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A CASE STUDY ON AIR DECCAN

Entrepreneurship Management

AIRLINES
“Once you get hooked on the airline business, it's worse than dope.” “This is a nasty, rotten business.” “Air transport is just a glorified bus operation.”
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GLOBAL CARRIERS:LOW COST AIRLINES
US Ireland Ireland Malaysia Australia Saudi Arabia Singapore Germany UK US Southwest Airlines Ryan air Easy jet Air Asia Virgin Blue Air Arabia Value air Air Berlin Air Southwest US Airways
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WORLD SCENARIO - LOW COST AIRLINES

 The successful low cost airlines are more profitable than
established carriers

 Ryanair has a market capitalisation of about £3 billion  Globally, the largest and most successful low cost airline is
Southwest in the US  Operating Margins of different international airlines:
Ryanair Southwest United Airlines Lufthansa Air France KLM British Airways 22.7% 21.8% 11.9% 5.7% 3.5% 1.5% 0.9%

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AVIATION INDUSTRY IN INDIA : CHARACTERISTICS

Huge Potential Under penetrated market
o Total Passenger Traffic : 50 million o Passenger trips per annum :
India : 0.05 United states : 2.02

Untapped air cargo market
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8 % Over next 10 years 6 .AVIATION INDUSTRY IN INDIA : CHARACTERISTICS Medium Term Growth Forecast : India GDP : 7.3 % per annum Domestic air travel : 20 – 25 % WTTC Travel & Tourism : 8.

7 .AVIATION INDUSTRY IN INDIA : CHARACTERISTICS Constraints : o Infrastructure constraints o Shortage of airport facilities o Parking bays o Air traffic control facilities o Takeoff and landing slots. o Less than 100 airports having more than one daily service.

MACRO ENVIRONMENT ANALYSIS Main Factors : Political Economic Socio-cultural Technological Other Factors : Demographic Natural Environment 8 .

MACRO ENVIRONMENT ANALYSIS : POLITICAL Open Sky Policy Deregulations in different spheres Low entry barriers FDI limits : o 49 % for airlines o 100% for airports 9 .

8 %in 2005 10 .MACRO ENVIRONMENT ANALYSIS : ECONOMIC  Growing middle class income  Consistent GDP growth of more than 8% and projected rate in two digits  Hike in average salary 14%(highest) in the world  Tourism industry growth :8.

2 mn Status symbol to travel in plane.MACRO ENVIRONMENT ANALYSIS : SOCIO-CULTURAL Growing middle class : o 1993-1999 : 39.5 m to 56. 11 .7 m households o 2005 : 300 m o 2010 : 400 m (Estimated) Increase in leisure travel by tourists by 15 % in 2005 Foreign tourists in 2006 : 3.

CAT-3 Developing Greenfield Airports with Private Sector Example : Bangalore Airport Corporation Ltd. passenger and cargo. Example : ILS. 12 .MACRO ENVIRONMENT ANALYSIS : TECHNOLOGICAL Modernization & Privatization of Airports Modern Technology for efficient handling of aircraft.

MACRO ENVIRONMENT ANALYSIS : DEMOGRAPHIC AND NATURAL Changing pattern of consumers Highest percentage people of age group 20-25 Educational environment Shift towards family concept High energy cost 13 .

LOW COST CARRIERS IN INDIA Air Deccan Spice Jet Indigo Airlines Go Air Jetlite (Formerly known as Air Sahara) 14 .

lounges etc. Emphasis on direct sale of ticket through Internet avoiding fee and commission paid to travel agents. Employees working in multiple roles Unbundling of ancillary charges to make the Headline fare lower 15 .BUSINESS MODEL OF LOW COST CARRIERS  A single Passenger class  A single type of airplane reducing training and service cost No frills such as free food/drinks.

AVIATION INDUSTRY IN INDIA : MARKET SHARE The Domestic Aviation Market Share 1% 2% 8% 8% 6% 34% Jet airways Indian Air Deccan Air Sahara Kingfisher Spicejet 21% 20% Goair Others 16 .

MARKET SHARE IN LCC SEGMENT 17 .

AIRLINE INDUSTRY IN INDIA : SERVICE VS PRICE GRAPH S E R V I C E PRICE 18 .

AIR DECCAN COME SIMPLIFLY WITH US… Market Share : 21.2 % .

low cost and safe travel to the common man by constantly driving down the air fares as an ongoing mission 20 .VISION AND MISSION Vision : Empower every Indian to fly Mission : To demystify air travel in India by providing reliable.

K Laxman‟s „Common Man‟ Free Tickets : Images courtesy of Air Deccan 21 .MARKETING STRATEGY Common Man : The Brand Ambassador for Air Deccan. the people‟s airline is Mr. R.

radio and billboards In flight magazine for revenue generating In flight shopping scheme called “Brand for less” – AVA Merchandising Tie-up with Café Coffee Day ICICI-Travel agent purchase card Tie-ups with HPCL and Reliance Web World 22 .MARKETING STRATEGY Advertisement through print.

HOW AIR DECCAN CUTS COST? Quicker turnaround time Lower distributions costs All economy seating configuration No free catering on board Alternative revenue channels 100% web enabled bookings – e ticketing Enhanced cash flow management 23 .

SWOT ANALYSIS Strengths :  Leader in LCC segment : First to target the middle class : First mover advantage  Highest load efficiency  Flies to destinations in the hinterland  A „Lean-and-Mean‟ approach to staffing 24 .

SWOT ANALYSIS Weaknesses :  Focuses mostly on South Indian market  Image plagued by frequent breakdowns and near misses  Very limited advertising  Reached at the threshold of cost efficiency 25 .

SWOT ANALYSIS Opportunities :  Extensive network to capitalize Air Cargo business  Plenty of scope for expansion of operations  Strengthen its position in Chartered flight segment  Could start „Contractual Employment‟ 26 .

Go Air and Spice Jet  High Risk Perception 27 .SWOT ANALYSIS Threats :  High attrition rate  The threat of new entrants into Low Price Segment especially Indigo.

Power of Suppliers.PORTER FIVE FORCE ANALYSIS • • • • • Threat of new entrants Power of buyers. . Competitive rivalry. Availability of substitutes.

OPEN SKY POLICY • Liberalization of the Aviation Industry (Open Sky Policy): – Ended monopolies of state carriers – Increased number of players in the market: Pre 1991 – Two Currently – More than Ten  74% in Airports  49% in Airline Carriers • Increased FDI limit in Air Transport Services • Restructuring and development of Airports • Privatization of Airports .

•The agreement will enhance passenger & cargo services between the countries.100 .to be commissoned in 2008 Concession awarded .modernisation and upgradation Concession awarded .……….750 Total 4.750 1. Airport Hyderabad Bangalore Delhi Mumbai Kolkata Chennai Status Under Construction . decrease airfares & accompany innovations & new partnerships in the aviation industry.modernisation and upgradation To be privatised To be privatised Operator GMR-Malaysia Airports Siemens.Continued •India & the United States signed a landmark agreement. Unique Zurich GMR-Fraport GVK-Bidwest Investment (USD million) 300 300 1. permitting any number of airlines to operate any number of flights to any point in each other's territory.to be commissoned in 2008 Under Construction .. L&T.

35000 crores by 2010 • Growth to exceed that of China. France and Australia .FUTURE TRENDS IN AVIATIONS SECTOR • 25.5 million Domestic Travelers by next 12 months • Airline Industry to be worth Rs.

150 crores into Deccan Aviation Ltd. a new CEO will be appointed reporting directly to the Board of Directors. . Gopinath will continue as Executive Chairman.UB Group makes significant investment in Air Deccan • An initial investment of Rs. • Captain G.396 crores were made before the end of June.R. had been made against which shares were allotted and further investments of Rs.

• Kingfisher Airlines and Air Deccan will. ground handling. work very closely together to exploit the significant synergies that exist in the areas of operations and maintenance. henceforth. distribution penetration etc. vastly increased connectivity. feeder services. .

• The Kingfisher-Air Deccan group will be the largest domestic airline with a fleet of 71 aircraft including 41 Airbus aircraft and 30 ATR aircraft. . This combined airline powerhouse will cover all segments of air travel from low fares to premium fares and offer the maximum number of 537 daily flights covering the single largest network in India connecting 69 cities whilst taking advantage of unparalled synergy benefits arising from a common fleet of aircraft.

INNOVATIVE: His concept was completely new to the Indian aviation industry. GOPINATH • RISK TAKING: Most risk taking entrepreneurs to start a • • • • new concept of low cost airline in India. Marketing and distribution policy of company. G. .ENTREPRENEURAL TRAITS OF CAPT. PERSUASIVE: Managed to collect the required fund and people. He applied many new strategies in pricing. LEADERSHIP: He influenced his staff to be competive and punctual. VISIONARY: He had a vision of changing the mode of transport of burgeoning Indian middle class.R.

COMPETITOR ANALYSIS • • • • Competition within current business design Competition in low cost format Withdrawal from the market Competition between low cost carriers .

SOME MAJOR PLAYERS… .

SPICE JET FLYING FOR EVERYONE Market Share : 6 % .

VISION AND MISSION Vision : To ensure that flying is no longer only for CEOs and business travelers. to price sensitive consumers . but for everyone Mission : To become India‟s preferred low-cost airline. delivering the lowest air fares with the highest consumer value.

MARKETING STRATEGY Entered with Rs. 99 fares for first 99 days offering „low everyday spicey fares‟ Aims to compete with Indian Railway‟s AC segment Aims at future fleet expansion to increase market share 40 .

CHALLENGES Small fleet structure Small load efficiency compared to Air Deccan Competition with new entrants Market share of East-central India High attrition rate 41 .

GOAIR THE PEOPLE‟S AIRLINES – TO FLY SMART Market Share : 2 % 42 .

STRENGTHS AND WEAKNESSES Strengths : Promoted by Wadia group GoAir Free Fares Weaknesses : Small network : Only in Southern and Western India Small fleet structure Load efficiency 43 .

INDIGO ALWAYS AFFORDABLE. HASSLE FREE Market Share : 0-1% 44 . NO GIMMICKS.

customer service. Uses new Airbus A320-200 aircraft Efficient processes 45 .MARKETING STRATEGY Focuses on One thing : One type of airplane. route etc. fare.

CURRENT TRENDS : CONSOLIDATIONS ALL AROUND Kingfisher-Air Deccan Deal o Kingfisher buys out 26 % stake for Rs.550 crore. o They have combined Market share of 33% o They are second biggest player after Jet Sahara deal Jet airways and Air Sahara merger o Air Sahara name changed to Jetlite 46 .

FUTURE TRENDS  The projection for Indian Aviation for 2020 is estimated at: o 400 million passengers o Including 180 million domestic passengers o 1.000 aircraft in the civil aviation sector Likely to follow the footholds of International Low Price Carriers e.g. 47 . More emphasis will be on Arabian and South-East Asian circuits. Southwest Airlines etc. Air Arabia.

com 48 .civilaviationweek.FUTURE TRENDS : PASSENGER FORECAST Source : www.

com 49 .civilaviationweek.FUTURE TRENDS : PROPOSED ADDITION PROPOSED ADDITION 100 80 60 40 20 0 PROPOSED ADDITION Source : www.

THANK YOU 50 .