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CLASH FOR THE INDIAN SKIES…
INDIGO VS SPICEJET VS JET AIRWAYS
“A PROJECT ON COMPARATIVE STUDY OF INDIAN LOW COST CARRIER
(LCC) WITH RESPECT TO INDIGO, SPICEJET, AND JET AIRWAYS”
SUBMITTED BY
PRIYA AWASTHI (01)
SELWYN MASCARENHAS (16)
PALLAVI PATIL (25)
SAAD SIDDIQUI (36)
SUBMITTED TO
DR. PROF. SUHAS RANE
For A Course On
STRATEGIC MANAGEMENT
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INDEX
Sr.
No
Title Pg. No
1 Executive summary 3
2 Introduction and Industry Overview 4
3 Factors Affecting the Growth of Aviation Sector, Major
Threats and Problems
4-5
4 Market Share 5-6
5 SWOT of Aviation Sector in India 6
6 PESTLE of Aviation Sector in India 7-10
7 Introduction to companies 11
8 SWOT of Companies 12-13
9 Financial Highlights of Companies 14-17
10 Strategies used by Companies 18-21
11 Our Learnings 22
12 Recommendations and Conclusion 23
13 References 24
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EXECUTIVE SUMMARY
The project undertaken is a comparative study of Indian low cost carriers (LCC) with
respect to Indigo, Spicejet, and Jet Airways. The project provides information on the
various aspects of LCC. It covers the various strategies used by the companies and their
financial performance. It also provides various suggestions to the stakeholders.
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INTRODUCTION
India is the 9th largest aviation market in
the world with a size of around Rs. 107200
crores and is aiming to become the 3rd
largest by 2020.
Indian aviation industry promises huge
growth potential due to large and growing
middle class population, rapid economic
growth, higher disposable incomes, rising
aspirations of the middle class and overall low penetration levels.
Civil aviation industry in India is experiencing a new era of expansion driven by
factors such as low cost carriers, modern airports, foreign direct investments in
domestic airlines, etc.
The air transport in India has attracted FDI of over Rs. 3812.3 crores from April
2000 to February 2015.
INDUSTRY OVERVIEW
In May 2016, domestic air passenger traffic rose 21.63% to 0.867 crore from 0.713
crore during the same month of the last year.
In March 2016, total aircraft movements at all Indian airports stood at 1,60,830
which was 14.9% higher than March 2015.
Indian domestic air traffic is expected to cross 10 crores passengers by FY 2017,
compared to 8.1 crores passengers in 2015, as per Centre for Asia Pacific Aviation
(CAPA).
India is among the five fastest growing aviation markets globally with 27.5 crore
new passengers.
The airlines operating in India are projected to record a collective operating profit of
Rs. 8,100 crores in fiscal year 2016, according to Crisil Ltd.
http://www.india-aviation.in/pages/view/38/an_overview.html
FACTORS AFFECTING THE GROWTH OF THE AVIATION SECTOR
From an over- regulated and under- managed sector, the aviation industry in India
has now changed to a more open, liberal and investment – friendly sector, especially
after 2004. Some major factors contributing to this are:
Higher Household Incomes
Strong Economic Growth
Entry of Low Cost Carriers (LCC)
Increased FDI inflows in domestic airlines
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Increased tourist inflow
Surging Cargo movement
Cutting Edge Information Technology (IT) Interventions
Focus on Regional Connectivity
Modern Airports
Sustained Business Growth and
Supporting Government Policies
MAJOR THREATS
The continuous rise in the price of fuel is a major threat.
A terrorist attack anywhere in the world can negatively impact air travel.
Government intervention can lead to new costly rules.
A global economic slowdown negatively impacts leisure, optional and
business travel.
PROBLEMS FACED BY THE AVIATION SECTOR
High operational costs
Cut throat competition
High service tax and other charges
High foreign exchange rate
http://www.mapsofindia.com/my-india/business/in-indias-burgeoning-aviation-sector-
safety-is-the-key-word
NUMBER OF LOW COST AIRLINES IN INDIA
Sr
No. No. of Players Company Logo
Market
Share
1 IndiGo Airline
38.7%
2 Jet Airways
18.9%
3 Air India Express
15.1%
4 SpiceJet Airline
12.9%
5 GoAir Airline
8.5%
6 Air Asia India
2.1%
7 Others 3.8%
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http://www.livemint.com/Companies/HbO0mmX9bimghBtdHR10iK/Air-traffic-expands-
21-in-April-Jet-slips-on-market-share.html
SWOT ANALYSIS OF INDIAN AVIATION INDUSTRY
39%
19%
15%
13%
9%2%4%
Market Share of LCC (in terms of passengers carried)
IndiGo Jet Airways Air India Express SpiceJet GoAir Air Asia India Others
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PESTLE ANALYSIS OF INDIAN AVIATION INDUSTRY
POLITICAL FACTORS:
National Civil Aviation Policy (NCAP) 2016 –
Objectives:
Establish an integrated eco-system which will lead to significant growth of civil
aviation sector, which in turn would promote tourism, increase employment and
lead to a balanced regional growth.
Ensure safety, security and sustainability of aviation sector through the use of
technology and effective monitoring.
Enhance regional connectivity through fiscal support and infrastructure
development.
Enhance ease of doing business through deregulation, simplified procedures and e-
governance.
Promote the entire aviation sector chain in a harmonized manner covering cargo,
MRO, general aviation, aerospace manufacturing and skill development.
1. Open Sky Agreement:
US – No restrictions
UK – Few restrictions
ASEAN and 100 other countries – Limited restrictions regarding landing points,
traffic rights, seasons, capacity, etc.
2. FDI limits:
100% FDI limits is permitted for green field airport projects.
Upto 74% FDI is permitted for existing airport.
3. Taxation Policy:
According to a survey conducted by FICCI-EY on civil aviation sector title ‘Indian
Aviation: Waiting on the runway’, 57% respondents said ‘High Taxation’ is a major
deterrent to growth of aviation industry.
Huge amount of taxes on aviation sector has led to thin profit margins and increases
the cost of ticket by almost 20% (approx.)
Taxes on ATF (which constitutes 30% - 35 % of the operational cost of LCC in
India) – Central Government levies 14% excise duty, 10 % custom duty and States
levy sales tax at weighted average rate of 22.1%
Also with the implementation of GST, the service tax rate which is currently
applicable on air tickets (15%) will increase to a minimum 18%
http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3
&newsid=2152
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Impact-
Positive impact on the civil aviation sector, LCC will be benefitted from the new
policy with increased demand for air transport.
Integration of all the related sectors like MRO, aerospace manufacturing, etc. and
skill development programs will strengthen the aviation sector and bring down cost
of maintenance.
Open sky agreements will open up the aviation sector to intense competition which
will make sure only the most efficient LCC will survive.
Increase in FDI limits will help the LCC with much needed capital and
technological know-how.
High taxes will continue to make a dent in the profits of the airlines.
ECONOMIC FACTORS:
India has emerged as the fastest growing major economy in the world as per the Central
Statistics Organization (CSO) and International Monetary Fund (IMF). According to the
Economic Survey 2015-16, the Indian economy will continue to grow more than 7 per
cent in 2016-17.
The improvement in India’s economic fundamentals has accelerated in the year 2015 with
the combined impact of strong government reforms, RBI's inflation focus supported by
benign global commodity prices.
http://www.ibef.org/economy/indian-economy-overview
1. Inflation:
Consumer prices in India went up 6.07 percent year-on-year in July of 2016. It was
the highest figure since August of 2014, as food cost rose further.
Higher inflation affects the purchasing power of consumers. Higher inflation is
usually negative for aviation sector.
http://www.tradingeconomics.com/india/inflation-cpi
2. Employment:
Unemployment rate in India as on 14th August, 2016 was 9.3 % - Urban (11.4%)
Rural (8.3%).
Decrease in unemployment rates affects the overall economy positively.
http://unemploymentinindia.cmie.com/
3. Growing Middle Class Income:
India’s economic growth and rising disposable income of the middle class is
expected to create significant demand for passenger air travel.
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Impact –
Growth in economy will increase the Per Capita National Income (for FY 2014-15 it
stood at Rs. 86879) and Per Capita Disposable Income (for FY 2014-15 it stood at
Rs. 58208; based on 30% average personal tax rate) which can have a positive
impact on LCC.
http://pib.nic.in/newsite/PrintRelease.aspx?relid=136214
Increasing inflation may affect the purchasing power of consumers thereby
discouraging them to use LCC.
Increase in middle class income will lead to demand for LCC as more number of
people will option for flying than use railways in order to save time.
SOCIAL FACTORS:
1. Attitude to Work & Leisure:
Changing attitudes towards work and leisure has helped LCC to grab on the
changing trend. People no more use air travel as luxury but more as a necessity to
save time.
2. Security Issues & Terrorism:
Recent terrorist attacks on Brussels Airport & Istanbul Ataturk Airport has
questioned the safety of air travel. Under these circumstances, it is of paramount
importance that airlines as well as airports and all other players in the airline
industry improve their safety standards and ramp up their security checks.
3. Population Demographics:
It has been noted that ‘Age’ and ‘Income’ are two very important factors that affect
the demand for air travel. 64% of India’s population is in 15-59 age group. Also,
35.4% are in lower middle class bracket while 11.4% are in upper middle class
bracket. This certainly means there is a huge potential to be tapped by LCC in India.
Impact –
Changing attitude will help LCC to cash on the changing trend by using various
innovative strategies and thereby increase their topline.
Attacks on airport creates fear in the mind of people and may have a slight impact
on the demand for LCC but the regular users seem unfazed.
The population demographics on India is such that 64% of it is in the 15-59 age
group. Young people prefer air travel.
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TECHNOLOGICAL FACTORS:
Technology has been a cornerstone of aviation industry ever since the dawn of aviation –
commencing with the conquering of ‘flights’ to becoming a key enabler for
communications, business innovation, and business models.
Indian LCC are upgrading their technology in order to face the stiff competition in
the already competitive industry.
This includes using software to optimize flight planning for minimum fuel burning
routes and altitudes and also by making use of latest fuel saving technology.
New technologies at airports like advance baggage handling system, accepting
mobile boarding pass on a passenger’s smartphone, notifications of schedule
changes are being published in real time to passenger, etc.
Impact –
Fuel saving technologies will reduce the cost and increase profitability.
Increase in customer satisfaction.
LEGAL FACTORS:
In the recent past, a number of legal changes have been implemented in India, such
as minimum wage increase, increase in FDI, liberalization of aviation sector from
the shackles of cumbersome taxes and laws, etc.
The cabinet has cleared new civil aviation policy which replaced 5/20 condition
with 0/20 rule which means any airline with 20 planes in its fleet can go for
international flights.
Impact –
Entry of more airlines (especially foreign LCC) is expected.
Indian LCC can now fly on international routes without waiting for 5 years.
Increase in FDI will help the domestic LCC with capital and technological know-
how.
ENVIRONMENTAL FACTORS:
The environmental impact of aviation occurs because aircraft engines emit heat, noise,
particulates and gases which contribute to climate change and global warming. The global
aviation industry produces 2% of all human induced CO2 emissions. Alternative fuels,
particularly sustainable biofuels, have been identified as excellent candidates for helping
achieve the industry target of reducing 50% of the emissions by 2050.
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INTRODUCTION TO COMPANIES
Particular Indigo SpiceJet Jet Airways
Commenced On 8th April 2006; 10
years ago
23 May 2005; 11
years ago
5th May 1993; 23
years ago
Founder Rakesh Gangwal and
Rahul Bhatia
Ajay Singh Naresh Goyal
Destinations 40 (35 Domestic & 5
abroad)
41 (35 Domestic & 6
abroad)
68 (48 Domestic & 20
abroad)
Headquarters Gurgaon, India Gurgaon, India Mumbai, India
Fleet
(Aircraft)
Airbus 320-200
Airbus 320 neo
(109 aircrafts)
Boeing737-700
Boeing737-800
Boeing737-900ER
Bombardier Dash 8
Q400
(36 aircraft)
Airbus A330-200/300
ATR 72-500/600
Boeing 737-900ER
(116 aircraft)
Services Offers only economy
class
Offers economy class
& Spice Max Class
(extra legroom,
premium economy)
Offers 3 classes:
First Class
Premiere Class
Economy Class
Vision To be India’s largest
and fastest growing
airline through 3
things:
Affordable
fares
On time
performance
and
Hassle free
travel
experience
To ensure that flying
is no longer only for
CEO’s and business
travelers, but for
everyone.
Organization vision is
to become the “best
airline in the world’’
and to come in the top
5 preferred airlines.
Mission To provide quality
and reliable air travel
facilities to the young,
price conscious, first
time travelers.
To become India’s
preferred low-cost
airline, delivering the
lowest air fares with
the highest consumer
value, to price
sensitive consumers
Most preferred
domestic airline in
India.
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SWOT ANALYSIS OF THE COMPANIES
JET AIRWAYS
STRENGTHS
Trusted Airline by the Corporates
Biggest Indian Airline company
with over 13,000 employees
Operations in over 75 Indian
cities and over 400 flights daily
WEAKNESSES
Competition from the LCC’s and
other competitors means market
share growth is tough
OPPORTUNITIES
Has presence in every segment
Increasing number of people
opting to travel by airlines
THREATS
Fuel cost makes up 40% of
operating expenses which is
going up gradually, labor aviation
regulations, etc.
Unfavorable Govt. policies and
aviation regulations
INDIGO AIRLINES
STRENGTHS
Strong backing of the promoters
and is one of the largest low cost
carriers in India
Only LCC to make consistent
profits
Good advertising has increased its
brand recall
WEAKNESSES
Does not fly to as many routes as
its competitors
Still has to establish itself on
international destinations
OPPORTUNITIES
Opening up of International
routes
Largest Market share among
LCC’s in Indian Market
Middle class taking to the skies
THREATS
Fuel cost makes up 40% of
operating expenses which is
going up gradually, labor aviation
regulations, etc.
Plenty of new LCC’s to compete
with
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SPICEJET AIRLINES
STRENGTHS
Has a reach to around 35 Indian
destinations
LCC segment is ever growing in
the country
One of the largest low cost
carriers in India
WEAKNESSES
Low market share due to presence
of significant competition
Has limited destinations and no
international presence
OPPORTUNITIES
Middle class taking it to the skies
International tie-ups would boost
the brand image and reach
THREATS
Fuel cost makes up 40% of
operating expenses which is
going up gradually, labor aviation
regulations, etc.
Strong competition in LCC
segment
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FINANCIAL HIGHLIGHTS OF THE COMPANIES
Financial Snapshot of Indigo (Interglobe Aviation Ltd)
Rs. In crores (except FV, MV &
EPS)
Particulars 2015 2016 %
change
Income from operations 13852.238 16042.488 15.81%
Expenses
Total expenses 12357.864 13637.499 10.35%
of which
Aircraft fuel expenses 5748.486 4779.324 -16.86%
Aircraft and engine rentals 1952.238 2612.152 33.80%
Operating profit before other income,
finance cost and exceptional items 1567.472 2502.41 59.65%
PAT 1304.172 1989.72 52.57%
Share capital 34.372 360.357 948.40%
FV of each share 10 10 0.00%
MV of each share (30th August, 2016) - 879 -
Market Cap (30th August, 2016) - 31444 -
Reserves 386.323 1473.92 281.53%
EPS (Basic) 42.48 58.17 36.94%
Operating profit margin 11.32% 15.60% 37.85%
Net profit margin 9.41% 12.40% 31.74%
Debt Equity Ratio 8.46 2.00 -76.34%
RoA 21.07% 35.57% 68.87%
Operational Efficiency
RASK (Rs) 3.95 3.78 -4.30%
Avg fare (Rs) 4882 4248 -12.99%
CASK (Rs) 3.42 3.12 -8.77%
ASK (Rs. crores) 3533 4283 21.23%
RPK (Rs. crores) 2818 3597 27.64%
Load factor (%) 79.80% 84.00% 5.26%
Comments –
The top line has grown by 15.81% whereas the bottom line has grown by
52.57% and the expenses has gone up by 10.35% only which shows
operational efficiency and a drop in crude price which has helped airlines
world over.
The load factor (% utilisation of seats in an aircraft) has increased by
5.26% showing better utilisation of aircrafts.
https://www.nseindia.com/corporates/corporateHome.html?id=allAnnouncements
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Financial Snapshot of Jet Airways (India) Ltd
Rs. In crores (except FV, MV &
EPS)
Particulars 2015 2016 % change
Income from operations 18044.22 19556.5 8.38%
Expenses
Total expenses 20451.88 19948.13 -2.46%
of which
Aircraft fuel expenses 6686.26 5015.73 -24.98%
Aircraft and engine rentals 1958.92 2124.79 8.47%
Operating profit before other income,
finance cost and exceptional items -878.45 1219.2 238.79%
PAT -1813.71 1173.56 164.70%
Share capital 113.6 113.6 0.00%
FV of each share 10 10 0.00%
MV of each share (30th August, 2016) - 534.15 -
Market Cap (30th August, 2016) - 6062 -
Reserves -4203.88 -3127.6 25.60%
EPS (Basic) -159.66 103.31 -164.71%
Operating profit margin -4.87% 6.23% 228.06%
Net profit margin -10.05% 6.00% 159.70%
Debt Equity Ratio -1.62 -2.06 27.56%
RoA -9.50% 13.84% 245.75%
Operational Efficiency
RASK (Rs) 4.68 4.43 -5.34%
Avg fare (Rs) 7865 7322 -6.90%
CASK (Rs) 5.01 4.34 -13.37%
ASK (Rs. crores) 4479.6 5011.4 11.87%
RPK (Rs. crores) 3684.6 4129.9 12.09%
Load factor (%) 82.30% 82.40% 0.12%
Comments -
The top line has grown by 8.38% whereas the bottom line has
grown by 164.74% and the expenses has gone down by 2.46%
which shows operational efficiency and decrease in finance cost and
a drop in crude price which has helped airlines world over.
The load factor (% utilisation of seats in an aircraft) has increased
by .12% which is marginal.
http://www.bseindia.com/corporates/ann.aspx?expandable=3
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Financial Snapshot Spicejet Ltd
Rs. In crores (except FV, MV
& EPS)
Particulars 2015 2016 %
change
Income from operations 5172.734 5020.396 -2.95%
Expenses
Total expenses 5986.376 4773.505 -20.26%
of which
Aircraft fuel expenses 2409.622 1391.959 -42.23%
Aircraft and engine rentals 864.388 805.447 -6.82%
Operating profit before other income,
finance cost and exceptional items -743.311 314.567 142.32%
PAT -748.409 343.505 145.90%
Share capital 599.45 599.45 0.00%
FV of each share 10 10 0.00%
MV of each share (30th August, 2016) - 58.2 -
Market Cap (30th August, 2016) - 3486 -
Reserves -
2214.467
-
1810.162 18.26%
EPS (Basic) -13.38 4.36 -
132.59%
Operating profit margin -14.37% 6.27% 143.60%
Net profit margin -14.47% 6.84% 147.29%
Debt Equity Ratio -1.03 -1.46 41.81%
RoA -43.37% 19.63% 145.27%
Operational Efficiency
RASK (Rs) 3.75 4.1 9.33%
Avg fare (Rs) 3824 3598 -5.91%
CASK (Rs) 4.22 3.79 -10.19%
ASK (Rs. crores) 1456.5 1290.9 -11.37%
RPK (Rs. crores) 1187.1 1174.7 -1.04%
Load factor (%) 81.00% 91.00% 12.35%
Comments –
The top line has gone down by -2.95% whereas the bottom line has grown by
145.90% and the expenses has gone down by 20.26% which shows operational
efficiency a drop in crude price which has helped airlines world over.
The load factor (% utilisation of seats in an aircraft) has increased by 12.35% which
is marginal.
https://www.nseindia.com/corporates/corporateHome.html?id=allAnnouncements
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21.07%
-9.50%
-43.37%
35.57%
13.84%19.63%
-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
Indigo Jet Airways Spice Jet
Operating profit margin (in %)
2014-15 2015-16
9.41%
-10.05%
-14.47%
12.40%
6.00% 6.84%
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
Indigo Jet Airways Spice Jet
Net profit margin (in %)
2014-15 2015-16
21.07%
-9.50%
-43.37%
35.57%
13.84% 19.63%
-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
Indigo Jet Airways Spice Jet
RoA (in %)
2014-15 2015-16
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STRATEGIES USED BY COMPANIES
Pricing Strategies –
Comparison of Ticket Price (One-way trip, Cheapest possible rates, Inclusive of taxes)
All figures in Rs.
Route Indigo Spicejet Jet Airways
Mumbai – Delhi 3170 3450 3870
Mumbai – Chennai 2450 2950 3150
Mumbai – Kolkata 4650 5130 5270
Mumbai – Bengaluru 2450 3250 2800
Mumbai – Hyderabad 2300 2550 2250
Mumbai – Cochin 2950 4000 5000
Mumbai – Ahmedabad 2300 2450 1700
Mumbai - Goa 2450 2500 2650
o All the rates are obtained from the websites of the respective airlines and
reflect one-week prior booking rates.
o Rates are subject to changes.
Comments –
i. It is observed that Indigo provides cheapest rates for almost all the areas
served.
ii. Jet Airways has the highest ticket prices but it also provides food and other
amenities.
iii. Spicejet is in the middle with average ticket pricing and adds on like extra leg
space, food, etc.
INDIGO AIRLINES:
It is a ‘No Frills’ airline i.e. it does not provide any luxury but does its work of
transporting people from one place to another safely and on time.
They have only 1 type of Aircraft (A-320-232) which results in greater flexibility by
using the same crew from pilots to flights attendants.
They also avoid the D-Check which is done after every 8 years of operations by
leasing the aircrafts for 5-6 years and new renewal later on. This mean no airplane
remains out of service at any time.
They use latest fuel saving technologies to reduce the cost of operations.
They also don’t provide meals during short distance flights (1.5 hours or less).
19 | P a g e
SPICEJET:
Spice Jet has started using ‘Pricing Stimulation’ as well as ‘Dual Fleet’ strategies.
Under ‘Pricing Stimulation’, Spicejet provides steep discounts to frequent users as
well as non-users in order to grab the market share.
It is also reducing maintenance cost to boost profitability.
Spicejet is also using dual fleet strategy where Bombardier Q400 aircraft are being
used for high frequency shorter routes while Boeing 737 aircraft are being used for
long distance routes with more passengers.
JET AIRWAYS:
A strategic partnership with ETIHAD Airways provides Jet with new codeshares
and additional capital.
Jet Airways provides economical as well as luxury class travel to its customer,
hence, executives prefer Jet Airways.
The profitability of Jet has soared on the back of low fuel prices.
Jet has one of the highest aircraft utilization rate at 12.7 hours a day.
Jet Airways has started cost cutting program and focused on improving results
by not entering the discount war led by Spicejet.
Marketing Strategies -
JET AIRWAYS
INDIGO
SPICEJET
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PORTER’S FIVE FORCES ANALYSIS
Competitive Rivalry (HIGH)
Competition among major players is very high, especially in LCC’s (Low cost
carrier) section because the airlines compete for the middle income group customers
and passengers of air-conditioning segment of railways. This group has low brand
loyalty and is highly price sensitive.
Competition might intensify further in LCC segment with Air Asia India being
granted DGCA’s operator license.
Threat of New Entrants (LOW)
Air Asia India has been granted DGCA approval (Price War)
Threat remains low because of the nature of the industry (Regulatory hurdles,
Capital-intensive)
Threat of Substitute Products (LOW)
Threat remains low in this sector also as no other means of transport is as swift, and
convenient as airlines. It saves time.
Railways can be a substitute for LCC but the travel time is high and ‘Skype’ &
‘video – conferencing’ may not work all the time.
21 | P a g e
Bargaining Power of Suppliers (HIGH)
Bargaining power of suppliers remain high as there are only few fuel and aircraft
suppliers.
Talent pool of pilots, engineers and other staff is also limited.
Bargaining Power of Customers (LOW)
Bargaining power of customers remains low as the demand for low cost air travel is
quite high.
The costs of switching airplanes and services offered hardly differ with each other.
Source: Source: Central Asia-Pacific Aviation, TechSci Research
Note: *(Notes w.r.t airlines)
KANO MODEL –
Attributes Indigo Spicejet Jet Airways
Basic 1.Flight won’t be
cancelled
2.Guaranteed seat
3.Transporting safely
from destination A to
B
1.Flight won’t be
cancelled
2.Guaranteed seat
3.Transporting safely
from destination A to
B
1.Flight won’t be
cancelled
2.Guaranteed seat
3.Transporting safely
from destination A to
B
Performance 1.No frills
2.On time service
3.Cheap fare
4.Comfortable seats
1.No frills
2.More legroom for
Spice Max class
3.Average fare
1.Services like food
and entertainment
2.All three classes
available i.e.
Economy, First,
Business.
3.Comparatively
higher fare
Delight 1.Festive offers
2.Food of very good
quality and tasty (for
flights > 1.5 hours)
3.Cabin crew is very
warm and punctual
1.Festive offers
2.Loyalty points
1.Exotic dining
experience
2.Premium services
like more legroom,
beautiful ambience,
etc.
22 | P a g e
LEARNINGS –
Indigo is ruling the Indian skies and will continue to do so, at least in near future.
Indigo was able to break even in the 3rd year of its operations, a feat in itself, and
has been profitable ever since, a claim few can boast of.
All this has been possible because of the strategic plans implemented by the
management like using a single type of aircraft, going for top quality executives,
having single ‘Economy’ class seats, having maintenance contracts with Airbus so
as to keep the safety standards high, etc.
Under the new management, Spicejet is looking for turnaround and its going strong
with back to back profits in all the quarters of FY 2015-16.
With deep discounting strategies, its gaining market share of other players.
Spicejet is also paying off its debt to reduce the interest cost.
Jet Airways had a spectacular FY 2015-16 as it managed to post net profit after 5
years and has been aggressive with its own strategies.
Partnership with Etihad has boosted the balance sheet and Jet Airways is trying to
grab the premium segment by providing luxurious services.
It is also paying off its loan in order to reduce its huge interest cost.
In an industry where profit margins are thin, INDIGO remains ‘the king’ whereas
SPICEJET is ‘the dark horse’ catching up with the leaders and JET AIRWAYS ‘the
knight’ that has a presence not only in domestic market, but also in international
market.
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RECOMMENDATIONS –
To Airlines-
Airlines should not indulge in unethical practices like increasing air fare during
festive seasons to exorbitant levels.
All safety standards should be strictly adhered to as per international standards.
Crew members should be regularly trained on customer service.
Passengers should be compensated properly in case of flight delays.
Passengers should be kept updated regarding their schedule.
Cost cutting measures should be implemented to boost profitability.
To Government and Regulatory Authority –
Taxes should be rationalized.
Taxes on aviation fuel and services need to be reduced in order to make Indian LCC
competitive in international market.
DGCA should take speedy decisions on licensing of operators.
Budget food stalls should be opened on airports.
Airport infrastructure in non-metro cities needs to be improved.
Consumer complaint redressal should be quick and appropriate.
Regulatory hurdles should be removed.
CONCLUSION –
We conclude that, an industry bogged by heavy taxes and regulatory hurdles, stiff
competition and thin profit margins, no customer loyalty yet high customer expectations, it
is a classic case of survival of the fittest and INDIGO is leading the pack on all the fronts.
But it must be noted that under the new management, Spicejet has managed to shut its
doomsayers, and become profitable once again. Jet Airways is also catching up to its rivals
and with the liberalization of regulations under new aviation policy, new LCC are entering
the market increasing the competition and putting pressure on the profit margin.
Time will tell who won in the ‘Clash for the Indian skies’.
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REFERENCES –
http://www.india-aviation.in/pages/view/38/an_overview.html
http://www.tradingeconomics.com/india/inflation-cpi
http://www.mapsofindia.com/my-india/business/in-indias-burgeoning-aviation-sector-
safety-is-the-key-word
http://www.livemint.com/Companies/HbO0mmX9bimghBtdHR10iK/Air-traffic-expands-
21-in-April-Jet-slips-on-market-share.html
http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=
2152
http://www.tradingeconomics.com/india/inflation-cpi
All the financial data was sourced from - BSE India, NSE India, and respective websites
of the company.
http://www.bseindia.com/corporates/ann.aspx?expandable=3
https://www.nseindia.com/corporates/corporateHome.html?id=allAnnouncements
Glossary
LCC Low cost carrier
RASK Revenue per Available Seat Kilometer
CASK Cost per Available Seat Kilometer
ASK Available Seat Kilometers
RPK Revenue passenger Kilometers
DGCA Directorate General of Civil Aviation