y PRESENTED TO:-

Pro. Sonu gupta

PRESENTED BY:-

Neha popat(69) Vidhi patel(108) Vikas shah (93) Shubhro banerjee (81) Saurabh shrivastava(96)

INTRODUCTION TO INDUSTRY
Aviation Industry in India
y Civil aviation in India started with its first commercial

flight on February 18, 1911

y The First flight of aviation industry was from Allahabad to

Naini.
y First domestic air route between Karachi and Delhi was

opened in December 1912 by the Indian State Air Services in collaboration with the Imperial Airways.

Sector structure/Market size

y Today, private airlines account for around 75 per cent share of

the domestic aviation market.

y India is the 9th largest aviation market in the world. y According to the Ministry of Civil Aviation, around 29.8 million

passengers traveled to/from India during 2008, an increase of 30 per cent on previous year.

y It is predicted that international passengers will grow up to 50

million by 2015.

Growth
y Annual growth rate of 18 per cent, and was worth US$ 5.6

billion in 2008.

y India ranks fourth after US, China and Japan in terms of

domestic passengers volume.

y Domestic airlines flew 3.67 million passengers in August 2009,

as against 2.92 million in the corresponding period last yearan increase of 26 per cent.

y 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 by 2010.

CONTD

y The domestic aviation sector is expected to grow at a rate

of 9-10 per cent.

y 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.

Aviation Policy
y For existing airports, FDI up to 74 per cent is permitted

through automatic approvals and up to 100 per cent through special permission.
y 100 per cent tax exemption for airport projects for a period

of 10 years.
y The Indian government plans to set up an Airport Economic

Regulatory Authority to provide a level playing field to all players.

Major Investments
y Investment in airport infrastructure was over US$ 5 billion

in 2008 and will go up US$ 9 billion by 2013, of which close to US$ 6.8 billion is expected to come through public private partnerships (PPP) model, according to a study by research firm Frost & Sullivan.

Road Ahead
y Passenger traffic is projected to grow at 15 per cent in the

next 5 years.
y Investment opportunities of US$ 110 billion envisaged up

to 2020 with US$ 80 billion in new aircraft and US$ 30 billion in development of airport infrastructure.
y Aerospace major Boeing forecasts that the Indian

market will require 1,000 commercial jets in the next 20 years.

MAJOR PLAYERS IN THE INDUSTRY

y JET AIRWAYS y KINGFISHER y INDIAN AIRLINES y PARAMOUNT AIR WAYS y INDIGO y GO AIR y DECCAN AIRWAYS

VISION The main vision of the company is to provide better facility to all class passengers. MISSION To be the recognized leader in our target markets. To be the preferred employer wherever we operate. To recognize the value of our human assets. To be the partner of choice for customers, and other creators of innovative concepts.

CONTD
y Kingfisher Airlines Limited is India's largest airline. y Based in Bangalore. y Operates more than 400 flights a day, network of 77

destinations, with regional and long-haul international services. y One of six airlines in the world to have a five-star rating

y Headquarters: UB City, Bangalore y Started operations on 9 May 2005, following the dry lease of

four brand new Airbus A320-200 aircraft.

y Its first flight was from Mumbai to Delhi y At the launch of the airline, Dr. Mallya said that he is

"committed to achieving our ambition of making Kingfisher Airlines India's largest private airline both in capacity and market share by 2010. y Brand ambassador : Deepika Padukone

y On 13 October 2008, Kingfisher chairman Vijay Mallya and

his Jet Airways counterpart Naresh Goyal announced a strategic alliance after a meeting in Mumbai.
y The alliance was formed to implement code-sharing between

the two airlines on both domestic & international flights, joint fuel management to reduce expenses.
y common ground handling, joint utilization of crew & sharing

of their frequent flier programmers, namely King Club & Jet Privilege.

MARKET STRUCTURE OF AVIATION INDUSTRY

y What is market structure? y It is a set of market characteristics that determine

the economic environment in which the firm operates.

y Characteristics of Aviation industry:y Number of firms operating in the market: y Initially there are only two airlines are operating in the market

Indian airlines and Air India. y Because of the liberal government policies new players are also entered the market right now about 16 airlines are operating in the Indian aviation market.

Contd
y Degree of product differentiation among the competing

producers:
y All airlines in the market are providing the service for the

transportation but their services are different from one another. So, they are providing heterogeneous product.
y Some airlines are providing low coast ticket while some are

providing high cost tickets.

Contd
y The likelihood of new firm entering into the market: y long procedure to start a airline. y Licensing from the government. y

As we see all the characteristics of the kingfisher airline are of oligopoly market. So, market of aviation industry is oligopoly market.

MEASURING ECONOMIC AND ACCOUNTING PROFIT OF KINGFISHER

y Economic profit of kingfisher airline:

Economic profit = total revenue total economic cost y = total revenue explicit cost implicit cost.
y
Total revenue =10,029crore Explicit cost = cost of sales + operating cost = 6,506 + 3,123 = 9,629 Implicit cost = money spend on purchase of planes = 4598 crores (as company has invested 4590 crores on the investment in expanding their airline capacity and we assume 15% interest on it.)

y Economic profit = 10,026 9,624 4590 y

= -4188 crores

y Accounting profit of kingfisher airline: y

Accounting profit = total revenue- explicit cost

Accounting profit = 10,026 9,624 = 402 crores

CASH FLOW OF KINGFISHER

Mar 10 Mar' 09 Mar 08Jun'07 Jun ' 06 Profit before tax -2,417.92-2,155.21-682.59-416.18 -336.80 Net cashflow-operating activity -1,665.09-645.78 -541.52 -552.58 -179.81 Net cash used in investing activity235.13 206.63 13.82 119.48 -345.72 Netcash used in fin. Activity 1,464.55 290.11 -9.23 993.68 699.08 Net inc/dec in cash and equivlnt 34.60 -149.04 -536.9 560.57 173.55 Cash and equivalnt begin of year 171.87 320.91 817.05 256.47 82.93 Cash and equivalnt end of year 206 .47 171.87 280.12 817.05 256.47

DEMAND IN AVIATION INDUSTRY

y The amount of goods and services that consumers in the

market are willing and able to purchase during a given period of time is called quantity demanded.
y The total demand in the airlines industry is 29.8 million in

India during 2008 and which will expect to grow to 50 million in 2020.

Factors affecting demand of kingfisher airline:

y Globalization is the major factors which affect the demand of kingfisher airlines

positively as there is increase in the globalization in the country after 1991-92 LPG policy so more and more people are coming to India so it has increase the demand of kingfisher airlines.
y Free movement of people from one region to another region also affecting the demand

positively.
y Increasing wealth of the people of India as we know that India is one of the fastest

growing country in the world so peoples wealth are also increased on the other hand which leads to the increasing standard of living of people. So, more and more people are now starting to travel from airlines. It has increase the demand of the airline.
y Indian government has adopted the open sky policy because of this more and more

international airlines are coming to India which will increase the competition in the aviation market so it will decrease the demand of the kingfisher air line.

Changes in Demand for Air Travel:

Class of Service Capacity ASK % Revenue US$ % Operating Ratio Revenue as % of Total Costs

First Business Economy Total

2.4 14.8 82.8 100.0

3.8 28.1 68.1 100.0

73 129 105 ?

y The business travel market has seen a marked change in

recent years but remains vital to the airline industry.

y The airline industry has long relied on the business travel

market as a major source of profit. As illustrated in Table 1, although nearly 15% of the INDIAN airlines capacity is allocated to business class it generates 28% of airlines revenue.
y First class does not usually generate profits. This can explain

many airlines move from a three to a two-class cabin in recent years.

ELASTICITY OF DEMAND IN AVIATION INDUSTRY

PRICE ELASTICY IN AVIATION INDUSTRY = change QD % change price Elastic demand for economic class Inelastic for business and sensitive passengers

FACTORS AFFECTING TO PRICE ELASTICITY OF DEMAND

y Availability of substitute y Percentage of consumers budget y Time period of adjustment

EFFECT OF PRICE ELASTICITY ON KINGFISHER AIRLINE

y As the table above shows that consumers are giving more

preference to the price rather than service so kingfisher which is targeting the premium class customer. Now think of targeting lower class customer as more revenue is generated by economic class customers
y STRATEGY OF KINGFISHER TO MEET THE DEMAND y Target lower & economic class y Merged with jet airways y Focusing on the cost cutting

THANK YOU