Acharya¶s Bangalore B-School¶s 10th April 2011

Prepared by:Piyush Kr Thakur Rakesh Baidya Saurav Das Thakur MBA (B.U) 2nd sem ,Sec B

A-I being a government regulated body, it fails to understand many commercial implications, namely, that to operate two flights a week. we need to create the same infrastructure we require to operate six. This has led to an increase in Virgin's overhead costs as the crew keeps waiting for a week. This is the reason why Virgin will scarcely be able to pass on the envisaged benefits to their customers.

In December 1999, India's national carrier , Air India (A-I) signed an agreement with Virgin Atlantic Airways (VA) by which VA would fly three flights on the Delhi-London route on a code-sharing basis with A-I. This was hailed as a significant development for the ailing A-I. The code sharing arrangement was expected to trigger off a price war in the DelhiLondon route where British Airways (BA) was a dominant player.

A-I was registered as Air India International in 1948. Later in 1962, the word 'International' was dropped and from March 1994, the airline began functioning as AirIndia Limited. In 2000, A-I's network covered 44 destinations. A-I had a code sharing arrangement with a number of foreign airlines. These included Air France, Swiss Air, Bellview Airlines, Austrian Airlines, Asiana Airlines, Scandinavian Airlines, Singapore Airlines, Aeroflot, Air Mauritius, Kuwait Airways and Emirates.

According to the agreement, VA would fly three more flights a week on this route by 2001. In July 2000, VA started off with two flights a week on Thursdays and Saturdays from Delhi. It planned to have a third flight by October 2000. However, till late 2001, VA was still flying two flights. A-I did not seem ready to allow VA fly the third flight because A-I too had a flight from Delhi on Monday, the day VA wanted to fly from Delhi. Meanwhile, the Government of India (GoI) granted rights to BA to fly three more flights per week from Kolkata to London.

This was in violation of the bilateral pact signed between Britain and India according to which BA and A-I were allowed to fly 16 flights a week to each other's country. BA was already flying 16 flights a week-seven from Delhi, seven from Mumbai and two from Chennai.


Every year an estimated 0.3 million passengers traveled from Delhi to London, which was nearly 40 per cent of the total outbound traffic from India. The only available direct route codes were held by BA and A-I.

Passengers were forced to take circuitous routes offered by airlines like Emirates and Royal Jordanian which made them wait for hours at distant airports. Branson's efforts to woo A-I started in 1997.

In the late 1990s, as part of its disinvestment programme, the GoI decided to divest 40% stake in A-I and began looking for a strategic partner. The strategic partner would take up 40% stake with only a 26% cap to foreign airlines. Ever since it began operations in 1984, VA focused on international routes. After the airlines maiden flight, from London's Gatwick airport to Newark on the outskirts of New York, Richard Branson added several lucrative routes to his kitty. Till 1999, the airline had code-share agreements with Continental Airlines, Malaysian Airlines, and British Midland. In the late 1990s, Branson was targeting the lucrative Delhi-London route.

In late 2001, VA was severely affected by the downturn in the global aviation industry. VA was finding it difficult to sustain its operations in India with only two flights a week. VA had made it clear that unless it was allowed to increase the frequency to three, its exit from India would be a distinct possibility.

Air-India was once famous for its service . It even thaught of competing with different airlines but finally landed up making Virgin Atlantic the successful competitor. Today A-I would learn from VA's innovation in hospitality. VA was the first airline to offer a TV monitor with every seat (in every class). It offered in-flight beauty therapy including the services of masseurs, ice-cream cones during in-flight movies and a chauffeured motorcycle service to airports. Also in the offing were email and Internet services. Upper class passengers were provided laptop power leads with every seat, and headsets to reduce noise in the cabin. IT is very clear that once VA startes its operations, it would be an all-out fight to lure passengers and AI would be the worst sufferer. As VA promised to offer tickets at 15 per cent less than BA, a Delhi-London VA ticket would be cheaper than A-

The competitive war between VA , AI & BA will not only bring the competition among the aviation players but even bring the price war. Among all ,one will survive who will be able to provide the service at ---cheapest cost, effective Service that too with-in least time. These feature will not only bring revenue but increase the market share too.Equal opportunity should be provided to virgin Atlanta , Air India & British airways in the ratio 40:30:30 then it will give different attractive schemes for Delhi-London Skies.

Customers are the one whos benefit should not be eliminated in eithe of the cases whether it be Air-India, Virgin atlanta or British airways. The customers want their flight to be :Affordable Convenient With good comfort Timely takeoff and Landing. The Service provider who will be Efficient in providing the above facilities will no doubt rule the industry.

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