Final Airlines

PEST Analysis Of Airlines

PROJECT REPORT ON

“PEST ANALYSIS OF AIRLINES”

SUBMITTED BY

MISS. KINJAL .B. GOTECHA

TYBMS (SEMESTER V)

M.L. DAHANUKAR COLLEGE OF COMMERCE

VILE PARLE (EAST)

MUMBAI – 400 057

PROJECT GUIDE

PROF. RUPA ADATIA

SUBMITTED TO

UNIVERSITY OF MUMBAI

ACADEMIC YEAR

2003-04

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CERTIFICATE

To Whom It may Concern

I, _____________________________hereby certify that Miss. Kinjal

.B. Gotecha of M.L. Dahanukar College Of Commerce And Management

Studies of TYBMS (Semester V) has completed her project on “PEST “PEST

Analysis Of Airlines”Analysis Of Airlines” in the academic year 2003-04.

The information submitted is true and original to the best

of my knowledge.

Signature of Project Guide Signature of principal

Place : Mumbai

Date :- 200 __________

DECLARATION

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I, Miss Kinjal .B. Gotecha of M.L. Dahanukar College Of Commerce

And Management Studies of TY.BMS (Semester V) hereby declare that I

have completed the project on “PEST Analysis Of Airlines” in the

academic year 2003-04.

The information submitted is true and original to the best of my

knowledge.

Signature of the student

ACKNOWLEDGEMENT

The topic “PEST ANALYSIS OF AIRLINES” is quite vast and this is my

honest submission, which would not be possible without the help and support

of the people who have guided me.

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At first, I would like to thank our co-ordinator Prof. Shashikant Patil who

gave me this

opportunity to explore the wide arenas of this topic. I thank my project guide

Prof. Rupa Adatia who guided me throughout this project. Thanks to Mrs.

Shobha Nimbalkar, Asst Mngr Sales of Indian Airlines, who provided me with

practical information, so that I could substantiate my information with facts.

Last but not the least. I would like to thank my parents, friends and

peers to help me collect information.

All the above people have given me great backing throughout this

project.

PREFACE

Airline sector has grown since a number of years as transportation has

grown its importance. It is very important to take care of the time factor for

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businesspersons, emergencies and in many other cases, the speed is

provided by air travel.

There are a number of factors, which influence this sector. PEST

Analysis of this sector helps to analyze the changing scenario of airlines.

Along with PEST, this project also includes the importance of airlines as a

service sector. The way in which this sector had grown to provide the best

services in return of the value.

Liberalization and privatization of airlines result in the changing trends

of this industry. It also provides other sectors such as hotels and tourism, a

platform for tie-ups with it in order to expand the air traffic.

Hats off to the pioneers of this industry- to the builders, engineers,

operating people and those in all other departments of an airline- people who

‘manufacture’ air transportation.

Thus emphasis is laid on various political, social, technological and

economic along with other factors for the study of airlines as a service sector

too.

EXECUTIVE SUMMARY

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This project is devoted to various factors influencing the airlines in

general. Although PEST acts as a very important tool in fulfilling the above

aspect, the role of airlines as a service sector too highlights various sides of

the airlines.

This entire report on PEST analysis of airlines contains a number of

ideas which are summarized as below:-

The beginning speaks about the introduction to airline sector as a

whole. It gives an idea of the airline industry.

The airline history focuses on the Wright brothers and their contribution

in bringing the concept of air travel into being.it speaks about the open sky

policy and its contribution to the airline industry.

Next is about the institutional framework of the airline industry and its

role played in this sector.

The present status of this industry is highlighted in the next chapter.it

speaks about the economic contribution and the statistics of air traffic in india.

The chapter of PEST analysis focusses on gives a brief idea of this tool

PEST to be used. It highlights on all the political, economic, social and

technological factors if airlines. With the support of a number of press

releases and current news articles the factors are given great emphasis.

Next, airlines is explained as a service sector and various service

characteristics are highlighted.

The quality of service in this industry is defined through the RATER

analysis in the preceeding chapter followed by this is a focus on the moments

of truth experienced in this sector and also recommendations in order to

achieve customer satisfaction to the fullest.

IATA plays an important role in the airline industry which is spoken

about in the next chapter.

Liberalisation of this aector is focussed in the next chapter along with

recent trends in this industry.

A case study on INDIAN AIRLINES reveals various aspects of the

factors during the post-11 attack and the SARS fear.

As a whole this report is an emphasis on a number of factors related to

the airline industry and its role as a service sector.

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TABLE OF CONTENTS

INTRODUCTION TO AIRLINES

AIRLINE HISTORY

INSTITUTIONAL FRAMEWORK

PRESENT STATUS

PEST ANALYSIS

AIRLINES AS A SERVICE SECTOR

RATER ANALYSIS

MOMENTS OF TRUTH

IATA

LIBERALISATION OF THE AIRLINE SECTOR

CASE STUDY ON INDIAN AIRLINES

CONCLUSION AND RECOMMENDATIONS

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INTRODUCTION TO AIRLINES

Airlines is considered to be the fastest mode of transport. It is one of the

emerging industry providing the customers with impeccable service. Airline industry,

worldwide is constantly facing threats from attacks or any wide spread disease like

SARS, which affects its sales considerably. This has lead to bankruptcy and massive

layoffs in many airline companies.

Despite of all these exegencies, airline companies have regained their status

and continue providing its state-of-art service. It is coming up with a flood of

innovative schemes to lure the customers. The attacks on twin tower had severly

affected the aviation industry, but two years after the attack, it has come to normal

and running with all its confidence. It had been a learning experiece for all the

airlines. They now are giving prime importance to the security measures.

The same is the scenario of Indian Aviation. The history of Indian Aviation

dates back to 1912. From then there is no looking back.Gone are the days when

flying by air was a distant dream for common people owing to high ticket fares.

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http://www.regalaviationcharter.com/images/charter2.jpg


Today with the increasing competition, airlines have slashec their prices, but this has

not affected their quality of service.

The airline companies have created a great impact in the minds of the

customers as the ultimate service provider of all the transports.

AIRLINE HISTORY

WRIGHT BROTHERS.

The Wright Brothers, Orville Wright (1871 - 1948) and Wilbur Wright

(1867 - 1912), are credited with the invention of the airplane and controllable

powered heavier-than-air flight.

The brothers grew up in Dayton, Ohio, where they ran a bicycle repair, design

and manufacturing company (the Wright Cycle Company). Drawing on the work of

Sir George Cayley, they extended the technology of flight with the principles of

control still used today. They had researched and initially relied upon the

aeronautical literature of the day, including Otto Lilienthal's tables but, finding that

the Smeaton Coefficient, a variable in the formula for lift and the formula for drag

was wrong, designed and built a wind tunnel to perform practical tests.

In 1903 they went to Kitty Hawk, North Carolina to continue their aeronautical

work, choosing Kitty Hawk (actually Kill Devil Hill) because of its strong and steady

winds, and on March 23, 1903 they applied for a patent for their airplane design.

Then on December 17, 1903 Orville Wright took to the air. Orville's uncontrolled

flight, of 120 feet in 12 seconds, was recorded in a famous photograph. In the fourth

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http://www.wikipedia.org/wiki/1903

http://www.wikipedia.org/wiki/December_17

http://www.wikipedia.org/wiki/Patent


http://www.wikipedia.org/wiki/March_23

http://www.wikipedia.org/wiki/Kitty_Hawk%2C_North_Carolina

http://www.wikipedia.org/wiki/Wind_tunnel

http://www.wikipedia.org/w/wiki.phtml?title=Otto_Lilienthal&action=edit

http://www.wikipedia.org/wiki/Sir_George_Cayley

http://www.wikipedia.org/wiki/Wright_Cycle_Company

http://www.wikipedia.org/wiki/Bicycle

http://www.wikipedia.org/wiki/Dayton%2C_Ohio

http://www.wikipedia.org/wiki/Airplane






flight of the same day, the only flight made that day which was actually controlled,

Wilbur Wright flew 852 feet in 59 seconds.

The Wrights established a flying field at Huffman Prairie, near Dayton, and

continued work in 1904, using a catapult takeoff system to compensate for the lack

of wind in this location. By the end of the year, the Wright brothers had sustained

flights of 5 minutes, circling over Huffman Prairie. This was really the world's first

airport.

The Wright brother brought great attention to flying by their flight around the Statue

of Liberty in New York in 1909.

Contrary to popular belief, the Wrights were not the first to build heavier-than-

air machines capable of flying under their own power; that had been done earlier by

Samuel Langley and possibly Richard Pearse. However, their three-axis system of

control, using wing warping (later supplanted by ailerons) to control roll, elevators to

control pitch and angle of attack and a rudder to control yaw, made flight stable and

sustainable. The same principles are still in use in all modern aircrafts.

OPEN SKY POLICY

The Open-sky policy came in April 1990. The policy allowed air taxi- operators

to operate flights from any airport, both on a charter and a non charter basis and to

decide their own flight schedules, cargo and passenger fares. The operators were,

however, required to use aircraft with a minimum of 15 seats and conform to the

prescribed rules. In 1990, the private air taxi-operators carried 15,000 passengers.

This number increased to 4.1 lakh in 1992, 29.2 lakh in 1993, 36 lakh in 1994 and

48.9 lakh in 1995.

The 1996, private air taxi operators carried 49.08 lakh passengers which

amounted to a 41.14 per cent share in the domestic air passenger traffic. Seven

operators viz NEPC Airlines, Skyline NEPC, Jet Air, Archana Airways, Sahara India

Airlines, Modiluft and East West Airlines had since acquired the status of scheduled

airlines. Besides this, there were 22 nonscheduled private operators and 34 private

operators holding no-objection certificate in 1996.

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http://www.wikipedia.org/wiki/Rudder

http://www.wikipedia.org/wiki/Angle_of_attack

http://www.wikipedia.org/wiki/Elevator

http://www.wikipedia.org/wiki/Aileron

http://www.wikipedia.org/wiki/Richard_Pearse

http://www.wikipedia.org/w/wiki.phtml?title=Samuel_Langley&action=edit

http://www.wikipedia.org/wiki/New_York

http://www.wikipedia.org/wiki/Statue_of_Liberty

http://www.wikipedia.org/wiki/Statue_of_Liberty

http://www.wikipedia.org/wiki/First_canoe_to_fly


INSTITUTIONAL FRAMEWORK

MINISTRY OF CIVIL AVIATION (MCA):

MCA is responsible for the formulation of national policies and programmes

for development and regulation of civil aviation and for devising and implementing

schemes for the orderly growth and expansion of civil air transport.

DIRECTORATE GENERAL OF CIVIL AVIATION (DGCA):

The DGCA is the main regulatory organisation in the country responsible for

regulation of air transport services to/from/within India and for enforcement of civil air

regulations, air safety and airworthiness.

AIRPORT AUTHORITY OF INDIA (AAI):

AAI provides infrastructure facilities. Its aim is to accelerate the integrated

development, expansion and modernisation of the operational, terminal and cargo

facilities, in line with international standards.

INTERNATIONALS AIRPORTS DIVISION (IAD)

IAD manages the eight international airports at Delhi, Mumbai, Calcutta,

Chennai, Thiruvananthapuram, Kochi, Hyderabad and Bangalore.

NATIONAL AIRPORTS DIVISION (NAD)

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http://www.tatry.sk/Images/Doprava/Sky/sky01_m.jpg


NAD manages all domestic airports in the country.

PRESENT STATUS

The airline industry today faces challenges unprecedented in its history. With

the global economic slowdown affecting business travel, the airlines were already in

crisis before September 11th. But, the tragic events of last September aggravated

the situation by weakening consumer confidence further and brought into question

the existing security mechanism. The latest IATA estimates suggest that airlines

collectively lost close to US $ 12 billion as they experienced a 5.7% decline in total

traffic. The increase in costs due to higher insurance costs, security etc has put

increasing pressure on airlines and jeopardized their viability leading to widespread

layoffs and bankruptcies in the industry.

The Indian aviation industry on the other hand has weathered the storm with

greater ease than many of its more illustrious western counterparts. Though it is

largely dominated by the public sector and somewhat insulated from market

exigencies.

Despite the inherent cyclical nature of the aviation sector, its contribution to

the economy is indisputable.

But with the passage of time, the scenario is changing. The airlines are striving

hard to cope up with the crisis. Domestic and international passenger traffic in India

is projected to grow annually at 12.5%yoy and 7%yoy respectively over the next

decade. At the same time, domestic and international cargo traffic is expected to

grow at 4.5%yoy and 12%yoy respectively. By the year 2005, Indian airports are

likely to handle 60mn international passengers and 300,000 tons of domestic and

1.2mn tons of international cargo.

Over the next decade international and domestic air traffic are expected to

grow from the present levels of 42 million to close to 90 million. International air

cargo exports from India are expected to rise from 0.7 million tonnes per annum to

2.4 million t.p.a while domestic cargo will rise from 300,000 t.p.a to over 1 million

t.p.a. Both Boeing and Airbus Industries expect that with the low penetration of

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aviation services in India, aviation services would grow faster than in most countries

and ahead of India's GDP growth.

However, in order to achieve such levels of growth a number of policy and

regulatory constraints will need to be addressed immediately.

ECONOMIC CONTRIBUTION

The aviation industry plays an indispensable role in the growth and efficiency

of an economy. The sector acts as an economic catalyst by opening up new market

opportunities, moving products and services with speed and efficiency. Therefore,

international trade and commerce relies heavily on the aviation sector. The

contribution of the aviation sector in India is especially significant taking into account

that it only forms a small part of the transportation industry. The sector facilitates

international trade, tourism, and foreign direct investment thereby enabling the

growth of the economy and making it internationally competitive

At present over 40% of India's exports and imports, by value, are carried by air

and 95% of foreign tourists arrive into India by air making the tourism industry the

third largest foreign exchange earner. According to NCAER estimates foreign

exchange transactions worth US $ 22.5 billion annually is directly facilitated by civil

aviation, while another US $96 billion are moderately facilitated by civil aviation

services.

A report published by CII and NCAER also establishes that growth in air

transport is closely inter-linked with growth in the Gross Domestic Product both

internationally and nationally. For a percent increase in India's GDP, domestic

passengers are expected to increase by 1% , for international passengers this

sensitivity is about 1.3%.

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INDIA’S AIR TRAFFIC STATISTICS

Year

Domestic

Passengers

(in million)

Increase

(in per cent)

International

Passengers

(in million)

Increase

(in per cent)

1996-97

(Actual)12.00 10.5 10.8 7.0

1997-98 13.26 10.25 11.6 7.0

1998-99 14.65 10.5 12.4 7.0

1999-2000 16.20 10.5 13.3 7.0

2000-01 17.57 10.5 14.1 7.0

2001-02 19.06 8.5 14.9 6.0

2002-03 20.68 8.5 15.8 6.0

2003-04 22.44 8.5 16.8 6.0

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2004-05 24.35 8.5 17.8 6.0

2005-06 25.05 7.0 18.8 5.5

2006-07 27.87 7.0 19.8 5.5

2007-08 29.82 7.0 20.9 5.5

2008-09 31.91 7.0 22.1 5.5

2009-10 34.15 7.0 23.3 5.5

2010-11 36.54 7.0 24.6 5.5

2011-12 39.09 7.0 25.9 5.5

2012-13 41.44 6.0 27.2 4.9

2013-14 43.93 6.0 28.5 4.9

2014-15 46.56 6.0 29.9 4.9

2015-16 49.35 6.0 31.4 4.9

2016-17 52.32 6.0 32.9 4.9

Sources: Airports Authority of India, Foundation for Aviation.

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CHAPTER FIVE

PEST ANALYSIS OF AIRLINES

INTRODUCTION

The airline industry has seen rapid growth in the last few years. Before

any kind of analysis is undertaken, it is important to find out what are the main

environmental influences that have led to this growth. Also, how the extent to

which the changes are occurring, are to be taken care of. This is important

because the change in these factors can have significant effect on the way

the industry performs

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The environmental influences can be analyzed by the use of PEST

analysis. Within it’s parameters, PEST indicates the importance of the

political, economic, social & the technological changes in the industry.

A brief idea about these factors is as follows:

POLITICAL

The political analysis comprises of the various legislations,

regulations & government policies declared for the respective industry.

ECOMONIC

The economic factors’ influencing an industry defines the exchange

rate, inflation rates, income growth, debt & saving levels.

SOCIAL

The social factors are those having an impact due to people’s choice

and include beliefs, values and attitudes of the society

TECHNOLOGICAL

An impact of the new technology such as Internet, EDI, mobile and

increasing advancing in computing are covered under the technological

factors of the analytical tool PEST

POLITICAL FACTORS

The political factors are the main driving force of the airline industry.

The Air-India airline industry is built on the backbone of the government

support and it cannot sustain itself without it.

All the support services like the hotel industry, tourism and other

transport industry to name some are heavily dependant on the support and

co-operation of the government. Any policy that comes into force can have

dramatic effect on the way the industry players perform.

Focusing on the recent factors concerned with various policies

announced by the government are the following facts. The articles mentioned

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below highlight the influence of the “Open sky policy” announced by the Civil

Aviation Ministry.

Stability of the political environment

The airline industry is very susceptible to changes in the political environment

as it has a great bearing on the travel habits of its customers. An unstable political

environment causes uncertainty in the minds of the air travelers, regarding traveling

to a particular country.

Overall India’s recent political environment has been largely unstable due to

international vents & continued tension with Pakistan. The recent Gujarat riots & the

government’s inability to control the situation has also led to a increasing the

instability of the political arena.

The most significant political event however has been September 11. The

events occurring on September had special significance for the airline industry since

airplanes were involved. The immediate results were a huge drop in air traffic due to

safety & security concerns of the people.

impact on Air India: -

After the terror strikes, Asian Airlines seemed relatively unaffected and the

demand was relatively stable a week after the attacks – a far cry from the marked

downturn in bookings that airlines in the US have seen.

Drop In air traffic leading to financial problems:

For Air India, initial cancellations caused a loss of Rs. 9.5 crores in terms of

grounded flights and hotel accommodation for stranded passengers. The airline has

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now curtailed its direct flights to New York and Chicago, stopped its weekly London

terminator service and rerouted a service to Singapore. Despite this, and the pull out

of United Airlines, Air India flights are still not full to the U.S. and London. Insurance

conditions from leasers have forced the airline to ground all four of its recently leased

aircraft.

Trade relations with other countries –

International airlines are greatly affected by trade relations that their country

has with others. Unless governments of the two countries trade with each other,

there could be restrictions of flying into particular area leading to a loss of potential

air traffic (e.g. Pakistan & India)

India could find itself one airline short on the European sector as Richard

Branson’s Virgin Atlantic is reported to be reviewing its strategy for its young

unprofitable Indian operations. During its short stay in this country, Virgin Atlantic has

already notched up losses on the Delhi-London sector and its exit from India may be

a distinct possibility if bilateral talks between the UK and the Indian government do

not yield more ground in India for the airline soon.

Political interference & bureaucracy

This is another major area of consideration for airlines. This is because most

governments recognize the huge revenue potential of the airline industry. This leads

to a lot of politicians & ministers try to interfere with its operation hoping to gain come

benefit.

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Another aspect is that in countries with high corruption levels like India, bribes

have to be paid for every permit & license required. Therefore constant liasoning with

the minister & other government official is necessary.

The state owned airlines suffer the maximum from this problem. These airlines

have to make several special considerations with respect to selection of routes, free

seats to ministers, etc which a privately owned airline need not do. The state owned

airlines also suffers form archaic laws applying only to them such as the retirement

age of the pursers & hostesses, the labour regulations which make the management

less flexible in taking decision due to the presence of a strong union, & the heavy

control & interference of the government. This affects the quality of the service

delivery & therefore these airlines shave to think of innovative service marketing ideas

to circumvent their problems & compete with the private operators.

Air India is fully controlled by the state. This cause many problems in its

functioning due to the indecisiveness of the government & slow decision-making. An

example of how political interference has caused problems for air India is the recent

proposed disinvestment of Air India.

The sluggishness of the government & its hesitation to sell Air India to foreign

buyers due to the political implications has cost the airline some huge bids by Air

France & Singapore Airlines. The TATA group is the only one left in the race, which

effectively means that the government will have no choice, but to sell it to them &

therefore won’t be in the power to negotiate on price.

Besides major decision making, the daily decisions of Air India also face

interference from bureaucrats & government officials who are not qualified to do so

with regards to the airline industry.

No US airline is keen to increase it’s number of flights to India

Open Skies evoke little response from airlines

Nov 11th 2002

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Business Standard

The Civil Aviation Ministry’s Open Sky Policy has not drawn any encouraging

response from the US and European airlines. Few carriers have shown interests in

the policy, with not a single US airline keen on increasing their number of flights to

India.

The ministry had announced an Open Sky Policy for about four months

between December 2002 and March 2003.

During this period, airlines will be allowed to increase the frequency of flights

or capacities from the destinations already being served. However the offer has been

restricted to airlines from the US and Europe.

The carriers from South East Asia and West Asia have been barred from

availing of the opportunity.

Civil Aviation ministry officials said there had been a luke warm response from

the European airlines to the policy

“Only Lufthansa has asked for permission to deploy a couple of extra flights to

Bangalore. Air France has not shown interest in increasing flights during the period,”

a senior ministry official said.

British Airways, too, has not taken a decision on the deployment of extra

flights. The airline was citing per city of staff as a reason behind the hesitation to

increase flights, ministry officials said.

The only airline, which seems to be enthusiastic, is Virgin Atlantic. However,

since the airline at present has a commercial agreement with Air India, which has

been the cause of some controversy of late, it remains to be seen wither Virgin is

granted permission

According to industry officials the reason for such a response on the path of

airlines is that out bound traffic dips during the winter months. “ Out bound

passenger traffic drops almost 15 % during the winter months compared to summer,

though inbound traffic goes up. An airline cannot just cater to inbound traffic, as it will

have to fly empty planes out of the country on the return trip, “an industry expert

pointed out

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The ministry might have seen a different response had the policy been

extended to South East Asian airlines as well. According to experts, the tourist traffic

had shifted from Europe and US to South East Asia last year.

While the latter has seen an upswing in traffic by 25 %, Europe & the US have

seen an equal negative method.

Most of the South East Asian airlines said if they were allowed to participate in

the policy, they would increase their capacity by 10 – 15 %

Thus it can be inferred that, due to the ministry’s policy of Open Sky, a few

airlines could only benefit. The air traffic resulted in a shift due to the policy which

created a great impact on the airlines from the US and Europe.

As the political environment is not conducive as required restricts the airlines

to flourish at its best. The policies must be active for all the airlines for development

of the sector.

Keep Skies Open

June 20th 2003

Business Line

The extension of the open skies policy to let airlines from North America and

Europe add flights into Indian cities during the peak tourist season to October to March is

a sign that liberalization is taking root in this much – protected sector. Ostensibly, this is a

move to help enlarge tourism flows. It would be tautology to say that the country’s

earnings from tourism are linked to the number of tourist who is able to fly in and that in

turn is dependant on the number of airline seats made available to them. In sufficient

capacity means high fares and fewer passengers and tourist spending which is what the

Ministry of Tourism has been complaining about for long. Yet this simple equation had

eluded the Civil Aviation Ministry that clung on to the old practice of trying to determine

how many seats airlines can deploy instead of letting airlines which are best placed to

read their market decide how many aircraft they would deploy and to what destinations.

The right to operate international flights has ale\ways been determined by complex

bilateral deals among governments. In India’s case it has involved working out bilateral

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capacities that would protect the commercial operations of the national carriers, Air India

and Indian Airlines. In the normal course, capacities between two countries would be split

equally between each country’s designated carriers. There were two problems in such an

arrangement; One, the capacities were determined finally by the Civil Aviation ministry

and not by the airlines themselves, and, two, often Air India

(Or Indian Airlines in some cases) would not have the aircraft to fly to a country that

sought to have its carrier fly to India. In the latter case, the government would extract for

Air India the right to sell a few seats in flights operate by the other country’s airline. The

combine market share of Air India and Indian Airlines on international routes in less than a

third when it ought to have been half.

In a rapidly changing market it is inconceivable that governments can gauge or

predict passenger demands any better than airlines can. Nimble – footed response to the

market is a virtue in most sectors, not so the airlines; they need to get government

approval to even move their feet. This archaic and feudal practice has no place today,

which I why one tends to welcome the move to extend the open skies policy, in a feeble

and grudging manner. Offering the hand of freedom only to western European and North

American is discriminatory, tourists do come from elsewhere, and it is a moot point

whether they are less worthy. And why should the government restrict that freedom to the

period from October to March? Letting go is clearly difficult for the government.

Govt’s reluctance to liberalise aviation policy hurts tourism

July 18th 2003

The Economic Times

The government’s failure to liberalise the Civil Aviation policy and allow foreign

carriers to operate more capacity to Indian destinations is preventing the tourism industry

from tapping the country’s full potential. A large number of foreign tourists choose other

destinations since seats are not available to India or the tariff is high.

Foreign carriers are not allowed to operate adequate number of services to India since

the government wants to protect the interests of Air India and Indian Airlines. This is

leading to huge losses in terms of tourist arrivals and spending, the tourism industry feels.

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“We should see the big picture. If more foreign tourists come in, the government will

also earn significant revenue in the form of taxes. Since tourists from various source,

markets including Europe and the US are high spenders, the entire economy – especially

service sectors associated to tourism – would benefit in a big way,” Ankur Bhatia

managing Director of Amadeus India said.

Passengers would find more options and cheaper fares if the government follows an

Open Sky Policy. The governments policy on bilateral was a typical example of being

pennywise and pond foolish said Vinay Maheshwary of service4s International, a Delhi

based Travel services Company. Inbound tourism was picking up and the progress would

be much faster if fares to India were not higher than competing destinations like Thailand,

he added.

The government should look at the benefits to hotels, tour operators, transport

companies and allied tourism services. The progress of all these segments are being

hampered for protecting the state owned carriers, He added. Air India should be allowed

to compete in the International markets as market economy ensures that the fittest would

survive.

When Lufthansa was seeking permission for more flights to India, Mr. Maheshwary

said, Air India was withdrawing from Frankfurt.

It is obvious from the above news reports that the government has highly influenced

the tourism industry by taking decisions in the airline sector.

Insufficient capacity means high fares and fewer passengers and tourists spending which

is what the tourism industry has been complaining about for long.

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HEAVY TAXES, GOVT CONTRTOL ARE CHOKING THE INDUSTRY.

What is alarming is that, fares have steadily increased during this period though the

recent introduction of advance purchases tariff’s give the impression of the customer

getting a better deal.

Connectivity has also worsened during this period with many small centers going

out of radar while the metros are flooded with increasing frequencies. Indian Airlines has

been hit by shrinking capacity and the dilly – dallying of the government which has failed

to privatize the carrier. While the public sector airline can at least opt for privatization, Jet

faces a tougher task. If the private airline is in losses despite corporate management and

efficiency, the lack of which is cited as the reason for the lackluster of Indian Airlines, there

is no room left for improvement. It would appear that a policy framework of heavy taxes

and excessive control has more than outweighed the favour bestowed on incumbent

players by the stunted competition created as part and parcel of the country’s Civil

Aviation policy.

If the government is keen to improve aviation security, how can the leading

domestic airline of the country be allowed to operate with a tax haven background?

Various other factors like ground handling are being discussed at length due to security

reasons. However, what becomes clear is that the current system of too many

government controls has neither benefited airlines nor consumers.

Supply of aviation turbine fuel is still controlled by PSUs and state government

imposes a high sales tax on this key input. Airport charges have been going up and

depreciation of the rupee over the years has added to the burden. The government

imposes a 15 % impost on tickets in the name of inland air travel tax. Various other levies

add to the cost borne by the passenger. Airlines still have to seek government permission

before buying or leasing aircraft and lack of domestic industry has led to dependence on

import for spares. The industry has been seeking a reduced tax burden, adequate

financing facilities and drastic reduction of government control on the sector.

25


26


ECONOMIC FACTORS

The airline industry like the other industries grows with the increase in

the spending of the people. The more the people spend, the more the

industry grows. The spending power of the people has been increasing in the

country and all over the world. The large increase in the spending power in

most developed countries has left a large amount of idle cash in their hand.

This has led to the airlines boom the world over and India has been no

exception.

However, over spending is also evident not only in increase of people

traveling by air but also in hotels. Even the number of domestic tourists

traveling by air has dramatically gone up.

Economic factors are key variables, which have an impact on the key

activity in the airline sector. Income levels and personal wealth govern the

level of consumer activity. As levels grow, more discretionary incomes

available to spend on traveling by air. Also, consumer confidence in the

economy and in job security has a major impact in the growth and

development of airlines.

The exchange rates in an economy highly influence the airlines. This is

because a highly competitive and service sector like airlines has to deal in a

number of different currencies for its working and progress.

The inflation rated plays a decisive role in airlines as a price factor. The

rise in prices of tickets in economy class has a major impact on the common

people or the middle class travelers. There is a chain reaction in the effect of

inflation rates as it results in price rise, which ultimately affects the demand

and supply condition. In turn, the passenger traffic is thoroughly affected

which comes back to the airlines in the form of large or small number of

travelers.

Indian Airlines, in a bid to cope with slackening demands during the

post summer vacation period, had decided to reduce its fares on 5 western

sector routes. The first version after Indian Airlines announced its flexible fare

policy in May 2001; the new rates came into effect from June 28 th . It also

introduced point-to-point fares on a dozen routes.

27


The five sectors for which the fares had been reduced were:-

Ahmadabad- Bangalore

Mumbai – Bangalore,

Mumbai – Chennai,

Mumbai – Kolkota,

Goa – Mumbai.

Norms governing ‘day – return’ fares had also been liberalized. The ‘Day

return’ fare on Delhi – Mumbai sector had been reduced to make it more

competitive.

The senior official in commercial department of Indian Airlines said that

this was only the beginning and that they would keep making changes on the

basis of demand – supply position.

Fares had been brought down where ever the demand was low. At the

same time, the airline planned to hike fares in Sectors where demand was

found to rise.

Business Cycles:-

Business cycles have a wide reaching impact on the airline industry.

During recession, airline is considered a luxury & therefore spending on air

travel is cut which leads to reduce prices. During prosperity phase people

indulge themselves in travel & prices increase.

After the September 11 incidents, the world economy plunged into

global recession due to the depressed sentiment of consumers. The airline

industry was the hardest hit, as people became wary of travel & there were

large-scale cancellations. The loss of income for airlines led to higher

operational costs not only due to low demand but also due to higher

insurance costs, which increased after the WTC bombing. This prompted the

industry to lay off employees, which further fueled the recession as spending

decreased due to the rise in unemployment.

As the recession deepens, airlines are being hit harder than before.

This is because companies reduce their travel budgets during a recession,

28


which affects the corporate business of airline industry. In such conditions

the airlines need to develop new strategies for survival.

Air India has taken initiative to counter the recession by introducing special

offers, discontinuing services in order to cut costs, etc. It also plans to

upgrade it fleet in order to keep up with market trends.

Civil Aviation policy:-

The changes announce in the civil aviation policy go a long way in

impacting the airline industry. The divestment of the government’s

shareholding in air India will take place under the framework of the civil

aviation policy. India’s civil aviation policy lays down the following guidelines

which directly impact airline industry:

A) Private sector participation – the policy determines the extent to which airlines

can have private sector participation.

B) Regulation & rationalization of the ATF (airline turbine fuel) price, which is very

important input & directly affects final pricing decisions of the airlines.

C) Domestic passenger & Cargo air transport which includes the limits of foreign

equity participation, regulation of capacity induction with a view to ensuring safety,

security and preventing unhealthy levels of capacity.

MAKE AIR TRAVEL AFFORDABLEWe can do without cartelisation

October 2, 2003

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The economic times

The civil aviation minister Rajiv Pratap Rudy wants the three domestic

airlines-jet airways, Indian Airlines and Sahara- to coordinate their flight

schedule to provide better connectivity. He feels that such an arrangement

can ensure that flights are not bunched together but spread throughout the

day. Indeed, the final outcome makes sense, but the way the minister wants

to achieve it does not. Such attempts at co-ordination are bound to

degenerate into cartelization, especially when entry barriers are high. So, air

travellers will have the convenience of flights being available throughout the

day, but we have to pay through their nose for the same. In other words, one

senseless decision could fritter away all the gains of increased competition in

the domestic air travel following the entry of private airlines. Airfares have

declined to possibly the lowest, and service standards have improved even in

the state owned Indian Airlines. Minus the cutthroat competition, all these

improvements would disappear almost overnight.

In the country of India's dimension, the top priority for the civil aviation

policy should have been to make air travel affordable. Unfortunately, a

combination of state and central duties has made air travel unaffordable for

most Indians. As a result, today it is a lot cheaper to fly from India to a host of

foreign destinations than to traverse from one end of the country to the other.

No wonder, so many Indian tourists prefer Southeast Asian countries to our

exotic destinations. What good is promoting Kerala to, say, someone in North

India when a back and forth train journey takes almost four days and the

alternative air travel costs nearly 25,000 (Delhi - Kochi - Delhi)? In the civil

aviation minister devoted himself to the single task of ensuring cheaper air

travel, he would have done a great service to the nation. And in the process

he would have achieved the objective of flights being spaced out throughout

the day. For, cheaper air travel would mean more traffic, which would in turn

mean more flights. The task involved is not too difficult; all it involves is

working on the simple arithmetic of reduction in duties the accompanied by

increased volumes.

30


SOCIAL FACTORS

Social factors are a major influence in consumer buying decisions, and

this applies to airline industry just like other industries. over the time , changes

do appear which affect the consumers habits.

Changing Travel Habits –

The changing travel habits of people have very wide implications for the airline

industry. Air India need to focus on their clientele which are mostly low income clients

& their habits in order to keep them satisfied. The destination, kind of food etc all has

to be chosen carefully in accordance with the tastes of their major clientele.

31


Cultural differences -

Depending upon the clientele an airline has, the cultural differences of each

country have to be absorbed into aspects such as the hospitality, the menu etc. The

domestic airlines like Indian airlines therefore need to include special cuisine such as

jain meals, special offers on festivals etc.

Airlines bookings take off as SARS fears recede

July 16, 2003

The Economic Times

Airline bookings are up for the second consecutive month after the slump in

February-may. While total domestic and international bookings have increased by 7% in

July over the same period last year, June saw an increase of 15% over the corresponding

period in 2002.the beginning of 2003 was good for airline bookings with an upsurge of

15% in Jan (yoy) while Feb. saw a decline of 16%, march (-25%), April (-20%) and may (-

6%).

International airline bookings also increased significantly in June after the impact of

sars was over and travelers resumed their long pending business travel and vacations.

Not only this, attractive airfares by domestic carriers also fuelled air travel, say travel

agents.

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This increase is a result of overall improvement in bookings in Asia-pacific, said Ankur

Bhatia, Amadeus India MD. “Since late June, daily net bookings from the thirty two Asia-

pacific countries and territories had started looking similar to the number of bookings from

the same time last year. daily net bookings reached around 1,80,000 in the first few days

of July compared with 1,20,000 the same time last year”, he said . in the midst of the sars

scare in mid-April, bookings were at a low of around 30,000.

He added that cancellation rates have sharply declined recently from a high of 82% in

April to 66% last month and attributed the recent recovery of the industry to promotional

campaigns, such as Thai airways’ luck is in the air promotion, which offered 20,000 free

tickets.

Himmat Anand, COO, Sita World Travels, said this increase in airline bookings can be

attributed to an increase in domestic and outbound tourism. “The success of apex

(advance purchase) fares that flexible pricing is here to stay. Attractive airfares offered by

domestic carriers played an important role in increasing demand for air travel. After sars,

countries like Hongkong and Thailand are also offering lucrative packages to enhance

tourism in their respective countries,” he said.

A travel agent said that domestic airlines are offering concessions to customers by

way of auctions, additional frequent flier miles and co-branded cards. Jet airways has

launched special packages to various destinations including Port Blair, Ooty, Darjeeling,

Kodaikanal, Shimla, Manali, Mussorie, Srinagar, Banglore and Chennai. Though apex

fares dilute yield, all domestic airlines are expected to persist with deep discount tariffs.

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The above news article clearly mentions that SARS, considered as a major social

factor in the mid-2003 affected the air traffic considerably. the various promotional

offers, offered to the travelers increased the bookings heavily as the fear of SARS

receded.

Testing times in the air (social)

34


What's important to the successful functioning of an airline is, people training and fair terms of

employment. And for that you don't need to privatise, you just need to give the public sector a

chance.

Privatisation of domestic airlines in India is often quoted as a big

success story favouring similar efforts across the board, especially in aviation.

The assumption is that if it worked with airlines, then it would work with all

other aspects of aviation.

But are private airlines really able to do better because of privatisation, and if

so, privatisation of what?

Private and public sector airlines are stuck with the same aircraft

manufacturers, as well as maintenance parameters. Choosing between

Boeing and Airbus, or CRJ and Bombardier, is a bit like trying to figure out the

great difference between Tweedle-dee-dee and Teedle-dee-dum! (Though it

must be mentioned here that with economy class passenger seating comfort

and cabin baggage space being the main criterions, for short range flights, the

A-320 beats the B-737 any day, and for long range flights, the B-777 scores

way above the A-340, and so Air India seems to have got it all wrong again).

Aircraft interiors and seat pitch aside, nothing has changed there.

Air Sahara and Jet Airways have a few really ancient, noisy and rattling

aircraft too, which compete well with the Alliance Air Boeing 737-200

venerables in terms of age as well as despatch unreliability. Common users'

services, such as airports, Air Traffic Control, safety/fire-fighting,

arrival/departure halls, check-in counters, everything is the same, regardless.

As a matter of fact, the private airlines get the lousier locations and the more

distant bays. Certain services, such as apron control, security and safety, are

moving back into the domain of Government control in the most privatised of

countries, such as the US. Which is how it should be, considering the vast

improvement in airport security in India after they've brought in the CISF, an

all-India force. How would you like it if fire services at airports were privatised?

Computerisation and the consequent benefits of technology are on par,

private or public sector. As a matter of fact, while Indian Airlines (IA) and Air

35


Sahara have provided Internet ticketing for over a year now, Jet Airways is yet

to do so. And this, in a day and age where the much-maligned Indian

Railways set the benchmark for Internet ticketing, worldwide, with online sales

reaching almost Rs 1 crore a day. There is no evidence that adoption of a

technology for the benefit of a customer is any better or worse in the private or

public sector.

Onboard catering, cleaning, sanitation, engineering, maintenance,

adhering to government/DGCA regulations and scheduling, depends on

various factors common to most airlines. But that big bug, IA planes waiting

for VIPs, has now spread to the private players too.

So what's left?

Well, the biggest benefit of privatisation of aviation has been cost to

customer. But that really came about specifically and only after Air Sahara put

the cat amongst the contented pigeons about two years ago. Remember all

the private players now gone, brands such as East-West, Damania, Modiluft,

NEPC-Skyline, Continental, who simply followed the prices set by IA?

It doesn't require an expensive consultant to tell us that what's left is

people training, fair employment terms and leaving people to do their jobs in

accordance with norms. And for that you don't need to privatise. You just need

to give the public sector a chance. If you do that, it can perform as efficiently

as any private sector, with far greater social responsibility.

Red alert!

There is a security guideline, apparently, that once you have had your

boarding pass issued you cannot leave the terminal building. So, if you show

your boarding pass at the entry/exit gate and ask to be let out for a smoke or

walk, then the CISF officer on duty will not let you out. Fair enough, the

reasons for this are apparently to prevent people from checking in on behalf of

others, or to leave the terminal after checking their baggage in. This rule can

be by-passed at smaller airports, where everybody knows everybody anyway.

36


However, at airports like Delhi, Chennai and Mumbai, this rule is

followed strictly for bona-fide passengers. But you can leave after checking in

by walking confidently towards the VIP entrance near the Airport Manager's

office, and exit the building from there. Then walk around the terminal

building, and smartly walk in again on the strength of the same boarding pass,

which prevented you from leaving! This correspondent does this regularly at

Delhi, when a flight is delayed and a smoke or a simple observation trip is

called for. Last week, it was Chennai's turn, and with a boarding pass pre-

issued at Bangalore earlier in the morning for a late-flight Chennai to Delhi, it

was a great reason for the Hindi-speaking CISF officers on duty at the bona-

fide entry gate to refuse permission to exit, and smile broadly whenever I re-

appeared from outside to re-enter.

What a shame!

Strange are the ways aviation security is interpreted, and not just in

India. Listen to the list of don'ts: Can't carry pickles, pepper, round fruit or

sealed bottles of water, but you can get as much of it served to you with the

meal. Can't carry torches or batteries, but you can reach into the safety

equipment or cabin crew bags stored at the rear and help yourself to any of

these. Can't use cell phones once on board because they may impact the

computers in the cockpit, but all sorts of walkie-talkies and cell-phones used

by ground staff are allowed.

And most of all, we can't carry nail clippers or small knives/scissors, but

the nice elderly lady will not be stopped from continuing with her, for knitting!

Oh some reassurance

Anxiety amongst passengers for information from the flight deck seems

to be on the increase, especially after 9/11. Delayed departures after entering

aircraft, and before or after closing doors, with or without substantial activity

outside and inside, sudden warnings to fasten seat belts, sudden and

perceptible changes in engine sounds as well as changes in altitude, not

switching off engines after landing and hanging around on taxiways or bays

and circling in holding patterns are events that add to the already stressed

environment inside an aircraft.

37


Generalising is not very accurate, but, by and large, cockpit crews from

Far Eastern countries tend to be quite chatty. Europeans provide precise

information, with straight-faced humour. American pilots are into accuracy

with friendliness, and often go into information overdose. Very often, one of

the audio channels is set to the ATC-cockpit frequencies.

But what about our very own Indian pilots? They must be either really

busy in the cockpit all the time, giving the autopilot an inferiority complex, or

they are simply unaware of how a few words from them to the passengers

every now and then would ease the stress involved for many passengers in

taking a flight. A few notable exceptions aside, the rest go through the same

dull drone on outside temperature, cruising altitude, standard warning on

wearing seatbelts and sometimes a reference to the cabin crew. Nothing else.

Your airplane could bounce up and down in the worst of turbulence, and

instead of a reassuring voice from the cockpit all we get a terse

announcement.

Unlike earlier, more aviation passengers know that the avionics and

autopilots on board a modern airplane can handle emergencies in the air

better than the human at the helm.

So what is the real reason, then for the pilot's scant interaction with the

passengers? No wonder we, as Indian passengers, always seem to be in a

hurry to leave the aircraft.

TECHNOLOGICAL FACTORS:

Technology has played a major role within the airlines, bringing about far greater

efficiency through computerized records and transaction systems, also in using

development through the setting up of detailed customer databases for effective

segmentation and targeting.

This makes it essential that the policymakers change their attitudes and the

professionals prove themselves personally committed. Innovation makes the way for

38


demand generation and profit maximization. It opens new avenues for increasing the

market share of airlines. So, the need to promote innovation.

A technology driven marketing information system is a key through which airlines can

be technologically forward. Better communication facilities are one of the first pre-

requisites for growth in the inflow of passengers. This has been made possible through

technology. Many remote and inaccessible areas of the country get connected to the rest

if the world thanks to the technology base in international and domestic airlines.

Changes In Technology For Safety & Security

Post September 11, the Civil Aviation Ministry is deploying CISF personnel at

all metro and hypersensitive airports. Quick- reaction teams of the National Security

Guards (NSG) have been added to the security teams at such airports.

Intelligence agencies have virtually taken over some of the metro airports and

close circuit television cameras have been installed at strategic points. Sky marshals

have been deployed on various flights. The BCAS conducts surprise checks at all

airports.

Information Technology & Its Impacts

The increasing use of the Internet has provided many opportunities to

airlines. According to the Greenfield Online Digital Shopping Index in the US, airline

tickets ranked among the top five most purchased items on the Internet. Travel

business is the number one online consumer spending segment with more than two

39

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million business travelers having spent $3 billion online in 1999, and the figure all set

to grow to $20 billion by 2004 as per a survey conducted by Forrester Research.

Air India has leveraged this opportunity by providing many internet based

services to its customer such as online ticket booking, updated flight information &

handling of customer complaints.

Infrastructure

USTDA (US trade & development association) is funding a feasibility study

and workshops for the Airports Authority of India as part of a long-term effort to

promote Indian aviation infrastructure. The Authority is developing modern

communication, navigation, scrutiny, and air traffic management systems for India's

aviation sector that will help the country meet the expected growth and demand for

air passenger and cargo service over the next decade.

A proposal for restructuring the existing airports at Delhi, Mumbai, Chennai

and Kolkata through long-term lease to make them world class is under

consideration. This will help in attracting investments in improving the infrastructure

and services at these airports. Setting up of new international airports at Bangalore,

Hyderabad and Goa with private sector participation is also envisaged.

These technological changes in the environment have an impact on Air India as

well. Better airport infrastructure, means better handling of airplanes, which can help

reduce maintenance cost. It also facilitates more flights to such destinations.

In airline industry, technology is necessary for customer satisfaction. It enables

to track and implement according to traffic levels on various flights and manage

inventory accordingly. They help airlines make reservations quickly by enabling each

ticket agent to check hundreds of flights for available seating. It helps the airline

industry in reservations, ticketing, checking in passengers, maintenance schedules,

and personnel records, accounting and stock control.

Surf’n’click: airline ticketing goes live

August 11, 2003

The economic times

40


Physical airline tickets may soon be a relic of the low tech past. Air travel entered a

new era on Saturday with the launch of live e-ticketing in the country. Passengers will no

longer have to bother to collect tickets from air travel agents, or worry about lost

misplaced ones. With e-ticketing, reservations will be confirmed by e-mail or fax. The

plain-paper confirmation, with a reference number of the reservation and the itinerary, will

replace the ticket dockets. The paper is good enough for entry at all Indian airports.

The system, already popular internationally is being offered in India by global

distribution service provider Galileo and Travel Company Thomas cook.

The bureau of civil aviation security (BCAS) has already issued a notification

accepting e-tickets. This means passengers with the tickets will be allowed access to the

passenger terminal buildings at airports for check in. they will have to show a proof of

identity like a passport, photo identity card, driving license or a credit card.

Commenting on the new system, Seema Luthra, president and CEO of Galileo

(India), said, “IATA studies have shown that the end-transaction cost of a physical ticket is

a bout five times that of an e-ticket.” so, e-ticketing is major cost saving tool for airlines.

About 70% of the tickets issued in the US are e-tickets, she said. The system has been in

use in India for the past few years. But the passengers had booked e-tickets in other

markets and were travelling to India. But the system has now been formally certified by

IATA’s billing operation, BSP India. Worldwide, over 45 airlines participate with Galileo for

e- ticketing. These airlines can start offering e-tickets to their customers in India.

Computers have already revolutionized consumer air travel, especially with fare

checking and online ticket sales, and now some of the airlines are moving to get rid of

paper tickets entirely, travel industry sources said.

E-tickets give certain advantages to both airlines and passengers. The system

facilitates direct-to-customer sales, while saving airlines $6-7 on each ticket they don’t

have to print and mail to customers. Late bookings have also become easy: make a

phone call, get your confirmation faxed to you, or print it out, and its over.

Air-India sets up global call centre

July 13, 2003

The economic times

41


Giving a major push to its customer-friendliness drive and ‘product upgradation’, Air

India on Saturday seyt up its first global international call centre for round the clock

operations in north east Mumbai while for domestic travelers a similar facility would be

launched by October 2003.

“The global centre at Deonar will be manned by 25 people and operate 7 days a

week,” the leading international carriers spokesman Jitender Bhargava told The Free

Press Journal. Civil Aviation Minister Rajiv Pratap Rudy, making the ‘first call and booking’

through video conferencing, inaugurated the centre.

“The idea for the centre is to improve customer service,” Jitender Bhargava said

adding, “It would take calls from overseas countries. Our target area is US and UK where

we have lately enhanced a number of services.”

The call centre has sophisticated technical infrastructure and would deploy qualified

and trained manpower. “The international call centre would ensure reservation for flights,

hotels, car rentals, meal choice, special seats booking, special requirements for

passengers like wheel-chairs, child care and even flight baggage,” he said.

In the past one year, Air-India’s capacity to USA has substantially increased and is

poised for further growth in the winter timetable. The round the clock call centre, it is

hoped, would eradicate one of the major complaint areas that during weekend Maharaja’s

staff does not give their best of services. Civil Aviation Minister is in the city to attend a

meeting of Parliamentary Consultative Committee attached to his ministry.

Talking to reporters, Rudy said that the fleet acquisition plan and the Aviation Policy

would be given final shape by two months. “The plan would ensure level playing field for

all concerned including private parties,” he said.

Adequate steps were being taken to upgrade Mumbai and Delhi airports.

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42


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45


Video/music on individual seats

Leading airlines provide personal video screens and music players on each

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E.g. video games on Japan airlines

Conducting business in the sky

Virgin air provides a circular seating arrangement and also provides laptop

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Sale of empty seats through auctions/internet

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passengers through internet.

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achieving success often means winning the hearts and minds of consumers

during check-in, before the plane even takes off. Airlines like Air Canada are

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installing self-service kiosks there by reducing checking time and increasing

passenger throughput.

Telephony sky-to-ground

Many airlines now offer call facility from the aircraft to the ground locations like

house or the office thus enabling people to stay connected.

CHAPTER SIX

AIRLINES AS A SERVICE SECTOR

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Unique Service Characteristics

INTANGIBILITY

Services are intangible in nature. Unlike goods, which are tangible and can be

seen and touched, services can only be experienced. It means that services are high in

credence qualities whereas goods are high in search qualities. A company can

differentiate its service from its competitors by providing tangible clues.

A company can provide tangibility to its services by –

Association with physical goods or items,

Association with the physical environment,

Performance and involving customers

As we know that services are intangible, a service marketer has to face many

problems. In the airline industry transportation is the core product. Since it is intangible in

nature a service company can distinguish itself from its competitors by providing several

tangible clues like –

Food / Beverages

Newspapers

Movies

Music

Staff uniforms

Logos

Color and design

Seats and cushions

Assistance with work

Audio / Video facilities for work or pleasure

Fax, laptops, etc.

Baggage retrieval

Flight bookings

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A service marketer can overcome the difficulties of intangibility of services through:

Reducing service complexity

Stressing on tangible clues

Facilitating word – of - mouth recommendations

Focusing on service quality

Here are a few examples of leading airline companies that provide tangibility to its

services through various tangible elements –

1.Indian Airlines – The Maharaja – Logo, also they describe themselves as ‘The Peoples

Carrier – The National Carrier’.

2.Jet Airways – the airline for businessmen, easy booking facilities, easy custom

clearances and baggage retrieval, good in-flight services.

3.Southwest – friendly, no frills, low fare airline.

4.Air Canada – provides laptop connections and helps in sending fax messages –

favourite with North American business travelers.

INSEPARABILITY

Another characteristic of services is customer involvement in production i.e.

inseparability. The inseparability of services leads to –

Customer being co-producer

Often customer being co-consumers with other customers and

Customer traveling to the point of service production

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All the above three problems are faced by the service marketer in the airline industry.

So the service marketer has to think of ways in which he can satisfy his consumers in an

efficient manner.

Customers are separated on the basis of price – business and economy class.

Also airline are trying to overcome inseparability by providing facilities such as –

Games for kids – Air Canada

On-line Booking – Sahara

INCONSISTENCY

Inconsistency refers to the variability in the service. Service variability leads to

difficulty in projecting a consistent image and developing a strong brand. As it is difficult to

standardize to blueprint the service process there is inconsistency in service quality. Also

services rely on human inputs there is a high amount of variability. This can be overcome

by providing personalized services and focusing on employee training. Up to an extent,

automation and mechanization also can help to reduce inconsistency.

E.g.: most airlines include online booking resulting in a standardized procedure

& fewer mistakes due to human errors.

Another way of reducing inconsistency in airlines is the standardization of in-flight

procedures for example the security instructions given at the beginning of the flight.

INVENTORY:

It is not possible to store services. Also the service capacity cannot be

increased, as it can be limited. Services also face irregular demand patterns. Again the

service can be short-lived.

The inventory for airline industry is mainly the food and the aircrafts spares and parts.

Airlines face the problem of inventory mainly due to irregular demand patterns.

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E.g.: The Boeing Company and British Airways announced today that the airline will be

the first launch customer for the Global Airline Inventory Network(SM), an innovative new

service in which Boeing will manage British Airways' supply chain for expendable airframe

spare parts used in its fleet of Boeing airplanes. This includes parts from Boeing as

well as other suppliers.An expendable part is one that is typically replaced rather than

repaired after use. These range from fasteners and brackets to floor panels and

airplane skins.

The Global Airline Inventory Network(SM) is designed to attack costly inventory

inefficiencies in the airline industry, where both airlines and suppliers incur extra costs

because of duplicated distribution channels and unnecessary inventory levels.

Congestion occurs during peak periods like vacations and festivals and at other

times there is unused capacity. Thus special discounts & offers are offered during

these periods to boost seat capacity (called the PLF -- passenger load factor)

CHAPTER SEVEN

RATER Analysis

Customers don’t assess the quality of service on one dimension only,

they use multiple parameters to judge the quality of the service that they are

being offered. These characteristics which people consider vary from person

to person, industry to industry. Even depend upon the product on offer. But

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generally, if we consider a service industry these are the five basic criteria’s

which the customer will consider to judge the quality of service being provided

to him.

Reliability

Assurance

Tangibles

Empathy

Responsiveness

When we look at these points with respect to the airline industry we

find that the following qualities are expected by the customer.

Reliability – flights to promised destinations depart and

arrive on schedule

Assurance – trusted name, good safety record,

competent employees

Tangibles – aircraft, ticketing counters, baggage area,

uniforms

Empathy – understanding of special individual needs,

anticipates customer needs

Responsiveness - prompt and speedy system for ticketing, in flight,

baggage handling

RELIABILITY – Ability to perform the promised service dependably and

accurately.

This would basically be that company delivers to the customer what is

promised & the customers basically like to deal with companies that can fulfill

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their promises. When we look at the airline industry we can see the following

things the customer would expect certain basic facilities like: some functional

infrastructure provided to him, the flight leaving & taking off on time, the

luggage reaching safely.

There was an article in the newspaper, where in the journalist talked

about how Indian airlines was the airline that the public could trust. The

journalist basically talks about them being the national carrier, profit would

not be their only objective and so they would try to provide the right kind of

service, they wouldn’t fly an aircraft just so they can save on the costs or don’t

have to bear the losses even if the plane is not a 100%, whereas someone

like Jet would probably consider the monetary costs involved in the process,

and even that could influence their decision.

The general belief is that the service offered by Indian Airlines is below

standard or not upto the mark. But then they charge lesser than other airlines,

so they are mostly concentrating on the pricing for their market share. But

some people even choose Indian Airlines because they believe that Indian

Airlines won’t be cutting costs and so won’t run a plane not completely ready.

Basically, they’d rather travel in slightly lower grade airline than risk their

lives.

ASSURANCE – Employees knowledge and courtesy and their

ability to inspire trust and confidence

Assurance would basically mean the kind of knowledge the employees

have and the courtesy & the ability of the employees to generate confidence

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in the user’s mind about the service being provided. The employees should

have a positive morale & should be motivated if they have to promote the firm

& create a sense of assurance in the flyer’s mind.

Jet Airways is generally considered the more customer friendly of the

domestic airlines. The staff there is nicer to old people or little kids who might

be traveling. Though Jet has a very young staff, so some of the members

could possibly not match the kind of experience the Indian Airlines crew has.

Suppose some senior citizen is traveling alone in an aircraft for the first time

the crew should see to it that he is given proper instructions & is comfortably

settled in his seat.

Besides this, after the September 11 crisis, there was a lot of

skepticism in the fliers & to instill a little confidence in the consumer’s mind,

the government paid greater emphasis on security in the aviation policy. This

was all so that people would feel safe next time they traveled by air. They

would appoint a committee and look into the recommendations provided by

them to better the security arrangements in the airplanes & airports.

TANGIBLES – Appearance of physical facilities, equipment,

personnel and written materials

Tangible features would be those physical features, which can be felt

by the customer. These would be the physical proofs, which would help the

customer to judge the quality of service. Incase of the airline it’d be the aircraft

that the airline uses, how old they are, the kind of facilities that are provided

inside the aircraft or in the waiting area. The technology used for baggage

handling. The coaches used to transport the customer to the aircraft, all of

these speak leaps & bounds about the service provider. The kind of skilled

staff that they have the uniform that the staff wears.

The tangibles would also include the infrastructural facilities present at

the airports. This is where we find most of the Indian airports lacking. They

have no proper arrangements to handle the customers.

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When we look at the aircraft fleet that is a very important tangible feature, and

we find that Indian Airlines has a really ancient fleet of aircraft’s which doesn’t

make it extremely safe as older planes are more prone to damage. Whereas,

Jet Airways has the youngest fleet in the business.

EMPATHY – Caring, Individualized attention given to customers

Empathy basically is when the employees of the organization make the

customer feel at home, at ease, make him feel wanted. The customers are

mostly offered the same service from most of the airlines. The easiest way for

an airline the maintain and grow it’s client base is to be empathetic towards

their customers, to understand their specific needs and to cater to them &

they should make each customer feel like he is a unique asset to the

company & like their single most important client. Addressing the clients by

their first names, keeping a track of their usual flying routes, their preferences

in flight & catering to all of those, maybe giving him his favorite seat each time

he travels.

Customers like to be treated properly for the money that the pay and

the airline should try and offer the maximum benefit to the flyer for the money

that he pays. Air India in April invested 15 crores in the first class segment to

give it a face-lift and started providing full-recline seats since they give

minimum fatigue on long trips (exceeding 8 hours of flying).

RESPONSIVENESS – Willingness to help customers and provide prompt

service.

Responsiveness would basically be the kind of time it would take for

the firm to address a customer’s complaint or for the firm to provide service to

the customer. The degree of responsiveness shows the level of commitment

that the people of the company have towards their work. It is very necessary

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for the company to concentrate on prompt & the right kind of responsiveness

to the needs of the customer.

Incase, a certain passenger doesn’t like a certain meal served on the

plane, the cabin crew should be in a position to offer him an alternative meal

in little time, as his perception or opinion of the airline company would mainly

depend upon whether he goes satisfied on this complaint or not. Care should

be taken that prompt response and top quality service is provided to satisfy all

of the customer’s needs.

CHAPTER EIGHT

MOMENTS OF TRUTH

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http://www.idealspain.com/Photos/Airports/almer02.jpg


A moment of truth exists when a customer comes into contact with the

organisation. At every point of contact, he experiences the service and makes

an evaluation about it being good or bad. That is the moment, which creates

satisfaction, is dissatisfaction. That is a moment when a problem may occur. If

a problem doesn’t occur and the problem passes off as expected, there is no

dissatisfaction. That is also the moment when the experience could be very

different than from what was expected, resulting in a perception of intense

delight and the _expression of ‘wow’. That is the defining moment of reality.

Jan Carlzon, president of Scandinavian Airlines, is credited with

originating the concept of moments of truth. Carlzon took over as president

when the airline had lost 30 million dollars in the two previous years. In his

single-minded focus for becoming the best airline of the frequent business

traveler in Europe, he determined that the first 15-second encounter between

a passenger (customer) and his front-line people (employees) set the tone or

image of the entire company in the mind of that customer. Thus, each

encounter with a customer is a moment of truth.

Carlzon carefully reviewed every step of the customer contact process,

and identified 5 critical times when the airline interacted with the

customer. He called these 5 points of contact "the Moments of Truth," and

they work for any business.

For airlines, they are:

Making a reservation

Getting tickets

Boarding

Flying

Retrieving baggage

Carlzon recognized that at any one of these crucial moments, the

airline could either strengthen their relationship with a customer, or risk losing

them. And he personally checked up on how the airline was meeting them.

The key is to ensure that every moment of truth is a positive one for the

customer. By establishing this culture in SAS, the airline returned to

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profitability in one year while the rest of the international airlines tallied a

record two billion-dollar collective loss.

Each encounter you or an employee has with a customer is a moment of

truth. The customer's perception (reality) of your company is formed by every

encounter. To deliver superior customer service, every encounter must result

in a positive experience for your customer.

For example, every time the phone rings at your business, it is a

moment of truth. Are your customers/prospects greeted with a cheerful,

professional and efficient handling of their call? How each call is handled

provides one of the most opportune moments of truth for you to make a

positive impact and help customers "feel" good about doing business with you

and your company. The most important person(s) in your company is the

person(s) who answers the phone.

Indian Airlines

Some of the things IA does in providing their customer with the best

service to their customers.

Making a Reservation:

You can book your Indian Airlines ticket by ringing up or visiting any IA

booking office or approved travel agent in India and approved General sales

agents of Indian Airlines and interline partners abroad.

When you make a reservation on an Indian Airlines flight, the time limit

by which you much purchase your ticket would be indicated.

If you are wait-listed on a fully booked flight, the airline will call you up

on your contact number as soon as your reservation is upgraded from the

wait-list .

If a ticket is not purchased or presented for endorsement before the

expiry of the indicated time limit, the reservation is automatically cancelled by

the reservation system.

Getting Tickets:

Each IA domestic and international stations have Booking Offices.

Besides, there are eight off-line stations, which have our booking offices also.

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At the four major metros, i.e. Delhi, Mumbai, Calcutta and Chennai, there are

multiple booking offices including one that works round the clock.

The airline has nearly 1600 approved travel agents all over India and

General Sales Agents at the foreign stations, who are always available for

ticketing. Reservations can also be made abroad through other IATA airlines,

who are IA interline partners and through their approved travel agents as well.

Whoever is booking the ticket on your behalf must indicate your desired meal

preference.

On many occasions, the correct meal preference is not indicated,

through ignorance or lack of attention. While uplifting food for any flight. Indian

Airlines goes as per the indicated vegetarian/non-vegetarian ratio of the

booked passengers any subsequent change, therefore, upsets the balance.

Of course, extra meals of both types are put on board but sometimes even

these are not enough to take care of the variation.

Boarding:

IA offers assistance to all passengers who require special handling -

wheel chair, stretcher or assistance of unaccompanied minors, etc. If you or

any passenger being booked by you require any special assistance at the

airport, please indicate it when you make the booking to ensure the service is

provided.

Jet Airways

The best test of the service provided is customer response and satisfaction.

Some of the responses to the moments of truth provided by Jet are:

Jet Airways - by R Thomas

In March I flew Jet Airways from Mumbai to Bangalore. It was the best flight I

have been on. It surpassed the European carrier, which I had flown to India on -

Swiss. I was given a full meal in economy class on a flight that was just over 2 hrs.

On almost all US carriers, you are only given peanuts on a flight that short. Drinks

were served several times throughout the flight. The seat was comfortable and there

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was a good in-flight shopping magazine. Thick pillows and good blankets were

available. We left Mumbai ten minutes early and reached Bangalore twenty minutes

ahead of schedule. There were friendly, helpful Jet Airways reps in the baggage

claim to help me get my bags on a trolley. Jet Airways shows that India can create a

good airline and it deserves a higher Skytrax rating.

Jet Airways - by N Sushilkumar

Jet Airways has been assisting and foreigners in a much better way. Domestic

terminal needs to be modernized with service like Tea/Coffee and STD booths. Jet

Airways surpassed Indian Airlines in many ways, thanks to Government of India for

allowing private services. Flight arrival and departure can be seen at ease, on

Internet, home page of Jet Airways. Jet Airways is meeting its commitment and we

wish all prosperity and growth with international banner.

Jet Airways - by Desmond Desa

Jet Airways is an excellent airline. Even though they currently only fly on Indian

domestic sectors. Their service far exceeds that of the other international airlines

such as Air France, Swiss Air and Delta. The average age on the Jet Airways fleet is

less than 3 years and the aircraft are clean. The food is great. But most of all their

friendly service stands out. The flight attendants go out of their way to make sure you

have a comfortable flight. Jet Airways truly stands up to their motto -- "the joy of

flying." Their low rating on Skytrax surprises me. I definitely think they are, at a

minimum, 4 stars plus!

Jet Airways - by Rahul Agarwal

Jet Airways comes as a real relief to frequent fliers in Indian skies, who have, it

seems, been perennially at the mercy of the embarrassingly poor Indian Airlines. The

Business class service definitely conforms with international standards. The most

important aspect of any flight is the seating comfort, and Jet's product is unrivalled -

excellent legroom, comfortable seat width, good recline. It’s even better than the

product offered by Thai on its A330 Business Class. The in-flight service is just

phenomenal and the grim faces of Indian Airlines attendants - good riddance! Food

could be better, but who cares on a 2-hour flight? I definitely am looking forward to

the commencement of their international operations.

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Inference

Jet Airways beats Indian Airways hands down when it comes to customer

satisfaction. This is a result of better moments of truth provided by the airline. As a

result, Jet Airways which is a relatively new entrant to the Indian Airline Industry has

managed to nearly upstage IA and win over a huge chunk of their clientele.

Recommendation: In providing a better customer experience

Few things, which we suggest, would make for a better customer experience.

Making a Reservation:

Answer the phone with a smile – ‘it shows’. The tone & words of the person who take

the call, the way in which he addresses and speed with which he conforms the

reservation.

Getting Tickets:

Ease in acquiring the tickets. Number of ways in which the airline offers tickets –

online, agents, branches etc. Simplicity, care & Handling.

Boarding:

1. Recognition & acknowledgment of the traveller.

2. The speed with which luggage is checked in, security check in and the other

formalities.

3. Porter Assistance and wheel chair for disabled and the aged.

4. Choice of Seat preferred.

5. Things to do, while waiting for the flight.

Flying:

1. Cheerful & hospitable crew members.

2. Providing the customer with the meal of his choice.

3. Instructions to be given in a clear & understandable language.

4. To be ready for any kind of assistance which can be needed by any passenger.

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5. Making the traveller feel at ease & comfortable with the journey.

Retrieving Baggage:

1. Providing for speedy & safe access of customers baggage.

2. Complaint handling system in case of misplaces or damaged baggage.

3. Porter assistance to carry the baggage to the kerb side.

CHAPTER NINE

IATA

IATA stands for International Air Transport Association to promote safe, regular

and economical air transport and foster air commerce by developing industry

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working standards. It is a voluntary association of air carriers which is committed to

the principal of competition and free trade in air transportation. Its members (now

totaling more than 220) carry more than 97% of the world’s scheduled air traffic

under the flags of over 130 independent nations. It has its head-quarters in Montreal,

Canada.

MAJOR FUNCTIONS OF IATA:-

IATA co-ordinates activities such as tariff, scheduling, passenger and cargo

services and agency administration. It liaisons and lobbies with ICAI (International

Civil Aviation Organisation) and government to monitor and reduce airport fees. This

activity regularly saves the world’s airlines up to $100 million a year.

Among its other activities, it provides joint solutions to the airlines for exploiting

opportunities or solving problems. It assists governments, world over, in bilateral

negotiations in general, and tariffs in regular.

It acts as a collective link for passenger and cargo agents to make representation to

the airlines.

THE AGENCY ACCREDITATION PROGRAMMES OF IATA:-

No airline can afford to set up sales offices in every city of the world, yet most

airlines want to sell their services worldwide. Travel and cargo agents are the

market-place intermediaries who make this possible. They become accredited with

IATA by demonstrating soundness, proficiency of staff and the suitability and security

of their premises.

TRAINING PROGRAMMES UNDERTAKEN BY IATA:-

IATA undertakes accreditation of sales agency by undertaking training

programmes to oversee the airline passenger and cargo segments. Programmes are

designed to assure airlines and other agents in the agent community if high

professional standards at individual agencies. In fact the IATA Fraud Prevention

Training Programme equips people who process tickets to recognize invalid travel

documents.

Airlines have been losing millions of dollars on account of stolen and

fraudulently used tickets every year. IATA’s Aviation Training and Development

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Institute (ATDI) is a unique source of international training and professional

development, serving the needs of five aviation industry sectors: Airlines, Airports,

Cargo, Civil Aviation and Travel and Tourism.

It has the most comprehensive portfolio of aviation training and professional

development programmes, leading to internationally recognized certificates and 11

IATA diplomas.

Its impressive curriculum of skills and management courses, addresses the

latest management issues and technological developments, supporting IATA’s

initiatives in such crucial fields as security, financial controls and e-commerce.

IATA’s PRORATION SERVICE:-

IATA’s proration service allocates revenue to individual carriers who provide

part of the transport service on a multi-leg journey. Proration is important because

about 50 million air passengers a year undertake multi-leg journeys using different

carriers i.e. they interline. The proration service is a highly automated complex

process, which is an integral part of the clearing process.

IATA’s TRAFFIC FORECAST:-

IATA’s traffic forecast for the period 2001-2005 for passenger traffic is expected

to average 3.5% between 2001 and 2005, including the effect of the record 2.1% fall

in passenger numbers in 2001. Growth at that level would result in 637 million

international passengers carried in 2005. The highest average growth percentage is

expected on routes within the Far East and lowest on trans-Pacific routes.

The freight traffic is likely to average on annual growth of only 2% for 2001

to2005, including the effect of the record 7.7% fall in freight tonnes in 2001. The

highest average growth percentage is expected on routes between Europe and

Africa and lowest on North Atlantic and European routes.

In general, IATA is the agency through which the airlines seek to solve jointly

those problems, they cannot individually surmount and to do that work which can be

carried out more effectively by combined effort. It is active in the fields of traffic,

finance, legal and technical matters, medicine, public information, and the like.

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Thus IATA plays a very significant role in the airlines sector.

CHAPTER TEN

LIBERALISATION OF THE AIRLINE SECTOR

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Liberalisation - Opening up of a country's markets to foreign/ private players.

The liberalisation process in the airline sector has been going on since 1992, but it

has seen a lot of turbulence.

The main effects of liberalisation in this sector are: more players, less fares and

better service. Before 1992 there was just one airline - Indian Airlines. When the

government liberalised the sector in 1992 a lot of airlines came in (Damania, East-

West, Jet), but with a market shake-up in the mid 90's only the fittest have survived.

Today there are 3 major national players (IA, Sahara, Jet) and several regional

players (NEPC, Span, Gujarat). As a result of liberalisation, the services of all

airlines have gone up and along with that the fares have dropped noticeably.

GOVERNMENT POLICY

The policy of the government in the 50's was to connect all of India via air.

Hence today we find that almost all small towns of India have airports. The policy

failed because not many people could afford to fly and almost no one flew to small

towns. Today when small towns are finally getting flights it is found that the

equipment at the airports is outdated (eg - The Patna airport was built in the 60's but

use of the airport and all it's facilities began only in the 80's. That is, for twenty years

the equipment in the airport was just lying around).

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After 1992, however, the government has adopted an "Open skies" policy. In

this policy, players are allowed to enter and leave the market as they seem fit.

IS THE GOVERNMENT SERIOUS ?

Often it has been found that the government's talk on liberalisation has to been

taken with a pinch of salt. In the airlines sector it has been seen that although the

government seems to have done a lot about liberalisation there are still some areas

that haven't changed at all.

1. Narrow air corridors - An air corridor is nothing but the width of the passage an

airliner can fly in. In India most of the air corridors are still very narrow as a majority

of the airspace is still with the airforce. For instance, the approach to the Delhi airport

is just 3 kms. wide. This narrow corridor was a primary cause of the April 26 1993

Charki Dadri crash in Haryana, where all 351 people on board two international

airlines - Saudi Arabian Airlines and Kazakhstan Airlines were killed in a mid-air

collision. It was one of the worst crashes in aviation history. So although the

government has opened the skies they haven't yet opened the highways of the sky.

2. Tata-SIL - Some years ago the Tatas along with Singapore Airlines wanted to start

a domestic airline service in the country. The government, under pressure from

Indian Airlines, didn't give them the permission to do so. IA feared the competition

that Tata-SIL could provide. They also said that before allowing the Tata-SIL airline

to take off, the government should allow them to function as a complete private

airline. This demand was not completely unjustified as even today IA is made to give

50% discount to IAS and defence officers. Also, they are made to fly to less popular

destinations (North-East, Andaman & Nicobar Islands) which results in a loss of

revenue for them.

On the other hand, today the government is ready to privatise IA and AI. They are

even willing to let any foreign airline hold a 40% stake in Air India. Such a step

shows a deep commitment to liberalisation and has been well received by the global

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airlines. Many airlines have already come forward and placed their bids for the stake

in AI (Delta Airlines, Singapore Airlines, Air France).

To conclude one can say that even though the government has been giving

confusing signals in the past, it seems that now they are ready to go ahead with the

liberalisation process.

ATEC COMMITTEE AND IT'S FINDINGS

Pre 1956, private companies were allowed to open scheduled/ non-scheduled

airlines. A total of 9 institutions came up. In this period a 'Dakota' was sold for Rs.

20,000. However, these airlines soon started having financial problems. The

operators requested the government for loans. The government wanted to know as

to why the private airlines weren't doing too well and so it appointed the ATEC (Air

Transport Enquiry Committee) headed by Dr. Rajyadhaksha to do so. After

completing it's investigation the committee came up with several reasons for the

economic poor show of the private airlines, four noteworthy reasons were:

a) Non-standardisation of inventories - Different qualities and types of equipment

was used due to multiple type of aircraft used. This hiked the maintenance cost of all

the airlines.

b) Multiplicity of rate - The rates of all institutions differed.

c) Loss of revenue due to NAMS - NAMS means Nightly Air Mail Service. Private

operators were made to carry air mail on their flights at night time, which meant a

loss of passengers and hence a loss of revenue.

d) High cost of fuel - The fuel used in aircraft is ATF (Aviation Turbine Fuel). It is

nothing but a form of highly purified kerosene. However, the purification process

accounts for 35% of the cost of the fuel which many operators could not afford.

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These reasons along with several other reasons lead to the nationalisation of

the airline sector through the 'Air Co-operation Act' which took effect on 26 June

1953. Under the act, eight out of nine private operators became 'Indian Airlines

Corporation' and one was constituted as 'Air India Corporation'.

WHY DEREGULATION AND SCHEDULED AIRLINES?

According to the planning commission the air transport industry in India has a

growth rate of over 10% and with the existing fleet strength the national airline could

not meet the demand in the market. Hence, deregulation of the skies was the only

option. Deregulation means to allow free entry in to the market. Private airlines were

allowed to start as air taxi operators in 1992. The growing demand for rationalisation

of policies made the government lay down conditions through which air taxi

operators could become scheduled airlines (ie - they are allowed to print their

schedules). The major emphasis in allowing scheduled airlines are:

a) Government permission to import plane.

b) Rationalisation of operative routes.

The players who come in to the market either exist with all their gimmickry or fade

away due to economic pressures.

RECENT TRENDS IN AIRLINE INDUSTRY

The Skytrax Travel Panel Survey conducted between November 5th and

November 28th shows it is the corporate traveler that are shying away from air travel

- with nearly half of respondents saying their reduction in air travel was a direct result

of their employers concerns over safety.

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Of greater concern, over 60 per cent of respondents said they believe they will

be cutting back corporate air travel frequency during the next 12 months - these

responses coming from travelers located in all parts of the world and indicating that

financial / recessionary fears are extremely widespread.

Leisure segment –

In the leisure segment less than 25 per cent are traveling less by air, and

there is a trend to show that price cutting is stimulating short term demand for many.

For example the Indian globetrotter seems to be making the most of the

airline industry's crisis this season.

The primary factor driving out- with out-bound airfares down by an average of

20 per cent, post-Diwali travel activity is witnessing a welcome spurt, though travel

agents and airline companies may still find it difficult to better last year's levels.

In Bound travel, post-Diwali is prices. Prices on an average are down by 20

per cent. Travel agents and airline companies are under considerable pressure on

the pricing front. Hefty discounts have become mandatory with every package

offering.

For Indians, popular destinations this season are the Far East (this includes China),

South Africa and cruises to Australia and New Zealand.

CASE STUDY ON INDIAN AIRLINES

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The most reliable and competent airlines in India, Indian Airlines has

proved itself in a number of ways.

An “image track survey” conducted among air travellers in the country

by IMRB International have revealed that Indian airlines have shown an

amazing turn around in 2003, climbing from 35% to 45%. With 10% increase,

it now shares the top honors with Jet Airways, for whom it has been a climb

down from 54% to 45%.

Indian Airlines has emerged the clear favorite in the most competitive

segment, that of corporate travellers, with 48% voting in its favour.

A meeting with Mrs. Shobha Nimbalkar, assistant manager sales, gave

substantial information about a post-11 situation and SARS effects along with

other fruitful information.

All the policies announced by the government have had a direct impact

on Indian Airlines being a PSU. During the post-11 attack, the government

announced the various insurance policies for the airlines, which were

mandatory to be undertaken. Indian Airlines was not an exception to it.

In addition, looked into the risk bearing factors, and made the check in,

check out strict for security reasons.

The recent news of India –Pak joining air links from Jan1st, 2004, has

greatly affected the air traffic of Indian airlines. This has greatly improved the

strain in the relations of both the countries for which Indian airlines, too

expects to contribute.

The post-11 attack had greatly affected Indian airlines in economic

terms due to a downward trend in the economy. The air traffic had lowered

leading to slack in prices. There was cost cutting in a number of areas in order

to face the downfall economic situation. They had to operate flights quite

economically, by combining the flights as per convenience.

The Air Turbine Fuel (ATF), a cost raising factor in the airlines had to

be taken care of. The salaries to their employees were not raised for a

particular period in order to compensate the downfall. At the same time, the

employees supported by decreasing phone calls, and other bills which

contributed a lot to the Indian Airlines. Getting rid of the inventory was also

undertaken in order to recover funds economically.

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The fear of SARS had also enabled Indian Airlines to prove itself in the

bad times. As in any natural calamities it is the first one to reach in case of

earthquakes, floods and SARS was one of the like.

The airlines informed the general public through bulletins and articles

for awareness. The travellers wrer provided with masks and other

requirements in order to take care of themselves. The staff, cabin crew and

other employees were given good training to handle situations during that

period.

SARS as a social factor had reduced the air traffic and resulted in a

downward trend. The fear of flying among the people was overcome by Indian

airlines in a number of ways—taking care of the children, the aged and also in

emergency cases. All this puts Indian airlines in the forefront even in the times

of a downfall with the support of its employees.

As far as the technology in Indian airlines is concerned, it mainly takes

care of the safety of aircrafts, promoting the airlines through various measures

and the like. Online ticketing has also entered Indian airlines just like others.

The passengers can visit the sites of Indian airlines before booking tickets and

get the required information quickly due to he technology.

Indian airlines have completed its 50 years of service in the year 2003.

As a golden jubilee year, it has come up with various schemes in order to

promote its sales. It has a popular scheme —Frequent Flyer Programme

(FFP) through which their regular flyers are provided with additional benefits.

The joint FFP of IA and Air India was founded 10 years ago, with Air France

as an alliance partner.

Indian airlines have grown as a service industry since years. It hopes to see a

bright future and stand out among the majors and private flyers as a PSU

contributing a great share to the airline sector.

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CONCLUSION AND RECOMMENDATIONS

Air travel has developed considerably since years and thus the airlines.

The government will continue playing its roll in the airline sector, by means of

introducing new policies and regulations. Privatisation may also continue

growing in order to provide a social effect of airlines.

The economics scenario is never stable and so also it will continue

fluctuating to affect airlines in a number of ways. But accelerated cost cutting

is essential to brighten the future of airlines.

In order to improve its services airlines must concentrate on certain

social factors and provide greater degree of customer satisfaction.

Technology is playing its role in all sectors and an airline is no

exception to it. Aircrafts as now capable now of faster flights with greater

number of passengers, thanks to the technology. Increased security

measures, criminal database crosschecks, cockpit security to be tightened, al

this calls for high-tech idead, which need to be developed.

Thus airlines sector needs to grow to it’s fullest and explore the places

in order to widen the transport globally. Overcoming the barriers it has already

reached the heights but still requires developing itself as a sector.

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Final Airlines

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