Expansion and Going Global

IIPM Ranked No. 1 B-School In Global Exposre - Zee...

Expansion and going global, therefore, seems to be the ‘mother of all’ reasons behind this money-raising jamboree. But is there another viewpoint? Syed Sagheer, Aviation Expert, PINC Research provides a probable radical motive – that of consolidations and further acquisitions. “Smaller players like GoAir and SpiceJet can see imminent acquisition by big players. Private investment in these companies has also dried up making them vulnerable for acquisitions. Money raised can be used for buy-offs as well,” he professes, adding that, “Improvement in scale of operations is the only way airlines can break even…”

An interesting change in the sectoral landscape is the go-global wind that has started blowing of late; of course, fuelled by postponement of Kingfisher’s plans to fly abroad (as policy regulations only allow airlines which have completed five successful domestic years to fly overseas). However, for fear of sounding overenthusiastic, one should not overlook the fact that this indeed appears a logical solution for the ailing sector, to get its promises back on track (remember 2003 and the Air Deccan fairytale?).

“More than three-fourth of the total international traffic in India is handled by foreign airlines. So we have a huge opportunity there. We can use our network more efficiently – using our domestic network to feed international and vice-versa,” says a Kingfisher official. True that there would be the initial investments involved (for fleet expansion, crew, technical support, training, offices, et al) when these aviators start international operations, but for Indian airliners going abroad seems to be the only option left to break into the profitability zone. Says Hick Bailey, Expert, FitchRatings International, “Given the high cost of operations and overcapacity in the domestic market, airlines will bleed to death if they aren’t soon allowed to fly abroad…”

So how can we statistically prove the cost-saving and revenue-earning logic? In an exclusive 4Ps B&M research, we discovered that the most profitable airlines in the world are also the ones which have maximum international presence (refer Figure 1). British Airways (international presence of 97% and $4.2 billion in profits over the past five years), Lufthansa (95% and $3.6 billion), Air France (91% and $5.7 billion) and NorthWest Airlines (44% and $1.4 billion) made profits while the entire global aviation lost in excess of $10 billion during the past half-a-decade. To further quantify the advantages that can be gained from international presence, revenues earned per unit distance is also highest on international routes (refer Figure 5).

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

Read these article :-
ZEE BUSINESS BEST B SCHOOL SURVEY
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global
The Indian Institute of Planning and Management (IIPM)
IIPM Campus

For More IIPM Info, Visit below mentioned IIPM articles.
4Ps Power Brand Awards 2007
When IIPM comes to education, never compromise
IIPM, GURGAON
IIPM - Admission Procedure
IIPM is A World of Career
Why Study Abroad When IIPM Gives You 3 global Advantages!