Strategy Formulation and Implementation Aviation
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STRATEGY FORMULATION AND IMPLEMENTATION AVIATION SECTOR SUBMITTED TO: Prof. RASHMI MENON SUBMITTED BY: RICHA SARITA Shailendra HARSHIT YASH ANKIT INTRODUCTION TO THE AVIATION INDUSTRY The 1884 La France, the first fully controllable airship Although many people think of human flight as beginning with the aircraft in the early 1900s, in fact people had been flying repeatedly for more than 100 years. Wright brothers’ first successful flight in Kitty Hawk in 1903. American Airlines in 1928 and United Airlines in 1931. Development of the mail system by the U.S. Postal Service helped create the airline industry. Increased R&D of aircraft after World War II: World War II saw a drastic increase in the pace of aircraft development and production. All countries involved in the war stepped up development and production of aircraft and flight based weapon delivery systems. After World War II commercial aviation grew rapidly, used mostly ex-military aircraft to transport people and cargo. This growth was accelerated by the glut of heavy and super-heavy bomber airframes like the B-29 and Lancaster that could be converted into commercial aircraft. The DC-3 also made for easier and longer commercial flights. The first North American commercial jet airliner to fly was the Avro C102 Jetliner in September 1949, shortly after the British Comet. By 1952, the British state airline BOAC had introduced the De Havilland Comet into scheduled service. OVERVIEW OF THE GLOBAL AIRLINE INDUSTRY The global airlines industry grew by 11.3% in 2007 to reach a value of $429.9 billion In 2012 the industry is forecast to have a value of $711 billion, an increase of 65.4% since 2007 The industry grew by 5.6% in 2007 to reach a volume of 2,076 million passengers. In 2012 the industry is forecast to have a volume of 2,362 million passengers, an increase of 13.7% since 2007 The domestic segment dominated in the global airline industry and accounted for 1.4 billion passengers in 2007, equivalent to 66.5% of the industry's overall volume The Americas region is the largest airline industry in the world accounting for 51.1% of the global industry's value The report informs business decisions, enabling the reader to spot future trends and developments. Furthermore, the information contained in the report adds weight to presentations and helps the reader to save time carrying out entry-level research. The global airline industry consists of over 2000 airlines operating more than 23,000 aircraft, providing service to over 3700 airports. In 2010, the world’s airlines flew almost 28 million scheduled flight departures and carried over 2 billion passengers. The growth of world air travel has averaged approximately 5% per year over the past 30 years, with substantial yearly variations due both to changing economic conditions and differences in economic growth in different regions of the world. Historically, the annual growth in air travel has been about twice the annual growth in GDP. Even with relatively conservative expectations of economic growth over the next 10-15 years, a continued 4-5% annual growth in global air travel will lead to a doubling of total air travel during this period. In the US airline industry, approximately 100 certificated passenger airlines operate over 11 million flight departures per year, and carry over one-third of the world’s total air traffic – US airlines enplaned 745 million passengers in 2010. US airlines reported over $160 billion in total revenues, with approximately 545,000 employees and over 8,000 aircraft operating 31,000 flights per day. The economic impacts of the airline industry range from its direct effects on airline employment, company profitability and net worth to the less direct but very important effects on the aircraft manufacturing industry, airports, and tourism industries, not to mention the economic impact on virtually every other industry that the ability to travel by air generates. Commercial aviation contributes 8 percent of the US Gross Domestic Product, according to recent estimates. OVERVIEW OF THE INDIAN AIRLINE INDUSTRY Indian aviation industry is growing at 17% rate for the last few years with more than 40 million passengers have travelled in domestic sectors and more than 20 million passengers have travelled in international sectors in India in 2008. The number of airports in India has also been increased significantly with 15 international airports, 87 domestic airports, 27 civil enclaves and more than 300 small airstrips. Also air cargo is growing at a rate of 13%-14% and contributes around 0.2% of India’s GDP. Besides the year old public company Air India the major private players operating in Indian market are Jet Airways, Kingfishers, Spice Jet, Indigo, Paramount, Go Air etc. Among this Kingfisher has the largest market share of 21% closely followed by Jet Airways with 19.5% market share. Indian airline have maintained a seat factor of 70% to 80% in 2009. Aviation Industry in India is one of the fastest growing aviation industries in the world. With the liberalization of the Indian aviation sector, aviation industry in India has undergone a rapid transformation. From being primarily a government-owned industry, the Indian aviation industry is now dominated by privately owned full service airlines and low cost carriers. Private airlines account for around 75% share of the domestic aviation market. Earlier air travel was a privilege only a few could afford, but today air travel has become much cheaper and can be afforded by a large number of people. The sector deals with the transport of passenger and cargo from one place to another, using the aerial route. About 75 million passengers are use the service contributing $5.6billion every year. Around 15% growth rate is been registered in last 10 years. Growth in 2020 statement predicts handling 280 million customers by 2020 MAJOR CHANGES IN AVIATION INDUSTRY 1986: Private Sector Players permitted as Air taxi operators. Jet, Air Sahara, etc started service. 1994: Private Carriers permitted to operate scheduled services. Six operators granted license, however only Jet and Air Sahara able to service. 2003: Entry of low cost carriers. Air Deccan, Spice Jet, Go Air, Indigo. PLAYERS IN INDIAN AVIATION INDUSTRY ARE The players in aviation industry can be categorized in three groups: Public players : Indian Airlines Private players: Jet Airways, Kingfisher Airlines, Spice Jet, Air Deccan. Start up players : Omega Air, Magic Air, Premier Star Air & MDLR Airlines KINGFISHER AIRLINES UB group based in Bangalore, is a conglomerate of different companies with a major focus on the brewery (beer) and alcoholic beverages industry. The company markets most of its beer under the Kingfisher brand. The group is headed by Dr Vijay Mallya. The UB Group was founded by a Scotsman, Thomas Leishman in 1857. Kingfisher, the Group's most visible and profitable brand, made a modest entry in the sixties. During the 1950's and 60's, the company expanded greatly by acquiring other breweries. First was the addition of McDowell as one of the Group subsidiaries, a move which helped United Breweries to extend its portfolio to wines and spirits business. Strategically, the Group moved into agro-based industries and medicines when Mallya acquired Kissan products and formed a long-term relationship with Hoechst AG of Germany to create the Indian pharmaceutical company now known as Aventis Pharma, the Indian subsidiary of the global pharma major Sanofi-Aventis. The UB Group’s Brewing Entity - called United Breweries Limited (UBL) - has also assumed undisputed market leadership with a national market share in excess of 50%. Through a process of aggressive acquisition and market penetration, The UB Group today controls 60% of the total manufacturing capacity for Beer in India. Of the many private aviation companies in India, Kingfisher Airlines is one name that has established itself in a short time span as the hallmark of quality. Today the main hub of this aviation giant is at the Chattrapati Shivaji International Airport in Mumbai and its registered office is in Bangalore, India. Owned by the United Breweries group which has made rapid strides under the leadership of Vijay Mallya, Kingfisher Airlines is the top airlines in the region and has also been awarded a five star status. The company also has a low cost cousin which operates by the name of Kingfisher Red and is a pioneer in the Indian low frills airlines industry just like its bigger brother. A plane of the Kingfisher Airlines can be easily identified by the official logo of the company which is a flying kingfisher bird with red, blue and green colors forming the background. This is one of the major luxury carriers in India and its flights take off for more than 70 destinations. People in India now prefer Kingfisher over other airlines because of the remarkable on-board services. When it comes to the in-flight services, Kingfisher is simply the best. One of the key reasons of the very high popularity of Kingfisher Airlines is the fact that its entire staff is considered among the best dressed and best trained. Kingfisher also excels in a number of other areas like courteous service, cheap airfares, and a huge set of special discounts and offers. Compared to nearly every other air carrier in India, the interiors of Kingfisher aircraft are like heaven. They offer truly world-class luxurious amenities and when flying with Kingfisher you really feel special. At a number of times, Kingfisher Airlines offers cheaper airfares for the people who prefer online ticketing. Kingfisher Airlines has a website that allows not just online booking of flights but also allows you to check flight status, applicable air fare and much more.