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A STUDY ON
INDIAN AIRLINES INDUSTRY
SUBMITTED TO:
DR.SAMIK SHOME
SUBMITTED BY:
GROUP NUMBER: 1
MARKETING B
PILLAI AKHIL MOHAN
DEEPANJANA GHOSH
KOMAL AGARWAL
ROHIT SINHA
DECLARATION
This is to declare that the Report titled Industry Analysis of Indian Airlines Industry has been
made for the partial fulfillment of the Course Research Methodology in Semester II by Group 1
of Marketing Section B, MBA July (2013-15) under the guidance of Dr.SamikShome.
We confirm that this Report truly represents our work undertaken as a part of our Course. This
work is not a replication of work done previously by any other person/group. We also confirm
that the contents of the report and the views contained therein have been discussed and
deliberated with the faculty.
.
.
CERTIFICATE
This is to certify that Group 1, of Marketing Section B, MBA July (2013-15) has completed the
report titled Industry Analysis of Indian Airlines Industry under my guidance for the partial
fulfillment of the Course: Research Methodology in Semester II of the Master of Business
Administration.
SIGN:
NAME:
DATE:
ACKNOWLEDGEMENT
It gives us great pleasure to thank Alliance Universitys Alliance School of Business for
providing us with an opportunity to study this subject and to improve our understanding on the
same.
At Alliance School of Business, we would like to thank Dr. Samik Shome for his guidance
throughout the process and for his extensive support and cooperation for making this Industry
Analysis happen.
His experience, industry expertise and knowledge has helped our group greatly, he has not only
guided the entire group but has also helped us in understanding the different aspects of Research
analysis of an Industry, particularly the Aviation sector in India.
He has instilled confidence in the entire group to be able to conduct the research.
LIST OF TABLES
NUMBER
NAME
PAGE
1.1
1.2
1.3
3.1
16
3.2
Business Diversification
30
3.3
Fleets: Apr-07
32
3.4
46
3.5
47
3.6
49
3.7
49
3.8
50
3.9
51
5-6
LIST OF FIGURES
NUMBER
NAME
PAGE
1.1
1.2
3.1
17
3.2
20
3.3
Classification of Passengers
24
3.4
25
3.5
PESTEL Model
27
3.6
34
3.7
40
3.8
Benefits of Outsourcing
41
3.9
47
3.10
48
3.11
48
EXECUTIVE SUMMARY
Following report has been made on the Indian Aviation Industry. All the data has been
collected from the internet, research papers and surveys.
Indian aviation industry has changed to a more open and investment friendly sector. It plays a
greater role in the development of the Indian economy. The increase in the income of people,
entry of low cost carriers (LCC), FDI, new government policies, growth in other businesses,
globalization etc. are reasons for the growth of the Indian aviation industry. The aviation sector
in India is expected to have a bright future.
The report gives information on different aspects of the Indian aviation industry. For simplicity it
is divided into various parts and information. Some of the key points are:
(i)
Introduction to the Indian aviation industry and defines its importance to the
economy.
(ii)
The industry analysis. Under this the following objectives are studied.
Market share and nature of competition
Market segmentation
PEST analysis
Business diversification
Mergers and acquisitions
International exposure
Technology intensity
Marketing initiatives
Future outlook and
Comparison with US and other countries
The whole project gives us detail information about the Indian aviation industry.
In the end of the study we have given up certain recommendations which we think are important
from the point of view of the Indian Aviation Industry.
CHAPTER 1:
INTRODUCTION
From the figure 1.1 it is clear that the profitability is improving where the 2000s peaks are below
the margins and are above the peaks of 1990s.
http://www.businessvibes.com/blog/global-airline-market-analysis-2013
http://www.businessvibes.com/blog/global-airline-market-analysis-2013
3
http://www.businessvibes.com/blog/global-airline-market-analysis-2013
2
10
Figure 1.2 2012 worldwide airline financial results per departing passenger
From the figure 1.2 it can be seen that there is an increase in the revenue per passenger by only
$2.56. Also there is a lag in cost by $10 which excludes $12 ancillaries.
Although there was decrease in the projection of 2013, still it is estimated that the industry will
be successful with regard to the profits of the sector.
While the United States, Middle East and much of the parts of Asia have contributed to the
growth, Latin America and Europe are unstable markets.
The airline companies all over the world have done a profitable task, but the forecast for 2014
will be decided as per the fuel prices. Fuel costs are an important factor as they were responsible
for 31% of the 2013 costs of operating. A profit of $16.4 billion is forecasted by IATA in 2014
because of the oil prices situation.
1.2 INDIAN SCENARIO
The Indian Aviation is now an open, friendly to the investor, and a liberalized one which is quite
different what it was 10years ago. The entrance of LCCs has contributed to a growth of the
sector, with an improvement in the infrastructure and an increase in the operating airlines.
Following are some of the key points in reference to the Indian Airline industry:
(i)
(ii)
100% increase in the FDI limit has been given by the government for the airlines and
Greenfield airports.
Increase in the number of airlines including the LCCs, leading an increase in the
competition and reduction of the fare resulting in growth of air traffic.
11
(iii)
(iv)
(v)
YEAR
MAJOR MILESTONES
< 1953
1953
1986
1994
Air Corporation act repealed; Private players can operate schedule services
1995
Jet, Sahara, Modiluft, Damania, East West granted scheduled carrier status
1997
2001
2003
2005
2007
2010
2011
12
2012
Government allows direct ATF imports, FDI proposal for allowing foreign
carriers to pick up to 49% stake under consideration
2013
2013
AirAsia and the Tata Group queuing up to start two new airlines in India.
2014
(yet to
happen)
Table 1.2: Trend of Foreign Tourist Arrivals during the period 1995-2010
4
5
http://www3.weforum.org/docs/TTCR/2013/TTCR_Chapter1.4_2013.pdf
http://civilaviation.gov.in/cs/groups/public/documents/document/moca_001680.pdf
13
The contribution of the Aviation industry to the UK economy, Oxford Economic Forecasting,1999
http://articles.economictimes.indiatimes.com/2013-03-07/news/37531826_1_tourism-industry-globaldownturn-global-challenges
7
14
Civil Aviation sector is reflecting value addition and employment by various activities appearing
to be much deeper, thus strengthening the economic foot-print of a country.
1.4.2 Snapshot
The importance of a particular industry is known by the income and employment generated
through it. This can be seen from the table 1.2.
Table 1.3 Estimated Gross revenue earned by sub-sectors of Indian Civil Aviation sector
AIRLINES
AIRPORTS
Maintenance Repair
Overhaul (MRO)
SUB-SECTORS
GROSS INCOME
(Rs.Crores)
Scheduled
43,352
Non-Scheduled
1,528
TOTAL
44,880
AA1
5,734
Private
3,805
TOTAL
9,539
4,000
and
19,000
Air cargo
Industry
and
Express
2,000
Ground handling
325
Aviation Academies
TOTAL
79,744
It can be seen that the contribution of the scheduled airlines is about 50% of the gross income of
the total sector.
1.5 OBJECTIVES OF THE STUDY
Following are the objectives of the study on Indian Airlines Industry:
(i) To measure the market shares and nature of competition of the Indian Airline Industry.
(ii) To identify the demographics of the flyers.
(iii)To carry out the PESTEL Analysis of the Indian Airline Industry.
(iv) To determine the business diversification of the Indian Airline Industry.
(v) To determine the mergers and acquisitions in the Indian Airline Industry.
(vi) To determine the international exposure of the Indian Airline industry.
(vii)
To identify the technologies used in the Indian Airline Industry those play a
strategic role in its development.
(viii)
To identify the marketing initiatives used in the Indian Airline Industry.
(ix) To compare the Indian Airline industry with various international airline industry.
(x) To identify the trends in the civil aviation industry projecting the future scenario.
1.6 CONCLUSION
Indian Aviation industry plays an integral part in the development of the economy as a whole
and is one of the major contributors to increase the employment level in the country. Not only
through its direct flight operations but also through ground services and all other supporting
activities that are directly or indirectly related to the aviation sector.
The Ministry of Civil Aviation has taken a number of steps to bring a revival of this sector after a
period of recession in the economy. Aviation sector contributes approximately INR 33,000 Crore
to the GDP of India which is around 0.5%.
It not only brings an economic development but also contributes the up-liftment of the business
industry of the country again indirectly adding to the GDP of the country. Aviation sector acts as
a catalyst in the social up-liftment as a whole.
16
CHAPTER 2:
LITERATURE REVIEW
17
18
on steps to improve long term viability and improve its customer service and brand building. In
the long term the operators must focus on improving cost structure, through rationalization at all
levels which includes routes and fleets which aims at cost efficiency. It also includes return of
pricing power through better alignment of capacity to the demand growth at the industry level.
There has been a high cost of air travel due t the unnecessary government ownership and
regulations of airlines. There has been a change rapidly over the last few decades which has led
to explosive growth supported by structural reforms, modernizations of airports and
improvement in the service standards. In many parts of the world air travel has been transformed
into a major mode of mass transportation.
2.2.6 Aviation industry in India challenges for the low cost carriers
Due to the liberalization of aviation industry in India there has been a boom for domestic and
international passenger carriers. There has been a growth rate of 44.6% and 8.7% in the domestic
passenger and cargo traffic and there has been a growth rates of 15.8% and 13.8% in the
international passenger and cargo traffic during 2006. The Airport Authority of India (AAI)
manages total 122 airports in the country including 11 international and 94 domestic airports and
28 civil enclaves. 70% of the passenger traffic in the country is handled by top 5 airports and out
of that Delhi and Mumbai together account for more than 50% of the passenger traffic.
According to the latest data compiled by Airport Authority of India (AAI) shows that all the
airports handled 90.44 million passengers during the year 2006 as compared to 67.95 million
passengers handled during the same period in the previous year. Indian Aviation Industry has
seen substantial growth due to(i) Low-cost carriers (LCC) like Spice Jet ,Go Air , etc.
(ii) Scheduled domestic air services are available now from 75 airports which was 50 earlier.
20
CHAPTER 3:
INDUSTRY ANALYSIS
21
22
3.2 OBJECTIVE 1
TO MEASURE THE MARKET SHARES AND
COMPETITION OF THE INDIAN AIRLINE INDUSTRY.
NATURE
OF
AIRLINE
INDIGO
29.5
22.5
SPICEJET
19.8
AIRINDIA (DOM)
19.1
GOAIR
9.0
SOURCE: DGCA
23
Source: DGCA
3.2.1.1 Indigo
Indigo was launched on August 4, 2006. Interglobe Enterprises is the Parent company of Indigo,
and is owned by Mr. Rakesh Gangwal. It is a privately owned LCC and is based in Gurgaon with
its main base, Indira Gandhi International Airport. It is one of the fastest growing LCC in the
world and is amongst the best offering professional services with discounted airfares and
economical prices with great deals. It operates to all the major cities of India. 8 Its fleet is of 76
new Airbus A320 aircraft. It offers 485 daily flights connecting to 36 destinations .Its services
are user friendly as compared to other airlines. 9
Budget airline Indigo has widened its lead over rivals, touching a 29.8% market share ,the
highest since its 2006 launch according to the data released by the Directorate General of Civil
Aviation (DGCA). Indigo has seized the opportunity with both hands once it became apparent
that kingfisher was on its way out. Passengers will continue to pay higher fares with one airline
dominating to this extent as Indigos share is highest than any other airlines.10
http://www.makemytrip.com/flights/indigo_airlines-history.html
http://en.wikipedia.org/wiki/IndiGo
10
http://www.livemint.com/Companies/rLH5i8cGefPFZswxxObSKO/IndiGo-widens-lead-to-30market-share.html
9
24
http://en.wikipedia.org/wiki/Jet_Airways
http://www.makemytrip.com/flights/jetlite-history.html
13
http://en.wikipedia.org/wiki/SpiceJet
14
http://www.makemytrip.com/flights/spicejet-history.html
12
25
15
http://www.makemytrip.com/flights/air_india-history.html
http://archive.indianexpress.com/news/air-indias-market-share-passenger-revenue-grow-in-q2of-201314/1187822/
17
http://en.wikipedia.org/wiki/GoAir
18
http://www.makemytrip.com/flights/goair-history.html
19
http://articles.economictimes.indiatimes.com/2013-12-18/news/45338317_1_market-sharegoair-cent-share
20
http://www.business-standard.com/article/companies/goair-mulls-leasing-planes-to-retainmarket-share-113122000781_1.html
16
21
http://mis.kent.edu/Users/weinroth/public/July%208%20Southwest%20Progress%20Report.htm
26
and it is between the two extreme ends of market types. In this type there are few suppliers
controlling a large share of market. Pricing falls between perfectly competitive market where a
player have no pricing power and a monopoly market where a single player according to the
demand can fix the highest price.
Figure 3.2: Porters Five Forces of Competition
Source22
3.2.2.1 Competitive Forces:
3.2.1.1 Rivalry among Sellers
Rivalry among sellers is moderate to strong . Airlines compete on price and services they
also compete on the frequency of flights , reliability of services , frequent flyer programs
and other amenities. In the recent years the airlines are concentrating more on returning
to profitability than expansion.
3.2.1.2 Potential New Entrants
The potential of new entrants is weak to moderate . It has barriers of entry due to the low
traffic levels and a lack of desirable gate access in airports. There are several other
reasons which can cause difficulties for new entrants :1.
Capital-intensive
22
https://www.google.co.in/search?q=nature+of+competition+in+the+airline+industry&source=ln
ms&tbm=isch&sa=X&ei=CRM5U6z5OIOrrAfwoYGABg&ved=0CAcQ_AUoAg&biw=1242&
bih=585#facrc=_&imgdii=_&imgrc=_JCH0mMfKAyvM%253A%3BjmlR30yW3BRONM%3Bhttp%253A%252F%252Fhbr.org%252Fhbrgmain%252Fresources%252Fimages%252Farticle_assets%252Fhbr%252F0801%252FR0801E_
A.gif%3Bhttp%253A%252F%252Fhbr.org%252F2008%252F01%252Fthe-five-competitiveforces-that-shape-strategy%252Far%252F1%3B390%3B341
27
2.
3.
Labor-intensive
Energy-intensive
23
http://mis.kent.edu/Users/weinroth/public/July%208%20Southwest%20Progress%20Report.htm
28
24
http://mis.kent.edu/Users/weinroth/public/July%208%20Southwest%20Progress
%20Report.htm
29
3.3
OBJECTIVE 2
TO IDENTIFY THE DEMOGRAPHICS OF THE FLYERS.
3.3.1 Demographics of flyers-Market Segmentation
Market Segmentation is the marketing strategy that divides the broad target market into
subsets of consumers with common needs. It is designed and implemented to target
specific customer segments, addressing their needs or desires that are common in the
segments.
It is very difficult to for the companies to fulfil the needs and demands of each and every
customer but the companies try their level best to fulfil their needs and demands and for
this they follow an approach called target marketing.
Main objectives of market segmentation are
(i)
(ii)
Market is segmented on the basis of age , family size , gender , household income ,
occupation , education , religion ,etc.
Airlines segment the market according to the demand of services. There are mainly two
types of segments in which the airline industry has divided its customers(i)
(ii)
Segment in which the customers are willing to pay for better services offered by
the airlines. They can buy tickets even if the cost is high for better services
The second segment is the one in which the customers look for discounts and they
focus mainly on the fares rather than the services offered by the airlines. 25
http://www.researchomatic.com/Passenger-Airline-Industry45556.html#congrats
25
30
31
3.3.3 Segments
The segmentation in Indian airlines majorly concentrates on the income factor of the people.
This is because there is a gradual increase in middle class peoples percentage year by year.
Figure 3.4 Segmentation of Indian Airline Industry
26
27
http://www.mbaskool.com/brandguide/airlines/388-indigo-airlines.html
http://pitchonnet.com/blog/2011/05/15/cover-story-indigo-flying-high/
32
They are concerned more about the services than the fares ,their segment is
mainly upper class people who are ready to pay any price for the services
provided. They have two segments business class and economy class. 28
3.3.4.3 Market Segmentation of SpiceJet
Indigos market segment is mainly for cost conscious passengers and their
target group is lower middle class or middle class people who are conscious
about the fares and are concerned mainly about the price not services. Their
services offered are well received by the customers. 29
3.3.4.4 Market Segmentation of AirIndia
AirIndias market segment is middle class people and their main aim is to
look towards the needs and demands of each and every customer and
provides them with the best fares with very good services as compared to the
other airlines.
3.3.4.5 Market Segmentation of GoAir
Indigos market segment is mainly for cost conscious passengers and their
target group is lower middle class or middle class people who are conscious
about the fares and are concerned mainly about the price not services. 30
3.4
OBJECTIVE 3
TO CARRY OUT THE PESTEL ANALYSIS OF THE INDIAN AIRLINE
INDUSTRY.
3.4.1 PESTEL ANALYSIS
Luxury , comfort and convenience comes in our mind when we think about airlines .The
airlines worldwide suffer due to the higher operating costs , lower profits and decreasing
margins. Radical restructuring can help the airlines revive its fortunes. PESTLE analysis
is used to analyze the current state of the airline industry.
http://www.slideshare.net/shubhraha/jet-airways-strategy
http://www.mbaskool.com/brandguide/airlines/538-spicejet.html
30
http://www.mbaskool.com/brandguide/airlines/387-go-air.html
28
29
33
3.4.1.1 Political
The political environment of the airline industry is highly regulated this is because the global
aviation industry gives importance to passenger safety and so they have resorted to higher
regulations for the operation of the airlines. There is also deregulation on the supply side which
has lead to more competition among airlines and there is also regulation on the demand side
which means that the passengers and fliers can press for more amenities and low prices. 31
3.4.1.2 Economic
It is very difficult for the global airline industry to recover from the aftermath of the 911 attacks
and with this theres also recession. The other reason is the fluctuations in the oil prices due to
the Second Iraq War and the sudden spike in the oil prices before the great recession of 2008.
Due to the global economic slowdown the airlines are struggling the main reasons being
declining passenger traffic, competition from low cost carriers , fuel prices being higher , labor
demands and high costs of maintenance and operating costs. Due to these reasons the airlines
have gone to heavy losses and have been prone to bankruptcies and closure because they could
http://managementstudyguide.com/pestle-analysis-of-global-aviationindustry.htm
31
34
not afford to profitably run their operations. This has lead to many mergers and acquisitions in
the airline industry. 32
3.4.1.3 Social
Social changes of a generation has lead to more demanding customers in terms of services so the
airlines have to balance their costs with their increasing demand. Customers are ready to pay for
the services provided and due to the Baby Boomer generation the airlines are loosing their source
of income. The profile of passengers have also changed there are more number of economic
passengers than business passengers who prefer improved communication facilities rather than
flying down to meet their business partners.
3.4.1.4 Technological
The airline industry uses technology extensively in its operations so they are often
recommended to make use of advanced technology for the front as well for the back office.
Mobile technologies need to be adapted for ticketing ,distribution and customer service. Theres
also a need of the social media to be leveraged by the airline industry.
3.4.1.5 Environmental
Passengers are counting their carbon footprint with climate changes entering the social
consciousness as the passengers are nowadays more environmentally conscious. This has forced
the airlines to adopt green flying and they are being more responsive to the concerns of the
environmentalists. The airlines are concentrating a lot on their CSR activities due to the social
responsibility initiatives becoming more pronounced. 33
3.4.1.6 Legal
The number of lawsuits against airlines from workers as well as the customers has gone up. The
regulations are also being strict with the airlines and they are coming out with new strategies and
they are bothered if the airlines are violating any laws. The each and every move of the airlines
are being scrutinized regarding the delays, safety issues and other fears.
http://managementstudyguide.com/pestle-analysis-of-global-aviationindustry.htm
33
http://managementstudyguide.com/pestle-analysis-of-global-aviationindustry.htm
32
35
3.5
OBJECTIVE 4
TO DETERMINE THE BUSINESS DIVERSIFICATION OF THE INDIAN
AIRLINE INDUSTRY.
DIVERSIFIACTION
Standalone
Standalone
Standalone
Conglomerate
Conglomerate
37
3.6
OBJECTIVE 5
TO DETERMINE THE MERGERS AND ACQUISITIONS IN THE
INDIAN AIRLINE INDUSTRY.
http://capaindia.com/PDFs/Jet-Airways-May-07.pdf
35
http://nrao-m-a-handbook.blogspot.in/2007/09/acquisition-of-air-sahara-by-jet.html
38
for them. Also they needed to achieve efficiencies in costs through common maintenance
of both the B737 and ATRs.
Table 3.3 Fleets: Apr-07
JET AIRWAYS
B737-300
SAHARA
COMBINED
(JETLITE)
B737-400
B737-700
13
20
B737-800
28
35
B737-900
2
7
CRJ-200
ATR-72
A330-200
A340-300
TOTAL
62
26
88
(ii)
(iii)
(iv)
36
Staff
New corporate structure was needed to be made by Jet management, rationalization of
the workforce and also to integrate a deal between both the carriers. An employee
which was not required by one was taken over by the other, as the two had made a
commitment that the employees wont lose their jobs as a result of the deal.
Network
Jetlite was the only carrier which was given permission for operating internationally, in
spite of the condition that a carrier must be 5 years in domestic flying.
Financing
Jet Airways funded the take-over through $450 million of promoters equity 36. The
amount which was to be paid to Sahara was given in all cash.
http://nrao-m-a-handbook.blogspot.in/2007/09/acquisition-of-air-sahara-by-jet.html
39
Thus it can be said, that this acquisition led Jet Airways in cost reduction scope and capacity
expansion without compromising in excess expenses. This largest acquisition also led Air Sahara
in relief of debt. And all above Indian economy was looking forward in better position due to
new cash flows in airlines and purchasing new aircrafts.
37
http://pib.nic.in/newsite/erelease.aspx?relid=30435
40
The combined airline was now Indias largest domestic airline with a fleet size of
71 aircrafts40.
537 flights to 69 cities41 were offer by the new airlines.
The market share was 30% for combined airline, which made them the second
largest in the country.
After the merger the Kingfisher is focusing on international routes and Air
Deccan in domestic areas.
38
39
40
"Kingfisher-Air Deccan: Different, Yet Similar,"The Hindu Business Line, June 01, 2007
41
41
(v)
(vi)
The Air Deccan is continuing its operations as a low cost carrier while
Kingfisher as a full service carrier.
The Kingfisher can save a lot of operational cost. It helped them to expand its
services internationally. They can reduce their maintenance cost. If they manage
their routes which are more profitable with low fare then they can attract more
passengers.
http://www.livemint.com/Companies/PA3J9VHjGRWPNYKT3mlV2K/Tata-Group-Singapore-Airlines-incorporateairline-venture.html
43
http://www.thehindu.com/business/Industry/airasia-ties-up-with-tatas-to-start-airline-inindia/article4435684.ece
42
3.7
OBJECTIVE 6
TO DETERMINE THE INTERNATIONAL EXPOSURE OF THE INDIAN
AIRLINE INDUSTRY.
44
http://www.jetairways.com/EN/JP/PressReleases/JetAirwaysEtihad.aspx
45
http://www.jetairways.com/EN/JP/PressReleases/JetAirwaysEtihad.aspx
43
(v)
(vi)
3.8
OBJECTIVE 7
TO IDENTIFY THE TECHNOLOGIES USED IN THE INDIAN AIRLINE
INDUSTRY THOSE PLAY A STRATEGIC ROLE IN ITS
DEVELOPMENT.
In the last decade Indian aviation has achieved tremendous growth, but many things which are
important for passenger travel were unchanged. To remove these new efficient technologies had
the ability to transform travel satisfaction to consumers in three years. There are new
technologies like:
1. RFID tracking of bags as well as flights which are tracked through GPS.
2. Self-service kiosks,
3. Social media for increasing sales,
4. Using mobile as medium to book tickets, check flight status, etc.
5. Using biometrics for employees for proper quality as it will help the customers to have a
hassle free travel experience by giving custom options depending on the customers
choices.
Environment in the airline industry needs to be secure loyal consumers and make more sales by
being more efficient. Such technologies are being implemented to promote vibrant and consumer
friendly airline industry. New technologies in the industry are strategies have a high weight age
which brings different engagements for passengers form consumers and companys point of
45
view. Reducing pollution through cutting edge technology to create new engines for the aircraft
will also help the planet and reduce the CO2 emissions.
In the past 50 years many technological developments have been done to convert natural gas &
coal to generate liquid fuels. Technologies like CTL have been long gone, now new
technological developments have been made but they are more expensive presently, it converts
crude oil in to jet fuel i.e. kerosene, it gives a future possibility to continue utilizing now
renewable resources in the aviation industry. Numerous companies in this industry are trying to
perfect this conversion technology to optimize the resources available to generate jet fuel.
Air traffic management programs are very sophisticated computer systems which does the job of
managing huge sets of flight data.
Programmes like NextGen in US and SESAR in European continent are still being developed
for air traffic management for better control in the flight traffic to make it more efficient.
NextGen system will start and will be fully functional from 2012 to 2025 whereas SESAR will
be functional in between 2014 and 2020.
Many technical improvements are being done by the airline companies to their aircrafts to utilize
the carbon abatement. They are using lightweight materials during manufacturing the parts of the
aircraft like seats, frame of the plane, manufacturing fuel efficient engines. Due to lack of crude
oil due less supply and huge demand for oil the price of the fuels are on the rise all the suppliers
in the industry are trying to exploit all the possible technological improvements to improvise the
aircraft performance as it will help in reducing the cost for their target consumers which will help
the companies to have an edge in the competitive market.
Implementing more lightweight materials fuel efficient engines for the jet have been taken as an
opportunity through technical improvisations. Usage of light composite materials in the plane
has given us an opportunity to retrofit the existing aircraft and also build a new one to, but it has
a downside of being more expensive and very few places the composite parts can be fitted but it
gives a very low gas of greenhouse emissions. This new technology is the promising future for
the aviation industry as new Boeings can be building.
Engine manufacturers of jet plane are constantly developing efficiency in fuel usage for the
aircraft. As the emission are directly connected to the engines of the plane new ways for
improving this engines is been developed like advance designs of turbofan and a new material
called ceramics are used as its light in weight.
In many instances the NextGen customers prefers technology over human interface and is more
comfortablewith new technologies. But human touch points for interaction with customers need
to kept available in the future too as many new customers would prefer both. As most of the
people have android or smart phones with them the scope of using these phones for core services
shows a huge potential if the airline companies have dedicated apps for the same, but this
initiative is at the beginning stage and has a long way to go in the future. The younger
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generations who are the tech savvy customers of the future are attracted through social sites, so
the companies have capitalize this opportunity and engage more advertisements in the social
platform media. Social media platforms bring out the best and the worst influence which will
directly impact the brand image of the company. Customers want to enhance their travel
experiences by having Wi Fi feature while travelling, on time streaming of videos to their mobile
devicesthere will be considerable shift in accordance with the relationship with customers by the
year end on 2015 which brings out the need to implement improves BI systems.
It is now plays a strategic role in the airline industry Airlines shouldfocus on how they can turn
such features not simply into a point of competitive differentiation but to generate ancillary
revenue.
3.8.1 Technologies Used
They planning to include automation in the service delivery by technology like automatic
3boarding, kiosks, self-bag drop, mobile applications, etc. as self-service is the new best
initiative which will grow tremendously if they are coordinated well.
3.8.1.1 Cloud Computing: Today the Indian aviation members is not fully using Cloud
computing, but they know they need to adopt as the aviation industry players are going global
and every member is adopting it slowly, benefits of this cloud computing is it will reduce the
cost and managing backups will be easy which will help in creating better solutions
Figure 3.6: Benefits of Cloud Computing
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3.9
OBJECTIVE 8
TO IDENTIFY THE MARKETING INITIATIVES USED IN THE INDIAN
AIRLINE INDUSTRY.
book tickets, timely departures, no unnecessary problems while check in. Hassle free delivery of
belongings like bags. This nationwide low fare service is considered as a goodwill gesture to
their loyal customers as they book their tickets in advance before the holiday season. Popular
website called Makemytrip.com came to decision by observing that the discount fares will make
people travel even they havent planned a trip by then. So these offers will boost their revenues.
This strategy has brought in different comments from different quarters. The CEO of CAPA,
Kapilkaul said that there is lot of appetite for Indian low fare airline market and other airlines
will follow suit. This strategy of giving low fares to its customers are not given to the entire
passengers on the flight. Itsbeen given to very few seats on the flight mostly during off season.
This is like a boost to the airline industry. spicejet did a very good move as it will help in
stimulating the market because generally February to April is a lean period and you want to
stimulate the market and by selling seats at this lean period they could earn more profits and the
actual season starts in may
Indian airlines came with the same marketing offer called jaldejalde. This offer was in
November 2012, this also improved the revenues of Air India and Indigo cut its fares at that
time.
Experts claim domestic budget carriers will not be able to recover the money or cost incurred on
each seat, As Spice jet and Jet airways has slashed away prices, Indigo and Indian airlines had no
other options but to reduce the prices to similar destinations routes. The DGCA official has less
say on the changes of fares asits not their job to tell them and they are not interested in
interfering with the offers which the airline companies but they are concerned about the long
term side effects of keeping the fares low as it might affect the airline companies
Aviation ministry is now concentrating on fixing a limit to these low line air fares. Yatra.com has
multiplied five times because of this reduction in air fares.
Low fares will boost the airline industry as it will increase the sales as well as the profits in the
long term which shows a lot of scope for making big money for the airlines. There is one more
reason for these discount offers because these airlines are not making profit for the last 2 years
and there is increase of 50 percent in the aviation fuel. There will be a definite increase in
passenger traffic because of this and there was a drastic decrease in passenger traffic in the year
2013 made these airlines to take this decision. Some customers need to opt for only those airlines
irrespective of the fares charged as they dont have a choice to select other airlines due
emergency factors. The other strategy which the airlines used is to fill the seats which come
under the weaker routes where it is tough to fill the seats.It is an excellent strategy and it is time
when airline companies are going into smaller cities and these type of offers will promote the
airlines and will increase the loyal customers which is very important for these airlines and there
is no better way for promoting for these airlines.
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This marketing initiative will boost the airline industry as there will more increase in the airline
traffic and this will help airline companies with having instant cash which is very important for
any industry. The future of these airlines industries looks promising as there will be increase in
loyal customers for these airline industries. In the year 2014 Indigo airlines are leading the
largest market share among the LLC in India, they provide value for money services towards its
consumers. Indigo Airlines is equipped with aggressive airline fleet and plans for expanding their
reach to its customers. They follow the marketing strategy by utilizing several channels of
communication like social networking sites, internet, and travel sites to generate awareness about
their brand in the market. They also connect with their customers through mobile applications by
giving flight information, many airliners have now also started with M- ticket too Customers
agree that the company has earned the distinction of on-time performance and consistent basic
and desirable services. special efforts of the staff to address minute details and keep the customer
satisfied, innovative modes of communication with the customers and attractive fares all have
made Indigo a LCC of choice for thousands of travelers each day. Indigo airlines became the
market leader due to their constant increase in size of their fleet and connection of more routes in
domestic as well as international routes .Its success lies in its on-time hassle-free service motto
together with its clear business strategy.
3.9.2 Marketing Communication
Differentiating with other competitors in the industry can be done through different ways, first is
by creating a brand and developing it and it can be done by implementing new services which
are specialized in nature but they have to make sure that this service offerings are informed to its
target customers. Generating this services and showcasing them through constant marketing
strategies towards its customers will create awareness and positive word of mouth will be
channeled properly creating loyalty to its brand. Creative interface on the airline companys
website which will show all the service provided by the airliner and giving the customers the
opportunity to use technologies like mobile applications and tablets. Social networking sites
generate a lot of traffic of users which makes it one of the main places for promoting ones brand
through advertisements, campaigns, etc. which will create a buzz around the internet as the
information travels fast even though its good or bad information. Marketing ones product and
service should be done through various channels and make sure the promotional activities are
kept on going at regular intervals so that the customers retain the information. One can do this by
print media hoardings ate prominent locations.by participating in shows, sponsoring the shows,
etc. Customer delight can be achieved by using low promotional fares by focusing on customers
using direct mail, Emails, mobile communication. The core values of the company shows their
exact marketing style as it shows their offerings to their customers.
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3.10 OBJECTIVE 9
TO IDENTIFY THE TRENDS IN THE CIVIL AVIATION INDUSTRY PROJECTING
THE FUTURE SCENARIO.
3.10.1
Introduction
In this report we excel about the opportunities of India's aviation, and present its future blueprint.
The present situation of Indian airlines reflects some facts about their future environmental
conditions. Here we can predict some cases where the airlines are going to face some tough
challenge in running their operations.
The CAPA (Centre for Aviation and Air Transport) forecasts that Indian aviation will be the
third largest industry by 2020.evary year 452 million passengers will travel and 1030 aircra fts
will be on the fleet. The aggregate value of investments will be of $120 billion by 2020, from
which $80 million will be spent on new crafts. Investments would be the key factor to
accomplish the challenges of growth. Technology, innovation may be helpful to meet the
expected growth, but it is strategically unimportant.
They contribute in increasing the speed of the sector. Operational efficiency, cost reductions,
customer experience enhancement are the key drivers for investments. Investment in skills and
infrastructure are necessary to meet the growth challenges.
Maneesh Jaikrishna, Country Director - India and Subcontinent SITA, said: "SITA is acting like
a catalyst in the innovations of aviation since 60 years. As the world's leading specialist in IT
solutions and air transport communications, we look forward to continue to work with the Indian
aviation industry and the Government to motivate innovation during this tremendous period of
change and transformation."
Kapil Kaul, CEO CAPA India, said: Today technology has the enough potential to become
more pervasive and transform the airlines operations, border control, service providers and
airports. The industry can utilize technology not only for cost efficiencies and functionality
purposes, but to enhance customers experiences, security improvement and develop a new
stream of commercial revenue."
3.10.2 Prevail of critical uncertainty
Indian aviation is in its great uncertain phase since a decade. An estimated loss of US$2 billion
by the end of 31st March 2012. Indian aviation is going to face an equally challenging years
ahead. Increase in operating costs, uncertainty in regulation, Indian economic conditions and a
typical global environment will pile the burden on airlines, mainly the poor performing airlines.
Anyhow, this may even create some market opportunities to the other players to exploit as they
are better positioned.
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3.11 OBJECTIVE 10
TO COMPARE THE INDIAN AIRLINE INDUSTRY WITH VARIOUS
INTERNATIONAL AIRLINE INDUSTRY.
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3.11.5 Conclusion
In aviation industry segmentation is done mainly as low cost carrier (LCC) and full service
carrier (FSC) airline. LCC has less fare compared to FSC. LCC provides fewer comforts whereas
FSC provides all types of comforts. FSC is preferred by business travelers and LCC is preferred
by leisure travelers, middle class etc.
To analyze both internal and external factors this is very important. The performance of a
company should depend on the internal environment that is inside the company. We cannot
control the external factors but it will influence the company performance. To evaluate the
strengths and weakness of the business through external environment this is done. For every
business these factors will vary.
Diversification in business not only acts as a key tool for survival but also like an option to
enhance a rapid growth. Airlines are using many ways of diversifying their business. Some of
them are adding some product lines and some are even trading under different brand names apart
from parent brand.
The main thing to remember in diversifying the business is that the main business should do well
and should be seen it sustains and supports further extensions. Planning is very much important
in this case because launching something outside the existing customer base is always a riskier
part to practice.
For the growth of Indian aviation sector this mergers and acquisitions take place. But the airlines
of India are not successful of these mergers they want to be competitive with others and want to
fly internationally. For these reasons they are going with this. The competition among the full
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service carriers and low cost carriers give problems on cost and maintenance etc. The companies
should think before going to this decisions that will give profit to the companys or not.
The government is also working towards the welfare of aviation industry in India. According to
the union budget 2012-13 the government has permitted direct import of Aviation Turbine Fuel
(ATF) and has also exempted custom duty on aircraft spare parts. Also the Airports Authority of
India is involved in some doing international projects in other countries. So overall it is a good
sign for the Indian aviation industry.
All the players of airline industry are coming up with their own techniques of branding,
marketing, and advertising. The target is to maintain their customer base and even attract more to
increase their market share. Sustainability is the main motto of any business particularly in a
competitive market and to support it they need to constantly innovating and marketing
themselves in an absolutely effective manner.
The above forecasts will help the airlines industry in directing them towards achieving their
positive opportunities and to be aware of the future consequences due to their present actions,
which may make them to run them into losses.
The profitability opportunities and growth orientation in air traffic is forecasting a positive
environment to the private players mainly until they are capable of grabbing these unused
opportunities.
There are many parameters on which the aviation sector can be compared to other companies in
the world, it is visible that the Indian industry has a huge potential to grow and the government
needs to be broad-minded while making the policies for the aviation industry in India. Also
Indian aviation companies are becoming almost competitive to the foreign companies and are
getting geared up for the extensive international competition.
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CHAPTER 4:
CONCLUSION
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4.1 OBSERVATIONS
This report has been extracted from the keen observations of the industry. To brief the report, we
have some observations that tell about the industry situation and its necessities. Some of the
observations are as follows:
(i)
There is a demand to increase the FDI flow into the country, to run the operations.
(ii)
The readymade future for acquisitions and mergers.
(iii)
Due to the reason increase in travel expenses the tourism and the hospitality sector is
undergoing huge pressure.
(iv)
The business people and delegates opt for other source of communication like video
conference in order to escape the travel alliance burden.
(v)
In the domain of competition the air traffic is not at all considered by the airlines.
(vi)
There is a huge rise in expectations due to the rapid growth.
(vii) The variation between profit and the revenue is large.
(viii) Uneven allocation of routes and illogical pricing of fares.
4.2 RECOMMENDATIONS
There are some recommendations which can be followed in order to rule out the cons in the
industry. These recommendations are meant for the improvement of the industry in retrospective
approach.
(i)
Should concentrate on reducing the ticketing costs by implementing the front
operations effectively.
(ii)
The routes must be optimized to the possible extent and the logistics as well.
(iii)
Upgrading of airports is already in a process and must be observed it will be a
continuous process.
(iv)
The air traffic must be handled effectively.
(v)
Packages with value added services must be rendered to the customers.
(vi)
The turnaround times must be improved for maintenance purpose.
(vii) Baggage clearance charges should be checked so as to increase the efficiency of the
fuel.
(viii) The lean organization approach is advised to follow for the operational advantage
(ix)
Liberalization should be still increased and generalizing the budget model is
advisable.
The above are the observations and the recommendations that are made to diagnose them. We
expect the Airline industry to come across the barriers and fly high.
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REFERENCES
(i)
http://www.iica.in/images/Civil%20Aviation%20Sector.pdf
(xix) Retrieved from
www.oecd.org/sd-roundtable/papersandpublications/49482790.pdf
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