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PEST Analysis Of Airlines
PROJECT REPORT ON
“PEST ANALYSIS OF AIRLINES”
SUBMITTED BY
MISS. KINJAL .B. GOTECHA
TYBMS (SEMESTER V)
M.L. DAHANUKAR COLLEGE OF COMMERCE
VILE PARLE (EAST)
MUMBAI – 400 057
PROJECT GUIDE
PROF. RUPA ADATIA
SUBMITTED TO
UNIVERSITY OF MUMBAI
ACADEMIC YEAR
2003-04
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PEST Analysis Of Airlines
CERTIFICATE
To Whom It may Concern
I, _____________________________hereby certify that Miss. Kinjal
.B. Gotecha of M.L. Dahanukar College Of Commerce And Management
Studies of TYBMS (Semester V) has completed her project on “PEST “PEST
Analysis Of Airlines”Analysis Of Airlines” in the academic year 2003-04.
The information submitted is true and original to the best
of my knowledge.
Signature of Project Guide Signature of principal
Place : Mumbai
Date :- 200 __________
DECLARATION
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PEST Analysis Of Airlines
I, Miss Kinjal .B. Gotecha of M.L. Dahanukar College Of Commerce
And Management Studies of TY.BMS (Semester V) hereby declare that I
have completed the project on “PEST Analysis Of Airlines” in the
academic year 2003-04.
The information submitted is true and original to the best of my
knowledge.
Signature of the student
ACKNOWLEDGEMENT
The topic “PEST ANALYSIS OF AIRLINES” is quite vast and this is my
honest submission, which would not be possible without the help and support
of the people who have guided me.
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PEST Analysis Of Airlines
At first, I would like to thank our co-ordinator Prof. Shashikant Patil who
gave me this
opportunity to explore the wide arenas of this topic. I thank my project guide
Prof. Rupa Adatia who guided me throughout this project. Thanks to Mrs.
Shobha Nimbalkar, Asst Mngr Sales of Indian Airlines, who provided me with
practical information, so that I could substantiate my information with facts.
Last but not the least. I would like to thank my parents, friends and
peers to help me collect information.
All the above people have given me great backing throughout this
project.
PREFACE
Airline sector has grown since a number of years as transportation has
grown its importance. It is very important to take care of the time factor for
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PEST Analysis Of Airlines
businesspersons, emergencies and in many other cases, the speed is
provided by air travel.
There are a number of factors, which influence this sector. PEST
Analysis of this sector helps to analyze the changing scenario of airlines.
Along with PEST, this project also includes the importance of airlines as a
service sector. The way in which this sector had grown to provide the best
services in return of the value.
Liberalization and privatization of airlines result in the changing trends
of this industry. It also provides other sectors such as hotels and tourism, a
platform for tie-ups with it in order to expand the air traffic.
Hats off to the pioneers of this industry- to the builders, engineers,
operating people and those in all other departments of an airline- people who
‘manufacture’ air transportation.
Thus emphasis is laid on various political, social, technological and
economic along with other factors for the study of airlines as a service sector
too.
EXECUTIVE SUMMARY
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PEST Analysis Of Airlines
This project is devoted to various factors influencing the airlines in
general. Although PEST acts as a very important tool in fulfilling the above
aspect, the role of airlines as a service sector too highlights various sides of
the airlines.
This entire report on PEST analysis of airlines contains a number of
ideas which are summarized as below:-
The beginning speaks about the introduction to airline sector as a
whole. It gives an idea of the airline industry.
The airline history focuses on the Wright brothers and their contribution
in bringing the concept of air travel into being.it speaks about the open sky
policy and its contribution to the airline industry.
Next is about the institutional framework of the airline industry and its
role played in this sector.
The present status of this industry is highlighted in the next chapter.it
speaks about the economic contribution and the statistics of air traffic in india.
The chapter of PEST analysis focusses on gives a brief idea of this tool
PEST to be used. It highlights on all the political, economic, social and
technological factors if airlines. With the support of a number of press
releases and current news articles the factors are given great emphasis.
Next, airlines is explained as a service sector and various service
characteristics are highlighted.
The quality of service in this industry is defined through the RATER
analysis in the preceeding chapter followed by this is a focus on the moments
of truth experienced in this sector and also recommendations in order to
achieve customer satisfaction to the fullest.
IATA plays an important role in the airline industry which is spoken
about in the next chapter.
Liberalisation of this aector is focussed in the next chapter along with
recent trends in this industry.
A case study on INDIAN AIRLINES reveals various aspects of the
factors during the post-11 attack and the SARS fear.
As a whole this report is an emphasis on a number of factors related to
the airline industry and its role as a service sector.
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PEST Analysis Of Airlines
TABLE OF CONTENTS
INTRODUCTION TO AIRLINES
AIRLINE HISTORY
INSTITUTIONAL FRAMEWORK
PRESENT STATUS
PEST ANALYSIS
AIRLINES AS A SERVICE SECTOR
RATER ANALYSIS
MOMENTS OF TRUTH
IATA
LIBERALISATION OF THE AIRLINE SECTOR
CASE STUDY ON INDIAN AIRLINES
CONCLUSION AND RECOMMENDATIONS
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PEST Analysis Of Airlines
INTRODUCTION TO AIRLINES
Airlines is considered to be the fastest mode of transport. It is one of the
emerging industry providing the customers with impeccable service. Airline industry,
worldwide is constantly facing threats from attacks or any wide spread disease like
SARS, which affects its sales considerably. This has lead to bankruptcy and massive
layoffs in many airline companies.
Despite of all these exegencies, airline companies have regained their status
and continue providing its state-of-art service. It is coming up with a flood of
innovative schemes to lure the customers. The attacks on twin tower had severly
affected the aviation industry, but two years after the attack, it has come to normal
and running with all its confidence. It had been a learning experiece for all the
airlines. They now are giving prime importance to the security measures.
The same is the scenario of Indian Aviation. The history of Indian Aviation
dates back to 1912. From then there is no looking back.Gone are the days when
flying by air was a distant dream for common people owing to high ticket fares.
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PEST Analysis Of Airlines
Today with the increasing competition, airlines have slashec their prices, but this has
not affected their quality of service.
The airline companies have created a great impact in the minds of the
customers as the ultimate service provider of all the transports.
AIRLINE HISTORY
WRIGHT BROTHERS.
The Wright Brothers, Orville Wright (1871 - 1948) and Wilbur Wright
(1867 - 1912), are credited with the invention of the airplane and controllable
powered heavier-than-air flight.
The brothers grew up in Dayton, Ohio, where they ran a bicycle repair, design
and manufacturing company (the Wright Cycle Company). Drawing on the work of
Sir George Cayley, they extended the technology of flight with the principles of
control still used today. They had researched and initially relied upon the
aeronautical literature of the day, including Otto Lilienthal's tables but, finding that
the Smeaton Coefficient, a variable in the formula for lift and the formula for drag
was wrong, designed and built a wind tunnel to perform practical tests.
In 1903 they went to Kitty Hawk, North Carolina to continue their aeronautical
work, choosing Kitty Hawk (actually Kill Devil Hill) because of its strong and steady
winds, and on March 23, 1903 they applied for a patent for their airplane design.
Then on December 17, 1903 Orville Wright took to the air. Orville's uncontrolled
flight, of 120 feet in 12 seconds, was recorded in a famous photograph. In the fourth
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PEST Analysis Of Airlines
flight of the same day, the only flight made that day which was actually controlled,
Wilbur Wright flew 852 feet in 59 seconds.
The Wrights established a flying field at Huffman Prairie, near Dayton, and
continued work in 1904, using a catapult takeoff system to compensate for the lack
of wind in this location. By the end of the year, the Wright brothers had sustained
flights of 5 minutes, circling over Huffman Prairie. This was really the world's first
airport.
The Wright brother brought great attention to flying by their flight around the Statue
of Liberty in New York in 1909.
Contrary to popular belief, the Wrights were not the first to build heavier-than-
air machines capable of flying under their own power; that had been done earlier by
Samuel Langley and possibly Richard Pearse. However, their three-axis system of
control, using wing warping (later supplanted by ailerons) to control roll, elevators to
control pitch and angle of attack and a rudder to control yaw, made flight stable and
sustainable. The same principles are still in use in all modern aircrafts.
OPEN SKY POLICY
The Open-sky policy came in April 1990. The policy allowed air taxi- operators
to operate flights from any airport, both on a charter and a non charter basis and to
decide their own flight schedules, cargo and passenger fares. The operators were,
however, required to use aircraft with a minimum of 15 seats and conform to the
prescribed rules. In 1990, the private air taxi-operators carried 15,000 passengers.
This number increased to 4.1 lakh in 1992, 29.2 lakh in 1993, 36 lakh in 1994 and
48.9 lakh in 1995.
The 1996, private air taxi operators carried 49.08 lakh passengers which
amounted to a 41.14 per cent share in the domestic air passenger traffic. Seven
operators viz NEPC Airlines, Skyline NEPC, Jet Air, Archana Airways, Sahara India
Airlines, Modiluft and East West Airlines had since acquired the status of scheduled
airlines. Besides this, there were 22 nonscheduled private operators and 34 private
operators holding no-objection certificate in 1996.
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PEST Analysis Of Airlines
INSTITUTIONAL FRAMEWORK
MINISTRY OF CIVIL AVIATION (MCA):
MCA is responsible for the formulation of national policies and programmes
for development and regulation of civil aviation and for devising and implementing
schemes for the orderly growth and expansion of civil air transport.
DIRECTORATE GENERAL OF CIVIL AVIATION (DGCA):
The DGCA is the main regulatory organisation in the country responsible for
regulation of air transport services to/from/within India and for enforcement of civil air
regulations, air safety and airworthiness.
AIRPORT AUTHORITY OF INDIA (AAI):
AAI provides infrastructure facilities. Its aim is to accelerate the integrated
development, expansion and modernisation of the operational, terminal and cargo
facilities, in line with international standards.
INTERNATIONALS AIRPORTS DIVISION (IAD)
IAD manages the eight international airports at Delhi, Mumbai, Calcutta,
Chennai, Thiruvananthapuram, Kochi, Hyderabad and Bangalore.
NATIONAL AIRPORTS DIVISION (NAD)
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PEST Analysis Of Airlines
NAD manages all domestic airports in the country.
PRESENT STATUS
The airline industry today faces challenges unprecedented in its history. With
the global economic slowdown affecting business travel, the airlines were already in
crisis before September 11th. But, the tragic events of last September aggravated
the situation by weakening consumer confidence further and brought into question
the existing security mechanism. The latest IATA estimates suggest that airlines
collectively lost close to US $ 12 billion as they experienced a 5.7% decline in total
traffic. The increase in costs due to higher insurance costs, security etc has put
increasing pressure on airlines and jeopardized their viability leading to widespread
layoffs and bankruptcies in the industry.
The Indian aviation industry on the other hand has weathered the storm with
greater ease than many of its more illustrious western counterparts. Though it is
largely dominated by the public sector and somewhat insulated from market
exigencies.
Despite the inherent cyclical nature of the aviation sector, its contribution to
the economy is indisputable.
But with the passage of time, the scenario is changing. The airlines are striving
hard to cope up with the crisis. Domestic and international passenger traffic in India
is projected to grow annually at 12.5%yoy and 7%yoy respectively over the next
decade. At the same time, domestic and international cargo traffic is expected to
grow at 4.5%yoy and 12%yoy respectively. By the year 2005, Indian airports are
likely to handle 60mn international passengers and 300,000 tons of domestic and
1.2mn tons of international cargo.
Over the next decade international and domestic air traffic are expected to
grow from the present levels of 42 million to close to 90 million. International air
cargo exports from India are expected to rise from 0.7 million tonnes per annum to
2.4 million t.p.a while domestic cargo will rise from 300,000 t.p.a to over 1 million
t.p.a. Both Boeing and Airbus Industries expect that with the low penetration of
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PEST Analysis Of Airlines
aviation services in India, aviation services would grow faster than in most countries
and ahead of India's GDP growth.
However, in order to achieve such levels of growth a number of policy and
regulatory constraints will need to be addressed immediately.
ECONOMIC CONTRIBUTION
The aviation industry plays an indispensable role in the growth and efficiency
of an economy. The sector acts as an economic catalyst by opening up new market
opportunities, moving products and services with speed and efficiency. Therefore,
international trade and commerce relies heavily on the aviation sector. The
contribution of the aviation sector in India is especially significant taking into account
that it only forms a small part of the transportation industry. The sector facilitates
international trade, tourism, and foreign direct investment thereby enabling the
growth of the economy and making it internationally competitive
At present over 40% of India's exports and imports, by value, are carried by air
and 95% of foreign tourists arrive into India by air making the tourism industry the
third largest foreign exchange earner. According to NCAER estimates foreign
exchange transactions worth US $ 22.5 billion annually is directly facilitated by civil
aviation, while another US $96 billion are moderately facilitated by civil aviation
services.
A report published by CII and NCAER also establishes that growth in air
transport is closely inter-linked with growth in the Gross Domestic Product both
internationally and nationally. For a percent increase in India's GDP, domestic
passengers are expected to increase by 1% , for international passengers this
sensitivity is about 1.3%.
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PEST Analysis Of Airlines
INDIA’S AIR TRAFFIC STATISTICS
Year
Domestic
Passengers
(in million)
Increase
(in per cent)
International
Passengers
(in million)
Increase
(in per cent)
1996-97
(Actual)12.00 10.5 10.8 7.0
1997-98 13.26 10.25 11.6 7.0
1998-99 14.65 10.5 12.4 7.0
1999-2000 16.20 10.5 13.3 7.0
2000-01 17.57 10.5 14.1 7.0
2001-02 19.06 8.5 14.9 6.0
2002-03 20.68 8.5 15.8 6.0
2003-04 22.44 8.5 16.8 6.0
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PEST Analysis Of Airlines
2004-05 24.35 8.5 17.8 6.0
2005-06 25.05 7.0 18.8 5.5
2006-07 27.87 7.0 19.8 5.5
2007-08 29.82 7.0 20.9 5.5
2008-09 31.91 7.0 22.1 5.5
2009-10 34.15 7.0 23.3 5.5
2010-11 36.54 7.0 24.6 5.5
2011-12 39.09 7.0 25.9 5.5
2012-13 41.44 6.0 27.2 4.9
2013-14 43.93 6.0 28.5 4.9
2014-15 46.56 6.0 29.9 4.9
2015-16 49.35 6.0 31.4 4.9
2016-17 52.32 6.0 32.9 4.9
Sources: Airports Authority of India, Foundation for Aviation.
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CHAPTER FIVE
PEST ANALYSIS OF AIRLINES
INTRODUCTION
The airline industry has seen rapid growth in the last few years. Before
any kind of analysis is undertaken, it is important to find out what are the main
environmental influences that have led to this growth. Also, how the extent to
which the changes are occurring, are to be taken care of. This is important
because the change in these factors can have significant effect on the way
the industry performs
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PEST Analysis Of Airlines
The environmental influences can be analyzed by the use of PEST
analysis. Within it’s parameters, PEST indicates the importance of the
political, economic, social & the technological changes in the industry.
A brief idea about these factors is as follows:
POLITICAL
The political analysis comprises of the various legislations,
regulations & government policies declared for the respective industry.
ECOMONIC
The economic factors’ influencing an industry defines the exchange
rate, inflation rates, income growth, debt & saving levels.
SOCIAL
The social factors are those having an impact due to people’s choice
and include beliefs, values and attitudes of the society
TECHNOLOGICAL
An impact of the new technology such as Internet, EDI, mobile and
increasing advancing in computing are covered under the technological
factors of the analytical tool PEST
POLITICAL FACTORS
The political factors are the main driving force of the airline industry.
The Air-India airline industry is built on the backbone of the government
support and it cannot sustain itself without it.
All the support services like the hotel industry, tourism and other
transport industry to name some are heavily dependant on the support and
co-operation of the government. Any policy that comes into force can have
dramatic effect on the way the industry players perform.
Focusing on the recent factors concerned with various policies
announced by the government are the following facts. The articles mentioned
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PEST Analysis Of Airlines
below highlight the influence of the “Open sky policy” announced by the Civil
Aviation Ministry.
Stability of the political environment
The airline industry is very susceptible to changes in the political environment
as it has a great bearing on the travel habits of its customers. An unstable political
environment causes uncertainty in the minds of the air travelers, regarding traveling
to a particular country.
Overall India’s recent political environment has been largely unstable due to
international vents & continued tension with Pakistan. The recent Gujarat riots & the
government’s inability to control the situation has also led to a increasing the
instability of the political arena.
The most significant political event however has been September 11. The
events occurring on September had special significance for the airline industry since
airplanes were involved. The immediate results were a huge drop in air traffic due to
safety & security concerns of the people.
impact on Air India: -
After the terror strikes, Asian Airlines seemed relatively unaffected and the
demand was relatively stable a week after the attacks – a far cry from the marked
downturn in bookings that airlines in the US have seen.
Drop In air traffic leading to financial problems:
For Air India, initial cancellations caused a loss of Rs. 9.5 crores in terms of
grounded flights and hotel accommodation for stranded passengers. The airline has
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now curtailed its direct flights to New York and Chicago, stopped its weekly London
terminator service and rerouted a service to Singapore. Despite this, and the pull out
of United Airlines, Air India flights are still not full to the U.S. and London. Insurance
conditions from leasers have forced the airline to ground all four of its recently leased
aircraft.
Trade relations with other countries –
International airlines are greatly affected by trade relations that their country
has with others. Unless governments of the two countries trade with each other,
there could be restrictions of flying into particular area leading to a loss of potential
air traffic (e.g. Pakistan & India)
India could find itself one airline short on the European sector as Richard
Branson’s Virgin Atlantic is reported to be reviewing its strategy for its young
unprofitable Indian operations. During its short stay in this country, Virgin Atlantic has
already notched up losses on the Delhi-London sector and its exit from India may be
a distinct possibility if bilateral talks between the UK and the Indian government do
not yield more ground in India for the airline soon.
Political interference & bureaucracy
This is another major area of consideration for airlines. This is because most
governments recognize the huge revenue potential of the airline industry. This leads
to a lot of politicians & ministers try to interfere with its operation hoping to gain come
benefit.
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PEST Analysis Of Airlines
Another aspect is that in countries with high corruption levels like India, bribes
have to be paid for every permit & license required. Therefore constant liasoning with
the minister & other government official is necessary.
The state owned airlines suffer the maximum from this problem. These airlines
have to make several special considerations with respect to selection of routes, free
seats to ministers, etc which a privately owned airline need not do. The state owned
airlines also suffers form archaic laws applying only to them such as the retirement
age of the pursers & hostesses, the labour regulations which make the management
less flexible in taking decision due to the presence of a strong union, & the heavy
control & interference of the government. This affects the quality of the service
delivery & therefore these airlines shave to think of innovative service marketing ideas
to circumvent their problems & compete with the private operators.
Air India is fully controlled by the state. This cause many problems in its
functioning due to the indecisiveness of the government & slow decision-making. An
example of how political interference has caused problems for air India is the recent
proposed disinvestment of Air India.
The sluggishness of the government & its hesitation to sell Air India to foreign
buyers due to the political implications has cost the airline some huge bids by Air
France & Singapore Airlines. The TATA group is the only one left in the race, which
effectively means that the government will have no choice, but to sell it to them &
therefore won’t be in the power to negotiate on price.
Besides major decision making, the daily decisions of Air India also face
interference from bureaucrats & government officials who are not qualified to do so
with regards to the airline industry.
No US airline is keen to increase it’s number of flights to India
Open Skies evoke little response from airlines
Nov 11th 2002
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PEST Analysis Of Airlines
Business Standard
The Civil Aviation Ministry’s Open Sky Policy has not drawn any encouraging
response from the US and European airlines. Few carriers have shown interests in
the policy, with not a single US airline keen on increasing their number of flights to
India.
The ministry had announced an Open Sky Policy for about four months
between December 2002 and March 2003.
During this period, airlines will be allowed to increase the frequency of flights
or capacities from the destinations already being served. However the offer has been
restricted to airlines from the US and Europe.
The carriers from South East Asia and West Asia have been barred from
availing of the opportunity.
Civil Aviation ministry officials said there had been a luke warm response from
the European airlines to the policy
“Only Lufthansa has asked for permission to deploy a couple of extra flights to
Bangalore. Air France has not shown interest in increasing flights during the period,”
a senior ministry official said.
British Airways, too, has not taken a decision on the deployment of extra
flights. The airline was citing per city of staff as a reason behind the hesitation to
increase flights, ministry officials said.
The only airline, which seems to be enthusiastic, is Virgin Atlantic. However,
since the airline at present has a commercial agreement with Air India, which has
been the cause of some controversy of late, it remains to be seen wither Virgin is
granted permission
According to industry officials the reason for such a response on the path of
airlines is that out bound traffic dips during the winter months. “ Out bound
passenger traffic drops almost 15 % during the winter months compared to summer,
though inbound traffic goes up. An airline cannot just cater to inbound traffic, as it will
have to fly empty planes out of the country on the return trip, “an industry expert
pointed out
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PEST Analysis Of Airlines
The ministry might have seen a different response had the policy been
extended to South East Asian airlines as well. According to experts, the tourist traffic
had shifted from Europe and US to South East Asia last year.
While the latter has seen an upswing in traffic by 25 %, Europe & the US have
seen an equal negative method.
Most of the South East Asian airlines said if they were allowed to participate in
the policy, they would increase their capacity by 10 – 15 %
Thus it can be inferred that, due to the ministry’s policy of Open Sky, a few
airlines could only benefit. The air traffic resulted in a shift due to the policy which
created a great impact on the airlines from the US and Europe.
As the political environment is not conducive as required restricts the airlines
to flourish at its best. The policies must be active for all the airlines for development
of the sector.
Keep Skies Open
June 20th 2003
Business Line
The extension of the open skies policy to let airlines from North America and
Europe add flights into Indian cities during the peak tourist season to October to March is
a sign that liberalization is taking root in this much – protected sector. Ostensibly, this is a
move to help enlarge tourism flows. It would be tautology to say that the country’s
earnings from tourism are linked to the number of tourist who is able to fly in and that in
turn is dependant on the number of airline seats made available to them. In sufficient
capacity means high fares and fewer passengers and tourist spending which is what the
Ministry of Tourism has been complaining about for long. Yet this simple equation had
eluded the Civil Aviation Ministry that clung on to the old practice of trying to determine
how many seats airlines can deploy instead of letting airlines which are best placed to
read their market decide how many aircraft they would deploy and to what destinations.
The right to operate international flights has ale\ways been determined by complex
bilateral deals among governments. In India’s case it has involved working out bilateral
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PEST Analysis Of Airlines
capacities that would protect the commercial operations of the national carriers, Air India
and Indian Airlines. In the normal course, capacities between two countries would be split
equally between each country’s designated carriers. There were two problems in such an
arrangement; One, the capacities were determined finally by the Civil Aviation ministry
and not by the airlines themselves, and, two, often Air India
(Or Indian Airlines in some cases) would not have the aircraft to fly to a country that
sought to have its carrier fly to India. In the latter case, the government would extract for
Air India the right to sell a few seats in flights operate by the other country’s airline. The
combine market share of Air India and Indian Airlines on international routes in less than a
third when it ought to have been half.
In a rapidly changing market it is inconceivable that governments can gauge or
predict passenger demands any better than airlines can. Nimble – footed response to the
market is a virtue in most sectors, not so the airlines; they need to get government
approval to even move their feet. This archaic and feudal practice has no place today,
which I why one tends to welcome the move to extend the open skies policy, in a feeble
and grudging manner. Offering the hand of freedom only to western European and North
American is discriminatory, tourists do come from elsewhere, and it is a moot point
whether they are less worthy. And why should the government restrict that freedom to the
period from October to March? Letting go is clearly difficult for the government.
Govt’s reluctance to liberalise aviation policy hurts tourism
July 18th 2003
The Economic Times
The government’s failure to liberalise the Civil Aviation policy and allow foreign
carriers to operate more capacity to Indian destinations is preventing the tourism industry
from tapping the country’s full potential. A large number of foreign tourists choose other
destinations since seats are not available to India or the tariff is high.
Foreign carriers are not allowed to operate adequate number of services to India since
the government wants to protect the interests of Air India and Indian Airlines. This is
leading to huge losses in terms of tourist arrivals and spending, the tourism industry feels.
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PEST Analysis Of Airlines
“We should see the big picture. If more foreign tourists come in, the government will
also earn significant revenue in the form of taxes. Since tourists from various source,
markets including Europe and the US are high spenders, the entire economy – especially
service sectors associated to tourism – would benefit in a big way,” Ankur Bhatia
managing Director of Amadeus India said.
Passengers would find more options and cheaper fares if the government follows an
Open Sky Policy. The governments policy on bilateral was a typical example of being
pennywise and pond foolish said Vinay Maheshwary of service4s International, a Delhi
based Travel services Company. Inbound tourism was picking up and the progress would
be much faster if fares to India were not higher than competing destinations like Thailand,
he added.
The government should look at the benefits to hotels, tour operators, transport
companies and allied tourism services. The progress of all these segments are being
hampered for protecting the state owned carriers, He added. Air India should be allowed
to compete in the International markets as market economy ensures that the fittest would
survive.
When Lufthansa was seeking permission for more flights to India, Mr. Maheshwary
said, Air India was withdrawing from Frankfurt.
It is obvious from the above news reports that the government has highly influenced
the tourism industry by taking decisions in the airline sector.
Insufficient capacity means high fares and fewer passengers and tourists spending which
is what the tourism industry has been complaining about for long.
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PEST Analysis Of Airlines
HEAVY TAXES, GOVT CONTRTOL ARE CHOKING THE INDUSTRY.
What is alarming is that, fares have steadily increased during this period though the
recent introduction of advance purchases tariff’s give the impression of the customer
getting a better deal.
Connectivity has also worsened during this period with many small centers going
out of radar while the metros are flooded with increasing frequencies. Indian Airlines has
been hit by shrinking capacity and the dilly – dallying of the government which has failed
to privatize the carrier. While the public sector airline can at least opt for privatization, Jet
faces a tougher task. If the private airline is in losses despite corporate management and
efficiency, the lack of which is cited as the reason for the lackluster of Indian Airlines, there
is no room left for improvement. It would appear that a policy framework of heavy taxes
and excessive control has more than outweighed the favour bestowed on incumbent
players by the stunted competition created as part and parcel of the country’s Civil
Aviation policy.
If the government is keen to improve aviation security, how can the leading
domestic airline of the country be allowed to operate with a tax haven background?
Various other factors like ground handling are being discussed at length due to security
reasons. However, what becomes clear is that the current system of too many
government controls has neither benefited airlines nor consumers.
Supply of aviation turbine fuel is still controlled by PSUs and state government
imposes a high sales tax on this key input. Airport charges have been going up and
depreciation of the rupee over the years has added to the burden. The government
imposes a 15 % impost on tickets in the name of inland air travel tax. Various other levies
add to the cost borne by the passenger. Airlines still have to seek government permission
before buying or leasing aircraft and lack of domestic industry has led to dependence on
import for spares. The industry has been seeking a reduced tax burden, adequate
financing facilities and drastic reduction of government control on the sector.
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PEST Analysis Of Airlines
ECONOMIC FACTORS
The airline industry like the other industries grows with the increase in
the spending of the people. The more the people spend, the more the
industry grows. The spending power of the people has been increasing in the
country and all over the world. The large increase in the spending power in
most developed countries has left a large amount of idle cash in their hand.
This has led to the airlines boom the world over and India has been no
exception.
However, over spending is also evident not only in increase of people
traveling by air but also in hotels. Even the number of domestic tourists
traveling by air has dramatically gone up.
Economic factors are key variables, which have an impact on the key
activity in the airline sector. Income levels and personal wealth govern the
level of consumer activity. As levels grow, more discretionary incomes
available to spend on traveling by air. Also, consumer confidence in the
economy and in job security has a major impact in the growth and
development of airlines.
The exchange rates in an economy highly influence the airlines. This is
because a highly competitive and service sector like airlines has to deal in a
number of different currencies for its working and progress.
The inflation rated plays a decisive role in airlines as a price factor. The
rise in prices of tickets in economy class has a major impact on the common
people or the middle class travelers. There is a chain reaction in the effect of
inflation rates as it results in price rise, which ultimately affects the demand
and supply condition. In turn, the passenger traffic is thoroughly affected
which comes back to the airlines in the form of large or small number of
travelers.
Indian Airlines, in a bid to cope with slackening demands during the
post summer vacation period, had decided to reduce its fares on 5 western
sector routes. The first version after Indian Airlines announced its flexible fare
policy in May 2001; the new rates came into effect from June 28 th . It also
introduced point-to-point fares on a dozen routes.
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PEST Analysis Of Airlines
The five sectors for which the fares had been reduced were:-
Ahmadabad- Bangalore
Mumbai – Bangalore,
Mumbai – Chennai,
Mumbai – Kolkota,
Goa – Mumbai.
Norms governing ‘day – return’ fares had also been liberalized. The ‘Day
return’ fare on Delhi – Mumbai sector had been reduced to make it more
competitive.
The senior official in commercial department of Indian Airlines said that
this was only the beginning and that they would keep making changes on the
basis of demand – supply position.
Fares had been brought down where ever the demand was low. At the
same time, the airline planned to hike fares in Sectors where demand was
found to rise.
Business Cycles:-
Business cycles have a wide reaching impact on the airline industry.
During recession, airline is considered a luxury & therefore spending on air
travel is cut which leads to reduce prices. During prosperity phase people
indulge themselves in travel & prices increase.
After the September 11 incidents, the world economy plunged into
global recession due to the depressed sentiment of consumers. The airline
industry was the hardest hit, as people became wary of travel & there were
large-scale cancellations. The loss of income for airlines led to higher
operational costs not only due to low demand but also due to higher
insurance costs, which increased after the WTC bombing. This prompted the
industry to lay off employees, which further fueled the recession as spending
decreased due to the rise in unemployment.
As the recession deepens, airlines are being hit harder than before.
This is because companies reduce their travel budgets during a recession,
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PEST Analysis Of Airlines
which affects the corporate business of airline industry. In such conditions
the airlines need to develop new strategies for survival.
Air India has taken initiative to counter the recession by introducing special
offers, discontinuing services in order to cut costs, etc. It also plans to
upgrade it fleet in order to keep up with market trends.
Civil Aviation policy:-
The changes announce in the civil aviation policy go a long way in
impacting the airline industry. The divestment of the government’s
shareholding in air India will take place under the framework of the civil
aviation policy. India’s civil aviation policy lays down the following guidelines
which directly impact airline industry:
A) Private sector participation – the policy determines the extent to which airlines
can have private sector participation.
B) Regulation & rationalization of the ATF (airline turbine fuel) price, which is very
important input & directly affects final pricing decisions of the airlines.
C) Domestic passenger & Cargo air transport which includes the limits of foreign
equity participation, regulation of capacity induction with a view to ensuring safety,
security and preventing unhealthy levels of capacity.
MAKE AIR TRAVEL AFFORDABLEWe can do without cartelisation
October 2, 2003
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PEST Analysis Of Airlines
The economic times
The civil aviation minister Rajiv Pratap Rudy wants the three domestic
airlines-jet airways, Indian Airlines and Sahara- to coordinate their flight
schedule to provide better connectivity. He feels that such an arrangement
can ensure that flights are not bunched together but spread throughout the
day. Indeed, the final outcome makes sense, but the way the minister wants
to achieve it does not. Such attempts at co-ordination are bound to
degenerate into cartelization, especially when entry barriers are high. So, air
travellers will have the convenience of flights being available throughout the
day, but we have to pay through their nose for the same. In other words, one
senseless decision could fritter away all the gains of increased competition in
the domestic air travel following the entry of private airlines. Airfares have
declined to possibly the lowest, and service standards have improved even in
the state owned Indian Airlines. Minus the cutthroat competition, all these
improvements would disappear almost overnight.
In the country of India's dimension, the top priority for the civil aviation
policy should have been to make air travel affordable. Unfortunately, a
combination of state and central duties has made air travel unaffordable for
most Indians. As a result, today it is a lot cheaper to fly from India to a host of
foreign destinations than to traverse from one end of the country to the other.
No wonder, so many Indian tourists prefer Southeast Asian countries to our
exotic destinations. What good is promoting Kerala to, say, someone in North
India when a back and forth train journey takes almost four days and the
alternative air travel costs nearly 25,000 (Delhi - Kochi - Delhi)? In the civil
aviation minister devoted himself to the single task of ensuring cheaper air
travel, he would have done a great service to the nation. And in the process
he would have achieved the objective of flights being spaced out throughout
the day. For, cheaper air travel would mean more traffic, which would in turn
mean more flights. The task involved is not too difficult; all it involves is
working on the simple arithmetic of reduction in duties the accompanied by
increased volumes.
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PEST Analysis Of Airlines
SOCIAL FACTORS
Social factors are a major influence in consumer buying decisions, and
this applies to airline industry just like other industries. over the time , changes
do appear which affect the consumers habits.
Changing Travel Habits –
The changing travel habits of people have very wide implications for the airline
industry. Air India need to focus on their clientele which are mostly low income clients
& their habits in order to keep them satisfied. The destination, kind of food etc all has
to be chosen carefully in accordance with the tastes of their major clientele.
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PEST Analysis Of Airlines
Cultural differences -
Depending upon the clientele an airline has, the cultural differences of each
country have to be absorbed into aspects such as the hospitality, the menu etc. The
domestic airlines like Indian airlines therefore need to include special cuisine such as
jain meals, special offers on festivals etc.
Airlines bookings take off as SARS fears recede
July 16, 2003
The Economic Times
Airline bookings are up for the second consecutive month after the slump in
February-may. While total domestic and international bookings have increased by 7% in
July over the same period last year, June saw an increase of 15% over the corresponding
period in 2002.the beginning of 2003 was good for airline bookings with an upsurge of
15% in Jan (yoy) while Feb. saw a decline of 16%, march (-25%), April (-20%) and may (-
6%).
International airline bookings also increased significantly in June after the impact of
sars was over and travelers resumed their long pending business travel and vacations.
Not only this, attractive airfares by domestic carriers also fuelled air travel, say travel
agents.
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PEST Analysis Of Airlines
This increase is a result of overall improvement in bookings in Asia-pacific, said Ankur
Bhatia, Amadeus India MD. “Since late June, daily net bookings from the thirty two Asia-
pacific countries and territories had started looking similar to the number of bookings from
the same time last year. daily net bookings reached around 1,80,000 in the first few days
of July compared with 1,20,000 the same time last year”, he said . in the midst of the sars
scare in mid-April, bookings were at a low of around 30,000.
He added that cancellation rates have sharply declined recently from a high of 82% in
April to 66% last month and attributed the recent recovery of the industry to promotional
campaigns, such as Thai airways’ luck is in the air promotion, which offered 20,000 free
tickets.
Himmat Anand, COO, Sita World Travels, said this increase in airline bookings can be
attributed to an increase in domestic and outbound tourism. “The success of apex
(advance purchase) fares that flexible pricing is here to stay. Attractive airfares offered by
domestic carriers played an important role in increasing demand for air travel. After sars,
countries like Hongkong and Thailand are also offering lucrative packages to enhance
tourism in their respective countries,” he said.
A travel agent said that domestic airlines are offering concessions to customers by
way of auctions, additional frequent flier miles and co-branded cards. Jet airways has
launched special packages to various destinations including Port Blair, Ooty, Darjeeling,
Kodaikanal, Shimla, Manali, Mussorie, Srinagar, Banglore and Chennai. Though apex
fares dilute yield, all domestic airlines are expected to persist with deep discount tariffs.
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PEST Analysis Of Airlines
The above news article clearly mentions that SARS, considered as a major social
factor in the mid-2003 affected the air traffic considerably. the various promotional
offers, offered to the travelers increased the bookings heavily as the fear of SARS
receded.
Testing times in the air (social)
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PEST Analysis Of Airlines
What's important to the successful functioning of an airline is, people training and fair terms of
employment. And for that you don't need to privatise, you just need to give the public sector a
chance.
Privatisation of domestic airlines in India is often quoted as a big
success story favouring similar efforts across the board, especially in aviation.
The assumption is that if it worked with airlines, then it would work with all
other aspects of aviation.
But are private airlines really able to do better because of privatisation, and if
so, privatisation of what?
Private and public sector airlines are stuck with the same aircraft
manufacturers, as well as maintenance parameters. Choosing between
Boeing and Airbus, or CRJ and Bombardier, is a bit like trying to figure out the
great difference between Tweedle-dee-dee and Teedle-dee-dum! (Though it
must be mentioned here that with economy class passenger seating comfort
and cabin baggage space being the main criterions, for short range flights, the
A-320 beats the B-737 any day, and for long range flights, the B-777 scores
way above the A-340, and so Air India seems to have got it all wrong again).
Aircraft interiors and seat pitch aside, nothing has changed there.
Air Sahara and Jet Airways have a few really ancient, noisy and rattling
aircraft too, which compete well with the Alliance Air Boeing 737-200
venerables in terms of age as well as despatch unreliability. Common users'
services, such as airports, Air Traffic Control, safety/fire-fighting,
arrival/departure halls, check-in counters, everything is the same, regardless.
As a matter of fact, the private airlines get the lousier locations and the more
distant bays. Certain services, such as apron control, security and safety, are
moving back into the domain of Government control in the most privatised of
countries, such as the US. Which is how it should be, considering the vast
improvement in airport security in India after they've brought in the CISF, an
all-India force. How would you like it if fire services at airports were privatised?
Computerisation and the consequent benefits of technology are on par,
private or public sector. As a matter of fact, while Indian Airlines (IA) and Air
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PEST Analysis Of Airlines
Sahara have provided Internet ticketing for over a year now, Jet Airways is yet
to do so. And this, in a day and age where the much-maligned Indian
Railways set the benchmark for Internet ticketing, worldwide, with online sales
reaching almost Rs 1 crore a day. There is no evidence that adoption of a
technology for the benefit of a customer is any better or worse in the private or
public sector.
Onboard catering, cleaning, sanitation, engineering, maintenance,
adhering to government/DGCA regulations and scheduling, depends on
various factors common to most airlines. But that big bug, IA planes waiting
for VIPs, has now spread to the private players too.
So what's left?
Well, the biggest benefit of privatisation of aviation has been cost to
customer. But that really came about specifically and only after Air Sahara put
the cat amongst the contented pigeons about two years ago. Remember all
the private players now gone, brands such as East-West, Damania, Modiluft,
NEPC-Skyline, Continental, who simply followed the prices set by IA?
It doesn't require an expensive consultant to tell us that what's left is
people training, fair employment terms and leaving people to do their jobs in
accordance with norms. And for that you don't need to privatise. You just need
to give the public sector a chance. If you do that, it can perform as efficiently
as any private sector, with far greater social responsibility.
Red alert!
There is a security guideline, apparently, that once you have had your
boarding pass issued you cannot leave the terminal building. So, if you show
your boarding pass at the entry/exit gate and ask to be let out for a smoke or
walk, then the CISF officer on duty will not let you out. Fair enough, the
reasons for this are apparently to prevent people from checking in on behalf of
others, or to leave the terminal after checking their baggage in. This rule can
be by-passed at smaller airports, where everybody knows everybody anyway.
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PEST Analysis Of Airlines
However, at airports like Delhi, Chennai and Mumbai, this rule is
followed strictly for bona-fide passengers. But you can leave after checking in
by walking confidently towards the VIP entrance near the Airport Manager's
office, and exit the building from there. Then walk around the terminal
building, and smartly walk in again on the strength of the same boarding pass,
which prevented you from leaving! This correspondent does this regularly at
Delhi, when a flight is delayed and a smoke or a simple observation trip is
called for. Last week, it was Chennai's turn, and with a boarding pass pre-
issued at Bangalore earlier in the morning for a late-flight Chennai to Delhi, it
was a great reason for the Hindi-speaking CISF officers on duty at the bona-
fide entry gate to refuse permission to exit, and smile broadly whenever I re-
appeared from outside to re-enter.
What a shame!
Strange are the ways aviation security is interpreted, and not just in
India. Listen to the list of don'ts: Can't carry pickles, pepper, round fruit or
sealed bottles of water, but you can get as much of it served to you with the
meal. Can't carry torches or batteries, but you can reach into the safety
equipment or cabin crew bags stored at the rear and help yourself to any of
these. Can't use cell phones once on board because they may impact the
computers in the cockpit, but all sorts of walkie-talkies and cell-phones used
by ground staff are allowed.
And most of all, we can't carry nail clippers or small knives/scissors, but
the nice elderly lady will not be stopped from continuing with her, for knitting!
Oh some reassurance
Anxiety amongst passengers for information from the flight deck seems
to be on the increase, especially after 9/11. Delayed departures after entering
aircraft, and before or after closing doors, with or without substantial activity
outside and inside, sudden warnings to fasten seat belts, sudden and
perceptible changes in engine sounds as well as changes in altitude, not
switching off engines after landing and hanging around on taxiways or bays
and circling in holding patterns are events that add to the already stressed
environment inside an aircraft.
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PEST Analysis Of Airlines
Generalising is not very accurate, but, by and large, cockpit crews from
Far Eastern countries tend to be quite chatty. Europeans provide precise
information, with straight-faced humour. American pilots are into accuracy
with friendliness, and often go into information overdose. Very often, one of
the audio channels is set to the ATC-cockpit frequencies.
But what about our very own Indian pilots? They must be either really
busy in the cockpit all the time, giving the autopilot an inferiority complex, or
they are simply unaware of how a few words from them to the passengers
every now and then would ease the stress involved for many passengers in
taking a flight. A few notable exceptions aside, the rest go through the same
dull drone on outside temperature, cruising altitude, standard warning on
wearing seatbelts and sometimes a reference to the cabin crew. Nothing else.
Your airplane could bounce up and down in the worst of turbulence, and
instead of a reassuring voice from the cockpit all we get a terse
announcement.
Unlike earlier, more aviation passengers know that the avionics and
autopilots on board a modern airplane can handle emergencies in the air
better than the human at the helm.
So what is the real reason, then for the pilot's scant interaction with the
passengers? No wonder we, as Indian passengers, always seem to be in a
hurry to leave the aircraft.
TECHNOLOGICAL FACTORS:
Technology has played a major role within the airlines, bringing about far greater
efficiency through computerized records and transaction systems, also in using
development through the setting up of detailed customer databases for effective
segmentation and targeting.
This makes it essential that the policymakers change their attitudes and the
professionals prove themselves personally committed. Innovation makes the way for
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PEST Analysis Of Airlines
demand generation and profit maximization. It opens new avenues for increasing the
market share of airlines. So, the need to promote innovation.
A technology driven marketing information system is a key through which airlines can
be technologically forward. Better communication facilities are one of the first pre-
requisites for growth in the inflow of passengers. This has been made possible through
technology. Many remote and inaccessible areas of the country get connected to the rest
if the world thanks to the technology base in international and domestic airlines.
Changes In Technology For Safety & Security
Post September 11, the Civil Aviation Ministry is deploying CISF personnel at
all metro and hypersensitive airports. Quick- reaction teams of the National Security
Guards (NSG) have been added to the security teams at such airports.
Intelligence agencies have virtually taken over some of the metro airports and
close circuit television cameras have been installed at strategic points. Sky marshals
have been deployed on various flights. The BCAS conducts surprise checks at all
airports.
Information Technology & Its Impacts
The increasing use of the Internet has provided many opportunities to
airlines. According to the Greenfield Online Digital Shopping Index in the US, airline
tickets ranked among the top five most purchased items on the Internet. Travel
business is the number one online consumer spending segment with more than two
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PEST Analysis Of Airlines
million business travelers having spent $3 billion online in 1999, and the figure all set
to grow to $20 billion by 2004 as per a survey conducted by Forrester Research.
Air India has leveraged this opportunity by providing many internet based
services to its customer such as online ticket booking, updated flight information &
handling of customer complaints.
Infrastructure
USTDA (US trade & development association) is funding a feasibility study
and workshops for the Airports Authority of India as part of a long-term effort to
promote Indian aviation infrastructure. The Authority is developing modern
communication, navigation, scrutiny, and air traffic management systems for India's
aviation sector that will help the country meet the expected growth and demand for
air passenger and cargo service over the next decade.
A proposal for restructuring the existing airports at Delhi, Mumbai, Chennai
and Kolkata through long-term lease to make them world class is under
consideration. This will help in attracting investments in improving the infrastructure
and services at these airports. Setting up of new international airports at Bangalore,
Hyderabad and Goa with private sector participation is also envisaged.
These technological changes in the environment have an impact on Air India as
well. Better airport infrastructure, means better handling of airplanes, which can help
reduce maintenance cost. It also facilitates more flights to such destinations.
In airline industry, technology is necessary for customer satisfaction. It enables
to track and implement according to traffic levels on various flights and manage
inventory accordingly. They help airlines make reservations quickly by enabling each
ticket agent to check hundreds of flights for available seating. It helps the airline
industry in reservations, ticketing, checking in passengers, maintenance schedules,
and personnel records, accounting and stock control.
Surf’n’click: airline ticketing goes live
August 11, 2003
The economic times
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PEST Analysis Of Airlines
Physical airline tickets may soon be a relic of the low tech past. Air travel entered a
new era on Saturday with the launch of live e-ticketing in the country. Passengers will no
longer have to bother to collect tickets from air travel agents, or worry about lost
misplaced ones. With e-ticketing, reservations will be confirmed by e-mail or fax. The
plain-paper confirmation, with a reference number of the reservation and the itinerary, will
replace the ticket dockets. The paper is good enough for entry at all Indian airports.
The system, already popular internationally is being offered in India by global
distribution service provider Galileo and Travel Company Thomas cook.
The bureau of civil aviation security (BCAS) has already issued a notification
accepting e-tickets. This means passengers with the tickets will be allowed access to the
passenger terminal buildings at airports for check in. they will have to show a proof of
identity like a passport, photo identity card, driving license or a credit card.
Commenting on the new system, Seema Luthra, president and CEO of Galileo
(India), said, “IATA studies have shown that the end-transaction cost of a physical ticket is
a bout five times that of an e-ticket.” so, e-ticketing is major cost saving tool for airlines.
About 70% of the tickets issued in the US are e-tickets, she said. The system has been in
use in India for the past few years. But the passengers had booked e-tickets in other
markets and were travelling to India. But the system has now been formally certified by
IATA’s billing operation, BSP India. Worldwide, over 45 airlines participate with Galileo for
e- ticketing. These airlines can start offering e-tickets to their customers in India.
Computers have already revolutionized consumer air travel, especially with fare
checking and online ticket sales, and now some of the airlines are moving to get rid of
paper tickets entirely, travel industry sources said.
E-tickets give certain advantages to both airlines and passengers. The system
facilitates direct-to-customer sales, while saving airlines $6-7 on each ticket they don’t
have to print and mail to customers. Late bookings have also become easy: make a
phone call, get your confirmation faxed to you, or print it out, and its over.
Air-India sets up global call centre
July 13, 2003
The economic times
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PEST Analysis Of Airlines
Giving a major push to its customer-friendliness drive and ‘product upgradation’, Air
India on Saturday seyt up its first global international call centre for round the clock
operations in north east Mumbai while for domestic travelers a similar facility would be
launched by October 2003.
“The global centre at Deonar will be manned by 25 people and operate 7 days a
week,” the leading international carriers spokesman Jitender Bhargava told The Free
Press Journal. Civil Aviation Minister Rajiv Pratap Rudy, making the ‘first call and booking’
through video conferencing, inaugurated the centre.
“The idea for the centre is to improve customer service,” Jitender Bhargava said
adding, “It would take calls from overseas countries. Our target area is US and UK where
we have lately enhanced a number of services.”
The call centre has sophisticated technical infrastructure and would deploy qualified
and trained manpower. “The international call centre would ensure reservation for flights,
hotels, car rentals, meal choice, special seats booking, special requirements for
passengers like wheel-chairs, child care and even flight baggage,” he said.
In the past one year, Air-India’s capacity to USA has substantially increased and is
poised for further growth in the winter timetable. The round the clock call centre, it is
hoped, would eradicate one of the major complaint areas that during weekend Maharaja’s
staff does not give their best of services. Civil Aviation Minister is in the city to attend a
meeting of Parliamentary Consultative Committee attached to his ministry.
Talking to reporters, Rudy said that the fleet acquisition plan and the Aviation Policy
would be given final shape by two months. “The plan would ensure level playing field for
all concerned including private parties,” he said.
Adequate steps were being taken to upgrade Mumbai and Delhi airports.
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42
PEST Analysis Of Airlines
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ground operational processes and commercial products management are the key
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Single/multi-hops routes planning and operations
Routes budget simulation and revenue planning
Real time and extensive track and trace at all levels of all operations
Advanced airfreight operations such as automated rerouting
Terminal handling, co-management and warehousing management
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PEST Analysis Of Airlines
Dangerous goods management
Door-To-Door, Gate-To-Gate operations support
Airline operations discrepancies management
Claims management, call centre and help desk management
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44
PEST Analysis Of Airlines
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OTHER NEW TECHNOLOGICAL INNOVATIONS THAT HAVE CHANGED
THE FACE OF AIRLINE INDUSTRY ARE AS FOLLOWS.
45
PEST Analysis Of Airlines
Video/music on individual seats
Leading airlines provide personal video screens and music players on each
seat so that the passenger can choose to see/hear what he or she likes.
E.g. video games on Japan airlines
Conducting business in the sky
Virgin air provides a circular seating arrangement and also provides laptop
computers and other business tools so that businesspersons can conduct
their business while travelling.
Sale of empty seats through auctions/internet
There are several online ticket exchanges where customers can trade tickets
with each other and also the airlines.
For e.g. Sahara airlines offers the facility to sell its empty seats to the
passengers through internet.
Real time price change
American airlines changes its prices about fifty thousand times a day. this is
possible through a very strong database system which calculate fares based
on routes, traffic, number of empty seats, bulk discounts, etc.
Real time flight information
With the help of technology airlines provide real time reservation status and
also schedule status to users via several mediums.
Self Service Technology
Today passengers want speed- on and off the ground. Infact, for airlines,
achieving success often means winning the hearts and minds of consumers
during check-in, before the plane even takes off. Airlines like Air Canada are
46
PEST Analysis Of Airlines
installing self-service kiosks there by reducing checking time and increasing
passenger throughput.
Telephony sky-to-ground
Many airlines now offer call facility from the aircraft to the ground locations like
house or the office thus enabling people to stay connected.
CHAPTER SIX
AIRLINES AS A SERVICE SECTOR
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PEST Analysis Of Airlines
Unique Service Characteristics
INTANGIBILITY
Services are intangible in nature. Unlike goods, which are tangible and can be
seen and touched, services can only be experienced. It means that services are high in
credence qualities whereas goods are high in search qualities. A company can
differentiate its service from its competitors by providing tangible clues.
A company can provide tangibility to its services by –
Association with physical goods or items,
Association with the physical environment,
Performance and involving customers
As we know that services are intangible, a service marketer has to face many
problems. In the airline industry transportation is the core product. Since it is intangible in
nature a service company can distinguish itself from its competitors by providing several
tangible clues like –
Food / Beverages
Newspapers
Movies
Music
Staff uniforms
Logos
Color and design
Seats and cushions
Assistance with work
Audio / Video facilities for work or pleasure
Fax, laptops, etc.
Baggage retrieval
Flight bookings
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PEST Analysis Of Airlines
A service marketer can overcome the difficulties of intangibility of services through:
Reducing service complexity
Stressing on tangible clues
Facilitating word – of - mouth recommendations
Focusing on service quality
Here are a few examples of leading airline companies that provide tangibility to its
services through various tangible elements –
1.Indian Airlines – The Maharaja – Logo, also they describe themselves as ‘The Peoples
Carrier – The National Carrier’.
2.Jet Airways – the airline for businessmen, easy booking facilities, easy custom
clearances and baggage retrieval, good in-flight services.
3.Southwest – friendly, no frills, low fare airline.
4.Air Canada – provides laptop connections and helps in sending fax messages –
favourite with North American business travelers.
INSEPARABILITY
Another characteristic of services is customer involvement in production i.e.
inseparability. The inseparability of services leads to –
Customer being co-producer
Often customer being co-consumers with other customers and
Customer traveling to the point of service production
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PEST Analysis Of Airlines
All the above three problems are faced by the service marketer in the airline industry.
So the service marketer has to think of ways in which he can satisfy his consumers in an
efficient manner.
Customers are separated on the basis of price – business and economy class.
Also airline are trying to overcome inseparability by providing facilities such as –
Games for kids – Air Canada
On-line Booking – Sahara
INCONSISTENCY
Inconsistency refers to the variability in the service. Service variability leads to
difficulty in projecting a consistent image and developing a strong brand. As it is difficult to
standardize to blueprint the service process there is inconsistency in service quality. Also
services rely on human inputs there is a high amount of variability. This can be overcome
by providing personalized services and focusing on employee training. Up to an extent,
automation and mechanization also can help to reduce inconsistency.
E.g.: most airlines include online booking resulting in a standardized procedure
& fewer mistakes due to human errors.
Another way of reducing inconsistency in airlines is the standardization of in-flight
procedures for example the security instructions given at the beginning of the flight.
INVENTORY:
It is not possible to store services. Also the service capacity cannot be
increased, as it can be limited. Services also face irregular demand patterns. Again the
service can be short-lived.
The inventory for airline industry is mainly the food and the aircrafts spares and parts.
Airlines face the problem of inventory mainly due to irregular demand patterns.
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E.g.: The Boeing Company and British Airways announced today that the airline will be
the first launch customer for the Global Airline Inventory Network(SM), an innovative new
service in which Boeing will manage British Airways' supply chain for expendable airframe
spare parts used in its fleet of Boeing airplanes. This includes parts from Boeing as
well as other suppliers.An expendable part is one that is typically replaced rather than
repaired after use. These range from fasteners and brackets to floor panels and
airplane skins.
The Global Airline Inventory Network(SM) is designed to attack costly inventory
inefficiencies in the airline industry, where both airlines and suppliers incur extra costs
because of duplicated distribution channels and unnecessary inventory levels.
Congestion occurs during peak periods like vacations and festivals and at other
times there is unused capacity. Thus special discounts & offers are offered during
these periods to boost seat capacity (called the PLF -- passenger load factor)
CHAPTER SEVEN
RATER Analysis
Customers don’t assess the quality of service on one dimension only,
they use multiple parameters to judge the quality of the service that they are
being offered. These characteristics which people consider vary from person
to person, industry to industry. Even depend upon the product on offer. But
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generally, if we consider a service industry these are the five basic criteria’s
which the customer will consider to judge the quality of service being provided
to him.
Reliability
Assurance
Tangibles
Empathy
Responsiveness
When we look at these points with respect to the airline industry we
find that the following qualities are expected by the customer.
Reliability – flights to promised destinations depart and
arrive on schedule
Assurance – trusted name, good safety record,
competent employees
Tangibles – aircraft, ticketing counters, baggage area,
uniforms
Empathy – understanding of special individual needs,
anticipates customer needs
Responsiveness - prompt and speedy system for ticketing, in flight,
baggage handling
RELIABILITY – Ability to perform the promised service dependably and
accurately.
This would basically be that company delivers to the customer what is
promised & the customers basically like to deal with companies that can fulfill
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their promises. When we look at the airline industry we can see the following
things the customer would expect certain basic facilities like: some functional
infrastructure provided to him, the flight leaving & taking off on time, the
luggage reaching safely.
There was an article in the newspaper, where in the journalist talked
about how Indian airlines was the airline that the public could trust. The
journalist basically talks about them being the national carrier, profit would
not be their only objective and so they would try to provide the right kind of
service, they wouldn’t fly an aircraft just so they can save on the costs or don’t
have to bear the losses even if the plane is not a 100%, whereas someone
like Jet would probably consider the monetary costs involved in the process,
and even that could influence their decision.
The general belief is that the service offered by Indian Airlines is below
standard or not upto the mark. But then they charge lesser than other airlines,
so they are mostly concentrating on the pricing for their market share. But
some people even choose Indian Airlines because they believe that Indian
Airlines won’t be cutting costs and so won’t run a plane not completely ready.
Basically, they’d rather travel in slightly lower grade airline than risk their
lives.
ASSURANCE – Employees knowledge and courtesy and their
ability to inspire trust and confidence
Assurance would basically mean the kind of knowledge the employees
have and the courtesy & the ability of the employees to generate confidence
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PEST Analysis Of Airlines
in the user’s mind about the service being provided. The employees should
have a positive morale & should be motivated if they have to promote the firm
& create a sense of assurance in the flyer’s mind.
Jet Airways is generally considered the more customer friendly of the
domestic airlines. The staff there is nicer to old people or little kids who might
be traveling. Though Jet has a very young staff, so some of the members
could possibly not match the kind of experience the Indian Airlines crew has.
Suppose some senior citizen is traveling alone in an aircraft for the first time
the crew should see to it that he is given proper instructions & is comfortably
settled in his seat.
Besides this, after the September 11 crisis, there was a lot of
skepticism in the fliers & to instill a little confidence in the consumer’s mind,
the government paid greater emphasis on security in the aviation policy. This
was all so that people would feel safe next time they traveled by air. They
would appoint a committee and look into the recommendations provided by
them to better the security arrangements in the airplanes & airports.
TANGIBLES – Appearance of physical facilities, equipment,
personnel and written materials
Tangible features would be those physical features, which can be felt
by the customer. These would be the physical proofs, which would help the
customer to judge the quality of service. Incase of the airline it’d be the aircraft
that the airline uses, how old they are, the kind of facilities that are provided
inside the aircraft or in the waiting area. The technology used for baggage
handling. The coaches used to transport the customer to the aircraft, all of
these speak leaps & bounds about the service provider. The kind of skilled
staff that they have the uniform that the staff wears.
The tangibles would also include the infrastructural facilities present at
the airports. This is where we find most of the Indian airports lacking. They
have no proper arrangements to handle the customers.
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PEST Analysis Of Airlines
When we look at the aircraft fleet that is a very important tangible feature, and
we find that Indian Airlines has a really ancient fleet of aircraft’s which doesn’t
make it extremely safe as older planes are more prone to damage. Whereas,
Jet Airways has the youngest fleet in the business.
EMPATHY – Caring, Individualized attention given to customers
Empathy basically is when the employees of the organization make the
customer feel at home, at ease, make him feel wanted. The customers are
mostly offered the same service from most of the airlines. The easiest way for
an airline the maintain and grow it’s client base is to be empathetic towards
their customers, to understand their specific needs and to cater to them &
they should make each customer feel like he is a unique asset to the
company & like their single most important client. Addressing the clients by
their first names, keeping a track of their usual flying routes, their preferences
in flight & catering to all of those, maybe giving him his favorite seat each time
he travels.
Customers like to be treated properly for the money that the pay and
the airline should try and offer the maximum benefit to the flyer for the money
that he pays. Air India in April invested 15 crores in the first class segment to
give it a face-lift and started providing full-recline seats since they give
minimum fatigue on long trips (exceeding 8 hours of flying).
RESPONSIVENESS – Willingness to help customers and provide prompt
service.
Responsiveness would basically be the kind of time it would take for
the firm to address a customer’s complaint or for the firm to provide service to
the customer. The degree of responsiveness shows the level of commitment
that the people of the company have towards their work. It is very necessary
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PEST Analysis Of Airlines
for the company to concentrate on prompt & the right kind of responsiveness
to the needs of the customer.
Incase, a certain passenger doesn’t like a certain meal served on the
plane, the cabin crew should be in a position to offer him an alternative meal
in little time, as his perception or opinion of the airline company would mainly
depend upon whether he goes satisfied on this complaint or not. Care should
be taken that prompt response and top quality service is provided to satisfy all
of the customer’s needs.
CHAPTER EIGHT
MOMENTS OF TRUTH
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PEST Analysis Of Airlines
A moment of truth exists when a customer comes into contact with the
organisation. At every point of contact, he experiences the service and makes
an evaluation about it being good or bad. That is the moment, which creates
satisfaction, is dissatisfaction. That is a moment when a problem may occur. If
a problem doesn’t occur and the problem passes off as expected, there is no
dissatisfaction. That is also the moment when the experience could be very
different than from what was expected, resulting in a perception of intense
delight and the _expression of ‘wow’. That is the defining moment of reality.
Jan Carlzon, president of Scandinavian Airlines, is credited with
originating the concept of moments of truth. Carlzon took over as president
when the airline had lost 30 million dollars in the two previous years. In his
single-minded focus for becoming the best airline of the frequent business
traveler in Europe, he determined that the first 15-second encounter between
a passenger (customer) and his front-line people (employees) set the tone or
image of the entire company in the mind of that customer. Thus, each
encounter with a customer is a moment of truth.
Carlzon carefully reviewed every step of the customer contact process,
and identified 5 critical times when the airline interacted with the
customer. He called these 5 points of contact "the Moments of Truth," and
they work for any business.
For airlines, they are:
Making a reservation
Getting tickets
Boarding
Flying
Retrieving baggage
Carlzon recognized that at any one of these crucial moments, the
airline could either strengthen their relationship with a customer, or risk losing
them. And he personally checked up on how the airline was meeting them.
The key is to ensure that every moment of truth is a positive one for the
customer. By establishing this culture in SAS, the airline returned to
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PEST Analysis Of Airlines
profitability in one year while the rest of the international airlines tallied a
record two billion-dollar collective loss.
Each encounter you or an employee has with a customer is a moment of
truth. The customer's perception (reality) of your company is formed by every
encounter. To deliver superior customer service, every encounter must result
in a positive experience for your customer.
For example, every time the phone rings at your business, it is a
moment of truth. Are your customers/prospects greeted with a cheerful,
professional and efficient handling of their call? How each call is handled
provides one of the most opportune moments of truth for you to make a
positive impact and help customers "feel" good about doing business with you
and your company. The most important person(s) in your company is the
person(s) who answers the phone.
Indian Airlines
Some of the things IA does in providing their customer with the best
service to their customers.
Making a Reservation:
You can book your Indian Airlines ticket by ringing up or visiting any IA
booking office or approved travel agent in India and approved General sales
agents of Indian Airlines and interline partners abroad.
When you make a reservation on an Indian Airlines flight, the time limit
by which you much purchase your ticket would be indicated.
If you are wait-listed on a fully booked flight, the airline will call you up
on your contact number as soon as your reservation is upgraded from the
wait-list .
If a ticket is not purchased or presented for endorsement before the
expiry of the indicated time limit, the reservation is automatically cancelled by
the reservation system.
Getting Tickets:
Each IA domestic and international stations have Booking Offices.
Besides, there are eight off-line stations, which have our booking offices also.
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PEST Analysis Of Airlines
At the four major metros, i.e. Delhi, Mumbai, Calcutta and Chennai, there are
multiple booking offices including one that works round the clock.
The airline has nearly 1600 approved travel agents all over India and
General Sales Agents at the foreign stations, who are always available for
ticketing. Reservations can also be made abroad through other IATA airlines,
who are IA interline partners and through their approved travel agents as well.
Whoever is booking the ticket on your behalf must indicate your desired meal
preference.
On many occasions, the correct meal preference is not indicated,
through ignorance or lack of attention. While uplifting food for any flight. Indian
Airlines goes as per the indicated vegetarian/non-vegetarian ratio of the
booked passengers any subsequent change, therefore, upsets the balance.
Of course, extra meals of both types are put on board but sometimes even
these are not enough to take care of the variation.
Boarding:
IA offers assistance to all passengers who require special handling -
wheel chair, stretcher or assistance of unaccompanied minors, etc. If you or
any passenger being booked by you require any special assistance at the
airport, please indicate it when you make the booking to ensure the service is
provided.
Jet Airways
The best test of the service provided is customer response and satisfaction.
Some of the responses to the moments of truth provided by Jet are:
Jet Airways - by R Thomas
In March I flew Jet Airways from Mumbai to Bangalore. It was the best flight I
have been on. It surpassed the European carrier, which I had flown to India on -
Swiss. I was given a full meal in economy class on a flight that was just over 2 hrs.
On almost all US carriers, you are only given peanuts on a flight that short. Drinks
were served several times throughout the flight. The seat was comfortable and there
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PEST Analysis Of Airlines
was a good in-flight shopping magazine. Thick pillows and good blankets were
available. We left Mumbai ten minutes early and reached Bangalore twenty minutes
ahead of schedule. There were friendly, helpful Jet Airways reps in the baggage
claim to help me get my bags on a trolley. Jet Airways shows that India can create a
good airline and it deserves a higher Skytrax rating.
Jet Airways - by N Sushilkumar
Jet Airways has been assisting and foreigners in a much better way. Domestic
terminal needs to be modernized with service like Tea/Coffee and STD booths. Jet
Airways surpassed Indian Airlines in many ways, thanks to Government of India for
allowing private services. Flight arrival and departure can be seen at ease, on
Internet, home page of Jet Airways. Jet Airways is meeting its commitment and we
wish all prosperity and growth with international banner.
Jet Airways - by Desmond Desa
Jet Airways is an excellent airline. Even though they currently only fly on Indian
domestic sectors. Their service far exceeds that of the other international airlines
such as Air France, Swiss Air and Delta. The average age on the Jet Airways fleet is
less than 3 years and the aircraft are clean. The food is great. But most of all their
friendly service stands out. The flight attendants go out of their way to make sure you
have a comfortable flight. Jet Airways truly stands up to their motto -- "the joy of
flying." Their low rating on Skytrax surprises me. I definitely think they are, at a
minimum, 4 stars plus!
Jet Airways - by Rahul Agarwal
Jet Airways comes as a real relief to frequent fliers in Indian skies, who have, it
seems, been perennially at the mercy of the embarrassingly poor Indian Airlines. The
Business class service definitely conforms with international standards. The most
important aspect of any flight is the seating comfort, and Jet's product is unrivalled -
excellent legroom, comfortable seat width, good recline. It’s even better than the
product offered by Thai on its A330 Business Class. The in-flight service is just
phenomenal and the grim faces of Indian Airlines attendants - good riddance! Food
could be better, but who cares on a 2-hour flight? I definitely am looking forward to
the commencement of their international operations.
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PEST Analysis Of Airlines
Inference
Jet Airways beats Indian Airways hands down when it comes to customer
satisfaction. This is a result of better moments of truth provided by the airline. As a
result, Jet Airways which is a relatively new entrant to the Indian Airline Industry has
managed to nearly upstage IA and win over a huge chunk of their clientele.
Recommendation: In providing a better customer experience
Few things, which we suggest, would make for a better customer experience.
Making a Reservation:
Answer the phone with a smile – ‘it shows’. The tone & words of the person who take
the call, the way in which he addresses and speed with which he conforms the
reservation.
Getting Tickets:
Ease in acquiring the tickets. Number of ways in which the airline offers tickets –
online, agents, branches etc. Simplicity, care & Handling.
Boarding:
1. Recognition & acknowledgment of the traveller.
2. The speed with which luggage is checked in, security check in and the other
formalities.
3. Porter Assistance and wheel chair for disabled and the aged.
4. Choice of Seat preferred.
5. Things to do, while waiting for the flight.
Flying:
1. Cheerful & hospitable crew members.
2. Providing the customer with the meal of his choice.
3. Instructions to be given in a clear & understandable language.
4. To be ready for any kind of assistance which can be needed by any passenger.
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PEST Analysis Of Airlines
5. Making the traveller feel at ease & comfortable with the journey.
Retrieving Baggage:
1. Providing for speedy & safe access of customers baggage.
2. Complaint handling system in case of misplaces or damaged baggage.
3. Porter assistance to carry the baggage to the kerb side.
CHAPTER NINE
IATA
IATA stands for International Air Transport Association to promote safe, regular
and economical air transport and foster air commerce by developing industry
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PEST Analysis Of Airlines
working standards. It is a voluntary association of air carriers which is committed to
the principal of competition and free trade in air transportation. Its members (now
totaling more than 220) carry more than 97% of the world’s scheduled air traffic
under the flags of over 130 independent nations. It has its head-quarters in Montreal,
Canada.
MAJOR FUNCTIONS OF IATA:-
IATA co-ordinates activities such as tariff, scheduling, passenger and cargo
services and agency administration. It liaisons and lobbies with ICAI (International
Civil Aviation Organisation) and government to monitor and reduce airport fees. This
activity regularly saves the world’s airlines up to $100 million a year.
Among its other activities, it provides joint solutions to the airlines for exploiting
opportunities or solving problems. It assists governments, world over, in bilateral
negotiations in general, and tariffs in regular.
It acts as a collective link for passenger and cargo agents to make representation to
the airlines.
THE AGENCY ACCREDITATION PROGRAMMES OF IATA:-
No airline can afford to set up sales offices in every city of the world, yet most
airlines want to sell their services worldwide. Travel and cargo agents are the
market-place intermediaries who make this possible. They become accredited with
IATA by demonstrating soundness, proficiency of staff and the suitability and security
of their premises.
TRAINING PROGRAMMES UNDERTAKEN BY IATA:-
IATA undertakes accreditation of sales agency by undertaking training
programmes to oversee the airline passenger and cargo segments. Programmes are
designed to assure airlines and other agents in the agent community if high
professional standards at individual agencies. In fact the IATA Fraud Prevention
Training Programme equips people who process tickets to recognize invalid travel
documents.
Airlines have been losing millions of dollars on account of stolen and
fraudulently used tickets every year. IATA’s Aviation Training and Development
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PEST Analysis Of Airlines
Institute (ATDI) is a unique source of international training and professional
development, serving the needs of five aviation industry sectors: Airlines, Airports,
Cargo, Civil Aviation and Travel and Tourism.
It has the most comprehensive portfolio of aviation training and professional
development programmes, leading to internationally recognized certificates and 11
IATA diplomas.
Its impressive curriculum of skills and management courses, addresses the
latest management issues and technological developments, supporting IATA’s
initiatives in such crucial fields as security, financial controls and e-commerce.
IATA’s PRORATION SERVICE:-
IATA’s proration service allocates revenue to individual carriers who provide
part of the transport service on a multi-leg journey. Proration is important because
about 50 million air passengers a year undertake multi-leg journeys using different
carriers i.e. they interline. The proration service is a highly automated complex
process, which is an integral part of the clearing process.
IATA’s TRAFFIC FORECAST:-
IATA’s traffic forecast for the period 2001-2005 for passenger traffic is expected
to average 3.5% between 2001 and 2005, including the effect of the record 2.1% fall
in passenger numbers in 2001. Growth at that level would result in 637 million
international passengers carried in 2005. The highest average growth percentage is
expected on routes within the Far East and lowest on trans-Pacific routes.
The freight traffic is likely to average on annual growth of only 2% for 2001
to2005, including the effect of the record 7.7% fall in freight tonnes in 2001. The
highest average growth percentage is expected on routes between Europe and
Africa and lowest on North Atlantic and European routes.
In general, IATA is the agency through which the airlines seek to solve jointly
those problems, they cannot individually surmount and to do that work which can be
carried out more effectively by combined effort. It is active in the fields of traffic,
finance, legal and technical matters, medicine, public information, and the like.
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Thus IATA plays a very significant role in the airlines sector.
CHAPTER TEN
LIBERALISATION OF THE AIRLINE SECTOR
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PEST Analysis Of Airlines
Liberalisation - Opening up of a country's markets to foreign/ private players.
The liberalisation process in the airline sector has been going on since 1992, but it
has seen a lot of turbulence.
The main effects of liberalisation in this sector are: more players, less fares and
better service. Before 1992 there was just one airline - Indian Airlines. When the
government liberalised the sector in 1992 a lot of airlines came in (Damania, East-
West, Jet), but with a market shake-up in the mid 90's only the fittest have survived.
Today there are 3 major national players (IA, Sahara, Jet) and several regional
players (NEPC, Span, Gujarat). As a result of liberalisation, the services of all
airlines have gone up and along with that the fares have dropped noticeably.
GOVERNMENT POLICY
The policy of the government in the 50's was to connect all of India via air.
Hence today we find that almost all small towns of India have airports. The policy
failed because not many people could afford to fly and almost no one flew to small
towns. Today when small towns are finally getting flights it is found that the
equipment at the airports is outdated (eg - The Patna airport was built in the 60's but
use of the airport and all it's facilities began only in the 80's. That is, for twenty years
the equipment in the airport was just lying around).
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After 1992, however, the government has adopted an "Open skies" policy. In
this policy, players are allowed to enter and leave the market as they seem fit.
IS THE GOVERNMENT SERIOUS ?
Often it has been found that the government's talk on liberalisation has to been
taken with a pinch of salt. In the airlines sector it has been seen that although the
government seems to have done a lot about liberalisation there are still some areas
that haven't changed at all.
1. Narrow air corridors - An air corridor is nothing but the width of the passage an
airliner can fly in. In India most of the air corridors are still very narrow as a majority
of the airspace is still with the airforce. For instance, the approach to the Delhi airport
is just 3 kms. wide. This narrow corridor was a primary cause of the April 26 1993
Charki Dadri crash in Haryana, where all 351 people on board two international
airlines - Saudi Arabian Airlines and Kazakhstan Airlines were killed in a mid-air
collision. It was one of the worst crashes in aviation history. So although the
government has opened the skies they haven't yet opened the highways of the sky.
2. Tata-SIL - Some years ago the Tatas along with Singapore Airlines wanted to start
a domestic airline service in the country. The government, under pressure from
Indian Airlines, didn't give them the permission to do so. IA feared the competition
that Tata-SIL could provide. They also said that before allowing the Tata-SIL airline
to take off, the government should allow them to function as a complete private
airline. This demand was not completely unjustified as even today IA is made to give
50% discount to IAS and defence officers. Also, they are made to fly to less popular
destinations (North-East, Andaman & Nicobar Islands) which results in a loss of
revenue for them.
On the other hand, today the government is ready to privatise IA and AI. They are
even willing to let any foreign airline hold a 40% stake in Air India. Such a step
shows a deep commitment to liberalisation and has been well received by the global
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airlines. Many airlines have already come forward and placed their bids for the stake
in AI (Delta Airlines, Singapore Airlines, Air France).
To conclude one can say that even though the government has been giving
confusing signals in the past, it seems that now they are ready to go ahead with the
liberalisation process.
ATEC COMMITTEE AND IT'S FINDINGS
Pre 1956, private companies were allowed to open scheduled/ non-scheduled
airlines. A total of 9 institutions came up. In this period a 'Dakota' was sold for Rs.
20,000. However, these airlines soon started having financial problems. The
operators requested the government for loans. The government wanted to know as
to why the private airlines weren't doing too well and so it appointed the ATEC (Air
Transport Enquiry Committee) headed by Dr. Rajyadhaksha to do so. After
completing it's investigation the committee came up with several reasons for the
economic poor show of the private airlines, four noteworthy reasons were:
a) Non-standardisation of inventories - Different qualities and types of equipment
was used due to multiple type of aircraft used. This hiked the maintenance cost of all
the airlines.
b) Multiplicity of rate - The rates of all institutions differed.
c) Loss of revenue due to NAMS - NAMS means Nightly Air Mail Service. Private
operators were made to carry air mail on their flights at night time, which meant a
loss of passengers and hence a loss of revenue.
d) High cost of fuel - The fuel used in aircraft is ATF (Aviation Turbine Fuel). It is
nothing but a form of highly purified kerosene. However, the purification process
accounts for 35% of the cost of the fuel which many operators could not afford.
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These reasons along with several other reasons lead to the nationalisation of
the airline sector through the 'Air Co-operation Act' which took effect on 26 June
1953. Under the act, eight out of nine private operators became 'Indian Airlines
Corporation' and one was constituted as 'Air India Corporation'.
WHY DEREGULATION AND SCHEDULED AIRLINES?
According to the planning commission the air transport industry in India has a
growth rate of over 10% and with the existing fleet strength the national airline could
not meet the demand in the market. Hence, deregulation of the skies was the only
option. Deregulation means to allow free entry in to the market. Private airlines were
allowed to start as air taxi operators in 1992. The growing demand for rationalisation
of policies made the government lay down conditions through which air taxi
operators could become scheduled airlines (ie - they are allowed to print their
schedules). The major emphasis in allowing scheduled airlines are:
a) Government permission to import plane.
b) Rationalisation of operative routes.
The players who come in to the market either exist with all their gimmickry or fade
away due to economic pressures.
RECENT TRENDS IN AIRLINE INDUSTRY
The Skytrax Travel Panel Survey conducted between November 5th and
November 28th shows it is the corporate traveler that are shying away from air travel
- with nearly half of respondents saying their reduction in air travel was a direct result
of their employers concerns over safety.
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Of greater concern, over 60 per cent of respondents said they believe they will
be cutting back corporate air travel frequency during the next 12 months - these
responses coming from travelers located in all parts of the world and indicating that
financial / recessionary fears are extremely widespread.
Leisure segment –
In the leisure segment less than 25 per cent are traveling less by air, and
there is a trend to show that price cutting is stimulating short term demand for many.
For example the Indian globetrotter seems to be making the most of the
airline industry's crisis this season.
The primary factor driving out- with out-bound airfares down by an average of
20 per cent, post-Diwali travel activity is witnessing a welcome spurt, though travel
agents and airline companies may still find it difficult to better last year's levels.
In Bound travel, post-Diwali is prices. Prices on an average are down by 20
per cent. Travel agents and airline companies are under considerable pressure on
the pricing front. Hefty discounts have become mandatory with every package
offering.
For Indians, popular destinations this season are the Far East (this includes China),
South Africa and cruises to Australia and New Zealand.
CASE STUDY ON INDIAN AIRLINES
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The most reliable and competent airlines in India, Indian Airlines has
proved itself in a number of ways.
An “image track survey” conducted among air travellers in the country
by IMRB International have revealed that Indian airlines have shown an
amazing turn around in 2003, climbing from 35% to 45%. With 10% increase,
it now shares the top honors with Jet Airways, for whom it has been a climb
down from 54% to 45%.
Indian Airlines has emerged the clear favorite in the most competitive
segment, that of corporate travellers, with 48% voting in its favour.
A meeting with Mrs. Shobha Nimbalkar, assistant manager sales, gave
substantial information about a post-11 situation and SARS effects along with
other fruitful information.
All the policies announced by the government have had a direct impact
on Indian Airlines being a PSU. During the post-11 attack, the government
announced the various insurance policies for the airlines, which were
mandatory to be undertaken. Indian Airlines was not an exception to it.
In addition, looked into the risk bearing factors, and made the check in,
check out strict for security reasons.
The recent news of India –Pak joining air links from Jan1st, 2004, has
greatly affected the air traffic of Indian airlines. This has greatly improved the
strain in the relations of both the countries for which Indian airlines, too
expects to contribute.
The post-11 attack had greatly affected Indian airlines in economic
terms due to a downward trend in the economy. The air traffic had lowered
leading to slack in prices. There was cost cutting in a number of areas in order
to face the downfall economic situation. They had to operate flights quite
economically, by combining the flights as per convenience.
The Air Turbine Fuel (ATF), a cost raising factor in the airlines had to
be taken care of. The salaries to their employees were not raised for a
particular period in order to compensate the downfall. At the same time, the
employees supported by decreasing phone calls, and other bills which
contributed a lot to the Indian Airlines. Getting rid of the inventory was also
undertaken in order to recover funds economically.
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PEST Analysis Of Airlines
The fear of SARS had also enabled Indian Airlines to prove itself in the
bad times. As in any natural calamities it is the first one to reach in case of
earthquakes, floods and SARS was one of the like.
The airlines informed the general public through bulletins and articles
for awareness. The travellers wrer provided with masks and other
requirements in order to take care of themselves. The staff, cabin crew and
other employees were given good training to handle situations during that
period.
SARS as a social factor had reduced the air traffic and resulted in a
downward trend. The fear of flying among the people was overcome by Indian
airlines in a number of ways—taking care of the children, the aged and also in
emergency cases. All this puts Indian airlines in the forefront even in the times
of a downfall with the support of its employees.
As far as the technology in Indian airlines is concerned, it mainly takes
care of the safety of aircrafts, promoting the airlines through various measures
and the like. Online ticketing has also entered Indian airlines just like others.
The passengers can visit the sites of Indian airlines before booking tickets and
get the required information quickly due to he technology.
Indian airlines have completed its 50 years of service in the year 2003.
As a golden jubilee year, it has come up with various schemes in order to
promote its sales. It has a popular scheme —Frequent Flyer Programme
(FFP) through which their regular flyers are provided with additional benefits.
The joint FFP of IA and Air India was founded 10 years ago, with Air France
as an alliance partner.
Indian airlines have grown as a service industry since years. It hopes to see a
bright future and stand out among the majors and private flyers as a PSU
contributing a great share to the airline sector.
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PEST Analysis Of Airlines
CONCLUSION AND RECOMMENDATIONS
Air travel has developed considerably since years and thus the airlines.
The government will continue playing its roll in the airline sector, by means of
introducing new policies and regulations. Privatisation may also continue
growing in order to provide a social effect of airlines.
The economics scenario is never stable and so also it will continue
fluctuating to affect airlines in a number of ways. But accelerated cost cutting
is essential to brighten the future of airlines.
In order to improve its services airlines must concentrate on certain
social factors and provide greater degree of customer satisfaction.
Technology is playing its role in all sectors and an airline is no
exception to it. Aircrafts as now capable now of faster flights with greater
number of passengers, thanks to the technology. Increased security
measures, criminal database crosschecks, cockpit security to be tightened, al
this calls for high-tech idead, which need to be developed.
Thus airlines sector needs to grow to it’s fullest and explore the places
in order to widen the transport globally. Overcoming the barriers it has already
reached the heights but still requires developing itself as a sector.
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