Industry Analysis (2/10)
#InvestingUniversity
Aviation Industry:
Indian Aviation sector has become the third largest domestic market in terms of handling domestic traffic and aims to overtake China and the United States to become the world’s third largest air passenger market in the next 10 years.
🌟 Cyclicity: Fairly Cyclical (In a good economic situation, people would have disposable income that they can spend on expensive Air Travel.)
🌟 Value Chain
➡️ Inbound Logistics (Yield, Fuel Management, Aircraft Lease/Acquisitions)
➡️ Operations (Ticket Counters, Baggage handling)
➡️ Outbound Logistics (Online reservation system, Connecting flights)
➡️ Services (Support services, Baggage services)
➡️ Marketing & Sales (Online portal, Promotions, Advertisements)
🌟 Revenue Drivers
➡️ Aircraft Manufacturing
➡️ Ticket sales
➡️ In-flight services (Food, Wifi)
🌟 Cost Drivers
➡️ Fuel Expense
➡️ Financial expenses (Lease, Interest Obligations)
➡️ Employee salaries
➡️ Depreciation of Property
🌟 Growth Drivers
➡️ Rising Disposable Incomes
➡️ Economic conditions (Travel and Tourism sector booms generally in a good
economic situation)
➡️ Competition between carriers
➡️ Policy framework for Infrastructural development
🌟 Key Market Players
➡️ Vistara (10.4%)
➡️ Air India (8.4%)
➡️ Go First (8.2%)
➡️ Air Asia (4.6%)
Recently Akasa Air, a low-cost carrier has entered the Aviation space and looks to compete with the likes of Indigo and Vistara. Another interesting fact is that TATA holds a 23.6% market share in the Aviation sector (8.4% in Air India, 10.4% in Vistara and 4.6% in Air Asia).
The aviation sector is known for its capital-intensive nature and asset-heavy structure and is proven that withstanding the costs and generating profits in a long term is quite cumbersome.
What is your opinion of the Industry and would you invest?
