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Final sumission

  1. 1. CHAPTER-1
  2. 2. CHAPTER-1RESEARCH METHODOLOGY1.1 RESEARCH OBJECTIVES The research carried out during the project had many objectives related to the servicequality of the Indian airline industry. Some of the objectives of the research carried outare listed below: • To study the concept of service quality and dimensions governing service quality. • To study the service quality of different service providers in the Indian aviation industry. • To measure the service quality with the help of the service quality dimensions for the service providers. • To compare the service quality of different service providers with Kingfisher airlines and to find the airline service provider with the best service quality. • To understand the knowledge gap or the gap between the management’s perception about the customer expectations and the customer expectations. • To measure the knowledge gap for the service providers of the Indian aviation industry.1.2 RESEARCH METHODOLOGY The research methodology gives an idea about the type of research design, thesampling techniques, the process of data collection and the instrument used for datacollection. Let us try to understand all the portions in detail. Page | 2
  3. 3. 1.3 RESEARCH DESIGN The research design in this project was descriptive research design. A descriptiveresearch design describes marketing characteristics or functions. Also it is qualitative innature. The project carried out involves measuring service quality with the help of servicequality dimensions which are the attributes for that service provider or the brand. Hencethe project includes describing marketing characteristics or functions and thus it is adescriptive research design.1.4 DATA COLLECTION The data collection in this project was through both the primary and secondarysources. The primary sources include the customers of the service provider who providedthe primary data. Textbooks, journals, internet websites and other magazines providedthe secondary data for the project. Hence both primary and secondary data were collectedduring the project.1.5 QUESTIONNAIREThe instrument used for the collection of the primary data was a structuredquestionnaire. The questionnaire is to be filled up by the customers of an airline serviceprovider. The questionnaire will have closed ended questions or multiple choicequestions. Page | 3
  4. 4. 1.6 SAMPLING TECHNIQUE AND SAMPLE SIZE The sampling technique used in this project was a non-probability sampling. A non-probability sampling relies on the personal judgment of the researcher rather than chanceto select samples. The sampling technique in a non-probability sampling was that of aconvenience sampling. Convenience sampling attempts to obtain a sample of convenientsamples. The selection of the samples is left primarily to the interviewer. Often therespondents are selected because they happen to be in the right place at the right time.The sample size was kept 200 for the project purpose.1.7 LIMITATIONSThe limitations of the research carried out for the project are as follows: • Only 4 service providers are taken into consideration while studying the service quality of the service providers and measuring and comparing them. Hence the whole industry was not covered. • Moreover only domestic airline services are taken into consideration because of the constraint of time and accessibility. • Sample size was 200. Hence it cannot be generalized to a larger population. Page | 4
  5. 5. CHAPTER-2 Page | 5
  6. 6. SERVICES2.1 WHAT IS A SERVICE? In economics and marketing, service is the non-material equivalent of a good. It isclaimed to be a process that creates benefits by facilitating a change in customers, achange in their physical possessions, or a change in their intangible assets. Serviceprovision has been defined as an economic activity that does not result in ownership, andthis is what differentiates it from providing physical goods. Service has certain characteristics which differentiates it from products or goods. Thefeatures or characteristics of services are as follows: Intangibility - Services are intangible in nature and this is the basic feature orcharacteristic of a service that differentiates it from the products or physical goods. Forexample, a student renders educational services cannot see or feel the knowledgeprovided by the instructor or the teacher. Simultaneity - Services are simultaneously produced and consumed. The productionof the service and the consumption of the service take place at the same time. Hence theservices have a characteristic of simultaneity. Perishability - Services are also perishable in nature which means that if not soldthen cannot be regained. Hence services cannot be stored. In case of an airplane seats nottaken up would remain empty during the entire flight. The service capacity of this flighthas perished and cannot be recouped. Services cannot be returned or resold. Page | 6
  7. 7. Inseparability - The services cannot be separated from the people providing theservices. The service can never be separated from the service provider. Hence servicesalso have the characteristics of inseparability. Heterogeneity - Services are heterogeneous because a service is modified for eachclient or each situation. The service delivered can never be the same if delivered again.Hence mass production of services is difficult. Both inputs and outputs to the processesinvolved providing services are highly variable, as are the relationships between theseprocesses, making it difficult to maintain consistent quality. Labour intensive - Services are labour intensive. Services usually involveconsiderable human activity, rather than a precisely determined process. Human resourcemanagement is important. The human factor is often the key success factor in serviceindustries. Hence these are the characteristics of services. There are many types of servicesavailable. The services can be classified on a particular appropriate basis. Let us try toclassify the service on the basis of industry and target effects. Page | 7
  8. 8. 2.2 TYPES OF SERVICES There are many types of services and to understand them better, they need to beclassified. The services are broadly classified on the following basis:CLASSIFICATION OF SERVICES BY TARGET EFFECTS • Services aimed at physical care such as health care, beauty salons, gymnasiums and restaurants • Services for intangible assets such as banking, legal consultation, accounting, brokering, insurance and securities services. • Services aimed at the mind of the customer such as education, broadcasting, information, entertainment and amusement. • Services aimed at physical possessions and tangible assets such as transport, repair and maintenance, cleaning and janitorial, laundry, gardening and veterinary services.CLASSIFICATION OF SERVICES BY INDUSTRYServices can be classified on the basis of the industry as shown in the table below: Page | 8
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  10. 10. 2.3 TANGIBILITY SPECTRUM The dichotomy between physical goods and intangible services should not be giventoo much credence. These are not discrete categories. Most business theorists see a continuum with pure service on one terminal point andpure commodity good on the other terminal point. This continuum is known as atangibility spectrum. For example, a restaurant provides a physical good (the food), but also providesservices in the form of ambience, the setting and clearing of the table, etc. And althoughsome utilities actually deliver physical goods — like water utilities which actually deliverwater — utilities are usually treated as services. Hence there is a pure service and there isa pure product on the other side of the tangibility spectrum. Figure 2.3 shows a tangibility spectrum. In the table we can see that salt is a pureproduct whereas teaching is a pure service. The fast food outlets can be considered as acombination of services and products as food provided is tangible and service provided interms of hospitality and service delivery is intangible. The airline services are not pure services and not pure products. Airline services aresomewhere in the middle of the tangibility spectrum as shown in the figure by fast foodoutlets. From this we can also conclude that services are different from the products andhence the marketing of services is also different from that of products. Lets try tounderstand the marketing mix for services which is different from the traditionalmarketing mix of products. Page | 10
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  12. 12. 2.4 EXPANDED MARKETING MIX All elements within the control of the firm that communicate the firms capabilitiesand image to customers or that influence customer satisfaction with the firms productsare as follows: 1. Product 2. Price 3. Place 4. Promotion The above given marketing is given for products and is also known as 4 Ps ofmarketing. In case of services the marketing mix is extended. Services have 7 Ps ofmarketing as follows: 1. Product 2. Price 3. Place 4. Promotion 5. People 6. Physical evidence 7. Process The additional Ps of marketing for services have an important role to play. Each ofthem has high level of significance in case of services. Lets us try to understand theexpanded marketing mix of services one after the other in detail with suitable examples. Page | 12
  13. 13. PEOPLE – The frontline or service-provider employee plays a key role in the servicesdelivery process since it is this category of employee that executes the service promise tothe customer. The important points about people are as follows: • People are the visible face of the service provider. They are the only ones who are seen and heard by the service recipient. For example, the receptionist at the tax office receives the returns at the counters. We are not allowed to go in any further or meet with the taxation officers. • In many cases, they are the only link between the service provider and the customer. • As frontline employees, who are in touch with the customers, they carry out the function of marketing of the service to the current and potential customers. • Customer satisfaction can be brought about these employees. Therefore, their satisfaction and motivation are of crucial interest to the service provider. • Only the employee’s promise enables the service provider to make the marketing promise to the customer. More importantly, the employees deliver this service promise to the customers. Thus, they are the crucial element around which the entire performance of the service provider revolves. Hence from this we can say that the service provider employee is the kingpin in theservices delivery. They are also known as internal customers. If a service organizationtakes good care of internal customers then only they can ultimately satisfy the externalcustomers. Hence we need to pay greater importance to their psychological and mentalmake up rather than mere qualifications. Page | 13
  14. 14. PHYSICAL EVIDENCE – the physical evidence of a service comes in different formsand guises. These include the physical aspects of the location of the service delivery suchas the design, functionality, and aesthetics of the place. The air flow, décor, temperature,etc. create the right atmosphere for the service delivery. The dress, uniform, appearance,and facial expressions of the frontline employees form a crucial part of this physicalevidence.DIFFERENT PHYSICAL EVIDENCE IN DIFFERENT SERVICE SETTINGSThere are essentially three types of encounters between the customer and the serviceprovider. These are: • The remote encounter: This type of encounter does not bring the two parties face to face but they may be in touch through letter, e-mail, mail order, delivery machines such as ATM, etc. Railway reservations through Internet, theatre booking, enquiries, etc. are some examples of this type of encounters. • The indirect personal encounter: This type of encounter occurs on telephone, on Internet, etc. The two parties are not in face to face contact but have some means of instantaneous communication. The examples are after sales service phone numbers and helplines for credit cards and bank accounts. • The direct personal encounter: This is the most common encounter for the services provision. The customer is in face to face contact with the service provider. The appearances of the employees, uniforms, settings, etc. all contribute to the perception of the service quality. Internal and external environment and tangible elements together constitute thephysical evidence of a service. Page | 14
  15. 15. PROCESS – This means procedures, mechanism and flow of activities by which aservice is acquired. Process decisions radically affect how a service is delivered tocustomers.For example, at a restaurant the process involves certain steps as following: 1. Providing information with the help of a menu 2. Consulting 3. Order taking 4. Delivering the service as per the order 5. Billing 6. Payment This is a basic and simple process at a restaurant. There can be many such processesfor different services. A process if changed can change the service delivery and hence canalso change the service quality perceived by the customers. Hence process is supposed tobe designed properly. It is also a very important mix of marketing in services. Page | 15
  16. 16. CHAPTER 3 Page | 16
  17. 17. SERVICE QUALITY3.1 CONCEPT Quality is defined as "Degree to which a set of inherent characteristic fulfilsrequirements" by ISO 9000. Quality is also defined as “Fitness for use” by Joseph M. Juran. Fitness in thisdefinition is defined by the customer. Quality can also be defined in simple words as “Conformance to Requirements” asdefined by Philip B. Crosby. The difficulty with this is that the requirements may notfully represent what the customer wants; Crosby treats this as a separate problem. Quality has particular parameters or dimensions of measurement. The quality of aproduct can be measured on the basis of certain parameters or dimensions as follows: 1. Performance 2. Features 3. Reliability 4. Conformance 5. Durability 6. Serviceability 7. Aesthetics 8. Perceived Image, reputation, brand name, etc. Page | 17
  18. 18. The dimensions of service quality are different from that of product quality. Thedeterminants of service quality are as follows: 1. Reliability 2. Assurance 3. Tangibles 4. Empathy 5. Responsiveness Initially there were 10 dimensions of service quality which were then reduced to only5 dimensions later. Assurance is a combination of competence, courtesy, credibility andsecurity. Empathy is a replacement of access, communication and understanding thecustomer. Hence the previous model of 10 dimensions is reduced to model of 5dimensions. Page | 18
  19. 19. 3.2 SERVICE QUALTIY DIMENSIONS The service quality dimensions are already listed earlier and now let us try tounderstand each and every dimension in detail.RELIABILITY – DELIVERING ON PROMISES Reliability is the ability to perform the promised services dependably and accurately.Normally this may be turned as “No excuses” service delivery. In its broadest sense,reliability means that the company delivers on its promises – promises about delivery,service provision, problem resolution and pricing. One company that effectivelycommunicates and delivers on the reliability dimension is Federal Express (FedEx).Federal Express a courier service organization has positioned itself as a reliableorganization in terms of handling and delivering the packages. All firms need to be aware of customer expectations of reliability. Firms that do notprovide the core service that customers think they are buying fail their customers in themost direct way.ASSURANCE – INSPIRING TRUST AND CONFIDENCE Assurance is defined as employees’ knowledge and courtesy and the ability of thefirm and its employees to inspire or convey trust and confidence. This dimension is likelyto be particularly important for services that the customer perceives as involving high riskand/or about which they feel uncertain about their ability to evaluate outcomes, forexample, banking, insurance, and brokerage, medical and legal service. Airlines also need to provide an assurance to the customers as flying is considered asa high risk as compared to railways or road transport. Also ships and cruises have toprovide an assurance to the customers. Page | 19
  20. 20. TANGIBILITY – REPRESENTING THE SERVICE PHYSICALLY Tangibles are defined as the appearance of physical facilities, equipment, personnel,and communication materials. All of these provide physical representations or images ofthe service that customers, particularly new customers, will use to evaluate quality. Whiletangibles are often used by service companies to enhance their image, provide continuity,and signal quality to customers, most companies combine tangibles with anotherdimension to create a service quality strategy for the firm.EMPATHY – TREATING CUSTOMERS AS INDIVIDUALS Empathy is defined as the caring, individualized attention the firm provides itscustomers. Empathy means treating the customers as individuals. The essence of empathyis conveying, through personalized or customized services, that customers are unique andspecial. Customers want to feel understood by and important to firms that provide serviceto them. Building relationships is the key factor and helps in building the service quality.RESPONSIVENESS – BEING WILLING TO HELPResponsiveness is the willingness to help customers and to provide prompt service. Thisdimension emphasizes attentiveness and promptness in dealing with customer requests,questions, complaints and problems. Responsiveness is communicated to customers bythe length of time they have to wait for assistance, answers to questions, or attention toproblems. Responsiveness also captures the notion of flexibility and ability to customizethe service to customer needs. Page | 20
  21. 21. 3.3 MOMENTS OF TRUTH Each and every point where a customer comes in contact with the serviceorganization is known as a service encounter. These points of contact create an image orimpression in the customers mind about the service provider. This service encounter isalso known as “moment of truth”. Such points of contact thus form moments of truth fora service provider. This concept was used and formulated by Jan Carlzon who was theCEO of SAS (Scandinavian Airline Services) during the period 1981-1993. For example, among the service encounters a hotel customer experiences are checkingin to the hotel, being taken to a room by a bell person, eating a restaurant meal, requestinga wake-up call, and checking out. In a hospital context, a study of patients revealed thatencounters with nursing staff were more important in predicting satisfaction than wereencounters with meal service or patient discharge personnel. Side from common keyencounters, there are some momentous encounters that like the proverbial “one badapple” simply ruin the rest and drive the customer away no matter how many or whattype of encounters have occurred in the past.The Disney Corporation estimates that each of its amusement park customer experiencesabout 74 service encounters and that a negative experience in any one of them can lead toa negative overall evaluation. Mistakes or problems that occur in early levels of theservice cascade are particularly critical, because a failure at one point results in greaterrisk for dissatisfaction at each ensuing level. Page | 21
  22. 22. 3.4 GAPS MODEL OF SERVICE QUALITY The service quality has five dimensions as explained earlier. Also the service qualityhas a gaps model in which we can understand different types of gaps in the servicequality which can be filled or closed so as to provide a zero defect service. Differentpeople have developed different model for the gaps in service quality. The mostextensively used and accepted gaps model of service quality is known as SERVQUAL. SERVQUAL model consists of five gaps in the service quality. One of the five gapsis customer gap and the other four gaps are service provider gaps. The central focus of thegaps model is the customer gap, the difference between customer expectations andperceptions. Hence this gap is also known as Expectations Gap. Firms need to close thisgap – between what customers expect and receive – in order to satisfy the customers andbuild long term relationships with them. The four provider gaps are as follows: 1. Gap 1 – Knowledge Gap 2. Gap 2 – Standards or Design Gap 3. Gap 3 – Delivery Gap 4. Gap 4 – Communications Gap Page | 22
  23. 23. CUSTOMER GAP OR EXPECTATIONS GAP The difference between customer expectations and customer perceptions creates thecustomer gap. While customer perceptions are subjective assessments of actual serviceexperiences, customer expectations are the standards of, or reference points for,performance against which service experiences are compared. Customers perceive thatthey get what they think they will and should. In practice, a customer gap typically exists.The Gap 5 shown in the following figure of service quality is customer gap orexpectations gapGAPS MODEL OF SERVICE QUALITY Page | 23
  24. 24. KNOWLEDGE GAP – NOT KNOWING WHAT CUSTOMERS EXPECT This gap is the difference between customer expectations of service and companyunderstanding of those expectations. Management perceptions about the customerexpectations can be different from the customer expectations. There can be many reasonsbehind this gap. Some of them are as follows: Provider may not interact directly withcustomers, be unwilling to ask about expectations, or be unprepared to address them. The key factors leading to this type of gap are as follows: • Inadequate marketing research orientation o Insufficient marketing research o Research not focused on service quality o Inadequate use of market research • Lack of upward communication o Lack of interaction between management and customers o Insufficient communication between contact employees and managers o Too many layers between contact personnel and top management • Insufficient relationship focus o Lack of market segmentation o Focus on transactions rather than relationships o Focus on new customers rather than relationship customers • Inadequate service recovery o Inevitable service failures o Not understanding the importance of service recovery Page | 24
  25. 25. STANDARDS/DESIGN GAP – NOT HAVING RIGHT STANDARDS/DESIGNThe difference between company understanding of customer expectations anddevelopment of customer driven service designs and standards is known as the standardsgap or the design gap. Customer driven standards are different from the conventionalperformance standards that most services companies establish in that they are based onpivotal customer requirements that are visible to and measured by customers.The key factors leading to this type of a gap are as follows: • Poor service design o Unsystematic new service development process o Vague, undefined service designs o Failure to connect service design to service positioning • Absence of customer defined standards o Lack of customer defined standards o Absence of process for setting service quality goals o Absence of process management to focus on customer requirements • Inappropriate physical evidence and servicescape o Inappropriate tangibles and physical setting Page | 25
  26. 26. DELIVERY GAP – NOT DELIVERING TO SERVICE STANDARDSThis type of gap is the difference between the service standards or the service design andthe service delivery. It is the discrepancy between development of customer drivenservice standards and actual service performance by company employees. Thus evenwhen standards accurately reflect customers’ expectations, if the company fails to providesupport for them – if it does not facilitate, encourage and require their achievement –standards do no good.The key factors leading to this type of gap are as follows: • Deficiencies in human resource policies o Ineffective recruitment o Poor employee-technology job fit o Inappropriate evaluation and compensation systems • Failure to match supply and demand o Inappropriate customer mix o Over reliance on price • Customers not fulfilling roles o Customer lack knowledge of their responsibilities o Customers negatively affect each other Page | 26
  27. 27. COMMUNICATIONS GAP – PROMISES DON’T MATCH PERFORMANCEThe difference between service delivery and the service provider’s externalcommunications is known as the communications gap. Promises made by a servicecompany through its media advertising, sales force, and other communications maypotentially raise customer expectations that serve as the standard against which customersassess service quality. The discrepancy between actual and promised service therefore hasan adverse effect on the customer gap.The key factors leading to this type of gap are as follows: • Lack of integrated services marketing communications o Not including interactive marketing in communications plan o Absence of strong internal marketing program • Ineffective management of customer expectations o Not adequately educating customers • Over promising o Over promising in advertising o Over promising in personal selling o Over promising through physical evidence cues • Inadequate horizontal communications o Insufficient communication between sales and operations Page | 27
  28. 28. CHAPTER 4 Page | 28
  29. 29. CHAPTER-4AIRLINE INDUSTRY IN INDIA4.1 INTRODUCTION Airlines vary from those with a single airplane carrying mail or cargo, through full-service international airlines operating many hundreds of airplanes. Airline services canbe categorized as being intercontinental, intracontinental, regional or domestic and maybe operated as scheduled services or charters. DELAG, Deutsche Luftschiffahrts-Aktiengesellschaft (German: acronym for"German Airship Transport Corporation") was the worlds first airline. It was founded onNovember 16, 1909 with government assistance, and operated airships manufactured byZeppelin Corporation. Its headquarters were in Frankfurt. Air India was founded as Tata Airlines in 1932, a division of Tata Sons Ltd. (nowTata Group) by J. R. D. Tata. On October 15, 1932 the founder, J. R. D. Tata flew asingle engined De Havilland Puss Moth registered VT-and carrying air mail (postal mailof Imperial Airways) from Karachis Drigh Road Aerodrome to Bombays Juhu Airstripvia Ahmedabad. The aircraft continued to Madras via Bellary piloted by Royal Air Forcepilot Neville Vincent . Following the end of World War II, regular commercial service was restored in Indiaand Tata Airlines became a public limited company on 29 July 1946 under the name AirIndia. The airline was set up under Air Corporations Act, 1953 with an initial capital ofRs.32 million and started operations on 1 August 1953. It was established after legislationcame into force to nationalize the entire airline industry in India. Page | 29
  30. 30. At the time of independence, the number of air transport companies, which wereoperating within and beyond the frontiers of the company, carrying both air cargo andpassengers, was nine. It was reduced to eight, with Orient Airways shifting to Pakistan.These airlines were: Tata Airlines, Indian National Airways, Air service of India, DeccanAirways, Ambica Airways, Bharat Airways and Mistry Airways. The Open-sky policy came in April 1990. The policy allowed air taxi- operators tooperate flights from any airport, both on a charter and a non charter basis and to decidetheir 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 increasedto 4.1 lakh in 1992, 29.2 lakh in 1993, 36 lakh in 1994 and 48.9 lakh in 1995. There has been a revolution in air travel in India in the last decade. Ever since thegovernment launched its open sky policy and allowed private players to enter the arenathere has been a sea change in the airline industry in India. Air travel has become cheaperand more affordable and the number of people traveling by air has gone up drastically.Consequently, Indian Airports too have changed for the better. Airports in India havebecome more swanky and passenger friendly. In the recent past Indian civil aviation sector has grown manifold. The rapid growthof Indian economy has resulted in a spillover effect on the airline industry in India.Several new players have entered the industry and many more are about to enter thearena. The arrival of cheap airline carriers in India has spiced up the whole affair.Suddenly the air travel is no more the monopoly of the rich and the mighty. Now it hasbecome a common man’s vehicle and revolutionized the way a common Indian travelerused to travel. Here is a brief preview of domestic airlines in India. This includes privateairlines as well as low cost airlines in India. A low-cost carrier or low-cost airline (also known as a no-frills or discount carrier /airline) is an airline that offers generally low fares in exchange for eliminating manytraditional passenger services. The first successful low-cost carrier was Pacific Southwest Page | 30
  31. 31. Airlines in the United States, which pioneered the concept when their first flight tookplace on May 6, 1949. Often, this credit has been incorrectly given to Southwest Airlineswhich began service in 1971 and has been profitable every year since 1973. Air Deccan, SpiceJet, GoAir, IndiGo airlines and paramount airways are some of thelow cost carriers in India. Jet airways, Kingfisher airlines and Air Sahara, Air India, andIndian are not considered as the low cost carriers. 4.2 AIRLINE INDUSTRY IN INDIA–PLAYERS The airline industry in India has a lot of private players as open-sky policy was givenby government in 1990. After this policy many foreign players entered the airlineindustry of India. Also government companies like Air India and Indian airlines were apart of the airline industry of India. The list of existing players in airline industry is asfollows: 1. Air India 2. Indian 3. Jet airways 4. SpiceJet 5. Air Deccan 6. Kingfisher airlines 7. Air Sahara 8. GoAir 9. IndiGo 10. Paramount airways 11. Jagson Airlines There are many low cost airlines which are going to enter the industry within a year or so. The list of those players which are waiting to take a wing in 2009/2010 is as follows: Page | 31
  32. 32. 1. Dev airlines 2. Omega Air 3. Mega airways 4. Magic Air 5. Indus 6. East West 7. Premier Star Air 8. MDLR airlines 4.3 AIRLINE INDUSTRY(INDIA)-CURRENT SCENARIO The airline industry in India today is facing a huge loss. According to an article inBusinessworld Jan’06, for every passenger flying today in India, airlines are losing on anaverage roughly $15 i.e. the gap between the revenue and costs; some airlines are losingthan others. At 32 million passengers expected to fly in 2008-09, that works out to $480million or Rs 2,200 crore. In September 2009, a total of 100,000 seats were available perday. By December that went to 120,000. Since April 2008, the industry has added 120aircraft. Airlines are buying planes like they were peanuts and adding capacity at afrenetic pace. Industry leader Jet Airways has clocked a loss of over Rs 100 crore in thefirst half. That Indian industry suffers from the ‘herd mentality’ is quite evident by the trends intelecommunications, information technology, BPO…the list is long. Airline has been nodifferent. Everyone worth his salt has jumped into it at the same time, so there is toomuch capacity. Traffic is growing but capacity is growing faster. So to break even,airlines have to achieve higher load factors than before. That means severe competitionand very low fares. Making matters a lot worse is the obsession with one or two routes.For example, Delhi-Mumbai has close to 44 flights operating one way Page | 32
  33. 33. 4.4 MARKET SHARE OF MAJOR PLAYERS(DOMESTIC) Source Page | 33
  34. 34. 4.5 OVERVIEW OF MAJOR PLAYERS4.5.1 INDIAN AIRLINESIndian Airline is an airline based in Mumbai, India, and focuses primarily on domesticroutes, along with several international services to neighbouring countries in Asia. IndianAirlines is state-owned, and is administered by the Ministry of Civil Aviation. It is one ofthe two flag carriers of India, the other being Air India.Though the company that owns and operates the airline continues to be named IndianAirlines Limited, on 7 December 2005, the airline was rebranded as Indian foradvertising purposes as a part of a program to revamp its image in preparation for aninitial public offering (IPO). The airline operates closely with Air India, Indias nationalcarrier. Alliance Air, a fully-owned subsidiary of Indian Airlines, was renamed Air IndiaRegional.In 2007, the Government of India announced that Indian Airlines would be merged intoAir India. As part of the merger process, a new company called the National AviationCompany of India Limited (NACIL) was established, into which both Air India (alongwith Air India Express) and Indian Airlines] (along with Alliance Air) will be merged.Once the merger is complete, the airline - which will be called Air India - will continue tobe headquartered in Mumbai and will have a fleet of over 130 aircraft.HistoryThe airline is set up under the Air Corporations Act, 1953 with an initial capital of Rs. 32million and started operations on 1 August 1953. It was established after legislation cameinto force to nationalise the entire airline industry in India. Two new national airlineswere to be formed along the same lines as happened in the United Kingdom with BritishOverseas Airways Corporation (BOAC) and British European Airways (BEA). Air India Page | 34
  35. 35. took over international routes and Indian Airlines Corporation (IAC) took over thedomestic and regional routes.Seven former freedom domestic airlines, Deccan Airways, Airways India, BharatAirways, Himalayan Aviation, Kalinga Airlines, Indian National Airways and AirServices of India, were merged to form the new domestic national carrier. Indian AirlinesCorporation inherited a fleet of 99 aircraft including 74 Douglas DC-3 Dakotas, 12Vickers Vikings, 3 Douglas DC-4s and various smaller types from the seven airlines thatmade it up.Vickers Viscounts were introduced in 1957 with Fokker F27 Friendships being deliveredfrom 1961. The 1960s also saw Hawker Siddeley HS 748s, manufactured in India byHindustan Aeronautics Limited, join the fleet.The jet age began for IAC with the introduction of the pure-jet Sud Aviation Caravelleairliner in 1964, followed by Boeing 737-200s in the early 1970s. April 1976 saw the firstthree Airbus A300 wide-body jets being introduced. The regional airline, Vayudoot,which had been established in 1981, was later reintegrated. Page | 35
  36. 36. Old orange logo of Indian Airlines until the mid-2000sBy 1990, Airbus A320-200s were introduced. The economic liberalisation processinitiated by the Government of India in the early 1990s ended Indian Airlines dominanceof Indias domestic air transport industry. Indian Airlines faced tough competition fromJet Airways, Air Sahara (now Jet Lite), East-West Airlines, Skyline NEPC, andModiLuft. As of 2005, Indian Airlines was the second largest airline in India after JetAirways while Air Sahara controlled 17% of the Indian aviation industry.East-West Airlines, Skyline NEPC and ModiLuft discontinued flight operations but theentry of several low-cost airlines in India, such as Air Deccan, SpiceJet, IndiGo(Interglobe Enterprise) and others like Kingfisher Airlines continue to give competition inits market, forcing Indian to cut down air-fares. However, as of 2006, Indian Airlines wasstill a profit making airline.Indian Airlines Limited is wholly owned by the Government of India through a holdingcompany and has 19,300 employees as of March 2007 Its annual turn-over, together withthat of its subsidiary Alliance Air, is well over Rs.4000 crores (around US$ 1 billion).Together with its subsidiary, Alliance Air, Indian Airlines carries a total of over 7.5million passengers annually.In December 2007, Air India was invited to join the Star Alliance. Since Indian Airlinesis in the midst of merging with Air India, it too will effectively be a member. Page | 36
  37. 37. 4.5.2 INDIGOINTRODUCTIONIndiGo is a private domestic low-cost airline based in Gurgaon, Haryana, India. Itoperates domestic services linking 20 destinations. Its main base is Delhis Indira GandhiInternational Airport. It was awarded the title of ‘Best Domestic Low Cost Carrier’ inIndia for 2008.5.3.2HistoryIndiGo Air is owned by an Indian named Mr Rahul Bhatia. The airline commencedoperations on 4 August 2006 with a service from Delhi to Imphal via Guwahati. Theairline is owned by InterGlobe Enterprises. It took delivery of its first Airbus A320aircraft on 28 July 2006 and received six aircraft during 2006. Nine more aircraft weredelivered in 2007 taking the total to 15. Former US Airways Executive Vice-President,Marketing and Planning Bruce Ashby joined IndiGo as their Chief Executive Officer.The airline has also acquired 3 parking spots in Indira Gandhi International Airport andChhatrapati Shivaji International Airport.IndiGo placed an order for 100 Airbus A320 family aircraft during the 2005 Paris AirShow. The total order was worth US $6 billion, one of the highest by any domestic carrierduring the show. The carrier has set a target of serving approximately 30 Indian cities by2010 with a fleet size of 40 A320 aircraft. The airline will receive all 100 A320 familyaircraft by 2016. The Indian Government has approved the airlines aircraft import plan"in principle". Page | 37
  38. 38. 4.5.3 JET AIRWAYSINTRODUCTIONJet Airways is an airline based in Mumbai, India. It is Indias second largest airline afterAir India and the market leader in domestic sector. It operates over 400 daily flights to 80destinations worldwide.In July 2008, Which? magazine ranked Jet Airways as the worlds best long-haul airlineafter Singapore Airlines.In a poll conducted by in September 2008,it was voted as the worlds seventh best airline overall. Jet Airways has also won a surveyaward for the quality of its catering from Which? magazine. Jet Airways also operatestwo low-cost airlines, namely JetLite (formerly Air Sahara) and Jet Airways Konnect.HistoryJet Airways was incorporated as an air taxi operator on 1 April 1992. It started Indiancommercial airline operations on 5 May 1993 with a fleet of four leased Boeing 737-300aircraft. In January 1994, a change in the law enabled Jet Airways to apply for scheduledairline status, which was granted on 4 January 1995. It began international operations toSri 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 Jet’s parentcompany, Tailwinds, and has 10,017 employees (at March 2007)Jet Airways Airbus A340-300E at London Heathrow Airport in 2005 with the 1993-2007liveryNaresh Goyal, who already owned Jetair (Private) Limited, which provided salesand marketing for foreign airlines in India, set up Jet Airways as a full-service scheduledairline to compete against state-owned Indian Airlines. Indian Airlines had enjoyed amonopoly in the domestic market between 1953, when all major Indian air transportproviders were nationalised under the Air Corporations Act (1953), and January 1994, Page | 38
  39. 39. when the Air Corporations Act was repealed, following which Jet Airways receivedscheduled airline status.Jet Airways Boeing 777-300ER at San Francisco International Airport in the airlines newlivery introduced in 2007Jet Airways and Air Sahara were the only private airlines tosurvive the Indian business downturn of the early 1990s. In January 2006, Jet Airwaysannounced that it would buy Air Sahara for US$500 million in an all-cash deal, making itthe biggest takeover in Indian aviation history. The resulting airline would have been thecountrys largest] but the deal fell through in June 2006.On 12 April 2007, Jet Airways agreed to buy out Air Sahara for 14.5 billion rupees(US$340 million). Air Sahara was renamed JetLite, and was marketed between a low-costcarrier and a full service airline. In August 2008, Jet Airways announced its plans tocompletely integrate JetLite into Jet Airways.In October 2008, Jet Airways laid off 1900 of its employees, resulting in the largest lay-off in the history of Indian aviation. However, later, the employees have been asked toreturn to work. Civil Aviation Minister Praful Patel said that the management reviewedits decision after he analyzed the decision with them.[9][10]In October 2008, Jet Airways and rival Kingfisher Airlines announced an alliance whichprimarily includes an agreement on code-sharing on both domestic and internationalflights, joint fuel management to reduce expenses, common ground handling, jointutilization of crew and sharing of similar frequent flier programs.[11]On 8 May 2009, Jet Airways launched another low-cost airline, Jet Airways Konnect.The new airline uses spare aircraft from Jet Airways routes that were discontinued due tolow passenger load factors. It also uses the same operator code as Jet Airways. Thedecision to launch a new brand instead of expanding the JetLite network was takenconsidering the regulatory delays involved in transferring aircraft from Jet Airways toJetLite, as the two have different operator codes.[12]Starting 8 September 2009, several Jet Airways pilots went on a simulated strike byreporting sick and failing to turn up for duty. The stated reason for the pilots action is that Page | 39
  40. 40. the pilots "are protesting against the dismissal of two senior pilots last month by theairline." [13] On 9 September 2009, the airline had to cancel over 160 domestic flights dueto this reason.[14]. The five-day strike by pilots ended on 13 September 2009. It led to acancellation of 800 flights where more than 400 of the companys pilots called in sick.According to Indian media reports, the strike cost the airline some $8m (£4.79m) a day.[15]ServicesCabin classesWith the arrival of its new Boeing 777-300ER and Airbus A330-200 aircraft, Jet Airwayshas introduced a new cabin with upgraded seats in all classes. The Boeing 777-300ERaircraft has three classes of service: First, Première (Business), and Economy. The AirbusA330-200 aircraft have two classes: Première and Economy. All Airbus A330-200 andBoeing 777-300ER aircraft have this feature. Boeing 737 aircraft are configureddifferently. Jet Airways has a three-star rated Business and First Class, and is in the toptwenty-five business classes reviewed by Skytrax. Economy class has been reviewed as athree-star product by Skytrax.Jet Airways First Class Suite on board a Boeing777-300ER.First ClassFirst class is available on all Boeing 777-300ER aircraft. All seats convert to a fully-flatbed, similar to Singapore Airlines first class seat but much smaller. It was the twenty-second airline in the world to have private suites All seats in First have a 21-inchwidescreen LCD monitor with audio-video on-demand systems (AVOD), in seat powersupply, and USB ports etc. Jet Airways is the first Indian airline to offer fully-enclosedsuites on its aircraft; each suite has a closable door, making for a private compartment.Skytrax consumer airline reviewers recently rated Jet Airways First Class as being 14thbest in the world. Page | 40
  41. 41. PremièrePremière (Business Class) on the Airbus A330-200 and Boeing 777-300ER internationalfleet has a fully-flat bed with AVOD entertainment. Seats are configured in a herringbonepattern (1-2-1 on the Boeing 777-300ER, and 1-1-1 on the Airbus A330-200), with eachseat offering direct access to the aisle. Première seats on the A330-200s leased from ILFCare configured differently in a 2-2-2 non-herringbone pattern. Each Première Seat has a15.4-inch flat screen LCD TV with AVOD. USB ports and in-seat laptop power areprovided.On the short-haul/domestic Boeing 737-700/800, all new aircraft are equipped withAVOD. All seats are standard recliner business-class seats with a few newer aircraft withelectronic recline and massager.Economy ClassEconomy class on Jets Airbus A330-200, Boeing 737-700/800 and Boeing 777-300ERaircraft has 32-inch seat pitch. Seats on the Boeing 777-300ER/Airbus A330-200 have a"hammock-style" net footrest. The cabin is configured in 3-3-3 abreast on the Boeing777-300ER, 2-4-2 on the Airbus A330-200, and 3-3 in the Boeing 737. Each Economyseat on the 777-300ER/A330-200 has a personal 10.6-inch touch screen LCD TV withAVOD.Some recently acquired Boeing 737-700/800 aircraft also feature Personal LCD screenswith AVOD.All three classes feature Mood lighting on the Airbus A330-200 and Boeing 777-300ER,with light schemes corresponding to the time of day and flight position. Page | 41
  42. 42. 4.5.4 SPICE JETINTRODUCTIONSpiceJet is a low-cost airline based in Delhi, India. It began service in May 2005 and by2008, it was Indias second-largest low-cost airline in terms of market share.SpiceJet was voted as the best low-cost airline in South Asia and Central Asia region bySkytrax in 2007. Rising fuel costs and increasing competition resulted in SpiceJet postinga loss in the first quarter of 2008-09. In August 2008, SpiceJet announced plans to raiseUS$100 million through foreign investment. HistorySpiceJet was earlier known as jadoo airlines , a reincarnation of ModiLuft. It is promotedby Ajay Singh and the Kansagra family.SpiceJet marked its entry in service with Rs. 99 fares for the first 99 days, with 9,000seats available at this rate.This deal was followed it up with a Rs. 999 promotional scheme on select routes. Theirmarketing theme "offering low everyday spicy fares and great guest services to priceconscious travelers. Their aim is to compete with the Indian Railways passengerstravelling in air conditioned coaches.On 15 July 2008 Billionaire Wilbur Ross suggested he would invest $80 million (aboutRs 345 crore) in the low cost airline. The board of directors of SpiceJet accepted an offerin-principle from the US-based PE firm that would make available about Rs 345 crore toSpiceJet, a joint statement issued by SpiceJet and WL Ross & Co.Spicejet names their airlines as the Modi family owns the group which is called the SpiceGroup and also have GSM mobile services in India called Spice Telecom Page | 42
  43. 43. 4.6 Fiscal Issues in Aviation IndustryAirlines are an important part of the Indian economy. Apart from contributingconsiderably to the national exchequer and providing significant employmentopportunities, a whole host of industry sectors – from tourism to hospitality.The high operating-cost environment in India, coupled with the competitive nature of theAirline business, has resulted in a continued strain on the health of the airlines in India.Fiscal Issues: • Rationalizing ATF Prices to International Benchmarks • Withholding tax on leased aircraft • Fringe Benefit Tax • Service Tax • Sales Tax • Cenvat Credit on ATF • Hedging of Aviation Turbine Fuel (ATF) Page | 43
  44. 44. ATFFuel currently accounts for close to 40% of the total operating costs for airlines in India.The estimated annual fuel bill for the industry is around USD 1.7 billion, based onSeptember 2006 rates. There is also a tremendous wastage of fuel in the air & at thetarmac, due to traffic congestion in Delhi and Mumbai that the airlines have to bear.Current ATF prices in India (Dec 2009)Domestic Flights Rs. 39,000 / kilolitreFollowing the dismantling of the ‘Administered Price Mechanism’ (APM) effective April1, 2001, the prices of ATF in India are based on the “International Import Parity Prices”,and directly linked to the benchmark of Platt’s publication of FOB Arabian Gulf ATFprices (AG); and do not relate to the actual cost of producing ATF in India. ATF pricesfor domestic operations also include Freight charges from Gulf to India, Customs Duty of10%, domestic transportation and other charges, Excise Duty of 8.16% (including cess).Even though the ATF supplied at Indian airports (both for domestic and internationaloperations) is not imported into India but is the product of crude refined in Indianrefineries from imported crude, the 10% Customs Duty is taken into account in fixing . Page | 44
  45. 45. Withholding tax on leased aircraftSection 10(15A) of IT Act of 1961 provides exemption from payment of withholding taxon lease rental incomes on aircraft and engines earned by a non-resident Lessor from anIndian company, subject to respective agreements being approved by the IndianGovernment. This exemption is currently valid only for lease agreements which havebeen signed prior to 31 March, 2007. The non-availability of this exemption subsequentto March 2007 will significantly increase fleet acquisition costs of Indian carriers,particularly in a market where demand for aircraft is greater than supply.The aircraft leasing finance companies have a gross up clause in their agreementswhereby the WHT is paid not by the lessor (lease company), but by the lessee (IndianAirline). The vast majority of countries too, impose no withholding tax on lease rentals.The few countries that do impose a WHT, have allowed planning and structuralalternatives to minimize the taxes, such as leasing the aircraft through our existing foreignsubsidiaries. Previously, Australia and Japan had withholding tax laws, but those.The leasing route is an established industry practice for airlines globally. Majorinternational leasing companies indicate that the vast majority of countries do not imposewithholding taxes on lease rentals payable. In all cases, the lessors require the leasingcompanies to assume the liabilities for any withholding taxes imposed as also of allindirect taxes applicable such as value added and property taxes. All aircraft and enginelease agreements thus inevitably contain clauses that require the lessee to gross-up thepayments.The non-availability of this exemption will significantly increase the fleet acquisitioncosts of Indian carriers, particularly in a market where demand for aircrafts is greater thanthe supply. Page | 45
  46. 46. Fringe Benefit TaxThis tax has also been made applicable on • free / concessional passages granted to airline executives and family • expenses for crew • hotel accommodation provided to passengers due to delays & cancellations; and • expenses on catering and inflight entertainment.None of these items can be considered as ‘fringe benefits’. There is thus a need to removethese from the coverage of FBT.Service TaxF& J Class tickets: This tax is not global practice, and therefore puts Indian carriers’potential as International network carriers in jeopardy as it increases the total amount apassenger connecting through India must pay as compared to connections via any otherpoint.Service tax on landing, airport & air navigation fees: India has imposed a 10.2% servicetax fee on landing, airport and air navigation fees. This greatly reduces thecompetitiveness of Indias air transport sector. Page | 46
  47. 47. Sales TaxThere is a disparity in the fuel sales tax between Turbo Props and Regional Jets (less than100 seaters). While Turbo Props enjoy substantially lower sales tax concessions,Regional Jets which are also deployed on the same routes are charged higher sales tax fortheir fuel needs. This is not helpful for the promotion and good health of India’s RegionalCarriers.Sales Tax / VAT are payable on all supplies meant for international voyages irrespectiveof the jurisdiction of its consumption. There is a need for extending the same benefit tothe airlines – as in the case of exporters where they are exempt from payment of anyExcise Duty / Sales Tax on their inputs – on all its procurements dedicated for itsinternational operations.Cenvat Credit on ATFNon-allowance of credit to the airlines on ATF is against the fundamental principle of theCENVAT provisions – resulting in the cascading effect of taxes. Page | 47
  48. 48. Hedging of Aviation Turbine Fuel (ATF)De-regulation of Commodity Hedging is proceeding on a slow path. Domestic airlineshave to procure ATF only through domestic refineries at International Prices. Since theyare not physically importing the commodity, the airlines are not permitted to hedge thecommodity.In a upward moving oil regime, the airlines have no option but to see their input costsexplode and whenever possible, pass on the same to passengers. A similar situation wasfaced by local refiners on hedging their refinery margins where the Government and RBIcame out with a notification permitting national oil companies to hedge their refinerymargins without having physical import/exports. At a time when there are concerns ofcrude continuing to be floored at USD 50-55 with no apparent ceiling in sight.An urgent re-look at the present oil/petro products hedging regulations is needed.Domestic airlines should be permitted to hedge their ATF price risk. Many global airlineshave used fuel hedging for effective risk management for themselves. Page | 48
  49. 49. CHAPTER 5 Page | 49
  50. 50. CHAPTER-5KINGFISHER AIRLINESKingfisher Airlines Limited is a major Indian airline. Kingfisher operates more than 400flights a day and has a network of 80 destinations, with regional and long-haulinternational services.[1]. Kingfisher Airlines, through one of its holding companiesUnited Breweries Group, has a 50 percent stake in low-cost carrier Kingfisher Red.Kingfisher Airlines is one of six airlines in the world to have a five-star rating fromSkytrax, along with Asiana Airlines, Malaysia Airlines, Qatar Airways, SingaporeAirlines and Cathay Pacific Airways. In May 2009, Kingfisher Airlines carried more thana million passengers, giving it the highest market share among airlines in India.Kingfisher has its registered office in the UB Tower in Bangalore and its head office inthe Kingfisher House in Mumbai.5.1History:Kingfisher Airlines registered office at the UB Group Towers in Bangalore, IndiaThe airline started operations on 9 May 2005, following the dry lease of four new AirbusA320-200 aircraft.[7] Its first flight was from Mumbai to Delhi. At the launch of theairline, Dr. Mallya said that he is "committed to achieving our ambition of makingKingfisher Airlines Indias largest private airline both in capacity and market share by2010."Kingfisher was the first Indian airline to have in-flight entertainment (IFE) systems onevery seat even on domestic flights. All passengers were given a "welcome kit"consisting goodies such as a pen, facial tissue and headphones to use with the IFE system. Page | 50
  51. 51. On 14 July 2008, Kingfisher unveiled its first ever Wide-body aircraft, a AirbusA330-200 (registered VT-VJL) at the 46th Farnborough Airshow held in July 2008.On 3 September 2008, Kingfisher started its international operations by connectingBangalore with London. On 15 September 2009 the London service was withdrawn.On 23 February 2010 Kingfisher announced that it would be joining the Oneworld airlinealliance by 2011 subject to regulatory approval5.2 Cabin classes:DomesticKingfisher FirstThe domestic Kingfisher First seats have a 48 inch seat pitch and a 125 degree seatrecline. There are laptop and mobile phone chargers on every seat. Passengers can availof the latest international newspapers and magazines. There is also a steam ironingservice on board Kingfisher First cabins. Every seat is equipped with a personalized IFEsystem with AVOD which offers a wide range of Hollywood and Bollywood movies,English and Hindi TV programmes, 16 live TV channels and 10 channels of KingfisherRadio. Passengers also get BOSE noise cancellation headphones.Domestic Kingfisher First is only available on selected Airbus A320 family aircraft. Page | 51
  52. 52. Kingfisher ClassThe domestic Kingfisher Class has 32-34 inch seat pitch with footrests. Every seat isequipped with personal IFE systems with AVOD on-board the Airbus A320 familyaircraft. As in Kingfisher First, passengers can access the latest movies, English andHindi TV programmes, live TV and Kingfisher Radio.On-board the ATR 72-500s there are 17 colour LCD drop-down screens mounted alongwith loudspeakers for audio in the cabin overhead, a head-end unit to handle CDs andDVDs, and a crew control panel. The screens measure 12.7 cm by 9.3 cm, weigh 0.2 kgeach and are spaced every two or three seat rows along both sides of the cabin.Economyclass meal on-board a Kingfisher Airlines domestic flightKingfisher RedAfter Kingfisher Airlines acquired Air Deccan, its name was changed to SimpliflyDeccan and subsequently to Kingfisher Red. Kingfisher Red is Kingfisher Airlines low-cost class on domestic routes. Passengers are given complimentary in-flight meals andbottled water. A special edition of Cini Blitz magazine is the only reading materialprovided.Kingfisher Airlines is the first airline in India to extend its King Club frequent flyerprogram to its low-cost carrier as well. Passengers can earn King Miles even when theyfly Kingfisher Red, which they can redeem for free tickets to travel on KingfisherAirlines or partner airlines. Page | 52
  53. 53. InternationalKingfisher FirstThe international Kingfisher First has full flat-bed seats with a 180 degree recline, with aseat pitch of 78 inches, and a seat width of 20-24.54 inches.[15] Passengers are givenMerino wool blankets, a Salvatore Ferragamo toiletry kit, a pyjama to change into, five-course meals and alcoholic beverages. Also available are in-seat massagers, chargers andUSB connectors.Every Kingfisher First seat has a 17 inch widescreen personal television with AVODtouchscreen controls and offers 357 hours of programming content spread over 36channels, including Hollywood and Bollywood movies along with 16 channels of liveTV, so passengers can watch their favorite TV programmes live. There is also acollection of interactive games, a jukebox with customisable playlists and KingfisherRadio. Passengers are given BOSE noise cancellation headphones.The service on board the Kingfisher First cabins includes a social area comprising a full-fledged bar staffed with a bartender, a break-out seating area just nearby fitted with twocouches and bar stools, a full-fledged chef on board the aircraft and any-time dining. Aturn-down service includes the conversion of the seat into a fully-flat bed and an air-hostess making the bed when the passenger is ready to sleep.Both Kingfisher First and Kingfisher classes feature mood lighting on the AirbusA330-200 with light schemes corresponding to the time of day and flight position. Page | 53
  54. 54. Kingfisher ClassThe international Kingfisher Class seats offer a seat pitch of 34 inches, a seat width of18 inches and a seat recline of 25 degrees (6 inches). Passengers get full lengthmodacrylic blankets, full size pillows and business class meals. There are in-seat chargersand USB connectors.Each Kingfisher Class seat has a 10.6 inch widescreen personal television with AVODtouchscreen controls. The IFE is similar to that of the international Kingfisher First class.In-flight entertainmentKingfishers IFE system is the Thales TopSeries i3000/i4000 on-board the Airbus A320family aircraft, and Thales TopSeries i5000 on-board the Airbus A330 family aircraftprovided by the France-based Thales Group.[16]Kingfisher LoungeKingfisher Lounges are offered to Kingfisher First passengers, along with King ClubSilver and King Club Gold members. Lounges are located in:India • Bangalore • Chennai • Delhi • Hyderabad • Mumbai Page | 54
  55. 55. King ClubThe Frequent-flyer program of Kingfisher Airlines is called the King Club in whichmembers earn King Miles everytime they fly with Kingfisher or its partner airlines,hotels, car rental, finance and lifestyle businesses. There are four levels in the scheme:King Club Base, Red, Silver and Gold levels. Members can redeem points for over anumber of schemes. Gold and Silver members enjoy access to the Kingfisher Lounge,priority check-in, excess baggage allowance, bonus miles, and 2 Kingfisher First upgradevouchers for Gold membership. Page | 55
  56. 56. Chapter 6 Page | 56
  57. 57. Findings and analysisQ. How Often Do You Fly?This question gave an idea about the frequency of traveling through airlines for aparticular respondent. This question gives an idea whether the respondents have a pastexperience or are new to the services or are frequent users of airline services. 20% of therespondents used the airline service once a year which is the lowest in the category.12.5% of the respondents used the airlines for traveling once in every 6 months. 15% ofthe respondents used the airlines for traveling once in a month. 52.5% of the respondentsused the airline services frequently. FREQUENCY OF TRAVELING THROUGH AIRLINES Page | 57
  58. 58. DEMOGRAPHICS OF THE RESPONDENTSThe questions related to the demographics of the respondents are explained in thissection. The questions were related to the age, gender, occupation and income. All theimportant factors of demographics are covered in these characteristics. The demographicsof the respondents are shown in the following charts which give us an idea about thecustomer profile or the respondents’ profile.Age group of Respondents:14% of respondents fall between the age group of 0-18 years, 26% of respondent’s fallsbetween the age of 18-23 years, 30% of respondent’s falls between the age group of31-45 years, 20% of respondents falls between the age group of 45-60 years, 10% ofrespondents falls between the age group above 60 years. Page | 58
  59. 59. GENDER: INCOMEIncome level of people varies from 0-2 lakhs to 10 lakhs and above where maximumrespondents falls between the income level of 2-5 lakhs where as there are almost equalnumber of respondents from 0-2 lakhs , 5-10 lakhs and 10 lakhs and above.The remaining questions in the questionnaire were related to the service qualitydimensions which are taken together for a single service provider. Then the total servicequality of all the Service providers is compared. Also the service quality dimensions arefound for individual service providers. Page | 59
  60. 60. As there were certain constraints in carrying out the project only 4 service providers weretaken into consideration for calculating the service quality. The service providers takeninto consideration during the project are as follows: 1. SpiceJet 2. Jet Airways 3. Indian Airlines 4. Kingfisher AirlinesFor all the service providers mentioned above every service dimension was calculatedand a total score for service quality is measured. This total score of all the serviceproviders is compared and then the service provider with the best service quality is found.Now the data for the service providers for the service quality dimensions are analyzedand the results are given in the next section. The section gives the details about theservice quality dimensions in individual service provider. Then a comparison of the totalscore of service quality is carried out for all the service providers which are explained inthe later portion of the analysis.Let us first try to measure the knowledge gap of all the service providers and then we canmeasure the dimensions of service quality and compare the overall service quality of allthe service providers. Page | 60
  61. 61. KNOWLEDGE GAPThis was the only gap which could have been calculated in the project as far as the gapsin service quality are concerned. The knowledge gap is the gap between themanagement’s perceptions about the customers’ expectations and the customers’expectations. Given below is a chart which gives an idea about the knowledge gapexisting in all the service providers taken into consideration.KNOWLEDGE GAP FOR ALL SERVICE PROVIDERS From this chart we can conclude the following: • Kingfisher has the least gap and hence it understands the customers’ expectations very well. It is the best service provider in terms of understanding the customers’ expectations. • Indian Airlines has the highest gap and hence it does not understand the customers’ expectations as compared to other service providers. Jet airways are the next best to Spice Jet in terms of knowledge gap. Page | 61
  62. 62. Service Quality Dimensions• To measure the Service Quality dimensions we have kept several parameters in the Questionnaire in which the respondents have to tick on likert scale ranging from excellent to bad. Then by measuring the mean of all parameters we found out the score of the Service Quality Dimension.• For Tangibility the parameters are Seat comfort, Cleanliness of cabin, Cleanliness of toilets, Newspapers/magazines, pillows/blankets, Quality of entertainment, Quality of beverages, handling of luggage, appearance and clothing of cabin crew.• For Responsiveness the parameters are punctuality of timing, politeness/courtesy, friendliness and language skills of cabin crew• For Reliability parameters are Staff provides service without making fumbles, responds quickly to problems, response happens at promised time.• For Assurance parameters are Cabin crew’s safety drill, courtesy of staff, efficiency of check-in staff, and service efficiency of cabin crew.• For Empathy parameters are individual attention to customers, flight timings convenient to customers, long term relationship with customers. Page | 62
  63. 63. Service Quality Dimensions 1) Tangibility T ang iblity 3.5 3 2.5 2 1.5 1 0.5 0 S pic ejet J et Indian A ilines K ingfis her • Analyzing the tangibility factor of each of the airlines it is very clear from the above graph that tangibility of kingfisher airlines compared to rest of the airlines is definitely high. • Kingfisher airlines is having such a significant increase in response towards tangibility compared with the other flights is due to many factors that are playing important role for such a shift in the above graph. • Comparing Tangibles such as seat comfort, Cleanliness of cabin, Cleanliness of toilets and many other factors such as availability of newspapers and magazines, Pillows and blankets etc. plays an most important role in shifting peoples response more towards kingfisher compared with other airlines. Page | 63
  64. 64. • Though Indian airlines is public sector undertaking airlines but then also as far as the question of tangibility is concern it was rated as second most preferable after kingfisher. Only the difference in response of kingfisher and Indian airlines was that there was comparatively less seat comfort in Indian airlines compared to kingfisher airlines.• Now talking about jet and spice jet they both were rated at lowest level by the respondents and comparing these two airlines there was almost equal grading to both of the airlines as far as tangibility is concern.• So from above graph it is clear that kingfisher has got more preference and positive response of people on tangibility criteria. Page | 64
  65. 65. 2) Responsiveness R es pons ivenes s 32.5 21.5 10.5 0 S pic ejet J et Indian A ilines K ingfis her• Now comparing Responsiveness of the above airlines, it was remarkable that kingfisher has majority of people rating it highest also in the factor of responsiveness followed by Indian airlines.• As kingfisher is five star rated airlines it is obvious thing that staff of kingfisher will be more responsive towards the facilities to be provided on time and also problems to be solve at time. But position of Indian airlines in minds of people holds second place in responsiveness criteria is remarkable.• Factors included in Responsiveness, such as friendliness, language skills, waiting time to check in and courtesy of check in staff played very important role for shifting the above graph in favor of kingfisher. Page | 65
  66. 66. • Now talking about jet and spice jet they both were rated at lowest level by the respondents and comparing these two airlines there was almost equal grading to both of the airlines as far as responsiveness is concern. Page | 66
  67. 67. 3) Assurance A s s uranc e 32.5 21.5 10.5 0 S pic ejet J et Indian A ilines K ingfis her • Analyzing the assurance factor, of each of the airlines it is very clear from the above graph that assurance of kingfisher airlines compared to rest of the airlines is definitely high. • Kingfisher airlines is having such a significant increase in response towards assurance compared with the other flights is due to many factors that are playing important role for such a shift in the above graph. • Comparing assurance factors such as seat politeness/courteous, service efficiency, efficiency of check in staff and safety of cabin crew drill plays an most important role in shifting peoples response more towards kingfisher compared with other airlines. Page | 67
  68. 68. • In case of assurance Indian airlines was rated as second most preferable after kingfisher. Only the difference in response of kingfisher and Indian airlines was that there was comparatively less service efficiency and efficiency of check in staff in Indian airlines compared to kingfisher airlines.• Now talking about jet and spice jet they both were rated at lowest level by the respondents and comparing these two airlines there was almost equal grading to both of the airlines as far as assurance is concern.• So from above graph it is clear that kingfisher has got more preference and positive response of people on assurance criteria. Page | 68
  69. 69. 4) Reliability R eliablity 3 2.5 2 1.5 1 0.5 0 S pic ejet J et Indian A ilines K ingfis her• While comparing reliability of all the above mentioned airlines the result was same as it was in the case of tangibility, assurance and responsiveness. It was kingfisher which was as most reliable airlines by most of the people from the sample.• Reliability of kingfisher compared with other three airlines is very high and comparing the other three airlines that is Spice jet, Jet airways and Indian Airlines its almost same in all the three airlines. Page | 69
  70. 70. • Reliability factors such as Service without fumbles, Quick response towards problem and Response towards problem in promised time plays very important role in gauging reliability factor of any of the airlines and kingfisher is able to provide the above mention services to the expectation of people this the reason of highest Reliability level of kingfisher by the respondents.• From the above graph it can be clearly interpreted that kingfisher compared with other three airlines is more reliable. Page | 70
  71. 71. 5) Empathy E mpathy 32.5 21.5 10.5 0 S pic ejet J et Indian A ilines K ingfis her • Empathy also seems to be in the favor of kingfisher, from the above graph it can be clearly interpreted that Empathy of kingfisher airlines compared to other airlines is defiantly very high followed by spice jet. • Empathy factors such as Individual attention, Convenience of flight timings and Long term relations affects response of the people up to an extent. Kingfisher is having highest level of empathy level in the minds of the people. Page | 71
  72. 72. • This time instead of Indian Airlines, Spice jet is following Kingfisher in this criteria so it can be interpreted that Empathy of spice jet is more then tangibility, reliability, assurance and responsiveness of itself.• An Indian airline is having lowest Empathy after Jet airway which is having second lowest Empathy level Page | 72
  73. 73. Service providers 1) Spice JetThe scores of the service quality dimensions of spice jet are given in the chart below.Here we have kept 1 as excellent and 5 as poor , Service quality dimension which showslower rating in graph means its better than one showing higher rating in graph.GRAPH FOR SERVQUAL DIMENSIONS FOR INDIAN AIRLINES Page | 73
  74. 74. • The scores in the above chart conclude the following. • Empathy has the lowest score in all the service quality dimensions so its better than rest of service quality dimensions. This shows that employees i.e. people are contributing more in the service quality. • Tangibility and responsiveness are having the high scores and hence the physical evidence is not good. • Moreover they are not much reliable in services and lack assurance as well. • This shows that the service provider is not able to provide reliable services or not able to inspire trust and confidence for the service. Page | 74
  75. 75. 2) JET AIRWAYSThe scores of the service quality dimensions for Jet Airways are given below in the formof a chart. Here we have kept 1 as excellent and 5 as poor , Service quality dimensionwhich shows lower rating in graph means its better than one showing higher rating ingraph. The chart can easily give idea about the conclusions.GRAPH FOR SERVQUAL DIMENSIONS FOR JET AIRWAYS Page | 75
  76. 76. • The scores in the above chart conclude the following: • The service quality dimension of Tangibility has the highest contribution in the overall service quality. • Reliability and Empathy dimensions are close to each other in terms of the score. • Hence these 2 service quality dimensions are contributing equally in the overall service quality in case of Jet Airways. • This shows that physical evidence and other tangibles and intangibles are all contributing in an equal manner to achieve the overall service quality. • Responsiveness of the people is not up to the mark which staff must be given more training to serve to customers efficiently. Page | 76
  77. 77. 3) Indian AirlinesThe scores of the service quality dimensions for Indian Airlines are given below in theform of a chart. Here we have kept 1 as excellent and 5 as poor , Service qualitydimension which shows lower rating in graph means its better than one showing higherrating in graph. The chart can easily give idea about the conclusions.GRAPH FOR SERVQUAL DIMENSIONS FOR KINGFISHER AIRLINES Page | 77
  78. 78. • The scores in the above chart conclude the following: • Empathy as a service quality dimension is the Poor. Hence it means that the staff does not provide individual attention to customers. • Also the dimensions assurance and reliability are good are almost equal and they contribute equally to the overall service quality. • As the tangibility is poor so the physical evidence of the service provider is not upto mark. Page | 78
  79. 79. 4) Kingfisher AirlinesThe scores of the service quality dimensions for Kingfisher Airlines are given below inthe form of a chart. . Here we have kept 1 as excellent and 5 as poor , Service qualitydimension which shows lower rating in graph means its better than one showing higherrating in graph. The chart can easily give idea about the conclusions.GRAPH FOR SERVQUAL DIMENSIONS FOR SPICEJETThe scores in the chart above conclude the following: • Responsibility scores the poor in all the other dimensions of service quality. • The tangibility is excellent which means the physical evidence of the service provider is also good. Quality of entertainment provided by kingfisher is the best. • Empathy score is also not too good as compared to other service quality dimensions. Assurance and Reliability are good which means staff assures customers about their safety and service provider is very reliable Page | 79
  80. 80. Punctuality of Flights• Now talking about punctuality of flight timings it can be clearly interpreted from graph that Kingfisher is highest number of rating from the respondents towards excellent side, it is Indian airlines and the Spice jet who are having minimum number of responses in their favor.• Considering the fair side of performance is concern it is Jet airways which tops the chart from its responses being maximum on fair side.• Considering poor and bad performance then it is very clear from the graph that punctuality of Indian Airlines and Spice Jet is not up to the mark as expected of the travelers so they both have strong point to be think up on regarding its punctuality Page | 80
  81. 81. Seat comfort • As far as seat comfort is concern it can be clearly interpreted from graph that Kingfisher is highest number of rating from the respondents towards excellent side, it is Indian airlines and the Spice jet who are having minimum number of responses in their favor. • Considering the fair side of performance is concern it is Jet airways which tops the chart from its responses being maximum on fair side. • Considering poor and bad performance then it is very clear from the graph that seat comfort of Indian Airlines is not up to the mark as expected of the travelers so Indian Airlines have strong point to be think up on regarding its seat comfort. Page | 81
  82. 82. Quality of beverages • Quality of beverages plays most important role in deciding satisfaction level of travelers and beverages is only important factor that indicates strong tangibility of any of air line service provider. • It can be clearly interpreted from the above graph that kingfisher is having highest responses as excellent followed by Spice Jet. • Indian Airline and Jet Airways is having most of the responses as poor and bad so there is strong point to be think upon for these both airlines. Page | 82
  83. 83. Quality of Entertainment • As far as quality of entertainment is concern it can be clearly interpreted from graph that Kingfisher is highest number of rating from the respondents towards excellent side, it is Indian airlines and the Spice jet who are having minimum number of responses in their favor. • Considering the fair side of performance is concern it is Jet airways which tops the chart from its responses being maximum on fair side. • Considering poor and bad performance then it is very clear from the graph that quality of entertainment of Indian Airlines and Spice Jet is not up to the mark as expected of the travelers so Indian Airlines have strong point to be think up on regarding its quality of entertainment. Page | 83
  84. 84. Cross Tabulations: By which airlines do you travel the most Vs If price reduced then ready to switchover Cross tabulationBy which airlines do you travel the most * If price reduced then ready to switch over CrosstabulationCount If price reduced then ready to switchover Probably Probably Yes Yes Maybe No No TotalBy which airlines do Spice jet 20 15 8 5 2 50you travel the most Jet airways 15 21 8 2 4 50 Indian 18 14 11 5 2 50 AirlinesTotal 53 50 27 12 8 150 • From the above graph it can be clearly interpreted that people are having strong preference towards kingfisher but not able to travel in kingfisher due to its high ticket prices compared to other airlines in domestic as well as in international. Page | 84
  85. 85. • In the above graph it is shown that around 80% of Spice Jet user are ready to switch themselves to Kingfisher, If Kingfisher reduces its prices in comparison with rest of the players in the industry.• Now considering Jet Airways it also has most of the responses towards “yes” and “probably yes” options so it can be interpreted that Jet also has its target audience loyal to kingfisher but attracted to price factor of Jet Airways.• Now Indian Airlines has around 76% of people who are ready to shift themselves to Kingfisher if Kingfisher reduces its price up to an extent so its is remarkable thing that even public sector Airlines is not able to give stiff fight to Kingfisher as far as preferences of people are concern.• The respondents who are not ready to shift from there Airline service providers are minimum and can be counted on figures. So it is clear that Kingfisher has strong preference and loyalty of people. Page | 85
  86. 86. How often do you fly Vs Service provider maintains long term relationship Cross tabulationCount Service provider maintains long term relationship Strongly Strongly Agree Agree Neutral Dis Agree Disagree TotalHow often do Once in a year 2 10 11 8 9 40you fly Once in 60 9 4 7 5 25 months Once in a month 4 16 0 1 9 30 Frequently 39 44 6 7 9 105Total 45 79 21 23 32 200 • When asked respondents about maintenance of relationships from the side of Airline service provider it was expected and obvious that most of the respondents Page | 86
  87. 87. who were the frequent traveler of particular Airline service provider responded positively.• Respondents who travel once in a month also had positive view point towards maintenance of relationship by the service providers as they can be also counted under the head of frequent traveler.• Respondents who were not the frequent flyers that is they travel once in six months or once in a year they responded negatively towards the question asked to them, from them around 85% of people responded as disagree and strongly disagree.• So it can be clearly interpreted that frequent flayers enjoys more privilege on side of service provider compared no flayer who is not a frequent flayer. Page | 87
  88. 88. HYPOTHESIS H0: There is no association between Age and people ready to shift to Kingfisher airlines if Kingfisher reduces its rates. H1: There is association between Age and people ready shift to Kingfisher airlines if Kingfisher reduces its rates.If price reduced then ready to switchover * age group Cross tabulationCount Age group 0-18 18-30 31-45 45-60 60 and above TotalIf price reduced then Yes 12 27 10 0 5 54ready to switchover Probably Yes 0 15 25 5 0 45 Maybe 6 0 10 5 0 21 Probably No 0 0 0 15 0 15 No 0 0 0 5 10 15Total 18 42 45 30 15 150 Chi-Square Tests Asymp. Sig. Value df (2-sided) Pearson Chi-Square 184.281a 16 .000 Likelihood Ratio 178.571 16 .000 Linear-by-Linear 59.309 1 .000 Association N of Valid Cases 150 • From above output of SPSS window we can see that Significance value of pearson chi-Square is 0.000 which is less than 0.05 ,this means that H0 is rejected and H1 is accepted because pearsons Chi-square significance value is less than 0.05. It means shift to kingfisher is dependent on age group Page | 88
  89. 89. .• From the above graph we can see that people from age group between 0-18 and 18-30 have replied yes or probably yes when asked that are they ready to shift to kingfisher airlines if it reduces its rates.They said they are ready to shift to kingfisher airlines.• People between age group 31-45 said probably yes or may which means they may or may not shift to kingfisher airlines.• People between age group 45-60 and 60 & above said NO which means they are not ready to shift to kingfisher , they are loyal to their respectiver airlines. Page | 89