InvestorQ : Do you think it would be possible for Air India to achieve 30% market share in the Indian context, as is proposed by the Tatas?
Rutuja Nigam made post

Do you think it would be possible for Air India to achieve 30% market share in the Indian context, as is proposed by the Tatas?

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3 weeks ago
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Tatas have set themselves a grand plan to gain 30% market share of the domestic aviation market in the next five years i.e. by 2027. Here is what you need to know about the nature of the plan and whether it would be really feasible.

a) The Air India grand plan to expand market share to 30% in five years is called the Vihaan.AI plan. Interestingly, in Sanskrit literature Vihaan means a new dawn or a new beginning which is what the Tatas are desperately looking to recreate out of Air India.

b) That will be a steep spike in market share and here is why. A year after Tatas took over Air India, market share has fallen from 11% to 8.4%. In short, Tatas will have to grow the market share 4-fold to be able to achieve 30% market share. Is it really feasible.

c) Tatas surely have a plan in place to achieve the 30% market share in 5 years. Firstly, Tatas will bring quality service that Air India was known for under the Tatas. That should help to some extent. Secondly, to match up to Indigo, they need to match up to their fleet of 276 aircraft. Obviously, fleet expansion has to be aggressive for the Tatas.

d) Profitability is the key so Air India has to work on efficiency parameters like spread of RASK and CASK, passenger load factor (PLF) and pricing. Above all, Air India must be urgently capitalized and Tatas are raising nearly $4 billion.

e) However, 30% market share in 5 years will be easier said than done. Look at the numbers. India flies 11 million passengers monthly and growing at 10.5% annually. If Tatas need to achieve 30% market share in five years, then Air India has to grow its passenger flow 6-fold in the next 5 years, which is an extremely uphill task. Remember, Indigo already has 57% market share and Akasa Airlines and a revamped Jet are waiting to fire on all cylinders.

f) One possibility is that Air India and Vistara are merged since Vistara already has 11.5% market share. The one simple way is to hope that Indigo would make a hash of its business model just like Kingfisher and Jet Airways did in the past.

g) Behind all these dreams, there is a real story. India is an aviation market that is extremely sensitive to price. That is where Indigo has scored over the years combined with efficient delivery. That is the stranglehold that Air India has to break.

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