Subject category:
Strategy and General Management
Published by:
IBS Research Center
Length: 14 pages
Data source: Published sources
Topics:
Growth of Indian aviation sector; Impact of aviation turbine fuel (ATF); Prices on airlines operation; Operational costs of the airlines; Cost structure of the airlines; Indian airline operators; Business environment; Passenger traffic growth; Bankruptcy in aviation sector; Business expansion strategy; What is fuel hedging?; Competitive strategy; Revenue model of the airlines; Business model; Industry consolidation; Government policy on aviation industry
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Abstract
In a severely competitive industry, the last straw can be a steady rise in operational costs. For Indian airline operators, who were already making losses, increased airline turbine fuel (ATF) costs meant more woes. ATF costs representing 50% of total costs in 2007 rose to 70% in 2008, triggering ticket price increases. With travellers consequently turning towards roads and railways, airline operators managed the cost revenue gap through: (1) removing travel agent commission; (2) the reduction of passenger amenities and short-haul flights; (3) job reductions; (4) deferred fleet expansion; and (5) operational collaborations between operators. Hedging options were also being examined. Industry experts opined that losses could double if prices remained at current levels. The pertinent question was how long could the Indian operators cope?
About
Abstract
In a severely competitive industry, the last straw can be a steady rise in operational costs. For Indian airline operators, who were already making losses, increased airline turbine fuel (ATF) costs meant more woes. ATF costs representing 50% of total costs in 2007 rose to 70% in 2008, triggering ticket price increases. With travellers consequently turning towards roads and railways, airline operators managed the cost revenue gap through: (1) removing travel agent commission; (2) the reduction of passenger amenities and short-haul flights; (3) job reductions; (4) deferred fleet expansion; and (5) operational collaborations between operators. Hedging options were also being examined. Industry experts opined that losses could double if prices remained at current levels. The pertinent question was how long could the Indian operators cope?