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STRATEGIC MANAGEMENT

PRESTIGE INSTITUTE OF MANAGEMENT AND RESEARCH

Assignment -1
ETOP analysis of Aviation industry

Submitted to- Submitted by-


Prof. Ranjana patel Azhar mohd.
Rohan Saini
Susheel Paraste
Rohit Soni
AIRLINE INDUSTRY IN INDIA
 454 airports and airstrips
(includes Operational, Non Operational, Abandoned and Disused
Airports)
 127 are owned & operated by AAI
 16 - international, 7 custom airports, 28 civil enclaves
 Scheduled domestic air services - available from 82 airports

 May 2007- May 2008


 25.5 million domestic & 22.4 million international passengers
 20% growth – highest in the world

 Growth Rate Projections (for next 5 yrs)


 15% p.a (Passenger Traffic)
 11.4% p.a (Cargo Traffic)
HISTORY
1911  First commercial flight
 Airmails from Allahabad to Naini(10 km)

1932  The Aviation Department of Tata Sons Ltd. Established


1938  Tata Airlines (successor to aviation division of Tata Sons)
 Tata Air Lines converted into a public Company and
1946 renamed Air India Limited
 Air India International incorporated
1948
 Nationalization of Aircraft Industry
 Air India (serving the international sectors)
1953
 Indian Airlines (serving domestic sectors)
 Deccan Airways, Airways India, Bharat Airways,

Himalayan Aviation, Kalinga Airlines, Indian National


Airways and Air Services of India
HISTORY
1986  Private Sector Players permitted as Air
taxi operators
 Players including Jet, Air Sahara, NEPC, East West,
Modiluft,etc started service

1990 Open Sky Policy


1994 Private Carriers permitted to operate scheduled services


2003 Entry of low-cost carriers


2007 Merger of Indian Airlines into Air India


 Acquisition of Air Sahara by Jet Airways


2008
 Kingfisher acquired 49% stake in Deccan Aviation
WHAT IS ETOP ?
 The environment in which business operates has a greater
influence on their successes or failures. There is a strong
linkage between the changing environment, the strategic
response of the business to such changes and the
performance. It is therefore important to understand the
forces of external environment the way they influence
this linkage. 
 The organisations while attempting at strategic
realignments, try to capture these opportunities and avoid
the emerging threats. At the same time the changes in the
environment affect the attractiveness or risk levels of
various investments of the organizations or the investors.
CONT….
BROAD DIMENSIONS OF EXTERNAL
ENVIRONMENT
 The macro environment in which all organizations
operate broadly consist of the economic environment,
the political and legal environment, the socio cultural
aspects and the environment related issues like pollution,
sustainability etc. The technological temper and its
progress has been the key driver behind the major
changes witnessed in the external environment making it
increasingly complex.
CONT..
 The external forces can be classified into six broad
categories: Political, Economic, Social, Technological,
Environmental and Legal Forces. Changes in these
external forces affect the changes in consumer demand
for both industrial and consumer products and services.
These external forces affect the types of products
produced, the nature of positioning them and market
segmentation strategies, the types of services offered,
and choice of business. Therefore, it becomes important
for the organizations
ETOP OF INDIAN AVIATION INDUSTRY

 An airline provides air transport services for passengers or


freight. Airlines lease or own their aircraft with which to supply
these services and may form partnerships or alliances with other
airlines for mutual benefit. Generally, airline companies are
recognized with an air operating certificate or license issued by
a governmental aviation body.

Airlines vary from those with a single aircraft carrying mail or


cargo, through full-service international airlines operating
hundreds of aircraft. Airline services can be categorized as being
intercontinental, intra-continental, domestic, or international,
and may be operated as scheduled services or charters.
POLITICAL FACTORS 
In India, one can never over-look the political factors which influence each and every industry
existing in the country. Like it or not, the political interference has to be present everywhere.

 The airline industry is very susceptible to changes in the political environment as it has a great
bearing on the travel habits of its customers. An unstable political environment causes
uncertainty in the minds of the air travellers, regarding travelling to a particular country.

 International airlines are greatly affected by trade relations that their country has with others.
Unless governments of the two countries trade with each other, there could be restrictions of
flying into particular area leading to a loss of potential air traffic.

 Another aspect is that in countries with high corruption levels like India, bribes have to be
paid for every permit & license required.

 The most significant political event however has been September 11. The events occurring on
September had special significance for the airline industry since airplanes were involved. The
immediate results were a huge drop in air traffic due to safety & security concerns of the
people.
OTHER POLITICAL FACTOR

- Liberalization of the Sector 

- Excise Duty and Sales Tax on Aviation Turbine Fuel 

- Modernization of Airports 
 
- Entry Barriers for New Players
ECONOMIC

-Decrease in passenger numbers.


-Competition from low cost airlines.
-Increase in cost i.e. Insurance.
-Deregulation has exposed airlines, previously operating
at inefficient cost levels.
-Many airlines in serious financial trouble e.g. Indigo.
SOCIAL
-Reluctance to fly
-Need to rebuild confidence in air travel
-Sub losses with knock on social affect

Technological
-Economies of scale in production due to expanding market size
-E-commerce method of selling tickets, therefore less infrastructure
required, overhead savings
-Growth of Electronic Ticketing 
- Satellite based Navigation Systems
SWOT ANALYSIS
 Strengths: 

1. Growing tourism: Due to growth in tourism, there has been an increase in number of the
international and domestic passengers. The estimated growth of domestic passenger segment is at
50% per annum and growth for international passenger segment is 25% 

2. Rising income levels: Due to the rise in income levels, the disposable income is also higher which
are expected to enhance the number of flyers.

 Weaknesses:

1.Under penetrated Market : The total passenger traffic was only 50 million as on 31st Dec 2005
amounting to only 0.05 trips per annum as compared to developed nations like United States have
2.02 trips per annum. 

2.Untapped Air Cargo Market: Air cargo market has not yet been fully taped in the Indian markets
and is expected that in the coming years large number of players will have dedicated fleets. 

3. Infrastructural constraints: The infrastructure development has not kept pace with the growth in
aviation services sector leading to a bottleneck. Huge investment requirement for physical
infrastructure for airports. 
CONT….
Opportunities: 

1.Expecting investments: investment of about US $30 billion will be made.

2.Expected Market Size: Average growth of aviation sector is about 25%-30%


and the expected market size is projected to grow upto100 million by 2010.

Threats Huge investments are expected to take place in aviation sector in near


future. It is estimated that by 2012. 

1.Shortage of trained Pilots: There is a shortage of trained pilots, co-pilots and


ground staff which is severely limiting growth prospects. 

2.Shortage of Airports: There is a shortage of airport facilities, parking bays,air


traffic control facilities and takeoff and landing slots. 

3. High prices: Though enough number of low cost carriers are already existing in
the industry, majority of the population is still not able to fly to other destinations. 
Jet-airways
ETOP ANALYSIS
 Political Issue  Social Effects
 License issue for international  Sound Pollution
operation  Plane hijacking
 Infrastructural constraint
 9/11 Incident
 ATF price policy(Air turbine
policy)

 Economic Effects  Technology Effects


 Rising income level  Modernization of aircrafts
 Reduced fare but yet not enough  Modern technology like CAT3
and ILS
SWOT ANALYSIS
 Strengths
 Market driver
 Opportunities
 Experience exceeding 14 year
 Untapped air cargo market
 Scope in international service and
 Only private airline with
international operation tourism
 Market leader
 Largest fleet size

 Weaknesses  Threats
 Loosing domestic market share  Strong competitors
 Old fleet with average age around  Fuel price hike
4.79 years  Overseas market competition
 Scope for improvement in

in-flight service
 Weak brand promotion
kingfisher
POLITICAL FACTORS
1) Open sky policy
2) FDI limits: 100% for Greenfield airports
74% for the existing airports
100% through special permission
49% for airlines.

ECONOMICAL FACTORS
1) Contribution to the Indian economy.
2) Rising cost of fuel.
3) Investment in the sector of aviation.
4) The growth of the middle income group family affects the aviation sector
SOCIAL FACTORS
1) Development of cities leads to better services and airports.
2)Employment opportunities.
3)Safety regulations.
4) The status symbol attached to a plane travel.

TECHNOLOGICAL FACTORS
1) The growth of e-commerce and e-ticketing.
2) Satellite based navigation system.
3) Modernisation and privatisation of the airports.
4) Developing green field airports with private sector for example in
Bangalore the airport corporation limited.
ENVIRONMENTAL FACTORS
1)The increase in the global warming.
2)The sudden and unexpected behavior of the atmosphere and the dependency
on whether.
3)Shortage of the infrastructural capacity
4)Tourism saturation.

LEGAL FACTORS
1) FDI limits
2) Bilateral treaties
3) Airlines acquisitions and the leasing cost.
MARKETING STRATEGY

 Focuses on One thing :


One type of airplane, fare, customer service, route
etc.
 Uses new Airbus A320-200 aircraft

 Efficient processes

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MACRO ENVIRONMENT ANALYSIS
 Main Factors :
Political
Economic
Socio-cultural
Technological
 Other Factors :

Demographic
Natural Environment

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MACRO ENVIRONMENT
ANALYSIS : POLITICAL
 Open Sky Policy
 Deregulations in different spheres

 Low entry barriers

 FDI limits :
 49 % for airlines
 100% for airports

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MACRO ENVIRONMENT ANALYSIS :
ECONOMIC
 Growing middle class income
 Consistent GDP growth of more than 8% and
projected rate in two digits
 Hike in average salary 14%(highest) in the world
 Tourism industry growth :8.8 %in 2005

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MACRO ENVIRONMENT ANALYSIS :
SOCIO-CULTURAL

 Growing middle class :


 1993-1999 : 39.5 m to 56.7 m households
 2005 : 300 m
 2010 : 400 m (Estimated)
 Increase in leisure travel by tourists by 25 % in 2009
 Foreign tourists in 2009 : 5.2 mn

 Status symbol to travel in plane.

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MACRO ENVIRONMENT ANALYSIS :
TECHNOLOGICAL

 Modernization & Privatization of Airports


Modern Technology for efficient handling of
aircraft, passenger and cargo.
Example : ILS, CAT-3
 Developing Greenfield Airports with Private Sector
Example : Bangalore Airport Corporation Ltd.

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MACRO ENVIRONMENT ANALYSIS :
DEMOGRAPHIC AND NATURAL

 Changing pattern of consumers


 Highest percentage people of age group 20-25

 Educational environment

 Shift towards family concept

 High energy cost

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THANK YOU !!

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