khalid ziya 007

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The Aviation industry in India began with the birth of Tata Airlines, through thebusiness relationship between Mr. Nevill Vintcent, a Royal Air Force pilot and Mr. JRDTata, the first Indian to get an A-license. Tata Airlines became Air India in August 1946.In 1953, the Air Corporation Act nationalized all existing airline assets and establishedthe Indian Airline Corporation and Air India International for domestic and international

air services respectively. These two companies enjoyed monopoly power in the industryuntil 1991, when private airlines were given permission to operate charter and nonscheduled services under the µAir Taxi¶ scheme to boost tourism. These carriers werenot allowed at the time, to fly scheduled flights or issue air tickets to passengers. As aresult, a number of private players including Jet Airways, Air Sahara, Modiluft, DamaniaAirways, NEPC airlines and East West Airlines commenced domestic operations. In1994, following the repeal of the Air Corporation Act, private players were permitted tooperate scheduled services. Ultimately the carriers with more efficient operations andstrategies survived and by 1997, only Jet Airways and Air Sahara made the cut from theoriginal group.

Company HistoryJet Airways (India) Private Limited is India¶s leading private airline. It boasts a marketshare of about45 percent. Jet operates a relatively young fleet of Boeing 737 jets andATR72 turboprops. It carries about seven million passengers a year. Its reputation for punctuality and outstanding service attracts a large proportion of business travelers.Jet¶s founder and chairman is Naresh Goyal, an Indian expatriate living in London. JetAirways, completed forteen years of operations on May 05, 2007, they have pioneeredbenchmarks such as automated ticketing at travel agency locations, automated flightalerts on GSM mobile phones, Tele-check in, Return Tele-check-in, Through Check-in,City Check-in, satellite ticketing at corporate houses and the unique three-tier frequentflier programme, Jet Privilege, in the domestic skies to make travel pleasant andquicker. Jet Airways operates over 255 flights daily to 41 destinations across thecountry. Jet Airways today operates one of the youngest aircraft fleet in the world withan average age of3.31 years. The fleet consists of 33 Classic and Next-GenerationBoeing 737-400/700/800 aircraft and eight Modern 62-seater ATR 72-500 turbo-propaircraft. The Airline offers Club Premiere (Business Class) in addition to Economy Classon most of its Boeing 737 flights. The Airline has won several national and internationalawards. The most recent being Business world µIndia¶s Most Respected Company in theTravel and Hospitality Sector¶, for 2003, Travel Trade Gazette¶s (TTG) µBest DomesticAirline Award¶ for 2002 among 14 countries in the Asia-Pacific region, Air TransportWorld (ATW) µMarket Development Award¶ for 2001, the Qimpro Gold Standard for 2001and the Hospitality & Food Service (H&FS) µBest Domestic Airline¶ trophy four times. Jet

Airways is proud that we are one of the few airlines in the world to receive the ISO 9001certification for our in-flight services.

OriginsCompany founder Naresh Goyal began his travel career in 1967 at the age of 18 as ageneral sales agent (GSA) for Lebanese International Airlines. In May 1974, he formedhis own company, Jetair (Private) Limited, to market other foreign airlines in India. Jet



air eventually grew to a network of60 branch offices. After three and a half decades of monopoly by Air India and Indian Airlines, the Indian government reopened thedomestic aviation market to private carriers in April 1989. Goyal set up Jet Airways(India) Private Limited in 1991. Initial investment was $20 million. Through an Isle of Man holding company, Tail Winds, company founder Naresh Goyal (then based in

London) owned 60 percent of Jet Airways, with Gulf Air and Kuwait Airways dividing theremaining 40 percent. Jet Airways began domestic flight operations with four new-generation Boeing 737s on May 5, 1993. The first flights were from Mumbai to Delhiand Madras and ten other destinations. (Jet was not the first private airline in the skies;that distinction went to East West Airlines, which launched in February 1992.) JetAirways aimed to carry seven million passengers by the end of 1993, and to take in firstyear revenue in excess of $75 million (INR 2.4 billion).

The mission statement says ³Jet Airways going to upgrade the concept of domesticairline travel to that of a LI world-class airline.

Vision Statement: Organization vision is to become the ³Best Airline in the World´.

SWOT ANALYSIS

STRENGTHS: Jet grasps the nettle, restructuring finally paying off

Financial discipline (not before time): Jet Airways' management is finally executing an effective

restructuring plan after some haphazard attempts over the past 18 months to come to grips

with a rapidly changing market.

Encouragingly, the airline generated a USD10.4 million net profit in the fourth quarter to 31-

Mar-2009, turning around a USD55.1 million net loss in the previous corresponding period and

a USD44 million loss in the third quarter. This was to some extent driven by exceptional items

such as income from sub-leasing aircraft, changes to depreciation charges and tax credits. Full

year losses reached USD79.3 million in the 12 months ended 31-Mar-2009, following a USD63.1

million loss in the previous corresponding period.

The improved fourth quarter operating result was achieved through an extensive cost cutting

programme that included network restructuring, the deferral of aircraft deliveries for the next 1-2 years, rationalisation of personnel costs, restructuring of aircraft leases, debt restructuring,

cash conservation/cost savings measures and a focus on alliances. Jet stated the full impact of

this restructuring programme would be seen in the coming financial year.

Revenue fell 8.2% in the quarter to USD505.9 million, while EBITDAR margin in the fourth

quarter surged 13.1 ppts to 20.8% in the fourth quarter.



Jet Airways EBITDAR margin growth: 1Q08 to 1Q09

Source: Centre for Asia Pacific Aviation & Jet Airways

WEAKNESSES: Brand confusion

Too many brands: A key strategy by Jet to "adapting to new market realities" and capture price

sensitive markets is its "Jet Konnect" product. Its third brand in the domestic market (after Jet

Airways and JetLite) risks further confusing the travelling public in a highly fragmented market.

A Risky Combination: Although full details are yet to be released, Jet Konnect is expected to

operate as a low fare brand within the existing full service carrier's operations. The danger is

that such a model could result in the undesirable combination of low fares and high costs.

Several carriers in Europe and North America have failed with such an approach. As

demonstrated by the Q antas/Jetstar example, a more successful strategy is one where the low

cost product is operated as an independent subsidiary with independent management and a

greenfield cost structure. That does not appear to be the intention with Jet Konnect.

Meanwhile, Jet Airways' all-economy unit, JetLite, is a massive drain, reporting a USD25.9

million net loss in the fourth quarter (albeit an improvement on the USD40.7 million loss in the

previous corresponding period). Load factors fell 0.4 ppts year-on-year to 69.1%. The strategic

mistake with JetLite was to attempt to create a low cost unit out of an airline with significant

legacy issues.

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OPPORTUNITIES: Growth options limited to short-haul

Short-haul international expansion: In terms of route development, Jet's long-haul ambitions

have been put on hold until market conditions improve. It is however planning to target short-

haul (B737) opportunities, with new services to Jeddah, Riyadh and additional services to

ASEAN & SAARC region destinations "in the near future". The expansion of its presence in these Middle East markets, particularly Saudi Arabia, is crucial in defending Jet's network against the

growing Middle East carriers, but also creates opportunities for increased hubbing over

Mumbai and Delhi to its strong domestic franchise and points in Southeast Asia.

Industry "consolidation": The return of the Singh Government should see an easing of foreign

ownership restrictions and could prompt more moves to consolidate the Indian airline sector.

Jet is unlikely to be an active participant following its costly acquisition of Sahara, its ineffective

operational alliance with Kingfisher and strong motivation within Jet's founders to maintain its

independence. The potential for easing of foreign investment rules should support the share prices of India's leading aviation companies, which could improve conditions for further capital

raisings in the medium term. Jet Airways' shares have risen strong since the election result.

Jet Airways share price growth: Jan-2009 to May-2009

Source: Centre for Asia Pacific Aviation & Rediff

Industry capacity rationalisation: Overall, some further consolidation activity in India is

expected in the next 12-18 months, especially in the LCC segment if oil prices stay above USD60




per barrel, which could help to rationalise industry capacity. This would be a positive

development for Jet.

THREATS: Ongoing economic weakness and competitive tension

Loss of pricing traction: Jet Airways' steep capacity reductions has meant its mantle as the

dominant Indian carrier has passed to Kingfisher Airlines - and with it the ability to influence

pricing. Yields were down sharply in the final quarter, increasing pressure on the airline to

reduce its costs.

Revenue per RPKM: 1Q08 to 4Q09

Source: Centre for Asia Pacific Aviation & Company reports

Jet's passenger numbers were down a significant 20% in the fourth quarter to 2.54 million, as

the airline reduced capacity by 9.3%. RPKs fell by 8.3%, resulting in a 0.8% improvement in

passenger load factor to 71.7%. The domestic market contracted 12% in the first quarter, with

Jet ceding market share to Kingfisher and the LCCs.

Jet's domestic market share has fallen to 17.8%, while JetLite's share remains around 7.4% for a

combined group share of 25.2%, 1.6 ppts below Kingfisher/Kingfisher Red.

"Challenging" outlook: Jet Airways admitted the global economic environment, coupled with

economic realities of the airline industry in India requires "exceptional efforts to return to

breakeven and profitability". It expects the year ahead to be "challenging", with sluggish

demand for both domestic and international operations and premium segments. It concluded,

"with the upcoming lean season, load factors and yields will continue to be under severe

pressure".




ORGANIZATIONAL APPRAISAL

1. Internal analysis

2. Comparitive analysis

3. Comprehensive analysis

1. Internal analysis

STRENGTHS: Jet grasps the nettle, restructuring finally paying off

Financial discipline (not before time): Jet Airways' management is finally executing an effective

restructuring plan after some haphazard attempts over the past 18 months to come to grips

with a rapidly changing market.

Encouragingly, the airline generated a USD10.4 million net profit in the fourth quarter to 31-

Mar-2009, turning around a USD55.1 million net loss in the previous corresponding period and

a USD44 million loss in the third quarter. This was to some extent driven by exceptional items

such as income from sub-leasing aircraft, changes to depreciation charges and tax credits. Full

year losses reached USD79.3 million in the 12 months ended 31-Mar-2009, following a USD63.1

million loss in the previous corresponding period.

The improved fourth quarter operating result was achieved through an extensive cost cutting

programme that included network restructuring, the deferral of aircraft deliveries for the next

1-2 years, rationalisation of personnel costs, restructuring of aircraft leases, debt restructuring,

cash conservation/cost savings measures and a focus on alliances. Jet stated the full impact of

this restructuring programme would be seen in the coming financial year.

WEAKNESSES: Brand confusion

Too many brands: A key strategy by Jet to "adapting to new market realities" and capture price

sensitive markets is its "Jet Konnect" product. Its third brand in the domestic market (after Jet

Airways and JetLite) risks further confusing the travelling public in a highly fragmented market.

A Risky Combination: Although full details are yet to be released, Jet Konnect is expected to

operate as a low fare brand within the existing full service carrier's operations. The danger is



that such a model could result in the undesirable combination of low fares and high costs.

Several carriers in Europe and North America have failed with such an approach. As

demonstrated by the Q antas/Jetstar example, a more successful strategy is one where the low

cost product is operated as an independent subsidiary with independent management and a

greenfield cost structure. That does not appear to be the intention with Jet Konnect.

Meanwhile, Jet Airways' all-economy unit, JetLite, is a massive drain, reporting a USD25.9

million net loss in the fourth quarter (albeit an improvement on the USD40.7 million loss in the

previous corresponding period). Load factors fell 0.4 ppts year-on-year to 69.1%. The strategic

mistake with JetLite was to attempt to create a low cost unit out of an airline with significant

legacy issues.

2. Comparitive analysis

Jet Airways

y Jet airways is the experienced airline in India

y Overall growth in 2007-08 is 16%

y Jet airways acquired Air Sahara in 2006

y Jet airways already has domestic as well as international flight

y Jet airways has its market share 31% including Air Sahara

y Average entertainment service

y Jet Airways won Double Honour Travel Trade Gazette Award

y They plan to start training academy

Kingfisher Airline

y Kingfisher one of the largest Airline in India

y Overall growth in 2007-08 is 37%

y Kingfisher acquired 46% share in Air Deccan y Domestic airlines poised to go international flight

y In a short span of 2 years its market share has become 28% including Air Deccan

y Personal in flight entertainment is at every seat

y It was awarded the Best New Airline of the year award

y Already has training academy



ETOP of Jet Airways

The Thr eats facing the LCC sector

There are numerous globally applicable external challenges to the low cost

model, such as high fuel costs, government regulation preventing orrestraining entry in one way or another, and protectionism generally.

However, regional differences also emerge when airlines and key observers

analyse the concerns that may lie ahead.

At a global level, Professor Levine sees generic and industry concerns: ³Thegreatest challenges will come from the intersection of airline growth

ambitions and low market-size growth due to a slow recovery from the

global recession and from pressures on costs. Low discretionary income andhigh savings rates will reduce leisure-travel spending and the adaptations

necessary to capture more business demand to replace it will increase

costs.´

And, on specific airline industry complexity, he says, ³These pressures willbe increased if fuel costs continue to rise and if environmental charges

become widespread. As LCCs mature, they will also come under labor costpressures as seniority increases and attempts are made to unionize growing

labor forces.´

.

Fuel Prices ± Enemy #1?

After a gruelling year last year, when fuel prices went far beyond levelsanyone expected, a number of LCCs are today prepared to confess frankly

that they had been doubting their future. So it is no surprise that fuelfeatures large on the list of threats to the respective airlines. And, despite

fears, there can be no certainty that continued slow economic conditions willprevent fuel prices from rising. The US ATA for example has been vociferous

in its belief that prices are inflated by money market speculation, not by

fundamentals, a view that has many supporters.



for Jey Airways ³the biggest challenge for our airline and most LCCs is fuel

volatility. Most of us do not have the balance sheets that can withstand

large losses for a long period of time,´ says David Cush. ³The ability of thelegacy carriers to withstand that has diminished, but has not disappeared.

In general, LCCs are much better at enduring the combination of a soft

revenue environment and low fuel prices than a strong revenue environmentand high fuel prices. If a strong economic recovery means much higher fuel

prices, we would rather do without.´

.

Bill Franke too ranks fuel prices as enemy #1: ³Probably the biggest issuesfor both LCC and legacy carriers over the next three years, a time of liquidity

issues for all, will be (i) jet fuel (and how to manage it in an inflationary

environment) and (ii) how airlines can finance their aircraft orders in

financial markets that are in disarray.

³Higher costs, particularly fuel costs, will stress both legacy and LCC carrierswho have limited capacity to hedge. If we see a sustained period of economic malaise coupled with high fuel, several large legacy carriers will

face restructuring. LCCs, even successful LCCs, will have to reduce growth

as they redirect capital to support their operations.´

Fuel prices rank high as a risk among the Middle East LCCs too, but in

context up against the array of factors that contribute to make the airlineindustry such fun. Adel Ali, of Air Arabia: ³Whether economies, political

instability, fluctuating oil prices, natural disasters and many other factors, itall impacts global aviation. Airlines have to face those challenges andsurpass it, its part of what this business is all about.´ And Sama¶sSteele«´the greatest threat is the same as others ± fuel prices, swine flu,worldwide recession and so on. The greatest challenge is to grow

significantly but profitably.´

Inevitably, fuel prices are critical to the shape of the industry. For the lower

cost carriers, fuel constitutes a higher proportion of costs and LCCs are

consequently more sensitive to substantial input price increases. As jet fuelprices went through USD170 a barrel last year and rising, many LCCs were

becoming seriously compromised. Peak oil promises to threaten the basic

model again, as economies recover.

Even at today¶s depressed levels of economic activity, oil prices are hovering

around USD70, partly on speculation, partly due to production and refining

issues. Once prices rise above these levels, there is a steep reduction in the

value proposition of LCCs vs full service airlines.



In the short to medium term, there is likely to be a ³crunch´ period, a

revenue vacuum, where the world emerges from recession and a short term

surge in demand forces fuel prices to peak, yet consumer demand for travelstill lags. This asynchronous scenario ± a highly likely one ± will be painful

for LCC and full service airlines alike.

Then, as activity returns, oil prices threaten to climb progressively higher,

until they reach a new plateau of economic activity. At that time, for any

carrier whose model is based on maintaining low costs, the disproportionateimpact of this external pressure becomes overpowering when fuel prices rise

towards the upper range of USD100-200 per barrel.

In these circumstances, even the lowest cost model cannot survive unless

substantial yield increases are possible. However, for the lower end of the

leisure market, fare increases quickly deter demand, eroding the value of

the ultra-low cost model.

If the fuel price inflation is accompanied by strong demand ± as it was for atime in 2008 ± that demand can help support airlines with a higher yield andservice profile. But even these carriers will be stressed and will favour

reducing capacity to maintain upward pressure on fares.

During 2009, US network airlines have been thrown a life raft as they

accessed the add-on ancillary revenue source. This offered a one-off step

change, generating billions of dollars a year. But, even with further increasesin the levels of baggage, seating, and other charges, future non-ticket

revenue improvements will be only marginal. There will be no easy refugethere.

This USD100+ fuel price scenario, which must be assumed to be set at

somewhere between ³likely´ and ³very possible´ over the next two years,

would therefore arguably favour those airlines which have chosen tonavigate a path somewhere between lowest cost and highest yield. An airline

which has the ability to generate yields across an interconnected system of

domestic and internationals services, but with a low cost base, has a risk-

basket which would look to prepare it best for these cost/revenue conditions.

Financing in disturbed financial markets

Bill Franke listed financing as one of his two main headaches: ³«new fuelefficient aircraft, with lower initial maintenance costs, will be out of reach

except for the most solvent of airlines as financial markets for new aircraft

have in large part dried up or, if available (ECA¶s or a few lessor aircraft),



require a substantial airline ³equity´ contribution or involve high monthly

lease costs.´

This is an underlying (and usually understated) concern for all airlines at

present. One indicator is the disparity noted in this report in the relationship

between lease costs for A330s (currently very much in demand, as the B787replacement of choice) and their purchase prices. At the same time as

purchase prices are sliding ± despite high demand ± lease prices are

skyrocketing. Few airlines have the balance sheet to allow them to use moretraditional methods of financing. As that process pervades the industry, so

aircraft move from being (owned) assets on the balance sheet to (leased)

liabilities on the current account, increasing each company¶s fragility.

Aircraft prices must inevitably suffer continued downward pressure as a

conspiracy of reduced demand and tight credit markets cool buyer

eagerness. There is also the unknown of several large leasing companies¶ asset positions in the face of credit limits; liquidating large inventories would

create real stresses, further diluting values. But that is little more than

academic for airlines, if credit is not available. And, for those which do list

aircraft on their balance sheets, decreased values may come home to roost.

Government charges and taxes

Despite the undoubted immense social and economic benefits delivered bythe aviation industry, low cost and full service alike, governments typically

have underperformed in supporting expansion. In the worst cases, this takes

the form of ugly grabs for revenue from the milk-cow, in others simply inunderfunding of infrastructure or counterproductive nationalism in airspace.

Airports too in many cases come in for criticism especially from low margin

LCCs.

Jetstar sees government taxes ± along with unnecessary regulatory

impediments - as suppressants of Australia-New Zealand travel too. The

respective tourism industries would be major beneficiaries of ³more costeffective travel between the two countries. Reforms such as a significant

reduction in the Passenger Movement Charge (currently AUD47), moves to a

single point of clearance, and having both countries support a reciprocalarrangement for once only customer processing for Customs andImmigration, plus the possibility of conducting Trans Tasman flights out of Australian and New Zealand domestic terminals, will deliver greater

passenger volumes on this route,´ says Bruce Buchanan diplomatically.

And in the US, the antiquated airways system is still a major impediment to

cost reduction, as well as emission reduction efforts. For Southwest¶s Gary



Kelly, one of the greatest challenges for the airline is the ³inefficiencies in

our air traffic control system´ and the carrier is striving to ³achieve more

efficient flying by deploying Required Navigational Performance, thecornerstone of the FAA's NextGen Air Traffic Control system, leading to

improved OTP and a reduction in fuel burn and carbon emissions.´

For European carriers the problem of multiple airways jurisdictions is such an

obvious and, for the time being intractable one, that none even mentioned it

± but Europe¶s patchwork of air traffic control regions remains everythingthat the most Machiavellian mind could devise to undermine efficiencies.

This has major cost implications for airlines ± in flight time and in delays ±

and will also in future cause the airlines to be penalised under emission

reduction systems.

For India¶s airlines, the taxation regime defies belief. The scale of taxation of

aviation turbine fuel (ATF) in that country makes it surprising that adomestic airline can even contemplate profitability. First of all, oil importing

remains a state monopoly, so any profit of the monopoly retailers is already

a de facto tax. Then the Central government imposes a customs duty of

10% and an excise duty of 8% (as this is taxed on the gross retail price, italready constitutes a tax on a tax); not to be outdone, each of the 27 states

also milks this holy cow ± at sales tax levels ranging from 4% to over 30%

for each departure.

Cascading taxes at Delhi, Mumbai and Bangalore for example are 20%, 25%

and 28% respectively. As these are accumulated on top of the other taxes,

the pyramid towers to levels which mean that, with oil prices around USD80a barrel, fuel represents 40% of total airline costs. In 2008, this proportion

was enough to drive most global airlines to the brink of bankruptcy; but for

India, this is situation normal. Simply the administrative price of accounting

each of these taxes would be enough to run a small airline. There can be no

more effective way of capping airline growth.

So when SpiceJet¶s Sanjay Aggarwal quietly notes ³If the Indiangovernment is successful in lowering the taxes on ATF and there is an

improvement in airport cost and infrastructure, the industry could get

healthier sooner rather than later,´ there is a history of suffering that would

have destroyed lesser industries.

Thr eats in transitioning to the ³new wor ld´

Inevitably, given the concerns of many observers, the process of movingaway from the safer haven of brutal low cost into a more yield-searching

mode can be risky. Virgin Blue,´ seeing the benefits of synergies between



our long and short haul operations´, seeks to address this challenge by

³over-delivering on reliability, network growth and perhaps some more

product development. Now, hopefully at the bottom of the economic cycle,and with a successful capital raising under our belt, we are negotiating for a

large aircraft order to underpin the rebound and future growth.´

Timing is everything. Complacency can be deadly

Dave Barger also pinpointed the constant striving as the key issue for hisairline: ³As JetBlue closes in on its ten-year anniversary, one of the

greatest threats and challenges to the firm is complacency.´ And AirAsia¶sTony Fernandes frets, ³I spend every waking moment and a few sleeping

hours, worrying about where we can save costs.´

The genuine low cost model is a restless beast, constantly threatened by the

challenges of its external environment, but always seeking a better way to

attack the core.

OPPORTUNITIES: Growth options limited to short-haul

Short-haul international expansion: In terms of route development, Jet's long-haul ambitions

have been put on hold until market conditions improve. It is however planning to target short-

haul (B737) opportunities, with new services to Jeddah, Riyadh and additional services to

ASEAN & SAARC region destinations "in the near future". The expansion of its presence in these

Middle East markets, particularly Saudi Arabia, is crucial in defending Jet's network against the growing Middle East carriers, but also creates opportunities for increased hubbing over

Mumbai and Delhi to its strong domestic franchise and points in Southeast Asia.

Industry "consolidation": The return of the Singh Government should see an easing of foreign

ownership restrictions and could prompt more moves to consolidate the Indian airline sector.

Jet is unlikely to be an active participant following its costly acquisition of Sahara, its ineffective

operational alliance with Kingfisher and strong motivation within Jet's founders to maintain its

independence. The potential for easing of foreign investment rules should support the share

prices of India's leading aviation companies, which could improve conditions for further capital raisings in the medium term. Jet Airways' shares have risen strong since the election result.

Jet Airways share price growth: Jan-2009 to May-2009



Industry capacity rationalisation: Overall, some further consolidation activity in India is

expected in the next 12-18 months, especially in the LCC segment if oil prices stay above USD60

per barrel, which could help to rationalise industry capacity. This would be a positive

development for Jet.

Factors for SuccessIndia ± An Investment DestinationIndia is emerging as a preferred investment destination for various industries that areplanning to expand their operations.The investment by foreign firms in India isincreasing at a brisk pace as a result of the country¶s low labour costs and theavailability of talented professionals.Various European firms are scouting for allianceswith Indian companies.This has increased the air traffic to India, and Jet Airways iscapitalising on this opportunity to expand its international operations to the EU and other regions.Tapping the NRI marketWith its international operations, Jet Airways has tapped the large non-resident Indians(NRIs) segment that resides in the USA and Europe. The company¶s advantage of being an early entrant has helped it in tapping this segment. It is leveraging itsestablished brand name in the domestic market, and has developed a good hold in themarket abroad.

Favourable Government ReformsThe new reforms introduced by the Indian government have provided momentum to thegrowth of Jet Airways. Reforms, such as liberalisation of international skies (permissionto fly to certain international destinations) for private domestic airlines, abolishingForeign Travel Tax, reducing excise duty on air turbine fuel (ATF) from16 per cent to 8per cent and increasing foreign investment limit from 40 per cent to 49 per cent, havepromoted Jet Airways¶ growth in international operationTourism Driving the Growth the growth in international air traffic to India. The Indian tourism industry has also beendriving Growing at a considerable pace, the travel and tourism expenditure is estimatedto register a CAGR of 8.8 per cent for the decade starting from2004 onwards. In 2005,33 per cent of tourists in India were from the UK and the US.Almost255,000 touristsannually visit India from the UK, the primary reason being the strong cultural linksbetween the two nations.A healthy growth of the Indian tourism industry has also helpedJet Airways to increase its international operations.

Futur e PlansExpanding Curr ent MarketsJet Airways has plans to expand its existing international operations in the UK and Asia.It plans to increase the frequency of flights to the existing destinations and also startoperations to new destinations. It would strengthen its overall network by supporting itsinternational operations through its already established domestic network.



Ambitious Expansion PlansJet Airways has plans of ambitious international expansions in the future with estimatedcapital expenditure of approximately EUR 2 billion over the next three to five years for

30 additional widebody and narrowbody aircraft. It is expected to increase its fleet sizefrom 53 aircraft in FY 2006 to 79 aircraft by FY08. Most of the purchased aircraft will beused on international routes. The management also plans to develop its ownmaintenance hangars and a pilot training centre. It plans to launch air services to keydestinations across the world including USA, Canada, UK, South Africa, Kenya,Mauritius, points in China and South East Asia and some points in Europe like Brussels,Rome and Zurich.

Jet Air ways' Strategy and Operations

Jet Airways' strategy in the 1990s was to position itself differently from Indian Airlines, whichwas then the dominant player in Indian aviation. Indian Airlines had a wide network of destinations across India, along with a large and varied fleet of aircraft, the pick of flying slots atairports, and the valuable backing of the national government. Despite these advantages, the

airline's performance was far from satisfactory. The airports and planes were badly maintained,the staff was indifferent (and sometimes rude) to passengers, and operations were ridden with

inordinate delays and cancellations. Despite this, the airline was profitable, as passengerswishing to fly had no other choice until the early 1990s...

Strategic advantage profile for Jet Airways

Capability factor competitive strengths or weaknesses

1. Finance High cost of capital; reserves and surplus position unsatisfactory

2. Marketing fierce competition in industry;company¶s position secure at

Present

3. Operation Aircrafts are in excellence condition; captive sourcesfor partsandcomponents available4. Personnel quality of managers and onboard and ground steff 5. Information computerized management information system6. General high quality and experienced top management generally adopts

management a proactive approach with regard to decision meking

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