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Format for the marketing plan

  1. 1. Strategic Marketing Plan for Domestic Airline Industry In SRI LANKA (Cinnamon Air) Prepared by G.T.C .Jayasiri Individual Assignment December 2012 Examination Page 1 of 51
  2. 2. Diploma in Travel Tourism Economics and Hospitality Management- DTTEHM UNIVERSITY OF COLOMOB SRI LANKA Table of Content 1. Executive Summary A. Summary of Situation Analysis B. Summary of Marketing Objectives. C. Summary of Marketing Strategies. D. Summary of Financial Projections. 2. Vision and Mission 3 The Company 3.1. Brief history 3.2. Current size, the areas where the company is operating, growth and profitability etc. 3.3. Internal Environment a. Staff Relations b. Resource Constraints c. Corporate Structure and Culture 4. The Product / Service 4.1. General Product Story a. Development, introduction and history. b. Product category and characteristics c. Stage of Product Life Cycle. d. Product uses Page 2 of 51
  3. 3. 5. The overall Market ( customers) 5.1. Market size estimates a. Current b. Trends and Future growth c. Expected market ( demand estimates) 5.2. Market Segments a. Geographic b. Demographic c. Psychographic d. Behavioral 5.3. Description of the characteristics of target customers a. Needs and benefits sought b. Product usage who is using, why they use, when do they use, how it is used d. Attitudes of the customers i. As to product category ii. As to company‟s product) iii. Why they like our product or not, If it is a new product, support with specific research done with your product) iv. Any unique character of our customers 5.4. Description of the purchasing process a. Buying decision making process b. What sources of information is sought c. Who makes the purchase? d. Is purchaser the consumer? e. Who or what may influence the purchase? Page 3 of 51
  4. 4. 6. Competition and Market share 6.1. Identification of competitors a. Primary competitors b. Secondary competitors c. Possible new competitors 6.2 Market Share a. Total industry sale by market b. Company market share c. Comparative analysis of Market share held by competitors d. Market share potential for the company 6.2 Describe following details of top three players in the market and any other competitor that would pose a threat to you or that you would be fighting with in order to enter into the marketa. Background of competitors i. Company and its size/type ii. Reputation iii. Sales force and their expertise iv. Financial strength v. Technology used vi. Research and development capabilities vii. Any other important aspect b. Current Product Strategy of competitors Comparative analysis of competitor’s product strategy i. Product Mix ii. Branding and packaging iii. Positioning iv. Image and reputation of brand v . Product Strengths and weaknesses c. Current distribution strategy of competitors Comparative Analysis about the competitor‟s distribution strategy i. Type of distribution network used ii. Evaluation of how distribution targets accomplished Page 4 of 51
  5. 5. iii. Relationship with channel members iv. Strength of the channel members v. Comparative analysis of Competitors prices d. Current Pricing Strategy i. Pricing objectives ii. Pricing strategies iii. Buyers attitude about the company prices iv. Channel attitude of about the company‟s prices e. Current Promotional Strategy Comparative Analysis of Competitor promo tools and campaigns i. Promotional Objectives ii. Strategies and themes used iii. Promotional Budgets and methods of allocation iv. Promotional tools used a. Advertising b. Sales Promotions c. Public Relations d. Direct marketing e. Personal Selling vi. Success and failures of promo campaigns 6.3 Summary of the competition 7.0 External Environmental factors 7.1 PESTEEL Factors 1. Political 2. Economical 3. Social 4. Technological 5. Ecological 6. Environmental 7. Legal 8. SWOT Analysis 3. G.1. Strengths 3. G.2. Weaknesses Page 5 of 51
  6. 6. 3.G.3 Opportunities 3.G. 4 Threats 9. Sales Objectives: It represents projected level of sales to be achieved. This is the most important element because it creates the direction for entire marketing plan. It should be SMART. Everything that follows in the plan designed to meet the sales objectives. 10. Marketing Objectives Marketing Objectives: Clearly defines what need of the market that we serve and what behavior we want from the market. This basically covers the SMART. Objectives would be for retaining existing customers, increasing sales from existing customers, developing new customers, increasing usage of the product etc. 11.Overall Marketing Strategies 11. 1 Targeting and Positioning 11.1.1. Targeting 11.1.2. Positioning 11.2 Tactical Marketing Mix Strategy Development ( 7ps) 11.2.1 Product Strategy 11.2.2 Pricing Strategy 11.2.3 Promotional Strategy 11.2.4 Distribution Strategy 11.2.5 Physical Evidence Strategy 11.2.6 Process Strategy 11.2.7 People Strategy 12. Marketing Strategy Implementation (Action plans) 13. Monitoring and Evaluation Graphical illustration plus a detailed explanation should be given and maximum of 2 A 4 pages can be used. Page 6 of 51
  7. 7. List of References (Harvard Format) Appendix Executive Summary Market factors favor inauguration of a new airline to meet the demand for additional, higher-quality passenger and cargo service linking all over Sri Lanka with the rapidly expanding markets of tourism industry . This new airline will base its business and marketing strategies on achieving high, and profitable, load factors through absorption of unmet demand in three key air-traffic categories: unserved and underserved routes on which high unmet demand currently exists or can be readily developed; serving key niche markets where demand is either unmet or poorly served; and meeting peak traffic demands on certain key regional, seasonal, and variable routes where very high load factors can be predicted despite existing but lower-quality competition, or where competition cannot meet the demand. In addition, the proposed new airline will be designed around, and operated utilizing, the most up-todate electronic, informational, and aviation technologies to ensure low operating and marketing costs, maximum efficiency in deployment of its resources, and a high level of customer service and convenience. And it is this final element - dedicating the airline, its staff, and its organization to providing a high level of customer service and convenience, and efficiently meeting the needs, wants, comfort, and safety of the passenger - that will assure the proposed airline's rapid acceptance in the marketplace and its long-term growth and success. D. Summary of Financial Projections. The six key characteristics leading to the success and profitability of this new carrier will be: Provision of high-quality service on routes and in markets that currently are either unserved, poorly served, or under-subscribed by existing carriers, thereby setting both a new trend and a new pace in air service for the clients. Employment of cost-effective, up-to-date regional aircraft that will be sized right for the market and the route, leading to higher load factors, reduced costs, improved efficiency and flexibility, Page 7 of 51
  8. 8. greater passenger comfort and satisfaction, and higher net profits. Outfitting these aircraft with the latest aviation technologies and navigational equipment will help ensure the highest level of reliability, punctuality, safety, and customer satisfaction. Utilization of the latest electronic and informational technologies in sales and marketing; reservations, ticketing and check-in; scheduling and resource planning; cargo tracking; and operational oversight. Such techniques as internet marketing, reservations, and sales; electronic ticketing and check-in; online quality control, resource planning, operational oversight, cargo and baggage tracking, and customer service, all will reduce staffing requirements while offering ease-of-use and greatly enhanced access by, and convenience to, the customer. Recognition that not everyone is geared for the electronic world, leading the proposed airline to provide a high level of non-electronic service as well, particularly to the many newer, lessexperienced travelers - but future loyal customers - found in the region. Ensuring a friendly, cooperative, enjoyable, yet highly professional face to the customer. Development and implementation of cooperations, associations, and partnerships with other larger, more established, and highly regarded airlines both within and beyond the region to provide an extensive range of connections, through fares, frequent-flyer mileage sharing, and other passenger and client advantages through interline arrangements, code shares, common hubbing, and so forth. In short, the goal of this new airline is to be known to the passenger and the cargo customer by its proposed motto: "We've got a job to do, and we do it every day - for you!" Primary financial results anticipated during the first year of operations include: Average passenger load factors in the 60-80 percent range, depending on route and season, reached within the first year of flight operations, and increasing thereafter to the 75-90 percent range. Revenues approaching [XYZ] million USD within the first six months of flight operations, exceeding [XYZ] million USD by the end of the first year, [XYZ] million USD in the second year of operations, and nearly [XYZ] million USD in the third. A gross operating margin of close to [XYZ] percent achieved within the first year of operations, reaching close to double that by the third year, and with steady growth enabling rational expansion of the airline thereafter. Even in the first year of operations, a pre-tax profit of [XYZ] Page 8 of 51
  9. 9. million USD is anticipated. This is applying a very conservative business model, and is achieved on an initial investment of less than [XYZ] million USD, yielding a return on equity of [XYZ] percent. The accompanying chart illustrates the growth and profit potential present. 1.1 Objectives The proposed airline will have as its primary objectives the following elements: 1. To establish and operate a new domestic airline aiming specifically at linking all the air hubs with the rapidly expanding Tourism markets of Middle East, Far East & Europe.. 2. To provide service and absorb unmet demand in three key traffic categories: unserved and underserved routes on which high demand currently exists or can be developed; serving key niche markets where demand is either unmet or poorly served; and meeting peak traffic demands on certain key regional, seasonal, and variable routes where very high load factors can be predicted despite existing, but lower-quality, competition. 3. To implement an organizational and marketing strategy that will, beginning in the first year of flight operations, achieve average passenger load factors in the 65-85 percent range, depending on route and season, and increasing thereafter to the 75-90 percent range, thereby maximizing revenues and return on investment while minimizing risk. 4. To achieve revenues in excess of [XYZ] million USD per quarter within the first six months of flight operations, and exceeding [XYZ] million USD per quarter, by the end of the first year. 5. To achieve net operating profits in the [XYZ] percent range within the first 12 months of flight operations, an annualized return-on-investment of approximately [XYZ] percent by the end of the second year of operations, and steady growth enabling rational expansion of the airline thereafter. 6. To achieve the projected results starting with two mid-to-large-size domestic aircraft, growing to five by the end of the first year of operations, similar to the 28-passenger British Aerospace Rav199 Cesna Grand Caravan / Ceasna 208 domestic Passenger air crafts, obtained on either a dry-lease or purchase basis; supplementing those aircraft with larger, longer-range passenger aircraft and cargo liners on a charter or wet-lease basis to serve peak-demand and intermittent routes and periods, as well as cargo demands, as called for by the business plan; and incrementally expanding the fleet size and scope on a dry-lease or purchase basis to at least double its initial capacity by the beginning of the Page 9 of 51
  10. 10. third year of operations to accommodate projected passenger and cargo growth in the business plan's out-years. 7. To gear operations, and present a professional, serious, growth-oriented image from the outset, that will set the stage for reasoned, planned expansion, mirroring growth rates projected for the first year of operations, and that will enable the airline to extend its regional scope and, in future years, to transition from its initial regional status into a larger continental and intercontinental carrier. 8. As an element critical to achieving the airline's other key objectives, to identify and develop key interline alliances, cooperations, associations, and partnerships with other larger, more established, and highly regarded airlines both within and beyond the target region that will enable the proposed airline to provide an extensive range of connections, through fares, frequent-flyer mileage sharing, and other passenger and client advantages through interline arrangements, code shares, common hubbing, and so forth. A. Summary of Situation Analysis DOMESTIC FLIGHTS IN SRI LANKA Sri Lanka‟s domestic air travel market has seen resurgence since the dawn of peace to the island nation in 2009. There are a number of airlines presently operating domestic flights within Sri Lanka offering scheduled service as well as charter flights. Page 10 of 51
  11. 11. Given below is the Sri Lanks‟s domestic scheduled air routes map as of 26th January 2012. Maps used in this section have been generated using the Great Circle Mapper In red is the main domestic trunk route of Sri Lanka, connecting the Colombo Ratmalana Airport (RML) with Jaffna. Shown in blue are the routes operated by Helitours, the commercial airline unit of the Sri Lanka Air Force. In green are routes operated by SriLankanAirTaxi, operated by SriLankan Airlines. The „crosshair‟ signs depict floatplane stations. Main domestic airlines of Sri Lanka SriLankanAirTaxi Helitours ExpoAir Page 11 of 51
  12. 12. Deccan Aviation Air Senok Cosmos Aviation Daya Airlines Cinnamon Air ( from 2012 ) Main domestic airports of Sri Lanka Colombo City, Ratmalana Airport (RML) Jaffna Airport (JAF) Colombo PeliyagodaWaterdrome NuwaraEliya (NUA) Koggala (KCT) Bentota (BJT) Kandy (KDZ) Dambulla (DBU) Batticaloa (BTC) Trincomalee, China Bay Airport (TRR) The following map depicts the present domestic route map of Sri Lanka. I have referred to Colombo Ratmalana Airport (RML) as Colombo Domestic to differentiate it from the main international airport. In red is the Ratmalana - Jaffna route, which is presently flown by Helitours with scheduled flights as well as by a number of other airlines on a charter basis. This is also the route which aforementioned ExpoAir will soon begin operation on. In green are the routes presently operated by SriLankanAirTaxi (as of this writing). Shown in green 'crosshairs' are the floatplane-dromes that it is operating into. While the routes are shown as originating from Colombo, CMB - the floatplane routes in fact originate from a floatplane-drome nearby the city centre of Colombo - which puts it in equal distance between Colombo, CMB and Colombo, RML airports. In blue are the routes operated at the time of writing by Helitours. Page 12 of 51
  13. 13. Maps used in this section have been generated using the Great Circle Mapper The following map shows Tiruchirapally in southern India for reference. Page 13 of 51
  14. 14. Maps used in this section have been generated using the Great Circle Mapper Jaffna (JAF) in the Northern Peninsular was in fact an international airport till the early 1980s, when its operations were halted due to the terrorist activities in Northern Sri Lanka. Prior to this, then national carrier of Sri Lanka, Air Ceylon used to operate a number of routes into India from Jaffna, while Indian Airlines too is known to have operated into Jaffna. Until the opening of Colombo Bandaranaike Airport (CMB) in 1969, Colombo Ratmalana (RML) airport was the key international airport in Colombo. While Ratmalana operated some cargo flights in early 2000s, the shorter runway at the airport has made it unfavorable for jet aircraft, and at present the airport is being planned to be converted into a business airport with an extension of the runway. Koggala (KCT) airport at one time catered to the world's longest nonstop flight, operated by Qantas Catalina Flying boats from Perth. Known popularly as "The Dou ble Sunrise", this route formed the vital air link between Australia and England during the 1943-1945 era. The flight between Perth and Koggala could take anywhere between 27-33 hours at this time. With the dawn of peace, major investments in aviation facilities, and a growing economy, Sri Lanka's domestic aviation sector sure looks to have a brighter future ahead. B. Summary of Marketing Objectives. (¼ A4 page) Page 14 of 51
  15. 15. : Page 15 of 51
  16. 16. C. Summary of Marketing Strategies. (One A4 page) Marketing Strategies: ”Official airline” or “Official alliance” status. Exclusive logo presence in all printed material. Complimentary advertisements in conference programmes and other associationpublications. Providing a list of potential and actual attendees for the conference in order for airline to promote transport to the event. Exclusive mention in association and event websites, including links to airline booking working with airlines engines (NB if the association members have a particularly valuable business profile, the opportunity for the airline to market to the entire membership should not be under estimated, especially if member numbers are significantly higher than likely delegate numbers). Proactive marketing to inform delegates about promotional flight offers and about the range of potential routes using the “official airline” and its partners, and to encourage early booking. Meeting planners to provide sales lead contacts, subject to the approval of the delegates and the applicable legislation. Distribution of airline collateral material to delegates (eg invitations to join Frequent Flyerprogramme). Recognition of airline during the event (eg invitations to VIP events; logo presence on signage; name mention during key elements of the event; airline executive as speaker if the conference is on a subject relevant to airlines). Page 16 of 51
  17. 17. Complimentary participation in the conference programme or workshop if deemed relevant to airline/alliance. Monitoring of how effective the partnership has been. This is important not just for securing support for one event, but also if the association wishes to develop a longer term partnership with a particular alliance. Further … Employing an experienced, highly professional management team that combines vision; realism; financial ability; solid knowledge of the aviation business; familiarity with, and belief in, the utilization and benefits of the latest aviation, electronic, and informational technologies; on-theground knowledge of the region and markets to be served; realization of the crucial importance of an organization's personnel to its success; and a total familiarity with, and commitment to, the overall mission and goals of the proposed new airline. Intelligent, progressive, and aggressive marketing that identifies the airline as a different kind of player, one that is sharper and smarter, and with a higher level of professionalism and operational standard than is the norm in the target region. Concentration on safety, with highly trained, dedicated, and professional personnel, caring for the passenger and the passenger's needs and wants, the advantages offered by advanced technology, and straightforward, understandable, highly competitive tariffs and fare pricing, all will form key pillars of the marketing strategy. Identification, through careful market research, of unserved or under-served routes and city pairs in the target market area with sufficient passenger demand to enable high load factors and profitable operations utilizing the category of aircraft envisaged. Use of an all-jet fleet of newer, modern, Western-built regional aircraft that offer a high level of comfort, safety, and fuel and operational efficiency and flexibility, which meet all normal aviation standards, and which offer sufficient, but not excessive, passenger and cargo capacity on the envisaged routes. Use of advanced electronic and information technology to reduce staffing and other operational costs; expand the potential market base; readily capture sales opportunities; simplify and speed passenger, baggage, and cargo handling; and enhance customer convenience and satisfaction.Additional important, though less critical, keys to assuring the airline's success include the following: Page 17 of 51
  18. 18. Identifying, negotiating, and entering into, in the pre-operational stage and early on, beneficial associations, cooperations, and partnerships with larger, more established, highly regarded carriers both within and beyond the target market region to offer interline arrangements, through fares, frequent-flyer mileage sharing, and convenient hubbing and long-distance onward connections to passengers. Successful execution of this element of the business plan is crucial to the overall success and growth of the airline, and must be kept in mind in the organizational plan and structuring of the airline. Establishing a high level of operational oversight and quality control that will ensure that the airline always lives up to its marketing commitments and fulfills the promise of a high level of service, customer satisfaction, convenience, and safety, at a reasonable, highly competitive fare. Avoiding the temptation to go head-to-head with established carriers on routes that already are well-served, unless solid evidence exists of additional, significant pent-up demand, or widespread customer dissatisfaction with existing services. Maintaining flexibility that enables the airline to always respond and adapt to changing market conditions and opportunities, without being erratic, and employing equipment, scheduling, and staffing on a basis that is sufficient to get the job done properly, efficiently, and at a high rate of return, without "overkill" or fielding costly excess capacity or, conversely, unduly cancelling scheduled flight operations. Identifying, developing, and quickly and cost-effectively exploiting opportunities for new markets, new market concepts, and expanded sales potential. Supplementing regularly scheduled passenger service with both regularly scheduled and also special cargo services when and where sufficient demand exists, and also with seasonal, peakperiod, and other intermittent passenger services on certain key regional, seasonal, and variable routes where very high load factors can be predicted despite existing but lower-quality competition, or where competition cannot meet the demand. Larger, longer-range, or specialized aircraft may be employed on a charter or wet-lease basis to provide these supplemental, but potentially highly profitable, passenger and cargo services. Looking to combine the core aviation business with ancillary marketing concepts and activities and ground-based operations that support, supplement, and complement the aviation elements of the business, including such activities as package-, group-, and charter-travel program offerings; value-added sales and customer services, both land- and Internet-based; construction and operation of enhanced passenger-, baggage-, and cargo-handling facilities and Page 18 of 51
  19. 19. services; and other logical business pursuits both within and outside the immediate aviation business. Avoiding growth for growth's sake, and instead looking for solid niche-enlargement opportunities that will allow incremental, but always profitable, expansion. D. Summary of Financial Projections. FINANCIAL PLAN This section of the plan offers the core elements for evaluating the financial viability of the proposed new airline. Both in text and in charts and tables, all the key elements are presented to offer a frank appraisal of the venture and the opportunity it presents. Of particular importance is the following section which presents the key "Important Assumptions" on the core cost and revenue aspects of the airline. These assumptions are based on cost factors involving the proposed Cesna 208 aircrafts, and assume dry leasing of new aircraft (a comparison is also given for a purchase option, although that option, as will be apparent from the numbers, demands a much larger up-front cash outlay, and does not necessarily lead to economies of operation, particularly in the short run). Among the assumptions made were that the airline will begin operating with just three 99-passenger regional jets, with very low load factors, beneath 25 percent of capacity, and at fare levels that in all likelihood are lower than reasonably expected on the planned route network. These assumptions were taken to ensure a conservative approach to the financial planning, and to demonstrate that even with these constraints the proposed airline can be profitable as early as the first year of operations. It also was assumed that the aircraft will receive maximum utilization, up to six, seven, or more segments per day. A "wave" or "W" route pattern, and reciprocating or circular routes, was assumed, rather than simply a spoke-and-hub route pattern, to enable service to more destinations and to maximize use of the aircraft. A major feature of the route planning has been to enable business travelers to go and come back from destinations generally in the same day, and certainly in the same week. Crew requirements and hour restrictions also were considered in the planning. Page 19 of 51
  20. 20. Again, it should be stressed that even with the considerable constraints employed in the calculations, the airline can be expected to carry upwards of 600 passengers in its first year, and possibly up to a 1000 passengers, and to reach profitability within the first year of operations, with significant growth in both revenues and cash generated thereafter. The Important Assumptions section also includes information on the third prong of the proposed marketing strategy, which is to employ wet-leased or chartered aircraft to serve high-demand regional, seasonal, and peak-traffic markets as a supplement to the regular scheduled service of the airline. A conservative approach also was taken with this segment, and again it was shown to be a profitable area to pursue, although relatively modest particularly at the outset in terms of overall revenues. It is strongly suggested that the Important Assumptions section be reviewed carefully prior to more in-depth examination of the financials since it explains the premises on which the financials are based. It also should be noted that the aircraft costing section is based on a segment approach, with aircraft acquisition, operating and crew costs, and some direct sales costs, as well as revenues, apportioned on a "segment" basis. Note that some elements that go into the segment costing are based on hourly costs, extrapolated to the segment length, and others are strictly on a "per segment" basis. The number of aircraft employed are stated at the top, on a "full-time equivalent" (FTE) basis, allowing for variance in fleet size during the year as new aircraft are brought into the fleet. 7.1 Important Assumptions In addition to the general financial and business assumptions presented in the following table, the key parameters presented on the next page also were included as Operating Assumptions in formulating the financial portions of this business plan. Every effort was made to be realistic in these Assumptions, and if anything they were formulated conservatively, particularly in calculating initial load factors and revenue yields which, in practice, should be considerably higher than offered here. Additionally, passenger and cargo fares were considered to be flat over the entire period covered by this plan to compensate for the possibility that additional competition could force fares to remain relatively constant over the period. However, the objective of this exercise was to show that the proposed operation will be profitable even with much lower revenues than would normally be expected, and the numbers do in fact confirm a profitable outcome. Page 20 of 51
  21. 21. Operating Assumptions FY 2012 FY 2013 FY 2014 Aircraft in service (FTE) 2.83 5.33 7.33 Aircraft in service at end of FY 5 7 9 Cost per aircraft if purchased $26,000,000 $26,000,000 $26,000,000 Annual leasing cost per aircraft $3,120,000 $3,120,000 $3,120,000 Insurance rate % of aircraft cost 1.50% 1.50% 1.50% Annual insurance cost per aircraft $390,000 $390,000 $390,000 Captain's Annual Salary $60,000 $66,000 $69,300 First Officer's Salary % of Captain 80% 80% 80% Flight Attendant's Salary % of Capt 30% 30% 30% Salary Burden as percent of Salary 20% 20% 20% Crew members per flight Flght-2/Cab-3 Flght-2/Cab-3 Flght-2/Cab-3 Crew contingents per aircraft 3 3 3 Total crew per aircraft (min.) Flght-6/Cab-9 Flght-6/Cab-9 Flght-6/Cab-9 Flight Hours/Month for Crew 80 80 80 Average Total Salary Cost/Hour $202.50 $222.75 $233.89 Total aircraft maint. cost/hour $800 $800 $800 Fuel burn kg/hour 2,100 2,100 2,100 Fuel cost per kg $0.35 $0.35 $0.35 Handling cost/segment (ave.) $360 $400 $440 ATC cost/segment (ave.) $120 $130 $140 Page 21 of 51
  22. 22. Land/depart charge per seg. (ave.) $150 $180 $210 Parking fee/aircraft/night $150 $170 $190 In-flight items/pax -- Value $6 $7 $8 In-flight items/pax -- Premium $8 $9 $10 Percent/revenues commissionable 40% 35% 30% Commission payable 9% 9% 9% Ave. reservations cost/pax/seg $2 $2 $2 Average segment (hours) 1.25 1.3 1.35 Annual segments 6,520 11,808 15,638 Ave. total capacity/segment (pax) 99 99 99 Ave. Annual Load Factor (%) 50% 65% 75% Ave. split Value/Premier 79/20 79/20 79/20 Average fare per Value pax/seg. $110 $110 $110 Average fare per Premier pax/seg. $143 $143 $143 Cargo per segment (kgs) 700 700 700 Ave. cargo tariff per segment/kg. $0.50 $0.50 $0.50 Ave. cargo tariff per segment $350 $350 $350 Average pax revenues/segment $5,775 $7,507 $8,933 Average cargo revenues/seg. $350 $350 $350 Total ave. revenues/segment $6,125 $7,857 $9,283 Total ave. costs/segment $4,972 $5,449 $5,741 Total ave. net yield/segment $1,153 $2,408 $3,542 Page 22 of 51
  23. 23. Total revenues/year $39,935,000 $92,775,456 $145,167,550 Total operating costs/year $32,417,440 $64,341,792 $89,777,758 Total net operating. revenues/year $7,517,560 $28,433,664 $55,389,792 Additionally, expected net revenues from offering peak-demand special flights also are calculated. They are set apart separately from the scheduled-service revenues to show that both types of service and particularly the more important scheduled service - are viable and the airline will be profitable even without these additional revenues. The assumptions utilized here are based on dry leasing new Cesan 208/208 Grand Caravan has at a high level of outfitting and with necessary spares included. 2. Vision and Mission Vision Trendsetter of the Domestic Air Line Market in Sri Lanka Mission To be the Market Leader The Company 3.1. Brief history The origins of John Keells Holdings lie in a produce and exchange broking business started by two Englishmen, Edwin and George John, in Colombo, Ceylon, in the early 1870s. E. John & Co. was one of a handful of broking companies that helped build tea production and export into the mainstay of the colonial Ceylonese economy. In 1948, the year of Ceylon's Independence, E. John & Co. merged with two London-based broking companies to form the private limited company of E. John, Thompson, White & Co. Ltd. Business opportunities in a fledgling post-Independence economy spurred growth and expansion throughout the Fifties and Sixties. The name that is now synonymous with Sri Lankan business leadership came Page 23 of 51
  24. 24. into existence following the acquisition of another Colombo broking company, Keell&Waldock Ltd, in 1960, the resulting entity being named John Keells Thompson White Ltd. As Ceylon modernized, becoming the Republic of Sri Lanka in 1972, social and political change helped drive John Keells' expansion and diversification. The growing economic importance of travel and tourism was reflected in the acquisition of Walkers Tours & Travels, the leading inbound tour company of the time, and the Mackinnons' Group, which had extensive interests in shipping. Thus began a process of diversification that has resulted in today's 70-member conglomerate. The parent firm, now known as John Keells PLC, became a public quoted company in 1974. In October 1986 a newly incorporated John Keells Holdings Ltd. (JKH) acquired a controlling stake in John Keells Limited and obtained a quotation on the Colombo Stock Exchange amidst a heavily over-subscribed public share issue. In terms of market capitalization, John Keells Holdings PLC is the largest listed conglomerate on the Colombo Stock Exchange. Other measures tell a similar tale; our group companies manage the largest number of hotel rooms in Sri Lanka, own the country's largest privately-owned transportation business and hold leading positions in Sri Lanka's key industries: tea, food and beverage manufacture and distribution, logistics, real estate, banking and information technology. Our investment in Sri Lanka is so deep and widely diversified that our stock price is sometimes used by international financial analysts as a benchmark of the country's economy. For 140 years, we have remained proudly independent, forcefully committed to private ownership and private dividends, and relying on foresight, expertise and integrity for success and growth. Having a significant portion of our shares held by foreign investors, our Group has also partnered with some of the world's finest business establishments, from DHL to American Airlines, from IBM to Toshiba, and from Thomas Cook to Kuoni. For emerging-market investors and those seeking a business partner in Sri Lanka, John Keells is an option that simply cannot be ignored John Keells Holdings PLC (JKH) is one of the largest conglomerates operating in Sri Lanka and in terms of market capitalisation, is the largest listed conglomerate on the Colombo Stock Exchange. Other measures tell a similar tale; the group of companies manages the largest number of hotel rooms in Sri Lanka, own the country's largest privately owned transportation business and hold leading positions in Sri Lanka's key industries: tea, food and beverage manufacture and distribution, logistics, real estate, banking and information technology. Its investment in Sri Lanka is so deep and widely Page 24 of 51
  25. 25. diversified that its stock price is sometimes used by international financial analysts as a benchmark of the country's economy. For 140 years, JKH have remained proudly independent, forcefully committed to private ownership and private dividends, and relying on foresight, expertise and integrity for success and growth. Having a significant portion of its shares held by foreign investors, the Group has also partnered with some of the world's finest business establishments, from DHL to American Airlines, from IBM to Toshiba, and from Thomas Cook to Kuoni. 3.2. Current size, the areas where the company is operating, growth and profitability etc. Operational Sectors Consumer Foods & Retail The Consumer Foods Sector Group is home to a portfolio of leading brands in the Beverage, Frozen Confectionary and Processed Meats categories, which include "Elephant" Carbonated Soft Drinks, "Elephant House" Ice Creams and the "Keells&Krest" ranges of Processed Meats. All brands are market leaders in their respective categories and are supported by a well-established distribution channel of almost 80,000 outlets island-wide. I. II. Ceylon Cold Stores PLC Keells Food Products PLC III. Nexus Networks (Pvt) Limited IV. JayKay Marketing Services (Pvt) Limited Financial Services Financial services sector operates in the banking, leasing, insurance and stock brokering industries. This sector has been identified as a key growth sector in its portfolio. I. II. III. John Keells Stock Brokers (Pvt) Limited Nations Trust Bank PLC Union Assurance PLC Page 25 of 51
  26. 26. Information Technology Providing quality, world-class Information Communication Technology services from consultancy, software services and information integration to office automation, JKH offer end-to-end ICT services and solutions to customers in Sri Lanka and South Asia, as well as the UK, Middle East, Scandinavia and the Far East.With an unparalleled customer base, including local blue chip companies and industry leaders and international Fortune 500 companies. John Keells Holdings has a joint venture with Quatrro a Knowledge Process Outsourcing company headed by Raman Roy, widely regarded as the father of the Indian BPO industry. The JV has operations in India with the brand name Quatrro Business Support Services and in Sri Lanka with the name AuxiCogent providing specialized Information Technology enabled Services (ITeS). The companies leverage process delivery expertise of Quatrro and domain expertise of John Keells Holdings to provide Offshore Technical support, Internal Service Desk, Inbound and Outbound Customer Service, Transcription, Reservations, Holiday Package sales to Fortune 500, Global and Medium Enterprises in Telecom, Healthcare, Travel, Airlines, Media and Entertainment verticals. Quatrro Business Support's Customer Relationship Management services have been recognized in the IAOP's 20 best CRM services' global list. I. InfoMate (Pvt) Ltd II. John Keells Computer Services (Pvt) Limited III. John Keells Office Automation (Pvt) Limited IV. John Keells BPO Leisure Representing JKH's single largest net asset exposure, JKH‟s Hotel chain encompasses two city hotels that offer 40% of the five star room capacity in Colombo and seven resort hotels spread in prime tourist locations all over Sri Lanka and three located in the Maldives, offering beaches, mountains, wildlife and cultural splendour. JKH owns Walkers Tours Limited, the premier Destination Management Company (DMC) in the country which represents a large network of global Tour Operators, including Thomas Cook, Hotelplan, Virgin Holidays and many others which are household names internationally. Under the umbrella of Walkers Tours, our separate brands, Nature Odyssey, Mackinnons Tours and John Page 26 of 51
  27. 27. KeellsConventions, focus on specific niches of the tourism sector. Meanwhile, Whittall Boustead (Travel) Limited, exclusively represents Kuoni International, the single largest generator of tourists to Sri Lanka. Its comprehensive expansion into South Asia includes a fully owned subsidiary - Serene Holidays (Pvt.) Ltd - which has offices in Delhi, Mumbai and Ahmadabad for both in-bound and out-bound tourism in India. I. II. Walkers Tours Limited Serene Holidays (Pvt) Limited III. John Keells Hotels PLC IV. Cinnamon Hotels & Resorts V. Chaaya Hotels and Resorts VI. Cinnamon Air Property Owning a significant land bank in prime areas of Colombo and the rest of the country, the Property Group is one of the largest private sector proprietors of real estate in Sri Lanka. As the controlling shareholder of Asian Hotels and Properties PLC – the owners and promoters of „Crescat City‟ which houses the five star hotel „Cinnamon Grand‟, the up-market shopping mall „The Crescat Boulevard‟, the 30-storey luxury apartment complex „The Monarch‟, the 35-storey luxury apartment complex, „The Emperor‟ and the „Angsana City Club & Spa‟, the Property Development arm concentrates primarily on the development and sale of residential apartments. The Property Management arm of the group concentrates on the operations of the Crescat Boulevard and the management of the office sites within the city. The Property Group has launched a new condominium project known as "On Three 20" which consists of 475 apartments in the heart of the city of Colombo. Reservations for apartments units are currently being accepted and construction is scheduled to start in April 2011. I. Asian Hotels & Properties PLC Transportation Page 27 of 51
  28. 28. With a vision to be a leading provider of transportation solutions related services and infrastructure in the region, the Sector Group at present operates in three strategic business units - Ports & Shipping, Integrated Logistics and Airline & Aviation services that offer a complete array of transportation related services in Sri Lanka and the region. Businesses in the Sector Group include and operation of South Asia Gateway Terminals in the Port of Colombo, Sri Lanka's only private Port Operator and the largest private sector investment; Lanka Marine Services, primary supplier of marine fuels and lubricants; and joint ventures/associations with leading transportation multinationals such as Maersk Line, DPWN (DHL), American Express, the Keppel Group and MISC, in the areas of Shipping, Air Express, Travel, Inland Container Depots, Warehousing and Haulage. Other businesses include International Freight Forwarding and NVOCC Operations and Airline representation with global partners such as American Airlines, Jet Airways, Leisure Cargo Gmbh, Gulf Air, Air Mauritius and Asiana Airlines. The Sector Group also has a regional network of its own offices covering key cities and gateways in India and the Maldives and will shortly commence operations in Pakistan and Bangladesh. Airline Strategic Business Unit (SBU): a. John Keells Air Services (Pvt) Limited b. Mack Air (Pvt) Limited c. Mack Air Services Maldives (Pvt) Limited d. Mackinnons American Express Travel (Pvt) Limited Logistics SBU: a. DHL Keells (Pvt) Limited b. John Keells Logistics India (Pvt) Limited c. John Keells Logistics Lanka (Pvt) Limited d. John Keells Logistics (Pvt) Limited e. John Keells Logistics Maldives - Maldives Freight & Logistics (Pvt) Ltd Shipping & Ports SBU: a. Lanka Marine Services Limited Page 28 of 51
  29. 29. b. Maersk Lanka c. South Asia Gateway Terminals (Pvt) Limited Plantation Services Tea Smallholder Factories PLC produces the best CTC and are amongst the top manufactureres of orthodox low grown teas, which are produced from green leaf supplied by 14,000 Tea Small Holders. With over 130 years of experience in the tea trade, John Keells PLC is the leading tea broker in the country. Its facility is Asia's largest and best state-of-the-art warehousing complex for pre-auction produce. Continuing to infuse international best practices in the production and sale of high quality teas, JKPLC has been a steadfast partner to Sri Lanka's top income earning tea industry. John Keells PLC A. Staff Relations 3.3. Internal Environment 3.1 Management Team A complete management team, covering the elements of administration, aviation, and finance, is being assembled. This team brings together a wide range of skills and backgrounds covering the key areas needed to form, launch, and operate the airline, and from a range of national origins. 3.2 Management Team Gaps It is premature to speak of management team gaps until a core management team is named. The individuals who will play leading roles with the new airline will need to possess the widest possible range of the requisite skills. The current project team believes investors in the airline will want to play a key role in helping formulate core management. Once primary investment is established, that step can be undertaken, and it is anticipated that the core team will be finalized quickly. The new airline will need people with skill, experience, energy, and vision to head up and serve in such areas as information management, flight safety, aviation operations, aviation maintenance, ground operations, sales and marketing, communications, and human resources management. Also good pilots, co-pilots, cabin crew members, and ground staff, and administrative staff. Page 29 of 51
  30. 30. Cinnamon Air anticipates putting together the best possible airline management team in the business, one that also shares the common vision of what this new airline truly can be and what it can become. 3.4 Personnel Plan Along with aircraft acquisition and operating costs, personnel costs represent one of the two largest cost factors faced by the new airline. Additionally, the airline's personnel will largely determine the success of the venture. Therefore, it is crucially important to develop and implement an effective personnel operations and compensation plan. The Personnel Plan for the new airline reflects the stress on the use of technology to reduce staffing and costs, and the concomitant stress on customer service. Consequently, staffing is heavier (with individual function directors) in such areas as information technology and oversight of such functions as human resources, flight safety, flight maintenance, and ground operations than might otherwise be the case with a smaller regional airline. On the other hand, functions such as sales and marketing, bookkeeping and finance, and personnel management are reduced, with the assumption being that the effective use of advanced, cost-efficient informational technologies in these areas will make up for the reduced staffing, resulting in significant cost savings while providing superior results at less effort. It is assumed, based on the experience of other domestic airlines in the country, that something on the order of 60-70 percent of all reservations and bookings will be made electronically, and such passengers will be ticketed and checked-in electronically using special electronic check-in kiosks such as those employed successfully by the U.S. carrier Continental Airlines, leading to major cost savings in areas such as sales, reservations, and ground check-in staffing, as well as in commissions paid out to outside travel agencies. Staffing in the sales and marketing area is aimed at targeted customer contact to generate corporate and group business, rather than individual sales, and to develop special marketing programs designed to generate significant increases in both passenger and cargo business. Responsibilities will be divided along both regional and functional lines, with one regional sales and marketing manager, notionally responsible for business generation and three marketing managers (one responsible for special sales aimed specifically at the peak traffic/special flights/holiday travel/charters market, the other for air cargo sales), reporting to one director of sales and marketing. Additional personnel will answer customer inquiries and take reservations on the telephone at central headquarters, with phone Page 30 of 51
  31. 31. calls forwarded to them from throughout the airline market area, and also will respond to email/website-forwarded inquiries. All key functional positions throughout the airline, including in the sales and marketing area, are backed up by professional support personnel, most of whom will be cross-trained in different areas, so there will always be coverage of all key functional areas as well as back-up support when work demand requires it. In the ground-service area, the airline will utilize its own personnel to the extent practical in order to assure a more consistently positive experience for the passenger. All major destinations will be staffed by airline personnel, while at some smaller and more remote destinations, or where local practice or requirement dictates it, ground handling and service may be contracted out to local service providers. Even in such cases, efforts will be made to utilize spare flight crew personnel to assist with oversight of ground services and respond to customer needs, again stressing the airline's focus on cross-training. Finally, as revenues and passenger demand increases, the Personnel Plan can be expanded to provide additional ground service personnel at key locations and to expand the number of locations where the airline provides its own ground-service staffing. Again through the use of e-ticketing, e-check-in, and e-baggage tracking, ground-service staffing requirement will be very light compared with a more traditional organization. Particularly given the fairly light flight scheduling at most locations and the convenient size of the projected aircraft, checkins should be quick and easy, with little waiting in line or fighting with crowds - major marketing advantages as well. Given the airline's motto, "We have a job to do, and we do it every day - for you!", cross-training and cross-functioning will be core elements of the new airline's personnel-management approach. Everyone will be inculcated with the spirit that she or he is personally responsible for the passenger and the client having a positive experience when in contact with the new airline. Everyone, from the president on down, will be familiar with (and participate in) virtually every aspect of the work and customer-service process (a method employed successfully by the former PEOPLExpress and other "people-oriented" carriers and other successful service businesses). While no one will expect (nor want) a receptionist to fly the airplane, nor a sales manager to perform engine repairs, nor for that matter a pilot or flight attendant to tend to the bookkeeping, common customer-service functions like Page 31 of 51
  32. 32. check-in, gate monitoring, baggage handling, and answering customer inquiries can and should be performed from time to time by any and all available personnel. This process also requires, however, that personnel receive actual training and experience in these various areas, so they do not become more of a hindrance than a help. Even the airline's uniforms will project an image of ordinary people doing extraordinary work to please and make the passenger feel comfortable. There will be a stress on informality, utilizing "nonuniform" uniforms to again stress the airline's work ethic and customer-service orientation, making both employee and client feel more at home. This approach also is in keeping with today's trend toward greater informality and equality in the work place, and away from the stilted authoritarian way of the past. Finally, the proposed hierarchy and salary structure is designed to be both economical as well as sufficiently attractive and competitive to enable the airline to recruit good, qualified personnel. At the same time, in keeping with the overall ambience of the airline, it also stresses relative equality and fairness in its structure. A good benefits package, consistent with, and perhaps better than, available elsewhere in the industry or related industries, and the more abstract benefits of being part of a wellrespected, well-functioning, professional, winning team, also will be elements attracting good employees to the new airline and keeping them on the team. There are only about 10 pay grades provided for in the salary plan for the entire airline, including executive-level salaries, with jobs that may be markedly different in terms of function, but similar in terms of experience required, difficulty, and importance, sharing the same pay grade. Most subordinate grades within given functions are based on a set percentage of higher-level salaries within the same general function. In addition, the plan for pay increases is straightforward and fosters clarity and understanding, rather than anxiety and unhealthy competition, among employees. Everyone, across the board, from top to bottom in the organization, who performs satisfactorily will receive a 10 percent pay increase at the end of the first year of service (deemed to be the most difficult), and a 5 percent pay increase at the end of each subsequent year of service (with adjustments made only on the basis of specific across-the-board or localized issues like inflation, currency devaluations, and so forth). Unsatisfactory performance merits only one of two remedies: Dismissal, or placement on a limited probationary regime to determine if problems can be remedied and the employee brought up to Page 32 of 51
  33. 33. standard within a given time limit. Otherwise, there is no room, and no cause, for protracted anxiety on the part of the satisfactory employee concerning such issues as pay raises and related issues. The only other issue is the possibility of promotion to a higher position within the organization, and the airline will endeavor to promote its best from within whenever possible. One other issue worth considering, though it is not included in the current plan, is the possibility of offering a bonus to all employees, as a specific percentage of their pay, when the airline shows a particularly profitable year to encourage additional "pride of ownership" and esprit de corps. B. Resource Constraints The most important resources that project managers have to plan and manage on day-to-day basis are people, machines, materials, and working capital. Obviously, if these resources are available in abundance then the project could be accelerated to achieve shorter project duration. On the other hand, if these resources are severely limited, then the result more likely will be a delay in the project completion time. Depending on the type of resources, the costs of providing an abundance of such resources to accelerate project completion time can be very high. However, if resources are readily available and excess premiums are not incurred to use them on the project, then project cost should be low, as some project costs are resource related while others are likely to be time dependent. In general, projects with a shorter duration are less expensive. The longer the duration of the project, the higher will be overall project cost due to the increase in fixed costs such as overheads. The reality is that as long as the work on a project is ongoing it will continue to draw resources into its orbit. Whatever the parameters of the project, it is unlikely that the relationship between cost and duration is linear. For any particular project, the decision to place the project on the curve between the point of least duration with its associated higher resource requirements and a point of increased duration with its associated lower resource requirements depends on the particular parameters of the project. C. Corporate Structure and Culture (one A 4 page) JKH has a culture in which performance is deeply embedded. As an employee of John Keells you are what you do. Through our policies and processes we ensure that our employees get the maximum opportunity they need to perform at their best. With the strength of our diversity you are able to gain Page 33 of 51
  34. 34. experience in a multitude of industries which we hope will eventually lead you to become a leader in one of our businesses in Sri Lanka or overseas. We hire the right people with the right attitude and our employees never fail to deliver. JKH is committed to the highest standards of business integrity, ethical values and professionalism in all its activities towards rewarding all its stakeholders with greater creation of value, year-on-year. Our governance framework which has been communicated to all levels of management and staff in individual businesses and functional units is based on the following – Page 34 of 51
  35. 35. CINNAMON AIR – ORGANIZATIONAL STRUCTURE Reflecting the overall nature of the organization envisaged, there is very little hierarchy in the organizational plan for the airline. In an operation where safety and accountability are so much at issue, obviously someone has to be in charge, and there also have to be clear lines of authority (and expertise) in the operational aspects of the airline. But beyond that, the organization is designed around flexibility, a high level of personal accountability and responsibility, and common crosstraining and sharing of responsibilities as need arises and circumstances permit. The levels of organization (reflected in the personnel and salary chart in the Personnel section of this plan) are as follows: President and chief executive officer (who reports to the Board of Directors of the airline company). Vice president and general manager. Functional vice presidents for the core areas of commercial activities, finance, and operations. Directors covering sales and marketing, communications, human resources, flight safety, flight operations, ground operations, maintenance, and information systems. Managers in sales and marketing, as well as in station management functions. Professional, engineering, ground handling, service, and other support personnel. On the flight side, which reports to the director of flight operations and also responds to the director of flight safety, there are only three levels of personnel: Captain; First officer; Flight attendant. Salary scales and levels of authority have been simplified and based on a rational scale allowing for similar levels, though of different natures, of functional work to be compensated at the same pay levels. The overall objective is to foster an atmosphere of cooperation and shared responsibility to the overall mission, which is to provide the customer and client with the best possible, safest, and most satisfying experience with the airline. Cross-training and cross-functioning are important parts of the organization plan, as explained in more detail elsewhere in this document. Page 35 of 51
  36. 36. 4. The Product / Service 4.1. General Product Story a. Development, introduction and history. Saffron Aviation (Pvt) Ltd, a joint venture between John Keells Holdings PLC (JKH), MMBL Leisure Holdings (Pvt) Limited and Phoenix Ventures Limited, signed an agreement with the Board of Investment of Sri Lanka last week, to establish a domestic air taxi service in Sri Lanka with an initial investment of US$ 6.8Mn out of a total planned investment of US$ 8.4Mn. The start-up fleet will consist of two Cessna 208 Caravan Amphibian aircraft (seating 9 passengers each) and one wheeled Cessna 208B Grand Caravan aircraft (seating 12 passengers) that would provide the flexibility for the airline to operate from any of the domestic and international airports as well as from waterdromes in Sri Lanka. Cessna 208 Grand Caravan Cessna 208Amphibian aircraft Page 36 of 51
  37. 37. The domestic air taxi service, flying under the brand name „Cinnamon Air‟ will fill a critical void in the current tourism offering in Sri Lanka by providing a unique service of scheduled daily flights linking the Bandaranaike International Airport (BIA) with key holiday locations on the South West coast, the East Coast (in the summer season), Kandy, the Cultural Triangle and Hambantota/Yala. Flights to and from the BIA will largely connect with arrival and departure flight timings of the National Carrier and all major international airlines serving Colombo. Commercial operations of Cinnamon Air are expected to commence in the last quarter of FY 2012. The air taxi service will augment the overall visitor experience in Sri Lanka by significantly reducing the time spent by tourists on road transfers between the airport and hotels and on excursions, whilst providing passengers with a unique, panoramic view of the outstanding countryside and scenery. The service will also be an important value addition to benefit several investments in upscale boutique hotel properties in the recent past, thus contributing significantly towards attracting high end tourism traffic to Sri Lanka. Whilst scheduled services will be retailed through all Tour Operators and Travel Agents and directly to customers via the internet, „Cinnamon Air‟ will also offer short scenic flights and charter flights to any part of the island for groups, cruise passengers and corporate travelers. MMBL Leisure Holdings (Pvt) Limited is a fully owned subsidiary of Mercantile Merchant Bank Limited set up to explore investment opportunities of the tourism sector. Phoenix Ventures Limited is an investment holding company that is also the parent company of Brandix Lanka Limited and Phoenix Industries Limited. Page 37 of 51
  38. 38. Why JKH Entered in to the Domestic Air Line Business? Latest seat capacity data compiled by the Centre for Asia Pacific Aviation shows an interesting fact – Sri Lanka is Asia Pacific‟s fastest growing aviation market. The island nation, rich of cultural and bio-diversity variety, has recorded a staggering growth in tourist arrivals ever since the war against the world‟s second fiercest terrorist group ended with victory, in 2009. For the month of April, 2011 alone, tourist arrivals to Sri Lanka have grown by 66.7%. As per the data compiled by Centre for Asia Pacific Aviation, Sri Lanka has achieved a 25.9% growth in airline seat capacity for May 2011, versus May 2010. ( Sri Lanka had a total of 78,992 weekly airline seats offered in May 2011. ) This makes Sri Lanka the fastest growing aviation market in Asia Pacific and puts it ahead the growth rates of Asian heavyweights Hong Kong ( 13.5% ), India ( 18.4%), Indonesia ( 15.9%), Malaysia (12.6%) and Singapore (13.5%). For your interest on this fast growing, unique, aviation market – Airline Industry Review has now compiled a special section on Sri Lanka. This includes latest news, fleet info and airport info. And it is free! So have a look at it right away! While Sri Lanka is at present ranked 15 in the aforementioned report, it will not be hard for Sri Lanka to come to a much higher position if developments such as opening up the international market for local private carriers and marketing the country‟s attractions better, are taken place. As the Trend setters of the Hospitality Industry JKH put a giant leap towards the Sri Lankan Domestic Air Line Market b. Product category and characteristics (one A4 page) Airport drop and pick-up • Transfers between hotels (Selected Destinations) • Sight visits (Southern Coast, Sigiriya, Ancient Cities, Some other Beach areas) Page 38 of 51
  39. 39. • Corporate transfers • Sightseeing tours • Wedding transfers Arrival by Sea Plane Going away by Sea Plane Flower drop for wedding Photography with Air Craft Sightseeing honeymoon Other Tours • Golf tours • Joyrides • Aviation sports • Aerial filming and photography Charter Flight Schedule of Cinnamon Air MON/ WED/ FRI EXV 711 – Departure Ratmalana – 0700 hours Arrival Palaly – 0830 hours EXV 712 – Departure Palaly – 0900 hours Arrival Ratmalana – 1030 hours EXV 713 – Departure Ratmalana – 1430 hours Arrival Palaly – 1600 hours EXV 714 – Departure Palaly – 1630 hours Arrival Ratmalana – 1800 hours TUE/ THU/ SAT Page 39 of 51
  40. 40. EXV 711 – Departure Ratmalana – 0700 hours Arrival Palaly – 0830 hours EXV 712 – Departure Palaly – 0900 hours Arrival Ratmalana – 1030 hours SUN EXV 713 – Departure Ratmalana – 1430 hours Arrival Palaly – 1600 hours EXV 714 – Departure Palaly – 1630 hours Arrival Ratmalana – 1800 hours (Subject to change) Pricing Strategy Airfares:Adults/Child fares:Return Rs 24.000/- One way Rs 12.500/- Infants no charges Baggage Allowance:Adult/child – 15 kgs Infants – no baggage allowance Excess luggage charges – Rs 150.00/- per kilo Maximum checked baggage dimensions:a. Length - 44 inches b. Height – 14 inches c. Breadth – 22 inches Operational Process: Page 40 of 51
  41. 41. Details required To make a reservation we require name in full, NIC or Passport details, address and telephone contacts, and email if any. General Product Details. Competitive Comparison In comparing the proposed new airline to its competitors, there are at least two levels of comparison that must be considered; the usually lower-standard airlines, both scheduled and charter, flying out of the within the country, and the higher-standard, more highly regarded airlines operating out in Sri Lanka ( Eg – Sri Lanka Heli Tours. Expo Air) Beating the former source of competition is both a reasonable and an essential goal. But comparing favorably, and even standing notably above, the latter also is an important objective since these airlines will represent direct competition to the new airline on many of its projected key routes, despite efforts to avoid such competition to the extent feasible. Fortunately, several of the key distinguishing characteristics planned for the new carrier not only will enable it to fare extremely well in both levels of competitive comparison, but will actually be achievable at a savings in cost and resources. In other words, by being smart, the new airline can be significantly better than its competition while at the same time accruing lower overall costs, a remarkably good combination. In comparing the proposed new carrier to Domestic Air Line Market, it is important to look at those factors that determine how most travelers choose an airline. They include the following (and the order of importance is different for each traveler and each situation, but the most important factors are listed): • Safety, actual and perceived; • Cost, and range of the fares offered; • Destinations served; • Availability of seats; Page 41 of 51
  42. 42. • Availability of fares; • Convenience of flight schedules, times of arrivals and departures; • Frequency of flights; • Connections, including reliability and convenience of connections; • Nature of flights: non-stop, direct, number of stops, aircraft changes; • Availability of different classes of service; • Onboard comfort, service, meals, and amenities; • Type of aircraft, including jet or non-jet, size, and speed; • Age and condition of aircraft; • Ease and efficiency of reservations and ticketing; • Reliability and on-time departures and arrivals; • Ground service; • Reliability and quality of baggage handling; • Friendly, competent service in reservations, check-in, and in the air; • Overall reputation of airline; • Nationality of carrier; • Factors of personal preference. While no airline probably can excel in every one of these areas, the closer an airline comes to "excellent," or at least "good," ratings in each of these key areas, the better it will fare in its competitive standing. Both in the overall design of the airline and its basic operational features, as well as in its management, quality control, and day-to-day operations, the proposed airline is expected to stand out positively in almost every regard. c. Stage of Product Life Cycle. Growth Level d. Product uses (primary, secondary and potential uses in if any) Page 42 of 51
  43. 43. Primary target is the Foreign tourist those who are coming to the Sri Lanka The Challenge is to create awareness of the new features offered by Cinnamon Air and by targeting television and online audiences simultaneously, and within a short timeframe. Page 43 of 51
  44. 44. 7.1 PESTEEL Factors 1. Political 2. Economical 3. Social 4. Technological 5. Ecological 6. Environmental 7. Legal Terrorism Fears / Political Instability Assessing the longer-term impact of the fear of terrorist attack on the size of the aviation market is very difficult. It is; of course, important to keep personal political opinions out of any analysis as far as possible, but it is this writer‟s opinion that little was learnt as a result of the September 11 attack, or from those which have followed it. A terrorism threat can only be addressed by seeking to understand and address the underlying grievances which caused the terrorist movement to arise in the first place. The “War on Terror” has simply increased resentment, and has provided the best imaginable recruitment propaganda for those seeking to foment extremism Environmental Page 44 of 51
  45. 45. In many aviation markets today, airline managers are facing the challenge of change and adaptation. They were formerly able to enjoy the reassurance of regulated conditions, with limited competition and only a very slow pace of change. Today, economic liberalization is giving new opportunities which must be exploited if success is to be achieved. It also brings new threats which must be countered effectively. Given the nature of the challenges facing airlines, it would be naïve in the extreme to assume that these do not impinge on the marketing area of their activities. They most certainly do, with sound marketing policies for a liberal market being quite different for those which might be appropriate for a regulated one. Above all other considerations, a deregulated situation requires that systems should be in place to enable decisions to be made quickly. New opportunities to enter routes will arise at short notice, and may disappear equally rapidly if another airline is able to react faster and take advantage of the potential first. Equally, it may be necessary to change the specification of the product quickly, if a competitor offers customers better value-for-money. Also, pricing policies will have to be adjusted frequently, with changes often being required on a daily basis or sometimes even more frequently than this. As we will discuss further in Section 6:1:2, a feature of regulated markets used to be that all airlines charged the same fares, and fares only changed infrequently, following an often tortuous set of procedures which needed to be undertaken in order to gain regulatory approval. The situation in today‟s liberal markets is in strong contrast. The combination of the ending of regulatory controls on pricing and the advent of the ability to disseminate fares information instantaneously, through the spread of so-called Global Distribution Systems and over the Internet, (see Section 7:3) has meant that millions of fares now often change overnight at The Marketing Environment 57 times of active price competition. No airline can now afford the luxury of a slow response at such a time. If airlines are to make decisions quickly, certain conditions must be met. Decision-making processes must be streamlined, with flat Page 45 of 51
  46. 46. organisational structures and, often, a degree of autocracy prevailing in the most successful carriers. Where possible, too, decision-making must be decentralised to the managers of small profit centres, where people will have a better understanding of the detail of local market conditions. Economical If there is a clear and important interplay between the world of politics and airline marketing, there is a relationship of equal or even greater importance with economic change and development. 3:3:1 Economic Growth and the Trade Cycle The demand for air travel is characterised by a very high income elasticity. The Marketing Environment Therefore, as the world economy grows, so the demand for air travel can beexpected to increase too.This continuing growth gives both enormous opportunities and greatchallenges to the airline industry. The opportunities come with the chanceto exploit a growing market, something which would be the envy ofmanagers in many other industries. The challenges are to accommodate thegrowth through suitable infrastructure development and withoutunacceptable environmental consequences, and to exploit the demand whilst achieving the stable profits which the industry has so often found elusive.Besides a clear pattern of growth, growth rates are uneven throughtime. Just as one would expect, air transport industry growth rates are tiedclosely to those in the world economy. If growth in the economy is rapidin a particular year, so is the increase in air travel demand. Periods ofeconomic stagnation see a significant slowing of the rate of increase indemand. Social Page 46 of 51
  47. 47. Partly, but not exclusively, reflecting trends in age and family structures, the modern travel industry is having to adjust to a marked broadening in the range of requirements of vacationers. When holidays by air first began to become popular in the 1960s, most people wanted little more than a relaxing opportunity to sunbathe by a hotel swimming pool. This is not so today. Better education, growing experience of air travel and fears about the health risks of excessive exposure to the sun are all meaning that to a greater and greater degree, holidays must reflect a lifestyle based on individual choice. People expect to be able to pursue their hobbies while they are on holiday, with winter sports, golf, history and trekking holidays all now well-established sub-segments of the market. They expect to be able to take holidays of different lengths in order to fit in with their available vacation time. They also require opportunities to visit new and interesting, often long-haul, destinations. Overall, the trend in the holiday market is often, and appropriately, described as “de-packaging the package”. People increasingly want a holiday experience which reflects their own individual requirements. They do not expect to be treated as part of a herd of cattle, to suit the convenience of the travel provider Page 47 of 51
  48. 48. Objectives/ Goals of the Action Plan The negative impacts of economic downturn, rising fuel costs, regional conflicts and terrorism have not dented confidence in the future of air travel. The escalation of air traffic, concentrated in the Asia Pacific region, is driving strong growth within the aviation industry. International forecasts predicts over 24,000 (source: Airbus global market forecast report) new aircraft will be delivered to world airlines over the next 20 years. The airline industry will need to employ more than 18,000 pilots per year for aircraft currently on order. To leverage this growth potential into an economic opportunity for the State, the Queensland Government has developed a vision to be an aviation and aerospace hub for the Asia Pacific region. Competitive strengths include: Strategically located regional, national and i • international airports • Decentralized economy driving a networked and innovative general aviation industry • Critical mass of globally competitive aerospace firms • World class aviation training and education system • Demonstrated commitment to research and development, technology diffusion and commercialization • Collaborative partnerships between universities, other research organizations and the aviation industry. Growth opportunities arise from: • The emergence of the Asia Pacific region as a focus for international aviation growth • increased global demand for aviation training • local development of emerging and advanced aviation technologies Page 48 of 51
  49. 49. • international and national route development and airline basing • increased Defence demand for aerospace manufacture, modification and maintenance. The Cinnamon Air will play a leading role in the development of the aviation and aerospace industry and will act to reinforce the success factors which make this a high performing priority sector. These are: • accelerated investment • financially support research and development • encourage global business collaborations • further airline basing • increased defence aerospace opportunities • rapid development of local aviation and aerospace capability • innovative product development • national and international market development • strong growth of an advanced local skills base. 1300 363 711 (Interstate callers • 07 3001 6359) Page 49 of 51
  50. 50. References - Specification & Description of Grand Caravan – Jul 2010 publication - The Airline Industry Challenges in the 21st Century – A. Cento - Dominate the Market in Apple Style – Harris Consulting LLC - Strategic Marketing Planning - Colin & Richard -2nd Edition - CAPA - Aviation Outlook FY 2012/13 - Sri Lankan Airlines Annual Report 2010 , 2011 - Virginia Tourism Corporation Strategic Marketing Plan FY2012 - Decan Aviation Lanka Monthly Newsletter- Nov‟12 - Economics and Social Statistics of Sri Lanka - Airline Marketing & Management – Stephen Shaw – Sixth Eidition - Segmentation Analysis of Domestic Airline Passenger MarketsEdward R Bruning Kent state university ,Mary L Kovcic& Larry E Oberdick - Asia Pacific Aviation Outlook 2009 Page 50 of 51
  51. 51. APENDIX Page 51 of 51