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Aviation Scenario in the Region

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Government backed initiatives like short term reduction in airport user charges ... tourism related industries such as hotels, world class malls, DSF, DSS, etc ... – PowerPoint PPT presentation

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Title: Aviation Scenario in the Region


1
Aviation Scenario in the Region
  • Presentation By
  • Pankaj Srivastava
  • Regional Manager-Gulf
  • Indian Airlines, Dubai

  • 19.9.2004

2
Aviation Scenario
  • Global Industry
  • Scenario in the Region
  • Indian Context
  • Major Issues

3
Global Industry
  • Industry Today
  • 100 years of flight in 2003
  • From 10 m passengers in 1944 to 1.6 b today
  • Estimated annual growth _at_ 4.5 approx 2.2 b by
    2010
  • Important driver of economic growth Among the
    largest industries globally
  • Highly vulnerable to external shocks

4
Global Industry
  • Recent Past
  • World Airline Industry severely tested in recent
    years
  • Global economic slowdown
  • September 11
  • Iraq conflict
  • SARS
  • 50 years of profits wiped out in 2002 itself
    Global airlines lost USD 30b between 2001 to 2003
  • Additional security measures cost airlines over
    USD 5b annually

5
Global Industry
  • Recent Past
  • Many renowned airlines closed many on verge of
    bankruptcy
  • Industry recovery initiatives include ruthless
    cost reduction 400,000 jobs slashed
    restructuring of routes other cost-cutting
    measures
  • Even in their best year, airlines made an average
    net profit of 2.9 only

6
Global Industry
  • Signs of Recovery
  • 20.1 growth during 2004 first half
  • 8.2 over same period in 2000 Thus three years
    growth is lost
  • Industry not out of the woods as yet

7
Global Industry
  • Major issues before the industry today
  • Cost structure fuel, security, etc
  • In 2004 Rising Fuel prices Every dollar per
    barrel adds USD 1b to industry costs
  • Safety
  • Security Over USD 5 b annual costs
  • User charges

8
Middle East RegionThe Star Performer
  • In spite of decline of aviation industry all over
    the world, ME region has been able to maintain
    growth.
  • 33.5 growth during Jan-Jul 2004 over previous
    year 47.8 in comparison with 2000
  • Two new airlines formed Etihad and Air Arabia
  • Less impact of the factors that affected the
    industry all over the world

9
Middle East Region
  • Growth Stimulators Economy
  • Emergence as major tourism destination ( Dubai
    Qatar making aggressive bids for tourism hub)
  • Booming construction business
  • Restructuring of key sectors finance, real
    estate, IT
  • Creation of hassle free business environment
    Adoption of free market principles

10
Middle East Region
  • Growth Stimulators Expansion
  • Aggressive capacity addition
  • Route expansion by airlines in the region
  • Formation of new airlines
  • Concentration of world class hub airports
  • Augmentation of handling capacity at airports
  • Development of Airport free zones

11
Middle East Region
  • Growth Stimulators Industry Resilience
  • Relative insulation of air transport industry
    despite 9/11, SARS, Iraq
  • Growth in intra-regional tourism offset the
    decline in the tourism to US/Europe
  • Government backed initiatives like short term
    reduction in airport user charges

12
Middle East Region
  • Growth Stimulators Role of government
  • Development of infrastructure
  • Investment in airlines, airports
  • Thrust to tourism
  • Support to tourism related industries such as
    hotels, world class malls, DSF, DSS, etc
  • Recognition - Role of airlines in economic
    development

13
Middle East India routes
  • India a major component of ME routes More than 4
    m ex-pat population in ME region belongs to
    India.
  • Feeds 6th freedom traffic of all major players in
    the region
  • Almost all Indian international airports are now
    accessible to airlines of the region.
  • Open Sky during November to March
  • India Emerging as preferred tourist destination

14
Middle East India routes
  • Growing trade links Middle-east is one of the
    largest trading region of India
  • Increased corporate India presence in the region
  • Growing economic cooperation
  • - Health care
  • - Education
  • - IT/Communication
  • - Entertainment
  • Resulting in increased opportunities in air
    transport

15
Indian Airlines in Gulf Region - Consistent growth
  • Major role in fostering air transport links
  • From 2 flights/week during 1992 to present 83
    flights a week
  • Seats offered From 300/week during 1992 to
    present 10,500/week
  • Annual Passengers From 50,000 in the beginning
    to present 800,000
  • Gulf Airports - Eight airports in five countries
  • Indian Destinations - 14
  • Present Earnings - USD 200 million

16
IAs Gulf Market Strategy
  • Direct interior connectivity Flight to home
    town
  • Appropriate aircraft
  • Low prices
  • Strong schedules Uniform market preferred
    timings, frequencies
  • Relationship -Trade, Customers
  • Strength of domestic network in India

17
Indian Airlines Future Gulf Plans
  • More destinations frequencies
  • Consolidation of existing routes
  • Development of Sharjah as hub
  • Increase in capacity deployment
  • Possibility of intra-gulf beyond
    routes

18
Indian Market Emerging Scenario
  • Deregulation major beneficiaries are regional
    airlines enjoying virtually unrestricted access
  • Trend expected to continue
  • Rapid increase in international market 14
    million during 2003 showing growth of 10
  • Growing Indian outbound tourism Dubai - an
    attractive affordable destination
  • Private domestic airlines - permitted
    international routes
  • Opportunities and challenges ahead

19
Indian Aviation Scenario Major Issues
  • Basic issues are same as those confronting global
    industry
  • However, in the Indian context more profound in
    some areas such as
  • Fuel prices 100 higher than internationally
  • User charges 100 higher than internationally
  • Taxation
  • Compulsion to operate un-economical routes no
    subsidy
  • Spurt in capacity in domestic market, impacting
    viability

20
Aviation Industry Way Forward
  • No magic formula for turnaround Needs
    series of measures to reduce costs
  • Holistic approach to fuel management, integrating
    conservation efforts, efficiencies, initiatives
    to reduce taxation, hedging, etc
  • Technology to help reduce costs, bring in
    efficiencies, simplify business processes, etc.

21
Aviation Industry Way Forward
  • No magic formula for turnaround
    Participation by all stakeholders
  • Partners in value chain Airport service
    providers can not be making net margins of 20
    when airlines are ailing
  • Restructuring To run more on business principles
    and less on politics
  • Govt role in areas such as security and safety

22
Thank you
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