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Study of strategic

management decisions

of

Indian AviationIndustry


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CHAPTER 1

INTRODUCTION


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Objective:

To study various airlines in Indian aviation Industry

To study and analyze Strategic Management decisions of different

airlines in IAI

Scope of the project

To understand and study the concepts of strategic management.

To study the management decision of Domestic airlines in IAI.

The project will involve Strategic management analysis using Pest

Analysis, SWOT analysis, Tows Analysis etc.

Data Collection

Secondary data collected through various magazines, books,

Newspapers , case studies and internet will be used.

Data Analysis

The project analysis will involve Pest Analysis, SWOT analysis, Towsanalysis etc.


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Chapter 2Literature Survey


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Theoretical Framework and Review of Literature

INTRODUCTION

Indian Aviation Industry

The basic function of an airline is to accommodate for passengers and cargo while

taking them to far-off places between two major cities or towns within a country or

beyond geographical borders.

The aviation industry in India has grown by leaps and bounds in recent years in

terms of kilometers flown as well as customers serviced. The economy of a country

is substantially determined by the quality of air transport.

Air transport is also considered to be the swiftest mode of transport. Almost all the

states have one or more airports, which are regularly serviced by several airlines.

There are a number of international airports, which also serve as domestic airport

too. Others are only domestic airports.

The Air Transport Companies are both in the public sector and in the private sector.

In the public sector, there are Air India and Alliance Air. In addition to this there

are several private scheduled operators, viz. Jet Airways (India) Ltd., Go Airways,

Kingfisher Airlines, Paramount Airways Pvt. Ltd., Go Airlines (India) Pvt. Ltd.,

and Inter Globe Aviation Ltd. (Indigo) operating on the domestic sector providing a

wide choice of flights and connectivity to various parts of India. One cargo airline

viz. Blue Dart Aviation Pvt. Ltd. is also operating scheduled cargo services in the

country. At present there are 59 companies holding non scheduled air transport

operators permit.


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THE KEY DOMESTIC PLAYERS

Airlines

Founded

Head

Quarters

Key Person LOGO

Air India,

1932

Mumbai Arvind Jadhav,

Chairman &

MD

Jet Airways,

1993

Mumbai Naresh Goyal

,Founder &

Chairman

Jet Lite

(Formerly

Air Sahara),

1991

New

Delhi

Naresh Goyal

,Owner &

Chairman

Kingfisher

Airlines,

2004

Bangalore Vijay Mallaya,

CMD

Kingfisher

Red

(Formerly

Air

Deccan),2003

Bangalore Vijay Mallaya,

Chairman &

CEO


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Indigo

Airlines,

2005

New

Delhi

Bruce Ashby,

President &

CEO

Spice Jet,

2005

New

Delhi

Siddhanta

Sharma,CEO

& COO

Go Air

Airlines,2005

Mumbai Jeh Wadia, MD

Paramount

Airlines,

2005

Chennai M.Thiagarajan,

MD

AIR INDIA

Air India International entered the jet age in 1960 when its first Boeing 707, named

Nandadevi and registered VT-DJJ, was delivered. Jet services to New York via

London were inaugurated that same year in May 1960.

On 8 June 1962, the airline's name was officially truncated to Air India. On 11 June

1962, Air India became the world's first all-jet airline.

Air India Limited is the national airline of India with a worldwide network of

passenger and cargo services.

Air India is state-owned, and administered as part of the National Aviation

Company of India Limited - which was created in 2007 to facilitate Air India's


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airline status, which was granted on 4 January 1995. It began international

operations to Sri Lanka in March 2004.

While the company is listed on the Bombay Stock Exchange, 80% of its stock is

controlled by Naresh Goyal (through his ownership of Jets parent company,

Tailwinds).

JET LITE

JetLite, formerly Air Sahara, is an airline based in New Delhi, India. Controlled by

Jet Airways, the airline operates scheduled services connecting metropolitan centers

in India.

The airline also provides helicopters which are available for charter services and

aerial photography. Jet Airways and Air Sahara were the only private airlines to

survive the Indian business downturn of the early 1990s.

In January 2006, Jet Airways announced that it would buy Air Sahara for $500

million in an all-cash deal, making it the biggest takeover in Indian aviation history.

On 12 April 2007, Jet Airways agreed to buy out Air Sahara for 14.5 billion rupees

($340 million). Air Sahara was renamed JetLite, and was marketed between a low-

cost carrier and a full service airline.

KINGFISHER AIRLINES

Kingfisher Airlines Limited is an airline based in Bangalore, India.

Kingfisher Airlines, through one of its holding companies United Breweries Group,

has acquired 26% stake in the budget airline Air Deccan and has option to buy

further of 20% stake from the secondary sector.


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INDIGO AIRLINES

Indigo Airlines is a private domestic low-cost airline based in Gurgaon, India. It

operates domestic services linking 14 destinations. The airline is owned by

InterGlobe Enterprises.

SPICE JET AIRLINES

SpiceJet is a low-cost airline based in New Delhi, India. It began service in May

2005. It was voted as the best low-cost airline in South Asia and Central Asia

region by Skytrax in 2007. SpiceJet was earlier known as Royal Airways, a

reincarnation of ModiLuft.

SpiceJet marked its entry in service with Rs. 99 fares for the first 99 days, with

9000 seats available at this rate.

Their aim is to compete with the Indian Railways passengers travelling in AC

coaches.

JAGSON AIRLINES

Jagson Airlines is an airline based in Delhi, India. It operates scheduled and charter

services within India and to Bhutan and Nepal. Jagson Airlines operate flights

between Delhi and Rajasthan and Madhya Pradesh and Himachal Pradesh. They

also operate a helicopter service between Srinagar, Baltal and Amarnath.

GO AIR AIRLINES

Go Air is a low-cost airline based in Mumbai, India and is wholly owned by the

Wadia Group.

THE COMPETITION IN THE AIRLINES SECTOR IN INDIA THE

AERIAL WAR


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Since the deregulation, the Indian Airlines has grown tremendously. Also, average

prices have fallen consistently due to the increasing number of players in the

market. This fall in prices has benefited the consumers the most. If some fliers

would disagree that the decline in prices have not benefited all the travelers then it

can be proven that the fliers paying a high price also gets a superior product, in

terms of flexibility and service. Moreover, the increasing demand for airline

services is also helping airline companies to run a competitive business. People

prefer air travel as a feasible option for commuting because it saves time and also

because of the value added services provided by different airline companies. The

competition in the Indian Airline Industry has succeeded in increasing the volume

of travel and lowering average prices which has in the end benefited the final

consumer and also to the airline companies.

Alliances and mergers are one of the factors which are giving a solid boost to the

Airline Industry in India. Different airline companies, foreign as well as Indian, are

tying up or taking over or merging to produce effective collaborations in service

delivery with profitable returns. It is not the just the airline companies but also

associate industries such as tours and travels agencies, hotels, transport

organizations etc. which are also getting targeted by airline companies to deliver

quality service to the customers.

At the end, it can be inferred that the Indian Airline Industry is growing at a fast

pace and the credit goes to the effective and positive impact of the increasing

competition in the industry. Factors indicating to the increasing competition in the

airline industry are the pricing and promotion strategies adopted by the airline

companies; value added services offered; sales promotion; product/service


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innovation; cost cutting strategies like downsizing; and so on. Airline companies

are concentrating on the customer delight and also the costs to produce profitable

returns with effective customer/market retention.

Marketing MIX (4 Ps)

THE PRODUCT MIX

Product is the core thing which every enterprise tries to deliver. Product is of

course, the service that companies have to offer to the customer. Getting the product

right is the single most important activity of marketing. If the product isn't what the

market wants, no amount of price adjustment or brilliant promotion will encourage

consumers to buy it. The airline product is quite a complex one since it comprises

of a service of incorporating the temporary user of airline seat and certain tangible

products such as free flight bags or a free bottle of duty free spirit to encourage

booking. The product here refers to Airline service offering. Although service

products are essentially intangible, there are certain pyhsical characteristics which

consumer assess in their evaluation of product choice.

Attractiveness of the offering in terms of pyhsical features such as consumers have

high expectation, the food & drinks offered, entertainment. Facilities available,

associated level of services such as, quality of seats & interior decoration.

The airline product includes of two types of services:

1. On the ground services,

2. In-flight services.


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The on-the-ground services include a convenient airport with car parking facilities,

duty free' shopping quick and efficient checking of baggage, efficient service at

reservation counter, transport to the airport, etc.

The service provided inside is intangible and is highly variable. The airhostesses are

trained to provide polite, warm and courteous service. The courteous service that

the representatives at the baggage counter, reservation counter provide goes a long

way in developing customer loyalty. The travel agents of the airlines also need to be

efficient and polite.

Differentiating the Product

It is important to recognize that what the consumers are demanding are not

products, or features of products but the benefits they offer. Producing added

benefits thus helps the marketer to distinguish one product from another. Good

design or style of service can form the basis of differentiation. This enables the

company to create a personality for its service. The design and decor of the aircraft

provides opportunities to personalize their product as well as periodically to update

them when differentiation under IATA regulations was virtually excluded,

nonetheless, certain airlines were able to develop distinct personalities. Eagle

Airlines created an entirely new market between New York and Bermuda, for e.g.

by developing an image of a friendly airline distinctive from other airline serving

the route. A similar style was evident in Richard Branson's Virgin Airways.

CORE PRODUCT AND SUPPLEMENTARY SERVICES


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regarding handling customer queries, knowledge about the airplane itself,

knowledge about cuisine etc.

Consultation

This aspect of supplementary services can be customized according to the needs of

the customer. It is more in the case of people processing and high personnel-contact

services.

Airlines are moving more actively into the role of consultant today. They are doing

away with the travel agents & designing & selling packaged tours to consumers

directly. In this aspect they often act as consultants to the customer, by giving him

advice & suggestions regarding the type of plan he can choose, the benefits he will

get the mode of travel he should choose etc.

Another aspect to consultation at airlines is when the customer approaches the

airline regarding traveling to particular destination, the airline gives him a variety of

choices of routes that he can take.

In some cases airline may also design special menus & benefits in consultation with

its frequent fliers by keeping in constant touch with them & asking them for

suggestion as to what they want in their airline which will make their experience

more comfortable.

Order taking

The order taking procedure is essentially the booking procedure of the airlines. The

important aspect to be noted here is that the procedure is smooth, easily understood

& fast. Reservation of airline tickets is now easy and reliable since it is fully

computerized. There are 24 hours reservations. Passengers can specify their seat

preferences at the time of reservation.


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Most airlines use the telephone, fax, and email methods of booking. The emphasis

here is on fast booking & at the same time getting the required information form the

customer. This is done by establishing a standard reservation procedure & format

thus reducing the risk of inconsistent service delivery. The online booking system

also facilitates better order taking & processing.

The scheduling aspect assumes importance as reservations on the wrong flight to

the wrong place are likely to be unpopular.

Hospitality & Caretaking

With the increased competition today in the airline industry & the increasing

similarity of services offered by each airline, hospitality has emerged as a key-

differentiating factor between one airline & the other.

The hospitality aspect of an airline is tested right form the time of the reservation

(courtesy of the booking official) to the airlines desk at the airport to the actual in-

flight travel (the attitude of the flight attendants) to the post flight help extended.

Safekeeping

In airlines the safekeeping issue is that of safeguarding the customers baggage.

Baggage allowances are offered about 30 kgs of check-in baggage is allowed.

Passengers carrying international tickets are given further allowance of around an

added 30 kgs Priority baggage delivery is offered to members. The customers

entrust his baggage to the airline & it is the airlines responsibility to keep it in a

proper condition.


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Children and infants usually travel along with their parents and guardian. In case of

unaccompanied minors, customer service staff renders all assistance like checking

in and escorting up to the aircraft and handing over to the senior-most cabin

attendant on board the flight. He is looked after on board the flight right up to the

point flight reaches the destination and he is received by his guardian.

Exceptions

Special requests airline very often receive special requests form customers with

regards to meal preferences, special amenities for elderly people or children.,

medical needs etc. these needs have to considered & acceded to wherever possible.

Handling of customer suggestions / complaints every airline today has a customer

service centre which entertains customer suggestions & complaints. On the flight,

customers are often asked for their opinion regarding service equality. Many

corporate frequent travelers are consulted when the airline decides to make any new

change.

Billing & payment

The billing procedure in airlines is simple. The options available to the customer are

plenty including credit card & travelers cheque. Airlines use the open account

system with their corporate clients. Frequent fliers are also given special payment

privileges.


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LEVELS OF PRODUCT

The Core Service

The core service of the airlines industry is to transport People, goods and services to

various destinations. As the needs of the people increased the entire system became

more organized and formal. After this stage come the various supplementary

services.

The Supplementary Services

The airline industry has many players they had a brand name like Air India, Jet

Airways, British Airways. All of them had some common services to offer like

connecting flights, through check-in, tele-check in, food on board, and

complementary gifts etc.

Different classes like economy class, business class were introduced. Air

concessions are given to school students, old people etc. Singapore airlines were the

first to introduce small 8television screen for every passenger. The freebies are

actually win-win deals between airlines and other services.

Jet Lite, for example, offers its passengers a business-plan on two-way economy

class ticket, which includes a nights stay with breakfast, STD fac ility for 3 minutes

and boardroom facility at the Park Hotel, New Delhi. To Delhi based fliers to

Mumbai, it offers a nights stay with breakfast, airport transfers and VIP amenities

at The Orchid, Mumbai. For business class, the plan includes a stay at The Leela,

with buffet breakfast and late checkout.


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All these added service helps the customer to decide upon which airlines he wants

to travel. As competition increased and the customers wanted more the next phase

evolved and that is the augmented service.

The Augmented Service

This phase is where the customers expectations are met; the service providers kept

working on new methods to meet the ever-changing customers demands. The

players introduced online booking, which was very convenient for the service users.

British Airways business class has showers; its more spacious and comfortable.

Sahara airlines offer its passengers six different types of cuisine like vegetarian, fat

free, diabetic etc. They also have auction going on board. Virgin airlines have

gambling on board, they also have body massage to offer to their passengers. Air

Emirates has something called cab service, they have customized pick up and drop

cab service.

This phase is the most crucial one; with increased competition service will become

the final differentiation.

Future Service

As mentioned above the customer needs keep changing, the future is unknown. The

customers may be looking in for more frequent inexpensive air travel, something

like air taxis, super sonic speed. This decreases the time thus reducing the cost so

continual improvement in Services is required. .

BRAND POSITIONING

Brand positioning is all about identifying the optimal location in our customers

minds for our Brand and our competitors. Proper positioning makes it easier to


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facilitate understanding of the Brand. Proper positioning clarifies what the Brand is

all about, how it is both unique and similar to competitive brands, why customers

should purchase and use the Brand.

Creating brand awareness is one of the most important aspects for any product or

service. Due to the intense competition in the market every airline has to position

them in the market. It is only if they position themselves well can they create a

Brand image, brand relationship as well as brand responses.

Each and every airline would want to have a market for them as well as have a good

name in the minds of the customers.

Airlines use unique attributes to position their brands in the minds of the potential

customers. Thus consumers strongly associate those attributes with that particular

brand, positively evaluate it and believe that they can not find those attributes to the

same extent with a competitive brand.

STRATEGIC GROUPS

Full range carriers with medium price : Wide coverage of services provided

and have greatest potential to capture and can lead in market. But have less number

of International destinations and the new comers can come up with low fares.

For Example; Jet, Indian Airlines, King Fisher

Low cost carriers with low price : Great facilities and technology but no service

for economic class.

For Example ; Kingfisher Red, Jet Lite, Spice Jet, Go Air, Indigo and other

Low cost carriers.

Very high service with high price : Better service due to high fare and Attractive

for the growing middle class. But less coverage within country.


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While price is tactical, it has localized implementation, it is temporary in nature and

therefore price is flexible.

Pricing plays a vital role in the marketing mix of any airline. The fair price

concept is supreme, mainly because more than anything else most potential

customers will base their purchase decisions on the basis of price of the ticket.

Passengers tend to seek value for the money they are spending.

The final price that the passengers pay is made up of various components. The air

fare charged by private scheduled domestic airlines comprises of basic fare, fuel

surcharge, congestion surcharge, passenger service fee and transaction fee (if the

ticket is booked other than the Website). Out of these, only passenger service fee is

the component collected by the airlines on behalf of the airport operators.

Pricing Strategies

1. Demand-based pricing: The pricing of air fares under this strategy is simple. It is

based on the demand from the customers. It involves setting prices consistent with

customer perceptions of value, i.e., prices are what customers will pay for the

services provided.

For example: The person sitting next to u might not have paid the same price for the

ticket. If a person wanting to travel in Business class does not get the ticket for the

same when tried to book at the last minute, will travel in Economy class paying

more than what the other travelers mustve paid. The pricing in airline industry is

never fixed or same. Its fluctuating in nature depending upon time, demand and


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other such attributes. So when, the demand exceeds supply for the seats in an

airplane, the price charged on the ticket is much higher than other passengers.

2. Season-based pricing:

The pricing of airline industry largely depends on seasons. For example, if a person

is travelling by Indigo from Mumbai to Bangalore, the pricing will be different for

different time periods. It will be cheaper in monsoon while comparatively

expensive in winter. Also, it depends when the person is booking the ticket.

If he books the ticket 3months before the date hell travel he might avail the ticket

at a cost that is 30-40% less than what the person may be charged if he books the

ticket 20days before.

For example: if a traveler books a ticket during normal weekdays the prices would

not be too high. Whereas, if the same traveler books the tickets during Diwali or

Christmas, he will be charged more than what he was charged earlier for the same

destination. And this strategy remains the same for all kinds of airlines. The prices

may not be exactly same but itll be quite similar.

Also, Jet airways provide tickets at a comparatively lower rate during the vacations

for student-passengers. This helps them tap the population travelling abroad for

education purposes as well as increase occupancy ratio.

3. Competition-based pricing:

This strategy focuses on the prices charged by other airlines. Competition-based

pricing does not always imply having the same price strategy as the competitors. It

means keeping ones pricing strategy such that it is cheaper in cost or it offers the

same price as competitors with better and/or more facilities. Thus its basic purpose

is to have a competitive edge over the rival airlines.


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of Indian, that offers discounts to passengers on site collaborated with India

times by offering a bid for international destinations at low fares.

ii. Odd pricing: This is another strategy wherein the service providers offerprices at an amount which seems comparatively lower than the normal rates.

It is based on U.S. dollar price-strategy wherein instead of charging $500

they will charge $489 or so. So in case on Spicejet. Instead of offering a

ticket from Mumbai to Goa at Rs. 2400 they would offer at Rs. 2299. So, on

looking at the figure the price difference seems to be more which in fact is

just hundred and eleven rupees.

iii. Penetration pricing: This is a strategy in which new services are introduced at

low prices to stimulate trial and widespread use. This strategy is appropriate when

the sale of tickets is price-sensitive.

In order to make, travel by air more affordable to the common man, a couple of

years ago Jet Airways announced a new offer `Everyone can fly' which offered a

major reduction in economy class air fares on certain selected routes across the

country. In most of the airlines, the reduction enables economy class air fares being

competitive to rail fares being charged for the same journey.

5. Pricing Strategies when the customer means Value is everything I want in a

service:

When the customer is concerned more in the get component of the service,

monetary price is not of primary concern. The more desirable attributes that an

airline provides, the more highly valued that service is likely to be and higher the

price that the marketer can set.


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Skimming strategy: This is a strategy in which new services are introduced at high

prices with large promotional expenditures. It is an effective approach when

services have undergone major improvement over past services. In this situation the

customer is more concerned about obtaining the service than the cost of the service,

thus allowing the service providers to skim the customers most willing to pay the

highest prices.

An example of this would be that of Virgin Atlantic airlines that has gambling on

board. They also provide in-flight body massage to their passengers. There is a bar

in the air craft. Also, they provide lounge facility at the airport to the frequent

flyers.

Also, when Kingfisher had newly started first class with Kingfisher first, the rates

of the tickets were very high compared to other airlines tickets. But travelers still

opted for it as they wanted to have the new flying experience with Kingfisher.

THE PLACE MIX

In Airlines, they utilize more than one method of distribution for e.g they sell

tickets through travel agents & sell seats on flights to tour operators , whilst also

operating direct marketing. Whichever distribution strategy is selected, channel

management plays a key role. For channels to be effective they need realiable

updated information. For these reason, I.T has been widely adopted such as on-line

booking system.

This dimension of marketing mix focuses on processing of services and selecting

the location points for airways and airlines offices keeping in view the comforts and

conveniences of the end users. By the processing of services, our emphasis is on the


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involvement of channels, front-line-staff, travel agency offices; offices of the tour

operators or so from where service flow and reach the ultimate users.

1. The air transport needs to make sure that the prospects dont face any difficulty

in buying the tickets and make necessary arrangements for the confirmation of

booking.

2. It is also to be confirmed that the users booking their luggage are not to face

inconvenience.

3. The behavioral profile of the personnel working in offices of travel agents and in

the offices of the airways and airlines require due attention. It is almost clear that

airhostess looking attractive, smart, well dressed are at your disposal to make

available to you the defined services.

4. It is also to be sure that the information network of the offices of the travel agents

is technology-driven and user-friendly.

5. The security checking, custom checking of passport, visa, income tax clearance

or so. It is essential that all the windows or the counters offer the services as per the

provision and promises.

6. Keeping in view the duration and nature of flights, the users are made available

lunch/ dinner, breakfast and drinks inside the aircrafts.

7. If in course of the journey, you are supposed to change the aircrafts and the

duration of stay is long, it is the responsibility of the airport authorities and

concerned airway and airlines to make available the accommodation facilities.


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Another dimension of place mix is related to location and management of the

offices of the airways, travel agents, tour operates, transport operators or so.

1. The main thing in the selection of a place is easy accessibility. The prospect

customer should get an easy access to the office and ticket counters. The place is

required to be safe, well connected with all-weather proof roads where all the

required infrastructural facilities are to be available.

2. The technology-driven booking system is to be ensured. The online booking

facility should be user friendly and all the information regarding the company

should be available on the company site so that customer can get all the information

at it ease.

3. The water and sanitation facilities for the users and comfortable seating

arrangements need due care of the travel agents or airways offices. The lighting,

ventilation facilities need to be made available.

4. The interior decoration, furnishing, plantation need aesthetic sense so that the

users from a positive opinion regarding the airways services. The interiors should

be creative so that people can enjoy their ride and make their trip a memorable one.

5. The positioning of posters of airways and airlines which look attractive and draw

the attention of the users attending the offices for chartered flights, packaged tour

need due care.

6. It is in this context that they find management of place an important component

of the marketing mix.

In view of the above, it is right to mention that air transportation business is linked

with a number of allied services offered by a number of agencies and organizations.


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If they dont find cohesion and coordination the promised services would hardly

reach to the end users.

KEEPING

There are three entities in the entire transaction:

1. Customer: He is the person who wishes to satisfy his needs i.e, transportation

from one destination to another. Here, the customer is a passenger or a potential

passenger.

2. Company: This is both the dreamer and the offerer. It here refers to the various

airlines which offer its aviation services to the customers to satisfy their demand for

transportation from one destination to another, for example: The Indian Airlines.

Here, the company makes a promise to its customers to deliver the right quality

service.

3. Provider: The service providers are finally the people who interact with

customers. They keep the promise that the airline operator has made to its

customers by delivering the finest services. They are the ones who carry out final

transactions. The customer actually comes in contact with the service provider and

not the company. For example: the air-hostess and the crew.

The interaction between these three parties while providing the service takes place

in the following manner:

The company is established with the basic objective of providing the specific

transport service. Thus the airline industry with players like Indian airlines, Jet

airways, Sahara airways etc came into being.

The air service provider that is the company communicates with the customer and

makes him aware of the services. It makes promises to the customer by advertising


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through various medias. For e.g.: the TV ad of Indian airlines advertising its new

sleep-in seats.

The customer who gathers knowledge about the service approaches the company

for availing his service in order to satisfy his need. This interface of the customer

with the company is through the customers interaction with the providers of the

company. The company enables its promises to the customers through setting up

facilities to deliver the promises by setting up ticket and enquiry counters. The

outcome of the to be transaction is determined by the interaction between the

provider and the customer. Hence the company aims at offering its providers with

the required infrastructure and training to optimize the quality of the transaction.

For e.g.: Yearly employee training programs and performance appraisals are done

by Sahara airlines.

The three strategic points where the provider and the customer interact are:

a) Ticket purchase at the airline counter or the ticket agency.

b) Checking in while boarding.

c) During disembarkation.

All three sides are essential to complete the triangle. All three marketing activities

represented by the sides of the triangle are critical to efficient delivery of the

service, even if one of the sides is out of place, the triangle will be distorted; in

other words the total marketing effort cannot be optimally supported.

THE PROMOTION MIX

The formulation of an ideal promotion mix is essential to inform sense and persuade

the users. The business magnets, business executives, politicians, cine artists, high


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spending tourists, business houses using expensive inputs and trading the same, the

Department of Posts, domestic and international tourists are some of the users of the

air services. The users appear to be more conscious, aware of their rights and in a

majority of the cases are found sophisticated.

However, majority of the users are sophisticated and therefore the promotional

efforts are required to be more creative. The professionals engaged in the air

services bear the responsibility of blending the different components of promotion

in such a way that the task of increasing the business is simplified. Since a number

of airways and airlines have been facing problem of financial crunch, it is pertinent

that they make possible an optimal use of the different components of promotion.

PROMOTION MIX VARIABLES

Since domestic deregulation occurred in 1978, competition in the airline industry

has intensified and become more concentrated. The respective airline needs to

provide certain benefits that the other airlines do not. Promotion has become a big

aspect since the arrival of numerous private airlines. The way this industry has

attracted people to them has changed. Airline companies have struggled with

making new ways to market their products. Today airline advertising focuses on

price, rather than the pleasure of the flying experience. Companies use the radio,

newspapers, and billboards in big cities, tops of taxicabs and sides of buses to put

their ads on. Even coffee cups in restaurants are starting to be used for

advertisement.


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Promotion should be done keeping in mind the competitors product. This helps in

promoting own product/service with a message that has an edge over the others.

Kingfisher understands its competitors well and promotes their service accordingly.

Vijay Mallya's Kingfisher Airlines adopts an innovative marketing strategy to

snatch attention from Jet Airways' advertisement.

In the ad displayed on the hoarding above, Jet Airways say, "We've changed."

Kingfisher Airlines comes up with a cheeky billboard above Jet's hoarding that

says, "We made them change! This was a very innovative and smart move on

kingfishers part to promote their service thereby denoting that their own service is

so much better that Jet Airways had to change and improvise them to reach their

standards. This needs presence of mind on part of marketing and promotion heads.

Spice Jet, Indias most preferred low frills airline, has announced a unique offer

of 3,00,000 tickets at a special price of Rs 3/- per ticket. This special offer flags off

the third anniversary celebration of the airline. Booking for this special promotion,

was opened on May 9, 2008 and will continue till the tickets are sold out.

Tickets bought will be valid for travel from July 1 to September 21, 2008 on all

flights covering its 18 destinations. This offer is available only on SpiceJet - Low

Cost Indian Airlines, Book Indian Flight Tickets Online, Cheap Fares Air Travel in

India - SpiceJet offers Discount Airline Ticket Fares Online. In the last three years

Spice jet has flown over8.1 million people across all their destinations. They have

helped Spice jet gets over 10.3% market share. This special promotion is Spice jets

way of thanking them for their support.


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PROMOTIONAL MIX AND ADVERTISING

Advertising

As any other service, the air transportation service needs creative advertisements to

promote their business. This is the first component of the promotion mix, which is

based on professional excellence of the advertising agencies. In view of the rising

cost of inputs and increasing the impact of worldwide economic depression on the

air transportation, there is a need to make the advertisement budget optimistic Vis-

a- Vis optimal.

This is essential to regulate the multi-dimensional expenses found of unproductive

nature and instrumental in making the service expensive. The telecast media and the

print media are found important while promoting the air business.


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While advertising through the telecast media, budgetary constraints and budgetary

provisions should be considered. Also the quality and nature of target market and

level of expectations should be kept in mind. The advertising professionals need to

make the advertisement slogans campaigns and messages proactive to the

generation of business. Kingfisher is a good example for advertising its services.

They advertised kingfisher not merely into the business of transporting people from

point A to point B. They have created a new category of Aviation Hospitality Space

thus making service and hospitality their main focus. Their slogan is kingfisher

airlines- Fly the good times. This is how they are differentiating their product

from other airlines. The airlines also have to make sure that whatever the strategic

decisions they make to promote the business are in a position to establish an edge

over the promotional measures of the competitors. They are also required to assign

due weightage to the efforts made for the projection of a positive image. The Indian

Airlines as well as Air India have been facing the image problem but the

advertisement may be efficacious in transmitting the facts and removing the image

problem.

As mentioned earlier, Indian airlines started promoting its first class fully reclining

seats to as a tool to improve the image problem and attract more passengers in its

first class. It is essential that while advertising one has to keep in mind the image of

the country, the natural scenes, the tourist attractions, rich cultural heritage or so

which would energize the process of motivating the tourists. For example: Thai

Airways have air-hostess wearing colorful long and flowery dresses and greet by

joining hands and bowing to their passengers as a part of their culture. While


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advertising, it is impact generating that we select an opportune moment of flight, an

attractive scene of take-off, high attractiveness of personnel in general and the air

hostess in particular, the landscape of an attractive tourist center, wild life

sanctuaries, lake, park and so on. The air transportation services can also use the

broadcast media.

For example: In times of rising fuel prices and lower occupancy rates Jet Airways

has come out with a lavish ad featuring the most expensive brand ambassador of

time Shahrukh Khan. The Shahrukh Khan TVC, which broke on September 1, 2008

is the first of three campaigns Jet has planned (the ones on economy and premier

class will follow), and is running across most news channels and some specialized

travel channels. The ad marks the television debut of Jet Airways which had

previously relied heavily on the print medium. While competitor Kingfisher relies

on showcasing complete range of Consumer experience Jet is trying to highlight its

product superiority. Jet had come out with Boeing 777 last year, which has some

superior features and this ad is merely an aim to highlight those features besides

trying to latch on to the celebrity appeal of Shahrukh Khan.

Another example would be that of Indigo airlines that uses Internet and print media

as a visual medium to advertise itself. What is interesting is the fact that the ad is

not flashy and it just conveys simple facts.

An important source of visibility for Indigo is the internet where e-ticketing give it

a chance to come up with its offers.The launch and subsequent editorial patronage

and newspaper support that Indigo carved out for itself helped it set itself up as a

brand.


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back, the footrest that will pop up, life valets when your lady lands at the airport at

midnight and helping hands that lift her bag. The ad ends with the message Queen

of your heart deserves to fly like one ". The third in the series aims at the decision

maker himself. The ad aimed at male traveler as usual talks about the 'flying models

", the smile that tastes better than the ice-cream, spectacle cleaner and the air-

boutique. The ad ends with the message ' Every man's seat feels like his throne'.

With regard to the quality of campaign, it may miss some eyeballs because of not

being an eye catchy ad. But the message surely is smart. The basic premise in this

ad campaign is that Men are the decision makers with regard to this service. May be

a campaign aimed at lady executives may also come in the future.

On the promotional front, Kingfisher has signed up the latest diva of Bollywood,

Ms Deepika Padukone as the brand ambassador.

Sales Promotion

A component of promotion adopted for a particular period to touch the target and

withdraw the measures when the time is over is known as sales promotion. The tool

based on incentives is found instrumental in sensitizing the users. The travel agents

contribute a lot to the promotion of air transport business and therefore we need to

think in their favor on a priority basis. The tour operators also contribute to the

process and therefore need to think in their favor. The front- line-staff in the offices

of the airways and the receptionists working there also play the same role. This

makes it significant that they are given some incentives which are in the form of a

holiday trip to a particular place, concessional services to their children or spouse or

so. Also offering them with innovative gifts, which have not been offered by their


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competitors, can be given. The nature and type of incentives would depend on the

contributions of providers. If they make immense contributions, the incentives

would be in good quality and volume. There are incentives given called the

promotional incentives on the basis of the frequency of using the services.

For e.g: Through Jet Airways, return ticket passengers on metro flights (both

economy and business) can avail a discount at all Taj and ITC hotels in South India.

Also Sahara has a fanatical assortment of gifts being handed out (its Take Offer).

Braun Mixer grinders, CTVs, cameras, handy cams, mobile phones and even free

holiday packages are up for grabs as a part of their sales promotion campaign.

Also, theres something called marketing bonanzas. Some airlines give free tickets

to customer so as to make them aware of their services. These tickets or any other

gift voucher are given so as to attract a lot of people. This is a very interesting way

of catching the headlines of customers. Example Go Air was sending SMSs to any

number that they have won a free ticket from Mumbai to Goa or Delhi. Kingfisher

has also sent messages to people for free ticket.

Jet lite announced its Summer Special Bonanza promotion for online bookings

through its website. Even Air Deccan used this approach of giving gift voucher

worth Rs.250 and a saving of Rs.99 per t icket if booked thorugh Air Deccans site.

The offer was valid for bookings made between 22-May-08 and 10-Jun-08 and for

travel in the same period. There was also a 2 nights, 3 day holiday package to be

won in the offer period.

Jet Airways, India's premier international airline, has announced a special

promotional package for students flying to its destinations in the United States,


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Canada, United Kingdom, Europe or Asia. Jet Airways' special promotional

package is valid for outbound travel on or before October 31, 2008. Existing, as

well as new, students will receive a whole host of benefits including excess baggage

allowance and special fares. Students availing of this offer will be allowed to carry

an extra piece of baggage, with each piece not exceeding 23 kilos, on flights to the

US, Canada, UK & Europe; and an additional 10 kilos on flights to Asia (Shanghai,

Hong Kong, Singapore, Kuala Lumpur and Bangkok), on Jet Airways' online

destinations.

With Jet Airways special promotional package, students will also receive

exclusively designed Student Kits', in association with its partners. These may be

collected after the purchase of a ticket at any of Jet Airways' city sales offices

around India. Each kit contains a Matrix mobile connection with free talk-time

worth Rs.4000 in the US, UK, Singapore and Australia, ICICI Bank Travel Cards

for hassle free transactions across the world, a free Tata Indicom Wi-Fi Roam Card

enabling internet connectivity from over 50,000 hotspots in the US ,UK, Austria,

Czech Republic, Germany, Netherlands, Switzerland, France and Japan; Bajaj

Allianz Travel Insurance with special privileges and low premiums and VIP

vouchers worth Rs.500/- on purchase of VIP travel accessories.

Jet Airways also offers students an ergonomically-designed seat with hammock

style head rest and foot support, the airline also provides its Economy passengers a

personal reading light, on demand In-Flight Entertainment and access to over 200

hours of Hollywood and Bollywood movies, regional films, and television and short


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programmes. Thus Jet Airway plans to tap mass-students travelling abroad during

this period.

Personal Selling

The air transport organizations find personal selling which is the mix of promotion

mix helpful in increasing the business. An art to influence, stimulate, sensitize the

impulse buying is known as personal selling. The air transport-marketing

professionals are supposed to know about the behavioral profile of persons who act

as personal promoters. The travel agents, tour operators, transport operators, travel

guides, front-line staff on the booking counters, receptionists contribute

substantially to the process of promotion. If they stop selling, the offices of airways

would find it difficult to sell. This makes it clear that even the quality services fail

in attracting the users, if the channels are not co-operated. This makes it essential

that the airlines offer incentives to them so that they keep on moving the process of

stimulation.

To better understand the concept of personal selling, the airline in question needs to

follow the diagram given above. It explains all the things that the people involved in

the process of selling should know and do. Starting with the first point, customers

value for time, money and energy should be considered. Their comfort and

suitability should be addressed to. They should be provided service in such a way

that they get more than they expect to. It can be said that the customers should be

pampered.

For instance, giving chocolates on arrival and departure or welcome drinks or

discounts during off-season to name a few. The delivery of tickets should be made

on time this enhances the effect of personal selling.


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and also a positive image is built in the market by their loyal customers.

Indigo airline being a low-cost airline does not allocate much fund to advertising

hence, it entirely relies on word-of-mouth promotional tool to spread a word about

their services and thus communication is established and brand is recognized by the

people who are potential flyers rather than the entire country which is an expensive

affair.

Customer Segmentation

Most airlines use a very traditional segmentation strategy, dividing passengers into

first class, business travelers and economy travelers. But, nowadays most of the

airlines offer only two classes the business class and the economy class.

The customers subsequently also be divided as per the scope of the market .This is a

process of subdividing a market into distinct subsets of customers that behave in the

same way or have similar needs. Each subset may conceivably be chosen as a

market target to be reached with a distinct marketing strategy.

This includes preparing a method of identifying a group of consumers, within a

broader market, that has similar characteristics and needs. Segments can be

identified by examining geographical, demographic, psychographic, and behavioral

differences.

Segmentation of the aviation industry can be done under the following factors:

Geographic segmentation


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Geographic segmentation calls for dividing the market into different geographical

units such as nations, states, regions etc. the company can operate in one or few

areas or operate in all but pay little attention to local variations.

Most of the domestic airlines, their market segment consists of the customers whos

destination are major commercial cities like Mumbai, Delhi, Kolkatta etc. apart

from these the airlines also concentrate of tourists destinations like Goa, Agra etc.

The reason behind this is that such sectors have major traffic and are profitable

sectors. However Indian Airlines, being the National Carrier of the country, flys

even to the unprofitable sectors and concentrates on the segment of people flying to

such destinations.

Demographic segmentation

In demographic segmentation, the market is divided into groups on the basis of

variables such as age, family size, family life cycle, gender, income, occupation,

education, religion and social class. There are several reasons for the popularity of

demographic variables to distinguish customer groups. One reason is that consumer

needs, wants, usage rates and brand preferences are often associated with

demographic variables.

Airlines like Kingfisher targets the affluent class and the executives from multi

national companies, business community etc. However in the case of Air Deccan

and other low cost airlines, their segment is the population from the lower middle

class and the middle class. Thus it can be said that Kingfisher targets the classes

whereas the no frill airlines target the masses.


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Psychographic segmentation

Psychographics is the science of using psychology and demographics to better

understand consumers. In this segmentation customers are divided into different

groups on the basis of psychological, personality, lifestyles or values. People within

the same demographic groups can exhibit very different psychographic profiles.

The airline tries to work on the psychology of the people. Kingfisher concentrates

on the segment of people who do not mind paying a higher price, but would like to

have the best of comforts. Whereas the low cost airlines targets those customers,

who believe in value for money services and account for every rupee that they

spend.

Behavioral segmentation

In behavioral segmentation the customers are divided into groups on the basis of

their knowledge of, attitude towards, use of or response to a product or a service. It

refers to grouping consumers in terms of their relationship with the product, for

instance their usage rate, the purpose of use, their willingness and readiness to buy,

etc.

Segmentation of customers on the basis of airlines

Business Class

They are crucial for airlines' profitability. With less spare time and more cash in

their pockets, they agree to pay a premium price for a premium service. The

premium prices they pay provide wider and more comfortable seats, better choice of

meals and seats, luxurious lounges.


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If the airline is also providing the first class including the business class and the

economy class then it will provide additional services to the first class travelers in

addition to the other services. These services may include fully reclining seats,

workstation and TV surrounded by private dividers

Economy Class

They represent a totally different market. The most important consideration for

most of them is the price. The lower the airfare, the more people will fly the

respective airline. By and large, with the exception of wealthy travelers, this

segment will not pay extra for premium services and will agree to change several

planes during their trip if this option costs less than a direct flight.

PHYSICAL EVIDENCE

Physical Evidence refers to the environment in which the service is delivered and

where the service industry and customer interact. It is the ability and environment in

which the service is delivered. Both tangible goods that help to communicate and

perform the service, and the intangible experience of existing customers and the

ability of the business to relay that customer satisfaction to potential customers.

The aircraft by itself, the seating configuration meant to be comfortable and

spacious, the in-flight food, the staff dressing, baggage handling facility, colour of

the aircraft, in-flight entertainment, and ambience in the aircraft provide physical

evidence to the airline service. Nowadays, websites are another major part of the

physical evidence of airlines. A recently completed survey indicates that passengers


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rely on major airline websites, but would like the airlines to improve those sites to

better meet their specific needs and expectations.83 percent of the passengers

indicated they use airline websites to book flights. The survey also identified that

nearly half (48 percent) of respondents indicated they also book flights by calling

the airline directly, which may be a further indication that airline websites are not

sufficiently meeting the needs of small business travelers. Results show that 56

percent of respondents use travel websites to make flight arrangements, while 47

percent use a travel agent, compared to 83 percent using airlines' websites.

Hence, the websites should be updated regularly, should be less time consuming,

fast processing and easily operative.

COLOUR AND STAFF DRESSING

Increasing importance is given to the cabin crew and the ground staff uniform.

Designers are given contracts to design the uniform and the colors are such which

symbolizes the airlines motto. Colour is a visual identifier and thus attractive color

scheme catches the eye of the passenger. The staff dressing also helps to

differentiate one airline from other. Just by looking at the staff, the passenger

assumes the standard of the airlines. And these two are the first thing that a

passenger visualizes in an airline. However, another important reason for the use of

color is the expansion of a corporate culture. For example, Paramount Airways does

this very well. Their use of blue color emphasizes confidence, a character trait that

is important to the airline industry, especially in these times. Blue also demonstrates

vastness, opportunity, a sense of modernism and openness and honesty.


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KINGFISHER AIRLINES

The first thing that strikes about fly Kingfisher is the bold use of the color Red.

From the tail of the aircraft with the logo of the kingfisher bird and the word

Kingfisher painted boldly across the body of the aircraft in Red to the interior decor

and even the Crew uniformits Red, Red, Red all the way.

The in-flight crew called 'Flying Models' are clad in short Red skirts and a trendy

rolled up sleeve jacket in Red with a white shirt unlike the traditional blazers and

waist coats of other airlines. There are no male pursers on board either because KF

in-flight is all women.

AIR INDIA

Eminent Indian fashion designer Ritu Beri was roped in by national carrier Air

India to design the new uniform for its cabin crew and ground staff. Air India went

for a complete makeover to reflect its aspiration to be a powerful global entity.

The design of the new uniforms draw inspiration from the Sun Temple of Konark in

Orissa, yet maintains a modern outlook. The colour palette of the uniform is red,

orange, black and white, with red standing for strength and orange for cultural

roots.

The uniform for the female employees, both ground staff and cabin crew, included

sarees, tunics, scarves, jackets, coats, aprons and shoes, while there would be

specially designed ties for the male staff.

JET AIRWAYS

To position itself as a global airline, Jet Airways introduced fresh airline uniform

for the cabin crew designed by Italian designer Roberto Capucci. Their uniform


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reflects distinctive international look capturing spirit of new India and a meeting

point between East and West

IN FLIGHT MEALS

Airline passengers always have a certain standard of living and are very hygienic

about the food. However, in-flight meals have often been the butt of many jokes

over the years for their perceived lack of nutritional value. In airlines, the passenger

prefers variety in the meal offered, noticing the nutritional value. They also see as

to which caterers is serving the food; the way the food is served and handled. This

is one critical aspect where even the service recovery cant help to retain the

passenger because even the slightest of the mistake by the chef or by the cabin

crew, or compromising on the quality of food might prove very dangerous for the

passengers health. This, in turn, will spread a bad reputation of the company.

Hence, more and more airlines are in fact striving to make their meals more

attractive by packing as much goodness as possible into them.

KINGFISHER AIRLINES

In-flight Meals or Snacks are served as part of the fare on every flight and small

amenity kits distributed as well. Depending on the flight time, Kingfisher serves

Breakfast, Lunch, High Tea or Dinner on all flights. An individual menu card is

there on all Kingfisher flights. Kingfisher has a wide variety of multi-cuisine menu

to suit the varying tastes of the local sectors. Indian, Chinese, Continental and

World Cuisine is available on various sectors. Vegetarian or non-vegetarian food

can be chosen on the flight. Kingfisher First Class passengers can choose from a


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special menu and depending on their choice, a three course gourmet meal is served

on the flight.

It also provides an exclusive three course menu complete with a Kingfisher

sparkling welcome drink, signature dessert and freshly brewed coffee on board.

JET AIRWAYS

Jet airways have different menu options onboard for Premiere and Economy class

passengers.

The following specialty meal options are available on Jet Airways:

Strict Vegetarian (STVG) , Jain Meal (JNML) , Diabetic Meal (DBML), Low

Cholestrol (LFML), Low Sodium (LSML), Low Calorie (LCML), Low Protein

(LPML), Non Lactose Meal (NLML), No Salt (NSML)

This shows the passenger that Jet Airways do care about their health , thus creating

a goodwill among the passengers.

Kosher meals

Jet Airways also offers kosher meals (KSML) on the Mumbai-London-Mumbai and

Mumbai-Singapore-Mumbai sectors. Kosher Meal preference has to be notified 48

hours in advance. The Kosher Meal on Jet Airways flights consists of Western Non-

Vegetarian Meal of Fish, Potatoes and Vegetables. Kosher meals are served

onboard in a sealed pack. The cabin crew opens the pack in front of the passenger

and shows the Kosher certificate inside the box.

This assures the passenger that there is no malfunctioning or adulteration in the

meal provided , thus creating an impression in the mind that meals offered in Jet

Airways are of the best quality.


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AIR INDIA

Air India offers a wide variety in its in-flight meal menus, with a multi-cuisine

approach to cater to the predilections of the range of passengers. The variety of food

ranges from vegetarian meal, Moslem meal, Kosher meal, Low Sodium meals to

something simple as a fruit platter. The meals are hygienically packed from reputed

hotel chains like the Taj Group and Ambassador. Besides the regular normal

vegetarian and non-vegetarian meal, Indian Airlines also provides special meals

such as Jain meal, Diet meal, child meal etc.

IN FLIGHT ENTERTAINMENT

To make long flights more enjoyable, several major commercial airlines offer in-

flight entertainment and information systems to their passengers. This is

increasingly gaining popularity in the airlines sector because the passengers here,

unlike other modes of travel do not have any other source of entertainment. In

airlines, the interaction among passengers is also minimum. So, this is one of the

tangible tools of attracting or pulling the passengers towards an airline. Nowadays,

there are lots of innovations done in the in flight entertainment system and each

airlines is daily coming up with some or the other new technology or up gradation

for the passengers to have entertainment in the flight.

KINGFISHER AIRLINES

Kingfisher Airlines flights have individual LCD TV screens for each passenger.

They have a choice of 5 video channels of the trendy FUN TV, or listen to

Kingfisher Radio which offers a choice of 10 international radio channels. There is

a separate video channel for kids too to keep them busy on the flight. All passengers

are given complimentary headphones to enjoy the in-flight entertainment. For


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Kingfisher First Class passengers there is an extra wide 8.4 inch LCD swivel screen

fitted on every seat. Kingfisher First Class passengers can also enjoy noise

canceling headphones for a quiet and relaxed flight experience. Kingfisher First

Class passengers can also play video games on the LCD screen and even play

multiplayer games with their co-passengers.

Kingfisher Airlines has tied up with Dish TV to provide live in flight entertainment

to its passengers. This shows the weightage given in flight entertainment in the

airlines sector.

JET AIRWAYS

Jet Screen, Jet Airways' In-flight entertainment system is available on both business

and economy class on several Jet Airways flights. Jet Airways has also installed

state-of-the-art Panasonic 3000i Audio Video on Demand (AVOD) on every seat in

some of its flights. In addition to video channels, up to 8 audio entertainment

channels playing latest Bollywood songs, International Pop songs, Ghazals, Indian

and Western Classical, etc. are also available on Jet Screen.

SEATING

In airlines, passengers mostly stay glued to their seats. So, its very important to

have a comfortable seating in the flight. Specially , in long distance journey the

passenger has to spend a lot of time on the seats, thus the passenger should have full

satisfaction with the seats provided, as in, there should be enough leg space, there

shouldnt be any back problem, comfortable head space and more importantly , the

seats should be clean. The seating arrangement has to be spacious as different

individuals have different physique. Thus, the seats should be such wherein every


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passenger irrespective of his/ her size or shape should feel relaxed and comfortable

on the seats and should feel refreshed after reaching the destination.

Seating is not much of a problem in airlines like Kingfisher or Jet however low cost

airlines needs a lot of improvement because they usually have this problem of not

having enough leg space.

KINGFISHER AIRLINES

The seats are the plush Separate seats with a 48 inch pitch, 125 degree recline,

adjustable headrests and fully extendable footrests. The expansive legroom, the

fully lie flat bed in Kingfisher First and the widest seat pitch in the skies, allows the

passenger to stretch those tired muscles to the fullest. There are also laptop chargers

and mobile phone chargers in each seat.

JET AIRWAYS

Jet Airways is the first airline in the world to install new ergonomically designed

seats that offer more space, reduce pressure on the passengers body and has

adjustable "Hammock" head rest and a unique foot net which gives added support,

especially on long journeys.

NEWSPAPERS AND MAGAZINES

Newspapers and in flight magazines are provided to the passengers so that even in

the skies they can get information and update their knowledge.


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ENVIRONMENTAL SCAN

The following is an Environmental Scan of the Global as well as the Indian Airline

Sector/Industry. The scan identifies the trends impacting the demand in the Airline

Industry and the capability of the service providers to meet the expected demand.

While the current events are important, the focus of the scan is on the trends likely

to be important and effective in five to ten years from now. Apart from identifying

the demand trends, the scan also identifies the constraints and issues of the airline

industry, the key players, resources and the outcomes for the various service

providers.

In India, the service airline business is in trouble. Many airlines companies are

struggling to establish a business model which is viable to the business and

profitable. Most of the companies are running into losses quarter after quarter due

to the increasing costs etc. The recent high volume of passenger and freight flow

has not been able to return profits. The low-fare airlines business model has been a

success but has not been able to recover the increasing costs. The following factors

represent the business environments for the airlines companies.

PEST Analysis

Political Factors

Liberalization of Air Services

Many economies have now adopted a forward looking approach in matters of

policies for the liberalization of the civil aviation sector. Many economies are

opening up with regards to bilateral agreements and are attracting more foreign

passengers. Also, the air traffic between nations such as India-US, China-US, and


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many more strategic nations is on an increase. These liberalization policies are

surely a boost to the airlines sector since the demand goes up and also service

providers can take advantage such the fuel cost advantage (fuel prices in foreign

nations are lesser), Globalization, Mergers and Acquisition etc.

Modernization of Infrastructure

With the availability of word class, improved technology, the infrastructure has

been modernized to the maximum extent possible providing the best possible

experience to the travelers. Airports are getting modernized with the entry of

foreign investments. The best example is the airports in India, which have

undergone modernization and are as beautiful and well-managed as the Heathrow

airport. Airports in tourist places such Udaipur have also undergone beautification

in order to give the foreign passenger a global experience.

Investments, Resourcing and Outsourcing

The promotion of Foreign Direct Investments by liberalizing the investment

policies in the airline sector is relevant from the increasing number of people

traveling by air and this has lead to generation of investment opportunities in the

aviation sector. Foreign players are now not hesitating from investing in the airline

sector of India and other developing nations. Due to Globalization, the demand is

present in every part of the world be it in the U.S.A. or South Africa or Indonesia.

Also, with the entry of foreign players is leading to tremendous outsourcing which

is in a way reducing cost due to effective logistics decisions.

Economical Factors


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Transportation Gateways to World trade

The global Airline Industry has developed as such that the infrastructure is

facilitating World Trade, the export and import of goods, services and people. The

world trade trends and the economic conditions of different nations indeed have an

impact on the airline industry, the demand and the outcomes. Amongst the Asian

nations, Japan is facing stagnation because of which the foreign investments and the

demand for trade in goods and services have fallen. Whereas, in China and South

Korea, the import demands from various nations have increased. These economic

conditions are affecting the airline industries of these nations.

Price and Availability of Petroleum Products

Rising and the volatile world process of Petroleum Products represent trends that

have profound impact on the airline industry and the costs to the service provider.

Higher fuel costs affect the demand and the operating costs thus changing the travel

pattern. They also affect the infrastructure such as amenities like sky-walks etc.

higher petroleum prices stem for a mix of factors which are complex in nature such

as supply interruptions, geopolitics, change in usage patterns etc. The effects of

high petroleum prices on airlines can be seen clearly in the balance-sheets of

airlines such as the Kingfisher which has recorded losses in Quarters I and II along

with many other airlines which are unable to recover their rising costs.

Cost and Availability of Skilled Labor

The airline industry demands extreme skilled labor such as the pilots, ground staff

and the flight crew. The labor not only has to be skilled and available but has to be


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efficient because of the heterogeneous nature of the services provided. No airline

can recruit a trainee pilot and directly assign him to fly a Boeing-777 or an Airbus-

319 airplane carrying around 500 passengers. The labor-force has to be trained and

then assigned with tasks to perform after proper evaluation. Airlines have their own

subsidiary training centers which concentrate completely on the grooming and

training of the labor-force. The selection, recruitment, evaluation and training are

costly in nature and thus the companys costs goes up which get transferred to the

customer or the market thus affecting the market and the demand. Also, skilled

personnel in aviation occupations (particularly pilots) are being attracted to

overseas airlines and airports, creating training demand on top of projected

domestic labor requirements.

Also, a matter of concern to the airlines companies is the aging work-force which is

low on efficiency and productivity. Accommodating such an aging and un-

productive workforce in the organization structure is difficult.

Cost and Availability of Strategic Raw Material

Strategic raw material with respect to the airline industry is steel and cement which

are required for the manufacture of airplanes and other infrastructure required. The

prices of steel and cement are growing at an alarming rate. Thus, making these

materials available is a difficult and an expensive task resulting in the increase in

the costs to the service provider.

Mergers and Acquisition


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Strategic M & A between airline providers are another boosting factor to the airline

industry. The Star Alliance which was founded in 1997 with only 5 Airline

Companies now has 21 Airlines Companies. Also, the merger of Air India and

Indian Airlines is a good example of a Strategic merger. These mergers make the

airline companies stronger and efficient with respect to service providing. A better

co-ordination between different airline companies results in a joint effort in tackling

supply problems of fuel, aw material, labor etc. The merger of Air India and Indian

Airlines was a strategic merger to tackle the competition from the private players in

the Indian Aviation sector.

Changing industry structures and market

The global market is highly volatile and undergoes dynamic changes such as in the

demand, the supply, investments etc. This dynamic nature of the market affects not

one or two service provider but the entire sector. The changing business models

effect into a shift of demand which has to be catered to by the entire industry. For

example, the low-cost airline business model gave birth to an all-together different

class of flier, the best bargain available wherein bookings are made 3 months in

advance and that too in auctions etc. This led to a steep increase in demand and the

number of travelers almost doubled. The strain was felt by the service provider. The

low-cost airline model was not only forcing other airlines to lower their fairs and

fight the competition but also cater to the demand. Thus, the volatile nature of the

industry does take a toll on the airline service providers.


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Technological Factors

Improving Technology

With Globalization, technology is going through tremendous change with the

special emphasis by companies in Research and Development. Every service

provider is looking for a cost effective method, world class infrastructure, best of

the best service providing to passengers etc. technology is surely another boosting

factor the airline industry. Facilities such as E-ticketing, Kiosk Check-in, internet

connectivity in-flight etc. are due to the improving the technology. These facilities

are resulting into customer-delight.

Other Factors

Apart from the PEST Factors affecting the Business Environments of the Airline

Industry, there are many more factors which are affecting the demands and

determining the market trends for the sector. The following factors are a part of the

of the PEST factors but they have an all-round impact on the sector thus cannot be

allocated under a specific heading.

Following the Other Factors:

Tourism

Since the last ten years, world tourism has been struggling due to the frequent

terrorist attacks and natural calamities happening in key economic destinations. The

9/11 bombing of the twin towers in New York had the most destructive effect to the

tourism in the entire of the United States. Tourism in the U.S.A. has not yet

recovered. Because of the fall of tourism, the international travelling has reduced

thus directly affecting the airline industry. Nations now are concentrating on

promoting tourism in order to improve revenues in the related sectors, most


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excess workload. Pilots, flight crew getting stressed are a common issue now and

the stress is resulting into hazardous effects for the airline companies.


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SWOT ANALYSIS

STRENGTHS

Open Economies

The world is getting smaller. Thanks to the opening up of economies like India. The

developing nations have a lot of potential with regards to industrial growth.

Opening up policies regarding the airline services initiates MNCs to venture into

developing markets.

Efficient Marketing

Due to the heavy competition in the sector, airline companies are initiating on

dynamic marketing strategies. These strategies are encouraging people to fly who

were once scared of flying and also considered it an expensive mode of commuting.


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Networking

The Airline Sector on the Global as well as the National level is well-networked

and have efficient resources put into the networking infrastructure. Travelling from

any destination to another destination is possible with varied options available to

the traveler.

Modern Fleet

With average age of aircraft of about 5 yrs Indian Aviation sector have one of the

most modern Fleet of aircrafts

WEAKNESSES

Threat of New Entrants

At the first glance, the Airline sector looks very profitable and full of opportunities.

No doubt, there are a lot of opportunities but there are many candidates fighting for

the opportunities. The competition is so intense that no player can be profitable

along with being an effective player in the market. Capital intensive businesses like

an Airline Company cannot afford to forego iotas profits for market share.

Power of Suppliers

The airline supply business is mainly dominated by Boeing and Airbus. For this

reason, there is a sort of monopoly of the suppliers which takes a toll on the costs.

Also, a stagnant supply poses as a weakness to the increasing demand for airplanes.

Power of Buyers (The service providers)


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The bargaining power of buyers in the airline industry is quite low. Obviously, there

are high costs involved with switching airplanes, but in order to give the best to the

traveler, companies have no option but to buy at a high price.

Availability of Substitutes

Other modes of commuting, may it be people or cargo, are definitely cheaper as

compared to air-travel. As a result, the airlines sector often loses market due to

these substitute means. Especially, in the freight carriage sector, the business is

falling due to increasing prices of airline companies.

Competitive Rivalry

The airline sector is highly competitive. Highly competitive sectors fetch minimum

returns. Also, low returns in the airline business in the long run can pose as threat

because of the businesses being capital-intensive.

OPPORTUNITIES

Emerging Technologies

The latest technologies and the innovations in the technologies are improving

service delivery internal as well as external, minimizing costs, enabling mobile

computing for booking, check-ins etc. and enabling businesses for capitalization of

economies of scale and scope offered by government wide approaches.

Government Initiatives


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Businesses can be able to capitalize on resources constraints and achieve resource

cost efficiencies. Improvement of Inter-Government Partnership and Delegating of

work-load is possible.

Resourcing and Investments

Outsourcing and investments help the businesses to further support the

departmental objectives thus resulting in the achievement of the companys goal.

Other advantages are knowledge sharing / continuous learning, increased career

bridging opportunities, ability to identify and justify resource requirements, ability

to balance workloads, improved management of the costs etc.

THREATS

Poaching

The labor-force management is very costly with respect to the airlines sector. Also,

due to the liberalization of policies, foreign and private players often poach work-

force of competitors which leads to talent-drain and thus losses.

Inefficient Planning

Inefficient planning results into in-effective decisions which result into difficult

situations. Also, planning in the airline sector is also tough wherein one has to

consider every other element of service delivery and cost management.

Government Interference

Extensive Government Interference can affect the accountability of the organization

wherein the Government influences decision making and also planning. One

incident can be recalled of the Government Interference during the Privatization of

the Airline sector.


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TTOOWWSS AANNAALLYYSSIISS

STRENGTH- OPPORTUNITIES STRATEGIES

They have to focus on increasing tourism to expand their business bytaking advantage of their strong brand value and reputation in mind of

customer.

TO penetrate international market they need very much use of their qualityand continuous innovation.

TO reach more and more domestic market they have to make their routerationalization wider.

WEAKNESS- OPPORTUNITIE STRATEGIES

They need to take advantage of expanding tourism industry As still it isnot a profit making organization.

To diversify their competition they need to penetrate into internationalmarket and cover.


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STRENGTH- THREAT STRATEGIES

To fight competitors use their brand value and reputation. Use continuous innovation techniques to generate more promotionalstrategies.

WEAKNESS- THREAT STRATEGIES

Cut down their prices to lower the impact of economic slowdown. Try to minimizing their competition by differentiating more.


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Chapter 4

Conclusion


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ConclusionThough Aviation is a booming industry in India, rising fuel costs and stringent

competition could be the area of concern. The aviation sector in India has been

marked by fast-paced change in the past few years. Until liberalization, just the two

government-owned carriers flew to both domestic and foreign destinations. From

being a service that few could afford, the sector has now graduated to being a

fiercely competitive industry with the presence of a number of private and public

airlines and several consumer oriented offerings.

The sector being a growth sector is expected to do good over a long-t

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