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%

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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AVIATION INDUSTRY IN INDIA : CHARACTERISTICS

Medium Term Growth Forecast :
India GDP : 7.3 % per annum

Domestic air travel : 20 25 %

WTTC Travel & Tourism : 8.8 % Over next 10 years

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
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MACRO ENVIRONMENT ANALYSIS : POLITICAL

Open Sky Policy Deregulations in different spheres Low entry barriers FDI limits :
o 49 % for airlines o 100% for airports

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 :8.8 %in 2005

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MACRO ENVIRONMENT ANALYSIS : SOCIO-CULTURAL

Growing middle class :

o 1993-1999 : 39.5 m to 56.7 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 : 3.2 mn Status symbol to travel in plane.
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MACRO ENVIRONMENT ANALYSIS : TECHNOLOGICAL

Modernization & Privatization of Airports

Modern Technology for efficient handling of aircraft, passenger and cargo. Example : ILS, CAT-3

Developing Greenfield Airports with Private

Sector
Example : Bangalore Airport Corporation Ltd.

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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

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LOW COST CARRIERS IN INDIA

Air Deccan Spice Jet Indigo Airlines Go Air Jetlite (Formerly known as Air Sahara)

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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, 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
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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

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MARKET SHARE IN LCC SEGMENT

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AIRLINE INDUSTRY IN INDIA : SERVICE VS PRICE GRAPH

S E R V I C E

PRICE

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AIR DECCAN
COME SIMPLIFLY WITH US

Market Share : 21.2 %

VISION AND MISSION

Vision :
Empower every Indian to fly

Mission :
To demystify air travel in India by providing reliable, low cost and safe travel to the common man by constantly driving down the air fares as an ongoing mission

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MARKETING STRATEGY
Common Man :
The Brand Ambassador for Air Deccan, the peoples airline is Mr. R.K Laxmans Common Man

Free Tickets :

Images courtesy of Air Deccan

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

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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
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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

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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

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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

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

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PORTER FIVE FORCE ANALYSIS

Threat of new entrants Power of buyers. Power of Suppliers. Availability of substitutes. Competitive rivalry.

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

..Continued
India & the United States signed a landmark agreement, permitting any number of airlines to operate any number of flights to any point in each other's territory. The agreement will enhance passenger & cargo services between the countries, decrease airfares & accompany innovations & new partnerships in the aviation industry.

Airport Hyderabad Bangalore Delhi Mumbai Kolkata Chennai

Status Under Construction - to be commissoned in 2008 Under Construction - to be commissoned in 2008 Concession awarded - modernisation and upgradation Concession awarded - modernisation and upgradation To be privatised To be privatised

Operator GMR-Malaysia Airports Siemens, L&T, Unique Zurich GMR-Fraport GVK-Bidwest

Investment (USD million) 300 300 1,750 1,750

Total

4,100

FUTURE TRENDS IN AVIATIONS SECTOR

25.5 million Domestic Travelers by next 12
months

Airline Industry to be worth Rs. 35000

crores by 2010

Growth to exceed that of China, France

and Australia

UB Group makes significant investment in Air Deccan

An initial investment of Rs.150 crores into
Deccan Aviation Ltd. had been made against which shares were allotted and further investments of Rs.396 crores were made before the end of June.

Captain G.R. Gopinath will continue as Executive

Chairman, a new CEO will be appointed reporting directly to the Board of Directors.

 Kingfisher Airlines and Air Deccan will,

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

 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.

ENTREPRENEURAL TRAITS OF CAPT. G.R. GOPINATH

RISK TAKING: Most risk taking entrepreneurs to start a

new concept of low cost airline in India. INNOVATIVE: His concept was completely new to the Indian aviation industry. He applied many new strategies in pricing, Marketing and distribution policy of company. VISIONARY: He had a vision of changing the mode of transport of burgeoning Indian middle class. PERSUASIVE: Managed to collect the required fund and people. LEADERSHIP: He influenced his staff to be competive and punctual.

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, but for everyone

Mission :
To become Indias preferred low-cost airline, delivering the lowest air fares with the highest consumer value, to price sensitive consumers

MARKETING STRATEGY

Entered with Rs. 99 fares for first 99 days

offering low everyday spicey fares Aims to compete with Indian Railways AC segment Aims at future fleet expansion to increase market share

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CHALLENGES

Small fleet structure Small load efficiency compared to Air

Deccan Competition with new entrants Market share of East-central India High attrition rate

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GOAIR
THE PEOPLES AIRLINES TO FLY SMART

Market Share : 2 %

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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

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INDIGO
ALWAYS AFFORDABLE, NO GIMMICKS, HASSLE FREE

Market Share : 0-1%

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MARKETING STRATEGY
Focuses on One thing :
One type of airplane, fare, customer service, route etc.

Uses new Airbus A320-200 aircraft Efficient processes

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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

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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. Air Arabia, Southwest Airlines etc. More emphasis will be on Arabian and South-East Asian circuits.

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FUTURE TRENDS : PASSENGER FORECAST

Source : www.civilaviationweek.com

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FUTURE TRENDS : PROPOSED ADDITION

PROPOSED ADDITION
100 80 60 40 20 0 PROPOSED ADDITION

Source : www.civilaviationweek.com

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THANK YOU

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