4. Objective:
To study various airlines in Indian aviation Industry
To study and analyze Strategic Management decisions of different
airlines in IAI
Scope of the project
To understand and study the concepts of strategic management.
To study the management decision of Domestic airlines in IAI.
The project will involve Strategic management analysis using Pest
Analysis, SWOT analysis, Tows Analysis etc.
Data Collection
Secondary data collected through various magazines, books,
Newspapers , case studies and internet will be used.
Data Analysis
The project analysis will involve Pest Analysis, SWOT analysis, Tows
analysis etc.
4
6. Theoretical Framework and Review of Literature
INTRODUCTION
Indian Aviation Industry
The basic function of an airline is to accommodate for passengers and cargo while
taking them to far-off places between two major cities or towns within a country or
beyond geographical borders.
The aviation industry in India has grown by leaps and bounds in recent years in
terms of kilometers flown as well as customers serviced. The economy of a country
is substantially determined by the quality of air transport.
Air transport is also considered to be the swiftest mode of transport. Almost all the
states have one or more airports, which are regularly serviced by several airlines.
There are a number of international airports, which also serve as domestic airport
too. Others are only domestic airports.
The Air Transport Companies are both in the public sector and in the private sector.
In the public sector, there are Air India and Alliance Air. In addition to this there
are several private scheduled operators, viz. Jet Airways (India) Ltd., Go Airways,
Kingfisher Airlines, Paramount Airways Pvt. Ltd., Go Airlines (India) Pvt. Ltd.,
and Inter Globe Aviation Ltd. (Indigo) operating on the domestic sector providing a
wide choice of flights and connectivity to various parts of India. One cargo airline
viz. Blue Dart Aviation Pvt. Ltd. is also operating scheduled cargo services in the
country. At present there are 59 companies holding non scheduled air transport
operators permit.
6
7. THE KEY DOMESTIC PLAYERS
Airlines Head Key Person LOGO
Founded Quarters
Air India, Mumbai Arvind Jadhav,
1932 Chairman &
MD
Jet Airways, Mumbai Naresh Goyal
1993 ,Founder &
Chairman
Jet Lite New Naresh Goyal
(Formerly Delhi ,Owner &
Air Sahara), Chairman
1991
Kingfisher Bangalore Vijay Mallaya,
Airlines, CMD
2004
Kingfisher Bangalore Vijay Mallaya,
Red Chairman &
(Formerly CEO
Air
Deccan),2003
7
8. Indigo New Bruce Ashby,
Airlines, Delhi President &
2005 CEO
Spice Jet, New Siddhanta
2005 Delhi Sharma,CEO
& COO
Go Air Mumbai Jeh Wadia, MD
Airlines,2005
Paramount Chennai M.Thiagarajan,
Airlines, MD
2005
AIR INDIA
Air India International entered the jet age in 1960 when it‟s first Boeing 707, named
Nandadevi and registered VT-DJJ, was delivered. Jet services to New York via
London were inaugurated that same year in May 1960.
On 8 June 1962, the airline's name was officially truncated to Air India. On 11 June
1962, Air India became the world's first all-jet airline.
Air India Limited is the national airline of India with a worldwide network of
passenger and cargo services.
Air India is state-owned, and administered as part of the National Aviation
Company of India Limited - which was created in 2007 to facilitate Air India's
8
9. merger with Indian Airlines. Air India was founded by J. R. D. Tata in 1932 as Tata
Airlines, a division of Tata Sons Ltd. (now Tata Group).
ALLIANCE AIR
The airline was established on 1 April 1996 and started operations on 21 June 1996.
It is wholly owned by Indian Airlines.
Air India Regional started as Alliance Air (which was the low-cost arm of Indian
Airlines. As part of Indian Airlines' merger with Air India, Alliance Air was
renamed Air India Regional.
INDIAN AIRLINES
Indian Airlines was an airline based in Delhi, India and focused primarily on
domestic routes, along with several international services to neighboring countries
in Asia.
Indian Airlines is state-owned, and is administered by the Ministry of Civil
Aviation.
The airline operates closely with Air India, India's national carrier. Alliance Air, a
fully-owned subsidiary of Indian Airlines, was renamed Air India Regional.
JET AIRWAYS
Jet Airways is an airline based in New Delhi, India and is the country's second-
largest international airline after Air India and the largest domestic airline.
Jet Airways was incorporated as an air taxi operator on 1 April 1992. It started
commercial airline operations on 5 May 1993 with a fleet of 4 Boeing 737-300
aircraft.
In January 1994, a change in the law enabled Jet Airways to apply for scheduled
9
10. airline status, which was granted on 4 January 1995. It began international
operations to Sri 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 parent company,
Tailwinds).
JET LITE
JetLite, formerly Air Sahara, is an airline based in New Delhi, India. Controlled by
Jet Airways, the airline operates scheduled services connecting metropolitan centers
in India.
The airline also provides helicopters which are available for charter services and
aerial photography. Jet Airways and Air Sahara were the only private airlines to
survive the Indian business downturn of the early 1990s.
In January 2006, Jet Airways announced that it would buy Air Sahara for $500
million in an all-cash deal, making it the biggest takeover in Indian aviation history.
On 12 April 2007, Jet Airways agreed to buy out Air Sahara for 14.5 billion rupees
($340 million). Air Sahara was renamed JetLite, and was marketed between a low-
cost carrier and a full service airline.
KINGFISHER AIRLINES
Kingfisher Airlines Limited is an airline based in Bangalore, India.
Kingfisher Airlines, through one of its holding companies United Breweries Group,
has acquired 26% stake in the budget airline Air Deccan and has option to buy
further of 20% stake from the secondary sector.
10
11. INDIGO AIRLINES
Indigo Airlines is a private domestic low-cost airline based in Gurgaon, India. It
operates domestic services linking 14 destinations. The airline is owned by
InterGlobe Enterprises.
SPICE JET AIRLINES
SpiceJet is a low-cost airline based in New Delhi, India. It began service in May
2005. It was voted as the best low-cost airline in South Asia and Central Asia
region by Skytrax in 2007. SpiceJet was earlier known as Royal Airways, a
reincarnation of ModiLuft.
SpiceJet marked its entry in service with Rs. 99 fares for the first 99 days, with
9000 seats available at this rate.
Their aim is to compete with the Indian Railways passengers travelling in AC
coaches.
JAGSON AIRLINES
Jagson Airlines is an airline based in Delhi, India. It operates scheduled and charter
services within India and to Bhutan and Nepal. Jagson Airlines operate flights
between Delhi and Rajasthan and Madhya Pradesh and Himachal Pradesh. They
also operate a helicopter service between Srinagar, Baltal and Amarnath.
GO AIR AIRLINES
Go Air is a low-cost airline based in Mumbai, India and is wholly owned by the
Wadia Group.
THE COMPETITION IN THE AIRLINES SECTOR IN INDIA – THE
AERIAL WAR
11
12. Around 20 years ago, when the Airline Industry of India was Government
Regulated, the airline Industry was considered to be a “natural monopoly” where
only one Airline Company would be able to survive in the competitive environment
and meet the demands profitably. But since deregulation, the perception is changing
and there is no evidence of any sort of monopoly in the Indian Airline Industry.
Foreign and private players have entered into the market offering the best at the best
prices to the rising demand of the Indian traveler.
With the recent change in the Aviation Policy by the Government, several vistas in
business have opened up and new opportunities have emerged. The creation of new
and incumbent airlines and private sector participation in the development of
Aviation infrastructure is a positive outcome of these new developments. Several
global Aviation consultants and private equity players are eyeing this opportunity
and are setting up their branches within the country.
Despite its unprecedented growth, the Civil Aviation industry in India is still in a
relatively early stage of its development after its liberalization. Experiences from
abroad, i.e., the US and Europe, show tremendous structural shifts in terms of route
development, pricing, quality and frequency of traffic, as well as spatial
concentration at few key airports. It can be said that market liberalization provided
not only for greater opportunities in the industry, but also for greater risks. Recent
waves of consolidation among airlines are only one example.
12
13. Since the deregulation, the Indian Airlines has grown tremendously. Also, average
prices have fallen consistently due to the increasing number of players in the
market. This fall in prices has benefited the consumers the most. If some fliers
would disagree that the decline in prices have not benefited all the travelers then it
can be proven that the fliers paying a high price also gets a superior product, in
terms of flexibility and service. Moreover, the increasing demand for airline
services is also helping airline companies to run a competitive business. People
prefer air travel as a feasible option for commuting because it saves time and also
because of the value added services provided by different airline companies. The
competition in the Indian Airline Industry has succeeded in increasing the volume
of travel and lowering average prices which has in the end benefited the final
consumer and also to the airline companies.
Alliances and mergers are one of the factors which are giving a solid boost to the
Airline Industry in India. Different airline companies, foreign as well as Indian, are
tying up or taking over or merging to produce effective collaborations in service
delivery with profitable returns. It is not the just the airline companies but also
associate industries such as tours and travels agencies, hotels, transport
organizations etc. which are also getting targeted by airline companies to deliver
quality service to the customers.
At the end, it can be inferred that the Indian Airline Industry is growing at a fast
pace and the credit goes to the effective and positive impact of the increasing
competition in the industry. Factors indicating to the increasing competition in the
airline industry are the pricing and promotion strategies adopted by the airline
companies; value added services offered; sales promotion; product/service
13
14. innovation; cost cutting strategies like downsizing; and so on. Airline companies
are concentrating on the customer delight and also the costs to produce profitable
returns with effective customer/market retention.
Marketing MIX (4 P’s)
THE PRODUCT MIX
Product is the core thing which every enterprise tries to deliver. Product is of
course, the service that companies have to offer to the customer. Getting the product
right is the single most important activity of marketing. If the product isn't what the
market wants, no amount of price adjustment or brilliant promotion will encourage
consumers to buy it. The airline product is quite a complex one since it comprises
of a service of incorporating the temporary user of airline seat and certain tangible
products such as free flight bags or a free bottle of duty free spirit to encourage
booking. The product here refers to Airline service offering. Although service
products are essentially intangible, there are certain pyhsical characteristics which
consumer assess in their evaluation of product choice.
Attractiveness of the offering in terms of pyhsical features such as consumers have
high expectation, the food & drinks offered, entertainment. Facilities available,
associated level of services such as, quality of seats & interior decoration.
The airline product includes of two types of services:
1. On the ground services,
2. In-flight services.
14
15. The on-the-ground services include a convenient airport with car parking facilities,
duty free' ¬shopping quick and efficient checking of baggage, efficient service at
reservation counter, transport to the airport, etc.
The service provided inside is intangible and is highly variable. The airhostesses are
trained to provide polite, warm and courteous service. The courteous service that
the representatives at the baggage counter, reservation counter provide goes a long
way in developing customer loyalty. The travel agents of the airlines also need to be
efficient and polite.
Differentiating the Product
It is important to recognize that what the consumers are demanding are not
products, or features of products but the benefits they offer. Producing added
benefits thus helps the marketer to distinguish one product from another. Good
design or style of service can form the basis of differentiation. This enables the
company to create a personality for its service. The design and decor of the aircraft
provides opportunities to personalize their product as well as periodically to update
them when differentiation under IATA regulations was virtually excluded,
nonetheless, certain airlines were able to develop distinct personalities. Eagle
Airlines created an entirely new market between New York and Bermuda, for e.g.
by developing an image of a friendly airline distinctive from other airline serving
the route. A similar style was evident in Richard Branson's Virgin Airways.
CORE PRODUCT AND SUPPLEMENTARY SERVICES
15
16. Many services products consist of a bundle that includes a variety of service
elements and even some physical goods. It is important to distinguish between the
core product that the customer buys and the supplementary services that accompany
that product.
THE FLOWER OF SERVICE
Core product surrounded by clusters of supplementary services.
The core service of an airline is the service of transport. The supplementary services
are classified into eight clusters & each one is analyzed with respect to the airline
industry:
* Facilitating elements
* Enhancing elements
Information
This aspect of supplementary service is common for every person that needs
information about the organization. In case of airline industry, up to date
information regarding flight schedules, ticket fares, information about promotion
schemes etc must be available to customers.
Customers can avail of this information literally at their fingertips today with every
airline starting its own website which gives complete details to the customer & also
entertains queries.
It also includes providing information to employees regarding new policies
affecting the airline & equipping them with enough information, which the
customers might demand. Extensive training is provided to in-flight attendants
16
17. regarding handling customer queries, knowledge about the airplane itself,
knowledge about cuisine etc.
Consultation
This aspect of supplementary services can be customized according to the needs of
the customer. It is more in the case of people processing and high personnel-contact
services.
Airlines are moving more actively into the role of consultant today. They are doing
away with the travel agents & designing & selling packaged tours to consumers
directly. In this aspect they often act as consultants to the customer, by giving him
advice & suggestions regarding the type of plan he can choose, the benefits he will
get the mode of travel he should choose etc.
Another aspect to consultation at airlines is when the customer approaches the
airline regarding traveling to particular destination, the airline gives him a variety of
choices of routes that he can take.
In some cases airline may also design special menus & benefits in consultation with
its frequent fliers by keeping in constant touch with them & asking them for
suggestion as to what they want in their airline which will make their experience
more comfortable.
Order taking
The order taking procedure is essentially the booking procedure of the airlines. The
important aspect to be noted here is that the procedure is smooth, easily understood
& fast. Reservation of airline tickets is now easy and reliable since it is fully
computerized. There are 24 hours reservations. Passengers can specify their seat
preferences at the time of reservation.
17
18. Most airlines use the telephone, fax, and email methods of booking. The emphasis
here is on fast booking & at the same time getting the required information form the
customer. This is done by establishing a standard reservation procedure & format
thus reducing the risk of inconsistent service delivery. The online booking system
also facilitates better order taking & processing.
The scheduling aspect assumes importance as reservations on the wrong flight to
the wrong place are likely to be unpopular.
Hospitality & Caretaking
With the increased competition today in the airline industry & the increasing
similarity of services offered by each airline, hospitality has emerged as a key-
differentiating factor between one airline & the other.
The hospitality aspect of an airline is tested right form the time of the reservation
(courtesy of the booking official) to the airline‟s desk at the airport to the actual in-
flight travel (the attitude of the flight attendants) to the post flight help extended.
Safekeeping
In airlines the safekeeping issue is that of safeguarding the customer‟s baggage.
Baggage allowances are offered about 30 kgs of check-in baggage is allowed.
Passengers carrying international tickets are given further allowance of around an
added 30 kgs Priority baggage delivery is offered to members. The customers
entrust his baggage to the airline & it is the airline‟s responsibility to keep it in a
proper condition.
18
19. Children and infants usually travel along with their parents and guardian. In case of
unaccompanied minors, customer service staff renders all assistance like checking
in and escorting up to the aircraft and handing over to the senior-most cabin
attendant on board the flight. He is looked after on board the flight right up to the
point flight reaches the destination and he is received by his guardian.
Exceptions
Special requests – airline very often receive special requests form customers with
regards to meal preferences, special amenities for elderly people or children.,
medical needs etc. these needs have to considered & acceded to wherever possible.
Handling of customer suggestions / complaints – every airline today has a customer
service centre which entertains customer suggestions & complaints. On the flight,
customers are often asked for their opinion regarding service equality. Many
corporate frequent travelers are consulted when the airline decides to make any new
change.
Billing & payment
The billing procedure in airlines is simple. The options available to the customer are
plenty including credit card & travelers cheque. Airlines use the open account
system with their corporate clients. Frequent fliers are also given special payment
privileges.
19
20. LEVELS OF PRODUCT
The Core Service
The core service of the airlines industry is to transport People, goods and services to
various destinations. As the needs of the people increased the entire system became
more organized and formal. After this stage come the various supplementary
services.
The Supplementary Services
The airline industry has many players they had a brand name like „Air India‟,‟ Jet
Airways‟,‟ British Airways‟. All of them had some common services to offer like
connecting flights, through check-in, tele-check in, food on board, and
complementary gifts etc.
Different classes like economy class, business class were introduced. Air
concessions are given to school students, old people etc. Singapore airlines were the
first to introduce small 8”television screen for every passenger. The freebies are
actually win-win deals between airlines and other services.
Jet Lite, for example, offers its passengers a „business-plan‟ on two-way economy
class ticket, which includes a night‟s stay with breakfast, STD facility for 3 minutes
and boardroom facility at the Park Hotel, New Delhi. To Delhi based fliers to
Mumbai, it offers 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 breakfast and late checkout.
20
21. All these added service helps the customer to decide upon which airlines he wants
to travel. As competition increased and the customers wanted more the next phase
evolved and that is the augmented service.
The Augmented Service
This phase is where the customer‟s expectations are met; the service providers kept
working on new methods to meet the ever-changing customers‟ demands. The
players introduced online booking, which was very convenient for the service users.
British Airways business class has showers; it‟s more spacious and comfortable.
Sahara airlines offer its passengers six different types of cuisine like vegetarian, fat
free, diabetic etc. They also have auction going on board. Virgin airlines have
gambling on board, they also have body massage to offer to their passengers. Air
Emirates has something called cab service, they have customized pick up and drop
cab service.
This phase is the most crucial one; with increased competition service will become
the final differentiation.
Future Service
As mentioned above the customer needs keep changing, the future is unknown. The
customers may be looking in for more frequent inexpensive air travel, something
like air taxis, super sonic speed. This decreases the time thus reducing the cost so
continual improvement in Services is required. .
BRAND POSITIONING
Brand positioning is all about identifying the optimal location in our customers‟
minds for our Brand and our competitors. Proper positioning makes it easier to
21
22. facilitate understanding of the Brand. Proper positioning clarifies what the Brand is
all about, how it is both unique and similar to competitive brands, why customers
should purchase and use the Brand.
Creating brand awareness is one of the most important aspects for any product or
service. Due to the intense competition in the market every airline has to position
them in the market. It is only if they position themselves well can they create a
Brand image, brand relationship as well as brand responses.
Each and every airline would want to have a market for them as well as have a good
name in the minds of the customers.
Airlines use unique attributes to position their brands in the minds of the potential
customers. Thus consumers strongly associate those attributes with that particular
brand, positively evaluate it and believe that they can not find those attributes to the
same extent with a competitive brand.
STRATEGIC GROUPS
Full range carriers with medium price : Wide coverage of services provided
and have greatest potential to capture and can lead in market. But have less number
of International destinations and the new comers can come up with low fares.
For Example; Jet, Indian Airlines, King Fisher
Low cost carriers with low price : Great facilities and technology but no service
for economic class.
For Example ; Kingfisher Red, Jet Lite, Spice Jet, Go Air, Indigo and other
Low cost carriers.
Very high service with high price : Better service due to high fare and Attractive
for the growing middle class. But less coverage within country.
22
23. For Example : Taj airways, Club one airways
Good service with medium price : Low fare as compared to higher service
provider. Better services than LCC. Targeting to the middle class customers.
For Example : Kingfisher, Jet airways
Re- branding has also become an important concept. It is evident that the mergers
and acquisitions have become an important part of the airline industry. Thus they
need to re-brand themselves under one common name.
Examples of Re- Branding:
KINGFISHER AND AIR DECCAN
Kingfisher‟s acquisition of Air Deccan would lead to the latter being re-branded
under a new name Kingfisher Red. The new brand positioning is a shift from being
a low-cost airline to a value-based airline. It re-emerged with a new revamped
stylish look. The emphasis will be on creating a stylish airline keeping with the UB
Group‟s brand image.
The branding exercise will encompass areas such as changing the look and feel of
the aircraft, including interiors, ticketing and check-in counters and staff uniforms.
The colors red and white will dominate the changes, with the aircraft, leather seats,
carpet, boarding passes and airport counters painted red.
INDIAN AIRLINES AND AIR INDIA
When Indian Airlines and Air India merged, they retained the brand name of the
latter due to its better brand positioning. The logo was evolved out of a combination
of the two airlines. The red colored flying swan with the Konarak Chakra in orange
became the new brand logo.
23
24. SAHARA AND JET AIRWAYS
However, in case of Sahara airlines being branded Jet Lite by Jet Airways, there
could well are a dichotomy in the consumer‟s mind of the new brand‟s positioning.
Jet has a premium connotation while Sahara was a low-priced air carrier. The Jet
Lite brand might end up confusing its customers.
Thus it can be said that if the transition is smooth and the integrity of core values
retained, then any re-branding exercise can be successful. The new brand has to be
updated and not outdated.
PRICING MIX
Pricing decisions play a crucial role in managing the business of air transportation.
The increasing operational costs, the rising competition, the falling occupancy ratio,
the imbalances in demand and supply, the increasing pressure of inflation are some
of the important factors influencing the decisions for setting fare and freight rates in
the air transport business. The Ministry of Tourism and Civil Aviation, the Indian
Airlines Corporation, the National Airports Authority, the International Airports
Authority of India, the Air India Corporation are the bodies directly or indirectly
influencing the process of making the pricing decisions. The main problem is to
make the pricing decisions competitive because it is found that even the private air
transport organizations are involved in the process too. It is seen that the following
are the features in price i.e.:
1.Flexibility
2.Price Level
3.Differentiation
4.Discounts and Allowances.
24
25. While price is tactical, it has localized implementation, it is temporary in nature and
therefore price is flexible.
Pricing plays a vital role in the marketing mix of any airline. The „fair price‟
concept is supreme, mainly because more than anything else most potential
customers will base their purchase decisions on the basis of price of the ticket.
Passengers tend to seek value for the money they are spending.
The final price that the passengers pay is made up of various components. The air
fare charged by private scheduled domestic airlines comprises of basic fare, fuel
surcharge, congestion surcharge, passenger service fee and transaction fee (if the
ticket is booked other than the Website). Out of these, only passenger service fee is
the component collected by the airlines on behalf of the airport operators.
Pricing Strategies
1. Demand-based pricing: The pricing of air fares under this strategy is simple. It is
based on the demand from the customers‟. It involves setting prices consistent with
customer perceptions of value, i.e., prices are what customers will pay for the
services provided.
For example: The person sitting next to u might not have paid the same price for the
ticket. If a person wanting to travel in Business class does not get the ticket for the
same when tried to book at the last minute, will travel in Economy class paying
more than what the other travelers must‟ve paid. The pricing in airline industry is
never fixed or same. It‟s fluctuating in nature depending upon time, demand and
25
26. other such attributes. So when, the demand exceeds supply for the seats in an
airplane, the price charged on the ticket is much higher than other passengers.
2. Season-based pricing:
The pricing of airline industry largely depends on seasons. For example, if a person
is travelling by Indigo from Mumbai to Bangalore, the pricing will be different for
different time periods. It will be cheaper in monsoon while comparatively
expensive in winter. Also, it depends when the person is booking the ticket.
If he books the ticket 3months before the date he‟ll travel he might avail the ticket
at a cost that is 30-40% less than what the person may be charged if he books the
ticket 20days before.
For example: if a traveler books a ticket during normal weekdays the prices would
not be too high. Whereas, if the same traveler books the tickets during Diwali or
Christmas, he will be charged more than what he was charged earlier for the same
destination. And this strategy remains the same for all kinds of airlines. The prices
may not be exactly same but it‟ll be quite similar.
Also, Jet airways provide tickets at a comparatively lower rate during the vacations
for student-passengers. This helps them tap the population travelling abroad for
education purposes as well as increase occupancy ratio.
3. Competition-based pricing:
This strategy focuses on the prices charged by other airlines. Competition-based
pricing does not always imply having the same price strategy as the competitors. It
means keeping one‟s pricing strategy such that it is cheaper in cost or it offers the
same price as competitors with better and/or more facilities. Thus its basic purpose
is to have a competitive edge over the rival airlines.
26
27. For example, Indian airline industry is filled with low-cost airlines. So Air Deccan
before getting acquired by Kingfisher had many competitors like Indian airlines,
Air India (before merger), Indigo airlines and Go air. And now Spicejet had entered
the already filled jammed low-cost airline bandwagon. This brings about a
competition in the pricing of the tickets. Spice jet on completion of three years on
May 23rd 2008 offered 3 lakh tickets just for Rs. 3 starting from July 1st to 21st
September 2008 across its 18 destinations in India. This was a very smart move to
attract passengers especially those travelling by Economy class who are very cost
conscious.
4. Pricing strategies when customer means “Value is Low price”:
This strategy can be applied when the most important determinant of value to a
customer is money. But this does not imply that the level and standard of service,
facilities and other attributes should be looked upon. It just means that pricing takes
a forward stand as compared to the other attributes. To establish a price for this
strategy, the marketer should understand and know the objective of charging low
prices, how the customers‟ interpret prices and how they value their travelling
experience on the basis of prices.
There are various methods of applying this strategy:
i. Discounting: The service provider or marketer may offer discounts or price
cuts to communicate to the price-sensitive buyers/ customers‟ that they are
receiving value for which their money is spent. For example: Spice jet has a
special group discounting scheme wherein groups of over 15 guests may be
provided with consideration for special fares.Another example would be that
27
28. of Indian, that offers discounts to passengers on site collaborated with India
times by offering a bid for international destinations at low fares.
ii. Odd pricing: This is another strategy wherein the service providers offer
prices at an amount which seems comparatively lower than the normal rates.
It is based on U.S. dollar price-strategy wherein instead of charging $500
they will charge $489 or so. So in case on Spicejet. Instead of offering a
ticket from Mumbai to Goa at Rs. 2400 they would offer at Rs. 2299. So, on
looking at the figure the price difference seems to be more which in fact is
just hundred and eleven rupees.
iii. Penetration pricing: This is a strategy in which new services are introduced at
low prices to stimulate trial and widespread use. This strategy is appropriate when
the sale of tickets is price-sensitive.
In order to make, travel by air more affordable to the common man, a couple of
years ago Jet Airways announced a new offer `Everyone can fly' which offered a
major reduction in economy class air fares on certain selected routes across the
country. In most of the airlines, the reduction enables economy class air fares being
competitive to rail fares being charged for the same journey.
5. Pricing Strategies when the customer means “ Value is everything I want in a
service”:
When the customer is concerned more in the „get‟ component of the service,
monetary price is not of primary concern. The more desirable attributes that an
airline provides, the more highly valued that service is likely to be and higher the
price that the marketer can set.
28
29. Skimming strategy: This is a strategy in which new services are introduced at high
prices with large promotional expenditures. It is an effective approach when
services have undergone major improvement over past services. In this situation the
customer is more concerned about obtaining the service than the cost of the service,
thus allowing the service providers to skim the customers most willing to pay the
highest prices.
An example of this would be that of Virgin Atlantic airlines that has gambling on
board. They also provide in-flight body massage to their passengers. There is a bar
in the air craft. Also, they provide lounge facility at the airport to the frequent
flyers.
Also, when Kingfisher had newly started first class with Kingfisher first, the rates
of the tickets were very high compared to other airlines‟ tickets. But travelers still
opted for it as they wanted to have the new flying experience with Kingfisher.
THE PLACE MIX
In Airlines, they utilize 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 realiable
updated information. For these reason, I.T has been widely adopted such as on-line
booking system.
This dimension of marketing mix focuses on processing of services and selecting
the location points for airways and airlines offices keeping in view the comforts and
conveniences of the end users. By the processing of services, our emphasis is on the
29
30. involvement of channels, front-line-staff, travel agency offices; offices of the tour
operators or so from where service flow and reach the ultimate users.
1. The air transport needs to make sure that the prospects don‟t face any difficulty
in buying the tickets and make necessary arrangements for the confirmation of
booking.
2. It is also to be confirmed that the users booking their luggage are not to face
inconvenience.
3. The behavioral profile of the personnel working in offices of travel agents and in
the offices of the airways and airlines require due attention. It is almost clear that
airhostess looking attractive, smart, well dressed are at your disposal to make
available to you the defined services.
4. It is also to be sure that the information network of the offices of the travel agents
is technology-driven and user-friendly.
5. The security checking, custom checking of passport, visa, income tax clearance
or so. It is essential that all the windows or the counters offer the services as per the
provision and promises.
6. Keeping in view the duration and nature of flights, the users are made available
lunch/ dinner, breakfast and drinks inside the aircrafts.
7. If in course of the journey, you are supposed to change the aircrafts and the
duration of stay is long, it is the responsibility of the airport authorities and
concerned airway and airlines to make available the accommodation facilities.
30
31. Another dimension of place mix is related to location and management of the
offices of the airways, travel agents, tour operates, transport operators or so.
1. The main thing in the selection of a place is easy accessibility. The prospect
customer should get an easy access to the office and ticket counters. The place is
required to be safe, well connected with all-weather proof roads where all the
required infrastructural facilities are to be available.
2. The technology-driven booking system is to be ensured. The online booking
facility should be user friendly and all the information regarding the company
should be available on the company site so that customer can get all the information
at it ease.
3. The water and sanitation facilities for the users and comfortable seating
arrangements need due care of the travel agents or airways offices. The lighting,
ventilation facilities need to be made available.
4. The interior decoration, furnishing, plantation need aesthetic sense so that the
users from a positive opinion regarding the airways services. The interiors should
be creative so that people can enjoy their ride and make their trip a memorable one.
5. The positioning of posters of airways and airlines which look attractive and draw
the attention of the users attending the offices for chartered flights, packaged tour
need due care.
6. It is in this context that they find management of place an important component
of the marketing mix.
In view of the above, it is right to mention that air transportation business is linked
with a number of allied services offered by a number of agencies and organizations.
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32. If they don‟t find cohesion and coordination the promised services would hardly
reach to the end users.
KEEPING
There are three entities in the entire transaction:
1. Customer: He is the person who wishes to satisfy his needs i.e, transportation
from one destination to another. Here, the customer is a passenger or a potential
passenger.
2. Company: This is both the dreamer and the offerer. It here refers to the various
airlines which offer its aviation services to the customers to satisfy their demand for
transportation from one destination to another, for example: The Indian Airlines.
Here, the company makes a promise to its customers to deliver the right quality
service.
3. Provider: The service providers are finally the people who interact with
customers. They keep the promise that the airline operator has made to its
customers by delivering the finest services. They are the ones who carry out final
transactions. The customer actually comes in contact with the service provider and
not the company. For example: the air-hostess and the crew.
The interaction between these three parties while providing the service takes place
in the following manner:
The company is established with the basic objective of providing the specific
transport service. Thus the airline industry with players like Indian airlines, Jet
airways, Sahara airways etc came into being.
The air service provider that is the company communicates with the customer and
makes him aware of the services. It makes promises to the customer by advertising
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33. through various media‟s. For e.g.: the TV ad of Indian airlines advertising its new
sleep-in seats.
The customer who gathers knowledge about the service approaches the company
for availing his service in order to satisfy his need. This interface of the customer
with the company is through the customer‟s interaction with the providers of the
company. The company enables its promises to the customers through setting up
facilities to deliver the promises by setting up ticket and enquiry counters. The
outcome of the “to be transaction” is determined by the interaction between the
provider and the customer. Hence the company aims at offering its providers with
the required infrastructure and training to optimize the quality of the transaction.
For e.g.: Yearly employee training programs and performance appraisals are done
by Sahara airlines.
The three strategic points where the provider and the customer interact are:
a) Ticket purchase at the airline counter or the ticket agency.
b) Checking in while boarding.
c) During disembarkation.
All three sides are essential to complete the triangle. All three marketing activities
represented by the sides of the triangle are critical to efficient delivery of the
service, even if one of the sides is out of place, the triangle will be distorted; in
other words the total marketing effort cannot be optimally supported.
THE PROMOTION MIX
The formulation of an ideal promotion mix is essential to inform sense and persuade
the users. The business magnets, business executives, politicians, cine artists, high
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34. spending tourists, business houses using expensive inputs and trading the same, the
Department of Posts, domestic and international tourists are some of the users of the
air services. The users appear to be more conscious, aware of their rights and in a
majority of the cases are found sophisticated.
However, majority of the users are sophisticated and therefore the promotional
efforts are required to be more creative. The professionals engaged in the air
services bear the responsibility of blending the different components of promotion
in such a way that the task of increasing the business is simplified. Since a number
of airways and airlines have been facing problem of financial crunch, it is pertinent
that they make possible an optimal use of the different components of promotion.
PROMOTION MIX VARIABLES
Since domestic deregulation occurred in 1978, competition in the airline industry
has intensified and become more concentrated. The respective airline needs to
provide certain benefits that the other airlines do not. Promotion has become a big
aspect since the arrival of numerous private airlines. The way this industry has
attracted people to them has changed. Airline companies have struggled with
making new ways to market their products. Today airline advertising focuses on
price, rather than the pleasure of the flying experience. Companies use the radio,
newspapers, and billboards in big cities, tops of taxicabs and sides of buses to put
their ads on. Even coffee cups in restaurants are starting to be used for
advertisement.
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35. Promotion should be done keeping in mind the competitor‟s product. This helps in
promoting own product/service with a message that has an edge over the others.
Kingfisher understands its competitors well and promotes their service accordingly.
Vijay Mallya's Kingfisher Airlines adopts an innovative marketing strategy to
snatch attention from Jet Airways' advertisement.
In the ad displayed on the hoarding above, Jet Airways say, "We've changed."
Kingfisher Airlines comes up with a cheeky billboard above Jet's hoarding that
says, "We made them change!” This was a very innovative and smart move on
kingfisher‟s part to promote their service thereby denoting that their own service is
so much better that Jet Airways had to change and improvise them to reach their
standards. This needs presence of mind on part of marketing and promotion heads.
Spice Jet, India‟s most preferred low – frills airline, has announced a unique offer
of 3,00,000 tickets at a special price of Rs 3/- per ticket. This special offer flags off
the third anniversary celebration of the airline. Booking for this special promotion,
was opened on May 9, 2008 and will continue till the tickets are sold out.
Tickets bought will be valid for travel from July 1 to September 21, 2008 on all
flights covering its 18 destinations. This offer is available only on SpiceJet - Low
Cost Indian Airlines, Book Indian Flight Tickets Online, Cheap Fares Air Travel in
India - SpiceJet offers Discount Airline Ticket Fares Online. In the last three years
Spice jet has flown over8.1 million people across all their destinations. They have
helped Spice jet gets over 10.3% market share. This special promotion is Spice jet‟s
way of thanking them for their support.
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36. PROMOTIONAL MIX AND ADVERTISING
Advertising
As any other service, the air transportation service needs creative advertisements to
promote their business. This is the first component of the promotion mix, which is
based on professional excellence of the advertising agencies. In view of the rising
cost of inputs and increasing the impact of worldwide economic depression on the
air transportation, there is a need to make the advertisement budget optimistic Vis-
a- Vis optimal.
This is essential to regulate the multi-dimensional expenses found of unproductive
nature and instrumental in making the service expensive. The telecast media and the
print media are found important while promoting the air business.
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37. While advertising through the telecast media, budgetary constraints and budgetary
provisions should be considered. Also the quality and nature of target market and
level of expectations should be kept in mind. The advertising professionals need to
make the advertisement slogans campaigns and messages proactive to the
generation of business. Kingfisher is a good example for advertising its services.
They advertised kingfisher not merely into the business of transporting people from
point A to point B. They have created a new category of Aviation Hospitality Space
thus making service and hospitality their main focus. Their slogan is kingfisher
airlines- “Fly the good times.” This is how they are differentiating their product
from other airlines. The airlines also have to make sure that whatever the strategic
decisions they make to promote the business are in a position to establish an edge
over the promotional measures of the competitors. They are also required to assign
due weightage to the efforts made for the projection of a positive image. The Indian
Airlines as well as Air India have been facing the image problem but the
advertisement may be efficacious in transmitting the facts and removing the image
problem.
As mentioned earlier, Indian airlines started promoting its first class fully reclining
seats to as a tool to improve the image problem and attract more passengers in its
first class. It is essential that while advertising one has to keep in mind the image of
the country, the natural scenes, the tourist attractions, rich cultural heritage or so
which would energize the process of motivating the tourists. For example: Thai
Airways have air-hostess wearing colorful long and flowery dresses and greet by
joining hands and bowing to their passengers as a part of their culture. While
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38. advertising, it is impact generating that we select an opportune moment of flight, an
attractive scene of take-off, high attractiveness of personnel in general and the air
hostess in particular, the landscape of an attractive tourist center, wild life
sanctuaries, lake, park and so on. The air transportation services can also use the
broadcast media.
For example: In times of rising fuel prices and lower occupancy rates Jet Airways
has come out with a lavish ad featuring the most expensive brand ambassador of
time Shahrukh Khan. The Shahrukh Khan TVC, which broke on September 1, 2008
is the first of three campaigns Jet has planned (the ones on economy and premier
class will follow), and is running across most news channels and some specialized
travel channels. The ad marks the television debut of Jet Airways which had
previously relied heavily on the print medium. While competitor Kingfisher relies
on showcasing complete range of Consumer experience Jet is trying to highlight its
product superiority. Jet had come out with Boeing 777 last year, which has some
superior features and this ad is merely an aim to highlight those features besides
trying to latch on to the celebrity appeal of Shahrukh Khan.
Another example would be that of Indigo airlines that uses Internet and print media
as a visual medium to advertise itself. What is interesting is the fact that the ad is
not flashy and it just conveys simple facts.
An important source of visibility for Indigo is the internet where e-ticketing give it
a chance to come up with its offers.The launch and subsequent editorial patronage
and newspaper support that Indigo carved out for itself helped it set itself up as a
brand.
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39. .Publicity
Publicity is a process of persuasive communication for which no payment is made.
Strengthening public relations activities if found essential to promote the business
airlines or airways. The Public Relations Officer, Receptionists, Travel Agents,
Travel Guides, Media people are some of the sensitive points of publicizing the
business. The most important point in this is the co-operation of media. The
marketing professionals should have an idea of magazines, newspapers preferred by
the prospects or users and they develop rapport with the correspondents concerned.
The Airlines need to recruit efficient personnel for that very purpose that should
have professional excellence no doubt but in addition they are also required to have
the potentials of attracting the users, prospects.
For e.g.: Indian Airlines helped the cancer patients and took them for a small outing
as part of their public relation campaign. Similarly, Sahara linked up with Close- up
by taking Hrithik Roshan. Here for Close-up it is a promotional strategy while for
Sahara a publicity that an airline is linking up with FMCG by using an entity.
Kingfisher is right now running a print campaign in major business publications.
The new series of campaigns are focused on the functional attributes of the airlines.
Deviating from the usual flashy ads, Kingfisher is now appealing to the Left- brain
of the consumers. The ads are targeting the three segments of user‟s i.e Children,
Ladies and Males but the ads are talking to Men who are the key decision makers.
The ad for the young travelers talks about special kids‟ meal, wide seats and games.
The ad ends with an appeal to the father that “Your little prince deserves to feel like
a King ". The ad for the lady travelers talks about the seats that bend all the way
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40. back, the footrest that will pop up, life valets when your lady lands at the airport at
midnight and helping hands that lift her bag. The ad ends with the message “Queen
of your heart deserves to fly like one ". The third in the series aims at the decision
maker himself. The ad aimed at male traveler as usual talks about the 'flying models
", the smile that tastes better than the ice-cream, spectacle cleaner and the air-
boutique. The ad ends with the message ' Every man's seat feels like his throne'.
With regard to the quality of campaign, it may miss some eyeballs because of not
being an eye catchy ad. But the message surely is smart. The basic premise in this
ad campaign is that Men are the decision makers with regard to this service. May be
a campaign aimed at lady executives may also come in the future.
On the promotional front, Kingfisher has signed up the latest diva of Bollywood,
Ms Deepika Padukone as the brand ambassador.
Sales Promotion
A component of promotion adopted for a particular period to touch the target and
withdraw the measures when the time is over is known as sales promotion. The tool
based on incentives is found instrumental in sensitizing the users. The travel agents
contribute a lot to the promotion of air transport business and therefore we need to
think in their favor on a priority basis. The tour operators also contribute to the
process and therefore need to think in their favor. The front- line-staff in the offices
of the airways and the receptionists working there also play the same role. This
makes it significant that they are given some incentives which are in the form of a
holiday trip to a particular place, concessional services to their children or spouse or
so. Also offering them with innovative gifts, which have not been offered by their
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41. competitors, can be given. The nature and type of incentives would depend on the
contributions of providers. If they make immense contributions, the incentives
would be in good quality and volume. There are incentives given called the
promotional incentives on the basis of the frequency of using the services.
For e.g: Through Jet Airways, return ticket passengers on metro flights (both
economy and business) can avail a discount at all Taj and ITC hotels in South India.
Also Sahara has a fanatical assortment of gifts being handed out (its‟ Take Offer).
Braun Mixer grinders, CTVs, cameras, handy cams, mobile phones and even free
holiday packages are up for grabs as a part of their sales promotion campaign.
Also, there‟s something called marketing bonanzas. Some airlines give free tickets
to customer so as to make them aware of their services. These tickets or any other
gift voucher are given so as to attract a lot of people. This is a very interesting way
of catching the headlines of customers. Example Go Air was sending SMSs to any
number that they have won a free ticket from Mumbai to Goa or Delhi. Kingfisher
has also sent messages to people for free ticket.
Jet lite announced its „Summer Special Bonanza‟ promotion for online bookings
through its website. Even Air Deccan used this approach of giving gift voucher
worth Rs.250 and a saving of Rs.99 per ticket if booked thorugh Air Deccan‟s site.
The offer was valid for bookings made between 22-May-08 and 10-Jun-08 and for
travel in the same period. There was also a 2 nights, 3 day holiday package to be
won in the offer period.
Jet Airways, India's premier international airline, has announced a special
promotional package for students flying to its destinations in the United States,
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42. Canada, United Kingdom, Europe or Asia. Jet Airways' special promotional
package is valid for outbound travel on or before October 31, 2008. Existing, as
well as new, students will receive a whole host of benefits including excess baggage
allowance and special fares. Students availing of this offer will be allowed to carry
an extra piece of baggage, with each piece not exceeding 23 kilos, on flights to the
US, Canada, UK & Europe; and an additional 10 kilos on flights to Asia (Shanghai,
Hong Kong, Singapore, Kuala Lumpur and Bangkok), on Jet Airways' online
destinations.
With Jet Airways special promotional package, students will also receive
exclusively designed Student Kits', in association with its partners. These may be
collected after the purchase of a ticket at any of Jet Airways' city sales offices
around India. Each kit contains a Matrix mobile connection with free talk-time
worth Rs.4000 in the US, UK, Singapore and Australia, ICICI Bank Travel Cards
for hassle free transactions across the world, a free Tata Indicom Wi-Fi Roam Card
enabling internet connectivity from over 50,000 hotspots in the US ,UK, Austria,
Czech Republic, Germany, Netherlands, Switzerland, France and Japan; Bajaj
Allianz Travel Insurance with special privileges and low premiums and VIP
vouchers worth Rs.500/- on purchase of VIP travel accessories.
Jet Airways also offers students an ergonomically-designed seat with hammock
style head rest and foot support, the airline also provides its Economy passengers a
personal reading light, on demand In-Flight Entertainment and access to over 200
hours of Hollywood and Bollywood movies, regional films, and television and short
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43. programmes. Thus Jet Airway plans to tap mass-students travelling abroad during
this period.
Personal Selling
The air transport organizations find personal selling which is the mix of promotion
mix helpful in increasing the business. An art to influence, stimulate, sensitize the
impulse buying is known as personal selling. The air transport-marketing
professionals are supposed to know about the behavioral profile of persons who act
as personal promoters. The travel agents, tour operators, transport operators, travel
guides, front-line staff on the booking counters, receptionists contribute
substantially to the process of promotion. If they stop selling, the offices of airways
would find it difficult to sell. This makes it clear that even the quality services fail
in attracting the users, if the channels are not co-operated. This makes it essential
that the airlines offer incentives to them so that they keep on moving the process of
stimulation.
To better understand the concept of personal selling, the airline in question needs to
follow the diagram given above. It explains all the things that the people involved in
the process of selling should know and do. Starting with the first point, customer‟s
value for time, money and energy should be considered. Their comfort and
suitability should be addressed to. They should be provided service in such a way
that they get more than they expect to. It can be said that the customer‟s should be
pampered.
For instance, giving chocolates on arrival and departure or welcome drinks or
discounts during off-season to name a few. The delivery of tickets should be made
on time this enhances the effect of personal selling.
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44. The entire aim of personal selling is to provide customer‟s easy access and hassle-
free journey and that is what should be done by the airlines and that is where the
circle of personal selling ends. To fulfill the above mentioned criteria the airline
industry must select persons, agencies having a positive image.
The travel agencies having a well established business can help substantially and
therefore it is the prime responsibility that while selecting the travel agents one
must assign due weight age to the image of the agencies. The tour and transport
operators help considerably and one needs to think about the incentives to be
offered to the promoters. In personal selling, the front-line staff or personnel at the
booking or reservation counter of airlines office playing an incremental role in
promoting the business. Here, it is essential that one is aware of the credentials of
persons supposed to discharge the business responsibility and try his best to brush
up their faculties as and when opportunities come.
Word-of-mouth Promotion
This happens to be an important constituent of promotion mix in which the
promoters act as a hidden sales force. The air transport organization depends on this
type of promotion if they feel that the quality of services offered by them is of
world class. In the Indian perspective, the Indian Airlines, Air India, Sahara India,
Jet Airways and others may use this component of promotion if they realize that
providers have not been distorting the quality of services promised. If you are
traveling by kingfisher and you really like the experience then you will definitely
recommend your friends, relatives, etc to travel by the same airlines. Word of
mouth is the best promotional strategy as it does not incur any cost for the company
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45. and also a positive image is built in the market by their loyal customers.
Indigo airline being a low-cost airline does not allocate much fund to advertising
hence, it entirely relies on word-of-mouth promotional tool to spread a word about
their services and thus communication is established and brand is recognized by the
people who are potential flyers rather than the entire country which is an expensive
affair.
Customer Segmentation
Most airlines use a very traditional segmentation strategy, dividing passengers into
first class, business travelers and economy travelers. But, nowadays most of the
airlines offer only two classes – the business class and the economy class.
The customers subsequently also be divided as per the scope of the market .This is a
process of subdividing a market into distinct subsets of customers that behave in the
same way or have similar needs. Each subset may conceivably be chosen as a
market target to be reached with a distinct marketing strategy.
This includes preparing a method of identifying a group of consumers, within a
broader market, that has similar characteristics and needs. Segments can be
identified by examining geographical, demographic, psychographic, and behavioral
differences.
Segmentation of the aviation industry can be done under the following factors:
Geographic segmentation
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46. Geographic segmentation calls for dividing the market into different geographical
units such as nations, states, regions etc. the company can operate in one or few
areas or operate in all but pay little attention to local variations.
Most of the domestic airlines, their market segment consists of the customers who‟s
destination are major commercial cities like Mumbai, Delhi, Kolkatta etc. apart
from these the airlines also concentrate of tourists destinations like Goa, Agra etc.
The reason behind this is that such sectors have major traffic and are profitable
sectors. However Indian Airlines, being the National Carrier of the country, fly‟s
even to the unprofitable sectors and concentrates on the segment of people flying to
such destinations.
Demographic segmentation
In demographic segmentation, the market is divided into groups on the basis of
variables such as age, family size, family life cycle, gender, income, occupation,
education, religion and social class. There are several reasons for the popularity of
demographic variables to distinguish customer groups. One reason is that consumer
needs, wants, usage rates and brand preferences are often associated with
demographic variables.
Airlines like Kingfisher targets the affluent class and the executives from multi
national companies, business community etc. However in the case of Air Deccan
and other low cost airlines, their segment is the population from the lower middle
class and the middle class. Thus it can be said that Kingfisher targets the classes
whereas the no frill airlines target the masses.
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47. Psychographic segmentation
Psychographics is the science of using psychology and demographics to better
understand consumers. In this segmentation customers are divided into different
groups on the basis of psychological, personality, lifestyles or values. People within
the same demographic groups can exhibit very different psychographic profiles.
The airline tries to work on the psychology of the people. Kingfisher concentrates
on the segment of people who do not mind paying a higher price, but would like to
have the best of comforts. Whereas the low cost airlines targets those customers,
who believe in value for money services and account for every rupee that they
spend.
Behavioral segmentation
In behavioral segmentation the customers are divided into groups on the basis of
their knowledge of, attitude towards, use of or response to a product or a service. It
refers to grouping consumers in terms of their relationship with the product, for
instance their usage rate, the purpose of use, their willingness and readiness to buy,
etc.
Segmentation of customers on the basis of airlines
Business Class
They are crucial for airlines' profitability. With less spare time and more cash in
their pockets, they agree to pay a premium price for a premium service. The
premium prices they pay provide wider and more comfortable seats, better choice of
meals and seats, luxurious lounges.
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48. If the airline is also providing the first class including the business class and the
economy class then it will provide additional services to the first class travelers in
addition to the other services. These services may include fully reclining seats,
workstation and TV surrounded by private dividers
Economy Class
They represent a totally different market. The most important consideration for
most of them is the price. The lower the airfare, the more people will fly the
respective airline. By and large, with the exception of wealthy travelers, this
segment will not pay extra for premium services and will agree to change several
planes during their trip if this option costs less than a direct flight.
PHYSICAL EVIDENCE
Physical Evidence refers to the environment in which the service is delivered and
where the service industry and customer interact. It is the ability and environment in
which the service is delivered. Both tangible goods that help to communicate and
perform the service, and the intangible experience of existing customers and the
ability of the business to relay that customer satisfaction to potential customers.
The aircraft by itself, the seating configuration meant to be comfortable and
spacious, the in-flight food, the staff dressing, baggage handling facility, colour of
the aircraft, in-flight entertainment, and ambience in the aircraft provide physical
evidence to the airline service. Nowadays, websites are another major part of the
physical evidence of airlines. A recently completed survey indicates that passengers
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49. rely on major airline websites, but would like the airlines to improve those sites to
better meet their specific needs and expectations.83 percent of the passengers
indicated they use airline websites to book flights. The survey also identified that
nearly half (48 percent) of respondents indicated they also book flights by calling
the airline directly, which may be a further indication that airline websites are not
sufficiently meeting the needs of small business travelers. Results show that 56
percent of respondents use travel websites to make flight arrangements, while 47
percent use a travel agent, compared to 83 percent using airlines' websites.
Hence, the websites should be updated regularly, should be less time consuming,
fast processing and easily operative.
COLOUR AND STAFF DRESSING
Increasing importance is given to the cabin crew and the ground staff uniform.
Designers are given contracts to design the uniform and the colors are such which
symbolizes the airlines motto. Colour is a visual identifier and thus attractive color
scheme catches the eye of the passenger. The staff dressing also helps to
differentiate one airline from other. Just by looking at the staff, the passenger
assumes the standard of the airlines. And these two are the first thing that a
passenger visualizes in an airline. However, another important reason for the use of
color is the expansion of a corporate culture. For example, Paramount Airways does
this very well. Their use of blue color emphasizes confidence, a character trait that
is important to the airline industry, especially in these times. Blue also demonstrates
vastness, opportunity, a sense of modernism and openness and honesty.
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50. KINGFISHER AIRLINES
The first thing that strikes about fly Kingfisher is the bold use of the color Red.
From the tail of the aircraft with the logo of the kingfisher bird and the word
Kingfisher painted boldly across the body of the aircraft in Red to the interior decor
and even the Crew uniform –it„s Red, Red, Red all the way.
The in-flight crew called 'Flying Models' are clad in short Red skirts and a trendy
rolled up sleeve jacket in Red with a white shirt unlike the traditional blazers and
waist coats of other airlines. There are no male pursers on board either because KF
in-flight is all women.
AIR INDIA
Eminent Indian fashion designer Ritu Beri was roped in by national carrier Air
India to design the new uniform for its cabin crew and ground staff. Air India went
for a complete makeover to reflect its aspiration to be a “powerful” global entity.
The design of the new uniforms draw inspiration from the Sun Temple of Konark in
Orissa, yet maintains a modern outlook. The colour palette of the uniform is red,
orange, black and white, with red standing for strength and orange for cultural
roots.
The uniform for the female employees, both ground staff and cabin crew, included
sarees, tunics, scarves, jackets, coats, aprons and shoes, while there would be
specially designed ties for the male staff.
JET AIRWAYS
To position itself as a global airline, Jet Airways introduced fresh airline uniform
for the cabin crew designed by Italian designer Roberto Capucci. Their uniform
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51. reflects distinctive international look capturing spirit of new India and a meeting
point between East and West
IN FLIGHT MEALS
Airline passengers always have a certain standard of living and are very hygienic
about the food. However, in-flight meals have often been the butt of many jokes
over the years for their perceived lack of nutritional value. In airlines, the passenger
prefers variety in the meal offered, noticing the nutritional value. They also see as
to which caterers is serving the food; the way the food is served and handled. This
is one critical aspect where even the service recovery can‟t help to retain the
passenger because even the slightest of the mistake by the chef or by the cabin
crew, or compromising on the quality of food might prove very dangerous for the
passenger‟s health. This, in turn, will spread a bad reputation of the company.
Hence, more and more airlines are in fact striving to make their meals more
attractive by packing as much goodness as possible into them.
KINGFISHER AIRLINES
In-flight Meals or Snacks are served as part of the fare on every flight and small
amenity kits distributed as well. Depending on the flight time, Kingfisher serves
Breakfast, Lunch, High Tea or Dinner on all flights. An individual menu card is
there on all Kingfisher flights. Kingfisher has a wide variety of multi-cuisine menu
to suit the varying tastes of the local sectors. Indian, Chinese, Continental and
World Cuisine is available on various sectors. Vegetarian or non-vegetarian food
can be chosen on the flight. Kingfisher First Class passengers can choose from a
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52. special menu and depending on their choice, a three course gourmet meal is served
on the flight.
It also provides an exclusive three course menu complete with a Kingfisher
sparkling welcome drink, signature dessert and freshly brewed coffee on board.
JET AIRWAYS
Jet airways have different menu options onboard for Premiere and Economy class
passengers.
The following specialty meal options are available on Jet Airways:
Strict Vegetarian (STVG) , Jain Meal (JNML) , Diabetic Meal (DBML), Low
Cholestrol (LFML), Low Sodium (LSML), Low Calorie (LCML), Low Protein
(LPML), Non Lactose Meal (NLML), No Salt (NSML)
This shows the passenger that Jet Airways do care about their health , thus creating
a goodwill among the passengers.
Kosher meals
Jet Airways also offers kosher meals (KSML) on the Mumbai-London-Mumbai and
Mumbai-Singapore-Mumbai sectors. Kosher Meal preference has to be notified 48
hours in advance. The Kosher Meal on Jet Airways flights consists of Western Non-
Vegetarian Meal of Fish, Potatoes and Vegetables. Kosher meals are served
onboard in a sealed pack. The cabin crew opens the pack in front of the passenger
and shows the Kosher certificate inside the box.
This assures the passenger that there is no malfunctioning or adulteration in the
meal provided , thus creating an impression in the mind that meals offered in Jet
Airways are of the best quality.
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53. AIR INDIA
Air India offers a wide variety in its in-flight meal menus, with a multi-cuisine
approach to cater to the predilections of the range of passengers. The variety of food
ranges from vegetarian meal, Moslem meal, Kosher meal, Low Sodium meals to
something simple as a fruit platter. The meals are hygienically packed from reputed
hotel chains like the Taj Group and Ambassador. Besides the regular normal
vegetarian and non-vegetarian meal, Indian Airlines also provides special meals
such as Jain meal, Diet meal, child meal etc.
IN FLIGHT ENTERTAINMENT
To make long flights more enjoyable, several major commercial airlines offer in-
flight entertainment and information systems to their passengers. This is
increasingly gaining popularity in the airlines sector because the passengers here,
unlike other modes of travel do not have any other source of entertainment. In
airlines, the interaction among passengers is also minimum. So, this is one of the
tangible tools of attracting or pulling the passengers towards an airline. Nowadays,
there are lots of innovations done in the in flight entertainment system and each
airlines is daily coming up with some or the other new technology or up gradation
for the passengers to have entertainment in the flight.
KINGFISHER AIRLINES
Kingfisher Airlines flights have individual LCD TV screens for each passenger.
They have a choice of 5 video channels of the trendy FUN TV, or listen to
Kingfisher Radio which offers a choice of 10 international radio channels. There is
a separate video channel for kids too to keep them busy on the flight. All passengers
are given complimentary headphones to enjoy the in-flight entertainment. For
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54. Kingfisher First Class passengers there is an extra wide 8.4 inch LCD swivel screen
fitted on every seat. Kingfisher First Class passengers can also enjoy noise
canceling headphones for a quiet and relaxed flight experience. Kingfisher First
Class passengers can also play video games on the LCD screen and even play
multiplayer games with their co-passengers.
Kingfisher Airlines has tied up with Dish TV to provide live in flight entertainment
to its passengers. This shows the weightage given in flight entertainment in the
airlines sector.
JET AIRWAYS
Jet Screen, Jet Airways' In-flight entertainment system is available on both business
and economy class on several Jet Airways flights. Jet Airways has also installed
state-of-the-art Panasonic 3000i Audio Video on Demand (AVOD) on every seat in
some of its flights. In addition to video channels, up to 8 audio entertainment
channels playing latest Bollywood songs, International Pop songs, Ghazals, Indian
and Western Classical, etc. are also available on Jet Screen.
SEATING
In airlines, passengers mostly stay glued to their seats. So, it‟s very important to
have a comfortable seating in the flight. Specially , in long distance journey the
passenger has to spend a lot of time on the seats, thus the passenger should have full
satisfaction with the seats provided, as in, there should be enough leg space, there
shouldn‟t be any back problem, comfortable head space and more importantly , the
seats should be clean. The seating arrangement has to be spacious as different
individuals have different physique. Thus, the seats should be such wherein every
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55. passenger irrespective of his/ her size or shape should feel relaxed and comfortable
on the seats and should feel refreshed after reaching the destination.
Seating is not much of a problem in airlines like Kingfisher or Jet however low cost
airlines needs a lot of improvement because they usually have this problem of not
having enough leg space.
KINGFISHER AIRLINES
The seats are the plush Separate seats with a 48 inch pitch, 125 degree recline,
adjustable headrests and fully extendable footrests. The expansive legroom, the
fully lie flat bed in Kingfisher First and the widest seat pitch in the skies, allows the
passenger to stretch those tired muscles to the fullest. There are also laptop chargers
and mobile phone chargers in each seat.
JET AIRWAYS
Jet Airways is the first airline in the world to install new ergonomically designed
seats that offer more space, reduce pressure on the passenger‟s body and has
adjustable "Hammock" head rest and a unique foot net which gives added support,
especially on long journeys.
NEWSPAPERS AND MAGAZINES
Newspapers and in flight magazines are provided to the passengers so that even in
the skies they can get information and update their knowledge.
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57. ENVIRONMENTAL SCAN
The following is an Environmental Scan of the Global as well as the Indian Airline
Sector/Industry. The scan identifies the trends impacting the demand in the Airline
Industry and the capability of the service providers to meet the expected demand.
While the current events are important, the focus of the scan is on the trends likely
to be important and effective in five to ten years from now. Apart from identifying
the demand trends, the scan also identifies the constraints and issues of the airline
industry, the key players, resources and the outcomes for the various service
providers.
In India, the service airline business is in trouble. Many airlines companies are
struggling to establish a business model which is viable to the business and
profitable. Most of the companies are running into losses quarter after quarter due
to the increasing costs etc. The recent high volume of passenger and freight flow
has not been able to return profits. The low-fare airlines business model has been a
success but has not been able to recover the increasing costs. The following factors
represent the business environments for the airlines companies.
PEST Analysis
Political Factors
Liberalization of Air Services
Many economies have now adopted a forward looking approach in matters of
policies for the liberalization of the civil aviation sector. Many economies are
opening up with regards to bilateral agreements and are attracting more foreign
passengers. Also, the air traffic between nations such as India-US, China-US, and
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58. many more strategic nations is on an increase. These liberalization policies are
surely a boost to the airlines sector since the demand goes up and also service
providers can take advantage such the fuel cost advantage (fuel prices in foreign
nations are lesser), Globalization, Mergers and Acquisition etc.
Modernization of Infrastructure
With the availability of word class, improved technology, the infrastructure has
been modernized to the maximum extent possible providing the best possible
experience to the travelers. Airports are getting modernized with the entry of
foreign investments. The best example is the airports in India, which have
undergone modernization and are as beautiful and well-managed as the Heathrow
airport. Airports in tourist places such Udaipur have also undergone beautification
in order to give the foreign passenger a global experience.
Investments, Resourcing and Outsourcing
The promotion of Foreign Direct Investments by liberalizing the investment
policies in the airline sector is relevant from the increasing number of people
traveling by air and this has lead to generation of investment opportunities in the
aviation sector. Foreign players are now not hesitating from investing in the airline
sector of India and other developing nations. Due to Globalization, the demand is
present in every part of the world be it in the U.S.A. or South Africa or Indonesia.
Also, with the entry of foreign players is leading to tremendous outsourcing which
is in a way reducing cost due to effective logistics decisions.
Economical Factors
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59. Transportation Gateways to World trade
The global Airline Industry has developed as such that the infrastructure is
facilitating World Trade, the export and import of goods, services and people. The
world trade trends and the economic conditions of different nations indeed have an
impact on the airline industry, the demand and the outcomes. Amongst the Asian
nations, Japan is facing stagnation because of which the foreign investments and the
demand for trade in goods and services have fallen. Whereas, in China and South
Korea, the import demands from various nations have increased. These economic
conditions are affecting the airline industries of these nations.
Price and Availability of Petroleum Products
Rising and the volatile world process of Petroleum Products represent trends that
have profound impact on the airline industry and the costs to the service provider.
Higher fuel costs affect the demand and the operating costs thus changing the travel
pattern. They also affect the infrastructure such as amenities like sky-walks etc.
higher petroleum prices stem for a mix of factors which are complex in nature such
as supply interruptions, geopolitics, change in usage patterns etc. The effects of
high petroleum prices on airlines can be seen clearly in the balance-sheets of
airlines such as the Kingfisher which has recorded losses in Quarters I and II along
with many other airlines which are unable to recover their rising costs.
Cost and Availability of Skilled Labor
The airline industry demands extreme skilled labor such as the pilots, ground staff
and the flight crew. The labor not only has to be skilled and available but has to be
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60. efficient because of the heterogeneous nature of the services provided. No airline
can recruit a trainee pilot and directly assign him to fly a Boeing-777 or an Airbus-
319 airplane carrying around 500 passengers. The labor-force has to be trained and
then assigned with tasks to perform after proper evaluation. Airlines have their own
subsidiary training centers which concentrate completely on the grooming and
training of the labor-force. The selection, recruitment, evaluation and training are
costly in nature and thus the company‟s costs goes up which get transferred to the
customer or the market thus affecting the market and the demand. Also, skilled
personnel in aviation occupations (particularly pilots) are being attracted to
overseas airlines and airports, creating training demand on top of projected
domestic labor requirements.
Also, a matter of concern to the airlines companies is the aging work-force which is
low on efficiency and productivity. Accommodating such an aging and un-
productive workforce in the organization structure is difficult.
Cost and Availability of Strategic Raw Material
Strategic raw material with respect to the airline industry is steel and cement which
are required for the manufacture of airplanes and other infrastructure required. The
prices of steel and cement are growing at an alarming rate. Thus, making these
materials available is a difficult and an expensive task resulting in the increase in
the costs to the service provider.
Mergers and Acquisition
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61. Strategic M & A between airline providers are another boosting factor to the airline
industry. The Star Alliance which was founded in 1997 with only 5 Airline
Companies now has 21 Airlines Companies. Also, the merger of Air India and
Indian Airlines is a good example of a Strategic merger. These mergers make the
airline companies stronger and efficient with respect to service providing. A better
co-ordination between different airline companies results in a joint effort in tackling
supply problems of fuel, aw material, labor etc. The merger of Air India and Indian
Airlines was a strategic merger to tackle the competition from the private players in
the Indian Aviation sector.
Changing industry structures and market
The global market is highly volatile and undergoes dynamic changes such as in the
demand, the supply, investments etc. This dynamic nature of the market affects not
one or two service provider but the entire sector. The changing business models
effect into a shift of demand which has to be catered to by the entire industry. For
example, the low-cost airline business model gave birth to an all-together different
class of flier, the best bargain available wherein bookings are made 3 months in
advance and that too in auctions etc. This led to a steep increase in demand and the
number of travelers almost doubled. The strain was felt by the service provider. The
low-cost airline model was not only forcing other airlines to lower their fairs and
fight the competition but also cater to the demand. Thus, the volatile nature of the
industry does take a toll on the airline service providers.
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62. Competition
Two factors which worry the airline companies are the demand and the competition.
With the liberalization of policies, foreign players and private players have entered
the market giving a tough time to the Government companies. Also, the foreign and
the private players have an edge due to the exposure to a global standard, world
class infrastructure and thus provide better services to the passengers in cost-
effective manner. Local and Public players have to face the heat and cope up with
the competition which result into mergers and acquisition which altogether is a
positive for the Airline sector.
Sociological Factors
Population and Urbanization
Demographics are an important factor determining the demand and the key markets
for the airline industry. The migration of population from nation to nation either for
lifestyle as well as economic reasons has led to the growth of the demand. The
population growth leads to increased demand for people movement and for support
services such as the hospitality and tourism services. Also, an important feature of
the growing population is that the growth is taking place in the urban area and thus
further creating demand for movement and air transportation from city to city. For
example, the increasing movement of people from major international cities has led
to the increase in the number of flights between these key cities, such as Mumbai-
London; Mumbai-Paris etc.
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63. Technological Factors
Improving Technology
With Globalization, technology is going through tremendous change with the
special emphasis by companies in Research and Development. Every service
provider is looking for a cost effective method, world class infrastructure, best of
the best service providing to passengers etc. technology is surely another boosting
factor the airline industry. Facilities such as E-ticketing, Kiosk Check-in, internet
connectivity in-flight etc. are due to the improving the technology. These facilities
are resulting into customer-delight.
Other Factors
Apart from the „PEST‟ Factors affecting the Business Environments of the Airline
Industry, there are many more factors which are affecting the demands and
determining the market trends for the sector. The following factors are a part of the
of the „PEST‟ factors but they have an all-round impact on the sector thus cannot be
allocated under a specific heading.
Following the „Other Factors‟:
Tourism
Since the last ten years, world tourism has been struggling due to the frequent
terrorist attacks and natural calamities happening in key economic destinations. The
9/11 bombing of the twin towers in New York had the most destructive effect to the
tourism in the entire of the United States. Tourism in the U.S.A. has not yet
recovered. Because of the fall of tourism, the international travelling has reduced
thus directly affecting the airline industry. Nations now are concentrating on
promoting tourism in order to improve revenues in the related sectors, most
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64. important being the airlines sector. „Incredible India‟ is one such initiative by the
Government of India to promote national as well as international tourism.
Safety and Security Concerns
Events such as the 9/11 blasts, blasts at the London Airport, blasts at the Madrid
Railway Station and the serial blasts in the Mumbai local trains confirm that
transport facilities are being targeted by terrorists. These events have led an increase
in the safety and security issues in major cities. These issues are affecting the
demand of airlines services for travelling by people.
Environmental Concerns
It is now recognized that the rise in temperature due to climate changes are because
of the human activities such as Globalization, agriculture, burning of fossil fuels,
deforestation etc. all these activities are to meet the increasing demand of the
increasing population. The airline industry needs these activities in order to fulfill
the demand of the movement of the population from one place to another.
Environmental issues and concerns are obstructing in developing infrastructure such
as new airports etc. the airline industry without a proper infrastructure cannot create
profits for the players in the market.
Workload
We just mentioned volatile nature of the market and demand and its effect on the
industry. This effect is felt in the hanging workload for the employees. In peak
season times, the workload is tremendous. Also, the labor-force is not available as
required by the industry. Thus, the existing work-force has to bear the brunt of
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65. excess workload. Pilots, flight crew getting stressed are a common issue now and
the stress is resulting into hazardous effects for the airline companies.
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66. SWOT ANALYSIS
STRENGTHS
Open Economies
The world is getting smaller. Thanks to the opening up of economies like India. The
developing nations have a lot of potential with regards to industrial growth.
Opening up policies regarding the airline services initiates MNCs to venture into
developing markets.
Efficient Marketing
Due to the heavy competition in the sector, airline companies are initiating on
dynamic marketing strategies. These strategies are encouraging people to fly who
were once scared of flying and also considered it an expensive mode of commuting.
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67. Networking
The Airline Sector on the Global as well as the National level is well-networked
and have efficient resources put into the networking infrastructure. Travelling from
any destination to another destination is possible with varied options available to
the traveler.
Modern Fleet
With average age of aircraft of about 5 yrs Indian Aviation sector have one of the
most modern Fleet of aircrafts
WEAKNESSES
Threat of New Entrants
At the first glance, the Airline sector looks very profitable and full of opportunities.
No doubt, there are a lot of opportunities but there are many candidates fighting for
the opportunities. The competition is so intense that no player can be profitable
along with being an effective player in the market. Capital intensive businesses like
an Airline Company cannot afford to forego iota‟s profits for market share.
Power of Suppliers
The airline supply business is mainly dominated by Boeing and Airbus. For this
reason, there is a sort of monopoly of the suppliers which takes a toll on the costs.
Also, a stagnant supply poses as a weakness to the increasing demand for airplanes.
Power of Buyers (The service providers)
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68. The bargaining power of buyers in the airline industry is quite low. Obviously, there
are high costs involved with switching airplanes, but in order to give the best to the
traveler, companies have no option but to buy at a high price.
Availability of Substitutes
Other modes of commuting, may it be people or cargo, are definitely cheaper as
compared to air-travel. As a result, the airlines sector often loses market due to
these substitute means. Especially, in the freight carriage sector, the business is
falling due to increasing prices of airline companies.
Competitive Rivalry
The airline sector is highly competitive. Highly competitive sectors fetch minimum
returns. Also, low returns in the airline business in the long run can pose as threat
because of the businesses being capital-intensive.
OPPORTUNITIES
Emerging Technologies
The latest technologies and the innovations in the technologies are improving
service delivery internal as well as external, minimizing costs, enabling mobile
computing for booking, check-ins etc. and enabling businesses for capitalization of
economies of scale and scope offered by government wide approaches.
Government Initiatives
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69. Businesses can be able to capitalize on resources constraints and achieve resource
cost efficiencies. Improvement of Inter-Government Partnership and Delegating of
work-load is possible.
Resourcing and Investments
Outsourcing and investments help the businesses to further support the
departmental objectives thus resulting in the achievement of the company‟s goal.
Other advantages are knowledge sharing / continuous learning, increased career
bridging opportunities, ability to identify and justify resource requirements, ability
to balance workloads, improved management of the costs etc.
THREATS
Poaching
The labor-force management is very costly with respect to the airlines sector. Also,
due to the liberalization of policies, foreign and private players often poach work-
force of competitors which leads to talent-drain and thus losses.
Inefficient Planning
Inefficient planning results into in-effective decisions which result into difficult
situations. Also, planning in the airline sector is also tough wherein one has to
consider every other element of service delivery and cost management.
Government Interference
Extensive Government Interference can affect the accountability of the organization
wherein the Government influences decision making and also planning. One
incident can be recalled of the Government Interference during the Privatization of
the Airline sector.
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