Aviation Final)

Project on
Airlines
SECTOR
Aviation Industry
Dhaval .B. Shah

{WRO 0280699}
Jimit .C. Doshi
{WRO 0280567}
ICAI
ICAI Bhawan
November 17th-December 25th

{5.00 pm. To 9.00 pm.}
CONTENTS
 Introduction
 History of Civil Aviation Industry
 The New Policy
 Changing Pattern of Government Regulations
 Recent Developments in Civil Aviation
 Domestic Air Carriers
 Airport Infrastructure
 Low Cost Airlines: A Preview
 PEST Analysis
 Segmentation Strategy
 7 P’s of Marketing Mix
 Case Study – King Fisher Airlines
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“The commercial use of aircrafts for the carrying of persons, mail and cargo and the name
generally used in the aviation industry to describe the operations of fortified air carriers is
known as the airlines/aviation industry.” Aviation means ‘Flying in the Air’ or the ‘Art of
Flying’.
Airlines are one of the fastest growing industries in the world. It is occupying a significant
place in the transport management of today’s world. Both from passengers and goods
operation, the air transportation services have been playing an incremental role.
Tale of the Airplane
WRIGHT BROTHERS.
The Wrights began their efforts to invent the airplane by carefully studying what others had
done before. They studied the various hot air balloons trips and decided to make the
aircrafts. The Wrights followed the example set by Lilienthal and continued by Chanute of
beginning with the glider. The Wrights also choose to pattern their aircraft after the Chanute-
Herring biplane, a sturdy and relatively successful biplane glider. Lilienthal's data on the lift
of wing surfaces were used in their design of the 1900 and 1901 gliders.
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By careful study, the Wrights identified the best features of past aircraft and employed
aeronautical theory about the lift of wings to design their first craft. Although it did not
perform as expected, it was among the best gliders that had ever been built.
History of Indian Aviation Sector
Travel by air in the modern sense began in India only in 1877, when Joseph
Lyna took off from the Lalbagh Gardens in Bombay, and ascended to an altitude of about
7,500 feet and landed at Dadra. In the years that followed, there was a tremendous
development of air transportation in India as in any other c ount r ies due t o
t e c h n o l o g i c a l advances and c oo pe r a t i on from t h e government.
India also has the distinction of organizing the first flight by an aero plane in
the world in February 1911. This flight piloted by French pilot M. Picquet flew from
Allahabad to Naini.
However, it took more than 20 years for the country to have its own airline.
In October 15, 1932, Tata Son’s Ltd – which later become Air India International –
commenced weekly airmail service with a Puss Moth aircraft between Karachi and
Madras via Ahmedabad and Bombay, covering over
1,300 miles. Later two more airlines – Indian National Airways in 1933 and
Air Services of Indian in 1937 came up.
At the time of independence, the number of air transport companies, which
were operating within and beyond the frontiers of the company, carrying both air
cargo and passengers, was nine. It was reduced to eight, with Orient Airways shifting to
Pakistan. These airlines were: Tata Airlines, Indian National Airways, Air service of
India, Deccan Airways, Ambica Airways, Bharat Airways and Mistry Airways.
In early 1948, a joint sector company, Air India International Ltd., was established by the
Government of India. Its first flight took off on June 8, 1948 on the Mumbai (Bombay)-
London air route. The joint venture was headed by J.R.D. Tata, a visionary who had
founded the first India airline in 1932 and he had himself piloted its inaugural flight.
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The Government then nationalized the airlines industry in 1953, with enactment
of Air Corporation Act, and assets of nine existing air companies were transferred to
the two new corporations – Air India International and the Indian Airlines. After 40
years, in 1994 Air Corporation Act was repealed ending the monopoly of the national
air corporations and enabling entry of private operators.
Today, India occupies an eminent position in the civil aviation sector with a
large fleet of aircrafts. In all, 56 airlines are operating scheduled air services to and
through India and 22 foreign airlines are flying over Indian Territory. There are over
450 airports and 1091 registered aircraft in the country. In addition to the three public
sector airlines Air India, Indian Airlines, Alliance Air - there are three private operators
-Jet Airways, Sahara India Airlines & Air Deccan. There are also 41 non-
scheduled air transport operators. Additionally 34 applicants have been granted NOC
by the Ministry of Civil Aviation for setting up non-scheduled air transport operation.
Estimates show that the domestic and international passenger traffic in India is
projected to grow annually at 12.5% and 7% respectively over the next decade. Indian
airports are likely to handle 60mn international passengers and 300,000 tons of
domestic and 1.2mn tons of international cargo.
The aviation industry in India has grown by leaps and bounds in recent years in terms of
kilometers flown as well as customers serviced. The economy of a country is substantially
determined by the quality of air transport. The airlines today have made themselves more
popular among its customers by various marketing tactics like:
• Reduced costs of air tickets for frequent flyers.

• E-ticketing i.e. virtually eliminating the need for agents. Reynar and Easy jet two of
UK’s low cost carriers have eliminated travel agents completely and sell all their
tickets online.,
• Selling tickets through online auctions,
• Various freebies and accommodation offers provided at lower rates.
• Improved and interactive staff.
• Increase in aircraft capacity
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Changing Pattern of Government Regulations
In India is perhaps the m o st st r i k i n g e x a m p l e of the progress made in the liberalization

of the Indian economy, a process that began a decade ago. Civil air transport business
which hitherto had been the Government's monopoly has been completely liberalized, as
a result of which private airlines have been flourishing.
The process of disinvestment of Government equity in national carriers has been
initiated, private participation for airports has been further liberalized and the
bilateral for operation of international services are being further encouraged. This in turn
has opened up immense opportunities for investment in the civil aviation sector in
India. The steps taken by t h e government are as follows:
1. Investments Opportunities Foreign Equity

Foreign Equity up to 40% and NRI investment up to 100% is permitted in
domestic air transport services. Equity from foreign airlines is not permitted
directly or indirectly.
2. Disinvestment of the Government Equity in airlines

Government of India decided to disinvest partly its shareholding in both Air India and
Indian Airlines, presently wholly owned companies of the Government. But with general
elections round the corner this issue has been put on the backburner with constant
opposition from various sections of the society.
3. Entry-Exit barriers removed

Barriers to entry and exit from this sector have been removed. Only pre-entry
scrutiny to verify financial soundness, maintenance, security and safety aspects of
operations and human resource development proposals is done. Choice of aircraft type
and size left to the operator.
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4. Private participation in Airports
Foreign equity participation is allowed in ventures for airports, up to
74% automatic approvals and up to100% with special permission. Participation is also
open to foreign airport authorities.
A variety of fiscal incentives has been provided to airport project, as decided by
Government from time to time. They are as follows:
• 100% deduction in profits for purposes of Income Tax for first five years.
• 30% deduction in profits for Income Tax purposes for next five years.
• Full deduction to run for continuous 10 out of 20 fiscal years of assessee's

choice.
• 40% of profits from infrastructure also deductible for financial institutions providing
long term finance for airport infrastructure projects.
5. Bilateral for operation of international air services

The Government has been more liberal in granting additional entitlements
to foreign airlines both in terms of capacity as well as in terms of points of call. The
exist ing air services agreement with Unit ed St at es of America is an extremely
liberal one as it allows any number of US airlines to operate services from/to India. US
airlines are also allowed to decide the size of aircraft and their frequencies.
6. Taxes and Tariffs
In order to facilitate acquisition of aircraft Government of India has reduced
tariffs for import of aircraft from 8% to Nil. Even aircraft taken on lease do not attract
customs duties. India also has a liberal Corporate Tax/Income Tax regime for
airlines and encourages investment by allowance of high depreciation rates.
7. Civil Aviation Policy

Having drawn up a successful growth model for the civil aviation sector, the
Government is now engaged in evolving a comprehensive and integrated new civil
aviation policy, some of the major highlights of which are:
• All players and stakeholders are assured of a level playing field.
• Private participation is encouraged and opportunities are created for

investors to realize adequate returns on their investments.
• Rapid up gradation of airport infrastructure to world class is encouraged with
priority to the busiest airports and those handling international flights.
• International cooperation in aviation and development in tune with
international trends and best practices, consistent with airspace sovereignty
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is promoted.
After four decades of control, Civil Aviation sector has been liberalized with a
view to draw benefits of efficiency, safety and quality in service. Government has
also opened doors to foreign participation in investment in this sector.
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Recent Developments in Civil Aviation
Civil Aviation:
The different types of civil aviation are:
• Domestic airlines (Indian Airlines)

• International airlines (Air India, Lufthansa)
• Chartered airlines (Evergreen, Deccan Aviation)
• Private helicopter services (Pawn Hans)
• Corporate aircraft (Reliance)
• Transport (Fed EX owns planes)
Airports:
The airplanes don’t own the airports. These are controlled by the agencies like Airports
Authority of India. AAI maintains the airports in India. Airlines get the routes and landing
rights. These can be either used by them or swapped (e.g. Air India gave unused Delhi-
London route to Virgin)
Classes:
• Passengers can avail different types of classes in airlines:

• Economy class
• Business class
• First class
The difference lies in various facilities like reclining seats etc. There is a significant
difference in prices.
Marketing:
Airlines use conventional marketing methods for attracting customers. E.G.
• Advertising – The Singapore Girl campaign of Singapore Airlines

• PR- Public Relations by Richard Branson of Virgin
• Brand Mascot- Maharaja of Air India
• Schemes—Frequent flyer programmes of various airlines
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PEST Analysis: The Indian Airline Industry
A PEST analysis is an analysis of the external macro-environment that affects all firms.
P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the
external macro-environment. Such external factors usually are beyond the firm's control and
sometimes present themselves as threats. For this reason, some say that "pest" is an
appropriate term for these factors. Let us look at the PEST analysis of the Indian aviation
sector:
1) P - Political Factors
In India, one can never over-look the political factors which influence each and every
industry existing in the country. Like it or not, the political interference has to be present
everywhere. Given below are a few of the political factors with respect to the airline industry:
• 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 events & continued tension with Pakistan.
• The recent Gujarat riots & the government’s inability to control the situation
have also led to an increase in 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.
• 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)
• 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 from 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.
2) E- Economic Factors
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. In India, even a company like Citibank was forced
to cut costs to increase profits for which even the top level managers were given first class
railway tickets instead of plane tickets.
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 fuelled the recession as
spending decreased due to the rise in unemployment.
Even the SARS outbreak in the Far East was a major cause for slump in the airline
industry. Even the Indian carriers like Air India was deeply affected as many flights were
cancelled due to internal (employee relations) as well as external problems, which has been
discussed later.
3)S- Social Factors
The changing travel habits of people have very wide implications for the airline industry.
In a country like India, there are people from varied income groups. The airlines have to
recognize these individuals and should serve them accordingly. Air India needs 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.
Especially, since India is a land of extremes there are people from various religions and
castes and every individual traveling by the airline would expect customization to the
greatest possible extent. For e.g. A Jain would be satisfied with the service only if he is
served jain food and it should be kept in mind that the customers next to him are also jain or
at least vegetarian.
Another good example would be the case of South West Airlines which occupies a solid
position in the minds of the US air travelers as a reliable and convenient, fun, low fare, and
no frills airline. The major element of its success was the augmented marketing mix which it
used very effectively. What South West did was it made the environment inside the plane
very consumer friendly. The crew neither has any uniform nor does it serve any lavish foods,
which indirectly reduces the costs and makes the consumers feel comfortable.
4)T-Technological Factors
The increasing use of the Internet has provided many opportunities to airlines. For e.g.
Air Sahara has introduced a service through the internet, wherein the unoccupied seats are
auctioned one week prior to the departure.
Air India also provides many internet based services to its customer such as online ticket
booking, updated flight information & handling of customer complaints.
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,
surveillance, 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.
A good example of the impact of technology would be that of AAI, wherein with the help
of technology it has converted its obsolete and unused hangars into profit centers. AAI is
now leasing these hangars to international airlines and is earning huge profits out of it. AAI
has also tried to utilize space that was previously wasted installing a lamination machine to
laminate the luggage of travelers. This activity earns AAI a lot of revenue.
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.
Segmentation: The Airline Industry
Most airlines use a very traditional segmentation strategy, dividing passengers into
business travelers and economy travelers (mostly leisure travelers). The common strategy is
to squeeze as much profit as possible from business class passengers who are attracted by
superior services and corresponding high prices and, at the same time, to try and fill the rest
of the seats and ensure growth by attracting economy class passengers with lower fares.
Following are the popular segments:
1) Business passengers
They are crucial for airlines' profitability. With less spare time and more cash in their
pockets, they agree to pay a premium price for a premium service.
Today business passengers account for approximately 48% of passengers, and these
48% contribute 66% of airlines' revenue. The premium prices they pay provide wider and
more comfortable seats, better choice of meals and seats, luxurious lounges.
Airlines can choose from a multitude of premium services to offer to business travelers.
Some of these extras range from seats equipped with faxes and telephones, to gambling
machines, showers, massage services and suit ironing services in the recently introduced
arrival lounges.
Business passengers believe it is worth extra money if they can save time and arrive
looking fresh for an important meeting. Business passengers will avoid transit flights even if
a longer flight could save them money. But amongst other perks, flexible reservation
services are probably the most important to them. Reservations for business trips are often
made just a couple of days in advance. A no penalty cancellation policy is also very
important to business passengers.
The best way to reach business travelers is through printed advertising. Business news
media, such as "The Economist" or "The Wall Street Journal" are some of the best
publications through which airlines can reach business travelers. Many airlines design
special promotional programs that target corporate bookers and meeting planners, who are
responsible for business trips reservations. Frequent flyer programs are an added bonus for
business passengers.
2)Leisure Travelers
They represent a totally different market. The most important consideration for most of
them is the price. The lower the airfare, the more people will fly the respective airline.
By and large, with the exception of wealthy travelers, this segment will not pay extra for
premium services and will agree to change several planes during their trip if this option costs
less than a direct flight.
Despite lower margins provided by this segment, leisure travelers are very important to
an airline's bottom line. Part of the reason is that technological progress in the area of tele-
conferencing and increased use of the internet for business communications is expected to
reduce the number of business travelers. Thus, airlines are counting on the leisure segment
to provide further growth.
How can airlines benefit from the growth opportunities in the leisure segment without
losing immediate profit opportunities in the business segment? This is a tough issue in
airline marketing management. By improving services and reducing prices for economy
class passengers, airlines risk that some business passengers will switch to economy class.
This has already happened with Japan Airlines, for example, which was forced to
eliminate business class seats on some of its flights. On the other hand, if an airline focuses
on business class passengers, it risks losing its economy class passengers to another
airline.
Since business class passengers are not many, a company relying mostly on business
travelers will often end up flying half-empty planes, losing the potential revenue generated
by lower priced economy seats.
On the other hand, few airlines catering solely to economy class passengers can be
successful because a low fare carrier must fill the entire plane if it is to generate revenue
from its low-margin operations.
The allocation of business and economy class seats on a plane is determined through a
process called yield management. A good yield manager knows the approximate proportion
of business and leisure travelers for each flight in advance, based on sophisticated statistical
models.
Thus he/she tries to sell early, the economy seats at a cheaper price, while keeping enough
seats reserved for business travelers, who usually book at the last minute. Keeping just the
right amount of business seats reserved is important: selling too few economy seats in
advance may result in a less-than-full plane while selling too many economy seats may
result in a full plane, but with insufficient revenue to gain a profit.
This kind of segmentation serves airlines well enough when implemented within one
company. It would be very difficult for any single airline to target just one of these two
segments - business or leisure - successfully.
There are exceptions - small regions that serve destinations where the majors do not fly,
for example, are in a better position to implement a low price policy. They can even get
business travelers to fly them despite the lack of premium services because no other airline
would get them there. Southwest is a classic example, proving that low cost carriers can
thrive.
Major international carriers, however, need to target both the business and the leisure
segments they may also target different ethnic and geographical segments differently,
depending on the markets from which they draw the majority of their customers.
For example, even though Japan Airlines advertise extensively to the American public,
their message -"Your needs. Your Airline," seems to work best for the traditional Japanese
audience.
Inside one country, two national carriers may also focus on different destinations, which
is the case with Canadian Airlines and Air Canada. Passengers' tastes determine airlines'
strategies. While British Airways focuses on comfort and luxury, valued by European
passengers, Air Canada equips its business class seats with plugs for laptops and
telephones, appreciated by North American business travelers.
MARKETING STRATEGIES
Airlines formulate their Marketing Strategies keeping in mind the 7 P’S of the Marketing Mix
The 7P’s of Marketing Mix
1) Product Mix
Getting the product right is the single most important activity of marketing. If the product
isn't what the market wants, no amount of price adjustment or brilliant promotion will
encourage consumers to buy it. The airline product is quite a complex one since it
comprises of a service of incorporating the temporary user of airline seat and certain
tangible products such as free flight bags or a free bottle of duty free spirit to encourage
booking.
The airline product includes of two types of services:
1. on the ground services,
2. In-flight services.
The on-the-ground services include a convenient airport with car parking facilities, duty free'
shopping quick and efficient checking of baggage, efficient service at reservation counter,
transport to the airport, etc.
The service provided inside is intangible and is highly variable. The airhostesses are
trained to provide polite, warm and courteous service. The courteous service that the
representatives at the baggage counter, reservation counter provide goes a long way in
developing customer loyalty. The travel agents of the airline.
Differentiating the Product
It is important to recognize that what es also need to be efficient and polite. the
consumers are demanding are not products, or features of products but the benefits they
offer. Producing added benefits thus helps the marketer to distinguish one product from
another. Good design or style of service can form the basis of differentiation. This enables
the company to create a personality for its service. The design and decor of the aircraft
provides opportunities to personalize their product as well as periodically to update them
when differentiation under IATA regulations was virtually excluded, nonetheless, certain
airlines were able to develop distinct personalities. Eagle Airlines created an entirely new
market between New I York and Bermuda, for e.g. by developing an image of a friendly
airline distinctive from other airline serving the route. A similar style was evident in Richard
Branson's Virgin Airways.
LEVELS OF PRODUCT
FOUR PRODUCT LEVELS
1) The Core Service
The core service of the airlines industry is to transport goods and services to various
destinations.
2) The Supplementary Services
The airline industry has many players they had a brand name like ‘Air India’,’ Jet
Airways’,’ British Airways’. All of them had some common services to offer like connecting
flights, through check-in, tele check in, food on board, and complementary gifts etc.
Different classes like economy class, business class were introduced. Air concessions
are given to school students, old people etc. Singapore airlines were the first to introduce
small 8”television screen for every passenger. The freebies are actually win-win deals
between airlines and other services.
All these added service helps the customer to decide upon which airlines he wants to
travel. As competition increased and the customers wanted more the next phase evolved
and that is the augmented service.
3) The Augmented Service
This phase is where the customer’s expectations are met; the service providers kept
working on new methods to meet the ever-changing customers’ demands. The players
introduced online booking, which was very convenient for the service users.
For Eg. British Airways business class has showers; it’s more spacious and comfortable.
Sahara airlines offer its passengers six different types of cuisine like vegetarian, fat free,
diabetic etc.
This phase is the most crucial one; with increased competition service will become the final
differentiation.
4)Future Service
As mentioned above the customer needs keep changing, the future is unknown. The
customers may be looking in for more frequent inexpensive air travel, something like air
taxis, super sonic speed. This decreases the time thus reducing the cost.
The diagrammatical representation of the core and supplementary services in

the airline industry is shown below:
COMFORT/ SPACE
TICKETS
CONNECTI FOOD
NG
FLIGHTS Core MULTI-
AUCTION TRANSPOR CUISINE
T
BRAND NAME CONCESSIO
(Air India, Jet NS
Airways)
COMPLEMENTA
RY GFITS
2) Price Mix
Price plays as much a tool of marketing as promotion plays a critical role in the
marketing mix. The concept of 'fair price' is paramount. Buyers judge whether a product is
fairly priced by seeing whether it represents value for money. Pricing can be classified in
three ways.
DIVISION OF FARES:
The final fares charged to the passengers include the following components:
o Basic fares
o Insurance
o Inland Aviation Travel Tax (IATT).
o Passenger Service Fee (PSF)
The basic fares include the operating cost incurred by the airlines and the profit margin.
The major constituents of the operating cost in respect of domestic airlines in India are the
Aviation Turbine Fuel (ATF) the basic raw material for this service industry, varies 30-40 %
depending on aircraft utilization; Navigation, Landing & Parking costs 7-10%; Repair and
Maintenance 13%, Manpower 12%; Acquisition/ Depreciation & Insurance 13% and balance
other expenses.
Pricing Strategies
a)Premium Pricing:
The airlines may set prices above the market price either to reflect the image of quality
or the unique status of the product. The product features are not shared by its competitors or
the company itself may enjoy a strong reputation that the 'brand image' alone is sufficient to
merit a premium price.
b)Value for Money Pricing:
The intention here is to charge the average price for the product and emphasize that it
represents excellent value for money at this price. This enables the airline to achieve good
levels of profit on the basis of established reputation.
c)Cheap Value Pricing:
The objective here is to undercut the competition and price is used to trigger the purchase
immediately. Unit profits are low, but overall profits are achieved. Air India and Indian
Airlines have slashed their prices to meet the competition of private airlines so that they can
consolidate their position in the market.
Airlines usually practice differential pricing. There are three classes: The First Class, The
Executive or Business Class and The Economy Class. Fares for each class are different
since the facilities provided and the comfort and luxury level is different in each class.
Seasonal fares are also fixed, fares rise during the peak holiday times.
d)Low-cost Pricing:
With the advent of the low-cost airlines in the Indian aviation industry, a different low-
cost flying concept has come up. Since these low-cost airlines are trying to woo the
customers by providing air travel in exceptionally low prices, a price-band kind of pricing has
to be designed.
In low-pricing strategies, the airlines provide very low prices for the flight tickets. Also,
they prices are made cheaper by booking the tickets long before the flight date.
e)APEX Fares
In this scheme, people are given very cheap rates only if tickets are booked atleast before
the specified time period. But the draw-back here is that if the booking is cancelled, a
substantial amount of money is not returned.
3) Place Mix
Marketing-channel distributions are among the most critical decisions facing the
management. The companies chosen channel ultimately affect all the other marketing
decisions.
"Marketing channels are sets of ‘interdependent’ organizations involved in

the process of making the service available for consumption".
Understanding what, where, why, when, and how the target market buy, is the first step
in designing the marketing channel. The marketer must understand the service output levels
desired by the target market and types and levels of services that the people want and
expect when they purchase the service.
Distribution channels
The Four methods of distribution are as following:
• Consolidation: The direct sale of tickets from airport to the passenger on the
airline desk.
• Tour Operator/ Travel Agent: Customers approach travel agents or tour

operators who book the tickets from the airline and take commission. E.g. SOTC
• Affiliated with companies: As the name defines, airlines gets affiliated with
companies who carry all its trips with a same airline who in turn gives special
discounts or offers in return.
• Direct through home leased system, e.g. Phone, fax, email and also online
e-booking
4) Promotion Mix
The formulation of an ideal promotion mix is essential to inform sense and persuade the
users. In the Indian perspective, we need more creative efforts because the potential users
in a majority of the cases don’t prefer to use air services. The business magnets, executives,
politicians, actors, high spending tourists etc are some of the users of the air services. The
users appears to be more conscious, aware of their rights and in a majority of the
cases are found to be sophisticated and therefore the promotional efforts have to be
creative. Many airlines are facing financial crunch, it is pertinent that they make optimum use
of different components of promotions. They are as follows :
a)Advertising
Airlines need creative advertisements to promote their business. In the view of rising
cost of inputs and the increasing impact of worldwide economic depression on the
airlines, advertisements should be budget optimistic vis-à-vis optimal. The telecast media
and print media are important for promoting the air business.
The airlines have to make sure that whatever strategic decision they make to promote the
businesses are in a position to establish an edge over competitor’s promotional
measures. Also the airlines should keep in mind the quality and the nature of the target
markets and the level of expectations.
This is essential to make advertisements proactive for the expansion of business. They are
also required to assign due weight age to the efforts made for projection of positive image.
We can’t deny the fact that both Indian airlines and Air India have been facing image
problems. The ads may be efficacious in transmitting the facts and removing the image
problem. It is also essential that while advertising airlines should also keep in mind the
image of our country, the scenic beauty, tourist attractions, rich cultural heritages or which
would attract number of tourists. While advertising it is impact generating that one should
select an opportune moment of flight is an attractive scene of take off, and so on. Airlines
can also use broadcast media. The domestic flights should use radios because due to
increasing access to FM.
b)Publicity
Publicity is an important component of promotion mix. It is a process of

persuasive communication. It is very instrumental in sensitizing the persuasion process
provided the media people, public relations officers provide their help. Strengthening the
PR activities is essential to promote airlines business. The PRO, Receptionist, Travel
agents, Media people are very important people in publicizing the business. The marketing
professionals can seek the cooperation of media people by organizing dinners, meetings,
get together, press conference etc, also giving them small gifts and motivating them to
publish news items which are in favor of airlines.
c)Sales promotion
The sales promotion measures are meant for both the related sources channel sing and
using the business, such as the travel agents, tour operators and all of them who process
the services and the passengers and business houses who use the services.
The travel agents contribute a lot to the promotion of airlines business and therefore the
need to think of them in their favor on their priority basis. In addition the tour operators, the
frontline staff also must be given priority. Hence they should be offer some incentives this
will motivate them to promote the product. The user also deserves incentives.
The incentives may be in the form of confessional services, a small gift etc.
E.g. EMIs, which allow customers to pay in installments.
d) Judo Tactics
‘Easy Jet’
A] GO flight which was supposed to be the media event for BA resulted into a Disaster
because ‘easy Jet’ bought 10 tickets of the flight and gave free coupons of easyJet to the
148 passengers.
B] Awareness on the wing of its Rivals: Contest on web offering FREE flight vouchers for
guessing how much BA’s GO would lose during the year.
e) Word of mouth
‘Customer Loyalty Ladder’
This happens to be an important constituent of the promotion mix in which the promoters act
as a hidden sales force. The satisfied groups of users, opinion leaders narrate outstanding
merits or salient features of services used by them.
If you travel by Air India and are satisfied with the services offered by them then it is
natural that you will share your experiences with your friend’s relatives, they trust in you and
therefore the stimulation process is on. The moment your friends and relatives get an
opportunity to travel they find Air India their first choice.
Ads may be ineffective, publicity may also be ineffective but word of mouth can never be
ineffective
5) People Mix
In the service industry, service personnel come in direct contact with their customers in
the course of production and consumption of the services.
Because people provide most services, the selection, training, and motivation of
employees can make a huge difference in attaining customer satisfaction. Ideally,
employees should exhibit competence, caring attitude, responsiveness, initiative, problem
solving ability, and goodwill. Many service organizations trust their people enough to
empower their front-line personnel to resolve customer problems.
The airhostess in any airline come in contact with the customers in the process of
providing the service, while the cock-pit crew are employees who contribute to the service
product but do not come in direct contact with the customers.
The physical presence and the percentage of time the customer is present reflect the
customer contact and extent of contact respectively. Services with high contact are more
difficult to control and manage because of the degree of variability in the quality, demand
and nature of service.
The service contact personnel in the airline industry is an airhostess who is expected
to possess a pleasing personality with polite service handling. While on the other hand
the cock pit crew, being categorized as a low contact personnel, require possessing high
analytical and technical attributes. In the airline industry, there is also the ancillary service
personnel, the travel agent who helps to create the service exchange but is not a part of the
service.
While delivering services, airlines ensure that the service is delivered as promised and
this is often totally with in the control of the front-line staff. This ensures some amount of
reliability. This in turn affects the degree
Of responsiveness sought from customers. The quality of service that the front-
lone staff provides is highly depended on his/her ability to communicate their credibility.
Airlines deliver caring and individualized attention to customers through their airhostesses.
Empathy implies that these personnel will listen, adapt, and be flexible in delivering what
individual customers need. Also the appearance of an employee are important aspects as it
forms the tangible dimensions of quality along with other factors like service quality, decor
etc.
To start off, airlines hire the right personnel with essential requirements. They recruit the
right people and develop, and train them to deliver quality service. These employees are
provided with effective and sufficient support systems and are motivated in a manner, they
stick to the organization. They are more treated as customers, rather than employees. For
example, Delta Airlines recruits an employee, and moulds him to cater to their demands.
These employees are sent to places like the US and Frankfurt on a 21 day training
programme. The successful completion of this training motivates the staff to stay on with the
airline. They are provided with offers such as one-month bonus or some incentive, on the
achievement of the sales target.
6) Process Mix
The process of airline service lays emphasis on the involvement of channels, front line
staff, travel agency offices, offices of the tour operators or so form where the services flow &
reach to the ultimate users.
The process begins at the time of reservation goes on to the confirmation of

seats. For e.g.: Computer reservation system of Indian Airlines enables any reservation
request from anywhere in the world to be auctioned in minutes. The reservation facility is
accessible through all-major computerized reservation system of the world.
By giving details of where to book and how to book airlines help in providing quality
services to the customers. They also offer concession, by not charging any cancellation
charges and also giving them the option to make a change in the reservation status if he
requests so on the presentation of ticket, all these facilities go a long way in increasing
passenger convenience.
Then facilities at the airport, the baggage handling, flight information, etc. also helps in
delivering quality service and making travel a pleasure.
In the aircraft the meal service, in-flight entertainment, reading material, in-flight amenities,
etc. help the customers, the travelers to have an enjoyable and convenient travel.
All these procedures form a part of the total process designed to deliver quality service.
Airlines are making every effort to constantly redefine service procedures to enhance
service satisfaction levels.
7) Physical Mix
Physical Evidence refers to the environment in which the service is delivered and where the
service industry and customer interact. The aircraft by itself, the seating configuration meant
to be comfortable and spacious, and the in-flight food provide physical evidence to the
airline service.
The Boeing Company and The Airbus Industry are the best commercial aircraft makers
and almost all airline industries make use of one of these airlines. The seating is such that
it is comfortable and there is enough leg space.
The in-flight food is another, important aspect, a wide selection of meals is offered to the
passengers. Passengers are requested to indicate their reference at the time of
reservation itself. Delta Airlines has introduced new sleeper seats with electric controls for
reclining lumbar support, leg rest extension, expanded seat back height for a more insulated
environment etc. thus providing highly comfortable seating.
Booking offices, ticket counters, etc. must be spacious and well designed with good looks.
Further the air crafts must be given good exteriors and must be maintained wel1.
The aircraft must have elegant interiors and must be incorporated with all basic facilities.
The aircrafts must have well designed seats with more leg room especially in the business
class.
Domestic lounges are enhanced with good interiors and basic amenities which will make
it an ideal place to conduct business, entertain or relax.
The jet logo prominently displayed on each of its aircrafts, is used a cue to trigger of a
reminder of the customer’s experience at Jet & also of all the values that jet airways stands
for.
The physical evidence would also include the other facilities in the aircraft. Some of the
bigger aircrafts have more than the usual facilities on board. These sort of tangible clues act
as identification marks for the airline & help the customer to evaluate on airline from
another.
To provide safe and efficient operations, set industry standards, provide excellent customer
service developing a well trained and highly motivated workforce. We aim to revolutionize
the way India flies.
ABOUT KINGFISHERS
Kingfisher Airlines is India's first and
only private airline to commence operations with a brand new fleet of aircraft. Kingfisher
Airlines offers Full Service at True Value and promises an unparalleled experience to the
Indian air traveler. For the first time in the Indian skies, Kingfisher Airlines offers world-class
in-flight entertainment with personal video screens for every seat. There’s a wide selection of
5 video channels and 10 audio channels available on-board. Also on offer are extra-wide
seats and spacious legroom, delicious gourmet meals, international-class cabin crew and a
whole host of comforts and delights. Kingfisher Airlines also facilitates doorstep delivery of
tickets on guest request. Fly the Good Times with Kingfisher Airlines.
SERVICES PROVIDED BY KINGFISHER AIRLINES
In-flight entertainment to take-off with

Personalized screens and headphones broadcasting 5 video channels
and the exclusive Kingfisher Radio – 10 audio channels to make your journey an
entertaining experience.
Feeling comfortable, now?

You will, with the seats we’ve got in store for you. Indulgently wide, plenty of legroom and
adjustable headrests. Our superbly groomed flight attendants will ensure that you’re well
taken care of.
Bon appetite
A special selection of food and beverages are available on board.
The little details
The Kingfisher Class experience begins even before you step on board. When you book
your ticket online in the comfort of your home or office. At spacious terminals. At the
convenient self Check-in counters.
OTHER FEATURES OF KINGFISHERS
Information
Customers can avail of information literally at their fingertips today with KINGFISHER
starting its own website which gives complete details to the customer & also entertains
queries. In case of airline industry, up to date information regarding flight schedules, ticket
fares, information about promotion schemes etc available to customers.
It also includes providing information to employees regarding new policies affecting the
airline & equipping them with enough information, which the customers might demand.
Extensive training is provided to in-flight attendants regarding handling customer queries,
knowledge about the airplane itself, knowledge about cuisine etc.
Consultation
KINGFISHER is moving more actively into the role of consultant today. They are doing
away with the travel agents & designing & selling packaged tours to consumers directly.
In this aspect they often act as consultants to the customer, by giving him advice &
suggestions regarding the type of plan he can choose, the benefits he will get the mode of
travel he should choose etc.
Another aspect to consultation is when the customer approaches the airline regarding
traveling to particular destination, they gives him a variety of choices of routes that he can
take.
In some cases also design special menus & benefits in consultation with its frequent
fliers by keeping in constant touch with them & asking them for suggestion as to what they
want in their airline which will make their experience more comfortable.
Order taking
The order taking procedure is essentially the booking procedure. The important aspect to
be noted here is that the procedure is smooth, easily understood & fast. Reservation of
airline tickets is now easy and reliable since it is fully computerized. There are 24 hours
reservations. Passengers can specify their seat preferences at the time of reservation.
KINGFISHER uses the telephone, fax, and email methods of booking. The emphasis
here is on fast booking & at the same time getting the required information form the
customer. This is done by establishing a standard reservation procedure & format thus
reducing the risk of inconsistent service delivery. The online booking system also facilitates
better order taking & processing.
The scheduling aspect assumes importance as reservations on the wrong flight to the
wrong place are likely to be unpopular.
Hospitality & Caretaking

With the increased competition today in the airline industry & the increasing similarity of
services offered by each airline, hospitality has emerged as a key-differentiating factor
between one airline & the other.
The hospitality aspect of KINGFISHER is tested right form the time of the reservation
(courtesy of the booking official) to the airline’s desk at the airport to the actual in-flight travel
(the attitude of the flight attendants) to the post flight help extended.
Safekeeping
The safekeeping issue is that of safeguarding the customer’s baggage. Baggage
allowances are offered about 30 kgs of check-in baggage is allowed. The customers entrust
his baggage to KINGFISHER & it is then their responsibility to keep it in a proper condition.
Children and infants usually travel along with their parents and guardian. In case of
unaccompanied minors, customer service staff renders all assistance like checking in and
escorting up to the aircraft and handing over to the senior-most cabin attendant on board the
flight. He is looked after on board the flight right up to the point flight reaches the destination
and he is received by his guardian.
Exceptions
Special requests – They very often receive special requests form customers with regards
to meal preferences, special amenities for elderly people or children., medical needs etc.
these needs have to considered & acceded to wherever possible.
Billing & payment
The billing procedure is simple. The options available to the customer are plenty
including credit card & travelers Cheques. KINGFISHER use the open account system with
their corporate clients. Frequent fliers are also given special payment privileges.
TYPES OF CUSTOMERS OF KINGFISHER
TYPES OF CUSTOMERS
BUSSINESS PASSENGERS LEISURE PASSENGERS
Business passengers
They are crucial for KINGFISHER’profitability. With less spare time and more cash in
their pockets, they agree to pay a premium price for a premium service.
Today business passengers account for approximately 48% of passengers, and
these 48% contribute 66% of their revenue. The premium prices they pay provide wider and
more comfortable seats, better choice of meals and seats, luxurious lounges.
KINGFISHER has a multitude of premium services to offer to business travelers.
Some of these extras range from seats equipped with faxes and telephones, to gambling
machines, showers, massage services and suit ironing services in the recently introduced
arrival lounges.
Business passengers believe it is worth extra money if they can save time and arrive
looking fresh for an important meeting. Business passengers will avoid transit flights even if
a longer flight could save them money. But amongst other perks, flexible reservation
services are probably the most important service being offered to them. Reservations for
business trips are often made just a couple of days in advance. A no penalty cancellation
policy is also very important to business passengers.
Leisure Travelers / Passengers
They represent a totally different market. The most important consideration for most
of them is the price. The lower the airfare, the more people will fly. By and large, with the
exception of wealthy travelers, this segment don’t not pay extra for premium services and
don’t agree to change several planes during their trip if this option costs less than a direct
flight.
Despite lower margins provided by this segment, leisure travelers are very important
to their bottom line. Part of the reason is that technological progress in the area of tele-
conferencing and increased use of the internet for business communications is expected to
reduce the number of business travelers. Thus, KINGFISHER is counting on the leisure
segment to provide further growth.
PRICE ANALYSIS
Price plays as much a tool of marketing as promotion plays a critical role in the marketing
mix. The concept of 'fair price' is paramount. Buyers judge whether a product is fairly priced
by seeing whether it represents value for money. Pricing can be classified in three ways.
DIVISION OF FARES:
The final fares charged to the passengers include the following components:
• Basic fares
• Insurance
• Inland Aviation Travel Tax (IATT).
• Passenger Service Fee (PSF)
The basic fares include the operating cost incurred and the profit margin. The major
constituents of the operating cost in respect are the Aviation Turbine Fuel (ATF) the basic
raw material for this service industry, varies 30-40 % depending on aircraft utilization;
Navigation, Landing & Parking costs 7-10%; Repair and Maintenance 13%, Manpower 12%;
Acquisition/ Depreciation & Insurance 13% and balance other expenses.
How are fares arrived at?
In capacity (seats) and frequency (flights) between any two points, market research the
route in order to arrive at the total potential for that segment. In other words, the capacity
and frequency is tailored to the size of the market. Accordingly, the pricing structure is also
arrived at. Pricing or fare levels are arrived at after taking into consideration various factors;
type of aircraft, configuration of aircraft (number of seats), density of route, competitor
activity, and minimum breakeven cost.
In order to achieve the breakeven seat factor and thereafter maximize loads, they
embark upon a series of marketing activities. These will vary from a publicity campaign
highlighting various facets of the Product, to sales, service, punctuality, ideal departure and
arrival timings, connections and so on. In short, the entire focus is to increase the yield and
load factor (seat factor). The yield or the bottom line is the income generated from ticket
sales less costs incurred on the route.
Why do fares fall?
When the yield drops or the seat factor falls, there is an immediately alerted to
enquire into the causes for this. This leads to a fare war wherein the airline either tries to
protect its market share or responds to another airline which tries to increase its own market
share.
VARIOUS PRICING STRATEGIES
Premium Pricing:
KINGFISHER sets prices above the market price either to reflect the image of quality or the
unique status of their product. The product features which are not shared by its competitors.
The company itself enjoy a strong reputation that the 'brand image' alone is sufficient to
merit a premium price.
Value for Money Pricing:
The intention here is to charge the average price for the product and emphasize that it
represents excellent value for money at this price. This enables them to achieve good levels
of profit on the basis of established reputation.
Cheap Value Pricing:
The objective here is to undercut the competition and price is used to trigger the purchase
immediately. Unit profits are low, but overall profits are achieved. KINGFISHER have
slashed their prices to meet the competition of other private airlines so that they can
consolidate their position in the market.
KINGFISHER usually practice differential pricing. There are three classes: The First Class,
The Executive or Business Class and The Economy Class. Fares for each class are different
since the facilities provided and the comfort and luxury level is different in each class.
Seasonal fares are also fixed, fares rise during the peak holiday times.
Low-cost Pricing:
With the advent of the low-cost airlines in the Indian aviation industry, a different low-cost
flying concept has come up. Since these low-cost airlines are trying to woo the customers by
providing air travel in exceptionally low prices, a price-band kind of pricing has to be
designed.
In low-pricing strategies, KINGFISHER provide very low prices for the flight tickets. Also, the
prices are made cheaper by booking the tickets long before the flight date.
APEX Fares:
In this scheme, people are given very cheap rates only if tickets are booked at least before
the specified time period. But the draw-back here is that if the booking is cancelled, a
substantial amount of money is not returned.
ANALYSIS OF TICKET BOOKING PATTERN OF KINGFISHER
IN 2007 AND 2008
40%
35%
30%
25%
20% 2007
15% 2008
10%
5%
0%
KF OFF CALL CENTER ONLINE AGENT TRAVEL AGENT ONLINE DIRECT
INCREASE AND EXPECTED INCREASE IN THE TWO MAJOR SOURCES OF INCOME

OF KINGFISHER
1) INCREASE IN CARGO (MILLION TONNES)
800
700
600
500
400
300
200
100
0
2005 2006 2007 2008(E) 2009(E) 2010(E)
(DOMESTIC)
INCREASE IN PASSENGER REVENUE (%)
12
10
0
2005 2006 2007 2008(E) 2009(E) 2010(E)
Thus it is very clear that over the years KINGFISHER has shown a tremendous increase in
its revenue.
COMPARITIVE EARNING OF OTHER AVIATION INDUSTRY IN INDIA AGAINST

KINGFISHER IN THE YEAR 2006
(Rs. IN CRORE)
7
6
5
4
3
2
1
0
JET SAHARA AIR DECCAN KINGFISHER SPICE JET GOAIR
COMPARATIVE EARNING OF KINGFISHER AGAINST OTHER INTERNATIONAL

AVAITION INDUSTRY IN THE YEAR 2006
(Rs. IN CRORE)
20
15
10
0
RYANAIR SOUTHWEAT KINGFISHER BRITISH AIR FRANCE
AIRWAYS
For KINGFISHER Mumbai to Dehli sector has been the major source of revenue. It has
accounted for 11.3% of its total revenue. It is not only a revenue generating sector but also a
major profit generating sector for kingfisher. Hence they all provided the best facilities like
best seats, best terminals, frequent flights, best scheduled flights between Mumbai and
Dehli. There has been a 70% increase in the number of flights between the two cities
QUARTERLY SCHEDULE OF OPERATING REVENUE OF KINGFISHER

(Rs. IN MILLIONS)
1550
1500
1450
1400
1350
1300
1250
1200
1150
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08
DOMESTIC
MARKET SHARE OF KINGFISHER AND OTHER AVIATION INDUSTRIES IN INDIA
IN THE YEAR 2008
60%
50%
40%
30%
20%
10%
0%
AIR INDIA JET KINGFISHER OTHERS
KINGFISHER V/S JET AIRWAYS

(MALLYA V/S GOYAL)
On October 28, at a ceremony to unveil Air Deccan's new-look aircraft in Mumbai, On
October 28, at a ceremony to unveil Air Deccan's new-look aircraft in Mumbai, chairman of
United Breweries group and Kingfisher Airlines, Vijay Mallya, said with characteristic flourish:
"We have given the full service carriers a run for their money. Now, we will give the low cost
carriers a run for theirs."
Though he did not refer to any one airline, it was clear his statement was directed at Jet
Airways and Jetlite (formerly Air Sahara). Ever since Mallya launched Kingfisher in May
2005, making it number one in India has been a foregone conclusion; it's the world's biggest
carriers he wants to take on.
Kingfisher's meteoric rise has taken rival and unquestioned number one domestic carrier in
the country, Jet Airways, quite by surprise. Used to competing with only Sahara (never a
worthy opponent anyway), Jet enjoyed several years of unfettered success after it had
trounced Indian Airlines's monopoly and market, becoming India's premier airline since
1993.
This supremacy has now been challenged by a nimble and aggressive Kingfisher which, in
just two years and following Mallya's buyout of Air Deccan, is commanding the same market
share as Jet Airways and Jetlite.
He may not publicly admit it but Goyal's troubles began soon after Kingfisher took to the
skies. "If Naresh Goyal had a magic wand, he'd probably wish away the last two years. Few
things have gone right for his airline since the second half of 2005," says a close associate
who was on his board but has since resigned.
In Mallya, Goyal appears to have found his first worthy opponent. If Goyal is well connected
and knows how to keep the politicians beaming, Mallya is "not exactly an orphan".
If Goyal has managed to hire professionals and build a brand, Mallya is a past-master at
building brands. And if Jet has never had a problem raising money before, Mallya has group
United Breweries (with a market capitalisation of $5 billion) backing him.
In its initial avatar Kingfisher was aiming to be a low-fare carrier, but soon after its launch
Mallya converted it to premium service, taking Jet head-on. Mallya is spending money like
water (the airline lost Rs 400 crore in the first year) and has left no stone unturned to grab
Jet's market, launching direct advertising campaigns asking Jet fliers to convert to
Kingfisher, luring them with miles, better food and a slicker, cooler yet equally efficient
option.
Mallya is proving to be "maniacal" about being on time; every delay is examined threadbare
in a much dreaded early morning conference which he conducts over the telephone with his
senior executives, no matter which part of the world he's in.
When Kingfisher started, many in the industry had questioned its survival. "Not only has it
survived," says Kamal Choubey, officer on special duty to civil aviation minister Praful Patel,
"one simply cannot deny that Kingfisher's product is the best in the industry."
There are few who appreciate Jet's subtle, quiet efficiency when it's up against Kingfisher's
flamboyance. Gopal Sarma, CEO of Feedback Ventures, who accumulated 400,000 miles
on Jet Airways' frequent flier service, says he now often chooses Kingfisher simply because
its service on the ground is so superior.
He received a Kingfisher Gold card in the mail and has already accumulated 80,000 miles
on it. "If I call Kingfisher and ask to be put on a flight in two hours, they give me incredible
service. With the amount I travel, I appreciate things like this," he says.
Other than the corporate flyer, Kingfisher is trying to attract the young, upwardly mobile
Indian who aspires to fly Kingfisher simply because he identifies with Mallya and his style
statement of living life king-size. Mallya's passion for his airline (some call it obsession) is
very clears.
In 2006, Jet's initial troubles were compounded by its messy buyout of Air Sahara which
many feel was simply a move to thwart Kingfisher from acquiring it. Against the advice of his
senior colleagues, Goyal offered Rs 2,300 crore (Rs 23 billion) for it, a pretty high price for
the airline.
"It was like a bee in his bonnet. Once he set his mind to it, he refused to back down, even
though everyone warned him it wasn't a great buy," says a senior official who has since left
Jet.
As was widely predicted, Jet's share price reacted adversely and has never recovered to
what it listed at. The company's total market capitalisation following the announcement of the
Sahara deal fell from over Rs 10,000 crore (Rs 100 billion) to Rs 4,558 crore (Rs 45.58
billion).
The moment the deal was called up, the share price recovered somewhat - a clear indication
of what the market thought of the Sahara buy, but even today it is trading below the price at
which it listed.
At roughly the same time the civil aviation ministry threw open international routes to private
carriers. Jet saw this as a natural extension to its business (and one where it enjoys first-
mover advantage) and ordered new aircraft.
With competition rising and losses deepening (in the first half of 2006-07, it totted up losses
over Rs 100 crore), it needed to raise money and the intention was to do that through foreign
currency convertible bonds (FCCB) of $400 million.
But with the share price languishing in the Rs 600-800 range, Goyal would have been forced
to dilute a larger portion of his equity than he was willing. So, the issue was postponed.
Around the same time as Jet announced its buyout of Sahara, Air Deccan listed. By then
Goyal had seen Air Sahara at close quarters and even he realised it was not worth the
money he'd committed - but withdrawing proved harder than he'd expected.
"As the court battle with Sahara proceeded, it was far from evident what the final judgment
would be. I think he (Goyal) chose to go in for a known position rather than an uncertain one,
which could be worse," says a Jet official, who was privy to the goings-on.
These events coincided with a bloodbath in fares in the domestic market as Air Deccan cut
prices to take on new competition, and the new competition cut prices to take on Air Deccan.
"All the players - full service or low-fare - were sucked into it, so obviously everyone started
making losses," says Kapil Kaul, CEO of Centre of Asia Pacific Aviation. With losses on
domestic operations rising and the launch of international operations - which will pay off only
later - most investment firms and brokerages are maintaining a "reduce" position on Jet
stock.
Says Gautam Roy, aviation analyst with Mumbai-based financial services firm Edelweiss:
"We are not very optimistic on Jet's immediate prospects. It is more a long term story." It has
now been two years since Jet has been trying to raise $400 million through some form or the
other (earlier through an FCCB, now a rights issue) and it's proved more elusive than Goyal
could have imagined.
Although Jet officials say that by end January, they should be able to raise the funds,
industry sources say they'll only believe it when they see it.
Kingfisher's chief financial officer, A Raghunathan, argues that this is one of Kingfisher's big
strengths vis-vis Jet. "Obviously, our own balance sheet is not strong enough. The group's
backing is a pillar for us." He says that the airline has got Rs 500 crore (Rs 5 billion) in
equity, loans and guarantees from the group to raise finances.
Jet loyalists are quick to point out that using group funds to get into a sector where you
bleed is not good business sense, and that Jet has raised over $2 billion in the past from
international loans on its own strength, passing the intense scrutiny of lenders.
Then, during the middle of this year, Mallya made a calculated move, buying out Air Deccan
for what many feel is a "song", to deftly match Jet and Jetlite's marketshare.
So, while Jet's management has been struggling to make sense of what it inherited in the
Sahara deal, Mallya is capitalising on Deccan's advantages and has entered a segment
that's sure to give returns in India.
What has compounded problems for Jet is its chairman, Goyal's centralised style of
functioning (according to sources he only trusts board member and confidant Vic Dungca,
based in London), leading to an exodus at the middle and senior management levels over
the last two years.
Often, major decisions exclude top officials, so the joke in Jet is that "whenever anything of
significance happens, senior officials are the last to know"! "To be an able general, you have
to carry your troops with you. That Goyal hasn't been able to do," says a former board
member of Jet.
With Kingfisher and several other career options coming up, what started off as a steady
trickle has become a virtual flood. Goyal's problems on this front intensified when four senior
executives of the airline resigned together in April 2007, including highly trusted vice
president for corporate and public affairs, Nandini Verma, who'd spent 20 years with Jet.
The latest who's planning to abandon the Jet stable and jump onto the Kingfisher
bandwagon is Charles Soon, head of airport services, who after being publicly castigated by
Goyal for a flight delay has been in a huff and is looking to quit.
Eight former employees that Business Standard spoke to said that the chairman's style of
functioning "left a lot to be desired". (Executive director Saroj K Datta and chief executive
officer (CEO) Wolfgang Prock-Schauer refused to comment on this, arguing that disgruntled
employees will have grouses.) In contrast, barring erratic timings and odd schedules, United
Breweries group and Kingfisher airline executives don't have many complaints against their
chairman. Several Kingfisher senior officials are old UB hands who have spent 25-30 years
with the group.
However, as Saroj Datta puts it, people come and people go. He says that Jet's attrition rate
has been constant and that in any industry with competition and new opportunities, things
like this will happen.
"We have 10,000 employees. Even if 100 people leave, it's not very significant. We had seen
it and have been well prepared for it," says he. "Yes, people are leaving, but are loads
falling?" asks a Jet source. Like rival Kingfisher, Jet Airways is a one-man show (without
Naresh Goyal or Vijay Mallya, both companies would be rudderless), making it a shared
weakness.
But unlike Kingfisher, which is yet to build a strong foundation, Jet already has one. It has a
phenomenal network and will expand by 20 aircraft from April 2007 to March 2008 (it now
has 70 aircraft).
According to Wolfgang Prock Schauer, the last two years have been tough for the entire
aviation industry in India, not just for his airline, and he doesn't think that the rise of one
airline - with India and its gigantic market - has to necessarily coincide with the fall of
another.
"While things may look rosy for Kingfisher right now, Jet has been through and survived
worse," says a former Jet Airways board member, his point being that Mallya should not
underestimate Goyal's strengths.
Swot Analysis
SWOT
STRENGTH OPPORTUNI
WEAKNESS THREATS
TIES
S-STRENGTHS
• HUGE BRANDNAME- One of the most important strength of kingfisher is that it has a
huge brand name. The name this company has earned for itself is enough to speak for
it. Customers have trusted this company for years.
• REGIONAL CONNECTIVITY- Kingfisher is providing services to almost all part of India.

It is also providing services to many parts outside India.
• EFFICIENT STAFF- Kingfisher has one of the best staff in Indian aviation industry. The
most enthusiastic, helpful, caring staff makes passengers feel at home while flying.
• CAPITALISATION- Kingfisher is one of the airlines which is capable to bear losses

because of the huge finance support it enjoys.
• VISIONOR- kingfisher it backed by the great vision of Vijay Mallay Who can take
kingfisher to the world
• THE DECCAN DEAL- - which can gives it market share, a new market segment
W-WEAKNESS
• UNDER PENETRATED MARKET- The total passenger traffic was only 50 million
as on 31st Dec 2005 amounting to only 0.05 trips per annum as compared to
developed nations like United States have 2.02 trips per annum.
• INDAIN MENTALITY- Most of the Indian people still prefer railway traveling to
airlines. Hence Kingfisher needs to work hard in this direction to attract more
passengers by providing them better services for which it might have to spend more
towards customer welfare.
• UNTAPPED CARGO MARKET- Air cargo market has not yet been fully taped in the
Indian markets Hence much of the earning scope is lost.
• INFRASTRUCTURE CONSTRAIN- The infrastructure development has not kept

pace with the growth in aviation services sector leading to a bottleneck. There is a
huge investment requirement for physical infrastructure for airports.
• EMPLOYEE SHORTAGE- There is clearly a shortage of trained and skilled

manpower in the aviation sector as a consequence of which there is cut-throat
competition for employees which, in turn, is driving wages to unsustainable levels.
Moreover, the industry is unable to retain talented employees.
O-OPPORTUNITIES
• EXPECTED INVESTMENT- investment of about US $30 billion will be made.
• EXPECTED MARKET- Average growth of aviation sector is about 25%-30% and the
expected market size is projected to grow upto100 million by 2010.
• GROWING TOURISM- Due to growth in tourism, there has been an increase in
number of the international and domestic passengers. The estimated growth of
domestic passenger segment is at 50% per annum and growth for international
passenger segment is 25%
• RISISNG INCOMES- Due to the rise in income levels, the disposable income is also
higher which are expected to enhance the number of flyers.
T-THREATS
• INCREASING FUEL PRICE- As fuel prices have climbed, the inverse relationship
between fuel prices and airline stock prices has been demonstrated. Moreover, the
rising fuel prices have led to increase in the air fares.
• DECLINING YEILD- LCCs and other entrants together now command a market
share of around 46%. Legacy carriers are being forced to match LCC fares, during a
time of escalating costs. Increasing growth prospects have attracted & are likely to
attract more players, which will lead to more competition. All this has resulted in
lower returns for all operators.
• TRUNK ROUTE- It is also a matter of concern that the trunk routes, at present, are
not fully exploited. One of the reasons for inability to realize the full potential of the
trunk routes is the lack of genuine competition. The entry of new players would
ensure that air fares are brought to realistic levels, as it will lead to better cost and
revenue management, increased productivity and better services. This in turn would
stimulate demand and lead to growth.
• HIGH INPUT COST- Apart from the above-mentioned factors, the input costs are
also high. Some of the reasons for high input costs are:-
Withholding tax on interest repayments on foreign currency loans for aircraft
acquisition. Increasing manpower costs due to shortage of technical personnel.
RECOMENDATIONS
THUS FROM ALL THE ABOVE ANALYSIS OF I’SERVICES, MARKET STRUCTURE
ANALYSIS, REVENUE ANALYSIS, COMPETITON ANALYSIS, PEST ANALYSIS,
SWOT ANALYSIS WE CAN SAY THAT THE FOLLOWING ARE THE MAIN AREA
WHERE KINGFISHER NEEDS TO CONCENTRATE TO BRING ABOUT
MODIFICATION IN ORDER TO ENHANCE ITS BUSINESS, EARNINGS AND
GOODWILL.
• Due to increasing competition in the aviation industry it is important for KINGFISHER
to increase its working standard to match its competitor’s levels.
• It needs to distinguish itself from the rest of its competitor by providing unique
services- like regional food, entertainment etc.
• To meet the needs of passengers and to get additional customers it needs to think
from the customer’s point of view.
• It needs to be consistent with its technical services (like booking system, route
chosen etc.) so that it does not disturb the passengers.
• The technical services like the booking system, the check in timings should be the
most convenient of all other airlines.
• Security is the key factor- the safer the airline the more preferable it is. Security
should be in both the terms that is from external sources like hijackers and also
internal safety like safe landing etc.
• They should provide more personalize services to passengers so that need of each
passenger is taken care of.
• It should expedite the procedure of its alliance with Jet Airways, so that their flights
are more cost effective in this recession period.
• The Airlines should market itself very effectively with the help of big Brand
Ambassadors. This will indeed popularize the brand among the masses resulting into
more business.
• The Airlines should time and again declare various attractive ticketing schemes along
with gifts and discounts. This would contribute in the revenue of the airlines.
• The Airlines should give special privilege and best deals to its regular customers, as
loyalty rewards.
Here are some Recommendations which Jets Airways should implement to meet its
competitors and to increase its market reputation in terms of tangible & intangible value
• The efficiency should be such that aren’t any delays or cancellation of flights
which forces customers to turn towards other airlines.
• Jet any appoint cabin crew which who can speak the regional language of the
place where the flight is distinct.
• One Indian, one regional food option should be provided. They should also take
into consideration those food habits of senior citizens.
• The method of booking tickets, the flight timings and the route should remain the
same for as long as possible. (That is that there should not be any frequent
changes.)
• they should also start advertising on television, or put up some hoarding during
special offers, give regular up dates in newspapers
• They can also have some famous personality as their brand ambassador (like
some movie star or some sports personality etc) to further promote their services
to local public.
• Also this will help kingfisher to create a vibrant image and secure the number one
position in the market.
SUMMARISED STUDY OF THE ABOVE THROUGH POWERPOINT SLIDES.
P.T.O.
Ind
 Significa
Aviation Industry
 Quick M
48
Changing Govt. Pattern About
Aviation Industry
 Foreign Investment
Opportunities
 Disinvestment of
Govt.
 Removal of Entry Exit
Barrier
 Private Participation
 Liberalisation of
Taxes & Tariffs
 Starting Civil Aviation
Policy
Case Study
Kingfisher
About Kingfisher
• Launched in May
2005
• Chairman- Mr. Vijay
Mallay
• International class
crew cabin
• Whole host of
comforts and Delights
Features of Kingfisher
 Websites Service
Provides Up-to-date
Information
 Provides Travelling
Consultancy
 Online Ticket Booking
 Hospitality & Caring
 Safekeeping fo
Baggages
 Easy Payment
Passenger Analysis
• Business Passengers • Leisure Passengers
 Regular Travelers  Rare Travelers
 Prefer Low Cost
 Can Afford Premiun Cost
 They Believe Money Worth
 They Believe Money Lies in Other Srevices Like
Worth Lies in Saving of Food, Seat etc
Time  They Mind Long Non Stop
Jounies
 They don’t Mind Long
Jorunies
• Social Analysis • Technological
Changing traveling Analysis
habits Online booking
Changing income Auction of unbooked
Religious customs seats at concessiional
attached to food etc. rates
Entertaining compliants.
Price Sturcture
• Premiun Pricing
• Value For Money
Pricing
• Cheap Value Pricing
• Low Cost Pricing
• Apex Princing
Kingfisher v/s Jet Airways

• Mallya • Goyal
 Better condition of  Comparatively poor
flights as it’s a new fight conditions
entry into this sector
 Excellent external  Dependent on its own
financial support balance sheet
 Centralized Working  Decentralized working
 Deccan deal might  Sahara aquisation
help securing new helped grabbing the
market market.
 Has to build  Has a long build
professional team. Reputation
 Mallya’s knowladge  Incompetable
isn’t parallel to knowledge of Goyal
Goyal’s  ExcellantLobbing
 Unable to leverage services an ability to
connection laverage connection.
SWOT Analysis
• Strength • Weakness
Huge brandname Under penetrated
Regional connectivity market
Efficient staff Indian mentality
Capitalisation Untapped CargoMarket
Visinor Infrastructure constrain
Deccan deal Employee storage.
• Opportunities • Threats
Expected investment Increasing fuel price
Expected market Declining yield
Growing tourism Trunk route
Rising income. High input cost.
Conclusion- Problem Areas

• Increase working
standard to match
competitors level
• Provide unique
services to distinguish
itself form the rest.
• Technical stability is a
must.
• Security- extranal and
internal safety.
Recommendations 1
RECCOMENDATIONS
 Fights should be regular
so rhat people don’t turn
elsewhere.
 Regional language
should be used in flights
 Flight timings, route etc
should be standardi zed.
 Must advertise their
airline
 Get famous brand
ambassador.
Recommendations 2
RECOMMENDATIONS
 Effective Advertising
Loyalty Rewards to regular


customers.
Use of known Brand

Ambassadors
Designing attractive Ticketing

Schemes.
 Get famous brand
Ambassadors

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Project on

Dhaval .B. Shah

November 17th-December 25th

 History of Civil Aviation Industry

 The New Policy

 Changing Pattern of Government Regulations

 Recent Developments in Civil Aviation

 Domestic Air Carriers

 Low Cost Airlines: A Preview

 7 P’s of Marketing Mix

 Case Study – King Fisher Airlines

Tale of the Airplane

History of Indian Aviation Sector

• Reduced costs of air tickets for frequent flyers.

In India is perhaps the m o st st r i k i n g e x a m p l e of the progress made in the liberalization

1. Investments Opportunities Foreign Equity

2. Disinvestment of the Government Equity in airlines

3. Entry-Exit barriers removed

• Full deduction to run for continuous 10 out of 20 fiscal years of assessee's

5. Bilateral for operation of international air services

7. Civil Aviation Policy

• Private participation is encouraged and opportunities are created for

The different types of civil aviation are:

• Domestic airlines (Indian Airlines)

• Passengers can avail different types of classes in airlines:

Airlines use conventional marketing methods for attracting customers. E.G.

• Advertising – The Singapore Girl campaign of Singapore Airlines

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

3)S- Social Factors

Segmentation: The Airline Industry

The 7P’s of Marketing Mix

The airline product includes of two types of services:

1. on the ground services,

Differentiating the Product

FOUR PRODUCT LEVELS

1) The Core Service

2) The Supplementary Services

3) The Augmented Service

The diagrammatical representation of the core and supplementary services in

b)Value for Money Pricing:

c)Cheap Value Pricing:

"Marketing channels are sets of ‘interdependent’ organizations involved in

The Four methods of distribution are as following:

• Tour Operator/ Travel Agent: Customers approach travel agents or tour

Publicity is an important component of promotion mix. It is a process of

E.g. EMIs, which allow customers to pay in installments.

‘Customer Loyalty Ladder’

The process begins at the time of reservation goes on to the confirmation of

SERVICES PROVIDED BY KINGFISHER AIRLINES

In-flight entertainment to take-off with

Feeling comfortable, now?

OTHER FEATURES OF KINGFISHERS

Hospitality & Caretaking

Billing & payment

BUSSINESS PASSENGERS LEISURE PASSENGERS

How are fares arrived at?

Why do fares fall?

VARIOUS PRICING STRATEGIES

Value for Money Pricing:

Cheap Value Pricing:

IN 2007 AND 2008

INCREASE AND EXPECTED INCREASE IN THE TWO MAJOR SOURCES OF INCOME

INCREASE IN PASSENGER REVENUE (%)

COMPARITIVE EARNING OF OTHER AVIATION INDUSTRY IN INDIA AGAINST