A

Project Report
On

“Competing services of Airline Industry ”

In partial fulfillment of the SRM subject in fulltime MBA programme under

Gujarat Technology University.

Submitted To:
Dr. Kavita Kshatriya

Submitted On:
March 21, 2011

Submitted By:
Harshit Shah (09083)
Ravish Patel (09066)
Harshit Damani (09014)
Randhir Padheriya (09117)
Jignesh Sudra (09104)

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N.R.Institute of Business Management , Ahmedabad.

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 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
many.

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.

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 PRESENCE SCENARIO

Revolutionized by privatization along with active participation of the foreign investors, the
Indian airline industry has experienced phenomenal transformation over the last couple of years.
From being a service catering to the needs of the privileged group only it is now well within the
reach of middle class population. This has been the result of increased competition in the Indian
aviation industry due to the presence of a wide variety of private and public airlines with their
low price tags. It was further helped by the entry of Air Deccan, the first budget airline in India,
offering unbelievable tariffs to the customers.

In the financial year 2009-10 there has been a significant 22.3 percent growth in passenger traffic
in the domestic airports while the aircraft movement recorded a growth by 14.2 percent.

In terms of the number of flights Jet Airways secures the top position with 8,168 flights
operating till June 2007. Indian Airlines is in second position with 7,562 flights. Sahara (3,225
flights), Air Deccan (2,889 flights), Spice Jet (483 flights) and Kingfisher Airlines (367 flights)
come thereafter in the list of domestic and national carrier operators.

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 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:

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.

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.

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 DIFFERENT PRODUCT LEVELS

The Core Service:

The core service of the airlines industry is to transport goods and services to various destinations.
As the needs of the people increased the entire system became more organized and formal. After
this stage comes the various supplementary services.

The Supplementary Services:

The airline industry has many players they had a brand name like ‘Air India’,’ Jet Airways’,’
British Airways’. All of them had some common services to offer like connecting flights,
through check-in, tele check in, food on board, and complementary gifts etc.

Different classes like economy class, business class were introduced. Air concessions are given
to school students, old people etc. Singapore airlines were the first to introduce small 8”
television screen for every passenger. The freebies are actually win-win deals between airlines
and other services.

Sahara, for example, offers its passengers a ‘business-plan’ on two-way economy class ticket,
which includes a night’s stay with breakfast, STD facility for 3 minutes and boardroom facility at
the Park Hotel, New Delhi. To Delhi based fliers to Mumbai, it offers a night’s stay with
breakfast, airport transfers and VIP amenities at The Orchid, Mumbai. For business class, the
plan includes a stay at The Leela, with buffet breakfast and late checkout.
All these added service helps the customer to decide upon which airlines he wants to travel. As
competition increased and the customers wanted more the next phase evolved and that is the
augmented service.

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The Augmented Service:

This phase is where the customer’s expectations are met; the service providers kept working on
new methods to meet the ever-changing customers’ demands. The players introduced online
booking, which was very convenient for the service users.

British Airways business class has showers; it’s more spacious and comfortable. Sahara airlines
offer its passengers six different types of cuisine like vegetarian, fat free, diabetic etc. They also
have auction going on board. Virgin airlines have gambling on board, they also have body
massage to offer to their passengers. Air Emirates has something called cab service, they have
customized pick up and drop cab service.

This phase is the most crucial one; with increased competition service will become the final
differentiation.

Future Service:

As mentioned above the customer needs keep changing, the future is unknown. The customers
may be looking in for more frequent inexpensive air travel, something like air taxis, supersonic
speed. This decreases the time thus reducing the cost.

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 4 P’s of Airline Industry
Product

The airline industry is a service that satisfies customer needs for travelling. In the airline
industry the customers can be divided into two segments, business and leisure. While the airline
industry started out as a luxury item, business travel has changed this industry to a necessity. As
we further become a global economy and communication between international companies
intensifies, travel needs continue to increase. The leisure traveller has always had the need for
the airline industry. Satisfying the customer needs today involves competitive rates, convenient
booking of flights and benefits with those flights.
Some of the problems with this industry are personally experienced by the customers. The
airlines have a difficult time being punctual and this has become the norm in the industry,
although some companies try to avoid it. The industry is highly susceptible to situations that
result in declines in air travel, such as political instability, regional hostilities, recession, fuel
price escalation, inflation, adverse weather conditions, consumer preferences, labour instability
or regulatory oversight.
Airlines are now in the commodity business as the public demands low-priced transportation. It
has moved from elite to a common form of transportation. Today's travellers know how to surf
the web for bargains through a myriad of sites such as Orbitz, Expedia, Travelocity, Hotwire,
and Cheaptickets. As a commodity, airlines cannot increase prices to increase profits, so their
only choice is to cut operating costs such as labour costs.
Amid the competition, airlines have refocused their attention on the customers. The industry still
heavily targets frequent flyers, as members can earn miles through travelling, car rentals, hotels,
and credit card use. On overseas flights, business class seats convert to real flat beds. Soon
passengers will have internet access during flights. Airlines are also catering to the consumer by
offering mostly organic menus, while others are offering meals-to-go before boarding. For
travellers pressed for time, many airlines offer fast check-in, online at home before leaving for
the airport; or self-service check-in kiosks where passengers identify themselves with a credit
card, print their own boarding pass, change their seat, and purchase meal coupons.

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Price
The following are the pricing strategies:
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 not 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.
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 the airline to 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. Air India and Indian Airlines
have slashed their prices to meet the competition of private airlines so that they can consolidate
their position in the market.
Airlines usually practice differential pricing. There are three classes: The First Class, The
Executive or Business Class and The Economy Class. Fares for each class are different since the
facilities provided and the comfort and luxury level is different in each class. Seasonal fares are
also fixed, fares rise during the peak holiday times.
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 are trying to woo the customers by
providing air travel in exceptionally low prices, a price-band kind of pricing has to be designed.
In low-pricing strategies, the airlines provide very low prices for the flight tickets. Also, they
prices are made cheaper by booking the tickets long before the flight 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 booking is cancelled, a substantial
amount of money is not returned.

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Promotion
Integrated Marketing Communication
A successful product or service means nothing unless the benefit of such a service can be
communicated clearly to the target market. An organisations promotional mix can consist of:

 Advertising

 Public Relations

 Sales Promotion

 Personal Selling

 Direct Mail

 Internet / E-commerce

In airline industry all the above methods are use for promotion purpose.

The aims of promotion fall into three main categories: to inform, to remind, & to persuade. It
will always be necessary to inform prospective consumers about new products & services, but
other issue may also need this type of communication to consumers; new uses, price changes,
information to build consumer confidence & to reduce fears, full description of service offering,
image building. Similarly consumers may need to get reminded about all these types of issues,
especially in the off-peak season.
It is vitally important to recognize that promotion, or marketing communications generally, may
not always be aimed at potential consumer or end user of service. In many business areas, it is to
design promotions aimed at channel customers to complement end user promotion. For e.g.
Airlines will need to promote their services to tour operators as well as end user.

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Distribution (Also known as the place variable in the marketing mix, or the 4 Ps)

In Airlines, they utilise more than one method of distribution. For e.g. they sell tickets through
travel agents & sell seats on flights to tour operators, whilst also operating direct marketing.
Whichever distribution strategy is selected, channel management plays a key role. For
channels to be effective they need reliable updated information. For these reason, I.T has
been widely adopted such as on-line booking system.

Channel structures vary somewhat by the nature of the service

 Internet booking system

 Telephone reservation system.

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 Extended Marketing Mix

Marketers suggest that the unique requirements of selling services require the organization attend
to three additional P's. These are people, physical evidence and process.

People
The people section of the Marketing Mix is the most important section of the extended
Marketing Mix. It is broken up into three sections: Employees, Consumers and the Company.
Do we have enough employees to provide a good service? ; Do they have the necessary personal
and professional skills? , Do they understand the brand-values? , Are they enough motivated or
too tired?
Those are questions that airlines companies have to ask themselves, and which answers are going
to have important consequences in the type of service provided.
The analysis of the buyer behaviour is really interesting in this sector. Every individual have
different needs and expectations in this market, so segmentation and positioning will be also
fundamental. Furthermore, it’s normally an industry where, the user follows all the steps of the
buyer behaviour in the selection and purchase of the service. Special importance have the
Information Search by the customer (which is normally more complete than in other purchases)
and beliefs and attitudes, which are the most important challenges of this analysis because
normally have an important weight in the final decision of the customer. In a market as
competitive as this one, a personal bad experience or just a non favourable belief or attitude can
determine the user's choice forever. That's why the Brand Image is also fundamental for this kind
of Companies.

For e.g. A Jain would be satisfied with the service only if he is served Jain food and it should be
kept in mind that the customers next to him are also Jain or at least vegetarian.Therefore,
management faces a tremendous challenge in selecting and training all of these people to do their
jobs well, and, perhaps even more important, in motivating them to care about doing their jobs
well, and to make an extra effort to serve their customers. After all, these employees must
believe in what they are doing and enjoy their work before they can, in turn, provide good
service to customers. The "people" component of the service marketing mix also includes the
management of the firm's customer mix. Because services are often experienced at the provider's

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facilities, other customers who are being served there can also influence one’s satisfaction with a
service. For e.g. crying children in a nearby seat on an airplane or ill mannered customer are all
examples of unpleasant service conditions caused by a firm's other patrons.
Physical Evidence

The service is intangible because unlike a product it can't be experienced before it is delivered. It
is the ability and environment in which a service is delivered. Because it is intangible customers
are at greater risk when deciding whether to use a service, so to reduce this risk, and improve
success, potential customer are offered the chance to see what the service would be like with the
use of testimonials, demonstrations etc. Physical layout is not only relevant to its promotional
materials, but also to the layout and structure of the organization, and websites. Customers have
far higher expectations and therefore they select the particular service which they know will
satisfy their want.
Promotional materials and written correspondence provide tangible reassurance; they can be
incorporated into the firm's marketing communications to help reduce customer anxiety about
committing to the purchase. Service firms should design these items with extreme care, since
they will play a major role in influencing a customer's impression of the firm. In particular, all
physical evidence must be designed to be consistent with the "personality" that the firm wishes to
project in the marketplace.
They can offer to the consumer more than a fly: additional services, and so they focus their
promotional efforts in communicating that to the potential user.

Process

The customer service department of any airline company deal with a number of processes
involved in making marketing effective in an organisation e.g. processes for handling customer
complaints, processes for identifying customer needs and requirements, processes for handling
requirement etc.

Example of Jet (Entire Process)

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Purchasing process

According to epinions.com, travelers' overall purchasing experiences with Jet have been very
positive. People like how easy it is to choose from the different one-way fares online to make up
a round-trip reservation. Some travelers prefer to use Jettelephone reservation agents for
purchasing their tickets. Overall, these reservation agents have been described as very courteous
and helpful.

Destination Choices

We found many negative reviews on epinions.com when it came to Jet destination offerings.
Several people complained that Jet doesn't offer service (either non-stop or connecting) to
enough destinations. Some complained about Jet operating out of smaller, less convenient
airports (like Poona and Nasik). People also complained that Jet only offers limited flights per
day to some destinations, making travel less convenient for some.

Overall Customer Service

Based on our findings at epinions.com, Jet customer service is very highly regarded. Although
some people have had unpleasant experiences, almost everyone who gave an opinion raved about
the service from Jet flight attendants, gate agents, ticketing/reservation agents, and even the
pilots.

The 7 Ps - price, product, place, promotion, people, process and physical evidence comprise the
modern marketing mix that is particularly relevant in service industry, but is also relevant to any
form of business where meeting the needs of customers is given priority.

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 QUALITY DIMENSION
IN CONTEXT WITH AIRLINE INDUSTRY

Reliability is most important to customers. Reliability is performing promised service

dependably and accurately. If you don't deliver on your promise you can lose customers and
your credibility will be damaged. It takes a long time for a company to build up a reputation for
reliability, and only a short time to be branded as "unreliable".

Security in airline industry is a very important issue. Terrorist threats and narcotics are the main
threats in Indian airports. The airlines and the security screening people they contract with have a
simple choice – employ more staff so as to process their passengers more efficiently, or lay off
staff and cause their passengers to spend more time waiting to check in than they actually spend
on the flight itself.

Tangible - Tangibles refers to physical facilities and facilitating goods. Examples of tangibles
would be distinctive materials such as brochures and the cleanliness of the facilities. Tangible is
what makes you different than competitors. Customer can see for themselves and then decide
whether to go for the service or not.

Responsiveness - Responsiveness is the willingness to help customers promptly. Avoid having

customers waiting for no apparent reason. Responsiveness is very important because if you
provide customers with what they need in a timely fashion they will be satisfied. Nobody likes
to wait. Replying to a customer request promptly is a good example of responsiveness. If
customers see that the company is willing to help, this will cause loyalty and it will let them
know that you are concerned about them.

Assurance is the ability to convey trust and confidence. Being polite and showing respect for
customers will create trust. Also having professional and knowledgeable staff will create trust
and confidence in customers. People enjoy meeting pleasant, knowledgeable people.

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 JET AIRWAYS
Cabin

Domestic & international short haul

 Première

The Première features 40-inch extra-wide seats with a personal Widescreen LCD attached to
each seat. The Première cabin is configured in a 2-2 abreast pattern.

 Economy Class

Jet Airways Economy class on its Boeing 737 Next Generation features 30-inch seat pitch with
personal Widescreen LCD behind each seat. Jet Airways was the World's first airline to
introduce in-flight entertainment systems on the Boeing 737 aircraft. The Economy class cabin is
configured in a 3-3 abreast pattern on the Boeing 737 Next Generation and 2-2 abreast pattern on
the ATR 72-500.

International long haul

 First Class

First class is available on all Boeing 777-300ER aircraft. All seats convert to a fully-flat bed,
similar to Singapore Airlines first class seat but much smaller. It was the twenty-second airline in
the world to have private suites. All seats in First have a 23-inch widescreen LCD monitor with
audio-video on-demand systems (AVOD), BOSE noise cancelling headphones, in seat power
supply, and USB ports etc. Jet Airways is the first Indian airline to offer fully-enclosed suites on
its aircraft; each suite has a closable door, making for a private compartment. Skytrax consumer
airline reviewers recently rated Jet Airways First Class as being 14th best in the world.

 Première

Première (Business Class) on the Airbus A330-200 and Boeing 777-300ER international fleet
has a fully-flat bed with AVOD entertainment. Each Première Seat has a 15.4-inch flat screen

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LCD TV with AVOD. USB ports and in-seat laptop power are provided. All seats are standard
recliner business-class seats with a few newer aircraft with electronic recline and massager.

 Economy Class

Economy class on Jet's A330-200/777-300ER aircraft has 32-inch seat pitch. Each Economy seat
on the A330-200/777-300ER has a personal 10.6-inch touch screen LCD TV with AVOD.

In-flight entertainment
Jet Airways' Panasonic eFX IFE system on-board the Boeing 737-700/800 and Panasonic
eX2IFE system on-board the Airbus A330-200/Boeing 777-300ER, called "JetScreen", offers
audio video on-demand programming (passengers can start, stop, rewind, and fast-forward as
desired). It has over 100 movies, 80 TV programmes, 11 audio channels and a CD library of 125
titles. The system operates via individual touchscreen monitors at each seat, and is available in
all classes.

Airport lounges
Jet Airways Lounges are offered to First and Première Class passengers, along with JetPrivilege
Platinum, Gold or Silver card members. The international lounge at Brussels has showers,
business centre, entertainment facilities and children's play areas.

► Frequent-flyer program

JetPrivilege is Jet Airways’ frequent-flyer program.

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 KINGFISHER AIRLINES

Cabin

Domestic:

Kingfisher First

The domestic Kingfisher First seats have a 48 inch seat pitch and a 126 degree seat recline. There
are laptop and mobile phone chargers on every seat. Passengers can avail of the latest
international newspapers and magazines. There is also a steam ironing service on board
Kingfisher First cabins. Every seat is equipped with a personalised IFE system
with AVOD which offers a wide range of Hollywood and Bollywood movies, English and Hindi
TV programmes, 16 live TV channels and 10 channels of Kingfisher Radio. Passengers also
get BOSEnoise cancellation headphones.

Domestic Kingfisher First is only available on selected Airbus A320 family aircraft.

Kingfisher Class

The domestic Kingfisher Class has 32-34 inch seat pitch.

Every seat is equipped with personal IFE systems with AVOD on-board the Airbus A320 family
aircraft. As in Kingfisher First, passengers can access the movies, English and Hindi TV
programmes, a few live TV channels powered by DishTV and Kingfisher Radio. The screen is
controlled by a controller-console on the seat armrest. Earcup headphones are provided free of
cost to all passengers. The default channel shows, alternating every few seconds, The
aeroplane's ground speed, outside temperature, altitude, distance and time to destination; the
position of the aircraft on a graphical map and one or more advertisements.

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Passengers are served meals on most flights. Before take-off, passengers are served
bottled Lemonade.

On-board the ATR 72-500s there are 17 colour LCD drop-down screens mounted along with
loudspeakers for audio in the cabin overhead, a head-end unit to handle CDs and DVDs, and a
crew control panel. The screens measure 12.7 cm by 9.3 cm, weigh 0.2 kg each and are spaced
every two or three seat rows along both sides of the cabin.

Kingfisher Red

After Kingfisher Airlines acquired Air Deccan, its name was changed to Simplifly Deccan and
subsequently to Kingfisher Red. Kingfisher Red is Kingfisher Airline's low-cost class on
domestic routes. Passengers are given complimentary in-flight meals and bottled water. A special
edition of Cine Blitz magazine is the only reading material provided.

International:

Kingfisher First

The international Kingfisher First has full flat-bed seats with a 180 degree recline, with a seat
pitch of 78 inches, and a seat width of 20-24.54 inches. Passengers are given Merino wool
blankets, a Salvatore Ferragamo toiletry kit, a pyjama to change into, five-course meals and
alcoholic beverages. Also available are in-seat massagers, chargers and USB connectors.

Every Kingfisher First seat has a 17 inch widescreen personal

television with AVOD touchscreen controls and offers 357 hours of programming content spread
over 36 channels, including Hollywood and Bollywood movies along with 16 channels of live
TV, so passengers can watch their favorite TV programmes live. There is also a collection of
interactive games, a jukebox with customisable playlists and Kingfisher Radio. Passengers are
given BOSE noise cancellation headphones.

The service on board the Kingfisher First cabins includes a social area comprising a full-fledged
bar staffed with a bartender, a break-out seating area just nearby fitted with two couches and bar

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stools, a full-fledged chef on board the aircraft and any-time dining. A turn-down service
includes the conversion of the seat into a fully-flat bed and an air-hostess making the bed when
the passenger is ready to sleep.

Kingfisher Class

The international Kingfisher Class seats offer a seat pitch of 34 inches, a seat width of 18 inches
and a seat recline of 25 degrees (6 inches). Passengers get full length modacrylic blankets, full
size pillows and business class meals.

Each Kingfisher Class seat has a 10.6 inch widescreen personal television
with AVOD touchscreen controls.This device can be used to control the IFE, reading-lights, play
games and even has a credit-card swipe for shopping on Kingfisher's 'Air Boutique'. It also has a
facility for sending text-messages, though the service isn't provided by Kingfisher.

In-flight entertainment
Kingfisher's IFE system is the Thales TopSeries i3000/i4000 on-board the Airbus A320 family
aircraft, and Thales TopSeries i5000 on-board the Airbus A330 family aircraft provided by
the France-based Thales Group.

Kingfisher was the first Indian airline to have in-flight entertainment (IFE) systems on every seat
even on domestic flights. All passengers were given a "welcome kit" consisting goodies such as
a pen, facial tissue and headphones to use with the IFE system. Now, passengers of kingfisher
class are not given "welcome kits" but as mentioned earlier, a complimentary bottle of lemonade
and earphones for use with the IFE are still given. Initially, passengers were able to watch only
recorded TV programming on the IFE system, but later an alliance was formed with Dish TV to
provide live TV in-flight. And in a marked departure from tradition, Kingfisher Airlines decided
to have an on-screensafety demonstration using the IFE system, however the conventional safety
briefing by the flight attendants still exists on many flights.

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King Club
The Frequent-flyer program of Kingfisher Airlines is called the King Club in which members
earn King Miles every time they fly with Kingfisher or its partner airlines, hotels, car rental,
finance and lifestyle businesses. There are four levels in the scheme: Red, Silver,Gold and
Platinum levels. Members can redeem points for over a number of schemes. Platinum, Gold and
Silver members enjoy access to the Kingfisher Lounge, priority check-in, excess baggage
allowance, bonus miles, and 3 Kingfisher First upgrade vouchers for Gold membership. Platinum
members get 5 upgrade vouchers.

Kingfisher Lounge
Kingfisher Lounges are offered to Kingfisher First passengers, along with King Club
Silver and King Club Gold members.

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