MBA, PGDM - Business Design project, 2nd Trimester, 2010.
This project involved extensive primary and secondary research and analysis conducted over 2 months. Information was obtained from airline officials, social networks, passengers & frequent flyers worldwide, aviation authorities, and the Ministry of Civil Aviation in India, apart from extensive online research of the Global aviation industry.
2. Q The History of Civil aviation
Q History of Commercial Aviation
Q The Indan Aviation Sector
Q Pioneers of the Commercial Aviation Industry
Q The Stakeholders
Q Value Offerings
QDistribution Channels
QSupply Chain
QRegulatory Authorities
QCurrent & Upcoming trends
QAdvertising Agencies & Financial Cos.
QConventional v/s Unconventional Business Models
Q References
3.
4. December 17, 1903 , Orville and Wilbur Wright introduced to the world
the principle of controlled, powered flight.
Their Wright Flyer cost less than a thousand pounds to build, and
although its first flight only covered a distance of 120 feet, a billion-
dollar industry was born.
5. Airships
The first aircraft to make
routine controlled flights were
non-rigid airships
In 1929 the Graf Zeppelin
made a complete
circumnavigation of the globe,
The "Golden Age" of the
airships ended on May 6,
1937 after the Hindenburg
disaster.
Airships have seen only niche
application since that time
6. The Douglas DC-3, was the
first airliner that was profitable
carrying passengers
exclusively, starting the modern
era of passenger airline
service.
7. Passenger travel goes Supersonic!
The AĂŠrospatiale- British Aircraft
Corporation Concorde â a
turbojet-powered supersonic
passenger airliner.
The development project was an
international treaty between
Britain and France
First flown in 1969, entered
service in 1976 and continued
commercial flights for 27 years.
8. Big, Bigger, Biggest!
The Airbus A380 is the first
aircraft with a capacity larger than
that of the 747.
The Superjumbo has two
passenger decks extending the
full length of the fuselage, as well
as a full-length lower third deck
for cargo.
Seating Capacity: 525 â 853
1970 - first flight of the Boeing
747, a.k.a. Jumbo Jet
The worldâs 1st first double-
deck jet airliner. Top deck is
smaller than the main level.
Seating Capacity: 416 - 524
9.
10. History of the Airline Industry
The world's first airline ď DELAG,
(Deutsche Luftschiffahrts-
Aktiengesellschaft)
Founded November 16, 1909,
Germany
Operated airships manufactured by
The Zeppelin Corporation.
11. The Common-manâs Airline
The budget flight revolution began in America with
Southwest Airlines in Dallas, Texas, 1973
Southwest Airlines, JetBlue, AirTran Airways, Skybus Airlines
and other low-cost carriers begin to pose a serious
challenge to the "legacy airlinesâ.
India's first low cost airline, Air Deccan launched in 2003.
12.
13. The Birth of Indian Aviation
The First commercial flight in Indiaâ
--The year: February 18, 1911
--The Pilot: Monseigneur Piguet
--The Route: Allahabad to Naini, distance of approx. 10 km.
The first flight in the history of Indian aviationâ
--The year: 1932
--The Pilot: JRD Tata
--The Aircraft:De Havilland Puss Moth, Tata Aviation Services.
--The route: Karachi to Delhi
14. Commercial Aviation in India - Timeline
Landmarksin Indian Aviation History
India's first lowcost airline,
Air Deccan launched
First commercial flight in
India
(18/2/1911)
Beginning of Indian
Aviation Industry
1st flight byan Indian -JRD
Tata (15/10/1932)
Air India International
formed
1st International flight - AI
Intl.(Bom-Lon)
All Domestic services
brought under Indian
Airlines
The Air Corporations Act,
1953 - Airlines nationalised
Jet Age begins -1st Boeing
707-420 bought byAI
Indiaâs first Boeing 747-
200B bought byAI
Repeal of Air
Corporations Act,1953 -
newdomestic carriers
emerge
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
15. The Jet age in India!
1960, Indian aviation enters the Jet Age :
-- 1st Boeing 707-420, âGauri Shankarâ bought by Air India International.
16. Commercial Aviation in India â
Statistics
Q 43.29 million ď Domestic Passenger Base.
(4th highest in the world, after US, China, Japan.)
Q 15 ď No. of scheduled passenger airline operators.
Q 400 ď total no. of aircraft.
Q 82 ď Total no. of Airports in India.
Q 706 ď No. of International flights per week.
Q 69 ď Foreign airlines, 49 countries.
Q 103 ď countries India has Bilateral air services agreement with.
Source: http://civilaviation.nic.in/home.html
17. 26%
20%
19%
16%
13%
6%
Jet Airways & Jet
Lite
Kingfisher
NACIL
IndiGo
Spice Jet
GoAir
Current market share of Indian carriers in the domestic aviation
market
Source: http://civilaviation.nic.in/home.html
18.
19. Pioneers of the Indian Aviation Industry
Jehangir Ratanji Dadabhoy Tata
Known as the father of Indian civil aviation.
One of the first Indians to be granted a commercial
pilot licence.
Founded India's first commercial airline, 'Tata Airlines',
in 1932, which in 1946 became Air India.
In 1948, JRD Tata launched Air India International as
India's first international airline.
In 1953, appointed as Chairman of Air-India and a
director on the Board of Indian Airlines - a position he
retained for 25 years.
20. Pioneers of the Indian Aviation Industry
Capt. Gorur Ramaswamy Gopinath
Considered the father of low cost air travel in India
His dream was to enable "every Indian to fly at least
once in his lifetime."
Observed that nobody in India was targeting the
middle class as consumers for aviation
2003 - Launched India's first low cost airline, Air
Deccan.
September 24, 2003, first Air Deccan flight took off
from Hyderabad to Vijayawada
21. Pioneers of the Global Aviation Industry
Herb Kelleher
ďŹCo-founder, Chairman Emeritus and former CEO of
Southwest Airlines
ďŹ Kelleher and one of his law clients, Rollin King, created
the concept on a cocktail napkin in a San Antonio, Texas
restaurant.
ďŹFrom its birth in 1971 Southwest has succeeded by
daring to be different: offering low fares to its passengers
by eliminating unnecessary services
ďŹDuring his tenure as CEO of Southwest, Kelleher's
colorful personality created a corporate culture which
made Southwest employees well-known for taking
themselves lightlyâbut their jobs seriously
23. âLook at what the competition is doing, and do the
oppositeâ
Strategy canvas of Virgin America vis-Ă -vis Southwest Airlines and Regular
fare airlines in the US.
24.
25. Value Parameters
Q Safety
Q Pricing
Q Comfort
Q In-flight Service & hospitality
Q On- Ground Facilities (Lounges, business centres etc. for privilege customers)
Q Frequency
Q On-time Performance
Q Convenient operations (e.g. check-in, booking/cancellation, website,
customer support, luggage, transfers, airport formalities, etc.)
28. Competitorsâ additional offerings
Frequent flyer rewards
Student schemes
Exclusive First class service
State-of-the-art technology (Eg. Airbus A380)
Travel Insurance / Insurance for lost baggage
Business / First class lounges at airport
Childrensâ center
35. âThe Kingfisher Airlines family will consistently deliver a safe, value-based and
enjoyable travel experience to all our guests.â - www.flykingfisher.com/
Welcome aboard an airline where warm Indian hospitality flawlessly blends with
international expertise. âJet Airways www.jetairways.com/
IndiGo team uses all of its resources to design processes and rules that are safe
and simple, that make sense, and that cut waste and hassles, which in turn ensures
a uniquely smooth, seamless, precise, gimmick-free customer experience at fares
that are always affordable. www.goindigo.in/
GoAir is positioned as âThe Smart People's Airlineâ. Its captivating theme, âFly Smartâ
is aimed at offering passengers a consistent, quality-assured and time-efficient
service. www.goair.in/
With a dynamic fare structure, SpiceJet offers fares that are affordable and
significantly lower than most airlines. With contemporary interiors, modern graphics
and vibrant colours, SpiceJet is very much like todayâs traveler - practical yet stylish.
www.spicejet.com/
Airline Value Statements
48. Yield Management Systems
Strategic control of inventory to sell it to the right customer at the right time for the right
price.
Used when the resources available for sale are of a fixed amount and are perishable
When the aircraft departs, the unsold seats cannot generate any revenue and thus can
be said to have perished.
Airlines use a software to monitor how seats are being reserved and react accordingly,
e.g. by offering discounts when it seems probable that seats will remain unsold.
51. ⢠Responsible for regulation of air transport services to/from/within
India.Regulatory body
â˘Primarily dealing with safety issues.
Safety
⢠Enforcement of civil air regulations, air safety, and airworthiness
standards.
Standards &
Enforcement
⢠Also co-ordinates all regulatory functions with the International Civil
Aviation Organisation (ICAO).
International
coordination
⢠Licensing of pilots, aircraft maintenance engineers, flight engineers,
ATCs, and conducting examinations and checks
Licensing &
Certification
The Directorate General of Civil Aviation
(DGCA)
52. Initially set up as a Cell in the Directorate General of Civil Aviation
(DGCA) in January 1978
Reorganized into an independent department on 1st April , 1987 under the
Ministry of Civil Aviation
Main responsibility - to lay down standards and measures pertinent to
security of civil flights at International and domestic airports in accordance
with ICAO Guidelines.
Coordinate, monitor, inspect and train personnel in Civil Aviation Security
matters.
4 Regional Offices located at International airports i.e.
Delhi, Mumbai, Kolkata and Chennai.
Bureau of Civil Aviation Security (BCAS)
53. Airports Authority of India
(AAI)
⢠Of international and domestic airports and civil
enclaves. (Includes passenger info systems)
Design, Development,
Operation, Maintenance
⢠Control and Management of the extending
beyond the territorial limits of the country.
Indian airspace
⢠Expansion and strengthening Runways,
Taxiway etc.
Operation area
⢠Provision of Communication and Navigation
aids, viz. ILS, DVOR, DME, Radar etc.
Communication and
Navigation
Founded, 1st April 1995
54. Airports Economic Regulatory Authority
(AERA)
The Airports Economic Regulatory Authority (AERA) is a statutory body
constituted under the Airports Economic Regulatory Authority of India Act,
2008.
Functions:
To determine the tariff for the aeronautical services taking into consideration
the capital expenditure incurred and timely investment in improvement of
airport facilities.
The service provided, its quality and other relevant factors.
The cost for improving efficiency.
Economic and viable operation of major airports.
To monitor the set Performance Standards relating to
quality, continuity and reliability of service.
55. International Civil Aviation Organization
(ICAO)
Specialized agency of the United Nations, HQ in Montreal, Canada
Sets standards and recommended practices concerning air navigation, its
infrastructure, facilitation of border-crossing procedures for international
civil aviation.
Defines the protocols for air accident investigation
⢠Procedures for Air Navigation ServicesPANS
⢠Standards and Recommended PracticesSARPs
⢠Regional Supplementary ProceduresSUPPs
56. International Air Transport
Association (IATA)
The International Air Transport Association (IATA) HQ - Montreal,
Canada.
Represents 230 airlines - 93% of scheduled international air traffic.
150+ countries, 101 offices around the globe.
Assigns 3-letter IATA Airport Codes and 2-letter IATA airline designators,
which are commonly used worldwide.
Worldwide accreditation of travel agents. Over 80% of airlines' sales come
from IATA accredited agents.
Publishes standards for use in the airline industry.
The Bar Coded Boarding Pass (BCBP) - 2-Dimensional (2D) bar code
printed on paper boarding passes or sent to mobiles phones for electronic
boarding passes.
57. Acts Governing the Civil Aviation Sector in India
⢠An Act to make better provision for the control of the manufacture,
possession, use, operation, sale, import and export of aircraft.
THE AIRCRAFT ACT, 1934
⢠An Act for the better administration and management of airports and civil
enclaves where air transport services are operated and of all aeronautical
communication stations.
THE AIRPORTS AUTHORITY OF INDIA ACT,
1994
⢠An Act for the implementation of certain rules relating to international
carriage by air signed at Warsaw in 1929, to non-international carriage by air
THE CARRIAGE BY AIR ACT, 1972
⢠An act pertaining to offences committed on board an Aircraft
⢠Any act or omission taking place on board an Indian registered aircraft while
in flight outside India which, would constitute an offence under any law in
force in India.
THE TOKYO CONVENTION ACT, 1975
⢠Anyone who seizes or exercises control of an aircraft in flight, unlawfully, by
force or any other form of intimidation, commits the offence of hijacking.
⢠The offender punished with life imprisonment and shall also be liable to fine.
THE ANTI-HIJACKING ACT, 1982
⢠An Act for the Suppression of Unlawful Acts against the Safety of Civil
Aviation
THE SUPPRESSION OF UNLAWFUL ACTS
AGAINST SAFETY OF CIVIL AVIATION ACT,
1982
⢠An act to provide for the establishment of an AERA to regulate tariff and other
charges for the aeronautical services rendered at airports and to monitor
performance standards of airports.
THE AIRPORTS ECONOMIC REGULATORY
AUTHORITY OF INDIA ACT,2008
58.
59. The road to recovery
The number of travellers taking to the skies jumped 10.1 percent in
October, according to figures released November 25 by the
International Air Transport Association (IATA).
People are flying five percent more than they were before the
economic crisis.
http://www.independent.co.uk/travel/news-and-advice/air-trends-led-by-the-middle-east-
air-travel-continues-to-grow-2143719.html
Region % increase in demand
compared to October 2009
Middle East 18%
Africa 13.3
North America 12.4%
Europe 9.6%
Asia Pacific 7.3%
Latin America 4.9%
60. Liberalization and Privatisation
Global air transport industry has moved away from government
control and ownership towards deregulation and private ownership ,
last 25 years.
Following deregulation of U.S. airline industry in the late 1970s,
leading to lower fares and higher, improved productivity.
Alongside, another trend of privatization of government owned
airlines designated by a countryâs government to operate
international air services
e.g. Australia (Qantas Airways), U.K. (British Airways), Germany
(Lufthansa) and Japan (Japan Airlines).
61. Airline Alliances
Alliances between various Airlines, Domestic and International
Enables its member airlines to offer their customers more services and benefits than
any airline can provide on its own.
Benefits to flyers --broader route network, opportunities to earn and redeem frequent
flyer miles and points across the combined network and more airport lounges.
Upcoming â Alliances between Domestic airlines in India.
American Airlines
British Airways
Finnair
Iberia
Royal Jordanian
Cathay Pacific
Mexicana
Kingfisher
Etc.
Air France
Alitalia
Delta Air Lines
Kenya Airways
KLM
Korean Air
Etc.
Air Canada
Continental
Lufthansa
United Airlines
Etc.
62. More Trends
Credit cards offers enabling conversion of reward points into
air miles.
Co-branded credit cards (Eg. Citibank +Kingfisher Airlines)
âStanding room / standing seats on short-haul flights
(Eg. Ryanair)
Travel Packages (e.g. Kingfisher Holidays)
Per-plane tax rather than Air Passenger Duty, i.e. a per-plane
duty, where each plane is taxed according to its emissions,
63. Carbon tax
According to the European Union Emissions Trading Scheme (EU
ETS) all airline companies with routes entering or operating inside
the EU will face a carbon tax.
EU, Australia and the United States
The solution aims to realize zero carbon emission increases in
2020 and reach an average annual fuel efficiency increase of 1.5
percent between 2009 and 2020.
The International Air Transport Association has also set a goal
to reduce net CO2 emissions 50% by 2050 as compared to 2005
levels.
66. Possible upcoming Technology trends
Self service kiosks for boarding, self bag tagging
RFID tags for baggage to avoid mishandling
Increased use of Mobile and Internet Ticketing, check-in
Outsourcing customer service, bookings, etc. to call centres
Automated customer service
Cloud computing to minimize costs, outsource,
and decrease carbon footprint
68. The Airline: Jet Airways
⢠Claims to have redefined the quality standards of air travel amongst the Indian public,
and is looking to expand the brand beyond India.
⢠Spends up to Rs 50 crore per year on marketing
⢠Has increased its budget after it bought and rebranded Sahara into JetLite.
The Creative Agency: M&C Saatchi
⢠London-based advertising agency, 10 other offices across Asia, recently Delhi.
⢠Handles Jet Airwaysâ global advertising business. Other clients - British Airways and
Qantas
⢠"This campaign is to communicate and celebrate the changes which are taking place,
across the product. This campaign reflects Jet Airways as India's finest international
airline.â -Kamal Oberoi, Chaiman and CEO, M&C Saatchi
69. The Airline: IndiGo
⢠IndiGo, the low budget airline carrier promoted by the travel conglomerate InterGlobe
Enterprises, launched a new ad campaign for 2010.
⢠Focus on IndiGo's formidable track record, operational efficiency and clockwork
precision.
â˘
⢠360-degree campaign focused on TV, digital, print and outdoor media.
The Creative Agency: Weiden + Kennedy
⢠Based in Portland, Oregon. Has offices all around the world, including Amsterdam,
London, New York, Tokyo, Shanghai and Delhi.
⢠The ad was directed by Wieden + Kennedy, and produced by BangBang Films.
⢠The point of our campaign is that only IndiGo ensures that you get from A to B without
wasting your time and moneyâ
⢠- V Sunil, executive creative director, Wieden+Kennedy
70. The Airline: Kingfisher
⢠Over 375 daily flights to 71 destinations, with regional and international services
⢠Frequent use of Ambush Marketing, recently taking on Jet Airways, GoAir & IndiGo
⢠Their previous ad agencies were Equus Red Cell, Rediffusion Y&R Pvt. Ltd
The Creative Agency: J Walter Thompson
⢠JWT will now aid in building brand awareness for Kingfisher airlines in selected target
markets both in India and abroad.
⢠Provides advertising, market research and public relations services.
⢠Current market leader in India
71. The Airline: Indian Airlines
⢠State owned domestic airline of India.
⢠Major drop in market share from almost 100% in 1990, to about 30 per cent in 2004
due to emergence of private carriers.
⢠Major brand makeover â changed everything from the name to the Logo, the ticket,
the counter, the colour of the floor inside the aircraft, to the uniforms and the standard
of service. etc.
The Creative Agency: RK Swamy BDDO
â˘Their services include General Advertising, Media Planning & Buying, Oudoor
Management, Brand Consultancy, Production of TV Commercials / Audio Visuals /
Films / Radio Commercials etc.
â˘Handled the complete makeover- identity change of Indian Airlines to 'Indian,
designing of the new logo, brand campaign.
â˘"It was a major challenge to us, to capture the essence of the brand, and to deliver a
distinct and bold look. The result is there for all to see.â âAjit Shah, ED
72. The Airline: GoAir
⢠Low-cost Airline owned by the Wadia Group
⢠India's first low fare carrier to win the prestigious international award for "Excellent
Services" awarded by the Pacific Area Travel Writers Association (PATWA)
The Creative Agency: Law & Kenneth
â˘Law & Kenneth is a Delhi-based Ad agency which has worked with companies like
Dabur Healthcare, Dabur Foods and Unitech, among others
â˘Tagline of the campaign: 'Chalo India, Let's Fly Smart' , Preity Zinta to be its Brand
Ambassador
â˘Aim to position GoAir as a youthful, fun, exciting, energetic, dynamic, vibrant,
colourful, on the go, and forward-looking airline for the people of India.
73. The Airline: SpiceJet
⢠Launched a new brand campaign which communicates their unique brand offerings,
crystallized into a clear brand message "Get more when you fly SpiceJet".
⢠While the brand has in the past focused on âprice point' or âpromo' driven advertising,
⢠The new "Get More When You Fly" campaign in 2009-10 used major Indian
magazines and on radio - nationally.
The Creative Agency: Contract (India)
â˘"Get more when you fly SpiceJet" is the first brand campaign for SpiceJet by
Contract Advertising Agency.
â˘Working on a national mandate for refining the communication of the brand across all
media including outdoor and online.
â˘Won this account in a competitive pitch which included O&M, Bates 101, M&C Satchi,
Leo Burnett and Lowe.
74. Air India Ltd.
State-owned flag carrier of India, is working with 4 agencies â Crayons
Advertising, Draftfcb+Ulka, Saatchi & Saatchi, Interpub as its creative
and media partners.
Selected these agencies after a multi-agency pitch. The overall business
size is pegged in the region of Rs-50-60 crore.
The empanelment is for a period of 3 years. DraftFCB Ulka and Interpub
were already on Air Indiaâs roster.
All four agencies will be responsible for mix of creative and media duties for
the brand which will include ATL and BTL campaigns both.
75.
76. The Conventional Airline
Conventio
nal Airline
Resources
Revenue
Streams
Ticket
sales
3rd
Party
Loyalty
programs
Fleet
FnB
Manpowe
r
Fuel
Partnership
s
Direct
Customer
Offerings
Reservation
s
Transfers Lounges
Entertainment
Food
77. Southwest Airlines
World's first and largest low-cost carrier.
The largest U.S. airline by domestic passenger numbers.
--US Market share -28.73%
Has carried more passengers than any other U.S. airline since August 2006 for
combined domestic and international passengers* 3,200 flights daily
One of the worldâs most profitable airlines, posting a profit for the 37th consecutive
year in January 2010.
The 15 minute TAT defines all processes, procedures and policies for Southwest
Airlines.
78. The Southwest way
Southwest
Airlines
Low ticket
prices all
year round
Point-to
point
15-minute
TAT
Simplified
boarding
Vacation
Packages
Fuel
Hedging
Single
Aircraft
type-
Boeing
737-
Culture
sharing
Limited
passenger
services
Frequent
departures
79. The LCC model
⢠Have as many seats on board the aircraft as possible
⢠Fill seats as much as possible
⢠Fly the aircraft as often as possible.
Optimization
⢠As opposed to the Hub-and-spoke model followed by legacy
airlines
⢠Minimize costs
Point-to-point services
⢠By having only one aircraft type
⢠Pilots and cabin crew can operate on any aircraft in the fleetSingle type fleet-
⢠Emphasis on direct sales of tickets, especially over the Internet
⢠Avoid travel agency commissions and computer reservation
system fees
Direct ticketing
⢠Less elaborate on-board service.
⢠Unreserved seatingNo frills
⢠paying a pre-determined price for future jet fuel purchases.
⢠Anticipate future jet fuel prices will be higher than current pricesFuel hedging
⢠Commision-based sales, Advertising in-flightAncillary revenue
80. The Elitist Revolution
Since the mid 80âs the trend in the airline business has been to cut costs.
Rather than going the LCC way, Virgin Atlantic chose to redefine the travel experience for business
and first-class travellers
Positioned itself as a first-class airline focused on providing passengers with fun, class, and comfort.
Offers limousine services, lounges featuring spas, rooftop gardens, massage bays, sun-tan booths
and hydro-pools!
Recently also the first to fly one of its planes using biofuels.
81. Codesharing & Airline Alliances
One of the first airline partnerships was that of KLM & Northwest Airlines.
Involves one airline selling tickets for another airline's flights under its own airline code.
To expand one's service offerings and to increase sales.
Airline alliances have become prevalent since the late 1990s.
Coordinate passenger service programs (e.g. lounges and frequent-flyer programs),
offer special interline tickets, extensive codesharing (sometimes systemwide).
Often the companies combine IT operations, or purchase fuel and aircraft as a bloc.
82. Almost 15% market share in India
Focus on the Experience, high service standard, even in a low cost
flight
Complimentary meal on all flights.
In-flight entertainment system on some flights.
Loyalty program and co-branded credit cards
Access to the Kingfisher Lounge for privilege customers.