A TYBMS Project Report

Airlines – A Prominent Service Sector

Submitted To Prof. Jalpa Parekh of BMS Department

Group Members:

Danish Choudhari (40)Jaffer Choudhari (41)Khatija Daudi (06)Mayuri Joshi (08)

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ACKNOWLEDGEMENT

We are greatly honoured and privileged to thank and acknowledge those people who have contributed directly or indirectly in making this project successfully.

Firstly with gratitude, we would thank Our Principal Sir, Prof. A.E. Lakdawala for giving us the opportunity for making this project and extracting good knowledge from this project. We also thank Our Joint-Principal, Prof. Kamala A.; Vice-Principal Prof. Mallika and Our BMS Co-ordinator, Prof. Arshi in this context. With immense gratitude, we would like to thank Our Subject Co-ordinator, Prof. Jalpa Parekh, for guiding us throughout the project.

We would also thank all the sources from whom we have collected the data and lastly our

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group members who have been supportive and co-operative throughout.

Sr. No.

Contents Pg. No.

1. Executive Summary

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2. Introduction 53. Origin of Aviation

Sector in India6

4. Past Performance 75. Present

Performance7

6. Future Plans 97. Contribution to

the Indian economy

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8. Key Players 12

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9. Market segmentation

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10. Marketing Mix 1611. New innovations 2312. Conclusion 2513. Bibliography 26

EXECUTIVE SUMMARY

The Aviation industry in India encompasses a wide range of services related to air transport such as passenger and cargo airlines, unscheduled service operators --- private jets and helicopters, airport management, and support services like Maintenance, Repairs and Overhaul (MRO), ground handling, in-flight catering, and training.

The Aviation sector has reaped massive benefit from the entry of private carriers, especially from those of the low fare ones. The growth of the airlines sector has caused a sharp upturn in demand for allied services including MRO, ground handling, and catering services. The booming aviation industry, along with its tertiary services, has wreaked a major talent crunch, boosting opportunities for training service providers. The ever-expanding Indian economy and increased demand for trade has pushed the need for air cargo services to a new high. Increasing number of entrants in the sector has forced airports to expand their cargo handling capacities.

The aviation sector is still a small part of the travel and transportation services sector in India. 2006-07 posted annual passenger traffic of about 96 million, as compared to nearly 6 billion passengers carried by the railways. The industry has already bumped into several challenges; inadequate infrastructure being the most crucial. The airlines suffered losses of

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around USD 500 million in 2006-07. The high cost of operations, intense competition, and unsustainably low fares have contributed to these losses. While initiatives have been taken to remove bottlenecks to growth, a need for further investments in capacity is felt more than ever. A recent spate of mergers, however, has come to some relief.

The decelerating profit margin does not entail a slump in revenue generation. It is the increasing costs that have thrown the aviation industry into the present plight. India’s aviation sector stands up to the crisis and races against its fastest growing global competitors. Improved affordability and connectivity add to the expected improvement in both passengers and cargo traffic. Large public and private investments in air travel infrastructure, supported by government initiatives, are expected to pour in.

INTRODUCTION

The Indian aviation industry is one of the fastest-growing aviation industries in the world. 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% share of the domestic aviation market. Earlier air travel was a privilege only a few could afford, but today air travel has become much cheaper and can be afforded by a large number of people. In addition to these factors, the emphasis on modernization of non-metro airports, fleet expansion by airlines, service expansion by state owned carriers, development of the maintenance, repair and overhaul (MRO) industry in India, opening up of new international routes by the Indian government, establishment of new airports and renovation and restructuring of the existing airports have added to the growth of the industry.

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Air transportation in India now comes under the direct control of the Department of Civil Aviation, a part of the Ministry of Civil Aviation and Tourism of Government of India. Aviation by its very nature constitutes the elitist part of our country's infrastructure. This sector has substantial contribution towards the development of country's trade and tourism, providing easier access to the areas full of natural beauty. It therefore acts as a stimulus for country's growth and economic prosperity.

With a compound annual growth rate (CAGR) of 18 per cent and 454 airports and airstrips in place in the country, of which 16 are designated as international airports, Union Civil Aviation Minister, Mr. Praful Patel has stated that the aviation sector will witness revival by 2011.

Origin of aviation sector in India

The origin of Indian civil aviation industry can be traced back to 1912, when the first air flight between Karachi and Delhi was started by the Indian State Air Services in collaboration with the UK based Imperial Airways. It was an extension of London-Karachi flight of the Imperial Airways. In 1932, JRD Tata founded Tata Airline, the first Indian airline. At the time of independence, nine air transport companies were carrying both air cargo and passengers.

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These were Tata Airlines, Indian National Airways, Air service of India, Deccan Airways, Ambica Airways, Bharat Airways, Orient Airways and Mistry Airways. In early 1948, Government of India established a joint sector company, Air India International Ltd in collaboration with Air India (earlier Tata Airline) with a capital of Rs 2 crore and a fleet of three Lockheed constellation aircraft. The inaugural flight of Air India International Ltd. took off on June 8, 1948 on the Mumbai-London air route. The Government nationalized nine airline companies vide the Air Corporations Act, 1953. Accordingly it established the Indian Airlines Corporation (IAC) to cater to domestic air travel passengers and Air India International (AI) for international air travel passengers. A third government-owned airline, Vayudoot, which provided feeder services between smaller cities, was merged with IAC in 1994.

Past performance

Around 2006-2007, the airlines began showing signs of financial distress. The combined losses for Air India and Indian Airlines in 2006-07 were Rs 770 crores (Rs 7.7 billion). After the merger of the airlines, this went up to Rs 7,200 crores (Rs 72 billion) by March 2009. This was followed by restructuring plans which are still in progress. In July 2009, SBI Capital Markets Ltd was appointed to prepare a road map for the recovery of the airline. The carrier sold three Airbus A300 and one Boeing 747-300M in March 2009 for $18.75 million to survive the financial crunch.

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Analysts opined that a combination of factors such as high aviation turbine fuel (ATF) prices, rising labor costs and shortage of skilled labor, rapid fleet expansion, and intense price competition among the players were responsible for the losses in this sector. The problem was also compounded by new players entering the industry even before the existing players could stabilize their operations. It was estimated that the industry as a whole could face losses of over Rs. 22 billion in 2006-07. Some experts expect the industry to consolidate in the near future. The government also was keen to restrict the losses in this sector by closer scrutiny of the business plans of new entrants, conducting quarterly financial audits, etc.

Present performance

Revolutionized by privatization along with active participation of the foreign investors, the Indian aviation industry has experienced phenomenal transformation over the last couple of years. From being a service catering to the needs of the privileged group only it is now well within the reach of middle class population. This has been the result of increased competition in the Indian aviation industry due to the presence of a wide variety of private and public airlines with their low price tags. It was further helped by the entry of Air Deccan, the first budget airline in India, offering unbelievable tariffs to the customers.

It is a phase of rapid growth in the industry due to huge build-up of capacity in

the LCC (low cost carriers) space, with capacity growing at approximately 45% annually. The growth in supply is overshadowed by the extremely strong demand growth, led primarily by the conversion of train/bus passengers to air travel, as well as by the fact that low fares have allowed passengers to fly more frequently.

In the financial year 2005-06 there has been a significant 22.3 percent growth in passenger traffic in the domestic airports while the aircraft movement recorded a growth by 14.2 percent. In terms of the number of flights Jet Airways secures the top position with 8,168 flights operating till June 2005. Indian Airlines is in second position with 7,562

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flights. Sahara (3,225 flights), Air Deccan (2,889 flights), Spice Jet (483 flights) and Kingfisher Airlines (267 flights) come thereafter in the list of domestic and national carrier operators. With an increase in traffic movement during December 2009 and increase in revenues by almost US$ 21.4 million, the Airports Authority of India seems set to accrue better margins in 2009-10, as per the latest estimates released by the Ministry of Civil Aviation. This is being primarily attributed to increase in the share of revenue from Delhi International Airport Limited (DIAL) and Mumbai International Airport Limited (MIAL).Passengers carried by domestic airlines from January-February 2010 stood at 8,056,000 as against 6,761,000 in the corresponding period of 2009—a growth of 19.2 per cent, according to a report released by the Ministry of Civil Aviation.

According to the reports of PTI on Thursday, May 13, 2010, between January and April, domestic airlines carried around 1.62 crore passengers as against the 1.33 crore during the same period last year. This came against the backdrop of continued downward trends witnessed in the global aviation sector since it was hit by recession and experienced negative growth since 2008. In contrast, the scheduled Indian airlines flew a total of 41.88 lakh domestic passengers in April against 39.03 lakhs in March this year. Of these, Jet Airways and JetLite combined carried 10.84 lakh, Kingfisher 8.98 lakh, while Air India (domestic) remained at the third spot with 7.62 lakh passengers. Among the low cost carriers, 6.58 lakh passenger preferred to fly with IndiGo, SpiceJet carried 5.27 lakh and GoAir 2.46 lakh while all-business airline Paramount Airways carried just 13,000 passengers during April, official figures showed.

Barring Kingfisher and Paramount Airways, all other airlines witnessed a growth in their market share in April in comparison to their shares in the month of March. Kingfisher witnessed the biggest fall in its market share from 22.6% in March to 21.4% in April, while Paramount's share dipped from 1.6% to a mere 0.3%. Market share of Jet Airways and JetLite combine remained almost same. Its share was 25.8% in March which increased to 25.9%. Among the gainers, market share of troubled national carrier Air India (domestic) went up from 17.6% in March to 18.2% in April, while that of IndiGo went up from 15% to 15.7%. Similarly, SpiceJet cornered a share of 12.6% in April against 12% in March and GoAir 5.9% against 5.4%, figures showed.

FUTURE PLANS

The boom in the aviation sector is likely to generate nearly 2.5 lakh jobs by the year 2010. The study says that the civil aviation sector is also set to become Rs 35,000-crore industry by the same time.

Scheduled Aircraft - The total aircraft fleet is likely to reach 1000 by 2020, including replacement of the current fleet of 312 aircraft, with an estimated value of US$80bn

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The growth of India’s aviation sector has the potential to absorb up to US$120 billion of investment by 2020.

Air Traffic - CAPA research projects that domestic passenger traffic will reach 150-180 million by 2020, with international traffic in excess of 50 million.

General Aviation - Market for 500 + aircraft in the Non-Scheduled Category by 2020 and 300 aircraft in the private category use. Estimated Investment of US$ 4 billion.

Airports – US$ 30 billion plus investment requirement by 2020(Included 9 billion already committed).

Indian aerospace companies are growing too. Hindustan Aeronautics Limited (HAL) was ranked 40th in Flight International's list of the top 100 aerospace companies last year.

The AAI has drawn ambitious long term plans to meet challenges posed by ever increasing air traffic and advancement in aircraft technology. Some of the major plans for implementation of ICAO CNS/ATM programme are:

Replacement of ground based Communication, Navigation and Surveillance (CNS) with Satellite based CNS system.

Establishment of Differential Global Positioning System (DGPS). Automation in the Air Traffic Control Services. Establishment of Automatic Dependent Surveillance (ADS). Coverage of the Indian land mass through Satellite Communication, VHF Data Links

and Monopulse Secondary Surveillance Radar with Mode 'S' Capability.

CONTRIBUTION OF AVIATION SECTOR TO THE INDIAN ECONOMY

The Role of Aviation Industry in India GDP in the past few years has been phenomenal in all respects. The Aviation Industry in India is the most rapidly growing aviation sector of the world. With the rise in the economy of the country and followed by the liberalization in the aviation sector, the Aviation Industry in India went through a complete transformation in the recent period.

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The growth in the Indian economy has increased the Gross Domestic Product above 8% and this high growth rate will be sustained for a good number of years.

Air traffic has grown enormously and expected to have a growth which would be above 25% in the travel segment.

In the present scenario around 12 domestic airlines and above 60 international airlines are operating in India.

With the growth in the economy and stability of the country India has become one of the preferred locations for the trade and commerce activities.

Aviation Industry in India has placed the biggest order for aircrafts globally. Aviation Industry in India holds around 69% of the total share of the airlines traffic in the region of South Asia

Future challenges:

Initializing privatization in the airport activities

Modernization of the airlines fleet to handle the pressure of competition in the aviation industry

Rapid expansion plans for the major airports for the increased flow of air traffic

Immense development for the growing Regional Airports

FDI Policy:

The Reserve Bank of India (RBI) announced that foreign institutional investors might have shareholdings more than the limited 49% in the domestic sector.

In Airports:

Foreign equity up to 100% is allowed by the means of automatic approvals pertaining to establishment of Greenfield airports.

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Foreign equity up to 74% is allowed by the means of automatic approvals pertaining to the existing airports.

Foreign equity up to 100% is allowed by the means of special permission from Foreign Investment Promotion Board, Ministry of Finance, pertaining to the existing airports

In Air Transport Services:

Up to 49% of foreign equity is allowed by the means of automatic approvals pertaining to the domestic air transport services.

Up to 100% of NRI investment is allowed by the means of automatic approvals pertaining to the domestic air transport services.

Key PLAYERS

1) Kingfisher launched its services in May 2005. Dr. Vijay Mallya is the chairman and the CEO of Kingfisher airlines.

2) Air India was founded by J. R. D. Tata in July 1932 as Tata Airlines, a division of Tata Sons Ltd. It is India's oldest and largest airline. Its corporate office is located at the Air India Building at Nariman Point in South Mumbai. It is the 16th largest airline in Asia.Air India is facing financial crunch. Air India has 44 worldwide destinations. In the financial year ending March 31, 2006, Air India has made a

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net profit of Rs.97 million; earned a revenue of Rs.87,480 million - representing a growth of almost 15 per cent over the previous year.

3) Air Sahara is a privately owned airline operating scheduled services connecting all metropolitan centers in India. The airline was established on 20th

September, 1991 and began its operations on December 1993 with two Boeing 737-200 aircraft as Sahara Airlines. Sahara Airlines was rebranded as Air Sahara on 2 October 2000.

4) Jet Airways started Indian commercial airline operations in May 1993. Naresh Goyal is the founder & chairman. Jet Airways, along with Air Sahara, is the only airline which survived the dismal period of 1990s when many private airlines in India were forced to close down. Jet Airways operates over 300 flights to 43 destinations. It currently controls about 32% of India's aviation market. In April 2007, they acquired Air Sahara.

5) SpiceJet is a low-cost airline. Their marketing theme "offering low 'everyday spicey fares' and great guest services to price conscious travelers". Their aim is to compete with the Indian Railways passengers travelling in AC coaches.

6) Indigo Airlines is a new and private domestic airline. It ordered 100 Airbus A320 aircraft during the 2005 Paris Air Show. The new low-fare carrier has started operations from August 4, 2006.

Name of the players Market share

Kingfisher Airlines and Kingfisher Red (previously Air Deccan)

28%

Jet Airways and Jet Lite (previously Air Sahara)

25%

Air India and Indian (previously Indian Airlines)

16%

Indigo 14%SpiceJet 12%

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GoAir 3%Paramount airways 2%MDLR airways 0.004%

MARKET SEGMENTATION

To segment a market is to identify the fact that certain parts of the market are different from others. Market segmentation is a notion associated with target marketing because in target marketing, products or services are tailored for the needs of different clientele. This approach is quite different from the mass marketing concept because in mass marketing, all commodities are produced in bulk and they are assumed to meet similar consumer needs. While this approach has its advantages, one cannot ignore the fact that it

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disregards one of the most important rules in marketing; that consumer needs and preferences rarely collude. In general there are three approaches to market segmentation:

In undifferentiated strategy, all the customers are treated as same and no particular efforts are made by the firm to satisfy particular groups. This works in case of commodities.

In case of concentrated strategy, one firm chooses to focus on one of the several segments that exist leaving others to the competitors. For e.g. Deccan airlines focuses on price sensitive customers.

But many airlines go in for differentiated strategy wherein they offer high prices tickets to those who are inflexible in that they cannot tell in advance when they need to fly. Mostly, this category is for business travelers filling up the plane partially. And the remaining seats are given to price sensitive consumers ordering tickets in advance.

There are three types of segmentation variables:

Demographic segmentation: Demographic segments depend on a series of attributes. This is one of the most common marketing segments. Under this, products are segmented on the basis of age, sex, income levels, location, ethnicity, etc. for e.g. Jet Airways have segmented East and west India on the basis of their food preferences like west prefer vegetarian whereas east prefer non-vegetarian. Jet airways has two economy class subsidiaries, namely Jet Lite and Jet Airways Konnect.

Psychographic segmentation: Psychographic segmentation refers to the use of consumer lifestyles as a basis for classifying ones' customers. Since different people have different interests and activities, then such an approach would be plausible in marketing. In this approach, companies may classify their consumer on the basis of their values. Jet airways provide Golden Jet Escapes and Jetkids which is a special program for children aged 2 to 12, Jet mall in partnership with ELVY-premier and domestic.

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Behavioural segmentation: In this category, consumers are classified according to consumer reception of company products. Some consumers may use products frequently, while others may be first timers. In other instances, other consumers may be occasional purchasers. Jet airways offer Jet Privilege for frequent flyers and Jet Mobile and Air India is still preferred airline for the government staff and old clientele.

MARKETING MIX

The marketing mix refers to the blend of ideas, concepts & features which marketing management put together to best appeal to their target market segments. Each target segment will have a separate marketing mix, tailored to meet the specific needs of consumer in the individual segment.

Service marketing managers have found that the traditional four P's of marketing are inadequate to describe the key aspects of the service marketer's job. The traditional marketing mix is said to consist of the following elements of the total offering to consumers: the product (the basic service or good, including packaging, attendant services

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etc.); its price; the place where the product is made available (or distribution channels - not generally a real issue for most services, except perhaps for repair and maintenance); and promotion (marketing communication: advertising, public relations and personal selling).

A. Product Mix

The airline industry is a service that satisfies customer needs for travelling. In the airline the customer can be divided into two segments: Business and Leisure. As we further became a global economy and communication between international companies intensifies, business travel continues to increase. Some of the problems like punctuality, political instability, fuel prices, regional problem, weather conditions, etc. are the major concerns of an airline industry which should be avoided in order to provide better products.

The services provided inside the flight include the core service of travel, crew, ambience and comfort, in-flight entertainment etc. This is highly variable across competitors as per brand and different classes of travel. The on-the-ground services include a convenient airport with car parking facilities, waiting lounges, duty free' shopping quick and efficient checking of baggage, efficient service at reservation counter, transport to the airplane, etc.

Levels of Product:

1. Core Product: At this level the core benefit is converted into a basic service package. Core benefit is the benefit which the customer is actually buying. In our case it is the service of traveling or transportation of goods. The basic or the core product includes from buying the ticket to reaching the destination. The low cost airlines like Indigo, GoAir and SpiceJet offer the product at this level and compete on the basis of price.

2. Formal/Actual/Expected Product: This includes a set of services and products that the consumer normally expects to receive along with the core benefit. For example: In flight snacks, comfortable seats, on time departure and arrival etc. The low cost model of airlines labels these addition services as ‘frills’ and tries either to eliminate or charge separately for these.

3. Augmented Product: An augmented product exceeds customer’s expectations. For example, serving hot food, warm and friendly crew, provision of in flight entertainment etc. At this level all possible augmentations are offered and the companies try to encompass new and innovative ways to satisfy customers. Where Emirates airline offers onboard shower spas for the first class customers, Thai Airways offers a limousine service at the airport and Virgin Atlantic offers an onboard massage. Jet Airways, Kingfisher Class, Air India IC compete in this segment. Sahara

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airlines offer six types of cuisines like vegetarian, fat free, diabetic, etc.

4. Potential/Future product: As mentioned above, the customer’s needs keep on changing, the future is unknown. The customers might look for inexpensive traveling like air taxis, supersonic speed, etc.

As the level moves from the core benefit to the potential product, the competition moves from price to service and experience of the customer.

Kingfisher airlines’ success can be related to the differentiated features provided by it like:

Roving agents: A roving agent is a check-in counter on the move. Passengers with hand baggage are required to stand in queues at the check-in counters. The roving agents come to the customer and assist them.

Different check-in options: The airlines allow its customers to do a web check-in from its website apart from the airport check-in.

Special care for unaccompanied minors, senior citizens, etc: The airline takes the responsibility of escorting the children safely to the arrival terminal and after verifying the credentials of the assigned person, the child is released. Disabled passengers are assigned a wheel chair.

In-flight treatment: Every seat is treated to an individual T.V with Live T.V as well as pre-recorded entertainment channels and radio.

B. Promotional Mix

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The aims of promotion fall into three main categories: to inform, to remind, & to persuade. It will always be necessary to inform prospective consumers about new products & services, but other issue may also need this type of communication to consumers; new uses, price changes, information to build consumer confidence & to reduce fears, full description of service offering, image building, etc. Similarly consumers may need to get reminded about all these types of issues, especially in the off-peak season.

Kingfisher has adopted a well rounded approach to reach out its customers. Kingfisher has 360 degree promotion strategy. They promote through all possible media like T.V., radio, print, outdoor, malls multiplexes, clubs and their in-flight magazine. They have tied up with various brands like Tata Tetley, Pepsi, Microsoft, Inox, ICICI bank, etc. It has also issued a co-branded credit card in association with ICICI Bank. The card owner earns 100 point on every spend which can be converted into King Miles. King Club is a airline’s loyalty program. As a member of the club, customers enjoy a wide range of exclusive discounts and privileges. The more a customer flies with Kingfisher, the more he is rewarded. On the promotional front, Kingfisher Airlines has signed up the latest diva of Bollywood Ms. Deepika Padukone as the Brand Ambassador.

C. Price Mix

Pricing in airlines is a fairly complex issue, since there are price variations due to variations in the level of demand, particularly because of seasonality, when every airline gives price discounts & competition is tough. An airline is always faced by high levels of fixed costs, leading to variants of cost-plus pricing or ROI as key determinants of pricing levels.

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It is important to include pricing tactics which exploit price sensitivities fully. It differentiates service levels & offer higher price ‘value added services’, as in business class air travel. We have different authorities to manage and control domestic as well as international air transport business. The Ministry of Civil Aviation, the Indian Airline Corporation, the National Airport Authority, the International Airport Authority of India and the Air India Corporation are the bodies directly or indirectly influencing the process of pricing decision. The concept of fair price is very important. Pricing can be classified in 3 ways:

Cheap value pricing: This method of pricing is used to undercut the competition and trigger immediate purchase. Though the unit profits are low, the overall profits are achieved. In order to meet the competition and consolidate their position in the market, Air India and Indian Airlines have their price.

Value for money pricing: In this method, average price is charged for the product and it is emphasized that it represents excellent value for money at this price. This enables the airline to achieve the good level of profit.

Premium pricing: In this method, the prices are set above the market price either to reflect the image of quality or the unique status of the product. Premium pricing succeeds if the company enjoys a strong reputation that the brand image alone is sufficient or the product features are not shared by its competitors.

Kingfisher Airlines has been termed as the “first full frills – true value carrier”. The airline has a well defined target audience which is the Sec A and Sec B+ of the Indian economy which falls under the age group of 25 – 45 years with high disposable income. This section is modern and trendy looking for high flying experience even though they have to shell out more. Gourmet cuisine and in-flight entertainment is offered on board.

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D. Place Mix

The air transport organisation has to make sure that the prospects don’t face any difficulty while buying the tickets and make necessary arrangements for the confirmation of the booking. It is also confirmed that the users booking their luggage do not face any inconveniences. Another dimension of place is related to the location and management of offices of airways, travel agent, tour operators, transport operators etc. Easy accessibility should be the main criteria in selecting the place. The place should be safe, well connected with all weather proof roads, where all the required infrastructure facilities are available. The water and sanitation facilities for the users and comfortable seating arrangements must be made available. Lighting and ventilation facilities should also be taken care of. The interior decoration furnishing, plantation needs aesthetic sense so that the user forms a positive opinion regarding the airway services. In airlines, they utilize more than one method of distribution: they sell tickets through travel agents and sell seats to tour operators.

In Place Mix, Kingfisher includes following:

Connectivity: Kingfisher flies to 38 destinations across India which covers a wide geography and connects all metros and major cities. It also has connectivity among the two tier cities of the country.

Frequency of flights: Kingfisher operates 218 flights everyday across its 38 destinations. The frequency between the four metros and other major cities accounts for maximum number of take-offs every day.

Booking of tickets: The customers have the option to book ticket at the airport or through travel agent or by logging on the website.

E. People Mix

Many services require personal interactions between customers and the firm's employees and these interactions strongly influence the customer's perception of service quality. For example, travel through airlines can be greatly affected by the way of serving, knowledge ability, helpfulness of the staff - both crew members as well as ground staff. One's impression about the airline and willingness to return are determined to a large extent by the brief encounters with the front-desk staffs, crew members, helpers, airhostess and so on.

After all, these employees must believe in what they are doing and enjoy their work before they can, in turn, provide good service to customers. Management policies are

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considered to be of particular strategic importance for delivering high-quality services. Establishing a customer-oriented culture throughout the firm and empowering employees to provide quality service cannot be established merely by putting up inspiring posters. Management leadership, job redesign and systems to reward and recognize outstanding achievement are among the issues that a successful service manager must address. The term "internal marketing" has been coined to characterize the sets of activities a firm must undertake to win over the hearts and minds of its employees to achieve service excellence.

The real winning factor for Kingfisher is the quality of the staff service and it is of course critical that the airline is able to sustain quality levels as they experience continued and rapid expansion. The crew undergoes rigorous training programmes. It has also instituted Kingfisher Training Academy to cater to the growing demand of trained service oriented professionals. This institute provides intensive training on Airlines Orientation covering Airline Rules and Regulations, Cabin Familiarization, Gallery Management and Announcement Delivery.

F. Physical Evidence Mix

This element of the expanded marketing mix addresses the "tangible" components of the service experience and firm's image referred earlier. Physical surroundings and other visible clues can have a profound effect on the impressions customers form about the quality of the service they receive. The "services cope" - that is, the ambience, the background music, comfort of seating and the physical layout of a service facility - can greatly affect a customer's satisfaction with a service experience. In particular, all physical evidence must be designed to be consistent with the "personality" that the firm wishes to project in the marketplace.

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Kingfisher airline’s physical evidence includes:

Fleet: Kingfisher airline has a brand new fleet of aircraft comprising of 18 ATR 72, 4 A 319s, etc.

Interiors: All aircrafts have design interiors, what influences customers is the bold red colour.

Cleanliness: all aircrafts are well maintained for cleanliness and a pleasant experience.

G. Process Mix

Because customers are often involved in the production of services, the flow and progress of the production process is more important for services than it is for goods. A customer who buys a television set is not particularly concerned about the manufacturing process that made it. But the customer at the airport is not merely interested in the end result i.e. the travel but the entire experience of arriving at the restaurant - of being seated, enjoying the ambience, check in, security checks, being seated in the airplane - is important.

The customer service department deals with a number of processes involved in making marketing effective in an organisation, for e.g. processes for handling customer complaints, identifying customer needs and requirements, etc. Kingfisher has following processes:

Easy booking of tickets - 24/7 customer service, web booking and travel agents. There is a personalized valet service provided at all airports. The valet service staff

assists the passengers’ right from the time they reach airport till the check-in and also upon the arrival at the destination where the staff guides the passengers to the right baggage belt and assists them with it.

The airline tries to ensure that the passengers can retrieve their baggage after they disembark from the aircraft within the shortest possible time.

New innovations

1. PMO pushes for higher FDI in airlines

The Prime Minister’s Office (PMO) has pushed for allowing foreign airlines to pick up stakes in Indian carriers along with a significant say in their management. It has asked the

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civil aviation ministry to support Indian airline companies’ plans for rapid fleet and route expansion with such a policy action. The PMO has specifically told the ministry in a recent letter to promptly include the proposal on the agenda of the group of ministers (GoM) on aviation, official sources told FE. The move is expected to lead domestic airlines to adopt global best practices, besides opening new funding vistas at a time when air traffic growth has peaked. The PMO initiative also coincides with the improved liquidity position of many foreign airlines which went through a bad patch during the economic downturn of the last two years. Currently, FDI up to 49% is allowed in domestic aviation, but foreign airlines are barred from investing on the grounds of national pride and security. The proposal is to allow at least 26% FDI by foreign airlines, which would entail their presence on the airlines’ boards. Sections of the government including the department of industrial policy and promotion, the nodal agency for FDI policy, have pitched for an even higher stake of 49%. While India’s No.1 private airline Jet Airways has opposed the move to allow foreign airlines to invest in domestic carriers, others like Vijay Mallya-controlled Kingfisher Airlines have lobbied hard for such equity infusion. Civil aviation minister Praful Patel had earlier this year said that government was considering divestment in Air India as one of the options to help the national carrier tide over the financial crisis.

Nirbhay Kumar/Indian ExpressWednesday, June 23, 2010

2. Modernisation of non-metro airports

The Airports Authority of India (AAI) is undertaking the development and modernization of all 35 non-metro airports in the country simultaneously and work is due to be completed by March 2010. Wholly owned subsidiaries of AAI are being created for the development and operation of these airports. According to the AAI, it has already awarded work orders for terminal buildings at 13 airports, and for airside development, including runway, taxiway, apron, fire station, control tower and isolation bay, at 19 airports. Two Greenfield airports at Bangalore and Hyderabad are being developed. The other two metro airports - Chennai, Kolkata -- may soon be on the modernization path. At least 10 non-metro airports are being developed as strategic airports serving the region or respective states, and at least a few more non-metro airports are being positioned strategically as regional hub airports or nodes providing better connectivity to overall airport network and feeding international network through hub/metro airports.

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With these developments in aviation infrastructure, we may also see some airports making money not purely on passenger traffic, but also by means of cargo, logistics, SEZs and real estate projects being developed adjacent to airports.

CONCLUSION

The Indian aviation industry has shown continued growth in recent years with key

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drivers being positive economic factors (including high GDP growth), industrial performance, corporate profitability/expansion, higher disposable incomes and growth in consumer spending as well as wider availability of low fares. The current growth rate in domestic and international travel exceeds 25%, the highest in the world. In the period April-September 2009, the total aircraft movements witnessed an increase of 29.6% year-on-year to 494.92 thousand aircraft movements, as compared to 318.89 thousand during April-September 2007. The Indian domestic market grew at almost 50% in the first half of 2007. On average, full service carriers are shedding a remarkable 1.5% of market share every month to low cost carriers.

With the increasing LCCs, airline travel can be afforded easily. Thus, with an intense competition prevailing in the aviation segment, airline players are trying their level best in attaining competitive edge. They use all possible tools to make an impact on the minds of their customers.

This sector has a vast scope in employment, market, customer service, etc. Customer service is the major component in any service sector. Since services are judged on the basis of credential and experience qualities, it is immensely important that an airline industry makes itself competitive enough to stand the market. They should lure the customers with all the privileges and thereby, achieve customer acquisition as well as customer retention.

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Reference Books:

Services Marketing: S.M.Jha -- Himalya Publishing House

Websites:

http://www.decisionanalyst.com/publ_art/marketsegmentation.daiwww.ibef.org/industry/aviation.aspx http://business.mapsofindia.com/india-gdp/industries/aviation.htmlwww.learnmarketing.net/servicemarketingmix.htmwww.encyclopedia.com/doc/1G1-173876196.html

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