Air India Express: The Changing Phase for a

Low-Cost International Carrier

Strategic analysis
TABLE OF CONTENTS

1. Introduction .................................................................................................................................................. 3
2. Strategic Position........................................................................................................................................ 4
2.1 Macro-environment Analysis – PESTEL .......................................................................................... 4
Political ..................................................................................................................................................... 4
Economic.................................................................................................................................................. 5
Social ........................................................................................................................................................ 5
Legal ......................................................................................................................................................... 5
2.2 Industry Analysis – Porter’s 5 forces ................................................................................................. 5
2.3 Internal Factors ..................................................................................................................................... 6
Culture and purpose of the Company.................................................................................................. 7
Stakeholders ............................................................................................................................................ 7
Governance ............................................................................................................................................. 8
2.4 Discussion Internal Factors- Strengths & Weaknesses ................................................................. 8
2.5 SWOT Analysis .................................................................................................................................... 8
2.6 Discussion and summary .................................................................................................................... 9
3. Strategic Choices ....................................................................................................................................... 9
3.1The TOWS.............................................................................................................................................. 9
3.2 Discussion of the 4 choices .............................................................................................................. 10
SO: Strategic choice ............................................................................................................................. 10
ST: Strategic choice ............................................................................................................................. 10
WT: Strategic choice ............................................................................................................................ 10
WO: Strategic choice............................................................................................................................ 11
4. Strategy in Action ..................................................................................................................................... 11
4.1 SAFe analysis ..................................................................................................................................... 11
5. Conclusion ................................................................................................................................................. 12
6. Reference LisT.......................................................................................................................................... 13

BUSI-1633 STRATEGY FOR MANAGERS 2

1. INTRODUCTION

Air India Express is an international low-cost carrier that is a subsidiary of Air India, the flag carrier
airline of India. The company went through a difficult period in 2010 when an accident killed 164
passengers. However, in 2015, the company managed to earn a net profit amounting to USD
53million, and in 2016 they increased their profits by 14% (Jayakrishnan, 2019). The Indian aviation
market is growing, and the company is focusing on expanding its domestic routes. Consequently,
the company needs to address the competition, overcome the challenges, continue its growth, and
focus on regional routes without affecting its international operations (Jayakrishnan, 2019).

This report aims to conduct a Strategic Analysis of Air India Express using different tools and
frameworks to evaluate and discuss the key issues and the contextual situation of its operations and
expansion plans. There will be three main sections: the Strategic position of the company, the
Strategic Choices, and the recommended Strategic Actions.

BUSI-1633 STRATEGY FOR MANAGERS 3

2. STRATEGIC POSITION

This first section will analyse the strategic position of the Air India Express using different tools and
frameworks such as PESTEL, Porter’s Five Forces, VRIO.

2.1 MACRO-ENVIRONMENT ANALYSIS – PESTEL

The first framework used is Pestel (Table 1), analysing the macro-environment of the company.
Therefore, the main opportunities and threats that could impact the company in the short and long
term will be investigated.

PESTEL ANALYSIS

Political - Government intention to enhance

regional connectivity (UDAN
PLAN)

- FDI

- Open-skies policy

Economic - Fuel costs

- Airport charges

- Indian aviation market rank 3rd

globally in 2020

Social - Shortage of skilled labour

- Increase of customers

Legal - Inflexible labour laws

Table 1: PESTEL analysis

POLITICAL
The UDAN Plan is a project by the Indian Government that aims to improve regional connections.
Hence, this will enable the aviation market to grow exponentially and increase the companies’ profits.
However, the competition with foreign carriers could increase due to the FDI limit and the open-skies
policy that could become potential threats (Jayakrishnan, 2019).

BUSI-1633 STRATEGY FOR MANAGERS 4

ECONOMIC
The fuel cost is depending on the oil fluctuation price and this is a crucial aspect. Then, the airport’s
charges are alleged to be the 2nd highest in the Asian and Gulf countries. In addition, there is a
shortage of airports in India, and thanks to the new regulations, this issue should be faced soon.

SOCIAL
Regarding the social factors highlighted, there is a shortage of skilled labour, such as pilots and
crew. This factor should be taken into consideration as there is a steady increase of customers
regionally and internationally (Jayakrishnan, 2019).

LEGAL
The inflexible labour laws are another major issue for airlines companies. The highly skilled and
unskilled workers are highly unionised, as the relationship with the organisational level is frequently
tense.

2.2 INDUSTRY ANALYSIS – PORTER’S 5 FORCES

This report is now conducting Porter’s 5 forces analysis (Table 2). The competition within the industry
is not merely coming from competitors there are 5 key forces has shown below (Bruijl, 2018).

Table 2: Porter's 5 forces analysis

BUSI-1633 STRATEGY FOR MANAGERS 5

The rivalry among existing competitors is high due to the high costs, the industry growth, and the
low differentiation that is available in this sector. The bargaining power of suppliers is high, due to
the oil fluctuation price and the maintenance costs, as well as the airport’s charges for flying slots.
However, a recent softening of fuel rates empowered the aviation market’s growth because enable
the companies to sell low fares and flight deals. On the other hand, the power of buyers is moderate.
The government is allocating reimbursements for low-cost carriers to minimise their losses while
expanding on domestic routes (Jayakrishnan, 2019).

According to Porter (1979), there are many crucial barriers when it comes to the threat of new
entrants, for example, the economy of scale and the experience aspect. Hence, companies that are
willing to enter a sector, should adapt their production. For example, if the cost to produce a product
is high, but if the company increases the production the costs will decrease. On the contrary,
companies already in the industry will benefit from this with a higher advantage (Johnson, et al.,
2017). Likewise, experience is fundamental. The longer a company is in a sector the better
knowledge leads to having lower costs. Therefore, companies entering a new market should gather
that experience and this is a hard process that requires a lot of resources (money and time). For
these reasons, the threat of entry would be much lower, because the company has already the
experience needed to succeed.

The threat of substitutes is considered high, as there are many other means of transports in the
country, for example, the railway has been the dominant mode of transport for years, especially for
price-sensitive customers (IATA, 2018).

2.3 INTERNAL FACTORS

The company’s resources and capabilities will be now examined (Table 3). Then, the VRIO analysis
will help to understand how to accomplish a sustainable competitive advantage (Table 4).

RESOURCES CAPABILITIES

- Domestic operations - Maximise the resources to

- International operations PHYSICAL operate internationally
- Fleet size (to be increased) - Radixx system

- Air India debt (negative - Exceed annual targets

aspect) - Profits
FINANCIAL
- International market share
6%

- Work force (managers, - Brand value

crew, and ground staff) - Customer value
HUMAN
- Current and future partners - Task-orientated business
- Customers culture

Table 3: Resources and Capabilities

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 Table 4: VRIO analysis

CULTURE AND PURPOSE OF THE COMPANY

In terms of organisational culture, it could impact the strategy and affect the corporate performance.
For example, the company’s brand values are its history, as it has a strong brand identity through its
long history and the mascot of Air India. Also, the company is task-oriented, as they increased
efficiency and their international operations which helped them to exceed their annual targets in 2017
(Jayakrishnan, 2019; Economic Times, 2018). Therefore, a durable corporate culture is an effective
resource for the competitive advantage of the company (Barney, 1986).

Occasionally, the company should adapt the organisational culture to maximise or update the
strategy, but this is a challenging aspect to be managed. However, the case study does not offer
any other elements regarding the organisational culture.

STAKEHOLDERS
The stakeholders of Air India Express have an interest in the company, therefore investigating the
influence they can have upon a strategy is vital to achieve the company’s objectives. There are two
groups of stakeholders: externals and internals. The external economic stakeholders which are those
with financial connections with the organisation, such as shareholders, airports, banks, and oil
suppliers. Then, the external political stakeholders are the Indian government and government
agencies, that can issue specific regulations to operate, such as airport authorities. On the other
hand, the internal stakeholders are the highly skilled and un-skilled employees and managers
(Johnson, et al., 2017; Jayakrishnan, 2019).

BUSI-1633 STRATEGY FOR MANAGERS 7

GOVERNANCE
Air India Express is a subsidiary of Air India, therefore corporate governance enhances the
communication and the relationship between them, as this could have an impact on the company’s
strategies. This is a regulation system that helps shareholders, owners, and institutional investors to
structure and control the board, the CEO, and managers to follow the needs and concerns of the
organisation daily (Johnson, et al., 2017).

2.4 DISCUSSION INTERNAL FACTORS- STRENGTHS & WEAKNESSES

The resources and capabilities that could give a sustained competitive advantage to the company
are the strong brand value, the customers’ value, and the international operations. The factors are
valuable, rare, and inimitable thanks to the company’s profits and its current market share. While
partners are representing a competitive parity to the company because they are valuable, but not
rare. Nevertheless, the rivalry level is high. The competitive parity or disadvantage are including the
domestic operations and their fleet size. These elements are valuable for the company. Hence, a
strategic change should be made. Another important aspect is the debt from the parent company
which could not be sustainable in the long term.

2.5 SWOT ANALYSIS

Strengths: Weaknesses:

• Brand Value • Domestic Routes

• Customer Value • Low Profitability

• International Routes • Fleet size

• Radixx system • Air India Debt

Opportunities: Threats:

• Passenger’s Growth • Oil price fluctuation

• UDAN Plan • FDI

• Expansions of • 5/20 restriction

infrastructures and
modernisations of • High Competition
airports • Shortage of Skilled
• Partnering with Fly Employees
Dubai • Open-skies policy

Table 5: SWOT analysis

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2.6 DISCUSSION AND SUMMARY

This section is ending with the SWOT analysis (Table 5), the OTs are coming from the analysis of
the external environment while the SWs are coming from the internal factors. The major strengths of
Air India Express are within their strong brand, customer values, and their capabilities within the
international routes. According to Keller and Lehmann (2009), this could result in a company’s
success in the long term.

3. STRATEGIC CHOICES

Using the outcomes from the SWOT analysis in the Strategic Position Section, this report will now
examine the Strategic Choices that come from the TOWS analysis that is shown below.

3.1THE TOWS

Internal Factors

Strengths (S) Weaknesses (W)

External factors

Opportunities SO: International Operations WO: Domestic Operations

(O) Expansion Expansion

Threats (T) ST: Boost Brand value WT: Increase of PLF

Table 6: TOWS analysis

BUSI-1633 STRATEGY FOR MANAGERS 9

3.2 DISCUSSION OF THE 4 CHOICES

The strategic choices for the company’s growth in the short and long term will be now explained.

SO: STRATEGIC CHOICE

One of the company’s key strengths and opportunities is its expansion in the aviation industry on an
international level. The company should add some innovative elements to attract more customers
and to retain the ones they have already (Ramón-Rodríguez, et al., 2011). They should consider
partnering with Fly Dubai. Competing internationally, especially in the United Arab Emirates, as
complementary organisations could help to be competitive in the chosen industry (Goetz & Shapiro,
2012; Air India Charters Limited, 2016). Also, they could use a market development strategy, to sell
their existing services for new markets. This strategy is involving new users and new geographies.
This could be ideal when expanding the market for international or domestic operations (Johnson,
et al., 2017). Moreover, the political situation abroad should be analysed to have an overall view of
the policies and legislation to operate there (Jayakrishnan, 2019).

ST: STRATEGIC CHOICE

The company should boost its brand value, as this could help them to sustain a competitive
advantage. As a result of the advent of the internet and in addition to the already existing Radixx
system, there will be a marking strategy recommended. The company should include a marketing
promotion with several campaigns (Ansoff, 1988), with a customer’s loyalty program and frequent
flyer program, which is currently used by the major international airlines (Berman, 2006). The
company can reward people looking at how many times they have flown with them or the kilometres
travelled depending if it is a long or a short haul, “the more you earn points, the more you travel”
(Yellin, 2021).

WT: STRATEGIC CHOICE

Following the constant increase of PLF, the company should consider enlarging its actual fleet size
which counts 23 aircraft (Air India Express Limited, 2017). Thus, the company should pursue a
market penetration policy to buy more aircraft and to increase the number of passengers to grow
their market share, hence their profits. Currently, the FDI limit is capped at 49% and consent from
the Government is mandatory if the limit is exceeded. Hence, the improvement of FDI limits and new
policies that will help companies should be formulated to expand the Indian aviation sector. Also, the
company could lease some of their fleets or operate in partnership with other companies such as
the European LCC Ryanair is doing with Laudamotion and Malta Air, to reduce the costs and
maintain the quality level (Prichinet, 2020).

BUSI-1633 STRATEGY FOR MANAGERS 10

WO: STRATEGIC CHOICE
Along with the passenger’s growth, the UDAN plan (The Hindu, 2017) to improve the regional routes
by the Indian government, the intentions of expanding infrastructures, and the modernisation of
already existing airports, domestic operations expansion should be considered. When focusing on
regional routes, the international ones should not be affected and loads of work for ground staff and
crews in different locations should be measured (Jayakrishnan, 2019). Managing labour relations
within this sector is challenging. The company should prevent strikes, providing support and benefits
to their workforce (Proper, et al., 2009). Furthermore, the strategy clock model has a different
approach to evaluate hybrid strategies that can bring together generic strategies. The hybrid strategy
is adopted by low-cost carriers. It is focusing more on the price instead of the company’s costs, and
it allows for changes in strategy (Johnson, et al., 2017). Moreover, it could be an asset when quickly
entering the market and to growth the market share (Johnson, et al., 2017). Also, they can start
expanding domestically lowering their costs and reducing their prices as low-cost carriers are price
centred, using a cost leadership. Then, the company can differentiate the product, thanks to some
premium services to be added to have two potential segments of the market to be targeted.

4. STRATEGY IN ACTION

From the TOWS table above the report will now use the SAFe tool to evaluate the 4
strategic options suggested for Air India Express.

4.1 SAFE ANALYSIS

Table 7: SAFe analysis

As shown in the table above, the first option will be the brand value implementation which is a
strategic action that comes from a combination of strengths and threats. Currently, this is the most

BUSI-1633 STRATEGY FOR MANAGERS 11

suitable strategy, acceptable by key stakeholders and with a low-risk level, feasible in terms of
financial costs as this could be regarding mostly their IT teams and their customer service.

Then, domestic operations expansion is the second option that will enhance their market share and
their profits in the long run. Thus, this element is suitable, acceptable with a moderate level of risks
that could be predicted in advance, while the financial costs will be more expensive until the
achievement of the breakeven point. Moreover, as the domestic market is growing, in terms of
demand and infrastructure, this strategic action will be right in time.

Finally, the other two options are suitable too, yet the costs, the human resources, and the effort will
be more than the first two options. Thus, these two strategic options will be recommended for Air
India Express to be realised in the future.

Therefore, as the company is also planning to expand its operations, they should take into
consideration that situations may change, and this can affect the original strategy (Ansoff, 1988;
Johnson, et al., 2017). Hence, it is highly recommended to contemplate a strategic risk management
plan to have a solution for each problem that may arise (J Clarke & Suvir, 1999).

5. CONCLUSION

Overall, this report analysed in depth the current situation of Air India Express and how the company
should tackle the issues that could have an impact on their operations. Strategies were evaluated to
suggest some recommendations to the company towards their short and long-term objectives.
However, the expectations of the stakeholders should be taken into consideration and when the
strategy chosen is developed it should reflect their needs (Atkinson, et al., 1997).

BUSI-1633 STRATEGY FOR MANAGERS 12

6. REFERENCE LIST

Air India Charters Limited, L., 2016. Annual report for 2015-2016. [Online]
[Accessed 12 2021].

Air India Express Limited, L., 2017. Annual report 2016-2017. [Online]
Available at: http://www.airindia.in/ writereaddata/Portal/FinancialReport/1_437_1_annual-report-of-air-india-
express-limited-2016-2017.pdf
[Accessed 12 2021].

Ansoff, H., 1988. Corporate Startegy. In: s.l.:Penguin.

Atkinson, A. A., Waterhouse, J. H. & Wells, R. B., 1997. A Stakeholder Approach to Strategic Performance
Measurement. Sloan Management Review; Cambridge, 38(3), pp. 25-37.

Barney, J. B., 1986. Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?. Academy of
Management Review, 11(3).

Berman, B., 2006. Developing an Effective Customer Loyalty Program. California Review.

Bruijl, G. H. T., 2018. The Relevance of Porter's Five Forces in Today's Innovative and Changing Business Environment.
[Online]
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[Accessed 12 2021].

Economic Times, N., 2018. Air India Express net profit exceeds target for the year. [Online]
Available at: https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/air-india-express-
netprofitexceeds-target-for-the-year/articleshow/63013803.cms
[Accessed 12 2021].

Goetz, C. F. & Shapiro, A. H., 2012. Strategic alliance as a response to the threat of entry: Evidence from airline
codesharing. International Journal of Industrial Organization, 30(6), pp. 735-747.

IATA, 2018. IATA. [Online]

Available at: https://www.iata.org/contentassets/eec5052bac6a4fd68f98e751b0b97d21/india-aviation-summit-
aug18.pdf
[Accessed 12 2021].

J Clarke, C. & Suvir, V., 1999. Strategic risk management: the new competitive edge. Long Range Planning, 32(4), pp.
414-424.

Jayakrishnan, S., 2019. Air India Express: The Changing Phase for a Low-Cost International Carrier. In: s.l.:SAGE
Publications: SAGE Business Cases Originals.

Johnson, G. et al., 2017. Exploring strategy: Text and cases. 11th Edition ed. s.l.:Pearson Education.

Keller, K. L. D., 2009. Assessing long-term brand potential. Journal of Brand Management, Issue 17, pp. 16-17.

Mintzberg, H., Ahlstrad, B. & & Lampel, J., 2008. Strategy Safari. Financial Times.

Porter, M. E., 1979. The Five Competitive Forces That Shape Strategy. Harvard Business Review.

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Prichinet, G.-C., 2020. Strategic analysis of Ryanair. [Online]
Available at: https://research-
api.cbs.dk/ws/portalfiles/portal/60705222/816473_Strategic_Analysis_of_Ryanair_13.01.2020_Prichinet_George_Cris
tian.pdf
[Accessed 12 2021].

Proper, K., Deeg, D. & & J van der Beek, A., 2009. Challenges at work and financial rewards to stimulate longer
workforce participation. Human Resources for Health volume, Volume 70.

Ramón-Rodríguez, A. B., Moreno-Izquierdo, L. & F.Perles-Ribes, J., 2011. Growth and internationalisation strategies in
the airline industry. Journal of Air Transport Management, 17(2), pp. 110-115.

The Hindu, N., 2017. All you need to know about the UDAN scheme for low-cost, regional connectivity. [Online]
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Yellin, J., 2021. CNN Underscored. [Online]

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