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STRATEGIC MANAGEMENT

STRATEGIC ANALYSIS OF JET AIRWAYS

Submitted to:
Prof. Muqbil Burhan

Submitted by:
Group 5
Rajagopalan Ganesan (271154)
Aishwarya Raj (271124)
Mohit Mudgal (271147)
Shubhani Garg (271168)
Meenakshi Gupta (271145)
Akshit Chawla (271183)
INTRODUCTION
India, home to one-sixth of the world’s population, is quickly becoming one of the world’s
economic engines. Its bureaucratic and outdated regulatory policies have been reformed
resulting in a three-fold increase in the number of scheduled airlines and a five-fold increase
in the number of aircraft operated.

The largest and most popular airline in Mumbai, India is Jet Airways which started in 1993.
Naresh Goyal (both founder and owner) still owns eighty percent of the company, and
oversees all aspects of the business.

The purpose of this report is to evaluate a successful and well-organized strategic analysis for
the airline services provider, Jet Airways. Jet Airways was the India’s market leader in airline
industries, however now it has been facing increased competition over the last decade,
resulting in attrition in their market share.

Both current internal and external environment of Jet Airways are analysed. Jet airways focus
on their fundamental service delivery to restore their competitive advantage within the
industry.

Airline Industry Drivers

CURRENT POSITION

 Jet Airways which took the skies in 1993 was the country’s premier private airlines
 But today, as it celebrates its 25th anniversary, the company has lost its dominant
position in the market
 The market share of Jet Airways and Jet Lite together has slipped from 21.7 % at the
end of 2014 to 17.8 % at the end of 2017. In 2018, it has further slipped down to 15.4
% now.
 The company’s On-time Performance which used to be good has now fallen by a
reasonable margin
 Altogether, Jet seems to be suffering from a Identity Crisis
EXTERNAL ANALYSIS

Revenue = Passenger Revenue + Cargo revenue + Food & Beverages revenue.

Passenger Revenue = Number of passengers * Average Ticket price.

Number of Passengers = Number of aircrafts * Number of departures* Average number of


seats * Load factor

Similarly,

Total Cost = Fuel cost + leasing costs+ other costs

Fuel cost = Number of departures, * Average fuel price * Fuel per departure.

Leasing cost depends on Number of aircrafts

Challenges for Airlines Industry –

1. High dependence on oil prices


2. Security Concerns
3. Weather related delays
4. High fixed cost business – Inventory is essentially the number of seats aircraft is
carrying. If that aircraft is not flying, the company is not making money.
5. Competition – Price wars are common in airlines industry because of less
differentiated products , no brand loyalty, high fixed cost business.

The population of India is approx.. 130 crores. Number of seats that available are .1 per
capita. Comparing that to developing nations , say, China - 4 times that of India .

Compared that to developed nations – Most of them vary from 4 to 30 times that of India.
This tells us that the Indian Airlines industry is supply constraint industry, due to lack of
infrastructure, lack of demand, etc.
In terms of departures, !2 crores domestic departures. International were about 6 crores. That
adds to 18 crores passengers in a total population of 130 crores.

Total Domestic Available seat Kilometres is about 134 billion. Out of this, Total seats that
were occupied (Revenue Passenger Kilometres) were 117 billion.

Indian Airlines Passenger Growth

Barring 2009 & 2013 financial year, in almost all year – domestic growth has been double
digits. International growth has also been substantial.
Other Challenges that Indian airline industry faces –

The number of airports in India that are operational – 346

Population of India – 130 crores

Compared with US-

Number of airports – 13513

Population – 33 crores

This highlights the infrastructure issue in India.


Competitor’s Analysis

The only consistently profitable airline industry in India has been Indigo.

Cost of fuel is nearly 30-40% of total operating costs and approx. 25-30% of total Revenue.

Jet Airways has been operationally positive in the last few years.

FY 18 is where the problem for the airlines industry started due to crude price and Rupee
depreciation. Therefore in this financial year, most companies have made substantial losses.

Revenue per departure for Jet is higher because of international exposure. For the same
reason, revenue per passenger for Jet is higher.

Break even point – Cost per departure/Revenue per passenger. For indigo it is , 131
passengers as compared to 112 for jet airways.

PESTEL ANALYSIS

POLITICAL ISSUE

 License issue for international operation.


 Infrastructural constraint.
 ATF price policy.
 Open sky policy.
 FDI Limits: 100% Greenfield airport
 74% existing airports.
 100% through special permission.
 49% for airlines.

ECONOMIC EFFECTS

 The income level is rising.


 Contribution to the Indian economy.
 There is a rise in the cost of fuel.
 Investment in the sector of aviation.
 The growth of the middle income group family affects the aviation sector.
 Reduced fare but yet not enough.

SOCIAL EFFECTS

 Developing of the cities to better services and airports.


 Employment opportunities.
 Safety regulations.
 The status symbol attached to a plane travel.

TECHNOLOGICAL EFFECTS

 Modernization of aircrafts.
 The growth of e-commerce and e-ticketing.
 Satellite based navigation system.
 Modernisation and privatisation of the airports.
 Modern technology like CAT3 and ILS.

ENVIRONMENTAL SECTOR

 There is an increase in the global warming.


 The sudden change and the unexpected behaviour of the climate and to depend on the
atmosphere.
 Shortage of the infrastructural capacity.
 There is a tourism saturation.

LEGAL FACTORS.
 FDI limits.
 Bilateral treaties.
 Airlines acquisitions and the leasing cost.

PORTER’S FIVE FORCES MODEL OF JET AIRWAYS:

(1) The threat of the entry of new competitors:

The threat of the new entrants is very high for Jet Airways, because right now there are so
many new airline company that has come with new strategies and services. The more
profitable the industry is the more attractive it will be to new competitors. And as we know
that Jet Airways is a very well known airline company of India since many years and it has a
brand image and has a good reputation on the customers mind but then also Jet Airways has
to give the best service quality to the customers to remain the market leader in the business.

(2) The intensity of the competitive rivalry:

The intensity of the competitive rivalry is high for Jet Airways. Jet Airways has many
competitive rivals like Kingfisher Airlines, British Airways, Air India, Virgin Atlantic, etc.
Jet Airways has both long haul flights and short haul flights. They are losing the domestic
share market so in this competitive industry they have to bring some innovation in their
business. Their strategy is very powerful because they are concentrating more in the service
quality. Their aircrafts are modernised and they have the modernised technology like CAT3
and ILS.

(3) The threat of substitute products or services:

The threat of substitute for Jet Airways is low. There are few substitutes for Jet Airways:

For short haul flights they have: Jet Connect and Jet Lite.

For long haul flights they have: No notable substitute.

(4) The bargaining power of customers (buyers):

The bargaining power of buyer is medium. Jet Airways has the option to switch the suppliers
and according to that the customers of Jet Airways also has the option to switch.
(5) The bargaining power of suppliers:

The bargaining power of supplier is high. The supplier can switch to any other option at any
time.

Internal Analysis

SWOT ANALYSIS

STRENGTHS WEAKNESSES

 Experience exceeding 14 year.  Loosing domestic market share .


 Only private airline with  Old fleet with average age around
international operation . 4.79 years.
 They have a strong brand value and  Scope for improvement in in-flight
their reputation is very high in the service.
mind of the customers.  High ticket pricing.
 The service quality is good.  Facing a tough competition from the
 Largest fleet size. competitors.
 There is a continuous innovation in
their business.

OPPORTUNITIES THREATS

 Untapped air cargo market .  Strong competitors.


 Scope in international service and  Fuel price hike.
tourism.  Overseas market competition.
 The non penetrated domestic market.  Infrastructure issues.
 Tourism saturation.
 Economic slowdown.
 Promotion and sponsorship
declining.
RESOURCES & CAPABILITIES

Financial Resources & Capabilities

•The funds that are available for the airlines for its smooth functioning and its strengths
which can be inferred from its financial position

Technological Resources & Capabilities

•The skills and resources that create leading edge products and services supported by
trademarks, patents, copyrights, and trade secrets

Human Resources & Capabilities

•The strong base of experience and talent(around 14000 employees), which can be felt in its
worldwide success and achievements

Physical Resources & Capabilities

•From its limited amount of aircrafts in its initial days to 124 aircrafts in total today, Jet has
developed a global network of around 70 destinations

Organizational Resources & Capabilities

•The management has positioned the airlines at a very high level so that it is seen as a
perfect example of its organizational resource allocation strategy

Reputational Resources & Capabilities

•Jet has possessed the perfect technique of developing its reputation as a best service
provider, smart employer and a social corporate citizen

REFERENCES

 https://www.ukessays.com/essays/tourism/the-strategic-planning-for-jet-airways-
tourism-essay.php/

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