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The success of many low cost airlines (LCA) such as (Southwest, Ryanair, AirAsia and Easy-jet) in

many parts of the world has inspired airline and business firms in India to launch LCAs. Air Deccan
was the first LCA in India. It launched its service on September 2003, with two aircrafts running 20
services to eight cities. By September 2004, Air Deccan increased this figure to 54 flights a day. Air
Deccan followed a different business model from that of the full service airlines (FSA's) to maintain
its low cost advantage.

Air Deccan's objective is to make air travel affordable by offering services at nearly 50% of the
airfares offered by present market players. Air Deccan wants to target frequent business travelers
who are interested in connectivity and airfare rather than in comforts and facilities. The airline also
wants to target the premium train travelers i.e., those who travel in air-conditioned coaches. The
pricing of Air Deccan tickets is such that the airfares are substantially lower than those of the major
airlines and slightly higher than the A/C class fares of railways.

On the service front, Air Deccan offers no-frills air travel to the customers. The usual frills in standard
airline service like different full course meals, in-flight entertainment, business lounges at the
airport, and different levels of classes, air-hostesses and crew members have been removed. Only a
single class of seats is offered with no numbered scats, food and beverages have to be purchased by
passengers if needed, and there is only a single air-hostess per flight to assist passengers.

In order to make this venture successful, Air Deccan has undertaken various measures. The cost of
aircraft and their maintenance form a major item of expenditure for any airline. In order to cut costs
on this front, Air Deccan opted to hire smaller 48-seater ATR 320 aircrafts from Avions De Transport
Regional (Toulouse, France) on contract. The contract includes the lease of the aircraft, training of
pilots and engineers and 24-hour global maintenance support. By making lease arrangements and
outsourcing maintenance as well, the company saved on capital investments and variable costs. As
no food was served, cleaning the aircraft was simple. Besides, no time was spent in loading or
unloading food. Thus, when compared to full-service airlines (FSAs'), which had to be serviced for an
hour after landing, Air Deccan's aircrafts took only 20 minutes to be prepared for flying. Thus more
flights per aircraft were possible.

On the distribution front, Air Deccan has devised a unique online reservation system. Customers can
either call its 24-hour call center or use its website to book their flight tickets. Apart from e-ticketing,
the airline has tied-up with various retail outlets where the customers can book their tickets. For
instance, Uday Home World, a consumer electronics chain store in Bangalore, offers this facility for
Air Deccan. The airline plans to have 400 such outlets spread across all the major cities where it
operates.

On the pricing front, Air Deccan's prices stand at around 50% of prices offered by the full-service
airlines. For example, when the Jet Airways fare for a one-way Chennai-Bangalore was Rs. 3,235, the
Air Deccan flight was priced at Rs 1,755. The airline kept 25% of its seats at prices ranging from Rs
700 to Rs 1500 on all its major trunk routes. Another 50% seats were priced at half of the fares of the
economy class of FSAs'. The remaining 25% seats were priced at 70% of the price of economy class
tickets of FSAs. The price to be charged depended on when the customer booked his ticket (i.e. the
earlier the date, the cheaper the rate). For instance, it launched a unique scheme called Dynafares
where a few tickets on every flight were made available at Rs 700. However, to be eligible for the Rs
700 fare, the ticket had to be bought and confirmed at least 90 days in advance.
In terms of marketing, Air Deccan has attempted to position its services as catering to the common
people of India. Air Deccan promotes its services mainly through the print and outdoor media. Prior
to the launch, it ran outdoor and print ads that were teasers aimed at generating curiosity.
Questions such as "Why should there be a class system in the air?" were asked. After the launch, it
promoted its services chiefly on the pricing platform and on its coverage of cities. The post-launch
ads highlighted the coverage and price differential of the services with other major airlines. The print
advertisements focused chiefly on the company's low fares. After giving details of the flights, the
advertisement discussed how `Dynafares' worked.

Air Deccan also ran a television ad to focus on the "affordability" theme. Its television advertisement
featured a cardboard cut-out of a well built super hero. This was followed by people of different
ages, and from different walks of life, popping out from behind the cut-out. Among the people who
pop out are a schoolgirl, a housewife, a businessman, a small boy and a young motorcyclist. As they
pop out, with their faces in place of the hero's face, the voice-over says, "Now everyone can fly
Air Deccan - up to 50% lower airfares." Nitish Mukherjee, managing director, Orchard Advertising
(the agency who created the ad), explained the rationale of the ad strategy, "Air Deccan was giving
many their first flight ever. Therefore, it wasn't just a low fare airline,' but an airline that was
empowering a nation. Hence, the film about real people who wished to fly, and an airline that is
making it possible." Being the first low-cost airline service in India, Air Deccan got extensive coverage
in the media, and this helped increase awareness about its services among consumers. Air Deccan's
logo shows the back of two hands spread and held thumb to thumb in yellow and blue, signifying a
flying bird, with the tagline - "Simplifly". Air Deccan will, however face tough competition from
various new entrants. One of the strong contenders is the UB group, which is planning to launch
Kingfisher Airlines. But Vijay Mallya, Chairman UB group, says, "My airline is no way going to be a
Greyhound type of service." The UB group says it will not follow the low-cost model. It is targeting
the upwardly mobile section of customers and promises them a funliner experience. Other new
entrants are the Wadia group's 'Go', 'Visa Airline' being started by former Indian Airlines pilots, Air-
India's 'Air-India Express', and `Royal Airlines', Modiluft's restructured venture.

Questions for Discussion:

1. Discuss how effectively Air Deccan has used the elements of its services marketing mix to market
its services.

2. Perishability is one of the major characteristics that affect service providers like Air Deccan. What
steps has Air Deccan taken to reduce the negative effects of perishability?