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ECONOMICS OF SAFETYECONOMICS OF SAFETY
BYBY
DECCAN AVIATION LIMITEDDECCAN AVIATION LIMITED
INTRODUCTIONINTRODUCTION
ECONOMIC BOOM IN INDIA HAS ENHANCED ECONOMIC BOOM IN INDIA HAS ENHANCED DEMAND FOR HELICOPTER SERVICES FOR DEMAND FOR HELICOPTER SERVICES FOR NUMBER OF APPLICATIONS NUMBER OF APPLICATIONS
AVERAGE GROWTH IN DEMAND ESTIMATED AVERAGE GROWTH IN DEMAND ESTIMATED AT 15% ANNUALLYAT 15% ANNUALLY
TO ENSURE SURVIVAL - YIELD TO INPUT TO ENSURE SURVIVAL - YIELD TO INPUT RATIO SHOULD BE POSITIVE RATIO SHOULD BE POSITIVE
THIS RATIO HAS A LARGE BEARING ON THIS RATIO HAS A LARGE BEARING ON INVESTMENT IN SAFETYINVESTMENT IN SAFETY
SAFETY BEGETS ALL ELSE SAFETY BEGETS ALL ELSE
NUMBERS MATCHING FOR NUMBERS MATCHING FOR ECONOMIC VIABILITYECONOMIC VIABILITY
MARKET REALITIES EXISTING IN INDIA MARKET REALITIES EXISTING IN INDIA TODAY ARETODAY ARE LOW SELLING RATES PER HOUR LOW SELLING RATES PER HOUR SELLING RATES DECREASING WITH TIME SELLING RATES DECREASING WITH TIME
DESPITE INFLATIONARY PRESSURESDESPITE INFLATIONARY PRESSURES HIGH COSTS OF TRAINING AND RETAINING HIGH COSTS OF TRAINING AND RETAINING
PILOTS AND ENGINEERSPILOTS AND ENGINEERS SQUEEZE ON AVAILABILITY OF TRAINED SQUEEZE ON AVAILABILITY OF TRAINED
MANPOWER ONLY LIKELY TO DETERIORATEMANPOWER ONLY LIKELY TO DETERIORATE HIGH FUEL PRICES AND OTHER COSTSHIGH FUEL PRICES AND OTHER COSTS
• MATCHING OF YIELD & OPERATING COSTS MATCHING OF YIELD & OPERATING COSTS MARGINS IF ANY HAVE DECREASED TO MARGINS IF ANY HAVE DECREASED TO
UNSUSTAINABLE LEVELS UNSUSTAINABLE LEVELS
TREND OF CONTRACTED TREND OF CONTRACTED RATES PER HOURRATES PER HOUR
1000
1500
2000
2500
3000
3500
2002 2003 2004 2005
US
$
BELL 212
BELL 412 EP
BELL 407
BELL 206
DEPLETION OF CONTRACTED RATES PER HOURDEPLETION OF CONTRACTED RATES PER HOUR - BELL 212 - BELL 212
0
500
1000
1500
2000
2500
1999 2000 2001 2002 2003 2004 2005
YIELD IN $
MARGINS SQUEEZE ANALYSISMARGINS SQUEEZE ANALYSIS
MARGINS SQUEEZE ANALYSISMARGINS SQUEEZE ANALYSIS ECONOMIC VIABILITY QUESTIONABLEECONOMIC VIABILITY QUESTIONABLE AGRICULTURAL AVIATION NO LONGER EXISTS AGRICULTURAL AVIATION NO LONGER EXISTS REVERSE FINACING STUDY BEING REVERSE FINACING STUDY BEING
UNDERTAKEN FOR ACQUISITIONS UNDERTAKEN FOR ACQUISITIONS CONSEQUENTLY ACQUISITION PACKAGE OF CONSEQUENTLY ACQUISITION PACKAGE OF
AIRCRAFT BEING RESTRICTED TO BARE AIRCRAFT BEING RESTRICTED TO BARE ESSENTIALSESSENTIALS
INITIAL TRAINING TOO BEING LIMITED TO INITIAL TRAINING TOO BEING LIMITED TO ESSENTIAL MINIMUMESSENTIAL MINIMUM
ADVANCED RECURRENT TRAINING WITH OEM ADVANCED RECURRENT TRAINING WITH OEM ALMOST NON-EXISTENT ALMOST NON-EXISTENT
MARGINS SQUEEZE ANALYSISMARGINS SQUEEZE ANALYSIS
MAINTENANCE OF LARGER POOL OF MAINTENANCE OF LARGER POOL OF TRAINED PERSONNEL NECESSARY TO TRAINED PERSONNEL NECESSARY TO CATER FOR POACHING/ATTRITION. CATER FOR POACHING/ATTRITION. PRESENT SCENARIO DOES NOT AFFORD PRESENT SCENARIO DOES NOT AFFORD THIS LUXURYTHIS LUXURY
OTHER FALLOUTS OF OTHER FALLOUTS OF MARGINS SQUEEZE MARGINS SQUEEZE
NO INVESTMENTS BEING MADE IN NEWER NO INVESTMENTS BEING MADE IN NEWER AIRCRAFT AIRCRAFT
NO INTEGRATION OF MODERN SYSTEMS, NO INTEGRATION OF MODERN SYSTEMS, ESSENTIAL TO ENHANCE SAFETY, BEING ESSENTIAL TO ENHANCE SAFETY, BEING MADEMADE
AVERAGE AGE OF INDIAN OFFSHORE AVERAGE AGE OF INDIAN OFFSHORE FLEET IS APPROXIMATELY 15 YEARSFLEET IS APPROXIMATELY 15 YEARS
NO INVESTMENTS BEING MADE ON THE NO INVESTMENTS BEING MADE ON THE GROUND TO ENHANCE SAFETY GROUND TO ENHANCE SAFETY
OTHER FALLOUTS OF OTHER FALLOUTS OF MARGINS SQUEEZE MARGINS SQUEEZE
FACTORS CONSIDERED SURMOUNTABLE TO FACTORS CONSIDERED SURMOUNTABLE TO ENSURE SAFETY NOT BEING ADDRESSED ENSURE SAFETY NOT BEING ADDRESSED ADEQUATELY ADEQUATELY
EFFICIENCY BEING ADVERSELY AFFECTED BY EFFICIENCY BEING ADVERSELY AFFECTED BY PRESENT SCENARIOPRESENT SCENARIO
IN OVERALL ANALYSIS OIL COMPANIES PAYING IN OVERALL ANALYSIS OIL COMPANIES PAYING MORE WITH SAFETY ISSUES BEING ADDRESSED MORE WITH SAFETY ISSUES BEING ADDRESSED IN A REACTIVE MANNER IN A REACTIVE MANNER
INDUSTRY UNABLE TO SUSTAIN ITSELF UNLESS INDUSTRY UNABLE TO SUSTAIN ITSELF UNLESS FUNDS FROM EXTERNAL SOURCES ARE FUNDS FROM EXTERNAL SOURCES ARE INFUSED INFUSED
ALL THIS HURTS EVERY COMPONENT OF ALL THIS HURTS EVERY COMPONENT OF OPERATIONSOPERATIONS
FUTURE NEEDS OF INDUSTRYFUTURE NEEDS OF INDUSTRY
ESSENTIAL NEED TO REPLACE AT LEAST 50 ESSENTIAL NEED TO REPLACE AT LEAST 50 OFFSHORE AIRCRAFT IN NEXT 5 YEARS OFFSHORE AIRCRAFT IN NEXT 5 YEARS
WITH GROWTH IN DEMAND FOR OFFSHORE WITH GROWTH IN DEMAND FOR OFFSHORE TASKS 50 MORE AIRCRAFT NEED TO BE TASKS 50 MORE AIRCRAFT NEED TO BE PROCUREDPROCURED
MARGINS NEED TO BE GENERATED FOR MARGINS NEED TO BE GENERATED FOR THIS REPLACEMENTTHIS REPLACEMENT
WITH EXISTING TRENDS FINANCING FROM WITH EXISTING TRENDS FINANCING FROM SELF GENERATED FUNDS IS ANYTHING BUT SELF GENERATED FUNDS IS ANYTHING BUT POSSIBLEPOSSIBLE
AFFECTS ON CLIENTSAFFECTS ON CLIENTS UNECONOMICAL OPERATIONSUNECONOMICAL OPERATIONS SAFETY FACTORS AS MANDATED BY AUTHORITIES SAFETY FACTORS AS MANDATED BY AUTHORITIES
ARE BEING MET BUT LESS THAN COGENT ARE BEING MET BUT LESS THAN COGENT APPROACH BEING ADOPTED APPROACH BEING ADOPTED
LATEST WORLD STANDARDS OF SAFETY MAY NOT LATEST WORLD STANDARDS OF SAFETY MAY NOT BE FOLLOWED AS NO INVESTMENTS IN NEW BE FOLLOWED AS NO INVESTMENTS IN NEW SAFETY ENHANCING HARDWARE LIKELY TO BE SAFETY ENHANCING HARDWARE LIKELY TO BE CONSIDEREDCONSIDERED
A COMPREHENSIVE APPROACH TO SAFETY BY ALL A COMPREHENSIVE APPROACH TO SAFETY BY ALL CONCERNED (INCLUDING REGULATORY CONCERNED (INCLUDING REGULATORY AUTHORITIES) WOULD BE LESS PROBABLE IF AUTHORITIES) WOULD BE LESS PROBABLE IF FUNDS NOT MADE AVAILABLEFUNDS NOT MADE AVAILABLE
CLIENTS SHOULD CONSIDER THE MAXIM THAT CLIENTS SHOULD CONSIDER THE MAXIM THAT ““LOWEST BID NOT INDICATIVE OF BEST DEAL ON LOWEST BID NOT INDICATIVE OF BEST DEAL ON OFFER”OFFER”
REALITY AS IT EXISTSREALITY AS IT EXISTS
OIL INDUSTRY FINANCES ARE HEALTHIEST OIL INDUSTRY FINANCES ARE HEALTHIEST EVEREVER
TREND LIKELY TO CONTINUE FOR SOME TIMETREND LIKELY TO CONTINUE FOR SOME TIME MOST OPPORTUNE MOMENT IN OIL MOST OPPORTUNE MOMENT IN OIL
INDUSTRY’S HISTORY TO INVEST IN INDUSTRY’S HISTORY TO INVEST IN HELICOPTER SAFETYHELICOPTER SAFETY
HUMAN FACTOR STILL HIGHEST CAUSE OF HUMAN FACTOR STILL HIGHEST CAUSE OF ACCIDENTS. TRAINING OF PERSONNEL ACCIDENTS. TRAINING OF PERSONNEL CRITICAL TO MINIMIZING ACCIDENTSCRITICAL TO MINIMIZING ACCIDENTS
““INVESTMENT IN GOOD INVESTMENT IN GOOD TRAINING MAY NOT TRAINING MAY NOT
ELIMINATE ACCIDENTS ELIMINATE ACCIDENTS ENTIRELY BUT ENTIRELY BUT
SHORTCOMINGS SHORTCOMINGS WORRIES US ALL”WORRIES US ALL”
WAY AHEAD FOR INDUSTRYWAY AHEAD FOR INDUSTRY
NEED FOR RATIONALIZATION OF YIELD & NEED FOR RATIONALIZATION OF YIELD & AVOIDANCE OF UNDERCUTTINGAVOIDANCE OF UNDERCUTTING
NEED FOR SENSITIZING OIL COMPANIES ON NEED FOR SENSITIZING OIL COMPANIES ON PERILS OF UNREALISTIC LEVELS OF PERILS OF UNREALISTIC LEVELS OF UNDERBIDDING UNDERBIDDING
NEED FOR A HOLISTIC APPROACH TO NEED FOR A HOLISTIC APPROACH TO SAFETY BY HARNESSING TECHNOLOGY TO SAFETY BY HARNESSING TECHNOLOGY TO OBVIATE HUMAN FACTOR RELATED OBVIATE HUMAN FACTOR RELATED ACCIDENTS & ITS NEVER BEEN MORE ACCIDENTS & ITS NEVER BEEN MORE RELEVANT IN OUR SCENARIORELEVANT IN OUR SCENARIO
DECCAN AVIATION LIMITEDDECCAN AVIATION LIMITED