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Fu
ture
Ch
alle
ng
es F
or
the
Ind
ian
Mar
ket
An
dre
w M
iller
CE
O C
entr
e fo
r A
sia
Pac
ific
Avi
atio
n
Ap
ril 2
006
- 2
-
En
viro
nm
enta
l Dri
vers
Go
vern
men
ts’ f
ocu
s o
n t
ou
rism
gro
wth
an
d r
egio
nal
dis
per
sal
sti
mu
late
eco
no
my
Rap
id l
iber
alis
atio
n o
f mar
kets
LC
C s
tart
-up
s en
teri
ng
Fla
g c
arri
ers’
lim
ited
ab
ility
to
res
po
nd
(cu
ltu
re, c
ost
str
uct
ure
,d
ecis
ion
-mak
ing
, ow
ner
ship
)
New
in
tern
atio
nal
ro
ute
s fr
om
sec
on
dar
y p
ort
s
Tra
velle
rs e
mb
race
th
e L
CC
mo
del
LC
Cs
gra
bb
ing
sig
nif
ican
t m
arke
t sh
are
Lo
wer
far
es s
tim
ula
tin
g m
ore
air
tra
vel
LC
Cs
gro
win
g t
he
mar
ket:
bu
s/tr
ain
/car
tra
velle
rs f
lyin
g
- 3
-
Wh
at s
trat
egie
s ca
n a
irlin
esp
urs
ue…
.?
Bas
is f
or
Str
ateg
y
Def
ensi
veO
ffen
sive
Gro
wth
Ret
ain
cu
sto
mer
s–
Po
ten
tial
“lo
wfa
re”
swit
cher
s–
Pre
miu
m p
ax–
Fee
der
tra
ffic
for
med
/lon
gh
aul
net
wo
rkvi
abili
ty
Co
nta
in t
he
gro
wth
of
com
pet
ito
rs–
LC
C–
Oth
ers?
Tak
e co
ntr
ol
of
mar
ket
–D
isti
nct
bra
nd
s–
Pri
ce le
ader
ship
–L
ow
est
cost
s
Cap
ture
sh
are
of
mar
ket
gro
wth
En
han
ce s
har
eho
lder
val
ue
- 4
-
… a
nd
wh
y d
o t
hey
fin
d it
so
har
d?
Bar
rier
s to
Imp
lem
enta
tio
n
Def
ensi
veO
ffen
sive
Gro
wth
Competency
Capital
Speed
- 5
-
Wh
at a
re t
he
mar
ket
imp
acts
on
Leg
acy
Fu
ll S
ervi
ce C
arri
ers
aro
un
d t
he
wo
rld
?
Lo
ss o
f h
om
e d
om
esti
c m
arke
t to
LC
C s
tart
-up
s
Lo
ss o
f in
bo
un
d in
tern
atio
nal
mar
ket
shar
e to
oth
er N
ewW
orl
d C
arri
ers
du
e to
der
egu
lati
on
, e.g
. Em
irat
es
Pre
ssu
re o
n h
om
e fl
ag c
arri
ers
to k
eep
pac
e in
inve
stin
g in
new
cap
acit
y
Mo
vem
ent
away
fro
m s
ing
le h
om
e ca
rrie
r in
tern
atio
nal
hu
bw
ith
res
ulta
nt
net
wo
rk s
pre
ad i
n d
eman
d
Red
uct
ion
in y
ield
s co
up
led
wit
h h
igh
er le
gac
y co
sts
(lab
ou
r co
ntr
olle
d)
- 6
-
Gro
wth
of
No
n H
ub
Air
po
rts
Pas
sen
ger
gro
wth
(ye
ar-o
n-y
ear)
at
Ind
ia’s
to
p 1
1 ai
rpo
rts
(Ap
r-05
to
Feb
-06)
01234567
Hyder
abad
Amris
tar Ban
galore Ahm
edab
ad
Delhi
Kolkat
aCoch
in Trivan
drum
GoaM
umbai
Chennai
Millions
0%5%10%
15%
20%
25%
30%
35%
40%
Inte
rnat
iona
l Pax
Gro
wth
- 7
-
Ho
w a
re h
om
e le
gac
y fl
ag c
arri
ers
rest
ruct
uri
ng
?
Reg
ain
ing
co
ntr
ol o
f th
eir
ho
me
do
mes
tic m
arke
t b
y in
tro
du
cin
gL
CC
op
erat
ion
s, e
.g.
Qan
tas
wit
h J
etst
ar
Res
tru
ctu
rin
g t
he
cost
bas
e o
f th
e le
gac
y ca
rrie
r d
om
esti
co
per
atio
n in
to “
Leg
acy
Lit
e”, e
.g. A
ir L
ing
us
and
Air
New
Zea
lan
d
Res
tru
ctu
rin
g t
he
inte
rnat
ion
al c
ost
bas
e (n
on
-fu
el)
to 2
0-30
%lo
wer
th
an c
urr
ent
cost
s, e
.g.
SQ
, C
X, B
A
Pro
tect
ing
sec
on
dar
y p
ort
s as
wel
l as
pri
mar
y h
ub
s, e
.g. Q
F, L
H,
NZ
Mer
gin
g o
per
atio
ns
to s
trip
ou
t co
sts,
e.g
. MH
an
d A
ir A
sia
Mer
gin
g a
irlin
es t
o a
chie
ve b
enef
its
of s
cale
, e.g
. AF
/KL
M a
nd
Air
Sah
ara/
Jet
Air
way
s
- 8
-
Wh
ere
will
th
e co
st c
om
pre
ssio
nco
me
fro
m f
or
leg
acy
carr
iers
?
01234567
Fu
llS
ervi
ceC
arri
er
Sea
tD
ensi
tyA
ircr
aft
Util
isat
ion
Peo
ple
Sal
es &
Mar
ketin
gU
ser
Ch
arg
esA
ircr
aft
rela
ted
Ove
rhea
dL
ow
Co
stC
arri
er
Aro
un
d h
alf
of
the
cost
dif
fere
nti
al c
om
es f
rom
mo
re s
eats
an
d b
ette
rai
rcra
ft u
tili
sati
on
Sim
ple
str
uct
ure
;fe
w s
tep
s to
cust
om
er
Inn
ov
ativ
eap
pro
ach
es
to d
irec
tse
llin
g
1
2
New
er a
ircr
aft
(les
sm
ain
ten
ance
, bet
ter
fuel
bu
rn, e
tc)
can
als
o h
elp
3
4
10 5
- 9
-
Wh
at d
oes
th
is m
ean
fo
r A
ir In
dia
and
Ind
ian
Air
lines
an
d t
he
Ind
ian
Go
vern
men
t as
a s
har
eho
lder
?
Th
e In
dia
n m
arke
t h
as t
rem
end
ou
s g
row
th o
pp
ort
un
itie
s
Th
e g
ove
rnm
ent
po
licie
s su
pp
ort
lon
g-t
erm
gro
wth
Th
e In
dia
n le
gac
y ca
rrie
rs a
re n
ot
wel
l pla
ced
to
“cr
eate
valu
e” f
rom
th
is d
ereg
ula
tio
n
Du
plic
atio
n o
f g
ove
rnm
ent
cap
ital
in t
he
do
mes
tic a
nd
inte
rnat
ion
al m
arke
t as
so
me/
mo
st c
ust
om
ers
are
the
sam
e
Th
e G
ove
rnm
ent
inve
sto
r n
eed
s to
rat
ion
alis
e it
sap
plic
atio
n o
f ca
pit
al in
th
e d
om
estic
an
d in
tern
atio
nal
mar
kets
no
t o
nly
to
sto
p lo
sses
bu
t g
row
the
mar
ket
- 10
-
Air
Ind
ia L
osi
ng
Gro
un
d in
Inte
rnat
ion
al G
row
th
Inte
rnat
ion
al p
asse
ng
er g
row
th,
Air
In
dia
vs
To
tal
Ind
ia
-5%
0%
5%
10%
15%
20%
2000/01
2001/02
2002/03
2003/04
2004/05
Tota
l in
tern
atio
nal
Pax
Air I
ndia
Pax
- 11
-
Wh
at d
oes
th
e In
dia
n G
ove
rnm
ent
do
?
Mer
ge
the
do
mes
tic
and
inte
rnat
ion
al o
per
atio
ns
at a
lo
wer
co
stb
ase
(2+
2=3)
with
hig
her
rev
enu
e p
ote
nti
al (
2+2=
5)
Man
y h
isto
rica
l pre
ced
ents
: B
OA
C/B
EA
= B
A, Q
anta
s/A
ust
ralia
nA
irlin
es =
Qan
tas,
NA
C/A
ir N
ew Z
eala
nd
All
mer
ger
s to
ok
too
lon
g a
nd
did
n’t
giv
e q
uic
k w
ins
Th
e In
dia
n G
ove
rnm
ent
will
ben
efit
fro
m h
ind
sig
ht
fro
m t
hes
eg
lob
al m
erg
ers
Th
e b
alan
ce s
hee
t st
ress
on
th
e n
atio
nal
car
rier
will
be
alle
viat
ed
A c
oo
rdin
ated
air
craf
t, n
etw
ork
an
d b
ran
d p
osi
tion
ing
will
be
ach
ieve
d w
hic
h w
ill b
e g
oo
d f
or
tou
rism
- 12
-
Th
e w
ork
of
CA
PA
Co
nsu
ltin
g
Pro
du
cts
–L
egac
y C
arri
er R
estr
uct
uri
ng
–L
CC
Sta
rt-u
ps
–A
irlin
e M
erg
ers,
Acq
uis
itio
ns
and
Jo
int
Ven
ture
s
Geo
gra
ph
ies
–A
fric
a-
Au
stra
lia–
Ind
ia-
Ind
on
esia
–Ja
pan
- N
ew Z
eala
nd
–M
alay
sia
- S
ing
apo
re
Ski
lls–
CE
O/M
D/C
OO
–A
ll co
nsu
ltan
ts h
ave
han
ds-
on
avi
atio
n e
xper
ien
ce–
CA
PA
dat
a b
ase
pro
vid
es u
nri
vale
d m
arke
t in
telli
gen
ce
- 13
-
Th
e E
nd