copy of 19312717 final 707 version 3
TRANSCRIPT
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INDIAN
AIRLINES
ARPIT PATEL
RITA ISSRANI
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9.Critical Factors for success
10.Poreters Generic Strategies
11.Swot Analysis
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Introduction To Indian Aviation
Sector
In 1932, JRD Tata, a visionary launched Indiasfirst scheduled airline, Tata Airline .
In early 1953, a joint sector company, Air IndiaInternational Ltd. was established by theGovernment of India and Air India (earlier Tata
Airline) .
By 1962, eight private airlines were merged to
form Indian Airlines Corp., namely DeccanAirways, Airways - India, Bharat Airways,
Himalayan Aviation, Kalinga Air Lines,Indian National Airwa s Air India Air
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The Change
There has been a marked change in the civil
aviation scenery in India. Whereas prior to 1992 when the two public
sector airlines, namely Air-India and IndianAirlines enjoyed a monopoly in the domesticsector, today a dozen airlines are competingfor a market share.
After 1992 ,many Airlines company came intoexistence as government adopted OPEN SKYPOLICY, made LIBERALIZATION andPRIVATIZATION in India.
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The substantial growth of customer traffic
in Indian aviation industry is mostly dueto:
low fares offered by Low Cost Carriers(LCC).
Scheduled domestic air services are now
available from 122 airports as against just50 earlier.
Numbers of Flights operating: 2500 perday.
International Pla er as well as domestic
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THE PLAYERS
PublicplayersAir India,
Private players -AirDeccan, Air Sahara,GoAir Airlines, IndiGo
Airline, Jagson Airline,Jet Airways, KingfisherAirline, ParamountAirways, SpiceJetAirlines
Start up players -Omega Air, Magic Air,Premier Star Air andMDLR Airlines.
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Current Market Share
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DETERMINE OF PRICE1.ATF
ATF refers to Air Turbine Fuel whichis used by airlines in its operations.
ATF contributes to the 40 % of operationcost
It includes freight charges from gulf to India
,Customs Duty, Domestic Transportationand various taxes.
India usually Pay higher ATF charges ascompared to other countries.
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2.Lease Rental
Private operators except Air India haveleased aircraft from USA and Europe
They pay on average $375000 to
$500000 per month depending on theaircraft
They contribute almost 33 % of
operational cost
They generally have to pay their rents indollar terms
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3.Other factors
Advertising and Promotional Expenses
Airport charges
Technology employed by the airlines
Current Financial position
Prices set by other airlines competing in the
present environment.
Pilot fees
Government regulation.
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No Frills- Air Deccan
Air Deccan use NO FRILLS strategies. It is a 'no frillsairline', meaning that the airline has cut out all theadd-on costs of travel and focuses on gettingpeople from one location to another safely
E.g. Air Deccan offered airfares as low as Rs 500 plustaxes on the Mumbai-Delhi sector.
Air Deccan's normal fares are much lower than what
passengers are used to paying for air travel on JetAirways, Indian Airlines or Air Sahara.
Now, Air Deccan known as KINGFISHER RED.......
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Indian Airlines
Use frequent flyer programmes (FFP).
A frequent flyer program (FFP) is a loyalty
program offered by many airlines. Typically, airlinecustomers enrolled in the program accumulatepoints corresponding to the distance flown on thatairline. Accrued points (also known as frequent flyer
miles) can be redeemed for free air travel; for othergoods or services; or for increased benefits, suchas airport lounge access or priority bookings.
APEX FARE
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Kingfisher Airlines Limited, is a major Indian airline.
Kingfisher operates more than 400 flights a day and has a network
of 72 destinations, with regional and long-haul international
services.Kingfisher Airlines, through one of its holding companies
United Breweries Group has a 50 percent stake in low-cost
carrierKingfisher Red formerly known as Air Deccan.
Kingfisher Airlines is the first airline in India to extend its
King Club frequent flyer program to its low-cost carrier as
well. Passengers can earn King Miles even when they fly
Kingfisher Red, which they can redeem for free tickets to
travel on Kingfisher Airlines or partner airlines.
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JET AIRWAYS
Started commercial airline operations on 5th May 1993
Headed by Mr Naresh Goyal
Operates three airlines- Jet Airways, Jet Lite and Jet
Airways konnect
Jet Lite was earlier Air Sahara which was taken over by Jet
Airways
12th April 1997
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Schemes Offered By Jet Airways :
Frequent Flyer Scheme
APEX pricing Scheme
Cash Back Offer
Jet Privilege Scheme : use its points in international
hotel
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Scheme preferenceWith the entry of new players in the market, airlines arecompeting for passengers on non-price parameters. This
increases the product differentiation in order to decreaseelasticity of demand in the market. Given the keydifferentiators that substitute for price, consumers have ratedApex fares as their most preferred scheme. Now, IndianAirlines, Jet and Air Sahara offer apex fares. Next mostpreferred to Apex fares is the frequent flyer program, a trendnoticed predictably in the high frequency repeat users andthose traveling on business.
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WHAT IS APEX ?
Apex refer to ADVANCE PURCHASE EXCURSION FARE.
It is a non-cancellable return fare offered at a heavy discount
on the conditions:
1. To get the apex fares, tickets have to be booked at least
seven days in advance.The earlier you book, the higher the
discount.
2. Tickets are purchased at least 7 to 20 days or 21 days
or 21 to 29 days or above in advance
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Disadvantages of APEX
Planning air travel three weeks in advance was
not very convenient
The tickets in this scheme were non
refundable.
No flexibility as tickets under this scheme could
not be rescheduled.
Very few tickets were offered by aircraft
companies under this scheme.
It led to the congestion of airports.
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Effects of APEX
Led to increase in the number of customers.
Loss of airline companies minimized as with the
increase of passengers the aircraft ran to their full
capacity.
It brought a veritable boom in tourism sector.
It was able to lure the middle class people who
referred to travel b trains.
FACTORS WHICH
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FACTORS WHICH
HELPED TO BRING
DOWN THE PRICE
1. Open Sky Policy:
The signatories are allowed to fly over the skies of India
EFFECT:
--Tourist arrivals in India are expected to grow exponentially,
-- The increase in number of international tourists will
percolate down to increase in domestic passengers
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2. Deregulation:
Deregulation is the removal or simplification of government rules
and regulations that constrain the operation of market forces.
Deregulation does not mean elimination of laws against fraud, but
eliminating or reducing government control of how business is
done, thereby moving toward a more free market.
EFFECT:
Entry into the air travel industry is not only cheaper, but also
affordable to new operators
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3.Modernization of Airports
The Indian Cabinet hasapproved a proposal
mandating the state-run
airport operator to modernize35 airports in second-tier
cities within the next two
years.
Effect:
Improved infrastructure would lead to rise in no.
of travelers and also so
would encourage more operators.
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4. Abolishment of
Taxes
Foreign Travel Tax (FTT) Rs500 and
15% inland air travel tax (IATT)
charged on Basic airfare has been
abolished by the government to
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5. Reduction on
Excise Duty
The excise duty on ATF was reduced from 16 to 8 per
cent. The average domestic price of ATF is 99 per cent
higher than prices in foreign countries and affects
domestic airlines drastically as ATF accounts for 30 to 40
per cent of operating costs
Effect :
It would lead to low fares thus giving a boost to air
travel
Effect: It would lead to increase in imports.
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6. Landing Charges abolished
Landing charges for aircraft with less than 80
seats were abolished
Landing charges for larger aircraft have been
reduced by 15% with effect from February
11,2004.
Effect: Reduction in cost.
C h i t
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Consumer choice parametersThe following chart provides information which are decisive
in making the choice of the Airline.
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CRITICAL FACTORS FOR SUCCESS
STEPS THAT GOVERNMENT SHOULD TAKE
Implement code sharing i.e. selling seats on a flightoperated by another carrier. This saves direct costs andincrease market presence
Eliminate regulatory structure completely to boost newentrants and allow more profit for existing
Eliminate the fuel tax
Eliminate category III restrictions i.e. operator needs todeploy on less popular routes as well
Improve quality of airports
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STEPS THAT INDUSTRY SHOULD TAKE
Reduce labor costs
Simplify flight operations
Offer more transparent pricing
Get smart on fuel
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Porters Generic Strategy
Cost Leadership
Focus
Differentiation
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Swot analysis
STRENGTHS:
passengers would always continue usingthis mode of transportation
Ensure leisure travel along with timesaving
Capacity expansions continuouslyhappening in this industry
The comfort level of customer is the primefocus of this industry now that competitionhas set in to such a high level
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Weakness:
Excess capacity
More complex flight operations
Mounting debt high investment to debtratio
Cost to revenue ratio is also very high
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Opportuni t ies:
create a niche by operating short haulflights catering specifically to certain
group of customers
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Threats:
Labor problems
Competition increasing from the LCCs
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Thank You