born2rule
July 31st, 2007, 10:59 PM
indian aviation industry
frnds this is not a project...but this can help u in studying the service sector
Finally, after loads of denials, Captain Gopinath (earlier MD of Air Deccan and now the Chairman) announced on May 31st, 2007, that a 26% stake of his airline has been sold to Vijay Mallya-owned UB Group. It was indeed a marriage of unequals.
The flamboyant Mallya runs India's newest full-cost carrier (in fact when a flurry of low cost carriers were entering the market, he decided to go the other way), and is known for providing the best facilities to his passengers, while Air Deccan is known for its cost-cutting measures.
The two airlines' business models seem to be diametrically opposite and probably this is why these will not be merged, and continue to be run as separate entities, with Vijay Mallya's men going on the board of Air Deccan. In fact if the market share of the two entities is added, it exceeds that of the Jet-Sahara combine.
It may not sound like good sense that Vijay Mallya bought a heavy loss-making airline, but this could just be the pill that the doctor ordered to turn the fortunes of Air Deccan, and in fact of all the other low-cost carriers. This deal is all set to bring an end to the fierce price wars among various low-cost airlines (probably this is why on the day of this deal, a jump was seen in the share prices of Spice Jet and Jet Airways).
More To Come
It surely is consolidation time for the Indian aviation industry with three deals coming in quick succession - Jet-Sahara, Kingfisher-Deccan, and the much awaited Air India-Indian Airlines merger which has already been cleared by the Union cabinet. And as I write this, media reports suggest that there could be a couple more deals in the offing.
It could just be a three-way race to grab a stake in India's No. 2 low-cost airline - Spice Jet - which holds an 8% share in the Indian market. Kingfisher, Jet & Paramount Airways (a South India centric business-class airline run by the promoters of Paramount Textiles) may all soon be fighting it out for a controlling stake in Spice Jet.
Also, it has been now a few days that rumours are going around that the Wadia Group promoted Go Air may sell a stake to Paramount. Media reports suggest that Go Air's MD Jeh Wadia is not ready to exit the aviation business just as yet, but is open to selling a 26% stake.
The Panacea for Indian Aviation Industry
This consolidation spree could well be the panacea for Indian aviation industry where almost all the airlines were bleeding badly, thanks to fierce price wars just to grab market shares. This dog-fight had indeed made them too short-sighted and led them to taking huge losses. Even full service airlines like Jet had turned into a loss-making one. All this can be attributed to the viral concept of free-ticketing that hit the Indian aviation sector, courtesy the low cost carriers.
Free Tickets: A Route to Bankruptcy
Free Tickets is a concept which is now seen pretty frequently in the Indian aviation sector. Ever since Air Deccan was launched in 2003, tickets at low prices seem to have been in fashion!
All the other low-cost airlines have followed suite. Lakhs of free tickets are on offer. The passenger just needs to pay taxes on it (which come to somewhere around INR 1200) and the passenger gets a ticket to fly a few months from now. In the recent past, Air Deccan has offered as many as 11 lakh free tickets.
The benefit that these tickets provide to an airline is instant money to use up. If in one 'issue' of 3 lakh tickets, the airline manages to sell off two thirds (2 lakhs) of these tickets "free", the instant money that the company can make is around INR 24 crores. This money is immediately available for use as their working capital.
But all this may just even seem to be utter short-sightedness and a new way to accumulate losses. For instance, as recently Vijay Mallaya commented about Air Deccan - The company gets average revenues per passenger as Rs. 2600 while each passengers cost comes out to be around Rs. 2900. If that is the case then just to get instant money to keep the airline's day-to-day business running, the company is giving away free tickets, it is nothing but sheer short-sightedness of running a business. (It is noteworthy that Air Deccan is not the only one which is offering cheap or free tickets, it is a practice being followed across the low-cost carrier segment)
Passengers Dish Out More
For the passengers, this era of consolidation in the Indian aviation sector implies one main thing - An Increase in Fares!
No more free tickets! Soon after getting the 26% stake in Air Deccan, Vijay Mallya told the media that Air Deccan will no longer sell tickets at a loss. He added that an INR 500 increase in fares will be enough to convert Air Deccan into a profit making airline.
Airliners Win
In the end, the winners will be the promoters of various airlines who are set to convert their loss-making ventures into money-spinners, courtesy the raised fares.
All one would like to see now is where will this consolidation spree halt?
http://www.coolavenues.com/know/gm/shekhar-aviation-3.php
frnds this is not a project...but this can help u in studying the service sector
Finally, after loads of denials, Captain Gopinath (earlier MD of Air Deccan and now the Chairman) announced on May 31st, 2007, that a 26% stake of his airline has been sold to Vijay Mallya-owned UB Group. It was indeed a marriage of unequals.
The flamboyant Mallya runs India's newest full-cost carrier (in fact when a flurry of low cost carriers were entering the market, he decided to go the other way), and is known for providing the best facilities to his passengers, while Air Deccan is known for its cost-cutting measures.
The two airlines' business models seem to be diametrically opposite and probably this is why these will not be merged, and continue to be run as separate entities, with Vijay Mallya's men going on the board of Air Deccan. In fact if the market share of the two entities is added, it exceeds that of the Jet-Sahara combine.
It may not sound like good sense that Vijay Mallya bought a heavy loss-making airline, but this could just be the pill that the doctor ordered to turn the fortunes of Air Deccan, and in fact of all the other low-cost carriers. This deal is all set to bring an end to the fierce price wars among various low-cost airlines (probably this is why on the day of this deal, a jump was seen in the share prices of Spice Jet and Jet Airways).
More To Come
It surely is consolidation time for the Indian aviation industry with three deals coming in quick succession - Jet-Sahara, Kingfisher-Deccan, and the much awaited Air India-Indian Airlines merger which has already been cleared by the Union cabinet. And as I write this, media reports suggest that there could be a couple more deals in the offing.
It could just be a three-way race to grab a stake in India's No. 2 low-cost airline - Spice Jet - which holds an 8% share in the Indian market. Kingfisher, Jet & Paramount Airways (a South India centric business-class airline run by the promoters of Paramount Textiles) may all soon be fighting it out for a controlling stake in Spice Jet.
Also, it has been now a few days that rumours are going around that the Wadia Group promoted Go Air may sell a stake to Paramount. Media reports suggest that Go Air's MD Jeh Wadia is not ready to exit the aviation business just as yet, but is open to selling a 26% stake.
The Panacea for Indian Aviation Industry
This consolidation spree could well be the panacea for Indian aviation industry where almost all the airlines were bleeding badly, thanks to fierce price wars just to grab market shares. This dog-fight had indeed made them too short-sighted and led them to taking huge losses. Even full service airlines like Jet had turned into a loss-making one. All this can be attributed to the viral concept of free-ticketing that hit the Indian aviation sector, courtesy the low cost carriers.
Free Tickets: A Route to Bankruptcy
Free Tickets is a concept which is now seen pretty frequently in the Indian aviation sector. Ever since Air Deccan was launched in 2003, tickets at low prices seem to have been in fashion!
All the other low-cost airlines have followed suite. Lakhs of free tickets are on offer. The passenger just needs to pay taxes on it (which come to somewhere around INR 1200) and the passenger gets a ticket to fly a few months from now. In the recent past, Air Deccan has offered as many as 11 lakh free tickets.
The benefit that these tickets provide to an airline is instant money to use up. If in one 'issue' of 3 lakh tickets, the airline manages to sell off two thirds (2 lakhs) of these tickets "free", the instant money that the company can make is around INR 24 crores. This money is immediately available for use as their working capital.
But all this may just even seem to be utter short-sightedness and a new way to accumulate losses. For instance, as recently Vijay Mallaya commented about Air Deccan - The company gets average revenues per passenger as Rs. 2600 while each passengers cost comes out to be around Rs. 2900. If that is the case then just to get instant money to keep the airline's day-to-day business running, the company is giving away free tickets, it is nothing but sheer short-sightedness of running a business. (It is noteworthy that Air Deccan is not the only one which is offering cheap or free tickets, it is a practice being followed across the low-cost carrier segment)
Passengers Dish Out More
For the passengers, this era of consolidation in the Indian aviation sector implies one main thing - An Increase in Fares!
No more free tickets! Soon after getting the 26% stake in Air Deccan, Vijay Mallya told the media that Air Deccan will no longer sell tickets at a loss. He added that an INR 500 increase in fares will be enough to convert Air Deccan into a profit making airline.
Airliners Win
In the end, the winners will be the promoters of various airlines who are set to convert their loss-making ventures into money-spinners, courtesy the raised fares.
All one would like to see now is where will this consolidation spree halt?
http://www.coolavenues.com/know/gm/shekhar-aviation-3.php