A|r Deccan

Imp|ement|ng the Low Cost

Mode| |n Ind|a
CASL S1UD
A|r Deccan
Imp|ement|ng the Low Cost
Mode| |n Ind|a
CASL S1UD
Made 8y Group 11
kach|t 1|war|
|yush kumar kaghav
Gaurav kumar Agarwa|
anka[ Ia|n
Nam|t mod|
Devendra 1adh|ya|
k k Son|
Made 8y Group 11
kach|t 1|war|
|yush kumar kaghav
Gaurav kumar Agarwa|
anka[ Ia|n
Nam|t mod|
Devendra 1adh|ya|
k k Son|
1he lndlan
economy has
grown aL an
average raLe of
around 8 ln Lhe
lasL decade 1he
rlse ln buslness
and lelsure Lravel
(boLh domesLlc
and lnLernaLlonal
Slnce 2003
when low fare
Lravel ln lndla
was ushered ln a
number of low
cosL carrlers
(LCC) have
enLered Lo serve
Lhls fasL growlng
markeL
Powever all of
Lhe LCC carrlers
andwlLh rare
excepLlons
even Lhe full
servlce carrlers
(lSC) charglng
hlgher fares have
been maklng
losses
CperaLlng a
commerclal
alrllne ln lndla so
far has noL been
a proflLable
buslness
An Cvervlew
Ma[or p|ayers |n the Industry
os|t|on|ng of D|fferent Carr|ers
8CCM AND 8US1 IN INDIAN AVIA1ICN
INDUS1k
Mooopoly of
Alt loJlo ooJ
loJloo Altlloes
1be
metqeoce of
o New loJloo
Altlloe loJostty
lo 200J
coptolo
Coplootbs
stotteJ Alt
ueccoo
1bos beqoo tbe
boom phose lo
tbe oltlloes
loJostty
esttoctotloq of tbe loJostty
eLSahara
merger
klngflsherAlr
ueccan
merger
Alr lndla
lndlan Alrllnes
merger
9olnL Lo polnL servlce
uo noL provlde frllls
Mlnlmum number of alr hosLesses on Lhe fllghL
8emovlng buslness class sLorage space for Lhe meals and
llmlLed seaL plLch
do noL lssue LlckeLs Lo 9assengers
1ry Lo mlnlmlze caplLal cosLs and cosLs of Lhe crew and
hangerage
Save on dlsLrlbuLlon cosLs
Low Cost Carr|ers
Alr ueccan
% mpowerlng every lndlan Lo fly
V|s|on
% 1o demysLlfy alr Lravel by provldlng
rellable low cosL and safe Lravel Lo
Lhe common man by consLanLly
drlvlng down Lhe fares as an on golng
mlsslon
M|ss|on
A|r Deccan's target|ng A|r Deccan's target|ng
1he 8us|ness Strategy
ponsion
P/ons
5troteqies for luture sustenonce
Alrllnes no of alrcrafLs no of lllghLs
(dally)
uLlllzaLlon of
alrcrafL
(lllghLs/AlrcrafL)
Average fleeL
age (ln years)
Alr lndla 108 119
eL Alrways 87 400 4397 43
klngflsher Alrllnes 73 218 2906 22
eLLlLe 24 230 10416 63
SweaLlng lLs asseLs SweaLlng lLs asseLs
no lrllls no lrllls
1hls means LhaL lL does noL offer any complemenLary servlces offered by
oLher fullservlce alrllnes
1hls means LhaL lL does noL offer any complemenLary servlces offered by
oLher fullservlce alrllnes
CompllmenLary servlces lnclude mulLlculslne food alrporL lounges
magazlnes enLerLalnmenL eLc
CompllmenLary servlces lnclude mulLlculslne food alrporL lounges
magazlnes enLerLalnmenL eLc
lncur noL only Lhe baslc cosL of food buL also Lhe cosL of oven
mlcrowave preheaLed food cablns and servlng Lrolleys
lncur noL only Lhe baslc cosL of food buL also Lhe cosL of oven
mlcrowave preheaLed food cablns and servlng Lrolleys
Moreover Lhe alrcrafL becomes llghLer as a resulL of offloadlng of
heaLlng appllances whlch lncreases Lhe fuel efflclency of Lhe alrcrafL
Moreover Lhe alrcrafL becomes llghLer as a resulL of offloadlng of
heaLlng appllances whlch lncreases Lhe fuel efflclency of Lhe alrcrafL
1hls reduces cosLs assoclaLed wlLh food appllances heaLlng and servlng
(sLewards and sLewardess) Lhus resulLlng ln ma[or cosLs savlngs
1hls reduces cosLs assoclaLed wlLh food appllances heaLlng and servlng
(sLewards and sLewardess) Lhus resulLlng ln ma[or cosLs savlngs
Cnllne booklng and lv8 LlckeLlng Cnllne booklng and lv8 LlckeLlng
llmlnaLes Lhe need for commlsslons payable Lo
mlddlemen
CbvlaLes Lhe need of LlckeLlng agenLs and addlLlonal
workers Lhus cuLLlng down Lhe wage blll
1he paperwork assoclaLed wlLh LransacLlons ls
conslderably reduced
1he LlckeLs are senL onllne Lo Lhe emall address of Lhe
cusLomer and Lhe cusLomer can geL a prlnLouL of Lhe
LlckeL hlmself
CuLs Lhe cosL of LransacLlons resulLlng ln lower LlckeL
prlces
W 1he LlckeLs are prlced accordlng Lo Lhe
avallablllLy and demand of LlckeLs
W 1he marglnal cosL of flylng an addlLlonal
cusLomer ls very low
W lL earns lLs revenues noL only from Lhe sale of
LlckeLs buL also from Lhe sale of food lLems
and any oLher servlce for whlch lL charges over
and above Lhe prlce of Lhe LlckeL
nomic Pricinq
1he alrllne plans Lo offer
Lhe fuselage Lhe exLerlor
of Lhe alrcrafL body and
lnfllghL space for
adverLlslng
lL ls expecLed Lo generaLe
revenues worLh 8s 3060 lakh
a monLh from Lhe move
AdverLlslng revenues AdverLlslng revenues
Low cosL or
value carrler ??
Low cosL or
value carrler ??
P@ 5@@ - D5@, P@ 5@@ - D5@,
lD5 lD5
1o offer lLs passengers a conslsLenL quallLy
assured and Llme efflclenL performance aL
affordable fares
1argeLs Lhe 1sL 2nd and 3rd A/C 8allway
passengers and volvo 8us 9assengers
lares 40 lower Lhan LradlLlonal alrllnes
Pu8 MCuL Pu8 MCuL
W mulaLes polnLLopolnL sLraLegy of SouLh
WesL Alrllnes
W flrsL lncreases fllghLs ln Lhe exlsLlng neLwork
spreads cosLs across dlfferenL overheads lL uLlllze
crew fuel and alrcrafL more
W used mosLly ln meLros and 1ler2
Plgher lncome levels hlgher occupancy raLe
8eLLer lnfrasLrucLure
CCM9A8A1lv AnAL?SlS CCM9A8A1lv AnAL?SlS
8eposlLlonlng Lo value Carrler Alrllnes
klngflsher 8ed
CoAlr Lo CoComforL
eLLlLe
AIRLINE TYPES OF AIRCRAFTS
JetLite Boeing 737 series and Canadian
Regional Jets 200 Series.
GoAir Airbus A320s (leased and
purchased)
SpiceJet Boeing 737-800
Boeing 737-900
Indigo Airbus A320
AirDeccan/Kingfisher Red 48 and 72 seater ATRs on the
regional routes and the 180-seater
A320 on the trunk routes.
2. Fleet Ot Alrcratt Utlllzeo
AIRLINE MODEL ADOPTED
JetLite Point to point between metros,
hub-n-spoke for non-metros to
metros and vice-versa or between
non-metros
GoAir Hub/Point-to-point model
SpiceJet Point-to-point, and regional hub-n-
spoke
Indigo Point-to-point model
AirDeccan/Kingfisher Red Hub-n-spoke model
. Mooels aoopteo
Low cost v]s |ow fare
W Splce eL has lowesL unlL cosL aL 62 cenLs per ASk
Comparable wlLh SouLhwesL asy eL and eL 8lue
1wlce LhaL of Alr Asla wlLh unlL cosL of 3 cenLs per ASk
W usually LCCs provlde polnLLopolnL servlce whlle lSCs work on
hubandspoke sysLem
Alr ueccan has devlaLed from Lhe LCC buslness model
has a hubandspoke model Lo connecL meLros wlLh Lowns
1hls has lncreased lLs cosLs
lll ltooke Moooqloq ultectot of leoJloq oltlloe lovestmeot
fltm loJlqo lottoets
1bete ls oot o sloqle oltlloe lo loJlo tbot opetotes o ttoe low cost
sttoctote ooly lowfote ooJ lowmotqlo
Is the LCC bus|ness mode| |n Ind|a
susta|nab|e?
W Lowfare alrllnes have common feaLures
asy Lo repllcaLe and are lnLegral Lo LCC ln lndla As a resulL Lhey do noL
offer a susLalnable compeLlLlve advanLage
W 1yplcally a lowfare alrllne chooses rouLes LhaL are noL already operaLed
by oLher lowfare alrllnes
Peadon compeLlLlon prlce war beneflLs consumers noL proflLable
Lo Lhe alrllnes
W CovernmenL has Lo lmprove alrporL lnfrasLrucLure lf Lhls model ls Lo
succeed
lncrease ln alr Lrafflc noL maLched wlLh Lhe lncrease ln Lhe lnfrasLrucLure
leads Lo long halLs and walLlng of Lhese planes delays besldes loss of
preclous alr fuel
W ShorLhaul servlces lmpose cosL dlsadvanLages
Culck Lurnarounds Lo achleve hlgh uLlllzaLlon become crlLlcal
W Alr fuel consLlLuLe Lhe largesL share of expenses
1he underdeveloped commodlLy hedglng markeL puLs a sLumbllng
block on Lhese companles Lo hedge agalnsL flucLuaLlng prlces of alr
fuel
W 1he cosL of procurlng new fleeL AlrcrafLs need Lo have aL leasL 80
occupancy of seaLs Lo be vlable ln long run
MusL explore lowcosL rouLes less Llme Laklng rouLes raLher Lhan
haullng on Lhe same popular rouLes lf Lhey wlsh Lo remaln vlable ln
long run
W 8equlremenL for Lralned commanders Lo operaLe Lhese fllghLs
Severe demand supply gap prlce hlke lncreaslng cosL
uture Cut|ook
W Chased markeL share le revenue maxlmlzaLlon and forced Lhe
lncumbenLs Lo maLch Lhelr low prlces
Whlle revenue maxlmlzaLlon ls a good shorL Lerm sLraLegy Lo enLer Lhe
markeL sooner or laLer LCCs have Lo be become proflLable
2 ouLcomes elLher Lhey go busL ln a markeL shakeouL or Lhey
merge/geL acqulred by oLher alrllnes
Near term cha||enges
8eallzlng Lhe beneflLs of Lhe consolldaLlons
8eallgnlng Lhelr compeLlLlve sLraLegles Lo become proflLable
9ursulng aggresslve cosL reducLlon
1he avallablllLy of caplLal
ConsLralnLs due Lo poor lnfrasLrucLure for avlaLlon ln lndla
Not oew omooq fotelqo lowcost cottlets bove eltbet metqeJ ot
solJ off tbelt bosloess Joe to looqtoo oosostolooblllty