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Transcript of INDIAN AIRLINES
The First Flight
Indian State Air Services in collaboration with UK based Imperial Airways introduced the London -Karachi - Delhi
flight, the first International flight to and from India.
India’s six private airlines accounted for more than 10% of domestic traffic.
Many foreign airlines started providing international services. In 1995, 42 airlines operated air services to, from, and through India.
Tata Airlines came to being as a division of Tata Sons Ltd.
It started Air Mail services on the Karachi, Ahmedabad, Bombay, Bellary, Madras routes on 15 October.
In 1946, Tata airlines was rebranded as Air India.
Ushering in all the ‘Low Cost Carriers’ in the country when
Air Deccan started its services.
Between 2005 and 2011, the airline industry grew in India buoyed by the overall growth rate and the growing services industry.
Soon After Independence
India had 9 airline companies providing passenger and
These airline companies were:
Tata Airlines Air service of India
Deccan Airways Indian National Airways
Ambica Airways Orient Airways
Bharat Airways Mistry Airways
India was the 9th largest aviation market in the world with 82 operational airports, 735 aircraft, 12 operational scheduled airlines and 121 non-scheduled operators.
The number of air passengers travelling in India is expected to cross 50 million this year.
The size of the Indian airline industry, according to a report by ICRA was estimated to be about Rs.60, 000 crore in June 2012.
Air Corporations Act
Indian Airlines and Air India International were set
up after nationalization of the entire airline industry.
At this time eight formerly independent domestic airlines were merged.
(5.7%-8.6% FROM 2003-04 to 2010-11)
(62% population age group(15-60))
Rising Urban Population.
(M & A : $ 50 billion)
Significant market developments
(LCC constituted 67% market share by 2009)
Investment in Airport and Infrastructure.
Remote Area Connectivity
Aviation Industry Growth
In the year 2008, the industry grew at a CAGR of about
Established airlines launched new routes and introduced new aircrafts.
From 2005 to 2009, Indian carriers ordered 400 Boeing and Airbus aircrafts worth about $37 billion.
Has Government done enough
Only innovation in Industry:LCC
Growth Deceleration: WHY???
After the collapse of Lehman Brothers and the subsequent monetary crises faced by the European nations, the Indian economy slowed down and the existing structural deficiencies started to show up.
Structural & operational loopholes.
No regulation by the Indian government.
Performance of Indian Carrier
Pilot salary differ with aircraft
Pilots struck work that led to cancellation of flights
Competition increasing & Market share lost
60% TO 17%
Fly the good times
First Indian airlines to have inflight entertainment system on every seat with passenger being able to watch TV on board.
The only airline to have a five-star rating from Skytrax.
Fleet of 63 aircraft and being entitled as India's favourite airline.
Loss since inception.
Most of the fleet on buy & lease back program.
High operational cost plus ineffective route rationalization.
By early 2012, airline accumulated loss of INR 7000 cr.
Bank accounts were frozen by Mumbai Income tax department.
Airline delayed salary of its employees in 2011 and defaulted on tax deducted at the source from employee income to tax department.
DGCA suspended its licence on 20th October 2012 and IATA suspended the airlines in February 2012.
In February 2013, the Indian Government announced the withdrawal of both domestic and International flight entitlement allocated to the airlines. With this the airlines have been officially grounded.
The banks and the aviation leasing firms have been taking hold of the de-registered planes.
Kingfisher Airlines was started in May 2005.
Based in Bangalore, the airline is owned by the United Breweries Group under the chairmanship of Vijay Mallya.
Kingfisher, through its holding company UB group, bought 26% of stakes in the budget Airline Air Deccan and effectively invested Rs 1,000 crore in the Rs419 crore loss making company in 2007.
Applying your maximum resources where the maximum revenue can be generated.
Keeping planes airborne as much as possible
Keeping infrastructure cost low by operating in few destinations only
Keeping operational cost low
Managing fuel burden
Fuel efficient(Due to increasing crude oil prices)
Founded : 2005
Commenced Operations: August 2006
USP: On time performance, lowest price
Segment: Cost conscious passengers
Positioning: Low cost No frills
USP: On time performance, lowest price
4P’s OF MARKETING MIX
ON GROUND SERVICES
Airport bagagge service
Call centre experience
IN FLIGHT SERVICES
In cabin experience
Approach to customer
The existing competition between firms in the market.
The bargaining power and price sensitivity of suppliers.
PORTER'S FIVE FORCES MODEL
The bargaining power and price sensitivity of the consumer.
EXISTING INDUSTRY RIVALRY
the concentration of firms in the market
the diversity of the competitors
the differentiation of the products
excess capacity and exit barriers
POTENTIAL NEW ENTRANTS
The threat of new entrants into the market.
THREAT OF SUBSTITUTES
The availability of substitutes to the product.
BARRIERS TO ENTRY
Economies of scale and scope
Aggressive tactics + retaliation
Number of suppliers to the industry
Number of available alternatives
Size and number of customers
Cost of switching to a competitor
Competition for custom
Size and number of customers
The ease and cost of switching to the substitute
The threat of competitors bringing out a more advanced product
The impact that substitutes have on pricing policy
Intensive & Franchising
Online 24-hour reservation Systems.
Tour Operator/ Travel Agent.
Affiliated with companies.
From Indian Scenario
Brand of Kalyan Group
Short & Long Haul flights-LCC/High Operated Efficiencies
High Aircraft Utilisation
Technology Competencies of IT
Complete understanding of how to make LCC airline
East Air Key Points :
4.Short & Long Haul flights-LCC
5.High Operated efficiencies
6.High Aircraft utilisation
7.No Loyalty/Reward programme &
No business executive classes
9.Hassle free booking , boarding facillity
10.Safe journey at lowest possible cost
11.Complete understanding of LCC airline
Kalyan group Key points:
1.Strong business history (100 years)
3.Strong technology background-
4.Strong export network(Easy to get licenses)
Market Entry Strategy
East Air India
Marketing Mix Strategies
MG : 241
Case Study Presentation
Indian Airline Industry:
Will the flight be smooth?
Abhinav Singh Bandani Verma
Gaurav Khanna Sowmiyan Mori
India's airlines operate in a liberal environment in both the domestic and international spheres.
There is no shortage of competition.
Carriers are free to operate any domestic routes without seeking permission from the government, and without restriction on pricing.
Liberal approach to bilateral air services agreements with key overseas markets, resulting in greater access for foreign carriers.
The country's airlines operate a relatively young and modern fleet
Ensuring a high quality passenger experience, improved safety and good operational reliability.
India's airlines offer a good quality product in each of the operating models in existence.(Kingfisher-5 Skytrax rating, Jet Airways-3 Skytrax rating)
The LCCs offer a comfortable, efficient and reliable service.
On-time performance, least flight cancellations
Economic growth has been the primary driver of air traffic
Outlook for growth and consumption has improved, which is a positive for the aviation industry.
Foreign Equity Allowed:49% Foreign Equity & 100% NRI investment allowed
The rapid growth in air traffic over the last few years exposed the deficiencies of airport infrastructure across the country.
Operate well above design capacity.
Congestion in the terminals and on the runways delivered a poor experience for the passenger and a costly, inefficient operating environment for the airlines.
Upgrade of non-metro airports remains behind schedule
Limited investment that has taken place in improving infrastructure for air traffic management.
Leads to expensive aircraft holding patterns, indirect flight paths and sub-optimal use of runways.
Air India, is in a dire situation.
With no clear direction, management instability at the top and continuing issues with the integration of Air India and Indian Airlines.
India's carriers have accumulated billions of dollars in losses and debt.
Due to intense competition which has been perpetuated, airlines have struggled to raise fares to break even levels.
High Cost Structure:
Operates in high cost environment- taxation structure.
Taxation on fuel, which can increase the cost to 60% above the international benchmark.
Limitations of airport infrastructure also increase costs as carriers are unable to schedule fast turnarounds reduced aircraft utilisation.
High quality ancillary services such as MRO and training are not currently available in India
Insufficient skilled technical and management personnel.
lack of in-depth experience and knowledge at all levels.
Absence of high quality training infrastructure in-country
Shortage of qualified safety inspectors(India has been put on notice that unless this issue is addressed, it may be relegated to a Category II nation, which would mean that Indian carriers would not be permitted to increase services to the US.)
Trips per capita remain low even by the standards of other developing countries.
On the international front, less than 1% of Indians travel overseas each year.
India is ideally positioned as a major aviation hub at the crossroads between Europe, the Middle East and Asia Pacific.
Opportunity to leverage its huge home market to compete with these longer established hubs.
Lower Costs, Higher Quality:
Improvements in airport and airspace infrastructure
Development of indigenous training and maintenance facilities and the potential for fiscal reform
Opportunity for India to develop as a global outsourcing hub in areas such as aerospace manufacturing, MRO and training.
Middle East Aviation:
The carriers of the Gulf are aggressively expanding in India-with high frequencies from multiple destinations to their hubs, from where passengers can access extensive global networks.
Inbound international traffic in particular is sensitive to such events. Similarly the potential for India to develop as a global traffic and services hub is contingent upon it being seen as a safe and attractive destination.
Prof. R. Srinivasan
2nd April, 2014