Case study on Indian Airline industry (Chosen Player Jet Airways)

AGENDA
Aviation Industry- Last 5 years and market forecast Competitive landscape Position of the chosen player in the market Business problem for the chosen player Existing marketing strategy of the selected player Recommendations on marketing strategy of chosen player

Indian Aviation Industry has evolved over the last century..

Pre-Independence 1912-1945
1912: First domestic air route was started between Karachi and Delhi in December 1912. It was opened by the Indian Air Services in collaboration with the UK based Imperial Airways as an extension of London-Karachi flight of the Imperial Airways. 1915: Tata Sons Ltd., the first Indian airline, started a regular airmail service between Karachi and Madras

Public Sector 1945-1990

1948: Before the time of independence, nine air transport companies were carrying both air cargo and passengers in the Indian Territory. 1948: To further strengthen the aviation sector of India, the Indian Government and Air India (earlier Tata Airline) set up a joint sector company, Air India International 1953: Indian Airlines was nationalized which brought the civil aviation sector under the purview of the government

Liberalization 1990-2010
1990: Open skies policy and other liberalization policies was adopted wherein several private airlines have ventured into the aviation business in succession 1995: Air Deccan, India s first LCC was established Late 1990 s: Indian Airlines, the giant of Indian air travel industry, gradually lost its market share to these private airlines.

Indian Aviation Industry has grown significantly over the last 5 years
The Indian airlines industry grew by 9% by value in 2009 to reach a value of $7 billion. The compound annual growth rate of the industry in the period 2005 09 was 19.6%.
10 8 6 4 2 0

$
7 5 6 7

60 40 20 0 -20

UPDATE % DATA

2006

2007

2008 2009 INDUSTRY BY VALUE

2010

The Indian airlines industry grew by 35.5% in 2009 to reach a volume of 73.8 million passengers. The compound annual growth rate of the industry in the period 2005 09 was 20.6%.

$
100 80 60 40 20 0 92
74 58

%
40 30 20 10 0 -10

48

55

2006
Source : Data-monitor report

2007

2008

2009

2010

INDUSTRY BY VOLUME

Political National and airport security FDI: 49% in Airlines 100% in airports Freedom to determine fares Level Playing field

Economic Income of salaried class up: 14 to 16% GDP growth of 8% -9% in last 5 years Nil Import tariff on Aircraft Seat pricing inventory

Social Increasing travelling lifestyles Increasing business travelling Growing middle class

Technological IT Revolution

Online ticketing

Best price shopping services niform aircraft types

L as mass transport medium Air travel: from luxury towards necessity

p gradation of airport infrastructure

Oligopoly structure of the market ustomer View

Safety measures

UPDATE ??? DATA

Political Bureaucracy Economic Tax and Tariffs: 8% import duty and 25 33% state sales tax on ATF Social Lack of skilled manpower (In-flight staff) Technological ?????Night landing facilities

International routes after 5 years

Pricing strategy dependent on individual firm s behavior

Customer service

Operation during winter

No clear policy for state carriers

International petroleum prices

Safety concern

Capital intensive Technology

The Indian airlines industry is expected to grow by 18% over 2010 to $17.9 billion in 2014
20 15 10 5 0
2010 2011E 2012E INDUSTRY BY VALUE 2013E 2014E %Growth $ Billion 12

18 14 16 9

40 30 20 10 0

The expected growth of the aviation industry could be primarily owed to the following factors: High expected growth of gross domestic product Expectation of rise in per capita income Expected increase in personal disposable income Growth in international trade Plans of higher promotion of tourism

200 150 100 50 0

The Indian airlines industry is expected to grow by 14% over 2010 to 156.2 million customers in 2014
92
106

121

137 13

156

25 20 15 10 5 0

2010

2011E

2012E

2013E

INDUSTRY BY VOLUME

2014E

% Growth Millions of passengers

AGENDA
Aviation Industry- Last 5 years and market forecast Competitive landscape Position of the chosen player in the market Business problem for the chosen player Existing marketing strategy of the selected player Recommendations on marketing strategy of chosen player

Source: Directorate general of civil aviation

- Capitalizes on services on board - Has created a brand name associated with professionalism and on time performance - Competes with kingfisher in the full frills sector and post the merger with Air Sahara has inherited the network and business connections of the brand - Focuses on customer loyalty and corporate tie-ups - Building on modern aircrafts - Jet has been the market leader for a while and is trying to sustain the position now

- High on brand equity - Has created a Kingfisher experience value proposition with a personal message to passengers as guests - First domestic airline to come up with in flight entertainment system - Acquired Deccan which now operates as Kingfisher red the low cost carrier - Focus on customer loyalty with King club and has retail tie ups as well as tie ups with ICICI for loyalty points - Focus on leg room and in flight comfort - High on advertising campaigns and offers during travel seasons - Now gone international

- Second largest low cost carrier - Began its operations in May 2005 It is a reincarnation of Modi-luft -Flies to 22 destinations across India, Nepal and Sri-Lanka Focuses on offering low, everyday spicy fairs and great guest services to price conscious travellers. Their aim is to compete with Indian Railways passengers travelling in AC coaches

Competitor - trend analysis

Income Mar-04 Jet Airways (India) Ltd. 35781.7 Kingfisher Airlines Ltd. 682.2 Spicejet Ltd. 146.5 Mar-05 44466.7 3208.6 41.5 Mar-06 61247.5 38.8 Mar-07 74697 13518.2 7554.4 Distribution Mar-04 Jet Airways (India) Ltd. 0 Kingfisher Airlines Ltd. 0 Spicejet Ltd. 0 Mar-05 0 0 0 0.6 Mar-06 0 Mar-07 0 0 1.6 Advertising Mar-04 Jet Airways (India) Ltd. 0 Kingfisher Airlines Ltd. 6.9 Spicejet Ltd. 0 Mar-05 0 62.9 0 0 Mar-06 0 Mar-07 0 106.5 0 Marketing Mar-04 Jet Airways (India) Ltd. 3372.1 Kingfisher Airlines Ltd. 8.3 Spicejet Ltd. 1.5 Mar-05 4555.1 16.7 1.4 18.1 Mar-06 7261.2 Mar-07 8008.5 28.4 194.3 Mar-08 9828.6 440.6 806.5 Mar-09 10981.7 4434 976.1 Mar-08 0 409.5 0 Mar-09 0 2102.3 0 Mar-08 0 0 5.7 Mar-09 0 0 0 Mar-08 96443 15699 14509.5 Mar-09 127988.6 62360.4 18219.8

Income

While all players faced a dip in Mar-06, Jet airways got a hit in Financial year 06-07, analyst view says as a part of Air Sahara and Jet consolidation

Advertising

Kingfisher seems to be the only Airline doing a lot of advertising with brand ambassadors like Deepika Padukone. Other players don t have much spent directly in this area

Jet Airways is more towards digital and social marketing . They were the first one to launch email coupons for Jet privilege customers.

AGENDA
Aviation Industry- Last 5 years and market forecast Competitive landscape Position of the chosen player in the market Business problem for the chosen player Existing marketing strategy of the selected player Recommendations on marketing strategy of chosen player

Founded by Mr Naresh Goyal as an air taxi operator commenced commercial airline operations on 5 May 1993

Jet Airways currently operates a fleet of 97 aircraft

Jet Airways flies to 75 destinations

Appointed Mr. Nikos Kardassis as a new CEO 18 months ago

Posted profit before tax of INR 466 million or US $ 10.5 million versus loss of INR 4,676 million or (US $ 104.1) million for FY2011

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2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Customer interfacing Portal/stalls/office spaces/reservation centers Utilization of assets Avoid layoffs of employees Turn around time Savings on gate charges Streamlined operations Fuel management Ground handling Point to point rather than hubspoke model Smaller airports-target New Markets Sharing alliances with other players Awards and certifications

AGENDA
Aviation Industry- Last 5 years and market forecast Competitive landscape Position of the chosen player in the market Business problem for the chosen player Existing marketing strategy of the selected player Recommendations on marketing strategy of chosen player

 Be profitable after the ambitious air Sahara takeover Bring in efficiency with latest technology and increase operating margin with increase in ASKM

Brand Value

Segregate the LLC Jet Lite and the premium Jet Airways brand Build on the old on time performance and low customer complaint platform and the numbers and loyal customers back

Contribution

Market Share

Maintain the market leader position

AGENDA
Aviation Industry- Last 5 years and market forecast Competitive landscape Position of the chosen player in the market Business problem for the chosen player Existing marketing strategy of the selected player Recommendations on marketing strategy of chosen player

Pricing strategy based on yield and differentiated in terms of class, Advanced passenger excursion and various schemes based on

High aircraft utilization. By reducing turnaround time and fly more hours on an average day

Limited number of similar aircrafts - Reduces training costs and simplifies maintenance

Pricing is the backbone of revenue generation and core of the strategy. High end information management systems help achieve the same

Expansion in the existing markets and focus on tapping international markets

Increase frequency on profitable routes

AGENDA
Aviation Industry- Last 5 years and market forecast Competitive landscape Position of the chosen player in the market Business problem for the chosen player Existing marketing strategy of the selected player Future Market Potential for the chosen player Recommendations on marketing strategy of chosen player

Scenario conditions
Measure Expected market Share Expected revenue 2012 2013 2014 Best Case 30% Moderate Case 23% Worst case 18%

4.2 4.8 5.4

3.22 3.68 4.14

2.52 2.88 3.24

Indulge in more marketing campaigns like Road-shows, Advertisements in print/TV and other kind of social media to strengthen the brand in the minds of the consumers and to attract newer customers Position the full service airline (Jet Airways) and low cost brand (Jet-Lite and Jet Konnect) in a proper manner in the minds of the customer. Convert the business class regular customer into loyal customers by Focusing on on-time performance Special schemes for kids and senior citizens Award gift packs Give a more end to end experience i.e. a home pick-up to a final drop for all business/first class passengers For price sensitive customers, it is important for Jet Airways to retain the same. However, it should take into consideration the incremental value of retaining such customers. Therefore, it should have in place a strong mechanism of monitoring the purchase patterns of extremely price sensitive customers. Build a strong MIS system in order to track Passenger details Customer preferences Average Baggage size Preferred destination of regular customers Food/Drinks habit of regular customers Create a strong Feedback mechanism and incorporate the same in the flight operations