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Airlines case study


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Airlines case study

  1. 1. Study of strategicmanagement decisionsofIndian AviationIndustry 1
  2. 2. Table of ContentsChapter I: Introduction 1.1 Objective …………………………………………………………………………….. 1.2 Scope of the project...…………………………………………………………….......Chapter II: Theoretical Framework and Review of Literature 2.1 Indian Aviation Industry................................................................................................ 2.2 Key Domestic Players……………………………………………………………......... 2.3 Product Mix………………………………………………………………………........ 2.4 Pricing Mix…………………………………………................................................... 2.5 Place Mix…………………………………………………………………………….. 2.6 Promotion Mix ……………………………………………………………………….Chapter III: Analysis 3.1 Environmental Scan (PEST Analysis)………………………………………………. 3.2 SWOT Analysis……………………………………………………………………... 3.3 TOWS Analysis……………………………………………………………………...Chapter IV: Conclusion 4.1 Conclusion……………..……………..……………………………………….. …….Bibliography……………………..…………………………..…………………………….. 2
  4. 4. Objective: To study various airlines in Indian aviation Industry To study and analyze Strategic Management decisions of differentairlines in IAIScope 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 PestAnalysis, SWOT analysis, Tows Analysis etc.Data CollectionSecondary data collected through various magazines, books,Newspapers , case studies and internet will be used.Data AnalysisThe project analysis will involve Pest Analysis, SWOT analysis, Towsanalysis etc. 4
  5. 5. Chapter 2Literature Survey 5
  6. 6. Theoretical Framework and Review of LiteratureINTRODUCTIONIndian Aviation IndustryThe basic function of an airline is to accommodate for passengers and cargo whiletaking them to far-off places between two major cities or towns within a country orbeyond geographical borders.The aviation industry in India has grown by leaps and bounds in recent years interms of kilometers flown as well as customers serviced. The economy of a countryis substantially determined by the quality of air transport.Air transport is also considered to be the swiftest mode of transport. Almost all thestates have one or more airports, which are regularly serviced by several airlines.There are a number of international airports, which also serve as domestic airporttoo. 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 thereare 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 awide choice of flights and connectivity to various parts of India. One cargo airlineviz. Blue Dart Aviation Pvt. Ltd. is also operating scheduled cargo services in thecountry. At present there are 59 companies holding non scheduled air transportoperators permit. 6
  7. 7. THE KEY DOMESTIC PLAYERSAirlines Head Key Person LOGOFounded QuartersAir India, Mumbai Arvind Jadhav,1932 Chairman & MDJet Airways, Mumbai Naresh Goyal1993 ,Founder & ChairmanJet Lite New Naresh Goyal(Formerly Delhi ,Owner &Air Sahara), Chairman1991Kingfisher Bangalore Vijay Mallaya,Airlines, CMD2004Kingfisher Bangalore Vijay Mallaya,Red Chairman &(Formerly CEOAirDeccan),2003 7
  8. 8. Indigo New Bruce Ashby,Airlines, Delhi President &2005 CEOSpice Jet, New Siddhanta2005 Delhi Sharma,CEO & COOGo Air Mumbai Jeh Wadia, MDAirlines,2005Paramount Chennai M.Thiagarajan,Airlines, MD2005AIR INDIAAir India International entered the jet age in 1960 when it‟s first Boeing 707, namedNandadevi and registered VT-DJJ, was delivered. Jet services to New York viaLondon were inaugurated that same year in May 1960.On 8 June 1962, the airlines name was officially truncated to Air India. On 11 June1962, Air India became the worlds first all-jet airline.Air India Limited is the national airline of India with a worldwide network ofpassenger and cargo services.Air India is state-owned, and administered as part of the National AviationCompany of India Limited - which was created in 2007 to facilitate Air Indias 8
  9. 9. merger with Indian Airlines. Air India was founded by J. R. D. Tata in 1932 as TataAirlines, a division of Tata Sons Ltd. (now Tata Group).ALLIANCE AIRThe 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 IndianAirlines. As part of Indian Airlines merger with Air India, Alliance Air wasrenamed Air India Regional.INDIAN AIRLINESIndian Airlines was an airline based in Delhi, India and focused primarily ondomestic routes, along with several international services to neighboring countriesin Asia.Indian Airlines is state-owned, and is administered by the Ministry of CivilAviation.The airline operates closely with Air India, Indias national carrier. Alliance Air, afully-owned subsidiary of Indian Airlines, was renamed Air India Regional.JET AIRWAYSJet Airways is an airline based in New Delhi, India and is the countrys 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 startedcommercial airline operations on 5 May 1993 with a fleet of 4 Boeing 737-300aircraft.In January 1994, a change in the law enabled Jet Airways to apply for scheduled 9
  10. 10. airline status, which was granted on 4 January 1995. It began internationaloperations to Sri Lanka in March 2004.While the company is listed on the Bombay Stock Exchange, 80% of its stock iscontrolled by Naresh Goyal (through his ownership of Jet‟s parent company,Tailwinds).JET LITEJetLite, formerly Air Sahara, is an airline based in New Delhi, India. Controlled byJet Airways, the airline operates scheduled services connecting metropolitan centersin India.The airline also provides helicopters which are available for charter services andaerial photography. Jet Airways and Air Sahara were the only private airlines tosurvive the Indian business downturn of the early 1990s.In January 2006, Jet Airways announced that it would buy Air Sahara for $500million 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 AIRLINESKingfisher 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 buyfurther of 20% stake from the secondary sector. 10
  11. 11. INDIGO AIRLINESIndigo Airlines is a private domestic low-cost airline based in Gurgaon, India. Itoperates domestic services linking 14 destinations. The airline is owned byInterGlobe Enterprises.SPICE JET AIRLINESSpiceJet is a low-cost airline based in New Delhi, India. It began service in May2005. It was voted as the best low-cost airline in South Asia and Central Asiaregion by Skytrax in 2007. SpiceJet was earlier known as Royal Airways, areincarnation of ModiLuft.SpiceJet marked its entry in service with Rs. 99 fares for the first 99 days, with9000 seats available at this rate.Their aim is to compete with the Indian Railways passengers travelling in ACcoaches.JAGSON AIRLINESJagson Airlines is an airline based in Delhi, India. It operates scheduled and charterservices within India and to Bhutan and Nepal. Jagson Airlines operate flightsbetween Delhi and Rajasthan and Madhya Pradesh and Himachal Pradesh. Theyalso operate a helicopter service between Srinagar, Baltal and Amarnath.GO AIR AIRLINESGo Air is a low-cost airline based in Mumbai, India and is wholly owned by theWadia Group.THE COMPETITION IN THE AIRLINES SECTOR IN INDIA – THEAERIAL WAR 11
  12. 12. Around 20 years ago, when the Airline Industry of India was GovernmentRegulated, the airline Industry was considered to be a “natural monopoly” whereonly one Airline Company would be able to survive in the competitive environmentand meet the demands profitably. But since deregulation, the perception is changingand 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 bestprices to the rising demand of the Indian traveler.With the recent change in the Aviation Policy by the Government, several vistas inbusiness have opened up and new opportunities have emerged. The creation of newand incumbent airlines and private sector participation in the development ofAviation infrastructure is a positive outcome of these new developments. Severalglobal Aviation consultants and private equity players are eyeing this opportunityand are setting up their branches within the country.Despite its unprecedented growth, the Civil Aviation industry in India is still in arelatively early stage of its development after its liberalization. Experiences fromabroad, i.e., the US and Europe, show tremendous structural shifts in terms of routedevelopment, pricing, quality and frequency of traffic, as well as spatialconcentration at few key airports. It can be said that market liberalization providednot only for greater opportunities in the industry, but also for greater risks. Recentwaves of consolidation among airlines are only one example. 12
  13. 13. Since the deregulation, the Indian Airlines has grown tremendously. Also, averageprices have fallen consistently due to the increasing number of players in themarket. This fall in prices has benefited the consumers the most. If some flierswould disagree that the decline in prices have not benefited all the travelers then itcan be proven that the fliers paying a high price also gets a superior product, interms of flexibility and service. Moreover, the increasing demand for airlineservices is also helping airline companies to run a competitive business. Peopleprefer air travel as a feasible option for commuting because it saves time and alsobecause of the value added services provided by different airline companies. Thecompetition in the Indian Airline Industry has succeeded in increasing the volumeof travel and lowering average prices which has in the end benefited the finalconsumer and also to the airline companies.Alliances and mergers are one of the factors which are giving a solid boost to theAirline Industry in India. Different airline companies, foreign as well as Indian, aretying up or taking over or merging to produce effective collaborations in servicedelivery with profitable returns. It is not the just the airline companies but alsoassociate industries such as tours and travels agencies, hotels, transportorganizations etc. which are also getting targeted by airline companies to deliverquality service to the customers.At the end, it can be inferred that the Indian Airline Industry is growing at a fastpace and the credit goes to the effective and positive impact of the increasingcompetition in the industry. Factors indicating to the increasing competition in theairline industry are the pricing and promotion strategies adopted by the airlinecompanies; value added services offered; sales promotion; product/service 13
  14. 14. innovation; cost cutting strategies like downsizing; and so on. Airline companiesare concentrating on the customer delight and also the costs to produce profitablereturns with effective customer/market retention.Marketing MIX (4 P’s)THE PRODUCT MIXProduct is the core thing which every enterprise tries to deliver. Product is ofcourse, the service that companies have to offer to the customer. Getting the productright is the single most important activity of marketing. If the product isnt what themarket wants, no amount of price adjustment or brilliant promotion will encourageconsumers to buy it. The airline product is quite a complex one since it comprisesof a service of incorporating the temporary user of airline seat and certain tangibleproducts such as free flight bags or a free bottle of duty free spirit to encouragebooking. The product here refers to Airline service offering. Although serviceproducts are essentially intangible, there are certain pyhsical characteristics whichconsumer assess in their evaluation of product choice.Attractiveness of the offering in terms of pyhsical features such as consumers havehigh 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. 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 atreservation counter, transport to the airport, etc.The service provided inside is intangible and is highly variable. The airhostesses aretrained to provide polite, warm and courteous service. The courteous service thatthe representatives at the baggage counter, reservation counter provide goes a longway in developing customer loyalty. The travel agents of the airlines also need to beefficient and polite.Differentiating the ProductIt is important to recognize that what the consumers are demanding are notproducts, or features of products but the benefits they offer. Producing addedbenefits thus helps the marketer to distinguish one product from another. Gooddesign or style of service can form the basis of differentiation. This enables thecompany to create a personality for its service. The design and decor of the aircraftprovides opportunities to personalize their product as well as periodically to updatethem when differentiation under IATA regulations was virtually excluded,nonetheless, certain airlines were able to develop distinct personalities. EagleAirlines created an entirely new market between New York and Bermuda, for developing an image of a friendly airline distinctive from other airline servingthe route. A similar style was evident in Richard Bransons Virgin Airways.CORE PRODUCT AND SUPPLEMENTARY SERVICES 15
  16. 16. Many services products consist of a bundle that includes a variety of serviceelements and even some physical goods. It is important to distinguish between thecore product that the customer buys and the supplementary services that accompanythat product.THE FLOWER OF SERVICECore product surrounded by clusters of supplementary services.The core service of an airline is the service of transport. The supplementary servicesare classified into eight clusters & each one is analyzed with respect to the airlineindustry:* Facilitating elements* Enhancing elementsInformationThis aspect of supplementary service is common for every person that needsinformation about the organization. In case of airline industry, up to dateinformation regarding flight schedules, ticket fares, information about promotionschemes etc must be available to customers.Customers can avail of this information literally at their fingertips today with everyairline starting its own website which gives complete details to the customer & alsoentertains queries.It also includes providing information to employees regarding new policiesaffecting the airline & equipping them with enough information, which thecustomers might demand. Extensive training is provided to in-flight attendants 16
  17. 17. regarding handling customer queries, knowledge about the airplane itself,knowledge about cuisine etc.ConsultationThis aspect of supplementary services can be customized according to the needs ofthe customer. It is more in the case of people processing and high personnel-contactservices.Airlines are moving more actively into the role of consultant today. They are doingaway with the travel agents & designing & selling packaged tours to consumersdirectly. In this aspect they often act as consultants to the customer, by giving himadvice & suggestions regarding the type of plan he can choose, the benefits he willget the mode of travel he should choose etc.Another aspect to consultation at airlines is when the customer approaches theairline regarding traveling to particular destination, the airline gives him a variety ofchoices of routes that he can take.In some cases airline may also design special menus & benefits in consultation withits frequent fliers by keeping in constant touch with them & asking them forsuggestion as to what they want in their airline which will make their experiencemore comfortable.Order takingThe order taking procedure is essentially the booking procedure of the airlines. Theimportant 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 fullycomputerized. There are 24 hours reservations. Passengers can specify their seatpreferences at the time of reservation. 17
  18. 18. Most airlines use the telephone, fax, and email methods of booking. The emphasishere is on fast booking & at the same time getting the required information form thecustomer. This is done by establishing a standard reservation procedure & formatthus reducing the risk of inconsistent service delivery. The online booking systemalso facilitates better order taking & processing.The scheduling aspect assumes importance as reservations on the wrong flight tothe wrong place are likely to be unpopular.Hospitality & CaretakingWith the increased competition today in the airline industry & the increasingsimilarity 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.SafekeepingIn 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 anadded 30 kgs Priority baggage delivery is offered to members. The customersentrust his baggage to the airline & it is the airline‟s responsibility to keep it in aproper condition. 18
  19. 19. Children and infants usually travel along with their parents and guardian. In case ofunaccompanied minors, customer service staff renders all assistance like checkingin and escorting up to the aircraft and handing over to the senior-most cabinattendant on board the flight. He is looked after on board the flight right up to thepoint flight reaches the destination and he is received by his guardian.ExceptionsSpecial requests – airline very often receive special requests form customers withregards 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 customerservice centre which entertains customer suggestions & complaints. On the flight,customers are often asked for their opinion regarding service equality. Manycorporate frequent travelers are consulted when the airline decides to make any newchange.Billing & paymentThe billing procedure in airlines is simple. The options available to the customer areplenty including credit card & travelers cheque. Airlines use the open accountsystem with their corporate clients. Frequent fliers are also given special paymentprivileges. 19
  20. 20. LEVELS OF PRODUCTThe Core ServiceThe core service of the airlines industry is to transport People, goods and services tovarious destinations. As the needs of the people increased the entire system becamemore organized and formal. After this stage come the various supplementaryservices.The Supplementary ServicesThe airline industry has many players they had a brand name like „Air India‟,‟ JetAirways‟,‟ British Airways‟. All of them had some common services to offer likeconnecting flights, through check-in, tele-check in, food on board, andcomplementary gifts etc.Different classes like economy class, business class were introduced. Airconcessions are given to school students, old people etc. Singapore airlines were thefirst to introduce small 8”television screen for every passenger. The freebies areactually win-win deals between airlines and other services.Jet Lite, for example, offers its passengers a „business-plan‟ on two-way economyclass ticket, which includes a night‟s stay with breakfast, STD facility for 3 minutesand boardroom facility at the Park Hotel, New Delhi. To Delhi based fliers toMumbai, it offers a night‟s stay with breakfast, airport transfers and VIP amenitiesat The Orchid, Mumbai. For business class, the plan includes a stay at The Leela,with buffet breakfast and late checkout. 20
  21. 21. All these added service helps the customer to decide upon which airlines he wantsto travel. As competition increased and the customers wanted more the next phaseevolved and that is the augmented service.The Augmented ServiceThis phase is where the customer‟s expectations are met; the service providers keptworking on new methods to meet the ever-changing customers‟ demands. Theplayers 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, fatfree, diabetic etc. They also have auction going on board. Virgin airlines havegambling on board, they also have body massage to offer to their passengers. AirEmirates has something called cab service, they have customized pick up and dropcab service.This phase is the most crucial one; with increased competition service will becomethe final differentiation.Future ServiceAs mentioned above the customer needs keep changing, the future is unknown. Thecustomers may be looking in for more frequent inexpensive air travel, somethinglike air taxis, super sonic speed. This decreases the time thus reducing the cost socontinual improvement in Services is required. .BRAND POSITIONINGBrand 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. 22. facilitate understanding of the Brand. Proper positioning clarifies what the Brand isall about, how it is both unique and similar to competitive brands, why customersshould purchase and use the Brand.Creating brand awareness is one of the most important aspects for any product orservice. Due to the intense competition in the market every airline has to positionthem in the market. It is only if they position themselves well can they create aBrand 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 goodname in the minds of the customers.Airlines use unique attributes to position their brands in the minds of the potentialcustomers. Thus consumers strongly associate those attributes with that particularbrand, positively evaluate it and believe that they can not find those attributes to thesame extent with a competitive brand.STRATEGIC GROUPSFull range carriers with medium price : Wide coverage of services providedand have greatest potential to capture and can lead in market. But have less numberof 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 servicefor economic class. For Example ; Kingfisher Red, Jet Lite, Spice Jet, Go Air, Indigo and otherLow cost carriers.Very high service with high price : Better service due to high fare and Attractivefor the growing middle class. But less coverage within country. 22
  23. 23. For Example : Taj airways, Club one airwaysGood service with medium price : Low fare as compared to higher serviceprovider. Better services than LCC. Targeting to the middle class customers. For Example : Kingfisher, Jet airwaysRe- branding has also become an important concept. It is evident that the mergersand acquisitions have become an important part of the airline industry. Thus theyneed to re-brand themselves under one common name.Examples of Re- Branding:KINGFISHER AND AIR DECCANKingfisher‟s acquisition of Air Deccan would lead to the latter being re-brandedunder a new name Kingfisher Red. The new brand positioning is a shift from beinga low-cost airline to a value-based airline. It re-emerged with a new revampedstylish look. The emphasis will be on creating a stylish airline keeping with the UBGroup‟s brand image.The branding exercise will encompass areas such as changing the look and feel ofthe 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 INDIAWhen Indian Airlines and Air India merged, they retained the brand name of thelatter due to its better brand positioning. The logo was evolved out of a combinationof the two airlines. The red colored flying swan with the Konarak Chakra in orangebecame the new brand logo. 23
  24. 24. SAHARA AND JET AIRWAYSHowever, in case of Sahara airlines being branded Jet Lite by Jet Airways, therecould 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 JetLite brand might end up confusing its customers.Thus it can be said that if the transition is smooth and the integrity of core valuesretained, then any re-branding exercise can be successful. The new brand has to beupdated and not outdated.PRICING MIXPricing 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 someof the important factors influencing the decisions for setting fare and freight rates inthe air transport business. The Ministry of Tourism and Civil Aviation, the IndianAirlines Corporation, the National Airports Authority, the International AirportsAuthority of India, the Air India Corporation are the bodies directly or indirectlyinfluencing the process of making the pricing decisions. The main problem is tomake the pricing decisions competitive because it is found that even the private airtransport organizations are involved in the process too. It is seen that the followingare the features in price i.e.:1.Flexibility2.Price Level3.Differentiation4.Discounts and Allowances. 24
  25. 25. While price is tactical, it has localized implementation, it is temporary in nature andtherefore 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 potentialcustomers 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 airfare charged by private scheduled domestic airlines comprises of basic fare, fuelsurcharge, congestion surcharge, passenger service fee and transaction fee (if theticket is booked other than the Website). Out of these, only passenger service fee isthe component collected by the airlines on behalf of the airport operators.Pricing Strategies1. Demand-based pricing: The pricing of air fares under this strategy is simple. It isbased on the demand from the customers‟. It involves setting prices consistent withcustomer perceptions of value, i.e., prices are what customers will pay for theservices provided.For example: The person sitting next to u might not have paid the same price for theticket. If a person wanting to travel in Business class does not get the ticket for thesame when tried to book at the last minute, will travel in Economy class payingmore than what the other travelers must‟ve paid. The pricing in airline industry isnever fixed or same. It‟s fluctuating in nature depending upon time, demand and 25
  26. 26. other such attributes. So when, the demand exceeds supply for the seats in anairplane, 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 personis travelling by Indigo from Mumbai to Bangalore, the pricing will be different fordifferent time periods. It will be cheaper in monsoon while comparativelyexpensive 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 ticketat a cost that is 30-40% less than what the person may be charged if he books theticket 20days before.For example: if a traveler books a ticket during normal weekdays the prices wouldnot be too high. Whereas, if the same traveler books the tickets during Diwali orChristmas, he will be charged more than what he was charged earlier for the samedestination. And this strategy remains the same for all kinds of airlines. The pricesmay not be exactly same but it‟ll be quite similar.Also, Jet airways provide tickets at a comparatively lower rate during the vacationsfor student-passengers. This helps them tap the population travelling abroad foreducation purposes as well as increase occupancy ratio.3. Competition-based pricing:This strategy focuses on the prices charged by other airlines. Competition-basedpricing does not always imply having the same price strategy as the competitors. Itmeans keeping one‟s pricing strategy such that it is cheaper in cost or it offers thesame price as competitors with better and/or more facilities. Thus its basic purposeis to have a competitive edge over the rival airlines. 26
  27. 27. For example, Indian airline industry is filled with low-cost airlines. So Air Deccanbefore getting acquired by Kingfisher had many competitors like Indian airlines,Air India (before merger), Indigo airlines and Go air. And now Spicejet had enteredthe already filled jammed low-cost airline bandwagon. This brings about acompetition in the pricing of the tickets. Spice jet on completion of three years onMay 23rd 2008 offered 3 lakh tickets just for Rs. 3 starting from July 1st to 21stSeptember 2008 across its 18 destinations in India. This was a very smart move toattract passengers especially those travelling by Economy class who are very costconscious.4. Pricing strategies when customer means “Value is Low price”:This strategy can be applied when the most important determinant of value to acustomer 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 takesa forward stand as compared to the other attributes. To establish a price for thisstrategy, the marketer should understand and know the objective of charging lowprices, how the customers‟ interpret prices and how they value their travellingexperience 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. 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 atlow prices to stimulate trial and widespread use. This strategy is appropriate whenthe sale of tickets is price-sensitive.In order to make, travel by air more affordable to the common man, a couple ofyears ago Jet Airways announced a new offer `Everyone can fly which offered amajor reduction in economy class air fares on certain selected routes across thecountry. In most of the airlines, the reduction enables economy class air fares beingcompetitive to rail fares being charged for the same journey.5. Pricing Strategies when the customer means “ Value is everything I want in aservice”: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 anairline provides, the more highly valued that service is likely to be and higher theprice that the marketer can set. 28
  29. 29. Skimming strategy: This is a strategy in which new services are introduced at highprices with large promotional expenditures. It is an effective approach whenservices have undergone major improvement over past services. In this situation thecustomer 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 thehighest prices.An example of this would be that of Virgin Atlantic airlines that has gambling onboard. They also provide in-flight body massage to their passengers. There is a barin the air craft. Also, they provide lounge facility at the airport to the frequentflyers.Also, when Kingfisher had newly started first class with Kingfisher first, the ratesof the tickets were very high compared to other airlines‟ tickets. But travelers stillopted for it as they wanted to have the new flying experience with Kingfisher.THE PLACE MIXIn Airlines, they utilize more than one method of distribution for e.g they selltickets through travel agents & sell seats on flights to tour operators , whilst alsooperating direct marketing. Whichever distribution strategy is selected, channelmanagement plays a key role. For channels to be effective they need realiableupdated information. For these reason, I.T has been widely adopted such as on-linebooking system.This dimension of marketing mix focuses on processing of services and selectingthe location points for airways and airlines offices keeping in view the comforts andconveniences of the end users. By the processing of services, our emphasis is on the 29
  30. 30. involvement of channels, front-line-staff, travel agency offices; offices of the touroperators 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 difficultyin buying the tickets and make necessary arrangements for the confirmation ofbooking.2. It is also to be confirmed that the users booking their luggage are not to faceinconvenience.3. The behavioral profile of the personnel working in offices of travel agents and inthe offices of the airways and airlines require due attention. It is almost clear thatairhostess looking attractive, smart, well dressed are at your disposal to makeavailable to you the defined services.4. It is also to be sure that the information network of the offices of the travel agentsis technology-driven and user-friendly.5. The security checking, custom checking of passport, visa, income tax clearanceor so. It is essential that all the windows or the counters offer the services as per theprovision and promises.6. Keeping in view the duration and nature of flights, the users are made availablelunch/ dinner, breakfast and drinks inside the aircrafts.7. If in course of the journey, you are supposed to change the aircrafts and theduration of stay is long, it is the responsibility of the airport authorities andconcerned airway and airlines to make available the accommodation facilities. 30
  31. 31. Another dimension of place mix is related to location and management of theoffices 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 prospectcustomer should get an easy access to the office and ticket counters. The place isrequired to be safe, well connected with all-weather proof roads where all therequired infrastructural facilities are to be available.2. The technology-driven booking system is to be ensured. The online bookingfacility should be user friendly and all the information regarding the companyshould be available on the company site so that customer can get all the informationat it ease.3. The water and sanitation facilities for the users and comfortable seatingarrangements 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 theusers from a positive opinion regarding the airways services. The interiors shouldbe 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 drawthe attention of the users attending the offices for chartered flights, packaged tourneed due care.6. It is in this context that they find management of place an important componentof the marketing mix.In view of the above, it is right to mention that air transportation business is linkedwith a number of allied services offered by a number of agencies and organizations. 31
  32. 32. If they don‟t find cohesion and coordination the promised services would hardlyreach to the end users.KEEPINGThere are three entities in the entire transaction:1. Customer: He is the person who wishes to satisfy his needs i.e, transportationfrom one destination to another. Here, the customer is a passenger or a potentialpassenger.2. Company: This is both the dreamer and the offerer. It here refers to the variousairlines which offer its aviation services to the customers to satisfy their demand fortransportation from one destination to another, for example: The Indian Airlines.Here, the company makes a promise to its customers to deliver the right qualityservice.3. Provider: The service providers are finally the people who interact withcustomers. They keep the promise that the airline operator has made to itscustomers by delivering the finest services. They are the ones who carry out finaltransactions. The customer actually comes in contact with the service provider andnot the company. For example: the air-hostess and the crew.The interaction between these three parties while providing the service takes placein the following manner:The company is established with the basic objective of providing the specifictransport service. Thus the airline industry with players like Indian airlines, Jetairways, Sahara airways etc came into being.The air service provider that is the company communicates with the customer andmakes him aware of the services. It makes promises to the customer by advertising 32
  33. 33. through various media‟s. For e.g.: the TV ad of Indian airlines advertising its newsleep-in seats.The customer who gathers knowledge about the service approaches the companyfor availing his service in order to satisfy his need. This interface of the customerwith the company is through the customer‟s interaction with the providers of thecompany. The company enables its promises to the customers through setting upfacilities to deliver the promises by setting up ticket and enquiry counters. Theoutcome of the “to be transaction” is determined by the interaction between theprovider and the customer. Hence the company aims at offering its providers withthe required infrastructure and training to optimize the quality of the transaction.For e.g.: Yearly employee training programs and performance appraisals are doneby 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 activitiesrepresented by the sides of the triangle are critical to efficient delivery of theservice, even if one of the sides is out of place, the triangle will be distorted; inother words the total marketing effort cannot be optimally supported.THE PROMOTION MIXThe formulation of an ideal promotion mix is essential to inform sense and persuadethe users. The business magnets, business executives, politicians, cine artists, high 33
  34. 34. spending tourists, business houses using expensive inputs and trading the same, theDepartment of Posts, domestic and international tourists are some of the users of theair services. The users appear to be more conscious, aware of their rights and in amajority of the cases are found sophisticated.However, majority of the users are sophisticated and therefore the promotionalefforts are required to be more creative. The professionals engaged in the airservices bear the responsibility of blending the different components of promotionin such a way that the task of increasing the business is simplified. Since a numberof airways and airlines have been facing problem of financial crunch, it is pertinentthat they make possible an optimal use of the different components of promotion.PROMOTION MIX VARIABLESSince domestic deregulation occurred in 1978, competition in the airline industryhas intensified and become more concentrated. The respective airline needs toprovide certain benefits that the other airlines do not. Promotion has become a bigaspect since the arrival of numerous private airlines. The way this industry hasattracted people to them has changed. Airline companies have struggled withmaking new ways to market their products. Today airline advertising focuses onprice, 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 puttheir ads on. Even coffee cups in restaurants are starting to be used foradvertisement. 34
  35. 35. Promotion should be done keeping in mind the competitor‟s product. This helps inpromoting own product/service with a message that has an edge over the others.Kingfisher understands its competitors well and promotes their service accordingly.Vijay Mallyas Kingfisher Airlines adopts an innovative marketing strategy tosnatch attention from Jet Airways advertisement.In the ad displayed on the hoarding above, Jet Airways say, "Weve changed."Kingfisher Airlines comes up with a cheeky billboard above Jets hoarding thatsays, "We made them change!” This was a very innovative and smart move onkingfisher‟s part to promote their service thereby denoting that their own service isso much better that Jet Airways had to change and improvise them to reach theirstandards. 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 offerof 3,00,000 tickets at a special price of Rs 3/- per ticket. This special offer flags offthe 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 allflights covering its 18 destinations. This offer is available only on SpiceJet - LowCost Indian Airlines, Book Indian Flight Tickets Online, Cheap Fares Air Travel inIndia - SpiceJet offers Discount Airline Ticket Fares Online. In the last three yearsSpice jet has flown over8.1 million people across all their destinations. They havehelped Spice jet gets over 10.3% market share. This special promotion is Spice jet‟sway of thanking them for their support. 35
  36. 36. PROMOTIONAL MIX AND ADVERTISINGAdvertisingAs any other service, the air transportation service needs creative advertisements topromote their business. This is the first component of the promotion mix, which isbased on professional excellence of the advertising agencies. In view of the risingcost of inputs and increasing the impact of worldwide economic depression on theair 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 unproductivenature and instrumental in making the service expensive. The telecast media and theprint media are found important while promoting the air business. 36
  37. 37. While advertising through the telecast media, budgetary constraints and budgetaryprovisions should be considered. Also the quality and nature of target market andlevel of expectations should be kept in mind. The advertising professionals need tomake the advertisement slogans campaigns and messages proactive to thegeneration of business. Kingfisher is a good example for advertising its services.They advertised kingfisher not merely into the business of transporting people frompoint A to point B. They have created a new category of Aviation Hospitality Spacethus making service and hospitality their main focus. Their slogan is kingfisherairlines- “Fly the good times.” This is how they are differentiating their productfrom other airlines. The airlines also have to make sure that whatever the strategicdecisions they make to promote the business are in a position to establish an edgeover the promotional measures of the competitors. They are also required to assigndue weightage to the efforts made for the projection of a positive image. The IndianAirlines as well as Air India have been facing the image problem but theadvertisement may be efficacious in transmitting the facts and removing the imageproblem.As mentioned earlier, Indian airlines started promoting its first class fully recliningseats to as a tool to improve the image problem and attract more passengers in itsfirst class. It is essential that while advertising one has to keep in mind the image ofthe country, the natural scenes, the tourist attractions, rich cultural heritage or sowhich would energize the process of motivating the tourists. For example: ThaiAirways have air-hostess wearing colorful long and flowery dresses and greet byjoining hands and bowing to their passengers as a part of their culture. While 37
  38. 38. advertising, it is impact generating that we select an opportune moment of flight, anattractive scene of take-off, high attractiveness of personnel in general and the airhostess in particular, the landscape of an attractive tourist center, wild lifesanctuaries, lake, park and so on. The air transportation services can also use thebroadcast media.For example: In times of rising fuel prices and lower occupancy rates Jet Airwayshas come out with a lavish ad featuring the most expensive brand ambassador oftime Shahrukh Khan. The Shahrukh Khan TVC, which broke on September 1, 2008is the first of three campaigns Jet has planned (the ones on economy and premierclass will follow), and is running across most news channels and some specializedtravel channels. The ad marks the television debut of Jet Airways which hadpreviously relied heavily on the print medium. While competitor Kingfisher relieson showcasing complete range of Consumer experience Jet is trying to highlight itsproduct superiority. Jet had come out with Boeing 777 last year, which has somesuperior features and this ad is merely an aim to highlight those features besidestrying to latch on to the celebrity appeal of Shahrukh Khan.Another example would be that of Indigo airlines that uses Internet and print mediaas a visual medium to advertise itself. What is interesting is the fact that the ad isnot flashy and it just conveys simple facts.An important source of visibility for Indigo is the internet where e-ticketing give ita chance to come up with its offers.The launch and subsequent editorial patronageand newspaper support that Indigo carved out for itself helped it set itself up as abrand. 38
  39. 39. .PublicityPublicity is a process of persuasive communication for which no payment is made.Strengthening public relations activities if found essential to promote the businessairlines or airways. The Public Relations Officer, Receptionists, Travel Agents,Travel Guides, Media people are some of the sensitive points of publicizing thebusiness. The most important point in this is the co-operation of media. Themarketing professionals should have an idea of magazines, newspapers preferred bythe prospects or users and they develop rapport with the correspondents concerned.The Airlines need to recruit efficient personnel for that very purpose that shouldhave professional excellence no doubt but in addition they are also required to havethe potentials of attracting the users, prospects.For e.g.: Indian Airlines helped the cancer patients and took them for a small outingas part of their public relation campaign. Similarly, Sahara linked up with Close- upby taking Hrithik Roshan. Here for Close-up it is a promotional strategy while forSahara 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- brainof 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 likea King ". The ad for the lady travelers talks about the seats that bend all the way 39
  40. 40. back, the footrest that will pop up, life valets when your lady lands at the airport atmidnight and helping hands that lift her bag. The ad ends with the message “Queenof your heart deserves to fly like one ". The third in the series aims at the decisionmaker 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 mans seat feels like his throne.With regard to the quality of campaign, it may miss some eyeballs because of notbeing an eye catchy ad. But the message surely is smart. The basic premise in thisad campaign is that Men are the decision makers with regard to this service. May bea 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 PromotionA component of promotion adopted for a particular period to touch the target andwithdraw the measures when the time is over is known as sales promotion. The toolbased on incentives is found instrumental in sensitizing the users. The travel agentscontribute a lot to the promotion of air transport business and therefore we need tothink in their favor on a priority basis. The tour operators also contribute to theprocess and therefore need to think in their favor. The front- line-staff in the officesof the airways and the receptionists working there also play the same role. Thismakes it significant that they are given some incentives which are in the form of aholiday trip to a particular place, concessional services to their children or spouse orso. Also offering them with innovative gifts, which have not been offered by their 40
  41. 41. competitors, can be given. The nature and type of incentives would depend on thecontributions of providers. If they make immense contributions, the incentiveswould be in good quality and volume. There are incentives given called thepromotional incentives on the basis of the frequency of using the services.For e.g: Through Jet Airways, return ticket passengers on metro flights (botheconomy 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 freeholiday packages are up for grabs as a part of their sales promotion campaign.Also, there‟s something called marketing bonanzas. Some airlines give free ticketsto customer so as to make them aware of their services. These tickets or any othergift voucher are given so as to attract a lot of people. This is a very interesting wayof catching the headlines of customers. Example Go Air was sending SMSs to anynumber that they have won a free ticket from Mumbai to Goa or Delhi. Kingfisherhas also sent messages to people for free ticket.Jet lite announced its „Summer Special Bonanza‟ promotion for online bookingsthrough its website. Even Air Deccan used this approach of giving gift voucherworth 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 fortravel in the same period. There was also a 2 nights, 3 day holiday package to bewon in the offer period.Jet Airways, Indias premier international airline, has announced a specialpromotional package for students flying to its destinations in the United States, 41
  42. 42. Canada, United Kingdom, Europe or Asia. Jet Airways special promotionalpackage is valid for outbound travel on or before October 31, 2008. Existing, aswell as new, students will receive a whole host of benefits including excess baggageallowance and special fares. Students availing of this offer will be allowed to carryan extra piece of baggage, with each piece not exceeding 23 kilos, on flights to theUS, Canada, UK & Europe; and an additional 10 kilos on flights to Asia (Shanghai,Hong Kong, Singapore, Kuala Lumpur and Bangkok), on Jet Airways onlinedestinations.With Jet Airways special promotional package, students will also receiveexclusively designed Student Kits, in association with its partners. These may becollected after the purchase of a ticket at any of Jet Airways city sales officesaround India. Each kit contains a Matrix mobile connection with free talk-timeworth Rs.4000 in the US, UK, Singapore and Australia, ICICI Bank Travel Cardsfor hassle free transactions across the world, a free Tata Indicom Wi-Fi Roam Cardenabling internet connectivity from over 50,000 hotspots in the US ,UK, Austria,Czech Republic, Germany, Netherlands, Switzerland, France and Japan; BajajAllianz Travel Insurance with special privileges and low premiums and VIPvouchers worth Rs.500/- on purchase of VIP travel accessories.Jet Airways also offers students an ergonomically-designed seat with hammockstyle head rest and foot support, the airline also provides its Economy passengers apersonal reading light, on demand In-Flight Entertainment and access to over 200hours of Hollywood and Bollywood movies, regional films, and television and short 42
  43. 43. programmes. Thus Jet Airway plans to tap mass-students travelling abroad duringthis period.Personal SellingThe air transport organizations find personal selling which is the mix of promotionmix helpful in increasing the business. An art to influence, stimulate, sensitize theimpulse buying is known as personal selling. The air transport-marketingprofessionals are supposed to know about the behavioral profile of persons who actas personal promoters. The travel agents, tour operators, transport operators, travelguides, front-line staff on the booking counters, receptionists contributesubstantially to the process of promotion. If they stop selling, the offices of airwayswould find it difficult to sell. This makes it clear that even the quality services failin attracting the users, if the channels are not co-operated. This makes it essentialthat the airlines offer incentives to them so that they keep on moving the process ofstimulation.To better understand the concept of personal selling, the airline in question needs tofollow the diagram given above. It explains all the things that the people involved inthe process of selling should know and do. Starting with the first point, customer‟svalue for time, money and energy should be considered. Their comfort andsuitability should be addressed to. They should be provided service in such a waythat they get more than they expect to. It can be said that the customer‟s should bepampered.For instance, giving chocolates on arrival and departure or welcome drinks ordiscounts during off-season to name a few. The delivery of tickets should be madeon time this enhances the effect of personal selling. 43
  44. 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 thecircle of personal selling ends. To fulfill the above mentioned criteria the airlineindustry must select persons, agencies having a positive image.The travel agencies having a well established business can help substantially andtherefore it is the prime responsibility that while selecting the travel agents onemust assign due weight age to the image of the agencies. The tour and transportoperators help considerably and one needs to think about the incentives to beoffered to the promoters. In personal selling, the front-line staff or personnel at thebooking or reservation counter of airlines office playing an incremental role inpromoting the business. Here, it is essential that one is aware of the credentials ofpersons supposed to discharge the business responsibility and try his best to brushup their faculties as and when opportunities come.Word-of-mouth PromotionThis happens to be an important constituent of promotion mix in which thepromoters act as a hidden sales force. The air transport organization depends on thistype of promotion if they feel that the quality of services offered by them is ofworld 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 thatproviders have not been distorting the quality of services promised. If you aretraveling by kingfisher and you really like the experience then you will definitelyrecommend your friends, relatives, etc to travel by the same airlines. Word ofmouth is the best promotional strategy as it does not incur any cost for the company 44
  45. 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 advertisinghence, it entirely relies on word-of-mouth promotional tool to spread a word abouttheir services and thus communication is established and brand is recognized by thepeople who are potential flyers rather than the entire country which is an expensiveaffair.Customer SegmentationMost airlines use a very traditional segmentation strategy, dividing passengers intofirst class, business travelers and economy travelers. But, nowadays most of theairlines 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 aprocess of subdividing a market into distinct subsets of customers that behave in thesame way or have similar needs. Each subset may conceivably be chosen as amarket target to be reached with a distinct marketing strategy.This includes preparing a method of identifying a group of consumers, within abroader market, that has similar characteristics and needs. Segments can beidentified by examining geographical, demographic, psychographic, and behavioraldifferences.Segmentation of the aviation industry can be done under the following factors:Geographic segmentation 45
  46. 46. Geographic segmentation calls for dividing the market into different geographicalunits such as nations, states, regions etc. the company can operate in one or fewareas or operate in all but pay little attention to local variations.Most of the domestic airlines, their market segment consists of the customers who‟sdestination are major commercial cities like Mumbai, Delhi, Kolkatta etc. apartfrom 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 profitablesectors. However Indian Airlines, being the National Carrier of the country, fly‟seven to the unprofitable sectors and concentrates on the segment of people flying tosuch destinations.Demographic segmentationIn demographic segmentation, the market is divided into groups on the basis ofvariables such as age, family size, family life cycle, gender, income, occupation,education, religion and social class. There are several reasons for the popularity ofdemographic variables to distinguish customer groups. One reason is that consumerneeds, wants, usage rates and brand preferences are often associated withdemographic variables.Airlines like Kingfisher targets the affluent class and the executives from multinational companies, business community etc. However in the case of Air Deccanand other low cost airlines, their segment is the population from the lower middleclass and the middle class. Thus it can be said that Kingfisher targets the classeswhereas the no frill airlines target the masses. 46
  47. 47. Psychographic segmentationPsychographics is the science of using psychology and demographics to betterunderstand consumers. In this segmentation customers are divided into differentgroups on the basis of psychological, personality, lifestyles or values. People withinthe same demographic groups can exhibit very different psychographic profiles.The airline tries to work on the psychology of the people. Kingfisher concentrateson the segment of people who do not mind paying a higher price, but would like tohave 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 theyspend.Behavioral segmentationIn behavioral segmentation the customers are divided into groups on the basis oftheir knowledge of, attitude towards, use of or response to a product or a service. Itrefers to grouping consumers in terms of their relationship with the product, forinstance their usage rate, the purpose of use, their willingness and readiness to buy,etc.Segmentation of customers on the basis of airlinesBusiness ClassThey are crucial for airlines profitability. With less spare time and more cash intheir pockets, they agree to pay a premium price for a premium service. Thepremium prices they pay provide wider and more comfortable seats, better choice ofmeals and seats, luxurious lounges. 47
  48. 48. If the airline is also providing the first class including the business class and theeconomy class then it will provide additional services to the first class travelers inaddition to the other services. These services may include fully reclining seats,workstation and TV surrounded by private dividersEconomy ClassThey represent a totally different market. The most important consideration formost of them is the price. The lower the airfare, the more people will fly therespective airline. By and large, with the exception of wealthy travelers, thissegment will not pay extra for premium services and will agree to change severalplanes during their trip if this option costs less than a direct flight.PHYSICAL EVIDENCEPhysical Evidence refers to the environment in which the service is delivered andwhere the service industry and customer interact. It is the ability and environment inwhich the service is delivered. Both tangible goods that help to communicate andperform the service, and the intangible experience of existing customers and theability of the business to relay that customer satisfaction to potential customers.The aircraft by itself, the seating configuration meant to be comfortable andspacious, the in-flight food, the staff dressing, baggage handling facility, colour ofthe aircraft, in-flight entertainment, and ambience in the aircraft provide physicalevidence to the airline service. Nowadays, websites are another major part of thephysical evidence of airlines. A recently completed survey indicates that passengers 48
  49. 49. rely on major airline websites, but would like the airlines to improve those sites tobetter meet their specific needs and expectations.83 percent of the passengersindicated they use airline websites to book flights. The survey also identified thatnearly half (48 percent) of respondents indicated they also book flights by callingthe airline directly, which may be a further indication that airline websites are notsufficiently meeting the needs of small business travelers. Results show that 56percent of respondents use travel websites to make flight arrangements, while 47percent 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 DRESSINGIncreasing 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 whichsymbolizes the airlines motto. Colour is a visual identifier and thus attractive colorscheme catches the eye of the passenger. The staff dressing also helps todifferentiate one airline from other. Just by looking at the staff, the passengerassumes the standard of the airlines. And these two are the first thing that apassenger visualizes in an airline. However, another important reason for the use ofcolor is the expansion of a corporate culture. For example, Paramount Airways doesthis very well. Their use of blue color emphasizes confidence, a character trait thatis important to the airline industry, especially in these times. Blue also demonstratesvastness, opportunity, a sense of modernism and openness and honesty. 49
  50. 50. KINGFISHER AIRLINESThe 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 wordKingfisher painted boldly across the body of the aircraft in Red to the interior decorand 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 trendyrolled up sleeve jacket in Red with a white shirt unlike the traditional blazers andwaist coats of other airlines. There are no male pursers on board either because KFin-flight is all women.AIR INDIAEminent Indian fashion designer Ritu Beri was roped in by national carrier AirIndia to design the new uniform for its cabin crew and ground staff. Air India wentfor 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 inOrissa, 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 culturalroots.The uniform for the female employees, both ground staff and cabin crew, includedsarees, tunics, scarves, jackets, coats, aprons and shoes, while there would bespecially designed ties for the male staff.JET AIRWAYSTo position itself as a global airline, Jet Airways introduced fresh airline uniformfor the cabin crew designed by Italian designer Roberto Capucci. Their uniform 50
  51. 51. reflects distinctive international look capturing spirit of new India and a meetingpoint between East and WestIN FLIGHT MEALSAirline passengers always have a certain standard of living and are very hygienicabout the food. However, in-flight meals have often been the butt of many jokesover the years for their perceived lack of nutritional value. In airlines, the passengerprefers variety in the meal offered, noticing the nutritional value. They also see asto which caterers is serving the food; the way the food is served and handled. Thisis one critical aspect where even the service recovery can‟t help to retain thepassenger because even the slightest of the mistake by the chef or by the cabincrew, or compromising on the quality of food might prove very dangerous for thepassenger‟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 moreattractive by packing as much goodness as possible into them.KINGFISHER AIRLINESIn-flight Meals or Snacks are served as part of the fare on every flight and smallamenity kits distributed as well. Depending on the flight time, Kingfisher servesBreakfast, Lunch, High Tea or Dinner on all flights. An individual menu card isthere on all Kingfisher flights. Kingfisher has a wide variety of multi-cuisine menuto suit the varying tastes of the local sectors. Indian, Chinese, Continental andWorld Cuisine is available on various sectors. Vegetarian or non-vegetarian foodcan be chosen on the flight. Kingfisher First Class passengers can choose from a 51
  52. 52. special menu and depending on their choice, a three course gourmet meal is servedon the flight.It also provides an exclusive three course menu complete with a Kingfishersparkling welcome drink, signature dessert and freshly brewed coffee on board.JET AIRWAYSJet airways have different menu options onboard for Premiere and Economy classpassengers.The following specialty meal options are available on Jet Airways:Strict Vegetarian (STVG) , Jain Meal (JNML) , Diabetic Meal (DBML), LowCholestrol (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 creatinga goodwill among the passengers.Kosher mealsJet Airways also offers kosher meals (KSML) on the Mumbai-London-Mumbai andMumbai-Singapore-Mumbai sectors. Kosher Meal preference has to be notified 48hours in advance. The Kosher Meal on Jet Airways flights consists of Western Non-Vegetarian Meal of Fish, Potatoes and Vegetables. Kosher meals are servedonboard in a sealed pack. The cabin crew opens the pack in front of the passengerand shows the Kosher certificate inside the box.This assures the passenger that there is no malfunctioning or adulteration in themeal provided , thus creating an impression in the mind that meals offered in JetAirways are of the best quality. 52
  53. 53. AIR INDIAAir India offers a wide variety in its in-flight meal menus, with a multi-cuisineapproach to cater to the predilections of the range of passengers. The variety of foodranges from vegetarian meal, Moslem meal, Kosher meal, Low Sodium meals tosomething simple as a fruit platter. The meals are hygienically packed from reputedhotel chains like the Taj Group and Ambassador. Besides the regular normalvegetarian and non-vegetarian meal, Indian Airlines also provides special mealssuch as Jain meal, Diet meal, child meal etc.IN FLIGHT ENTERTAINMENTTo make long flights more enjoyable, several major commercial airlines offer in-flight entertainment and information systems to their passengers. This isincreasingly gaining popularity in the airlines sector because the passengers here,unlike other modes of travel do not have any other source of entertainment. Inairlines, the interaction among passengers is also minimum. So, this is one of thetangible tools of attracting or pulling the passengers towards an airline. Nowadays,there are lots of innovations done in the in flight entertainment system and eachairlines is daily coming up with some or the other new technology or up gradationfor the passengers to have entertainment in the flight.KINGFISHER AIRLINESKingfisher 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 toKingfisher Radio which offers a choice of 10 international radio channels. There isa separate video channel for kids too to keep them busy on the flight. All passengersare given complimentary headphones to enjoy the in-flight entertainment. For 53
  54. 54. Kingfisher First Class passengers there is an extra wide 8.4 inch LCD swivel screenfitted on every seat. Kingfisher First Class passengers can also enjoy noisecanceling headphones for a quiet and relaxed flight experience. Kingfisher FirstClass passengers can also play video games on the LCD screen and even playmultiplayer games with their co-passengers.Kingfisher Airlines has tied up with Dish TV to provide live in flight entertainmentto its passengers. This shows the weightage given in flight entertainment in theairlines sector.JET AIRWAYSJet Screen, Jet Airways In-flight entertainment system is available on both businessand economy class on several Jet Airways flights. Jet Airways has also installedstate-of-the-art Panasonic 3000i Audio Video on Demand (AVOD) on every seat insome of its flights. In addition to video channels, up to 8 audio entertainmentchannels playing latest Bollywood songs, International Pop songs, Ghazals, Indianand Western Classical, etc. are also available on Jet Screen.SEATINGIn airlines, passengers mostly stay glued to their seats. So, it‟s very important tohave a comfortable seating in the flight. Specially , in long distance journey thepassenger has to spend a lot of time on the seats, thus the passenger should have fullsatisfaction with the seats provided, as in, there should be enough leg space, thereshouldn‟t be any back problem, comfortable head space and more importantly , theseats should be clean. The seating arrangement has to be spacious as differentindividuals have different physique. Thus, the seats should be such wherein every 54
  55. 55. passenger irrespective of his/ her size or shape should feel relaxed and comfortableon 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 costairlines needs a lot of improvement because they usually have this problem of nothaving enough leg space.KINGFISHER AIRLINESThe seats are the plush Separate seats with a 48 inch pitch, 125 degree recline,adjustable headrests and fully extendable footrests. The expansive legroom, thefully lie flat bed in Kingfisher First and the widest seat pitch in the skies, allows thepassenger to stretch those tired muscles to the fullest. There are also laptop chargersand mobile phone chargers in each seat.JET AIRWAYSJet Airways is the first airline in the world to install new ergonomically designedseats that offer more space, reduce pressure on the passenger‟s body and hasadjustable "Hammock" head rest and a unique foot net which gives added support,especially on long journeys.NEWSPAPERS AND MAGAZINESNewspapers and in flight magazines are provided to the passengers so that even inthe skies they can get information and update their knowledge. 55
  56. 56. Chapter 3Analysis 56
  57. 57. ENVIRONMENTAL SCANThe following is an Environmental Scan of the Global as well as the Indian AirlineSector/Industry. The scan identifies the trends impacting the demand in the AirlineIndustry 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 likelyto be important and effective in five to ten years from now. Apart from identifyingthe demand trends, the scan also identifies the constraints and issues of the airlineindustry, the key players, resources and the outcomes for the various serviceproviders.In India, the service airline business is in trouble. Many airlines companies arestruggling to establish a business model which is viable to the business andprofitable. Most of the companies are running into losses quarter after quarter dueto the increasing costs etc. The recent high volume of passenger and freight flowhas not been able to return profits. The low-fare airlines business model has been asuccess but has not been able to recover the increasing costs. The following factorsrepresent the business environments for the airlines companies.PEST AnalysisPolitical FactorsLiberalization of Air ServicesMany economies have now adopted a forward looking approach in matters ofpolicies for the liberalization of the civil aviation sector. Many economies areopening up with regards to bilateral agreements and are attracting more foreignpassengers. Also, the air traffic between nations such as India-US, China-US, and 57
  58. 58. many more strategic nations is on an increase. These liberalization policies aresurely a boost to the airlines sector since the demand goes up and also serviceproviders can take advantage such the fuel cost advantage (fuel prices in foreignnations are lesser), Globalization, Mergers and Acquisition etc.Modernization of InfrastructureWith the availability of word class, improved technology, the infrastructure hasbeen modernized to the maximum extent possible providing the best possibleexperience to the travelers. Airports are getting modernized with the entry offoreign investments. The best example is the airports in India, which haveundergone modernization and are as beautiful and well-managed as the Heathrowairport. Airports in tourist places such Udaipur have also undergone beautificationin order to give the foreign passenger a global experience.Investments, Resourcing and OutsourcingThe promotion of Foreign Direct Investments by liberalizing the investmentpolicies in the airline sector is relevant from the increasing number of peopletraveling by air and this has lead to generation of investment opportunities in theaviation sector. Foreign players are now not hesitating from investing in the airlinesector of India and other developing nations. Due to Globalization, the demand ispresent 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 whichis in a way reducing cost due to effective logistics decisions.Economical Factors 58
  59. 59. Transportation Gateways to World tradeThe global Airline Industry has developed as such that the infrastructure isfacilitating World Trade, the export and import of goods, services and people. Theworld trade trends and the economic conditions of different nations indeed have animpact on the airline industry, the demand and the outcomes. Amongst the Asiannations, Japan is facing stagnation because of which the foreign investments and thedemand for trade in goods and services have fallen. Whereas, in China and SouthKorea, the import demands from various nations have increased. These economicconditions are affecting the airline industries of these nations.Price and Availability of Petroleum ProductsRising and the volatile world process of Petroleum Products represent trends thathave 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 travelpattern. 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 suchas supply interruptions, geopolitics, change in usage patterns etc. The effects ofhigh petroleum prices on airlines can be seen clearly in the balance-sheets ofairlines such as the Kingfisher which has recorded losses in Quarters I and II alongwith many other airlines which are unable to recover their rising costs.Cost and Availability of Skilled LaborThe airline industry demands extreme skilled labor such as the pilots, ground staffand the flight crew. The labor not only has to be skilled and available but has to be 59
  60. 60. efficient because of the heterogeneous nature of the services provided. No airlinecan 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 andthen assigned with tasks to perform after proper evaluation. Airlines have their ownsubsidiary training centers which concentrate completely on the grooming andtraining of the labor-force. The selection, recruitment, evaluation and training arecostly in nature and thus the company‟s costs goes up which get transferred to thecustomer or the market thus affecting the market and the demand. Also, skilledpersonnel in aviation occupations (particularly pilots) are being attracted tooverseas airlines and airports, creating training demand on top of projecteddomestic labor requirements.Also, a matter of concern to the airlines companies is the aging work-force which islow on efficiency and productivity. Accommodating such an aging and un-productive workforce in the organization structure is difficult.Cost and Availability of Strategic Raw MaterialStrategic raw material with respect to the airline industry is steel and cement whichare required for the manufacture of airplanes and other infrastructure required. Theprices of steel and cement are growing at an alarming rate. Thus, making thesematerials available is a difficult and an expensive task resulting in the increase inthe costs to the service provider.Mergers and Acquisition 60
  61. 61. Strategic M & A between airline providers are another boosting factor to the airlineindustry. The Star Alliance which was founded in 1997 with only 5 AirlineCompanies now has 21 Airlines Companies. Also, the merger of Air India andIndian Airlines is a good example of a Strategic merger. These mergers make theairline companies stronger and efficient with respect to service providing. A betterco-ordination between different airline companies results in a joint effort in tacklingsupply problems of fuel, aw material, labor etc. The merger of Air India and IndianAirlines was a strategic merger to tackle the competition from the private players inthe Indian Aviation sector.Changing industry structures and marketThe global market is highly volatile and undergoes dynamic changes such as in thedemand, the supply, investments etc. This dynamic nature of the market affects notone or two service provider but the entire sector. The changing business modelseffect into a shift of demand which has to be catered to by the entire industry. Forexample, the low-cost airline business model gave birth to an all-together differentclass of flier, the best bargain available wherein bookings are made 3 months inadvance and that too in auctions etc. This led to a steep increase in demand and thenumber of travelers almost doubled. The strain was felt by the service provider. Thelow-cost airline model was not only forcing other airlines to lower their fairs andfight the competition but also cater to the demand. Thus, the volatile nature of theindustry does take a toll on the airline service providers. 61
  62. 62. CompetitionTwo factors which worry the airline companies are the demand and the competition.With the liberalization of policies, foreign players and private players have enteredthe market giving a tough time to the Government companies. Also, the foreign andthe private players have an edge due to the exposure to a global standard, worldclass 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 withthe competition which result into mergers and acquisition which altogether is apositive for the Airline sector.Sociological FactorsPopulation and UrbanizationDemographics are an important factor determining the demand and the key marketsfor the airline industry. The migration of population from nation to nation either forlifestyle as well as economic reasons has led to the growth of the demand. Thepopulation growth leads to increased demand for people movement and for supportservices such as the hospitality and tourism services. Also, an important feature ofthe growing population is that the growth is taking place in the urban area and thusfurther creating demand for movement and air transportation from city to city. Forexample, the increasing movement of people from major international cities has ledto the increase in the number of flights between these key cities, such as Mumbai-London; Mumbai-Paris etc. 62
  63. 63. Technological FactorsImproving TechnologyWith Globalization, technology is going through tremendous change with thespecial emphasis by companies in Research and Development. Every serviceprovider is looking for a cost effective method, world class infrastructure, best ofthe best service providing to passengers etc. technology is surely another boostingfactor the airline industry. Facilities such as E-ticketing, Kiosk Check-in, internetconnectivity in-flight etc. are due to the improving the technology. These facilitiesare resulting into customer-delight.Other FactorsApart from the „PEST‟ Factors affecting the Business Environments of the AirlineIndustry, there are many more factors which are affecting the demands anddetermining the market trends for the sector. The following factors are a part of theof the „PEST‟ factors but they have an all-round impact on the sector thus cannot beallocated under a specific heading.Following the „Other Factors‟:TourismSince the last ten years, world tourism has been struggling due to the frequentterrorist attacks and natural calamities happening in key economic destinations. The9/11 bombing of the twin towers in New York had the most destructive effect to thetourism in the entire of the United States. Tourism in the U.S.A. has not yetrecovered. Because of the fall of tourism, the international travelling has reducedthus directly affecting the airline industry. Nations now are concentrating onpromoting tourism in order to improve revenues in the related sectors, most 63
  64. 64. important being the airlines sector. „Incredible India‟ is one such initiative by theGovernment of India to promote national as well as international tourism.Safety and Security ConcernsEvents such as the 9/11 blasts, blasts at the London Airport, blasts at the MadridRailway Station and the serial blasts in the Mumbai local trains confirm thattransport facilities are being targeted by terrorists. These events have led an increasein the safety and security issues in major cities. These issues are affecting thedemand of airlines services for travelling by people.Environmental ConcernsIt is now recognized that the rise in temperature due to climate changes are becauseof the human activities such as Globalization, agriculture, burning of fossil fuels,deforestation etc. all these activities are to meet the increasing demand of theincreasing population. The airline industry needs these activities in order to fulfillthe demand of the movement of the population from one place to another.Environmental issues and concerns are obstructing in developing infrastructure suchas new airports etc. the airline industry without a proper infrastructure cannot createprofits for the players in the market.WorkloadWe just mentioned volatile nature of the market and demand and its effect on theindustry. This effect is felt in the hanging workload for the employees. In peakseason times, the workload is tremendous. Also, the labor-force is not available asrequired by the industry. Thus, the existing work-force has to bear the brunt of 64
  65. 65. excess workload. Pilots, flight crew getting stressed are a common issue now andthe stress is resulting into hazardous effects for the airline companies. 65
  66. 66. SWOT ANALYSISSTRENGTHSOpen EconomiesThe world is getting smaller. Thanks to the opening up of economies like India. Thedeveloping nations have a lot of potential with regards to industrial growth.Opening up policies regarding the airline services initiates MNCs to venture intodeveloping markets.Efficient MarketingDue to the heavy competition in the sector, airline companies are initiating ondynamic marketing strategies. These strategies are encouraging people to fly whowere once scared of flying and also considered it an expensive mode of commuting. 66
  67. 67. NetworkingThe Airline Sector on the Global as well as the National level is well-networkedand have efficient resources put into the networking infrastructure. Travelling fromany destination to another destination is possible with varied options available tothe traveler.Modern FleetWith average age of aircraft of about 5 yrs Indian Aviation sector have one of themost modern Fleet of aircraftsWEAKNESSESThreat of New EntrantsAt 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 forthe opportunities. The competition is so intense that no player can be profitablealong with being an effective player in the market. Capital intensive businesses likean Airline Company cannot afford to forego iota‟s profits for market share.Power of SuppliersThe airline supply business is mainly dominated by Boeing and Airbus. For thisreason, 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) 67