AIR DECCAN –Revolutionizing the Indian Skies. Case Study.

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Pertaining to Strategic Management course, here is a case analysis of Air Deccan- India's first low cost carrier.

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AIR DECCAN –Revolutionizing the Indian Skies. Case Study.

  1. 1. AIR DECCAN – REVOLUTIONIZING THE INDIAN SKIES. PRESENTED BYThe Assam Kaziranga University- School of Business.
  2. 2. Aviation Industry in India : Characteristics Huge Potential  Under penetrated market  Total Passenger Traffic : 50 million  Passenger trips per annum : India : 0.05 United states : 2.02  Untapped air cargo market  Infrastructure Constraint  High Fuel Cost 
  3. 3. Air Deccan creates „REVOLUTION‟ in Indian Transportation  In 2003 Air Deccan came to Birth.  Founder         –Capt. G.R. Gopinath. This was the first low cost carrier of India Cheaper than Railway 2- tier AC More advanced than railway system Covered 65 destinations in India 365 destination per day Flew 14 million passengers per year (maximum) Market Share 21.2 % Investment – USD 50 million
  4. 4. 4 Vision and Mission Vision : Empower every Indian to fly Mission : To demystify air travel in India by providing reliable, low cost and safe travel to the common man by constantly driving down the air fares as an ongoing mission.
  5. 5. Air Deccan‟s Business     Air Deccan‟s first flight took off from Bangalore to Hubli on August 25 , 2003 Positioning as „low cost carrier „ Offer no in-flight service Single class aircraft configuration Internet booking and cheap fares Two air craft strategy – Airbus and ATR Target market – Upper middle class for short term and lower middle class aggressively in long term
  6. 6. Air Deccan‟s Business (cont.)      Target to expand fleet-124 aircraft by 2013 The Indian aviation market expected to grow at 20% annually for the next ten years. Air Deccan targeted 18% market share by 2013 Passenger load factors anticipated at 70% Revenues per customer to increase at 5% in the long run Targets to decease fuel expense as a percentage of total revenues from 30% to 26%, operating expense from 23% to 16% in 8 years
  7. 7. PEST Analysis of Air Deccan‟s Business  Political Factors:  Deregulations in different spheres.  Open Sky Policy  Low Entry Barriers  FDI limits- 49% on airlines and 100% on airports.
  8. 8.  Economic Factor:  Purchasing power increasing rapidly  Growing middle class Income  Hike in Average Salary in the world at that period. (14%- highest).  Consistent GDP growth and projected double digit growth.  Tourism Industry Growth. 8.8% in 2005  Socio-cultural Factor:  Status symbol to travel by air.  Growing Middle class households.  Increase in leisure travel by tourists by 15 % in 2005  Foreign tourists in 2006 : 3.2 mn
  9. 9.  Technological Factors:  Modernization & Privatization of Airports Modern Technology for efficient handling of aircraft, passenger and cargo. Example : ILS, CAT-3 Developing Greenfield Airports with Private Sector Example : Bangalore Airport Corporation Ltd.  Ticketing increasing becoming Web Based. 
  10. 10. Marketing Strategy 10 Common Man : The Brand Ambassador for Air Deccan, the people‟s airline is Mr. R.K Laxman‟s „Common Man‟ Free Tickets : Images courtesy of Air Deccan
  11. 11. Marketing Strategy 11       Advertisement through print, radio and billboards In flight magazine for revenue generating In flight shopping scheme called “Brand for less” – AVA Merchandising Tie-up with Café Coffee Day ICICI-Travel agent purchase card Tie-ups with HPCL and Reliance Web World
  12. 12. How Air Deccan cuts cost? 12        Quicker turnaround time Lower distributions costs All economy seating configuration No free catering on board Alternative revenue channels 100% web enabled bookings – e ticketing Enhanced cash flow management
  13. 13. SWOT Analysis 13  Strengths :  Leader in LCA segment : First to target the middle class : First mover advantage  Highest load efficiency  Flies to destinations in the hinterland  A „Lean-and-Mean‟ approach to staffing
  14. 14. SWOT Analysis 14  Weaknesses :  Focuses mostly on South Indian market  Image plagued by frequent breakdowns and near misses  Very limited advertising  Reached at the threshold of cost efficiency
  15. 15. SWOT Analysis 15  Opportunities :  Extensive network to capitalize Air Cargo business  Plenty of scope for expansion of operations  Strengthen its position in Chartered flight segment  Could start „Contractual Employment‟
  16. 16. SWOT Analysis 16  Threats :  High attrition rate  The threat of new entrants into Low Price Segment. Especially IndiGo, Go Air and SpiceJet  High Risk Perception
  17. 17. Generic Strategies Model. 1. Cost Leadership Strategy      Single Air Hostess per flight. 48 seater aircraft to lower maintenance and service fee. Unique Online Reservation system. No Frills airline but food / beverage can be bought inside the aircraft. Prices are almost 50% lower than the full service airlines .
  18. 18. Generic Strategies Model (Cont.) 2. Differentiation Strategy Single Passenger class system  Tie ups with Cafe Coffee Day, HPCL and Reliance Web World  Provides flights even to the hinterland  Allocation of prices to various percentage of seats 
  19. 19. Generic Strategies Model (cont.) 3. Focus Strategy Frequent business travelers  AC train travelers 
  20. 20. Rebranding        Renaming from „Air Deccan‟ to „Deccan‟ New Tagline - „The Choice is Simple‟ Blue and yellow name replaced by Red and White Sold 26% stake to Kingfisher Airlines in May 2007. No outsourcing of check- in staff Replacement of Ailing Aircrafts Cost incurred in rebranding process : Rs. 15 crore.

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