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Fare Analysis of Air India
Fare Analysis of Air India
ON
SUBMITTED BY
MANISH YADAV
R120108025
IN
AVIATION MANAGEMENT
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BONAFIDE CERTIFICATE
This is to certify that Mr. Manish Yadav, a student of University Of Petroleum & Energy
Studies, pursuing MBA (Aviation Management), has successfully completed summer training
at Air India during June-July, 2009 as part of his curriculum, the project report entitled, ‘Fare
Analysis Of AIR INDIA’, submitted by the student to the undersigned is an authentic record
of his original work, which he/she has carried out under my supervision and guidance.
I wish him all the best.
Date………………
Rajeev k. Chaudhary
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CERTIFICATE OF APPROVAL
The following Summer Internship Report titled " Fare Analysis Of Air India“ is hereby
approved as a certified study in management carried out and presented in a manner
satisfactory to warrant its acceptance as a prerequisite for the award of Post-Graduate
Degree in Management for which it has been submitted. It is understood that by this
approval the undersigned do not necessarily endorse or approve any statement made, opinion
expressed or conclusion drawn therein but approve the Summer Internship Report only for the
purpose it is submitted.
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ACKNOWLEDGEMENT
I am thankful to Air India for giving me the opportunity to work on a real time project (Study
of Fares, Pricing and Promotional schemes) which helped me getting meaningful insights
about the sales arena.
I am grateful to Mr.Rajeev Chaudhary, Passenger Sales Manager, Northern Region, and Air
India for providing me an opportunity to work on this project and providing me with valuable
inputs through the phase of the project. And express my sincere gratitude for his constant
guidance and motivation without which this project would not have been completed.
I would also like to thank Wg.Cdr.P.K.Gupta for providing deep insights in this arena and for
constantly guiding throughout the project.
My project at Air India was a great learning experience and for that I shall always be indebted
to Air India.
Manish Yadav
University of Petroleum & Energy Studies
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EXECUTIVE SUMMARY
Indian aviation industry has gone through many phases. First being a monopoly of Air India,
then having private players with the liberalization of the economy, then seeing the rise of
Low Cost Carriers and then mergers and acquisitions among airlines to grab market share.
The compound annual growth rate of the industry volume in the period 2003-2007 was
27.4%.
Kingfisher has the largest market share of the industry with 26%. The low cost carriers have
increased their capacity as they are doing very well in the market having very high seat
factor. Air India has improved its performance in the last year on Ex-Delhi routes. It has been
clocking a positive Market Performance Index (MPI) when its competitor Full Service
Carriers has a negative MPI. Air India also has the largest fleet size with the maximum
variety of aircrafts in its fleet. Air India also has the maximum sectors covered through Delhi
but Jet Airways has the maximum daily flights operating in the country.
The Full Service Carriers are promotional schemes which offer discount and special
privileges in order to acquire and retain price sensitive customers. They also have Frequent
Flier Programmes which are loyalty programmes. The players combine with other airline and
non airline partners in order retain customers by providing special privileges. Airlines are
also offering Holiday Packages to exotic destinations in the country and abroad.
The airlines price their tickets in order to get the maximum revenue from their flights as their
product is very perishable. Different classes of seats are made available and each has their
own restrictions of bookings. Jet Airways and Kingfisher use automated systems in order to
price their seats and make seats available to the customer whereas Air India has a manual
system to open their seats for booking. There is generally high correlation between fares of
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LCCs but there was no correlation between fares offered by Air India and other FSCs. There
was no significant difference between fares of weekends and weekdays.
TABLE OF CONTENTS
Acknowledgement………………………………………………………………….………04
Executive Summary………………………………………………………………………...05
1. INTRDUCTION
A. Airlines industry ..................................................................................................07
B. Research objectives ……………………………………………………………..09
C. Terms and definitions ……………………………………………………..........09
D. Abbreviations ……………………………………………………………...........10
2. LITERATURE REVIEW
A. Market structure- differentiated oligopoly............................................................11
B. Factors affecting consumer perception..................................................................12
C. Pricing in airlines....................................................................................................12
D. Frequent flier programs.........................................................................................13
3. ORGANISATION
A. History of AIR INDIA……………......................................................................15
B. Global Network......................................................................................................18
4. COMPETITIVE ANALYSIS
4.1 Major players in aviation industry.........................................................................23
4.2 Comparison of Players...........................................................................................28
4.3 Connectivity...........................................................................................................31
5. DATABASE AND ANALYSIS.........................................................................................33
6. INTERPETATION OF FARE TREND..............................................................................60
7. NEW DESTINATION (DOMESTIC).................................................................................61
8. SWOT ANALYSIS OF AIR INDIA..................................................................................65
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CHAPTER 1: INTRODUCTION
A. AIRLINES INDUSTRY
The first commercial flight in India was made on February 18, 1911, when a French pilot
Monseigneur Piguet flew airmails from Allahabad to Naini, covering a distance of about 10
km in as many minutes.
Tata Services became Tata Airlines and then Air-India and spread its wings as Air-India
International. For many years in India air travel was perceived to be an elitist activity. This
view arose from the “Maharajah” syndrome where, due to the prohibitive cost of air travel,
the only people who could afford it were the rich and powerful.
Until less than a decade ago, all aspects of aviation were firmly controlled by the
Government. In the early fifties, all airlines operating in the country were merged into either
Indian Airlines or Air India and, by virtue of the Air Corporations Act, 1953; this monopoly
was perpetuated for the next forty years. The Directorate General of Civil Aviation controlled
every aspect of flying including granting flying licenses, pilots, certifying aircrafts for flight
and issuing all rules and procedures governing Indian airports and airspace. With the opening
up of the Indian economy in the early Nineties, aviation saw some important changes. Most
importantly, the Air Corporation Act was repealed to end the monopoly of the public sector
and private airlines were reintroduced.
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buyout of loss-making Air Sahara, which means new entrants, will be confronted with larger
incumbents. Entering the market as a new company requires considerable capital (for
example, to acquire a fleet of planes); and, even for an existing company to begin operating
in India, the market may impose significant costs in terms of overheads, wages, and so on.
• Market analysis
The Indian airline industry generated total revenues of $8.3 billion in 2007, representing a
compound annual growth rate (CAGR) of 29.6% for the period spanning 2003-2007.
Industry volumes increased with a CAGR of 27.4% between 2003-2007, to reach a total of
47.2 million passengers in 2007.
Domestic flights dominated the Indian airline industry and accounted for 43.5 million
passengers in 2007, equivalent to 92.3% of the industry's overall volume. The performance
of the industry is forecast to decelerate, with an anticipated CAGR of 17.1% for the five-year
period 2007-2012, which is expected to drive the industry to a value of $18.3 billion by the
end of 2012.
Table 1.1: Indian airlines industry in $ billion 2003-07
Year $ billion INR billion % growth
2003 3 122.2
2004 3.6 150.4 23
2005 4.6 189.5 26
2006 6.6 272 43.6
2007 8.3 344 26.7
CAGR 2003-07 29.6
Source: Data monitor
• Market volume
The Indian airlines industry grew by 17.6% in 2007 to reach a volume of 47.2 million
passengers. The compound annual growth rate of the industry volume in the period 2003-
2007 was 27.4%.
Table 1.2: Indian Airlines Industry Volume: Passenger Million, 2003-07
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2003 17.9
2004 22 23
Source: Indiastat.com
B. RESEARCH OBJECTIVE:
✔ The ultimate objective of the project is to find out the trend of fares in last
two years of air India at international routes and comparison of AIR INDIA
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D. ABBREVIATIONS
FFP- Frequent Flier Programme
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• Firm is a price-setter
• Long run profit >= 0
• Strategy dependent on individual rival firm’s behaviour
In a differentiated oligopoly, a few firms produce products different enough for each firm to
have its own downward sloping demand curve. As with a perfectly competitive firm or a
monopoly, the differentiated oligopoly firm produces at a profit maximizing level of output
where marginal cost equals marginal revenue. The firm finds the price it will charge
customers at the profit maximizing level of output (Qm) from the demand curve, and sets
price to Pm. As we can see, the firm is earning economic profits since price exceeds average
total cost at the profit maximizing level of output.
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• Presence of competitors was not found as the major factor impacting the average
price. But the presence of competition increases the intensity of dynamic pricing
which implies higher discounts.
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flexibility to the firms for adjusting capacity as per market demand and avoid price
competition. The flexibility allows firms to set higher initial capacity.
Frequent flier program (FFP) is the most widely used reward program in the airlines industry
across the globe. FFP is essentially a customer loyalty program using reward points. (Malloy,
1998) describes the objective of customer loyalty program as rewarding of repurchasing by
encouraging customers to repurchase to meet targets levels at which attractive rewards are
offered. The “Sweetheart Stamps” promotion run by Southwest airlines in the 1970s, allowed
business travelers to accumulate benefits with which they could take their spouse on a free
ticket and can be considered as an FFP. But the first formal FFP was launched in 1981 by
American Airlines. The program known as Advantage offered first class upgrades from
economy on 12000 miles and 20 percent off on roundtrip ticket for 20000 miles. The other
airlines soon launched their own FFP and as on today more than 70 airlines have an FFP
program of their own with a complex web of airline alliances and partnership.
FFP programs are structured into various tiers which segment members based on their
frequency of flying. Higher the tier more is the benefits which are offered to the member.
FFP also has air miles or points which is the currency which is used to redeem benefits. The
air miles are not only earned by flying but also by various other sources making purchases
through credit cards, or shopping at a chain.
CHAPTER-3
ORGANISATION
Air India is the national carrier of India. Air India (formerly Air-India) is the national flag
carrier of India with a worldwide network of passenger and cargo services. It is one of the
two state-owned airlines in the country, the other being Indian (formerly Indian air Airlines.
The merger of Air India and Indian (formerly Indian airline) is in process. Its main bases are
Chhatrapati Shivaji International Airport, Mumbai and Indira Gandhi International Airport,
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New Delhi with hubs at Chennai International Airport. The airline connects 95 destinations
around the world, including 12 gateways in India with Air India Express, which is a fully
owned subsidiary of Air India. The IATA and ICAO code of Air India is AI and AIC
respectively. Other details are given below in table 1:
AIR INDIA
IATA AI
ICAO AIC
Call Sign AIRINDIA
Founded 1932
Chhatrapati Shivaji International Airport, Mumbai
Hubs Indira Gandhi International Airport, New Delhi
Chennai International Airport, Chennai
Frequent
Flyer
Flying Return
Program
Member
Maharajah Lounges
Lounge
Fleet Size 56 (+61 orders)
Destinations 95
Parent
Air India
Company
Company
"Your Place In Sky"
Slogan
Headquarters Mumbai, India
Key Person Mr. Arvind Jhadav ( Chairman)
Website: http://www.airindia.in
Table 1: Important Information about Air India
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In 1994 the airline was registered as Air India Ltd. In 1996, the airline inaugurated service to
its second US gateway at Chicago O’Hare international airport.
In May 2004. AI started its low cost subsidiary named AI Express. AI Express has been
operating exclusively on Gulf routes and has proved to be a successful international low cost
airline, a rare phenomenon.
In March 2004 Air India started non-stop flights from Ahmadabad’s Sadder Vallabhbhai Patel
International Airport to London, Heathrow, making it the third station from India (after
Mumbai and Delhi).
15 JULY 2007Air India has also been granted permission from the Government of India to
merge with Indian Airlines, the two flag carriers of India. The name of the new airline will
remain Air India, since it is known worldwide. The two airlines will formally become one
when they receive the new Boeing 777-200, with the new livery of the merged airline. The
new airline's headquarters will remain in Mumbai, and will have a strong fleet of 130+. After
the merger, the 2 airlines will apply for membership with Star Alliance, to make their network
bigger; Lufthansa will back Air India's application. Alliance Air and Air India Express are
also to merge as the new airline's low-cost arm.
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✔ Mumbai, India
✔ Chennai, India
✔ New York, USA
✔ London, United Kingdom
Air India will add more lounges worldwide, once the merger is complete, and it offers more
destinations worldwide.
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converted freighter aircraft, air India has introduced scheduled services to Frankfurt and
Paris. It has added two weekly cargo flight from Paris and five weekly flights from Frankfurt,
with a total of 14-destinons involved.
3.09 NETWORK:
In its ever-growing quest for providing direct services from various points in India, Air India
currently operates flights from Mumbai, and 13 other Indian cities, viz. Ahmadabad,
Amritsar, Bangalore, Chennai, Delhi, Goa, Hyderabad, Kochi, Kolkata, Kozhikode,
Lucknow, Pune and Thiruvananthapuram. Commencement of international operations from
these cities has obviated, to a very large extent, the need for passengers from these regions to
necessarily travel to Mumbai and Delhi, the traditional main gateways, for taking
international flights. Passengers boarding or deplaning in these cities can now complete their
immigration and custom formalities at their city airport, both at the time of departure and
arrival. The global network of air India is shown below
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B. COMPARISON OF PLAYERS
Different airlines players have been compared and analysed on three different parameters:
market performance, fleet strength and reach.
4.1 ANALYSIS OF MARKET PERFORMANCE
Market performance is analyzed by taking all the domestic sectors and also comparing only
ex-Delhi sectors separately.
• MARKET PERFORMANCE (DOMESTIC)
The market performance of the airlines is based on 3 parameters:
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a) Market Share
b) Seat Factor
c) Capacity Share
Figure: 4.1 Number of passengers flown from different airlines in April 09.
Source: indiastat.com
In terms of number of passengers in the month of April 09, Kingfisher (including Kingfisher
Red) is the leader in market share with 8.61 lakh passengers. Air India has the second highest
market share with 5.83 lakh passengers. Jet Airways has 5.52 lakh passengers but including
JetLite, it becomes the second highest market shareholder with 7.96 lakh passengers. Among
the LCC’s Indigo has the best market share with 4.54 passengers followed by SpiceJet with
3.87 lakh passengers.
a) Market Share: Market share is the number of passenger bookings by one airline as a
percentage of total passenger bookings among all the airlines.
Figure: 4.2 Market Shares of Domestic Airlines in April 08 and April 09
Source: livemint.com
With respect to previous year for the month of April, market share for Jet Airways including
JetLite has substantially fallen from 29.6% last year to 24.1% in this year. Market share for
Kingfisher has declined from 27.9% in April 08 to 26% in Apr 09. Market share for NACIL
has increased from 15.1% in April 08 to 17.6% in April 09. Share for all the LCC’s increased
except for GoAir which had a fall of a marginal 0.2%. Indigo had the highest market share
among LCC’s with an increase from 11.5% to 13.7%.
b) Seat Factor: - The seat factor is the percentage of the number of seats occupied by the
passengers in the flights. For e.g.:- if the seat factor of an airline is said to be 75% it
implies that of all the seats available in airlines, 75% were booked by the passengers.
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Source: indiastat.com
Paramount had the highest seat factor in April 09 followed by Indigo and GoAir. In fact all
the LCC’s had a market share of above 65%. Among full service carriers Jet Airways had the
highest seat factor with 65%.
c) Capacity Share: Capacity share is the percentage of seats available with the airline w.r.t.
the total seats available in the market.
Figure 4.4: capacity for airlines in April 09
Source: indiastat.com
Kingfisher had the maximum capacity share of 27% for April 09. Jet Airways including
JetLite had a capacity share of 24%. Air India has a capacity share of 19%. SpiceJet has a
capacity share of 11% and Indigo has a capacity share of 13%. GoAir has a capacity share of
4%.
4.2 MARKET PERFORMANCE (EX- DELHI)
Following is the analysis of market performance of different players on sectors only through
Delhi on the basis of capacity share, market share and seat factor.
Table 4.1: Different players are compared on capacity share, market share and seat
factor and MPI in April 07-March 08
APR’ 07 – MAR’ 08
Airline Capacity Passengers Seat MPI
Utilisation Capacity Market
Factor Share Share
IC 1994810 1440986 72% 20% 21% 1
Jet
Airways 2306024 1510381 65% 23% 22% -1
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Table 4.2: Different players are compared on capacity share, market share and seat
factor and MPI in April 08-March 09
APR’ 08 – MAR’ 09
Seat
Utilization Capacity Market
Airline Capacity Passenger Factor Share Share MPI
Air India (IC) 1988726 1233216 62% 18% 18% 0
Jet Airways 2161557 1232107 57% 19% 18% -1
Kingfisher 2093723 1156581 55% 19% 17% -2
JetLite 1023462 621363 61% 9% 9% 0
Kingfisher Red 587250 409651 70% 6% 6% 0
Spice Jet 1560331 1046541 67% 14% 16% 2
Go Air 446220 260238 58% 4% 4% 0
IndiGo 1197900 823219 69% 11% 12% 1
Total 11059169 6782916 61%
The average seat factor has declined from the last fiscal year clearly showing signs of effects
of recession in the economy. LCCs such as SpiceJet & Indigo have increased their capacity
because they are doing very well and giving a stiff competition to the Full Service Carriers
increasing their combined market share from 20% to 28%.
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Air India has been performing well having a better seat factor than the average seat factor for
the entire industry in both the years. It has reduced its capacity which has also led to a
decrease in the market share. Jet Airways with its subsidiary JetLite has an MPI of -1 and
Kingfisher with low cost carrier Kingfisher Red has an MPI of -2 for the year 2008-09.
Market Performance Index (MPI) is market share minus capacity share. This indicates how
well the airline has been able use its capacity vis-à-vis other airlines. A positive MPI is
always desirable for any airline.
According to the above table, it is visible that Jet Airways (including JetLite) is doing very
well in Northern Region having the maximum market share and capacity share though it has
a negative MPI. It is followed by Kingfisher and third comes Air India. Among LCCs, Indigo
has seen the greatest improvement, increasing its capacity share from 6% to 11% and market
share from 7% to 12% maintaining a positive MPI.
It can be seen that seat factor for NACIL has been the maximum since June 08 among the
Full Service Carriers bettering even the LCCs in few months. Kingfisher had the lowest seat
factor after June 08.
b) Comparison of market performance in most voluminous routes in April ‘09
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• Delhi-Mumbai (DEL-BOM): Air India had the largest number of flights in this
sector followed by Kingfisher in turn followed by Jet Airways for April 09. Jet
Airways and Indigo has the best seat factor in this sector. Kingfisher has the
maximum capacity share though Jet Airways is the leader in market share in this
sector. Jet Airways has the maximum MPI. Jet Airways has the best performance for
this sector.
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its counterpart airlines. Indigo has the best performance in this sector clocking the
second highest capacity share and the highest market share and good positive MPI.
Table 4.5: Market performance of different players on Delhi-Chennai route
DEL-MAA
AIRLINES FLTS CAP PAX S.F. CAP MKT MPI
IC 119 18875 12333 65.3 26.0 27.0 1.0
JET 115 17825 9860 55.3 24.5 21.5 -3.0
JETLITE 30 6000 3465 57.8 8.3 7.6 -0.7
SPICE JET 58 10962 8112 74.0 15.1 17.7 2.7
KINGFISHER 52 9152 4690 51.2 12.6 10.2 -2.3
INDIGO 55 9900 7298 73.7 13.6 15.9 2.3
429 72714 45758 62.9
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Source: DGCA
The above graph shows the total number of aircraft fleet with every domestic airline. Air
India has the largest number of aircrafts with 155 followed by Jet Airways with 109 aircrafts
and third is Kingfisher with 79 aircrafts.
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Air India has the largest variety with 16 types of aircrafts out of which 30% fleet consists of
A320-200. Jet Airways has 11 types of aircrafts and 38% of its fleet consists of 737-800.
Kingfisher has 6 types of aircrafts and has 36% of its fleet as A320-200.
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4.3 CONNECTIVITY
Reach is defined by the number of destinations covered by the players in the domestic and
international sector.
Table 4.9: No. of daily flights flown by different players to different destinations
Players No of daily Destinations Destinations Daily flights
fights from Delhi from Delhi
According to the table Jet Airways has the maximum flights operating daily in the domestic
region. Both Jet Airways and Air India cover the more than 90 destinations though Air India
covers the maximum destinations ex-Delhi. Though Air India covers maximum destinations
through Delhi, Jet Airways has the maximum flights operating from Delhi.
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# Published Fares: These are those fares that are published to the world at large through
industry standard channels ,notably the airline Tariff publishing company (ATPCO) and
SITA’s AIRFARE SYSTEM. If applicable to international markets and arrived at by
resolution at an IATA traffic conference, they might be referred to IATA Fares. They can
usually be broken down into full or normal fares & special and discounted fares.
# Normal or Full Fare: This is unrestricted, on-demand fare charged for travel in a particular
cabin (First, Business or economy class) in a market at any given time. The normal or full
fare can be looked upon as the pricing platform for a carrier’s service price offers in a
particular cabin in any given market.
#Special or Discounted Fares: These are discounted off the price platform in each cabin and
are available in most markets subjects to restrictions; they are associated with alphanumeric
code that varies widely from market to market. Airline commonly break them down into
promotional fares available to any body willing to meet restrictions on booking and
preferential fares available by reference to factors such as age or employment status.
# unpublished fares: These are also known as DGCA fares and offered through specific
distribution channels which involve prices that are unavailable through general channels.
# Net Fares: These are a feature of several international markets in particular and are notably
important in Asia. It is the gross fare for a block of seats sold to an agency less standard
commission and any other fare adjustment typically applied in the market concerned, the net
fare is the net fare less any volume or other incentive including travel agency commission
offered by the airline to a particular agency with which it has targeted a special relationship.
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The lower the net fare available to an agency, the lower the price it is able to charge retail
consumers.
CHAPTER-5
DOMESTIC INTERNATIONAL
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ANALYSIS OF PRICING
DOMESTIC (MAY-JUN)
Figure 5.1: Fares for DEL-BOM route on different days for different players
Table 5.1: Fares for DEL-BOM route on different days for different players
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• There was high correlation among the fares of LCCs. The correlation coefficient is
above 0.9.
Figure 5.2: Fares for DEL-CCU route on different days for different players
Table 5.2: Fares for DEL-CCU route on different days for different players
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Figure 5.3: Fares for DEL-MAA route on different days for different players
Table 5.3: Fares for DEL-MAA route on different days for different players
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• Air India had the best fare among the FSCs except for 30 days fare. In fact its 45 day
fare is competitive with the LCCs and even lower than a few LCCs.
Figure 5.4: Fares for DEL-BLR route on different days for different players
Table 5.4: Fares for DEL-BLR route on different days for different players
Figure 5.5: Fares for DEL-HYD route on different days for different players
Table 5.5: Fares for DEL-HYD route on different days for different players
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INTERNATIONAL (JUL07-JUN09)
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JUL07-JUN09
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FARE TREND
✔ Fuel component (YQ + YR) jump up from 2130 in jul07 to 3160 in jun09.
✔ Published Fare decline from 6320 in jul07 to 3800 in jun 09 with dump in oct08 i.e. 4600.
✔ Net fare achieved the same level after many variations & major decline from sep08
(9385) to mar09 (7178).
✔ The dominating foreign airline on this route is Emirates airline which operates with 60%-
70% load factor. AIRINDIA has to give competitive fare w.r.t Emirates airline.
✔ The graph is in correlation.
✔ In the month of aug07 there was peak period and demand was more which leads to high
published fare as well as net fare.
✔ The change in net fare was more as compared to Published fare in apr08-sep08 because
the commission given to the agents was more than usual.
✔ Fuel surcharge increased due to ATF hike.
✔ Being a public sector unit, AIR INDIA can’t play with fares in that manner in which other
airlines can do.
✔ Almost 60%-70% of Europe business is grasped by Emirates Airline.
DELHI TO DUBAI (DEL-DXB)
Return Fare
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JUL07-JUN09
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✔ Fuel coefficient (YQ + YR) decline from 6020 in jul07 to 3960 in jun09.
✔ Published fare shows a drastic hike from 7950 in jul07 to 17800 in may09.
✔ Net fare also shows an increment from 16088 in jul07 to 19026 in jun09 & highest in
month of oct08 i.e. 24489.
✔ The dominating foreign airline on this route is Emirates airline which operates with
60%-70% load factor. AIRINDIA has to give competitive fare w.r.t Emirates airline.
✔ The graph is in correlation.
✔ In the month of aug07 there was peak period and demand was more which leads to
high published fare as well as net fare.
✔ The change in net fare was more as compared to Published fare in apr08-sep08
because the commission given to the agents was more than usual.
✔ Fuel surcharge increased due to ATF hike.
✔ Being a public sector unit, AIR INDIA can’t play with fares in that manner.
✔ Almost 60%-70% of Europe business is grasped by Emirates Airline.
DELHI TO SHANGHAI (DEL-SHA)
ONE WAY FARE
43
AIRINDIA FARE ANALYSIS
U.P.E.S
44
AIRINDIA FARE ANALYSIS
U.P.E.S
JUL07-JUN09
45
AIRINDIA FARE ANALYSIS
U.P.E.S
✔ Fuel component (YQ + YR) remains almost constant from jul07 to jan09 then shows
downfall in feb09 i.e. 5180.
✔ Published fare also shows a constant trend from jul07 to mar08 then down trend from
apr08 to jun09 with dump in feb09 i.e. 10200.
✔ Net fare shows major fall from 20877 in jul07 to 15872 in jun09.The major downfall
period is from jun08 to feb09.
✔ The dominating airline on this route is Singapore airline which operates with 70%
load factor and covers long distance which helps in reducing per unit operation cost.
✔ The graph is in correlation.
✔ There is major decline in net fare w.r.t publish fare in period May08-jul08 because of
the fuel surcharge component.
✔ The fuel surcharge increase because of the ATF prices.
✔ The decline in fares in period may08-jul08 was due to competitive pricing w.r.t
Singapore Airline.
✔ Singapore airline have big pockets and financially strong thus bear losses unlike AIR
INDIA
46
AIRINDIA FARE ANALYSIS
U.P.E.S
JUL07-JUN09
47
AIRINDIA FARE ANALYSIS
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✔ Fuel component (YQ + YR) shows downfall from 3954 in jul07 to 9466 in jun09 with
major dump in may08-jul08.
✔ Published fare shows constant trend from july07 –mar08 then major fall in mar08-
jun08 and continue falling to 12000 in jun09.
✔ Net fare shows overall decline from 33161 in jul07 to 22636 in jun09 with the major
downfall in may08-sep08 and again in apr09-jun09.
✔ The dominating airline on this route is Singapore airline which operates with 70%
load factor and covers long distance which helps in reducing per unit operation cost.
✔ The graph is in correlation.
✔ There is major decline in net fare w.r.t publish fare in period May08-jul08 because of
the fuel surcharge component.
✔ The fuel surcharge increase because of the ATF prices.
✔ The decline in fares in period may08-jul08 was due to competitive pricing w.r.t
Singapore Airline.
✔ Singapore airline have big pockets and financially strong thus bear losses unlike AIR
INDIA
48
AIRINDIA FARE ANALYSIS
U.P.E.S
JUL07-JUN09
49
AIRINDIA FARE ANALYSIS
U.P.E.S
✔ Fuel component (YQ + YR) remains smooth from jul07 to jun09 with some variation
from may08 to jan09.
✔ Published fare shows a downfall from 15600 in jul07 to 12500 in jun09.
✔ Net fare remains smooth from July 07 to apr 08 then show rise trend & highest in
nov08.Then after major dump i.e. lowest in feb09 i.e14545
✔ The graph is in correlation.
✔ From apr08-jul08, the rise in net fare was due to the additive effect of fuel surcharge.
✔ Fuel surcharge increased due to the ATF hike.
✔ From mar09-jun09, the net fare increase because of the more commission given to the
agents.
✔ The major foreign airlines which dominate on this route are Singapore and Cathay
Pacific airline. Cathay Pacific use Jumbo 747-ER and 747-LR aircrafts which covers
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AIRINDIA FARE ANALYSIS
U.P.E.S
the destinations beyond Delhi. The operating cost per kilometre reduces because of
the long run distance, resulting into less operating cost and thus less fare.
✔ AIRINDIA is unable to operate Jumbo because of the less load factor and seat
utilization.
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AIRINDIA FARE ANALYSIS
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JUL07-JUN09
✔ Fuel component (YQ + YR) shows overall decline from3960 in jul07 to 6572 in jun09
but highest in nov08 i.e. 10534
✔ Published fare also follow the same trend i.e. decline from24000 in jul07 to 11740 in
jun09
✔ Net fare shows smooth trend from july07 to mar08 & then shows major up down
variations i.e. highest in nov08 i.e. 34702 and lowest in feb09 i.e17571
✔ The graph is in correlation.
✔ From apr08-jul08, the rise in net fare was due to the additive effect of fuel surcharge.
52
AIRINDIA FARE ANALYSIS
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53
AIRINDIA FARE ANALYSIS
U.P.E.S
54
AIRINDIA FARE ANALYSIS
U.P.E.S
JUL07-JUN09
55
AIRINDIA FARE ANALYSIS
U.P.E.S
56
AIRINDIA FARE ANALYSIS
U.P.E.S
29
dec07 31000 6248 37248 3% 35698 225 359 0% 35923
23
jan08 31000 7020 38020 3% 36470 225 366 0% 36695
95
feb08 31000 7090 38090 3% 36540 225 367 0% 36765
65
mar08 31000 7270 38270 3% 36720 225 369 0% 36945
45
apr08 31000 8760 39760 3% 38210 225 384 0% 38435
35
may08 31000 1103 42034 3% 40484 225 407 0% 40709
4 09
jun08 31000 1109 42090 3% 40540 225 407 0% 40765
0 65
jul08 31000 1114 42146 3% 40596 1054 416 0% 41650
6 50
aug08 31000 1114 42146 3% 40596 1054 416 0% 41650
6 50
sep08 31000 1221 43218 0% 43218 1214 444 0% 44432
8 32
oct08 31000 1221 43218 0% 43218 1214 444 0% 44432
8 32
nov08 28000 1240 40400 0% 40400 1316 417 10% 38916
0 16
dec08 28000 1240 40400 0% 40400 1316 417 10% 38916
0 16
jan09 28000 1255 40558 3% 37002 1330 383 3% 37955
8 32
feb09 28000 1265 40656 3% 39436 1356 407 10% 38076
6 92
mar09 17460 1265 30116 3% 29736 2656 323 0% 32392
6 92
apr09 17460 5442 29902 3% 22739 2607 253 0% 25346
46
may09 18820 5344 24164 3% 24004 2574 265 0% 26578
78
jun09 20000 5124 25124 3% 24379 2535 269 3% 26332
14
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AIRINDIA FARE ANALYSIS
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✔ Fuel component(YQ + YR) shows rising trend from 4774 in jul07 to 12400 in nov08
then show downward trend from 12400 in nov08 to 5124 in jun09 with lowest in
apr09.
✔ Published fare shows smooth trend from 31000 in jul07 to 28000 in nov08 then shows
downward trend from nov08-jun09 with lowest in month of mar09i.e 17460
✔ Net fare shows drastic change from 34449 in jul07 to 26332 in jun09 with rise trend
from jul07 –nov08 then major dump from feb09-jun09 with lowest in apr09 i.e. 32392
✔ The graph is in correlation.
✔ The dominating airline on this route is JAAL airline of Japan with the load factor of
60%-65%.
✔ From may08-nov08, the bounce in net fare is due to the additive effect of fuel
surcharge.
✔ Fuel surcharge increase due to the ATF hike.
✔ From feb09-apr09, JAAL airline drop their fares drastically and due to the
competitive pricing, AIRINDIA has to do the same.
✔ JAAL airline covers the destinations, across the globe, from TYO to DEL and then
FRA. The long distance coverage thus reducing per unit operational cost.
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AIRINDIA FARE ANALYSIS
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JUL 07-JUN
59
AIRINDIA FARE ANALYSIS
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✔ Fuel component (YQ + YR) shows overall rise from 3553 in jul07 to 6813 in jun09.
✔ Published fare shows zig zag trend during period jul07-jun08 then shows major dump
in the month of dec08.
✔ Net fare also shows the zig zag trend with overall rise from jul07 to nov08 then
sudden fall in dec08 then smooth rise trend follows.
✔ The dominating airlines on this route are Virgin airline, Lufthansa airline, British
Airways, Ethihad Airways with AIRINDIA.
✔ The graph is in correlation.
✔ The rise in net fare was due to the more demand in jul07. The net fare increase w.r.t
the published fare because of the commission given to the agents and fuel surcharge
also increase.
✔ The fuel surcharge increase due to the ATF hike.
✔ The zigzag motion is due to the comparative fares w.r.t the other foreign airlines.
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AIRINDIA FARE ANALYSIS
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JUL 07-JUN 09
61
AIRINDIA FARE ANALYSIS
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✔ Fuel component (YQ + YR) shows overall rise trend from 6806 in jul07 to16026 in
jun09.
✔ Published fare shows drastic dump from 23900 in jul07 to 8900 in jun09 with major
downfall nov08- may09.
✔ Net fare shows upward trend from 33010 in jul07 to 38782 in sep08 then major
decline in sep08-feb09.It shows overall decline trend.
✔ The dominating airlines on this route are Virgin airline, Lufthansa airline, British
Airways, Ethihad Airways with AIRINDIA.
✔ The graph is in correlation.
✔ The rise in net fare was due to the more demand in jul07. The net fare increase w.r.t
the published fare because of the commission given to the agents and fuel surcharge
also increase.
✔ The fuel surcharge increase due to the ATF hike.
✔ The zigzag motion is due to the comparative fares w.r.t the other foreign airlines.
CHAPTER-6
✔ The fluctuations in fares at these international routes are due to cyclic variation in
aviation industry. Aviation industry is in trap of recession from last two year and the
overall growth is also declining.
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AIRINDIA FARE ANALYSIS
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✔ As far as fuel component (YQ+YR) is concerned, the ATF hike is one of the
dominating factors in fluctuation of the fares.
✔ The fares of other international airlines also affect the fares of AIRINDIA because of
the market characteristics and competition.
✔ AIRINDIA is losing its market share because of the declining capacity utilisation and
load factor. The other airlines thus fetching up the passengers.
✔ Published fare decline due to recession that is still affecting the aviation industry. So
to maintain the loyal passenger AIRINDIA lower down its fares.
✔ Most of the airlines have big pockets i.e. they can afford losses but the same story is
opposite in case of AIRINDIA.
✔ Most foreign Airlines use Jambo747-ER and 747-LR aircraft on the particular route
that covers the long journey resulting into lowering down per unit cost.
✔ The fare trends fluctuate because of the financial condition of the AIRLINE itself.
✔ The Foreign Airlines i.e. Emirates, Cathay Pacific, Gulf Air, Singapore Airlines are
dominating at their particular routes and much potential in terms of finance.
CHAPTER-7
NEW DESTINATIONS
A. DOMESTIC
There are a few destinations which have not been exploited to the maximum. This is because
of the proximity of these places via road and rail transport. Two of these places are Agra and
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AIRINDIA FARE ANALYSIS
U.P.E.S
Uttarakhand. Both of the places have a substantial number of tourists coming to these places
every year.
Agra gets a good number of international tourists as it has the Taj Mahal which is one of the
seven wonders of the world. Agra also has a few other sites which are of historical
importance. A flight can be started from Delhi to Agra by an ATR so that it can be
commercially viable. The seats offered should be in only economy class as the time of flight
will be very less.
Uttarakhand is a destination which attracts mostly domestic tourist as it has a lot of places
having religious significance. It has an airport 25 kms away from capital city, Dehradun,
which has been recently upgraded to handle A 320 fleet as well. Dehradun is the centre from
where pilgrims can go to Badrinath, Kedarnath, Haridwar, Rishikesh etc. and holiday tourist
can go to places like Mussoorie. Kingfisher Red is the only big operator on this route
offering a ticket at Rs. 8500. As the flight duration is only for 45 minutes the seats should be
offered only in the economy class.
Both the places can fetch good business for LCCs segment with both the places attracting
many domestic and international tourists. It should be kept in mind that airlines would not be
competing on these routes not only with competitor airlines but also with road and rail
transport. Therefore, the airlines should make the marketing mix accordingly.
Table 6.2: Destinations where Kingfisher flies and Air India doesn’t
Destination City connected Flights/week
Belgaum Bangalore 4
Bhavnagar Mumbai 7
Bhuj Mumbai 7
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AIRINDIA FARE ANALYSIS
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Table 6.2: Destinations where Jet Airways flies and Air India doesn’t
Destination Connecting city Flights/week
Bhavnagar Mumbai 7
Bhuj Mumbai 14
Diu Mumbai 6
Gorakhpur Delhi 5
Porbandar Mumbai 6
Rajahmundry Hyderabad 6
The fig 6.1 shows the number of flights originating from the destinations where Air India
doesn’t fly and Kingfisher or Jet flies.
Figure 6.1: Existing flights from where only Kingfisher or Jet Airways fly
According to the number of flights originating from a destination following are the top six
potential destinations:
• Bhuj
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AIRINDIA FARE ANALYSIS
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• Bhavnagar
• Hubli
• Nasik
• Shimla
• Vijayawada
Jet Airways and Kingfisher both fly to Bhuj and Bhavnagar. The airlines fly only economy
class on the route. The ticket to Mumbai from Bhavnagar is around Rs. 3000 and from Bhuj
is around Rs. 3500. The duration of flights to Mumbai is around an hour from both the
destinations. The destinations are attractive for operating smaller planes in the LCC business
model.
Hubli is a city in Northern Karnataka and is situated 20 KM from Dharwad which is the
commercial and business centre for Northern Karnataka. It is connected to Mumbai,
Bangalore and Hyderabad (via Bangalore) with 14 flights per week departing from Hubli.
Kingfisher’s LCC Kingfisher Red is the only carrier flying from Hubli.
Nasik is located in Maharashtra around 180 Km from Mumbai and is referred as the “Wine
capital of India”. Nasik is the third most industrialized city after Mumbai and Pune in
Maharashtra. Nasik is also connected by Kingfisher Red to Mumbai and has very low fares
of around 1500 and duration of flight to Mumbai to around an hour.
Vijayawada is the third largest city of Andhra Pradesh and has gained the name of Business
capital of Andhra Pradesh over the years. It is 275 Km from Hyderabad and is connected to
Hyderabad and Bengaluru Kingfisher Red with prices around 4500 for Hyderabad and 3000
for Bengaluru.
Shimla is the capital of Himachal Pradesh and is a popular tourist destination. It is 365 Km
from New Delhi by Kingfisher Red. The fare on the route is high with prices around Rs
9500.
All the six destinations have varying level of fares but are operated primarily by Kingfisher
Red using the ATR aircraft (except for Bhuj where Kingfisher operates 320). The destinations
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U.P.E.S
have short duration flights with capacity in each flight varying around 50. These destinations
can be attractive if operated in the LCC mode.
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CHAPTER-8
SWOT ANALYSIS OF AIR INDIA
Strengths:
• It has the best Reach among the players.
• It has the largest and the most diverse fleet strength.
• Air India has a wide range of promotional schemes among the players. It offers the
best coupon schemes amongst the airlines and provides the covers a broader market
in terms of discounted fares provided compared to Jet and Kingfisher.
• It has the best holiday packages in terms of number of destinations covered and
combinations offered. Prices of the holiday packages are also competitive.
• It has strong Brand name and oldest Airline.
• It has strong Govt.backup & monopoly in various international routes.
• It has established infrastructure and prime parking slots & space
Weaknesses:
• Manual inventory management compared to automated inventory management used
by Jet and Kingfisher
• Despite best fleet and reach Air India is only third in terms of market share. The
seat factor was lowest among the players for the first quarter of 2009.
• Poor HR Strategies and management.
• Poor cost control and loss of market.
• Highest manpower ratio to aircraft.
• Air India lags behind Jet Airways and Kingfisher in terms of airline and non airline
partners. This is significant for the FFP especially when the three FSCs offer similar
benefits to the passengers.
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AIRINDIA FARE ANALYSIS
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Opportunities:
• As per “Airports Authority of India, Foundation for Aviation & Sustainable Tourism”,
the domestic traffic will witness a six to seven percent growth till 2017. The growth
presents an opportunity to improve capacity utilization.
• It can tap the various international routes where other airline is not operating as it
has wide code sharing.
• Airlines can charter into routes where there are very less players operating and can
gain a competitive advantage.
Threats:
• LCCs have become strong players and eating the market share of FSCs. The market
share of Indigo and Spice jet increased to 14 percent and 12 percent from 10 percent
each last year.
• There has been an alliance between Jet and Kingfisher who together own more than
50 percent of capacity and the market share.
• Only FSC without a well famed LCC in the domestic market.
Challenges:
• Shedding the negative image of Air India.
• Excess capacity leading to frequent fare drops/ dilution of yields.
• Prolific Expansion of low cost carriers.
• Retaining customers who have experienced deficiency in services.
• Resource and Strategic Management
• Regaining the faith and reliability on MAHARAJA i.e. AIR INDIA
Problems:
• Lack of selling efforts in interior cities.
• Tracking of productivity data for various incentive or PLB schemes.
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✔ AIR INDIA is going to create F&J cell to promote High Yield Business in Mid
August09.
✔ Dedicated sales officer for customized servicing of F&J passengers.
✔ Compilation of Exhaustive data bank of High net worth passengers, corporate, CEO’s
etc.
✔ Development of newsletter to high yield passengers with updates of products,
schemes etc.
✔ Personalized letter to potential and actual F&J passengers for post flight feedback.
✔ Enhancing reach to Trade Bodies such as ASSOCHAM, FICCI, CII etc.
✔ Special deals with corporate and GOI.
✔ Participation through sponsorship in high profile events.
✔ Conducting road show/Presentation to Agents and Corporate highlighting the New
AIR INDIA.
✔ Integration of NACIL and Sales team.
✔ Companion free scheme for West-USA/EUROPE up to Nov09.
✔ AIR INDIA will launch bonus free travel for spouse in first and executive class (F&J)
for Paris, London and New York.
✔ AIR INDIA will offer 30KGS free Baggage allowance for travel to London, Paris and
FRA.
✔ Complimentary pick-up and drop for F&J class passengers till 31st march 2010.
✔ AIR INDIA is going to Introduce New One India D.G.C.A commissionable fares in
August09.
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AIRINDIA FARE ANALYSIS
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✔ AIR INDIA is offering 3% IATA commission on basic fare plus fuel surcharge till
March 2010 and no Fuel surcharge will be charged on infant fares from India to
USA/CAN/UK/EUR.
✔ Introduction of Corporate Super Saver Scheme to strengthen the high yield
passengers.
✔ Special discounted Domestic and International night fare (25%) between 2300 to
0500 hrs. from Sep09 onwards.
Air India is a strong player in the market with the potential to become the leader once again.
It covers widest range of destinations, has the best fleet and offers competitive fares. Based
on the study following areas can be targeted in the quest to become the leading Indian player.
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AIRINDIA FARE ANALYSIS
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✔ Built up Preferred agent Scheme which will give major boost to sales efforts.
✔ Adequate number of trained staff at Customer contact points viz. call center, sales,
reservation, airport and in-flight.
✔ Sales kit for sales officer including Laptops and internet facility.
✔ Allow agents to re-issue tickets on international ticketing.
✔ Valet services for F & J passengers and use of premium cars for limo services.
✔ Creation of informative and interactive web portal for agents /passengers.
✔ Adopting flexible nature in corporate deals with the aim of getting F&J passengers.
Once business is retained, yield can be increased.
✔ Have to have a popular Brand Ambassador.
REFERENCES
✔ http://www.indianairlines.in/index.aspx
✔ http://www.airindiaholidays.in
✔ http://www.indiastat.com
✔ www.iata.org
✔ www.dgca.nic.in
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AIRINDIA FARE ANALYSIS
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✔ www.airindia.com
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AIRINDIA FARE ANALYSIS
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✔
APPENDICES
Appendix A: Fleet
Appendix A.1
NACIL Passenger Fleet
Capacit
Aircraft Owned Leased Orders Notes
y
4 owned, 3 dry leased, 2 wet leased;
202 operated by Air India; will be replaced by
Airbus A310-
4 4 0 the Boeing 787-8.
300
4 owned will be converted to freighters
for Air India Cargo.
Airbus A310
4 - - Operated by Air India
Freighter
144
Airbus A319-
11 5 9 120 Operated by Indian Airlines
100
122
Airbus A320- 146 Operated by Indian Airlines, All old
30 16 4
200 124 A320-200s will be replaced by 2014.
Airbus A321- 172
12 0 8 Operated by Indian Airlines.
200
Airbus A330- 279 Operated by Air India; will be replaced
0 2 0
200 by the Boeing 787-8.
ATR 42-320 0 7 0 48 Operated by Indian Airlines
Stored since 2000s; previously operated
Boeing 737- 119 by Air India Regional (Alliance Air);
6 0 0
200/Adv converted to freighters for Air India
Cargo.
Boeing 737- 119
7 - - Operated by Indian Airlines
200
Boeing 737- 15 7 4 189 Operated by Air India Express.
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AIRINDIA FARE ANALYSIS
U.P.E.S
800 186
Boeing 747- 293 Operated by Air India; to be retired by
6 0 0
400 2016.
Boeing 777- 272
0 1 0 ex-United Airlines; operated by Air India.
200
Boeing 777- 292 Ex-United Airlines; operated by Air
0 3 0
200ER India.
Boeing 777- 238 Operated by Air India, exclusively for
5 0 3
200LR 241 non-stop flights to the United States.
Boeing 777- 300
5 0 10 Operated by Air India.
300ER
Will be operated by Air India; to replace
Boeing 787-8 0 0 27
all dry leased A310-300s and A330-200s.
Bombardier 74
0 4 0 Operated by Indian Airlines.
CRJ700
Total 105 49 65
Source: - DGCA
Airline Partners
19 partners
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AIRINDIA FARE ANALYSIS
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Code- sharing
8 code share partners.
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Conversion Partners
10 conversion partners
77
Hotel Partners
20 hotel partners
AIRINDIA FARE ANALYSIS
U.P.E.S
Other Partners
8 other partners
78