Civil AviationCivil Aviation

Sector Analysis

CONTENTS

Q The History of Civil aviationQ History of Commercial Aviation Q The Indan Aviation Sector Q Pioneers of the Commercial Aviation IndustryQ The Stakeholders Q Value OfferingsQDistribution ChannelsQSupply ChainQRegulatory AuthoritiesQCurrent & Upcoming trendsQAdvertising Agencies & Financial Cos.QConventional v/s Unconventional Business ModelsQ References

Q THE HISTORY OF AVIATION

The History of Civil aviation

December 17, 1903 , Orville and Wilbur Wright introduced to the world the principle of controlled, powered flight.

Their Wright Flyer cost less than a thousand pounds to build, and although its first flight only covered a distance of 120 feet, a billion-dollar industry was born.

Airships

The first aircraft to make routine controlled flights were non-rigid airships

In 1929 the Graf Zeppelin made a complete circumnavigation of the globe,

The "Golden Age" of the airships ended on May 6, 1937 after the Hindenburg disaster.

Airships have seen only niche application since that time

The Douglas DC-3, was the first airliner that was profitable carrying passengers exclusively, starting the modern era of passenger airline service.

Passenger travel goes Supersonic!

The Aérospatiale- British Aircraft Corporation Concorde – a turbojet-powered supersonic passenger airliner.

The development project was an international treaty between Britain and France

First flown in 1969, entered service in 1976 and continued commercial flights for 27 years.

Big, Bigger, Biggest!

The Airbus A380 is the first aircraft with a capacity larger than that of the 747.

The Superjumbo has two passenger decks extending the full length of the fuselage, as well as a full-length lower third deck for cargo.

Seating Capacity: 525 – 853

1970 - first flight of the Boeing 747, a.k.a. Jumbo Jet

The world’s 1st first double-deck jet airliner. Top deck is smaller than the main level.

Seating Capacity: 416 - 524

Q History of Commercial Aviation

History of the Airline Industry

The world's first airline DELAG, (Deutsche Luftschiffahrts-Aktiengesellschaft)

Founded November 16, 1909, Germany

Operated airships manufactured by The Zeppelin Corporation.

The Common-man’s Airline

The budget flight revolution began in America with Southwest Airlines in Dallas, Texas, 1973

Southwest Airlines, JetBlue, AirTran Airways, Skybus Airlines and other low-cost carriers begin to pose a serious challenge to the "legacy airlines“.

India's first low cost airline, Air Deccan launched in 2003.

Q The Indian aviation sector

The Birth of Indian Aviation

The First commercial flight in India–

--The year: February 18, 1911 --The Pilot: Monseigneur Piguet --The Route: Allahabad to Naini, distance of approx. 10 km.

The first flight in the history of Indian aviation—

--The year: 1932--The Pilot: JRD Tata--The Aircraft:De Havilland Puss Moth, Tata Aviation Services.--The route: Karachi to Delhi

Commercial Aviation in India - Timeline

Landmarks in Indian Aviation History

India's first low cost airline, Air Deccan launched

First commercial flight in India

(18/2/1911)

Beginning of Indian Aviation Industry

1st flight by an Indian -J RD Tata (15/10/1932)

Air India International formed

1st International flight - AI Intl. (Bom-Lon) All Domestic services brought under Indian

Airlines

The Air Corporations Act, 1953 - Airlines nationalised

J et Age begins -1st Boeing 707-420 bought by AI

India’s first Boeing 747-200B bought by AI

Repeal of Air Corporations Act, 1953 -new domestic carriers

emerge

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

The Jet age in India!

1960, Indian aviation enters the Jet Age : -- 1st Boeing 707-420, “Gauri Shankar” bought by Air India International.

Source: http://civilaviation.nic.in/home.html

Commercial Aviation in India – Statistics

Q 43.29 million Domestic Passenger Base.(4th highest in the world, after US, China, Japan.)

Q 15 No. of scheduled passenger airline operators.

Q 400 total no. of aircraft.

Q 82 Total no. of Airports in India.

Q 706 No. of International flights per week.

Q 69 Foreign airlines, 49 countries.

Q 103 countries India has Bilateral air services agreement with.

Source: http://civilaviation.nic.in/home.html

26%

20%19%

16%

13%6%

Jet Airways & Jet Lite

Kingfisher

NACIL

IndiGo

Spice Jet

GoAir

Current market share of Indian carriers in the domestic aviation market

Q Pioneers of the commercial aviation industry

Pioneers of the Indian Aviation Industry

Jehangir Ratanji Dadabhoy Tata

Known as the father of Indian civil aviation.

One of the first Indians to be granted a commercial pilot licence.

Founded India's first commercial airline, 'Tata Airlines', in 1932, which in 1946 became Air India.

In 1948, JRD Tata launched Air India International as India's first international airline.

In 1953, appointed as Chairman of Air-India and a director on the Board of Indian Airlines - a position he retained for 25 years.

Pioneers of the Indian Aviation Industry

Capt. Gorur Ramaswamy Gopinath

Considered the father of low cost air travel in India

His dream was to enable "every Indian to fly at least once in his lifetime."

Observed that nobody in India was targeting the middle class as consumers for aviation

2003 - Launched India's first low cost airline, Air Deccan.

September 24, 2003, first Air Deccan flight took off from Hyderabad to Vijayawada

Pioneers of the Global Aviation Industry

Herb Kelleher

Co-founder, Chairman Emeritus and former CEO of Southwest Airlines

Kelleher and one of his law clients, Rollin King, created the concept on a cocktail napkin in a San Antonio, Texas restaurant.

From its birth in 1971 Southwest has succeeded by daring to be different: offering low fares to its passengers by eliminating unnecessary services

During his tenure as CEO of Southwest, Kelleher's colorful personality created a corporate culture which made Southwest employees well-known for taking themselves lightly—but their jobs seriously

Q The Stakeholders

Ref. to Mindmap

“Look at what the competition is doing, and do the opposite”

Strategy canvas of Virgin America vis-à-vis Southwest Airlines and Regular fare airlines in the US.

QValue Offerings

SEGMENTATION MATRIX

Value Parameters

Q Safety

Q Pricing

Q Comfort

Q In-flight Service & hospitality

Q On- Ground Facilities (Lounges, business centres etc. for privilege customers)

Q Frequency

Q On-time Performance

Q Convenient operations (e.g. check-in, booking/cancellation, website, customer support, luggage, transfers, airport formalities, etc.)

Safet

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On-tim

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In-fl

ight

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On-Gro

und

Facilit

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Conve

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t ope

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Strategy Canvas for Regular-fare Airlines

Kingfisher

Jet

Air India

Indian Airlines

Factors of Competition

Off

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ng

s

Safet

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Comfo

rt

On-tim

e pe

rform

ance

In-fl

ight

ser

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Conve

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Strategy Canvas of Low-cost Airlines

Kingfisher

Jet Lite

IndiGo

Spicejet

GoAir

Regular cost car-riers

Factors of Competition

Off

erin

gs

Competitors’ additional offerings

Frequent flyer rewards

Student schemes

Exclusive First class service

State-of-the-art technology (Eg. Airbus A380)

Travel Insurance / Insurance for lost baggage

Business / First class lounges at airport

Childrens’ center

Affordable Flying

Comfort

On-time performance

In-flight service

Convenient operations

International operations

“The Kingfisher Airlines family will consistently deliver a safe, value-based and enjoyable travel experience to all our guests.” - www.flykingfisher.com/

Welcome aboard an airline where warm Indian hospitality flawlessly blends with international expertise. –Jet Airways www.jetairways.com/

IndiGo team uses all of its resources to design processes and rules that are safe and simple, that make sense, and that cut waste and hassles, which in turn ensures a uniquely smooth, seamless, precise, gimmick-free customer experience at fares that are always affordable. www.goindigo.in/

GoAir is positioned as ‘The Smart People's Airline’. Its captivating theme, ‘Fly Smart’ is aimed at offering passengers a consistent, quality-assured and time-efficient service.  www.goair.in/

With a dynamic fare structure, SpiceJet offers fares that are affordable and significantly lower than most airlines. With contemporary interiors, modern graphics and vibrant colours, SpiceJet is very much like today’s traveler - practical yet stylish. www.spicejet.com/

Airline Value Statements

Friendly Competition???

Q Distribution Channels

THEN

NOW

The Evolution

Multi-channel Distribution DIRECT INDIRECT

Airport Ticket counters

Mobile Ticketing

Airlines’ Website

Ticketing Offices

Partner Sites

Online Travel Portals

Global DistributionSystem

Telecom Operators

Travel Agents

Corporate Tie-Ups

Call Center Sales

Codesharing Partners

Travel Package Deals

Airline Customer

Travel Agents

Direct Sales

Codesharing

Partner Websites

Distribution Chain

Direct Sales

Travel AgentsAirline

GDS

Website

User

Call Center

Partner Websites

Airline User

Mobile Ticketing

Website

Airport Counter

Airline Sales Office

Direct Sales

Airlines Users

Websites

Co. Travel Desk

Travel Agents

GDS

Corporate Sales

SUPPLY CHAIN

Aircraft manufacturer

Airline Co.

Customization

IT Systems

Interiors

Q

Commisioned

into Service

Certification (DGCA)

Hangar

Supply Chain (Part I)

Q

Q

Q

Maintenance COs

Pilot Training institutes /

AHAs

Fuel Cos.

Financial Organizations

F&B providers

Others

IT system/Platfor

m providers

Hangar

Q

QOther

Suppliers

QStaffing Cos.

Distribution Channels

Airline Co.

Supply Chain (Part I I)

Yield Management

Q

Yield Management Systems

Strategic control of inventory to sell it to the right customer at the right time for the right price.

Used when the resources available for sale are of a fixed amount and are perishable

When the aircraft departs, the unsold seats cannot generate any revenue and thus can be said to have perished.

Airlines use a software to monitor how seats are being reserved and react accordingly, e.g. by offering discounts when it seems probable that seats will remain unsold.

Ministry of Civil

Aviation

AAI

DGCABCAS

AERA

ICAO

Civil Aviation - Regulatory Authorities

Q REGULATORY FRAMEWORKS

• Responsible for regulation of air transport services to/from/within India.Regulatory body

• Primarily dealing with safety issues.Safety• Enforcement of civil air regulations, air safety,

and airworthiness standards. Standards & Enforcement

•Also co-ordinates all regulatory functions with the International Civil Aviation Organisation (ICAO).

International coordination

• Licensing of pilots, aircraft maintenance engineers, flight engineers, ATCs, and conducting examinations and checks

Licensing & Certification

The Directorate General of Civil Aviation (DGCA)

Initially set up as a Cell in the Directorate General of Civil Aviation (DGCA) in January 1978

Reorganized into an independent department on 1st April , 1987 under the Ministry of Civil Aviation

Main responsibility - to lay down standards and measures pertinent to security of civil flights at International and domestic airports in accordance with ICAO Guidelines.

Coordinate, monitor, inspect and train personnel in Civil Aviation Security matters.

4 Regional Offices located at International airports i.e.

Delhi, Mumbai, Kolkata and Chennai.

Bureau of Civil Aviation Security (BCAS)

Airports Authority of India (AAI)

• Of international and domestic airports and civil enclaves. (Includes passenger info

systems)

Design, Development, Operation, Maintenance

• Control and Management of the extending beyond the territorial limits of the country.

Indian airspace

• Expansion and strengthening Runways, Taxiway etc.

Operation area

• Provision of Communication and Navigation aids, viz. ILS, DVOR, DME, Radar etc.

Communication and Navigation

Founded, 1st April 1995

Airports Economic Regulatory Authority (AERA)

The Airports Economic Regulatory Authority (AERA) is a statutory body constituted under the Airports Economic Regulatory Authority of India Act, 2008.

Functions: To determine the tariff for the aeronautical services taking into consideration

the capital expenditure incurred and timely investment in improvement of airport facilities.

The service provided, its quality and other relevant factors.

The cost for improving efficiency.

Economic and viable operation of major airports.

To monitor the set Performance Standards relating to

quality, continuity and reliability of service.

International Civil Aviation Organization (ICAO)

Specialized agency of the United Nations, HQ in Montreal, Canada

Sets standards and recommended practices concerning air navigation, its infrastructure, facilitation of border-crossing procedures for international civil aviation.

Defines the protocols for air accident investigation

• Procedures for Air Navigation Services PANS

• Standards and Recommended PracticesSARPs

• Regional Supplementary Procedures SUPPs

International Air Transport Association (IATA)

The International Air Transport Association (IATA) HQ - Montreal,

Canada.

Represents 230 airlines - 93% of scheduled international air traffic. 150+ countries, 101 offices around the globe.

Assigns 3-letter IATA Airport Codes and 2-letter IATA airline designators, which are commonly used worldwide.

Worldwide accreditation of travel agents. Over 80% of airlines' sales come from IATA accredited agents.

Publishes standards for use in the airline industry.

The Bar Coded Boarding Pass (BCBP) - 2-Dimensional (2D) bar code printed on paper boarding passes or sent to mobiles phones for electronic boarding passes.

Acts Governing the Civil Aviation Sector in India

• An Act to make better provision for the control of the manufacture, possession, use, operation, sale, import and export of aircraft.THE AIRCRAFT ACT, 1934

• An Act for the better administration and management of airports and civil enclaves where air transport services are operated and of all aeronautical

communication stations.

THE AIRPORTS AUTHORITY OF INDIA ACT, 1994

• An Act for the implementation of certain rules relating to international carriage by air signed at Warsaw in 1929, to non-international carriage by airTHE CARRIAGE BY AIR ACT, 1972

• An act pertaining to offences committed on board an Aircraft• Any act or omission taking place on board an Indian registered aircraft while in

flight outside India which, would constitute an offence under any law in force in India.

THE TOKYO CONVENTION ACT, 1975

• Anyone who seizes or exercises control of an aircraft in flight, unlawfully, by force or any other form of intimidation, commits the offence of hijacking.

• The offender punished with life imprisonment and shall also be liable to fine.THE ANTI-HIJACKING ACT, 1982

• An Act for the Suppression of Unlawful Acts against the Safety of Civil Aviation THE SUPPRESSION OF UNLAWFUL ACTS

AGAINST SAFETY OF CIVIL AVIATION ACT, 1982

• An act to provide for the establishment of an AERA to regulate tariff and other charges for the aeronautical services rendered at airports and to monitor

performance standards of airports.

THE AIRPORTS ECONOMIC REGULATORY AUTHORITY OF INDIA

ACT,2008

Q CURRENT & FUTURE TRENDS

The road to recovery The number of travellers taking to the skies jumped 10.1 percent in

October, according to figures released November 25 by the International Air Transport Association (IATA).

People are flying five percent more than they were before the economic crisis.

http://www.independent.co.uk/travel/news-and-advice/air-trends-led-by-the-middle-east-air-travel-continues-to-grow-2143719.html

Region % increase in demand compared to October 2009

Middle East 18%

Africa 13.3

North America 12.4%

Europe 9.6%

Asia Pacific 7.3%

Latin America 4.9%

Liberalization and Privatisation

Global air transport industry has moved away from government control and ownership towards deregulation and private ownership , last 25 years.

Following deregulation of U.S. airline industry in the late 1970s, leading to lower fares and higher, improved productivity.

Alongside, another trend of privatization of government owned airlines designated by a country’s government to operate international air services

e.g. Australia (Qantas Airways), U.K. (British Airways), Germany (Lufthansa) and Japan (Japan Airlines).

Airline Alliances Alliances between various Airlines, Domestic and International

Enables its member airlines to offer their customers more services and benefits than any airline can provide on its own.

Benefits to flyers --broader route network, opportunities to earn and redeem frequent flyer miles and points across the combined network and more airport lounges.

Upcoming – Alliances between Domestic airlines in India.

American AirlinesBritish Airways

Finnair Iberia

Royal JordanianCathay Pacific

MexicanaKingfisher

Etc.

Air FranceAlitalia

Delta Air LinesKenya Airways

KLMKorean Air

Etc.

Air CanadaContinental Lufthansa

United AirlinesEtc.

More Trends

Credit cards offers enabling conversion of reward points into air miles.

Co-branded credit cards (Eg. Citibank +Kingfisher Airlines)

“Standing room / standing seats on short-haul flights

(Eg. Ryanair)

Travel Packages (e.g. Kingfisher Holidays)

Per-plane tax rather than Air Passenger Duty, i.e. a per-plane duty, where each plane is taxed according to its emissions,

Carbon tax According to the European Union Emissions Trading Scheme (EU

ETS) all airline companies with routes entering or operating inside the EU will face a carbon tax.

EU, Australia and the United States

The solution aims to realize zero carbon emission increases in 2020 and reach an average annual fuel efficiency increase of 1.5 percent between 2009 and 2020.

The International Air Transport Association has also set a goal to reduce net CO2 emissions 50% by 2050 as compared to 2005 levels.

Carbon footprint calculator

Anticipated Tech trends

Possible upcoming Technology trends

Self service kiosks for boarding, self bag tagging

RFID tags for baggage to avoid mishandling

Increased use of Mobile and Internet Ticketing, check-in

Outsourcing customer service, bookings, etc. to call centres

Automated customer service

Cloud computing to minimize costs, outsource,

and decrease carbon footprint

Above: Using mobile telephone

to check in for airline flightboarding pass

Air India Ltd. State-owned flag carrier of India, is working with 4 agencies – Crayons

Advertising, Draftfcb+Ulka, Saatchi & Saatchi, Interpub as its creative and media partners.

Selected these agencies after a multi-agency pitch. The overall business size is pegged in the region of Rs-50-60 crore.

The empanelment is for a period of 3 years. DraftFCB Ulka and Interpub were already on Air India’s roster.

All four agencies will be responsible for mix of creative and media duties for the brand which will include ATL and BTL campaigns both.

BUSINESS MODELS

The Conventional Airline

Conventional Airline

Resources

Revenue Streams

Ticket sales

3rd Party

Loyalty programs

Fleet

FnB

Manpower

Fuel

Partnerships

Direct

Customer Offerings

Reservations

Transfers Lounges

Entertainment

Food

Southwest Airlines World's first and largest low-cost carrier.

The largest U.S. airline by domestic passenger numbers. --US Market share -28.73%

Has carried more passengers than any other U.S. airline since August 2006 for combined domestic and international passengers* 3,200 flights daily 

One of the world’s most profitable airlines, posting a profit for the 37th consecutive year in January 2010.

The 15 minute TAT defines all processes, procedures and policies for Southwest Airlines.

The Southwest way

Southwest Airlines

Low ticket prices all

year round

Point-to point

15-minute TAT

Simplified boarding

Vacation Packages

Fuel Hedging

Single Aircraft type- Boeing 737-

Culture sharing

Limited passenger services

Frequent departures

The LCC model• Have as many seats on board the aircraft as possible

• Fill seats as much as possible• Fly the aircraft as often as possible.

Optimization

• As opposed to the Hub-and-spoke model followed by legacy airlines

• Minimize costsPoint-to-point services

• By having only one aircraft type• Pilots and cabin crew can operate on any aircraft in the

fleetSingle type fleet-

• Emphasis on direct sales of tickets, especially over the Internet

• Avoid travel agency commissions and computer reservation system fees

Direct ticketing

• Less elaborate on-board service.• Unreserved seating No frills

• paying a pre-determined price for future jet fuel purchases.

• Anticipate future jet fuel prices will be higher than current prices

Fuel hedging

• Commision-based sales, Advertising in-flightAncillary revenue

The Elitist Revolution Since the mid 80’s the trend in the airline business has been to cut costs.

Rather than going the LCC way, Virgin Atlantic chose to redefine the travel experience for business and first-class travellers

Positioned itself as a first-class airline focused on providing passengers with fun, class, and comfort.

Offers limousine services, lounges featuring spas, rooftop gardens, massage bays, sun-tan booths and hydro-pools!

Recently also the first to fly one of its planes using biofuels.

Codesharing & Airline Alliances

One of the first airline partnerships was that of KLM & Northwest Airlines.

Involves one airline selling tickets for another airline's flights under its own airline code.

To expand one's service offerings and to increase sales.

Airline alliances have become prevalent since the late 1990s.

Coordinate passenger service programs (e.g. lounges and frequent-flyer programs), offer special interline tickets, extensive codesharing (sometimes systemwide).

Often the companies combine IT operations, or purchase fuel and aircraft as a bloc.

Almost 15% market share in India

Focus on the Experience, high service standard, even in a low cost flight

Complimentary meal on all flights.

In-flight entertainment system on some flights.

Loyalty program and co-branded credit cards

Access to the Kingfisher Lounge for privilege customers.

References http://civilaviation.nic.in/home.html http://www.tcil.com/ca.asp#civil www.airlinequality.com/ http://www.indianaviationnews.com/indian-aviation-archievenews.asp?id=9&NID=307&PID=31 http://headlinesindia.mapsofindia.com/business/industries/aviation.html http://www.tcil.com/ca.asp#civil http://www.luggageguides.com/articles/2525/indian-aviation-industry.html http://en.wikipedia.org/ http://www.budgetairlineguide.com/low-cost-airlines-history http://www.ixigo.com/airlines/air-india-ai http://goindia.about.com/od/air/tp/india-domestic-airlines.htm www.airindia.in/ www.jetairways.com/ www.flykingfisher.com/ www.goindigo.in/ www.goair.in/ www.spicejet.com/ indian-airlines.nic.in/ www.virgin-atlantic.com/ www.southwest.com/ www.emirates.com/ www.lufthansa.com www.expedia.com www.yatra.com http://www.chinadaily.com.cn/bizchina/2009-10/28/content_8863537.htm http://www.environmentalleader.com/2009/11/03/u-s-airlines-lobby-feds-to-oppose-global-aviation-emissions-tax/ http://www.flightglobal.com/articles/2009/06/18/328523/2009-airline-it-trends-survey-technology-developments.html www.IATA.org www.sebi.gov.in/dp/jetair.pdf http://www.thetransnational.travel/news.php?cid=Star-Alliance-carriers-antitrust-immunity-ANA-Oneworld.Jan-10.20 http://www.flykingfisher.com/media-center/press-releases/india%E2%80%99s-kingfisher-airlines-set-to-join-oneworld-allia

nce.aspx

References

http://www.eturbonews.com/16755/oh-so-pretty-time-which-indian-carrier-would-it-be http://www.rediff.com/money/2006/jan/25bspec.htm http://www.dancewithshadows.com/flights/jet-airways-campaign.asp http://www.domain-b.com/brand_dossier/adv_brnd/20100518_airlines.html http://www.moneycontrol.com/news/business/kingfisher-jet-airwaysadvertising-warwords_278249.html http://www.dnaindia.com/lifestyle/report_babus-wake-up-to-smart-advertising_1476677 http://www.domain-b.com/companies/companies_a/air_india/20070821_advertising.html http://www.bestmediainfo.com/2010/10/air-india-empanels-four-agencies-for-creative-media-duties/ http://www.moneycontrol.com/news/business/goair-bagspatwa-international-awardberlin_273502.html http://www.spicejet.com/newspage.asp?strNews=Contractasitscreativeagency http://creativityandinnovation.blogspot.com/2006/12/southwest-airlines-flying-high-with.html http://www.icao.int/icao/en/atb/ecp/CaseStudies/Europe_LowCost_En.pdf http://en.wikipedia.org/wiki/Southwest_Airlines http://www.wired.com/cars/futuretransport/news/2008/07/portfolio_0708 http://www.sustainedadvantage.com/site/Road2Great/LOV/Application/SWAPivotPoint/tabid/145/Default.aspx http://www.tampaairport.com/about/facts/activity_reports/2009/marketshare_jan2009.pdf http://www.stealingshare.com/content/1160504877375.htm

Q THANK YOU.