A PROJECT REPORT ON AIRLINE INDUSTRY

Marketing plan
&
Strategy for Omega airlines

SUBMITTED TO:
SHUBRA BAHEL
SUBMITTED BY:
KARAN GAUR
RACHNA SHARMA
SAGAR DWIVEDI
VIKAS KUMAR JAIN
Table of content
1. Executive summary
 objective
 scope
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 Research methodology
2. External environment analysis
 Pest analysis
 Porter’s five force model
3. internal environment analysis
 SWOT analysis
 airline industry value chain analysis
4. competitive analysis
5. Ansoff’s matrix for omega airlines
6. STP for omega airlines
7. 7 p’s for omega airlines
8. SWOT matrix
9. Blueprinting model
10. RATER analysis
11. Moment of truth
12. Critical incident
13. Zone of tolerance
14. Service recovery
15. Bibliography

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Page | 3
 EXECUTIVE SUMMARY
This report is the analysis of airline industry as a whole. ,
competitive analysis is been done and explained in detail. In this
analysis we applied different type of models that have applied to
this analysis and try to get the results whether to enter airlines
service sector is a good decision for Omega or not . Our finding
of results tell that they have made Quit good decision by
entering into this market but they have pay some serious
attention as this is that type of service required huge investment
for entrance and exit both the cases. In this report we find all the
possibilities that might affect to them and at the same time we
suggested them solution to how to get over these problem. We
have formed an marketing plan and strategy for the same their
implication surely help them to enter in this market.

OBJECTIVES
The objective of this report is to study the external environment
of the Aviation Industry in India.
1. Subsequently, internal environment analysis is conducted
for Indian Airlines. With the help of this comprehensive
study, we have prepared a marketing plan for start-up
players.
2. To understand the utilization of strategic marketing tools
like porters five force model ,value chain analysis and

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 Tows matrix etc. and important factors responsible for the
formulation of corporate strategy

SCOPE
The scope of this report is to analyze various Marketing aspects
of theairline industry which would include the product, brands,
pricing, supply chain and logistics, marketing communications
and advertising, customer segmentation and their characteristics
and critical factors for success in this industry. The report
includes examples from various airlines across the world, but to
maintain specificity it retains an Indian perspective and
compares competitors across the Indian domestic carriers.

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the

research problem.It may be understood as a science of studying
how research is donescientifically. In it we study the various
steps that are generally adopted by aresearcher in studying his
research problem along with the logic behindthem. It is
necessary for the researcher to know not only the
researchmethods or techniques but also the methodology.

Data Source

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The data can be collected from two sources, i.e. Primary and
Secondary. Wehave collected the entire data of this project on
Airlines industry fromSECONDARY SOURCES like websites,
books, newspapers and magazines.

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 CURRENT SITUATION ANALYSIS
PEST Analysis: The Indian Airline Industry
A PEST analysis is an analysis of the external macro-
environment that affects all firms. P.E.S.T. is an acronym for the
Political, Economic, Social, and Technological factors of the
external macro-environment. Such external factors usually are
beyond the firm's control and sometimes present themselves as
threats. For this reason, some say that "pest" is an appropriate
term for these factors. Let us look at the PEST analysis of the
Indian aviation sector:

Political Factors

The airline industry is very susceptible to changes in the

political environment as it has a great bearing on the travel
habits of its customers. An unstable political environment
causes uncertainty in the minds of the air travellers, regarding
travelling to a particular country.

The most significant political event however has been

September 11. The events occurring on September had special

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significance for the airline industry since airplanes were
involved. The immediate results were a huge drop in air traffic
due to safety & security concerns of the people.

Economic Factors

Business cycles have a wide reaching impact on the airline

industry. During recession, airline is considered a luxury &
therefore spending on air travel is cut which leads to reduce
prices. During prosperity phase people indulge themselves in
travel & prices increase.

The loss of income for airlines led to higher operational costs

not only due to low demand but also due to higher insurance
costs. This prompted the industry to lay off employees, which
further fuelled the recession as spending decreased due to the
rise in unemployment.

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Social Factor

The changing travel habits of people have very wide

implications for the airline industry. In a country like India,
there are people from varied income groups. The airlines have to
recognize these individuals and should serve them accordingly.
The destination, kind of food etc. all has to be chosen carefully
in accordance with the tastes of their major clientele.

Especially, since India is a land of extremes there are people

from various religions and castes and every individual travelling
by the airline would expect customization to the greatest
possible extent. For e.g. A Jain would be satisfied with the
service only if he is served Jain food and it should be kept in
mind that the customers next to him are also Jain or at least
vegetarian.

Technological Factors

The increasing use of the Internet has provided many

opportunities to airlines. For e.g. Air Sahara has introduced a
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service, through the internet wherein the unoccupied seats are
auctioned one week prior to the departure.

Air India also provides many internet based services to its

customer such as online ticket booking, updated flight
information & handling of customer complaints. USTDA (US
trade & development association) is funding a feasibility study
and workshops for the Airports Authority of India as part of a
long-term effort to promote Indian aviation infrastructure. The
Authority is developing modern communication, navigation,
surveillance, and air traffic management systems for India's
aviation sector that will help the country meet the expected
growth and demand for air passenger and cargo service over the
next decade.

A proposal for restructuring the existing airports at Delhi,

Mumbai, Chennai and Kolkata through long-term lease to make
them world class is under consideration. This will help in
attracting investments in improving the infrastructure and
services at these airports. Setting up of new international airports
at Bangalore, Hyderabad and Goa with private sector
participation is also envisaged.

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These technological changes in the environment have an impact
on Air India as well. Better airport infrastructure, means better
handling of airplanes, which can help reduce maintenance cost.
It also facilitates more flights to such destinations.

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 Porter’s five forces model for airlines industry
1. Threat of New Entrants
Product differentiation:
In low cost carriers, there is not much differentiation in the basic
service that is being provided to the customers. Differentiation
can only be achieved by Value Added Services.
Switching cost:
1. The switching cost is not high. Customers can easily choose
other low cost carriers.
2. The switching cost of an airline company to other
business/industry is high as the exit cost is high.

In aviation industry the major entry barriers can be:

Government regulations:
1. The government's open sky policy has encouraged many
overseas players to enter the
aviation market.

2. Aviation was primarily a government owned industry. Due to

liberalization 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.

Indian Civil Aviation Policy

1. Private sector is allowed to operate scheduled and non-
scheduled services.

2. Operator should be a citizen of India or a company or a

body corporate which is
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 registered in India and whose principal base of business is
in India.

3. Chairman and at least two –thirds of its Directors are Indian

citizens.

4. Foreign equity participation up to 49 percent and

investment by Non- ResidentIndians (N.R.I), Overseas
Corporate Bodies (OCBs) up to 100% is allowed. The
representation of the foreign investing institution/entity on
the Board of Directors of the company shall not exceed
one-third of the total.

5. Foreign airlines are not permitted to pick up equity. Foreign

financial institutions andother entities who seek to hold
equity in the domestic air transport sector shall nothave
foreign airlines as their shareholders.

6. As regards safety and security arrangements, the operators

must ensure compliancewith relevant regulatory
requirements stipulated respectively by the Director
Generalof Civil Aviation (DGCA) and the Bureau of Civil
Aviation Security (BCAS).

7. For green field airports, foreign equity up to 100 percent is

allowed through automaticapprovals. For upgrading present
airports, foreign equity up to 74% is allowedthrough
automatic approvals and 100 percent through special
permission (from FIPB).

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Setup costs:
Nowadays, venture capital of $10 million or less is
enough to launch an airline.
1. In order to overcome the shortfall of aircrafts during the peak
seasons, airlines can utilize an ACMI lease agreement for the
extra aircraft. If the airline has many aircrafts, either owned or
leased, then they can offer their surplus aircrafts in their low
season to another airline that is facing peak season.

Strategic Ma
2. An airline company will bear the cost of purchasing an
aircraft if it wants to start or expand its fleet, leasing allows the
cost to be spread across several years. At the lease term end, the
lease can be renewed or aircraft can be returned, to be replaced
with more modern aircraft.
Fuel prices:

Domestic ATF prices have increased by over 160 per cent from
the beginning of 2005 till last year and by over 80 per cent from
a year-ago levels. In India, oil companies do not import ATF
directly; instead they refine it from imported crude oil. With
rising crude oil prices, imports are becoming expensive day by
day and at the same time, the government is unable to pass on
the full impact of this rise to the consumer. As a result, the state
owned oil marketing companies (almost 95 per cent of the
market is with state owned firms) are forced to sell diesel,
petrol, kerosene and LPG at way below cost, a cost they are
trying to somewhat make up by raising the price of ATF, which

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is under their control. As a result prices of ATF in India are
much higher than some of the other Asian countries.

2. Bargaining Power of Suppliers

Any airlines in general face a duopoly of two major suppliers

of aircrafts i.e. Airbus and Boeing. There are other suppliers like
Dauphin, Dronier, Bell, ATR-42 but do not meet the
requirements to serve the low cost commercial aircraft carriers.
Thus, suppliers are few and thus in better position to bargain as
they always finds customers for their aircrafts.

The switching cost is high due to the limited number of

suppliers.

Due to shortage of commercial aircraft pilots in India the

supply of pilots is concentrated, hence increasing their power.

There are only four suppliers for ATF (Aviation Turbine

Fuel); IOC, Hindustan Petroleum Corporation, Bharat Petroleum
and ONGC and since their number is limited, they possess more
power.

The proof of evidence for high power enjoyed by ATF

suppliers lies in the fact that the ATF prices constitute 35-40%
of the costs in India compared to 20-25% globally.

The brand value of suppliers is high due to their less number

and results in higher bargaining power for them.

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The suppliers are few and thus in better position to bargain as
they always finds customers for their aircrafts.

3. Bargaining Power of Buyers

Buyers in airlines industry are large in number and highly
fragmented thus lowering their power .With the growing Indian
economy and increasing low cost carriers, the buyers have
increased and so have the growth opportunities.

The switching cost is minimal since there are multiple

alternatives available. It is not difficult to move from one airline
to another or to switch to a substitute.

Furthermore the players in the particular strategic group do

have minimalistic differentiating points.

Backward integration from the buyers end is very difficult and

next to impossible.

4. Competitive Rivalry
The aviation industry is a highly competitive industry because of
which it is difficult to earn high returns in this sector. Below are
the major reasons for the high competition in the low-cost
carrier airlines:
• Very little scope for differentiation between competitors’
products and services
S
• Aviation is a mature industry with very little growth. The only
way to grow is by stealing away customers from competitors

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• Suppliers of aircrafts are the same, i.e., Boeing and Airbus.
Hence supplier’s bargaining power is high.
• Switching cost of customers is high for low cost carriers, i.e.,
there is no brand loyalty.

Thus, to compete small player players are trying to follow cost

leadership strategy by bringing down the ticket rates to the
minimum possible value. However, it is clear that, to sustain in
this cutthroat competition, each player will have to come up
with different strategies to improve the non price factors

5. Availability of Substitutes
The substitute for low cost airline company is the railways. But
this substitute is not very powerful due to the following reasons:
1. Customers use airline transport as it is convenient and saves
travelling time. So trains cannot work as a substitute to save
time.
2. Secondly, many customers use airlines as a status symbol. So
again, trains cannot substitute for prestige.

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 SWOT analysis of airlines industry

A SWOT analysis -- a review of strengths,

weaknesses, opportunities, and threats a core requirement of any
organization, and essential to understand any industry. The
volatile airline industry is no exception. While individual
airlines each analyze and make decisions based on their own
situations, there are overall industry similarities that all airlines
face, with each endeavoring to maximize strengths and
opportunities while minimizing weaknesses and threats.
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Strengths:
1. A major strength of any airline is the product itself -- air
travel. Despite downturns, over time air travel continues to
grow, not only due to population growth, but also due to an
increased propensity to fly.
2. Safety record and the associated public acceptance of air
travel as both a fast and safe way to travel. Both traditional,
brand recognized airlines and new low cost carriers share
this strength.
3. Airline staff is highly trained and experienced, from pilots
and flight attendants to mechanics and ground staff.
4. Business-wise, airlines have the ability to segment the
market, even on the same routes. This allows airlines to
establish different levels of service and make associated
pricing decisions.

Weakness:
1. Airlines have a high "spoilage" rate compared to most other
industries. Once a flight leaves the gate, an empty seat is
lost and non-revenue producing.
2. Aircraft is expensive and requires huge capital outlays. The
return on investment can be different than planned.
3. Large workforces spread over large geographic areas,
including international points, require continual
communication and monitoring. This can be exacerbated
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 during operational irregularities, e.g. bad weather.
4. While the business climate can change quickly, airlines
have difficulty making quick schedule and aircraft changes
due to leases, staffing commitments and other factors.
Opportunities:
1. Airline market growth offers continual expansion
opportunities for both leisure and business
destinations. This is particularly true for international
destinations.
2. Technology advances can result in cost savings, from
more fuel efficient aircraft to more automated
processes on the ground. Technology can also result in
increased revenue due to customer-friendly service
enhancements like in-flight Internet access and other
value-added products for which a customer will pay
extra.
3. Link-ups with other carriers can greatly increase
passenger volumes. By coordinating schedules,
airlines can offer service to destinations via a code
share agreement with a partner carrier.

Threats:

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 1. A global economic downturn negatively affects
leisure, optional travel, as well as business travel.
2. The price of fuel is now the greatest cost for many
airlines. An upward spike can destabilize the business
model.
3. A plague or terrorist attack anywhere in the world can
negatively affect air travel.
4. Government intervention can result in new costly rules
or unexpected new international competition.

SWOT matrix for omega airlines

Strengths Weakness
 Product  Expensive and
differentiation requires huge
 Advance capital
Opportunities technology  Large workforce
 Link with other  Environmental
carrier condition
 Market growth

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  Highly trained
staff
 Competition  High attrition in
 Infrastructure top brass
issue  Global economic
Threat downturn
 Government
intervention

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Breaking of cost in percentage
35

30

20 infrastructure
35 hrm
25 procurement
30 technological
25 procurement
20 technological
15
10 hrm
5
0 infrastructure
Category 1

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 Market share of airlines in India

Airlines

11.72; 12% 26.08; 26%

kingfisher
4.29; 4% 2.27; 2%
jet airways
jet lite
13.75; 14% air india
indigo
spice jet
go air
16.72; 17% paramount
17.66; 18%

7.39; 7%

It is clearly visible through this chart that at present scenario

kingfisher is market leader and it is the only player who plays in
premium segment so this is the sole and big competitor for
Omega airlines.

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 Ansoff’s matrix for Omega

Current product New product

Product
developmen
Current market Omega t strategy

New market Omega

Market
developmen
t strategy

If we put omega into this matrix then result would be that they
are trying to develop new differentiated airlines in the niche
market of premium segment it means they try to develop a new
market only for those who wants to fly only in luxury.

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 STP for omega airlines

• Segmentation

 Geographic Region

 Density

 Social Classes

 Income Level

• Targeting

Omega express
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  Business class

Omega premium

 upper middle, upper segment

• Positioning

 Lifestyle

 Benefits

 Quality

 Luxury

This is the possible STP for the Omega airlines as they are
playing in premium segment so they have to position them in
this condition where upper class society have reach and what
they believe to live in.

Market mix for omega airlines

Product

 On the ground services

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 On the ground services include a convenient airport with
car parking facilities, duty free shopping, quick and
efficient cheeking of baggage, efficient services at
reservation counter, transport to the airport.
 In flight services
Services provided are intangible and is highly variable. The
air hostess are trained to provide polite warm and courteous
services The courteous service that the representatives at the
baggage counter, reservation counter provide goes a long way in
developing customer loyalty. The travel agents of the airlines
also need to be efficient and polite.

The Core Service

The core service of the airlines industry is to transport goods

and services to various destinations. As the needs of the people
increased the entire system became more organized and formal.

The Supplementary Services

 connecting flights
 through check-in,
 tele check in,

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  food on board,
 and complementary gifts etc.
 Air concessions are given to school students, old people
etc.
 small 8”television screen for every passenger.
 STD facility for 5 minutes
The Enhancing services

 Online booking
 Spa and body massage
 Different types of cuisines
 Customized pick up and drop services

Pricing

Premium pricing:

The Omega airlines may set prices above the

market price either to reflect the image of quality or the unique
status of the product. The product features are not shared by its
competitors or the company itself may enjoy a strong reputation
that the 'brand image' alone is sufficient to merit a premium
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price. The price segment is a higher income group as well as the
upper middle class background.

Place

Distribution channel

 Consolidation:Thedirectsaleofticketsfromairporttothepass
enger onthe airline desk.
 Tour Operator/ TravelAgent: Customers
approachtravelagentsortouroperatorswhobooktheticketsfro
mtheairlineandtakecommission. E.g. SOTC
 Affiliated with companies:As then ame defines, airlines
gets affiliated with companies who carry all its trips with a
same airline who in turn gives special discounts or offers
in return.
 Direct through homel eased system, e.g. Phone, fax, email
and also online e-booking.
Promotions

 Advertisements

 Magazine and Newspaper ads

 Exposure at corporate event

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  Participation in International Air shows

 Endorsement by high profile celebrities and

business persons

People

This was the backbone of any industry so as for Omega so

they need to recruit highly trained staff. Focus of the training
is making them in hospitality, in flight training, interpersonal
skills. All they need to have a staff having understanding of
the customer of high class as they are planning to play in
premium class segment targeting higher income level group.

Process

Online booking of ticket, home delivery of tickets if customer

wants us them to deliver, telephone booking, outlets opened
by omega.

Physical evidence
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  Personal valets

 Exclusive lounge space

 Gourmet cuisine
F

 world class cabin r

o
n
t

s
t
B Blue printing for omega airlines a
a g
c
Physical evidence e
k Reservation Receiving tickets Arrival at airport Obtaining
through agents or Immigration/Boarding
other channels pass
s
t
a Line of interaction
g
Custom clearing Boarding the Alighting the Baggage retrieval
e flight/interaction aircraft
with crew:
experiencing
ambience

Line of visibility
Selecting aircraft Recruitment and Training and scripting
selection development

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line of internal physical relation

Designing the Arranging for

ambience tangible cues/local
news paper ,
magazine
Support
system

QualityDimensions:RATER Analysis

Customers don’t assess the quality of service on one

dimension only,
theyusemultipleparameterstojudgethequalityoftheservicethatthe
yare beingoffered.These characteristics which people consider vary

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from persont on person,industry to industry. Even depend upon
the product on offer.

Because of the intangibility and multifaceted nature of

many services, it may be harder to evaluate the quality of a
service than a good. Because the customers are often involved
in the service production a distinction need sto be drawn
between the process of service delivery and the actual output of
the service. The most extensive research into service quality
is strongly user oriented.

Airlines are broadly classified into 4 dimensions namely:

 Reliability – flights to promised destinations depart and

arriveon schedule
 Assurance –trusted name, good safety record,
Competent employees
 Tangibles – aircraft, ticketing counters, baggage area,
uniforms
 Empathy – understanding of special individual needs,
anticipates customer needs handling

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 Moment of truth

• Making areservation
• Gettingtickets
• Boarding
• Flying
• Retrievingbaggage

Critical incidence

Critical incidents are specific encounters between

customers and service employees that are especially satisfying
or dissatisfying for one or both parties. In the airline industry
critical incidents are very important as they help the company
evaluate and measure satisfaction level of the
customers.Thecriticalincidenttechniqueisamethodologyforcollec
tingand categorizingsuch incidentsinserviceencounters.

Zone of tolerance

In the airline industry, the customer expects a minimum

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level of
servicebelowwhichheisdissatisfiedwiththeserviceprovidedbythe
airline company.
Thisincludeseasyavailabilityoftickets,quickinformationabout
reschedulingoffightsoranyotherimmediatechangesmade,cleanair
crafts, hygienic food,safekeepingofbaggage
andadequatesafetymeasures(oxygen masks,parachutes)incase
ofanemergency.

Service recovery

If the omega airlines fails to deliver what they promise than

this could be the possible steps through which they can recover.

1ststep: acknowledgement andapologyforthefact.

2ndstep: listeningtothecustomers.

3rdstep:avoid defendingthecompany
andofferarationalexplanation.

4th step:offersomeextrabenefits

5thstep:haveaproperfollowupandmakesurenomistakesthistime,s
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o thathecaneasilyforgetabouttheservicefailure andis retained.

Bibliography

White Paper on ‘India Initiative: Issues in Civil

Aviation’ by the World Travel and Tourism Council
Aviation Week & Space Technology
Low-fare Airlines, . Economist.com.
Crisis at 50, Business World,
Businessline,
The Sky’s The Limit, Indian Express
Oil Prices drown out Airlines profit, Star Tribune,
A Feel for Airline Security. Time Canada,
To Cope With Travel Slump, Airlines Turn to Smaller
Jets. (cover story) Wall Street Journal - Eastern
Edition,
Wikipedia, the free content encyclopedia
India Transportation Infrastructure Blueprint

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 Discounted IA fares to take on no-frills Deccan Times of
India

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