Low cost airlines


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Low cost airlines

  2. 2. INTRODUCTIONIndia air travel was perceived to be an elitist activityIn 1953, all airlines merged into Indian Airlines orAir IndiaMonopoly perpetuated for next 40 yearsControlled by Directorate General of Civil AviationLater entrusted by Airport Authority of India
  3. 3. OPEN SKIESCurrent policy restricts the access of foreign AirlinesPotential tourists are not offered choice whentravelling to IndiaAdopt open skies policy, in order to promote Travel& TourismOn 1 March, 1994, Government open the gates forprivate entrantsSensing a huge opportunity, a large number of playersjumped into the frayProminent among them, Jet Airways, Sahara,Archana, East West, India International, Damania etc
  4. 4. LOW COST AVIATION (WIND OF CHANGE)Trade of low cost Aviation increased in recent pastOffers low fares eliminates all unnecessary servicesMost consumers opt for low pricesSerious threat to traditional „full service‟ airlinesForce to rethink the strategies and restructure theirfairs to Government owned and private Airlines
  5. 5. NEED FOR LOW COST AIRLINESDeregulation the demand for scheduled passengerwas driven by constraints and confines of its providersNetwork carriers were able to avoid cost sidepressure, by focusing on revenue-side strategiesPrice transparency-internet created, emergence ofnew breed of low cost carriersAt the end of 2000 demand for business class andother high end products fell dramaticallyLow cost carriers offer real, lasting competition tonetwork rivalsCustomers fall into segments with regard to demandfor products on offer
  7. 7. TARGET MARKETTo a large extent influenced the mass transportationand domestic tourism industryE.g., Country of Billion people, around12 Millionpeople travel by airLCCs also geared towards: holiday trips business tripsMiddle class people
  8. 8. Passenger and Cargo Traffic - India
  9. 9. Business Design for Low Cost Airlines
  10. 10. Strategy of Low Cost Airlines Business Strategy Keeping operating costs to a minimum Aggressive marketing Utmost efficiency inUsing secondary operations andairports maintenanceOutsourcing someoperations Increasing the aircraft seat capacity Charging for all additional
  11. 11. Indian Scenario: Air Sahara and Jet AirwaysJet Airways Took off with four Boeing 737-300‟s in April 1992 at Mumbai 100% Subsidiary of Tailwinds Ltd, situated in Cayman island Indian promoter, Naresh Goyal bought the entire stake, became sole ownerAir Sahara Started operation in 1993, between new Delhi and Mumbai sectors By 2001, it expanded its flying routes to 12 sectors Won many excellence award Turnover of Rs. 3.5 billion in 2001
  12. 12. Low cost AirlinesOn 25th August 2003 Air Deccan, India‟s first low cost carrier operated its first flightFares were half of those of the established airlinesOthers Alliance Air, GoAir, Air Arabia, Air One and foreign airlines amongst othersTarget customer whose basic need is to commute at a cheap fare
  13. 13. Indian Aviation: Market Players Kingfisher IndiGo Jet Airways JetLite Air India Spicejet GoAir
  14. 14. Air Deccan: First low cost Airline in IndiaUnit of Deccan Aviation Private LtdFormed in 1995India‟s largest private heli - charter companyGot reputation for providing speedy andreliable heli servicesVision to bridge divide with those who fly andthose who don‟t, by introducing low airfaresLeveraged the power of Internet to simplify theentire process
  15. 15. Strategies planned by Air DeccanMisson : Provide reliable, low cost and safe travel to thecommon menStrategies:High Aircraft UtilizationRoute planningAircraft fleetDynamic pricingAdditional revenuesCost reductionMarketing & promotion
  16. 16. Air Deccan: Fares and ReservationThe aim is to make air travel affordable to allIntroduced the concept of Dyna faresReservation systems:• Internet(www.airdeccan.net)• Call centre – through credit card• Travel agents• Airport counter
  17. 17. Different Low Cost Airlines
  18. 18. SWOT Analysis Strength Weakness “Lean and Mean”  No frills such as „free” approach in staffing food/drinks Rising income levels and  Lower safety standards demographic profile followed Airlines for price conscious  Crippling “oil shock” so customers difficult to survive at low cost New Short-Haul air routes are serviced  Absence of Institutionalized funding Smaller countries can rely on low cost airlines to service them Give more choices to fly
  19. 19. Opportunities Threats Attract middle class  Rising cost people  The threat of new entrants Extensive network to into (LCC) segment esp exploit the booming Air GoAir, Spice Jet, Indigo cargo business and Jagson Airlines Plenty of scope for  High risk perception expansion of operations  New strategies of Could start “Contractual traditional airlines Employment” Strengthen its position in the Chartered Flight segment
  20. 20. Why Low Cost Airlines are not so successful in India ???
  21. 21. Reasons: Why Low Cost Airlines not so successful in India?Failed in effective administrationPoor servicesUnable getting subsidiesLess interest of GovernmentFailed in building trust factor