Low Price Carriers in India

Low Cost Carriers BUZZ Section B Image courtesy of Boeing

Airlines
“ Once you get hooked on the airline business, it's worse than dope.”
“ This is a nasty, rotten business.”
“ Air transport is just a glorified bus operation.”

Global Carriers
US
Ireland
Ireland
Malaysia
Australia
Saudi Arabia
Singapore
Germany
UK
US
Southwest Airlines
Ryanair
Easy jet
AirAsia
Virgin Blue
Air Arabia
Valueair
Air Berlin
Air Southwest
US Airways

World Scenario - Low Cost Airlines
The successful low cost airlines are more profitable than established carriers
Ryanair has a market capitalisation of about £3 billion
Globally, the largest and most successful low cost airline is Southwest in the US
Operating Margins of different international airlines:
Ryanair Southwest United Airlines Lufthansa Air France KLM British Airways 22.7% 21.8% 11.9% 5.7% 3.5% 1.5% 0.9%

Aviation Industry in India : Characteristics
Huge Potential
Under penetrated market
Total Passenger Traffic : 50 million
Passenger trips per annum :
India : 0.05
United states : 2.02
Untapped air cargo market

Aviation Industry in India : Characteristics India GDP : 9.6 % per annum Domestic air travel : 20 – 25 % WTTC Travel & Tourism : 8.8 % Over next 10 years Medium Term Growth Forecast :

Aviation Industry in India : Characteristics
Constraints :
Infrastructure constraints
Shortage of airport facilities
Parking bays
Air traffic control facilities
Takeoff and landing slots.
Less than 100 airports having more than
one daily service.

Macro Environment Analysis
Main Factors :
P olitical
E conomic
S ocio-cultural
T echnological
Other Factors :
Demographic
Natural Environment

Macro Environment Analysis : Political
Open Sky Policy
Deregulations in different spheres
Low entry barriers
FDI limits :
49 % for airlines
100% for airports

Macro Environment Analysis : Economic
Growing middle class income
Consistent GDP growth of more than 8% and projected rate in two digits
Hike in average salary 14%(highest) in the world
Tourism industry growth :8.8 %in 2005

Macro Environment Analysis : Socio-cultural
Growing middle class :
1993-1999 : 39.5 m to 56.7 m households
2005 : 300 m
2010 : 400 m (Estimated)
Increase in leisure travel by tourists by 15 % in 2005
Foreign tourists in 2006 : 3.2 mn
Status symbol to travel in plane.

Macro Environment Analysis : Technological
Modernization & Privatization of Airports
Modern Technology for efficient handling of aircraft, passenger and cargo.
Example : ILS, CAT-3
Developing Greenfield Airports with Private Sector
Example : Bangalore Airport Corporation Ltd.

Macro Environment Analysis : Demographic and Natural
Changing pattern of consumers
Highest percentage people of age group 20-25
Educational environment
Shift towards family concept
High energy cost

Low Cost Carriers in India
Air Deccan
SpiceJet
IndiGo Airlines
Go Air
Jetlite (Formerly known as Air Sahara)

Business Model of Low Cost Carriers
A single Passenger class
A single type of airplane reducing training and service cost
No frills such as free food/drinks, lounges etc.
Emphasis on direct sale of ticket through Internet avoiding fee and commission paid to travel agents.
Employees working in multiple roles
Unbundling of ancillary charges to make the Headline fare lower

Aviation Industry in India : Market Share

Market Share in LCC Segment

Airline Industry in India : Service Vs Price Graph S E R V I C E P R I C E

Air Deccan Come SIMPLIFLY With Us…
Market Share : 21.2 %
Image courtesy of Air Deccan

Vision and Mission
Vision :
Empower every Indian to fly
Mission :
To demystify air travel in India by providing reliable, low cost and safe travel to the common man by constantly driving down the air fares as an ongoing mission

Marketing Strategy
Common Man :
The Brand Ambassador for Air Deccan, the people’s airline is Mr. R.K Laxman’s ‘ Common Man ’
Free Tickets :
Images courtesy of Air Deccan

Marketing Strategy
Advertisement through print, radio and billboards
In flight magazine for revenue generating
In flight shopping scheme called “Brand for less” – AVA Merchandising
Tie-up with Café Coffee Day
ICICI-Travel agent purchase card
Tie-ups with HPCL and Reliance Web World

How Air Deccan cuts cost?
Quicker turnaround time
Lower distributions costs
All economy seating configuration
No free catering on board
Alternative revenue channels
100% web enabled bookings – e ticketing
Enhanced cash flow management

SWOT Analysis
Strengths :
Leader in LCC segment :
First to target the middle class : First mover advantage
Highest load efficiency
Flies to destinations in the hinterland
A ‘Lean-and-Mean’ approach to staffing

SWOT Analysis
Weaknesses :
Focuses mostly on South Indian market
Image plagued by frequent breakdowns and near
misses
Very limited advertising
Reached at the threshold of cost efficiency

SWOT Analysis
Opportunities :
Extensive network to capitalize Air Cargo
business
Plenty of scope for expansion of operations
Strengthen its position in Chartered flight
segment
Could start ‘Contractual Employment’

SWOT Analysis
Threats :
High attrition rate
The threat of new entrants into Low Price Segment
especially IndiGo, Go Air and SpiceJet
High Risk Perception

SpiceJet flying for everyone
Market Share : 6 %
Image courtesy of SpiceJet Source : http://www.airteamimages.com

Vision and Mission
Vision :
To ensure that flying is no longer only for CEOs and business travelers, but for everyone
Mission :
To become India’s preferred low-cost airline, delivering the lowest air fares with the highest consumer value, to price sensitive consumers

Marketing Strategy
Entered with Rs. 99 fares for first 99 days offering ‘low everyday spicey fares’
Aims to compete with Indian Railway’s AC segment
Aims at future fleet expansion to increase market share

Challenges
Small fleet structure
Small load efficiency compared to Air Deccan
Competition with new entrants
Market share of East-central India
High attrition rate

GoAir The People’s Airlines – to FLY SMART
Market Share : 2 %
Image courtesy of GoAir

Strengths and Weaknesses
Strengths :
Promoted by Wadia group
GoAir FreeFares
Weaknesses :
Small network : Only in Southern and Western India
Small fleet structure
Load efficiency

IndiGo Always affordable, no gimmicks, hassle free
Market Share : 0-1%
Image courtesy of IndiGo

Marketing Strategy
Focuses on One thing :
One type of airplane, fare, customer service, route etc.
Uses new Airbus A320-200 aircraft
Efficient processes

An Example Images courtesy of www.chillnite.com

Current Trends : Consolidations All Around
Kingfisher-Air Deccan Deal
Kingfisher buys out 26 % stake for Rs.550 crore.
They have combined Market share of 33%
They are second biggest player after Jet Sahara deal
Jet airways and Air Sahara merger
Air Sahara name changed to JetLite

Future Trends
The projection for Indian Aviation for 2020 is estimated at:
400 million passengers
Including 180 million domestic passengers
1,000 aircraft in the civil aviation sector
Likely to follow the footholds of International Low Price Carriers e.g. Air Arabia, Southwest Airlines etc.
More emphasis will be on Arabian and South-East Asian circuits.

Future Trends : Passenger Forecast Source : www.civilaviationweek.com

Future Trends : Proposed Addition Source : www.civilaviationweek.com

Thank You
Jai Prakash Mundhra -071221
Kamal Agarwal -071222
Kartik Rawal -071223
Kaushal Dixit -071224
Ketan Mardikar -071225
Image courtesy of Boeing

References
http://www.wikipedia.org
http://www.flyairdeccan.net
http://www.goair.in
http://www.spicejet.com
http://www.hinduonline.com
http://www.civilaviationweek.com
http://www.businesstravelindia.com
http://www.yahoo.com
http://civilaviation.nic.in
http://www.skygod.com /quotes/
http://www.flykingfisher.com
http://www.goindigo.in
http://indiaaviation.aero

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Low Price Carriers in India

by jaijai on Aug 17, 2007

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