Kingfisher Airlines and AVIATION Industry

Internal factors:

Strengths:

1. A major strength of an airline is the product itself -- air travel. Despite

downturns, over time air travel continues to grow, not only due to population
growth, but also due to an increased propensity to fly.
2. Another strength is the safety record, and the associated public acceptance of
air travel as both a fast and safe way to travel. Both traditional, brand
recognized airlines and new low cost carriers share this strength.
3. Airline staff is highly trained and experienced, from pilots and flight
attendants to mechanics and ground staff.
4. Business-wise, airlines have the ability to segment the market, even on the
same routes. This allows airlines to establish different levels of service and
make associated pricing decisions.
5. Growing tourism: Due to growth in tourism, there has been an increase in
number of the international and domestic passengers. The estimated growth
of domestic passenger segment is at 50% per annum and growth for
international passenger segment is 25%
6. Rising income levels: Due to the rise in income levels, the disposable
income is also higher which are expected to enhance the number of flyers.

Weaknesses:

1. Under penetrated Market : The total passenger traffic was only 50 million as
on 31st Dec 2005 amounting to only 0.05 trips per annum as compared to
developed nations like United States have 2.02 trips per annum.
2. Untapped Air Cargo Market: Air cargo market has not yet been fully taped in
the Indian markets and is expected that in the coming year’s large number of
players will have dedicated fleets.
3. Infrastructural constraints: The infrastructure development has not kept pace
with the growth in aviation services sector leading to a bottleneck. Huge
investment requirement for physical infrastructure for airports.

4. Airlines have a high "spoilage" rate compared to most other industries. Once
a flight leaves the gate, an empty seat is lost and non-revenue producing.

5. Aircraft is expensive and requires huge capital outlays. The return on

investment can be different than planned.
6. Large workforces spread over large geographic areas, including international
points, require continual communication and monitoring. This can be
exacerbated during operational irregularities, e.g. bad weather.
7. While the business climate can change quickly, airlines have difficulty
making quick schedule and aircraft changes due to leases, staffing commitments
and other factors.

External factors:

Opportunities:

1. Expecting investments: investment of about US $30 billion will be made.

2. Expected Market Size: Average growth of aviation sector is about 25%-30%
and the expected market size is projected to grow upto100 million by 2011.
3. Airline market growth offers continual expansion opportunities for both
leisure and business destinations. This is particularly true for international
destinations.
4. Technology advances can result in cost savings, from more fuel efficient
aircraft to more automated processes on the ground. Technology can also result
in increased revenue due to customer-friendly service enhancements like in-
flight Internet access and other value-added products for which a customer will
pay extra.
5. Link-ups with other carriers can greatly increase passenger volumes. By
coordinating schedules, airlines can offer service to destinations via a code
share agreement with a partner carrier.

Threats:

Huge investments are expected to take place in aviation sector in near future. It
is estimated that by 2012,

1.Shortage of trained Pilots: There is a shortage of trained pilots, co-pilots and

ground staff which is severely limiting growth prospects.
2. Shortage of Airports: There is a shortage of airport facilities, parking bays, air
traffic control facilities and takeoff and landing slots.
3. High prices: Though enough number of low cost carriers are already existing
in the industry, majority of the population is still not able to fly to other
destinations.

4. A global economic downturn negatively affects leisure, optional travel, as

well as business travel.
5. The price of fuel is now the greatest cost for many airlines. An upward spike
can destabilize the business model.
6. A plague or terrorist attack anywhere in the world can negatively affect air
travel.
7. Government intervention can result in new costly rules or unexpected new
international competition.
 KINGFISHER AIRLINES

SWOT Analysis

Kingfisher's Strengths

 Strong brand value and reputation in the minds of customers.

 First airline with full new fleet of aircraft.
 UB group backing for raising financing.
 Well capitalised airline, prepared to take losses.
 Better handling of employees and staff; less centralised style of
functioning.
 Quality of the service.
 Brand image with Flamboyant personality of Vijay Mallya
  The Deccan deal - which gave it market share, a new market segment and
was cheap.

Kingfisher's Weaknesses

 Highly priced.
 Kingfisher is yet to build itself into an organisation; structures yet to fall
in place.
 Not as professionally run as Jet; yet to build a professionally competent
team.
 Chairman's people skills are better but employees have to work very
erratic hours.
 Kingfisher's loads are lower than Jet's, which could be a reflection of its
marketing and sales ability.

Kingfisher’s Opportunities

 The expanding tourism industry.

 The non-penetrated domestic market.
 International market.
 Untapped air cargo market.

Kingfisher’s Threats

 Tough competition from Jet Airlines, Indian Airlines.

 Infrastructure issues.
 Increasing fuel price.
 Saturation of tourism industry.
 Economic slowdown.
Internal factor Evaluation

STRENGTHS WEIGHTS RATING Weighted Score

1. Reputation 15% 4 0.6
2. New fleet of 17% 3 0.51
aircraft
3. Quality 14% 4 0.56
4. New market 13% 4 0.52
segment
WEAKNESS
1. Highly priced 15% 1 0.15
2. High attrition 12% 2 0.24
3. Yet to build 14% 2 0.28
into an
organisation
TOTAL 100% 2.86
WEIGHTED
SCORE

External factor Evaluation

OPPORTUNITIES WEIGHTS RATING Weighted Score

1. Under penetrated 15% 4 0.6
domestic markets
2. International 17% 3 0.51
market
3. Fleet size 14% 4 0.56
expansion
4. Expanding 13% 3 0.39
tourism industry
THREATS
1. Tough competition 15% 1 0.15
2. Infrastructure 12% 2 0.24
 issues
3. Increasing fuel 14% 1 0.14
price
TOTAL WEIGHTED 100% 2.59
SCORE

SPACE MATRIX

Conservativ Aggressive
2.59

2.86

Defensive Competitive