1. Jet Airways

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• 1994 Air Corporation act repealed; Private players can operate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.

28. Porter’s 5 Forces Model

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.

40. Top Players

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

56. Market Share

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

70. Profitability & Ratio Analysis

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

75. Investment Valuation Ratios

76. Profitability Ratios

77. Liquidity & Solvency Ratios

78. Debt Coverage Ratios

79. Management Efficiency Ratios

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