GROUP-8, MARKETING A MBA (2010-2012)







At the successful Completion of our project, we the students of Marketing µA¶ would like to express our sincere gratitude to all the people without whose support this project would not be completed. At the onset, we would like to thank the Management of ³School of Business, Alliance University´ for giving us the opportunity to undergo this research project.

We would also like to acknowledge the constant help and encouragement of our project guide Prof SAMIK SHOME, who has given his valuable suggestion, expert guidance and support throughout. We would also like to thank all those who have directly or indirectly helped us in the preparation of this report.

Group-08 Marketing A




We, the members of Group 8, Marketing A, MBA (2010-2012), would like to declare that the project on ³THE AVIATION INDUSTRY´ is an exclusive and detailed analysis carried out by us. The information, facts and figures in the report have been taken from reliable sources such as Capitaline, annual reports of companies and corporate websites.

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REGISTRATION NO, 10SBCM0452 10SBCM0202 10SBCM0507 10SBCM0324 10SBCM0417 10SBCM0156



term III. MBA (2010-2012).SCHOOL OF BUSINESS .SAMIK SHOME SIGNATURE: DATE: ALLIANCE UNIVERSITY. Marketing A. NAME OF THE FACULTY GUIDE: PROF. MBA (2010-2012). have completed the analysis on ³AVIATION INDUSTRY´ under my guidance for the partial completion of the course: Industry Analytics.AVIATION INDUSTRY ANALYSIS 2011 CERTIFICATE This is to certify that the members of group 8.

Literature Survey 3.2 Porters Five Forces Analysis 3.3 Origin of Airlines in India 1.2 Genesis of Airlines in India 1.10 Marketing Initiatives 3.3 Major Players in the Market 3.7.3 SWOT Analysis 3. 01 02 03 03 05 05 06 07 12 13 13 15 20 21 22 23 23 29 31 33 36 38 40 .7 Analysis of Industry 3.7.9 Mergers and Acquisition 3.11 Technology Intensity ALLIANCE UNIVERSITY.2 Classification of Indian Aviation 3.1 Introduction 3.5 Conclusion 2. Industry Analysis 3.8 Business Diversification 3.1Introduction 1.1 PESTLE Analysis 3.AVIATION INDUSTRY ANALYSIS 2011 TABLE OF CONTENTS: CONTENTS Executive Summary 1.4 Objectives 1. Introduction 1.5 Market Segmentation 3.SCHOOL OF BUSINESS PAGE NO.4 Market Shares 3.6 Nature of Competition 3.7.

Conclusion 5.6 Regional Traffic Performance Table 3.S Airspace Table 3.2 Passenger Miles as A Proportion of Available Seat Miles Table 3.13 Future Outlook 3.3 Number of Passenger Travelling Through U.AVIATION INDUSTRY ANALYSIS 2011 3.14 Future Outlook on Global Scenario 3.12 Current Scenario 3.15 Comparison with U.4 Load Factor of European Aviation Table 3.S and Other Countries 4.7 Statistic across the Continent 34 47 47 48 49 50 51 LIST OF FIGURES Figure 1 Comparison of Market Share in the years 2010 and Feb. References 42 43 43 45 54 55 LIST OF TABLES Table 3.SCHOOL OF BUSINESS . 2011 20 ALLIANCE UNIVERSITY.5 African Aviation Statistic Table 3.1 Status of Various Airlines Prevalent In India Table 3.

This US airline deregulation is perceived to be a success by other countries as it benefits a vast majority of travelers. But this deregulation also had some negative impacts.AVIATION INDUSTRY ANALYSIS 2011 EXECUTIVE SUMMARY: The global airline industry consists of over 2000 airlines operating more than 23.SCHOOL OF BUSINESS . The annual growth in air travel is twice the GDP growth. with substantial variations due to changing economic conditions and different economic growth in different regions. Deregulation and Liberalization worldwide: Since the deregulation of the US airlines in 1978. the pressure on the governments to reduce their involvement in the economics of airline competition has spread to most of the world. providing service to over 3700 airports. This airline industry provides service to virtually every corner of the globe and is an integral part of the global economy.000 aircrafts. mergers and bankruptcies of several airlines led to periodic job losses. Also all travelers did not enjoy the benefit of deregulation equally. reduced wages and airline labor unions with less power than they previously enjoyed. The global aviation industry is growing at an average rate of 5% per year over the past 30 years. The pressure to cut down costs. combined with increasing profit volatility. This deregulation saw the entry of many successful new entrants and low-fare airlines which had a great impact on the airline pricing practices and public¶s expectations of a low-priced air travel. ALLIANCE UNIVERSITY.







The aviation industry in India is one of those sectors that saw a constant pace of growth among other industries in the world over the past many years. The Indian aviation industry has witnessed an impressive growth of around 19%, with major contribution from the civil aviation segment. The government open sky policy has led to many overseas players entering the market and the industry has been growing both in terms of players and aircraft. From being primarily a government owned industry, the Indian aviation industry is now dominated by privately owned full service airlines and low cost carriers. Earlier air travel was a privilege, only few can afford but today air travel has became much cheaper and can be afforded by many people. The Aviation industry in India encompasses a wide range of services related to air transport such as passenger airlines which are scheduled, cargo airlines and unscheduled air operators like private jets and helicopters. This regulation of air transport services to/from/within India and for enforcement of civil air regulations, air safety and airworthiness standards is done by the Directorate General of Civil Aviation (DGCA). The DGCA is the regulatory body in the field of Civil Aviation primarily dealing with safety issues and also co-ordinates all regulatory functions with International Civil Aviation Organization.

1910: The first Indian to have an airplane was the young Maharaja of Patiala, Bhupinder Singh, who sent his Chief Engineer to Europe for a study with orders to buy three planes, including a Bleriot monoplane and Farman biplanes, which arrive in the Punjab later that year. 1912: The first domestic air route between Karachi and Delhi was opened by Indian State Air Service in collaboration with Imperial Airways. 1932: JRD Tata launches first scheduled airline, Tata Airlines, by piloting the first flight himself from Karachi to Mumbai via Ahmadabad on a single-engine.




1933: In its first year of operation. Tata Airlines flies 160,000 miles, carries 155 passengers and 10.71 tones of mail. Tata Airlines launches its longest domestic flight: Mumbai to Trivandrum with a six-seater Miles Merlin. 1945: Second domestic airline, Deccan Airways, is founded. Deccan Airways is the first of a bunch of new airlines to serve domestically in India. The first services began in July 1946. 1946: Tata Airlines changes its name to Air India. 1947: Air India signs an agreement with the government of India to operate international services with a weekly flight from Bombay to London via Cairo and Geneva. 1953: Indian Airlines formed by merging eight independent domestic airlines; Deccan Airways, Airways India, Bharat Airways, Himalayan Aviation, Kalinga Air Lines, Indian National Airways, Air India, Air Services of India,. Air India International takes over the international routes. 1960: India enters the jet age with an Air India B707; USA and India are connected for the first time with an Indian airline. 1990: East West Airlines becomes the first private airline after the government decided to end Indian Airlines monopoly over domestic civil aviation. 2003: Air Deccan, India¶s first ever budget airline begins operations on 25th August from Bangalore to Mangalore. 2004: On August 26, Air Deccan launched its A320 flights on the Delhi- Bangalore route.


a division of Tata Sons Ltd. On October 15. However.3. ORIGIN OF AIRLINES IN INDIA: The concept of Airline came in mid 19th century when Rufus Porter and Frederick Marriott. 2. To study about the major players and their market share. their attempt was floundered due to mishap in the airship catching fire. 5. All this would finally reflect India¶s standing in global market. 1932. ALLIANCE UNIVERSITY. To study about the market segmentation with respect to aviation industry. research & development. J. 1. German based DELAG was the first one to operate airline successfully.SCHOOL OF BUSINESS . JRD Tata. nature of competition. Tata himself flew a single engine De Havilland Puss Moth carrying air mail (postal mail of Imperial Airways) from Karachi to Mumbai via Ahmadabad. 6. Later in 1909. which would facilitate in analyzing different aspects such as market structure. The aircraft continued to Madras via Bellary piloted by Royal Air Force . with the assistance from the government. (now Tata Group). OBJECTIVES OF THE STUDY : The objective of this research is to conduct an in-depth analysis of the various aspects of the Indian Airline Industry.AVIATION INDUSTRY ANALYSIS 2011 1. To study the nature of competition existing in the Aviation industry.Tata Airlines was also one of the world's first major airlines which began its operations without any support from the Government. growth. which had its beginning as Tata Airlines in 1932. To study the overview of Indian aviation industry. 3. 1. D.4. The airline was founded by India's leading industrialist. an American started an airline in the form of airship. import export. India was also one of the first countries to embrace civil aviation. One of the first West Asian airline companies was Air India. To study about the business diversification of the different companies. 4. To find out the various mergers and acquisitions of the sector. The PEST analysis of aviation industry. 7. R. merger & acquisition etc.

To understand the level of impact of growing technology on the aviation industry.AVIATION INDUSTRY ANALYSIS 2011 8. 12. The scope of expansion of the aviation industry in concern with the future outlook. history and evolution of the Indian Airline industry. 9.S and other countries. 11. ALLIANCE UNIVERSITY. To compare the Indian industry with U. 1. To study the global scenario of the aviation industry.SCHOOL OF BUSINESS . The following chapter will be laying emphasis on the overview. To find out the contribution of Indian aviation industry to the economic growth. CONCLUSION: This section talks briefly about the major players in Indian Airlines industry and also shows the major objectives of the study. 10.5.


where individual technology will have to be developed especially when unavailable for other countries.AVIATION INDUSTRY ANALYSIS 2011 2. INTRODUCTION: As part of this Industry analysis.2. Now. Indian civil aviation industry which is much older. aviation industry is an industry that involves one of the largest variations of technologies and number of equipments and components. Many developed countries regard the civil aviation sector very important because of its influence on the national economy. technological capability & strategic influence. It also tells. Now. 15 articles and reports on the topics related to the Airline industry are taken into consideration. Various aspects of the industry have been studied as follows: 2.SCHOOL OF BUSINESS . the term strategic should be used broadly and need not necessarily be associated with defense. still operates from small base even though its domestic market potential and skilled man power should have given it intrinsic advantage to emerge as a globally important player in the civil aviation industry by now. while in comparison. ALLIANCE UNIVERSITY. have emerged as important players in the past decade. countries in Asia ± pacific region which entered the industry much later. STRATEGIC PLANNING FOR THE INDIAN CIVIL AVIATION INDUSTRY: Research article by Somshekhar & Chandra(1996) mainly focuses on the strategies that are needed to be implemented by the Indian civil aviation industry to stay afloat with the on growing competition worldwide throughout the world be it American or European or Asia-pacific civil aviation.1.

this article focus on a exploratory research which is conducted based on information collected from websites and authorities of several tourism organizations. The fast development of information communication technologies (ICT) and the expansion of the Internet have changed tourism industry structures around the world. brazil and south Africa which are playing major part in their respective fields of expertise vis a vis india for information technology . as fast-growing developing Countries in Asia. India and China. how important such changes are and also measures that has to be taken in near future. New technologies have been adopted in the aviation industry in Europe and America for more than 30 years. This article examines how the ICT and Internet gradually modifying the aviation industries in India and China thus indirectly improve the tourism industry structure. 2. visitor attractions and the tourism authorities. and the trend is likely to continue into the future. Aviation industry is one of the important elements of tourism system. ICTs INTERNET ADOPTION IN AVIATION INDUSTRY: SIMILARITIES IN INDIA AND CHINA: According to Leena & Neha(2010).4. Therefore. tour operators. It also talks about the factors which led to the initiative and the feasibility of such association for longer duration of time while competing with major players such as Boeing and airbus which actually possess a complete monopoly over the manufacturing sector as far as aviation sector is concerned.SCHOOL OF BUSINESS . are gaining importance in the international tourism market for their historical and cultural attractiveness as a destination. the aviation sector has adopted latest information communication technology initiatives throughout. basically talks about a initiative by three countries namely India . CAN IBSA COUNTRIES COOPERATE IN CIVIL AVIATION MANUFACTURING? MANAGING AMBITION WITH RATIONALITY: Research article by Parashar(2005).AVIATION INDUSTRY ANALYSIS 2011 2. ALLIANCE UNIVERSITY. brazil for manufacturing and south Africa for equipments and components.3. hotels. such as airlines.

6. this paper actually reviews the existing aviation industry literature to reason the policy challenges. Closure of old airports This also discusses the current trends and the reasons that are responsible for the current boom in the aviation sector. Safety issues 6. Land acquisition 7. including the policy of fee waiver cap on aircrafts with less than 80 seats or weighing less than 21 tonnes. the major issues that are currently making their presence felt in the aviation industry at a major level are: 1.5. ISSUES AND CHALLENGES IN AVIATION INDUSTRY: Research article by Neha . Shrinking profitability of airlines 2. talks about the major issues and challenges that are prevalent in the aviation industry or are about to be faced by the Indian aviation industry in the near future. Ground handling policy 3. Shortage of technical manpower 5. basically talks about the sustainability challenges that are prevalent in front of low cost carrier model or lost cost airlines which is very popular right now and seems to be very promising as well as far as current situation is concerned. Kamal and Swati(2007). High ATF prices 4. However the model is yet to acquire a competitive pricing position in the domestic Indian market Thus. 2. LOW COST CARRIER MODEL IN INDIA: SUSTAINABILITY CHALLENGES: The research article by Manisha(2010). For instance.SCHOOL OF BUSINESS . ALLIANCE UNIVERSITY.AVIATION INDUSTRY ANALYSIS 2011 2.

The organization today not only aim at delivering a service to the passenger but also focus on satisfying the passengers with excellent service so that the customer is left with a untarnishing image of the service provided to them and keeps that in his/ her mind forever .SCHOOL OF BUSINESS .8.AVIATION INDUSTRY ANALYSIS 2011 Also. This study compares and contrasts the service on the basis of collected data and to suggest some adequate measures to improve their service with respect to their beloved customers. A COMPARATIVE STUDY BETWEEN INDIAN PUBLIC AND PRIVATE (LOW COST) AIRLINES WITH RESPECT TO THEIR PASSENGER SERVICE: Research article by Mitra(2010).7. merger & acquisition. 2. This report on the Indian Airlines Industry will give a comprehensive insight of the industry with respect to the various parameters such as market structure. ALLIANCE UNIVERSITY. future outlook etc. 2. factors that influence foreign companies to enter the Indian market. major competitors. finally the paper concludes that the environmental impact of local air pollution around the airport is a function of an aircraft¶s seating configuration and maximum seating capacity demand on the given route instead of the size of aircraft. CONCLUSION: The literature review have not only covered the present scenario but also they have provided significant insights of the Indian Airlines Industry including the various opportunities. research and development. focuses on maintenance of healthy relationships with passengers by the players prominent in the Indian aviation industry. production trends. All this would finally reflect India¶s standing in global market. growth.


which operate scheduled international air services to and from India. merger and acquisitions.AVIATION INDUSTRY ANALYSIS 2011 3. which provide scheduled flights within India and to select international destinations. Scheduled air transport service: Scheduled Air Transport Service means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series.2. export and imports. ALLIANCE UNIVERSITY. technology and advertisements. Kingfisher Airline and IndiGo are some of the domestic players in the industry.SCHOOL OF BUSINESS . Spice Jet. Analyzing economic factors. In the report a careful analysis of several aspects of the Airlines industry is done to determine if they can make profit selling goods and services in the market. each flight being open to use by members of the public.1. Finally an analysis is done in terms of PESTLE analysis.4 CLASSIFICATION OF INDIAN AVIATION SECTOR: The Aviation sector is classified into three types mainly: 1. B) International airlines. future conditions and government regulations helped a lot in the report. market share. INTRODUCTION: Industry analysis is a market strategy tool used by a business to determine if they want to enter a product or service market. competitors. They are classified as : A) Domestic airlines. and SWOT analysis to get a clear understanding of the industry. Jet Airways. 3.

also known as executive class is the most expensive class offered by airline.AVIATION INDUSTRY ANALYSIS 2011 Further. increased cabin staff to passenger ratio are some of the basic amenities which are offered in this class by the operators. It may be on scheduled or non-scheduled basis. 2. For operation outside India. More leg room. these domestic and international airlines are demanded by the travelers based on three types of class offered by them which are: a) Business class.SCHOOL OF BUSINESS . Non-scheduled air transport service: It is an air transport service which is also known as air taxi service. complimentary food and beverages. personal TV laptop power ports. are some of the basic amenities offered in this class. These operations are to destinations within India. 3. c) Economy class is the lowest class offered by the airlines and are common on airlines operating in domestic route. In ±flight magazine. The operator is not permitted to publish time schedule and issue tickets to passengers. b) Premium class is a travel class positioned between business class and economy class and around 65 % less in cost as compared to business class. These are the air transport service other than the scheduled air transport service and may be on charter basis and/or non-scheduled basis. ALLIANCE UNIVERSITY. which are mostly preferred by business travellers and found on airlines operating on international routes. duty ±free catalogue food on purchase etc. the operator has to take specific permission of Directorate General of Civil Aviation demonstrating his capacity for conducting such an operation. Air cargo services: It is an air transportation of cargo and mail.

Passengers have now a variety of option to chose either from one government owned full service airline.AVIATION INDUSTRY ANALYSIS 2011 3. Kingfisher Red. and Go Air. and the airline has been involved in as many as 12 fatal accidents in its history. 3.SCHOOL OF BUSINESS . flies to most destinations in India. Jet Airways. Jet Lite. based in Mumbai. has brought about a huge increase in the number of domestic airlines in India in the recent years. On the positive side. The airline was merged with Air India. or five privately owned low cost carriers. Flights are often delayed. Indian Airlines has its share of inefficiencies. the government owned international airline. India's booming economy. in 2007 and effective from February 26. Today Air India is the 16th largest airline in Asia.3. full service domestic airline. three privately owned full service airlines. and the deregulation of the aviation industry.3. Kingfisher airlines. ALLIANCE UNIVERSITY. Indigo airlines. THE MAJOR PLAYERS AND THEIR MARKET SHARE: The major players in the Airline industry are Indian airlines. flight attendants and in-flight service leave a lot to be desired. Spice Jet.1 INDIAN AIRLINES: Indian Airlines is India's government owned. it has well planned routes and flight schedules. 2011 all flights of Indian airlines have now become Air India which marks the end of Indian airlines.

In total. It also leads the way in regard to in-flight entertainment on domestic flights in India and serving delicious food. full service airline that commenced operating in mid 1993. This is the one airline in the world to have five star rating from Skytrax. food. with bases in Mumbai. Passengers are treated as guests. It's a privately owned. which has the same "King of Good Times" owner as India's Kingfisher beer. Chennai.AVIATION INDUSTRY ANALYSIS 2011 3.3. the airline covers almost 40 destinations across India.SCHOOL OF BUSINESS .3 JET AIRWAYS: Jet Airways is widely regarded as India's biggest and best airline. Pune.3. and Delhi. Mumbai. started operating in mid 2005. seating is spacious and comfortable.Its headquarters are in Bangalore. and the airline puts significant effort into recruiting charming and attractive staff.2 KINGFISHER AIRLINES: Kingfisher Airlines is another highly regarded full service airline. The airline. It has bases in Delhi. According to DGCA. Hyderabad. this airline is the market leader of Indian aviation industry with the highest market share. ALLIANCE UNIVERSITY. Hyderabad. 3. This airline has won many awards for quality service for its outstanding in-flight service. Kolkata. and baggage handling. punctuality. and Bangalore.

connectivity of flights. Spice Jet invests heavily in safety.4 INDIGO AIRLINES: Indigo Airlines is based in Delhi and flies to around 15 destinations all over India.3. and that cut waste and hassles. Spice Jet¶s new generation fleet of aircraft is backed by cutting edge technology and infrastructure to ensure the highest standards in operating efficiency. Despite keeping fares low. interface design and personnel from around the world. The Indigo team uses all of these resources to design processes and rules that are safe and simple. Indigo incorporates the best hardware. seamless.SCHOOL OF BUSINESS . which is based in Delhi. precise. safety. gimmick-free customer experience at fares that are always affordable. which in turn ensures a uniquely smooth. started operating in mid 2005.AVIATION INDUSTRY ANALYSIS 2011 3. software. impeccable maintenance and a high level of ALLIANCE UNIVERSITY. 3.3. low cost carrier. that make sense. privately owned. This privately owned airline started operating in mid 2006 and is considered to be India's best low cost carrier. or customer service.5 SPICE JET: Spice Jet is another decent. The airline. the airline hasn't compromised on punctuality.

However.SCHOOL OF BUSINESS .7 JETLITE: ALLIANCE UNIVERSITY. 3. seasoned professionals and have significant international experience in both launching and managing low-cost airlines.6 KINGFISHER RED: Kingfisher Red. in early 2008 and from then the airline has improved a lot.3. the management is committed to bring to customers in India all the benefits of the global revolution in the skies. Spice Jet¶s key management personnel are all senior. and staffs are more committed and friendly. Kingfisher Airlines took over the airline. It now accepts international credit cards for bookings. the flight unlike previously has stopped serving food at free of cost and has started the business of selling the foods in flight. With thousands of cumulative man hours in the industry. affordable and refreshingly efficient experience for all. originally called Air Deccan. It started operating in mid 2003 and was India's first low cost carrier. is a privately owned low cost airline based in Bangalore. seat numbers are allocated.3. 3.AVIATION INDUSTRY ANALYSIS 2011 expertise. Spice Jet aims to make travel comfortable.

'Buy on board' inflight meals. it also has bases in Mumbai and Hyderabad. low cost airline that started operating in late 2005.AVIATION INDUSTRY ANALYSIS 2011 Jetlite used to be Air Sahara until Jet Airways successfully took the company over in mid 2007. In addition to its headquarters in Delhi. The low cost airline focuses on providing flights that connect India's capital cities. Positioned as a Value based Airline. quality-assured and time-efficient service through 'pocket-friendly' fares.8 GO AIR: Go Air is a small privately owned. Srinagar.3.SCHOOL OF BUSINESS . with the average age of its eight A320 Airbus airplanes being approximately seven months. It operates a fleet of brightly colored airplanes to twelve cities in India. Go Air is positioned as 'the Smart People's Airline'. Go Air now has the youngest fleet of aircraft in India. 3. and Guwahati. economical fares. 'Fly Smart' is aimed at offering passengers a consistent. Its remote destinations include Jammu. in-flight shopping and much more. Its captivating theme. ALLIANCE UNIVERSITY. JetLite promises to offer value for money.

4. GOVT. Companies are always looking to expand their share of the market.9 6. OF INDIA ALLIANCE UNIVERSITY.2 18 19.1 19 2010 2011 17.3 18.1 19.8 20 25 SOURCE: MINISTRY OF CIVIL AVIATION.AVIATION INDUSTRY ANALYSIS 2011 3.SCHOOL OF BUSINESS .8 7 8. The market has been strongly supported by the government and the private sector. Market share increases can allow a company to achieve greater scale in its operations and improve its profitability. MARKET SHARE: The Indian aviation industry has witnessed an impressive growth during the past few years. with major contribution from the civil aviation segment. in addition to trying to grow the size of the total market by appealing to larger demographics. Fig:1 COMPARISON OF MARKET SHARE IN YEAR 2010 AND FEB 2011. The market share is the percentage of an industry or market's total sales that is earned by a particular company over a specified time period.6 13.(IN PERCENTAGE) JET AIRWAYS JET LITE KINGFISHER SPICE JET GO AIR INDIGO AIR INDIA 0 5 10 15 6.3 13.1 15. or through advertising. lowering prices.7 17.

1 to 15.8 in 2011.1 in 2010.AVIATION INDUSTRY ANALYSIS 2011 The above bar graph shows a comparison between the market share of airlines in the year 2010 and 2011(Feb). Business class are the most costliest and is suitable for those personality for whom price of tickets is not that important when it comes to having a ride and they want to enjoy every minute of it. whereas economy class are for people who are middle class and below it who value for money and don¶t care much about comfort.3 in previous year. Kingfisher ranks second with a market share of 19 % as compared to 19. ALLIANCE UNIVERSITY. is very high whereas leisure travelers have lots of time on their hand to choose the airlines which offer best service according to their budget.1 %( Jet Airways + Jet Lite) as compared to 26.SCHOOL OF BUSINESS . Indigo ranks third with 18. Business class and premier class are generally found on international airlines whereas economy classes are found on domestic airlines. whose opportunity cost of time. The business travelers are generally time sensitive. This segmentation is done on the business class. From the figure it can be inferred that Jet Airways is still the market leader with an overall market share of 26. which are offered by different class of airlines. economy class and premier class offered by the airlines. whereas others want value for money.8% and 6. NACIL market share has been decreased from 17. some give greater preferences to the brand name.7% of market share in current year as compared to 17. as leisure travelers and business travelers. MARKET SEGMENTATION: Market Segmentation is the division of a market into different groups of customers with distinctly similar needs and product/service requirements. 3. Spice Jet and Go Air have a market share of 13. Some travelers prefer combination of prices and other features. The customers are differentiated on the basis of their travels.6% respectively in the year 2011. Premier class is cheaper than business class but costlier than economy class and caters to people above middle class.2 in the previous year.5. The segmentation of market is also done on the basis of level of luxury travelers want.

(b. the market has been changed to oligopolistic structure where many private players like Jet Airways. most of which are anti-competitive in nature. Airline¶s faces two type of customers which are either leisure or business travelers. The leisure travelers are flexible in planning their travel as compared to business travelers who are time sensitive.AVIATION INDUSTRY ANALYSIS 2011 3. Just as with frequent-flyer plans. the value of subsequent flights is enhanced by the increased opportunities for free travel. Travel agent incentive schemes appear to be particularly effective at increasing demand. NATURE OF COMPETITION: The nature of competition in Indian aviation industry is in shift mode from late 1980¶s . Earlier it was monopolistic market but later due to coming up of liberalization policy.) Frequent flier programs which reward loyal customers with free air travel. ALLIANCE UNIVERSITY. Most travel agents earn increased commission rates from at least one airline in return for steering passengers to those airlines.) Through negotiating special arrangements with large corporate customers where incentives are provided to the travellers for all travel with single airline.6. Some popular practices adopted by airlines are: (a. Spice jet have entered in the market.) Through travel agent incentive schemes. that rewards travel agents for directing bulk of their travels to specific airlines. Once a customer has flown on a particular airline with a frequent-flyer program. (c. The marginal value of the reward increases as the customer builds up miles or points on a single airline. Hence major competition is focused on time sensitive passengers as their opportunity cost of time is low. Hence airline uses variety of ticketing practices. the rewards for increased bookings on an airline are designed to Encourage the agent to concentrate bookings on a single carrier. therefore frequent-flyer programs encourage travellers to choose the airline that they are most likely to fly on in the future.SCHOOL OF BUSINESS . The entry barrier also has been reduced much considerably which has given opportunities for many private players to operate and many entry level players are still on process to start up their service.

There is a high degree of transparency in prices offered by the airlines. 3.1 PESTLE ANALYSIS: PESTLE analysis is an external analysis of the various macro environmental factors used in the environmental scanning component of strategic management.) Price Transparency where different airlines offer different prices. The macro environmental factors that affect the aviation industry are defined below: POLITICAL FACTORS: Political interference is present in every industry. The future prices of airlines are available over computer reservation system which is easily accessible by the rivals who can use it for their advantage. The wages for airline mechanics were ALLIANCE UNIVERSITY.7. 3. For instance if there is increase in price . The various measures are PESTLE analysis. The airline industry is very susceptible to changes in the political environment and this has great impact on the travel habits of the customers. ANALYSIS OF THE INDUSTRY: A qualitative analysis of the industry is done using various measures. Porter¶s five forces analysis and the SWOT analysis.AVIATION INDUSTRY ANALYSIS 2011 (d. An unstable political environment causes uncertainty in the minds of air travelers. thereby attracting more number of travellers. but will return to its original price after the increase in price has been implemented by the opposing airlines. then the rival will also follow with small increase. regarding travelling to a particular country.7.SCHOOL OF BUSINESS . Some examples are:  Deregulation of the aviation industry: It has resulted in the fares getting plummeted and also affecting the employment conditions.

This has led to foreign players investing in private national airlines. Issues such as fiscal policies. ALLIANCE UNIVERSITY. For example. which became law in November 2001. which means the airlines can choose their hubs which will help them earn maximum profits. equipment and taxes for social and economic purposes such as development aid. Other laws. most of which are funded by a per ticket tax on passengers and a tax on airlines. property. wage inequality and positive and negative externalities have a way of changing operations within this industry. It contributes less than 1% to the GDP and is increasing its contribution by 5% every year. the Aviation and Transportation Security Act. including taxes on income. The EU airlines can now fly between members and within member states and are subjected to same control on fares and capacity.  Taxation policy: The airline industry today faces thousands of taxes and fees on its operations and services. security and financial issues. fuel. mandates the federalization of certain airport security procedures and imposes additional security requirements on airports and airlines.  Liberalisation of skies: The liberalization of the skies has resulted in the airlines choosing a network of routes which will reduce their operational cost. because the industry involves operating between borders. ECONOMIC FACTORS: The aviation industry is particularly susceptible to external economic factors because it affects and depends on a substantial number of industries.AVIATION INDUSTRY ANALYSIS 2011 same all over the country before deregulation. then economic factors from other parts of the world other than the domestic market also affect it. Also.  EU enlargement: The EU enlargement has resulted in removal of significant entry barriers by setting common rules which will govern the safety. the environment and tourism expansion. taxes and airport rates and charges have also been imposed from time to time that significantly increase the cost of airline operations or reduce revenues.SCHOOL OF BUSINESS . But with the deregulation the successful airlines are paying higher and less successful ones are paying lower. regulations.  Ownership rules relaxed: Since the ownership rules are relaxed the airline industry is also globalizing at a faster rate.

AVIATION INDUSTRY ANALYSIS 2011 The aviation industry causes positive externalities such as. the aviation industry is affected by elasticity in supply and demand depending on the size of the industry and how long it has been in operation. heightening employment and boosting investment within any one country. Closely linked to fiscal and monetary policy is the issue of wage inequality. Negative externalities Top on this list is environmental emission. Companies that operate in countries with job losses are likely to witness the same within aviation. Consequently. The overall effect of this is an increase in the following y y y y y Trade improvement Business efficiency Increasing number and quality of growth sectors Boosts investments Improves other aspects of the economy. Also investments in infrastructure have a large role to play.SCHOOL OF BUSINESS . encouraging tourism. Impact of positive and negative externalities: The aviation industry has the capability of exposing a certain country to new markets. The aviation industry utilizes the highest amount of fuel in the transport sector. However. Lastly. The aviation industry is affected by monetary and fiscal policies in that government decisions to tax airlines eats into their operating costs. excessive emission of harmful gasses into the atmosphere thus causing pollution. it is also responsible for the rising amount of carbon emissions into the atmosphere. This is the reason why many governments have passed laws intended on regulating the quantity of emissions emanating from aircrafts. However. some of the negative externalities associated with the industry include emission of noise. This could bring about an overall increase in the GDP. It can also be asserted that the decision to liberalize the aviation industry can bring about many positive effects into the industry. statistics show that inter-firm disparities in wages are quite high especially with regard to pilots. ALLIANCE UNIVERSITY.

 Ethnicity Perception is a major factor in how one views the world.AVIATION INDUSTRY ANALYSIS 2011 SOCIAL FACTORS: Social factors have a major impact on businesses. ALLIANCE UNIVERSITY.  Security Airline companies have undergone a dramatic shift in the safety precautions they take. it also increases the anxiety and frustration with the amount of time and effort it takes to get from the airport ticket counter to the terminal gate. as it brings up the question of discrimination. and because passengers have grown increasingly aware of possible threats.  Obesity One controversy surrounds the issue of airline companies tightening their seat restrictions for obese passengers. How we perceive ethnicity. procedures and prices to accommodate the everchanging influences of their customers over the years. Airline companies alone have to spend a great deal of time and money revising their policies. on some level. And while the increase in security may. It has created something of a negative perception for particular races and religions. has much to do with September 11. due to recent terrorist attacks. Some companies have gone as far as to charge an overweight individual the cost of two seats because of their size. "Airline experts and executives say it's important not to exaggerate the effects of terrorism fears. airline companies contend that it simply costs more to fly those more portly passengers as it requires an additional amount of fuel. So it would seem that this issue has less to do with discrimination and more to do with simple arithmetic." However. Bloomberg Business week reports. those perceptions are not easily dismissed. 2001. ease the mind of the pilots. Since then the eyes of the world have grown increasingly sensitive to the ethnicity of passengers travelling on airplanes. As indelicate as this issue is. passengers and their families. because airline companies have had to exercise increased security measures because of terrorism.SCHOOL OF BUSINESS . as it relates to air travel. It is also one of the oldest studies in psychology. This has created a stir.

The introduction of age discrimination and disability discrimination legislation. y ALLIANCE UNIVERSITY. if the law affects the likelihood of customers buying the good or using the service). e-commerce method of selling tickets. This prevents the market leader or dominant player in the industry from acquiring rest of the minor players and thereby having a monopoly in the industry and exploiting the customers.AVIATION INDUSTRY ANALYSIS 2011 TECHNOLOGICAL FACTORS:  Economies of scale in production due to expanding market size. There are possibilities that every time an individual is searching for airfares he or she may not get into a specific airline website but with the help of social networking sites word can be spread out.SCHOOL OF BUSINESS . therefore fewer infrastructures required which result in overhead savings. y Competition laws: these are aimed at protecting small firms against bullying by larger firms and ensuring customers are not exploited by firms with monopoly power. In recent years in the UK there have been many significant legal changes that have affected firms' behavior. if new systems and procedures have to be developed) and demand (e. and Orkut are giving a boom to the industry with their widespread reach and huge number of users.  Modern aircraft are safer and more economic to run than in the past making possible cheap air travel.  Social networking sites like Twitter. LEGAL FACTORS: These factors are related to the legal environment in which firms operate.Different categories of law include: y Consumer laws: these are designed to protect customers against unfair practices such as misleading descriptions of the product. Face book. Legal changes can affect a firm's costs (e.  This online booking of tickets has helped travellers compare prices of different airlines flying to their desired destination and then choose the best offered price.g.g. an increase in the minimum wage and greater requirements for firms to recycle are examples of relatively recent laws that affect an organization¶s actions.

They cover issues such as training. Changes in temperature can impact many industries including aviation industry.SCHOOL OF BUSINESS .AVIATION INDUSTRY ANALYSIS 2011 y Employment laws: these cover areas such as redundancy. firearms. dismissal. gels and aerosols carried onto an aircraft. more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities. working hours and minimum wages. y Prohibited items: prohibited items include explosives. y Liquid restrictions: TSA (Transportation Security Administration) regulations for airlines specify limitations on liquids. ENVIRONMENTAL FACTORS: Environmental factors include the weather and climate change. They aim to protect employees against the abuse of power by managers. ALLIANCE UNIVERSITY. y Health and safety legislation: these laws are aimed at ensuring the workplace is as safe as is reasonably practical. tools and other sharp objects. reporting accidents and the appropriate provision of safety equipment. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries (for example.

2 PORTER¶S FIVE FORCES ANALYSIS : Porter's Five Forces is a framework for the industry analysis and business strategy development formed by Michael E. These five forces determine the competitive intensity and therefore attractiveness of the market. 2. Porter. in fact this is the most important attribute for a player to enter the industry. Porter¶s five forces analysis helps to analyze everything from the intensity of competition to the profitability and attractiveness of an industry. in which available profits for all firms are driven down to zero. Barriers to entry and exit: The barriers to entry and exit are very high and difficult.  A change in the business strategy can also force the entry of a new player in the industry.AVIATION INDUSTRY ANALYSIS 2011 3. ALLIANCE UNIVERSITY. Threat of New Entrants: There are many factors that allow the entry of new players in industry. then the chances of more airlines entering the industry are higher.  Brand recognition gives an added advantage to the new entrants in the market.  The industry involves high infrastructure costs. Some of them are:  If borrowing is cheap. high manufacturing costs thus has a requirement of huge capital to enter the industry. 1.  The cost of new fleets like Airbus or Boeing is highly expensive.7.SCHOOL OF BUSINESS . An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. As a high level of differentiation is required to capture a large share in the market from the existing players. A very unattractive industry would be one approaching "pure competition".  Existing loyalty to major brands. But in spite of all these factors still there are barriers to entry and exit in aviation industry. Attractiveness refers to the overall industry profitability.

3. Sometimes they may also come up with low travel packages impacting the airlines.SCHOOL OF BUSINESS . permission from state and central governments in order to enter the market as a player.  Travel agents try to exploit the business and leisure travellers. Bargaining power of Suppliers:  There isn't a lot of cut throat competition among suppliers because there are only a few major players in the industry like Boeing.  Costs of the aircraft supporting machinery are high.  High compensation needs to be paid for departing employees namely pilots. which reduces the bargaining power of the buyers. 4. High compensation needs to be paid for departing employees namely pilots. Airbus.  Involves government policies.  The buyers are conscious of the quality of service experienced for the cost incurred. Bargaining power of Buyers:  The bargaining power of buyers in the airline industry is quite low.  The high fuel prices can also reduce the power of the suppliers.  There are high costs involved in switching airplanes.AVIATION INDUSTRY ANALYSIS 2011  Availability of well trained pilots and cabin crews are limited. since there is aggressive competition on the service provided. etc and the industry is dominated by them and they form cartels between themselves. ALLIANCE UNIVERSITY.

AVIATION INDUSTRY ANALYSIS 2011 5. Therefore airways have a kind of monopoly here. It is the first stage of planning and helps marketers to focus on key issues. ALLIANCE UNIVERSITY. SWOT stands for strengths. Opportunities and threats are external factors.6. and threats. 3. money. cruises) and private transportation which act as substitutes. Availability of Substitutes: When considering the availability of substitutes in the airline industry the reasons to be considered are time. There are many others modes of travel such as railways (fast trains). sea routes (boats. But the degree to which these substitutes are preferred over air travel is very low. reduced product differentiation and diversity of rivals. 6. opportunities. personal preference and convenience.  Highly fragmented industry: organised players like Kingfisher and Jet airways account for 53% of the market share.  For international carrier.SCHOOL OF BUSINESS .  Intense competition: there is intense competition because of low switching cost.  In case of emergency it is very likely that customers might prefer air travel since the time taken is really less. weaknesses. This can spell disaster when times get tough in the economy. there is a very low degree of the other substitutes being preferred. Competitive Rivalry: Highly competitive industries like airline industry can have high degree of intra industry rivalry and can generally earn low returns because the cost of competition is high.3 SWOT ANALYSIS: SWOT analysis is a tool for auditing an organization and its environment. the customers might prefer railways or road travel over air travel while taking cost into consideration.  For regional or national travel. It is described below. Strengths and weaknesses are internal factors.

ALLIANCE UNIVERSITY. Other weaknesses faced by airlines are that. there is a large gap in terms of speed which saves a lot of valuable time. By coordinating schedules. Beside this the atmosphere of airlines are added with nice ambience and interiors which make flying a pleasant experience. due to some natural problem like poor visibility. Link-ups with other carriers can greatly increase passenger volumes.SCHOOL OF BUSINESS . airlines can offer service to destinations via a code share agreement with a partner carrier.AVIATION INDUSTRY ANALYSIS 2011 STRENGTHS: One of the unique strength of Aviation industry is that it saves time. shorter distances airline are not preferred except for the people using connecting flights. and hence is preferred by most business travelers to fly frequently. The same time travelers can reach Mysore by their own transport which is much more economical and time saver than flights. WEAKNESSES: One of the major weaknesses of airline is that if the seats are not completely filled then the losses incurred are very high. Newer territories are almost untapped and provide good opportunities especially for low cost airlines to provide service to these sectors. Also. Also. For example: Flight by Kingfisher between Bangalore and Mysore are generally not suitable for people staying in city. theft which are common in bus. As compared to other means of transport. railways etc. fliers are assured of safety in terms of robbery. because travel time to airport takes one hour and travelers have to reach airport at least one hour before departure for security checkup. OPPORTUNITIES: Major opportunities for airline industry are untapped market especially in Tier II cities and Tier III cities. heavy rain etc flights are often delayed causing inconvenience to the travelers.

BUSINESS DIVERSIFICATION: Diversification is the measure taken to spread industrial commitment over a large range of activities so that there is no overdependence on one. Even if this strategy is very risky. Diversification basically involves expansion of a business into different direction altogether where the new business is not at all related to the existing business. the company markets new products or services that have no technological or commercial synergies with current products but that may appeal to new groups of customers. the main reasons of adopting such a strategy are first to improve the profitability and the flexibility of the company. The price of fuel is now the greatest cost for many airlines. if successful. provide increased growth and profitability. it could also.SCHOOL OF BUSINESS .This leads to slower growth in the sector as the profit margins decrease and higher ticket prices lead to sub normal sales.AVIATION INDUSTRY ANALYSIS 2011 THREATS: The constant rise in crude oil prices leads to sharp rises in the cost of ATF (Aviation Turbine Fuel). Diversification can be conglomerate which is the growth of industry into new areas as a result of change in markets. ALLIANCE UNIVERSITY. in order to increase the profitability and longevity of a company or group as a whole. In other words. The conglomerate diversification has very little relationship with the firm's current business. technology and products or it can be stand alone where the players are focused on a single business. and second to get a better reception in capital markets as the company gets bigger. 3. a plague or terrorist attack anywhere in the world can negatively affect air travel. Therefore.7. Also.

Naresh Goyal. with regional and long-haul international services. The parent company is tailwinds limited headed by its chairman Mr. through its parent company United Breweries Group. thus making it a market leader in India. has a 50% stake in low-cost carrier Kingfisher Red. It is India's largest airline and the market leader in the domestic sector. Kingfisher Airlines. It operates over 400 flights daily to 67 destinations worldwide. Kingfisher airlines Kingfisher Airlines is an airline group based in India. In May 2009.9%. Jet Airways (Jet+JetLite) had a market share of 26.Kingfisher operates more than 375 daily flights to 71 destinations.9% in terms of passengers carried. TABLE 3.AVIATION INDUSTRY ANALYSIS 2011 The following table describes the status of various airlines prevalent in India. According to a PTI report. followed by Kingfisher Airlines with 19.1: STATUS OF VARIOUS AIRLINES PREVALENT IN INDIA AIRLINES Jet Airways & Jet Lite Kingfisher Airlines Air India Limited Indigo Spice Jet Go Air STANDALONE/CONGLOMERATE Standalone Conglomerate Standalone Standalone Conglomerate Conglomerate Jet airways Jet Airways is a major Indian airline based in Mumbai. for the third quarter of 2010.SCHOOL OF BUSINESS . Mumbai. Kingfisher Airlines is one of the seven airlines to be ranked as a 5-star airline by the independent research consultancy firm Skytrax[. Its head office is Kingfisher House in Vile Parle (East). Maharashtra. Kingfisher ALLIANCE UNIVERSITY. Its main hub is Chhatrapati Shivaji International Airport.

Spice jet went to be part of Kal Airways. Sun Group in 2010.AVIATION INDUSTRY ANALYSIS 2011 Airlines carried more than a million passengers. Mumbai based and majority owners of Bombay Dyeing and Britannia Industries. thus. Its main base is Chhatrapati Shivaji International Airport. Also. which Vijay Mallya also owns. Maharashtra. It launched commercial operations in November 2005. Haryana. it was India's second-largest low-cost airline in terms of market share.making the group a large conglomerate. the diversification of united breweries and kingfisher group extends to many more businesses ranging from breweries to a cricket team playing in Indian premier league known as royal challengers. Ltd. Spice Jet was voted as the best low-cost airline in South Asia and Central Asia region by Skytrax in 2007. The airline was established in 2005. giving it the highest market share among airlines in India. Thus.. Ltd.. It began service in May 2005 and by 2008. Its main base is Delhi's Indira Gandhi International Airport. It operates domestic services linking 25 destinations. Radio. Spice jet airlines SpiceJet is a low-cost airline headquartered in Gurgaon. Go air airlines Go Air is an Indian low-cost airline based in Mumbai.It was awarded the title of Best Domestic Low Cost Carrier in India for 2008. India. and Kal Airways Pvt. Force India. Kal Airways focuses on the development of its airline Spicejet. It is now wholly owned by the Wadia Group. It operates domestic passenger services to 18 cities with 131 daily flights and approximately 917 weekly flights. While Kal Media Services manages the TV. Sun Group is divided in two holdings: Kal Media Services Pvt. Indigo airlines Indigo is a private domestic low-cost airline based in Gurgaon. making it part of a large conglomerate as well.SCHOOL OF BUSINESS .following the acquisition by Kalanithi Maran. India. Mumbai. Newspaper and Magazine business. Kingfisher Airlines is also the sponsor of F1 racing outfit. ALLIANCE UNIVERSITY.

In the last few years airline mergers and acquisitions have been a growing trend in several countries across the globe. 3. If the other airline has any partnership with a rival group of airlines. y y y y The quality of service and brand image of the other airline. Globalizing competition. which actually is a standalone company and focus on their airline business only.8 MERGERS AND ACQUISITIONS: Airline mergers and acquisitions are on the rise across the globe. the oldest and the largest airline of India.SCHOOL OF BUSINESS . This helps in expanding service coverage and avoiding overlapping of flight schedules. Some of the important factors considered by airlines in taking merger and acquisition decisions are y The coverage area of the other airline. The airline is owned by the Gurgaon-based InterGlobe Enterprises. making it a standalone company which focus on aviation sector only. ALLIANCE UNIVERSITY. Financial circumstances prevailing in the market. Air India Air India is a state-owned flag carrier.AVIATION INDUSTRY ANALYSIS 2011 Rakesh Gangwal and Rahul Bhatia are the two founders of Indigo airlines. Thus. It is a part of the Indian government-owned Air India Limited (AIL) which is renamed as Air India Ltd. However mergers and acquisitions in the aviation industry are highly strategic in nature and are undertaken after taking into consideration several important factors. The airlines industry is abuzz with news of mergers and acquisitions. Strategically an airline would like to merge with or acquire an airline that operates in routes different from its own.

The new acquiring airline or the new group arising out of a merger may not pay the old salaries. The reasons for M&A from the perspective of Kingfisher Airlines and Air Deccan were ±  To start overseas business(2005)  For the purpose of expansion  Air Deccan agreed to recover from its losses. It has been operational for more than five years which is a prime requirement for an operator to go overseas. Kingfisher. Vijay Mallya owner of Kingfisher and Mr.R Gopinath owner of Air Deccan agreed on merger vested upon the best interest of both the companies to achieve the profitability in the two companies by overcoming the loss incurred by the company and certain other objectives like to fly overseas.1 KINGFISHER AND AIR DECCAN: Air Deccan.SCHOOL OF BUSINESS . Salary concerns . Seniority .Mergers and acquisitions in most cases are accompanied by layoffs.AVIATION INDUSTRY ANALYSIS 2011 The major concerns that airline employees are faced with in case of mergers and acquisitions are: y y Layoffs . which was new in the market wanted to expand its business by operating its service to overseas.A senior employee of an airline that is acquired may find himself to be not considered senior by the new employer. Mr. presently known as Kingfisher Red was a low cost airline which started its operation from 2003. new salary rules. Kingfisher and Air Deccan have exactly the same fleet of aircraft and almost same equipment which provides a huge opportunity on saving in engineering and maintenance cost. ALLIANCE UNIVERSITY.8. It was a case of reverse merger. G. y y Pensions and other benefits. Hence. Three major mergers that happened in the Indian airlines industry are namely: 3.

be it into manufacturing or services.AVIATION INDUSTRY ANALYSIS 2011 3. even though the commercials and promotions are not on that larger scale as other Indian sectors such as retail and FMCG. Indian aviation industry is also not much different from other industries. It basically involves functions such as marketing. Jet Airways announced its plan to completely integrate Jetlite into Jet Airways thereby transferring all shares of Air Sahara to Jet airways. (NACL). television commercials. promotions through hoardings. On august 2008.3 JET AIRWAYS AND AIR SAHARA: The merger between Jet Airways and Air Sahara happened on 12 June 2006 when Jet agreed to buy Air Sahara at 1450 crores. This merger was expected to create one of the biggest airlines in the world in terms of fleet size.8. The two airlines were merged to a new company ± National Aviation Company of India Ltd. as far as any industry is concerned. etc on a very large scale in order to attract potential customers towards the product or services. 3. 3.9. This merger was viewed as a step in the right direction because it positioned Air India well with respect to rivals Jet and Kingfisher since Air India was globally and nationally a well recognized brand name. ALLIANCE UNIVERSITY. MARKETING INITIATIVES OF THE INDIAN AVIATION SECTOR: Marketing initiatives are generally very important for the advertisements and promotion of a company.SCHOOL OF BUSINESS . Air Sahara was renamed as JETLITE and was marketed between a low cost carrier and full service airlines. advertisements. when it comes to advertisements and promotions. This combined fleet size placed the merger entity among the top 10 airlines in Asia and top 30 in the world.2 AIR INDIA AND INDIAN AIRLINES: The merger of Air India and Indian Airlines is one of the recent mergers in the Indian aviation industry.8.

For example. has become the symbol of excellent services worldwide which they reflect through their advertisements as well. a German carrier. we can say that a promotion. they have been able to identify themselves and stand out in the eyes of customers when it comes to service . indigo airlines. not much promotions and advertisements are there . even though . has been able to project themselves as the premier airlines. kingfisher. we can say that. Providing excellent service to the customer. Thus. are now synonymous with no ± frills airlines. Making their travel speedier.For instance . 3. whatever promotions and advertisements . which simply provide basic services at the lowest prices available in the market. Thus. with its slogan of ³king of good times ³. by focusing onto the factors such as services. through their advertisements. and acts as the face of Singapore airlines everywhere . offering excellent services. Lufthansa. almost every airlines has based their promotions on these factors only whenever and wherever they have chosen to do so . Now.SCHOOL OF BUSINESS . Making their travel more comfortable and economical. Also. if done in the correct direction. Comparing with the Indian scenario . ALLIANCE UNIVERSITY. through the help of different marketing initiatives. if we consider these factors . depends basically on following factors. Similarly. the airlines carriers are displaying . namely 1.AVIATION INDUSTRY ANALYSIS 2011 Now the most important aspects rendering which the promotions and advertisements are done. can lead to great brand recall in the eyes of customers and will lead the company forward for many years to come. an airline is able to differentiate itself and stand out from the competition. Singapore airlines have focused their advertisements and promotions on total customer satisfaction by promoting ³ Singapore girls ³ which is now synonymous with them . 2. in a comparative smaller duration of time. but still .

TECHNOLOGICAL INTENSITY: There have been significant changes in the technology in the recent year in the aviation industry. Satellite navigation is achieved by using a global network of satellites that transmit radio signals from approximately 11000 miles in high orbit.2 AUTOMATIC DEPENDENT SURVILLENCE SYSTEM: ADS (Automatic Dependent Surveillance) is a surveillance technique in which aircraft automatically provide. The technology is accurate enough to pinpoint locations anywhere in the world. vehicles and by ground facilities.10. Several different forms of ADS are currently in use or under development. four-dimensional position and additional data as appropriate. event contract and emergency contract. There are two global system in operation namely the Navigation Satellite Timing and Ranging system (NAVSTAR).10. It has become the main application of the ADS principle. ADS data is displayed to the controller on a screen that resembles a radar screen.AVIATION INDUSTRY ANALYSIS 2011 3. including aircraft identification. Automatic Dependent Surveillance-Contract (ADS-C) functions similarly to ADS-B but the data is transmitted based on a contract between a ground system and an aircraft: Demand contract. periodic contract. vector and other information for use by other aircraft. altitude. 3. and GLONASS (Global¶naya Navigatsivannaya Sputnikovaya Sistema) of the Russian Federation. ALLIANCE UNIVERSITY.SCHOOL OF BUSINESS . 3.1 GLOBAL NAVIGATION SATELLITE SYSTEM (GNSS): GNSS is a satellite system that is used to pinpoint the geographic location of userµs receiver in the world. via a data link. This application is most likely to find application to sparsely trafficked transcontinental or transoceanic crossings. 24 hours a day.board navigation and positionfixing systems. A number of new technologies have been introduced and many new technologies are expected to come in the upcoming years.10. India is planning to launch its own GNSS announcing plan to have regional operational in 2011-2012. data derived from on. commonly referred to as the Global Positioning System (GPS) and owned by the United States of America. including: Automatic Dependent Surveillance-Broadcast (ADS-B) is a function on an aircraft or surface vehicle that broadcasts position.

10. such as low ceilings or reduced visibility due to fog. in order to avoid this.SCHOOL OF BUSINESS .10. 3. rain.10. the airline generates bar code of six digits and whenever any baggage is lost. high-intensity lighting arrays to enable a safe landing during instrument meteorological conditions (IMC). the authorities can look on that loss baggage on previous airlines in which the passenger made a travel.4 RFID BAGGAGE SYSTEM: In order to avoid the loss or mishandling of bag. 3.10. The average statistic shows that out of per 1000 bags. ALLIANCE UNIVERSITY. So. the aviation industries are in process of implementing RFID Baggage System. or blowing snow.5 DEDICATED CARGO AIRPORTS: The civil aviation ministry is seriously considering setting up dedicated cargo airports across the country. in many cases. The Government would also have to provide a license for such airports to operate. around 5-7 bags are mishandled. using a combination of radio signals and.AVIATION INDUSTRY ANALYSIS 2011 3. the customer is asked to report loss of bag with that bar code number so that based on that bar code. These projects would also need clearances from various Central Government Ministries including Defense and Environment among others.6 ULTRA LIGHT AIRPORT: There are airports wherein. 3.3 INSTRUMENT LANDING SYSTEM: An instrument landing system is a ground-based instrument approach system that provides precision guidance to an aircraft approaching and landing on a runway. However Government will be involved with regards to the safety and security at these airports. the infrastructure will be developed entirely by the private sector with private resources and with absolutely no Government funding. These airports will be able to solve the current problems of the cargo carriers like the slot availability and high rentals charged by the existing metro airports.

11.6%.11 lakh as against 79. Aviation industry in the year 2010 has shown a tremendous growth as compared to 2009.AVIATION INDUSTRY ANALYSIS 2011 3. These are the airports which are constructed from scratch in a new location. Passengers carried by domestic airlines during January-February. because the existing airport is unable to meet the projected traffic requirement. ALLIANCE UNIVERSITY.51 lakh in the corresponding period of previous year thereby registering a growth of 19. Indian aviation industry is the 9th largest industry in the world with a passenger base of around 95 million. and there are many other proposal for the Greenfield airport in the country which can be seen in the few upcoming years. CURRENT SCENARIO OF THE AVIATION INDUSTRY: With airline industry shifting from monopoly to oligopoly based market structure. there have been a number of changes in the Aviation industry after the intervention of private parties. more number of Greenfield airport are being constructed. Bangalore International Airport is a live example of India¶s first Greenfield airport. 2011 were 95. At present. Also. which is constantly increasing due to coming of more number of private players and due to increasing of fleet of service by the existing player to different destination.SCHOOL OF BUSINESS . in order to meet the projected requirements of traffic.

2) The availability of capital. CAPA also says that by 2020.AVIATION INDUSTRY ANALYSIS 2011 3.13. The above mentioned challenges can be put back if the most efficient factor of a country namely the government takes on for successful and timely execution of the envisaged aviation projects which can be done through proper planning. This framework would help Indian aviation sector as one of the leaders in global aviation industry and to reach new heights. But in the near term. 400 million Indian passengers are likely to be flying and Indian airports would be handling more than 100 million passengers.SCHOOL OF BUSINESS . 4) Increasing jet fuel prices. formulating. executing and overseeing the implementation of such large size projects. ALLIANCE UNIVERSITY. This industry has also provided numerous advantages to the society and economy among which creation of employment opportunities is the major one. The centre for Asia Pacific Aviation (CAPA) had made a prediction which states that domestic air traffic will increase by 25 to 30 per cent till 2010 and international traffic growth by 15 per cent by 2010. they may face significant challenges such as: 1) Pursuing aggressive cost reduction. Co-ordination between the government and the private players has to get stronger in order to optimize efficiency and productivity of the aviation sector. The government can seek participation of all the concerned stakeholders in policy formulation by inviting their views and addressing issues faced by them. This has provided the people to make a successful career in this industry. FUTURE OUTLOOK ON GLOBAL SENARIO: In today¶s date aviation industry is said to be one of the best sectors with wider efficiency in serving their customers across the globe. 3) Constraints due to poor infrastructure for aviation in India. FUTURE OUTLOOK OF INDIAN AVIATION INDUSTRY: As long as the Indian economy¶s growth is strong. the long-term outlook for the airlines in India appears to be bright.12. 3. The airline¶s plans to expand capacity and replace ageing fleet aggressively will enable them to meet this growing demand more efficiently.

AVIATION INDUSTRY ANALYSIS 2011 The Aviation industry has to be guarded against foreign carriers especially from the Middle East. key concern that policies are introduced with little industry consultation. y National Agenda: A long term structured national plan with appropriate term. may need to break into smaller groups that may be more viable and efficient. Infrastructure is another major issue which has to be concerned to handle the growing competitive needs. Safety: Implementation of safety systems and culture. y Regulation: A modern and professional technical regulatory framework in line with global y standards such as EASA/FAA. Some of the other key issues are financial incentives to be considered for stimulating air taxis.SCHOOL OF BUSINESS . the objective of airport development must be clearer. Increasing competition among the private players has resulted in lowering air fairs to a great extent which in turn resulted in many major issues such as cutting down labour costs and increased work pressure to the human resource employed in the industry. Finally in the next stage of modernization. ALLIANCE UNIVERSITY. The result of privatization has made 60 per cent of traffic to lie in private hands which has resulted in the decline of revenue. AAI also needs to adopt a more commercial focus to airport charges. Airport planning needs to take greater responsibility for coordination and viability of different airport projects within similar catchments. Airports cannot be built in a vacuum hence there needs to be seamless coordination with other state agencies to develop ground transport and logistics. These major factors constitutes of the restructuring of AAI which seems to be one of the critical point has AAI is a very complex company with over 120 airports to be managed. institutional framework ± necessary to attract capital. to ensure that the outcome is better aligned with requirements. The following factors can be speculated to be the success factors behind the futuristic image of Indian airlines industry. The global meltdown and decrease in air travel due to terrorist activity have ended up becoming the major threats which has resulted down swing of the profitability of aircraft operators in India and other countries MAJOR FACTORS TO BE CONSIDERD TO MEET THE COMPETITIVE NEEDS: The airlines industry has to consider certain factors in order to maintain the ever growing competitive needs of the airlines sector. traffic development and non-aero revenue.

COMPARISON WITH U. with maximum growth predicted in nearly all sectors of the civil aviation market. Europe is the next major player now undergoing radical changes in the form of collaboration and mergers. 3.AVIATION INDUSTRY ANALYSIS 2011 y y y y Vision: Ministry to concentrate on policy and providing strategic leadership. However. liberalized economies in the region The North American market is presently the largest in the world. manufacture of these aircraft is ALLIANCE UNIVERSITY. y Capital: Streamlined foreign direct investment regulations. export and airline operations. the Indian market could also emerge as the next single important one in ten years. However. With liberalization and growth. Profile: Enhanced profile and recognition of aviation within government. The size of the domestic market alone makes it attractive for aircraft design.14. It is expected that the world jet airline fleet will be around 20. Taxation: Less punitive fiscal regime ± particularly sales tax on fuel. China already provides the aircraft manufacturers the biggest single market in this part of the world.000 by 2015. for manufacture.S AND OTHER COUNTRIES: The civil aviation industry is dominated by the United States of America in the manufacture and export of aircraft and remains the world's largest market for the industry. The Asian market which is growing rapidly is expected to overtake Europe as the next in the number of aircraft operated and the revenue passenger kilometers (RPKS) generated. manufacture and maintenance of aircraft in that country. Recent mergers and acquisitions in the manufacturing sector and airline operations have created corporations with the wherewithal to survive the capital intensive and long gestation nature of the industry. The main reason for this development has been the growth in the. Asia-pacific including China is the most promising region. HR World class education & training infrastructure is essential for safe and efficient aviation.SCHOOL OF BUSINESS . A major share of this fleet will be in North America and Asia.

governments are aware of the strategic nature of aerospace industries. ALLIANCE UNIVERSITY. except for the Bombardier group in Canada and Embraer in Brazil the European situation is however. manufacture and marketing. invest in aerospace R&D. however. except if the plan to build a 100 seater by Asian companies in China and South Korea goes ahead. and British Aerospace. given the capital intensive and long gestation periods involved.SCHOOL OF BUSINESS .AVIATION INDUSTRY ANALYSIS 2011 Predominantly by Boeing and Airbus Industries with McDonald Douglas having less than 15% market share. undergoing substantial reorganization with Fokker filing for bankruptcy. It is now expected that larger organizations with an ability to sustain the huge investments required for the development of new aircraft will emerge out of the restructuring. Also. in all the aircraft manufacturing countries. This situation may not change substantially for a number of years. Market forces have tended to dominate in the past decade and have forced restructuring of organizations and governments have privatized a number of companies that were once state owned. government play active roles in the marketing of the country's aerospace products. Aerospatiale (ATR) and Alenia considering joint development. government has accepted that subsidies. government funds and participation in management may not be efficient and could lead to macro-economic problems. Also. In countries like Brazil. Regional aircraft manufacture is dominated by Europe. The battle to increase market share by Airbus has ensured the development of new products in the form of the A319. Investment in a very large capacity transport is being seriously considered by Airbus and Boeing. In the west. though it is estimated to cost between $ 1 0 ± 15 billion. Indonesia. provide tax shelters for plants in areas aircraft for airworthiness and air safety issues are generally handled by Government agencies as well (Somshekhar and Chandra). Malaysia Governments have played active facilitator roles even if the industry was not owned by the Governments themselves. in western countries. A340 by Airbus and the 777 and 737-800 by Boeing.

Passengers¶ 2000 2010 domestic 599563678 629457532 international 134287145 153178694 Total 733850823 782636226 SOURCE: BUREAU OF TRANSPORTATION STATISTICS T-100 SEGMENT DATA ALLIANCE UNIVERSITY.S AVIATION: According to Air Transport Association (2010).S Aviation sector also provides 11 million jobs approximately.3:NUMBER OF PASSENGERS TRAVELLING THROUGH U.2%). U.AVIATION INDUSTRY ANALYSIS 2011 U.19 INTERNATIONAL TOTAL 74.S.as of now.750 airports in U.S AVIATION STATISTICAL DATA TABLE 3.2: LOAD FACTOR (PASSENGER MILES AS A PROPORTION OF AVAILABLE SEAT MILES IN PERCENT (%) (ALL CARRIERS ±ALL AIRPORTS) YEAR 2000 2010 DOMESTIC 71. the contribution of commercial aviation towards US GDP is US$731.97 81.S AIR SPACE.5 billion (5.S. ranks first in the aviation market.6 72.22 82. U.91 SOURCE: BUREAU OF TRANSPORTATION STATISTICS T-100 SEGMENT DATA TABLE3. U.93 81. There are 19.SCHOOL OF BUSINESS .

9 million additional jobs.4: LOAD FACTOR OF EUROPEAN AVIATION STATISTICS Year 2004 2009 load factor 56. Around 14% of the industry¶s turnover is invested in R&D to lower carbon emissions. Out of 650 million passengers who avail the European Airlines around 340 million passengers travel through AEA member airlines. These are some of the advantages of Single European Sky: y y y y Prime importance to safety Single authority to make decisions Reduction in delay and flight times Centralized crisis management expertise Implementation of Single European Sky would result in saving ¼ 3. TABLE 3. It would reduce the carbon emissions by 12% and save 500. By 2012.000 tons of fuel per year.7 billion per year.SCHOOL OF BUSINESS . It also provides employment to 1. Also.6 million people directly and generates 2. A combination of 35 major European Airlines form The Association of European Airlines.AVIATION INDUSTRY ANALYSIS 2011 EUROPEAN AVIATION The European Aviation sector contributes around ¼ 275 billion (3.1 63.1%) to European Union GDP. Currently European air space is fragmented into 31 national systems. EU governments have agreed to provide a single European Sky.0 SOURCE: ERA (EUROPEAN REGIONS AIRLINE ASSOCIATION) ALLIANCE UNIVERSITY.

the number of passengers travelling through African skies are around 56. Therefore.SCHOOL OF BUSINESS . can be speculated to be the turbulent political and social status of the countries situated within Africa which are worsening day by day. Year 2000 2009 Passengers 31.AVIATION INDUSTRY ANALYSIS 2011 AFRICAN AVIATION The African aviation industry is currently is least growing aviation industry throughout the world as far as this particular sector is concerned. The reasons for this less than expected growth inspite of its being highly populated and having great potential . TABLE 3. Also the passenger load factor is very less when compared to other regions. Right now.2 million which is way less than its counterparts in north American and asian territories.5 millions 56.5: AFRICAN AVIATION STATISTICS IN TERMS OF PASSENGERS. the aviation industry is getting affected as well.2 millions SOURCE: AFRAA (AFRICAN AIRLINES ASSOCIATION) ALLIANCE UNIVERSITY.

10% 12.10% 14.10% 9.70% 68.80% 12.70% 35.90% 67.30% 27.00% 24.e PLF.60% PLF 66.30% 45.00% 68.10% FLF 24.20% 13.80% AFTK 2.00% 6.90% ASK 1.00% 9.10% 7.60% 9.70% 66.70% 13.10% 13.10% 11.10% 13.6: JANUARY TO DECEMBER .50% 28.20% 28.10% 27.30% 12. the most important parameter which indicates the actual growth of the sector i.00% 28.00% 67.30% 10.2010 VS 2009: REGIONAL TRAFFIC PERFORMANCE RPK 2.10% 11.20% 13.20% 34.10% 69.80% 46.20% 9.80% 28. All these data are monthly data depicting the statistics per month as it happens till the end of the year.60% 27.10% 9.SCHOOL OF BUSINESS .90% 13.30% 46.60% 9.AVIATION INDUSTRY ANALYSIS 2011 TABLE 3.40% 31.50% 28.20% 7.70% 28.60% 26.50% 7.20% 69. ALLIANCE UNIVERSITY.30% 9.80% 13.20% 42. Freight tones kms ( FTK) and Freight load factor ( FLF). in this table indicates the percentage to be less than 70 % .90% 8.90% 69.60% 12.40% 11.40% 10.10% FTK -9. which is quite low in comparison to other regions prevalent in aviation industry .30% 68.20% 28. Also.40% 13.50% 23.20% 8.60% 43.90% 68.90% Jan Jan± Feb Jan± Mar Jan± Apr Jan± May Jan ± Jun Jan ± Jul Jan± Aug Jan± Sep Jan± Oct Jan±Nov Jan± Dec SOURCE: AFRAA/IATA The table shown above actually explains the various statistics regarding African aviation industry in terms of revenue passenger kms ( RPK) .40% 27. passenger load factor(PLF) .00% 8.90% 13.80% 67.

70% 76.50% 12.60% 15.80% .20% 78.10% 8.70% 43.00% 10.20% ASK 9. TABLE 3.60% 3.90% 4. north American aviation industry is still the leader followed by Europe having the passenger load factor of 82% and 79 % respectively.20% 3.40% 53. their being the most developed regions throughout the world and also their political and economic structures which is way better than other regions dominant in aviation sector.30% 46.90% 13.60% 2.10% 8.10% 77.40% FTK 23.40% PLF 69.SCHOOL OF BUSINESS .40% 8.10% 44.00% 5.90% FLF 26.90% 52. in spite of the excellent growth displayed by these regions .60% AFTK 12.10% 14.7: VARIOUS STATISTICS ACROSS THE CONTINENTS Region Africa Asia/Pacifi c Europe Latin America Middle East North America Industry Average RPK 12.60% 2.00% 82.60% 79.AVIATION INDUSTRY ANALYSIS 2011 A comparison of growth statistics across the different regions The aviation industry has been growing on a steady rate since last ten years because of the rise of many countries such as India.70% 21.90% 9.80% 20.10% 26.90% 65.20% 17.all these regions have been the catalysts as far as the rising growth in aviation industry is concerned. But .30% 0.40% 76. china from south east Asian region and brazil and south Africa from south American and African regions respectively . The reason behind this can be speculated to.80% 24. ALLIANCE UNIVERSITY.80% 7.70% 6.80% 29. SOURCE: AFRAA / IATA The above table clearly indicates that the highest load factor is evidently highest in north American region which is also the market leader as per the aviation industry is concerned.

AVIATION INDUSTRY ANALYSIS 2011 Also. It clearly indicates that the overall industry average of the aviation industry is 78.40 % which actually signifies a good growth across the sector.SCHOOL OF BUSINESS . it indicates that the passenger load factor is lowest in African region because of the low turnover of passengers throughout the region because of many political . ALLIANCE UNIVERSITY. social and environmental factors .


The industry suffers huge losses because its operational costs are very high. Slot constraint is another problem. it¶s not even reached break-even. After a thorough analysis of the aviation industry and its main aviation we can easily come to a conclusion that not even a single player in the entire industry is making profits. The capacity cannot be increased all of a sudden due to rising demand hence this creates a scarcity of infrastructure. So it¶s a win-win situation. INTRODUCTION: This chapter primarily concludes the study of the Indian Airline industry. AAI etc. If anyone deviates then the other airline can at a very short notice revert back to the original prices without bearing much cost. FINDINGS: The Indian aviation industry has witnessed a tremendous growth in the recent years driven by a number of macroeconomic. government reforms and market lead dynamics.SCHOOL OF BUSINESS . A bane as it enhances the chances of collusion.2.1. Landing and taking off rights are referred to as slots. 4. demographic. Price transparency of the system is both a boon and a bane. Parties entering the collusion find it easy to ensure cooperation as the follower will implement the price increase only after seeing the leader make the agreed changes. Also the capacity of airports is fixed.AVIATION INDUSTRY ANALYSIS 2011 4. ALLIANCE UNIVERSITY. These slots are an important consideration for the entrant as peak timed slots register heavy passenger load factors as compared to the oddly timed slots. There are some regulatory barriers that regulate the smooth functioning of airports and aircrafts like DGCA. But there are some instances when some players have made profits but then they had to compensate them for the debts and interests they incurred in the previous years.

From being primarily a government owned industry. the Indian aviation industry is now dominated by privately owned full service airlines and low cost carriers. only few could afford but today air travel has became much cheaper and can be afforded by many people. there is a large gap in terms of speed which saves a lot of valuable time.SCHOOL OF BUSINESS . Hence it can be concluded that domestic demand for aviation is tremendously increasing in India. Earlier air travel was a privilege. cargo airlines and unscheduled air operators like private jets and helicopters. and hence is preferred by most business travelers to fly frequently. The airline industry provides service to virtually every corner of the globe and is an integral part of the global economy. As compared to other means of transport. ALLIANCE UNIVERSITY. The Aviation industry in India encompasses a wide range of services related to air transport such as passenger airlines which are scheduled.AVIATION INDUSTRY ANALYSIS 2011 The government open sky policy has led to many overseas players entering the market and the industry has been growing both in terms of players and aircraft.

) Classification of seats from http://www. 2.bts.National Aerospace Laboratories. South Asian Journal of Tourism and Heritage (2010).com/abstract=1538704 5.AVIATION INDUSTRY ANALYSIS 2011 REFERENCE: 1.) Bureau of Transportation Statistics (2009).seatguru. 4.net/ ALLIANCE UNIVERSITY.) News on Aviation from http://www.(1997).(2010).(2010).) Indian Aviation information from http://indianaviationnews.sxm. National Transportation Statistics http://www.)Gupta .htm 8..N.com/blog/?p=36 11. S.(6) 6 .) Genesis of airline from http://ashwinnaik. Low cost carrier model in India: sustainability challenges.org/industry/aviation.)Somasekhar .html 10. N. & Agarwal . International Review of Business Research Papers .nic. Retrieved from http://www.) Aviation Classification from http://civilaviation. .nic.com/charts/premium_economy.(2010). S. Vishnoy.)Bhatia. 3(2).. A Comparative Study Between Indian Public And Private (Low Cost) Airlines With Respect To Their Passenger Service. Strategic Planning For Indian Civil Aviation Industry .in 9. Issues and challenges in aviation industry. K. Atraya. 3.D.)Arora. 6. Bangalore.) Mitra .& Chandra .in/moca/acvl.php 7.SCHOOL OF BUSINESS .48-65.gov/publications/national_transportation_statistics/html/table_01_03.(2010).aspx 12.ibef.B. ICTs Internet Adoption in Aviation Industry Similarities in India and China.) Information about DGCA from http://dgca.M. . L.

com 14.aai.com ALLIANCE UNIVERSITY.civilaviation.SCHOOL OF BUSINESS .AVIATION INDUSTRY ANALYSIS 2011 13.) www.com 15.) www.) www.dgca.


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