varies
from state to state.
• The stunted growth of Indian aviation comes
with an economic cost. India’s population is
about 240 times the size of Singapore’s. But
the number of aviation jobs is just about 14
times larger at 1.7 million. And the economic
contribution of aviation is still only 0.5 percent
of the Indian economy
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42. Suggestions for
Further Growth
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43. • We have studies various articles and drilled down to
the following recommendations :• Infrastructure Improvement
• Infrastructure is the backbone of Aviation Industry
• Infrastructure includes Airports, MRO Activities,
Technological Infrastructure, Trained Manpower
• Indian Government’s prime aim should be
Infrastructure Improvement
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44. Airport Improvement
• Key enablers to achieve the projected growth
are as follows:
a) Allow no-frills airport model to lower the fixed cost of
airport development and improve the financial viability of tier
II/III airports
b) Enable stable, transparent, predictable and investorfriendly regulatory regime with a mechanism for time-bound
resolution of issues
c) Upgrade Air Traffic Control (ATC) infrastructure and allow
all weather operations including night landing facility at Indian
airports, to provide impetus to tourist traffic
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45. MRO Activities Improvement
• The following key enablers would be imperative for India to
become a preferred MRO hub:
a) Eliminate discriminatory taxation policy for domestic MROs,
as there is nearly 40% tax differential between domestic and
foreign MROs
b) Incentivize airlines to set up their dedicated MRO hubs in
India through three-way joint ventures with MRO service
providers and airport companies
c) Consider abolishing import duties on spare pa
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46. Improvement in Air Connectivity
• Some key enablers that can facilitate the growth are as follows:
a) Rationalize ATF charges with international benchmarks thorough policy
changes
b) Connect less lucrative Tier II/III cities through government incentives
c) Allow more Indian carriers to fly overseas by utilizing full quota of bilateral
agreement
d) If the government is prepared to consider allowing direct importation of
fuel, it would appear to be far more logical to instead seek consensus on sales
taxation with state governments
e) Augment air cargo complex infrastructure through higher automation,
increasing number of screening machines, 24X7 security etc.
f) Mandate CBEC to switch over to multiple shifts of customs operations and
augment the number of customs personnel to cater to the increasing trade
requirements
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47. Future Outlook
for Aviation
Sector
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48. Future for Aviation Industry
• By the end of this decade, i.e. in 2020, air traffic in India is projected to
grow 3.5 times from today's level,
• Third-largest market in the world, behind the US and China, according to
the CAPA India 2011-12 aviation industry outlook.
• Liberalization and economic reforms undertaken by the government.
• AAI has announced that it will seek the government's clearance for its
proposal to issue USD 1.04 billion worth of infrastructure bonds to further
develop 15 airports in the country.
• 100% FDI: Under the civil aviation sector‘s investment policy, 100% FDI is
permissible for existing airports, with Government approval required for
FDI beyond 74%
•
Until recently, the AAI was the only major player involved in developing and
upgrading airports in the country.
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49. THANK YOU
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