Project on

Airlines
SECTOR

Aviation Industry
Dhaval .B. Shah
{WRO 0280699}
Jimit .C. Doshi
{WRO 0280567}

ICAI
ICAI Bhawan
November 17th-December 25th
{5.00 pm. To 9.00 pm.}

CONTENTS
Introduction
History of Civil Aviation Industry
The New Policy
Changing Pattern of Government Regulations
Recent Developments in Civil Aviation
Domestic Air Carriers
Airport Infrastructure
Low Cost Airlines: A Preview
PEST Analysis
Segmentation Strategy
7 P’s of Marketing Mix
Case Study – King Fisher Airlines
“The commercial use of aircrafts for the carrying of persons, mail and cargo and
the name generally used in the aviation industry to describe the operations of
fortified air carriers is known as the airlines/aviation industry.” Aviation me
ans ‘Flying in the Air’ or the ‘Art of Flying’.
Airlines are one of the fastest growing industries in the world. It is occupying
a significant place in the transport management of today’s world. Both from pas
sengers and goods oper-ation, the air transportation services have been playing
an incremental role.
Tale of the Airplane
WRIGHT BROTHERS.
The Wrights began their efforts to invent the airplane by carefully studying wha
t others had done before. They studied the various hot air balloons trips and de
cided to make the aircrafts. The Wrights followed the example set by Lilienthal
and continued by Chanute of beginning with the glider. The Wrights also choose t
o pattern their aircraft after the Chanute-Herring biplane, a sturdy and relativ
ely successful biplane glider. Lilienthal s data on the lift of wing surfaces we
re used in their design of the 1900 and 1901 gliders.
By careful study, the Wrights identified the best features of past aircraft and
employed aero-nautical theory about the lift of wings to design their first cra
ft. Although it did not perform as expected, it was among the best gliders that
had ever been built.
History of Indian Aviation Sector
Travel by air in the modern sense began in India only in 1877, when
Joseph Lyna took off from the Lalbagh Gardens in Bombay, and ascended to an alti
tude of about 7,500 feet and landed at Dadra. In the years that followed, there
was a tremendous development of air transportation in India as in any other coun
tries due to technological advances and cooperation from the government.
India also has the distinction of organizing the first flight by an a
ero plane in the world in February 1911. This flight piloted by French pi
lot M. Picquet flew from Allahabad to Naini.
However, it took more than 20 years for the country to have its own
airline. In October 15, 1932, Tata Son’s Ltd – which later become A
ir India International – commenced weekly airmail service with a Puss Moth airc
raft between Karachi and Ma-dras via Ahmedabad and Bombay, covering ove
r
1,300 miles. Later two more airlines – Indian National Airways in 1933 and
Air Services of Indian in 1937 came up.
At the time of independence, the number of air transport companies, wh
ich were operating within and beyond the frontiers of the company, car
rying both air cargo and passengers, was nine. It was reduced to eight,
with Orient Airways shifting to Pakistan. These airlines were: Tata Airline
s, Indian National Airways, Air service of India, Dec-can Airways, Ambi
ca Airways, Bharat Airways and Mistry Airways.
In early 1948, a joint sector company, Air India International Ltd., was establi
shed by the Government of India. Its first flight took off on June 8, 1948 on th
e Mumbai (Bombay)-London air route. The joint venture was headed by J.R.D. Tata,
a visionary who had founded the first India airline in 1932 and he had himself
piloted its inaugural flight.
The Government then nationalized the airlines industry in 1953, with ena
ctment of Air Corporation Act, and assets of nine existing air companies were
transferred to the two new corporations – Air India International and
the Indian Airlines. After 40 years, in 1994 Air Corporation Act was repealed en
ding the monopoly of the national air corporations and enabling entry
of private operators.
Today, India occupies an eminent position in the civil aviation sector
with a large fleet of aircrafts. In all, 56 airlines are operating scheduled a
ir services to and through India and 22 foreign airlines are flying ove
r Indian Territory. There are over 450 airports and 1091 registered ai
rcraft in the country. In addition to the three public sector airlines Air I
ndia, Indian Airlines, Alliance Air - there are three private operators -
Jet Airways, Sahara India Airlines & Air Deccan. There are also 4
1 non-scheduled air transport operators. Additionally 34 applicants have
been granted NOC by the Ministry of Civil Aviation for setting up non-scheduled
air transport operation.
Estimates show that the domestic and international passenger traffic in India is
pro-jected to grow annually at 12.5% and 7% respectively over the next decade.
Indian airports are likely to handle 60mn international passenger
s and 300,000 tons of domestic and 1.2mn tons of international cargo.
The aviation industry in India has grown by leaps and bounds in recent years in
terms of kilometers flown as well as customers serviced. The economy of a countr
y is substantially determined by the quality of air transport. The airlines toda
y have made themselves more popular among its customers by various marketing tac
tics like:
• Reduced costs of air tickets for frequent flyers.
• E-ticketing i.e. virtually eliminating the need for agents. Reynar and E
asy jet two of UK’s low cost carriers have eliminated travel agents completely a
nd sell all their tickets online.,
• Selling tickets through online auctions,
• Various freebies and accommodation offers provided at lower rates.
• Improved and interactive staff.
• Increase in aircraft capacity

Changing Pattern of Government Regulations

In India is perhaps the most striking example of the progress made in the liber
alization of the Indian economy, a process that began a decade ago. Civil air tr
ansport business which hitherto had been the Government s monopoly has been comp
letely liberalized, as a result of which private airlines have been flourishing.
The process of disinvestment of Government equity in national carriers has bee
n initiated, private participation for airports has been further
 liberalized and the bilateral for operation of international services are being
further encouraged. This in turn has opened up immense opportunities f
or investment in the civil aviation sector in India. The steps taken b
y the government are as follows:
1. Investments Opportunities Foreign Equity
Foreign Equity up to 40% and NRI investment up to 100% is permitted in domesti
c air transport services. Equity from foreign airlines is not
permitted directly or indi-rectly.
2. Disinvestment of the Government Equity in airlines
Government of India decided to disinvest partly its shareholding in both Air Ind
ia and Indian Airlines, presently wholly owned companies of the Government. But
with general elections round the corner this issue has been put on the backburne
r with constant opposition from various sections of the society.
3. Entry-Exit barriers removed
Barriers to entry and exit from this sector have been removed. Only p
re-entry scrutiny to verify financial soundness, maintenance, security a
nd safety aspects of op-erations and human resource development proposal
s is done. Choice of aircraft type and size left to the operator.
4. Private participation in Airports
Foreign equity participation is allowed in ventures for airports, up to
74% automatic approvals and up to 100% with special permission. Participat
ion is also open to foreign airport authorities.
A variety of fiscal incentives has been provided to airport project,
as decided by Government from time to time. They are as follows:
• 100% deduction in profits for purposes of Income Tax for first five year
s.
• 30% deduction in profits for Income Tax purposes for next five years.
• Full deduction to run for continuous 10 out of 20 fiscal years of assess
ee s choice.
• 40% of profits from infrastructure also deductible for financial institu
tions providing long term finance for airport infrastructure projects.
5. Bilateral for operation of international air services
The Government has been more liberal in granting addit
ional entitlements to foreign airlines both in terms of capacity as well as in t
erms of points of call. The ex-isting air services agreement with United States
of America is an extremely liberal one as it allows any number of US airlines t
o operate services from/to India. US airlines are also allowed to decide the siz
e of aircraft and their frequencies.
6. Taxes and Tariffs
In order to facilitate acquisition of aircraft Government of India has
reduced ta-riffs for import of aircraft from 8% to Nil. Even aircraft
taken on lease do not attract cus-toms duties. India also has
a liberal Corporate Tax/Income Tax regime for airlines and encourages inves
tment by allowance of high depreciation rates.
7. Civil Aviation Policy
Having drawn up a successful growth model for the civil aviation secto
r, the Govern-ment is now engaged in evolving a comprehensive and integrated new
civil aviation policy, some of the major highlights of which are:
• All players and stakeholders are assured of a level playing field.
• Private participation is encouraged and opportunities are
created for investors to realize adequate returns on their investments.
• Rapid up gradation of airport infrastructure to world class is
encouraged with priority to the busiest airports and those handling
international flights.
• International cooperation in aviation and development in t
une with interna-tional trends and best practices, consiste
nt with airspace sovereignty is promoted.
After four decades of control, Civil Aviation sector has been liberali
zed with a view to draw benefits of efficiency, safety and quality in
service. Government has also opened doors to foreign participation in investme
nt in this sector.

Recent Developments in Civil Aviation

Civil Aviation:
The different types of civil aviation are:
• Domestic airlines (Indian Airlines)
• International airlines (Air India, Lufthansa)
• Chartered airlines (Evergreen, Deccan Aviation)
• Private helicopter services (Pawn Hans)
• Corporate aircraft (Reliance)
• Transport (Fed EX owns planes)
Airports:
The airplanes don’t own the airports. These are controlled by the agencies
like Airports Authority of India. AAI maintains the airports in India. Airlines
get the routes and landing rights. These can be either used by them or swapped (
e.g. Air India gave unused Delhi-London route to Virgin)
Classes:
• Passengers can avail different types of classes in airlines:
• Economy class
• Business class
• First class
The difference lies in various facilities like reclining seats etc. There is a s
ignificant difference in prices.
Marketing:
Airlines use conventional marketing methods for attracting customers. E.G.
• Advertising – The Singapore Girl campaign of Singapore Airlines
• PR- Public Relations by Richard Branson of Virgin
• Brand Mascot- Maharaja of Air India
• Schemes—Frequent flyer programmes of various airlines

PEST Analysis: The Indian Airline Industry

A PEST analysis is an analysis of the external macro-environment that affe

cts all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and T
echnological factors of the external macro-environment. Such external factors us
ually are beyond the firm s control and sometimes present themselves as threats.
For this reason, some say that "pest" is an ap-propriate term for these factors
. Let us look at the PEST analysis of the Indian aviation sec-tor:
1) P - Political Factors
In India, one can never over-look the political factors which influence ea
ch and every in-dustry existing in the country. Like it or not, the political in
terference has to be present eve-rywhere. Given below are a few of the political
factors with respect to the airline industry:
• The airline industry is very susceptible to changes in the political env
ironment as it has a great bearing on the travel habits of its customers. An un
stable political envi-ronment causes uncertainty in the minds of the air travele
rs, regarding traveling to a particular country.
• Overall India’s recent political environment has been largely unstable d
ue to interna-tional events & continued tension with Pakistan.
• The recent Gujarat riots & the government’s inability to control the sit
uation have also led to an increase in the instability of the political arena.
• The most significant political event however has been September 11. The
events oc-curring on September had special significance for the airline industry
since airplanes were involved. The immediate results were a huge drop in air tr
affic due to safety & security concerns of the people.
• International airlines are greatly affected by trade relations that thei
r country has with others. Unless governments of the two countries trade with ea
ch other, there could be restrictions of flying into particular area leading to
a loss of potential air traffic (e.g. Pakistan & India)
• Another aspect is that in countries with high corruption levels like Ind
ia, bribes have to be paid for every permit & license required. Therefore consta
nt liasoning with the minister & other government official is necessary.
The state owned airlines suffer the maximum from this problem. These airlines h
ave 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 st
ate owned airlines also suffers from 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 qu
ality of the service delivery & therefore these airlines shave to think of in-no
vative service marketing ideas to circumvent their problems & compete with the p
rivate operators.

2) E- Economic Factors
Business cycles have a wide reaching impact on the airline industry. Durin
g recession, airline is considered a luxury & therefore spending on air travel i
s cut which leads to reduce prices. During prosperity phase people indulge thems
elves in travel & prices increase.
After the September 11 incidents, the world economy plunged into global re
cession due to the depressed sentiment of consumers. In India, even a company li
ke Citibank was forced to cut costs to increase profits for which even the top l
evel managers were given first class railway tickets instead of plane tickets.
The loss of income for airlines led to higher operational costs not only d
ue to low demand but also due to higher insurance costs, which increased after t
he WTC bombing. This prompted the industry to lay off employees, which further f
uelled the recession as spending decreased due to the rise in unemployment.
Even the SARS outbreak in the Far East was a major cause for slump in the
airline in-dustry. Even the Indian carriers like Air India was deeply affected a
s many flights were can-celled due to internal (employee relations) as well as e
xternal problems, which has been dis-cussed later.
3)S- Social Factors
The changing travel habits of people have very wide implications for the a
irline industry. In a country like India, there are people from varied income gr
oups. The airlines have to rec-ognize these individuals and should serve them ac
cordingly. Air India needs to focus on their clientele which are mostly low inco
me 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 the
ir major clientele.
Especially, since India is a land of extremes there are people from variou
s religions and castes and every individual traveling by the airline would expec
t customization to the greatest possible extent. For e.g. A Jain would be satisf
ied with the service only if he is served jain food and it should be kept in min
d that the customers next to him are also jain or at least vegetarian.
 Another good example would be the case of South West Airlines which occupi
es a solid position in the minds of the US air travelers as a reliable and conve
nient, fun, low fare, and no frills airline. The major element of its success wa
s the augmented marketing mix which it used very effectively. What South West di
d was it made the environment inside the plane very consumer friendly. The crew
neither has any uniform nor does it serve any lavish foods, which indirectly red
uces the costs and makes the consumers feel comfortable.
4)T-Technological Factors
The increasing use of the Internet has provided many opportunities to airl
ines. For e.g. Air Sahara has introduced a service through the internet, wherein
the unoccupied seats are auctioned one week prior to the departure.
Air India also provides many internet based services to its customer such
as online ticket booking, updated flight information & handling of customer comp
laints.
USTDA (US trade & development association) is funding a feasibility study
and work-shops for the Airports Authority of India as part of a long-term effort
to promote Indian aviation infrastructure. The Authority is developing modern c
ommunication, navigation, surveillance, and air traffic management systems for I
ndia s aviation sector that will help the country meet the expected growth and d
emand for air passenger and cargo service over the next decade.
A proposal for restructuring the existing airports at Delhi, Mumbai, Chenn
ai and Kolkata through long-term lease to make them world class is under conside
ration. This will help in attracting investments in improving the infrastructure
and services at these airports. Setting up of new international airports at Ban
galore, Hyderabad and Goa with private sector partici-pation is also envisaged.
A good example of the impact of technology would be that of AAI, wherein w
ith the help of technology it has converted its obsolete and unused hangars into
profit centers. AAI is now leasing these hangars to international airlines and
is earning huge profits out of it. AAI has also tried to utilize space that was
previously wasted installing a lamination machine to laminate the luggage of tra
velers. This activity earns AAI a lot of revenue.
These technological changes in the environment have an impact on Air India
as well. Better airport infrastructure, means better handling of airplanes, whi
ch can help reduce maintenance cost. It also facilitates more flights to such de
stinations.
Segmentation: The Airline Industry
Most airlines use a very traditional segmentation strategy, dividing passe
ngers into busi-ness travelers and economy travelers (mostly leisure travelers).
The common strategy is to squeeze as much profit as possible from business clas
s passengers who are attracted by superior services and corresponding high price
s and, at the same time, to try and fill the rest of the seats and ensure growth
by attracting economy class passengers with lower fares. Following are the popu
lar segments:
1) Business passengers
They are crucial for airlines profitability. With less spare time and mor
e cash in their pockets, they agree to pay a premium price for a premium service
.
Today business passengers account for approximately 48% of passengers, and
these 48% contribute 66% of airlines revenue. The premium prices they pay prov
ide wider and more comfortable seats, better choice of meals and seats, luxuriou
s lounges.
Airlines can choose from a multitude of premium services to offer to busin
ess travelers. Some of these extras range from seats equipped with faxes and tel
ephones, to gambling machines, showers, massage services and suit ironing servic
es in the recently introduced arrival lounges.
Business passengers believe it is worth extra money if they can save time
and arrive looking fresh for an important meeting. Business passengers will avoi
d transit flights even if a longer flight could save them money. But amongst oth
er perks, flexible reservation services are probably the most important to them.
 Reservations for business trips are often made just a couple of days in advance
. A no penalty cancellation policy is also very important to business passengers
.
The best way to reach business travelers is through printed advertising. B
usiness news media, such as "The Economist" or "The Wall Street Journal" are som
e of the best publica-tions through which airlines can reach business travelers.
Many airlines design special pro-motional programs that target corporate booker
s and meeting planners, who are responsible for business trips reservations. Fre
quent flyer programs are an added bonus for business passengers.
2)Leisure Travelers
They represent a totally different market. The most important consideratio
n for most of them is the price. The lower the airfare, the more people will fly
the respective airline.
By and large, with the exception of wealthy travelers, this segment will n
ot pay extra for premium services and will agree to change several planes during
their trip if this option costs less than a direct flight.
Despite lower margins provided by this segment, leisure travelers are very
important to an airline s bottom line. Part of the reason is that technological
progress in the area of tele-conferencing and increased use of the internet for
business communications is expected to reduce the number of business travelers.
Thus, airlines are counting on the leisure segment to provide further growth.
How can airlines benefit from the growth opportunities in the leisure segm
ent without los-ing immediate profit opportunities in the business segment? This
is a tough issue in airline marketing management. By improving services and red
ucing prices for economy class pas-sengers, airlines risk that some business pas
sengers will switch to economy class.
This has already happened with Japan Airlines, for example, which was forc
ed to elimi-nate business class seats on some of its flights. On the other hand,
if an airline focuses on business class passengers, it risks losing its economy
class passengers to another airline.
Since business class passengers are not many, a company relying mostly on
business travelers will often end up flying half-empty planes, losing the potent
ial revenue generated by lower priced economy seats.
On the other hand, few airlines catering solely to economy class passenger
s can be suc-cessful because a low fare carrier must fill the entire plane if it
is to generate revenue from its low-margin operations.
The allocation of business and economy class seats on a plane is determined th
rough a process called yield management. A good yield manager knows the approxim
ate proportion of business and leisure travelers for each flight in advance, bas
ed on sophisticated statistical models.
Thus he/she tries to sell early, the economy seats at a cheaper price, while ke
eping enough seats reserved for business travelers, who usually book at the last
minute. Keeping just the right amount of business seats reserved is important:
selling too few economy seats in ad-vance may result in a less-than-full plane w
hile selling too many economy seats may result in a full plane, but with insuffi
cient revenue to gain a profit.
This kind of segmentation serves airlines well enough when implemented wit
hin one company. It would be very difficult for any single airline to target jus
t one of these two seg-ments - business or leisure - successfully.
There are exceptions - small regions that serve destinations where the maj
ors do not fly, for example, are in a better position to implement a low price p
olicy. They can even get busi-ness travelers to fly them despite the lack of pre
mium services because no other airline would get them there. Southwest is a clas
sic example, proving that low cost carriers can thrive.
Major international carriers, however, need to target both the business an
d the leisure segments they may also target different ethnic and geographical se
gments differently, de-pending on the markets from which they draw the majority
of their customers.
For example, even though Japan Airlines advertise extensively to the Ameri
can public, their message -"Your needs. Your Airline," seems to work best for th
e traditional Japanese audience.
Inside one country, two national carriers may also focus on different dest
inations, which is the case with Canadian Airlines and Air Canada. Passengers t
astes determine airlines strategies. While British Airways focuses on comfort a
nd luxury, valued by European pas-sengers, Air Canada equips its business class
seats with plugs for laptops and telephones, appreciated by North American busin
ess travelers.
MARKETING STRATEGIES
Airlines formulate their Marketing Strategies keeping in mind the 7 P’S of the M
arketing Mix
The 7P’s of Marketing Mix
1) Product Mix
Getting the product right is the single most important activity of marketing
. If the product isn t what the market wants, no amount of price adjustment or b
rilliant promotion will encour-age consumers to buy it. The airline product is q
uite a complex one since it comprises of a service of incorporating the temporar
y user of airline seat and certain tangible products such as free flight bags or
a free bottle of duty free spirit to encourage booking.
The airline product includes of two types of services:
1. on the ground services,
2. In-flight services.
The on-the-ground services include a convenient airport with car parking facilit
ies, duty free shopping quick and efficient checking of baggage, efficient serv
ice at reservation counter, transport to the airport, etc.
The service provided inside is intangible and is highly variable. The airh
ostesses are trained to provide polite, warm and courteous service. The courteou
s service that the repre-sentatives at the baggage counter, reservation counter
provide goes a long way in develop-ing customer loyalty. The travel agents of th
e airline.
Differentiating the Product
It is important to recognize that what es also need to be efficient and po
lite. the con-sumers are demanding are not products, or features of products bu
t the benefits they offer. Producing added benefits thus helps the marketer to d
istinguish one product from another. Good design or style of service can form th
e basis of differentiation. This enables the com-pany to create a personality fo
r its service. The design and decor of the aircraft provides op-portunities to p
ersonalize their product as well as periodically to update them when differen-ti
ation under IATA regulations was virtually excluded, nonetheless, certain airlin
es were able to develop distinct personalities. Eagle Airlines created an entire
ly new market between New I York and Bermuda, for e.g. by developing an image of
a friendly airline distinctive from other airline serving the route. A similar
style was evident in Richard Branson s Virgin Airways.
LEVELS OF PRODUCT
FOUR PRODUCT LEVELS
1) The Core Service
The core service of the airlines industry is to transport goods and servic
es to various destinations.
2) The Supplementary Services
The airline industry has many players they had a brand name like ‘Air Indi
a’,’ Jet Air-ways’,’ British Airways’. All of them had some common services to o
ffer like connecting flights, through check-in, tele check in, food on board, an
d complementary gifts etc.
Different classes like economy class, business class were introduced. Air
concessions are given to school students, old people etc. Singapore airlines wer
e the first to introduce small 8”television screen for every passenger. The free
bies are actually win-win deals be-tween airlines and other services.
 All these added service helps the customer to decide upon which airlines h
e wants to travel. As competition increased and the customers wanted more the ne
xt phase evolved and that is the augmented service.
3) The Augmented Service
This phase is where the customer’s expectations are met; the service provi
ders kept working on new methods to meet the ever-changing customers’ demands. T
he players intro-duced online booking, which was very convenient for the service
users.
For Eg. British Airways business class has showers; it’s more spacious and
comfortable. Sahara airlines offer its passengers six different types of cuisin
e like vegetarian, fat free, di-abetic etc.
This phase is the most crucial one; with increased competition service will beco
me the final differentiation.
4)Future Service
As mentioned above the customer needs keep changing, the future is unknow
n. The customers may be looking in for more frequent inexpensive air travel, som
ething like air tax-is, super sonic speed. This decreases the time thus reducing
the cost.
The diagrammatical representation of the core and supplementary services in the
airline industry is shown below:

2) Price Mix
Price plays as much a tool of marketing as promotion plays a critical role
in the marketing mix. The concept of fair price is paramount. Buyers judge wh
ether a product is fairly priced by seeing whether it represents value for money
. Pricing can be classified in three ways.
DIVISION OF FARES:
The final fares charged to the passengers include the following components:
o Basic fares
o Insurance
o Inland Aviation Travel Tax (IATT).
o Passenger Service Fee (PSF)
The basic fares include the operating cost incurred by the airlines and the p
rofit margin. The major constituents of the operating cost in respect of domesti
c airlines in India are the Aviation Turbine Fuel (ATF) the basic raw material f
or this service industry, varies 30-40 % depending on aircraft utilization; Navi
gation, Landing & Parking costs 7-10%; Repair and Maintenance 13%, Manpower 12%;
Acquisition/ Depreciation & Insurance 13% and balance other expenses.
Pricing Strategies
a)Premium Pricing:
The airlines may set prices above the market price either to reflect the
image of quality or the unique status of the product. The product features are n
ot shared by its competitors or the company itself may enjoy a strong reputation
that the brand image alone is sufficient to merit a premium price.
b)Value for Money Pricing:
The intention here is to charge the average price for the product and emp
hasize that it represents excellent value for money at this price. This enables
the airline to achieve good levels of profit on the basis of established reputat
ion.
c)Cheap Value Pricing:
The objective here is to undercut the competition and price is used to trigg
er the purchase immediately. Unit profits are low, but overall profits are achie
ved. Air India and Indian Airlines have slashed their prices to meet the competi
tion of private airlines so that they can consolidate their position in the mark
et.
Airlines usually practice differential pricing. There are three classes: The
First Class, The Executive or Business Class and The Economy Class. Fares for ea
ch class are different since the facilities provided and the comfort and luxury
level is different in each class. Sea-sonal fares are also fixed, fares rise dur
ing the peak holiday times.
d)Low-cost Pricing:
With the advent of the low-cost airlines in the Indian aviation industry,
a different low-cost flying concept has come up. Since these low-cost airlines a
re trying to woo the customers by providing air travel in exceptionally low pric
es, a price-band kind of pricing has to be de-signed.
In low-pricing strategies, the airlines provide very low prices for the fl
ight tickets. Also, they prices are made cheaper by booking the tickets long bef
ore the flight date.
e)APEX Fares
In this scheme, people are given very cheap rates only if tickets are booked atl
east before the specified time period. But the draw-back here is that if the boo
king is cancelled, a sub-stantial amount of money is not returned.
3) Place Mix
Marketing-channel distributions are among the most critical decisions facin
g the man-agement. The companies chosen channel ultimately affect all the other
marketing decisions.
"Marketing channels are sets of ‘interdependent’ organizations involved in
the process of making the service available for consumption".
Understanding what, where, why, when, and how the target market buy, is the
first step in designing the marketing channel. The marketer must understand the
service output levels desired by the target market and types and levels of serv
ices that the people want and ex-pect when they purchase the service.
Distribution channels
The Four methods of distribution are as following:
• Consolidation: The direct sale of tickets from airport to the passenger
on the airline desk.
• Tour Operator/ Travel Agent: Customers approach travel agents or tour op
erators who book the tickets from the airline and take commission. E.g. SOTC
• Affiliated with companies: As the name defines, airlines gets affiliated
with compa-nies who carry all its trips with a same airline who in turn gives s
pecial discounts or offers in return.
• Direct through home leased system, e.g. Phone, fax, email and also onlin
e e-booking
4) Promotion Mix
The formulation of an ideal promotion mix is essential to inform sense and
persuade the users. In the Indian perspective, we need more creative efforts bec
ause the potential users in a majority of the cases don’t prefer to use air serv
ices. The business magnets, executives, politicians, actors, high spending touri
sts etc are some of the users of the air services. The users appears to be
more conscious, aware of their rights and in a majority of the cases a
re found to be sophisticated and therefore the promotional efforts have to be cr
eative. Many airlines are facing financial crunch, it is pertinent that they mak
e optimum use of different components of promotions. They are as follows :
a)Advertising
Airlines need creative advertisements to promote their business. In the view
of rising cost of inputs and the increasing impact of worldwide econom
ic depression on the airlines, advertisements should be budget optimisti
c vis-à-vis optimal. The telecast media and print media are important for promot
ing the air business.
The airlines have to make sure that whatever strategic decision they make to
promote the businesses are in a position to establish an edge over co
mpetitor’s promotional meas-ures. Also the airlines should keep in mind the qual
ity and the nature of the target markets and the level of expectations.
This is essential to make advertisements proactive for the expansion of busine
ss. They are also required to assign due weight age to the efforts made for proj
ection of positive image.
We can’t deny the fact that both Indian airlines and Air India have been facin
g image prob-lems. The ads may be efficacious in transmitting the facts and remo
ving the image problem. It is also essential that while advertising airlines sho
uld also keep in mind the image of our country, the scenic beauty, tourist attra
ctions, rich cultural heritages or which would attract number of tourists. While
advertising it is impact generating that one should select an oppor-tune moment
of flight is an attractive scene of take off, and so on. Airlines can also use
broadcast media. The domestic flights should use radios because due to increasi
ng access to FM.
b)Publicity
Publicity is an important component of promotion mix. It is a process of persu
a-sive communication. It is very instrumental in sensitizing the persuasion pr
ocess provided the media people, public relations officers provide their
help. Strengthening the PR activi-ties is essential to promote airlines business
. The PRO, Receptionist, Travel agents, Media people are very important people i
n publicizing the business. The marketing professionals can seek the cooperat
ion of media people by organizing dinners, meetings, get together, press confere
nce etc, also giving them small gifts and motivating them to publish news items
which are in favor of airlines.
c)Sales promotion
The sales promotion measures are meant for both the related sources channel si
ng and using the business, such as the travel agents, tour operators and all of
them who process the services and the passengers and business houses who use the
services.
The travel agents contribute a lot to the promotion of airlines business and t
herefore the need to think of them in their favor on their priority basis. In ad
dition the tour operators, the frontline staff also must be given priority. Henc
e they should be offer some incentives this will motivate them to promote the p
roduct. The user also deserves incentives.
The incentives may be in the form of confessional services, a small gift etc.
E.g. EMIs, which allow customers to pay in installments.

d) Judo Tactics
‘Easy Jet’
A] GO flight which was supposed to be the media event for BA resulted into a Dis
aster be-cause ‘easy Jet’ bought 10 tickets of the flight and gave free coupons
of easyJet to the 148 passengers.
B] Awareness on the wing of its Rivals: Contest on web offering FREE flight vouc
hers for guessing how much BA’s GO would lose during the year.

e) Word of mouth
‘Customer Loyalty Ladder’
This happens to be an important constituent of the promotion mix in which the pr
omoters act as a hidden sales force. The satisfied groups of users, opinion lead
ers narrate outstanding merits or salient features of services used by them.
If you travel by Air India and are satisfied with the services offered by t
hem then it is natu-ral that you will share your experiences with your friend’s
relatives, they trust in you and therefore the stimulation process is on. The mo
ment your friends and relatives get an oppor-tunity to travel they find Air Indi
a their first choice.
Ads may be ineffective, publicity may also be ineffective but word of mouth
can never be ineffective
5) People Mix
In the service industry, service personnel come in direct contact with th
eir customers in the course of production and consumption of the services.
Because people provide most services, the selection, training, and motivati
on of em-ployees can make a huge difference in attaining customer satisfaction.
Ideally, employees should exhibit competence, caring attitude, responsiveness,
initiative, problem solving ability, and goodwill. Many service organizati
ons trust their people enough to empower their front-line personnel to resolve c
ustomer problems.
The airhostess in any airline come in contact with the customers in the pro
cess of provid-ing the service, while the cock-pit crew are employees who contri
bute to the service product but do not come in direct contact with the customers
.
The physical presence and the percentage of time the customer is present r
eflect the customer contact and extent of contact respectively. Services
with high contact are more difficult to control and manage because of the degre
e of variability in the quality, demand and nature of service.
The service contact personnel in the airline industry is an airhostess who
is expected to possess a pleasing personality with polite service hand
ling. While on the other hand the cock pit crew, being categorized as a low con
tact personnel, require possessing high analytical and technical attribut
es. In the airline industry, there is also the ancillary service personnel, the
travel agent who helps to create the service exchange but is not a part of the s
ervice.
While delivering services, airlines ensure that the service is delivered as
promised and this is often totally with in the control of the front-line staff.
This ensures some amount of re-liability. This in turn affects the degree
Of responsiveness sought from customers. The quality of service that the front-l
one staff provides is highly depended on his/her ability to communicate their cr
edibility. Air-lines deliver caring and individualized attention to customers t
hrough their airhostesses. Empathy implies that these personnel will listen, ada
pt, and be flexible in delivering what in-dividual customers need. Also the appe
arance of an employee are important aspects as it forms the tangible dimensions
of quality along with other factors like service quality, decor etc.
To start off, airlines hire the right personnel with essential requirements
. They recruit the right people and develop, and train them to deliver quality s
ervice. These employees are provided with effective and sufficient support syste
ms and are motivated in a manner, they stick to the organization. They are more
treated as customers, rather than employees. For example, Delta Airlines recruit
s an employee, and moulds him to cater to their demands. These employees are sen
t to places like the US and Frankfurt on a 21 day training pro-gramme. The succe
ssful completion of this training motivates the staff to stay on with the air-li
ne. They are provided with offers such as one-month bonus or some incentive, on
the achievement of the sales target.
6) Process Mix
The process of airline service lays emphasis on the involvement of channe
ls, front line staff, travel agency offices, offices of the tour operators or so
form where the services flow & reach to the ultimate users.
The process begins at the time of reservation goes on to the co
nfirmation of seats. For e.g.: Computer reservation system of Indian Ai
rlines enables any reservation request from anywhere in the world to be auctione
d in minutes. The reservation facility is accessible through all-major computeri
zed reservation system of the world.
By giving details of where to book and how to book airlines help in providi
ng quality ser-vices to the customers. They also offer concession, by not chargi
ng any cancellation charges and also giving them the option to make a change in
the reservation status if he re-quests so on the presentation of ticket, all the
se facilities go a long way in increasing pas-senger convenience.
Then facilities at the airport, the baggage handling, flight information, etc
. also helps in de-livering quality service and making travel a pleasure.
In the aircraft the meal service, in-flight entertainment, reading material,
in-flight amenities, etc. help the customers, the travelers to have an enjoyable
and convenient travel.
All these procedures form a part of the total process designed to deliver q
uality service. Airlines are making every effort to constantly redefine service
procedures to enhance service satisfaction levels.
7) Physical Mix
Physical Evidence refers to the environment in which the service is delivered a
nd where the service industry and customer interact. The aircraft by itself, the
seating configuration meant to be comfortable and spacious, and the in-flight f
ood provide physical evidence to the airline service.
The Boeing Company and The Airbus Industry are the best commercial aircraft
makers and almost all airline industries make use of one of these airlines.
The seating is such that it is comfortable and there is enough leg space.
The in-flight food is another, important aspect, a wide selection of meals is
offered to the passengers. Passengers are requested to indicate their
reference at the time of reserva-tion itself. Delta Airlines has introduced new
sleeper seats with electric controls for reclining lumbar support, leg rest ext
ension, expanded seat back height for a more insulated envi-ronment etc. thus pr
oviding highly comfortable seating.
Booking offices, ticket counters, etc. must be spacious and well designed with g
ood looks. Further the air crafts must be given good exteriors and must be maint
ained wel1.
The aircraft must have elegant interiors and must be incorporated with all basic
facilities. The aircrafts must have well designed seats with more leg room esp
ecially in the business class.
Domestic lounges are enhanced with good interiors and basic amenities whic
h will make it an ideal place to conduct business, entertain or relax.
The jet logo prominently displayed on each of its aircrafts, is used a cue
to trigger of a reminder of the customer’s experience at Jet & also of all the v
alues that jet airways stands for.
The physical evidence would also include the other facilities in the aircraft.
Some of the bigger aircrafts have more than the usual facilities on board. Thes
e sort of tangible clues act as identification marks for the airline & help the
customer to evaluate on airline from another.
To provide safe and efficient operations, set industry standards, provide excell
ent customer service developing a well trained and highly motivated workforce. W
e aim to revolutionize the way India flies.

ABOUT KINGFISHERS
Kingfisher Airlines is India s first and only private airline to commence operat
ions with a brand new fleet of aircraft. Kingfisher Airlines offers Full Service
at True Value and promises an unparalleled experience to the Indian air travele
r. For the first time in the Indian skies, Kingfisher Airlines offers world-clas
s in-flight entertainment with personal video screens for every seat. There’s a
wide selection of 5 video channels and 10 audio channels available on-board. Als
o on offer are extra-wide seats and spacious legroom, delicious gourmet meals, i
nternational-class cabin crew and a whole host of comforts and delights. Kingfis
her Airlines also facilitates doorstep delivery of tickets on guest request. Fly
the Good Times with King-fisher Airlines.

SERVICES PROVIDED BY KINGFISHER AIRLINES

In-flight entertainment to take-off with
Personalized screens and headphones broadcasting 5 video channels and the exclus
ive Kingfisher Radio – 10 audio channels to make your journey an entertaining ex
perience.
Feeling comfortable, now?
You will, with the seats we’ve got in store for you. Indulgently wide, plenty of
legroom and adjustable headrests. Our superbly groomed flight attendants will e
nsure that you’re well taken care of.
Bon appetite
A special selection of food and beverages are available on board.
The little details
The Kingfisher Class experience begins even before you step on board. When you b
ook your ticket online in the comfort of your home or office. At spacious termin
als. At the convenient self Check-in counters.
OTHER FEATURES OF KINGFISHERS
Information
Customers can avail of information literally at their fingertips today with KING
FISHER starting its own website which gives complete details to the customer & a
lso entertains que-ries. In case of airline industry, up to date information reg
arding flight schedules, ticket fares, information about promotion schemes etc a
vailable to customers.
It also includes providing information to employees regarding new policies affec
ting the airline & equipping them with enough information, which the customers m
ight demand. Ex-tensive training is provided to in-flight attendants regarding h
andling customer queries, knowledge about the airplane itself, knowledge about c
uisine etc.

Consultation
KINGFISHER is moving more actively into the role of consultant today. They are d
oing away with the travel agents & designing & selling packaged tours to consume
rs directly.
In this aspect they often act as consultants to the customer, by giving him advi
ce & sug-gestions regarding the type of plan he can choose, the benefits he will
get the mode of travel he should choose etc.
Another aspect to consultation is when the customer approaches the airline regar
ding traveling to particular destination, they gives him a variety of choices of
routes that he can take.
In some cases also design special menus & benefits in consultation with its freq
uent fliers by keeping in constant touch with them & asking them for suggestion
as to what they want in their airline which will make their experience more comf
ortable.

Order taking
The order taking procedure is essentially the booking procedure. The important a
spect to be noted here is that the procedure is smooth, easily understood & fast
. Reservation of airline tickets is now easy and reliable since it is fully comp
uterized. There are 24 hours reser-vations. Passengers can specify their seat pr
eferences at the time of reservation.
KINGFISHER uses the telephone, fax, and email methods of booking. The emphasis h
ere is on fast booking & at the same time getting the required information form
the custom-er. This is done by establishing a standard reservation procedure & f
ormat thus reducing the risk of inconsistent service delivery. The online bookin
g system also facilitates better order taking & processing.
The scheduling aspect assumes importance as reservations on the wrong flight to
the wrong place are likely to be unpopular.
Hospitality & Caretaking
With the increased competition today in the airline industry & the increasing si
milarity of services offered by each airline, hospitality has emerged as a key-d
ifferentiating factor be-tween one airline & the other.
The hospitality aspect of KINGFISHER is tested right form the time of the reserv
ation (courtesy of the booking official) to the airline’s desk at the airport to
the actual in-flight travel (the attitude of the flight attendants) to the post
flight help extended.
Safekeeping
The safekeeping issue is that of safeguarding the customer’s baggage. Bagga
ge allow-ances are offered about 30 kgs of check-in baggage is allowed. The cust
omers entrust his baggage to KINGFISHER & it is then their responsibility to kee
p it in a proper condition.
Children and infants usually travel along with their parents and guardian. In ca
se of un-accompanied minors, customer service staff renders all assistance like
checking in and es-corting up to the aircraft and handing over to the senior-mos
t cabin attendant on board the flight. He is looked after on board the flight ri
ght up to the point flight reaches the destination and he is received by his gua
rdian.
Exceptions
Special requests – They very often receive special requests form customers with
regards to meal preferences, special amenities for elderly people or children.,
medical needs etc. these needs have to considered & acceded to wherever possible
.

Billing & payment

The billing procedure is simple. The options available to the customer are plent
y including credit card & travelers Cheques. KINGFISHER use the open account sys
tem with their corporate clients. Frequent fliers are also given special payment
privileges.
TYPES OF CUSTOMERS OF KINGFISHER

Business passengers
They are crucial for KINGFISHER’profitability. With less spare time and more cas
h in their pockets, they agree to pay a premium price for a premium service.
Today business passengers account for approximately 48% of passengers, and these
48% contribute 66% of their revenue. The premium prices they pay provide wider
and more comfortable seats, better choice of meals and seats, luxurious lounges.
KINGFISHER has a multitude of premium services to offer to business travelers. S
ome of these extras range from seats equipped with faxes and telephones, to gamb
ling ma-chines, showers, massage services and suit ironing services in the recen
tly introduced arrival lounges.
Business passengers believe it is worth extra money if they can save time and ar
rive looking fresh for an important meeting. Business passengers will avoid tran
sit flights even if a longer flight could save them money. But amongst other per
ks, flexible reservation services are probably the most important service being
offered to them. Reservations for business trips are often made just a couple of
days in advance. A no penalty cancellation policy is also very important to bus
iness passengers.
Leisure Travelers / Passengers
They represent a totally different market. The most important consideration for
most of them is the price. The lower the airfare, the more people will fly. By a
nd large, with the ex-ception of wealthy travelers, this segment don’t not pay e
xtra for premium services and don’t agree to change several planes during their
trip if this option costs less than a direct flight.
Despite lower margins provided by this segment, leisure travelers are very impor
tant to their bottom line. Part of the reason is that technological progress in
the area of tele-conferencing and increased use of the internet for business co
mmunications is expected to reduce the number of business travelers. Thus, KINGF
ISHER is counting on the leisure segment to provide further growth.

PRICE ANALYSIS
Price plays as much a tool of marketing as promotion plays a critical role in th
e marketing mix. The concept of fair price is paramount. Buyers judge whether
a product is fairly priced by seeing whether it represents value for money. Pric
ing can be classified in three ways.
DIVISION OF FARES:
The final fares charged to the passengers include the following components:
• Basic fares
• Insurance
• Inland Aviation Travel Tax (IATT).
• Passenger Service Fee (PSF)
The basic fares include the operating cost incurred and the profit margin. The m
ajor consti-tuents of the operating cost in respect are the Aviation Turbine Fue
l (ATF) the basic raw ma-terial for this service industry, varies 30-40 % depend
ing on aircraft utilization; Navigation, Landing & Parking costs 7-10%; Repair a
nd Maintenance 13%, Manpower 12%; Acquisition/ Depreciation & Insurance 13% and
balance other expenses.

How are fares arrived at?

In capacity (seats) and frequency (flights) between any two points, market resea
rch the route in order to arrive at the total potential for that segment. In ot
her words, the capacity and fre-quency is tailored to the size of the market. A
ccordingly, the pricing structure is also arrived at. Pricing or fare levels ar
e arrived at after taking into consideration various factors; type of aircraft,
configuration of aircraft (number of seats), density of route, competitor activi
ty, and minimum breakeven cost.
In order to achieve the breakeven seat factor and thereafter maximize loads, the
y embark upon a series of marketing activities. These will vary from a publicit
y campaign hig-hlighting various facets of the Product, to sales, service, punct
uality, ideal departure and ar-rival timings, connections and so on. In short,
the entire focus is to increase the yield and load factor (seat factor). The yi
eld or the bottom line is the income generated from ticket sales less costs incu
rred on the route.
Why do fares fall?
When the yield drops or the seat factor falls, there is an immediately alerted t
o enquire into the causes for this. This leads to a fare war wherein the airlin
e either tries to protect its market share or responds to another airline which
tries to increase its own market share.
VARIOUS PRICING STRATEGIES
Premium Pricing:
KINGFISHER sets prices above the market price either to reflect the image of qu
ality or the unique status of their product. The product features which are not
shared by its competitors. The company itself enjoy a strong reputation that the
brand image alone is sufficient to merit a premium price.¬
Value for Money Pricing:
The intention here is to charge the average price for the product and emphasize
that it represents excellent value for money at this price. This enables them t
o achieve good levels of profit on the basis of established reputation.

Cheap Value Pricing:

The objective here is to undercut the competition and price is used to trigger
the purchase immediately. Unit profits are low, but overall profits are achieved
. KINGFISHER have slashed their prices to meet the competition of other private
airlines so that they can consoli-date their position in the market.
KINGFISHER usually practice differential pricing. There are three classes: The F
irst Class, The Executive or Business Class and The Economy Class. Fares for eac
h class are different since the facilities provided and the comfort and luxury l
evel is different in each class. Sea-sonal fares are also fixed, fares rise duri
ng the peak holiday times.
Low-cost Pricing:
With the advent of the low-cost airlines in the Indian aviation industry, a diff
erent low-cost flying concept has come up. Since these low-cost airlines are try
ing to woo the customers by providing air travel in exceptionally low prices, a
price-band kind of pricing has to be de-signed.
In low-pricing strategies, KINGFISHER provide very low prices for the flight tic
kets. Also, the prices are made cheaper by booking the tickets long before the f
light date.
APEX Fares:
In this scheme, people are given very cheap rates only if tickets are booked at
least before the specified time period. But the draw-back here is that if the bo
oking is cancelled, a sub-stantial amount of money is not returned.

ANALYSIS OF TICKET BOOKING PATTERN OF KINGFISHER

IN 2007 AND 2008

INCREASE AND EXPECTED INCREASE IN THE TWO MAJOR SOURCES OF INCOME OF KINGFISHER
1) INCREASE IN CARGO (MILLION TONNES)
(DOMESTIC)
INCREASE IN PASSENGER REVENUE (%)
Thus it is very clear that over the years KINGFISHER has shown a tremendous incr
ease in its revenue.

COMPARITIVE EARNING OF OTHER AVIATION INDUSTRY IN INDIA AGAINST KINGFISHER IN TH

E YEAR 2006
(Rs. IN CRORE)

COMPARATIVE EARNING OF KINGFISHER AGAINST OTHER INTERNATIONAL AVAITION INDUSTRY

IN THE YEAR 2006
(Rs. IN CRORE)

For KINGFISHER Mumbai to Dehli sector has been the major source of revenue. It
has ac-counted for 11.3% of its total revenue. It is not only a revenue generat
ing sector but also a major profit generating sector for kingfisher. Hence they
all provided the best facilities like best seats, best terminals, frequent flig
hts, best scheduled flights between Mumbai and Dehli. There has been a 70% incre
ase in the number of flights between the two cities
 QUARTERLY SCHEDULE OF OPERATING REVENUE OF KINGFISHER
(Rs. IN MILLIONS)

DOMESTIC

MARKET SHARE OF KINGFISHER AND OTHER AVIATION INDUSTRIES IN INDIA

IN THE YEAR 2008

KINGFISHER V/S JET AIRWAYS

(MALLYA
V/S GOYAL)
On October 28, at a ceremony to unveil Air Deccan s new-look aircraft in Mumbai,
On Octo-ber 28, at a ceremony to unveil Air Deccan s new-look aircraft in Mumba
i, chairman of Unit-ed Breweries group and Kingfisher Airlines, Vijay Mallya, sa
id with characteristic flourish: "We have given the full service carriers a run
for their money. Now, we will give the low cost carriers a run for theirs."
Though he did not refer to any one airline, it was clear his statement was direc
ted at Jet Air-ways and Jetlite (formerly Air Sahara). Ever since Mallya launche
d Kingfisher in May 2005, making it number one in India has been a foregone conc
lusion; it s the world s biggest carriers he wants to take on.
Kingfisher s meteoric rise has taken rival and unquestioned number one domestic
carrier in the country, Jet Airways, quite by surprise. Used to competing with o
nly Sahara (never a worthy opponent anyway), Jet enjoyed several years of unfett
ered success after it had trounced Indian Airlines s monopoly and market, becomi
ng India s premier airline since 1993.
This supremacy has now been challenged by a nimble and aggressive Kingfisher whi
ch, in just two years and following Mallya s buyout of Air Deccan, is commanding
the same market share as Jet Airways and Jetlite.
He may not publicly admit it but Goyal s troubles began soon after Kingfisher to
ok to the skies. "If Naresh Goyal had a magic wand, he d probably wish away the
last two years. Few things have gone right for his airline since the second half
of 2005," says a close associate who was on his board but has since resigned.
In Mallya, Goyal appears to have found his first worthy opponent. If Goyal is we
ll connected and knows how to keep the politicians beaming, Mallya is "not exact
ly an orphan".
If Goyal has managed to hire professionals and build a brand, Mallya is a past-m
aster at building brands. And if Jet has never had a problem raising money befor
e, Mallya has group United Breweries (with a market capitalisation of $5 billion
) backing him.
In its initial avatar Kingfisher was aiming to be a low-fare carrier, but soon a
fter its launch Mallya converted it to premium service, taking Jet head-on. Mall
ya is spending money like water (the airline lost Rs 400 crore in the first year
) and has left no stone unturned to grab Jet s market, launching direct advertis
ing campaigns asking Jet fliers to convert to Kingfisher, luring them with miles
, better food and a slicker, cooler yet equally efficient option.
Mallya is proving to be "maniacal" about being on time; every delay is examined
threadbare in a much dreaded early morning conference which he conducts over the
telephone with his senior executives, no matter which part of the world he s in
.
When Kingfisher started, many in the industry had questioned its survival. "Not
only has it survived," says Kamal Choubey, officer on special duty to civil avia
tion minister Praful Patel, "one simply cannot deny that Kingfisher s product is
the best in the industry."
There are few who appreciate Jet s subtle, quiet efficiency when it s up against
Kingfisher s flamboyance. Gopal Sarma, CEO of Feedback Ventures, who accumulate
d 400,000 miles on Jet Airways frequent flier service, says he now often choose
s Kingfisher simply because its service on the ground is so superior.
He received a Kingfisher Gold card in the mail and has already accumulated 80,00
0 miles on it. "If I call Kingfisher and ask to be put on a flight in two hours,
they give me incredible ser-vice. With the amount I travel, I appreciate things
like this," he says.
Other than the corporate flyer, Kingfisher is trying to attract the young, upwar
dly mobile In-dian who aspires to fly Kingfisher simply because he identifies wi
th Mallya and his style statement of living life king-size. Mallya s passion for
his airline (some call it obsession) is very clears.
In 2006, Jet s initial troubles were compounded by its messy buyout of Air Sahar
a which many feel was simply a move to thwart Kingfisher from acquiring it. Agai
nst the advice of his senior colleagues, Goyal offered Rs 2,300 crore (Rs 23 bil
lion) for it, a pretty high price for the airline.
"It was like a bee in his bonnet. Once he set his mind to it, he refused to back
down, even though everyone warned him it wasn t a great buy," says a senior off
icial who has since left Jet.
As was widely predicted, Jet s share price reacted adversely and has never recov
ered to what it listed at. The company s total market capitalisation following t
he announcement of the Sahara deal fell from over Rs 10,000 crore (Rs 100 billio
n) to Rs 4,558 crore (Rs 45.58 bil-lion).
The moment the deal was called up, the share price recovered somewhat - a clear
indication of what the market thought of the Sahara buy, but even today it is tr
ading below the price at which it listed.
At roughly the same time the civil aviation ministry threw open international ro
utes to private carriers. Jet saw this as a natural extension to its business (a
nd one where it enjoys first-mover advantage) and ordered new aircraft.
With competition rising and losses deepening (in the first half of 2006-07, it t
otted up losses over Rs 100 crore), it needed to raise money and the intention w
as to do that through foreign currency convertible bonds (FCCB) of $400 million.
But with the share price languishing in the Rs 600-800 range, Goyal would have b
een forced to dilute a larger portion of his equity than he was willing. So, the
issue was postponed.
Around the same time as Jet announced its buyout of Sahara, Air Deccan listed. B
y then Goyal had seen Air Sahara at close quarters and even he realised it was n
ot worth the money he d committed - but withdrawing proved harder than he d expe
cted.
"As the court battle with Sahara proceeded, it was far from evident what the fin
al judgment would be. I think he (Goyal) chose to go in for a known position rat
her than an uncertain one, which could be worse," says a Jet official, who was p
rivy to the goings-on.
These events coincided with a bloodbath in fares in the domestic market as Air D
eccan cut prices to take on new competition, and the new competition cut prices
to take on Air Deccan.
"All the players - full service or low-fare - were sucked into it, so obviously
everyone started making losses," says Kapil Kaul, CEO of Centre of Asia Pacific
Aviation. With losses on do-mestic operations rising and the launch of internati
onal operations - which will pay off only later - most investment firms and brok
erages are maintaining a "reduce" position on Jet stock.
Says Gautam Roy, aviation analyst with Mumbai-based financial services firm Edel
weiss: "We are not very optimistic on Jet s immediate prospects. It is more a lo
ng term story." It has now been two years since Jet has been trying to raise $40
0 million through some form or the other (earlier through an FCCB, now a rights
issue) and it s proved more elusive than Goyal could have imagined.
Although Jet officials say that by end January, they should be able to raise the
funds, industry sources say they ll only believe it when they see it.
Kingfisher s chief financial officer, A Raghunathan, argues that this is one of
Kingfisher s big strengths vis-vis Jet. "Obviously, our own balance sheet is not
strong enough. The group s backing is a pillar for us." He says that the airlin
e has got Rs 500 crore (Rs 5 billion) in equity, loans and guarantees from the g
roup to raise finances.
Jet loyalists are quick to point out that using group funds to get into a sector
where you bleed is not good business sense, and that Jet has raised over $2 bil
lion in the past from interna-tional loans on its own strength, passing the inte
nse scrutiny of lenders.
Then, during the middle of this year, Mallya made a calculated move, buying out
Air Deccan for what many feel is a "song", to deftly match Jet and Jetlite s mar
ketshare.
So, while Jet s management has been struggling to make sense of what it inherite
d in the Sahara deal, Mallya is capitalising on Deccan s advantages and has ente
red a segment that s sure to give returns in India.
What has compounded problems for Jet is its chairman, Goyal s centralised style
of function-ing (according to sources he only trusts board member and confidant
Vic Dungca, based in London), leading to an exodus at the middle and senior mana
gement levels over the last two years.
Often, major decisions exclude top officials, so the joke in Jet is that "whenev
er anything of significance happens, senior officials are the last to know"! "To
be an able general, you have to carry your troops with you. That Goyal hasn t b
een able to do," says a former board mem-ber of Jet.
With Kingfisher and several other career options coming up, what started off as
a steady trickle has become a virtual flood. Goyal s problems on this front inte
nsified when four senior executives of the airline resigned together in April 20
07, including highly trusted vice president for corporate and public affairs, Na
ndini Verma, who d spent 20 years with Jet.
The latest who s planning to abandon the Jet stable and jump onto the Kingfisher
bandwagon is Charles Soon, head of airport services, who after being publicly c
astigated by Goyal for a flight delay has been in a huff and is looking to quit.
Eight former employees that Business Standard spoke to said that the chairman s
style of functioning "left a lot to be desired". (Executive director Saroj K Dat
ta and chief executive officer (CEO) Wolfgang Prock-Schauer refused to comment o
n this, arguing that disgruntled employees will have grouses.) In contrast, barr
ing erratic timings and odd schedules, United Breweries group and Kingfisher air
line executives don t have many complaints against their chairman. Several Kingf
isher senior officials are old UB hands who have spent 25-30 years with the grou
p.
However, as Saroj Datta puts it, people come and people go. He says that Jet s a
ttrition rate has been constant and that in any industry with competition and ne
w opportunities, things like this will happen.
"We have 10,000 employees. Even if 100 people leave, it s not very significant.
We had seen it and have been well prepared for it," says he. "Yes, people are le
aving, but are loads fall-ing?" asks a Jet source. Like rival Kingfisher, Jet Ai
rways is a one-man show (without Naresh Goyal or Vijay Mallya, both companies wo
uld be rudderless), making it a shared weakness.
But unlike Kingfisher, which is yet to build a strong foundation, Jet already ha
s one. It has a phenomenal network and will expand by 20 aircraft from April 200
7 to March 2008 (it now has 70 aircraft).
According to Wolfgang Prock Schauer, the last two years have been tough for the
entire avi-ation industry in India, not just for his airline, and he doesn t thi
nk that the rise of one airline - with India and its gigantic market - has to ne
cessarily coincide with the fall of another.
"While things may look rosy for Kingfisher right now, Jet has been through and s
urvived worse," says a former Jet Airways board member, his point being that Mal
lya should not un-derestimate Goyal s strengths.

Swot Analysis
S-STRENGTHS
• HUGE BRANDNAME- One of the most important strength of kingfisher is tha
t it has a huge brand name. The name this company has earned for itself is enou
gh to speak for it. Customers have trusted this company for years.
• REGIONAL CONNECTIVITY- Kingfisher is providing services to almost all p
art of India. It is also providing services to many parts outside India.
• EFFICIENT STAFF- Kingfisher has one of the best staff in Indian aviati
on industry. The most enthusiastic, helpful, caring staff makes passengers feel
at home while flying.
• CAPITALISATION- Kingfisher is one of the airlines which is capable to
bear losses be-cause of the huge finance support it enjoys.
• VISIONOR- kingfisher it backed by the great vision of Vijay Mallay Who
can take king-fisher to the world
• THE DECCAN DEAL- - which can gives it market share, a new market segme
nt

W-WEAKNESS
• UNDER PENETRATED MARKET- The total passenger traffic was only 50 milli
on as on 31st Dec 2005 amounting to only 0.05 trips per annum as compared to dev
el-oped nations like United States have 2.02 trips per annum.
• INDAIN MENTALITY- Most of the Indian people still prefer railway travel
ing to air-lines. Hence Kingfisher needs to work hard in this direction to attra
ct more passengers by providing them better services for which it might have to
spend more towards customer welfare.
• UNTAPPED CARGO MARKET- Air cargo market has not yet been fully taped in
the Indian markets Hence much of the earning scope is lost.
• INFRASTRUCTURE CONSTRAIN- The infrastructure development has not kept p
ace with the growth in aviation services sector leading to a bottleneck. There i
s a huge investment requirement for physical infrastructure for airports.
• EMPLOYEE SHORTAGE- There is clearly a shortage of trained and skilled m
an-power in the aviation sector as a consequence of which there is cut-throat co
mpetition for employees which, in turn, is driving wages to unsustainable levels
. Moreover, the industry is unable to retain talented employees.
O-OPPORTUNITIES
• EXPECTED INVESTMENT- investment of about US $30 billion will be made.
• EXPECTED MARKET- Average growth of aviation sector is about 25%-30% and
the expected market size is projected to grow upto100 million by 2010.
• GROWING TOURISM- Due to growth in tourism, there has been an increase i
n number of the international and domestic passengers. The estimated growth of d
o-mestic passenger segment is at 50% per annum and growth for international pas-
senger segment is 25%
• RISISNG INCOMES- Due to the rise in income levels, the disposable inco
me is also higher which are expected to enhance the number of flyers.

T-THREATS
• INCREASING FUEL PRICE- As fuel prices have climbed, the inverse relatio
nship between fuel prices and airline stock prices has been demonstrated. Moreov
er, the rising fuel prices have led to increase in the air fares.
• DECLINING YEILD- LCCs and other entrants together now command a market
share of around 46%. Legacy carriers are being forced to match LCC fares, durin
g a time of escalating costs. Increasing growth prospects have attracted & are l
ikely to attract more players, which will lead to more competition. All this has
resulted in lower returns for all operators.
• TRUNK ROUTE- It is also a matter of concern that the trunk routes, at
present, are not fully exploited. One of the reasons for inability to realize t
he full potential of the trunk routes is the lack of genuine competition. The en
try of new players would en-sure that air fares are brought to realistic levels,
as it will lead to better cost and rev-enue management, increased productivity
and better services. This in turn would stimulate demand and lead to growth.
• HIGH INPUT COST- Apart from the above-mentioned factors, the input cos
ts are also high. Some of the reasons for high input costs are:-
Withholding tax on interest repayments on foreign currency loans for aircraft ac
quisi-tion. Increasing manpower costs due to shortage of technical personnel.
RECOMENDATIONS
THUS FROM ALL THE ABOVE ANALYSIS OF I’SERVICES, MARKET STRUCTURE ANALYSIS, REVE
NUE ANALYSIS, COMPETITON ANALYSIS, PEST ANALYSIS, SWOT ANALYSIS WE CAN SAY THAT
THE FOLLOWING ARE THE MAIN AREA WHERE KINGFISHER NEEDS TO CONCENTRATE TO BRING
ABOUT MODIFICA-TION IN ORDER TO ENHANCE ITS BUSINESS, EARNINGS AND GOODWILL.
• Due to increasing competition in the aviation industry it is important f
or KINGFISHER to increase its working standard to match its competitor’s levels.
• It needs to distinguish itself from the rest of its competitor by provid
ing unique servic-es- like regional food, entertainment etc.
• To meet the needs of passengers and to get additional customers it needs
to think from the customer’s point of view.
• It needs to be consistent with its technical services (like booking syst
em, route chosen etc.) so that it does not disturb the passengers.
• The technical services like the booking system, the check in timings sho
uld be the most convenient of all other airlines.
• Security is the key factor- the safer the airline the more preferable it
is. Security should be in both the terms that is from external sources like hij
ackers and also inter-nal safety like safe landing etc.
• They should provide more personalize services to passengers so that need
of each passenger is taken care of.
• It should expedite the procedure of its alliance with Jet Airways, so th
at their flights are more cost effective in this recession period.
• The Airlines should market itself very effectively with the help of big
Brand Ambassa-dors. This will indeed popularize the brand among the masses resul
ting into more business.
• The Airlines should time and again declare various attractive ticketing
schemes along with gifts and discounts. This would contribute in the revenue of
the airlines.
• The Airlines should give special privilege and best deals to its regular
customers, as loyalty rewards.
Here are some Recommendations which Jets Airways should implement to meet its co
mpetitors and to increase its market reputation in terms of tangible & intangibl
e value
• The efficiency should be such that aren’t any delays or cancellation of
flights which forces customers to turn towards other airlines.
• Jet any appoint cabin crew which who can speak the regional language of
the place where the flight is distinct.
• One Indian, one regional food option should be provided. They should als
o take into consideration those food habits of senior citizens.
• The method of booking tickets, the flight timings and the route should r
emain the same for as long as possible. (That is that there should not be any fr
equent changes.)
• they should also start advertising on television, or put up some hoardin
g during special offers, give regular up dates in newspapers
• They can also have some famous personality as their brand ambassador (li
ke some movie star or some sports personality etc) to further promote their serv
ices to local public.
• Also this will help kingfisher to create a vibrant image and secure the
number one position in the market.
SUMMARISED STUDY OF THE ABOVE THROUGH POWERPOINT SLIDES.

P.T.O.
Recommendations 1
Recommendations 2