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Submitted To Dr.

Renu Verma

Submitted By Gaurav Singh Saini Rickey Rustagi Sudesh Sharma

Index  Overview Of Airlines Industry In India  Growth Of Indian Aviation Industry  Players in Indian Market  Future of Airlines Industry In India  Challengers For Low Cost Airlines  Challenges For Low Cost Carriers (LCC)  Demand Curve  Demand And Supply In The Airline Industry  How Aviation Industry Is Effecting India's Economy?  Pattren Of Indian Air.Fares  Airline Costs In India  Expenses & Revenue Of Aviation Industries In India  Competitors Analysis .

being valued round US$ 5.67 million passengers in August 2009.6 billion in 2008. The domestic airliners flew 3. There would be more than 100 million passengers by 2010. it has only been growing in terms of players and the number of aircrafts.92 million in the corresponding period of 2007. At present. Then again by 2020. Japan and India. The Centre for Asia Pacific Aviation (CAPA) has estimated that the domestic traffic will go up by 25% to 30% till 2010 along with a surge in the international traffic by 15%. From then. The open sky policy of the government has helped a lot of overseas players entering the aviation market in India. The number of domestic flights . Further statistics revealed that the air traffic in August 2009 was a double digit figure. US have always been the leader with followers in the league like China. Growth of Indian Aviation industry The Indian Civil Aviation market grew at a CAGR of 18%. The investment plans to the tune of US$ 9 billion has been made by the Aviation Ministry for modernizing the existing airports by 2010. as against 2. private airlines account for around 75% portion of the domestic aviation market.Overview of Airlines industry in India The aviation industry in India is one of those sectors that saw a constant pace of growth among the other industries in the world over the past many years. Indian airports will in all probability handle over 100 million passengers every year. up by 26%. In terms of domestic passengers' volume.

PLAYERS IN INDIAN MARKET Name of the players Kingfisher Airlines and Kingfisher Red (previously Air Deccan) Jet Airways and Jet Lite (previously Air Sahara) Air India and Indian (previously Indian Airlines) Indigo Spice Jet Go Air Paramount Airways MDLR Airlines Market Share 28% 25% 16% 14% 12% 3% 2% 0.004% .went up by 69% from 2005 to 2008. with the domestic aviation sector growing at 9-10%.

 US$ 110 billion investment is envisaged till 2020 with US$ 80 billion solely for new aircraft and US$ 30 billion for developing the airport infrastructure.Future of Airlines industry in India The challenges of the Indian aviation industry are cited below:  Passenger traffic is estimated to grow at a CAGR of over 15% in the coming few years.  The Ministry of Civil Aviation would handle around 280 million passengers by 2020. The aviation industry loses approximatelyRs 2000 crores annually due to underpricing of tickets and increasing fuel costs. (vii) LCC’s already reached the threshold of cost efficiency. (ii) absence of Institutional Funding. CHALLENGES FOR LOW COST AIRLINES Challenges for LCC’s in Indian Aviation Market The challenges facing LCC are: (i) crippling oil shock. (iii) acute shortage of trained Pilots. (viii) limited advertising. (vi) image plagued by frequent breakdowns and freak accidents. severely limiting growth prospects. (iv)unplanned location of Airports. (v) competition amongst the LCC’s. .

.Challenges for Low Cost Carriers (LCC) Domestic air traffic has crashed to 5 year low. The major happenings of these phenomena has been brought out in the following points: The slowdown in economy has made a negative shift in the consumer demand as mentioned in the graph below. This shift is due to decline in demand due to prevailing negative sentiments among consumers and companies. One of the major factors for this crash is the decline in consumer demand for air travel. The decline in consumer demand has primarily due to slowdown in global economy and rise in airfares.

/ 30% to as good as 100% from June 08 to Sep. The rise oin air fares has made a a movement along the demand curve leading to decline in demand as d mentioned in the graph below: Movement along the demand curve dueato hike in Air fares c t o r Price / Air fare / A i r t r a f f i c along demand curve F Qty.08. This has directly hit the Qty./ Load Factor / Air traffic Shows the demand movement ./ Load Factor / Air traffic demand in economy class where economy classLhas a hefty portion in the total domestic aviation business.Negative Shift in Demand Curve due to Global Economy Slowdown Price / Airfare Demand curve before slowdown Demand curve after slowdown Q t y The rise in the base fare and fuel surcharges together was ranging from .

However. The passenger load factors dropped to 77. .2007. This scenario clearly follows the Demand curve the relationship between Price and Quantity demanded. due to the spiral rise in the international crude oil prices and consequent rise in the ATF prices the domestic airlines were forced to increase their fares to either maintain their profit margins or even to increase to sustain their business.The ATF accounts for nearly 40% of the input cost of airlines from Oct. down from 78. The situation further worsens in the coming months.2008 against over 65% in Sep. the decline in demand was not only due to hike in fares but also due to slowdown in the international economy & financial crisis. After this period. the major decline in the demand started from June 2008 onwards when the consumers directly felt the heat of the hike in air fares. The rise in Input cost (ATF primarily) a fall in supply or cut in operation by service providers/airlines as mentioned in the graph below : Negative Shift in Supply curve to rise in Input Cost Price / Air fare Supply before rise in input costs Qty. The average load factor for these airlines has fallen to 55% in Sep.8 percent recorded for June 2007. 07 to June 08./ Load Factor / Air traffic The rise in these fares directly affected the demand in the sector. the hike in the air fares was one of the major reasons resulting a decline in the consumers demand.6 percent in June 2008. No doubt.

Kingfisher and Air Deccan.2008. To absorb the rise in the input costs the airlines are taking serious measures to improve efficiency and cut the operation expenses. Few of the measure are as below:  Airlines. The airlines have taken serious steps to tide war the crisis and regenerate the demand.  During the last two month. Acquiring of Sahara by Jet Airways.  There has been a drive to cut the operations to decrease the losses. Also. These moves are clearly to cut the expenditure and a way to absorb the rise in input costs instead of directly passing any further increased input cost directly to the consumers. the main private companies of aviation sector have tried to lay off their employees to reduce the operation costs. The govt. These measures are primarily focused to reduce overhead costs to sustain any declining demand scenario. This way the airlines will be able to tide over the current crisis. Joint Operations by Kingfisher & Jet Airways.e. highly competitive and Seasonal routes. This has lead to serious consolidation and mergers in aviation industry i.  The airlines have also either ceased or defer their plans to buy new airplanes to control the current operational costs. merger of Air India & Indian Airlines. The airlines have ceased their flights in unviable.-Sep. struggling to combat the rising costs are trying for joint operations to synergize their resources. there are plans to use small aircrafts for operation to reduce operation costs and meet the changed demand.Due to this sudden decline in demands in Jul. owned company like Air India has come up with novel concepts like voluntary leave for few years for their employees. .

 Translation: Don't buy airline stock. there should be few empty airline seats. Analysts view the moves as an attempt to woo back consumers who are putting off trips in response to the unfolding economic crisis. chief executive of FareCompare.  In theory.  Translation: Supply fell . which allows travelers to compare prices among Web sites..Demand and supply in the airline industry  Airlines have announced price cuts targeting leisure travelers through the usually busy winter holiday season and beyond..  And where you have empty seats.com. But analysts say winter sales suggest that airlines are struggling to fill their planes. Now fuel prices are retreating. but so is the demand for seats. demand falls creating a surplus and price falls. you have discounts.  Translation: income falls (or is expected to fall or is more uncertain).000 seats per day by zapping routes and grounding planes. says Rick Seaney.  The downturn is emerging as the biggest threat to the industry since it was buffeted by summer fuel prices. ...  The reduction was supposed to give airlines room to raise fares. Airlines have eliminated about 200.  Translation: But demand has fallen even farther .

Low cost airlines 3. of domestic airlines 2. Increased in no. In the last 10years the economy has opened up. The main factors which effect the Indian Economy are:1.Incresed no. of business travellers to different countries 2.How aviation industry is effecting india's economy? 10 years back there were just 2 airlines. Increased no. India's improving economy the other factors are:1. Both state owned . India has experienced growth rate of 8% per year. of incoming tourist and business enterprises .

PATTERN OF INDIAN FARES AIRLINE COSTS IN INDIA .

It was awarded the ‘Best New Airline Of the Year’ award. Overall growth in year 2006-07 is 16%. Personal in-flight entertainment in every seat. Average entertainment services. Jet Airways already has domestic as well as international flights Jet Airways has its market share 31% including Air Sahara. Kingfisher acquired 46% share in Air Deccan.EXPENSES & REVENUE OF AVIATION INDUSTRIES IN INDIA Kingfisher Vs Jet Airways • • • • • • • • Kingfisher is one of the latest Airlines in INDIA. Jet Airways won Double Honour Travel Trade Gazette Travel award. They are plan to start training academy. Overall growth in year 2006-07 is 37%. Jet airways acquired Air Sahara in 2006. Domestic airlines poised to go international flights. Already have training academy • • • • • • • • Jet Airways is the experienced airline in INDIA. . In a short span of 2 years its market share has become 28% including Air Deccan.

COMPETITORS ANALYSIS .

COMPETITORS ANALYSIS .