S. No
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Summary Service Marketing Unique Characteristics Of Service Marketing Mix For Service Marketing Introduction to Airline Industry Structure Of The Industry Haw Major Airlines Are Structured The Indian Aviation Industry Airport Infrastructure Development Of Civil Aviation Civil Aviation Policy Infrastructure Developments Airport Privatization Alliance Strategy Benefit To Passengers Recent Development Future Growth Of Non Metro Airports Case Study – Jet Airways Conclusion

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1 2 2 8 17 20 21 24 29 31 34 36 38 40 43 45 50 53 63

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We owe it to the Wright brothers for having invented airplanes. The Wright brothers could not have imagined how airplanes would change the way people live & do business. The airline industry has witnessed a sea change from two wheeler bi-planes to the Boeing 747's that are visible in our skies today. The passage of time has witnessed competition grow from leaps to bounds. Today airplanes are present in every country around the world with expectation of a few places. Even the industry has been growing year on year It was JRD Tata who made the first move to build up an airline industry in India. He with the help of Nevil Vincent, a former RAF pilot, went ahead and drew a plan for the operation of first flight from Karachi to Mumbai with single stopover at Ahmedabad. This is how Tata Airlines was born which was donated to Indian Government. On 28th May 1953, Air Corporation Act – 1953, the government of India nationalized the airlines industry. In accordance with this act, the two air corporations, viz. Indian Airlines Corporation and Air India International were established. In 1994 the monopoly was ended and Indian skies were opened for any carriers who fulfills the statutory requirement

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AIRLINE INDUSTRY The Indian aviation industry can be broadly classified into two main segments - Civil and Cargo. In fact, the birth of civil aviation is attributed to air cargo and mail. In the beginning, mail and air cargo were the important elements of air carrier services than passengers. The major players in the Indian context are Air India in the international segment and Indian Airlines, Jet Airways and Sahara in the domestic segment. Over the years, the aviation sector in India has evolved and today it is on the threshold of a major shake out with the divestment of the Indian government's stake in Air India and Indian Airlines on the cards. A number of domestic and foreign parties have evinced interest in the divestment process. Foreign airlines have also entered the Indian skies. The Indian aviation sector till recently was highly regulated by the government. As recently as the eighties saw the introduction of some new initiatives like the air taxi scheme, whose main objective was to boost tourism. Domestic and international passenger traffic in India is projected to grow annually at 12.5% and 7% respectively over the next decade. At the same time, domestic and international cargo traffic is expected to grow at 4.5% and 12% respectively. By the year 2010, Indian airports are likely to handle 60mn international passengers and 300,000 tons of domestic and 1.2mn tons of international cargo.

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Service industry is witnessing a major boom in India. Services like banking, car financing, consumer durable credit, cellular, paging, express, hospitality, travel and tourism, airlines, and, educational services on are today realizing the importance of marketing. Along with these big service businesses, many small businesses ranging from beauty saloons, pubs, gyms, play schools and so on are realizing the importance of marketing.

What is a service? And why should services receive special treatment from marketers? A popular definition describes services as "Any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to physical product." Although, the distinction between goods and services is somewhat artificial, since the success of goods manufacturers is vitally dependent on the service they provide, there are four commonly cited characteristics of services that make them different to market from goods: Intangibility, Inseparability, Variability and Perishability. ➢ Intangibility: Pure services such as baby-sitting cannot be seen or touched. They are ephemeral performances that can be experienced only as they are delivered. As the above definition of service suggests, intangibility may
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AIRLINE INDUSTRY represent the most critical difference between services and goods, and its implications for marketing are great. Intangible services are difficult to sell because they cannot be produced and displayed ahead of time. They are therefore harder to communicate to prospective customers. A passenger cannot feel the service that he would encounter in the airplane, however person may talk to other travelers who have experienced the same service, but their experience does not necessarily be the same. Marketers of services can reduce these risks by stressing tangible cues that will convey reassurance and quality to the prospective customers. These tangible cues range from the firm's physical facilities to the appearance and demeanor of its staff to the letterhead on its stationery to its logo. Life insurance companies are particularly savvy about this problem. Their service is, after all, the most intangible service: by definition, the buyer will never know the ultimate result of what he or she has bought! To compensate for this intangibility the major companies over the world have developed strong visual symbols for their firms. • • • • • Prudential – The rock of Gibraltar All state -Protective hands Traveler’s -A red umbrella Nationwide -A blanket Wausau -A train station

➢ Inseparability: Different service marketing marketers interpret this characteristic differently, but all interpretations point out those special operations problems exist for the firm's managers. One interpretation of this term is the inseparability of customers from the service delivery process. In particular, many services require the participation of the customer in
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AIRLINE INDUSTRY the production process. A child getting a haircut must sit still; otherwise, the family photo may have to be delayed for a month. The person who comes to a Chartered Accountant (C. A.) at the last minute with boxes of disorganized records may cause the C. A. to overlook some possible deductions. These examples illustrate the fact that, unlike goods, which are often produced in a location far removed from the customer and totally under the control of the manufacturing firm, service production often requires the presence and active participation of the customer - and of other customers. Depending upon the skill, attitude, and cooperation and so on that customers bring to the service encounter, the results can be good or bad, but in any event are hard to standardize. A second interpretation of inseparability refers to the fact that in some service industries the service delivered is inextricably tied to particular individual service providers. Customers may have ground for complaint if their service is not provided by, for example, the surgeon or lawyer they thought they were paying for. ➢ Variability: The fact that service quality is difficult to control compounds the marketer's task. Intangibility alone would not be such a problem in customers could be sure that the services they were to receive would be just like the successful experiences their neighbors were so pleased with. But in fact, customers know that services can vary greatly. Different front-line personnel have different abilities. Even the same service provider has good days and bad days or may be less focused at different times of day. Services are performances, often involving the cooperation and skill of several individuals, and are therefore unlikely to be same every time. This potential variability of service quality raises the risk faced by the consumer.
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AIRLINE INDUSTRY The service provider must find ways to reduce the perceived risk due to variability. One method is to design services to be as uniform as possible - by training personnel to follow closely defined procedures, or by automating as many aspects of the services as possible. The appeal of some service personnel - particularly, those involved in such expensive personnel services as beauty parlors treatments or home decoration - lies in their spontaneity and flexibility to address individual customer needs. The danger with too much standardization is that these attributes may be designed right out of the services, therefore reducing much of their appeal. A second way to deal with perceived risk from variability is to provide satisfaction guarantees or other assurances that the customer will not be stuck with a bad result.

➢ Perishability:
The fourth characteristic distinguishing services from goods is their time dependence. Services cannot be inventorised, since they are performed in real time. And time periods during which service delivery capacity sits idle represent revenue-earning potential that is lost forever. Periods of peak demand cannot be prepared for in advance by producing and storing services, nor can they be made up for after the fact. A service opportunity occurs at a point in time, and when it is gone, it is gone forever. This can present great difficulty in facilities planning. A survey of service firms found that the greatest operational challenges facing them were posed by the Perishability of their products. Matching service capacity to demand patterns can involve managing one or both elements. Perishability often puts a greater burden on service marketers to manage demand than it does on goods marketers, who can build up inventories to meet peak demand or can reduce prices later to move the unsold inventory. The cited survey
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AIRLINE INDUSTRY found that the firm's principal method for controlling demand was to increase personnel selling during potentially slow periods. Surprisingly, few firms claimed to use the standard economic solution of price changes to increase or decrease demand, although some service industries, such as resort hotels with seasonal demand, do this routinely. Few service providers had opinion that they developed alternative, counter seasonal service products to use slack capacity, although that has long been a common practice by goods marketers. Many service providers also control demand by requiring appointments. The alternative to controlling demand is to make service capacity flexible. Some service firms keep on call frontline personnel who can arrive on short notice to meet the surges in demand, or cross train support personnel to assist with customer service during busy periods.

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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.
Peo Pla Pri Physical of Service Marketing 7Prod P’s Servi Promot ple ce Evidence Proc uct ce ion

ess Qual ity Quali ty

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 etc.); its price; the
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AIRLINE INDUSTRY 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).

➢ The Product Mix :
The product here refers to Airline service offering. Although service products are essentially intangible, there are certain pyhsical characteristics which consumer assess in their evaluation of product choice. It the service mix, there is passenger services , cargo services, & the mail services. Attractiveness of the offering in terms of pyhsical features such as consumers have high expectation, the food & drinks offered , entertainment. Facilities available, associated level of services such as, quality of seats & interior decoration. The product is quite complex one since it comprises of aservice of certain tangibal such as free flight bags or free bottle or duty free spirit in order to encourage booking. Thr airline product includes 2 types of services, on the ground services and in-flight services. The on-the ground, services include car parking
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AIRLINE INDUSTRY facilities at the airport, duty free shopping, reservation counter, efficient checking of baggage, transport etc… •

Reservation :
Reservation of air-line ticket is now easy since it is fully computerized and now you can reserve your ticket through thr internet. There are 24 hours reservation, passenger can even specify their seat preference at the time of reservation.

Check in :
The check-in and flight handlingsystem airline has has also been computerized. Kingfisher offered tele-check-in

facilities to the passengers can call their special tele-check-in numbers at the airport upto 45 minutes before the departure and confirm their ticket. Their boarding card will await them at the airport. In order to relax after their check-in special lounges are provided.

• Baggage facilities :
About 30kgs of check-in baggage is allowed. Passenger, carrying international tickets are given further allowance of around an added 30kgs priority baggage delivery is offered to the members.

• Transport facilities :
Free transport service is provided to passengers in order to help them reach their destination faster. Apart from these tangibal elements the seating arrangement in the aircraft should be spacious and comfortable. The in-flight foods provide physical evidence to the airline service.
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➢ The Promotional Mix:

The aims of


fall into


main categories: to inform, to remind, & to pursuade. 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. Similarly consumers may need to get reminded about all these types of issues, especially in the off-peak season. It is vitally important to recognisse that promotion, or marketing communications generally, may not always be aimed at potential consumer or end user of service. In many business areas, it is to design promotions aimed at channel customers to complement end user promotion.for e.g Airlines will need to promote their services to tour operaters as well as end user.

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➢ The Pricing Mix:

Pricing in airlines because demand, variations

is a fairly complex in the level due of to

issues, since there are price variations particularly

seasonality, when every Airlines gives price discounts & competition is tough. Airlines will always faced by high levels of fixed costs, leading to variants of cost-plus pricing or ROI as key determinants of pricing levels. It is important to includde 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 diffenent authorities to manage and control domestic as well as international air transport busines. 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 cocept 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 aer low, the overall profits are achived. In order to meet the competition and consolidate their position in the market. Air india and indian airlines have their price.
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• 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.

➢ Place :
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 luggages 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.

➢ People Mix :
Many the
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services firm's


personal these

interactions between customers and employees and

AIRLINE INDUSTRY interactions strongly influence the customer's perception of service quality. For example, a person's stay at a hotel can be greatly affected by the friendliness, knowledge ability and helpfulness of the hotel staff - in most cases the lowest paid people in the organization. One's impression of the hotel and willingness to return are determined to a large extent by the brief encounters with the front-desk staffs, bellhops, housekeeping staff, restaurant wait staff and so on, many of which take place outside the direct control of the hotel management. In fact, the average hotel patron has very little contact with the hotel supervisors and managers. Therefore, management faces a tremendous challenge in selecting and training all of these people to do their jobs well, and, perhaps even more important, in motivating them to care about doing their jobs well, and, perhaps even more important, in motivating them to care about doing their jobs and to make an extra effort to serve their customers. 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. For this reason, human resources management policies and practices are considered to be of particular strategic delivering Establishing importance high-quality a for in services.


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
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AIRLINE INDUSTRY to win over the hearts and minds of its employees to achieve service excellence. The "people" component of the service marketing mix also includes the management of the firm's customer mix. Because services are often experienced at the provider's facilities, other customers who are being served there can also influence one’s satisfaction with a service. Ill mannered restaurants customers at the next table, crying children in a nearby seat on an airplane and commercial bank customers whose lengthy transactions take up the teller's are all examples of unpleasant service conditions caused by a firm's other patrons. On the other hand, the right mix of customers can greatly increase the enjoyment of experience - for example, at entertainment services, such as nightclubs or sporting events. Determining the desirable customer mix for a service, segmenting the market into compatible groups and managing customer arrivals to avoid conflict and enhance the service experience are essential components of service management.

➢ The 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 cues 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, the comfort of seating and the physical layout of a service facility - can greatly affect a customer's satisfaction with a service experience. The appearance of the staff, including clothes and grooming, may be used as important clues. Promotional materials and written can be correspondence provide tangible
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AIRLINE INDUSTRY incorporated into the firm's marketing communications to help reduce customer anxiety about committing to the purchase. Service firms should design these items with extreme care, since they will play a major role in influencing a customer's impression of the firm. In particular, all physical evidence must be designed to be consistent with the "personality" that the firm wishes to project in the marketplace.

➢ The 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 a fine restaurant is not merely interested in the end result - the cessation of hunger. The entire experience of arriving at the restaurant - of being seated, enjoying the ambiance, ordering, receiving and eating the meal - is important. The pace of the process and the skill of the provider are both apparent to the customer and fundamental to his or her satisfaction with the purchase. The importance of the process is true even for less 'sensual" experiences. A customer who applies for a loan at a bank evaluates the purchase not only by the amount of the loan received and the interest rate paid. The speed and sensitivity of the approval process, the interaction with the bank officers, the accuracy of bank statements and the ease of getting redress if mistakes are found all affect the person's attitudes about doing further business with the bank and his or her willingness to recommend it to others. Therefore, when designing service production processes, particular attention must be paid to customer perceptions of that process. For this reason, marketing and operations are closely related in service management.

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We owe it to the Wright brothers for having invented airplanes. The Wright brothers could not have imagined how airplanes would change the way people live & do business. The airline industry has witnessed a sea change from two wheeler bi-planes to the Boeing 747's that are visible in our skies today. The passage of time has witnessed competition grow from leaps to bounds. Today airplanes are present in every country around the world with expectation of a few places. Even the industry has been growing year on year. Technology has also made a significant contribution to the airline industry; over the years technological advances have been incorporated into the science of flying airplanes. The industry has also propelled the growth of ancillary services like travel agents, courier services, cargo handling, clearing & forwarding agents etc
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Nevill Vincent, a former RAF pilot came to India from Britain in 1929, on a brainstorming tour to survey a number of possible routes. It was through providence that he met JRD Tata, the first Indian to secure an A-license within the shortest number of hours. Vincent worked out a scheme, secured JRD's approval and together they presented it to Mr. Peterson, the director of Tata Sons and also JRD's mentor. Sir Dorab Tata, the then chairman of Tata Sons, pleasantly surprised all by giving the scheme his okay. So they went ahead and drew plans for the operation for the first flight from Karachi to Mumbai with a single stopover at Ahmedabad. All that they asked was a guarantee from the government for a year for the sum of Rs.100,000. This, however, was turned down. The Tata-Vincent combine was naturally disappointed but not dismayed. A second scheme was prepared. This time the guarantee asked was Rs.50,000 for the first year, Rs.25,000 for the second year and no guarantee at all from the third year onwards. This scheme was rejected too. The team then tried a third time. This time they offered to donate an air service to the Government of India with no strings attached. The Government finally agreed and thus was born Tata Airlines that later became Air India. On 28th May 1953, consequent to the coming into force of the Air Corporations Act, 1953, the Government of India nationalized the airlines industry. In accordance with this Act, the two air corporations, viz. Indian Airlines Corporation and Air India International, were established and the assets of all the then existing airline companies (nine) were transferred to the two new Corporations. The operation of scheduled air transport services was under the monopoly of these two Corporations and the Act prohibited any person other than the Corporations or their associates to operate any scheduled air transport services from, to, or across India.

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AIRLINE INDUSTRY However, after 40 years, in 1994, the wheel had turned a full circle as the Air Corporation Act, 1953 was repealed with effect from 1st March 1994. That ended the monopoly of the Corporations on scheduled air transport services. Air transport in India is now open to any carrier who fulfills the statutory requirements for operation of scheduled services.

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Types of Airline Certification
All airlines hold two certificates from the federal government: a fitness certificate and an operating certificate. The Department of Transportation (DOT) issues fitness certificates - called certificates of public convenience and necessity - under it's statutory authority. Basically, the certificate establishes that the carrier has the financing and the management in place to provide scheduled service. The certificate typically authorizes both passenger and cargo service. Some airlines, however, obtain only cargoservice authority. Commuter airlines that use aircraft with a seating capacity of 60 or fewer seats or a maximum payload capacity of no more than 18,000 pounds can operate under the alternative authority of Part 298 of DOT’s economic regulations. Operating certificates, on the other hand, are issued by the Federal Aviation Administration (FAA) under Part 121 of the Federal Aviation Regulations (FARs), which spell out numerous requirements for operating aircraft with 10 or more seats. The requirements cover such things as the training of flight crews and aircraft maintenance programs. All majors, nationals and regionals operate with a Part 121 certificate.

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➢ Line Personnel:
These include everyone directly involved in producing or selling an airline’s services - the mechanics, who maintain the planes; the pilots, who fly them; the flight attendants, who serve passengers and perform various inflight safety functions; the reservation clerks, airport check-in and gate personnel, who book and process the passengers; rampservice agents, security guards, etc. Line personnel generally fall into three broad categories: engineering and maintenance, flight operations, and sales and marketing. These three divisions form the heart of an airline and generally account for 85 percent of an airline’s employees. ➢ Operations: This department is responsible for operating an airline’s fleet of aircraft safely and efficiently. It schedules the aircraft and flight crews and it develops and administers all policies and procedures necessary to maintain safety and meet all FAA operating requirements. It is in charge of all flight-crew training; both initial and recurrent training for pilots and flight attendants, and it establishes the procedures crews are to follow before, during and after each flight to ensure safety. Dispatchers also are part of flight operations. Their job is to release flights for takeoff, following a review of all factors affecting a flight. These include the weather, routes the flight may follow, fuel requirements and both the amount and distribution of weight onboard the aircraft. Weight must be distributed evenly aboard an aircraft for it to fly safely.
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AIRLINE INDUSTRY ➢ Maintenance: Maintenance accounts for approximately 11 percent of an airline’s employees and 10-15 percent of its operating expenses. Maintenance programs keep aircraft in safe, working order; ensure passenger comfort; preserve the airline’s valuable physical assets (its aircraft); and ensure maximum utilization of those assets, by keeping planes in excellent condition. An airplane costs its owner money every minute of every day, but makes money only when it is flying with freight and/or passengers aboard. Therefore, it is vital to an airline’s financial success that aircraft are properly maintained Airlines typically have one facility for major maintenance work and aircraft modifications, called the maintenance base; larger airlines sometimes have more than one maintenance base. Smaller maintenance facilities are maintained at an airline’s hubs or primary airports, where aircraft are likely to be parked overnight. Called major maintenance stations, these facilities perform routine maintenance and stock a large supply of spare parts. A third level of inspection and repair capability is maintained at airports, where a carrier has extensive operations, although less than at its hubs. These maintenance facilities generally are called maintenance stations. ➢ Sales and Marketing: This division encompasses such activities as pricing, scheduling, advertising, ticket and cargo sales, reservations and customer service, including food service. While all of them are important, pricing and scheduling in particular can make or break an airline, and both have become more complicated since deregulation. As explained in the next chapter, airline prices change frequently in response to supply and demand and to changes in the prices of competitors’ fares. Schedules
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AIRLINE INDUSTRY change less often, but far more often than when the government regulated the industry. Airlines use sophisticated computer reservation systems to advertise their own fares and schedules to travel agents and to keep track of the fares and schedules of competitors. Travel agents, who sell approximately 80 percent of all airline tickets, use the same systems to book reservations and print tickets for travelers. ➢ Subcontractors: While major airlines typically do most of their own work, it is common for them to farm out certain tasks to other companies. These tasks could include aircraft cleaning, fueling, airport security, food service and in some instances, maintenance work. Airlines might contract out for all of this work or just a portion of it, keeping the jobs in house at their hubs and other key stations. However, whether an airline does the work itself or relies on outside vendors, the carrier remains responsible for meeting all applicable federal safety standards.

➢ Security measures:
The government will most probably accept the recommendations of the technical up gradation committee, set up to look into the different aspects of air security For international flights Air India & Indian airlines, security personnel have been trained in passenger profiling, supposed to be the "most fool-proof" security arrangement to identify suspicious traits among passengers. The government is willing to spare more highly trained commands, but the airlines have to be prepared to pay the price of having the sky on board, it is learnt

The civil aviation activities can be broadly classified into three areas:
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AIRLINE INDUSTRY ➢ Operational, ➢ Infrastructure ➢ Regulatory-cum-developmental. On the operational front, Air India provides international air services while Indian Airlines is involved in the field of domestic air services. Pawan Hans supplies helicopter support services, primarily to the petroleum sector. Air India, Indian Airlines and its subsidiary Alliance Air (which also provides domestic services) and Pawan Hans are government-owned. Other than them, there are a few private domestic operators too. Airports Authority of India (AAI), which was formed in April 1995 through the Airports Authority of India Act, by merging the separate ‘national’ and ‘international’ airport authorities that existed earlier supply infrastructural facilities. In terms of characteristics, the aviation industry is seasonal in nature. In the period April to May and again from November to December, demand is high. However, in the June-July period demand falls.

Domestic Players in Airlines:
Till recently, Indian Airlines had a monopoly in the sector. However, in 1993 the skies were opened for private participation and 8 airlines got the nod to commence operations. Of these, only two have survived - Jet Airways and Sahara Airlines. Another airline, called Crown Express, has very recently got an approval from the government to start domestic operations.

The market share of major players in 2000-06


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Aircraft’s owned

AIRLINE INDUSTRY Indian airlines Jet airways Sahara airlines 51 42 7 57 33 9

Market Share of Major Players
Market Share


42% 51%

Indian airlines Jet airways Sahara airlines

Over the past few years, Indian Airlines has lost market share and is currently second to private operators. Its market share has fallen from 50.5% in 1999 to 46.8% in 2000. The major gainers are the two domestic operators Jet and Sahara, the major beneficiary being Jet Airways. The combined market share of both of them has risen from 49.5% in 1999 to 53.2% in 2000. In terms of plant load factor too IA lags behind. While the average for all domestic operators was around 63.4%, Indian Airlines clocked a performance of 61.9%. Jet had the highest plant load factor of around 71.8%.

Operators Indian Airlines:

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AIRLINE INDUSTRY The network of Indian Airlines spans from Kuwait in the west to Singapore in the East and covers 75 destinations - 59 within India and 16 abroad. The Indian Airlines international network covers Kuwait, Oman, U. A. E, Qatar and Bahrain in West Asia, Thailand, Singapore, Yangoon (Rangoon) and Malaysia in South East Asia and Pakistan, Nepal, Bangladesh, Myanmar, Sri Lanka and Maldives in the South Asian subcontinent. Indian Airlines flight operations center on its four main hubs the main metro cities of Delhi, Mumbai, Calcutta and Chennai. Together with its subsidiary Alliance Air, Indian Airlines carries a total of over 7.5mn passengers annually. At present, Indian Airlines has a fleet strength of 55 aircraft's. Out of them, are 11 Airbus A300, 30 Airbus A320, 11 Boeing B737 and 3 Dorniers D0228. Indian Airlines has total staff strength of around 22,000 employees. Its annual turnover, together with that of its subsidiary Alliance Air, is over Rs.40bn.

Jet airways:

Jet Airways, India's most preferred airline, is now giving the world a better choice in the skies. The airline operates over 350 flights daily across 44 destinations within and also operates flights to
Belgium, United States of America India

Nepal, Sri Lanka, Singapore, Malaysia, United Kingdom, Thailand,



on one of the youngest and best

maintained fleets. Jet Airways plans to extend its international operations further in North America, Europe, Africa & Asia in the coming years with the induction of wide-body aircraft into its fleet years. There are many more domestic airlines operating in India Eg:-Air Deccan, Go Air etc.

International Airlines:
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AIRLINE INDUSTRY In the international sector, Air India is the sole Indian service provider. However, in the international market, the share Air-India is negligible compared to that of the likes of British Airways and Emirates Air.

Air India:
Air-India International was registered on March 8, 1948 and it inaugurated its international services on June 8, 1948, with a weekly flight from Mumbai to London via Cairo and Geneva with a Lockheed Constellation aircraft. Later on in 1962, the word 'International' was dropped. Effective March 1, 1994, the airline has been functioning as Air-India Limited. At present, Air India has a fleet strength of 23 aircrafts. Out of them are 6 Boeing 747-400, 4 Boeing 747-200, 2 Boeing 747-300 Combi, 8 Airbus 310300 and 3 Airbus 300-B4. The airline has plans to induct 4 more A-310-300 aircraft on dry lease effective December 2000. From a total of three stations served at the time of nationalization, Air-India's network today covers 44 destinations. In addition, Air India has a so-called 'code sharing' arrangement with a number of foreign airlines. These include Swiss Air, Bellview Airlines, Austrian Airlines, Asiana Airlines, Air France, Virgin Atlantic, Scandinavian Airlines, Singapore Airlines, Aeroflot, Air Mauritius, Kuwait Airways and Emirates.Air India carried a total of 3.35mn passengers in FY2000 as against 3.17mn in FY99. This made for a plant load factor of 70.3%.

Air-India has posted an operating profit of Rs.760mn in FY2000. This is good news given the fact that the airline had recorded its highest operating loss of Rs.4.13bn only three years ago i.e. in FY97. The airline had made its last operating profit in FY95. The net loss has been contained at Rs.370mn partly due to an additional payout of Rs.1.78bn during the fiscal due to a hike in
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AIRLINE INDUSTRY global and domestic fuel prices. Air-India's total turnover during the year was Rs.46.62bn as compared to Rs.42.36bn last year - a growth of 10%. While PBIDT was a negative Rs.6.48bn, the firm succeeded in raking in a cash profit of Rs.4.12bn during the year. Air-India has also achieved a positive return on its investments of over 5% in FY2000 on capital employed in the business as compared to a negative return in the last couple of

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There are a total of 449 airports/airstrips in the country. Airports are presently classified as international and domestic airports.

International Airports:
These are available for scheduled international operations by Indian and foreign carriers. Presently, Mumbai, Delhi, Chennai, Calcutta and Thiruvananthapuram fall into this category.

Domestic Airports:
In this category fall those airports which have custom and immigration facilities for limited international operations by national carriers and for foreign tourist and cargo charter flights. These include airports Bangalore (CE), Hyderabad, Ahmedabad, Calicut, Goa (CE), Varanasi, Patna, Agra (CE), Jaipur, Amritsar, Tiruchirapally, Coimbatore, and Lucknow. Yet another type of airports are known as Model Airports. These have a minimum runway length of 7,500 feet and are capable of handing A320 type Airbuses. They can cater to limited international traffic, if required. These airports are in Bhubaneswar, Guwahati, Nagpur, Vadodara, Imphal and Indore. There are 71 domestic airports, which fall in the category of 'Other' Domestic Airports. There are also 28 civil enclaves (CE) in Defense airfields. Twenty of them are currently in operation. Mumbai airport is the busiest in India and handles about 30% of the total passenger traffic in the country. The
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AIRLINE INDUSTRY Chhatrapati Shivaji international airport's share of the country's international traffic is around 40%.

Airports Authority of India:
The Airports Authority of India (AAI) was formed after the merger of International Airports Authority of India and the National Airports Authority by way of the Airports Authority Act (No.55 of 1994). It came into existence on 1st April 1995. AAI manages 5 international airports, 87 domestic airports and 28 civil enclaves. It provides air traffic services over the entire Indian airspace and adjoining oceanic areas. The AAI also undertakes assignments like airport feasibility studies, airport design project implementation, project supervision and manpower training. The AAI has undertaken consultancy projects in Libya, Algeria, Yemen, Maldives, Nauru and Afghanistan.

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Travel by air in the modern sense began in India only in 1877, when Joseph Lyna took off from the Lalbagh Gardens in Bombay, and ascended to an altitude of about 7,500 feet and landed at Dadra. In the years that followed, there was a tremendous development of air transportation in India as in any other countries due to technological advances and cooperation from the government. In 1920, the Indian Air board was set up as a part of the Department of Industries and Labour to provide safe navigation and landing places and live up to its International Commitments. With a view to draw up a plan in anticipating the post-war needs for civil air transport, the government of India appointed in 1943 the Reconstruction of Air Services Committee under the chairmanship of the Director of Civil Aviation. Captain F.C. Tymms, M.C., (later Sir Frederick Tymms). Armed with vast technical and administrative experience and an alarming capacity for work, Sir Frederick submitted by September 1943, a series of carefully thought out papers on all aspects of post-war aviation. Accepting the basic recommendation of the Tymm’s report, the government appointed a Committee in 1944 under the chairmanship of Sir Mohammad Ushman, a member of the Post and Air Department to follow up the Tymms plan. After a critical examination of the development of civil aviation in India, USA and European countries, the Committee suggested certain measures for the construction of new aerodromes and air routes by recommending that more local air services be started and that India should participate in the establishment of governmental assistance in the form of subsidy atleast in the initial stage, and introduction of the system of licensing for air carrier
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AIRLINE INDUSTRY companies. However it had not suggested any ceiling on the number of such licenses as recommended by the Tymms Committee. The cabinet after much discussion and deliberation decided to nationalize the civil air transport scheduled carriers and to create two monopoly corporations in the public sector. In March 1953, India’s Parliament passed the Air Corporation Act, which received the assent of the President on 20 th May. The main provisions of the Act were that: “There shall be transferred to and vested in: • Indian Airlines, the undertaking of all the existing Air Companies (other than Air India International Limited) and • Air India International, the undertaking of the Air India International Limited (AIIC)”. The saga of Indian Airlines began on the 1st of August 1953, following the amalgamation of eight private airlines. The journey began with a modest fleet but high aspirations and over the years, Indian Airlines innovated and upgraded its fleet to emerge as one of the largest domestic airlines in the world. Today, Indian Airlines, along with its subsidiary airline, Alliance Air, provides an extensive network, which encompasses the whole of India - a geographical area equivalent to Western Europe, besides reaching out to 17 International Stations. In the last four decades, Indian Airlines has progressed by leaps and bounds and built an excellent track record of manpower and infrastructural development. It has thus emerged as a proud symbol of modern India. Some of the highlights of this glorious period of evolution include: • Increase in passenger carriage from 0.5 million in 1954-55 to 8.4 million in 1997-98.

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AIRLINE INDUSTRY • Spread of network from 23,000 kilometres in 1953 to 1,18,000 kilometres in 1997-98. • • Growth of assets from Rs.21 million to Rs.30, 000 million in 1997-98. A manifold increase in system seat capacity from 3,070 seats per day in 1955 to 35,700 seats per day.

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The Ministry of Civil Aviation is the main central agency responsible for the formulation of national policies and programs for development and regulation of Civil Aviation and for devising and implementing schemes for orderly growth and expansion of Civil Air Transport. Its functions also extend to overseeing the provisions of airport facilities, air traffic services and carriage of passengers and goods by air. The Government has approved a new policy to promote private investments in the Aviation Sector. The highlights of the policy are as follows. • Foreign equity upto 40% and investment by non-resident Indians (NRIs) or overseas corporate bodies' (OCBs) upto 100% will be permitted in domestic air transport services.

Equity from foreign airlines will not be allowed directly, or indirectly, in domestic air transport services. Existing companies in which equity is held by foreign airlines will be advised to disinvest this equity.

Entry and exit barriers have been removed. There will be a scrutiny of applications to verify financial soundness and maintenance, security and safety aspects of operations.

• •

The choice of aircraft type and size is left to the operator. To achieve economies of scale, the minimum fleet size for a scheduled operator has been raised from the existing three aircraft to five. Also the minimum amount of shareholders' funds has been increased from the existing Rs.50mn (US$ 1.4mn) to Rs.100mn (US$ 2.9mn) for aircraft of all-up weight below 40,000 kg and from

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AIRLINE INDUSTRY Rs.100mn (US$ 2.9mn) to Rs.300mn (US$ 8.7mn) for all-up weight exceeding 40,000 kg. • Total capacity requirements in the air transport sector are being projected for a period of at least five years on an annual basis, to help the developer make investment decisions. • In the distribution of this capacity, while preference will be given to Indian Airlines according to its fleet augmentation plan, private operators' proposals to induct new capacity will be considered, based on the demand, load factor, past track record and financial soundness. • All scheduled operators are required to deploy 10 per cent of their capacity in NorthEast, Jammu and Kashmir, Andaman and Nicobar Islands and Lakshadweep. Mr. Shahnawaz Hussain has announced that the Aviation Policy would also focus on the need for setting up joint ventures to develop smaller airports, lease out the bigger airports and improve the existing aviation infrastructure.

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Private sector is now allowed in building airports. Among the private sectoraided airports to be developed in the next five years are Hassan (Karnataka), Mumbai, Goa and Bangalore. These airports are capital-intensive projects that have to be run efficiently to make them commercially profitable. The Mumbai project, for instance, will cost an estimated Rs.16bn (US$457mn). The Government has also decided to concentrate on developing existing airports rather than on new airports. The AAI is investing Rs.4.4bn (US$125.7mn) to develop model airports in 12 cities, with state-of-the-art equipment. Part financing of facilities through a tax paid by embarking international air passengers is an idea being tried out at Kozhikode, which generates large West Asia-bound traffic. A similar method may be adopted for development of airports in Rajasthan and Goa that are popular tourist destinations. Among airport construction projects with private participation, the

Hyderabad International Airport has progressed the furthest. It has passed the initial planning and the land acquisition stage. The project is expected to cost around Rs.1.6bn (US$45.7mn) in the first phase, and go up to around Rs.3bn (US$85.7mn) finally. In the first phase, equity will account for Rs.640mn (US$18.3mn), 26% of which the government of the State of Kerala holds, and the rest by non-resident Indians, banks, users (airline firms) and contractors. Term loans and short-term borrowings for working capital from banks will fund the rest of the project.

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AIRLINE INDUSTRY The AAI has also drawn up an Rs.40bn (US$1.1bn) plan to modernize and expand its airspace infrastructure to meet the demand growth projected for the coming five years. The growth strategy envisages not only better passenger facilities but also improved navigational and communication systems. The first phase will involve upgradation of conventional communication, navigational and surveillance systems as an immediate measure. The second will be a transition from the present ground-based ATS systems to satellite-based CNS/ATM by the year 2000. The internal resources generated at present being inadequate, the AAI plans to enhance revenues through rationalization of the tariff structure, as well as from commercial, cargo and duty-free shops.

IATA - The International Air Transport Associations
IATA - The International Air Transport Association- was founded in Haryana, CUBA, IN APRIL 1945. It is the prime vehicle for inter-airline cooperation in promoting safe, reliable, secure and economical air service - for the benefit of the world's consumers. The international scheduled air transport industry is now more than 100 times larger than it was in 1945. Few industries can match the dynamism of that growth, which would have been much less spectacular without the standards, practices and procedures developed within IATA. At its foundation IATA had 57 members from 31 nations, mostly in Europe and North America. Today it has over 230 members from more than 130 nations in every part of the globe.

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The Airport Authority of India, which manages five international airports, 87 Domestic airports and 28 civil enclaves at defense airfields, is facing an uphill task, as it for funds, management talent and its adherence to the government procedures. Government policies provide for privatization of airports at Delhi, Mumbai, Calcutta and Chennai through long lease and new developments at existing airports and Greenfield airports through private initiative. It's true that there is risk in privatization of airports, since airports essentially provide public utility services in monopolistic situations. There are apprehensions that private enterprises are profit motivated and with privatization users may not get quality services at affordable prices. To begin with, for four airports which the government has decided to privatize, consultants should immediately put the website details of assets, traffic figures for the past 10 years and figure projections, revenue figures existing and projected, profit & loss for last 10 Years, details of manpower, business plans, capital investment programs etc. This would enable potential investor to start preparatory work on their due diligence investigations. Consultants should in immediately of develop draft terms and to conditions minimum

governing lease of these airports clearly bringing out obligations of new managements terms service levels, commitment investments for development of airport facilities, operational standards to meet our national and international obligations, clauses to deal with emergency situations, termination in event of breach, etc. These should be discussed with the aviation industry and finalized. Government should set up a regulatory Authority whose main functions would be economic regulation and operational safety audit. This authority

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AIRLINE INDUSTRY through its statutory powers and intervene if standards of airport services in terms of safety, reliability and cost effectiveness are not met. Some of the states are taking initiative for development of Greenfield airports and they should be assisted by the Ministry of Civil Aviation in adopting more professional approach. In the first instance state governments should develop techno -economic feasibility reports for airport projects through experienced organizations / consultants of repute. Airport Authority of India (AAI) has a large number of airports where the traffic volumes are low. Private entrepreneurs are not likely to be interested in such airports, which are not financially viable. These airports should be commercialized by exploiting the commercial potential of airport lands, cost containment, increased productivity and improved cost recoveries. Thus, some of these airports may in the next few years reach a stage when they can also be privatized. There are some other airports with AAI, which could be transferred to state governments, local bodies or tourism agencies who are in an advantageous position to operate and manage them more cost effectively. It is conceded that privatisation is not likely to remove all the hiccups in the development of aviation sector .We need to have a model tailored to Indian Conditions, keeping in view the local laws, rules and regulations in tune with the political philosophy and psychology of local travelers. The funding pattern should be such that the investment made is beneficial to the investors due to monopoly nature of airport business. Foreign investors do not want to investment in aviation sector in India, due to abnormal delays in decision making, undue interference, non- consistent policies of government and to some extent inflated fear of corruption in India. It's therefore essential that sectors like aviation be left in hands of professional managers and the role of bureaucracy should be only custodial and regulatory

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Alliances in various manifestations have come to stay and airlines around the world are spending agonizing hours deciding who they will marry and on what terms. The basic reason for all these alliances and equity partnerships is that the competition is growing and the World Trade Organization (WTO) is spurring the move towards “open skies” in the real sense of the word. Multilateralism in the field of aviation would mean any airline could fly anywhere in the world without being bound by bilateral agreements like that exist at present. The impact of these global handshakes is being felt by smaller airlines, as about 70 percent of the large carriers have become a part of the various groupings. No individual airline can match the reach and the connectivity of the large groupings and the smaller carriers can only watch as the globe is carved up among the various mega alliances. As a strategy, an alliance involves ➢ Extensive code sharing and the frequent flier plans Code- Sharing is where an airline flies on behalf of the other on a particular sector. The Indian example is that of Indian Airlines and Air India that share codes in the Delhi-Mumbai as well as in the Gulf sector. The frequent flier programmes are yet another advantage. The miles earned on domestic flights can be redeemed on international flights. The Jet Airways has an alliance with KLM/Northwest and the British Airways. The passenger who flies on any of these airlines is eligible for the “Jet Privilege” card subject to the fulfillment of terms and conditions.

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maximize loads:
By this it implies that the two airlines that were earlier competing with each other on a particular route compete no longer because of the alliance. They instead time their flights so that their payload is maximized and they do not compete against each other. Effective scheduling of flights does this. When a domestic airline goes into an alliance with an International airline then the scheduling is done in such a way that the domestic flight can act as a connecting flight for the passengers of the international flight. The Indian example of such an alliance is that of Jet Airways with KLM/Northwest and British Airways. By this not only the domestic airline has an increased load factor but the international airline also has an increased load factor through better connectivity. ➢ Route planning: In route planning the alliance partners join hands for a particular route or a combination of routes. For example if Air Lanka has got scheduled flights from Colombo to Mumbai, then a passenger from Colombo can be issued a ticket from Colombo to New Delhi. From Mumbai to Delhi the alliance partner will carry the passenger.

➢ Joint pricing:
As stated above the passenger from Colombo to Delhi can be issued one single ticket though he shall be availing of the services of two airlines. This is called as joint pricing where in one of the partner issues a ticket on behalf of the other.

➢ Inventory management:

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AIRLINE INDUSTRY In the aviation industry the inventory costs form a major part of the cost. The inventories are quite expensive as well. The alliance partners maintain common set of inventories and this helps in the reduction of the inventory costs, as a large amount of capital is not blocked for this. ➢ Integration of information technology: This is yet another highlight of a successful alliance. The partners can have joint reservation, check in and check out systems and can also use the information technology infrastructure of the alliance partner. ➢ Joint purchasing by the alliance partners: The benefit of scale and bargaining powers can provide great synergies and the cost reduction to the partners.

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➢ Easy connections across the globe: An easy connection across the globe is made possible as the passenger has the advantage of flying to such locations where the international flights do not operate. In such a case the alliance partner provides the connecting services (provided it has the same in that region). ➢ Lounge access at various airports: The advantage of the frequent flier program is also that the passenger who holds the frequent flier status is eligible for availing of the lounge services of the alliance partner as well. For example the “Gold Card” holder of Jet Airways is eligible to avail of the lounge services of KLM/Northwest and British Airways. Times have changed to an extent that carriers, who were bitter rivals once, are now talking about joint sales incentives, sharing revenues and profits. Though no Indian carrier is yet a part of the giant global alliances, AirIndia, Indian Airlines and Jet Airways are already in other alliances like code-sharing, joint frequent flier programs. Airlines hold hands with each other in several ways depending on their needs. Of course, the most drastic measure is taking an equity stake, a method that is actually going out of vogue these days. Other common ways are CodeSharing where an airline flies on behalf of the other on a particular sector. Examples in India are Air-India and Air Lanka on flights to Delhi, Air- India and Indian Airlines on domestic flights to Delhi and flights to the Gulf, Jet Airways and KLM / Northwest. Joint marketing and frequent flier programs co-operation is another popular measure to tie-up. An
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AIRLINE INDUSTRY example is Jet Airways frequent flier program “Jet Privilege”, where it has a joint co-operation with British Airways and KLM /Northwest. This primarily means that the miles earned on domestic Indian routes can be redeemed on international flights. A corollary of this is the joint utilization of reservation, through check in and operational systems.

Other ways of alliance between the airlines for greater synergies:
1. Block seat arrangements: In this the airlines agree to take up a certain percentage of seats on another carrier on a particular route. 2. Block cargo schemes: For cargo, airlines have block cargo undertaking to provide a certain tonnage to another carrier; they can also have Cargo Code Shares between them. 3. Strategic partnership: This is another amorphous term wherein airline tie-up for long-term commercial gains. This sort of relationship usually ends up in equity partnership or more permanent commercial arrangements. The latest example is that of Singapore Airline taking a 49 percent stake in Richard Branson’s “Virgin Atlantic”.

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Going by the developments in the Indian aviation sector in the last few years, there stands no doubt that there is enormous scope for growth in India’s air traffic over the next few years. Today, the Indian aviation market is estimated to be around Rs 25,000 crore and is growing rapidly with the entry of numerous new players. The aviation industry in India began with the birth of Tata Airlines, through the business relationship between Mr Nevill Vintcent, a Royal Air Force pilot and Mr JRD Tata, the first Indian to get an A-licence. Tata Airlines became Air India in August 1946. In 1953, the Air Corporation Act nationalised all existing airline assets and established the Indian Airline Corporation and Air India International for domestic and international air services, respectively. These two companies enjoyed monopoly power in the industry until 1991, when private airlines were given permission to operate charter and nonscheduled services under the ‘Air Taxi’ scheme to boost tourism. These carriers were not allowed at the time, to fly scheduled flights or issue air tickets to passengers. In 1994, following the repeal of the Air Corporation Act, private players were permitted to operate scheduled services. The next big change in the industry came in late 2003 with the emergence of India’s first no-frill airlines, Air Deccan. It revolutionized the industry, offering fares as low as INR 500 (roughly $ 10), compared to full service fares. The key headlines in 2007 are going to be on dramatic increase in tourism and the "de-seasoning" of many destinations, which will again stir a surge in the aviation industry. The Indian tourism sector now accounts for 320 million domestic travelers and three million inbound travelers, mostly comprising Non- Resident Indians (NRIs) and People of Indian Origin (PIOs). This doublePage 47

AIRLINE INDUSTRY digit growth expected in the travel and tourism industry will surely reflect on the Indian aviation industry. While international tourism, both inbound and outbound is growing rapidly, India will be most impacted by domestic growth. The reason being that several destinations that were purely seasonal (for e.g. Goa from December to March) are now witnessing the flattening of these peaks to some extent and it’s believed that this process will continue and gain further momentum. E-ticketing has also played a pivotal role by reducing the obscure task of manual booking of airline tickets and the cost of issuing e-tickets is expected to reduce drastically. However, there are some hindrances that the Indian aviation industry needs to overcome like more airports, pilots, flight crew and less-stressed air traffic controllers. Apart from the visible infrastructure level improvements, modernisation, HR issues, aviation methodology, technological growth and controlling traffic congestion are some of the other issues that demand careful and timely attention. But, right now the scales seem to be in the favour of the Indian aviation industry, for which the sky is not the limit. Indian skies are more open than ever before. International airlines are servicing passengers right from Amritsar to Ahmedabad to Kochi, Greenfield airports are emerging at Hyderabad and Bangalore and plans to modernize and restructure the two gateway airports are moving ahead aggressively. On the other hand, private domestic carriers are now flying to international routes like Kuala Lumpur, Singapore and London and have ambitious plans to expand and spread wings to the US as well.
Model of the new Hyderabad Airport to be operational by March 2008

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AIRLINE INDUSTRY During the year 2004-05, air transport witnessed a growth of nearly 25 per cent, giving reason for the government to have an optimistic outlook and expect an average growth rate of 10 per cent by the year 2010 in the sector. The years 2004-05, 2005-06 and 2006-07 have been years of record growth in air traffic in the country. During the period of April- December 2005, domestic and international traffic grew by 24.2 per cent and 18 per cent, respectively. While international and domestic cargo during the same period recorded a growth of 11.7 per cent and 6.6 per cent. This growth has been the second highest in the world, next to China. Further, during the period April- September 2006, international and domestic passengers recorded a growth of 15.8 per cent and 44.6 per cent, respectively, leading to an overall growth of 35.5 per cent. During the same period, international and domestic cargo recorded growth of 13.8 per cent and 8.7 per cent, respectively, resulting in an overall growth of 12.0 per cent. ➢ LLCs are here to stay: The Centre for Asia Pacific Aviation forecasts Asia Pacific and Middle East LCCs will expand their seat capacity by over 230 per cent by 2012 over current levels – or around 40-50 per cent capacity growth each year over the next five years, according to the Outlook 2007 report. "A key story in the Asia-Pacific region for 2006 was the capacity restraint of the full service airlines, resulting in higher load factors. But there was a price. They lost market share, particularly to European and Middle East carriers, as well as the fast-growing Asia-Pacific LCCs", informed Mr. Peter Harbison, Executive Chairman of the Centre for Asia Pacific Aviation. According to the Outlook report, Asia is a two-speed market, with flag carriers growing much more slowly than other airlines, including carriers of India and China and the LCC sector. Association of Asia
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AIRLINE INDUSTRY Pacific Airlines carriers increased aggregate capacity (ASKs) by just 0.9 per cent in 2006, while Asia-Pacific LCC capacity surged 55 per cent year-on-year in 2006 to account for 8.9 per cent of the regional total and close to 11 per cent in the last quarter of 2006. "Based on recent LCC growth rates and aircraft orders, their share could reach 20 per cent by the end of this decade, with much higher levels of penetration in such markets as India, Thailand, Australia, Malaysia and Indonesia. The LCC share in Asia was less than 1 per cent in 2001. Such an outcome would eclipse the pace of LCC development in every other geographic region, albeit a delayed development in this region", said Mr. Harbison. Aircraft deliveries over the next five years will also be focused on the fastest growing markets – in particular, China and India — where there is great potential for demand growth to absorb new capacity additions, according to the report. ➢ Exploring New Destinations: AI has identified the need for non-stop operations to the US and is planning 12 new destinations in a phased manner to San Francisco, Washington, Houston, Toronto, Manchester, Beijing, Seoul, Taipei, Sydney, Lagos, Mauritius and South Africa. It has already started flights to Shanghai, Los Angeles, Seoul, Manchester and Toronto. Private airlines too have started operating to Kathmandu, Colombo, Kuala Lumpur, Bangkok and Singapore. Jet Airways has mounted flights to London from Delhi and Mumbai and plans to begin operations to the US. The open sky policy and liberalised bilateral agreements with number of countries have led to a quantum jump in forging greater connectivity to and from India, beginning with the UK whose carriers have been given access to Bangalore, Hyderabad and Kochi, besides
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AIRLINE INDUSTRY the four metro destinations. Reciprocally, Indian carriers can fly to Glasgow, Edinburgh and Bristol in addition to London, Manchester and Birmingham. A revised air services agreement was signed with US on April 14, 2005 granting unlimited access for the designated airlines to any points of call in each other’s territory as against four airports under the earlier agreement. Thus, there is American Airlines mounting direct, non-stop flights on the Chicago- Delhi sector in code-sharing agreement with Air Sahara (now part of Jet Airways) and Continental Airlines operating non-stop long haul flights on Delhi-New York sectors. ➢

Surging demand for air cargo:
While the passenger transportation sector is already bustling with activity, the interest of various aviation players—passenger as well as air cargo operators—is shifting to the largely untapped air cargo sector. Civil aviation minister Mr Praful Patel has indicated that the government is looking progressively at liberalising the air cargo sector, with plans to allow 74 per cent foreign direct investment (FDI). According to analysts, air cargo has not even scratched the surface of cargo industry in India. As per the Airbus market outlook for the next 20 years, the number of dedicated freighters in India will go up from the current dismal figure of 8 to around 165 aircraft by 2025. Air cargo accounts for only 5 per cent to 7 per cent of the total cargo in terms of volume, but in terms of value, air cargo stands for 35-40 per cent of the total cargo trade, according to sources. Though Indian air-cargo is a fairly nascent industry, IATA is, however, bullish on the positive outlook for India.

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Traffic growth at non-metro airports is expected to exceed that of the metro airports in near future. According to research undertaken by the rating agency Crisil, India’s non–metro airports are expected to host as many as 74 million passengers by the year 2009-10—almost four times than the 19 million passengers at the metro airports. The basis behind the projections are that there are 35 non-metro airports in the country, compared to 5 metro airports. Right on the cue, private airlines have lined up plans to reach 31 new destinations. These include tourist destinations like Pathankot and Bagdogra as well as commercial and crucial destinations like Coimbatore and Porbander. Of the nine airlines, Air Deccan has the maximum number of nonmetro airports on its radar. Needless to say, such growth in the air traffic entails major improvement in airport facilities. And this spells mammoth opportunities for the private sector. The total investment for the 35 non-metro airports is expected to be well over Rs 6,000. Of this, Rs 3,266 crore is to be spent on building airport facilities, while Rs 1,396 crore will go towards air side development, which will be primarily handled by AAI. However, it is likely that many private sector players will want to be involved in the city side development. The total investment in this area is expected to cost about Rs 1,500 crore. Government’s initiative to carry on the programme of upgrading the metro and the non-metro airports augurs much too well for the country’s civil aviation industry. However, it would be well imperative that the initiatives are effectively implemented and sustained policy reforms are undertaken to make the sector remain buoyant for the time to come.

➢ Opportunity in India:
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AIRLINE INDUSTRY In India, we at present stand witness to a major economic boom. As more and more sophisticated, high-tech products are being manufactured, assembled, and distributed in the country, the need for integrated air express service is subsequently increasing. Air cargo has started showing increased growths in the last year in line with GDP growth, to which it has a direct correlation. Currently, the size of the domestic organized Indian express market is pegged at Rs 10.75 billion, according to A C Neilson Report and we estimate the market growth in double-digit figures following last year’s trends. India is still not a mature market. However, with encouraging GDP growths projected, current increase in manufacturing, development of various industries, and India emerging as an important sourcing hub, opportunities exist like never before.

➢ Challenges to overcome
It is a fact that growth and challenges always go hand-in-hand, and the air express industry is no exception to this rule. While we have reason to be optimistic about the macroeconomic indicators like the encouraging GDP growths that augur well for our business, there are issues that we constantly need to address. For instance, fuel prices are a concern as they account for a significant part of our operating expenses. And even though we have a fuel surcharge mechanism in place, there is always a risk that prices would

escalate beyond control. Any kind of political disturbance or disruption is also detrimental to our business. Another important factor that particularly needs consideration in India is infrastructure. Infrastructure related to cargo terminals, cold storage,

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AIRLINE INDUSTRY automatic storage and retrieval systems, mechanized transportation of cargo, computerization and automation, and needs to be improved. In short, the much-talked airport modernisation across the country has to step up pace.

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➢ The Take Off:
Naresh Goyal, Chairman of Jet airways was the one-man show behind Jet airway’s birth. Goyal started his career as a marketing executive at the General Sales Agent (GSA) with Lebanese international airlines in Delhi. He than worked with Iraqi airways for a couple of years, before joining Royal Jordanian Airlines as a regional manager. Goyal's diligence & incredible ability to memorize flight schedules caught the attention of Ali Ghandour, who was then president & chairman of Royal Jordanian Airlines. Ghandour introduced Goyal to the wider world of aviation outside India. In 1974, Goyal decided to get into the GSA business himself establish Jet air Transportation representing Kuwait Airways & Air France. Simultaneously, Goyal was appointed regional manager of Philippine Airlines. Over the next few years, Goyal expanded his network picking up agencies for some more airlines. He was regular member at the AGM of International Air Transport Association (IATA) the global aviation body . Meanwhile Goyal turned into NRI & shifted his base to London. During the same time, Goyal also toyed with the idea of setting up his own airlines. The opportunity came in early 1990s, with the GOI's open
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AIRLINE INDUSTRY skies policy permitting private investment (including NRI's) in the

domestic aviation. In April 1992, Jet airways India was set up as a 100 % subsidiary of tailwind ltd., a company registered I Cayman islands (situated in the northwest Caribbean sea ) . Kuwait Airway's & Gulf Air had 40 % stake in tailwind ltd. Soon after being incorporated as a privately owned airline, Jet airways hired lintas the ad agency to develop Jet airways 's corporate logo, IMRB the market research firm to do a consumer survey & Anderson consulting to do feasibility study & help prepare the business plan. By 1992, goyal put his start-up team in place. Saroj datta & B.P.balinga, both directors at Air India, Rolland Thomas from Malaysia Airlines & Steven Jagannathan from Singapore Airlines joined the board.

➢ The Success Formula:
Jet airways started its operation with leased aircraft's. The idea was to expand faster by using funds to lease more aircraft's than buying one or two. Boeing 737 could cost anywhere between $ 40 to $ 50 mn, whereas a monthly lease could be as low as $ 0.4 mn. The most crucial decision was the choice of aircraft. While Damania, East West & Modiluft who also started their operations at the same time opted for the older Boeing 737.200s, Jet airways chose newer 737.300s whose least cost were atleast 40 % higher. four planes (about three years old) were leased from Ansett Airlines. Although the 737.300s were more expensive to lease they were more fuel-efficient (consumed 8% less fuel) & were cheaper to maintain. goyal felt that young fleet would help attracting customers. Analyst felt that by having one type of aircraft-the 737-in its fleet, Jet airways made the maintenance & flight crew training far simpler. Spares were common & inventories were lower as well. for engineers,
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AIRLINE INDUSTRY dealing with one type of aircraft. Balinga claimed that Jet airways technical dispatch reliability was 99.6 % , which meant that a Jet airways flight was rarely held up on account of technical snags. Jet airways also had another advantage in the form of a readymade distribution network in sister company Jetair's 85 offices countrywide through which it had access to a larger market beyond metros. Unlike other start-ups that started with manual reservations, Jet airways went in for computerized from day one. This airlines reservation system, though expensive, delivered superior service. Jet airways’s number of employee per aircraft was 163 & total employee strength of 4,000 as against Indian Airlines's 397. The focus was on productivity & cost control. A jet airway was not a lavish paymaster & increments were modest. Salaries provided were not as high as foreign airlines offered. Jet airways also invested heavily to train his pilots. An aviation academy housing the state-of-art Boeing 737 700 /800 flight simulator & flight training device for 737-400s was set up at a cost of $ 10 mn. Jet airways’s success was mainly due to its service excellence. Jet airways always ensured that its service surpassed customer expectations. Goyal ensured that the attendants & front line staff were fresh recruits trained in the "jet way"& not people from other airlines who would bring with them old culture. According to the frequent travelers, the hallmark of Jet Airways's service was its cheerful attitude. If flight was delayed, travelers were phoned & informed in advanced. Jet Airways's managed to achieve service excellence, because of being strictly disciplined from the start. Lapses were not tolerated & the focus was on performance. ➢

Innovations in service:
• Cabin bag-only passengers can check in at any city counter
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AIRLINE INDUSTRY • in • • Business class passengers can customize their meal & drinks Returning passengers can get two boarding passes at one check

In flight mail-order shopping offers premium products at a discount • JetMobile offers automated flight schedules over the cell phone

Jet Airways always focused on the business traveler. To attract & retain business traveler, it had to offered superior services. Jet Airways's picked up Indian Airlines's service module as a framework & borrowed a few ideas from KLM Royal Dutch Airlines for managing systems. Jet Airways's always believed in keeping close watch on its customer's service. On all its flights more than 20 minutes long, light refreshments were served & on longer flight passengers were served non-alcoholic drinks, cold towels & a three coarse meal. Jet Airways received 16,500service monitor questionnaire (SMQ's) every month & they were analyzed at various levels to plug loopholes in service. Every new flight attendant was put through at least three months of training in the first year & thereafter several more hours of in-flight & class room training. In December 1999, Jet Airways relaunched its frequent flier program under the 'jet privilege' (JP) name the (frequent flier program was initially launched in 1994). JP customers were not required to pay membership fees. They also did not have to produce boarding cards or other proof of travel. A passenger can earn free JP miles (points) by taking a Jet Airways flight. The new programme offered three different levels of privileges: J.P Blue, J.P Silver, J.P Gold, depending on the number of miles accrued or the number of flights flown. J.P Silver & Gold members could earn bonus miles on all Jet Airways flights & enjoyed lounge access, Tele check-in benefits. Jet Airways tied up with international carriers like KLM Royal Dutch Airlines & Northwest Airlines as a result of which JP members could earn miles on these airline
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AIRLINE INDUSTRY networks too. They could redeem their miles when they had earned atleast 10,000 miles or had flown 10 flights. Jet Airways had tied up with Oberoi Hotels & Resorts, Radisson Worldwide. Members of JP could earn miles on each stay at any of these hotels. In 2001, Jet Airways launched an in-flight; Jet Airways launched an inflight mail order catalogue, JetMall for high quality products. The inflight shopping programme enabled passengers to browse through a specially design mail order catalogue which helped those select products & get them products delivered at home within two to four hours anywhere in India. Jet Airways claimed that that the mail order catalogue was at par with the in-flight shopping catalogue on international flights. In early 2001, Jet Airways finalized a Rs. 16 bn loan for the purchase of 10 Boeing 737s to be delivered over next two years. This was the first deal in India that involved the US Exim Bank & an Indian Bank along with two offshore special purpose vehicles (SPVs). According to analyst, the beauty of the deal was that Jet Airways would finally end up borrowing from Indian investors & not from foreign bank. ➢

Performance of jet airways:
Performance of jet airways since its formulation in 1992.Over the years, jet airways has significantly improved its market share from 6.6 % in 1993-94 to 42 % in 2000-01. Right from the start, jet airways focused more on customer service rather than anything else. It was because of its superior customer service, that jet airways had become the most popular airline in India.

➢ Strategies of jet airways:
Its operations started in India with leased aircraft because buying an aircraft would have cost jet airways around $ 0.4 million. Jet airways
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AIRLINE INDUSTRY also started its operation with the new Boeing 737-300s & not the older Boeing 737-200s. This was because the new aircraft were fuelefficient & maintenance costs were low. Jet airways' aircraft utilization & number of flights a per day more than of Indian Airlines. Another reason of jet airways was it's lean structure. Compared Air India’s 397 employees per aircraft, Jet airways had only 163 employees per aircraft.

➢ Flying High In The Indian Sky:
In 2001, with revenues of $ 542.18 MN, Jet Airways emerged as the most popular domestic airlines in India. Jet Airways stated its operation in 1993; the number of its passengers increased from 0.663 million in 2001, when other private airlines had stopped their operations, Jet Airways not only continued to survive, but had become a formidable competitor to indias national domestic airlines -(AIR INDIA). Jet Airways seemed to be lone challenger to AIR INDIA with Sahara Airlines in the third position. Jet Airways's market share increased to 42 % in 2001 from 6.6 % in late 1990s. In 2001 , Jet Airways ran 215 flights per day compared to INDIAN AIRLINES's 208.Unlike the loss making INDIAN AIRLINES, Jet Airways is making profits. At the end of the first year, Jet Airways achieved average seat factor close to break-even level of 71 %. Thereafter it broke even & has been making profits ever since. In 2001, Jet Airways recorded profits of rupees 125mn compared to AIR INDIA which recorded a loss of Rs 1.77bn. The following pie diagrams will show the growth made by Jet Airways in the market share, passenger carried and the fleet size.

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In spite of all these challenges, India’s air express industry presents exciting opportunities. What is required to exploit this opportunity is a strong commitment from private sector operators, coupled with determined efforts by the government and regulators to transform the sector. With rapid technology development and improvement of infrastructural facilities, India can play a significant role in the global logistics industry. Opportunities abound, and as we deliver business in the 21st century, we shall make our dream a reality by bringing people and markets together for a stronger and more prosperous India.

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➢ India info ➢ Web site of Airport Authority of India. ➢ CMIE Journal ➢ Business Strategy ➢ Author: Sanjib Dutta & A. Mukund ➢ Title of the Book: Business Strategy ➢ Publication: 2002 ➢ Publisher: ICFAI Press ➢

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