Airline Industry 10 Ii
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AMITY INTERNATIONAL BUSINESS SCHOOL INDIAN AIRLINES 7P’S, STRATEGIES & RECOMMENDATIONS SUBMITTED BY :- GAURANG KADYAN HIMANSHU SRIVASTAVA AMLAN DUTTA RASHEE SAHDEV VISHWAROOP SINGHAL INDEX Table of Content Pg.No Chapter 1 i. Introduction 3 ii. Importance 4 iii. Present Scenario 5 iv. Classification & Types 7 v. Advantages 8 Chapter 2 i. PEST Analysis: The Indian Airline Industry 10 ii. Five product levels 15 Chapter 3 i. 7 P’s 17 i. Extended Marketing Mix 24 Chapter 4 i. Indian airlines profile 31 i. SWOT analysis 34 Chapter 5 i. Marketing strategies for Indian 37 Chapter 6 i. Comparison with KINGFISHER 41 Chapter 7 i. Recommendations 43 Page | 2 CHAPTER ONE INTRODUCTION Airline Industry in India is one of the fastest growing aviation industries in the world. With the liberalization of the Indian aviation sector, airline industry in India has undergone a rapid transformation. From being primarily a government-owned industry, the Indian airline industry is now dominated by privately owned full service airlines and low cost carriers. Private airlines account for around 75% share of the domestic aviation market. Earlier air travel was a privilege only a few could afford, but today air travel has become much cheaper and can be afforded by a large number of people. The origin of Indian civil aviation industry can be traced back to 1912, when the first air flight between Karachi and Delhi was started by the Indian State Air Services in collaboration with the UK based Imperial Airways. In 1932, JRD Tata founded Tata Airline, the first Indian airline. Airline organizations can be classified into a number of segments depending on the nature and degree of services they provide. Major Indian carriers are pressing their feet on the accelerator to reach an acme of service level by the year 2010 when their fleet strength will meet 500 to 550. In the previous two years more than 135 aircrafts have been introduced to keep up with the increasing number of passenger traffic in Indian aerospace. A number of domestic airline groups have emerged in a reasonably short span of time to make the market furiously competitive. Page | 3 IMPORTANCE Growing tourism: Due to growth in tourism, there has been an increase in number of the international and domestic passengers. The estimated growth of domestic passenger segment is at 50% per annum and growth for international passenger segment is 25%. Airlines play an important role in international tourism. Developing airline services helps the nation to cash on tourism as more than 85% of the foreign tourist arrives by air. Improving Infrastructure: We all know that India's air transport infrastructure is out-of-date. In fact the overall situation is critical. A recent report by McKinsey suggests that half of India's highly qualified graduates are located in cities without international airports. Without massive change, infrastructure will not be able to handle growth. We must move quickly now. Benefit all—the government, the airport, shippers, passengers, local communities and airlines Result in greater efficiency—lower costs Result in better service levels Globalization: Globalization has improved the lives of many in developing nations. Globalization in of its self is the trading of goods and services of a local economy into an integrated global economy. Technological advances have made this practice more feasible within the last 50 years. The major milestones were the development of the internet and increased transportation technology. These two advances made the world coined "flat" and set the stage for higher living standards. Page | 4 PRESENT SCENARIO The Indian aviation industry is one of the fastest growing aviation industries in the world with private airlines accounting for more than 75 per cent of the sector of the domestic aviation market (as of 2006). The industry is growing at a compound annual growth rate (CAGR) of 18 per cent. The country has 454 airports and airstrips, of which 16 are designated as international airports. Mr Praful Patel, Union Civil Aviation Minister has stated that the Indian aviation sector will become one of the top five civil aviation markets in the world over the next five years. Currently, India ranks ninth in the global civil aviation market. Passengers carried by domestic airlines from January-June 2010 stood at 25.71 million as against 21.1 million in the corresponding period of 2009—a growth of 22 per cent—according to data released by the Directorate General of Civil Aviation (DGCA). In terms of market share, private carrier Jet Airways was the market leader with 26.5 per cent share, followed by Kingfisher Airlines with 21 per cent, Air India with 16.9 per cent, Indigo with 16.4 per cent, SpiceJet with 13.3 per cent and GoAir with 5.8 per cent during the month of June 2010. Leading aircraft manufacturers Airbus and Boeing have expressed optimism over the growth of the civil aviation industry in India. As per Airbus, the country would need 1,032 new aircrafts worth around US$ 138 billion by 2028. On a similar note, Boeing has also predicted that the sector would require 1,150 commercial jets worth US$ 135 billion in the next 20 years. The 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. The Hyderabad International Airport is being managed by a public-private joint venture of the GMR Group, Malaysia Airports Holdings Berhad and the State Government of Andhra Pradesh along with the Airports Authority of India (AAI). Timothy J Roemer, the US Ambassador to India has said that the US will work with the Indian government and the domestic private sector to make the country an aviation hub. Speaking at India Aviation 2010, Roemer said that the public-private initiative, US-India Aviation Programme, would work together with the DGCA on helicopter aviation security. The AAI is set to spend over US$ 1.02 billion in 2010, towards modernisation of non-metro airports. AAI is planning the city-side development of 24 airports, including those at Ahmedabad and Amritsar. Additionally, 11 new greenfield airports have been identified to reduce passenger load on existing airports, according to Praveen Seth, member-operations, AAI. AAI also plans to spend around US$ 3.07 billion in the next five years for developing, upgrading and modernising metro and non-metro airports. Page | 5 With the growth in the industry, airport retailing has also gained pace in the recent times. Development of new terminals and airports such as the recently inaugurated T3 in New Delhi has provided added impetus to this segment. The highest margin earners in this segment are food and beverages, beauty product, electronic items, apparel etc. It has been predicted that airports would provide around 300,000-400,000 square feet retail space by 2015. Many companies are also planning to leverage on this growing segment by launching specific products for air travellers. For instance, French premium skincare brand L'Occitane is planning to develop a special range to cater to the airport retailing segment. Page | 6 CLASSIFICATION & TYPES The Indian airline sector can be broadly divided into the following main categories: 1. Scheduled air transport service, which includes domestic and international airlines. 2. Non-scheduled air transport service, which includes charter operators and air taxi operators. 3. 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: 1. 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. 2. International airlines, which operate 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. At present, there are 2 scheduled private airlines (Jet Airways and Air Sahara), which provide regular domestic air services along with Indian Airlines. In addition there are 47 Page | 7 non-scheduled operators providing air-taxi/non-scheduled air transport services. Apart from this, the players in airline industry can be categorized in three groups: Public players Private players Start up players. Three public players: AIR INDIA, INDIAN AIRLINES and ALLIANCE AIR. Private players: JET AIRWAYS, KINGFISHER AIRLINES, SPICE JET, INDIGO, GOAIR, PARAMOUNT AIRWAYS and many more. The start-up players are those planning to enter the markets. MARKET SHARE OF KEY PLAYERS IN THE INDIAN AVIATION SECTOR Name of the players Market Share Kingfisher Airlines and Kingfisher Red (previously Air Deccan) 28% Jet Airways and Jet Lite (previously Air Sahara) 25% Air India and Indian (previously Indian Airlines) 16% Indigo 14% Spice Jet 12% Go Air 3% Paramount Airways 2% MDLR Airlines 0.004% Page | 8 INVESTMENT POLICY The consolidated document on FDI policy was released on March 31, 2010. Currently, for the civil aviation sector (Airports): • FDI up to 100 per cent is allowed under the automatic route for Greenfield projects. • For existing projects, FDI up to 100 per cent is allowed; while investment up to 74 per cent under the automatic route and beyond 74 per cent under the government route.