Strategic

Management

Jet Airways
Jet Airways (India) Limited (JAIL) was incorporated in 1st April of the year 1992 as a private
company with limited liability and it commenced operations as an Air Taxi Operator in 5th May
of the year 1993 with a fleet of four leased Boeing 737 aircraft and also having ISO 9001
certification for its in-flight services. The Company became the first airline in India to operate
the Boeing 737-400 Aircraft in April of the year 1994 and it operates one of the youngest aircraft
fleets in the world today. The Company was granted the scheduled airline status in 14th January
of the year 1995. Jet Airways became a deemed public company in 1st July of the year 1996.
Jet Airways was reconverted into a private company as at 19th January 2001. The Company
bagged the prestigious Air Transport World Award 2001 for Market Development and the TTG
Travel Award 2002 for Best Domestic Airline. In the year 2004, the company made tie up with
the South African Airways. During the year 2005, Jet Airways Limited has filed its draft Red
Herring Prospectus with the Securities and Exchange Board of India (SEBI) to enter the capital
market with its initial public offering for used to fund its international expansion plans. Jet
Airways became a public company in 28the December of the year 2004. The Company launched
its first inter-continental flight by linking Mumbai with London Heathrow by a non-stop day
flight in the month of May during the year 2005. Jet Airways executed its purchase agreement
with The Boeing Company, USA in the year 2005, also in the identical period introduced an Inflight Safety Manual in Braille, and signed a pact with Gulf Air and the company won the Avaya
Global Connect Customer Responsiveness Award. During 2005-2006, the company completed
the construction of hangar complex with workshop and allied facilities in Mumbai.
Jet Airways and Etihad Airways, the national carrier of the United Arab Emirates, had inked a
code share agreement in June of the year 2008 and reciprocal frequent flier partnership on the
New Delhi-Mumbai-Abu Dhabi sectors. In same June 2008, launched its daily MumbaiShanghai-San Francisco flight, becoming the first Indian private carrier to operate to China. The
Company enhanced its network connectivity from Pune with the launch of its new direct services
to Hyderabad, Nagpur & Ahmedabad effective from July 15th 2008. During the same month, Jet
Airways got permission for fly to Dubai from Delhi and Mumbai.
The company has been in existence since 23 years. The promoters of the company are Naresh
Goyal and Anita Naresh Goyal. Key financial ratios of jet airways as on March 2015 were as
follows
Price to Earnings

5.76

Sales Turnover

0.33

PBDIT Margin

3.02

PBIT Margin

-0.87

PBT Margin

-9.26

Net Profit Margin

-9.26

Porters Five Forces

Threat of New Entrants
Aviation industry is highly cost intensive. Beside it has to go through a number of regulatory
compliance before it gets an excusatory order. The factor which make the new entry entrants are
The capital requirement, Expected retaliation, Inadequate Infrastructure.
Exit barriers-The high capital requirement makes it difficult for the companies to exit the market
but being a growing industry the existing players are willing to acquire and make exit for an
operator less difficult.

Power of Buyers
The power of buyers is low because they are large in number and highly fragmented. The
increasing GDP and the introduction of low cost airlines has not only increased the existing
number of buyers but opened the doors for a huge opportunity of growth.

Power of Suppliers
Switching costs-If we look at the aircrafts there are only two suppliers Boeing and Air Bus thus
the options available with the airlines to switch between is very limited and thus the switching
costs are high but sometime the competition between the two manufacturers reduces the costs to
some extent.
High fuel costs-Fuel accounts for nearly 35% of the total cost and the cost of fuel is increasing
rapidly posing a threat to the companys profits.

Availability of Substitute
Product for product substitution-Consumers has various options in terms of airlines to choose
from. They may also switch to other modes of transport such as road and rail.

Competitive Rivalry
The number of airlines is increasing which increases the level of competition among airlines.
Earlier when we thought of airlines the only name would be Indian Airlines but today the list is
long and growing with new carriers like Go air trying to make a mark in the industry. More over
six new low cost airlines are expected to come up.

Internal Analysis
SWOT Analysis
Strength

Experience exceeding 14 years

International operations
Large fleet operations
Among top 3 in India

Weakness

Losing domestic market share

Old fleet with average age of 4.79 years
Need improvement in in-flight service
Weak brand promotion

Opportunities

Untapped air cargo market

Scope in global service and tourism
Increasing salaries of people

Threats
Strong competitors
Fuel Price Hike
Overseas market competition
Regulations

Business Model
Jet Airways is best placed to capture the 16.5% CAGR in domestic passenger traffic and 15.5%
in international passenger traffic.
Jet offers a host of benefits due to flexible business model such as

Dominant market share in both the domestic and international market allowing it to
reshuffle part of its fleet depending on the seasonality in demand
Presence in FSC and LCC segments which enables to successfully divert part of its fleet
based on the demand supply scenario, and hence maintain the yields and load factors.
Varied fleet type, size and ownership making pilot poaching difficult, accommodating
demand across sectors easier and leasing out owned fleet to capitalize on the demandsupply mismatch

Jet Airways will roll out a single full-service product and stop its no-frills Konnect offering.
The move is aimed at boosting occupancy and increasing yields.

The airline had launched the Konnect service in 2009 to complement its full-service offering and
Konnect now constitutes 60 per cent of its domestic inventory
The airline is also planning a Guest First programme to enhance passenger experience onground as well as on-board and is training its ground staff and cabin crew on the new service
procedures. Changes are also being made to inflight menu and cabins are being spruced.
Jet hopes a single uniform service will help attract corporate travellers and arrest a slide in
market share and load factor. It reported a market share of 20.5 per cent in October, compared
with 25.2 per cent in January. The increase in costs will be marginal. It will be in small single
digits. However, the transition will have advantages for the company.

Profitability analysis

Year on Year increase in company's revenue and profitability.

Increase in market share
Increase/ decrease in Customer segment
Value creation for shareholders
Lost baggage claim
Any Accident/ technical faults

Conclusion
Value creation for customers and Service Innovation in service industry like Jet airways is driven
by customer feedback. Efficient delivery of services, quality of delivery followed by
performance put service organizations ahead in competition. Customer feedback gives an
opportunity to understand customer need, formulate improved & differentiated services and
deliver effectively. Integration of cross functional thinking in process of creating value added
services for customer gives opportunity to involve people is mission of the organization. Jet
airways made tie ups with various services like rent a car, hotels, shopping, dining in restaurant.
Boarding pass of flight extends discounts from various premier outlets ranges 15% to 50%.
Innovation gives competitive advantages to the organizations and also helps in sustain the
desired performance. Innovation described as continually renewing offering (Products &
services). Diversity in work force that always willing to accepts new age technology and
implement in deliverance resulted in scaling performance of the organization. A competitive
advantage means distinctive competencies or capabilities and perceived differently by customers
and stake holders. The competitive advantages can be offered through cost leadership, create
differentiation and focus on specific product / market / customer segment.
Some of challenges in airline industry are service quality, customer value, changes in
information technology, eliminating waste, managing productivity, combating competitive
forces, and measuring and monitoring performance in different ways.
As an organization has to identify profitable segment of customers and need to extend
knowledge of customers so that invest in the groups that are likely to bring the most consistent
returns.
The growth and sustainability of organization is driven by the profitability of the customers and
not their numbers alone and profitability changes with changes in the customer acquisition and
retention strategies.
Service industry is having challenge of delivering consistently high quality service and service
manager are focusing on
Realign strategy to accommodate shortened information chains, and changing customer demands
and preferences.
Redesign processes and reassemble operations taking account of what can and should be backoffice and front-office.
Restructure to accommodate new work, new technological interfaces.