Airline Industry india

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Marketing management

A report on

AIRLINE IND!"R# IN INDIA

PRESENTED BY – GROUP

AMI" $A"IL %&''(

NIRLI$"A DA! %&')(

$AN*+ANAN IN,LE %&'&(

"ANI!+A LAL %&'(,ANE!+ RA %&'%(

1

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!MI" !/NI %&'((

IN"R/D*"I/N

Aviation industry in India has the potential to grow because -

• 16 Millions Indians are travelling by rail daily

• 19 Millions Indians are travelling by air yearly

Due to bilateral air traffic agreements, the international air traffic increased by1!"#nly 1! of the Indian population have used the airplane at least once$AirDeccan% &'(! of our passenger are first time travellers)* '+( +(( Million"

Indians are potential air travellers"

here were only .# players in post independence era"All airlines weremerged either into Indian Airlines or Air India $Air /orporations Act,19+0*"overnment monopoly for ne2t '( years $till 1991*"3uge entry barriers for

private players"

*RREN" !*ENARI/

he liberali4ation of aviation industry in India has precipitated the boomfor domestic and international passenger carriers" he domestic passenger andcargo traffic recorded a growth rate of ''"6! and 5"!, and the international

passenger and cargo traffic recorded growth rates of 1+"5! and 10"5!respectively during ((6-(1" he Airport Authority of India $AAI* managestotal 1 airports in the country, which include 11 international airports, 9'domestic airports and 5 civil enclaves" op + airports in the country handle(! of the passenger traffic of which Delhi and Mumbai together account for

more than +(!" he latest data compiled by Airports Authority of India $AAI*shows that all the airports handled 9("'' million passengers during the calendaryear ((6 compared with 6"9+ million handled during the same period in the

previous year" he substantial growth of Indian aviation industry is mostly dueto%

$i* low fares offered by 7ow /ost /arriers $7//* li8e Deccan, pice:et,oAir etc; and

$ii* cheduled domestic air services are now available from + airports asagainst :ust +( earlier so it is evident that Indian airline industry is

• rowing vigorously at a rate of +-0(! and is e2pected to continue



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• International lights operating% +(( per day

MA/R $LA#ER!


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? In Apr-Dec (6, the domestic mar8et has grown at about '6!, from 6((( to 91((( pa2 per day, over and above growth of +! in Apr-Dec (+ over ('

? In DecC (6, domestic mar8et witnessed average daily carriage of around 11',((( passengers per day another first for the industry

? Indian aviation mar8et has been booming domestic at '6!, and international at1!, over the past 0 years

? 6 new airlines, almost all operating on the 7// model? trong capacity growth in the domestic mar8et, mainly in the 7// segment? trong economic growth

0EA2NE!!E!

? 7//s and other new entrants together now command a mar8et share of around '6!? 7egacy carriers forced to match low 7// fares, during a time of escalating costs? he bottom-line lower yields for all operators

,aps in Infrastr3ct3re

Airlines paying for these strategic gaps in many ways

? 3igher fuel consumption - long holding times, on ground and inthe air

? 7ower utilisation of aircraft - slot constraints and air trafficcongestion

? ub-optimal route networ8 strategies, due to lac8 of night par8ingstands at ma:or airports and navigational aids at many of thesmaller airports

+igh inp3t costs

? A> prices in India continue to be far higher than global rates, ma8ing A> accountfor 0+-'(! of operating cost, as against global average of (-+!

? 3igh basic rates aggravated by high ta2es imposed by tate ovt"Cs? A> cost 8ilolitre %

? EF ++ in Delhi? EF 5( in Mumbai? EF '++ in ingapore

? EF '9 in Dubai

/$$/R"NI"IE!

A large 4 growing potential market

? he 'th largest G nd fastest growing economy in the world - D< growth of 9"! inH0 ((6

? #ver 0(( million strong middle class? Disposable incomes e2pected to increase at an average of 5"+! p"a" till (1+ $


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? 09( million strong domestic tourism mar8et, growing at J10!? >oreign tourist inflows of '"'0 million, also growing at J10!

Air *argo

• >reight carriage in India currently around '(( tons per day

• /AB of 1+! over the past years

• >uelled by a fast growing economy, supported by a strong industrial base

• >orecast to grow at 11"'! p"a" till (11-1

• .ith ta2 proposed on aircraft lease rentals for leases concluded after 1st

AprilC("

• Increasing manpower costs due to shortage of technical personnel

,/5ERNMEN" A$$R/A*+.

he >oreign Direct Investment limit in Air ransport ervices $Domestic Airlines* has been increased from '(! to '9! and is soon e2pected to be increased further" 3owever, the

=BIKs and


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? >ull range carriers withmedium price

? 7ow cost carriers with low price

? ery high service with high price

? ood service with medium price

@et, Indian, ing >isher and other fullrange carriers

Air Deccan, pice @et, o Air, Indigoand other 7ow cost carriers

a: airways, /lub one airways

ingfisher, @et airways

a7 13ll range carriers with me8i3m price

!trength

.ide coverage of services provided

0eakness

7ess number of Internationaldestinations

/pport3nities

reatest potential to capture and leadin mar8et

"hreats

he new comers with low fares

E9amples:

et; In8ian; 2ing 1isher an8 other f3ll

range carriers


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!trength

reat facilities and technology

0eakness

=o service for economic class

/pport3nity

rowing business class

"hreats

he low fare lu2ury service providers

2ample%Air Deccan; !pice et; ,o Air; In8igo an8 other Low cost carriers

c7 5ery high ser=ice with high price

!trength

Letter service due to high fare"

0eakness

7ess coverage within country

/pport3nity

Attractive for he growing middleclass

"hreat

he low cost lu2ury service providers

E9ample:

"aj airways; *l3< one airways

87 ,oo8 ser=ice with me8i3m price

!trength

7ow fare as compared to higher service provider"Letter services than lcc"argeting to the middle class customers"

0eakness

ery new in industry

/pport3nities

3uge potential to capture mar8et

"hreats

2tra cost burden

E9amples:

2ingfisher; et airways

MAR2E" !+ARE/1 DI11EREN" AIRLINE! IN IND!"R# IN &''>



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E" AIR0A#! ? MAR2E" LEADER

? 01! #> MAB 3AB $After AcNuisition of )AIB A3ABAO*

? ++ AIB/BA>

? I=->7I3 BI/ AB I# 9((1%((( /BI>ID

63siness !trategy: et Airways

? Maintain mar8et leadership in the domestic mar8et? Develop two eNually strong pillars% domestic and international operations? /onsistently provide a superior product to our passengers? eamless connectivity spanning domestic and international routes? Improving cargo revenue potential -domestic and international? Beduce unit cost of operations

>ocus on reducing operating costs $specifically fuel* Beduction in selling and distribution cost $on-line boo8ings* Be-negotiation of agreements with various service providers

Market lea8ership

5



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Mar8et leadership has become such a typical pursuit that its implications are hardlyaccorded much thought" In the conte2t of aviation, this can mean being under constant siegefrom all sides - competitors, clientele and bureaucracy and an indefinite overhang of pressureto retain the top spot" @et Airways has done all of the above and continues to, in IndianaviationQs most important as well as tumultuous years" Its humble beginnings are difficult toimagine in light of its current dominance of domestic aviation and its encouraging head starton the international front"

Domestic En83rance

Leing a domestic private carrier in the early Q9(s was considered both, tantamount tosubversive competition to Indian Airlines ostensibly antagonising the authorities and afinancial misadventure" he Q9(s saw many start-ups fall by the way side, while @et Airwaysemerged from the meltdown as an airline with a focus on 8ey business routes" It too8 the leadin identifying new stations and consolidated with a mar8et share that has grown consistentlytill it too8 mar8et leadership from Indian Airlines in the early half of the decade and has held

it ever since" he airline followed a strategy of a steady e2pansion of domestic routes,scheduling flights between metros with a strategic focus on the business traveller with asophisticated product and on-time performance" A focus on the ma2imum utilisation of assets,similar to the approach of 7ow /ost /arriers $7//s* in urope and the E, helped theairline" @et Airways was also the first Indian carrier to loo8 at the capital mar8ets by floating aminority sta8e of ( per cent on the Mumbai stoc8 e2change in ((+, in order to fuele2pansions and reduce e2posure to debt"

6ran8 image thro3gh International win8fall

International flights stand out as the airlineQs biggest strategic milestone in so much asthe move gave the airline a global scale and e2posure" @et Airways was the first private airlineof India to fly to international destinations in March ((' with flights between /hennai and/olombo, after it was cleared by the overnment of India to operate scheduled services tointernational destinations" ubseNuently, the airline loo8ed at urope, when in December((', the overnment of India allowed private Indian carriers to fly to any internationaldestination world-wide with the e2ception of ulf countries" oday, it operates dailyinternational flights to /olombo, athmandu, ingapore, uala 7umpur and 7ondon$3eathrow* and will soon start serving Lang8o8, Lrussels and =ewar8"

@et Airways sei4ed the opportunity, positioning the Loeing 0-((5(( series fordestinations such as ingapore and uala 7umpur and leased Airbus A0'(-0(( wide-bodyaircraft for non-stop flights to 7ondon $3eathrow*" It also placed more order for wide- bodyaircraft with an eye on more long-haul flights to urope and =orth America" he airlinerealised the potential of a second-tier city li8e Amritsar, operating from there to 7ondon andthen started flights from Ahmedabad to 7ondon" It too8 @et Airways more than two years toget the necessary clearances from E authorities to fly to the Enited tates" he E tateDepartment gave the go ahead on =ovember 1+, ((6" .ith a view of operating over 1( dailyflights through Lrussels in the ne2t two years, @et Airways has chosen the uropean city as itshub for flights to =orth American cities, including =ew Por8, /hicago and 7os Angeles and/anadian capital, oronto" It is ta8ing delivery of 1( -0((Bs and 1( A00(-((s through

#ctober ((5"

9



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@et Airways has also ta8en the lead in introducing many of the 8ey internationalconveniences" .eb chec8-ins introduced in late ((+ became instantly popular with freNuent

business travellers and later chec8-in 8ios8s were also launched" In April ((, @et Airwayslaunched a new livery with the arrival of its first Loeing and third Airbus A00( aircraft"

"ren8setter attit38e

@et Airways in its typically Qtrendsetter attitudeQ created IndiaQs first domestic fullservice and low cost model by announcing the launch of a subsidiary airline, @etlite, whichwill be positioned between low cost and full-service" @et aircraft and ma:or destinations arenot its only focus" he airline, along with si2 others, recently obtained permission to operatean 5(-seater aircraft, which will not only widen its networ8 to include more tertiary cities butsave it valuable costs by way of landing charges and sales ta2 on A>, both of which arewaived by the government for such aircraft as they connect the countryQs vital hinterland toma:or cities" oing bac8 to the topic of the typical pursuit of mar8et leadership, in theaviation industry, it means much more than general statistics" @et Airways has seemingly been

aware of this, selling itself on the basis of brand above price, amidst a fully blown fare waramong its peers, managing eventually the best yields in the business, introducing Indian

passengers to some international conveniences and in the process, retaining that typical pursuit without fuss"

/ther !trategies

? Lest customer ervice

? erve both business and economic class

? AcNuired ahara airlines thus getting stronger hold in mar8et"

? everal chemes to acNuire and retain customers - Begular customers en:oysdiscounted fare

Inno=ation Lea8er

? @et Airways wins )Most innovative product launchO award" $ept ((*

--Investment in I, Besearch on /ustomer protective mechanism, #utsourcing by omnitech"

AIR DE**AN - */!" LEADER

1(



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? he company is used to spend close to Bs '( crore on various media and below-the-line mar8eting activities every year"

? he company has also launched ingfisher >irst, which is a print campaign to promote its first class service"

? he company is also planning a series of online promos to boost traffic in certainsectors such as Mumbai-ol8ata" hey are running online contests to boost traffic onthese sectors and are also loo8ing at partnering with premium hotels"

? I=>I3B Airlines has announced special fares for all personnel serving in theIndian Armed >orces, the Enion overnment, tate governments, and employees ofall public sector units in the country"

? he immediate families of these personnel - parents, spouses and dependent children -are also eligible for these reduced and special fares"

It lays stress 3pon

>ull ervice at rue alue

• Medium-cost operation• #ne single ingfisher /lass for all• hort flights and fast turnaround times $allowing ma2imum utili4ation of aircraft*

MAR2E" 1/LL/0ER! IN INDIAN A5IA"I/N IND!"R#

? # AIB ? I=DI#?


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"+REA" /1 NE0 EN"RAN"!

/onsiderably high cost to enter"

hortage par8ing bays at ma:or airports"

the low availability of slots in pea8 hours"

=o government restrictions for domestic newcomers e2cept for some legalformalities"

$lements o# %ndustry$lements o# %ndustryStructureStructure PorterPorter&&s Fi'e-Forcess Fi'e-Forces

(uye

rs

Suppl

iers

%ndustryCompetit

ors

Ba BargainingPor

ofSuppli

)e* $ntrants

Threat of NewEntrants

Threat ofSubstitutes

Su+stitutes

Bargainin

g

Power

of

Buyers

Bargaining

Power

of

Suppliers

Threat of Substitutes

Intensityof Bivalry

1'



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6AR,AININ, $/0ER /1 !$$LIER!

Aircraft suppliers

>leet >orecast for the India-Begion ((6-(11 this study shows that there will be appro2"

5+! growth in the order rate of air carriers"

here are only two ma:or suppliers Loeing and Airbus" here are others li8e LritishAerospace, AB-', Dauphin, Dronier, >o88ar,


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Aviation urbine >uel uppliers

? I#/? 3industan


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*oncl3sionhe Indian aviation Industry seems to be attractive for a new entrant after

analy4ing the mar8et in terms of competitors and other factors"Among the new low-cost carriers waiting to ta8e wing in ((6 were #mega

air, Magic Air, ast .est, Indus,


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