Indian Aviation - Air India - Global Outlook 2009-19
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This document summarizes the global aviation outlook from 2009 to 2019 and identifies key threats facing Air India. It notes that while the industry has proven resilient in the past, Air India faces significant challenges including a lack of accountability as a state-owned carrier, high costs, declining revenues, and strong competition from low-cost and global carriers. Without immediate action to introduce accountability, modernize operations, and implement a coherent long-term strategy, Air India risks further losses and may not remain viable beyond 2019.
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Indian Aviation - Air India - Global Outlook 2009-19
- 1. Global Outlook 2009 - 2019 Magdalena Anna Fas No. 07023514
- 3. Main threats to the business
- 4. Possible implications over next 10 yrs
- 6. DIFFICULT TIMES FOR THE INDUSTRY WORLDWIDE Source: Global Market Forecast 2009 – 2028, Airbus Industrie
- 7. VOLUME DOES NOT TRANSLATE INTO VALUE Source: Global Market Forecast 2009 – 2028, Airbus Industrie
- 8. Nevertheless
- 9. THE INDUSTRY HAS PROVEN ITS RESILIENCE BEFORE Source: Global Market Forecast 2009 – 2028, Airbus Industrie
- 10. AND THE FORECASTS REMAIN OPTIMISTIC Source: Global Market Forecast 2009 – 2028, Airbus Industrie
- 11. ASIA-PACIFIC WILL LEAD THE GROWTH Source: Current Market Outlook 2009 – 2028, Boeing Co.
- 12. LESS THAN 10% OF INDIAN POPULATION IS FLYING TODAY - WHICH ITSELF GIVES A MARKET OF AROUND 100M!! INDIA Source: Global Market Forecast 2009 – 2028, Airbus Industrie
- 13. In a nutshell
- 14. ONE OF MAIN PLAYERS DOMESTICALLY Source: www.bangaloreaviation.com; www.airindia.com
- 15. AND IN THE INTERNATIONAL MARKET, TOO Source: Airports Authority of India
- 16. Looks good. So where’s the catch?
- 17. Air India contributes 10% of global airline losses with just 0.35% of global traffic
- 18. In-house issues
- 20. state-owned = nobody’s
- 21. no incentives for profitability
- 23. employee to A/C ratio 200:1
- 24. fleet and network inefficiencies
- 25. accumulated loss of $3.2bn (over $1bn annually)
- 27. manual (!) yield management
- 28. price wars in domestic markets
- 29. more attractive market proposition of competitors (dom. & intl.)
- 31. no strategic vision at executive level
- 35. increased political pressure on AI’s comeback to profitability
- 36. focus on transparency
- 37. introduction of accountability measures (i.e. external audits)Goodwill at governmental level is critical if AI is to survive & be able to compete in the volatile market
- 39. Targets AI’s markets – domestic (LCCs) & international (global airlines)
- 41. “You can’t please everyone”
- 42. A mix of short-term operational decisions & long-term strategiesThe longer restructuring is postponed, the more market share AI loses to the benefit of its competitors.
- 44. Entry of strongly brand-focused competitors
- 46. Brand expectations must be materialized in brand execution
- 47. Fostering close bonds with Star Alliance partnersBrand restoration is a clue to AI’s future in the face of current brand perceptions: “Why Indians need to get over Air India & recognize Emirates as a national carrier?” (simpliflying.com)
- 49. Increases operational costs
- 51. Teaming-up with competition to accelerate changes
- 55. Operational restructuring as a starting point
- 56. On-going revision of processesLack of investment in fleet and of pro-environment modification of processes means AI stayed behind technologically & will not be able to cope with costly adjustments should environmental legislation be severed.
- 57. What next?
- 58. RESCUE PLAN FOR AIR INDIA 2010 - 2012
- 61. introduction of global standards of corporate governance
- 62. making the change start happening nowWithout an immediate implementation of comprehensive modernization and restructuring plans, Air India will slide deeper into unprofitability and stands a good chance of not making it into 2019.
- 63. Thank you for your attention Q & A
Notes de l'éditeur
- Within a year since the last economic downturn started, the way to full recovery is still long. Other factors excluded, air traffic growth usually follows the growth pattern of real GDP. Because the latest turmoil hit worldwide economies really hard, it is expected that air traffic also will take longer to rebound. It should be also noticed that premium traffic has suffered the most with companies switching to low-cost travel providers. Business customers may be unlikely to pay an extra even when the economy will have fully recovered.
- Although first signs of recovery have been spotted in increasing passenger numbers, this may be a completely wrong assumption. In an attempt to stimulate the market, airlines engaged in an across-the-board cost-cutting activity which improved the load factors but at the same time jeopardized the margins resulting in an average 2-5% lower revenues on 5-15% higher load factors.Cost-slashing might have seemed necessary especially for legacy carriers that found their customer base fleeing away to low-cost competition. However, where LCC is possibly still making money, the full-service carrier is already incurring a loss.In India, major domestic airlines engaged in price wars that led to average fare being cut by up to 85%.
- Over the years, airline industry proved its resilience and continued growing even after the 9/11.
- Asian markets remain the growth leaders with a huge backlog of tapped demand.
- The so-called propensity to fly factor for India is nowadays very low with less that 10% of Indian population undertaking air travel. Although it is already a huge market, the potential is enormous both on domestic and international routes. This is the perfect time for investments and network development in India with the result of being an established and renown operation in long-term.
- On the domestic market Air India has been consequently losing its market share and now occupies 3rd position (since Jet Airways & JetLite are effectively the same company). All these airlines have plenty of common features which Air India has not: Young, privately owned companies low-cost base attractive networks good value-for-money innovative and with “modern feel” strong brands new fleet no problems with unions
- Other Indian: Jet Airways, KingfisherOther Gulf: Air Arabia, Qatar Airways, Saudi Arabian Airlines, OmanAir, Gulf Air, Etihad and Kuwait AirwaysSouth-East Asia: Singapore Airlines, Cathay Pacific, Thai, Sri Lankan and MalaysianEurope: Lufthansa, British Airways, Air France, KLMAir India remains the No.1 international carrier in India despite of its huge losses. However, this is likely to change in the near future due to the Gulf carriers literally marching through Indian skies. Having very limited home customer bases, Emirates & the likes quickly realized India’s potential. Having achieved a foothold especially in regional airports, they are now trying to drive the competition out by capacity increases (but are yet to fly A380s on Indian routes). Air India is not able to compete here in short-term given the Gulf carriers’ service proposition is out of Air India’s reach.