India
South Korea
A Global Country Study Report On “A Comparative Study of Airlines Industry in India & South Korea” Submitted to Institute Code: 705 Institute Name: C.K. Shah Vijapurwala Institute of Management
Under the Guidance of Dr. Kunjal Sinha (Associate Professor, CKSVIM)
In partial Fulfilment of the Requirement of the award of the degree of Master of Business Administration (MBA) Offered By Gujarat Technological University Ahmedabad Prepared by: Kaushal Sharma (127050592096) Ravi Sharma (127050592097) Urvashi Sharma (127050592098) Adil Shekh (127050592099) Harsh Sheth (127050592100) Sneha Chaudhary (127050592102) Students of MBA Sem.-IV (Batch-4 2012-2014) Month & Year: April 2014 1
Global Country Study Report
India
South Korea
INSTITUTE CERTIFICATE
This is to Certified that Global Study and Report titled is the bonafide work of attached student list with enrollment numbers, who have carried out their research under our supervision. We also certify further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate. We have also checked the plagiarism extent of this report which is 9.8 % and the separate plagiarism report in the form of html /pdf file is enclosed with this.
Signature of the Faculty Guide Dr. Kunjal Sinha (Associate Professor, CKSVIM)
Signature of Director Dr. Rajesh Khajuria (Director, CKSVIM)
2
Global Country Study Report
India
South Korea
PLAGIARISM REPORT
The Plagiarism is being check by online service provider i.e. www.oaps.eu.in The Plagiarism report that has being generated is attached separately
3
Global Country Study Report
India
South Korea
PREFACE
With the respect & desire, we have pleasure to submit my report to Gujarat Technological University. MBA is a specialized course. The main objective of doing MBA is developing the Managerial skills, which helps us to become a decent manager in the life. In the Managerial field one cannot create success stories if he is not a good learner. One needs to be a good learner to sharpen his facts in the specific field to accomplish and achieve desired goals and heights. As a part of our MBA curriculum, we are required to do Global Country Project to gain the knowledge of trading between India & South Korea. This is a report related to my Global Country Project in South Korea on the topic “A COMPARATITIVE STUDY OF AIRLINES INDUSTRY IN INDIA & SOUTH KOREA”. We undertake knowledge regarding relationship between India & South Korea. In this report we have compiled the information pertaining to history of Countries and their relationship. So, the project is really helpful to generate those abilities and emerging the learning process. This is the key reason why we have taken study of this industry.
4
Global Country Study Report
India
South Korea ACKNOWLEDGEMENT
It is truly said, “By the time we realize the value of the people around us, it might be the Time for them to leave… So we should never miss a chance to say…THANK YOU.” Through this acknowledgement, we express our sincere gratitude towards all those people have helped me in the preparation of this project, which has been a learning experience. We would like to express gratitude to DR. RAJESH KHAJURIA (Director, CKSVIM) for providing us the opportunity regarding the project. We are also grateful to DR. KUNJAL SINHA (Associate Professor, CKSVIM) for her continuous and deliberate discussion on the topic and indeterminable burden taken by him in helping us during the project. We are also grateful to all faculty members for giving guidance for doing project. KAUSHAL SHARMA RAVI SHARMA URVASHI SHARMA ADIL SHEKH HARSH SHETH SNEHA CHAUDHARY
5
Global Country Study Report
India
South Korea STUDENT’S DECLARATION
We following
students, hereby declare that the Global Country Study Report titled
“Comparative Study of Airlines Industry Between India & South Korea” is a result of our own work and our indebtedness to other work publications, references, if any, have been duly acknowledged. If we are found guilty of copying any other report or published information and showing as our original work, or extending plagiarism limit, we understand that we shall be liable and punishable by GTU, which may include Fail in examination, repeat study & resubmission of the report or any other punishment that GTU may decide.
Names & Enrollment numbers:Enrollment No.
Name
127050592096
KAUSHAL SHARMA
127050592097
RAVI SHARMA
127050592098
URVASHI SHARMA
127050592099
ADIL SHEKH
127050592100
HARSH SHETH
127050592102
SNEHA CHAUDHARY
Place: - Vadodara
6
Global Country Study Report
Signature
Date: - 02-04-14
India
South Korea SUBJECT INDEX
CHAPTER No
PARTICULARS
PAGE NOS.
SUMMARY OF PART-I REPORT (MBA SEMESTER-III)
8-16
SUMMARY OF PART-II REPORT (MBA SEMESTER-IV)
17-25
PART II:- MICRO ANALYSIS: COMPANIES TOWS ANALYSIS, BUSINESS OPPORTUNITIES, STRATEGIES & PROJECTION OF IMPORT & EXPORTS 1. INTRODUCTION OF MAJOR PLAYER IN AIRLINES INDUSTRY OF 26 RESPECTIVE COUNTRIES 27-29 KOREAN AIR 30-31 JET AIRWAYS 2. SWOT ANALYSIS OF MAJOR PLAYER IN AIRLINES INDUSTRY OF 32 RESPECTIVE COUNTRIES 33 INTRODUCTION TO SWOT ANALYSIS 34 SWOT OF KOREAN AIR 35 SWOT OF JET AIRWAYS 36 COMPARATIVE OF TOWS OF KOREAN AIR & JET AIRWAYS 37 TOWS ANALYSIS IN GENERAL FOR AIRLINES INDUSTRY 3. INVESTMENT, IMPORT & EXPORT 38 39-40 INVESTMENT DATA 41-42 IMPORT & EXPORT OF SOUTH KOREA 43-44 IMPORT & EXPORT OF INDIA 4. POLICIES AND NORMS OF INDIA AND ROK 45-52 5. BUSINESS OPPORTUNITIES IN AIRLINES SECTOR 53-56 6. CHALLENGES TO AVIATION INDUSTRY 57-62 7. STRATEGIES & FORECASTING FOR AVIATION INDUSTRY 63 64-68 INNOVATION(WINNING) STRATEGY 69-71 FORECATING OF FUTURE 8. CONCLUSION, FINDINGS & SUGGESTIONS FOR 72-74 AIRLINES SECTOR ANNEXURE & BIBLOGRAPHY 75-81
7
Global Country Study Report
India
South Korea
EXECUTIVE SUMMARY (Part-I) As an MBA student it is great opportunity for us to expose our global countries knowledge given by Gujarat Technology University as Global Country Project. We have undertaken the Global Project for India & South Korea specifically in Airlines Industry. Today with the booming economy of India & South Korea, it has experienced an annual GDP growth rate of 20%. And South Korea’s economy is likely to be driven to sustained growth during 2012 – 2017 by abundant and increasingly skilled labour, high rate saving, healthy export business and potential urban growth. Keeping this in mind the study conducted is about one of the flourishing Industry of South Korea: - Airlines Industry. The Part -1 of report is all about the study of India & South Korea on History, Geographical Area, and Economy. ‘Current market scenario of South korea’ which depicts the Foreign Direct Investment (FDI) to be the driving force for South Korea’s on-going economic growth, the ‘STEEPLED Analysis ’ of India & South Korea identifies issues that affect the country’s performance as whole and particularly the Airlines Industry. The main objective of doing the STEEPLED Analysis of both India & South Korea for Country as whole and particular Airlines Industry to know the similarities and difference between the countries on the basis of following factors i.e. Socio-cultural, technological, economical, environment, political, legal, ethical, and demographical. It also includes analysis between the countries and trade relationship between the India & South Korea. Before taking the knowledge of particularly Airlines Industry it is necessary to get the knowledge of economy as a whole of both the countries. First of all we start with the ‘India”.
In the history of India large-scale communal violence took place before and after the subcontinent partition into two separate states - India and Pakistan. 8
Global Country Study Report
India
South Korea
The neighbouring nations have fought three wars since independence, the last of which was in 1971 and resulted in East Pakistan becoming the separate nation of Bangladesh.
It is a developing country.
Location: Southern Asia, Bordering The Arabian Sea And The Bay Of Bengal, Between Burma And Pakistan
Area: Total: 3,287,263 Sq. Km
Land: 2,973,193 Sq. Km
Water: 314,070 Sq. Km
Its capital is New Delhi & largest city is Mumbai: - 13,922,125 Sq. Km.
Its Government is Federal Parliamentary constitutional republic.
Its total population is 1,220,800,359 (July 2013 est.) & population growth rate is 1.28%.
Its GDP (Purchasing Power Parity) is 5.225 (Billion $) in the year 2012.
The country which we are going to compare with India is “South Korea”.
In the History of South Korea we came to know that it is an independent kingdom for much of its long history, Korea was occupied by Japan beginning in 1905 following the Russo-Japanese War. In 1910, Tokyo formally annexed the entire Peninsula. Korea regained its independence following Japan's surrender to the United States in 1945.
After World War II, a democratic-based government (Republic of Korea, ROK) was set up in the southern half of the Korean Peninsula while a communist-style government was installed in the north (Democratic People's Republic of Korea, DPRK). During the Korean War (1950-53), US troops and UN forces fought alongside ROK soldiers to defend South Korea from a DPRK invasion supported by China and the Soviet Union.
It is a developed country.
Location: Eastern Asia, Southern Half Of The Korean Peninsula Bordering The Sea Of Japan And The Yellow Sea
Area: Total: 99,720 Sq. Km Land: 96,920 Sq. Km Water: 2,800 Sq. Km 9
Global Country Study Report
India
South Korea
Its capital is Seoul & largest city is also Seoul: - 10,464,051 Sq. Km.
Its Government is Unitary Parliamentary constitutional republic.
Its total population is 48,955,203 (July 2013 est.)& population growth rate is 0.18%.
Its GDP (Purchasing Power Parity) is 1,625 (Billion $) in the year 2012.
After discussing regarding the economy of both the countries now we are going to discuss regarding the Airlines Industry which we have selected as our Global Country Project. Airlines Industry provide huge amount of income to the country. So, Government is all involved in developing and maintaining that Industry. In India Airlines Industry are runned by major players like Air India, Indian Airlines, jest Airways, Spice Jet, Indigo Airlines etc. There management includes both public and private sectors. In our report we have also discussed regarding the airports and its descriptions are as follows.
Total number of airports in India is 346 nos.
Airports - with paved runways
Total: 253 nos. over o 3,047 m: 22 o 2,438 to 3,047 m: 59 o 1,524 to 2,437 m: 76 o 914 to 1,523 m: 82 o under 914 m: 14 (2013)
Airports - with unpaved runways
Total: 93over
10
3,047 m: 1
2,438 to 3,047 m: 3
1,524 to 2,437 m: 6
914 to 1,523 m: 38
under 914 m:45 (2013)
Global Country Study Report
India
South Korea
In South Korea Airlines Industry are runned by major players like Korea Air, Asian Airlines, Air Bussan, Korean Airlines, and T’way Airlines etc. There management includes both public and private sectors. In our report we have also discussed regarding the airports and its descriptions are as follows. Total number of airports in India is 111 nos.
Airports - with paved runways
Total: 71 nos. over o 3,047 m: 4 o 2,438 to 3,047 m: 19 o 1,524 to 2,437 m: 12 o 914 to 1,523 m: 13 o under 914 m: 23 (2013)
Airports - with unpaved runways
Total: 40 over
914 to 1,523 m: 2
under 914 m:38 (2013)
This way the total geographical area of airports is distributed in both the countries. Now, we are going to discuss regarding the trade relationship between India & South Korea.
India-Republic of Korea Joint Commission for bilateral co-operation was established in February 1996, which is chaired by the External Affairs Minister and the Minister of Foreign Affairs and Trade from the Korean side. So far, six meetings of the Joint Commission have been held, with the last one held in Seoul in June 2010.
An Indian Cultural Centre was established in ROK in April 2011 and the Festival of India in Korea was inaugurated by Dr. Karan Singh, Honourable President of Indian Council for Cultural Relations on 30 June 2011.
It will be celebrated for 8 months in order to revitalize the cultural relations between the two countries. Indian Community in ROK is estimated to be about 8000. Their 11
Global Country Study Report
India
South Korea
composition includes businessmen, IT professionals, scientists, research fellows, students and workers.
There are about 150 businessmen dealing mainly in textiles. Over 1000 IT professionals/engineers have recently come to ROK and are working in various companies including large conglomerates such as Samsung and LG.
There are about 500 scientists/post-doctoral research scholars in ROK working in prestigious institutions.
The way the India and South Korea linked with each other is bilateral trade relationship. Bilateral Trade between South Korea and India, which is in favour of South Korea but India is catching up.
The Growth of India and South Korea is fast under Bilateral Trade but Intensity for the India is being low as compared to South Korea.
South Korea‘s Exports include following Manufactured Items:
Electronics Goods
Machinery
Transport
Equipment’s
Iron & Steel
Plastics & Organic
Chemical.
Exports of the above items constitute 2/3 of South Korea’s export with India.
India‘s Export include following Items:
12
Raw Material
Cotton Yarn
Fabrics
Petroleum Product
Oil Meals
Ores & Minerals
Global Country Study Report
India
South Korea
Iron & Steel
Trade in Services for both India & South Korea is low because of
Differences in Economic Development stages
Differences in Per Capita Income of both the countries.
Differences in strength and weakness in terms of labour, market, technology, capital.
IT Sector (Hardware & Software).
The Bilateral Trade shows that Korea has recorded surplus in merchandise trade whereas India has recorded surplus in trade services.
Mutual Investment:
From India : Tata & Mahindra
From South Korea: Samsung, Hyundai, LG, POSCO.
At last we have also made the comparison between the India and South Korea in terms of STEEPLED Analysis. The main motive of the comparative is to check at what parameters the both the countries are similar or different. It can be explained by the way of table:-
COMPARSION OF STEEPLED ANALYSIS OF INDIA & SOUTH KOREA FACTORS
INDIA
REPUBLIC OF KOREA (SOUTH KOREA)
SOCIO-CULTURAL
It adopts Traditional Culture It adopts Traditional Culture In Airlines airhostess wear In Airlines airhostess wear “Sarees” Hindu
“Hanbok” 80.5%,
Muslim no affiliation 46%, Christian
13.4%, Christian 2.3%, Sikh 26%, Buddhist 26%, 1.9%, other 1.8%, unspecified 0.1% . 13
Global Country Study Report
Confucianism 1%, other 1%.
India TECHNOLOGY
South Korea Modern Technology is being Latest technology is being used
for
convenience
passengers used like
for
passengers
online convenience
booking.
like
online
booking, option to select seats, boarding pass through mobile etc.
ECONOMY
It
has
an
Developing It
Economy.
has
an
Developed
Economy.
Its Government is Federal Its Government is Unitary Parliamentary constitutional Parliamentary constitutional republic.
republic.
The aviation industry is at The aviation industry growth boom,
where
growth ranged between 20-25%. The
ranged between 30-50%. growth in aviation has been The growth in aviation has possible
because
been possible because of aviation,
in
liberal
policies
in
of
civil
tourism
and
civil exports.
aviation, robust growth in tourism and exports. ENVIRONMENT
Stable based on the seasons Unstable (temperate, with (i.e. Winter, Summer & rainfall heavier in summer
POLITICAL
Monsoon)
than winter)
Involvement is moderate
Involvement is high
Foreign direct investment Foreign
14
Global Country Study Report
direct
investment
India
South Korea (FDI) can hold up to 49% in (FDI) can hold up to 11% in this transaction, while 25% this transaction, while 25% must be held by private must be held by private Indian
companies. Indian companies. Remaining
Remaining 26% to be held 64% to be held by Airport by Airport Authority of India Authority of India (AAI) and (AAI) and other government other government PSUs. PSUs. LEGAL
It has a common law system It has an mixed legal system based on the English model; combining European civil law, separate personal law codes Anglo-American apply
to
Christians,
law,
and
Muslims, Chinese classical thought and
Hindus;
judicial review of legislative acts. ETHICIAL
Different based on culture. Different based on culture. Following performed
activities They by
treat
ethically
airlines passenger without adopting
companies like Overbooked any unethical practices. flights, Cramped
seats,
False
advertising. But, they should not do those things.
15
Global Country Study Report
to
India DEMOGRAPHIC
South Korea Its
total
population
is Its
total
population
1,220,800,359 & population 48,955,203 growth rate is 1.28%.
&
is
population
growth rate is 0.18%.
0-14 years: 14.6% (male 0-14
years:
28.9%
3,717,701/female
187,236,677/female
3,424,490)
165,219,615)
(male
15-24 years: 13.6% (male 15-24 years: 18.2% (male 3,525,050/female
117,385,009/female
3,117,198)
104,516,448)
25-54 years: 47.8% (male 25-54 years: 40.4% (male 11,925,181/female
253,642,261/female
11,491,841)
239,219,931)
55-64 years: 11.7% (male 55-64
years:
6.9%
2,842,996/female
42,307,170/female
2,907,730)
41,785,413)
(male
65 years and over: 12.3% 65 years and over: 5.7% (male 3,533,923)
16
Global Country Study Report
2,469,093/female (male
32,992,850/female
36,494,985)
India
South Korea
EXECUTIVE SUMMARY (Part-II) In part- 2 of our report we have tried to analyse the prospects of this joint venture. We have also included the various government norms that both the countries pose in front of any aviation company to comply with for starting its operations in the respective countries. And the prospects for other such collaborations have also been analysed to provide a basis for such thoughts because right now nothing as such is in existence. Hence the report details about the prospects of collaboration between Indian and Korean aviation companies. For South Korea we have selected Korean Air because it has the major share in market compare to others. KOREAN AIR Parent Company
Hanjin Group
Category
International
Sector
Airlines
Tagline
Excellence in Flight
All USP
Best Airline in cargo transportation area
Marketing strategies:-
Segment: Customers looking for comfort/reliability
Target Group: Middle class/upper middle class
Positioning: Premium airlines operating globally
Competitors: Asiana Airlines, All Nippon Airways & AMR Corporation
For India we have selected Jet Airways because it has the major share in market compare to others JET AIRWAYS Parent Company
Tailwinds Limited
Category
Indian domestic sector
Sector
Airlines
Tagline
The Joy of Flying
USP
Premium Airline, High Class
17
Global Country Study Report
India
South Korea
Marketing strategies:-
Segment: Passengers preferring comfort
Target Group: Corporate, Upper Middle Class
Positioning: Premium
Competitors: Air India & Kingfisher Then we have discussed the TWOS analysis in airlines sector between this 2 major player in their respective countries
FACTORS
INDIA
REPUBLIC OF KOREA (SOUTH KOREA)
THREATS
Currency Fluctuation and
Additional anti-trust fines for
Change in government policies
price fixing and increasing in fuel and labour cost
WEAKNESS
Declining operational
Loss of market share to low cost
performance
airlines.
Legal proceedings
Operations are restricted on certain important routes.
OPPORTUNITY
Growth in global airline traffic
Positive outlook towards Korean
and Government initiative to
travel and tourism industry with
promote tourism.
more penetration in emerging economies to tap-international flyers.
STRENGTHS
18
Jet Airways has diversified
It has a Wide market reach its
business process and have
over 45 countries and has Strong
created a good image among
support of Korean Government
the Indian fliers.
which helps them to get
It is Trusted Airline by the
Involved in many eco-friendly
Corporate.
initiatives.
Global Country Study Report
India
South Korea
Aviation plays a very important role in the mode of transportation & economy. So, it is necessary to make the sufficient investment in it. Based on this database we can conclude that India invest more the South Korea in Aviation Industry as per the database
India is at 14th rank and invest 32.8% of Gross Domestic Product While South Korea is at 27th rank and invest 27.4% of Gross Domestic Product.
The import & export of the countries provides the heavy amount of monetary fund to coutry and it also helps materials flow from one country to another. Following are the import & export Data of both the countrie Export Data of South Korea (In U.S. Billion Dollars) Country
1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
South Korea 144
172.6 159.2 162.6 201.3 250.6 288.2 326
433.5 373.6 466.3 556.5
In the year 2012-13 it is 601.2 U.S Billion Dollars Import Data of South Korea (In U.S. Billion Dollars) Country
1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
South Korea 116
160.5 146.6 148.4 175.6 214.2 256
309.3 427.4 317.5 417.9 524.4
In the year 2012-13 it is 586.9 U.S Billion Dollars Export Data of India (In U.S. Billion Dollars) Country 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 India
36.3 43.1 44.5 44.5 57.24 69.18 76.23 112
176.4 168.2 201
299.4
In the year 2012-13 it is 324.1 U.S Billion Dollar Import Data of India (In U.S. Billion Dollars) Country 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 India
50.2 60.8 53.8 53.8 74.15 89.33 113.1 187.9 305.5 274.3 327
In the year 2012-13 it is 498.7 U.S Billion Dollars 19
Global Country Study Report
461.4
India
South Korea
The aviation Industry has to follow certain norms, policies & rules as per order of Government. They are as follows:-
Aviation norms in India India‘s Civil Aviation Requirement (CAR) Section 3, Part II and III mandates that a scheduled service operator that applies to provide services using aircraft with a takeoff mass of 40,000 kg or more must purchase or lease a minimum of five aircraft with start-up equity requirement of Rs 50 crore. Additionally, as an airline‘s fleet grows in increments of up to five planes, equity requirements grow by Rs 20 crore. With regards to aircraft with take-off mass of less than 40,000 kg, the start-up fleet minimum remains at five aircraft - purchased or leased - with the minimum equity requirement starting at Rs 20 crore and growing by Rs 10 crore with every five additional aircraft.32 For non-scheduled operators, the fleet requirements as stated in Civil Aviation Requirement Section 3, Series C, Part III Section 4.2 are minimal - requires possession of just one aircraft - there exist equity requirements based on the number of aircraft owned or leased by the operator, which create an additional financial barrier to entry. Other than this there are various safety norms which have to be abiding by the players of the industry. The route dispersal regulations are also there. Government of India’s Order No. AV 11012/2/94-A regulates how a carrier service provider allocates its fleet to various parts of the country. This regulation divides civil aviation routes into three categories. Category I includes the popular and extensively serviced routes - large Indian city hubs. Categories II and III tend to be remote, relatively small and unpopular service routes. This regulation intends to ensure adequate service to all domestic Indian destinations by compelling Indian airlines to fly there. Environmental rules are also there which has to be complied with. It details the operators to comply with the following criterions.
To develop a baseline data for carbon dioxide emissions around airports with year 2005 as base year in order to compare the results after implementing various emissions mitigation techniques, 20
Global Country Study Report
India
South Korea
To develop noise mitigating techniques in order to reduce noise due to aircraft movements in the vicinity of airport,
To develop noise contours around the airport to define zones with prescribed noise limits.
To develop a threshold noise levels in the airport vicinity along with MOEF/CPCB where the noise limits would be expected to be higher than normal categories.
Aviation norms in South Korea The equipment, personnel, technical data, and housing and facilities required for the certificate and rating, or for an additional rating must be in place for inspection at the time of certification or rating approval by the KCASA. An applicant may meet the equipment requirement of this paragraph if the applicant has a contract acceptable to the KCASA with another person to make the equipment available to the applicant at the time of certification and at any time that it is necessary when the relevant work is being performed by the AMO. In addition to meeting the other applicable requirements for an AMO certificate and rating, an applicant for an AMO certificate and rating located outside the ROK must show that the AMO certificate and/or rating is necessary for maintaining or altering ROK-registered aircraft and articles for use on ROK-registered aircraft. The applicant must show that the fee prescribed by the KCASA has been paid. The report deals with the various business opportunities present in aviation sector between the two countries. South Korea's Incheon International Airport has signed a memorandum of understanding (MoU) with Indian airport operator GMR Airports, as it eyes business opportunities in the Indian market. Under the agreement, Incheon will offer "operation technology support" to GMR-operated Delhi Airport, it said. The deal was signed on 18 July. The pilot project offers Incheon the prospect of new business opportunities in the Indian market, Incheon Airport said. The South Korean
21
Global Country Study Report
India
South Korea
company noted that there are 449 airports of various sizes in India, with business and personal air travel growing at 9% annually. "This MoU will prove to be a stepping stone over which we will be able to make further dent in the Indian market, leveraging our airport operation know-how of past decade and brand equity as a world's best airport," said CW Lee, president and CEO of Incheon Airport. Taxation of air transportation sector as a whole is disproportionately high which retards the industry’s development vice-versa the overall growth in the economy, and limits its potential economic contribution. To fully reap the economic benefits of air transportation, airlines must be treated as economic assets rather than as convenient source of taxation. High Tax regime on aviation in general and on ATF will reduce the wider economic benefits available from aviation, resulting in a negative impact on economic growth and overall Government revenue bases. The 5 major terms of challenges to aviation industries in all the countries are 1.
Fuel/oil It is consistently increasing with passage of time.
2.
Pollution control The amount of pollution is also increasing with increase in number of airlines. Thus it is to be maintained.
3.
Radiation exposure The airlines remove the heavy amount of radiation exposures from it. Aircraft flying polar routes near the geomagnetic poles are at particular risk.
4.
Personnel cutbacks Ascend Safety director Paul Hayes agrees with the sentiment. “Industry cutbacks are causing concerns. Aviation personnel are aware that they are working harder for less money, and they link this with increased risks to safety
22
Global Country Study Report
India 5.
South Korea
Global economic woes Although air travel, measured by number of passenger-kilometres flown, has long risen faster than economic growth, airline revenues have lagged world GDP growth for the past 20 years in real terms, Due to these 5 elements aviation industries has to face many problems.
In the report we have also included the strategies in relation to innovation strategies (Winning Strategy) for aviation industry and forecasting regarding the future prospective. Innovation Strategy (Winning Strategy) is being categories into 3 categories Mobility 1.0: Foundational Services It includes the guidelines to passengers that how to make use of internet for ticket booking, status updates of flights etc. Mobility 2.0. Smartphones untether users from PCs and are changing the game for passengers; It includes the innovation of e-technology for boarding pass, ticketing etc. The passengers only have to show the barcode generated while booking the ticket at the airport they will get your full details. The passenger’s only carrier’s barcode in their smartphones and their work is done. Mobility 3.0: The Future Due to introduction of this new technologies the work becomes easier and this act as an winning strategy for the airlines industry. Forecasting the futures of aviation Industry A number of organizations, airframe manufacturers and agencies have provided forecasts of how they see aviation growing in the future. These forecasts by Airbus, Boeing and ICAO (International Civil Aviation Organization) to name a few are summarized in Table 1; only values for international air passenger growth are included. All the values are fairly close, with ICAO being seemingly more optimistic. These values are presumably reflecting some adjustments for the current economic crisis. Interestingly, the Revenue Passenger Kilometres (RPK)/GDP growth 23
Global Country Study Report
India
South Korea
ratio is approximately 1.6 for both Boeing and Airbus, which is what it has been over the past decade or so. This would seem to imply the airframe manufacturers are among those who take the view that on balance world economies will emerge from the recession in the same structural condition as before; a business as usual view or, as the OECD has named it ‘the current crisis is an accident’. In their work, the OECD points out that even in the case in which globalization continues there is substantial foregone economic growth. The effects of the slump are large, with expected returns to previous growth rates not being realized for up to 5 years. If there is a shift from a globalization regime, such as retrenchment, this implies a whole regime change with significant long run consequences.
At last we have predicted certain conclusion, finding & suggestions for the aviation industry
CONCLUSION & FINDINGS Talks on joint venture between Korean Air and Air India are in process which would be beneficial for both the countries in various terms. From Korea, Korean air is renowned for its Resources and Technology whereas Jet Airways from India is having a good mass of customer which would make a great combination for the future collaboration. For strengthening the collaborative partnership talk Government of India has approved a share of 49% in FDI under the Open Sky Scheme. Due to the strong, ancient historical and cultural linkages between the two countries, there is huge potential for enhancing tourism-related trade and investment flows. If a conducive and facilitative environment is created, there are possibilities that tourist inflows from Korea to India would increase. Though economic relations between India and Korea have been strengthening, the current size of trade and investment between the two countries is relatively low compared to the size and structural complementarities of the two economies. 24
Global Country Study Report
India
South Korea
The trade and economic relations between India and Republic of Korea (Korea) have gathered momentum in recent years with bilateral trade reaching a substantial figure of $ 17.57 billion in 2013.
SUGGESTIONS 1. The current state of the civil aviation sector in India indicates that air traffic has increased considerably in the past few years and removing historic barriers to entry would infuse competition into the sector and expand the provision of air carrier services as recommended by Naresh Chandra in his "Competition Issues in Civil Aviation sector report. Therefore, the regulator may want to consider removing fleet, equity and experience requirements for international carrier service providers. Specifically, equity requirements should be replaced by requirements for carrier service providers to demonstrate financial viability, using India‘s cargo service sector as well as international practices as models of reform.
2. Consider phasing out compulsory government regulated route dispersal and put out a call for input from stakeholders for different incentive programs that will help create more air carrier traffic to smaller airports. Recently, the AAI considered a number of proposals for such incentive programs from air carriers. Input from India‘s civil aviation stakeholders can generate an alternative solution on how to ensure service to all of India‘s operational and future airports.
3. The Indian government may wish consider incentives beyond reductions of airport fees of under serviced airports, e.g., such as providing limited route service subsidies. This can have significant positive social impacts, such as creating economic opportunities for people living in under serviced regions and improvements in connectivity between rural airports and Indian hubs. While addressing a social need, limiting the duration of the subsidies will help limit the expense by the government.
25
Global Country Study Report
India
South Korea
CH-1 Introduction Of Major Player in airlines industry of respective countries
26
Global Country Study Report
India
South Korea
KOREAN AIR IN SOUTH KOREA Korean Air Lines Co., Ltd. (KRX: 003490), operating as Korean Air, is both the flag carrier and the largest airline of South Korea, with global headquarters located in Gonghang-dong, Gangseo-gu, Seoul, South Korea. Korean Air's
international
passenger
division
and
related
subsidiary cargo division together serve 130 cities in 45 countries,
while
its
domestic
division
serves
20
destinations. It is among the top 20 airlines in the world in terms of passengers carried and is also the topranked international cargo airline. Incheon International Airport serves as Korean Air's international hub. Korean Air also maintains a satellite headquarters campus at Incheon. It was voted Asia's best airline by Business Traveler readers in 2012.
FOUNDING Korean Air was founded by the South Korean government in 1962 as Korean Air Lines to replace Korean National Airlines, which was founded in 1946. On 1 March 1969, the Hanjin Transport Group took control of the airline. Long-haul freight operations were introduced on 26 April 1971, followed by passenger services to Los Angeles International Airport (LAX) on 19 April 1972. International flights to Hong Kong, Taiwan, and Los Angeles were flown with Boeing 707s until the introduction of the Boeing 747 in 1973. In 1973, the airline introduced Boeing 747s on its Pacific routes and started a European service to Paris, France using the 707 and then DC-10. In 1975, the airline became one of the first Asian airlines to operate Airbus aircraft with the purchase of 3 Airbus A300s, which were put into immediate service on Asian routes. Since the South Korean planes were prohibited to fly over the Soviet and North Korean airspace during the era, the European routes had to be designed eastbound, such as Gimpo-Anchorage-Paris.
27
Global Country Study Report
India
South Korea
CHANGE TO 'KOREAN AIR' A blue-top, silver, and redesigned livery with a new corporate "Korean Air" logo featuring a stylized Taegeuk design was introduced on 1 March 1984, and the airline's name changed to Korean Air from Korean Air Lines. This livery was introduced on its Fokker F28s. It was designed in cooperation between Korean Air and Boeing. In the 1990s, Korean Air became the first airline to use the new MD-11 to supplement its new fleet of Boeing 747-400 aircraft; however, the MD-11 did not meet the airline's performance requirements and they were eventually converted to freighters. Some older 747 aircraft were also converted for freight service.
FURTHER EXPANSION AND FOUNDING OF JIN AIR In the 1980s, Korean Air's head office was in the KAL Building on Namdaemunno, Jung-gu, Seoul.As of 2007, Korean Air was in negotiations to open its China hub in Beijing or Shanghai by the end of 2008.On 5 June 2007, Korean Air said that it would create a new low-cost carrier called Jin Air in Korea to compete with Korea's KTX high-speed railway network system, which offers cheaper fares and less stringent security procedures compared to air travel, which started its scheduled passenger service from Seoul to Jeju on 17 July 2008. Korean Air announced that some of its 737s and A300s would be given to Jin Air.By 2009, Korean Air's image had become more prestigious, differing from the airline's late-1990s image, which had been tarnished by several fatal accidents.In mid-2010, a co-marketing deal with games company Blizzard Entertainment sent a 747-400 and a 737-900 taking to the skies wrapped in StarCraft II branding. In August 2010, Korean Air announced heavy second-quarter losses despite record high revenue. In August 2010, Hanjin Group, the parent of Korean, opened a new cargo terminal at Navoi in Uzbekistan, which will become a cargo hub with regular Incheon-Navoi-Milan flights.In summer 2013, Korean Air acquired 44% of Czech Airlines stake. Czech Airlines will serve as its subsidiary, and Prague Ruzyne Airport will serve as Korean Air's secondary hub. Korean Air is in the process of transferring aircraft to Czech Airlines - one Airbus A330-300 was transferred in June 2013, and more are expected to come. Korean Air is currently thinking about transferring Airbus A330-300 or Boeing 747-400 to Czech airlines, after they are replaced with Airbus A330-200 and Airbus A380-800 respectively. 28
Global Country Study Report
India
South Korea
AEROSPACE RESEARCH AND MANUFACTURING Korean Air is also involved in aerospace research and manufacturing. The division, known as the Korean Air Aerospace Division (KAL-ASD), manufactures licensed versions of the MD 500 and UH60 Black Hawk helicopters, as well as the F-5E/F Tiger II fighter aircraft, the aft fuselage and wings for the KF-16 fighter aircraft manufactured by Korean Aerospace Industries, and parts for various commercial aircraft including the Boeing 737, 747, 777, 787 and the Airbus A330, and A380. In 1991 the division designed and flew the Korean Air Chang-Gong 91 light aircraft. KAA also provides aircraft maintenance support for the United States Department of Defense in Asia and maintains a research division with focuses on launch vehicles, satellites, commercial aircraft, military aircraft, helicopters, and simulation systems. In October 2012, a joint development deal between Bombardier Aerospace and a governmentlead South Korean consortium was revealed, to develop a 90-seater turboprop regional airliner, targeting a 2019 launch date. The consortium would include Korea Aerospace Industries and Korean Air Lines.
Marketing strategies:-
Segment: Customers looking for comfort/reliability
Target Group: Middle class/upper middle class
Positioning: Premium airlines operating globally
Competitors: Asiana Airlines, All Nippon Airways & AMR Corporation.
KOREAN AIR Parent Company
Hanjin Group
Category
International
Sector
Airlines
Tagline
Excellence in Flight
All USP
Best Airline in cargo transportation area
29
Global Country Study Report
India
South Korea
JET AIRWAYS IN INDIA Jet Airways is the second of India's two major airlines based in Mumbai, both, in terms of market share and passengers carried, after IndiGo. It operates over 3000 flights daily to 76 destinations worldwide. Its main hub is Mumbai, with secondary hubs at Delhi, Kolkata, Chennai, Bengaluru. It has an international hub at Brussels Airport, Belgium.
1992-2009: INCEPTION AND GROWTH Jet Airways was incorporated as an air taxi operator on 1 April 1992. It started commercial operations on 5 May 1993 with a fleet of four leased Boeing 737-300 aircraft from Malaysia Airlines. Jet began international operations from Chennai to Colombo in March 2004. The company is listed on the Bombay Stock Exchange, but 80% of its stock is controlled by Naresh Goyal (through his ownership of Jet’s parent company, Tailwinds). It has 13,177 employees (as at 31 March 2011). In January 2006 Jet Airways announced that it would buy Air Sahara for US$500 million in an allcash deal, making it the biggest takeover in Indian aviation history. It would have resulted in the country's largest airline but the deal fell through in June 2006. On 12 April 2007 Jet Airways agreed to buy out Air Sahara for INR14.5 billion (US$340 million). Air Sahara was renamed JetLite, and was marketed between a low-cost carrier and a full service airline.
2010-PRESENT: RISE TO INDIA'S LARGEST AIRLINE According to a PTI report, for the third quarter of 2010, Jet Airways (Jet+ Jet Lite ) had a market share of 22.6% in terms of passengers carried, thus making it a market leader in India, followed by Kingfisher Airlines with 19.9%. On 24 April 2013, Jet announced that they were ready to sell a 24% stake to Etihad at US$379 million. Earlier, in September 2012, the government of India announced that foreign airlines can take up a stake of up to 49% in Indian airlines, thereby making this deal possible. Jet Airways concentrated well on revenues, costs and network side, which resulted in the airline making profits for the first time since the rupee depreciation. Nikos Kardassis, the Chief Executive Officer of Jet Airways said "The combined impact of higher yields and lower costs (ex-fuel) have resulted in significantly lowering the breakeven seat factor levels in the business." 30
Global Country Study Report
India
South Korea
The airline announced a sale on its website, which offered 2 million seats for travel within India, till 31 December 2013. This sale was announced a little over one month after rival low-cost carrier SpiceJet announced a sale, which was expected to have triggered a fare-war. High airfares throughout 2012 due to grounding of Kingfisher Airlines caused passengers to opt out of air travel, leading to negative growth in traffic for the first time since 2009. Jet Airways planned to attract more passengers by subsequently lowering the fares, which was followed by SpiceJet again. With two airlines offering cheaper travel, India's flag carrier started losing passengers and it too offered cheaper tickets. This was followed by IndiGo and GoAir, resulting in a full-fledged fare war. Jet had introduced four different slabs of discounts depending upon the distance to destination. Under the offer, the fare up to 750 kilometres was priced at INR2250 (US$37), while for 750-1000 kilometres it was INR2850 (US$46). For air travel over a distance ranging from 1000 to 1400 kilometres, tickets were sold for INR3300 (US$54) and for travel beyond 1400 kilometres, tickets were sold for a maximum of INR3800 (US$62). Based on a calculation by The Economic Times, on average, Jet Airways was selling 6400 tickets per day, or 14 tickets per flight at these discounted rates. According to the news agency, several Indian travel sites started experiencing sever issues following a sudden increase in bookings. MakeMyTrip chief operating officer Keyur Joshi said that this move would help airlines increase aircraft occupancy from 75% to 85%. However, soon after the sale, the airline's market value started going down. This drop in market value was considered to have happened because of the indefinitely postponed Etihad deal. The stock had fallen by 18% in a period of one week. Economic Times reported that "The froth that developed around Jet stock was largely deal driven and has now fizzled away."
JET AIRWAYS Parent Company
Tailwinds Limited
Category
Indian domestic sector
Sector
Airlines
Tagline
The Joy of Flying
USP
Premium Airline, High Class
31
Global Country Study Report
India
South Korea
CH-2 SWOT analysis of Major Player in airlines industry of respective countries
32
Global Country Study Report
India
South Korea
INTRODUCTION TO SWOT ANALYSIS A TOWS analysis (SWOT analysis) is newly introduced to analysis. It is a structured planning method used to evaluate the strengths, weaknesses, opportunities, and threats involved in a project or in a business venture. A TOWS analysis can be carried out for a product, place, industry or person. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favourable and unfavourable to achieve that objective. Setting the objective should be done after the SWOT analysis has been performed. This would allow achievable goals or objectives to be set for the organization.
Strengths: characteristics of the business or project that give it an advantage over others.
Weaknesses: characteristics that place the business or project at a disadvantage relative to others.
Opportunities: elements that the project could exploit to its advantage.
Threats: elements in the environment that could cause trouble for the business or project
Identification of TOWS is important because they can inform later steps in planning to achieve the objective. First, the decision makers should consider whether the objective is attainable, given the SWOTs. If the objective is not attainable a different objective must be selected and the process repeated. Users of SWOT analysis need to ask and answer questions that generate meaningful information for each category (strengths, weaknesses, opportunities, and threats) to make the analysis useful and find their competitive advantage.
33
Global Country Study Report
India
South Korea
SWOT ANALYSIS OF KOREAN AIR
STRENGTHS It has a Wide market reach its over 45 countries. Strong support of Korean Government. Involved in many eco-friendly initiatives. Have nearly 130 destinations across the world.
WEAKNESS Loss of market share to low cost airlines.
Stiff competition means operations are restricted on certain important routes.
It is amongst the top airlines in terms of passengers carried.
OPPORTUNITY
THREATS
Positive outlook towards Korean travel and tourism industry.
Rising fuel prices.
Leverage on Korean Air Aerospace Division (KALASD) More penetration in emerging economies to tapinternational flyers.
34
Global Country Study Report
Foreign currency fluctuations. Rising labour cost and changing government policies. Additional anti-trust fines for price fixing.
India
South Korea
SWOT ANALYSIS OF JET AIRWAYS
STRENGTHS
WEAKNESS
It is the trusted Airline by the Corporate & Diversified business process.
Competition from the LCCs and other competitors means market share growth is tough.
Jet Airways has created a good image among the Indian fliers. One of the biggest Indian airline companies with over 13,000 employees working in it. Operations in over 75 Indian cities and over 400 daily flights. It also has international destinations in nearly 20 countries
OPPORTUNITY Strongly positioned in the International routes which have presence in every segment. Increasing number of people opting to travel by airlines. Government initiative to promote tourism.
35
Global Country Study Report
Presence of other airlines on international routes making it difficult to have significant market share. Declining operational performance & Legal proceedings.
THREATS LCCs eating up the market share. Foreign currency fluctuations. Increasing Fuel Costs and Labour Costs. Unfavourable Government policies and aviation regulations. Risk related to unforeseen circumstances.
India
South Korea
COMPARATIVE TABLE OF SWOT ANALYSIS FACTORS
INDIA
REPUBLIC OF KOREA (SOUTH KOREA)
THREATS
Currency Fluctuation and
Additional anti-trust fines for
Change in government policies
price fixing and increasing in fuel and labour cost
WEAKNESS
Declining operational
Loss of market share to low cost
performance
airlines.
Legal proceedings
Operations are restricted on certain important routes.
OPPORTUNITY
Growth in global airline traffic
Positive outlook towards Korean
and Government initiative to
travel and tourism industry with
promote tourism.
more penetration in emerging economies to tap-international flyers.
STRENGTHS
36
Jet Airways has diversified
It has a Wide market reach its
business process and have
over 45 countries and has Strong
created a good image among
support of Korean Government
the Indian fliers.
which helps them to get
It is Trusted Airline by the
Involved in many eco-friendly
Corporate
initiatives.
Global Country Study Report
India
South Korea
ACTION PLANS OF BOTH THE AIRLINES COMPANIES CAN BE EXPLAINED BY THE HELP OF TOWS ANALYSIS TOWS ANALYSIS IN GENERAL FOR BOTH THE AIRLINE COMPANIES
THREATS 1. Competition is the major threats to over come it the airline industry should make a frame a strategy which would play an equivalent role that of its competitor 2. Rising fuel prices. Is another threat to over come this company can practice surcharges which are an additional perticket fee added to a fare optionally to cover the increased cost of fuel to the carrier.
WEAKNESS 1. Customer satisfaction and there safety can be the major weak point in airline industry to overcome it they can take major care to serve there customer and make them feel secure. 2. Lack of technology adoption to over come this airlines industry has to focus on the changing trends in technology.
ACTION PLANS BY TOWS ANALYSIS OPPORTUNITY
1. Positive outlook towards travel and tourism industry by doing Mergers and acquisitions. 2. More penetration in emerging economies to tapinternational flyers.
37
Global Country Study Report
STRENGTH 1.Cost advantage 2.Innovation 3.Market share leadership 4.Strong management team 5.Strong brand equity
India
South Korea
CH-3 Investment, import & Export
38
Global Country Study Report
India
South Korea
INVESTMENT DATA OF VARIOUS COUNTRIES IN AVIATION INDUSTRY Rank Country
Investment (gross fixed) (%)
1
China
54.2
2
Equatorial Guinea
49
3
Cape Verde
45.4
4
Sao Tome and Principe 45.2
5
Congo, Republic of the
41.8
6
Belarus
39.7
7
Lesotho
38.8
8
Armenia
35.4
9
Kosovo
35
10
Vietnam
34.6
11
Lebanon
34.4
12
Seychelles
33.8
13
Algeria
33
14
India
32.8
15
Indonesia
32
16
Georgia
31.2
17
Nicaragua
30.9
18
Morocco
30.8
19
Macedonia
30.3
20
Albania
29.9
21
Ecuador
29.6
22
Chad
29.6
23
Gabon
28.6
24
Qatar
27.8
25
Gambia, The
27.6
26
Botswana
27.6
27
Iran
27.6
28
Korea, South
27.4
39
Global Country Study Report
India
South Korea
29
Sri Lanka
27.3
30
Panama
27.1
31
Kyrgyzstan
27
32
Oman
26.9
33
Mozambique
26.9
34
Australia
26.8
35
Thailand
26.2
36
Kuwait
26.1
37
Tanzania
26.1
38
Peru
25.6
39
Guyana
25.4
40
Belize
25.3
41
Tunisia
25.2
42
Haiti
25
43
Bangladesh
24.7
44
Honduras
24.7
45
Senegal
24.7
46
Bahrain
24.6
47
Romania
24.6
48
Sudan
24.6
49
Mauritius
24.5
50
Cambodia
24.3
Source:-http://www.indexmundi.com/g/r.aspx?t=50&v=142&l=en Based on this database we can conclude that India invest more the South Korea in Aviation Industry as per the database
India is at 14th rank and invest 32.8% of Gross Domestic Product While South Korea is at 27th rank and invest 27.4% of Gross Domestic Product.
40
Global Country Study Report
India
South Korea
EXPORT DATA OF SOUTH KOREA (U.S Billion Dollars)
Country
1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
South Korea 144
172.6 159.2 162.6 201.3 250.6 288.2 326
433.5 373.6 466.3 556.5
Source:-http://www.indexmundi.com/g/g.aspx?c=ks&v=85
This graph of export data of South Korea shows that there are so many changes has been occurred from Year 1999 to 2011 with $ 144 billion to $ 556.6 billion.
There is constant no growth from year 1999 to 2003. After that there is some minor upward change in Year 2004 with $ 201.3 billion.
In the year 2005 to 2008 there is so good growth in exporting of South Korea and year 2009 shows some decline In it from $ 250.6 billion to $ 343.6 billion.
Year 2010-11 than after there is high growth in exporting industry to $ 556.5 billion.
41
Global Country Study Report
India
South Korea
IMPORT DATA OF SOUTH KOREA (U.S Billion Dollars)
Country
1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
South Korea 116
160.5 146.6 148.4 175.6 214.2 256
309.3 427.4 317.5 417.9 524.4
Source:-http://www.indexmundi.com/g/g.aspx?v=89&c=ks&l=en
This graph of import data of south korea shows that there are so many changes has been occurred from Year 1999 to 2011 with $ 116 billion to $ 524.4 billion.
There is constant no growth from year 1999 to 2003. After that there is some minor upward change in Year 2004 with $ 175.6 billion.
In the year 2005 to 2008 there is so good growth in exporting of korea and year 2009 shows some decline In it from $ 427.4 billion to $ 317.5 billion.
Year 2010-11 than after there is high growth in import industry to $ 524.4 billion.
42
Global Country Study Report
India
South Korea
EXPORTS DATA OF INDIA (U.S Billion Dollars)
Country 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 India
36.3 43.1 44.5 44.5 57.24 69.18 76.23 112
176.4 168.2 201
299.4
Source:-http://www.indexmundi.com/g/g.aspx?c=in&v=85
This graph of export data of India shows that there are so many changes has been occurred from Year 1999 to 2011 with $ 36.3 billion to $ 299.4 billion.
There is constant no growth from year 1999 to 2003. After that there is some minor upward change in Year 2004 with $ 57.24 billion.
In the year 2005 to 2008 there is so good growth in exporting of india and year 2009 shows some decline In it from $ 176.4 billion to $ 168.2 billion.
Year 2010-11 than after there is high growth in exporting industry to $ 299.4 billion.
43
Global Country Study Report
India
South Korea
IMPORTS DATA OF INDIA (U.S Billion Dollars)
Country 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 India
50.2 60.8 53.8 53.8 74.15 89.33 113.1 187.9 305.5 274.3 327
461.4
Source:-http://www.indexmundi.com/g/g.aspx?c=in&v=89
This graph of import data of India shows that there are so many changes has been occurred from Year 1999 to 2011 with $ 50.2 billion to $ 461.4 billion.
There is constant no growth from year 1999 to 2003. After that there is some minor upward change in Year 2004 with $ 74.15 billion.
In the year 2005 to 2008 there is so good growth in exporting of india and year 2009 shows some decline In it from $ 305.5 billion to $ 274.3 billion.
Year 2010-11 than after there is high growth in import industry to $ 461.4 billion.
44
Global Country Study Report
India
South Korea
CH-4 Policies And Norms of India And ROK 45
Global Country Study Report
India
South Korea
AVIATION NORMS IN INDIA The Air Transport Services in the country are governed by the Rule 134 and schedule XI of Aircraft Rules 1937. Besides this, the Civil aviation Requirements (CAR). Section 3 Series C Part II/III/IV and VIII deals with the minimum requirements and procedures for issue/renewal of Air Operator Permit (Scheduled/Non Scheduled) in different categories like passenger/cargo. In order to fulfil the above function the responsibilities of AT1 section have been assigned as follows: 1. Issue/Renewal of Air Operator Permit (Scheduled/Non‐Scheduled). 2. Distribution of operational manual to the concerned Directorate viz Flight Standard Directorate and Air Safety Directorate (Hqrs.) 3. Holding preparedness meeting to assess the capability of intended/existing operator in terms of availability of infrastructure and manpower. 4. Issue of NOC for import/acquisition of aircraft/helicopter. 5. Endorsement/Deletion of aircraft and operation specifications on Air Operator 6. Permit (Scheduled/Non‐Scheduled) Besides the above, the State Government and the Public Sector Undertakings of Central/State Govt. are being issued Operating Permit upon meeting the requirements as contained in CAR Section 3 series C Part X. Under Rule 158A of the Aircraft Rules 1937 and upon meeting the criteria as laid down in CAR Section 3 Series F Part I, AT‐1 Section also issues flight clearances to foreign registered aircrafts including VIPs/tourist charter flights under ITP/cargo flights/ ambulance flights, which are over flying/landing/technical landing to/across India. Issues flight clearances to Indian registered aircraft also operating outside the country for revenue/non‐ revenue purposes and clearances for the Ballooning flights. 1. Collection and compilation of data on passenger and freight traffic from scheduled operators both domestic and international airlines, on scheduled operator and airports. 2. Uploading monthly data on traffic from the scheduled airlines on the DGCA website.
46
Global Country Study Report
India
South Korea
3. Uploading annually data from all operators including traffic statistics, financial data, fleet statistics and personal statistics. 4. Submission of statistical information to ICAO.
AIR TRANSPORT DIVISION – AED 1. Approval of winter/summer domestic schedule. 2. Compliance and Monitoring of Route Dispersal Guidelines. 3. Uploading of load factor and market share of domestic schedule airline. 4. To conduct preparedness meetings of Indian schedule carrier intended to undertake International Operations. 5. Evaluation of Air Carrier's Management of Significant changes ‐ Assessment of Impact of Financial Stress on Safety of Operations.
DUTIES ATTACHED TO DEPUTY DIRECTOR OF OPERATIONS 1. Check and scrutinize the application for issue of Scheduled/Non‐Scheduled 1. Operators Permit in passenger/cargo categories 2. Hold preparedness meeting before issue of permit. 3. Scrutinize and issuing permission for import/acquisition of aircraft to 4. Scheduled/Non‐Scheduled operators; 5. Check and scrutinize the application for Endorsement/deletion of the aircraft on the Operator’s Permit; 6. Forward application for grant of security clearance of the agencies seeking flight clearances and change in the Board of Directors of the Scheduled/ Non‐Scheduled Operators; 7. Issues flight clearances to foreign registered aircrafts including VIPs/tourist charter flights/cargo flights/ambulance flights, which are over flying/ landng/ technical landing to/across India. Issues flight clearances to Indian registered aircraft also operating outside the country for revenue/non‐revenue purposes and clearances for the Ballooning flights;
47
Global Country Study Report
India
South Korea
8. Scrutiny and forwarding of the cases of foreign registered aircraft staying in India for more than 14 days; 9. Issue of flight clearances in respect of cloud seeding operation and aerial survey etc.; 10. Approval of the charter flights by Indian Scheduled/Non‐Scheduled operators.
FLIGHT STANDARDS DIRECTORATE The Flight Standard Directorate (FSD) shall conduct regular Inspections and Surveillance of Scheduled Airlines and their aircrew in particular to ensure effective implementation of safety related Standards and Recommended Practices contained in the ICAO Annexes, particularly Annex 6, and the relevant Rules, Regulations, Procedures and Requirements laid down in Aircraft Rules, Civil Aviation Requirements, Aeronautical Information Circulars, AIP India etc. In addition to above, the Continued Surveillance of various operational aspects of operators is to be ensured by conducting various Inspections/Surveillance Checks regularly viz. Cockpit En‐route Inspection, Cabin Inspection, Ramp Inspection, Station Facility Inspection and Proficiency Check etc. In addition to this, Simulator Evaluation and Main Base Inspection etc. of the operators and Standardization/Proficiency Checks of their Training Captains are to be conducted as per the requirements. The functions and responsibilities of FID shall broadly include the following: A. SAFETY OVERSIGHT FUNCTIONS: 1. Development of Action Plan by Chief Flight Operations Inspector for Continued Surveillance of Airline Operators. 2. Surveillance of operational aspects of Airline Operators and follow‐up action 3. There of in accordance with the ‘Duties & Responsibilities of the Flight Operations Inspectors’ laid down in Flight Operations Inspector’s Manual (Ref. ICAO Doc. 8335‐ AN/879) 4. Random Checks of Pilots on their Proficiency & Skill. 5. Periodical Inspection of Airline Operators, Shippers/Freight Forwarders and
48
Global Country Study Report
India
South Korea
6. Cargo Terminals/Ware Houses at Airports with regard to transportation of carrying Dangerous Goods as per Civil Aviation Requirements.
AVIATION ENVIRONMENT UNIT (AEU) •
To develop measures that help in reduction of fuel consumptions and to provide necessary guidance to adopt these fuel reduction measures,
•
To develop measures to improve Fuel Efficiency and to provide necessary guidance in adopting these measures,
•
To guide and provide necessary guidance to the stakeholders in adopting voluntary measures in reducing carbon footprints,
•
To assess the local air quality around all domestic and international airports in the country in order to develop emissions inventory from aviation sector,
•
To develop a baseline data for carbon dioxide emissions around airports with year 2005 as base year in order to compare the results after implementing various emissions mitigation techniques,
•
To develop noise mitigating techniques in order to reduce noise due to aircraft movements in the vicinity of airport,
•
To develop noise contours around the airport to define zones with prescribed noise limits.
AVIATION NORMS IN SOUTH KOREA For the purpose of these Implementation Procedures, the following definitions are provided. Additional definitions can be found in Article II of the BASA executive agreement. a. “Additional Technical Condition” means a requirement of the importing state that is in addition to the applicable airworthiness requirements of the State of Design or that may be prescribed to provide a level of safety equivalent to that provided by the applicable airworthiness requirements for the importing state. b. “Airworthiness Standards” means regulations governing the design and performance of civil aeronautical products, parts, and appliances.
49
Global Country Study Report
India c. “Appliance”
South Korea means any instrument, equipment, mechanism, part, apparatus,
appurtenance, or accessory, including communications equipment that is used or intended to be used in operating or controlling an aircraft in flight and is installed in or attached to the aircraft. d. “Civil Aeronautical Product” (herein also referred to as “product”) means each civil aircraft, aircraft engine, or propeller. e. “Critical Component” means a part identified as critical by the design approval holder during the validation process, or otherwise by the exporting authority. Typically, such components include parts for which a replacement time, inspection interval, or related procedure is specified in the Airworthiness Limitations section of the manufacturer’s maintenance manual or Instructions for Continued Airworthiness. f. “Environmental Approval” means an approval issued when a civil aeronautical product has been found to comply with standards concerning noise, fuel venting, and/or exhaust emissions. g. “Environmental Standards” means regulations governing designs with regard to noise characteristics, fuel venting, and exhaust emissions of civil aeronautical products and appliances. h. “Environmental Testing” means a process by which a civil aeronautical product or appliance is determined to comply with environmental standards. i.
“Equivalent Level of Safety Finding” means a finding that alternative action taken provides a level of safety equal to that provided by the requirements for which equivalency is being sought.
j.
“Exemption” means a grant of relief from requirements of a current regulation when processed through the appropriate regulatory procedure by the FAA or KCASA, and found to have a level of safety at least equal to the regulation for which the relief is granted.
k. “Export” means the process by which a product, part or appliance is released from a civil aviation authority’s regulatory system for subsequent use by another country. l.
“Exporting Civil Aviation Authority” means the national organization within the exporting State, charged by the laws of the exporting State, to regulate the airworthiness and 50
Global Country Study Report
India
South Korea
environmental certification, approval, or acceptance of civil aeronautical products, parts, and appliances. The exporting civil aviation authority will be referred to herein as the exporting authority. m. “Familiarization” means the process whereby the importing authority obtains information and experience on an aeronautical product designed in the exporting State in order to prescribe additional technical conditions for that product; implement corrective airworthiness action in the event that the product experiences service difficulties during its operation in the importing State; and to ensure the development of appropriate maintenance, operating, and pilot type rating information, if applicable, for the product. n. “Finding” means a determination of compliance or non-compliance as the result of a civil aviation authority’s review, investigation, inspection, test, and/or analysis. o. “Import” means the process by which an exported product, part or appliance is accepted by a country’s civil aviation authority for use and is subsequently placed under that authority’s regulatory system. p. “Importing Civil Aviation Authority” means the national organization within the importing State, charged by the laws of the importing State with regulating the airworthiness and environmental certification, approval, or acceptance of civil aeronautical products, parts, and appliances. The importing civil aviation authority will be referred to herein as the importing authority. q. “Issue Paper” means a document representing an item that requires resolution prior to the issuance of KCASA or FAA Type Certificate (TC) or Supplemental Type Certificate (STC). r. “Licensing Agreement” means a commercial agreement between a TC or STC holder and a Production Approval Holder (or applicant) formalizing the rights and duties of both parties to use the design data for the purpose of manufacturing the product or part. s. “Maintenance” means the performance of inspection, overhaul, repair, preservation, and the replacement of parts or appliances of a product, but excludes preventive maintenance. t. “Manufacturer” means the person who, by FAA or KCASA regulation, is responsible for determining that all products or parts thereof produced within the quality control system 51
Global Country Study Report
India
South Korea
conform to an FAA or KCASA-approved design or established government or industry standard and are in a condition for safe operation. u. “Multi-National Consortium” means a group of manufacturers from multiple countries who have agreed to form a single company for production of a particular product. v. “New Aircraft” means an aircraft that is still owned by the manufacturer, distributor, or dealer, if there is no intervening private owner, lease, or time sharing arrangement, and the aircraft has not been used in any pilot school and/or other commercial operation. w. “Person” means an individual, firm, partnership, corporation, company, association, joint stock association, or governmental entity, and includes a trustee, receiver, assignee, or other similar representative of any of them. x. “Product” sees (d) Civil Aeronautical Product. y. “Production Quality System” means a systematic process which meets the requirements of the exporting authority and ensures that products, parts, and appliances will conform to the approved design and will be in a condition for safe operation. z. “Rebuilt engine” means a U.S. engine that has been disassembled, cleaned, inspected, repaired, and as necessary, reassembled, and tested by the production approval holder in accordance with 14 CFR parts 43.
52
Global Country Study Report
India
South Korea
CH-5 BUSINESS OPPORTUNITIES IN AIRLINES SECTOR
53
Global Country Study Report
India
South Korea
KOREA'S INCHEON AIRPORT LINKS MOU WITH INDIA'S GMR AIRPORTS South Korea's Incheon International Airport has signed a memorandum of understanding (MoU) with Indian airport operator GMR Airports, as it eyes business opportunities in the Indian market. Under the agreement, Incheon will offer "operation technology support" to GMR-operated Delhi Airport, it said. The deal was signed on 18 July. The pilot project offers Incheon the prospect of new business opportunities in the Indian market, Incheon Airport said. The South Korean company noted that there are 449 airports of various sizes in India, with business and personal air travel growing at 9% annually. "This MoU will prove to be a stepping stone over which we will be able to make further dent in the Indian market, leveraging our airport operation know-how of past decade and brand equity as a world's best airport," said CW Lee, president and CEO of Incheon Airport. Source: Pro, Mumbai.
POSITIVE IMPACT 1. The Government took note of the suggestions made by the MRO Association of India and it proposed to provide full custom duty exemption to new, rethreaded tyres as well as testing equipment for aircraft which will be imported by third-party MRO units. 2. Aircraft parts and tyres used to attract around 30% basic and additional customs duty on import. Due to this, the domestic MRO sector had become uncompetitive. 3. “MRO industry should acknowledge the recent good gesture by Government that issued a notification on June 20, 2012 that exempted MROs from service tax in respect of goods that are temporarily imported in India for repair and then re-exported. 4. This is a strong signal from the Government to encourage growth in MRO industry, which faces challenges all across the world, be it over-capacity in Europe or no inductions of new flying equipment in North America,” said S Rotkar of Air India. However, the industry 54
Global Country Study Report
India
South Korea
has to move on in spite of challenges and the intrinsic strengths of the country have to be exploited for the growth, he added. In summary, taxation of air transportation sector as a whole is disproportionately high which retards the industry’s development vice-versa the overall growth in the economy, and limits its potential economic contribution. To fully reap the economic benefits of air transportation, airlines must be treated as economic assets rather than as convenient source of taxation. High Tax regime on aviation in general and on ATF will reduce the wider economic benefits available from aviation, resulting in a negative impact on economic growth and overall Government revenue bases.
MRO ASSOCIATION OF INDIA Convened by PulakSen, Editor-in-Chief of Indian Aviation, the MRO Association of India came into existence after the inaugural MRO India 2011 show. Several of the country’s key MRO firms are part of this association which include AirWorks India, Max Aerospace, SSSI, SR Technic, Horrizon Aircraft Maintenance, United Helicopters, Kinghfisher Airlines and Rotor Wing Society of India. The Association was formed with the intention to assist and guide the evolution of the Indian aerospace market towards becoming a prime MRO destination for both Indian and international airline carriers and helicopter charter service providers. The aim behind the association is to function as a “Working Group” that will facilitate and support the Government in streamlining the overall industry framework in order to provide an added boost in developing the Indian aerospace MRO sector. The association played a major role in raising some of the key issues of the Industry and reach out to the concerned ministries.
INDIAN AIRCRAFTS MRO WITH OTHERS India’s aviation growth story can’t be successful if there is no strong MRO industry to back it up. India’s aviation growth story, which seems to be currently punctuated by global slowdown and deteriorating financial health of airlines due to high fuel cost and taxation, is far from over. 55
Global Country Study Report
India
South Korea
Contrary to current scenario, India is projected to see highest air traffic growth in the world over the next 20 years, exceeding even China. If Boeing’s recent projection to be believed, India’s airlines are forecast to take deliveries of 1,450 aircraft over the next two decades, valued at about US$ 175 billion. This only tells about kind of expansion this sector is expected to see. And it is subsequently going to propel the growth of India’s Maintenance, Repair and Overhaul (MRO) sector, which is expected to triple in size from Rs2,250 crore in 2010 to Rs7,000 crore by 2020. MRO also increase spend by airlines& rising passenger numbers, expanding fleet and stabilisation of low-cost carriers in the country, there can be no denial of the fact that on long term basis, MRO industry will grow in India,” said S Rotkar, Executive Director, Sales & Marketing, MRO- SBU, Air India, who are an airline-owned MRO service provider. India has the potential to be an MRO hub due to this growth in aircraft fleet size, location advantage and availability of talent. Moreover, low cost carriers would also prefer servicing of aircraft locally to save cost and time in a highly competitive market. To tab this growth potential in the MRO sector, HAL Aircraft Division, Nasik plans to establish a comprehensive independent world class MRO at the HAL Nasik airport area. The company will undertake maintenance of commercial aircraft, especially, Airbus A320 and Boeing 737 series aircraft. “Expression of Interest (EOI) is therefore invited from renowned establishment in the world having proven track record and experience to establish the MRO facility.
56
Global Country Study Report
India
South Korea
CH-6 CHALLENGES TO AVIATION INDUSTRY
57
Global Country Study Report
India
South Korea
TOP 5 FRUSTRATIONS IN AVIATION INDUSTRY: 1. Fuel/oil:
The global airline industry’s fuel bill is forecast to total $214 billion in 2013 (accounting for 31% of operating expenses at $108.0/barrel Brent of oil).
This is an increase of $4 billion over 2012 and is almost 5 times 2003’s fuel bill of $44 billion (that accounted for 14% of operating expenses at $28.8/barrel Brent).
In 2012 the fuel bill is estimated at $210 billion (accounting for 32% of operating expenses at $111.8 per barrel Brent).
Industry profits of $12.7 billion are forecast for 2013 and following profits of $7.6 billion in 2012.
Industry Fuel Costs and Net Profits
58
Global Country Study Report
India
South Korea
Fuel Impact on Operating Costs
% of Operating
Average Price per Break-even Price Barrel of Crude
Costs
(US$)
per Barrel (US$)
Total Fuel Cost
2006
26%
US$65.1
US$68.2
US$116 billion
2007
27%
US$73.0
US$81.8
US$133 billion
2008
33%
US$99.0
US$83.2
US$187 billion
2009
26%
US$62.0
US$59.1
US$123 billion
2010
25%
US$79.4
US$91.1
US$139 billion
2011
28%
US$111.2
US$116.2
US$176 billion
2012
32%
US$111.8
US$116.1
US$210 billion
2013 F
31%
US$108.2
US$115.5
US$211 billion
2014 F
30%
US$104.5
US$115.4
US$210 billion
Updated: 12/2013 Next Update: 03/2014
Source: Industry Financial Forecast Table (IATA Economics)
[PT6] 59
Global Country Project Report
India
South Korea
Impact of Refinery Margin on Fuel Costs
2. Pollution control: Total climate effects The Intergovernmental Panel on Climate Change (IPCC) has estimated that aviation is responsible for around 3.5% of anthropogenic climate change, a figure which includes both CO2 and non-CO2 induced effects. The IPCC has produced scenarios estimating what this figure could be in 2050. The central case estimate is that aviation’s contribution could grow to 5% of the total contribution by 2050 if action is not taken to tackle these emissions, though the highest scenario is 15%.Moreover, if other industries achieve significant cuts in their own greenhouse gas emissions, aviation’s share as a proportion of the remaining emissions could also rise. 60
Global Country Project Report
India
South Korea
3. Radiation exposure: Flying 12 kilometres (39,000 ft) high, passengers and crews of jet airliners are exposed to at least 10 times the cosmic ray dose that people at sea level receive. Several times a decade, a geomagnetic storm permits a solar proton event to penetrate down to jetliner altitudes. Aircraft flying polar routes near the geomagnetic poles are at particular risk.
4. Personnel cutbacks : Ascend Safety director Paul Hayes agrees with the sentiment. “Industry cutbacks are causing concerns. Aviation personnel are aware that they are working harder for less money, and they link this with increased risks to safety,” he says. At the same time, however, the majority of those who responded to the Ascend survey also said that aviation safety has improved over the past five years (52%), and that it will continue to improve over the next five years (58%).
5. Global economic woes : Although air travel, measured by number of passenger-kilometres flown, has long risen faster than economic growth, airline revenues have lagged world GDP growth for the past 20 years in real terms, Revenues and profits per seat have been falling because of greater competition springing from deregulation, first in America and then within Europe and across the Atlantic. Even before the latest slump only a third of mainstream airlines in Europe, America and Asia earned enough to cover their cost of capital, which is 8% on average Before September 11, 2001, the global industry was showing a net loss on international services of around $3 billion. Airlines to lose $5.8B in 2008 (IATA) 61
Global Country Project Report
India
South Korea
Asia-Pacific Region
Managed liberalization (slow to change)
Strong growth (especially since 9/11)(i.e., China 8% PAX growth ext 20 years; India growing domestically and internationally 20% per year)
No regional organization for Asia (unique)
“Megacarriers” and small international carriers co-exist
No interline agreements
Largest share of world economy
Busiest international route in world (Hong Kong – Taipei)
Growth of alliances
Airport and airspace congestion, competition, need for
advanced navigational equipment
15M seats to be cut
Centre of growth declining
Airline profits shrink $900M in 2012 to $300M in 2013
South Korea Region
62
Fairly stagnant in terms of growth
Rich and poor
High cost airlines feeling pinch of 9/11
Implementing low-cost strategies
Safety and security?
Airline profits to fall from $300M in 2012 to $200M in 2013
Global Country Project Report
India
South Korea
CH-7 STRATEGIES & FORECASTING FOR AVIATION INDUSTRY 63
Global Country Project Report
India
South Korea
INNOVATION STRATEGIES IN AIRLINES BUSINESS AIRLINE OF THE FUTURE: SMART MOBILITY STRATEGIES THAT WILL TRANSFORM THE INDUSTRY This Point of View from the Cisco® Internet Business Solutions Group (IBSG) explores Current use of mobile technology in the airline industry, future opportunities, and strategies that will enable airlines to harness the power of mobility to create new levels of customer Experience and operational efficiencies that will help produce successful results and sustainable competitive differentiation.
Rise of Mobile Communications
Figure 1. Internet Use via Mobile Devices Versus Desktop PCs, 2007–2015 (estimates)
64
Global Country Project Report
India
South Korea
AIRLINE MOBILITY EVOLUTION Airport and airline operations are also seeing innovative mobility enhancements in the areas of “operational messaging” (between the aircraft and airline headquarters), maintenance, pre- and in-flight services, flight planning, and asset and spare parts management. Let’s take a closer look at how mobile capabilities for airlines have evolved.
Mobility 1.0: Foundational Services Mobility 1.0 represents mobility’s most basic and foundational capabilities. These include Airlines disseminating essential operational messaging for flight plans, and “irregular”. Operations, such as emergency situations. Short message service (SMS) and other text Messaging applications have been used extensively by airlines and widely adopted by passengers. Email has also been a staple for transmitting flight details, gate information, and Rudimentary attempts at upselling and cross-selling of ancillary products and services. While Useful, SMS, email, and basic messaging fell short of the rich interaction one can enjoy while accessing the Internet using a PC with broadband connectivity.
Mobility 2.0. Smartphones untether users from PCs and are changing the game for passengers;
Booking—flight booking and rebooking; on board food selection prior to boarding
Mobile check-in and boarding passes—boarding pass sent to mobile phone as bar code; passenger holds phone up to bar-code reader upon boarding plane
Website optimization—websites designed to accommodate various mobile device footprints (smaller displays, different font sizes)
Messaging—targeted messages and advertisements sent to passengers’ mobile phones based on their unique profiles
Smartphone Bar-Code Reader Performs Mobile Check-In .
65
Global Country Project Report
India
South Korea
Mobility 3.0: The Future Mobility 3.0 solutions enable passengers to make far more intelligent and precise decisions about their travel to and from the airport. When combined, such capabilities create a mashup that offers context-aware, location-based services that can notify passengers of whether they need to leave for the airport earlier or later based on real-time and predictive data of traffic, airport, and airspace conditions. Figure 5 shows a mashup of three separate services: flight tracking, TSAwait, and FAAwait.
66
Global Country Project Report
India
South Korea
Examples of Mobility 3.0 services and applications include: Personal travel assistant—for travel-related interactions such as alerts pertaining to all aspects of the journey, including drive time to the airport, flight times, and security line status Mobile marketing—dynamic packaging of personalized offerings and discounts Mobile concierge service—with the push of a button, access a virtual concierge whose familiarity with the user’s profile (likes, dislikes, etc.) enables delivery of a highly personalized experience. Mobile payment—smartphone as a secure e-wallet, taking advantage of contextaware security capability Augmented reality—context- and location-aware applications enable an immersive, context-rich environment for the passenger Real-time business intelligence for airlines—rather than conduct analytical yield management on a batch basis, airlines can perform optimized real-time yield management based on passengers’ location, what they are doing, and what they might want.
67
Global Country Project Report
India
South Korea
Mobility 3.0 Architecture
BUSINESS OBJECTIVES The Business Objectives layer summarizes the business drivers for Mobility 3.0, using an industry standard taxonomy from which the necessary capabilities can be inferred. Profitability, the keystone business driver, is maximized when production, inventory management, sales, and market share strategies are aligned to maximize revenue and minimize cost through effective use of mobility.
CAPABILITIES The Capabilities layer depicts the services and functions an organization needs to achieve the business objectives. Journey orchestration provides a consistent, end-to-end passenger experience by delivering relevant contextual information to passengers throughout their travel—pre-check-in, en route, and post-travel. This capability enables airlines to assemble 68
Global Country Project Report
India
South Korea
multiple service elements into a growing repertoire of unified experiences that can adapt to meet changing airline and environmental needs and business conditions.
FORECASTING IN AVIATION INDUSTRY A number of organizations, airframe manufacturers
and
agencies have provided
forecasts of how they see aviation growing in the future. These forecasts by Airbus, Boeing and ICAO (International Civil Aviation Organization) to name a few are summarized in Table 1; only values for international air passenger growth are included. All the values are fairly close, with ICAO being seemingly more optimistic. These values are presumably reflecting some adjustments for the current economic crisis. Interestingly, the Revenue Passenger Kilometres (RPK)/GDP growth ratio is approximately 1.6 for both Boeing and Airbus, which is what it has been over the past decade or so. This would seem to imply the airframe manufacturers are among those who take the view that on balance world economies will emerge from the recession in the same structural condition as before; a business as usual view or, as the OECD has named it ‘the current crisis is an accident’. In their work, the OECD points out that even in the case in which globalization continues there is substantial foregone economic growth. The effects of the slump are large, with expected returns to previous growth rates not being realized for up to 5 years. If there is a shift from a globalization regime, such as retrenchment, this implies a whole regime change with significant long run consequences.
A particularly important insight from the OECD work is that even if a globalization regime is retained, the pattern of globalization must change since pre-crisis levels and patterns were not sustainable. Thus a stable, moderate and realigned globalization regime may emerge, but all of the forecasts reported in Table 1 do not reflect moderation or realignment.
The increasing amplitude in swings about the trend has resulted in higher costs for carriers. On the upswing, available capacity is expanded in increasing amounts and on the downswing this capacity drives fares lower and airline profits decline. The costs of adjustment 69
Global Country Project Report
India
South Korea
increase. A second consequence is on consumer confidence which moves in short bursts generally lagging the GDP cycle but they move together. As the amplitude of the cycles about the trend increases it may be consumer confidence will take a longer time to re-establish itself and once it does a more conservative atmosphere may prevail.11 There are the vagaries of war, flus (SARS, Swine) and political disruption. These work through the cycle but again can be more troublesome as the cycle changes. For example, trade improves productivity which has a positive impact on growth. If the bubbles reduce trade, the growth in GDP may slow more than proportionately due to loss of productivity. In the longer term, the growth in GDP and the growth in trade which exceeds GDP growth has driven international air passenger growth. The trend has been consistently upward and tied to growth in GDP, but this growth is currently zero or negative in many cases. The growth rates of exports of many countries are also negative (as illustrated in Figure 3) for selected countries. International air travel is following its traditional relationship with GDP and is also declining at double digits in some markets.
TRENDS IN GDP GROWTH RATE & SWINGS ABOUT THE TREND
70
Global Country Project Report
India
South Korea
GRAPH OF GROWTH MARKET OF AIRLINES INDUSTRY
This graph represents that airline growth rate will consistently increase form 0.2% in 1970 to 4.4% in year 2020-2030
71
Global Country Project Report
India
South Korea
CH-8 CONCLUSION, FINDINGS & SUGGESTIONS FOR AIRLINES SECTOR 72
Global Country Project Report
India
South Korea
CONCLUSION & FINDINGS
Talks on joint venture between Korean Air and Air India are in process which would be beneficial for both the countries in various terms.
From Korea, Korean air is renowned for its Resources and Technology whereas Jet Airways from India is having a good mass of customer which would make a great combination for the future collaboration.
For strengthening the collaborative partnership talk Government of India has approved a share of 49% in FDI under the Open Sky Scheme.
Due to the strong, ancient historical and cultural linkages between the two countries, there is huge potential for enhancing tourism-related trade and investment flows. If a conducive and facilitative environment is created, there are possibilities that tourist inflows from Korea to India would increase.
Though economic relations between India and Korea have been strengthening, the current size of trade and investment between the two countries is relatively low compared to the size and structural complementarities of the two economies.
The trade and economic relations between India and Republic of Korea (Korea) have gathered momentum in recent years with bilateral trade reaching a substantial figure of $ 17.57 billion in 2013.
73
Global Country Project Report
India
South Korea
SUGGESTIONS
The current state of the civil aviation sector in India indicates that air traffic has increased considerably in the past few years and removing historic barriers to entry would infuse competition into the sector and expand the provision of air carrier services as recommended by Naresh Chandra in his "Competition Issues in Civil Aviation sector report. Therefore, the regulator may want to consider removing fleet, equity and experience requirements for international carrier service providers. Specifically, equity requirements should be replaced by requirements for carrier service providers to demonstrate financial viability, using India‘s cargo service sector as well as international practices as models of reform.
Consider phasing out compulsory government regulated route dispersal and put out a call for input from stakeholders for different incentive programs that will help create more air carrier traffic to smaller airports. Recently, the AAI considered a number of proposals for such incentive programs from air carriers. Input from India‘s civil aviation stakeholders can generate an alternative solution on how to ensure service to all of India‘s operational and future airports.
The Indian government may wish consider incentives beyond reductions of airport fees of under serviced airports, e.g., such as providing limited route service subsidies. This can have significant positive social impacts, such as creating economic opportunities for people living in under serviced regions and improvements in connectivity between rural airports and Indian hubs. While addressing a social need, limiting the duration of the subsidies will help limit the expense by the government.
74
Global Country Project Report
India
South Korea
ANNEXURES
75
Global Country Project Report
India
South Korea
MARKET SHARE INFORMATION OF AVIATION COMPANIES IN INDIA FOR THE YEAR 2014 The Directorate General of Civil Aviation (DGCA) has come out with the April 2014 data of the market share of scheduled domestic airlines in the Indian skies. Let's take a look. Tabular form Presentation:-
Name of Players Jet Airways and Jet Lite Kingfisher Airlines Air India IndiGo SpiceJet GoAir Paramount Airways
India's Airlines Companies Market Share in (%) 27.70% 20.70% 18.60% 13.60% 12.40% 5.40% 1.50%
Source: - DGCA Graphical form Presentation:-
India's Airlines Companies Market Share in (%) 5.40%
1.50%
Jet Airways and Jet Lite Kingfisher Airlines
12.40% 27.70% 13.60%
IndiGo 20.70%
18.60%
76
Air India
Global Country Project Report
India
South Korea
MARKET SHARE INFORMATION OF AVIATION COMPANIES IN SOUTH KOREA FOR THE YEAR 2014 Tabular form Presentation:-
Name of Players Asiana Airlines Jeju Air Jin Air Korea Express Air Korean Air T'way Airlines
South Korea Airlines Companies Market Share in (%) 25.2 6.5 18.2 16.7 27.6 5.4
Graphical form Presentation:-
South Korea Airlines Companies Market Share in (%) 5.4 25.2 27.6 6.5 16.7
77
Global Country Project Report
18.2
Asiana Airlines Jeju Air Jin Air Korea Express Air Korean Air T'way Airlines
India HOW COST INCREASE OF FREIGHT IN AIRLINES INDUSTRY
78
Global Country Project Report
South Korea
India
South Korea
BIBLOGRAPHY
79
Global Country Project Report
India
South Korea
In Reference to List of Airlines Industries in India dated on 28-12-13 from http://en.wikipedia.org/wiki/List_of_airlines_of_Korea
In Reference to List of Airlines Industries in South Korea dated on 28-12-13 from http://en.wikipedia.org/wiki/Category:Airlines_of_South_Korea
In Reference to Economy date dated on 28-12-13 from http://en.wikipedia.org/wiki/Economy_of_South_Korea
In Reference to impact on aviation dated on 28-12-13 from http://en.wikipedia.org/wiki/Environmental_impact_of_aviation
In Reference to Countries information dated on 28-12-13 from http://www.indexmundi.com/india/#Introduction http://www.indexmundi.com/south_korea/ http://southkorea.facts.co/interestingsouthkoreafacts/aboutsouthkoreafunfacts.p hp http://www.123helpme.com/view.asp?id=163577 http://www.knowyourcountry.com/southkorea2.html
In Reference to literature review dated on 26-3-14 from http://www.iata.org/publications/economics/Pages/index.aspx
80
Global Country Project Report
India
South Korea
In Reference to investment & export and import data dated on 26-3-14 from http://export.gov/southkorea/doingbusinessinskorea/leadingsectorsforusexportsin vestment/
In Reference to List of Major Players in Airlines Industries dated on 26-3-14 from http://www.nationsonline.org/oneworld/major_airlines.htm
In Reference to economic data dated on 26-3-14 from http://www.iata.org/publications/economics/Pages/index.aspx
In Reference to MOU dated on 26-3-14 from http://www.flightglobal.com/news/articles/s-korea39s-incheon-airport-inks-mouwith-india39s-gmr-359813/
In Reference to market share major players dated on 26-3-14 from http://www.dsij.in/article-details/articleid/7478/market-share-of-scheduleddomestic-airlines-for-april-2013.aspx
81
Global Country Project Report
