Download - Final Airlines- Kinjals
-
7/30/2019 Final Airlines- Kinjals
1/71
PEST Analysis Of Airlines
1
PROJECT REPORT ON
PEST ANALYSIS OF AIRLINES
SUBMITTED BY
MISS. KINJAL .B. GOTECHA
TYBMS (SEMESTER V)
M.L. DAHANUKAR COLLEGE OF COMMERCE
VILE PARLE (EAST)
MUMBAI 400 057
PROJECT GUIDE
PROF. RUPA ADATIA
SUBMITTED TO
UNIVERSITY OF MUMBAI
ACADEMIC YEAR
2003-04
-
7/30/2019 Final Airlines- Kinjals
2/71
PEST Analysis Of Airlines
2
CERTIFICATE
To Whom It may Concern
I, _____________________________hereby certify thatMiss.
Kinjal .B. Gotecha ofM.L.Dahanukar College Of Commerce And
Management Studiesof TYBMS (Semester V) has completed her
project on PPEESSTT AAnnaallyyssiiss OOffAAiirrlliinneess in the academic year 2003-
04.
The information submitted is true and original to the
best of my knowledge.
Signature of Project Guide Signature of principal
Place : Mumbai
Date :- 200 __________
-
7/30/2019 Final Airlines- Kinjals
3/71
PEST Analysis Of Airlines
3
DECLARATION
I, Miss Kinjal .B. Gotecha of M.L. Dahanukar College Of
Commerce And Management Studies of TY.BMS (Semester V) hereby
declare that I have completed the project on PEST Analysis Of
Airlines in the academic year 2003-04.
The information submitted is true and original to the best of my
knowledge.
Signature of the student
-
7/30/2019 Final Airlines- Kinjals
4/71
PEST Analysis Of Airlines
4
ACKNOWLEDGEMENT
The topic PEST ANALYSIS OF AIRLINES is quite vast and this is my
honest submission, which would not be possible without the help and support of the
people who have guided me.
At first, I would like to thank our co-ordinator Prof. Shashikant Patil who gave
me this
opportunity to explore the wide arenas of this topic. I thank my project guide Prof.
Rupa Adatia who guided me throughout this project. Thanks to Mrs. Shobha
Nimbalkar, Asst Mngr Sales of Indian Airlines, who provided me with practical
information, so that I could substantiate my information with facts.
Last but not the least. I would like to thank my parents, friends and peers to
help me collect information.
All the above people have given me great backing throughout this project.
-
7/30/2019 Final Airlines- Kinjals
5/71
PEST Analysis Of Airlines
5
PREFACE
Airline sector has grown since a number of years as transportation has grown
its importance. It is very important to take care of the time factor for businesspersons,
emergencies and in many other cases, the speed is provided by air travel.
There are a number of factors, which influence this sector. PEST Analysis of
this sector helps to analyze the changing scenario of airlines. Along with PEST, this
project also includes the importance of airlines as a service sector. The way in which
this sector had grown to provide the best services in return of the value.
Liberalization and privatization of airlines result in the changing trends of thisindustry. It also provides other sectors such as hotels and tourism, a platform for tie-
ups with it in order to expand the air traffic.
Hats off to the pioneers of this industry- to the builders, engineers, operating
people and those in all other departments of an airline- people who manufacture air
transportation.
Thus emphasis is laid on various political, social, technological and economic
along with other factors for the study of airlines as a service sector too.
-
7/30/2019 Final Airlines- Kinjals
6/71
PEST Analysis Of Airlines
6
EXECUTIVE SUMMARY
This project is devoted to various factors influencing the
airlines in general. Although PEST acts as a very important tool in
fulfilling the above aspect, the role of airlines as a service sector
too highlights various sides of the airlines.
This entire report on PEST analysis of airlines contains a
number of ideas which are summarized as below:-
The beginning speaks about the introduction to airline sectoras a whole. It gives an idea of the airline industry.
The airline history focuses on the Wright brothers and their
contribution in bringing the concept of air travel into being.it
speaks about the open sky policy and its contribution to the airline
industry.
Next is about the institutional framework of the airline
industry and its role played in this sector.
The present status of this industry is highlighted in the next
chapter.it speaks about the economic contribution and the statistics
of air traffic in india.
The chapter of PEST analysis focusses on gives a brief idea of
this tool PEST to be used. It highlights on all the political,
economic, social and technological factors if airlines. With the
support of a number of press releases and current news articles the
factors are given great emphasis.
Next, airlines is explained as a service sector and various
service characteristics are highlighted.
-
7/30/2019 Final Airlines- Kinjals
7/71
-
7/30/2019 Final Airlines- Kinjals
8/71
PEST Analysis Of Airlines
8
TABLE OF CONTENTS
INTRODUCTION TO AIRLINES
AIRLINE HISTORY
INSTITUTIONAL FRAMEWORK
PRESENT STATUS
PEST ANALYSIS
AIRLINES AS A SERVICE SECTOR
RATER ANALYSIS
MOMENTS OF TRUTH
IATA
LIBERALISATION OF THE AIRLINE SECTOR
CASE STUDY ON INDIAN AIRLINES
CONCLUSION AND RECOMMENDATIONS
-
7/30/2019 Final Airlines- Kinjals
9/71
PEST Analysis Of Airlines
9
INTRODUCTION TO AIRLINES
Airlines is considered to be the fastest mode of transport. It is one of the emerging
industry providing the customers with impeccable service. Airline industry, worldwide is
constantly facing threats from attacks or any wide spread disease like SARS, which affects its
sales considerably. This has lead to bankruptcy and massive layoffs in many airline
companies.
Despite of all these exegencies, airline companies have regained their status and
continue providing its state-of-art service. It is coming up with a flood of innovative schemes
to lure the customers. The attacks on twin tower had severly affected the aviation industry,
but two years after the attack, it has come to normal and running with all its confidence. It
had been a learning experiece for all the airlines. They now are giving prime importance to
the security measures.
The same is the scenario of Indian Aviation. The history of Indian Aviation dates
back to 1912. From then there is no looking back.Gone are the days when flying by air was a
distant dream for common people owing to high ticket fares. Today with the increasing
competition, airlines have slashec their prices, but this has not affected their quality of
service.
The airline companies have created a great impact in the minds of the customers as the
ultimate service provider of all the transports.
-
7/30/2019 Final Airlines- Kinjals
10/71
PEST Analysis Of Airlines
10
AIRLINE HISTORY
WRIGHT BROTHERS.
The Wright Brothers, Orville Wright (1871 - 1948) and Wilbur Wright (1867 -
1912), are credited with the invention of the airplane and controllable powered heavier-than-
air flight.
The brothers grew up in Dayton, Ohio, where they ran a bicycle repair, design and
manufacturing company (the Wright Cycle Company). Drawing on the work of Sir George
Cayley, they extended the technology of flight with the principles of control still used today.
They had researched and initially relied upon the aeronautical literature of the day, including
Otto Lilienthal's tables but, finding that the Smeaton Coefficient, a variable in the formula for
lift and the formula for drag was wrong, designed and built a wind tunnel to perform practical
tests.
In 1903 they went to Kitty Hawk, North Carolina to continue their aeronautical work,
choosing Kitty Hawk (actually Kill Devil Hill) because of its strong and steady winds, and on
March 23, 1903 they applied for a patent for their airplane design. Then on December 17,
1903 Orville Wright took to the air. Orville's uncontrolled flight, of 120 feet in 12 seconds,
was recorded in a famous photograph. In the fourth flight of the same day, the only flight
made that day which was actually controlled, Wilbur Wright flew 852 feet in 59 seconds.
The Wrights established a flying field at Huffman Prairie, near Dayton, and continued
work in 1904, using a catapult takeoff system to compensate for the lack of wind in this
location. By the end of the year, the Wright brothers had sustained flights of 5 minutes,
circling over Huffman Prairie. This was really the world's first airport.
-
7/30/2019 Final Airlines- Kinjals
11/71
PEST Analysis Of Airlines
11
The Wright brother brought great attention to flying by their flight around the Statue of
Liberty in New York in 1909.
Contrary to popular belief, the Wrights were not the first to build heavier-than-air
machines capable of flying under their own power; that had been done earlier by Samuel
Langley and possibly Richard Pearse. However, their three-axis system of control, using
wing warping (later supplanted by ailerons) to control roll, elevators to control pitch and
angle of attack and a rudder to control yaw, made flight stable and sustainable. The same
principles are still in use in all modern aircrafts.
OPEN SKY POLICY
The Open-sky policy came in April 1990. The policy allowed air taxi- operators to
operate flights from any airport, both on a charter and a non charter basis and to decide their
own flight schedules, cargo and passenger fares. The operators were, however, required to
use aircraft with a minimum of 15 seats and conform to the prescribed rules. In 1990, the
private air taxi-operators carried 15,000 passengers. This number increased to 4.1 lakh in
1992, 29.2 lakh in 1993, 36 lakh in 1994 and 48.9 lakh in 1995.
The 1996, private air taxi operators carried 49.08 lakh passengers which amounted to a
41.14 per cent share in the domestic air passenger traffic. Seven operators viz NEPC Airlines,Skyline NEPC, Jet Air, Archana Airways, Sahara India Airlines, Modiluft and East West
Airlines had since acquired the status of scheduled airlines. Besides this, there were 22
nonscheduled private operators and 34 private operators holding no-objection certificate in
1996.
INSTITUTIONAL FRAMEWORK
-
7/30/2019 Final Airlines- Kinjals
12/71
PEST Analysis Of Airlines
12
MINISTRY OF CIVIL AVIATION (MCA):
MCA is responsible for the formulation of national policies and programmes for
development and regulation of civil aviation and for devising and implementing schemes for
the orderly growth and expansion of civil air transport.
DIRECTORATE GENERAL OF CIVIL AVIATION (DGCA):
The DGCA is the main regulatory organisation in the country responsible for
regulation of air transport services to/from/within India and for enforcement of civil air
regulations, air safety and airworthiness.
AIRPORT AUTHORITY OF INDIA (AAI):
AAI provides infrastructure facilities. Its aim is to accelerate the integrated
development, expansion and modernisation of the operational, terminal and cargo facilities,
in line with international standards.
INTERNATIONALS AIRPORTS DIVISION (IAD)
IAD manages the eight international airports at Delhi, Mumbai, Calcutta, Chennai,
Thiruvananthapuram, Kochi, Hyderabad and Bangalore.
NATIONAL AIRPORTS DIVISION (NAD)
NAD manages all domestic airports in the country.
PRESENT STATUS
-
7/30/2019 Final Airlines- Kinjals
13/71
PEST Analysis Of Airlines
13
The airline industry today faces challenges unprecedented in its history. With the
global economic slowdown affecting business travel, the airlines were already in crisis before
September 11th. But, the tragic events of last September aggravated the situation by
weakening consumer confidence further and brought into question the existing security
mechanism. The latest IATA estimates suggest that airlines collectively lost close to US $ 12
billion as they experienced a 5.7% decline in total traffic. The increase in costs due to higher
insurance costs, security etc has put increasing pressure on airlines and jeopardized their
viability leading to widespread layoffs and bankruptcies in the industry.
The Indian aviation industry on the other hand has weathered the storm with greater
ease than many of its more illustrious western counterparts. Though it is largely dominated
by the public sector and somewhat insulated from market exigencies.
Despite the inherent cyclical nature of the aviation sector, its contribution to the
economy is indisputable.
But with the passage of time, the scenario is changing. The airlines are striving hard to
cope up with the crisis. Domestic and international passenger traffic in India is projected to
grow annually at 12.5%yoy and 7%yoy respectively over the next decade. At the same time,
domestic and international cargo traffic is expected to grow at 4.5%yoy and 12%yoy
respectively. By the year 2005, Indian airports are likely to handle 60mn international
passengers and 300,000 tons of domestic and 1.2mn tons of international cargo.
Over the next decade international and domestic air traffic are expected to grow from
the present levels of 42 million to close to 90 million. International air cargo exports from
India are expected to rise from 0.7 million tonnes per annum to 2.4 million t.p.a while
domestic cargo will rise from 300,000 t.p.a to over 1 million t.p.a. Both Boeing and Airbus
Industries expect that with the low penetration of aviation services in India, aviation services
would grow faster than in most countries and ahead of India's GDP growth.
However, in order to achieve such levels of growth a number of policy and regulatory
constraints will need to be addressed immediately.
ECONOMIC CONTRIBUTION
-
7/30/2019 Final Airlines- Kinjals
14/71
PEST Analysis Of Airlines
14
The aviation industry plays an indispensable role in the growth and efficiency of an
economy. The sector acts as an economic catalyst by opening up new market opportunities,
moving products and services with speed and efficiency. Therefore, international trade and
commerce relies heavily on the aviation sector. The contribution of the aviation sector in
India is especially significant taking into account that it only forms a small part of the
transportation industry. The sector facilitates international trade, tourism, and foreign direct
investment thereby enabling the growth of the economy and making it internationally
competitive
At present over 40% of India's exports and imports, by value, are carried by air and 95%
of foreign tourists arrive into India by air making the tourism industry the third largest
foreign exchange earner. According to NCAER estimates foreign exchange transactions
worth US $ 22.5 billion annually is directly facilitated by civil aviation, while another US
$96 billion are moderately facilitated by civil aviation services.
A report published by CII and NCAER also establishes that growth in air transport is
closely inter-linked with growth in the Gross Domestic Product both internationally and
nationally. For a percent increase in India's GDP, domestic passengers are expected to
increase by 1% , for international passengers this sensitivity is about 1.3%.
INDIAS AIR TRAFFIC STATISTICS
-
7/30/2019 Final Airlines- Kinjals
15/71
PEST Analysis Of Airlines
15
Year
Domestic
Passengers
(in million)
Increase
(in per cent)
International
Passengers
(in million)
Increase
(in per cent)
1996-97
(Actual)
12.00 10.5 10.8 7.0
1997-98 13.26 10.25 11.6 7.0
1998-99 14.65 10.5 12.4 7.0
1999-2000 16.20 10.5 13.3 7.0
2000-01 17.57 10.5 14.1 7.0
2001-02 19.06 8.5 14.9 6.0
2002-03 20.68 8.5 15.8 6.0
2003-04 22.44 8.5 16.8 6.0
2004-05 24.35 8.5 17.8 6.0
2005-06 25.05 7.0 18.8 5.5
2006-07 27.87 7.0 19.8 5.5
2007-08 29.82 7.0 20.9 5.5
2008-09 31.91 7.0 22.1 5.5
2009-10 34.15 7.0 23.3 5.5
2010-11 36.54 7.0 24.6 5.5
2011-12 39.09 7.0 25.9 5.5
2012-13 41.44 6.0 27.2 4.9
2013-14 43.93 6.0 28.5 4.9
2014-15 46.56 6.0 29.9 4.9
-
7/30/2019 Final Airlines- Kinjals
16/71
PEST Analysis Of Airlines
16
2015-16 49.35 6.0 31.4 4.9
2016-17 52.32 6.0 32.9 4.9
Sources: Airports Authority of India, Foundation for Aviation.
CHAPTER FIVE
PEST ANALYSIS OF AIRLINES
-
7/30/2019 Final Airlines- Kinjals
17/71
PEST Analysis Of Airlines
17
INTRODUCTION
The airline industry has seen rapid growth in the last few years. Before any
kind of analysis is undertaken, it is important to find out what are the main
environmental influences that have led to this growth. Also, how the extent to which
the changes are occurring, are to be taken care of. This is important because the
change in these factors can have significant effect on the way the industry performs
The environmental influences can be analyzed by the use of PEST analysis.
Within its parameters, PEST indicates the importance of the political, economic,
social & the technological changes in the industry.
A brief idea about these factors is as follows:
POLITICALThe political analysis comprises of the various legislations, regulations &
government policies declared for the respective industry.
ECOMONIC
The economic factors influencing an industry defines the exchange rate,
inflation rates, income growth, debt & saving levels.
SOCIAL
The social factors are those having an impact due to peoples choice and
include beliefs, values and attitudes of the society
TECHNOLOGICAL
An impact of the new technology such as Internet, EDI, mobile and
increasing advancing in computing are covered under the technological factors of
the analytical tool PEST
POLITICAL FACTORS
-
7/30/2019 Final Airlines- Kinjals
18/71
PEST Analysis Of Airlines
18
The political factors are the main driving force of the airline industry. The
Indian airline industry is built on the backbone of the government support and it
cannot sustain itself without it.
All the support services like the hotel industry, tourism and other transport
industry to name some are heavily dependant on the support and co-operation of the
government. Any policy that comes into force can have dramatic effect on the way the
industry players perform.
Focusing on the recent factors concerned with various policies announced by
the government are the following facts. The articles mentioned below highlight the
influence of the Open sky policy announced by the Civil Aviation Ministry.
Stability of the political environment
The airline industry is very susceptible to changes in the political environment as it has
a great bearing on the travel habits of its customers. An unstable political environment
causes uncertainty in the minds of the air travelers, regarding traveling to a particular country.
Overall Indias recent political environment has been largely unstable due to
international vents & continued tension with Pakistan. The recent Gujarat riots & the
governments inability to control the situation has also led to a increasing the instability ofthe political arena.
The most significant political event however has been September 11. The events
occurring on September had special significance for the airline industry since airplanes were
involved. The immediate results were a huge drop in air traffic due to safety & security
concerns of the people.
impact on Air India: -
-
7/30/2019 Final Airlines- Kinjals
19/71
PEST Analysis Of Airlines
19
After the terror strikes, Asian Airlines seemed relatively unaffected and the demand
was relatively stable a week after the attacks a far cry from the marked downturn in bookings
that airlines in the US have seen.
Drop In air traffic leading to financial problems:
For Air India, initial cancellations caused a loss of Rs. 9.5 crores in terms of grounded
flights and hotel accommodation for stranded passengers. The airline has now curtailed its
direct flights to New York and Chicago, stopped its weekly London terminator service and
rerouted a service to Singapore. Despite this, and the pull out of United Airlines, Air India
flights are still not full to the U.S. and London. Insurance conditions from leasers have forced
the airline to ground all four of its recently leased aircraft.
Trade relations with other countries
International airlines are greatly affected by trade relations that their country has with
others. Unless governments of the two countries trade with each other, there could be
restrictions of flying into particular area leading to a loss of potential air traffic (e.g. Pakistan
& India)
India could find itself one airline short on the European sector as Richard Bransons
Virgin Atlantic is reported to be reviewing its strategy for its young unprofitable Indian
operations. During its short stay in this country, Virgin Atlantic has already notched up losses
on the Delhi-London sector and its exit from India may be a distinct possibility if bilateral
talks between the UK and the Indian government do not yield more ground in India for the
airline soon.
Political interference & bureaucracy
-
7/30/2019 Final Airlines- Kinjals
20/71
PEST Analysis Of Airlines
20
This is another major area of consideration for airlines. This is because most
governments recognize the huge revenue potential of the airline industry. This leads to a lot
of politicians & ministers try to interfere with its operation hoping to gain come benefit.
Another aspect is that in countries with high corruption levels like India, bribes have to
be paid for every permit & license required. Therefore constant liasoning with the minister &
other government official is necessary.
The state owned airlines suffer the maximum from this problem. These airlines have to
make several special considerations with respect to selection of routes, free seats to ministers,
etc which a privately owned airline need not do. The state owned airlines also suffers form
archaic laws applying only to them such as the retirement age of the pursers & hostesses, the
labour regulations which make the management less flexible in taking decision due to the
presence of a strong union, & the heavy control & interference of the government. This affects
the quality of the service delivery & therefore these airlines shave to think of innovative
service marketing ideas to circumvent their problems & compete with the private operators.
Air India is fully controlled by the state. This cause many problems in its functioning
due to the indecisiveness of the government & slow decision-making. An example of how
political interference has caused problems for air India is the recent proposed disinvestment of
Air India.
The sluggishness of the government & its hesitation to sell Air India to foreign buyers
due to the political implications has cost the airline some huge bids by Air France & Singapore
Airlines. The TATA group is the only one left in the race, which effectively means that the
government will have no choice, but to sell it to them & therefore wont be in the power to
negotiate on price.
Besides major decision making, the daily decisions of Air India also face interference
from bureaucrats & government officials who are not qualified to do so with regards to the
airline industry.
-
7/30/2019 Final Airlines- Kinjals
21/71
PEST Analysis Of Airlines
21
No US airline is keen to increase its number of flights to India
Open Skies evoke little response from airlines
Nov 11th
2002
Business
Standard
The Civil Aviation Ministrys Open Sky Policy has not drawn any encouraging
response from the US and European airlines. Few carriers have shown interests in the policy,
with not a single US airline keen on increasing their number of flights to India.
The ministry had announced an Open Sky Policy for about four months between
December 2002 and March 2003.
During this period, airlines will be allowed to increase the frequency of flights or
capacities from the destinations already being served. However the offer has been restricted
to airlines from the US and Europe.
The carriers from South East Asia and West Asia have been barred from availing of
the opportunity.
Civil Aviation ministry officials said there had been a luke warm response from the
European airlines to the policy
Only Lufthansa has asked for permission to deploy a couple of extra flights to
Bangalore. Air France has not shown interest in increasing flights during the period, a senior
ministry official said.
British Airways, too, has not taken a decision on the deployment of extra flights. The
airline was citing per city of staff as a reason behind the hesitation to increase flights,
ministry officials said.
The only airline, which seems to be enthusiastic, is Virgin Atlantic. However, since
the airline at present has a commercial agreement with Air India, which has been the cause of
some controversy of late, it remains to be seen wither Virgin is granted permission
According to industry officials the reason for such a response on the path of airlines isthat out bound traffic dips during the winter months. Out bound passenger traffic drops
almost 15 % during the winter months compared to summer, though inbound traffic goes up.
An airline cannot just cater to inbound traffic, as it will have to fly empty planes out of the
country on the return trip, an industry expert pointed out
-
7/30/2019 Final Airlines- Kinjals
22/71
PEST Analysis Of Airlines
22
The ministry might have seen a different response had the policy been extended to
South East Asian airlines as well. According to experts, the tourist traffic had shifted from
Europe and US to South East Asia last year.
While the latter has seen an upswing in traffic by 25 %, Europe & the US have seen
an equal negative method.
Most of the South East Asian airlines said if they were allowed to participate in the
policy, they would increase their capacity by 10 15 %
Thus it can be inferred that, due to the ministrys policy of Open Sky, a few airlines
could only benefit. The air traffic resulted in a shift due to the policy which created a great
impact on the airlines from the US and Europe.
As the political environment is not conducive as required restricts the airlines to
flourish at its best. The policies must be active for all the airlines for development of the
sector.
Keep Skies Open
June 20th
2003
Business Line
The extension of the open skies policy to let airlines from North America and Europe add
flights into Indian cities during the peak tourist season to October to March is a sign that
liberalization is taking root in this much protected sector. Ostensibly, this is a move to help
enlarge tourism flows. It would be tautology to say that the countrys earnings from tourism are
linked to the number of tourist who is able to fly in and that in turn is dependant on the number of
airline seats made available to them. In sufficient capacity means high fares and fewer passengers
and tourist spending which is what the Ministry of Tourism has been complaining about for long.
Yet this simple equation had eluded the Civil Aviation Ministry that clung on to the old practice of
trying to determine how many seats airlines can deploy instead of letting airlines which are best
placed to read their market decide how many aircraft they would deploy and to what destinations.
The right to operate international flights has ale\ways been determined by complex bilateral
deals among governments. In Indias case it has involved working out bilateral capacities that
-
7/30/2019 Final Airlines- Kinjals
23/71
PEST Analysis Of Airlines
23
would protect the commercial operations of the national carriers, Air India and Indian Airlines. In
the normal course, capacities between two countries would be split equally between each countrys
designated carriers. There were two problems in such an arrangement; One, the capacities were
determined finally by the Civil Aviation ministry and not by the airlines themselves, and, two, often
Air India
(Or Indian Airlines in some cases) would not have the aircraft to fly to a country that sought to have
its carrier fly to India. In the latter case, the government would extract for Air India the right to sell
a few seats in flights operate by the other countrys airline. The combine market share of Air India
and Indian Airlines on international routes in less than a third when it ought to have been half.
In a rapidly changing market it is inconceivable that governments can gauge or predict
passenger demands any better than airlines can. Nimble footed response to the market is a virtue
in most sectors, not so the airlines; they need to get government approval to even move their feet.
This archaic and feudal practice has no place today, which I why one tends to welcome the move to
extend the open skies policy, in a feeble and grudging manner. Offering the hand of freedom only
to western European and North American is discriminatory, tourists do come from elsewhere, and it
is a moot point whether they are less worthy. And why should the government restrict that freedom
to the period from October to March? Letting go is clearly difficult for the government.
Govts reluctance to liberalise aviation policy hurts tourismJuly 18
th2003
The Economic Times
The governments failure to liberalise the Civil Aviation policy and allow foreign carriers to
operate more capacity to Indian destinations is preventing the tourism industry from tapping the
countrys full potential. A large number of foreign tourists choose other destinations since seats are
not available to India or the tariff is high.
Foreign carriers are not allowed to operate adequate number of services to India since the
government wants to protect the interests of Air India and Indian Airlines. This is leading to huge
losses in terms of tourist arrivals and spending, the tourism industry feels.
We should see the big picture. If more foreign tourists come in, the government will also earn
significant revenue in the form of taxes. Since tourists from various source, markets including
-
7/30/2019 Final Airlines- Kinjals
24/71
PEST Analysis Of Airlines
24
Europe and the US are high spenders, the entire economy especially service sectors associated to
tourism would benefit in a big way, Ankur Bhatia managing Director of Amadeus India said.
Passengers would find more options and cheaper fares if the government follows an Open Sky
Policy. The governments policy on bilateral was a typical example of being pennywise and pond
foolish said Vinay Maheshwary of service4s International, a Delhi based Travel services Company.
Inbound tourism was picking up and the progress would be much faster if fares to India were not
higher than competing destinations like Thailand, he added.
The government should look at the benefits to hotels, tour operators, transport companies and
allied tourism services. The progress of all these segments are being hampered for protecting the
state owned carriers, He added. Air India should be allowed to compete in the International markets
as market economy ensures that the fittest would survive.
When Lufthansa was seeking permission for more flights to India, Mr. Maheshwary said, Air
India was withdrawing from Frankfurt.
It is obvious from the above news reports that the government has highly influenced the
tourism industry by taking decisions in the airline sector.
Insufficient capacity means high fares and fewer passengers and tourists spending which is what
the tourism industry has been complaining about for long.
HEAVY TAXES, GOVT CONTRTOL ARE CHOKING THE INDUSTRY.
-
7/30/2019 Final Airlines- Kinjals
25/71
PEST Analysis Of Airlines
25
What is alarming is that, fares have steadily increased during this period though the recent
introduction of advance purchases tariffs give the impression of the customer getting a better deal.
Connectivity has also worsened during this period with many small centers going out of
radar while the metros are flooded with increasing frequencies. Indian Airlines has been hit by
shrinking capacity and the dilly dallying of the government which has failed to privatize the
carrier. While the public sector airline can at least opt for privatization, Jet faces a tougher task. If
the private airline is in losses despite corporate management and efficiency, the lack of which is
cited as the reason for the lackluster of Indian Airlines, there is no room left for improvement. It
would appear that a policy framework of heavy taxes and excessive control has more than
outweighed the favour bestowed on incumbent players by the stunted competition created as part
and parcel of the countrys Civil Aviation policy.
If the government is keen to improve aviation security, how can the leading domestic airline
of the country be allowed to operate with a tax haven background?
Various other factors like ground handling are being discussed at length due to security reasons.
However, what becomes clear is that the current system of too many government controls has
neither benefited airlines nor consumers.
Supply of aviation turbine fuel is still controlled by PSUs and state government imposes a high
sales tax on this key input. Airport charges have been going up and depreciation of the rupee over
the years has added to the burden. The government imposes a 15 % impost on tickets in the name
of inland air travel tax. Various other levies add to the cost borne by the passenger. Airlines still
have to seek government permission before buying or leasing aircraft and lack of domestic industry
has led to dependence on import for spares. The industry has been seeking a reduced tax burden,
adequate financing facilities and drastic reduction of government control on the sector.
-
7/30/2019 Final Airlines- Kinjals
26/71
PEST Analysis Of Airlines
26
ECONOMIC FACTORS
-
7/30/2019 Final Airlines- Kinjals
27/71
PEST Analysis Of Airlines
27
The airline industry like the other industries grows with the increase in the spending of
the people. The more the people spend, the more the industry grows. The spending power of
the people has been increasing in the country and all over the world. The large increase in the
spending power in most developed countries has left a large amount of idle cash in their hand.
This has led to the airlines boom the world over and India has been no exception.
However, over spending is also evident not only in increase of people traveling by air but also
in hotels. Even the number of domestic tourists traveling by air has dramatically gone up.
Economic factors are key variables, which have an impact on the key activity in the airline
sector. Income levels and personal wealth govern the level of consumer activity. As levels grow,
more discretionary incomes available to spend on traveling by air. Also, consumer confidence in
the economy and in job security has a major impact in the growth and development of airlines.
The exchange rates in an economy highly influence the airlines. This is because a highly
competitive and service sector like airlines has to deal in a number of different currencies for its
working and progress.
The inflation rated plays a decisive role in airlines as a price factor. The rise in prices of tickets
in economy class has a major impact on the common people or the middle class travelers. There is a
chain reaction in the effect of inflation rates as it results in price rise, which ultimately affects the
demand and supply condition. In turn, the passenger traffic is thoroughly affected which comes
back to the airlines in the form of large or small number of travelers.
Indian Airlines, in a bid to cope with slackening demands during the post summer vacation
period, had decided to reduce its fares on 5 western sector routes. The first version after Indian
Airlines announced its flexible fare policy in May 2001; the new rates came into effect from June
28th . It also introduced point-to-point fares on a dozen routes.
The five sectors for which the fares had been reduced were:-
Ahmadabad- Bangalore
Mumbai Bangalore,
Mumbai Chennai,Mumbai Kolkota,
Goa Mumbai.
Norms governing day return fares had also been liberalized. The Day return fare on
Delhi Mumbai sector had been reduced to make it more competitive.
-
7/30/2019 Final Airlines- Kinjals
28/71
PEST Analysis Of Airlines
28
The senior official in commercial department of Indian Airlines said that this was only the
beginning and that they would keep making changes on the basis of demand supply position.
Fares had been brought down where ever the demand was low. At the same time, the airline
planned to hike fares in Sectors where demand was found to rise.
Business Cycles:-
Business cycles have a wide reaching impact on the airline industry. During recession,
airline is considered a luxury & therefore spending on air travel is cut which leads to reduce
prices. During prosperity phase people indulge themselves in travel & prices increase.
After the September 11 incidents, the world economy plunged into global recession due
to the depressed sentiment of consumers. The airline industry was the hardest hit, as people
became wary of travel & there were large-scale cancellations. The loss of income for airlines
led to higher operational costs not only due to low demand but also due to higher insurance
costs, which increased after the WTC bombing. This prompted the industry to lay off
employees, which further fueled the recession as spending decreased due to the rise in
unemployment.
As the recession deepens, airlines are being hit harder than before. This is because
companies reduce their travel budgets during a recession, which affects the corporate business
of airline industry. In such conditions the airlines need to develop new strategies for survival.
Air India has taken initiative to counter the recession by introducing special offers,
discontinuing services in order to cut costs, etc. It also plans to upgrade it fleet in order to keep
up with market trends.
Civil Aviation policy:-
The changes announce in the civil aviation policy go a long way in impacting the airline
industry. The divestment of the governments shareholding in air India will take place under
the framework of the civil aviation policy. Indias civil aviation policy lays down the
following guidelines which directly impact airline industry:
A) Private sector participation the policy determines the extent to which airlines can have
private sector participation.
B) Regulation & rationalization of the ATF (airline turbine fuel) price, which is very
important input & directly affects final pricing decisions of the airlines.
-
7/30/2019 Final Airlines- Kinjals
29/71
PEST Analysis Of Airlines
29
C) Domestic passenger & Cargo air transport which includes the limits of foreign equity
participation, regulation of capacity induction with a view to ensuring safety, security and
preventing unhealthy levels of capacity.
MAKE AIR TRAVEL AFFORDABLEWe can do without cartelisation
October 2, 2003
The economic times
The civil aviation minister Rajiv Pratap Rudy wants the three domestic
airlines-jet airways, Indian Airlines and Sahara- to coordinate their flight schedule to
provide better connectivity. He feels that such an arrangement can ensure that flights
are not bunched together but spread throughout the day. Indeed, the final outcome
makes sense, but the way the minister wants to achieve it does not. Such attempts at
co-ordination are bound to degenerate into cartelization, especially when entry
barriers are high. So, air travellers will have the convenience of flights being available
throughout the day, but we have to pay through their nose for the same. In other
words, one senseless decision could fritter away all the gains of increased competition
in the domestic air travel following the entry of private airlines. Airfares have
declined to possibly the lowest, and service standards have improved even in the state
owned Indian Airlines. Minus the cutthroat competition, all these improvements
would disappear almost overnight.
In the country of India's dimension, the top priority for the civil aviation policy
should have been to make air travel affordable. Unfortunately, a combination of state
-
7/30/2019 Final Airlines- Kinjals
30/71
PEST Analysis Of Airlines
30
and central duties has made air travel unaffordable for most Indians. As a result, today
it is a lot cheaper to fly from India to a host of foreign destinations than to traverse
from one end of the country to the other. No wonder, so many Indian tourists prefer
Southeast Asian countries to our exotic destinations. What good is promoting Kerala
to, say, someone in North India when a back and forth train journey takes almost four
days and the alternative air travel costs nearly 25,000 (Delhi - Kochi - Delhi)? In the
civil aviation minister devoted himself to the single task of ensuring cheaper air
travel, he would have done a great service to the nation. And in the process he would
have achieved the objective of flights being spaced out throughout the day. For,
cheaper air travel would mean more traffic, which would in turn mean more flights.
The task involved is not too difficult; all it involves is working on the simple
arithmetic of reduction in duties the accompanied by increased volumes.
SOCIAL FACTORS
Social factors are a major influence in consumer buying decisions, and this
applies to airline industry just like other industries. over the time , changes do appear
which affect the consumers habits.
Changing Travel Habits
-
7/30/2019 Final Airlines- Kinjals
31/71
PEST Analysis Of Airlines
31
The changing travel habits of people have very wide implications for the airline
industry. Air India need to focus on their clientele which are mostly low income clients & their
habits in order to keep them satisfied. The destination, kind of food etc all has to be chosen
carefully in accordance with the tastes of their major clientele.
Cultural differences -
Depending upon the clientele an airline has, the cultural differences of each country
have to be absorbed into aspects such as the hospitality, the menu etc. The domestic airlines
like Indian airlines therefore need to include special cuisine such as jain meals, special offers
on festivals etc.
Airlines bookings take off as SARS fears recede
July 16, 2003
The Economic Times
Airline bookings are up for the second consecutive month after the slump in February-
may. While total domestic and international bookings have increased by 7% in July over the same
period last year, June saw an increase of 15% over the corresponding period in 2002.the beginning
of 2003 was good for airline bookings with an upsurge of 15% in Jan (yoy) while Feb. saw a
decline of 16%, march (-25%), April (-20%) and may (-6%).
-
7/30/2019 Final Airlines- Kinjals
32/71
PEST Analysis Of Airlines
32
International airline bookings also increased significantly in June after the impact of sars was
over and travelers resumed their long pending business travel and vacations. Not only this,
attractive airfares by domestic carriers also fuelled air travel, say travel agents.
This increase is a result of overall improvement in bookings in Asia-pacific, said Ankur Bhatia,
Amadeus India MD. Since late June, daily net bookings from the thirty two Asia-pacific countries
and territories had started looking similar to the number of bookings from the same time last year.
daily net bookings reached around 1,80,000 in the first few days of July compared with 1,20,000
the same time last year, he said . in the midst of the sars scare in mid-April, bookings were at a
low of around 30,000.
He added that cancellation rates have sharply declined recently from a high of 82% in April to
66% last month and attributed the recent recovery of the industry to promotional campaigns, such
as Thai airways luck is in the air promotion, which offered 20,000 free tickets.
Himmat Anand, COO, Sita World Travels, said this increase in airline bookings can be
attributed to an increase in domestic and outbound tourism. The success of apex (advance
purchase) fares that flexible pricing is here to stay. Attractive airfares offered by domestic carriers
played an important role in increasing demand for air travel. After sars, countries like Hongkong
and Thailand are also offering lucrative packages to enhance tourism in their respective countries,
he said.A travel agent said that domestic airlines are offering concessions to customers by way of
auctions, additional frequent flier miles and co-branded cards. Jet airways has launched special
packages to various destinations including Port Blair, Ooty, Darjeeling, Kodaikanal, Shimla,
Manali, Mussorie, Srinagar, Banglore and Chennai. Though apex fares dilute yield, all domestic
airlines are expected to persist with deep discount tariffs.
-
7/30/2019 Final Airlines- Kinjals
33/71
PEST Analysis Of Airlines
33
The above news article clearly mentions that SARS, considered as a major social factor in the
mid-2003 affected the air traffic considerably. the various promotional offers, offered to the
travelers increased the bookings heavily as the fear of SARS receded.
Testing times in the air (social)
-
7/30/2019 Final Airlines- Kinjals
34/71
PEST Analysis Of Airlines
34
What's important to the successful functioning of an airline is, people training and fair terms o
employment. And for that you don't need to privatise, you just need to give the public sector a chance.
Privatisation of domestic airlines in India is often quoted as a big success story
favouring similar efforts across the board, especially in aviation. The assumption is
that if it worked with airlines, then it would work with all other aspects of aviation.
But are private airlines really able to do better because of privatisation, and if so,
privatisation of what?
Private and public sector airlines are stuck with the same aircraft
manufacturers, as well as maintenance parameters. Choosing between Boeing and
Airbus, or CRJ and Bombardier, is a bit like trying to figure out the great difference
between Tweedle-dee-dee and Teedle-dee-dum! (Though it must be mentioned here
that with economy class passenger seating comfort and cabin baggage space being the
main criterions, for short range flights, the A-320 beats the B-737 any day, and for
long range flights, the B-777 scores way above the A-340, and so Air India seems to
have got it all wrong again). Aircraft interiors and seat pitch aside, nothing has
changed there.
Air Sahara and Jet Airways have a few really ancient, noisy and rattling
aircraft too, which compete well with the Alliance Air Boeing 737-200 venerables in
terms of age as well as despatch unreliability. Common users' services, such as
airports, Air Traffic Control, safety/fire-fighting, arrival/departure halls, check-in
counters, everything is the same, regardless. As a matter of fact, the private airlines
get the lousier locations and the more distant bays. Certain services, such as apron
control, security and safety, are moving back into the domain of Government control
in the most privatised of countries, such as the US. Which is how it should be,
considering the vast improvement in airport security in India after they've brought in
the CISF, an all-India force. How would you like it if fire services at airports wereprivatised?
Computerisation and the consequent benefits of technology are on par, private
or public sector. As a matter of fact, while Indian Airlines (IA) and Air Sahara have
provided Internet ticketing for over a year now, Jet Airways is yet to do so. And this,
in a day and age where the much-maligned Indian Railways set the benchmark for
-
7/30/2019 Final Airlines- Kinjals
35/71
PEST Analysis Of Airlines
35
Internet ticketing, worldwide, with online sales reaching almost Rs 1 crore a day.
There is no evidence that adoption of a technology for the benefit of a customer is any
better or worse in the private or public sector.
Onboard catering, cleaning, sanitation, engineering, maintenance, adhering to
government/DGCA regulations and scheduling, depends on various factors common
to most airlines. But that big bug, IA planes waiting for VIPs, has now spread to the
private players too.
So what's left?
Well, the biggest benefit of privatisation of aviation has been cost to customer.
But that really came about specifically and only after Air Sahara put the cat amongst
the contented pigeons about two years ago. Remember all the private players now
gone, brands such as East-West, Damania, Modiluft, NEPC-Skyline, Continental,
who simply followed the prices set by IA?
It doesn't require an expensive consultant to tell us that what's left is people
training, fair employment terms and leaving people to do their jobs in accordance with
norms. And for that you don't need to privatise. You just need to give the public sector
a chance. If you do that, it can perform as efficiently as any private sector, with far
greater social responsibility.
Red alert!
There is a security guideline, apparently, that once you have had your
boarding pass issued you cannot leave the terminal building. So, if you show your
boarding pass at the entry/exit gate and ask to be let out for a smoke or walk, then the
CISF officer on duty will not let you out. Fair enough, the reasons for this are
apparently to prevent people from checking in on behalf of others, or to leave theterminal after checking their baggage in. This rule can be by-passed at smaller
airports, where everybody knows everybody anyway.
However, at airports like Delhi, Chennai and Mumbai, this rule is followed
strictly for bona-fide passengers. But you can leave after checking in by walking
confidently towards the VIP entrance near the Airport Manager's office, and exit the
-
7/30/2019 Final Airlines- Kinjals
36/71
PEST Analysis Of Airlines
36
building from there. Then walk around the terminal building, and smartly walk in
again on the strength of the same boarding pass, which prevented you from leaving!
This correspondent does this regularly at Delhi, when a flight is delayed and a smoke
or a simple observation trip is called for. Last week, it was Chennai's turn, and with a
boarding pass pre-issued at Bangalore earlier in the morning for a late-flight Chennai
to Delhi, it was a great reason for the Hindi-speaking CISF officers on duty at the
bona-fide entry gate to refuse permission to exit, and smile broadly whenever I re-
appeared from outside to re-enter.
What a shame!
Strange are the ways aviation security is interpreted, and not just in India.
Listen to the list of don'ts: Can't carry pickles, pepper, round fruit or sealed bottles of
water, but you can get as much of it served to you with the meal. Can't carry torches
or batteries, but you can reach into the safety equipment or cabin crew bags stored at
the rear and help yourself to any of these. Can't use cell phones once on board because
they may impact the computers in the cockpit, but all sorts of walkie-talkies and cell-
phones used by ground staff are allowed.
And most of all, we can't carry nail clippers or small knives/scissors, but the
nice elderly lady will not be stopped from continuing with her, forknitting!
Oh some reassurance
Anxiety amongst passengers for information from the flight deck seems to be
on the increase, especially after 9/11. Delayed departures after entering aircraft, and
before or after closing doors, with or without substantial activity outside and inside,
sudden warnings to fasten seat belts, sudden and perceptible changes in engine sounds
as well as changes in altitude, not switching off engines after landing and hanging
around on taxiways or bays and circling in holding patterns are events that add to the
already stressed environment inside an aircraft.
Generalising is not very accurate, but, by and large, cockpit crews from Far
Eastern countries tend to be quite chatty. Europeans provide precise information, with
straight-faced humour. American pilots are into accuracy with friendliness, and often
go into information overdose. Very often, one of the audio channels is set to the ATC-
cockpit frequencies.
But what about our very own Indian pilots? They must be either really busy in
the cockpit all the time, giving the autopilot an inferiority complex, or they are simply
-
7/30/2019 Final Airlines- Kinjals
37/71
PEST Analysis Of Airlines
37
unaware of how a few words from them to the passengers every now and then would
ease the stress involved for many passengers in taking a flight. A few notable
exceptions aside, the rest go through the same dull drone on outside temperature,
cruising altitude, standard warning on wearing seatbelts and sometimes a reference to
the cabin crew. Nothing else. Your airplane could bounce up and down in the worst of
turbulence, and instead of a reassuring voice from the cockpit all we get a terse
announcement.
Unlike earlier, more aviation passengers know that the avionics and autopilots
on board a modern airplane can handle emergencies in the air better than the human at
the helm.
So what is the real reason, then for the pilot's scant interaction with the passengers? No
wonder we, as Indian passengers, always seem to be in a hurry to leave the aircraft.
TECHNOLOGICAL FACTORS:
Technology has played a major role within the airlines, bringing about far greater efficiency
through computerized records and transaction systems, also in using development through thesetting up of detailed customer databases for effective segmentation and targeting.
This makes it essential that the policymakers change their attitudes and the professionals prove
themselves personally committed. Innovation makes the way for demand generation and profit
maximization. It opens new avenues for increasing the market share of airlines. So, the need to
promote innovation.
A technology driven marketing information system is a key through which airlines can be
technologically forward. Better communication facilities are one of the first pre-requisites for
growth in the inflow of passengers. This has been made possible through technology. Many remoteand inaccessible areas of the country get connected to the rest if the world thanks to the technology
base in international and domestic airlines.
Changes In Technology For Safety & Security
-
7/30/2019 Final Airlines- Kinjals
38/71
PEST Analysis Of Airlines
38
Post September 11, the Civil Aviation Ministry is deploying CISF personnel at all
metro and hypersensitive airports. Quick- reaction teams of the National Security Guards
(NSG) have been added to the security teams at such airports.
Intelligence agencies have virtually taken over some of the metro airports and close
circuit television cameras have been installed at strategic points. Sky marshals have been
deployed on various flights. The BCAS conducts surprise checks at all airports.
Information Technology & Its Impacts
The increasing use of the Internet has provided many opportunities to airlines.
According to the Greenfield Online Digital Shopping Index in the US, airline tickets ranked
among the top five most purchased items on the Internet. Travel business is the number one
online consumer spending segment with more than two million business travelers having
spent $3 billion online in 1999, and the figure all set to grow to $20 billion by 2004 as per a
survey conducted by Forrester Research.
Air India has leveraged this opportunity by providing many internet based services to
its customer such as online ticket booking, updated flight information & handling of customer
complaints.
Infrastructure
USTDA (US trade & development association) is funding a feasibility study and
workshops for the Airports Authority of India as part of a long-term effort to promote Indian
aviation infrastructure. The Authority is developing modern communication, navigation,
scrutiny, and air traffic management systems for India's aviation sector that will help the
-
7/30/2019 Final Airlines- Kinjals
39/71
PEST Analysis Of Airlines
39
country meet the expected growth and demand for air passenger and cargo service over the
next decade.
A proposal for restructuring the existing airports at Delhi, Mumbai, Chennai and
Kolkata through long-term lease to make them world class is under consideration. This will
help in attracting investments in improving the infrastructure and services at these airports.
Setting up of new international airports at Bangalore, Hyderabad and Goa with private sector
participation is also envisaged.
These technological changes in the environment have an impact on Air India as well.
Better airport infrastructure, means better handling of airplanes, which can help reduce
maintenance cost. It also facilitates more flights to such destinations.
In airline industry, technology is necessary for customer satisfaction. It enables to track
and implement according to traffic levels on various flights and manage inventory accordingly.They help airlines make reservations quickly by enabling each ticket agent to check hundreds
of flights for available seating. It helps the airline industry in reservations, ticketing, checking
in passengers, maintenance schedules, and personnel records, accounting and stock control.
Surfnclick: airline ticketing goes live
August 11, 2003
The economic times
Physical airline tickets may soon be a relic of the low tech past. Air travel entered a new era on
Saturday with the launch of live e-ticketing in the country. Passengers will no longer have to bother
to collect tickets from air travel agents, or worry about lost misplaced ones. With e-ticketing,
reservations will be confirmed by e-mail or fax. The plain-paper confirmation, with a reference
number of the reservation and the itinerary, will replace the ticket dockets. The paper is good
enough for entry at all Indian airports.
The system, already popular internationally is being offered in India by global distribution
service provider Galileo and Travel Company Thomas cook.
The bureau of civil aviation security (BCAS) has already issued a notification accepting e-
tickets. This means passengers with the tickets will be allowed access to the passenger terminal
buildings at airports for check in. they will have to show a proof of identity like a passport, photo
identity card, driving license or a credit card.
-
7/30/2019 Final Airlines- Kinjals
40/71
PEST Analysis Of Airlines
40
Commenting on the new system, Seema Luthra, president and CEO of Galileo (India), said,
IATA studies have shown that the end-transaction cost of a physical ticket is a bout five times that
of an e-ticket. so, e-ticketing is major cost saving tool for airlines. About 70% of the tickets issued
in the US are e-tickets, she said. The system has been in use in India for the past few years. But the
passengers had booked e-tickets in other markets and were travelling to India. But the system has
now been formally certified by IATAs billing operation, BSP India. Worldwide, over 45 airlines
participate with Galileo for e- ticketing. These airlines can start offering e-tickets to their customers
in India.
Computers have already revolutionized consumer air travel, especially with fare checking and
online ticket sales, and now some of the airlines are moving to get rid of paper tickets entirely,
travel industry sources said.
E-tickets give certain advantages to both airlines and passengers. The system facilitates direct-
to-customer sales, while saving airlines $6-7 on each ticket they dont have to print and mail to
customers. Late bookings have also become easy: make a phone call, get your confirmation faxed
to you, or print it out, and its over.
Air-India sets up global call centre
July 13, 2003
The economic times
Giving a major push to its customer-friendliness drive and product upgradation, Air India on
Saturday seyt up its first global international call centre for round the clock operations in north east
Mumbai while for domestic travelers a similar facility would be launched by October 2003.
The global centre at Deonar will be manned by 25 people and operate 7 days a week, the
leading international carriers spokesman Jitender Bhargava told The Free Press Journal. Civil
Aviation Minister Rajiv Pratap Rudy, making the first call and booking through video
conferencing, inaugurated the centre.
The idea for the centre is to improve customer service, Jitender Bhargava said adding, It
would take calls from overseas countries. Our target area is US and UK where we have lately
enhanced a number of services.
The call centre has sophisticated technical infrastructure and would deploy qualified and
trained manpower. The international call centre would ensure reservation for flights, hotels, car
-
7/30/2019 Final Airlines- Kinjals
41/71
PEST Analysis Of Airlines
41
rentals, meal choice, special seats booking, special requirements for passengers like wheel-chairs,
child care and even flight baggage, he said.
In the past one year, Air-Indias capacity to USA has substantially increased and is poised for
further growth in the winter timetable. The round the clock call centre, it is hoped, would eradicate
one of the major complaint areas that during weekend Maharajas staff does not give their best of
services. Civil Aviation Minister is in the city to attend a meeting of Parliamentary Consultative
Committee attached to his ministry.
Talking to reporters, Rudy said that the fleet acquisition plan and the Aviation Policy would be
given final shape by two months. The plan would ensure level playing field for all concerned
including private parties, he said.
Adequate steps were being taken to upgrade Mumbai and Delhi airports.
Double A Technologies Group has invested significantly in designing an extensive
portfolio of products built around innovative and advanced technologies. The portfolio spans
various business fields and solutions have all been built with common features such as: Online
and offline collaboration (eBusiness, cBusiness Platform), Enterprise Application Integration
(EAI), multi-currencies, multi-lingual support, Multi-Companies (Several companies can work
on the same solution), Multi-Channel integration, wired and wireless connectivity, support of
multiple platform and network protocols, etc. All solutions feature a high capability to change
and customize and supersedes any existing comparable solutions, in business functions, in
concepts, design and architecture.
Airlines Solutions
At the heart of any regions economy, the airline business has always been a strategic
and a fascinating area. Unfortunately, its profile has not prevented this business from being
extremely resilient and fragile. Globalization, oil price dependence, social and political events, to
cite only few, are examples of some of the most influencing factors that severely impact the airlinesbusiness. Because of current Air Traffic Management policies and regulation, we can say that
almost all airlines fly the same. Therefore, aircrafts, ground operational processes and commercial
products management are the key differentiating factors. Mastering ground operational processes,
as well as products management, are still at the hands of most airlines, be it small or large,
passengers or cargo airline.
-
7/30/2019 Final Airlines- Kinjals
42/71
PEST Analysis Of Airlines
42
The fact that airlines suffer from severe recession is certainly a problem but it is also an opportunity
for those who will take the initiative to reengineer their business processes and streamline
operations in order to strongly compete against their peers. The airline industry volatility and its
cyclic patterns address fundamental attributes that are required to feature. Double A Technologies
Group investigated such business challenges and trends. Investigations resulted in the successful
design of the most innovative portfolio of collaborative solutions available in the market. The
portfolio effectively integrates airline operational processes across the entire business chain and
supports newer concepts such as Collaborative Air Traffic Management as well as Gate-To-Gate,
enabling airlines to reach outstanding performance.
Support passengers and cargo airline operations
Single/multi-hops routes planning and operations
Routes budget simulation and revenue planning
Real time and extensive track and trace at all levels of all operations
Advanced airfreight operations such as automated rerouting
Terminal handling, co-management and warehousing management
Dangerous goods management
Door-To-Door, Gate-To-Gate operations support
Airline operations discrepancies management
Claims management, call centre and help desk management
Outsourcing management, contract and service level agreements mgt.
Airline adaptive procurement activities planning and operations
Quality assurance and support of ISO standards support
Multi standards message engineering and exchange (EDI, XML, etc)
Co-management, multi-sites, multi-currencies, multi-companies, multi-lingual
IATA and multiple airline messaging standards compliance
Scaleable and open to other ERP systems
What sets Regional's flight training apart from other flight schools?
Regional Airline Academy Flight Schools utilize new aircraft within our
fleet. When one sits in our new Piper flight trainers, he or she will be
immersed in the latest in flight aviation technology.
-
7/30/2019 Final Airlines- Kinjals
43/71
PEST Analysis Of Airlines
43
Experience is very important in obtaining the knowledge required by the fast-
paced airline industry. Over 200 years of combined executive airline
management makes up Regional Airline Academy Flight School's.
Why not receive college credit from our flight school while in flight training?
Regional Airline Academy Flight Schools have many college programs
available that offers up to 39 hours of college credit just for passing your flight
training courses.
Regional Airline Academy Flight Schools more than doubled in size within
the past year. New flight training aids, facilities, maintenance, and aircraft
have aided in the overall expansion of the flight school. RAA plans on
expanding even more through alliances with other airlines and flight training
facilities in order to provide the BEST flight training at an affordable cost.
Cost is always a major factor in the success of a new applicant. Regional
Airline Academy Flight Schools are proud to be one of the most cost-effective
flight schools in the industry. Our "Airline Career Program" is less expensive
than other flight schools due to the low airline interview requirements
(provided only by RAA), and the PAID internship provided by our flight
school as part of Professional Airline Career Course.
That's right! Upon completion of our program, each student is
GUARANTEED an interview with each of our airline alliances with only 700hours logged time and 100 hours multi-engine logged time!
What will your flight training include at Regional Airline Academy?
You will receive flight training from a professional and qualified staff eager
to aid in the success of EACH individual.
You will be taught how to work and interact within an airline environment as a
crew-member and as an employee.
You will be trained in the newest of aircraft with the latest in flight training
aids!
You will receive a great deal of individual flight training with small
classrooms designed to maximize the potential of each individual.
You will receive up to date information on the airline industry provided by
our airline advisory board comprised of active airline pilots and airline
management!
-
7/30/2019 Final Airlines- Kinjals
44/71
PEST Analysis Of Airlines
44
You will receive a Guaranteed Interview with our airline alliances upon
successful completion of our flight-training program.
OTHER NEW TECHNOLOGICAL INNOVATIONS THAT HAVE CHANGED
THE FACE OF AIRLINE INDUSTRY ARE AS FOLLOWS.
Video/music on individual seats
Leading airlines provide personal video screens and music players on each seat so that
the passenger can choose to see/hear what he or she likes.
E.g. video games on Japan airlines
Conducting business in the sky
Virgin air provides a circular seating arrangement and also provides laptop computers
and other business tools so that businesspersons can conduct their business while
travelling.
Sale of empty seats through auctions/internet
There are several online ticket exchanges where customers can trade tickets with each
other and also the airlines.For e.g. Sahara airlines offers the facility to sell its empty seats to the passengers
through internet.
Real time price change
-
7/30/2019 Final Airlines- Kinjals
45/71
PEST Analysis Of Airlines
45
American airlines changes its prices about fifty thousand times a day. this is possible
through a very strong database system which calculate fares based on routes, traffic,
number of empty seats, bulk discounts, etc.
Real time flight information
With the help of technology airlines provide real time reservation status and also
schedule status to users via several mediums.
Self Service Technology
Today passengers want speed- on and off the ground. Infact, for airlines, achieving
success often means winning the hearts and minds of consumers during check-in,
before the plane even takes off. Airlines like Air Canada are installing self-service
kiosks there by reducing checking time and increasing passenger throughput.
Telephony sky-to-ground
Many airlines now offer call facility from the aircraft to the ground locations like
house or the office thus enabling people to stay connected.
-
7/30/2019 Final Airlines- Kinjals
46/71
PEST Analysis Of Airlines
46
CHAPTER SIX
AIRLINES AS A SERVICE SECTOR
Unique Service Characteristics
INTANGIBILITY
Services are intangible in nature. Unlike goods, which are tangible and can be seen and
touched, services can only be experienced. It means that services are high in credence qualities
whereas goods are high in search qualities. A company can differentiate its service from its
competitors by providing tangible clues.
A company can provide tangibility to its services by
Association with physical goods or items,
Association with the physical environment,
Performance and involving customers
As we know that services are intangible, a service marketer has to face many problems.
In the airline industry transportation is the core product. Since it is intangible in nature a service
company can distinguish itself from its competitors by providing several tangible clues like
Food / Beverages
Newspapers
-
7/30/2019 Final Airlines- Kinjals
47/71
PEST Analysis Of Airlines
47
Movies
Music
Staff uniforms
Logos
Color and design
Seats and cushions
Assistance with work
Audio / Video facilities for work or pleasure
Fax, laptops, etc.
Baggage retrieval
Flight bookings
A service marketer can overcome the difficulties of intangibility of services through:
Reducing service complexity
Stressing on tangible clues
Facilitating word of - mouth recommendations
Focusing on service quality
Here are a few examples of leading airline companies that provide tangibility to its services
through various tangible elements
1. Indian Airlines The Maharaja Logo, also they describe themselves as The Peoples Carrier
The National Carrier.
2. Jet Airways the airline for businessmen, easy booking facilities, easy custom clearances and
baggage retrieval, good in-flight services.
3. Southwest friendly, no frills, low fare airline.
-
7/30/2019 Final Airlines- Kinjals
48/71
PEST Analysis Of Airlines
48
4. Air Canada provides laptop connections and helps in sending fax messages favourite with
North American business travelers.
INSEPARABILITY
Another characteristic of services is customer involvement in production i.e.
inseparability. The inseparability of services leads to
Customer being co-producer
Often customer being co-consumers with other customers and
Customer traveling to the point of service production
All the above three problems are faced by the service marketer in the airline industry. So the
service marketer has to think of ways in which he can satisfy his consumers in an efficient manner.
Customers are separated on the basis of price business and economy class.
Also airline are trying to overcome inseparability by providing facilities such as
Games for kids Air Canada
On-line Booking Sahara
INCONSISTENCY
Inconsistency refers to the variability in the service. Service variability leads to
difficulty in projecting a consistent image and developing a strong brand. As it is difficult to
standardize to blueprint the service process there is inconsistency in service quality. Also services
rely on human inputs there is a high amount of variability. This can be overcome by providing
personalized services and focusing on employee training. Up to an extent, automation and
mechanization also can help to reduce inconsistency.
E.g.: most airlines include online booking resulting in a standardized procedure &
fewer mistakes due to human errors.
Another way of reducing inconsistency in airlines is the standardization of in-flight procedures
for example the security instructions given at the beginning of the flight.
-
7/30/2019 Final Airlines- Kinjals
49/71
PEST Analysis Of Airlines
49
INVENTORY:
It is not possible to store services. Also the service capacity cannot be increased, as it
can be limited. Services also face irregular demand patterns. Again the service can be short-lived.
The inventory for airline industry is mainly the food and the aircrafts spares and parts. Airlines
face the problem of inventory mainly due to irregular demand patterns.
E.g.: The Boeing Company and British Airways announced today that the airline will be the first
launch customer for the Global Airline Inventory Network(SM), an innovative new service in which
Boeing will manage British Airways' supply chain for expendable airframe
spare parts used in its fleet of Boeing airplanes. This includes parts from Boeing as well as
other suppliers.An expendable part is one that is typically replaced rather than repaired after
use. These range from fasteners and brackets to floor panels and airplane skins.
The Global Airline Inventory Network(SM) is designed to attack costly inventory
inefficiencies in the airline industry, where both airlines and suppliers incur extra costs because
of duplicated distribution channels and unnecessary inventory levels.
Congestion occurs during peak periods like vacations and festivals and at other times
there is unused capacity. Thus special discounts & offers are offered during these periods to
boost seat capacity (called the PLF -- passenger load factor)
-
7/30/2019 Final Airlines- Kinjals
50/71
PEST Analysis Of Airlines
50
CHAPTER SEVEN
RATER Analysis
Customers dont assess the quality of service on one dimension only, they use
multiple parameters to judge the quality of the service that they are being offered.
These characteristics which people consider vary from person to person, industry to
industry. Even depend upon the product on offer. But generally, if we consider a
service industry these are the five basic criterias which the customer will consider to
judge the quality of service being provided to him.
Reliability
Assurance
Tangibles
Empathy
Responsiveness
When we look at these points with respect to the airline industry we find that
the following qualities are expected by the customer.
Reliability flights to promised destinations depart and
arrive on schedule
Assurance trusted name, good safety record,
competent employees
Tangibles aircraft, ticketing counters, baggage area,
uniforms
Empathy understanding of special individual needs,
anticipates customer needs
-
7/30/2019 Final Airlines- Kinjals
51/71
PEST Analysis Of Airlines
51
Responsiveness - prompt and speedy system for ticketing, in flight, baggage
handling
RELIABILITY Ability to perform the promised service dependably and
accurately.
This would basically be that company delivers to the customer what is
promised & the customers basically like to deal with companies that can fulfill their
promises. When we look at the airline industry we can see the following things the
customer would expect certain basic facilities like: some functional infrastructure
provided to him, the flight leaving & taking off on time, the luggage reaching safely.
There was an article in the newspaper, where in the journalist talked about
how Indian airlines was the airline that the public could trust. The journalist basically
talks about them being the national carrier, profit would not be their only objective
and so they would try to provide the right kind of service, they wouldnt fly an aircraft
just so they can save on the costs or dont have to bear the losses even if the plane is
not a 100%, whereas someone like Jet would probably consider the monetary costs
involved in the process, and even that could influence their decision.
The general belief is that the service offered by Indian Airlines is below
standard or not upto the mark. But then they charge lesser than other airlines, so they
are mostly concentrating on the pricing for their market share. But some people even
choose Indian Airlines because they believe that Indian Airlines wont be cutting
costs and so wont run a plane not completely ready. Basically, theyd rather travel in
slightly lower grade airline than risk their lives.
-
7/30/2019 Final Airlines- Kinjals
52/71
PEST Analysis Of Airlines
52
ASSURANCE Employees knowledge and courtesy and their ability to
inspire trust and confidence
Assurance would basically mean the kind of knowledge the employees have
and the courtesy & the ability of the employees to generate confidence in the users
mind about the service being provided. The employees should have a positive morale
& should be motivated if they have to promote the firm & create a sense of assurance
in the flyers mind.
Jet Airways is generally considered the more customer friendly of the
domestic airlines. The staff there is nicer to old people or little kids who might be
traveling. Though Jet has a very young staff, so some of the members could possibly
not match the kind of experience the Indian Airlines crew has. Suppose some senior
citizen is traveling alone in an aircraft for the first time the crew should see to it that
he is given proper instructions & is comfortably settled in his seat.
Besides this, after the September 11 crisis, there was a lot of skepticism in the
fliers & to instill a little confidence in the consumers mind, the government paid
greater emphasis on security in the aviation policy. This was all so that people would
feel safe next time they traveled by air. They would appoint a committee and look into
the recommendations provided by them to better the security arrangements in the
airplanes & airports.
TANGIBLES Appearance of physical facilities, equipment, personnel
and written materials
Tangible features would be those physical features, which can be felt by thecustomer. These would be the physical proofs, which would help the customer to
judge the quality of service. Incase of the airline itd be the aircraft that the airline
uses, how old they are, the kind of facilities that are provided inside the aircraft or in
the waiting area. The technology used for baggage handling. The coaches used to
transport the customer to the aircraft, all of these speak leaps & bounds about the
-
7/30/2019 Final Airlines- Kinjals
53/71
PEST Analysis Of Airlines
53
service provider. The kind of skilled staff that they have the uniform that the staff
wears.
The tangibles would also include the infrastructural facilities present at the
airports. This is where we find most of the Indian airports lacking. They have no
proper arrangements to handle the customers.
When we look at the aircraft fleet that is a very important tangible feature, and we
find that Indian Airlines has a really ancient fleet of aircrafts which doesnt make it
extremely safe as older planes are more prone to damage. Whereas, Jet Airways has
the youngest fleet in the business.
EMPATHY Caring, Individualized attention given to customers
Empathy basically is when the employees of the organization make the
customer feel at home, at ease, make him feel wanted. The customers are mostly
offered the same service from most of the airlines. The easiest way for an airline the
maintain and grow its client base is to be empathetic towards their customers, to
understand their specific needs and to cater to them & they should make each
customer feel like he is a unique asset to the company & like their single most
important client. Addressing the clients by their first names, keeping a track of their
usual flying routes, their preferences in flight & catering to all of those, maybe giving
him his favorite seat each time he travels.
Customers like to be treated properly for the money that the pay and the airline
should try and offer the maximum benefit to the flyer for the money that he pays. Air
India in April invested 15 crores in the first class segment to give it a face-lift and
started providing full-recline seats since they give minimum fatigue on long trips
(exceeding 8 hours of flying).
RESPONSIVENESS Willingness to help customers and provide prompt service.
Responsiveness would basically be the kind of time it would take for the firm
to address a customers complaint or for the firm to provide service to the customer.
-
7/30/2019 Final Airlines- Kinjals
54/71
PEST Analysis Of Airlines
54
The degree of responsiveness shows the level of commitment that the people of the
company have towards their work. It is very necessary for the company to concentrate
on prompt & the right kind of responsiveness to the needs of the customer.