Group 2 - Analysis of Profitability of Airlines Industry in India

8/6/2019 Group 2 - Analysis of Profitability of Airlines Industry in India

1/20

An Analysis of Profitability of the Airlines Industry in India

Prepared ByGroup 2 | Section F

Arnab Chowdhury PGP 26329Arunkumar R PGP 26330Avinash Madhavan PGP 26331Raygonda Birajdar PGP 26332Biswajit Mohanty PGP 26333Chinmay Desai PGP 26334David Sangma PGP 26335Desegan P PGP 26336

Managerial Economics


2/20

Introduction

History of Aviation in India Current Scenario

Factors increasing profitability

Factors decreasing profitability Comparative analysis with foreign carriers


3/20

History of Aviation in India

1910 -Bhupinder Singh, first Indian to have an airplane

1912 - First air flight between Karachi and Delhi

1931 - JRD Tata awarded Indias first pilot licence

1932 - Tata Aviation Services set up by JRD Tata

1945 Deccan Airways set up by Nizam and Tata


4/20

History of Aviation in India

1948 - Government of India took over Tata Airlines

1953 - Enactment of Air Corporations Act

50s 80s - Monopoly of Air India starts

1986 - complaints by Tourism sector, insufficient capacity

1989 - permission for private sector to operate Air Taxis

1992 - East West and Jet Airways commence operations


5/20

Current Scenario

Open Skies Policy Recent Growth

Government Regulations

Entry of Low Cost Carriers

Increasing Competition

Recent Air India Strike

Response to Economic Crisis

Market Share Analysis

Oligopolistic market


6/20


7/20

Factors Increasing Profitability

Tourism Burgeoning Indian Middle Class

Consumerism

Rail Travel Partially Inferior Good for Generation

Y

Government & State Tourism Campaigns

Medical Tourism

New Forms of Tourism (Eco-, Heritage-,

Adventure-)

Airlines Tourist Packages

Economies of Scale and Transaction Cost Theory


8/20

Population and Geography

2nd Largest Population

7 th Largest Country by Size

All 3 modes of overland travel - Air, Rail & Road-necessary

Consumers perspective: Longer the distance Greater the Opportunity Costs

Airlines perspective: Longer the distances Lower the Average Total costs

Greater the number of travelers Lower the Average

Total Costs



9/20

Improvement in Airport Infrastructure

Public Private Partnerships (PPP) Mumbai (GVK), Delhi (GMR), Hyderabad,

Bangalore T3 Terminal at Delhi & Rajiv Gandhi Airport at

Hyderabad

Airport Authority of India Metro - Kolkata & Chennai 35 non-metro cities and 23 other airports

Modernization and expansion of BrownfieldAirports

More flights per location Economies of Density

Development of Greenfield Airports More airports Economies of Scale



10/20


11/20

Effect of service quality

Taiwan survey-Service attracts customers

Luxury class- Business class Vs Economic Class

In-flight Service & Air port Services

Presentability - Age, weight, Height of Air hostesses



12/20

Effects of e-commerce

Booking- a click away

24X7, any place

Reduced customer contact costs

Increased transparency and updated information

Increased consumer demand



13/20

Factors Decreasing Profitability

High ATF cost

Shortage of skilled labor

Shortage in supply of aircraft

Competitive pricing

Other factors


14/20


15/20

Shortage of skilled labor

Market expansion increase in demand for pilots No proportionate growth in supply New market equilibrium Higher salary

Principal Agent Problem



16/20

Shortage of aircraft supply

Monopolistic market by Boeing and Airbus

Technology driven industry High entry cost

Increase in demand for aircrafts causes

High lease cost High aircraft price Operation cut



17/20

Competitive pricing

Increase in market higher number of leisure travelers

Introduction of Low cost Carriers A shift from monopolistic competition

Increase in number of players pressure on revenue and profit

Distributed market share - Oligopoly



18/20


19/20


20/20

Thank you

HAPPY FLYING

Group 2 - Analysis of Profitability of Airlines Industry in India

Documents

Transcript of Group 2 - Analysis of Profitability of Airlines Industry in India