The Indian Aviation Industry: Price Wars and More

In 1930,Indian business house Tata’s started Tata airline.  In 1953, the Air Corporations Act 1953 came into force

and all the assets of the then existing nine airline companies were transferred to two corporations - Indian Airlines Corp. (IA) and Air India International(Air India).
In 1993, the Air Corporations Act 1953 was abolished,

which put an end to the monopoly in the scheduled air transport services market.

In March 1994, govt. approved open skies policy and 8 private

carriers entered in market and they were:Jet Airways, Sahara, Indian International Archana, East- West, NEPC, Modiluft and Damania.
In 1995, The AAI offered infrastructural facilities to all airlines.

At this point of time, there were 449 airports.

ModiLuft’s airline. . East West airline was eventually closed down in August 1996. Damania airline was sold to NEPC in September 1995. the world's most expensive airline. was into problems right from the start. NEPC airline landed in serious financial problems and the company defaulted on payments.

therefore. . company had to shut down. NEPC ran into problems after the acquisition of Damania when the SEBI revealed that the deal was an UNFAIR TRADE PRACTICE.Reasons for Failure Damania established by a poultry farm owner was not financially strong. East-West airline Owed $3mn to PLM Equipment as lease rentals and change in government regulations was also reason. Modiluft’s airline mistake was that they hired the most expensive airline in the world to give them aircraft and services". This resulted in Serious financial problems.

 Lack of proper planning and poor promoter support.  Financially extremely weak in market.  Lack of professional expertise required in the aviation industry.Cont… The reasons were aplenty –  Lack of experience in the business.  Poor management .

. The only 'Indian advantage was the availability cheap labor. by mid-2001. all of which were Boeing Aircrafts.The Survivors  Jet Airways.  Sahara operated in 12 sectors with a fleet strength of 9 and  All the carriers hired planes at international prices and their maintenance was also undertaken by global companies at international rates.  Despite the intense marketing efforts of various companies. Indian Airlines & SAHARA survived. only JA and SAHARA managed to stay along with IA in the Indian market.

If flight was delayed .Cont.travelers were phoned and were informed in advance.JA had a fleet of 33 Boeing Aircraft. Eg. .  In May 1993.  By 2001 .  Jet Airways success could be mainly attributed to its excellent service. Jet Airways started its operation in India with four Boeing 737-300’s and based its operation in Mumbai.

Cont… MARKET SHARE(2000-01) Airlines IA JA Sahara Market Share(%) 51 42 7 Aircrafts Owned 57 33 9 .

PRICE WAR .

employees and started hourly shuttle service. . • JA entered into agreement with leading hotels and announced 20-50% off on rooms price. • IA introduced 50% off for govt.PRICE WAR • Price war started when aggressive marketing was on the peak. • Sahara announced discount on all major roots(Rs. There were many offers provided by the companies.600 to 1000 off).

JA had to eventually reduce its rates.) 7680 5375 6650 9585 . Jet Airways fares during july 2001 ROUTE Delhi to Mumbai Mumbai to Bangalore Mumbai-Chennai Mumbai-Kolkata OLD PRICE (Rs.) 8710 6880 8210 11695 NEW PRICE(Rs.•It was felt that the scheme of discount on rooms would not last for too long as the hotels were already offering huge discounts of their own.

Schemes adopted by airline Indian Airlines • IA introduced the APEX fares under its 'U Can Fly' scheme and JA under the 'Everyone Can Fly' scheme. • It introduced hourly shuttles on the Mumbai-Delhi route and thus offered more seats.  It offered great discounts. .

JET AIRWAYS • Frequent Flyer Scheme • APEX pricing Scheme • Cash Back Offer • Jet Privilege Scheme: Tied up with luxury hotels • Internet Auction .

. • Square Drive Scheme – ( Family Pack) 4k-2.[Restricted travel].Bidding process started from Base price – Re 1/• 'Wings & Wheels‘.Sahara • Sixer and Super Sixer Schemes in 2002 – according to these schemes a customer could buy a six-flight coupon ticket and fly any six sectors on the carrier's network for Rs.000.25.The scheme offered complementary airconditioned coach services to pick up passengers at designated points in the cities and drop them at the airport.5k • “Steal a Seat” .

The campaign planned to use cricket as a tool to connect people and encourage them to travel by the airline.Under the campaign.Cont.  Crickcitement.sourav ganguly was named the brand ambassador of the company. . a flyer (any class) had the opportunity to win a wide range of gifts (including a luxury car) everyday.

the interaction of both is vital for efficient service in an airline  Personalized attention: the service depends on the person who provide it. . but passenger look for better quality services. aircraft interior  Inseparability : ground and in flight service offered in an airline are typically produced and consumed at the same time . Since the client and service provider are present at the same time. Ex. They cannot be kept in inventory and distributed later on . and where it is provided.Marketing of Aviation  Intangibility : airline services is intangible.

 Perishability: time service is very important to an airline.  Subjectivity: service offered by an airline can be tested only by experiencing the same.Cont. .

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CONSUMER BUYING BEHAVIOR India Airlines  Monopoly for a long time  Competition in 90’s  Modern airport terminals  Still losing market share  What went wrong 20 .

What Airlines Observed  Importance of understanding consumer behavior  Organization need to understand : Why customers buy?  When customers buy?  What customers buy?  What are the factors influencing his buying? 21 .

PSYCHOLOGICAL FACTORS These are:  Motivations  Learning  Perceptions 22 .

MOTIVATION All customers have the need to buy tickets at some point  Why customers buy?  When customers buy?  What customers buy? 23 .

24 .Learning  Learning comes only through experience.  He/she using servies for long time  Satisfaction.

25 .PERCEPTIONS  Human being see or hear only what they want to anticipate and this is called ‘perception’.  Individuals with the same needs might not purchase similar products or services due to difference in perception.

 Issues related to perception  Selection attention  Selection distortion  Selection retention 26 .

. -Marketers try to understand this. -We pay attention to things which we feel will help us. 27 .Selective attention  Do we pay need to all advertisements.We skip many  Why? -We pay selective attention to certain stimuli.

28 .Selection distortion  When we see messages we add our own values/beliefs and filter the original message and original message gets disorted.

Selection retention •How many advertisements you saw yesterday are able to recall? -Very few •Results show Marketers need to create message in a manner which customers are able to recall? 29 .

SWOT ANALYSIS Strengths  Modern Fleet  High Quality Service  Cheap airfare  Customer oriented services .

Weakness  Airport infrastructure  Airways Infrastructure  High Cost Operation  Lack of Skilled Manpower .

Opportunities  Market Growth  Signs of Economic Growth  Political Stabilty  Liberal environment .

 Slowdown in the economy affecting the tourism. .Threats  Aggressive approach of Railways.

Conclusion and Recommendation The price cutting schemes will be feasible as long as external factors for pricing are under control. . If either one of them fails. •Airline is a mixture of both aircraft as an equipment and crew and ground staff as people that make the service effective. the services fails •They should have used Aggressive marketing in right way. • Jet Airways and Sahara Airways should have used “Analyzer marketing” instead of “Defender and Reactive marketing” .

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