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Research Methodology

Market Research of
Aviation Industry
Submitted by: Gayatri Misra (A3221512043)
Tushar Mathur (A3221512003)
Meenakshi Prasad (A3221512053)
Akanksha Mohanty (A3221512038)
Sahil Dhawan (A3221512060)
Arjun Kumar (A3221512061)

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Index
S.no Content Pg.No
1 Introduction 3
2 Background

3
3 Exploratory, descriptive or casual study 10
4 What data would be useful for making the forecast of product in
the domestic market?
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5 How would you go about locating sources of secondary data
useful for the decision?
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6 Bibliography 46












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Introduction
This report mainly focuses on the forecasting and gathering data relating to the Airline industry
that influence air passenger preferences of selection of a particular airline for traveling. Several
aspects related to service data gathering have been discussed in this report. In recent times
research related to the topics in the airline industry have become a hot spot for market analysts.
Different methods & dimensions are being used in such type of researches in order to know the
impact of service provided by airline to their passengers on the choice of airline selection while
making a decision for traveling. Past work on the study of airline service is used in such
researches to evaluate the effect of airline service on passenger future behavioral intentions
towards airline selection. Such researches are very helpful for those managers who work in the
airline industry to provide better & more attractive service quality.

Background
Air travel remains a large and growing industry. It facilitates economic growth, world trade,
international investment and tourism and is therefore central to the globalization taking place in
many other industries.
In the past decade, air travel has grown by 7% per year. Travel for both business and leisure
purposes grew strongly worldwide. Scheduled airlines carried 1.5 billion passengers last year. In
the leisure market, the availability of large aircraft such as the Boeing 747 made it convenient
and affordable for people to travel further to new and exotic destinations. Governments in
developing countries realized the benefits of tourism to their national economies and spurred the
development of resorts and infrastructure to lure tourists from the prosperous countries in
Western Europe and North America. As the economies of developing countries grow, their own
citizens are already becoming the new international tourists of the future.
Business travel has also grown as companies become increasingly international in terms of their
investments, their supply and production chains and their customers. The rapid growth of world
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trade in goods and services and international direct investment have also contributed to growth in
business travel.
Worldwide, IATA, International Air Transport Association, forecasts international air travel to
grow by an average 6.6% a year to the end of the decade and over 5% a year from 2000 to 2010.
These rates are similar to those of the past ten years. In Europe and North America, where the air
travel market is already highly developed, slower growth of 4%-6% is expected. The most
dynamic growth is centered on the Asia/Pacific region, where fast-growing trade and investment
are coupled with rising domestic prosperity. Air travel for the region has been rising by up to 9%
a year and is forecast to continue to grow rapidly, although the Asian financial crisis in 1997 and
1998 will put the brakes on growth for a year or two. In terms of total passenger trips, however,
the main air travel markets of the future will continue to be in and between Europe, North
America and Asia.
Airlines' profitability is closely tied to economic growth and trade. During the first half of the
1990s, the industry suffered not only from world recession but travel was further depressed by
the Gulf War. In 1991 the number of international passengers dropped for the first time. The
financial difficulties were exacerbated by airlines over-ordering aircraft in the boom years of the
late 1980s, leading to significant excess capacity in the market. IATA's member airlines suffered
cumulative net losses of $20.4bn in the years from 1990 to 1994.
Since then, airlines have had to recognize the need for radical change to ensure their survival and
prosperity. Many have tried to cut costs aggressively, to reduce capacity growth and to increase
load factors. At a time of renewed economic growth, such actions have returned the industry as a
whole to profitability: IATA airlines' profits were $5bn in 1996, less than 2% of total revenues.
This is below the level IATA believes is necessary for airlines to reduce their debt, build reserves
and sustain investment levels. In addition, many airlines remain unprofitable.
To meet the requirements of their increasingly discerning customers, some airlines are having to
invest heavily in the quality of service that they offer, both on the ground and in the air.
Ticketless travel, new interactive entertainment systems, and more comfortable seating are just
some of the product enhancements being introduced to attract and retain customers.
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A number of factors are forcing airlines to become more efficient. In Europe, the European
Union (EU) has ruled that governments should not be allowed to subsidize their loss-making
airlines. Elsewhere too, governments' concerns over their own finances and a recognition of the
benefits of privatization have led to a gradual transfer of ownership of airlines from the state to
the private sector. In order to appeal to prospective shareholders, the airlines are having to
become more efficient and competitive.
Deregulation is also stimulating competition, such as that from small, low-cost carriers. The US
led the way in 1978 and Europe is following suit. The EU's final stage of deregulation took effect
in April 1997, allowing an airline from one member state to fly passengers within another
member's domestic market. Beyond Europe too, 'open skies' agreements are beginning to
dismantle some of the regulations governing which carriers can fly on certain routes.
Nevertheless, the aviation industry is characterized by strong nationalist sentiments towards
domestic 'flag carriers'. In many parts of the world, airlines will therefore continue to face
limitations on where they can fly and restrictions on their ownership of foreign carriers.
Despite this, the airline industry has proceeded along the path towards globalization and
consolidation, characteristics associated with the normal development of many other industries.
It has done this through the establishment of alliances and partnerships between airlines, linking
their networks to expand access to their customers. Hundreds of airlines have entered into
alliances, ranging from marketing agreements and code-shares to franchises and equity transfers.
The outlook for the air travel industry is one of strong growth. Forecasts suggest that the number
of passengers will double by 2010. For airlines, the future will hold many challenges. Successful
airlines will be those that continue to tackle their costs and improve their products, thereby
securing a strong presence in the key world aviation markets.
In 1989 events began which severely damaged the economic foundations of the industry. The
Gulf crisis and economic recession caused the airlines to lose billions of dollars. The industry
experienced the first drop in passenger numbers in a decade, and by the end of the three-year
period 1989-1992 had lost about US$10 billion - more than had been made since its inception.
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Great airline names like Pan American and Eastern disappeared, while others, such as TWA and
Continental Airlines, sought shelter from bankruptcy.
Today the aviation industry is a low cost, low fare environment. Most of the major airlines have
undergone cost restructuring. Some airlines sought the protection from bankruptcy to restructure
and reduce costs and then emerged as strong low-cost competitors. The majority have entered
into cross-border alliances to improve profitability through synergy benefits.
Autumn 1996 saw the UK and US Governments hold bilateral talks with the intention of
negotiating an 'Open Skies' arrangement between the two countries. The result of these talks is
eagerly awaited by airlines on both sides of the Atlantic.
The last few years have seen the proliferation of airline alliances as the so called 'global carriers'
of the future are created. North American carriers have been very much at the forefront of this
activity, and today much of the world aviation market is shared between several large global
alliances, including KLM/NorthWest, Atlantic Excellence alliance, STAR, and the British
Airways / American Airlines alliance which also includes Canadian Airlines and Qantas. The
latter still awaits regulatory approval on both sides of the Atlantic.

India and Aviation

Indias aviation sector is enjoying a steady growth. Passenger output rose to 144 million in 2011
from 73 million in 2006, as per a study. This positive growth path can be attributed to the 11th
Five-Year Plan (20072012). This period witnessed the completion of four international airport
projects through the publicprivate partnership (PPP) mode; it was also during this period that
five Indian carriers began to function on international routes.

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Air transport in India today supports 56.6 million jobs and produces over US$ 2.2 trillion of the
global gross domestic product (GDP). Air passenger traffic is also increasing at a healthy rate, a
development driven by modern facilities and infrastructure.
The Centre had set aside an investment of US$ 12.1 billion in the airports sector during the 12th
Five-Year Plan period, of which US$ 9.3 billion is projected to come from Indias private sector
for construction of new and low-cost airports and development of existing ones.


Market Size

India would be the third largest aviation market by 2020, as per Mr Ajit Singh, Minister for Civil
Aviation, Government of India.

Passenger throughput increased to 159 million and cargo to 2.19 million metric tonnes in 2013, a
compound annual growth rate of 13 per cent and 10 per cent respectively over the period 2003
2013, as per data from the Airports Authority of India.

The Indian civil aviation industry is among the top 10 globally with a size of around US$ 16
billion.


Investments

The foreign direct investment inflows in air transport during April 2000 to March 2014 stood at
US$ 495.24 million, as per data released by Department of Industrial Policy and Promotion.

The following are some of the major investments and developments in the Indian aviation sector:

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Tata-Singapore Airlines plans to launch its services in India from September 2014, with
87 weekly flights in its first year of operations, as stated in the airlines application for an
air operators permit to the Directorate General of Civil Aviation .These flights will link
Delhi with Ahmedabad, Bangalore, Chandigarh, Goa, Hyderabad, Jammu, Mumbai,
Patna, and Srinagar.
Bengaluru-based company GMR Infrastructure has won a contract to upgrade Mactan-
Cebu international airport in the Philippines. GMR Infra and its partner, Philippine firm
Megawide Construction will make an upfront concession payment of US$ 325 million
and invest US$ 375 million over the next five years to build a new terminal and upgrade
the current one.
The Directorate General of Civil Aviation granted an air operators permit to AirAsia on
May 7, 2014, opening the path for the airline company to launch low-cost services in
India. AirAsia India will launch services with three Airbus A320 aircraft, from its
Chennai hub.
Trichy in Tamil Nadu has, over the past few years, become the fastest growing
international airport in India. International passenger traffic in the town increased 382 per
cent to 773,423 between 200607 and 201213. This year, it is expected to become the
10th biggest international airport in the country.
Low-cost airline SpiceJet is changing its network strategy in order to be more cost
effective and have better yields. The airline signed a US$ 4.4-billion deal in March 2014,
for 42 fuel-efficient Boeing 737 Max planes which would be delivered from 2018
onwards.


Government Initiatives

Indias Ministry of Civil Aviation revised the bilateral air traffic entitlements with Dubai in
February 2014, permitting them a 20 per cent increase in seats to India. We have allocated
Dubai 11,000 seats in three phases till the summer schedule of 2015. Dubai has agreed to grant
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change-of-gauge facility for Indian carriers at the existing airport, as per a senior official of the
Ministry.

The Ministry has also signed a Memorandum of Understanding with AAI for 201415, which
lists targets to be achieved by AAI on some key performance areas during the fiscal. The main
features of the MoU include parameters such as risk management, implementation of Enterprise
Resource Planning tools and development of disaster management plan.

Delhi Airport will soon become a zero-diversionary airport. The Committee set up by the
Directorate General of Civil Aviation to look into the matter, has presented its report with 27
recommendations. There were 57, 89 and 143 diversions in 2011, 2012 and 2013, respectively.
Chances of diversions of flights at Delhi Airport are expected to come down drastically after the
recommendations have been implemented.


Road Ahead

The aviation industrys potential in India is massive. The market already caters to about 150
million passengers passing through its many airports, with the potential to grow further. By
2020, traffic at airports in India is anticipated to reach 450 million. The aviation industry
presently supports about 0.5 per cent of the Indias GDP.
A report notes that the industry will continue to grow in India on the back of the performance of
regional airports. Currently, there are about 450 used/un-used/abandoned airports and airstrips
spread across India. Many Indian states, particularly in Eastern India, have begun taking steps to
promote air connectivity. Still, more needs to be done. All this will have a multiplier effect with
regards to higher growth of tourism, employment and local economic activities in the country.

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I. Exploratory, descriptive or casual study
EXPLORATORY STUDIES

Exploratory research is defined as the initial research into a hypothetical or theoretical idea.
This is where a researcher has an idea or has observed something and seeks to understand more
about it. An exploratory research project is an attempt to lay the groundwork that will lead to
future studies, or to determine if what is being observed might be explained by a currently
existing theory. Most often, exploratory research lays the initial groundwork for future research.

Exploratory research can come in two big forms: either a new topic or a new angle. A new topic
is often unexpected and startling in its findings. New angles can come from new ways of
looking at things, either from a theoretical perspective or a new way of measuring something.

First, you need to do an exploratory study. This is the problem finding phase. An exploratory
study forces you to focus the scope of your project. It helps you anticipate the problems and
variables that might arise in your project.

Perhaps the most common problem is size. Your project must be kept focused. If the scope of a
project is too big, it will not get off the ground. Too much information is overwhelming. An
important objective of an exploratory study is keeping your project manageable. The larger your
projects scope, the more difficult it is to control. This process will help you weed out problems.

In the case of making a forecast of airlines in the domestic market for the forthcoming year, for
example, an exploratory study would help your research team take an abstract idea and develop it
into a focused plan. The requirements would be market-driven. This process is time consuming,
but the results are worth the effort.
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Exploratory studies generally encompass three distinct methods:

Literature search
A literary search means you go to secondary sources of information: the internet, the public
library, company or government records. These sources are usually easy and inexpensive to
access. For example, your development team would search online. They would look at other
Airline companies in the market, the preferred destinations chosen by people, the pricing of
similar Airlines, the area and class of frequent fliers and any other information necessary to set
parameters on their project.


Expert interviews

After a literature search, your team would have a useful background for the project. They
know what questions to ask and how to set up their project. After the literary search, the
next step is to interview experts. These experts might include company executives or
consumers. They would also talk to people who used similar services. Your team would
seek out professionals who have careers relating to the research project. Your team
knows that one effective way to gain information from experts is through focus groups. A
focus group includes 6-8 individuals who share a common background, in this case,
Pilots, market analysis, administration, Ground staff, legal advisers who participate in a
joint interview. The secret to a successful focus group is ignoring the traditional
question/answer format. Instead, you encourage the free flow of ideas and discussion.

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Case studies

Every research project will have drawbacks. Thus, case studies become a important tool
because they allow you to examine another businesss managerial problems and
solutions. If another study deals with similar issues, you can avoid these pitfalls by
learning from its mistakes. Case studies include histories of other projects and
simulations of possible alternatives. A good What if? can save a lot of time and
resources.

DESCRIPTIVE STUDIES

Once the groundwork is established, the newly explored field needs more information. The next
step is descriptive research, defined as attempts to explore and explain while providing
additional information about a topic. This is where research is trying to describe what is
happening in more detail, filling in the missing parts and expanding our understanding. This is
also where as much information is collected as possible instead of making guesses or elaborate
models to predict the future - the 'what' and 'how,' rather than the 'why.'

An example is planning out how and what the technicality of setting up new airlines requires.
Things such as Logistics, Funds, Registration, and human resource will be further analysed.

Research over the last few decades has been expanding our understanding, providing
descriptions of the active processes in setting up a vast business such as Airlines.

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Airlines is quickly growing field. Over the last few decades, such as AirAsia, Jet connect,
Kingfisher, etc. There has been an active interest in many researchers to explore the field that
the current globalized market needs.

An exploratory study helps establish what you are selling, but the descriptive study will helps
find your market and understand your customer. Since you will not be able to sell to everyone, a
descriptive study is necessary to focus your project and resources.

There are different kinds of studies that can be implemented to better understand the market.

Market potential: description of the number of potential customers of a product.
Market-share: identification of the share of the market received by your product,
company and your competitors.
Sales analysis: description of sales by territory, type of account, size or model of
product.
Product research: identification and comparison of functional features and
specifications of com- petitive products.
Promotion research: description of the demographic characteristics of the audience
being reached by the current advertising program.
Distribution research: determining the number and location of retailers handling the
companys products. These are supplied by wholesalers and distributed by the company.
Pricing research: identifying competitors prices by geographic area.
These studies will help you formulate solutions. At the same time, they indicate how potential
customers might react.
For example, In Establishing an Airlines the market potential at this day and age when one
corner of the globe needs to be connected in order for life to function is extremely high. In a
world where to run economies, trade, education, etc, travel has become a lifestyle habit, the
market potential has sky rocketed. Moreover, with the expansion of the industry, private
companies have started to enter the venture an example for the same will be Kingfisher Airlines
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and Indigo have attracted many in the stock market. Further, The aviation business is one which
cannot be bound by boundaries, in fact, it erases boundaries and leads to a uniglobal cultural.


CAUSAL STUDIES


Even though descriptive studies describe and sometimes predict relationships, results, or events,
you may want to know why. If you can discover the reasons behind your solutions, then you can
assemble your own predictive models.
Such models can be used in the future. As a marketing researcher, knowing why will make your
job easier. Causal studies try to find out the relationship between a specific cause and a specific
effect.

Figuring out casual factors


Cause and effect have to be related. Before a cause and effect can be established, a logical
implication has to be found.
There are three types of evidence that can be used to establish causal relationships:


1. Associative variation

Associative variation involves taking two variables and seeing how often they are
associated. The more they show up in studies, the more likely they are related.
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Associative variation can be broken down into two distinctions: association by presence
and association by change. Association by presence measures how closely presence of
one variable is associated with presence of another. However, association by change
measures the extent to which a change in the level of one variable is associated with a
change in the level of the other.


2. Sequence of events

In order to establish a cause/effect relationship, you must first establish that the causal
factor occurred first.
3. Absence of other possible causal factors

You must also demonstrate that other factors did not cause the effect. Once you have proved this,
you can logically conclude that the remaining factor is the cause.
For example, studying the cause effect of an issue that arises in an airline company will help
avoid future issues, for instance, loss of baggage of a passenger can be avoided by updating the
software used for tracking baggage and use of tags.



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Conclusion

As can be inferred from the above study, in order to analyse an aviation businesses the
prerequisites involve studying the subject through all three methods of market research.
Elements of each type of research can help the company to prosper at different stages. However,
forecasting the market for the service in the fourth coming year can be best done through the
descriptive method since it analysis Market potential, Market-share, Sales analysis, Product
research, Promotion research Pricing research; through the study of which the requirements of
the market in a particular period of time can be best analysed.

II. What data would be useful for making the forecast of
product in the domestic market?

A market development strategy stems from a desire to expand sales volume of existing products through
new markets. This would include geographic expansions, targeting new market segments within the
domestic market. A market development strategy relies on the current predominant product technology
and tries to find viable new markets that will respond favorably to such technology. New users and new
market products are characteristic of a market development strategy.

Diversification is pursued when the company wishes to expand its business into related business and
unrelated business. A company pursuing this strategy confronts complexities associated with new
customer markets and new product technologies. New category entries and new-to-the-world products are
pursued in the course of diversification strategy.

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It is not unusual to hear a company's management speak about forecasts: "Our sales did not meet the
forecasted numbers," or "we feel confident in the forecasted economic growth and expect to exceed our
targets." In the end, all financial forecasts, whether about the specifics of a business, like sales growth, or
predictions about the economy as a whole, are informed guesses. In this article, we'll look at some of the
methods behind financial forecasts, as well as the actual process and some of the risks that crop up when
we seek to predict the future.

Financial Forecasting Methods

There are a number of different methods by which a business forecast can be made. All the methods fall
into one of two overarching approaches: qualitative and quantitative.

Qualitative Models

Qualitative models have generally been successful with short-term predictions, where the scope of the
forecast is limited. Qualitative forecasts can be thought of as expert-driven, in that they depend on market
mavens or the market as a whole to weigh in with an informed consensus. Qualitative models can be
useful in predicting the short-term success of companies, products and services, but meets limitations due
to its reliance on opinion over measurable data. Qualitative models include:
Market Research Polling a large number of people on a specific product or service to predict how
many people will buy or use it once launched.
Delphi Method: Asking field experts for general opinions and then compiling them into a forecast.
(For more on qualitative modeling, read Qualitative Analysis: What Makes A Company Great?)

Quantitative Models

Quantitative models discount the expert factor and try to take the human element out of the analysis.
These approaches are concerned solely with data and avoid the fickleness of the people underlying
the numbers. They also try to predict where variables like sales, gross domestic product, housing
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prices and so on, will be in the long-term, measured in months or years. Quantitative models
include:
The Indicator Approach: The indicator approach depends on the relationship between certain
indicators, for example GDP and unemployment rates, remaining relatively unchanged over time.
By following the relationships and then following indicators that are leading, you can estimate the
performance of the lagging indicators, by using the leading indicator data.
Econometric Modeling: This is a more mathematically rigorous version of the indicator
approach. Instead of assuming that relationships stay the same, econometric modeling tests the
internal consistency of data sets over time and the significance or strength of the relationship
between data sets. Econometric modeling is sometimes used to create custom indicators that can be
used for a more accurate indicator approach. However, the econometric models are more often used
in academic fields to evaluate economic policies. (For a basic explanation on applying econometric
models, read Regression Basics For Business Analysis.)
Time Series Methods: This refers to a collection of different methodologies that use past data to
predict future events. The difference between the time series methodologies is usually in fine details,
like giving more recent data more weight or discounting certain outlier points. By tracking what
happened in the past, the forecaster hopes to be able to give a better than average prediction about
the future. This is the most common type of business forecasting, because it is cheap and really no
better or worse than other methods.

How Does Forecasting Work?

There is a lot of variation on a practical level when it comes to business forecasting. However, on a
conceptual level, all forecasts follow the same process.

1. A problem or data point is chosen. This can be something like "will people buy a high-end coffee
maker?" or "what will our sales be in March next year?"

2. Theoretical variables and an ideal data set are chosen. This is where the forecaster identifies the relevant
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variables that need to be considered and decides how to collect the data.

3. Assumption time. To cut down the time and data needed to make a forecast, the forecaster makes some
explicit assumptions to simplify the process.

4. A model is chosen. The forecaster picks the model that fits the data set, selected variables and
assumptions.

5. Analysis. Using the model, the data is analyzed and a forecast made from the analysis.

6. Verification. The forecaster compares the forecast to what actually happens to tweak the process,
identify problems or in the rare case of an absolutely accurate forecast, pat himself on the back.


FORECASTING FORMULAS

There is a wide variety of forecasting formulas but no one magic formula that can forecast all outcomes
accurately all the time. The saying that when you have a hammer everything else is a nail is descriptive
of the marketing that surrounds software vendors approach to forecasting; that is, if the software package
uses a Linear Regression model then all forecasting is solved using this model, if Bayesian is the formula
incorporated then papers are written to show why it is better than all others.

Research explored which forecasting formula is best for a given set of data (Toward Computer Aided
Forecasting Systems, by Collopy et. al.). Several sets of data were forecast using a variety of statistical
models. The research showed that some formula was more accurate than others given a different
characteristic behaviour of the historical time series of data. The conclusion is that accurate forecasting
requires a tool-kit of formula that can span the following Data Element characteristics:


Non-linear seasonal
Non-linear
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Linear
Correlative

These formula types respond to the four main business data characteristics. Seasonal is the most common
behaviour of sales and demand data and Holt-Winters is a well recognized formula to respond to this
behaviour.
Non-linear has less general business application but has its use when the data behaviour is non-linear and
not seasonal.
Linear has two characteristic forms, the flat line and the line of the trend. A Spread Average formula
responds to the flat line behaviour and a Linear Regression for a straight line through the best fit of the
trend.
Another type of formula is correlative which uses sophisticated correlative models in conjunction with
statistical forecasting to relate the dependencies between different data. Models such as Flex on Historical
and Bayesian-Markov can be used. These formulas (especially Flex) have more benefit in budgeting and
have less general value in forecasting beyond 60 days.

Problems with Forecasting

Business forecasting is very useful for businesses, as it allows them to plan production, financing and so
on. However, there are three problems with relying on forecasts:

1. The data is always going to be old. Historical data is all we have to go on and there is no guarantee that
the conditions in the past will persist into the future.

2. It is impossible to factor in unique or unexpected events, or externalities. Assumptions are dangerous,
such as the assumptions that banks were properly screening borrows prior to the subprime meltdown, and
black swan events have become more common as our dependence on forecasts has grown.

3. Forecasts can't integrate their own impact. By having forecasts, accurate or inaccurate, the actions of
businesses are influenced by a factor that can't be included as a variable. This is a conceptual knot. In a
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worst case scenario, management becomes a slave to historical data and trends rather than worrying about
what the business is doing now.




FORECASTING IN AVIATION INDUSTRY

Prudent management must take into account future events and conditions. Often their nature
Can be anticipated by analyzing events of the recent past and applying techniques to project the
effects of these trends into the future. This must include forecasting techniques commonly used in aviation
planning and describes their use by airport operators, air carriers, and government agencies.

Indian aviation sector has witnessed a remarkable growth story in the last decade with robust growth in
passenger and cargo traffic, huge jump in the number of aircrafts operating in the country, an impressive
increase in the non scheduled operators, surge in investment in the airport infrastructure, rapid rise in the
number of operational airports, modernization and augmentation of capacities at various metro and non-
metro airports and much more.

DEMAND FORECAST

Methods of Forecasting

An aviation demand forecast is, in essence, a carefully formed opinion about future air traffic.
Its primary use is in determining future needs or estimating when they must be met. Any of several
methods may be used, with results that will vary widely in terms of scope, time scale, structure,
and detail; but they have certain common features. Chiefly, forecasts are derived from assumptions
about the relationship of the past and the future in that they postulate that certain measurable
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historical events or conditions have a causal or predictive relationship with events or
conditions that will be of interest in the future, Analysis of these historical factorsusually by
some sort of mathematical manipulation of data allows the forecaster to express expectations in
terms of some measure or index of aviation activity. From this initial product (e. g., expected passenger
travel, cargo volume, or aircraft operations) the forecaster can derive further estimates of the nature,
magnitude and timing of future needs for equipment, facilities, manpower, funding, and the like. Even
though the method used may be quite rigorous and mathematically complex, forecasting is inherently a
judgmental process where uncertainty abounds. The best that the forecaster can achieve is to be aware of
his biases, to identify the sources of uncertainty, and to estimate the probable magnitude of error.
In setting out to prepare a forecast, the forecaster has at his disposal two basic types of input
data. He may choose data on aviation activity itself and use historical performance trends to
project future activity. In effect, this approach assumes that the best predictor of future aviation
demand is past aviation demand. Alternatively, the forecaster may choose data related to underlying
economic, social, and technological factors that are presumed to influence aviation demand,
treating them as independent variables that can be used to predict demand as a dependent variable.

1. Among the factors that may be so used are: basic quantitative indicators, such as population,
gross national product (GNP), activity of certain sectors of the economy, personal
consumption expenditures, or retail sales;

2. derived socioeconomic and psychological indexes, such as propensity to travel, income
classifications, employment categories, educational levels, or family lifestyles; and

3. supply factors, such as fare levels, aircraft characteristics (size, speed, and operating
costs), schedule frequency, or structure of the air carrier industry.


The outputs of the forecast are measures of aviation activitypassenger enplanements, revenue
passenger-miles, freight ton-miles, number of aircraft in the fleet, or number of aircraft operations.
Other output measures, such as air carrier revenue, air traffic control (ATC) workload,
and demand for airport facilities can be derived from these estimates.
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The range and scope of forecasts can vary greatly, depending on the purpose they are to
serve. They might include all aviation or be limited to a particular type of traffic (passenger or
cargo) or a particular type of operator (scheduled air carrier, charter, or general aviation). The
geographical scope may be international, nationwide, regional, or limited to a particular market or
airport.

The forecasting horizon may range from a few months to 20 years, again depending on the purpose
of the forecast. Airlines, for example, tend to use very short-term projections of traffic in order
to estimate their financial or staffing needs on a quarterly or semiamual basis. Airport planners,
on the other hand, use very long-range forecast, on the order of 20 years, as a basis for major decisions
relating to land acquisition and airport development. Between these extremes, forecasting
horizons of 1,5, or 10 years are common for planning changes and improvements of airport facilities,
estimating ATC workload, projecting air earner fleet requirements, and financial planning.

There are two basic approaches to aviation demand forecasting top-down or bottom-up.
The top-down approach begins with the largest aggregates of economic and statistical data (usually
national totals) and seeks to provide a general picture of aviation demand spanning the
country and the entire system of air travel routes and facilities. Once the aggregate forecast has been
developed, portions of the total volume of traffic can be allocated to specific industry segments
or geographical regions based on historical shares or assumed growth rates.
The bottom-up approach, in contrast, begins with data for a specific geographic area and develops
a forecast of aviation demand at a particular airport or in a metropolitan region, typically
as an indicator of need for building or expanding local facilities. Where good data are available and
the economy of the region is developing in an orderly way, this approach can closely approximate the
reality of the area under study. In some cases, a number of such bottom-up forecasts may be combined to
make a composite forecast for a larger area, but this approach of building up a regional or national
aggregate from many local forecasts can lead to difficulties. For example, forecasts for some areas may be
overly optimisticoften a defensive strategy designed to assure adequate future capacity. It is not unusual
to find that the sum of many such bottom-up forecasts exceeds the top-down forecast for the region by a
wide margin.
25


Whether top-down or bottom-up, aviation demand forecasting as practiced today uses a wide variety
of methods. The attributes, limitations, and typical applications of these methods are discussed below.

TIME SERIES

The Time Series of data used to forecast is often the missing-link. The reason is that mathematical
approaches often have rules for selecting time. For example, a Holt-Winters formula should have at
least two years of data. However, our research and customer experience conclusively finds this not to
be true. Selecting the right Time Series of data associated with the Data Element to be forecast at the
specified Dimension is crucial for forecast accuracy. We have developed a methodology that utilizes
historical analysis combined with several leading statistical indicators to identify the Time Series that
will produce the highest accuracy for a selected Data Element at the selected Dimensional Node. We
call this the Predictive Package.

Econometric Models

The econometric model is by far the most frequently used method for forecasting aviation demand.
It is a mathematical representation of air traffic or its constituent parts and those independent
variables of the national economy which are thought to influence traffic growth. Econometrics
is the statistical technique used to quantify these relationships. The mathematical equations of the
model relate economic factors to the level of aviation activity, based on observation of past behaviour
of both the economy and the aviation industry. The equations may also be constructed
so as to reflect the effects of specific factors within the air transportation industry itself, such as fare
levels, route configurations, fuel costs, etc.

Among Federal Government agencies, both the Federal Aviation Administration (FAA) and the
Civil Aeronautics Board make extensive use of econometric forecasting methods. Econometric
models are also used by airlines, industry associations, and aircraft manufacturers. TWA, for
example, employs a set of econometric models to forecast passenger travel industrywide and, from
26

that, TWAs prospective market share. The Association of European Airlines uses a mathematical
model in which traffic varies directly with gross domestic product and inversely with average revenue
per passenger. McDonnell Douglas, Boeing, and Lockheed all have their own versions of
econometric models to project future sales of aircraft. The equations for the McDonnell Douglas
model, for instance, include the ratio of long- to short-term interest rates since the cost of borrowing
money has an effect on the ability of airlines to purchase aircraft.

Gravity Models

The gravity model was first developed in the sociological and marketing fields to describe various
forms of human interaction. The technique was later adapted by traffic engineers to describe
travel behavior. It is predicated on the assumption that travel behavior obeys a law analogous
to the law of gravity, in that attraction between cities varies directly with population and inversely
with distance. Thus, two large cities located near one another have a strong mutual attraction and
form a very dense transportation market; small cities located far apart have little travel between
them. The gravity model uses socioeconomic data for each pair of metropolitan areas to predict the
level of transportation activity between them. The equations often contain terms to describe the
special attractiveness of each city for different types of personal and business trips.
Although gravity models have been used extensively in highway planning, their use for aviation
forecasting is limited. The State of California uses a gravity model in its State Airport System Plan in
an effort to give a state wide system view of air transportation. The California gravity model takes
into account changes in population, employment level, and income of major metropolitan areas to
produce estimates of the travel that will be generated between various parts of the State. To provide
consistency among plans for all transportation modes, a similar gravity model incorporating the same
socioeconomic variables is used for other transportation forecasting
within the State.



27

The Bottom Line

Long range forecasting with 90%+ accuracy a year in advance requires knowledge about the Data
Element to be forecast and control of the Dimensions, statistical Formula and Time Series of the data
(used by the Formula). Deep Dimensionality and the ability to model several Dimensional configurations
are crucial to forecast accuracy.



CONCLUSION

Forecasting can be a dangerous art, because the forecasts become a focus for companies and
governments, mentally limiting their range of actions, by presenting the short to long-term future as
already being determined. Moreover, forecasts can easily breakdown due to random elements that can't
be incorporated into a model, or they can be just plain wrong from the beginning. The negatives aside,
business forecasting isn't going anywhere. Used properly, forecasting allows businesses to plan ahead
of their needs, raising their chances of keeping healthy through all markets. That's one function of
business forecasting that all investors can appreciate. (Interested in more methods employed in
financial modeling? Read Style Matters In Financial Modeling.)





28

III. How would you go about locating sources of secondary
data useful for the decision?


Market research
Market research is the key without the necessary information, you're simply flying blind in a
storm, headed for a crash landing. Market research does more than confirm your "gut feeling," it
provides critical information and direction. It identifies market needs and wants, product
features, pricing, decision makers, distribution channels, motivation to buy. They're all critical to
the decision process.
There are basically two types of data sources namely,
1) Internal data sources
Internal secondary data is usually an inexpensive information source for the company conducting
research, and is the place to start for existing operations. Internally generated sales and pricing
data can be used as a research source. The use of this data is to define the competitive position of
the firm, an evaluation of a marketing strategy the firm has used in the past, or gaining a better
understanding of the companys best customers.
There are three main sources of internal data. These are:
1. Sales and marketing reports-
These can include such things as:
Type of product/service purchased ,Type of end-user/industry segment ,Method of payment,
Product or product line ,Sales territory ,Salesperson ,Date of purchase ,Amount of purchase
,Price ,Application by product ,Location of end-user
2. Accounting and financial records-
29

These are often an overlooked source of internal secondary information and can be invaluable in
the identification, clarification and prediction of certain problems. Accounting records can be
used to evaluate the success of various marketing strategies such as revenues from a direct
marketing campaign.
There are several problems in using accounting and financial data. One is the timeliness factor
it is often several months before accounting statements are available. Another is the structure of
the records themselves. Most firms do not adequately setup their accounts to provide the types of
answers to research questions that they need. For example, the account systems should capture
project/product costs in order to identify the companys most profitable (and least profitable)
activities.
Companies should also consider establishing performance indicators based on financial data.
These can be industry standards or unique ones designed to measure key performance factors
that will enable the firm to monitor its performance over a period of time and compare it to its
competitors. Some example may be sales per employee, sales per square foot, expenses per
employee (salesperson, etc.).
3. Miscellaneous reports-
These can include such things as inventory reports, service calls, number (qualifications and
compensation) of staff, production and R&D reports. Also the companys business plan and
customer calls (complaints) log can be useful sources of information.
2) External data sources
There is a wealth of statistical and research data available today. Some sources are:
Federal government
Provincial/state governments
Statistics agencies
Trade associations
30

General business publications
Magazine and newspaper articles
Annual reports
Academic publications
Library sources
Computerized bibliographies
Syndicated services.
A good place to start your search is the local city, college or university library. Most reference
librarians are very knowledgeable about what data is available, or where to look to find it. Also
contact government libraries and departments for research reports/publications they may have
done.
Sources of Secondary Data

SECONDARY DATA



INTERNAL SOURCES EXTERNAL SOURCES
1. SALES 1. PERIODICALS
2. ACCOUNTS 2. INTERNET
3. GOVERNMENT
4. OTHERS
31

Preparing Secondary Data

Following are the steps involved in preparing a secondary data:-
-Document everything
-Save all syntax
-Create an abridged codebook describing the original and recoded variables of interest


Steps of collection of secondary data-
Step 1: Transfer all potential data of interest to a new file in preferred base program
Electronic codebooks (ECBs) greatly facilitate this process
Never alter the original data file!
Step 2: Address missing data
Identify/label missing values in software program
When possible, use knowledge of skip patterns to recode missing data as meaningful values
Select method for handling missing data (e.g., multiple imputations, full information maximum
likelihood [FIML])
Step 3: Recode variables
Reverse code negatively worded items if creating scale scores
Dummy code dichotomous variables into values of 0, 1 (original dataset may use values of 1,
2)
32

Recode other categorical variables (e.g., dummy or effect coding)
Combine separate but like variables
Recode variables so that all responses are based on the same units
Step 4: Create new variables
May need to recreate composite variables if disagree with original conceptualization
Psychometric work
Create scores from individual items using factor analysis or item
response theory
Unfortunately, individual survey items do not always hang together
To avoid potentially biased variance estimates,
(a) Incorporate measurement models directly into analysis, or
(b) Output plausible values
How to use Secondary Data

The first step in using secondary data is to identify the key indicators most relevant to you. A
key indicator is a piece of data which provides information about a group of clients or potential
clients. They can be used to describe the size of a group or the number (or percentage) with a
specific condition.
One way to select key indicators is to focus on measures that are commonly used by
subjectmatter specialist in your area. Variables that are used in published research of the
journals that you read also should be considered. Finally, your judgment and experience will lead
you to select measures that are relevant.
33

The second step is to interpret the data. The meaning of the data can be clarified by making
comparisons. One type of comparison is across time for the same unit.
Another type of comparison is between units. Comparing the number of foreclosures in your
county with that in a neighboring county or one with a similar population size can serve as a
basis for determining a need.

Locating Appropriate Secondary Data
There is a vast quantity of secondary data in epidemiology and public health that is available to
the individual researcher. However, the sheer quantity of data available, and the fact that the data
are collected and archived by many different governmental and private entities, means that the
process of locating appropriate secondary data is not always straightforward. In fact, this book
was written to ameliorate some of the difficulties involved. There is no single process to be
followed in every case, but we offer two examples of the process of locating and analyzing
secondary data to address a specific research question or problem.
The first step in collecting secondary data is to determine which institutions conduct research on
the topic area or country in question.
Large surveys and country-wide studies are expensive and time-consuming to conduct; therefore,
they are usually done by governments or large institutions with a research orientation. Thus,
government documents and official statistics are a good starting place for gathering secondary
data; however, as previously stated, the quality of the documents will vary depending on the
country of study and the amount of resources dedicated to data collection. Other major sources
of international development data are the World Bank, the United States Agency for
International Development (USAID), the United Nations Development Programme (UNDP), the
Food and Agriculture Organization of the United Nations (FAO), the International Fund for
Agricultural Development (IFAD), the World Health Organization (WHO), International Center
for Research on Women (ICRW), the Chronic Poverty Research Center (CPRC), the Center for
Research on Poverty (CROP), Overseas Development Institute (ODI), and Institute of
Development Studies (IDS) to name a few. International development institutes commonly
34

share information sources and have libraries for archiving these materials. Thus, a data-
gathering visit to one office might yield numerous sources of information on the topic area of
interest.
University libraries are good sources of information and should be consulted. Also, it would be
beneficial to establish contact with experts at local university departments that are dedicated to
research on the topic areas that you are interested in (e.g., Departments of Agricultural Sciences,
Public Health, Economics, Anthropology, Sociology). These experts can be important sources of
information on on-going research projects as well as for guiding you toward other sources of
topic area information or individuals that can be contacted. Local NGOs also often conduct
empirical research and can be valuable sources of information. This in particularly true when you
are searching for local-level information and data. In some cases, NGOs might also have small
libraries that provide additional information.


Data Collection: High-Cost Secondary Research
As we saw in the Data Collection: Low-Cost Secondary Research tutorial, there are many
sources marketers can turn to in order to obtain research information. However, while research
seekers can get lucky finding information through inexpensive means, the reality is that, in many
situations, locating in-depth, numbers-related market information is difficult and expensive.
Companies in the business of producing market metrics are mostly doing so to make money and
do not give the information away for free. Consequently, in many research situations, especially
those in which reliable market estimates are critical, acquiring the best researched market
information requires a fee.
Expensive sources of information generally include accessing reports from the originators of the
research, such as market research firms. However, since gaining access to good research can be
costly, on the surface it may not seem practical for small companies or individuals to take
advantage of these sources. Yet, research seekers also know that the level of detail available in a
single report may be enough to provide answers to most of their questions in which case these
35

reports can be real time savers (though marketers are cautioned against relying on a single
source for information to make marketing decisions).
Also, while the cost of reports can appear prohibitive, todays reports are much more accessible
than in the past when research suppliers required clients to sign up for high-priced subscription
services. Purchasing a subscription would then give the client access to a large number of
reports. Today many information sources permit the purchase of single research reports without
the requirement to commit to a subscription.
In this tutorial we look at high-cost market research sources that include:
Market Research Companies
Financial Services Companies
Consulting Firms
Research Distributors
It should be noted that some of these sources may make a limited amount of material available
for free so it is worth a look no matter how much money the research seeker has to spend.

Findings of the research-

Aviation Industry Analysis-

The total number of airports or airfields recognisable from the air is 352
The number of scheduled passenger airline operators has grown to 15 and the number of aircraft
in their fleet has risen to more than 400.
36

International flights have increased to 706 flights per week. Due to enhanced opportunities for
international connectivity, 69 foreign airlines from 49 countries are flying into India

Classification of Indian Aviation Sector

The Indian aviation sector can be broadly divided into the following main categories:

1. Scheduled Air Transport Services- It includes domestic and international airlines.

2. Non-scheduled air transport service - It includes charter operators and air taxi operators.

3.Air cargo service - It includes air transportation of cargo and mail. Scheduled air transport
service: It is an air transport service undertaken between two or more places and operated
according to a published timetable.

It includes:

1. Domestic airlines, which provide scheduled flights within India and to select international
destinations. Air Deccan, Spice Jet, Kingfisher Airline and Indigo are some of the domestic
players in the industry.

2. International airlines, which operate scheduled international air services to and from India. At
present, there are many scheduled private airlines like (Jet Airways, Spice Jet, Air Sahara etc.),
37

which provide regular domestic air services along with Indian Airlines. Non-scheduled air
transport service: It is an air transport service other than the scheduled one and may be on charter
basis and/or non-scheduled basis. The operator is not permitted to publish time schedule and
issue tickets to passengers. In addition there are 47 non-scheduled operators providing air-
taxi/non-scheduled air transport services.

Air Cargo Service Analysis
Air cargo services: It is an air transportation of cargo and mail. It may be on scheduled or non-
scheduled basis. These operations are to destinations within India. For operation outside India,
the operator has to take specific permission of Directorate General of Civil Aviation
demonstrating his capacity for conducting such an operation.

Trend evaluation of the present Aviation Industry

Trends in Aviation Industry-

1. Consolidation in aviation sector: In aviation industries the rise in the number of alliances will
help in promote the growth of aviation sector in India. Example of the Jet-Sahara merger is just
the beginning. Indian aviation industry is looking forward to more consolidations.

2. The number of passengers travelling by air is on the rise: By 2025 passenger boarding
expected to double and by the same time aircraft operations are expected to triple, the number of
passengers travelling by air is on rise.

38

3. For the travelling public, price is paramount in choosing a carrier: Airfares are fully
transparent to the public and travellers are choosing the lowest price option because of the
Internet and round-the-clock search facility. Even business travellers, who have been less price-
sensitive, are resisting fare increases. Travellers are not giving preference to brand but the only
premiums they are willing to pay for are time-of day and direct flights.

4. Capacity is growing without much constraint: The new aircraft have been ordered by Indian
carriers for delivery in the coming period, without clear plans to retire older planes. Significant
numbers of regional jets are also adding by them.

5. Cost structures will continue to handicap legacy carriers as they compete with newer airlines,
as well as with overseas carriers: Great threats are being posed by the low cost carriers to legacy
carriers, as a result of which they are reshuffle, their pricing policies. Apart from this, they are
also facing competition from overseas players.

6. Outsourcing: Private airlines are famous to hire foreign pilots, get expatriates or retired
personnel from the Air Force or PSU airlines, in senior management positions. Airlines are also
famous to take on contract employees such as cabin crew, ticketing and check-in agents. Recent
Initiatives and Developments Toward modernization of non-metro airports the Airports
Authority of India (AAI) is planning to spend over US$ 1.02 billion in 2010. There are even
plans of the city-side development of 24 airports, including airports at Ahmedabad and Amritsar.

There are even additionally, 11 new Greenfield airports which are in pipeline which have been
identified to reduce passenger load on existing airports. The government has formed National
Aviation Company Ltd (NACIL) by merging national carriers Air India and Indian Airlines into
a single entity. The blue print was prepared by the civil aviation ministry to convert Delhi airport
into an international hub for passenger airlines and has been done so recently. Modernization of
39

Airports Airports Authority of India (AAI) manages the development and modernization of all
35 non- metro airports in the country simultaneously and work is due to be completed by the
year end of 2010. Wholly owned subsidiaries of AAI are being created for betterment of these
airports. According to the AAI there are work orders for terminal buildings at 13 airports, and for
airside development, including runway, taxiway, apron, fire station, control tower and isolation
bay, at 19 airports. Policy on Merchant Airports Indian Aviation Industry will allow 100 %
foreign direct investment (FDI) in the development of airport infrastructure, the Government is
fast moving towards finalizing a policy on merchant airports. Under this new concept, merchant
airports will be built entirely by private parties with their own resources, without any
government funding. Growth in MRO Segment Indian Aviation with the advent of low-cost
airlines & ever-increasing passenger traffic there is a fleet expansion. There is an Initiation of the
whole new business avenue for global aircraft companies in maintenance, repair and overhaul
(MRO). This MRO facility provides major and minor maintenance, refurbishment and repairs of
aircraft. The gaint players like Boeing and Airbus have announced their plans for MRO facilities
in India. Foreign Equity Participation in Air Transport Services Recently the Government in
India has approved the Domestic Air Transport Policy which provides for foreign equity
participation up to 49% and also investment by Non-Resident Indians (NRIs) up to 100% in the
domestic air transport services. As the government plans to fix a higher foreign direct investment
(FDI) ceiling for five sub-sectors of the industry in days to come the flow of foreign investment
into aviation is likely to get smoother. Government Initiatives To create world class airports, the
government has recognised the need for the involvement of private players in the development of
airport infrastructure. Development of airports at Delhi and Mumbai has been taken up under
Public Private Partnership (PPP) mode The capital expenditure is funded through private equity,
borrowings, and internal resources of joint venture companies. The development work of
Mumbai airport is likely to be completed by 2012 whereas the work of a new terminal (Terminal
3) at Indira Gandhi International Airport at Delhi got completed in July 2010. The development
work of Kolkata and Chennai International airport has been taken up by Airport Authority of
India whereas Bangaluru and Hydrabad international airports have been developed on PPP mode
as greenfield airports. The AAI has taken up the development of 35 non metro airports at an
estimated cost of US$ 777.80 million The Government has also developed a model concession
agreement to develop greenfield airports under the PPP mode. The government has also allowed
40

100 per cent FDI, under the automatic route, for greenfield airports. FDI up to 49 per cent is
allowed in the domestic airlines sector under the automatic route. Recently, the Government has
relaxed rules to allow foreign carriers to buy up to 49 per cent stake in Indian airlines The
adoption of Open Sky Policy has resulted in the entry of several new privately owned airlines
and increased frequency / flights for international airlines.

Competitive Scenario-

Few big players controlling the market
Entry to the market difficult
Huge capital at their disposal
Low level of competition Key


Leading Players-
AIR INDIA Air India Ltd. (Air India) is a state owned airline service provider in India, offering
passenger and cargo transportation services. The company operates with a fleet of 135 passenger
aircraft and nine cargo carriers. It serves 63 domestic destinations within India and 33
international destinations across five continents. It also serves more than 10 destinations through
its code share agreement with Aeroflot, Air Mauritius, Austrian Airlines, Lufthansa and
Singapore Airlines. The company principally focuses on its international network covering
Kuwait, Oman, United Arab of Emirates, Qatar and Bahrain in West Asia. It operates its route
system through two major hubs in Mumbai and Delhi, along with secondary hubs in Calcutta and
Chennai. Air India is headquartered in Mumbai, Maharashtra, India.

41

SWOT analysis of AIR INDIA-

Strengths of AIR INDIA-

Air India has been the largest air carrier in India in terms of traffic volume and company assets.
It owns the most updated fleet and competent repairs and maintenance expertise. Its information
systems are advanced and compatible with its operation and service. It has a good reputation in
both international and domestic markets, quality service and the age-old Goodwill that has still
kept it alive in the interests of the rescue operators. Has financial backing of the Government.

Weaknesses of AIR INDIA-

Air India is operating across broad international and domestic markets competing with world
leading giant airlines as well as local small operators. This lack of clarity on the strategic
direction largely dilutes its capabilities and confuses its brand within markets. Low profitability
and utilization of capacity.
Growing Competitor base and entry of Low-Cost Carriers (LCCs) The airlines high-cost
structure and the compulsions of being a public sector unit are the reasons and it had been
making a loss and shall continue to make losses for some more quarters.

Opportunities of AIR INDIA-

India airline industry is growing faster and will continue to grow as the GDP increases, and the
trend is predicted to continue once the slowdown recedes. Worldwide deregulations make the
42

skies more accessible; the route agreement is easier to be achieved. The number of foreign
visitors and investors to India is increasing rapidly. Complementary industry like tourism will
increase demand for airline service. The Civil Aviation Ministrys strong regulation and
protection provides opportunities for consolidation and optimization. Customers are getting
wealthier, tend to be less price-conscious and prefer to choose quality service over cost. Best
time for introducing LCCs.

Threats for AIR INDIA-

Air India faces imminent aggressive competition from world leading airlines and price wars
triggered by domestic players. The Indian Railway Ministry has dramatically improved speed
and services in their medium/long distant routes, attracting passengers away from air service,
with prices almost at par with the low cost carriers Current News Air India threatens to stop
operations to North East airports.
Flights within the northeastern region may be hit from New Year, with Air India threatening to
stop its operations to airports like Tezpur, Lilabari and Shillong following non-payment of funds
by the North East Council (NEC). Loans taken by Air India now stand at Rs. 47,226 crore Air
India has a loan of over Rs. 47,000 crore and 95 services of the national carrier were not even
meeting the cash cost of the operations Star Alliance members reject Air India, invite Jet
Airways. Air India should choose one world The Star Alliance, a global grouping of 27 airlines,
has rejected the application of national carrier Air India to join the group. In over 14 years, and
28 applicants, this is the first time the application of any airline has been rejected because of the
mountainous losses of Air India, and its crashing brand value, especially due to the recent pilots'
strike. OneWorld having weak connection in the Indian and South Asian market. Along with Air
India, oneworld can bridge this gap and gain a commanding presence in the Gulf to South-East
Asia geography with the upcoming entries of Malaysia Airlines, and Sri Lankan Airlines. Air
India used to provide good inflight service, and with the assistance of oneworld and the backing
of respected airlines like British Airways and Cathay Pacific would hopefully allow Air India to
re-shape itself as an excellent service provider. INDIGO IndiGo is a private, low-cost airline
43

based in Gurgaon, Haryana, India. It was established in 2005 as a subsidiary of Interglobe
Enterprises. The airline started operations in August 2006 and by August 2012 was the largest
low cost carrier in India and was India's largest carrier by market share. As of March 2012 it is
the only airline in India making profits. IndiGo operates to 33 destinations in India and abroad
with 373 flights each day. Unlike most low cost carriers, IndiGo uses a hub and spoke model
used by full service airlines where the airline flights to different destinations are routed through
its hub.It plans to serve 100 cities in India, South East Asia, Middle East and China by 2025. It
plans to acquire 125 new aircrafts by 2025.

The things to keep in mind while introducing a new product
in the aviation industry-

Timing
Are all elements of the process coordinated? Is production on the same time schedule as the
promotion? Will the product be ready when you announce it? Set a time frame for the rollout,
and stick to it. Many products need to be timed to critical points in the business cycle. Miss it,
and invite failure. There are marketing tales galore about companies making new product
announcements and then having to reannounce when the product lags behind in manufacturing.
The result is loss of credibility, loss of sales, and another failure.

Capacity
If the new product or service is successful, do you have the personnel and manufacturing
capacity to cope with the success? Extended lead times for new products can be just as deadly as
bad timing.

44

Testing
Test-market the new product. Be sure it has the features the customer wants. Be sure the
customer will pay the price being asked. Be sure the distributor and sales organization are
comfortable selling it. You may need to test your advertising and promotion as well.


Distribution
Who's going to sell the product? Can you use the same distribution channels you currently use?
Can you use the same independent representatives or sales force? Is there sufficient sales
potential in the new product to convince a distributor, retailer, or agent to take on the new line?
There are significant up-front selling costs involved in introducing new products. Everyone in
the channel wants some assurance that the investment of time and money will be recovered.

Training
Your sales organization, inside employees, and distribution channels will need to be trained
about the new product. If the product is sufficiently complex, you may need to provide face-to-
face training. Or perhaps some type of multimedia program will do the job. If the product is not
that complex, literature may work. Again, timing is critical. Train before the product hits the
shelves, not after.

Promotion
Finally, you need the promotional program to support the introduction: advertising, trade shows,
promotional literature, technical literature, samples, incentives, Web site, seminars, public
45

relations. Time it all with production, inventory, shipments, and training. The new product will
simply sit in the warehouse without the right support materials.
These are some of the myriad issues you face in launching a new product or service. Research,
timing, and planning can all help increase the probability of success.












46

Bibliography
http://www.academia.edu/1957640/FACTORS_EFFECTING_CONSUMER_PREFERE
NCES_IN_AIRLINE_INDUSTRY
http://adg.stanford.edu/aa241/intro/airlineindustry.html
http://www.slideshare.net/nileshmashru/indigo-airlines-case-study
http://www.iata.org/whatwedo/stb/Documents/future-airline-distribution-report.pdf
http://www.deloitte.com/assets/Dcom-
UnitedStates/Local%20Assets/Documents/THL/us_thl_rising_above_the_clouds_POV_0
80813.pdf
http://www.dot.gov/policy/aviation-policy/competition-data-analysis/alliance-codeshares