For exclusive use Indian Institute of Management - Calcutta, 2015

IMB 365
JAYARAMA HOLLA, RISHIKESHA KRISHNAN AND SRINIVAS PRAKHYA

ESTIMATING DEMAND FOR A NEW AIR TRAVEL OFFERING (A)

In late 2007, buoyed by the explosive growth of the civil aviation industry in India, the countrys
National Aerospace Laboratories (NAL) was keen to take its civil aircraft development program to
the next level. It had already developed a 2-seater trainer aircraft Hansa and was at an
advanced stage in the development of a 14-seater transport aircraft Saras. However, to be a
part of the boom in domestic civil aviation services, it needed to develop a larger aircraft that
could connect small towns with each other and with larger cities.
Although the Government of India (GoI) was supportive of efforts to develop and manufacture
aircraft within the country, design and development of such an aircraft would be a much bigger
project than anything that NAL had undertaken before. Besides, as a Research and Development
organization, NAL had to bring on board partners for manufacturing. Globally, the trend was to
involve a range of strategic partners for critical sub-systems of the aircraft such as engines,
avionics, and airframe right from the design phase. Although broad numbers and trends suggested
the existence of a large market for civil aircraft in India, NAL realized that they needed a more
robust estimate of market demand if they were to convince the GoI and potential strategic partners
to support the project.
Kota Harinarayana, who joined NAL as an advisor to the Civil Aircraft Development Program,
had a long and successful career in the aerospace industry, first in Indias largest aerospace
company Hindustan Aeronautics Ltd., and later as the head of an ambitious project to build an
Indian Light Combat Aircraft (LCA). As head of the LCA program, Kota had built a successful
network of research and academic institutions and sought to replicate this in NALs civil aircraft
development program. On the market estimation dimension, he roped in two of Indias premier
educational institutions, the Indian Institute of Technology Bombay (IITB) and the Indian Institute
of Management Bangalore (IIMB). The IIMB team was of the opinion that the new aircraft could
be used to provide an air travel offering that could compete with high end rail and road travel
modes. Demand for the new aircraft would then be derived from the demand for the new air travel
offering and the first step would be to estimate countrywide demand for the latter. Although, IIMB
would be involved in demand estimation at the level of individual routes, the estimates so
generated would be fed into a larger model built by IITB to estimate aircraft demand for the
country.
The challenge before the IIMB team was to design a cost-effective and reasonably quick method of
demand estimation at the route level.

CIVIL AVIATION IN INDIA

With a large geography and several areas with difficult topography, civil aviation might have been expected to be a
growth sector in India. However, until the early 1990s, civil aviation grew only at the rate of the gross domestic
product (GDP) growth because it was seen as a luxury rather than an essential transportation service and was
monopolized by the state-owned airlines, Indian Airlines (domestic), and Air India (international). A first phase of
deregulation in 1993 that saw the entry of some private airlines gave a hint of the potential of the civil aviation
industry, but ended prematurely with the bankruptcy of many of the new airlines. A second phase of growth was
spurred by the entry of Indias first low-cost carrier (LCC) Air Deccan in 2003. By this time, India was on a clear
post-liberalization growth trajectory and ready for disruptive growth models. The entry of Air Deccan and other

Jayarama Holla, Rishikesha Krishnan and Srinivas Prakhya prepared this case for class discussion. This case is not intended to serve as an
endorsement, source of primary data, or to show effective or inefficient handling of decision or business processes.
Copyright 2012 by the Indian Institute of Management Bangalore. No part of the publication may be reproduced or transmitted in any form or
by any means electronic, mechanical, photocopying, recording, or otherwise (including internet) without the permission of Indian Institute of
Management Bangalore.

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 2 of 26

LCCs such as IndiGo and SpiceJet and the resultant decrease in fares saw the demand for civil aviation grow at
about 25% per annum, i.e. at about three times the growth of GDP.
Although, the sudden growth of civil aviation resulted in the growth of several auxiliary services and employment
for thousands of people, Indias R&D, design and manufacturing sectors missed out as the aircraft were purchased
or leased from the large international manufacturers such as Airbus, Boeing, ATR, or Embraer. The boom in civil
aviation was driven by travel between Indias six metropolitan cities (New Delhi, Mumbai, Chennai, Bangalore,
Hyderabad, and Kolkata) though a whole set of Tier II cities were fast becoming an important part of the network.
There were about 46 active airports in India. However, more than 300 small towns had airstrips, a legacy of British
rule in India and these could be potential sources of growth in the future.

AVIATION R&D AND MANUFACTURING CAPABILITIES IN INDIA

Indias aircraft manufacturing industry pre-dated Indias independence. Hindustan Aeronautics Ltd. (HAL) was set
up in 1942 by H. Walchand, a prominent Indian industrialist. HAL was nationalized after independence and became
a vertically integrated aircraft manufacturer catering primarily to Indias strategic needs. Most aircraft manufactured
by HAL were built under license from foreign aircraft manufacturers. HAL concentrated on the requirements of the
Indian Air Force, Navy, and Army. HAL had recently moved into the manufacture of indigenously developed
aircraft such as the light combat aircraft (LCA) and the Advanced Light Helicopter. HAL had done some civil
aircraft work in the past it manufactured the HS-748 and Dornier 228 aircraft under license. However, it remained
primarily a defense aircraft manufacturer. The National Aerospace Laboratories (NAL) was set up as part of a
national program to create advanced science and technology capabilities. Under independent Indias first Prime
Minister, Jawaharlal Nehru, networks of research laboratories were set up under umbrella bodies such as the Council
of Scientific & Industrial Research (CSIR), Indian Council of Agricultural Research (ICAR) and the Defence R&D
Organization (DRDO). NAL was an important constituent of the CSIR and was one of the prime repositories of
aeronautical R&D capability in the country. However, Indias most successful R&D efforts were arguably in the
field of space and atomic energy where the Indian Space Research Organization (ISRO) and the Atomic Energy
Commission (AEC) had successfully built vertically integrated capabilities in their respective fields. The Indian
aerospace community was keen to emulate ISRO in the civil aeronautics field.

THE OPPORTUNITY
The rapid increase in demand for air travel, sparked by the entry of new LCCs into the civil aviation sector, steps
taken to create new airports in metros, and plans to improve the civil aviation infrastructure in other towns and
cities, pointed to steady growth of the civil aviation sector in the years ahead. One of the LCCs, Air Deccan, started
routes to small towns that were hitherto not on the civil aviation network. As the growth in civil aviation is closely
linked to economic growth, with India projected to continue its impressive growth record in the years ahead, there
was reason to believe that there would be a market for a variety of aircraft in India. Already, Indian carriers had
announced orders and options for hundreds of aircraft from the mainstream aircraft manufacturers, Airbus and
Boeing. At the same time, it was recognized that a new aircraft takes a long time to develop, involves considerable
upfront investment, and the aircraft itself typically has a long useful life. Long-term demand projections were
therefore important to get a sense of the viability of a new aircraft program. The regional aircraft project taken up by
NAL intended to target developing small aircraft to service small airports located in the smaller towns of India. In
total, there were more than 334 (in 2002) civilian airports in India 238 with paved runways and 108 with unpaved
runways. As a follow-up to the development of Hansa and Saras, NAL was exploring the possibility of taking a lead
in the development of a new aircraft with a nominal capacity of 70 seats for use primarily in the civil aviation sector.
The regional aircraft project was likely to cost about Rs. 40 (1$ = Rs. 52, in 2012) billion in development and the
aircraft could roll out for certification and air worthiness trials by 20142015. The 70-seater aircraft was expected to
serve the domestic airline services market on regional routes, covering a range of about 600800 km. Discussions
with the existing operators indicated the need for an aircraft with 30% more fuel efficiency, 25% reduction in cost of
ownership, with an ability to fly faster than the ATR 72/42 and land in small airfields (30005000 ft) with minimum
facilities.

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 3 of 26

ESTIMATING DEMAND
The broad methodology for the estimation of total market demand for any industry is well-established. It consists of
the following steps (Barnett 1988).
x
x
x
x

Define the market

Divide total industry demand into its main constituents
Forecast the drivers of demand in each segment and project how they are likely to change
Conduct sensitivity analyses to understand the most critical assumptions and to gauge risks to the baseline
forecast

The market demand projections of three major aircraft manufacturers Airbus, Boeing, and Bombardier were
available in the public domain (Airbus 2006; Boeing 2006; Bombardier 2006). Based on the documents available,
and some other secondary material, Exhibit 1 describes the process followed by Airbus and Boeing. In addition to
these forecasts, elaborate demand forecasting exercises were periodically undertaken by the state transportation
departments, and the commissions for planning and developing airport systems and road networks. Until 2010, air
travel demand forecasting usually used quantitative indicators (population, gross national product, retail sales, etc.),
derived socioeconomic factors (propensity to travel, lifestyles, etc.), and supply factors (fare, frequency, etc.).
Primary forecasts were measures of air activity such as passenger traffic and freight traffic that could further lead to
estimates of number of aircraft required. Two approaches were prevalent in aviation forecasting. The top-down
approach developed aggregate national demand forecasts using economic data. These forecasts were then broken
down to regions using past data and projected growth rates. The bottom-up approach generated regional forecasts,
which were aggregated to obtain aggregate national forecasts. Forecasting methods included time trends,
econometric models, and gravity models. Judgmental forecasts of experts refined using Delphi techniques for
obtaining consensus were also used.

MARKET DEMAND IN INDIA

Both the Airbus and Boeing estimates were built ground-up based on individual routes in specified markets and
treating demand growth as a function of economic growth with adjustments for expected structural changes in the
markets.
Although, the IIMB team believed that the basic methodology to be followed may not be too different, it felt that
primary demand generation for air travel was possible by competing with all existing modes of travel. Hence, the
following issues needed to be addressed.
x
x
x

x
x
x
x

Generation of primary demand would require design of a new air travel offering that could compete with
rail and road; hence substitution between air, rail, and road needed to be understood well.
In an effort to stem the loss of traffic to LCCs, the Indian Railways had become more dynamic in their
strategies and this could have an impact on the growth of air traffic.
Announcements such as superfast highway corridors between selected pairs of cities could have a longterm effect on the demand for air travel, particularly since new airports in some cities were located far
outside the city centers and reaching the airport may take the same amount of time as air travel transit time
to a nearby location. At the same time, cities were planning new mass transit systems that could help
people reach the airport quickly.
Differential economic development growth rates across regions.
Many of the routes to Tier II cities and smaller towns had been started just then and it was too early to see a
trend.
Possible delays in creation/upgrade of airport infrastructure owing to resource constraints and the impact on
congestion in air and on ground.
Changes in market structure consequent to the entry of new players needed to be better understood. Since
these players did not have a long history, analogs from other countries could help to model the expected
behavior of the new entrants. There was also a question of the viability and sustainability of the pricecutting strategies followed by the low-cost carriers.

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 4 of 26

Exhibit 1 summarizes the demand projection for regional jets according to the existing estimates made by other
manufacturers. Exhibit 1a shows the air network and the traffic volume at 46 top airports in India and a comparison
of passenger traffic by train and air. However, demand for a specific aircraft such as the proposed 70-seater (Exhibit
2) would be determined by the credibility of the manufacturer, and the specific value proposition of the particular
aircraft.

ESTIMATING THE DEMAND POTENTIAL

Against this backdrop, the IIMB team wondered about the best way to estimate the demand for air travel and the yetto-be-designed aircraft. Clearly, any method adopted would have to be cost-effective and reasonably quick. It would
not be possible to study each and every route, so there was a need to identify representative routes that could be used
to extrapolate broader demand. In India, air travel was mostly between major cities and was historically driven by
business travel. The availability of an entire set of unused airfields presented a potential opportunity for generating
air travel demand in these locations. This would require a thorough understanding of the existing travel options and
designing an air travel offering that could successfully compete with the existing options. The teams objective was
to arrive at an assessment of the extent of potential demand in this context.
This forecasting exercise was divided into two distinct phases. In the first phase, one pair of origin and destination
airports would be identified for in-depth study. The Phase I study was further split into an exploratory phase to
arrive at the important attributes that influence travel mode choice and a final phase that would fine tune the attribute
set and examine the tradeoffs between these attributes. In the second phase, the focus would be on developing a
cost-effective approach to estimate countrywide demand.

PRIMARY DEMAND CREATION PHASE I EXPLORATORY STAGE

The objective was to assess the potential for air travel between hitherto unused airfields using small aircraft. In 2007
the travel modes available between such locations were restricted to rail and road. A new alternative such as air
travel would compete with the existing travel modes. In 20082009, passenger movement in India by air was less
than 0.4% of that by rail. This represented a huge opportunity for an air travel offering that could effectively
compete with rail and road travel modes. Hence, it was important to ascertain the benefits and tradeoffs contained in
the travel modes. This information would be useful in designing a new offering. Accordingly, in this phase, the
focus was on rail, road, and air as the primary travel modes leading to the following specific questions.
x
x
x

Can a new air travel product that can compete with road and rail be developed?
What benefits are required of such a new offering?
At what price would such an offering be attractive?

In the new product development process, such questions are the focus of the product design phase, which follows
the identification of opportunity. In the product design phase, precise measurement of consumer preferences for
products, which are bundles of benefits, is required.

CAPTURING CHOICE BEHAVIOR CONJOINT ANALYSIS

Traditional disjoint methods for ascertaining consumer preferences would consider (1) the value to the consumer
and (2) the importance of each attribute/benefit at various levels. The two ratings would then be combined resulting
in an overall utility. Conjoint analysis adopts a different approach and allows for assessment of tradeoffs. The
approach involves developing sets of combinations of attribute/benefits and obtaining relative assessments of these
combinations from the respondent. Conjoint analysis assumes that the utility associated with a product (total
worth) is obtained by combining the separate amounts of utility provided by each attribute (part-worth), which
could be present at one of the different levels. An appropriate analytic technique is then used to decompose this
overall assessment of the combination of benefits into the graded value of each benefit to the respondent. Such an
approach is preferred to the disjoint approach of obtaining an assessment of value associated with each benefit and
the importance of this benefit in the overall assessment, since it is relatively less burdensome for the respondent and
more representative of consumer behavior. The IIMB team decided to use the conjoint methodology to measure the
customer preferences.

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 5 of 26

The IIMB team adopted the following process to design the conjoint experiment.

STEP 1: FORMULATE THE RESEARCH

ATTRIBUTES AND THE LEVELS

PROBLEM

AND

SELECT

THE

Rajamundry, a small town with an airfield, in the state of Andhra Pradesh, was selected for the first phase of the
study (Exhibit 3). It is close to Kakinada which has a port and was emerging as a center of economic activity owing
to the potential for extracting natural gas in this region. It was also a transit point for religious tourism owing to the
temples located in this region. RajamundryChennai was chosen as the origindestination pair in this study.
The first key decision in formulating a conjoint exercise was the selection of attributes and levels for these attributes.
This decision involved careful consideration of all attributes that potentially created or detracted from the overall
worth of the product. Further, the attributes had to be actionable and communicable. However, if the number of
attributes and the levels were too many, the burden on the respondent increased resulting in possible data integrity
issues.
After a quick review of the existing travel modes in India, the IIMB team decided to retain air, rail, and bus as the
three main travel modes for inter-city travel. The team observed that travel by air-conditioned (AC) rail coach would
compete with air travel. The AC rail coach had two classes, namely 2-tier and 3-tier, with 2-tier being more
expensive because it provided more space to each traveler and was hence less crowded than a 3-tier coach.
Similarly, the bus travel between these two cities provided two options, Volvo and Garuda, Volvo being more
comfortable and more expensive.
The fare charged by different modes of transport was an important factor considered by the commuters. The team
observed the various existing fares for rail and bus and decided to elicit responses to air travel by setting the lowest
range of airfares at just beyond the highest of other modes of travel. To capture a non-linear pricing relationship, the
team decided to consider three price points, spread sufficiently far enough.
The IIMB team thought that travel time would be a consideration in selecting the mode of travel. Air travel between
these two cities could be done in about 1.5 hours, with rail and bus taking around 15 hours of travel. The short airtravel time was often offset by the distance to the boarding point as airports were usually located away from the city
unlike rail and bus stations. Hence, last mile connectivity or accessibility of the boarding point was used as one of
the attributes. The team wanted to gauge the response at the existing level of connectivity and improved level of
connectivity to the boarding point.
Owing to the popularity and affordability of rail and bus travel, availability was an issue in these modes of travel.
The team wanted to gauge the importance attached by the commuters to easy availability of tickets. The team
decided to provide a choice between the next day availability and the need to book the tickets, a week in advance.
Accordingly, the attributes and levels chosen for each attribute were as shown in Exhibit 4.

STEP 2: METHOD OF DATA COLLECTION

In full profile approaches, respondents are asked to rank or rate all the profiles chosen, in what is called judgment
data collection. Choice-based conjoint analysis is an alternative approach, in which the respondents are asked to
choose only one among a subset of profiles that is presented. Choice-based conjoint analysis provides a more natural
setting since in real life, consumers choose among the alternatives available in the market. Further, choosing one
from a small set of options is easier for the respondent relative to rating all profiles. Hence, choice-based conjoint
has been finding favor among market researchers. Respondents can choose a profile from each of the several sets of
choice alternatives, which include a none of the above option. The IIMB team decided to use the choice-based
conjoint method to collect the data.

STEP 3: DESIGN THE STIMULI

There are two approaches to eliciting travel mode preferences. In the pair-wise approach, the respondent may be
asked to evaluate two attributes at a time. In the full profile approach, complete profiles are constructed and

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 6 of 26

presented to the respondent. Further, in a full profile approach, a full factorial design consists of all possible
combinations of attributes and their levels. It is possible to estimate the main effects and interactions between
attributes using a full factorial design. It is not always feasible to use a full factorial design as the number of profiles
may be too large. For example, Exhibit 5 shows the linear factor design for this problem; there are 15 attributes with
two levels each and one with three levels. A full factorial design would contain
possible
combinations, making the respondents task of providing relative evaluations very difficult. Instead, a fractional
factorial design where a reduced number of combinations are arrived at by ignoring certain combinations or
interaction effects can be used. A fractional factorial design needs to be balanced and orthogonal. When each level
of every attribute occur equal number of times, then the design is balanced. A design is orthogonal when every pair
of levels belonging to a pair of attributes occurs equal number of times. A design which is both orthogonal and
balanced is 100% efficient. When it is not practical to generate an optimal design, different algorithms are used to
select the most optimal design possible which seeks to minimize the variance of estimated parameters. Randomizing
a design involves arranging the product combinations or the choices in a random order. Statistical software such as
SAS and SPSS has tools that enable designing such experiments.
The IIMB team decided to adopt a full profile approach to create the stimuli and use a fractional factorial design.
The process followed to generate the fractional factorial design using SAS macros (detailed in Exhibits 6 & 7)
contains the SAS code for implementing these macros. Given the attributes and levels, the macro %MktRuns is used
to arrive at the number of profiles for orthogonal and balanced designs and the macro %MktExe is used to create an
efficient and randomized design. %MktEval is used to evaluate the generated designs and finally %MktKey and
%MktRoll are used to roll out the conjoint design. The output from running these macros is presented in Exhibit 8.
An orthogonal and balanced design with 24 combinations was chosen.
A sample card presented to the respondents is shown in Exhibit 9. The respondent is required to choose one of the
six options presented in 24 such cards. The survey was administered to 30 respondents in the initial exploratory
phase. The data is available in the excel sheet phase1_exploratory_data_case_A.

STEP 4: ANALYSIS OF DATA

Although, choice-based conjoint reduces the respondents burden, the analysis is more complicated requiring the use
of discrete choice models since the dependent variable is nominal. When the dependent variable is metric, a multiple
regression model can be used to assess the marginal effects of an increase in independent variable on the dependent
variable. However, when the dependent variable is nominal, the relationships between the probabilities of the
choices and the independent variables have to be estimated. This is done by specifying utilities for each choice in
terms of the independent variables and estimating the importance weights of the independent variables in
determining choice using the observed data. The basic description of the choice model used is provided in
Annexure 1.
The importance weights were estimated using the SAS code detailed in Exhibit 10 and the results of estimation are
presented in Exhibit 11.

STEP 5: MANAGERIAL ANALYSIS

Analysis of these estimates suggests that:
x
x
x

Price and availability are the critical benefits.

Within a mode, time taken is not important.
Last mile connectivity is not important.

Here, only importance weights estimated with high precision (p<0.0001) are accepted; and for the rest, the
hypotheses that the weights are 0 cannot be rejected. Sensitivity analysis can be undertaken to see how the
attractiveness of air travel changes as fare decreases or availability increases. The utility of each option can be
computed using the importance weights associated with price and availability and these in turn can be used to
compute probabilities (see Annexure 1 for details). For instance, consider the travel modes and the utilities
associated with these travel modes given in Exhibit 12.

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 7 of 26

The probability of choosing the air travel option is

= 0.022682.
Further, if the airfare is reduced to Rs. 1,500, utility of the air travel offering increases to 1.755. The probability of
traveling by air when other choices remain the same and the airfare is reduced to Rs. 1,500 is

= 0.116698.
Thus, the market share of the air travel mode increases from around 2.3% to 11.7% when the fare decreases from
Rs. 2,900 to Rs. 1,500.
The IIMB team faced the task of redesigning the conjoint experiment for data collection on a large representative
sample. What are the attributes that should be retained and what are the levels that would be appropriate for
understanding travel mode competition and enabling design of an attractive new air travel offering? Once these
decisions were made, an efficient factorial design would be required. What other demographic and socio-economic
data would help in segmenting the market?

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 8 of 26

Annexure 1
Multinomial Logit
The basic assumption of discrete choice models is that the choice is based on the principle of utility maximization.
indicate the utility perceived by the respondent
by a choice alternative
. The utility
Let
specification consists of a deterministic component that is a weighted combination of attributes present in the
alternative and a random component that is known to the respondent but not to the analyst. Thus,

where

are the attributes of alternative and

The probability that an individual

is given by

is the random portion of the utility.

will choose alternative among the alternatives in the choice set

If the error distribution is Gumbel or Type I extreme value distribution

the probability that an individual

where

would choose an alternative is given by the multinomial logit form

is the vector of attributes describing alternative i.

Given a series of choices among the choice sets presented, the parameter  can be estimated by maximizing the
likelihood of the observed choices. The IIMB team decided to do an aggregate level analysis using a multinomial
logit model.
Here, the utility derived from an alternative i by a respondent n on choice occasion t is specified as

where
are dummy variables associated with each level of each attribute,
is the fare to be paid to travel in a
are importance weights of the respective attribute levels, and
is a random
given mode of commute,
component that is unknown to the analyst but known to the respondent. For each factor, the number of dummy
variables defined equals the number of levels in the factor minus 1. The dummy variables are

The utility maximizing respondent n chooses alternative i on occasion t with probability

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 9 of 26

References
Airbus (2006), Global market forecast 20042023, URL: http://www.airbus.com/.
Barnett F. W., Four steps to forecast total market demand, Harvard Business Review, 1988, 66(4), 28.
Boeing (2006), Current market outlook 2006, URL: http://www.boeing.com/commercial/cmo/pdf/cmo_06.pdf.
Bombardier (2006), Aerospace commercial aircraft market forecast 20062025, URL: http://www.bombardier.com.
Kane M. A. E. B., Airbus 3XX: Developing the worlds largest commercial jet, Harvard Business School Case No.
9-201-028, 2000.
Kuhfeld W. F., Marketing research methods in SAS experimental design, choice, conjoint, and graphical techniques,
SAS Institute Inc., Cary, NC, USA. 2005.

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 10 of 26

Exhibit 1
Available Demand Projections for Regional Jets
1. Airbus Global Market Forecast
According to a study by Kane (2000), Airbus predicts annual demand for new aircraft on each of the 10,000
passenger routes linking nearly 2000 airports based on an assumption that passenger and cargo growth will track
GDP growth. For every airline on each route, Airbus estimates the aircraft requirements for different types of
aircraft. The maximum feasible frequency limits for each route were estimated based on assumptions of airport
capacity, airplane speed, distance, and other factors. It is assumed that all airlines will seek to maintain market share
by adding capacity as demand increases, and by increasing aircraft size when it is not feasible to increase frequency.
They then compared the number of aircraft required to existing supply taking retirements into account.
The latest market demand forecast available from Airbus is the Global Market Forecast 20042023 (Airbus 2006).
Some salient features of Airbuss methodology and relevant observations that emerge from this document are:
x

x
x

x
x
x
x
x

Airbus divides the world aviation market into 140 distinct domestic, regional, and intercontinental
passenger sub-markets such as Domestic Indian sub-continent, Intra Asia and Indian sub-continent
USA. For each of these markets, demand is forecast using the latest projections of economic growth, oil
prices, and other relevant variables. Airbus uses econometric modeling techniques to forecast traffic for
each individual flow based on a best fit of the different sets of economic and air transport variables (p.
32).
The projections also take into account any expected structural changes (such as deregulation) that could
influence the future growth of a particular market. The growth of LCCs is one of the important
developments considered in this context since LCCs stimulate traffic and create new routes (p. 32).
Airline sensitivity to oil price increases depends on (1) the revenue lost from lower demand, (2) the ability
to impose a fuel surcharge on tickets, (3) the importance of fuel cost relative to other costs, (4) fuel hedging
strategies, and (5) fuel efficiency of the fleet (p. 12). Rapid oil price increases trigger the acceleration of
aircraft retirement (p. 14).
The propensity to travel in developing countries starts with domestic trips when incomes reach a particular
threshold, and then graduates to international travel when a higher threshold is reached (p. 20). In China,
income (measured by GDP per capita) and exports are the two primary drivers of demand growth (p. 19).
Between 1980 and 1998, Chinese domestic air traffic grew at an annual rate of 16.5% fueled by an increase
in disposable income (p. 20).
High-speed trains are important sources of competition to air traffic only when rail trip time is less than 3
hours (p. 21).
The bulk of air travel demand will be generated by mega-cities that will be the hub of economic activities
(p. 27).
In mature markets, air travel is driven by ticket price and consumer confidence in addition to economic
growth (p. 29).
Airbus uses the actual fleet replacement plans of each individual airline to predict induction of new aircraft.
If such plans are not available, historical behavior of that airline or airlines in that region is used to estimate
replacement behavior (p. 38).
The emerging low-cost airlines of Asia will drive single-aisle fleet expansion in the region (p. 44).

Based on their analysis, Airbus estimated that world air passenger traffic would increase at an average annual rate of
5.3% per year between 2004 and 2023, and that this would result in a growth of 4.5% seats per year. Airbus
predicted a compound annual growth rate of 4.0% for passenger traffic in the Domestic Indian sub-continent submarket, and 3.0% for passenger traffic in the Intra Indian sub-continent sub-market.

2. Boeing Current Market Outlook

According to Kane (2000), Boeing forecasts economic growth in 12 regions. Based on economic growth estimates,
it then forecasts regional traffic flows in 51 intra- and inter-regional markets.

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 11 of 26

The latest market demand forecast available from Boeing is the Global Market Outlook 2006 (Boeing 2006). Some
salient features of Boeings methodology and relevant observations that emerge from this document are:
x
x
x
x

x
x

Boeing predicts an annual world economic growth rate of 3.1%, and a passenger travel growth rate of 4.9%
between 2006 and 2025 (p. 4).
Liberalization is an important driver of air traffic growth and can stimulate market growth of 12% to 35%
(p. 7).
Similar to the Airbus approach, Boeing studies travel flows at a detailed level of individual routes and then
aggregates these into the main travel regions of the world. Travel growth rates are influenced by factors in
the countries at each end of the flow (p. 8).
The size of each economy and its growth rate has the largest effect on the growth of passenger travel in
each market. The rate of change of airfares will affect travel growth. In many markets, the biggest influence
on growth rates is the degree to which governments open market access to airlines based either within their
own territory or outside (i.e., the degree of liberalization in each countrys markets). Other important
factors to consider include the propensity for people of a given culture to travel, and the outlook for
change in any government-imposed restrictions on travel (p. 9).
The size of airplane used in any given region depends on traffic volumes, distances in key markets,
competitive strategies, availability of alternate forms of transport, and market access. Boeing argues that in
a deregulated market, airlines will tend to use smaller aircraft and provide more frequent service (p. 10).
Air transport accounts for about 8% of the world aggregate GDP. The break-up of this 8% is leisure travel
3%, visiting family and friends 2%, business travel 2%, and air transportation of cargo 1% (p. 16).

For the Southwest (SW) Asia region (that includes India), Boeing predicts a GDP growth rate of 5.4% and an air
passenger traffic growth rate of 7.1%. Boeings estimates incorporate recent developments such as the spurt in the
number of airlines in India. Based on these projections, Boeing visualizes a demand for only 70 regional jets in SW
Asia in the next 20 years.
Boeing demand projection for regional jets.

20062025

Regional jets
3450 (World)
580 (Asia-Pacific)
70 (SW Asia, including India)

Source: Boeing Current Market Outlook 2006. http://www.boeing.com/commercial/cmo/pdf/CMO_06.pdf

3. Embraer demand projections for regional jets

20062015

6190 seats
1300

91120 seats
1550

20062025

2950

3450

Source: Embraer predicts 7,950-jet market for 30- to 120-seaters, Aviation International News, November 2006. Downloaded from
http://www.ainonline.com/Issues/10_06/10_06_embraer_80.htm on November 2, 2006.

All the above demand figures are for the whole world.
Of its total projection of demand for 7,950 aircraft in the 30120 seats category over the next 20 years, Embraer
visualizes the major markets as North America and the Caribbean (53%), Europe (18%), Russia and Eastern Europe
(7%), and China (7%).

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 12 of 26

4. Bombardier demand projection for regional jets

6099 seats
20052025

4100 (world)
435 (Asia-Pacific excluding China)

Source: Bombardier Aerospace Commercial Aircraft Market Forecast 20062025 (Bombardier 2006)

Exhibit 1a
Domestic traffic (passenger movements) at top 46 airports in India
(20052006 and 20062007)
Airport
International Airports
Mumbai
Delhi
Chennai
Bangalore
Kolkata
Hyderabad
Ahmedabad
Goa
Trivandrum
Calicut
Guwahati
Amritsar
Srinagar
Jaipur
Nagpur
Total
Cochin International Airport Ltd.
Cochin (CIAL)
Custom Airports
Pune
Coimbatore
Lucknow
Mangalore
Varanasi
Patna
Tiruchirappalli
Gaya
Total
Domestic Airports
Vadodara
Jammu
Indore
Visakhapatnam
Agartala
Bhubaneswar
Udaipur
Bagdogra
Port Blair

200607

200506

14902373
13790078
6078196
6863965
5187867
4535519
2085875
1808447
595041
233277
1073869
107918
690384
595386
583208
59131403

11682444
10468028
4173345
4792051
3664548
2994021
1438969
1267864
322597
191506
724001
77974
457000
394452
351236
43000036

1134604

731762

1527938
852239
482537
449696
317418
311171
54366
0
3995365

905291
559133
430993
304824
232365
218824
29556
71
2681057

404242
473764
358496
330894
324664
350128
236502
259058
504064

360489
306385
272484
239979
236970
220084
210030
207587
204375

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 13 of 26

Exhibit 1a (Continued)
Airport
Madurai
Bhopal
Rajkot
Aurangabad
Raipur
Imphal
Chandigarh
Leh
Juhu
Dibrugarh
Jodhpur
Ranchi
Silchar
Total
Other Airports
Grand Total

200607
265406
169131
160711
170498
246038
214689
154705
140609
137205
127485
107733
145575
116590
5398187
953707
70613266

200506
178824
147268
139982
137388
135320
134701
130723
122401
106973
104125
101765
93508
81967
3873328
696048
50982231

Source: Airports Authority of India

The following table compares the passenger movement statistics

200506
(Crore)

200607
(Crore)

200708
(Crore)

Domestic air traffic (passenger movements) at top 46 airports

in India
Source: Airports Authority of India

5.09

7.06

8.7

Railway traffic (passengers originating) in India

Source: Data as per Central Statistical Organization (CSO),
Compiled by Indiastat.
Note: 1 Crore = 10 million

2676.43

2669.48

2535.81

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 14 of 26

Exhibit 2
RTA-70 prototype and specification

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 15 of 26

Exhibit 2 (Continued)

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 16 of 26

Exhibit 3
Rajamundry

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 17 of 26

Exhibit 4
Attributes and levels

Mode

Time
(hours)

Fare
(Rs.)

Accessibility/connectivity

Air

1,1.5

2900,2200,1500

Current, Improved

15

1400,1100

Current, Improved

15

740,1040

Current, Improved

15

700,1000

Current, Improved

15

1000,1300

Current, Improved

Rail2TAC
Rail3TAC
BusGaruda
BusVolvo

Availability
Next day, One
week
Next day, One
week
Next day, One
week
Next day, One
week
Next day, One
week

Exhibit 5
Linear factor design for travel modes
Travel Modes

Air

Factors

Time
1
1.5

No. of Levels

Fare
1500
2200
2900
3

Travel Modes

Rail-2TAC

Accessibility
Current
Improved

Availability
Next day
One week

Time
15

Fare
1100
1400

Accessibility
Current
Improved

Availability
Next day
One week

Rail-3TAC

Bus Garuda

Factors

Time
15

Fare
740
1040

Accessibility
Current
Improved

Availability
Next day
One week

Time
15

Fare
700
1000

Accessibility
Current
Improved

Availability
Next day
One week

No. of Levels

Travel Modes

Bus-Volvo

Factors

Time
15

Fare
1000
1300

Accessibility
Current
Improved

Availability
Next day
One week

No. of Levels

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 18 of 26

Exhibit 6
Conjoint choice analysis using SAS
Steps for choice-based conjoint using SAS 9.1 (Kuhfeld 2005)
x

Design the Choice Experiment

o Identify the attributes and the levels
o Run %MktRuns to suggest the number of runs for orthogonal and balanced designs
o Run %MktExe to suggest efficient designs
o Run %MktEval to evaluate the design generated
o Run %MktKey and %MktRoll to create the choice design

Administer the experiment by asking the respondents to fill the choice cards

Analysis of the data

o Run %MktMerge to merge the collected response data with the design.
o Run TRANSREG procedure to code the dummy variables
o Run PHREG procedure to do the multinomial logit on the collected data.

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 19 of 26

Exhibit 7
SAS code for Phase I design
libname data <directory path>;
/* suggests the number of choice sets */
%mktruns( 3 2**15);
/* look for entry with violations = 0 */
/* generate Linear Design with 24 choice sets */
%mktex( 3 2**15, n=24, seed=17)
title2 Examine Correlations and Frequencies;
%mkteval;
title2 Examine Design;
proc print data=randomized; run;
data key;
length mode $ 15;
input (Mode Time
datalines;
Air
Rail-2TAC .
Rail-3TAC .
Bus-Garuda .
Bus-Volvo .
None
....
;
run;

Fare

Accessibility

Availability) ($);

title2 Create Choice Design from Linear Design;

%mktroll( design=randomized, key=key, alt=mode, out=data.phase1_design )
proc print; id set; by set; run;
run;
title2 Evaluate Design;
%choiceff(model=class(Mode Time Fare Accessibility Availability), /* model, expand to
nalts=6, /* number of alternatives */
nsets=24, /* number of choice sets */
beta=zero, /* assumed beta vector, Ho: b=0 */
intiter=0, /* no internal iterations just */
/* evaluate the input design */
data=data.phase1_design, /* the input design to evaluate */
init=data.phase1_design(keep=set))/* choice set number from design*/

dummy vars */

data data.phase1_design;
set data.phase1_design;
length time_text Fare_text $20;
length acc_text avail_text $100;
label time_text= "Travel Time";
label Fare_Text= "Ticket Price Per Head";
label acc_text= "How easily you can get to the Airport/Station/Bus Stand";
label avail_text= "Advance Booking";

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 20 of 26

label mode_text ="Travel Mode";

label fare_num= "Fare";
if mode='None' then
mode_text='None of the Above';
else
mode_text=mode;
fare_num=0;
if mode="Air" then
do;
if time = 1 then time_text = "1.5Hrs";
else if time=2 then time_text= "1 Hrs";
if Fare=1 then fare_text= "Rs. 2900/-" ;
else if Fare=2 then fare_text="Rs. 2200/-";
else if Fare=3 then fare_text="Rs. 1500/-";
if Fare=1 then fare_num= 2900 ;
else if Fare=2 then fare_num=2200;
else if Fare=3 then fare_num=1500;
end;
if mode not in ('None','Air') then
time_text="15 Hrs.";
If mode='Rail-2TAC' then
do;
if Fare=1 then fare_text= "Rs. 1400/-";
else if Fare=2 then fare_text="Rs. 1100/-";
if Fare=1 then fare_num= 1400;
else if Fare=2 then fare_num=1100;
end;
If mode='Rail-3TAC' then
do;
if Fare=1 then fare_text= "Rs. 740/-";
else if Fare=2 then fare_text="Rs. 1040/-";
if Fare=1 then fare_num= 740;
else if Fare=2 then fare_num=1040;
end;
If mode='Bus-Garuda' then
do;
if Fare=1 then fare_text= "Rs. 700/-";
else if Fare=2 then fare_text="Rs. 1000/-";
if Fare=1 then fare_num= 700;
else if Fare=2 then fare_num=1000;
end;

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 21 of 26

If mode='Bus-Volvo' then
do;
if Fare=1 then fare_text= "Rs. 1300/-";
else if Fare=2 then fare_text="Rs. 1000/-";
if Fare=1 then fare_num= 1300;
else if Fare=2 then fare_num=1000;
end;
if Accessibility= 1 then acc_text = "At Current Level";
else if Accessibility= 2 then acc_text = "Improvement in connectivity";
else if Accessibility= . then acc_text = " ";
if availability= 1 then Avail_text = "Next Day Availability";
else if availability= 2 then Avail_text = "Book One week in Advance";
else if availability= . then Avail_text = " ";
run;
ods html ;
options nodate pageno=1 linesize=80 pagesize=60 ;
footnote 'IIM Bangalore';
title1 Travel Choice;
Title3 'How would you choose to travel?';
proc print data=data.phase1_design noobs label;
by set;
pageby set;
var mode_text time_text Fare_text acc_text avail_text;
label set="Choose one among the following options/ Choice #";
run;
ods html close;

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 22 of 26

Exhibit 8
Design summary
No. of
Levels
2
3

N
24
36
36
36
48
48
48
48
48
48
48
48
48
48

Frequency
15
1

Some Reasonable
Design Sizes
24 *
36 *
48 *
20
28
32
40
44
18
30
Design
2 ** 16 3 ** 1
2 ** 27 3 ** 1
2 ** 20 3 ** 2
2 ** 18 3 ** 1 6 **
2 ** 40 3 ** 1
2 ** 37 3 ** 1 4 **
2 ** 34 3 ** 1 4 **
2 ** 33 3 ** 1 8 **
2 ** 31 3 ** 1 4 **
2 ** 28 3 ** 1 4 **
2 ** 25 3 ** 1 4 **
2 ** 22 3 ** 1 4 **
2 ** 19 3 ** 1 4 **
2 ** 16 3 ** 1 4 **

Saturated = 18
Full Factorial = 93,304

Violations
0
0
0
16
16
16
16
16
105
105

1
1
2
1
3
4
5
6
7
8

Cannot Be
Divided by

36
36
36
36
36
4
4
Reference
Orthogonal Array
Orthogonal Array
Orthogonal Array
Orthogonal Array
Orthogonal Array
Orthogonal Array
Orthogonal Array
Orthogonal Array
Orthogonal Array
Orthogonal Array
Orthogonal Array
Orthogonal Array
Orthogonal Array
Orthogonal Array

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 23 of 26

Exhibit 9
Sample conjoint card
Mode

Travel Time
(hours)

Fare
(Rs.)

How easily you can get to the

Airport/Station/Bus Stand

Air

1.5

2900

Improved connectivity

Rail-2TAC

15

1100

Improved connectivity

Rail-3TAC

15

1040

At current level

Bus-Garuda

15

700

Improved connectivity

Bus-Volvo

15.

1300

Improved connectivity

Advance Booking
Next day
availability
Book one week in
advance
Book one week in
advance
Book one week in
advance
Next day
availability

None of the
Above

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 24 of 26

Exhibit 10
SAS code for Phase I analysis
libname data <directory path>;
/* Analysis */
/* create sas dataset from spreadsheet */
proc import datafile='<directory path>\phase1_data.xls'
out=data.phase1_data replace;
run;
title2 Merge Data and Design;
%mktmerge(design=data.phase1_design, /* input design */
data=data.phase1_data, /* input data set */
out=data.phase1_data, /* output data set with design and data */
nsets=24, /* number of choice sets */
nalts=6, /* number of alternatives */
setvars=r1-r24)
title2 Code the Independent Variables;
proc transreg design norestoremissing nozeroconstant data=data.phase1_data;
model class(mode time_text acc_text avail_text /zero='None' )
identity(fare_num);
id subject set c ;
output out=data.phase1_coded(drop=_type_ _name_ intercept) lprefix=0;
run;
%phchoice( on )
title2 Multinomial Logit Discrete Choice Model;
proc phreg data=data.phase1_coded brief ; /*&_trgind*/
model c*c(2) =&_trgind
/ ties=breslow;
strata subject set;
run;
%phchoice( off )

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 25 of 26

Exhibit 11
Model statistics

Pattern
1

Summary of Subjects, Sets, and Chosen and

Not Chosen Alternatives
Number of
Number of
Chosen Not Chosen
Choices Alternatives Alternatives
720
6
1
5

Model Fit Statistics

Criterion
Without
With
Covariates Covariates
2580.134
2 LOG L
1816.769
2580.134
AIC
1836.769
2580.134
SBC
1882.562

Testing Global Null Hypothesis: BETA=0

Test
Chi-Square DF Pr > ChiSq
<0.0001
Likelihood Ratio
763.3642 10
<0.0001
Score
756.3748 10
<0.0001
Wald
385.5123 10
Multinomial Logit Parameter Estimates
DF Parameter Standard Chi-Square
Estimate
Error
1
Air
18.61024 381.6573
0.0024
1
Bus-Garuda
18.25424 381.6567
0.0023
1
Bus-Volvo
18.13804 381.6568
0.0023
1
Rail-2TAC
18.45141 381.6568
0.0023
1
Rail-3TAC
19.33443 381.6567
0.0026
1
1 hour
0.51105
0.52144
0.9606
1
1.5 hours
1.11859
0.38231
8.5606
1
At Current Level
0.06049
0.09225
0.4299
1
Book One Week in Advance
1.03517
0.10009
106.9606
1
Fare
0.00117 0.000267
19.1514

Pr > ChiSq
0.9611
0.9619
0.9621
0.9614
0.9596
0.327
0.0034
0.512
<0.0001
<0.0001

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.

For exclusive use Indian Institute of Management - Calcutta, 2015

Estimating Demand for a New Air Travel Offering (A)

Page 26 of 26

Exhibit 12
Utilities associated with travel mode
Mode

Travel
Time
(hours)

Air

1.5

Rail-2TAC

15

1100

Rail-3TAC

15

740

Bus-Garuda

15

700

Bus-Volvo

15

1000

None of the
Above

Fare
(Rs.)
2900

Utility
Connectivity
Improved
connectivity
Improved
connectivity
Improved
connectivity
Improved
connectivity
Improved
connectivity

Advance Booking
Next day availability
Next day availability
Next day availability
Next day availability
Next day availability

0.00117*2900
= 3.393
0.00117*1100
= 1.287
0.00117*740
= 0.8658
0.00117*700
= 0.819
0.00117*1000
= 1.17
0

This document is authorized for use only in Marketing Data Analytics_Term-IV by Prof. Asim K. Pal, Indian Institute of Management - Calcutta from June 2015 to August 2015.