LOW COST AVIATION IN INDIA: CHANGING

REALITIES

OUTLINE

AVIATION IN INDIATARGET MARKETSTRATEGY OF LOW COST AIRLINESINDIAN SCENARIOPOTENTIAL OF AIR TRAVEL IN INDIANEW ENTRANTSSWOT ANALYSISCONCLUSION

INTRODUCTION

India air travel was perceived to be an

elitist activity

In 1953, all airlines merged into Indian

Airlines or Air India

Monopoly perpetuated for next 40 years

Controlled by Directorate General of Civil

Aviation

Later entrusted by Airport Authority of

India

OPEN SKIES

Current policy restricts the access of foreign AirlinesPotential tourists are not offered choice when travelling to IndiaAdopt open skies policy, in order to promote Travel & TourismOn 1 March, 1994, Government open the gates for private entrantsSensing a huge opportunity, a large number of players jumped into the frayProminent among them, Jet Airways, Sahara, Archana, East West, India International, Damania etc

LOW COST AVIATION(WIND OF CHANGE)

Trade of low cost Aviation increased in

recent past

Offers low fares eliminates all

unnecessary services

Most consumers opt for low prices

Serious threat to traditional ‘full service’

airlines

Force to rethink the strategies and

restructure their fairs to Government

owned and private Airlines

NEED FOR LOW COST AIRLINESDeregulation the demand for scheduled passenger was driven by constraints and confines of its providersNetwork carriers were able to avoid cost side pressure, by focusing on revenue-side strategiesPrice transparency-internet created, emergence of new breed of low cost carriersAt the end of 2000 demand for business class and other high end products fell dramaticallyLow cost carriers offer real, lasting competition to network rivalsCustomers fall into segments with regard to demand for products on offer

CUSTOMER SEGMENTATION

TARGET MARKET

To a large extent influenced the mass transportation and domestic tourism industryE.g., Country of Billion people, around12 Million people travel by air

LCCs also geared towards: holiday trips business tripsMiddle class people

Passenger and Cargo Traffic - India

Business Design for Low Cost Airlines

Strategy of Low Cost Airlines

Business Strategy

Aggressive marketing

Utmost efficiency in operations and maintenance

Increasing the aircraft seat capacity

Charging for all additional

Outsourcing some operations

Using secondary airports

Keeping operating costs to a minimum

Indian Scenario: Air Sahara and Jet Airways

Jet Airways Took off with four Boeing 737-300’s in April 1992 at

Mumbai 100% Subsidiary of Tailwinds Ltd, situated in Cayman

island Indian promoter, Naresh Goyal bought the entire

stake, became sole owner

Air Sahara Started operation in 1993, between new Delhi and

Mumbai sectors By 2001, it expanded its flying routes to 12 sectors Won many excellence award Turnover of Rs. 3.5 billion in 2001

Low cost AirlinesOn 25th August 2003 Air Deccan,

India’s first low cost carrier operated its first flight

Fares were half of those of the established airlines

Others Alliance Air, GoAir, Air Arabia, Air One and foreign airlines amongst others

Target customer whose basic need is to commute at a cheap fare

Indian Aviation: Market Players

KingfisherIndiGoJet AirwaysJetLiteAir IndiaSpicejetGoAir

Air Deccan: First low cost Airline in India

Unit of Deccan Aviation Private LtdFormed in 1995India’s largest private heli - charter companyGot reputation for providing speedy and reliable heli servicesVision to bridge divide with those who fly and those who don’t, by introducing low airfaresLeveraged the power of Internet to simplify the entire process

Strategies planned by Air Deccan

Misson : Provide reliable, low cost and safe travel to the common menStrategies:High Aircraft UtilizationRoute planningAircraft fleetDynamic pricingAdditional revenuesCost reductionMarketing & promotion

Air Deccan: Fares and Reservation

The aim is to make air travel affordable to allIntroduced the concept of Dyna faresReservation systems:• Internet(www.airdeccan.net)• Call centre – through credit card• Travel agents• Airport counter

Different Low Cost Airlines

SWOT Analysis

Strength“Lean and Mean”

approach in staffingRising income levels

and demographic profile

Airlines for price conscious customers

New Short-Haul air routes are serviced

Smaller countries can rely on low cost airlines to service them

Give more choices to fly

Weakness No frills such as

‘free” food/drinks Lower safety

standards followed Crippling “oil shock”

so difficult to survive at low cost

Absence of Institutionalized funding

Opportunities

Attract middle class people

Extensive network to exploit the booming Air cargo business

Plenty of scope for expansion of operations

Could start “Contractual Employment”

Strengthen its position in the Chartered Flight segment

Threats

Rising costThe threat of new

entrants into (LCC) segment

esp GoAir, Spice Jet, Indigo and Jagson Airlines

High risk perceptionNew strategies of

traditional airlines

Why Low Cost Airlines are not so successful in India ???

Reasons: Why Low Cost Airlines not so successful in India?

Failed in effective administrationPoor servicesUnable getting subsidiesLess interest of GovernmentFailed in building trust factor