This document summarizes the evolution of low-cost carriers in India, focusing on Air Deccan. It discusses that Air Deccan was founded in 2003 and grew rapidly but faced financial issues from overexpansion. Vijay Mallya acquired a controlling stake in 2007 to address these issues. The Indian aviation market was growing rapidly at over 25% annually but faced challenges like lack of airport infrastructure and air traffic controllers. Air Deccan targeted leisure travelers and competed with other low-cost carriers like SpiceJet and IndiGo. By 2007, Air Deccan was facing high employee turnover and technical issues, leading Mallya to consider options like merging it with his airline Kingfisher.

1. Case Analysis: Simplifly Deccan
Evolution of Low Cost Carrier
in India.
By: sujithBhaskarR

2. Air Deccan
• Captain Gopinath was the founder of Air Deccan.
• Air Deccan was the largest private low cost carrier in
India.
• It was launched in 2003 serving only 2 destinations.
• Vijay Mallya, the liquor tycoon, bought 26%
controlling stake in Air Deccan for 5.5 million.
• Vijay Mallya’s UB holdings owned Kingfisher
airlines.

3. Reason for Air Deccan to be in hands of Mallya
• Air Deccan had grown from serving 2 destinations to 65
destinations in 2007 by stretching its financial limits.
• The image of airline was quite unreliable due to its services
at that time.
• Many new low cost airlines were coming in with
distinguishable good services and strategy for market
expansions.
• Air Deccan needed a strategy to sustain in the market with a
remarkable good growth.
• The immediate concern for them to seek financial viability.

4. Aviation Industry in India
• Indian aviation market grow at more than 25%
in 2007-08
• The Indian aviation sector, deregulated in 1994,
was the fastest growing aviation market in the
world.
• According to a Confederation of Indian Industry
(CII) report released in 2000, between 45 to 70
million passengers were expected to fly
domestically by 2010.

5. Demand Pattern
• The customer demand for air travel in India was
mainly driven by the leisure, visiting friends and
relatives category.
• By 2010 more than 2/3rd of the domestic air
travelers were expected to come from this VFR
segment.

6. Airport Infrastructure
• The airport infrastructure was not able to keep
up with the growth in air traffics.
• Out of 94 civil airports managed by AAI, 65 was
reported to be in active use.
• Out of these 65, only 40 airports have a runway
of 5000 feet.
• During winter season, many airports face the
problem of fog because of poor infrastructure.

7. Other major problems
• Acute shortage of Air Traffic Controllers
• The increase in air traffic led to a corresponding
increase in the demand for pilots and cabin crew.
• Airlines became infamous for poaching staff from
one another.
• There was a lack of maintenance and repair facilities
in India.
• High tax rate on Aviation Turbine Fuel by Central
and State Govt. are another major concern.

8. Low cost air travel: A substitute for travel
by train
• Air travel in India was considered to be a luxury
and privilege of rich people.
• Captain Gopinath launched Air Deccan with a
vision to enable to fly at least once in his life
time.
• The target market segment was the upper class
train passengers.
• Used different pricing strategies.

9. Target Market and Product Positioning
• Leisure travelers
• Business travelers
▫ Corporate travelers
▫ Owners-managers of SME
▫ Self employed professionals
• Visiting friends and relative travelers

10. Sales and Distribution
• They did not use third party operations
• They have their own central computerized
system for ticket booking
• Route selection: routes are selected on the basis
of volume and capacity of travelers
• To have a dominant position on non metro
routes where its competitors have least interest,
while competing with other players in national
routes by cheaper fares
• Operations: point to point connectivity
• Introduced a procedural change in MRO

11. Competitors
• FSC Segment
▫ Jet Airways
▫ Air Sahara
▫ Kingfisher
• Low Cost Segment
▫ Spicejet
▫ Indigo
▫ Go Air

12. Air Deccan in 2007
• Employee turnover
• Not able to get landing slots at metros
• Unfavorable media
• Predatory pricing by competitors
• FFP by competitors
• Leased aircrafts had technical problems
• CFO resigned
• COO resigned due to difference of opinion with
captain Gopinath
• Infrastructure problems
• Bird Hits

13. Options left by Vijay Mallya for the
future of Air Deccan
 Merge Air Deccan with Kingfisher
 Make Air Deccan subsidiary
 Maintain status quo

14. Thank You