This document provides an analysis of Air Deccan, India's first low-cost carrier. It discusses Air Deccan's journey and ascent, applying Porter's Five Forces model to analyze its failures. Factors contributing to the success of competitor Indigo are examined using the VRIO framework. Recommendations for Air Deccan include choosing a single aircraft configuration, competitive staffing, fuel efficient technologies, and sustainable pricing.

1. AIR DECCAN CASE STUDY
PGPPro Hyderabad Co’2023
Group A Presentation
1. PGID – 92220116 Sumanth Narayana Bhagavatula
2. PGID – 92220070 Asha Pattnayak
3. PGID – 92220055 Nirosha Pinnapreddy
4. PGID – 92220051 Rama Manjusha Gathey
5. PGID – 92220083 Sruthi Keerthi Patel
6. PGID – 92220048 Lalit Prasad Amudalapalli
7. PGID – 92220081 Dilip Kumar
8. PGID – 92220037 Manoj Lakshmipathiraj
9. PGID – 92220005 Deepak Tripathi
10. PGID – 92220086 Srinivasa Srivatsava Lakkaraju

2. AIR DECCAN CASE STUDY
ANALYSIS
01
02
03
04
Air Deccan Journey
Indian Aviation Industry
Air Deccan Overview
Air Deccan Ascent
05
06
07
08
Air Deccan – VRIO Framework
Air Deccan Failure
Indigo Success Factors
Solution and Recommendation

3. FUTURE?
START
1997
Raised $25K as 1st Round of
investment
2002
Capt. Gopinath got inspired in
Phoenix Airport to Launch LCC
Model in India
Mar 2007
Air Deccan’s destinations
increased to 61 in India
Aug 2003
May 2007
Air Deccan’s first ATR turboprop
aircraft launched
Air Deccan opened to IPO to
support its growth plans
May 2007
Air Deccan gained a 21%
market share, making it the
largest LCC in India
1996
Founded Deccan Aviation -
Helicopter Charter Company
Air Deccan Journey
IN A GLANCE

4. Industry Aviation Industry
SUMMARY
Rapidly growing industry
3rd Fastest in the world
Forecasted 25% growth in the
next 5 years on average.
Expected 400% increase in
passengers in next 14 years
Growing middle class –
Increased Spending
Opening of FDI and foreign
investment
Infrastructure challenges - 25%
airports operating
Air routes development – few
and need investment
Government Policies not very
conducive currently.
Very high capex requirement
Needs big load factor for a
break even business

5. Air Deccan Overview
SUMMARY
Innovative Ideas - Significant
cost reduction measures.
Prior experience as helicopter
operator
First mover advantage in the
LCC market of India.
Clear customer segmentation
and target strategy.
Challenges in Capital raising –
Initial funding and later in IPO
First hand challenge in the LCC
market
Threats from other LCC
operators & industry
consolidation
High fuel price, airport
infrastructure challenges, delays

6. Air Deccan’s Ascent
Strengths
VALUE CREATION
Make air travel
affordable, reliable and
accessible to everybody
COST LEADER
Innovative and Successfully
Implemented several cost
reduction measures
ECONOMIES OF SCALE
Increased Seats per Flight,
Achieved a Load factor of
72% by 2007.
INNOVATIVE
Simplified processes such as
Ticket booking, turned meal
service to a profitable part
of business

7. VRIO Framework – Air Deccan
Analysis
ORGANIZATION
Strong coherent management team, experienced pilots from Air
Force, combination of flights, Hire experienced leader from LCC
industry. However overall operation cost was high due to
organization culture.
VALUABLE
Made air travel affordable, reliable and accessible to everybody
RARE
By targeting mid income travellers, they opened up new market for
aviation industry. Created flights paths to tier-2 cities which were
not present earlier. Started in LLC in India
INIMITABLE
The model of low-cost operations was not inimitable in the long
term.

8. • Shortage of qualified
flying personnel
• Unable to train crews fast
enough to meet their
demands
(Rivalry among existing competitors)
For the same LCC targeting
audience, Railway Tier 2 cost were
cheaper.
(Threats of Substitute)
• Consumer Surplus was very high for
early booking due to Rs.1 ticket (Pricing
model).
• Competitors able to provide attractive
addons at the same price
• Choosing IPO over Venture Capital
• Global finance market tension leads to
economy griding to halt.
(Bargaining power of Buyers)
Emerging competitors backed by
extremely deep pockets investors
(Threats of New entrants)
• Increase in Fuel price
• Pilots & avionics engineers were in
desperately short supply
• Operational expenses are higher
than the competitors
• Increase in repairs & maintenance
expenses due to Airport Flight
Control Infrastructure were not
coping well.
(Bargaining power of supplier)
Air Deccan - Failures
Porter’s Five Forces Model

9. RESTRICTED
Indigo Success Factor
USING VRIO FRAMEWORK
VALUE RARITY IMITABLE ORGANIZATION
Yes
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
LOW FARES
TAT
BRAND
FLEET
Yes
Yes
Yes
Yes
Created value & increased market share by offering low prices through single type air crafts which reduce
overall OPEX
Low average fleet age and single type of aircraft is a rarity in Indian airline industry
Strategies like shorter TAT, single type fleet are imitable, hence not sustainable in long run
It has become the brand name through its unique strategies. Maintained more than 90% Performance record
V
R
I
O
Economic
Implications

10. RESTRICTED
01
02
03
04
 Improper purchasing approach towards Air Crafts.
 Build conservative approach considering buying capacity.
 Choose single Aircraft Configuration
 Competitive Staffing for Sr. management and renumeration policy for pilots
AIRCRAFT
MANAGEMENT
FUEL
EFFICIENCY
BUSINESS MODEL &
POLICIES
PRICING
S
U
C
C
E
S
S
STRATEGIC COHERENCE 05
 Delimiting the uneconomical sectors/routes
 Adopt Fuel efficient technologies in the aircraft
 Being Agile & adaptable to market conditions
 Better response to microeconomic situation
 Pull back the Rs 1 Pricing model
 Sustainable pricing of flight tickets
Solutions and Recommendations
Air Deccan