•With a growth rate of 18 per cent per
annum, the Indian aviation industry is
one of the fastest growing aviation
in the world.
•India’s civil aviation sector has evolved over
time. On February 18, 1911 India‘s first
commercial airplane flew between Allahabad
•In 1912, India‘s first commercial
international flight operated by the erstwhile
Imperial Airways took place and connected
Delhi to Karachi and beyond. In 1932, J.R.D.
Tata flew an air mail service airplane, after
which Tata Airlines ventured into
scheduled air transport services.
In 1998, approximately 500 alliances
existed between airline companies.
Some of these alliances were to the
point of a merger (Market Share of
World Airlines Traffic, 2003). The
scene today is dominated by a few
multilateral alliances. Top three, Star,
Skyteam and Oneworld together
account for over 60% of the total
American Airlines, British Airways, Aer Lingus, Cathay Pacific, Finnair, Iberia, Lanchile, Quantas
United Airlines, Lufthansa, Air Canada, Air New Zeland, ANA, Asiana, Austrian, bmi British, midland, LOT Polish Airlines, Mexicana, SAS, Singapore,
Spanair, Thai Airways, Varig, US Airways, TAM
Air France, Delta Airlines, Aeromexico, Alitalia, CSA Czech Airlines, Korean Air, Northwest, Continental, KLM
Private sector is allowed to operate scheduled
and non-scheduled services.
Open skies policy for cargo services.
Min Capital Requirements & Fleet Size
Route Dispersal Guidelines
Foreign equity participation up to 49 per cent and
investment by Non-Indian Residents(NRIs), Overseas
Corporate Bodies (OCBs) up to 100% is allowed
•Benefits accruing to State carriers as they are the only domestic carriers allowed to fly
to the Gulf.
•Minimum Requirement of Domestic Flying for 5 Years & Min fleet of 20 aircrafts is a
must for seeking permission to fly internationally.
•Foreign airlines are not permitted to pick up equity. Foreign financial institutions and
other entities who seek to hold equity in the domestic air transport sector shall not
have foreign airlines as their share holders.
The aviation industry in India, especially
with regard to passenger airlines, follows a
strictly oligopoly-type structure with the
It is an industry dominated by a small
number of large firms.
The firm sells either identical or
differentiated products (the only
differentiation here being in service quality
and frills offered).
The industry has significant barriers to
entry (which holds true both with respect to
regulations and huge capital investment
Indian passenger airlines market is
characterized by following:
• Few number of firms contributing to majority of the
• Products are differentiated in terms of service quality and
•Marginal Revenue = Marginal Cost (MR = MC).
•Firm is a price setter
•Long run Profit >=0
•Strategic dependent on individual rival firm’s behaviour.
Indian Aviation Market – A
Study of consumer demand in industry
•Potentially, India is a very large corporate and
luxury travel market.
•Potentially, it is also a very low-fare market.
•India also has largely blocked but significant
markets in the north in China.
•India, unlike other major travel hubs in
region, is an original market both for
originating and turnaround traffic.
•India is also a potential transit hub in more
than one direction.
Factors affecting consumers demand
Following factors make
the demand function of
Comfort with the brand
Role of Air transport in the Economy
Recent research by Oxford Economics reveals that the direct contribution of
aviation sector in India to its GDP is 0.5% for the year 2009. If the Catalytic
impact of Civil Aviation is included, the contribution to GDP is 1.5%. Total
number persons employed in Civil Aviation sector is estimated to be 1.5 Million
and if we include the catalytic impact then it is 10 million persons. Globally for
every $ 100 of output produced and every 100 jobs generated by air transport
in the economy trigger additional demand of approximately $325 worth of
output and 610 jobs in other industries.7 During the year 2010-11, air
transport carried 54 Million domestic passengers and 37 Million International
passengers besides transporting 1.7 Million Metric tonnes of domestic and
international cargo. Air transport is crucial for the distribution of high value to
weight products and also for goods that are to be transported speedily.
India is not unique in requiring significant ownership stakes by citizens or overseas
Indians in its air carriers. The European Union, Australia and United States also
have domestic ownership requirements. Some of the reasons stated for these
upper limits on foreign ownership include public orsecurity interests
• IndiGo is a private, low-cost
airline based in Gurgaon, India Since
commencing operations, it has
established itself as one of India's
leading airlines using its model of
efficient, low-cost operations and by
attracting customers with low fares.
IndiGo is India's largest carrier by
market share as on August 2012
• As of March 2012 it is the only airline in
India making profits The country’s
youngest airline has become its largest.
• According to the latest figures released
by the DGCA, IndiGo, with 27 per cent
market share in July this year, has edged
past Jet, which managed 26.6 per cent
• IndiGo has consistently maintained its image as a friendly, hip airline.
Everything starting from its logo to its banner advertisements tells us
something that makes us smile. The vehicles it uses to carry luggage
are labeled “Cargo”, in sync with the name “IndiGo”. The air-sickness
bag says “Get Well Soon”.
• Instead of an in-flight magazine, it has a shopping catalogue with
interesting IndiGo branded curios. The picture on the left shows a USB
drive with a disclaimer: “This item can cause jealousy”! IndiGo’s on-
your-face communication has effectively broken clutter and grabbed
the attention of all. In today’s turbulent airline industry this is perhaps
what has kept IndiGo soaring high.
• IndiGo has also very successfully positioned its cabin-crew profile by
associating a glamour quotient with it. Advertisements seeking new crew
members communicate the message that the crew are not merely plain air-
hostesses, but are as glamorous as supermodels. This creates an aspirational
value in the minds of job applicants. The “Miss IndiGo” badges sported by the
air-hostesses assure passengers time and again that the crew serving them is
– Dr. Vijay Mallya is the Chairman and CEO of
– Kingfisher launched its airline services in May
• Kingfisher Airlines is the first carrier in the country to offer
live in-flight entertainment.
• Kingfisher Airlines Ltd & Dish TV have joined hands to
provide live in-flight entertainment on Kingfisher aircraft .
• The service would enable airline’s customers to book air
travel ticket after securing ‘ngpay’ application on their GPRS-
enabled mobile handsets
• On the promotional front, Kingfisher has signed up the latest
diva of Bollywood Ms.Deepika Padukone as the Brand
Strong Brand value & Reputation in the minds of
Quality of the service.
First airline to have new fleet of airbuses.
High Ticket prices.
The expanding tourism Industry.
Untapped Air cargo market
Under penetrated Domestic Market
Fuel Price Hike.
Price and quantity are determined by the
interaction of demand and supply in the market.
However, given the large number of buyers, firms
can decide prices at which they will sell tickets.
Implements third-degree price discrimination. That
is, fare restrictions screen customers and segment
them by their sensitivity to price and potentially by
their demand uncertainty. For instance, Indian
Airlines apex fares (for booking one week or three
weeks in advance).
The low cost airlines follow this different pricing
strategy. Customers booking early with carriers
such as Air Deccan will normally find much lower
prices if they are prepared to commit themselves to
a flight by booking early, on the justification that
consumer’s demand for a particular flight becomes
more inelastic the nearer to the time of the service.
The term ‘‘revenue management’’ is commonly used to
describe most aspects of airlines’ pricing and seat-
inventory control decisions.
Formally, revenue management describes a process of
setting fares for each route (origin and destination pair)
and each set of restrictions (nonstop, time-of-day, day-of-
week, refundable, advance purchase, first class or coach,
and Saturday-night stay over) and limiting the number of
seats available at each fare.
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