Aviation industry consolidation unfolds $120bn opportunity

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"As more passengers take to the skies, the race among airlines to gain as much market share in a fiercely competitive market that's plagued by high capital expenditure and increasing pressure on the revenue per seat, has led to the current run of mergers & acquisitions (M&As), making India the fastest consolidating market in the world with deals worth more than $600 million in less than three months."

 

"Such consolidation coupled with crashing fares brings with it the need to expand capacities, a fact that has also caught the fancy of global aviation suppliers queuing up to grab a share of the expected $120 billion order book for more than 1,100 aircrafts, associated infrastructure and support that will be needed over the next two decades." says Bundeep Singh Rangar, Chairman of IndusView , the India-focused cross-border advisory firm.

 

In the Indian aviation sector that's expected to grow at the rate of 20% over the next five years, timing will be of essence. The sooner an operator can grow in to new markets and segments more efficient will be the revenue generation and profit realization via shared costs and resources. Expanding in to new markets faster is not easily possible by organic means leaving room only for inorganic expansion.

 

The most notable of deals, the $322 million purchase of Air Sahara by Jet Airways , India's largest full service private sector airline increases Jet's market share by 8% to 33%, a combined fleet of more than 80 aircraft and additional sought-after international routes.

 

On the other hand, the acquisition of Deccan Aviation , India's top low-cost carrier by Kingfisher Airlines , a subsidiary of UB Group , India's largest alcoholic spirits manufacturer makes the latter India's largest airline with a 34% market share.

 

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