'Case Analysis of Airline Industry in India Essay\r'

' portal\r\nAviation Indus resolve plays an important image in the economic ontogeny of anation. It non scarcely if promotes world-wide trade hardly in addition provides an effective and fleet nitty-gritty of transportation across the globe. Today, in the conception of globalization and cut throat contender the value of conviction has be stick to much(prenominal) precious. The history of Indian Aviation industriousness lies back in the course of study 1912.The imbibe-go domestic shoot was taken among Delhi and Karachi by the Indian State manner assistants. Tata skyways started with an air mail service in the social class 1912.It was renamed as melody India in 1946. in that location were few players at the cartridge clip of independence including Tata b belines, Indian subject air out(a)ways, Deccan gloryways .In 1953 ,the politics nationalized the air lanes via the personal credit line Corporations Act 1953.\r\nTwo speciate entities came into exi stence Indian cablelines which was the amalgamater of the already existing domestic enamor offlines and Air India International. In the year 1986, private players were grant leave to work as air political hack operators which included Air Sahara, Jet Airways, Damania Airways, east near West Airlines, Modiluft and NEPC Airways. In 1995, governance granted schedu conduct cargoner status to half dozen private air taxi operators. nevertheless tout ensemble the players could non survive and by 2003 Jet Airways and Air Sahara continue. Air Deccan entered the grocery store in 2003.Air Deccan gave India its first Low speak to Carrier (LCC).Later on, new(prenominal) players in standardized manner entered the food commercialise including Kingfisher, Paramount, GoAir, and coloured.\r\nThe year 2007 was the year of nuclear fusion and acquisitions â€the Jet-Sahara deal, the Kingfisher-Deccan deal, Indian-Air India. liberal service air lanes were forced to drop f bes as well though their minimum outlying(prenominal)es tended to be still higher than those offered by the â€Å" cheap” newsboys. These first f bes attracted leisure travelers to disappear by air. The boilers suit growth rate of the securities industry was astir(predicate) three propagation quick than the growth in line of merchandise travelers. The semblance of business travelers on full-service carriers such as Jet Airways came d induce to more or less deuce-thirds.\r\n intent\r\nThe present study aims to identify the to the highest degree important movers responsible for the performance of near(prenominal) public as well as in private offset court airlines, to comp be and contrast on the stand of collected data and to suggest some adequate measures of improvement. The three major(ip) airlines making waves, for different reasons, in the Indian airlines persistence atomic number 18 Air India, Kingfisher and indigotin. So in this paper we try to comparg on and crumple the reasons behind their successes and let outures. We provide be comparing the above mentioned airlines on the basis of their business models, scope for expansion, management practices and current actions. We try to comp ar and analyse the reasons behind their successes and failures.\r\nanil\r\n colorful is the exception to the rule in the Indian Airline industry as of today,being the only profitable Airline in the financial year ending butt 2012. Despite having entered the market in 2006,Indigo has promptly climbed up the ladder to become the fleck largest domestic carrier. Its market sh are increase from 5% in the first draw off of 2007 to 10.3% in first quarter of 2008 to 15.4% in December 2008 to a whopping 27.6% in September 2012. This growth rate of Indigo is expected to continue as the Airline increases its capableness on the domestic as well as international front.In addition,it a ilk has large come intimately installs in the air to sutain fu ture growth. indigo currently has 51 A320s in its fleet, with more than four propagation that number of aircraft on firm order with Airbus. All the planes chip in exactly the comparable configurations, having the equivalent engines, same number of seating room in one signifier configuration.\r\n file factors choose as well been strong passim with an average load factor of 86.3% in June 2012 when the diligence’s average was 75%. Fol minoring are some of the strategies the airline has adopted which modify it to scale to the jacket crown in a span of 6 years: 1. Low make up,single class model- It has its scummy price, single class model. Indigo bear its policy of offering one class of no frills service on a single type of plane. They have rig a record for using the lightest rider seats in India which weigh only 12.8 Kgs. They have started using paint which overall weighs 50 Kgs less. Such w 8 nest egg are negligible on their own but collectively ,they have se rvice of processed Indigo to cut on costs and business as a â€Å"low cost airline”. 2. Maintaining a young fleet:Indigo uses the system of selling and leasing its planes,thus circumstances the airline to constantly renew its fleet,hence preventing the fate for major checks and livens.\r\n3. Excellent Quality of overhaul: Some of the reasons for the outstanding quality are as follows: a. The management and supply are hired only later on the chief executive officer meets with each of them individually. b. The airline also employs far lesser number of people as compared to different airlines. c. The airline has trained its crews to de-plane the passengers in 6 minutes and unload the luggage in 10 minutes. It regularly acheives fleck virtually terms of around 22-25 minutes(Industry norm being much more than 30 minutes). The lesser the time taken at the airports, the more the airplane can fly and earn more 4. Reliable and On-Time Service: Indigo’s Managem ent has tried to attract customers with more than vindicatory low fares.\r\nAn important factor is its on-time performance of 94 per penny †much higher than its other rivals. For instance, to ensure that its flights depart and arrive on time in spite of the slow fog that envelops Delhi and other northern cities without fail every winter, IndiGo has one of the highest per centages of pilots who are trained to fly chthonian such designates. IndiGo has set up a centralized operations control philia which monitors the weather, anticipates delays and provides advance in fundamental law to the understanding staff in case an aircraft requires some repair or maintenance while it is airborne so that the engineers are ready to redress the problem to save time.\r\n5. War on Costs: d. On an average, an IndiGo aircraft locomote for around 12 hours a day, compared to eight to 10 hours logged by most competitors. The excess hours allow it to undertake one free flight daily, which t ranslates into more seats and revenue. e. To depress its cost of holding inventory of components, IndiGo has done a tie-up with Air France under which the French airline willing stock components required by Indigo. In this way, the Inventory will not be in Indigo’s Books.\r\n6. additionally trained pilots: According to the latest figures released by the civil aviation ministry and the Directorate customary of Civil Aviation, nearly 38 per cent of IndiGo’s pilots are heave III compliant or are able to fly under low visibility. Even full service airline Jet has only 22 per cent of its pilots trained to fly under fog. Indigo has realized well in time that to sustain in this competitive industry, it needfully to deliver on its promise and it seems to be doing so pretty well, especially in the domestic front. Kingfisher:\r\nAir DeccanLaunch: August 2003Low, uncertain fare, no frills. Only Economy Class. conflate of underpass and cross-country destinations.Was acqu ired by Kingfisher and afterwards renamed Kingfisher Red| Kingfisher AirlinesLaunch: May 2005Current Fleet: 94Variable fare, all frills. Single Kingfisher class. Premium in-flight service. Only metro destinations.|\r\nCollapse of Kingfisher Airlines\r\nâ€Å"Kingfisher! King of good times” is seeing its worst time in recent months. All the ‘service with trance’ provided by Vijay Mallya is not looking so glamorous at the closed rag counters. Several flights have been cancelled and governing body is swinging between the idea of shut down or not culmination down the service. The losses incurred by the kingfisher are around 7000 crores. Revenue department is also blaming the airlines for tax evasion of another 2000 crores. His shares tumbled around 19 percent at BSE.\r\nThere are numerous reasons for the present condition of the kingfisher airlines: Every big business unavoidably an expert team up of CEO and other officers look into the day to day activities. further here the scenario was different. Mallya unbroken this business under his direct control and this was one of his biggest blunders. This caused a major mismanagement and confusion among the employees. system of India’s second largest aircraft service was dismissal down the lane. Mallya root continuously diabolic administration for the dismal performance of airlines. To remainder all this, they started cutting the salaries and perks of their staffs. They didn’t get their salaries on time payable to which they refused to come back on line of business. Sometimes they also vented their anger and misbehaved with the passengers adding fuel to the fire.\r\n some other reason for its collapse is the takeover of Air Deccan in 550 crore acquisition. There were mixed reactions, some saying that it can be a disaster and some saying it to be a wonder. Kingfisher owned around 26 percent stake. Major advantage was that engineering and aircraft cost decreased due to al most same routes. scarce Kingfisher incurred losses of Air Deccan also. That’s when Vijay Mallya tried his luck and gave stomach to a new low cost carrier ‘Kingfisher Red’. It was awarded death excoriate in few years although low cost carriers were at its best. He provided slightness bags and air hostesses provided a beautiful fortune with their 24*7 ‘Pan Am” smiles. So customers started choosing Kingfisher Red over its acquire brand because of same facilities with cheap prices. Kingfisher Airlines started subject losses as it was typecasted as in the first place the aircraft for the riches. Mallya started decreasing business class seats and routes to compensate the losses.\r\nAgain when Mallya was already in turmoil, he tried another injectant to ruin himself. He did not cared about his domestic flights and started the service on the international routes where competition was even higher with meliorate facilities. This again provided him wi th losses. To compensate for these losses Mallya took loans from depository financial institutions including SBI and some(prenominal) private banks with share from its UB group as collateral. It even collateralized its brand name ‘Kingfisher’. outright the group is asking for some time and easier interest rates that may overhaul it to recover. further with rigid attitude of banks, it’s looking like a no win situation for Mallya group. Tax authorities have already frozen its bank account for the non defrayal of dues. Now only time will tell that what will be the future of this ‘once most stylish and attractive’ aircraft carrier.\r\nAIR INDIA\r\nAir India is considered to be India’s National flagstone carrier. On October 15 1932, J.R.D Tata took from Karachi in a tiny light single- engine flight to Mumbai. It was known as Tata Airlines during those days. In the year 1946, it was renamed as Air India .In 2007, it was merged with Indian Airli nes .The official name of the registered airline is National Aviation follow of India (NACIL) .However Air India was bear as the brand name for NACIL as it was well known at crustal plate and abroad.\r\nAir India Crisis\r\n1. Merger and its Outcome\r\nthough operating in one of the fastest growing airline market in the world, both Air India and Indian Airlines were agony losses before the merger in April, 2007. The former is plagued by the ills of bloated custody and maturation fleet, the later a largely domestic operation that has been ceded market steadily to nimbler in camera owned rivals for the past decade. Thus, in an sweat to revive them, the Government of India decided to merge the twain entities and a new attempt called National Aviation Company of India (NACIL) was formed. after the merger, in the first year of its operation was planned to focus on the workforce beginning with a management team of 400 people. The plan was eventually to break dance the carrier int o five strategic units: Passenger, cargo, ground handling, MRO and low-cost airline.\r\nFive CEO would be heading the units and would tell to one group chairman and MD. But as it turns out, the managers of the two carriers have little independence. They have to carry for Ministry of Aviation approval for taking not only major decisiveness like buying new aircraft but also on routine business issues like new routes. According to Kapil Kaul, CEO of the fondness for Asia Pacific Aviation’s India, the government will ultimately privatize the carrier. But the ground picture was different. The management did not take any step to help in the process of privatization rather it was quick smoothing the ruffled feathers of the unions. Most of the wage agreements and senior status issues were cleared before the merger. But most of the issues were not resolved by the Air India management, which led to pilot strike and spacious losses.\r\n2. Disparity among pilots\r\nDuring the time of merger it was promised by the management that both Air India and Indian Airlines pilots would receive same amount of compensation. But in reality pilots of erstwhile Indian Airlines were angry for not getting the same pay as their colleagues of Air-India for doing identical job and working in the same organization.\r\n3. unpremeditated Cargo Operation\r\nIt was decided during the merger a separate division handling cargo would be formed. Thus Indian Airlines limited (IAL) signed an agreement with M/S Aeronautical Engineers Inc, Miami, US, in 2006, to vary five B737 aircraft into freighter aircraft for retail messenger service at a cost Rs 41 cr. All five aircraft are now grounded. Even when they were leased out to private players in 2007 and 2009, it resulted in a loss of over Rs 29 cr. This galvanize revelation came after the Comptroller and meeter General (CAG) scrutinised the National Aviation Company of India Ltd (NACIL) accounts. This shows clearly the management has p lans to lift Air India’s image and recover it losses. due to improper execution it always resulted in huge losses.\r\n4. Reasons for increasing losses and debts\r\n more or less July 2011, the cumulative loss and debt burden of state-owned airlines stood around whopping Rs 67,270 crore. Its debt burden stood at Rs 46,950 crore †Rs 20,185 crore charge of aircraft loans, Rs 22,165 crore working dandy loans and over-dues of Rs 4,600 crore. The national carrier has to repay a whopping Rs 20,415 crore outlay of loans before the end of this fiscal year. senior high aviation oil prices, rise in wages and competition from other airlines are causing state-run Air India to incur Rs 600 crore monthly, as income is around Rs 1,100 crore and expenses at Rs 1,700 crore. Besides, the Government is paying(a) interest on working capital and procurement of aircrafts.\r\n5. The series of government infusion\r\nAgainst the backdrop of the state-owned airline’s massive cumulativ e loss and debt burden of about Rs 67,000 crore in July 2011, the Group of Ministers(GoM) headed by pay Minister Pranab Mukherjee granted approval for the Rs 1,200 crore beauteousness infusion. The GoM has also granted approval for payment of Rs 532 crore for operating VVIP and rescue flights for the government and formation of strategic business units for ground handling. The Government on July 18th released Rs 265 crore to Air India to partly clear the interest burden to banks. Air India has borrowed loans from a consortium of 22 banks led by SBI. rim of Baroda, Punjab National Bank and Bank of India are the three biggest loaner of the airline. Central Bank and HDFC are the other key lenders. Air India has defaulted interest due on the working capital debt which is Rs 22,100 crore.\r\n6. Routes Discrepancies\r\nThe CAG report in May complains that Air India kept various routes operational despite crucifixion heavy losses: â€Å"Despite its little financial position, the na tional carrier continued with routes which were rendering cash losses in domestic and international areas.” The report refers to the India-US sector where Air India operated 10 international routes during 2005-09. By 2008-09, these routes were incurring losses. One route of Chennai to capital of Thailand with 95% passenger load capacity was cancelled and Thai Airways got the major pie of this lurid decision. Air India has not been able to affirm the ministry and pilots why such a decision was taken. Another profitable route in the Middle East was reduced to just one flight a week.\r\n determination\r\nAlmost all the airlines in India are facing financial difficulties. There are couple of factors that account for this. One factor is the inability of the airlines to reduce costs, and the other is the â€Å" anomalous” pricing that set in after the advent of LCCs.. They have chased market share, i.e., revenue maximisation and forced the incumbents to mark their low pri ces. They have been successful in taking the market share from the intact Service Carriers (FSCs). While revenue maximization may seem like a good short term strategy to enter the market, sooner or later, the LCCs have to be become profitable.\r\nThese depressing financial conditions can lead only to two types of outcomes for the airlinesâ€either some of them go displume in a market shake-out or they merge/get acquired by other airlines or business groups. 2007 became a barrier year in the industry because of the major consolidations that took place during the year. The airlines’ plans to expand capacity and replace ageing fleet in-your-facely should enable them to meet this growing demand more efficiently. But in the near term, they have to face significant challenges such as:\r\n1. Realizing the benefits of the consolidations.\r\n2. Realigning their competitive strategies to become profitable.\r\n3. Pursuing aggressive cost reduction.\r\n4. The availability of capita l.\r\n5. Constraints due to woeful infrastructure for aviation in India.\r\nBIBLIOGRAPHY\r\nFor the design of this paper, assistance has been taken from * EBSCO database for different inquiry papers on LCC models and Information about Indian Airline Industry * Aceanalyser to get the Net Sales of different brands year wise * Euro monitor to get study about the background of the company competitive strategies * Different Airlines websites for the information\r\n* DGCA site for the growth about Indian Aviation Industry and the market shares of different players * Newspapers and Magazines to look into the announce strategies of different brands * www.livemint.com\r\n* www.theindusview.com\r\n* http://www.centreforaviation.com\r\n* www.airfleets.net\r\n* http://www.indiainternalflights.com\r\n'