Copy of 19312717 Final 707 Version 3

8/14/2019 Copy of 19312717 Final 707 Version 3

1/38

INDIAN

AIRLINES

ARPIT PATEL

RITA ISSRANI


2/38


3/38

9.Critical Factors for success

10.Poreters Generic Strategies

11.Swot Analysis


4/38

Introduction To Indian Aviation

Sector

In 1932, JRD Tata, a visionary launched Indiasfirst scheduled airline, Tata Airline .

In early 1953, a joint sector company, Air IndiaInternational Ltd. was established by theGovernment of India and Air India (earlier Tata

Airline) .

By 1962, eight private airlines were merged to

form Indian Airlines Corp., namely DeccanAirways, Airways - India, Bharat Airways,

Himalayan Aviation, Kalinga Air Lines,Indian National Airwa s Air India Air


5/38

The Change

There has been a marked change in the civil

aviation scenery in India. Whereas prior to 1992 when the two public

sector airlines, namely Air-India and IndianAirlines enjoyed a monopoly in the domesticsector, today a dozen airlines are competingfor a market share.

After 1992 ,many Airlines company came intoexistence as government adopted OPEN SKYPOLICY, made LIBERALIZATION andPRIVATIZATION in India.


6/38

The substantial growth of customer traffic

in Indian aviation industry is mostly dueto:

low fares offered by Low Cost Carriers(LCC).

Scheduled domestic air services are now

available from 122 airports as against just50 earlier.

Numbers of Flights operating: 2500 perday.

International Pla er as well as domestic


7/38

THE PLAYERS

PublicplayersAir India,

Private players -AirDeccan, Air Sahara,GoAir Airlines, IndiGo

Airline, Jagson Airline,Jet Airways, KingfisherAirline, ParamountAirways, SpiceJetAirlines

Start up players -Omega Air, Magic Air,Premier Star Air andMDLR Airlines.


8/38

Current Market Share


9/38

DETERMINE OF PRICE1.ATF

ATF refers to Air Turbine Fuel whichis used by airlines in its operations.

ATF contributes to the 40 % of operationcost

It includes freight charges from gulf to India

,Customs Duty, Domestic Transportationand various taxes.

India usually Pay higher ATF charges ascompared to other countries.


10/38

2.Lease Rental

Private operators except Air India haveleased aircraft from USA and Europe

They pay on average $375000 to

$500000 per month depending on theaircraft

They contribute almost 33 % of

operational cost

They generally have to pay their rents indollar terms


11/38

3.Other factors

Advertising and Promotional Expenses

Airport charges

Technology employed by the airlines

Current Financial position

Prices set by other airlines competing in the

present environment.

Pilot fees

Government regulation.


12/38


13/38

No Frills- Air Deccan

Air Deccan use NO FRILLS strategies. It is a 'no frillsairline', meaning that the airline has cut out all theadd-on costs of travel and focuses on gettingpeople from one location to another safely

E.g. Air Deccan offered airfares as low as Rs 500 plustaxes on the Mumbai-Delhi sector.

Air Deccan's normal fares are much lower than what

passengers are used to paying for air travel on JetAirways, Indian Airlines or Air Sahara.

Now, Air Deccan known as KINGFISHER RED.......


14/38

Indian Airlines

Use frequent flyer programmes (FFP).

A frequent flyer program (FFP) is a loyalty

program offered by many airlines. Typically, airlinecustomers enrolled in the program accumulatepoints corresponding to the distance flown on thatairline. Accrued points (also known as frequent flyer

miles) can be redeemed for free air travel; for othergoods or services; or for increased benefits, suchas airport lounge access or priority bookings.

APEX FARE


15/38

Kingfisher Airlines Limited, is a major Indian airline.

Kingfisher operates more than 400 flights a day and has a network

of 72 destinations, with regional and long-haul international

services.Kingfisher Airlines, through one of its holding companies

United Breweries Group has a 50 percent stake in low-cost

carrierKingfisher Red formerly known as Air Deccan.

Kingfisher Airlines is the first airline in India to extend its

King Club frequent flyer program to its low-cost carrier as

well. Passengers can earn King Miles even when they fly

Kingfisher Red, which they can redeem for free tickets to

travel on Kingfisher Airlines or partner airlines.


16/38

JET AIRWAYS

Started commercial airline operations on 5th May 1993

Headed by Mr Naresh Goyal

Operates three airlines- Jet Airways, Jet Lite and Jet

Airways konnect

Jet Lite was earlier Air Sahara which was taken over by Jet

Airways

12th April 1997


17/38

Schemes Offered By Jet Airways :

Frequent Flyer Scheme

APEX pricing Scheme

Cash Back Offer

Jet Privilege Scheme : use its points in international

hotel


18/38

Scheme preferenceWith the entry of new players in the market, airlines arecompeting for passengers on non-price parameters. This

increases the product differentiation in order to decreaseelasticity of demand in the market. Given the keydifferentiators that substitute for price, consumers have ratedApex fares as their most preferred scheme. Now, IndianAirlines, Jet and Air Sahara offer apex fares. Next mostpreferred to Apex fares is the frequent flyer program, a trendnoticed predictably in the high frequency repeat users andthose traveling on business.


19/38

WHAT IS APEX ?

Apex refer to ADVANCE PURCHASE EXCURSION FARE.

It is a non-cancellable return fare offered at a heavy discount

on the conditions:

1. To get the apex fares, tickets have to be booked at least

seven days in advance.The earlier you book, the higher the

discount.

2. Tickets are purchased at least 7 to 20 days or 21 days

or 21 to 29 days or above in advance


20/38


21/38


22/38

Disadvantages of APEX

Planning air travel three weeks in advance was

not very convenient

The tickets in this scheme were non

refundable.

No flexibility as tickets under this scheme could

not be rescheduled.

Very few tickets were offered by aircraft

companies under this scheme.

It led to the congestion of airports.


23/38

Effects of APEX

Led to increase in the number of customers.

Loss of airline companies minimized as with the

increase of passengers the aircraft ran to their full

capacity.

It brought a veritable boom in tourism sector.

It was able to lure the middle class people who

referred to travel b trains.

FACTORS WHICH


24/38

FACTORS WHICH

HELPED TO BRING

DOWN THE PRICE

1. Open Sky Policy:

The signatories are allowed to fly over the skies of India

EFFECT:

--Tourist arrivals in India are expected to grow exponentially,

-- The increase in number of international tourists will

percolate down to increase in domestic passengers


25/38

2. Deregulation:

Deregulation is the removal or simplification of government rules

and regulations that constrain the operation of market forces.

Deregulation does not mean elimination of laws against fraud, but

eliminating or reducing government control of how business is

done, thereby moving toward a more free market.

EFFECT:

Entry into the air travel industry is not only cheaper, but also

affordable to new operators


26/38

3.Modernization of Airports

The Indian Cabinet hasapproved a proposal

mandating the state-run

airport operator to modernize35 airports in second-tier

cities within the next two

years.

Effect:

Improved infrastructure would lead to rise in no.

of travelers and also so

would encourage more operators.


27/38

4. Abolishment of

Taxes

Foreign Travel Tax (FTT) Rs500 and

15% inland air travel tax (IATT)

charged on Basic airfare has been

abolished by the government to


28/38

5. Reduction on

Excise Duty

The excise duty on ATF was reduced from 16 to 8 per

cent. The average domestic price of ATF is 99 per cent

higher than prices in foreign countries and affects

domestic airlines drastically as ATF accounts for 30 to 40

per cent of operating costs

Effect :

It would lead to low fares thus giving a boost to air

travel

Effect: It would lead to increase in imports.


29/38

6. Landing Charges abolished

Landing charges for aircraft with less than 80

seats were abolished

Landing charges for larger aircraft have been

reduced by 15% with effect from February

11,2004.

Effect: Reduction in cost.

C h i t


30/38

Consumer choice parametersThe following chart provides information which are decisive

in making the choice of the Airline.


31/38

CRITICAL FACTORS FOR SUCCESS

STEPS THAT GOVERNMENT SHOULD TAKE

Implement code sharing i.e. selling seats on a flightoperated by another carrier. This saves direct costs andincrease market presence

Eliminate regulatory structure completely to boost newentrants and allow more profit for existing

Eliminate the fuel tax

Eliminate category III restrictions i.e. operator needs todeploy on less popular routes as well

Improve quality of airports


32/38

STEPS THAT INDUSTRY SHOULD TAKE

Reduce labor costs

Simplify flight operations

Offer more transparent pricing

Get smart on fuel


33/38

Porters Generic Strategy

Cost Leadership

Focus

Differentiation


34/38

Swot analysis

STRENGTHS:

passengers would always continue usingthis mode of transportation

Ensure leisure travel along with timesaving

Capacity expansions continuouslyhappening in this industry

The comfort level of customer is the primefocus of this industry now that competitionhas set in to such a high level


35/38

Weakness:

Excess capacity

More complex flight operations

Mounting debt high investment to debtratio

Cost to revenue ratio is also very high


36/38

Opportuni t ies:

create a niche by operating short haulflights catering specifically to certain

group of customers


37/38

Threats:

Labor problems

Competition increasing from the LCCs


38/38

Thank You

Copy of 19312717 Final 707 Version 3

Documents

Transcript of Copy of 19312717 Final 707 Version 3