2009-11 stm

STRATEGIC MANAGEMENT PRESENTATION

ON “AIR DECCAN”

BY: GROUP-7

RUCHITA MEHTA (09063)

HIRAL MUNVAR (09066)

DEEPAK NAIR (09067)

MAYUR PATADIA (09075)

MUDRA PATEL (09077)

UNNATI SHARMA (09099)

Apr 13, 2023

FLOW OF THE PRESENTATION Industry overview

Company overview

Business model

Organizational structure

Competitive Strengths of Airline Operation

ABELL'S business model

ETOP

BCG Model

Generic Business strategic Model

Application of different strategy of Air Deccan

2Tolani Institute of Management Studies

Apr 13, 2023 3

INDUSTRY OVERVIEW

Tolani Institute of Management Studies

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AVIATION INDUSTRY IN INDIA• Origin of industry was in 1912 where 1st flight was

between Karachi and Delhi.

• The first Indian Airline – Tata Air line by JRD Tata.

• Constant pace of growth among other industries around the world.

• India – 9th largest market in aviation industry.

• 29.8 million passengers travelled to/from India in 2008 – 30% more than 2007.

• Primarily - government owned, now dominated by privately owned full service and low cost carriers.

• Private airlines – 75% market share of domestic aviation market.


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Cont.. Recent Development in Aviation

Industry: Naresh Chandra Committee Report – Road Map for Civil Aviation Sector. Domestic Air Lines being Allowed to Fly Overseas. Emergence of no Frills Airlines. Present Key Industry Characteristics: Highly under penetrated Market (Average Air Travel is

0.014 trips per person per year against 2.02 trips per person per year in US)

High fixed cost operating environment (High fuel charges as compare to International Airlines)

Regulatory and Infrastructure constrains Relatively limited reach across the country


Apr 13, 2023 6

CATEGORIES OF AVIATION SECTOR

IndianAviation Sector

Scheduled Air Transport Service

Domestic

Airlines

Internationa

l Airlin

es

Non-scheduled Air Transport

Service

Charter

Operators

Air Taxi

Operators

Air-Cargo Service

Transportation of cargo

& mail


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• The introduction of low-cost airlines, coupled with rising disposable incomes in the country, has resulted in a substantial growth in domestic passenger traffic, which increased at a CAGR of 19.2 % between 2003-04 and 2008-09.


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EXTERNAL MACRO ENVIRONMENT

FACTORS


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POLITICAL FACTORS An unstable political environment - uncertainty in the

minds of the air travellers, regarding travelling to a particular country.

Recent political environment – unstable due to international events and tension with Pakistan.

Most significant political event – 11th September – special significance for the airline industry – aeroplanes were involved.

Trade of Government of 2 countries – may restrict or allow flying into a particular area.

Corruption level – in India there has to be payment of bribe everywhere.

Special Considerations – only government airlines not private.

No flexibility in taking decision because of government influence.


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ECONOMIC FACTORS Business cycle – having wide

reaching impact on this industry.

Recession – considered as luxury – decrease in prices.

Prosperity – Indulge to have air journey – Increase in prices.


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SOCIAL FACTORS

Changing travel habits of people – wide implications.

Recognize the income level of individual and serve them.

Taste and preference during the journey with customization (E.g. Jain)

Environment inside the flight – reduce cost and increase customer satisfaction.


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TECHNOLOGICAL FACTORS Increase in use of internet – many

opportunities to airlines.

Other internet base services - online ticket booking, updated flight information & handling of customer complaints.

Technology help AAI - to convert unused hangar into profit centre by providing them on lease.

Better infrastructure – better handling of planes – reduce maintenance cost.


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MARKET FACTORS Customer factors:

o Still flights are very luxurious as well as expensive for middle class people.

o Values of customers are most important as vegetarians will prefer vegetable foods most.

o Customers are satisfied only if they get excellent services in terms of airhostess as well as lending and take off of flight & inside environment of flight.

Product factors:

o Different low cost pricing concept has increase the demand of Low cost airlines in the market.

o Airline players are promoting there product to end users as well as middleman people like tour operators.


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DEMAND DRIVERS High economic growth

Increasing consumerism and affordability

Growth in tourism

The emergence of low-cost carriers

“no-frills” service;

careful route selection to optimize passenger loads and yields;

minimized costs on various aspects of business;

innovative use of Internet and other communications technology to avoid the high cost of traditional airline reservations and communications systems;

lower or lowest initial pricing with careful revenue management. Tolani Institute of Management

Studies

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Cont..

Most Important Opportunity:

o Due to globalization - Growth in tourism - Ample amount of opportunity for all aviation players to earn from domestic as well as from international passengers.

o Airport development and modernization

o City-side development

o Airport connectivity

o MRO Facilities (Maintenance and Repair Operation)


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Cont..Most Important Threat:

o There are 7 players in this aviation industry - all 7 are doing tough competition with each other. Each and every player need to take care about services provided to customers – Many low cost airlines are full of complain.

o Each and every player need to focus on customer service and capture of suitable market.


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CONSTRAINTS

Infrastructure constraints

Shortage of airport facilities

Parking bays

Air traffic control facilities

Takeoff and landing slots.

Less than 100 airports having more than one

daily service.


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COMPANY OVERVIEW


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“I believe that for India to be a developed country, every Indian should

be able to fly. In all developed countries, the common man flies."

- GR Gopinath, Managing Director, Air Deccan.


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Mission & Vision


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VISION

“To empower every Indian citizen to fly.”

MISSION

“To demystify air travel in India by providing reliable, low-cost and safe travel to the common man.” Tolani Institute of Management

Studies

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AIM OF AIR DECCAN

To become the preferred airline of the “common man” of India, by providing a no-frills service that is safe, on-time and low cost

Serve the most destinations across India than any airline

Achieve business success while offering low fares, by increasing aircraft utilization, seeking to optimize load factors and Yields and reducing operating costs.


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SEED OF DECCAN AVIATION... Captain Gopinath was very impressed by the

large heli-charter industry, when he was trip to Vietnam.

India had only 45 helicopters, India has 2 million foreign tourist annually.

Captain Gopinath launched the helicopter charter business in India under the name of Deccan aviation, with help of captain K J Samuel.

The company started 2 helicopters and capital of Rs. 35 lacs.


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COMPANY INTRODUCTION

Air Deccan India's first low cost air line stared in Sept 2003.

It was started by Captain G. R. Gopinath and its first flight took off on 23 August 2003 from Hyderabad to Vijaywada.

The tagline of the airline was "Simply-fly," signifying that it was now possible for the common man to fly.


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Cont.. It was known popularly as the common

man's airline, with is logo showing two palms joined together to signify a bird flying.


They assure that their low fares come with high standards of flight safety. They have very stringent safety regulations in place, approved by the regulatory authorities.

The dream of Captain Gopinath was to enable "every Indian to fly at least once in his lifetime.“

Air Deccan offers services like free travel for infants, greater ticketing flexibility, new airport coaches, plush aircraft interiors, ticketing counters and complimentary water.

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Cont..


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Air Deccan was indeed the first airline to have brought the concept of e ticketing in India.

The number of passengers carried by Air Deccan India has been constantly increasing from

0.4 million passengers during – 2003 to 2004

9 million passengers during – 2006 to 2007.

The fares for Air Deccan flights were 40% to 50% less than that of other leading full service airlines (FSAs) in the country.

Cont..


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On 25 January 2006, Deccan went public by filing a red herring prospectus with the SEBI.

The resultant severe competition between airlines resulted in almost all the Indian carriers, including Air Deccan, running into heavy losses.

After initially trying to get in fresh capital for running the airline, Captain Gopinath eventually succumbed to pressures for consolidation.

So finally Air Deccan was merge with Kingfisher Airlines.

Cont..


BUSINESS MODEL OF AIRLINE OPERATION

Offering low fares to stimulate demand.

Low fares help Air Deccan generate new business throughout India – not only in new and under-served markets, but also in established markets that have so far failed to offer Indian middle-class consumers and cost-conscious businesses a choice of sufficiently cost-effective fares.

Air Deccan targets leisure, small business and corporate customers, and seeks passengers from the Indian middle class as well as from the cost-conscious segments of more well off classes.

Apr 13, 2023 29Tolani Institute of Management Studies

Reducing Costs, Increasing Utilization

Provide a no-frills service.

Air Deccan seeks to provide a simple service in exchange for its low fares.

Product and service extras that are not reasonably necessary to the core task of flying passengers safely and efficiently are eliminated.


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Seek high aircraft utilization.

Single-class seating arrangements in its aircraft and follows scheduling, ground handling and operational strategies designed to keep its planes in the air as long as practical every day.

These measures help Air Deccan to increase its available seats flown.

Air Deccan then uses load factor and yield management techniques in order to help maximize the revenues earned from, and help minimize the operating costs associated with, those available seats flown.Tolani Institute of Management

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Providing a safe and on-time service.

There are provision of safe travel to be of essential importance to our service.

We believe that customers also demand on-time service and expect a minimum of delays, flight cancellations, baggage handling errors and other inconveniences.

Increasing ancillary revenues.

In addition to charging for tickets, Air Deccan earns revenues from charging for in-flight, food and drink, selling advertising space on the interior and exterior of its aircraft and in a number of other ways.


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ORGANIZATION STRUCTURE

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SWOT ANALYSIS


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STRENGTH Cost differentiation

First mover advantage- first low cost airline in India.

Brand equity – It made air travel affordable to all Indians


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WEAKNESSES A fixed-cost perishable product – incentive to fill

empty seats and fly underutilized aircraft is fixed.

Questionable on time performance

Promoters having lack of financial muscle

No previous industry experience


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OPPORTUNITIES

Unserviced hinterland

Air charters

Product differentiation

Tax holiday on aircraft leasing


Apr 13, 2023 38

THREATS

Killer competition

Overcapacity

Indian railways

Growing road networks

Government control


COMPETITIVE STRENGTHS OF AIRLINE OPERATION

First mover advantage

Air Deccan is the first no-frills, low-cost, scheduled commercial passenger airline in India. .

Air Deccan retains the advantage of being known the longest as a no-frills, low-cost carrier and having had the longest time to adopt and refine its low cost carrier strategies.

Simplify!

Air Deccan follows a strategy of simplifying its operations to help keeps its costs down, its fares as affordable as possible and its services as easy for customers to evaluate, purchase and use as possible.


Cont..Strong management team, with leading low-

cost carrier expertise:

Air Deccan’s management team has the necessary depth and capability to expand the airline’s operations, refine its service delivery and implement its business model.

Load factor and yield management through dynamic pricing:

Air Deccan seeks to maximize revenue from ticket sales by attempting to achieve the best possible ticket price by filling as many seats as possible.

Air Deccan uses dynamic pricing to help optimize its load factors and yields.

Optimizing load factors and yields allows an airline to better approach a maximum level of revenues consistent with the preservation and increase of market share.


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ABELL'S BUSINESS MODEL

• Low cost• Less time

On line ticketWeb Based Reservation

Group

• Middle classCorporate class


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ETOP Analysis


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Environmental

Sectors

Nature of

Impact

Impact of each sector

Economic High In India, Purchasing power of the middle class and upper sections of society rising. Consistently opening of FDI’s limits in the airline sector has been increased from 40 to 49%.

Market High Overall industry growth rate encouraging. Indian market of airlines is now more competitive. Huge market available in India because of more young population.

International Low Competition is so high. 43


Apr 13, 2023 44

Environmental

Sectors

Nature of

Impact

Impact of each sector

Social High Educated population In visiting various parts of the Indian subcontinent on family vacation is growing trend. Professional network increases.

Technological High Air craft manufactures continues to build and deliver new aircraft, adding new capacity.

Political High Entry barriers (licencing,maintaince)

Supplier High Supply of pilots.

Regulatory High Complicated rules and regulations.


Apr 13, 2023 45

BCG MATRIX


Apr 13, 2023 46

200420052006

Air Deccan

Deccan Aviation

BCG Matrix from 2003 -2006

?Cash Cow

Dog

Time: - 2003

Deccan Aviation

Air Deccan

Deccan Aviation

Air Deccan

Mark

et

Gro

wth

Market ShareTolani Institute of Management

Studies

Apr 13, 2023 47

Mark

et

Gro

wth

Market Share

BCG Matrix & Life Cycle Of Air Deccan from 2003 - 2006

Introduction

Growth Stage

Maturity Stage

Decline Stage


Apr 13, 2023 48

COMPETITORS

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1. Air India : India’s Legacy CarrierThe history of Air India is the History of Indian Aviation. Air-India began operating in 1932 as Tata Airlines, named after J. R. D. Tata, its founder. Founded as a small, private, domestic carrier in 1932, Air-India is now government owned. It flies only International routes and has negligible presence felt while catering to the domestic traffic.

2. Indian Airlines : With nationalization of Air Transport in 1953 via Air Corporation Act,1953 , National Flag carriers : Indian and Air India were born. Indian was born from merger of 8 domestic carriers .It caters mainly to domestic routes with some presence felt in neighboring nations. Like Air India it’s a full service carrier. It has a subsidiary ‘Alliance Air’ .Its Symbol is Asoka’s Chakra.

Competitors Analysis


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3. Jet Airways :In 1993, Jet commenced its operations after the ban was lift by the government following the repeal of Air Corporation Act.1956. Jet Airways will be the most preferred domestic Airline in India. It will be the automatic first choice carrier for the traveling public and set standards, which other competing airlines will seek to match. It is the only airline that stood the crunch of late 1990’s. Jet started its International Operations in 2004 and carries more than 7 million passengers per annum. 4. Air Sahara:Like Jet, Sahara too began its operations in 1993 after the domestic Air Market was opened by the govt. in 1990’s. Air Sahara Limited is a leading private airline in India, owned by the diversified Sahara India Parivar group. After Jet, it was only airline that could stand the orrential winds of late 1990’s. After series of controversies Air Sahara has been taken over by Jet Airways in May, 2007. The airline is now renamed as “Jet Lite”.


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Segmentation

Air Deccan targets three market segments

■ leisure travelers

■ business travelers

■ corporate travelers


Apr 13, 2023 53

Marketing Strategies Air Deccan seeks to communicate the value

proposition through:

■ Public relations,

■ Advertising,

■ Direct marketing and

■ The Internet.

Air Deccan has been granted the right to use R.K. Laxman’s celebrated Indian mascot the ‘Common Man’ as its brand ambassador.


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ICICI-Travel agent purchase cardTie-ups with HPCL and Reliance Web

WorldEmphasis on “fly made possible”

and “better lifestyle through Air travel”

Offers ticket package called ‘Value Flier’ to the Leisure Customers


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How Air Deccan cuts cost?

Quicker turnaround time

Lower distributions costs

All economy seating configuration

No free catering on board

Alternative revenue channels

100% web enabled bookings – e ticketing


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Air Deccan Activity System

Apr 13, 2023 57

Limited passeng

er Service

Very Low Ticket Prices

High Aircraft

utilization

Highly productive ground and gate crews

Frequent Reliable

Departures

Point to point routes

between cities and Secondary

airports

No meals

No Seat assignments

15 minutes gate

turnarounds

Limited use of travel agents

Automatic ticket

machines

High Compensation of employees

High level of

employee stock

ownership

No baggage transfer

No connection with other

airlines

Standardized fleet

Air Deccan Low fare airlines

Apr 13, 2023

Contingency Strategy

Caption Gopinath had to often frequent government offices and approach politicians for clearing license.

He was not sure about the helicopter business so, he started sericulture business, agriculture consultancy and water solution business.

58Tolani Institute of Management Studies

Apr 13, 2023 59

CORPORATE-LEVEL STRATEGIES

Corporate Expansion(related

diversification)

Stability

Retrenchment


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GENERIC BUSINESS MODEL

Cost Leadership

Differentiation

Focused Cost Leadership

Focused Differentiation

Broad Target

Narrow Target

COMPETITIVE

SCOPE Low cost Services Differentiated Services

COMPETITIVE ADVANTAGE

Apr 13, 2023 61

Human Resource

Success depends in large part upon senior management, directors and key personnel, and ability to retain them and attract new key personnel when necessary.

Recruit and Retain skilled employees, including pilots and others, their operations, expansion plans and accordingly impact on revenue and business


Apr 13, 2023 62

CAPITAL COST

FUEL

DEPRICIATION

INTEREST

MARKETIN

G

FOOD/P

ASSENGER AM

ENITIES

AIRPORT CHARGES

ADMIN

ISTRATIO

N

SALA

RIES AND W

AGES

MAIN

TENANCE

INSU

RANCE0

5

10

15

20

25

30

0

20

7

3.5

8

3

68

27

14.5

3

13

26

13

7

0

15

2

12

19

2

COST STRUCTURE OF A FULL-SERVICE AIRLINECOST STRUCTURE OF A LOW-COST AIRLINE

CREATE

REDUCE

REDUCE

REDUCE REDUCE

REDUCE

REDUCEELIMINATE


Apr 13, 2023 63

MERGER OF AIR DECCAN AND KINGFISHER

Merger has been a result of Kingfisher Airlines recently acquiring 46 per cent in Deccan Aviation through a two step process.

The new firm will operate two separate brands – Deccan and Kingfisher – and will retain their identities of being a low-cost carrier and a full-service airline, respectively.


Apr 13, 2023 64

STRATEGY BEHIND THE MERGER

Kingfisher and Air Deccan have common fleet.

By the merger they are creating 2nd highest market share in the Indian aviation sector.

Deccan has not ordered any long haul planes while Kingfisher has. So once both begin international operations, Kingfisher would fly long haul destinations like the US, while Deccan could look at areas like the neighbouring countries, South East Asia, and the Middle East.

To acquire domestic market

bring down the cost of operation and accelerate the route to profitability by merging into a single entity.


Apr 13, 2023 65

STRATEGY FAILURE

Different Business Model

Operating From different Places

Different Target Segments

Airlines have got approval from the Bureau of Civil Aviation Security (BCAS) to have a common security set up at the airports.

Both Airlines cannot put their individual security set up on Airport.

Both the airlines are in the red. While Deccan Aviation reported a loss of Rs 419 crore for the year ended June 30, 2007, Kingfisher Airlines had a loss of Rs 577 crore on its books for the year ended March 31, 2007. Tolani Institute of Management

Studies

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THANK YOU


2009-11 stm

Documents

aviation industry

government airlines

air deccanby

air travellers

careful revenue management

air journey increase

political factors

private airlines