Air Charters: The Path Ahead

Amrita Krishnan
Himanshu Arora
Jatin Bhatia
Kaveri Ghosh
Pallavi
Radhika Kapoor
Scope Of The Presentation
• Air Charters- Introduction to the problem
• Indian Aviation Industry- An overview
• Major Players and Market Share
• Opportunities and Threat Analysis
• Porter’s Industry Analysis
• LCC and the LCLC Model
• Case Analysis
An Introduction
Air charters:
• Part of the Go Travel Group
• Spawns 50 destinations in India and abroad
• Logistics back-up from 40 offices
• Workforce: 1000
• Provides Aircraft in the range of:
▫ Helicopters
▫ Business jets
▫ Commercial sized airliners for corporate
Services

• Heli-sightseeing
• Heli-skiing
• Leisure Charter
• Charter Flights for pilgrimage in India
• Hire an Aircraft in India
• Charter a Jet/Helicopter
• Corporate Jets
• Executive Jets
• Aircraft on Rent for Film Shooting
• Air ambulance
• Cargo Charter

Fleet of 10 Helicopters & 5 Commercial jet aircrafts

• Change in Airport Authority of India Act to
incorporate privatization of two metro
onwards
airports
• High powered Committee under Shri
Late 90s
Naresh Chandra to make recommendations
• Air Corporation Act repealed Early 1990s
• Monopoly of the public sector ended
• All airlines merged into either Indian
Airlines or Air India Early 1950s
• Government controlled all the aspects of
aviation
Trends in Indian Aviation Industry
FACTS About The Aviation Sector
• India is currently the 9th largest aviation market in the world
• Civil aviation market to register more than 16% growth during
2010-2013.
• Airline industry has grown by 400% in about six-and-a-half years.
• In 10 years Indian market will be the third largest aviation market
after the US and China
• Acc. to data released by DGCA passengers carried by domestic
airlines registered a growth of 18.9 per cent
• Of the total domestic passengers carried by local carriers from
FY03 to FY06, 4.16 million (or 44%) were carried by LCCs.
• In terms of present market share, Jet Airways plus Jetlite was the
market leader with 26.1 per cent share, followed by Kingfisher
Airlines with 19 per cent, Indigo with 18.7 per cent, SpiceJet with
13.8per cent and GoAir with 6.6 per cent.
Policy measures
• AAI to spend over US$ 1.02 billion in 2010, towards modernisation of non-metro
airports. AAI is planning the city-side development of 24 airports. Additionally, 11
new greenfield airports have been identified for sharing passenger load.

• AAI also plans to spend around US$ 3.07 billion in the next five years for
developing, upgrading and modernising metro and non-metro airports.

For the civil aviation sector (Airports):

• FDI up to 100 per cent is allowed under the automatic route for greenfield
projects. For existing projects, FDI up to 100% is allowed; while investment
up to 74% under the automatic route and beyond 74% under the
government route

• Development of airports at Delhi and Mumbai has been taken up under PPP mode.
Mumbai airport work is likely to be completed by 2012 .
Major Players and Market Share
Air Deccan Spice Jet Kingfisher Airlines

* Pioneer of low cost * Aspires to be most * Wholly owned

airlines in India preferred low-cost subsidiary of United
airline Breweries ltd.
* Adopted a “Lean-
and-mean” approach * New generation fleet * India’s 1st private
to staffing of aircraft backed by airline with the
cutting edge youngest fleet
* Commercial success
Technology & * FUN TV and
helped raise $50
maintenance support Kingfisher Radio
million from investors
by KLM
* Fleet Size: Modern * Auctions for lifestyle
* Strategic Tie-up with products and sales of
fleet of 11 Airbus and
Navistaire to manage packaged food and
18 ATRs (2005-06)
revenues and beverages
reservations
* Fleet Size: 16 Airbus
* Fleet Size: 5 Boeing A-320 fleet
737-800
Opportunity and Threat Analysis
Opportunity Threats

Aviation policy
Change: Air Fares to
Lack of skilled pilots
fall as domestic ATF
prices soften

Increase in Passenger Privatization of

air traffic Airports: FDI issue

Open Skies Policy &

Airlines Following
IPO expansion
Entry of foreign
investors

Infrastructure: Airport Increasing

expansion Competition
Porter’s Industry Analysis
 Threat from
Substitutes
* Still expensive and
hence the least
preferred mode of
transport for shorter Intensity of Rivalry
distances * Following Air Deccan,
Threat from new players like Royal
entrants Airways, kingfishers,
* Double digit growth Go airlines, Indus Air &
in passenger traffic IA express plans to
service the low cost
* Change in civil Porter’s segment
aviation policy & Taxes
Industry *Airline Companies are
Analysis expanding fleet size to
acquire market share

Bargaining power of Bargaining power of

Supplier Buyer
* Few international * Less presently, but
suppliers ; No increasing with
domestic suppliers increase in
competition
Issue at hand

Should Air Charter launch an LCC or should it be

the First mover in LCLC segment in India?

• Background:
The recent success of LCC in India & the
upcoming trend of convergence of charter
airlines with LCC’s in European countries to
form low cost leisure
LCC (Low Cost Carrier) Model

• Airline operating in a point-to-point network

• Employees paid below industry average
• No Frills Service
• Flights schedules structured to attract high
volumes of low yield connecting passengers
• Provides facility of last minute seat assignment
changes, upgrades, and itinerary modifications
• Robust Distribution system to maximize revenue
How to emulate a LCC model ?
• Single type of aircraft for all destinations
• Flying to smaller airports
• Point-to-point service
• Reducing the cost of labor intensive processes
• Eliminate in-flight “Frills”
• Simple Internet/ Telephone based reservation
system
Full Service vs. Price Graph
Growth In Aviation Sector: LCC
Growth In Aviation Sector: LCC
 Jet LCC Comments

Staff Cost 10 3 Lower Staff training,

salaries
Fuel Charges 27 0 There could be
diseconomies if
overnight parking is
away from main hub
Aircraft Maintenance 12 5 No special “ Low Cost”
airports in India
Landing, navigation 6 0 Savings on in-flight
Charges meals
Passenger amenities 3.5 3 With online booking
catching up
Commissions 10 10

Others 7.5 4

Lease Rentals 5 0 Jet Airways follows a

conservative
depreciation policy
Depreciation 12 5
30 %
Financial Costs 7 0 cheaper
100 30 Key cost: % of total
costs
Limitations of LCC

• Big Players like IA and Jet score over their

competitors in areas like parking slots,
popularity, etc
• Cost base of LCC in India is not expected to be
much lower unlike in the west
• Revenue model: Mostly direct sales- B2C model
• Fixed Pricing
LCLC ( Low Cost Leisure Carrier) Model

LCC

LCLC
Charter
Airlines
LCLC
• Reduce cost for distribution and airport
procedures (Check in.. ) to the level of LCC
• Explore new revenue streams using innovative
B2C/ B2B service models
• Deliver services in defined Quality at lowest cost
• Optimize risk sharing through advanced dynamic
allotments and adequate revenue management
• Standardize B2B interfaces for booking of seats
and services
Analysis
LCLC: The way ahead
• Reasons:
▫ India is one of the preferred destination for tourist
▫ Robust growth of medical tourism (30%) and a one
of the best preferred destination in terms of
economy and facilities.
▫ India preferred location for investment for the
foreign investors

Thus it can be said there are a huge scope for LCLC

in India.
 Technological capabilities
• We have a new Customer Management Solution
(CMS) comprising inventory, reservations and
departure control using Unix & Linux technology
with relational databases as operating platforms.
• Yield Management system for b2b and B2C
Recommendation
• Air Charter should be the First mover in the
LCLC.
▫ It is in the charter airline which will provide better
capabilities in the LCLC
▫ In LCC there are many players but LCLC segment
is untouched.
▫ The core competency of Air Charter enables
improve quality elements or product features from
LCC provided costs and complexity remains
untouched.
Strategic Development
• Logical Incremental View – an evolutionary
step-by-step approach to strategy; it is an
adaptive approach but one which is more
controlled by the company.
• Porters Generic Strategies:
▫ Low-Cost
▫ Differentiation
▫ Focus
Thank You