SERVICE SECTOR: AIRLINES INDUSTRY

GROUP 4 - AJU, ESWARAN, LEKHA, MEGHA , SRIKANTH, SWETA

History
The birth of flight in 1903. Early 20th Century
In 1938, the Civil Aeronautics Board.

Deregulation, mid-1970s, Alfred Kahn.

Congress passed the Airline Deregulation Act of 1978.

Late 20th Century. 21st Century.

The effects of another economic downturn Losses continued for years; the industry as a whole didn't return to profitability until 2006

Industry characteristics: Huge potential

Under penetrated Market - Total Passenger Traffic only 50 mn 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

- High Level of potential demand with growth in Indian economy

Untapped Air Cargo Market - Air Cargo has not yet been fully taped in the Indian markets and is expected that

in the coming years

large no of players would have dedicated fleets What this means - Build up of capacity by existing players and entry of new players

Air Cargo
Freight carriage in India currently around 4200 tons per day CAGR of 15% over the past 2 years Fuelled by a fast growing economy, supported by a strong

industrial base
Forecast to grow at 11.4% p.a. till 2011-12

Ground Handling
Ground handling business in India estimated at Rs. 1074 crores Expected to grow at 15% CAGR till 2011-12 Opportunity lies in 3rd party handling as well as entering into service contracts with private airports / AAI to offer comprehensive ground handling solutions, e.g. AI CIAL at Cochin

Leveraging the internet

Increasing numbers are booking directly from the airlines websites Traditional sales channels with paper tickets cost airlines ~10% of

ticket price
Comparatively, e-ticket sales from own website cost an airline only ~3% of ticket price For every direct booking from their website, airlines save an estimated US$ 4 plus 5% agency commission Airlines can also turn their websites into one stop shops for all travel related services, generating additional revenue

Current Scenario: Indian Aviation Industry

The Indian aviation industry is one of the fastest growing aviation

industries in the world.

India has 454 airports and airstrips; of these, 16 are designated international airports. With the liberalization of the Indian aviation sector, aviation industry in India has undergone a rapid transformation. From being primarily a government-owned industry, the Indian aviation industry is now dominated by privately owned full-service

airlines and low-cost carriers.

Private airlines account for around 75 per cent share of the domestic aviation market.

..Cont.
There has been phenomenal growth in the Indian aviation sector in 2007-08. India has jumped to 9th position in world's aviation market from 12th in 2006.

As per the Ministry of Civil Aviation, the airline business is growing at

27 per cent per annum in India. During 2007, the domestic airline passenger traffic has shown a

growth of 32.51 per cent.

Further, the scheduled domestic air services are now available from 82 airports as against 75 in 2006.

..Cont.
35 other city airports are proposed to be upgraded. The city side development will be undertaken through PPP mode where an investment of US$ 357 million is being considered over the next 3 years. Over the next five years, AAI has planned a massive investment of US$ 3.07 billion - 43 per cent of which will be for the three metro airports in Kolkata, Chennai and Trivandrum, and the rest will go into upgrading other non-metro airports and modernizing the existing aeronautical facilities.

Marketing mix
Product
Core Transportation Supplementary Check in Food on board Connecting flight Complementary gifts In-flight entertainment Frequent flier programs Augmented Online booking Variety of meal options Pick up and drop service Mobile ticketing

Marketing Mix
Price: Premium, Cheap value & Apex fares. It depend on Class, Date & day of travel and profit margin & competitor pricing also. Place: Tour Operator, Travel agent & Online reservation. Promotion: Advertising, Publicity, Sales promotion & Personal selling. People: Reliability, Caring attitude & Goodwill. Physical Evidence: On the ground & Inflight. Process: Reservation, Flight Information, Facilities at The Airport, Baggage Handling, Meal Service & Flight Entertainment. Productivity & quality: To Deliver Quality Service by meeting demand with supply.

Marketing Mix Process

Reservation

Flight Information

Facilities at The Airport.

Baggage Handling

Meal Service
Flight Entertainment

Deliver Quality Service

An example of Ambush Marketing

Major Brands
Kingfisher Indian Airlines Lufthansa Jet Airways Qatar Fly Emirates Singapore Airlines British Airways

In sum
Despite a growing market, airlines in India are fighting for survival in a highly competitive environment

A host of initiatives are required to be taken by all concerned, to tide over the
current situation Control Costs Improve quality of service Develop a large pool of skilled / technical manpower Attract more professionals to manage the aviation industry Develop infrastructure to match growth plans Liberalize rules & regulations governing civil aviation, without compromising on safety & security Reduction in ATF prices and taxation on ATF and lease rentals