BCCA INSTITUTE OF

MANAGEMENT STUDIES

INTERNAL ASSESSMENT

Guided by Prof. Kazi

Semester V

Service Sector Management

TYBMS/A

Submitted By:

Roll No. Names

02 Mustafa Rangwala

03 Mustafa Attar

22 Mustafa Ranapurwala

28 Murtaza Udaipurwala

30 Mufaddal Khamgaonwala

32 Murtaza Rupawala

Overview of the Economy

GDP:

Gross domestic product (GDP) is the market value of all officially

recognized final goods and services produced within a country in a

year, or over a given period of time. GDP per capita is often used as an

indicator of a country’s material standard of living. GDP per capita is

not a measure of personal income. Under economic theory, GDP per

capita exactly equals gross domestic income (GDI) per capita.

However, due to differences in measurement, there is usually a

statistical discrepancy between the two figures.

INR 147 billion directly contributed through the output of the aviation

sector (airlines, airports and

Ground services, aerospace);

INR 107 billion indirectly contributed through the aviation sector’s

supply chain; and

INR 77 billion contributed through the spending by the employees of

the aviation sector and its

Supply chain.

In addition there are INR 582 billion in ‘catalytic’ benefits through

tourism, which raises the overall

Contribution to INR 912 billion or 1.5% of GDP.

Money supply:

In economics, the money supply or money stock, is the total amount

of monetary assets available in an economy at a specific time. There

are several ways to define "money," but standard measures usually

include currency in circulation and demand deposits. It is easy to

confuse the amount of spending money in the economy with the

amount of money in the economy.

Inflation :

The annualized inflation rate in India is 8.9% as of June 2012, as per

the Indian Ministry of Statistics and Programme Implementation. This

represents a modest reduction from the previous annual figure of 9.6%

for June 2011. Inflation rates in India are usually quoted as changes in

the Wholesale Price Index, for all commodities.

(10.8%); Machinery and Machine Tools (8.9%); Textiles (7.3%) and

Transport, Equipment and Parts (5.2%).

How inflation affects the common man?

If you are having to increasingly pay more for your groceries at your

neighbourhood Kirana store or a swanky department store, chances are

that you have been hit by inflation.

• Purchasing power of the rupee falls -- a Rs.50 note, which you could

use to buy a kilogram of rice, will now fetch only half a kilogram.

2) Commodity wholesaler dealers, such as rice dealers at mandis, may

try and hoard essential commodities like food grains on hopes of

reaping profits when prices increase further on dwindling supplies.

3) Fixed income groups will be hit the hardest because their salaries

will not be revised to include the cost of living even as prices of items

soar.

4) Household as well as national savings drop because there is less

money to save now as people use a greater part of their disposable

income to pay for daily-use commodities.

The better news:

A higher rate of inflation can make repaying loans easier because they

can end up paying back less money if the interest rate is lower than the

rate of inflation.

Exchange rate :

Price for which currency of country can be exchanged for

another country's currency is called exchange

rate. Factors that influence exchange rate include (1) interest rates,

(2) inflation rate, (3) trade balance, (4) political stability, (5) internal

harmony, (6) high degree of transparency in

the conduct of leaders and administrators, (7) general state of economy,

and (8) quality of governance.

In finance, an exchange rate (also known as a foreign-exchange

rate, forex rate, FX rate or Agio) between two currencies is the rate

at which one currency will be exchanged for another. It is also regarded

as the value of one country’s currency in terms of another currency. For

example, an interbank exchange rate of 91 Japanese yen (JPY, ¥) to

the United States dollar (US$) means that ¥91 will be exchanged for

each US$1 or that US$1 will be exchanged for each ¥91

BOP

Balance of Payment (Bop) of a country is defined as the record of all

economic transactions between the residents of a country and the rest

of the world in a particular period (over a quarter of a year or more

commonly over a year).

Trade – buying and selling of goods and services

Exports – a credit entry

Imports – a debit entry

Trade balance – the sum of Exports and Imports

Factor income – repayments and dividends from loans and investments

Factor earnings – a credit entry

Factor payments – a debit entry

Overview of Airline Industry

History

Indian Aviation Industry is one of the fastest growing airline industries

in the world. The history of Indian Aviation Industry started in

December 1912 with its first domestic air route between Karachi and

Delhi. It was opened by the Indian Air Services in collaboration with

the UK based Imperial Airways as an extension of London-Karachi

flight of the Imperial Airways. Tata Sons Ltd., the first Indian airline,

started a regular airmail service between Karachi and Madras three

years later without any backing from the Indian government.

During 19991-1992, Modiluft, East West and Damania went bankrupt.

Air Sahara and Jet Airways survived along with government own

Indian Airlines because they had the capability to bear losses.

Globalization and privatization had a major impact on aviation

industry. Indian aviation industry was deregulated by the government

in 1990s.By the year 2000 several private airlines have entered into the

aviation business in succession and many more were about to enter into

the arena. Indian aviation industry today is dominated by private

airlines and low-cost carriers like Deccan Airlines, GoAir, and

SpiceJet, etc. And Indian Airlines, the giant of Indian air travel

industry, gradually lost its market share to these private airlines.

Brief Introduction

Indian Aviation Industry has been one of the fastest-growing aviation

industries in the world with private airlines accounting for more than

75 % of the sector of the domestic aviation market. With a compound

annual growth rate (CAGR) of 18 % and 454 airports and airstrips in

place in the country, of which 16 are designated as international

airports, it has been stated that the aviation sector will witness revival

by 2011.

Today Hyderabad International Airport has been ranked amongst the

world's top five in the annual Airport Service Quality (ASQ) passenger

survey along with airports at Seoul, Singapore, Hong Kong and

Beijing. This airport in Hyderabad is managed by a public-private joint

venture consisting of the GMR Group, Malaysia Airports Holdings

Berhad and both the State Government of Andhra Pradesh and the

Airports Authority of India (AAI).

The Indian aviation sector can be broadly divided into the following

main categories:

Scheduled air transport service includes domestic and international

airlines.

Non-scheduled air transport service consists of charter operators and

air taxi operators.

Air cargo service, which includes air transportation of cargo and mail.

Scheduled air transport service: It is an air transport service

undertaken between two or more places and operated according to a

published timetable. It includes:

Domestic airlines, which provide scheduled flights within India and to

select international destinations. Air Deccan, Spice Jet, Kingfisher

Airline and IndiGo are some of the domestic players in the industry.

International airlines operate from scheduled international air services

to and from India.

Non-scheduled air transport service: It is an air transport service

other than the scheduled one and may be on charter basis and/or non-

scheduled basis. The operator is not permitted to publish time schedule

and issue tickets to passengers.

Air cargo services: It is an air transportation of cargo and mail. It may

be on scheduled or non-scheduled basis. These operations are to

destinations within India. For operation outside India, the operator has

to take specific permission of Directorate General of Civil Aviation

demonstrating his capacity for conducting such an operation.

Size of the Industry

India is one of the fastest growing aviation markets in the world. A total

of 127 airports in the country, which include 13 international airports,

7 custom airports, 80 domestic airports and 28 civil enclaves are

managed by The Airport Authority of India (AAI). There are about 450

airports and 1091 registered aircrafts in India today.

Top Leading Companies

Players in Indian aviation industry can be classified into three groups:

Public players

Private players

Start-up players

There are three public players: Air India, Indian Airlines and Alliance

Air. The private players include Jet Airways, Air Sahara, Paramount

airways, Go Air Airlines, Kingfisher Airlines, Spice Jet, Air Deccan

and many more. The start-up players is those which are planning to

enter into the markets. Some of them are Omega Air, Magic Air,

Premier Star Air and MDLR Airlines.

Employment opportunities

Today India Aviation Industry requires approximately 7,500-8,000

pilots and an equal number or more air cabin crew by 2010. Heavy pay

packages are awaiting pilots with a commercial pilot license (CPL). An

amateur pilot can start his career with a salary of Rs 2.5-3 lakh a month

with a commercial airline. With the sudden increase in the number of

airlines, pilots are in great demand.

Latest developments

Toward modernization of non-metro airports the Airports Authority of

India (AAI) is planning to spend over US$ 1.02 billion in 2010. There

are even plans of the city-side development of 24 airports, including

airports at Ahmedabad and Amritsar. There are even additionally, 11

new Greenfield airports which are in pipeline which have been

identified to reduce passenger load on existing airports.

The government has formed National Aviation Company Ltd (NACIL)

by merging national carriers Air India and Indian Airlines into a single

entity. The blue print was prepared by the civil aviation ministry to

convert Delhi airport into an international hub for passenger airlines

and has been done so recently.

Modernization of Airports

Airports Authority of India (AAI) manages the development and

modernization of all 35 non-metro airports in the country

simultaneously and work is due to be completed by the year end of

2010. Wholly owned subsidiaries of AAI are being created for

betterment of these airports. According to the AAI there are work

orders for terminal buildings at 13 airports, and for airside

development, including runway, taxiway, apron, fire station, control

tower and isolation bay, at 19 airports.

Growth in MRO Segment

Indian Aviation with the advent of low-cost airlines & ever-increasing

passenger traffic there is a fleet expansion. There is an Initiation of the

whole new business avenue for global aircraft companies in

maintenance, repair and overhaul (MRO). This MRO facility provides

major and minor maintenance,

Factors Responsible for Growth of Airline sector :

Political Environment

There are several limitations in aviation infrastructure in India for

instance parking bays, gates to board passengers, landing slots etc. are

in short supply. This often leads to massive delays, cancellation and

major losses in revenue for many LCCs. For upgraded infrastructure

facilities, India’s civil aviation minister Praful Patel said on 15

February 2006 that Indian government defer decision on privatization

of International Airport in Delhi and Mumbai.

Economic Environment

In Indian economy, there is a robust growth of 8.9 per cent GDP, in

first quarter of the current year. The aviation industry is at boom, where

growth ranged between 30-50 per cent. The growth in aviation has been

possible because of liberal policies in civil aviation, robust growth in

tourism and exports. Few years’ back domestic market was dominated

by three domestic carriers they were Indian Airlines (government

owned), Jet Airways and Air Sahara (private players). But now there

are 14 which include new players like Jagson, Air Deccan, Spice Jet,

Go Air, Magic Air etc

Social Environment

In India, before 1990s, traveling by air was considered expensive and

luxury mode of transportation. After deregulation in aviation industry

several new airlines come up and there was a drastic reduction in fares

which was a spur for Indians to opt for air travel. India’s first low cost

carrier Air Deccan began with Rs 500 per ticket offer. It was neck to

neck competition with Indian railways. Soon Spicejet gave a counter

offer of Rs 99 per ticket. Since then prices for airline ticket kept on

reducing as a promotion strategy. People traveling on trains by first or

second class AC, till now, shifted their attention to airlines. It improved

their lifestyle.

Technological Environment

Airports Authority of India in collaboration with Indian Space

Research Organization (ISRO) is developing a new satellite-based

navigation called Gagan. The project is likely to be operational by

2008. Only three countries including the United States has similar

Satellite-based system. It is one of the latest technology in the world.

It will enhance safety of flights.

Overview of the company

How it was started?

The airline was set up under the Air Corporations Act, 1953 with an

initial capital of Rs. 32 million and started operations on 1 August 1953.

It was established after legislation came into force to nationalise the

entire airline industry in India. Two new national airlines were to be

formed along the same lines as happened in the United Kingdom with

British Overseas Airways Corporation (BOAC) and British European

Airways (BEA). Air India took over international routes and Indian

Airlines Corporation (IAC) took over the domestic and regional routes.

Eight pre-Independence domestic airlines, Deccan Airways, Airways

India, Bharat Airways, Himalayan Aviation, Kalinga Airlines, Indian

National Airways and Air Services of India and the Domestic wing of

Air India, were merged to form the new domestic national carrier

Indian Airlines Corporation. International operations of Air India Ltd.

was taken over by the newly formed Air India International. Indian

Airlines Corporation inherited a fleet of 99 aircraft including 74

Douglas DC-3 Dakotas, 12 Vickers Vikings, 3 Douglas DC-4s and

various smaller types from the seven airlines that made it up.

What were the reasons for its decline?

How did it jumped back?

Proposed Privatization, expansion and merger (2000-2007)

In 2000-01, there were attempts to re-privatize Air India to improve

services, but in 2001 Singapore Airlines pulled out of the bidding

process and the global economy slumped. With the fall of the BJP-led

NDA government in 2004, these attempts were shelved. In 2000, Air

India introduced services to Shanghai and to its third U.S. gateway at

Newark Liberty International Airport in Newark, New Jersey. In May

2004, Air India launched a wholly owned low cost airline called Air-

India Express. Air India Express connecting cities in India with the

Middle East, Southeast Asia, and the Indian subcontinent. In 2004 Air

India launched flights to its fourth US gateway at Los Angeles

International Airport in Los Angeles (which has since been terminated)

and expanded its international routes to include flights from

Ahmedabad, Amritsar, Bangalore, and Hyderabad. On 1 December

2009, Air India introduced services to its fifth U.S. gateway at

Washington Dulles International Airport in Washington, D.C.,

accessed via a stopover at JFK Airport in New York City.

Until 2007, Air India and Indian Airlines operated as two completely

different airlines, though completely owned by the government of

India. Air India mainly operated on International long-haul routes while

Year Operating Revenues Operating Profit(Loss)

2002 41,015 -1347

2003 46,498 -1251

Indian Airlines operated on domestic and international short-haul

routes. Both airlines had different fleet expansion and retirement plans.

In 2007, the government decided to bring both the airlines, including

Air India Express and Indian Airlines' low cost subsidiary Alliance Air

under the control one body.

National Aviation Company of India Limited

The Government of India announced that Air India would be merged

with Indian Airlines. As part of the merger process, a new company

called the National Aviation Company of India Limited (NACIL), now

called Air India Limited was established as the holding company for

Air India and its subsidiaries. In February 2011, the merger came into

effect.

Around 2006–2007, the airlines began showing signs of financial

distress. The combined losses for Air India and Indian Airlines in

2006–07 were INR7.7 billion (US$130 million). After the merger of

the airlines, it went up to INR72 billion (US$1.2 billion) by March

2009.

Segmentation, Targeting & Positioning Strategy

A. Segmentation

Corporate Travellers

Corporate Travellers are travellers who uses air lines as a mode of

travelling the most of all other travellers. Most of corporate travellers

are Marketing Managers and Sales Managers who travel for business

increment and promotion daily, weekly or monthly as per their work

and tasks. So Air India has been focusing and are concentrating on this

segment specially.

Independent Business Travellers

These are Businessman who travel national and international tours for

business development and expansion and to build relationship & here

air lines come in to picture for accommodating such travellers a

comfortable means of travel and business trips. Air India also keep on

fetching such customers to generate more profits. This segment also

includes professionals and free lancers.

Holiday Travellers

Such travellers travels in holiday seasons like Eid, Diwali, Christmas,

Summer Vacations. Air India focus on such customers only in a

specific time of the year. They attract such customers via Discounts,

Offers & Schemes.

Pilgrimage Travellers

These travellers are belonging to different communities of the world

who travel to the holy places recognize by their religion. Such travellers

go national and international and travellers keeps on changing because

such pilgrimage trips are a compulsion once in lifetime. Here Air India

launches tour packages for travellers who wish to go for pilgrims.

Emergence Travelers

These are travellers who due to some urgent work or due to any

uncertainty needs to reach a specific place as soon and as fast as

possible. For such kind of travellers a number of seats are kept reserved

by Air India in every flight. Such travellers are not common and don’t

keep on coming back every time there are new travellers. The number

of people are less and hence the reserved seats kept are very low for

this market segment.

Travellers Visiting Relatives & Friends

These are general travellers who travel to visit relatives @ their native

place or friends staying far away. Such travellers are served by Air

India a normal ticket and services and discounts are usually not offered

directly.

Goods Transportation (Export Via Air)

Not only humans but also air lines pick and drop goods from one

destination to other at national and international level. Such transport

are attracted by Air India with special schemes and logistics portals.

B. Targeting By Air India

Tourism Agencies

Air India has a type with such agencies in order to sell their services.

They offer special discounts, bonus points and extra benefits to

agencies for selling their services via tourism agencies all over India

and abroad. These agencies are a major target in order to capture vast

customer segments

Online Ticket Sellers

These are sellers who specialize in selling tickets online via internet.

They don’t only extend their services to ultimate customers but online

selling widen their limitations of selling to sell to small ticket booking

agents.

Ticket Booking Agents

These are agents who book tickets for travelers to earn brokerage they

act like middleman between customers and companies. These agents

are also targeted by Air India in order to access sales. Air India does

this by providing such agents a high commission rates on sales of each

ticket and also some extra points which are redeemable.

C. Positioning By Air India

Their Own Website

Air India has its own website through which it does marketing and sales

of its services. The website link is www.airidia.com the link to fly to

your destination. They provide information of portals, ongoing

schemes and discounts, extra benefits on membership and special

holiday and festive discounts.

Via Yatra.com

They promote their air lines via Yatra.com as it is a famous online

portal to book tickets online via internet because it is famous listing

services on it and selling decreases cost of physical booking counters,

widen the area of sales and promotion and earn higher profits. This has

got huge sales generation for Air India.

Google Ad words

The very famous concept and used for online advertising and

promotion of goods and services. It also redirects to a specified link on

click as well as people not clicking can at least see the ads. Air India

has done positioning via Google Ad words and this has brought to their

website a huge traffic.

Ads Included In Tourism Packages

They include their ads in packages and catalog of tourism agencies by

influencing them by giving them higher commissions and incentives.

Such ads drags notice of customers and tune their mind to use travel

service of Air India which again maximize their sales.

Via Newspapers & Subscriptions

They give ads in newspapers in order to aware customers about their

services and ongoing offers and schemes. This is a good way of

positioning Air India in market as newspaper is read by all classes of

society.

Other Sources

They also promote selling of tickets and services given by them via

ticket bookings agents, magazines and different ad portals. They also

keep on switching to new positioning sources regularly to drive a mass

turnover.

Information Technology

Services Offered By air India through I.T. Department:-

1. Online booking

Online booking is a convenient way of booking your travel over the

internet

Benefits of Online Booking:-

• Book a flight and pay online for your travel.

• Request for a, special meal or service.

• Redeem your frequent flyer miles online.

• Check Flight status.

• View the Schedule/timetable.

• Also while booking online AI offers special fares for self, as well as

companion fares.

2. Web Check In:-

This is a facility through which passengers having confirmed booking

in an AI operated flights could check-in for the flight through AI web

site. Currently web check in is not available for travel from Bahrain,

Dhaka, Dubai, Muscat, Melbourne, Milan, Rome and Sydney.

Benefits of Web Check In:-

• Seat of my choice

• Saves time & Also Airport can be reached a little later, than

expected boarding timings

3. Mobile Check In:-

This is a facility through which passengers having confirmed booking

in Air India flights could check-in for the flight through their Mobile

phone by accessing URL http://flyai.mobi

Benefits Of Mobile Check In:

• Convenience of Passengers

• Simply having a web enabled Mobile Phone to avail this facility

Marketing Mix

The marketing mix refers to the set of actions, or tactics, that a company

uses to promote its brand or product in the market.

All the elements of the marketing mix influence each other. They make

up the business plan for a company and handled right, can give it great

success.

a) Product:

A product is seen as an item that satisfies what a consumer demands.

It is a tangible good or an intangible service. Tangible products are

those that have an independent physical existence. Typical examples

of mass-produced, tangible objects are the motor car and the

disposable razor. A less obvious but ubiquitous mass-produced

service is a computer operating system. The air transport service.

The airline product includes of two types of services:

• On the Ground Services.

• In-Flight Services.

b) Pricing:

Variety of structured price bands categorized on the basis of the

various combinations of routes (Short/long distances and number of

halts etc.) and categories (i.e. Business class, Economy class).

Premium Pricing, Value for Money Pricing, Cheap Pricing, Low-

Cost Pricing etc.

c) Promotions:

Point of purchases i.e. ticketing counters at traveling agencies,

online options (E.g. Membership promotions, couple tickets, Tourist

packages for agencies and various other individual and corporate

offers). Airlines Advertisement Needs to Keep in Mind the Image of

Country, The Scenic Beauty, Tourist Attractions, Rich Cultural

Heritages or Which Would Attract Number of Tourists.

d) Place:

• Ticketing counters delivering services.

• Online 24 hour reservation system

• Consolidation

• Tour Operator / Travel Agent

• Affiliated with company

e) People:

A team of skilled & professionally trained pilots, ground staff, flight

attendants, freight movers and packers, security personnel,

management decision makers and most importantly, customers.

f) Process:

To avail of the air service, there is online or manual booking of

tickets followed by confirmation at security desks on arrival at the

airport at least 2 hrs before the scheduled commencement of the

journey.

g) Physical Evidence

h) On the ground:

• Booking offices or ticket counters. • Paperwork. • Brand Logo. • Tickets

In-flight: • Aircraft. • Good Inner-exteriors. • Ambience.

• Labels or Tag

************