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Aviation industry Aviation industry Document Transcript

  • DEPARTMENT OF BUSINESS ADMINISTRATION UNIVERSITY OF LUCKNOW AIRLINE INDUSTRY SERVICE SECTOR MANAGEMENTSUBMITTED TO- SUBMITTED BY-
  • Mr.Sanjay Medhavi sir Gaurav Kardam MBA Marketing 3rd semester Page | 2
  • INDEX Table of Content Pg.No i. Introduction 3 ii. Importance 4iii. Presence Scenario 5iv. Classification & Types 6 v. Advantages 8 i. PEST Analysis: The Indian Airline Industry 10 ii. Five product levels 15 i. 4 P’s 17 i. Extended Marketing Mix 24 i. Segmentation 29 i. Role of Technology 31 i. 8 Quality Dimension 33 i. Conclusion ii. Future 35 36 Reference 37 INTRODUCTION Page | 3
  • Airline Industry in India is one of the fastest growing aviation industries in the world.With the liberalization of the Indian aviation sector, airline industry in India hasundergone a rapid transformation. From being primarily a government-owned industry,the Indian airline industry is now dominated by privately owned full service airlines andlow cost carriers. Private airlines account for around 75% share of the domestic aviationmarket. Earlier air travel was a privilege only a few could afford, but today air travel hasbecome much cheaper and can be afforded by a large number of people.The origin of Indian civil aviation industry can be traced back to 1912, when the first airflight between Karachi and Delhi was started by the Indian State Air Services incollaboration with the UK based Imperial Airways. In 1932, JRD Tata founded TataAirline, the first Indian airline.Airline organizations can be classified into a number of segments depending on thenature and degree of services they provide. Major Indian carriers are pressing their feeton the accelerator to reach an acme of service level by the year 2010 when their fleetstrength will meet 500 to 550. In the previous two years more than 135 aircrafts havebeen introduced to keep up with the increasing number of passenger traffic in Indianaerospace. A number of domestic airline groups have emerged in a reasonably short spanof time to make the market furiously competitive. Page | 4
  • IMPORTANCEGrowing tourism:Due to growth in tourism, there has been an increase in number of the international anddomestic passengers. The estimated growth of domestic passenger segment is at 50% perannum and growth for international passenger segment is 25%. Airlines play animportant role in international tourism. Developing airline services helps the nation tocash on tourism as more than 85% of the foreign tourist arrives by air.Improving Infrastructure:We all know that Indias air transport infrastructure is out-of-date. In fact the overallsituation is critical. A recent report by McKinsey suggests that half of Indias highlyqualified graduates are located in cities without international airports. Without massivechange, infrastructure will not be able to handle growth. We must move quickly now. Benefit all—the government, the airport, shippers, passengers, local communities andairlines Result in greater efficiency—lower costs Result in better service levelsGlobalization:Globalization has improved the lives of many in developing nations. Globalization in ofits self is the trading of goods and services of a local economy into an integrated globaleconomy. Technological advances have made this practice more feasible within the last50 years. The major milestones were the development of the internet and increasedtransportation technology. These two advances made the world coined "flat" and setthe stage for higher living standards. Page | 5
  • CLASSIFICATION & TYPESThe Indian airline sector can be broadly divided into the following main categories:1. Scheduled air transport service, which includes domestic and international airlines.2. Non-scheduled air transport service, which includes charter operators and air taxioperators.3. Air cargo service, which includes air transportation of cargo and mail.Scheduled air transport service: It is an air transport service undertaken between two ormore places and operated according to a published timetable. It includes:1. Domestic airlines, which provide scheduled flights within India and to selectinternational destinations. Air Deccan, Spice Jet, Kingfisher Airline and IndiGo are someof the domestic players in the industry.2. International airlines, which operate scheduled international air services to and fromIndia.Non-scheduled air transport service: It is an air transport service other than thescheduled one and may be on charter basis and/or non-scheduled basis. The operator isnot permitted to publish time schedule and issue tickets to passengers.Air cargo services: It is an air transportation of cargo and mail. It may be on scheduledor non-scheduled basis. These operations are to destinations within India. For operationoutside India, the operator has to take specific permission of Directorate General of CivilAviation demonstrating his capacity for conducting such an operation. Page | 6
  • At present, there are 2 scheduled private airlines (Jet Airways and Air Sahara), whichprovide regular domestic air services along with Indian Airlines. In addition there are 47non-scheduled operators providing air-taxi/non-scheduled air transport services.Apart from this, the players in airline industry can be categorized in three groups: Public players Private players Start up players.There are three public players: Air India, Indian Airlines and Alliance Air. The privateplayers include Jet Airways, Air Sahara, Kingfisher Airlines, Spice Jet, Air Deccan andmany more. The startup players are those planning to enter the markets. Some of themare Omega Air, Magic Air, Premier Star Air and MDLR Airlines Page | 7
  • ADVANTAGES1. Foreign equity allowed: Foreign equity up to 49 per cent and NRI (Non-Resident Indian) investment up to 100 per cent is permissible in domestic airlines without any government approval. However, the government policy bars foreign airlines from taking a stake in a domestic airline company.2. Low entry barriers: Nowadays, venture capital of $10 million or less is enough to launch an airline. Private airlines are known to hire foreign pilots, get expatriates or retired personnel from the Air Force or PSU airlines in senior management positions. Further, they outsource such functions as ground handling, check-in, reservation, aircraft maintenance, catering, training, revenue accounting, IT infrastructure, loyalty and programme management. Airlines are known to take on contract employees such as cabin crew, ticketing and check-in agents.3. Attraction of foreign shores: Jet and Sahara have gone international by starting operations, first to SAARC countries, and then to South-East Asia, the UK, and the US. After five years of domestic operations, many domestic airlines too will be entitled to fly overseas by using unutilised bilateral entitlements to Indian carriers.4. Rising income levels and demographic profile: Though Indias GDP (per capita) at $3,100 is still very low as compared to the developed country standards, India is shining, at least in metro cities and urban centres, where IT and BPO industries have made the young generation prosperous. Demographically, India has the highest percentage of people in age group of 20-50 among its 50 million strong middle class, with high earning potential. All this contributes for the boost in domestic air travel, particularly from a low base of 18 million passengers. Page | 8
  • 5. Untapped potential of Indias tourism: Currently India attracts 3.2 million tourists every year, while China gets 10 times the number. Tourist arrivals in India are expected to grow exponentially, especially due to the open sky policy between India and the SAARC countries and the increase in bilateral entitlements with European countries, and US.6. Glamor of the airlines: No industry other than film-making industry is as glamorous as the airlines. Airline tycoons from the last century, like J. R. D. Tata and Howard Hughes, and Sir Richard Branson and Dr. Vijaya Mallya today, have been idolized. Airlines have an aura of glamour around them, and high net worth individuals can always toy with the idea of owning an airline. All the above factors seem to have resulted in a "me too" rush to launch domestic airlines in India. Page | 9
  • PEST Analysis: The Indian Airline IndustryA PEST analysis is an analysis of the external macro-environment that affects all firms.P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors ofthe external macro-environment. Such external factors usually are beyond the firmscontrol and sometimes present themselves as threats. For this reason, some say that "pest"is an appropriate term for these factors. Let us look at the PEST analysis of the Indianaviation sector:Political Factors In India, one can never over-look the political factors which influence each andevery industry existing in the country. Like it or not, the political interference has to bepresent everywhere. Given below are a few of the political factors with respect to theairline industry:The airline industry is very susceptible to changes in the political environment as it has agreat bearing on the travel habits of its customers. An unstable political environmentcauses uncertainty in the minds of the air travellers, regarding travelling to a particularcountry.Overall India’s recent political environment has been largely unstable due to internationalevents & continued tension with Pakistan. The Gujarat riots & the government’s inabilityto control the situation have also led to an increase in the instability of the political arena.The most significant political event however has been September 11. The eventsoccurring on September had special significance for the airline industry since airplanes Page | 10
  • were involved. The immediate results were a huge drop in air traffic due to safety &security concerns of the people.International airlines are greatly affected by trade relations that their country has withothers. Unless governments of the two countries trade with each other, there could berestrictions of flying into particular area leading to a loss of potential air traffic (e.g.Pakistan & India)Another aspect is that in countries with high corruption levels like India, bribes have tobe paid for every permit & license required. Therefore constant liasoning with theminister & other government official is necessary. The state owned airlines suffer themaximum from this problem. These airlines have to make several special considerationswith respect to selection of routes, free seats to ministers, etc which a privately ownedairline need not do. The state owned airlines also suffers from archaic laws applying onlyto them such as the retirement age of the pursers & hostesses, the labour regulationswhich make the management less flexible in taking decision due to the presence of astrong union, & the heavy control &interference of the government. This affects thequality of the service delivery & therefore these airlines have to think of innovativeservice marketing ideas to circumvent their problems & compete with the privateoperators.Economic Factors Business cycles have a wide reaching impact on the airline industry. Duringrecession, airline is considered a luxury & therefore spending on air travel is cut whichleads to reduce prices. During prosperity phase people indulge themselves in travel &prices increase.After the September 11 incidents, the world economy plunged into global recession dueto the depressed sentiment of consumers. In India, even a company like Citibank was Page | 11
  • forced to cut costs to increase profits for which even the top level managers were givenfirst class railway tickets instead of plane tickets.The loss of income for airlines led to higher operational costs not only due to low demandbut also due to higher insurance costs, which increased after the WTC bombing. Thisprompted the industry to lay off employees, which further fuelled the recession asspending decreased due to the rise in unemployment.Even the SARS outbreak in the Far East was a major cause for slump in the airlineindustry. Even the Indian carriers like Air India was deeply affected as many flights werecancelled due to internal (employee relations) as well as external problems, which hasbeen discussed later.Social Factors The changing travel habits of people have very wide implications for the airlineindustry. In a country like India, there are people from varied income groups. The airlineshave to recognize these individuals and should serve them accordingly. Air India needs tofocus on their clientele which are mostly low income clients & their habits in order tokeep them satisfied. The destination, kind of food etc all has to be chosen carefully inaccordance with the tastes of their major clientele.Especially, since India is a land of extremes there are people from various religions andcastes and every individual travelling by the airline would expect customization to thegreatest possible extent. For e.g. A Jain would be satisfied with the service only if he isserved jain food and it should be kept in mind that the customers next to him are also Jainor at least vegetarian.Another good example would be the case of South West Airlines which occupies a solidposition in the minds of the US air travelers as a reliable and convenient, fun, low fare,and no frills airline. The major element of its success was the augmented marketing mix Page | 12
  • which it used very effectively. What South West did was it made the environment insidethe plane very consumer friendly. The crew neither has any uniform nor does it serve anylavish foods, which indirectly reduces the costs and makes the consumers feelcomfortable.Technological FactorsThe increasing use of the Internet has provided many opportunities to airlines. For e.g.Air Sahara has introduced a service, through the internet wherein the unoccupied seatsare auctioned one week prior to the departure.Air India also provides many internet based services to its customer such as online ticketbooking, updated flight information & handling of customer complaints. USTDA (UStrade & development association) is funding a feasibility study and workshops for theAirports Authority of India as part of a long-term effort to promote Indian aviationinfrastructure. The Authority is developing modern communication, navigation,surveillance, and air traffic management systems for Indias aviation sector that will helpthe country meet the expected growth and demand for air passenger and cargo serviceover the next decade.A proposal for restructuring the existing airports at Delhi, Mumbai, Chennai and Kolkatathrough long-term lease to make them world class is under consideration. This will helpin attracting investments in improving the infrastructure and services at these airports.Setting up of new international airports at Bangalore, Hyderabad and Goa with privatesector participation is also envisaged.A good example of the impact of technology would be that of AAI, wherein with the helpof technology it has converted its obsolete and unused hangars into profit centers. AAI isnow leasing these hangars to international airlines and is earning huge profits out of it. Page | 13
  • AAI has also tried to utilize space that was previously wasted installing a laminationmachine to laminate the luggage of travelers. This activity earns AAI a lot of revenue.These technological changes in the environment have an impact on Air India as well.Better airport infrastructure, means better handling of airplanes, which can help reducemaintenance cost. It also facilitates more flights to such destinations. Page | 14
  • FIVE PRODUCT LEVELSThe Core Service:The core service of the airlines industry is to transport goods and services to variousdestinations. As the needs of the people increased the entire system became moreorganized and formal. After this stage comes the various supplementary services.The Supplementary Services:The airline industry has many players they had a brand name like ‘Air India’,’ JetAirways’,’ British Airways’. All of them had some common services to offer likeconnecting flights, through check-in, tele check in, food on board, and complementarygifts etc.Different classes like economy class, business class were introduced. Air concessions aregiven to school students, old people etc. Singapore airlines were the first to introducesmall 8” television screen for every passenger. The freebies are actually win-win dealsbetween airlines and other services.Sahara, for example, offers its passengers a ‘business-plan’ on two-way economy classticket, which includes a night’s stay with breakfast, STD facility for 3 minutes andboardroom facility at the Park Hotel, New Delhi. To Delhi based fliers to Mumbai, itoffers a night’s 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 breakfastand late checkout. Page | 15
  • All these added service helps the customer to decide upon which airlines he wants totravel. As competition increased and the customers wanted more the next phase evolvedand that is the augmented service.The Augmented Service:This phase is where the customer’s expectations are met; the service providers keptworking on new methods to meet the ever-changing customers’ demands. The playersintroduced online booking, which was very convenient for the service users.British Airways business class has showers; it’s more spacious and comfortable. Saharaairlines offer its passengers six different types of cuisine like vegetarian, fat free, diabeticetc. They also have auction going on board. Virgin airlines have gambling on board, theyalso have body massage to offer to their passengers. Air Emirates has something calledcab service, they have customized pick up and drop cab service.This phase is the most crucial one; with increased competition service will become thefinal differentiation.Future Service:As mentioned above the customer needs keep changing, the future is unknown. Thecustomers may be looking in for more frequent inexpensive air travel, something like airtaxis, supersonic speed. This decreases the time thus reducing the cost. Page | 16
  • 4 P’sProductThe airline industry is a service that satisfies customer needs for travelling. In the airlineindustry the customers can be divided into two segments, business and leisure. While theairline industry started out as a luxury item, business travel has changed this industry to anecessity. As we further become a global economy and communication betweeninternational companies intensifies, travel needs continue to increase. The leisuretraveller has always had the need for the airline industry. Satisfying the customer needstoday involves competitive rates, convenient booking of flights and benefits with thoseflights.Some of the problems with this industry are personally experienced by the customers.The airlines have a difficult time being punctual and this has become the norm in theindustry, although some companies try to avoid it. The industry is highly susceptible tosituations that result in declines in air travel, such as political instability, regionalhostilities, recession, fuel price escalation, inflation, adverse weather conditions,consumer preferences, labour instability or regulatory oversight.Airlines are now in the commodity business as the public demands low-pricedtransportation. It has moved from elite to a common form of transportation. Todaystravellers know how to surf the web for bargains through a myriad of sites such as Orbitz,Expedia, Travelocity, Hotwire, and Cheaptickets. As a commodity, airlines cannotincrease prices to increase profits, so their only choice is to cut operating costs such aslabour costs.Amid the competition, airlines have refocused their attention on the customers. Theindustry still heavily targets frequent flyers, as members can earn miles through Page | 17
  • travelling, car rentals, hotels, and credit card use. On overseas flights, business classseats convert to real flat beds. Soon passengers will have internet access during flights.Airlines are also catering to the consumer by offering mostly organic menus, while othersare offering meals-to-go before boarding. For travellers pressed for time, many airlinesoffer fast check-in, online at home before leaving for the airport; or self-service check-inkiosks where passengers identify themselves with a credit card, print their own boardingpass, change their seat, and purchase meal coupons.PriceThe following are the pricing strategies:Premium Pricing:The airlines may set prices above the market price either to reflect the image of qualityor the unique status of the product. The product features are not shared by its competitorsor the company itself may enjoy a strong reputation that the brand image alone issufficient to merit a premium price.Value for Money Pricing:The intention here is to charge the average price for the product and emphasize that itrepresents excellent value for money at this price. This enables the airline to achievegood levels of profit on the basis of established reputation.Cheap Value Pricing: The objective here is to undercut the competition and price is used to trigger thepurchase immediately. Unit profits are low, but overall profits are achieved. Air India andIndian Airlines have slashed their prices to meet the competition of private airlines so thatthey can consolidate their position in the market. Page | 18
  • Airlines usually practice differential pricing. There are three classes: The First Class, TheExecutive or Business Class and The Economy Class. Fares for each class are differentsince the facilities provided and the comfort and luxury level is different in each class.Seasonal fares are also fixed, fares rise during the peak holiday times.Low-cost Pricing:With the advent of the low-cost airlines in the Indian aviation industry, a different low-cost flying concept has come up. Since these low-cost airlines are trying to woo thecustomers by providing air travel in exceptionally low prices, a price-band kind of pricinghas to be designed.In low-pricing strategies, the airlines provide very low prices for the flight tickets. Also,they prices are made cheaper by booking the tickets long before the flight date.APEX Fares:In this scheme, people are given very cheap rates only if tickets are booked at least beforethe specified time period. But the draw-back here is that if the booking is cancelled, asubstantial amount of money is not returned.PromotionIntegrated Marketing CommunicationA successful product or service means nothing unless the benefit of such a service can becommunicated clearly to the target market. An organisations promotional mix can consistof:  Advertising  Public Relations Page | 19
  •  Sales Promotion  Personal Selling  Direct Mail  Internet / E-commerceIn airline industry all the above methods are use for promotion purpose.The aims of promotion fall into three main categories: to inform, to remind, & topersuade. It will always be necessary to inform prospective consumers about newproducts & services, but other issue may also need this type of communication toconsumers; new uses, price changes, information to build consumer confidence & toreduce fears, full description of service offering, image building. Similarly consumersmay need to get reminded about all these types of issues, especially in the off-peakseason.It is vitally important to recognize that promotion, or marketing communicationsgenerally, may not always be aimed at potential consumer or end user of service. In manybusiness areas, it is to design promotions aimed at channel customers to complement enduser promotion. For e.g. Airlines will need to promote their services to tour operators aswell as end user. Page | 20
  • Distribution (Also known as the place variable in the marketing mix, or the 4 Ps) Page | 21
  • In Airlines, they utilise 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 reliable updated information. For these reason, I.T has been widely adopted such as on-line booking system.Channel structures vary somewhat by the nature of the service  Internet booking system  Telephone reservation system. Page | 22
  • Extended Marketing MixMarketers suggest that the unique requirements of selling services require the organization attend to three additional Ps. These are people, physical evidence and process.PeopleThe people section of the Marketing Mix is the most important section of the extendedMarketing Mix. It is broken up into three sections: Employees, Consumers and theCompany.Do we have enough employees to provide a good service? ; Do they have the necessarypersonal and professional skills? , Do they understand the brand-values? , Are theyenough motivated or too tired?Those are questions that airlines companies have to ask themselves, and which answersare going to have important consequences in the type of service provided.The analysis of the buyer behaviour is really interesting in this sector. Every individualhave different needs and expectations in this market, so segmentation and positioningwill be also fundamental. Furthermore, it’s normally an industry where, the user followsall the steps of the buyer behaviour in the selection and purchase of the service. Specialimportance have the Information Search by the customer (which is normally morecomplete than in other purchases) and beliefs and attitudes, which are the most importantchallenges of this analysis because normally have an important weight in the finaldecision of the customer. In a market as competitive as this one, a personal bad Page | 23
  • experience or just a non favourable belief or attitude can determine the users choiceforever. Thats why the Brand Image is also fundamental for this kind of Companies.For e.g. A Jain would be satisfied with the service only if he is served Jain food and itshould be kept in mind that the customers next to him are also Jain or at least vegetarian.Therefore, management faces a tremendous challenge in selecting and training all ofthese people to do their jobs well, and, perhaps even more important, in motivating themto care about doing their jobs well, and to make an extra effort to serve their customers.After all, these employees must believe in what they are doing and enjoy their workbefore they can, in turn, provide good service to customers.The "people" component of the service marketing mix also includes the management ofthe firms customer mix. Because services are often experienced at the providersfacilities, other customers who are being served there can also influence one’ssatisfaction with a service. For e.g. crying children in a nearby seat on an airplane or illmannered customer are all examples of unpleasant service conditions caused by a firmsother patrons.Physical EvidenceThe service is intangible because unlike a product it cant be experienced before it isdelivered. It is the ability and environment in which a service is delivered. Because it isintangible customers are at greater risk when deciding whether to use a service, so toreduce this risk, and improve success, potential customer are offered the chance to seewhat the service would be like with the use of testimonials, demonstrations etc. Physicallayout is not only relevant to its promotional materials, but also to the layout andstructure of the organization, and websites. Customers have far higher expectations andtherefore they select the particular service which they know will satisfy their want. Page | 24
  • Promotional materials and written correspondence provide tangible reassurance; they canbe incorporated into the firms marketing communications to help reduce customeranxiety about committing to the purchase. Service firms should design these items withextreme care, since they will play a major role in influencing a customers impression ofthe firm. In particular, all physical evidence must be designed to be consistent with the"personality" that the firm wishes to project in the marketplace.They can offer to the consumer more than a fly: additional services, and so they focustheir promotional efforts in communicating that to the potential user.ProcessThe customer service department of any airline company deal with a number of processesinvolved in making marketing effective in an organisation e.g. processes for handlingcustomer complaints, processes for identifying customer needs and requirements,processes for handling requirement etc.Example of Jet (Entire Process)Purchasing processAccording to epinions.com, travelers overall purchasing experiences with Jet have beenvery positive. People like how easy it is to choose from the different one-way faresonline to make up a round-trip reservation. Some travelers prefer to use Jettelephonereservation agents for purchasing their tickets. Overall, these reservation agents havebeen described as very courteous and helpful.Destination Choices Page | 25
  • We found many negative reviews on epinions.com when it came to Jet destinationofferings. Several people complained that Jet doesnt offer service (either non-stop orconnecting) to enough destinations. Some complained about Jet operating out of smaller,less convenient airports (like Poona and Nasik). People also complained that Jet onlyoffers limited flights per day to some destinations, making travel less convenient forsome.Overall Customer ServiceBased on our findings at epinions.com, Jet customer service is very highly regarded.Although some people have had unpleasant experiences, almost everyone who gave anopinion raved about the service from Jet flight attendants, gate agents,ticketing/reservation agents, and even the pilots.The 7 Ps - price, product, place, promotion, people, process and physical evidencecomprise the modern marketing mix that is particularly relevant in service industry, but isalso relevant to any form of business where meeting the needs of customers is givenpriority. Page | 26
  • SEGMENTATIONSegmentation involves finding out what kinds of consumers with different needs exist. Inthe airline industry, for example, some consumers look for only price, while others aremuch more concerned about other features and services provided. In general, it holds truethat "You cant be all things to all people," and experience has demonstrated that firmsthat specialize in meeting the needs of one group of consumers over another tend to bemore profitable.Generically, there are three approaches to marketing:In the undifferentiated strategy, all consumers are treated as the same, with firms notmaking any specific efforts to satisfy particular groups. This may work when the productis a standard one where one competitor really cant offer much that another one cant.Usually, this is the case only for commodities.In the concentrated strategy, one firm chooses to focus on one of several segments thatexist while leaving other segments to competitors. For example, Deccan Airlines focuseson price sensitive consumers who will forego meals and assigned seating for low prices.In contrast, most airlines follow the differentiated strategy: They offer high priced ticketsto those who are inflexible in that they cannot tell in advance when they need to fly andfind it impractical to stay over a Saturday. These travellers usually business travellers payhigh fares but can only fill the planes up partially. The same airlines then sell some of theremaining seats to more price sensitive customers who can buy two weeks in advance andstay over. Page | 27
  • Note that segmentation calls for some tough choices. There may be a large number ofvariables that can be used to differentiate consumers of a given product category; yet, inpractice, it becomes impossibly cumbersome to work with more than a few at a time.Thus, we need to determine which variables will be most useful in distinguishingdifferent groups of consumers.We might thus decide, for example, that the variables that are most relevant in separatingdifferent kinds of airlines consumers are:(1) Preference for price,(2) Preference for combination of price and other features,(3) Consumers not worried at all about price: Looking for privacy or luxury(4) Willingness to pay for brand namesWe now put these variables together to arrive at various combinations. Several differentkinds of variables can be used for segmentation.Demographic variables essentially refer to personal statistics such as income, gender,education, location (rural vs. urban, East vs. West), ethnicity, and family size. JetAirways; for instance, has found that people from western region (India) on the averageprefer vegetarian meal whereas people from east prefer non-vegetarian meal.Taking this a step farther, it is also possible to segment on lifestyle and values. Someconsumers want to be seen as similar to others, while a different segment wants to standapart from the crowd. Another basis for segmentation is behaviour. Some consumers are"brand loyal" i.e., they tend to stick with their preferred brands even when a competingone is on sale. Page | 28
  • ROLE OF TECHNOLOGYIntense competition in Indian Aviation Industry has made the role of technology veryimportant for domestic airline companies. Technology can help in making travelcomfortable, allow easy access to tickets and reduce time to check-in. A considerableamount of money is also saved by automation. Following points highlight the increasinguse of Technology by different Airlines:Vijay Mallya-promoted Kingfisher Airlines is planning to install a landscape camera atthe bottom of the aircraft that will enable passengers get a view of the take-off andlanding of their airplane when flying on domestic routes. They are also going to allowGSM phones to be used on board for the first time. They are already providing live TV aspart of our high-end In-Flight Entertainment (IFE) initiatives. Kingfisher Airlines hasannounced the launch of two world-class technological innovations to enhance guestconvenience. The first cutting-edge innovation is the introduction of the ‘Roving Agent’at the airport. Now guests with hand baggage need not have to wait at the check-incounter to collect their boarding pass, instead they can directly approach the KingfisherAirline’s Roving Agents deployed outside the security check-in area who will book themon their choice of seats.Also launched is the facility of ‘Web Check-in’. Now Kingfisher Airlines guests can sitin the comfort of their homes or offices and print their boarding passes. All a guest has todo is log on to the official website of Kingfisher Airlines, www.flykingfisher.com, andclick on the link - web check-in. Fill-in your reservation details and the screen willdisplay the choice of seats available onboard that particular flight. Once booked, the Page | 29
  • guest can conveniently print out the boarding pass and carry it along with him/her on theday of the flight and proceed straight to the security check counter at the airport.The Airbus A380, the world`s largest and most advanced passenger airplane, which iswidely regarded as the future of aviation, marks a momentous milestone in the history ofcivil aviation in India.Kingfisher Airlines, India’s fastest-growing airline, has engaged Sabre Airline Solutions,the global leader of software and services for the airline industry from planning toexecution, to provide a full suite of more than 20 enterprise applications to enhance itsguest processing functions, as the airline continues its rapid expansion of its operations.Kingfisher Airlines is also leveraging other technology from Sabre Airline Solutions tohelp analyze the market and determine the best approaches to maximize revenue.Kingfisher Airlines Ltd and Dish TV have joined hands to provide live in-flightentertainment on Kingfisher aircraft. The in-flight entertainment system is one of the bestin the world.The increasing use of the Internet has provided many opportunities to airlines. For e.g.Kingfisher has introduced a service through the internet, wherein the unoccupied seatsare auctioned one week prior to the departure.Public sector airline Air-India is exploring the possibility of launching an informationtechnology (IT) subsidiary to handle its automation activities.Jet Airways has launched an Interactive Voice Response (IVR)-based payment andticketing services. The service will allow passengers to complete their reservation withcredit cards through a secure gateway and instantly receive their e-tickets via email.Low-cost carriers such as Air Deccan, SpiceJet, GoAir and IndiGo are currently allowinga web-check apart from online booking. Page | 30
  • QUALITY DIMENSION IN CONTEXT WITH AIRLINE INDUSTRYReliability is most important to customers. Reliability is performing promised servicedependably and accurately. If you dont deliver on your promise you can lose customersand your credibility will be damaged. It takes a long time for a company to build up areputation for reliability, and only a short time to be branded as "unreliable".Security in airline industry is a very important issue. Terrorist threats and narcotics arethe main threats in Indian airports. The airlines and the security screening people theycontract with have a simple choice – employ more staff so as to process their passengersmore efficiently, or lay off staff and cause their passengers to spend more time waiting tocheck in than they actually spend on the flight itself.Tangible - Tangibles refers to physical facilities and facilitating goods. Examples oftangibles would be distinctive materials such as brochures and the cleanliness of thefacilities. Tangible is what makes you different than competitors. Customer can see forthemselves and then decide whether to go for the service or not.Responsiveness - Responsiveness is the willingness to help customers promptly. Avoidhaving customers waiting for no apparent reason. Responsiveness is very importantbecause if you provide customers with what they need in a timely fashion they will besatisfied. Nobody likes to wait. Replying to a customer request promptly is a goodexample of responsiveness. If customers see that the company is willing to help, this willcause loyalty and it will let them know that you are concerned about them. Page | 31
  • Assurance is the ability to convey trust and confidence. Being polite and showing respectfor customers will create trust. Also having professional and knowledgeable staff willcreate trust and confidence in customers. People enjoy meeting pleasant, knowledgeablepeople. By being pleasant and knowledgeable to everyone a business will present thekind of business image that draws new business.Empathy is the ability to be approachable. Empathy involves treating customers asindividuals. When a customer has a problem they should not be afraid to ask questions.A company should adapt to the specials needs of a customer. Listening to customersconcerns and proving them with a positive solution is how you show empathy. Page | 32
  • CONCLUSIONAirline industry in India is plagued with several problems. These include high aviationturbine fuel (ATF) prices, rising labour costs and shortage of skilled labour, rapid fleetexpansion, and intense price competition among the players. But one of the majorchallenges facing Indian aviation industry is infrastructure constraint. Airportinfrastructure needs to be upgraded rapidly if Indian aviation industry has to continue itssuccess story. Some steps have been taken in this direction. Two of Indias largestairports-Mumbai and New Delhi-were privatized recently. Two Greenfield airports arecoming up at Bangalore and Hyderabad in southern India. Investments are pouring intoalmost all aspects of the industry, including aircraft maintenance, pilot training and aircargo services. The future prospects of Indian aviation sector look bright.The Indian aviation industry has witnessed remarkable growth in recent years, with keydrivers being positive economic factors, including high GDP growth, good industrialperformance, and corporate profitability and expansion. Other factors include higherdisposable incomes, growth in consumer spending, and availability of low fares. Page | 33
  • FUTURE PROSPECTS OF INDIAN AIRLINE SECTORConsolidation in the aviation industry: Consolidation will ease competition and givepricing power to the dominant players and as a result of higher fares even smaller playerslike SpiceJet stand to benefit. The air fares for SpiceJet are expected to increase by 7.4%and 3.6% during FY12E and FY13E respectively.Due to booming economy, it is believed that the growth in the aviation industry willcontinue in the scenario of increased airfares. Generally it is believed that the aviationsector in any country grows at twice the growth rate of its GDP. In India, the GDP isgrowing at more than 7-8% per annum, which makes the growth rate in the aviationsector to be in excess of 15%. Aviation industry in India is expected to grow at a muchbetter rate than this because the industry is at a nascent stage with lower base and lowpenetration.Strong passenger growth to boost top-line and profit: Strong passenger growth wouldlead to 86% CAGR (Compound Annual Growth Rate) growth in revenues for the next twoyears. Increased passenger volume would also help in spreading fixed cost over largerpassenger base there by bringing down per unit cost.Domestic Passengers: In the last three years, the number of passengers travelling by airhas more than doubled with industry carrying 60mn passenger during FY011. On back ofconversion of upper class rail passengers to air travel and the surging tourism industry weexpect the number of people travelling by air to increase at a CAGR of 25% to 100mn byFY15E. We expect the revenue passengers for SpiceJet to increase from 2.8mn in FY11(12 months) to 6.8mn in FY12E, a CAGR of 58%. The expected growth in revenue Page | 34
  • passenger is on account of aggressive increase in fleet size from 11 aircrafts in FY11 to23 aircrafts by FY15E. REFRENCEBooks and Journals:Adrian Palmer , Principles of Services Marketing, third edition, McGraw Hill, London.Kotler Marketing Management Ninth EditionWebsites Referred:www.4ds.comwww.epinions.comwww.business.headlinesindia.comwww.oppapers.comwww.icmrindia.orgwww.airindia.comwww.flyairdeccan.netwww.spicejet.com (www.spicejet.com/pdf/BSE_Q2FY08)www.jetairways.comwww.flykingfisher.com Page | 35