The birth of civil air power in India began happened on Feb 18, 1911 when Henri Piquet flew a Humber biplane. In 1932, JRD Tata, a airy launches India & A ; acirc ; ˆ™s foremost scheduled air hose, Tata Airline and besides piloted its first innaugral battle. In early 1948, a joint sector company, Air India International Ltd. was established by the Government of India and Air India ( earlier Tata Airline ) with a capital of Rs 2 crore and a fleet of three Lockheed configuration aircraft. The joint venture was headed by J.R.D. Tata.
After the Second World War every bit many as 11 private domestic air hoses operated in India. The supply-demand was non in balance as the Indian air power market was still in a newcomer province. Many of these air hoses were doing heavy losingss as a consequence of which the authorities decided to nationalize the air hoses by organizing one domestic bearer and one international flag bearer. In 1953 Air-India International ( name truncated to Air-India in 1962 ) became a populace sector corporation along with Indian Airlines Corporation ( providing to domestic and regional paths ) . Eight former private air hoses were merged to organize Indian Airlines Corp. , viz. Deccan Airways, Bharat Airways, Air India, Himalayan Aviation, Kalinga Airlines, Indian National Airways, Air Services of India and Air-Services India. The fleet was reasonably large consisting of 73 DC-3 Dakotas, 12 Vikings, 3 DC-4s and some other smaller aircraft. ( * )
( Beginning: ( * ) www.knowindia.net )
There has been a pronounced alteration in the civil air power scenery in India. Whereas prior to 1992 when the two public sector air hoses, viz. Air-India and Indian Airlines enjoyed a monopoly in the domestic sector, today a twelve air hoses are viing for a market portion. The Indian civil air power industry is spread outing by springs and bounds. A batch of low-priced air hoses is runing or will get down operations during the current twelvemonth. India ‘s chief airdromes are get downing to confront capacity restraints and are in the procedure of being modernized. Indian air hoses have recently placed a record figure of aircraft orders. As an illustration, ATR received steadfast orders for 90 new aircraft in 2005 of which India ‘s ( Kingfisher Airlines and Air Deccan ) portion was 55 per cent.
1.3 INDIAN AIRPORTS
A authorities controlled organic structure AAI ( Airports Authority of India ) manages 127 airdromes in the state consisting 15 international airdromes, 7 restricted international airdromes, 80 domestic airdromes and 25 civil enclaves at defense mechanism landing fields. Indian airdromes handled 51.9 million domestic, 22.4 million international riders and 1.4 million dozenss of lading in the twelvemonth ended March 2006. projected traffic for 2012 is 130 million riders.
( Beginning: PPT by Exec Dir ( AAI ) at Airport forum in Dubai )
The authorities of India has recognised the demand to better the air power substructure in the state. Airports account for 40 per cent of India ‘s trade by value and 95 per cent of international travel to and from India takes topographic point through this manner. Harmonizing to estimations, the present substructure can back up a 20 per cent growing in rider traffic and 10 per cent growing in lading traffic. The ministry of civil air power estimations that there is a demand for an investing of Rs 260 – Rs 360 billion. The restructuring of the first stage of Delhi airdrome is expected to be completed by 2009 at a cost of Rs 1.9 billion. Expansion and upgradation of the current installation at Mumbai is already under manner. Work has started on a new international airdrome at Bangalore. Apart from beef uping of the Hyderabad track at a cost of Rs 700 million, a new international airdrome is besides being planned at a cost of Rs 13 billion. The authorities has besides decided to modernize 25 airdromes in non-metro metropoliss. Improvement of another 55 airdromes is besides on the anvil.
( Beginning: icfdc.com )
Forty nine per cent foreign direct investing ( FDI ) is permitted in funding airdrome substructure every bit good as in airdrome land handling. The authorities has late increased FDI from 40 per cent to 49 per cent in domestic air bearers. However foreign air hoses are non permitted to pick up a interest straight or indirectly. Non-resident Indians and corporate organic structures are allowed to keep up to 100 per cent equity in domestic air hoses.
( Beginning: icfdc.com )
1.6 AVIATION REGULATOR
The Civil Aviation Ministry plans to postpone a Bill to set up an independent Civil Aviation Economic Regulatory Authority ( CAERA ) . The new regulator would be responsible for formalizing all charges to be levied on operators and guaranting a flat playing field for all participants. Its undertakings would include repair of duty, finalizing parking and user charges, publishing wide guidelines to service suppliers, settling differences among stakeholders in new airdromes and interceding between assorted users and service suppliers, including air hoses. Initially the range of the regulator would be limited to modulating the economic facets of Delhi, Mumbai, Bangalore and Hyderabad airports where there is private engagement and AAI is a stakeholder. Henceforth, the AAI excessively would be answerable to the new regulator. To get down with, CAERA is expected to be a single-member regulator assisted by proficient staff. The Bill seeks to spread out its function in the yearss in front. That may go necessary anyhow, given the liberalization initiatives underway in the sector.
Macro environment analysis refers to analyze of those factors which affect an organisation but are beyond the control of an organisation. These factors are unmanageable.
Macro environment consist of following six wide countries:
3.1 POLITICAL Environment
Indian political scenario has, is and will undergo assorted alterations. Following are the assorted policy alterations which might hold an impact on air power industry in approaching old ages:
Open Sky Policy
India had this understanding with 40 states and recently it signed the policy with UK, USA and European Union. Harmonizing to this policy, The signers are allowed to wing over the skies of India. Under this agreement, air hoses from EU member states will be allowed to run flights to India from any of the 25 EU states irrespective of the bearer ‘s state of beginning.
Consequence: Tourist reachings in India are expected to turn exponentially, particularly due to the unfastened sky policy between India and the SAARC states and the addition in bilateral entitlements with European states, and the US. The addition in figure of international tourers will leach down to increase in domestic riders.
Prior to 1991, air power was nationalized and to a great extent regulated In 1953, the Air Corporation Act, 1953, changed the landscape of the air hose industry in India.It was in 1994 that the Air Corporation Act was repealed and therefore this allowed private operators to run in the domestic air hose and air power industry.
Requirements to go a scheduled operator air bearer in India have being reformed, the decreased limitations on foreign direct investing is 49 % for flights and 100 % for airdromes
Consequence: Entry into the air travel industry is non merely cheaper, but besides low-cost to new operators
Modernization of Airports
The Indian Cabinet has approved a proposal mandating the state-run airdrome operator to modernize 35 airdromes in second-tier metropoliss within the following two old ages. The modernization procedure will be the authorities between Rs. 70 to 80 billion.
Delhi ( Rs.8,700 chromium ) to GMR and Mumbai Airport Modernisation ( Rs.6,400 chromium ) to GVK are two biggest investing undertakings. Entire investing on manus in airdrome substructure crossedRs.35,000 crore in the one-fourth ended January 2006.This investing was spread over 89 projects.Upgradation of Kolkata and Chennai airdromes is on anvil.. Simultaneously, 20 non-metro airdromes will be developed. Two biggest active undertakings are the Bangalore International Airports Authority Ltd ( Rs.1.5 crore ) and GMR Hyderabad International Airport Ltd ( Rs.1.5 crore ) .
Consequence: Improved substructure would take to lift in no. of travelers and besides so would promote more operators.
Abolition of Taxes
Foreign Travel Tax ( FTT ) Rs500 and 15 % inland air travel revenue enhancement ( IATT ) charged on Basic airfare has been abolished by the authorities wef from January 9,2004 to cut down menus.
Decrease on Exise Duty
From January 9,2004, the excise responsibility on ATF was reduced from 16 to 8 per cent The mean domestic monetary value of ATF is 99 per cent higher than monetary values in foreign states and affects domestic air hoses drastically as ATF histories for 30 to 40 per cent of operating costs
Consequence: It would take to low menus therefore giving a encouragement to air travel
The authorities has reduced the mean age of aircraft being imported into India for commercial air hose operations by five old ages.
Consequence: It would take to increase in imports of aircraft therefore can deter more operators coming in and better services
Landing Charges abolished
Landing charges for aircraft with less than 80 seats were abolished and landing charges for larger aircraft have been reduced by 15 % with consequence from February 11,2004.
3.2 ECONOMIC ENVIRONMENT
India, ranked ten percent in the universe in 2004, is expected to be keeping 8th rank in the universe by 2014 and 4th rank in following old ages with a GDP of $ 1.15-1.4 trillion and $ 2.1-3 trillion severally, and a jutting growing rate of 6-8 % .
Consequence: This rise in income degrees along with debut of no-frills flights will take to
rise in no of travelers,
more investings in air power,
more competition and
rise in industrialisation taking to more demand of air conveyance
3.3 SOCIO-CULTURAL ENVIRONMENT
Change in Lifestyle
Average income of in-between category family is expected to lift to 194000 Rs by 2010 from 169000 Rs in 2001-02.No of families projected to be 43.6million in 2010. Consequence: So there is traveling to be alteration in life style and disbursement of people
Due to this alteration people will prefer Low cost air hoses alternatively of Railways foremost airconditioned therefore rise in air traffic
Rise in Leisure travel
Tourism industry grew 8.8 per cent over 2003- highest growing rate in the universe. 3.2 million foreign tourers visited India last year.There has been an addition in leisure travel by tourers of 15 % in 2004.
Consequence: It will take to lift in no of tourer riders therefore more encouragement for new operators.
3.4 TECHNOLOGICAL Environment
Introduction Of Airbus A380
The dual deck Airbus A380 is the most ambitious civil aircraft plan yet was launched in December 2000. An all new design Superjumbo, the Airbus A380 is the universe ‘s first twin-deck, twin-aisle airliner.It could be outfitted for particular rider utilizations such as slumberer cabins, concern centres or even child attention service. In a one-class constellation, the A380 could suit every bit many as 840 passengersAdvantages of the A380 include lower fuel burn per place and lower operating costs per place. Airbus states the A380 will utilize 20 % less fuel and will wing quieter, cheaper and more environmentally friendly than the 747
ILS-Instrument Landing System
Instrument set downing system ( ILS ) installations are a extremely accurate agencies of voyaging to the track under low visibleness conditions Various track environment illuming systems serve as built-in parts of the ILS system to help the pilot in landingWhen utilizing the ILS, the pilot determines aircraft place by instruments. ILS is classified harmonizing to capablenesss of the land equipment. Class I ILS provides counsel information down to a determination tallness ( DH ) of non less than 200 foot. Improved equipment ( airborne and land ) provide for Category II ILS attacks. ( DH of non less than 100feet )
3.5 DEMOGRAPHIC ENVIRONMENT
Changing Structure of Consumers
Middle category population of India was 300 million in 2005 and is projected to be 400 million for 2010.
Consequence: For air power, this growing is a singular accomplishment and a mark that the industry can merely spread out as more people gain the ability to buy air hose travel, supported by debut of low-priced bearers.
High % age of immature population
India has highest per centum of people in age group of 20-50, with high gaining potential.Also younger section has more mobility demands due to instruction or work, So it shows high chance of rise in Domestic air travel.
Higher figure of literates
Due to lift in instruction consciousness, there has been rise in no. of alumnuss and those prosecuting higher studies.which translates into higher gaining possible and higher disbursement on travel in future.
Due to lesser figure of joint households and increasing atomic households, there would be rise in air travel by kids to run into their grandparents.
3.6 NATURAL ENVIRONMENT
The mean domestic monetary value of ATF is 99 per cent higher than monetary values in foreign states and affects domestic air hoses drastically as ATF histories for 30 to 40 per cent of operating costs After a autumn in ATF in November and December by 2 % , and 11 % ,
for the 2nd back-to-back month, ATF monetary value in February soared by 3.5 % to the monetary value prevailing in Jan 2006. ( from Rs.35 a liter to Rs.36.2 a liter. )
Earlier, under the fuel pricing mechanism the subsidy given to Kerosene/diesel was loaded onto ATF. While this has been phased out, States are now imposing heavy Gross saless Tax on ATF which made it dearly-won.
Consequence: Due to high factor costs, short draw operations are rendered unviable.It would take to low net incomes therefore detering new operators.
4. Porter FIVE FORCE Analysis
Menace OF NEW ENTRANTS
The entry is easy but assorted ordinances make the launch of a new air hose hard. The factors which make the executing hard are
The capital requirement-An air hose is required to hold capitalisation of minimal 30 crores without which it is non allowed to takeoff.
Expected retaliation-The market is concentrated in the custodies of a few participants therefore any new participant would to confront stiff competition and revenge from the bing participants such as Jet Airways and Indian.
Legislation or authorities action-Along with the equity limitations for drifting an air hose they besides compel the air hoses to run on wasteful paths such as
Inadequate airdrome substructure frequently makes it hard for the bing air hoses to work swimmingly and therefore deters new 1s from come ining the market. Deficit of pilots and high fuel costs besides pose a menace as the bing demands itself are non being fulfilled.
Exit barriers-The high capital demand makes it hard for the companies to go out the market but being a turning industry the bing participants are willing to get and do issue for an operator less hard.
Power OF Buyers
The power of purchasers is low because they are big in figure and extremely disconnected. The increasing GDP and the debut of low cost air hoses has non merely increased the bing figure of purchasers but opened the doors for a immense chance of growing.
However the power is non every bit low as it could be because of minimum exchanging cost and options available. A client does non hold to incur an cost to travel from one air hose to another he might incur a cost if he has signed a contract otherwise no costs are involved which increases the power of the purchasers. Along with this the assorted options available between air hoses and even other manners of conveyance helps the purchasers.
Further there is no distinction among the participants in the same section illustration the differences between Air Deccan and Spice Jet is minimum.
Power OF Suppliers
The power of the providers are limited and therefore their power is high.
Concentration of suppliers-The providers of pilots and ATF are extremely concentrated which increases their power.
Switch overing costs-If we look at the aircrafts there are merely two providers Boeing and Air Bus therefore the options available with the air hoses to exchange between is really limited and therefore the shift costs are high but sometime the competition between the two makers reduces the costs to some extent.
Brand value-Less figure of providers consequences in a high trade name value which works in their favour and increases their bargaining power.
Forward integration-The air hoses besides face a menace of forward integrating. Though such an case has non taken topographic point in the past it may take topographic point in the hereafter as the providers have or know about most or the proficient facets of the industry.
There is an acute deficit of pilots which makes the industry dependant on them.
High fuel costs-Fuel histories for about 35 % of the entire cost and the cost of fuel is increasing quickly presenting a menace to the companies net incomes.
AVAILABILITY OF SUBSTITUTE
Merchandise for merchandise substitution-Consumers have assorted options in footings of air hoses to take from. They may besides exchange to other manners of conveyance such as route and rail.
Substitution for need- With the coming of engineering options such as picture conferencing and conference calls reduces the demand to go therefore the option of permutation of demand in present but it is fringy as it is non possible to wholly make away with travelling.
4.5 COMPETITIVE RIVALRY
The competition in the industry in high but the strength of the competition has been reduced as it is an spread outing market.
The figure of air hoses is increasing which increases the degree of competition among air hoses. Earlier when we thought of air hoses the lone name would be Indian Airlines but today the list is long and turning with new bearers like Goair seeking to do a grade in the industry. More over six new low cost air hoses are expected to come up.
High fixed costs and input restraints besides add to the competitory force per unit areas in the industry.
Like every industry amalgamations and acquisitions take topographic point here excessively which increases competitory competition between air hoses which in bend force more air hoses to choose for amalgamations and acquisitions therefore organizing a syrupy circle of competition.
Low degree of distinction between the services offered by the different air hoses increases the hazard of exchanging and thereby adds to the competition.
The industry is expected to turn at 22 % which really gives range to the bing participants and new 1s to run and reduces the extent of competition.
6. FUTURE OF INDIAN AVIATION
Harmonizing to A World Travel and Tourism Council study, India will be the fastest turning travel market in the universe over the following decennary ( Financial Express, 2001 ) . The survey expects the Indian travel market will treble to $ 51 billion by 2011 from the $ 16.3 billion presently. Air Travel in India grew by 20 % last twelvemonth and Boeing has raised its 20 twelvemonth market prognosis for Aircraft purchases from $ 25 Billion to $ 35 Billion.
More than 3 million Tourists visited India last twelvemonth and the touristry industry grew by 8.8 % YOY, highest in the universe. The International Airlines are competing with each other and be aftering to increase there frequences three crease. Apart from this assorted strategies are being used to pull more and more clients and besides pull the clients of AC categories of Trains. Some of the methods that are being used are as follows:
Low Price Tags
Last Day Fares
6.1 GROWTH INDICATORS
World Passenger traffic grew to 52.12 million in the last financial, from 43.47 million in 2004-05, to register a growing of 19.9 per centum.
Robust growing of 24 % in last financial in Indian Aviation Industry.
Sector expected to spread out by at least 16 % yearly for the following 5 old ages, siting on the overall economic growing of 8 % .
Prognosis: Growth In Air Traffic
Billowing Air Traffic in Indian Metros
6.2 EXPANSION Plans
The Burgeoning industry besides demands swift acquisition. Boeing has raised its 20-year market prognosis for India for aircraft purchases from US $ 25 billion to US $ 35 billion. Both Airbus and Boeing are waiting for the following large order, expected from Air India. The air hose is measuring medium and big capacity aircraft and is expected to order 50
wide-body jets, deserving about $ 5 billion at list monetary values. Airbus has been the donee of a
big ball of the new orders announced in 2004. The European pool will sell about 100 planes to Indian Airlines, Air Deccan and Kingfisher Air, and now says it wants to give something back to India by puting up a state-of-the-art preparation cum-
Maintenance Centre. The company is expecting authorities clearance for Indian Airlines ‘ $ 4 billion order for 43 Airbus aircraft, a determination that was made two old ages ago.
The authorities has raised the fuel monetary values by 7.5 % in January 2006.Prices increased from Rs. 32.56 a litre to Rs. 35 litre. Aircraft Fuel forms a major ball of the gross and therefore any alterations in the fuel monetary values effects the grosss in a major manner.
Rise in ATF Prices ( Rs/Kg )
A possible manner of covering with these lifting fuel monetary values is FUEL HEDGING which as used extensively and really successfully by Southwest Airlines. They booked Future options of fuel and therefore even when the fuel monetary values soared, they were able to secure fuel at really fine-looking monetary values.
Some recommendations to cover with the inefficiencies as suggested by WTC study are as follows:
Allow all Indian Carriers, Public or Private-to operate International paths.
Lower the cost of air power turbine fuel.
Lower the Landing and airdrome charges.
Strengthen and advance short draw touristry for concern development, trade and touristry.
Encourage of Proactive engagement of abroad investors and proficient directors in the denationalization of airdromes.
Promote commercial activities within airdromes such as hotel, eating houses etc.
Ensure a healthy growing in traffic to the private airdromes.
The above figures are picked, harmonizing to the aim of usage, so the PBDIT figure and the PBIT figures may differ from what the company has published in its one-year study.
We have considered the points which affects the nucleus concern, points related to other concern of the company other that operations i.e. investings etc, are non included in projecting the companies public presentation for the twelvemonth 2006-07.
Some figures are non really accurate, because it has been derived from the per centum figure of the whole gross revenues and so.
This is merely an estimation and gives an thought of companies advancement, so please be careful in utilizing it as mention for some sensitive determinations.
In this tabular array it is apparent that the gross revenues of the jet airways has increased by 25 % in the twelvemonth 2001-02 but has all of a sudden stopped for the twelvemonth 2002-03 in which twelvemonth it appeared to be increased by merely 1 % . but this is non the true index of the companies public presentation in that twelvemonth because, this is the twelvemonth in which most of the companies has shown losingss and had withdrawn their service after sulky cape in the air hose concern because of the onslaught on the WTC, in sept. 11, 2001.
2. In the twelvemonth 2002-03, though there was lethargy in the market the company
had increased its service to some more flights and more locations.
Coming down to the public presentation of the company once more we can see that the
company has recovered really shortly and has posed a net income of approx.12.5 % and has
shown a similar tendency of 20 % addition in the net gross.
Therefore if we consider the public presentation of the company in the twelvemonth of the crisis to measure the future public presentation of the company it will stand for a faulty projection for the company. So by excepting and projecting harmonizing to the tendency that the company has shown it comes out to be a growing of 20 % and therefore will bring forth gross of around 5238 crore.
In the twelvemonth 2005-06 the company has introduced some aircrafts ( Boeing 337-700, A340-300E ) , and due to surging monetary values of ATF the company has incurred higher sum of disbursals. It is hard to find whether company is traveling to increase more aircrafts and besides the fluctuating oil monetary values. So, we could non foretell the COGS of the company.
Another major ground, why the projection of the company is progressively hard is because, it has late been allowed to run overseas and for this company has been come ining into many new contracts and seeking to do acquisition like Sahara Airlines ( which failed, though ) , in fact the company has besides start operating in certain states, in which it had non been before. Therefore, it makes really hard to come up with the projection of promotional disbursals and other points of the P/L A/c and B/sheet.
Confronting the same job of an unnatural twelvemonth of crisis which impacts the air hose concern to a great extent, we have averaged the growing of the four old ages merely except 2000-01 and 2002-03 and got the simple norm of 20.75 % and have been projecting it as the possible growing of the company for 2006-07.But the growing of the company may even be higher because our projection goes conservative because we have have non acknowledged the slow growing of the twelvemonth 2003-04 and have considered it as a normal twelvemonth.
So, we conclude that the market portion of the jet air passages will turn at 20.75 % with certain premises made above and because of the extremely fluctuating ATF ( Aviation Turbine Fuel ) , and turning competion and no definite tendency in the different costs we decided non do any projection for the net income, which may be extremely defective.