final airlines- kinjals

7/30/2019 Final Airlines- Kinjals

1/71

PEST Analysis Of Airlines

1

PROJECT REPORT ON

PEST ANALYSIS OF AIRLINES

SUBMITTED BY

MISS. KINJAL .B. GOTECHA

TYBMS (SEMESTER V)

M.L. DAHANUKAR COLLEGE OF COMMERCE

VILE PARLE (EAST)

MUMBAI 400 057

PROJECT GUIDE

PROF. RUPA ADATIA

SUBMITTED TO

UNIVERSITY OF MUMBAI

ACADEMIC YEAR

2003-04


2/71


2

CERTIFICATE

To Whom It may Concern

I, _____________________________hereby certify thatMiss.

Kinjal .B. Gotecha ofM.L.Dahanukar College Of Commerce And

Management Studiesof TYBMS (Semester V) has completed her

project on PPEESSTT AAnnaallyyssiiss OOffAAiirrlliinneess in the academic year 2003-

04.

The information submitted is true and original to the

best of my knowledge.

Signature of Project Guide Signature of principal

Place : Mumbai

Date :- 200 __________


3/71


3

DECLARATION

I, Miss Kinjal .B. Gotecha of M.L. Dahanukar College Of

Commerce And Management Studies of TY.BMS (Semester V) hereby

declare that I have completed the project on PEST Analysis Of

Airlines in the academic year 2003-04.

The information submitted is true and original to the best of my

knowledge.

Signature of the student


4/71


4

ACKNOWLEDGEMENT

The topic PEST ANALYSIS OF AIRLINES is quite vast and this is my

honest submission, which would not be possible without the help and support of the

people who have guided me.

At first, I would like to thank our co-ordinator Prof. Shashikant Patil who gave

me this

opportunity to explore the wide arenas of this topic. I thank my project guide Prof.

Rupa Adatia who guided me throughout this project. Thanks to Mrs. Shobha

Nimbalkar, Asst Mngr Sales of Indian Airlines, who provided me with practical

information, so that I could substantiate my information with facts.

Last but not the least. I would like to thank my parents, friends and peers to

help me collect information.

All the above people have given me great backing throughout this project.


5/71


5

PREFACE

Airline sector has grown since a number of years as transportation has grown

its importance. It is very important to take care of the time factor for businesspersons,

emergencies and in many other cases, the speed is provided by air travel.

There are a number of factors, which influence this sector. PEST Analysis of

this sector helps to analyze the changing scenario of airlines. Along with PEST, this

project also includes the importance of airlines as a service sector. The way in which

this sector had grown to provide the best services in return of the value.

Liberalization and privatization of airlines result in the changing trends of thisindustry. It also provides other sectors such as hotels and tourism, a platform for tie-

ups with it in order to expand the air traffic.

Hats off to the pioneers of this industry- to the builders, engineers, operating

people and those in all other departments of an airline- people who manufacture air

transportation.

Thus emphasis is laid on various political, social, technological and economic

along with other factors for the study of airlines as a service sector too.


6/71


6

EXECUTIVE SUMMARY

This project is devoted to various factors influencing the

airlines in general. Although PEST acts as a very important tool in

fulfilling the above aspect, the role of airlines as a service sector

too highlights various sides of the airlines.

This entire report on PEST analysis of airlines contains a

number of ideas which are summarized as below:-

The beginning speaks about the introduction to airline sectoras a whole. It gives an idea of the airline industry.

The airline history focuses on the Wright brothers and their

contribution in bringing the concept of air travel into being.it

speaks about the open sky policy and its contribution to the airline

industry.

Next is about the institutional framework of the airline

industry and its role played in this sector.

The present status of this industry is highlighted in the next

chapter.it speaks about the economic contribution and the statistics

of air traffic in india.

The chapter of PEST analysis focusses on gives a brief idea of

this tool PEST to be used. It highlights on all the political,

economic, social and technological factors if airlines. With the

support of a number of press releases and current news articles the

factors are given great emphasis.

Next, airlines is explained as a service sector and various

service characteristics are highlighted.


7/71


8/71


8

TABLE OF CONTENTS

INTRODUCTION TO AIRLINES

AIRLINE HISTORY

INSTITUTIONAL FRAMEWORK

PRESENT STATUS

PEST ANALYSIS

AIRLINES AS A SERVICE SECTOR

RATER ANALYSIS

MOMENTS OF TRUTH

IATA

LIBERALISATION OF THE AIRLINE SECTOR

CASE STUDY ON INDIAN AIRLINES

CONCLUSION AND RECOMMENDATIONS


9/71


9

INTRODUCTION TO AIRLINES

Airlines is considered to be the fastest mode of transport. It is one of the emerging

industry providing the customers with impeccable service. Airline industry, worldwide is

constantly facing threats from attacks or any wide spread disease like SARS, which affects its

sales considerably. This has lead to bankruptcy and massive layoffs in many airline

companies.

Despite of all these exegencies, airline companies have regained their status and

continue providing its state-of-art service. It is coming up with a flood of innovative schemes

to lure the customers. The attacks on twin tower had severly affected the aviation industry,

but two years after the attack, it has come to normal and running with all its confidence. It

had been a learning experiece for all the airlines. They now are giving prime importance to

the security measures.

The same is the scenario of Indian Aviation. The history of Indian Aviation dates

back to 1912. From then there is no looking back.Gone are the days when flying by air was a

distant dream for common people owing to high ticket fares. Today with the increasing

competition, airlines have slashec their prices, but this has not affected their quality of

service.

The airline companies have created a great impact in the minds of the customers as the

ultimate service provider of all the transports.


10/71


10

AIRLINE HISTORY

WRIGHT BROTHERS.

The Wright Brothers, Orville Wright (1871 - 1948) and Wilbur Wright (1867 -

1912), are credited with the invention of the airplane and controllable powered heavier-than-

air flight.

The brothers grew up in Dayton, Ohio, where they ran a bicycle repair, design and

manufacturing company (the Wright Cycle Company). Drawing on the work of Sir George

Cayley, they extended the technology of flight with the principles of control still used today.

They had researched and initially relied upon the aeronautical literature of the day, including

Otto Lilienthal's tables but, finding that the Smeaton Coefficient, a variable in the formula for

lift and the formula for drag was wrong, designed and built a wind tunnel to perform practical

tests.

In 1903 they went to Kitty Hawk, North Carolina to continue their aeronautical work,

choosing Kitty Hawk (actually Kill Devil Hill) because of its strong and steady winds, and on

March 23, 1903 they applied for a patent for their airplane design. Then on December 17,

1903 Orville Wright took to the air. Orville's uncontrolled flight, of 120 feet in 12 seconds,

was recorded in a famous photograph. In the fourth flight of the same day, the only flight

made that day which was actually controlled, Wilbur Wright flew 852 feet in 59 seconds.

The Wrights established a flying field at Huffman Prairie, near Dayton, and continued

work in 1904, using a catapult takeoff system to compensate for the lack of wind in this

location. By the end of the year, the Wright brothers had sustained flights of 5 minutes,

circling over Huffman Prairie. This was really the world's first airport.


11/71


11

The Wright brother brought great attention to flying by their flight around the Statue of

Liberty in New York in 1909.

Contrary to popular belief, the Wrights were not the first to build heavier-than-air

machines capable of flying under their own power; that had been done earlier by Samuel

Langley and possibly Richard Pearse. However, their three-axis system of control, using

wing warping (later supplanted by ailerons) to control roll, elevators to control pitch and

angle of attack and a rudder to control yaw, made flight stable and sustainable. The same

principles are still in use in all modern aircrafts.

OPEN SKY POLICY

The Open-sky policy came in April 1990. The policy allowed air taxi- operators to

operate flights from any airport, both on a charter and a non charter basis and to decide their

own flight schedules, cargo and passenger fares. The operators were, however, required to

use aircraft with a minimum of 15 seats and conform to the prescribed rules. In 1990, the

private air taxi-operators carried 15,000 passengers. This number increased to 4.1 lakh in

1992, 29.2 lakh in 1993, 36 lakh in 1994 and 48.9 lakh in 1995.

The 1996, private air taxi operators carried 49.08 lakh passengers which amounted to a

41.14 per cent share in the domestic air passenger traffic. Seven operators viz NEPC Airlines,Skyline NEPC, Jet Air, Archana Airways, Sahara India Airlines, Modiluft and East West

Airlines had since acquired the status of scheduled airlines. Besides this, there were 22

nonscheduled private operators and 34 private operators holding no-objection certificate in

1996.

INSTITUTIONAL FRAMEWORK


12/71


12

MINISTRY OF CIVIL AVIATION (MCA):

MCA is responsible for the formulation of national policies and programmes for

development and regulation of civil aviation and for devising and implementing schemes for

the orderly growth and expansion of civil air transport.

DIRECTORATE GENERAL OF CIVIL AVIATION (DGCA):

The DGCA is the main regulatory organisation in the country responsible for

regulation of air transport services to/from/within India and for enforcement of civil air

regulations, air safety and airworthiness.

AIRPORT AUTHORITY OF INDIA (AAI):

AAI provides infrastructure facilities. Its aim is to accelerate the integrated

development, expansion and modernisation of the operational, terminal and cargo facilities,

in line with international standards.

INTERNATIONALS AIRPORTS DIVISION (IAD)

IAD manages the eight international airports at Delhi, Mumbai, Calcutta, Chennai,

Thiruvananthapuram, Kochi, Hyderabad and Bangalore.

NATIONAL AIRPORTS DIVISION (NAD)

NAD manages all domestic airports in the country.

PRESENT STATUS


13/71


13

The airline industry today faces challenges unprecedented in its history. With the

global economic slowdown affecting business travel, the airlines were already in crisis before

September 11th. But, the tragic events of last September aggravated the situation by

weakening consumer confidence further and brought into question the existing security

mechanism. The latest IATA estimates suggest that airlines collectively lost close to US $ 12

billion as they experienced a 5.7% decline in total traffic. The increase in costs due to higher

insurance costs, security etc has put increasing pressure on airlines and jeopardized their

viability leading to widespread layoffs and bankruptcies in the industry.

The Indian aviation industry on the other hand has weathered the storm with greater

ease than many of its more illustrious western counterparts. Though it is largely dominated

by the public sector and somewhat insulated from market exigencies.

Despite the inherent cyclical nature of the aviation sector, its contribution to the

economy is indisputable.

But with the passage of time, the scenario is changing. The airlines are striving hard to

cope up with the crisis. Domestic and international passenger traffic in India is projected to

grow annually at 12.5%yoy and 7%yoy respectively over the next decade. At the same time,

domestic and international cargo traffic is expected to grow at 4.5%yoy and 12%yoy

respectively. By the year 2005, Indian airports are likely to handle 60mn international

passengers and 300,000 tons of domestic and 1.2mn tons of international cargo.

Over the next decade international and domestic air traffic are expected to grow from

the present levels of 42 million to close to 90 million. International air cargo exports from

India are expected to rise from 0.7 million tonnes per annum to 2.4 million t.p.a while

domestic cargo will rise from 300,000 t.p.a to over 1 million t.p.a. Both Boeing and Airbus

Industries expect that with the low penetration of aviation services in India, aviation services

would grow faster than in most countries and ahead of India's GDP growth.

However, in order to achieve such levels of growth a number of policy and regulatory

constraints will need to be addressed immediately.

ECONOMIC CONTRIBUTION


14/71


14

The aviation industry plays an indispensable role in the growth and efficiency of an

economy. The sector acts as an economic catalyst by opening up new market opportunities,

moving products and services with speed and efficiency. Therefore, international trade and

commerce relies heavily on the aviation sector. The contribution of the aviation sector in

India is especially significant taking into account that it only forms a small part of the

transportation industry. The sector facilitates international trade, tourism, and foreign direct

investment thereby enabling the growth of the economy and making it internationally

competitive

At present over 40% of India's exports and imports, by value, are carried by air and 95%

of foreign tourists arrive into India by air making the tourism industry the third largest

foreign exchange earner. According to NCAER estimates foreign exchange transactions

worth US $ 22.5 billion annually is directly facilitated by civil aviation, while another US

$96 billion are moderately facilitated by civil aviation services.

A report published by CII and NCAER also establishes that growth in air transport is

closely inter-linked with growth in the Gross Domestic Product both internationally and

nationally. For a percent increase in India's GDP, domestic passengers are expected to

increase by 1% , for international passengers this sensitivity is about 1.3%.

INDIAS AIR TRAFFIC STATISTICS


15/71


15

Year

Domestic

Passengers

(in million)

Increase

(in per cent)

International

Passengers

(in million)

Increase

(in per cent)

1996-97

(Actual)

12.00 10.5 10.8 7.0

1997-98 13.26 10.25 11.6 7.0

1998-99 14.65 10.5 12.4 7.0

1999-2000 16.20 10.5 13.3 7.0

2000-01 17.57 10.5 14.1 7.0

2001-02 19.06 8.5 14.9 6.0

2002-03 20.68 8.5 15.8 6.0

2003-04 22.44 8.5 16.8 6.0

2004-05 24.35 8.5 17.8 6.0

2005-06 25.05 7.0 18.8 5.5

2006-07 27.87 7.0 19.8 5.5

2007-08 29.82 7.0 20.9 5.5

2008-09 31.91 7.0 22.1 5.5

2009-10 34.15 7.0 23.3 5.5

2010-11 36.54 7.0 24.6 5.5

2011-12 39.09 7.0 25.9 5.5

2012-13 41.44 6.0 27.2 4.9

2013-14 43.93 6.0 28.5 4.9

2014-15 46.56 6.0 29.9 4.9


16/71


16

2015-16 49.35 6.0 31.4 4.9

2016-17 52.32 6.0 32.9 4.9

Sources: Airports Authority of India, Foundation for Aviation.

CHAPTER FIVE

PEST ANALYSIS OF AIRLINES


17/71


17

INTRODUCTION

The airline industry has seen rapid growth in the last few years. Before any

kind of analysis is undertaken, it is important to find out what are the main

environmental influences that have led to this growth. Also, how the extent to which

the changes are occurring, are to be taken care of. This is important because the

change in these factors can have significant effect on the way the industry performs

The environmental influences can be analyzed by the use of PEST analysis.

Within its parameters, PEST indicates the importance of the political, economic,

social & the technological changes in the industry.

A brief idea about these factors is as follows:

POLITICALThe political analysis comprises of the various legislations, regulations &

government policies declared for the respective industry.

ECOMONIC

The economic factors influencing an industry defines the exchange rate,

inflation rates, income growth, debt & saving levels.

SOCIAL

The social factors are those having an impact due to peoples choice and

include beliefs, values and attitudes of the society

TECHNOLOGICAL

An impact of the new technology such as Internet, EDI, mobile and

increasing advancing in computing are covered under the technological factors of

the analytical tool PEST

POLITICAL FACTORS


18/71


18

The political factors are the main driving force of the airline industry. The

Indian airline industry is built on the backbone of the government support and it

cannot sustain itself without it.

All the support services like the hotel industry, tourism and other transport

industry to name some are heavily dependant on the support and co-operation of the

government. Any policy that comes into force can have dramatic effect on the way the

industry players perform.

Focusing on the recent factors concerned with various policies announced by

the government are the following facts. The articles mentioned below highlight the

influence of the Open sky policy announced by the Civil Aviation Ministry.

Stability of the political environment

The airline industry is very susceptible to changes in the political environment as it has

a great bearing on the travel habits of its customers. An unstable political environment

causes uncertainty in the minds of the air travelers, regarding traveling to a particular country.

Overall Indias recent political environment has been largely unstable due to

international vents & continued tension with Pakistan. The recent Gujarat riots & the

governments inability to control the situation has also led to a increasing the instability ofthe political arena.

The most significant political event however has been September 11. The events

occurring on September had special significance for the airline industry since airplanes were

involved. The immediate results were a huge drop in air traffic due to safety & security

concerns of the people.

impact on Air India: -


19/71


19

After the terror strikes, Asian Airlines seemed relatively unaffected and the demand

was relatively stable a week after the attacks a far cry from the marked downturn in bookings

that airlines in the US have seen.

Drop In air traffic leading to financial problems:

For Air India, initial cancellations caused a loss of Rs. 9.5 crores in terms of grounded

flights and hotel accommodation for stranded passengers. The airline has now curtailed its

direct flights to New York and Chicago, stopped its weekly London terminator service and

rerouted a service to Singapore. Despite this, and the pull out of United Airlines, Air India

flights are still not full to the U.S. and London. Insurance conditions from leasers have forced

the airline to ground all four of its recently leased aircraft.

Trade relations with other countries

International airlines are greatly affected by trade relations that their country has with

others. Unless governments of the two countries trade with each other, there could be

restrictions of flying into particular area leading to a loss of potential air traffic (e.g. Pakistan

& India)

India could find itself one airline short on the European sector as Richard Bransons

Virgin Atlantic is reported to be reviewing its strategy for its young unprofitable Indian

operations. During its short stay in this country, Virgin Atlantic has already notched up losses

on the Delhi-London sector and its exit from India may be a distinct possibility if bilateral

talks between the UK and the Indian government do not yield more ground in India for the

airline soon.

Political interference & bureaucracy


20/71


20

This is another major area of consideration for airlines. This is because most

governments recognize the huge revenue potential of the airline industry. This leads to a lot

of politicians & ministers try to interfere with its operation hoping to gain come benefit.

Another aspect is that in countries with high corruption levels like India, bribes have to

be paid for every permit & license required. Therefore constant liasoning with the minister &

other government official is necessary.

The state owned airlines suffer the maximum from this problem. These airlines have to

make several special considerations with respect to selection of routes, free seats to ministers,

etc which a privately owned airline need not do. The state owned airlines also suffers form

archaic laws applying only to them such as the retirement age of the pursers & hostesses, the

labour regulations which make the management less flexible in taking decision due to the

presence of a strong union, & the heavy control & interference of the government. This affects

the quality of the service delivery & therefore these airlines shave to think of innovative

service marketing ideas to circumvent their problems & compete with the private operators.

Air India is fully controlled by the state. This cause many problems in its functioning

due to the indecisiveness of the government & slow decision-making. An example of how

political interference has caused problems for air India is the recent proposed disinvestment of

Air India.

The sluggishness of the government & its hesitation to sell Air India to foreign buyers

due to the political implications has cost the airline some huge bids by Air France & Singapore

Airlines. The TATA group is the only one left in the race, which effectively means that the

government will have no choice, but to sell it to them & therefore wont be in the power to

negotiate on price.

Besides major decision making, the daily decisions of Air India also face interference

from bureaucrats & government officials who are not qualified to do so with regards to the

airline industry.


21/71


21

No US airline is keen to increase its number of flights to India

Open Skies evoke little response from airlines

Nov 11th

2002

Business

Standard

The Civil Aviation Ministrys Open Sky Policy has not drawn any encouraging

response from the US and European airlines. Few carriers have shown interests in the policy,

with not a single US airline keen on increasing their number of flights to India.

The ministry had announced an Open Sky Policy for about four months between

December 2002 and March 2003.

During this period, airlines will be allowed to increase the frequency of flights or

capacities from the destinations already being served. However the offer has been restricted

to airlines from the US and Europe.

The carriers from South East Asia and West Asia have been barred from availing of

the opportunity.

Civil Aviation ministry officials said there had been a luke warm response from the

European airlines to the policy

Only Lufthansa has asked for permission to deploy a couple of extra flights to

Bangalore. Air France has not shown interest in increasing flights during the period, a senior

ministry official said.

British Airways, too, has not taken a decision on the deployment of extra flights. The

airline was citing per city of staff as a reason behind the hesitation to increase flights,

ministry officials said.

The only airline, which seems to be enthusiastic, is Virgin Atlantic. However, since

the airline at present has a commercial agreement with Air India, which has been the cause of

some controversy of late, it remains to be seen wither Virgin is granted permission

According to industry officials the reason for such a response on the path of airlines isthat out bound traffic dips during the winter months. Out bound passenger traffic drops

almost 15 % during the winter months compared to summer, though inbound traffic goes up.

An airline cannot just cater to inbound traffic, as it will have to fly empty planes out of the

country on the return trip, an industry expert pointed out


22/71


22

The ministry might have seen a different response had the policy been extended to

South East Asian airlines as well. According to experts, the tourist traffic had shifted from

Europe and US to South East Asia last year.

While the latter has seen an upswing in traffic by 25 %, Europe & the US have seen

an equal negative method.

Most of the South East Asian airlines said if they were allowed to participate in the

policy, they would increase their capacity by 10 15 %

Thus it can be inferred that, due to the ministrys policy of Open Sky, a few airlines

could only benefit. The air traffic resulted in a shift due to the policy which created a great

impact on the airlines from the US and Europe.

As the political environment is not conducive as required restricts the airlines to

flourish at its best. The policies must be active for all the airlines for development of the

sector.

Keep Skies Open

June 20th

2003

Business Line

The extension of the open skies policy to let airlines from North America and Europe add

flights into Indian cities during the peak tourist season to October to March is a sign that

liberalization is taking root in this much protected sector. Ostensibly, this is a move to help

enlarge tourism flows. It would be tautology to say that the countrys earnings from tourism are

linked to the number of tourist who is able to fly in and that in turn is dependant on the number of

airline seats made available to them. In sufficient capacity means high fares and fewer passengers

and tourist spending which is what the Ministry of Tourism has been complaining about for long.

Yet this simple equation had eluded the Civil Aviation Ministry that clung on to the old practice of

trying to determine how many seats airlines can deploy instead of letting airlines which are best

placed to read their market decide how many aircraft they would deploy and to what destinations.

The right to operate international flights has ale\ways been determined by complex bilateral

deals among governments. In Indias case it has involved working out bilateral capacities that


23/71


23

would protect the commercial operations of the national carriers, Air India and Indian Airlines. In

the normal course, capacities between two countries would be split equally between each countrys

designated carriers. There were two problems in such an arrangement; One, the capacities were

determined finally by the Civil Aviation ministry and not by the airlines themselves, and, two, often

Air India

(Or Indian Airlines in some cases) would not have the aircraft to fly to a country that sought to have

its carrier fly to India. In the latter case, the government would extract for Air India the right to sell

a few seats in flights operate by the other countrys airline. The combine market share of Air India

and Indian Airlines on international routes in less than a third when it ought to have been half.

In a rapidly changing market it is inconceivable that governments can gauge or predict

passenger demands any better than airlines can. Nimble footed response to the market is a virtue

in most sectors, not so the airlines; they need to get government approval to even move their feet.

This archaic and feudal practice has no place today, which I why one tends to welcome the move to

extend the open skies policy, in a feeble and grudging manner. Offering the hand of freedom only

to western European and North American is discriminatory, tourists do come from elsewhere, and it

is a moot point whether they are less worthy. And why should the government restrict that freedom

to the period from October to March? Letting go is clearly difficult for the government.

Govts reluctance to liberalise aviation policy hurts tourismJuly 18

th2003

The Economic Times

The governments failure to liberalise the Civil Aviation policy and allow foreign carriers to

operate more capacity to Indian destinations is preventing the tourism industry from tapping the

countrys full potential. A large number of foreign tourists choose other destinations since seats are

not available to India or the tariff is high.

Foreign carriers are not allowed to operate adequate number of services to India since the

government wants to protect the interests of Air India and Indian Airlines. This is leading to huge

losses in terms of tourist arrivals and spending, the tourism industry feels.

We should see the big picture. If more foreign tourists come in, the government will also earn

significant revenue in the form of taxes. Since tourists from various source, markets including


24/71


24

Europe and the US are high spenders, the entire economy especially service sectors associated to

tourism would benefit in a big way, Ankur Bhatia managing Director of Amadeus India said.

Passengers would find more options and cheaper fares if the government follows an Open Sky

Policy. The governments policy on bilateral was a typical example of being pennywise and pond

foolish said Vinay Maheshwary of service4s International, a Delhi based Travel services Company.

Inbound tourism was picking up and the progress would be much faster if fares to India were not

higher than competing destinations like Thailand, he added.

The government should look at the benefits to hotels, tour operators, transport companies and

allied tourism services. The progress of all these segments are being hampered for protecting the

state owned carriers, He added. Air India should be allowed to compete in the International markets

as market economy ensures that the fittest would survive.

When Lufthansa was seeking permission for more flights to India, Mr. Maheshwary said, Air

India was withdrawing from Frankfurt.

It is obvious from the above news reports that the government has highly influenced the

tourism industry by taking decisions in the airline sector.

Insufficient capacity means high fares and fewer passengers and tourists spending which is what

the tourism industry has been complaining about for long.

HEAVY TAXES, GOVT CONTRTOL ARE CHOKING THE INDUSTRY.


25/71


25

What is alarming is that, fares have steadily increased during this period though the recent

introduction of advance purchases tariffs give the impression of the customer getting a better deal.

Connectivity has also worsened during this period with many small centers going out of

radar while the metros are flooded with increasing frequencies. Indian Airlines has been hit by

shrinking capacity and the dilly dallying of the government which has failed to privatize the

carrier. While the public sector airline can at least opt for privatization, Jet faces a tougher task. If

the private airline is in losses despite corporate management and efficiency, the lack of which is

cited as the reason for the lackluster of Indian Airlines, there is no room left for improvement. It

would appear that a policy framework of heavy taxes and excessive control has more than

outweighed the favour bestowed on incumbent players by the stunted competition created as part

and parcel of the countrys Civil Aviation policy.

If the government is keen to improve aviation security, how can the leading domestic airline

of the country be allowed to operate with a tax haven background?

Various other factors like ground handling are being discussed at length due to security reasons.

However, what becomes clear is that the current system of too many government controls has

neither benefited airlines nor consumers.

Supply of aviation turbine fuel is still controlled by PSUs and state government imposes a high

sales tax on this key input. Airport charges have been going up and depreciation of the rupee over

the years has added to the burden. The government imposes a 15 % impost on tickets in the name

of inland air travel tax. Various other levies add to the cost borne by the passenger. Airlines still

have to seek government permission before buying or leasing aircraft and lack of domestic industry

has led to dependence on import for spares. The industry has been seeking a reduced tax burden,

adequate financing facilities and drastic reduction of government control on the sector.


26/71


26

ECONOMIC FACTORS


27/71


27

The airline industry like the other industries grows with the increase in the spending of

the people. The more the people spend, the more the industry grows. The spending power of

the people has been increasing in the country and all over the world. The large increase in the

spending power in most developed countries has left a large amount of idle cash in their hand.

This has led to the airlines boom the world over and India has been no exception.

However, over spending is also evident not only in increase of people traveling by air but also

in hotels. Even the number of domestic tourists traveling by air has dramatically gone up.

Economic factors are key variables, which have an impact on the key activity in the airline

sector. Income levels and personal wealth govern the level of consumer activity. As levels grow,

more discretionary incomes available to spend on traveling by air. Also, consumer confidence in

the economy and in job security has a major impact in the growth and development of airlines.

The exchange rates in an economy highly influence the airlines. This is because a highly

competitive and service sector like airlines has to deal in a number of different currencies for its

working and progress.

The inflation rated plays a decisive role in airlines as a price factor. The rise in prices of tickets

in economy class has a major impact on the common people or the middle class travelers. There is a

chain reaction in the effect of inflation rates as it results in price rise, which ultimately affects the

demand and supply condition. In turn, the passenger traffic is thoroughly affected which comes

back to the airlines in the form of large or small number of travelers.

Indian Airlines, in a bid to cope with slackening demands during the post summer vacation

period, had decided to reduce its fares on 5 western sector routes. The first version after Indian

Airlines announced its flexible fare policy in May 2001; the new rates came into effect from June

28th . It also introduced point-to-point fares on a dozen routes.

The five sectors for which the fares had been reduced were:-

Ahmadabad- Bangalore

Mumbai Bangalore,

Mumbai Chennai,Mumbai Kolkota,

Goa Mumbai.

Norms governing day return fares had also been liberalized. The Day return fare on

Delhi Mumbai sector had been reduced to make it more competitive.


28/71


28

The senior official in commercial department of Indian Airlines said that this was only the

beginning and that they would keep making changes on the basis of demand supply position.

Fares had been brought down where ever the demand was low. At the same time, the airline

planned to hike fares in Sectors where demand was found to rise.

Business Cycles:-

Business cycles have a wide reaching impact on the airline industry. During recession,

airline is considered a luxury & therefore spending on air travel is cut which leads to reduce

prices. During prosperity phase people indulge themselves in travel & prices increase.

After the September 11 incidents, the world economy plunged into global recession due

to the depressed sentiment of consumers. The airline industry was the hardest hit, as people

became wary of travel & there were large-scale cancellations. The loss of income for airlines

led to higher operational costs not only due to low demand but also due to higher insurance

costs, which increased after the WTC bombing. This prompted the industry to lay off

employees, which further fueled the recession as spending decreased due to the rise in

unemployment.

As the recession deepens, airlines are being hit harder than before. This is because

companies reduce their travel budgets during a recession, which affects the corporate business

of airline industry. In such conditions the airlines need to develop new strategies for survival.

Air India has taken initiative to counter the recession by introducing special offers,

discontinuing services in order to cut costs, etc. It also plans to upgrade it fleet in order to keep

up with market trends.

Civil Aviation policy:-

The changes announce in the civil aviation policy go a long way in impacting the airline

industry. The divestment of the governments shareholding in air India will take place under

the framework of the civil aviation policy. Indias civil aviation policy lays down the

following guidelines which directly impact airline industry:

A) Private sector participation the policy determines the extent to which airlines can have

private sector participation.

B) Regulation & rationalization of the ATF (airline turbine fuel) price, which is very

important input & directly affects final pricing decisions of the airlines.


29/71


29

C) Domestic passenger & Cargo air transport which includes the limits of foreign equity

participation, regulation of capacity induction with a view to ensuring safety, security and

preventing unhealthy levels of capacity.

MAKE AIR TRAVEL AFFORDABLEWe can do without cartelisation

October 2, 2003

The economic times

The civil aviation minister Rajiv Pratap Rudy wants the three domestic

airlines-jet airways, Indian Airlines and Sahara- to coordinate their flight schedule to

provide better connectivity. He feels that such an arrangement can ensure that flights

are not bunched together but spread throughout the day. Indeed, the final outcome

makes sense, but the way the minister wants to achieve it does not. Such attempts at

co-ordination are bound to degenerate into cartelization, especially when entry

barriers are high. So, air travellers will have the convenience of flights being available

throughout the day, but we have to pay through their nose for the same. In other

words, one senseless decision could fritter away all the gains of increased competition

in the domestic air travel following the entry of private airlines. Airfares have

declined to possibly the lowest, and service standards have improved even in the state

owned Indian Airlines. Minus the cutthroat competition, all these improvements

would disappear almost overnight.

In the country of India's dimension, the top priority for the civil aviation policy

should have been to make air travel affordable. Unfortunately, a combination of state


30/71


30

and central duties has made air travel unaffordable for most Indians. As a result, today

it is a lot cheaper to fly from India to a host of foreign destinations than to traverse

from one end of the country to the other. No wonder, so many Indian tourists prefer

Southeast Asian countries to our exotic destinations. What good is promoting Kerala

to, say, someone in North India when a back and forth train journey takes almost four

days and the alternative air travel costs nearly 25,000 (Delhi - Kochi - Delhi)? In the

civil aviation minister devoted himself to the single task of ensuring cheaper air

travel, he would have done a great service to the nation. And in the process he would

have achieved the objective of flights being spaced out throughout the day. For,

cheaper air travel would mean more traffic, which would in turn mean more flights.

The task involved is not too difficult; all it involves is working on the simple

arithmetic of reduction in duties the accompanied by increased volumes.

SOCIAL FACTORS

Social factors are a major influence in consumer buying decisions, and this

applies to airline industry just like other industries. over the time , changes do appear

which affect the consumers habits.

Changing Travel Habits


31/71


31

The changing travel habits of people have very wide implications for the airline

industry. Air India need to focus on their clientele which are mostly low income clients & their

habits in order to keep them satisfied. The destination, kind of food etc all has to be chosen

carefully in accordance with the tastes of their major clientele.

Cultural differences -

Depending upon the clientele an airline has, the cultural differences of each country

have to be absorbed into aspects such as the hospitality, the menu etc. The domestic airlines

like Indian airlines therefore need to include special cuisine such as jain meals, special offers

on festivals etc.

Airlines bookings take off as SARS fears recede

July 16, 2003

The Economic Times

Airline bookings are up for the second consecutive month after the slump in February-

may. While total domestic and international bookings have increased by 7% in July over the same

period last year, June saw an increase of 15% over the corresponding period in 2002.the beginning

of 2003 was good for airline bookings with an upsurge of 15% in Jan (yoy) while Feb. saw a

decline of 16%, march (-25%), April (-20%) and may (-6%).


32/71


32

International airline bookings also increased significantly in June after the impact of sars was

over and travelers resumed their long pending business travel and vacations. Not only this,

attractive airfares by domestic carriers also fuelled air travel, say travel agents.

This increase is a result of overall improvement in bookings in Asia-pacific, said Ankur Bhatia,

Amadeus India MD. Since late June, daily net bookings from the thirty two Asia-pacific countries

and territories had started looking similar to the number of bookings from the same time last year.

daily net bookings reached around 1,80,000 in the first few days of July compared with 1,20,000

the same time last year, he said . in the midst of the sars scare in mid-April, bookings were at a

low of around 30,000.

He added that cancellation rates have sharply declined recently from a high of 82% in April to

66% last month and attributed the recent recovery of the industry to promotional campaigns, such

as Thai airways luck is in the air promotion, which offered 20,000 free tickets.

Himmat Anand, COO, Sita World Travels, said this increase in airline bookings can be

attributed to an increase in domestic and outbound tourism. The success of apex (advance

purchase) fares that flexible pricing is here to stay. Attractive airfares offered by domestic carriers

played an important role in increasing demand for air travel. After sars, countries like Hongkong

and Thailand are also offering lucrative packages to enhance tourism in their respective countries,

he said.A travel agent said that domestic airlines are offering concessions to customers by way of

auctions, additional frequent flier miles and co-branded cards. Jet airways has launched special

packages to various destinations including Port Blair, Ooty, Darjeeling, Kodaikanal, Shimla,

Manali, Mussorie, Srinagar, Banglore and Chennai. Though apex fares dilute yield, all domestic

airlines are expected to persist with deep discount tariffs.


33/71


33

The above news article clearly mentions that SARS, considered as a major social factor in the

mid-2003 affected the air traffic considerably. the various promotional offers, offered to the

travelers increased the bookings heavily as the fear of SARS receded.

Testing times in the air (social)


34/71


34

What's important to the successful functioning of an airline is, people training and fair terms o

employment. And for that you don't need to privatise, you just need to give the public sector a chance.

Privatisation of domestic airlines in India is often quoted as a big success story

favouring similar efforts across the board, especially in aviation. The assumption is

that if it worked with airlines, then it would work with all other aspects of aviation.

But are private airlines really able to do better because of privatisation, and if so,

privatisation of what?

Private and public sector airlines are stuck with the same aircraft

manufacturers, as well as maintenance parameters. Choosing between Boeing and

Airbus, or CRJ and Bombardier, is a bit like trying to figure out the great difference

between Tweedle-dee-dee and Teedle-dee-dum! (Though it must be mentioned here

that with economy class passenger seating comfort and cabin baggage space being the

main criterions, for short range flights, the A-320 beats the B-737 any day, and for

long range flights, the B-777 scores way above the A-340, and so Air India seems to

have got it all wrong again). Aircraft interiors and seat pitch aside, nothing has

changed there.

Air Sahara and Jet Airways have a few really ancient, noisy and rattling

aircraft too, which compete well with the Alliance Air Boeing 737-200 venerables in

terms of age as well as despatch unreliability. Common users' services, such as

airports, Air Traffic Control, safety/fire-fighting, arrival/departure halls, check-in

counters, everything is the same, regardless. As a matter of fact, the private airlines

get the lousier locations and the more distant bays. Certain services, such as apron

control, security and safety, are moving back into the domain of Government control

in the most privatised of countries, such as the US. Which is how it should be,

considering the vast improvement in airport security in India after they've brought in

the CISF, an all-India force. How would you like it if fire services at airports wereprivatised?

Computerisation and the consequent benefits of technology are on par, private

or public sector. As a matter of fact, while Indian Airlines (IA) and Air Sahara have

provided Internet ticketing for over a year now, Jet Airways is yet to do so. And this,

in a day and age where the much-maligned Indian Railways set the benchmark for


35/71


35

Internet ticketing, worldwide, with online sales reaching almost Rs 1 crore a day.

There is no evidence that adoption of a technology for the benefit of a customer is any

better or worse in the private or public sector.

Onboard catering, cleaning, sanitation, engineering, maintenance, adhering to

government/DGCA regulations and scheduling, depends on various factors common

to most airlines. But that big bug, IA planes waiting for VIPs, has now spread to the

private players too.

So what's left?

Well, the biggest benefit of privatisation of aviation has been cost to customer.

But that really came about specifically and only after Air Sahara put the cat amongst

the contented pigeons about two years ago. Remember all the private players now

gone, brands such as East-West, Damania, Modiluft, NEPC-Skyline, Continental,

who simply followed the prices set by IA?

It doesn't require an expensive consultant to tell us that what's left is people

training, fair employment terms and leaving people to do their jobs in accordance with

norms. And for that you don't need to privatise. You just need to give the public sector

a chance. If you do that, it can perform as efficiently as any private sector, with far

greater social responsibility.

Red alert!

There is a security guideline, apparently, that once you have had your

boarding pass issued you cannot leave the terminal building. So, if you show your

boarding pass at the entry/exit gate and ask to be let out for a smoke or walk, then the

CISF officer on duty will not let you out. Fair enough, the reasons for this are

apparently to prevent people from checking in on behalf of others, or to leave theterminal after checking their baggage in. This rule can be by-passed at smaller

airports, where everybody knows everybody anyway.

However, at airports like Delhi, Chennai and Mumbai, this rule is followed

strictly for bona-fide passengers. But you can leave after checking in by walking

confidently towards the VIP entrance near the Airport Manager's office, and exit the


36/71


36

building from there. Then walk around the terminal building, and smartly walk in

again on the strength of the same boarding pass, which prevented you from leaving!

This correspondent does this regularly at Delhi, when a flight is delayed and a smoke

or a simple observation trip is called for. Last week, it was Chennai's turn, and with a

boarding pass pre-issued at Bangalore earlier in the morning for a late-flight Chennai

to Delhi, it was a great reason for the Hindi-speaking CISF officers on duty at the

bona-fide entry gate to refuse permission to exit, and smile broadly whenever I re-

appeared from outside to re-enter.

What a shame!

Strange are the ways aviation security is interpreted, and not just in India.

Listen to the list of don'ts: Can't carry pickles, pepper, round fruit or sealed bottles of

water, but you can get as much of it served to you with the meal. Can't carry torches

or batteries, but you can reach into the safety equipment or cabin crew bags stored at

the rear and help yourself to any of these. Can't use cell phones once on board because

they may impact the computers in the cockpit, but all sorts of walkie-talkies and cell-

phones used by ground staff are allowed.

And most of all, we can't carry nail clippers or small knives/scissors, but the

nice elderly lady will not be stopped from continuing with her, forknitting!

Oh some reassurance

Anxiety amongst passengers for information from the flight deck seems to be

on the increase, especially after 9/11. Delayed departures after entering aircraft, and

before or after closing doors, with or without substantial activity outside and inside,

sudden warnings to fasten seat belts, sudden and perceptible changes in engine sounds

as well as changes in altitude, not switching off engines after landing and hanging

around on taxiways or bays and circling in holding patterns are events that add to the

already stressed environment inside an aircraft.

Generalising is not very accurate, but, by and large, cockpit crews from Far

Eastern countries tend to be quite chatty. Europeans provide precise information, with

straight-faced humour. American pilots are into accuracy with friendliness, and often

go into information overdose. Very often, one of the audio channels is set to the ATC-

cockpit frequencies.

But what about our very own Indian pilots? They must be either really busy in

the cockpit all the time, giving the autopilot an inferiority complex, or they are simply


37/71


37

unaware of how a few words from them to the passengers every now and then would

ease the stress involved for many passengers in taking a flight. A few notable

exceptions aside, the rest go through the same dull drone on outside temperature,

cruising altitude, standard warning on wearing seatbelts and sometimes a reference to

the cabin crew. Nothing else. Your airplane could bounce up and down in the worst of

turbulence, and instead of a reassuring voice from the cockpit all we get a terse

announcement.

Unlike earlier, more aviation passengers know that the avionics and autopilots

on board a modern airplane can handle emergencies in the air better than the human at

the helm.

So what is the real reason, then for the pilot's scant interaction with the passengers? No

wonder we, as Indian passengers, always seem to be in a hurry to leave the aircraft.

TECHNOLOGICAL FACTORS:

Technology has played a major role within the airlines, bringing about far greater efficiency

through computerized records and transaction systems, also in using development through thesetting up of detailed customer databases for effective segmentation and targeting.

This makes it essential that the policymakers change their attitudes and the professionals prove

themselves personally committed. Innovation makes the way for demand generation and profit

maximization. It opens new avenues for increasing the market share of airlines. So, the need to

promote innovation.

A technology driven marketing information system is a key through which airlines can be

technologically forward. Better communication facilities are one of the first pre-requisites for

growth in the inflow of passengers. This has been made possible through technology. Many remoteand inaccessible areas of the country get connected to the rest if the world thanks to the technology

base in international and domestic airlines.

Changes In Technology For Safety & Security


38/71


38

Post September 11, the Civil Aviation Ministry is deploying CISF personnel at all

metro and hypersensitive airports. Quick- reaction teams of the National Security Guards

(NSG) have been added to the security teams at such airports.

Intelligence agencies have virtually taken over some of the metro airports and close

circuit television cameras have been installed at strategic points. Sky marshals have been

deployed on various flights. The BCAS conducts surprise checks at all airports.

Information Technology & Its Impacts

The increasing use of the Internet has provided many opportunities to airlines.

According to the Greenfield Online Digital Shopping Index in the US, airline tickets ranked

among the top five most purchased items on the Internet. Travel business is the number one

online consumer spending segment with more than two million business travelers having

spent $3 billion online in 1999, and the figure all set to grow to $20 billion by 2004 as per a

survey conducted by Forrester Research.

Air India has leveraged this opportunity by providing many internet based services to

its customer such as online ticket booking, updated flight information & handling of customer

complaints.

Infrastructure

USTDA (US trade & development association) is funding a feasibility study and

workshops for the Airports Authority of India as part of a long-term effort to promote Indian

aviation infrastructure. The Authority is developing modern communication, navigation,

scrutiny, and air traffic management systems for India's aviation sector that will help the


39/71


39

country meet the expected growth and demand for air passenger and cargo service over the

next decade.

A proposal for restructuring the existing airports at Delhi, Mumbai, Chennai and

Kolkata through long-term lease to make them world class is under consideration. This will

help in attracting investments in improving the infrastructure and services at these airports.

Setting up of new international airports at Bangalore, Hyderabad and Goa with private sector

participation is also envisaged.

These technological changes in the environment have an impact on Air India as well.

Better airport infrastructure, means better handling of airplanes, which can help reduce

maintenance cost. It also facilitates more flights to such destinations.

In airline industry, technology is necessary for customer satisfaction. It enables to track

and implement according to traffic levels on various flights and manage inventory accordingly.They help airlines make reservations quickly by enabling each ticket agent to check hundreds

of flights for available seating. It helps the airline industry in reservations, ticketing, checking

in passengers, maintenance schedules, and personnel records, accounting and stock control.

Surfnclick: airline ticketing goes live

August 11, 2003

The economic times

Physical airline tickets may soon be a relic of the low tech past. Air travel entered a new era on

Saturday with the launch of live e-ticketing in the country. Passengers will no longer have to bother

to collect tickets from air travel agents, or worry about lost misplaced ones. With e-ticketing,

reservations will be confirmed by e-mail or fax. The plain-paper confirmation, with a reference

number of the reservation and the itinerary, will replace the ticket dockets. The paper is good

enough for entry at all Indian airports.

The system, already popular internationally is being offered in India by global distribution

service provider Galileo and Travel Company Thomas cook.

The bureau of civil aviation security (BCAS) has already issued a notification accepting e-

tickets. This means passengers with the tickets will be allowed access to the passenger terminal

buildings at airports for check in. they will have to show a proof of identity like a passport, photo

identity card, driving license or a credit card.


40/71


40

Commenting on the new system, Seema Luthra, president and CEO of Galileo (India), said,

IATA studies have shown that the end-transaction cost of a physical ticket is a bout five times that

of an e-ticket. so, e-ticketing is major cost saving tool for airlines. About 70% of the tickets issued

in the US are e-tickets, she said. The system has been in use in India for the past few years. But the

passengers had booked e-tickets in other markets and were travelling to India. But the system has

now been formally certified by IATAs billing operation, BSP India. Worldwide, over 45 airlines

participate with Galileo for e- ticketing. These airlines can start offering e-tickets to their customers

in India.

Computers have already revolutionized consumer air travel, especially with fare checking and

online ticket sales, and now some of the airlines are moving to get rid of paper tickets entirely,

travel industry sources said.

E-tickets give certain advantages to both airlines and passengers. The system facilitates direct-

to-customer sales, while saving airlines $6-7 on each ticket they dont have to print and mail to

customers. Late bookings have also become easy: make a phone call, get your confirmation faxed

to you, or print it out, and its over.

Air-India sets up global call centre

July 13, 2003

The economic times

Giving a major push to its customer-friendliness drive and product upgradation, Air India on

Saturday seyt up its first global international call centre for round the clock operations in north east

Mumbai while for domestic travelers a similar facility would be launched by October 2003.

The global centre at Deonar will be manned by 25 people and operate 7 days a week, the

leading international carriers spokesman Jitender Bhargava told The Free Press Journal. Civil

Aviation Minister Rajiv Pratap Rudy, making the first call and booking through video

conferencing, inaugurated the centre.

The idea for the centre is to improve customer service, Jitender Bhargava said adding, It

would take calls from overseas countries. Our target area is US and UK where we have lately

enhanced a number of services.

The call centre has sophisticated technical infrastructure and would deploy qualified and

trained manpower. The international call centre would ensure reservation for flights, hotels, car


41/71


41

rentals, meal choice, special seats booking, special requirements for passengers like wheel-chairs,

child care and even flight baggage, he said.

In the past one year, Air-Indias capacity to USA has substantially increased and is poised for

further growth in the winter timetable. The round the clock call centre, it is hoped, would eradicate

one of the major complaint areas that during weekend Maharajas staff does not give their best of

services. Civil Aviation Minister is in the city to attend a meeting of Parliamentary Consultative

Committee attached to his ministry.

Talking to reporters, Rudy said that the fleet acquisition plan and the Aviation Policy would be

given final shape by two months. The plan would ensure level playing field for all concerned

including private parties, he said.

Adequate steps were being taken to upgrade Mumbai and Delhi airports.

Double A Technologies Group has invested significantly in designing an extensive

portfolio of products built around innovative and advanced technologies. The portfolio spans

various business fields and solutions have all been built with common features such as: Online

and offline collaboration (eBusiness, cBusiness Platform), Enterprise Application Integration

(EAI), multi-currencies, multi-lingual support, Multi-Companies (Several companies can work

on the same solution), Multi-Channel integration, wired and wireless connectivity, support of

multiple platform and network protocols, etc. All solutions feature a high capability to change

and customize and supersedes any existing comparable solutions, in business functions, in

concepts, design and architecture.

Airlines Solutions

At the heart of any regions economy, the airline business has always been a strategic

and a fascinating area. Unfortunately, its profile has not prevented this business from being

extremely resilient and fragile. Globalization, oil price dependence, social and political events, to

cite only few, are examples of some of the most influencing factors that severely impact the airlinesbusiness. Because of current Air Traffic Management policies and regulation, we can say that

almost all airlines fly the same. Therefore, aircrafts, ground operational processes and commercial

products management are the key differentiating factors. Mastering ground operational processes,

as well as products management, are still at the hands of most airlines, be it small or large,

passengers or cargo airline.


42/71


42

The fact that airlines suffer from severe recession is certainly a problem but it is also an opportunity

for those who will take the initiative to reengineer their business processes and streamline

operations in order to strongly compete against their peers. The airline industry volatility and its

cyclic patterns address fundamental attributes that are required to feature. Double A Technologies

Group investigated such business challenges and trends. Investigations resulted in the successful

design of the most innovative portfolio of collaborative solutions available in the market. The

portfolio effectively integrates airline operational processes across the entire business chain and

supports newer concepts such as Collaborative Air Traffic Management as well as Gate-To-Gate,

enabling airlines to reach outstanding performance.

Support passengers and cargo airline operations

Single/multi-hops routes planning and operations

Routes budget simulation and revenue planning

Real time and extensive track and trace at all levels of all operations

Advanced airfreight operations such as automated rerouting

Terminal handling, co-management and warehousing management

Dangerous goods management

Door-To-Door, Gate-To-Gate operations support

Airline operations discrepancies management

Claims management, call centre and help desk management

Outsourcing management, contract and service level agreements mgt.

Airline adaptive procurement activities planning and operations

Quality assurance and support of ISO standards support

Multi standards message engineering and exchange (EDI, XML, etc)

Co-management, multi-sites, multi-currencies, multi-companies, multi-lingual

IATA and multiple airline messaging standards compliance

Scaleable and open to other ERP systems

What sets Regional's flight training apart from other flight schools?

Regional Airline Academy Flight Schools utilize new aircraft within our

fleet. When one sits in our new Piper flight trainers, he or she will be

immersed in the latest in flight aviation technology.


43/71


43

Experience is very important in obtaining the knowledge required by the fast-

paced airline industry. Over 200 years of combined executive airline

management makes up Regional Airline Academy Flight School's.

Why not receive college credit from our flight school while in flight training?

Regional Airline Academy Flight Schools have many college programs

available that offers up to 39 hours of college credit just for passing your flight

training courses.

Regional Airline Academy Flight Schools more than doubled in size within

the past year. New flight training aids, facilities, maintenance, and aircraft

have aided in the overall expansion of the flight school. RAA plans on

expanding even more through alliances with other airlines and flight training

facilities in order to provide the BEST flight training at an affordable cost.

Cost is always a major factor in the success of a new applicant. Regional

Airline Academy Flight Schools are proud to be one of the most cost-effective

flight schools in the industry. Our "Airline Career Program" is less expensive

than other flight schools due to the low airline interview requirements

(provided only by RAA), and the PAID internship provided by our flight

school as part of Professional Airline Career Course.

That's right! Upon completion of our program, each student is

GUARANTEED an interview with each of our airline alliances with only 700hours logged time and 100 hours multi-engine logged time!

What will your flight training include at Regional Airline Academy?

You will receive flight training from a professional and qualified staff eager

to aid in the success of EACH individual.

You will be taught how to work and interact within an airline environment as a

crew-member and as an employee.

You will be trained in the newest of aircraft with the latest in flight training

aids!

You will receive a great deal of individual flight training with small

classrooms designed to maximize the potential of each individual.

You will receive up to date information on the airline industry provided by

our airline advisory board comprised of active airline pilots and airline

management!


44/71


44

You will receive a Guaranteed Interview with our airline alliances upon

successful completion of our flight-training program.

OTHER NEW TECHNOLOGICAL INNOVATIONS THAT HAVE CHANGED

THE FACE OF AIRLINE INDUSTRY ARE AS FOLLOWS.

Video/music on individual seats

Leading airlines provide personal video screens and music players on each seat so that

the passenger can choose to see/hear what he or she likes.

E.g. video games on Japan airlines

Conducting business in the sky

Virgin air provides a circular seating arrangement and also provides laptop computers

and other business tools so that businesspersons can conduct their business while

travelling.

Sale of empty seats through auctions/internet

There are several online ticket exchanges where customers can trade tickets with each

other and also the airlines.For e.g. Sahara airlines offers the facility to sell its empty seats to the passengers

through internet.

Real time price change


45/71


45

American airlines changes its prices about fifty thousand times a day. this is possible

through a very strong database system which calculate fares based on routes, traffic,

number of empty seats, bulk discounts, etc.

Real time flight information

With the help of technology airlines provide real time reservation status and also

schedule status to users via several mediums.

Self Service Technology

Today passengers want speed- on and off the ground. Infact, for airlines, achieving

success often means winning the hearts and minds of consumers during check-in,

before the plane even takes off. Airlines like Air Canada are installing self-service

kiosks there by reducing checking time and increasing passenger throughput.

Telephony sky-to-ground

Many airlines now offer call facility from the aircraft to the ground locations like

house or the office thus enabling people to stay connected.


46/71


46

CHAPTER SIX

AIRLINES AS A SERVICE SECTOR

Unique Service Characteristics

INTANGIBILITY

Services are intangible in nature. Unlike goods, which are tangible and can be seen and

touched, services can only be experienced. It means that services are high in credence qualities

whereas goods are high in search qualities. A company can differentiate its service from its

competitors by providing tangible clues.

A company can provide tangibility to its services by

Association with physical goods or items,

Association with the physical environment,

Performance and involving customers

As we know that services are intangible, a service marketer has to face many problems.

In the airline industry transportation is the core product. Since it is intangible in nature a service

company can distinguish itself from its competitors by providing several tangible clues like

Food / Beverages

Newspapers


47/71


47

Movies

Music

Staff uniforms

Logos

Color and design

Seats and cushions

Assistance with work

Audio / Video facilities for work or pleasure

Fax, laptops, etc.

Baggage retrieval

Flight bookings

A service marketer can overcome the difficulties of intangibility of services through:

Reducing service complexity

Stressing on tangible clues

Facilitating word of - mouth recommendations

Focusing on service quality

Here are a few examples of leading airline companies that provide tangibility to its services

through various tangible elements

1. Indian Airlines The Maharaja Logo, also they describe themselves as The Peoples Carrier

The National Carrier.

2. Jet Airways the airline for businessmen, easy booking facilities, easy custom clearances and

baggage retrieval, good in-flight services.

3. Southwest friendly, no frills, low fare airline.


48/71


48

4. Air Canada provides laptop connections and helps in sending fax messages favourite with

North American business travelers.

INSEPARABILITY

Another characteristic of services is customer involvement in production i.e.

inseparability. The inseparability of services leads to

Customer being co-producer

Often customer being co-consumers with other customers and

Customer traveling to the point of service production

All the above three problems are faced by the service marketer in the airline industry. So the

service marketer has to think of ways in which he can satisfy his consumers in an efficient manner.

Customers are separated on the basis of price business and economy class.

Also airline are trying to overcome inseparability by providing facilities such as

Games for kids Air Canada

On-line Booking Sahara

INCONSISTENCY

Inconsistency refers to the variability in the service. Service variability leads to

difficulty in projecting a consistent image and developing a strong brand. As it is difficult to

standardize to blueprint the service process there is inconsistency in service quality. Also services

rely on human inputs there is a high amount of variability. This can be overcome by providing

personalized services and focusing on employee training. Up to an extent, automation and

mechanization also can help to reduce inconsistency.

E.g.: most airlines include online booking resulting in a standardized procedure &

fewer mistakes due to human errors.

Another way of reducing inconsistency in airlines is the standardization of in-flight procedures

for example the security instructions given at the beginning of the flight.


49/71


49

INVENTORY:

It is not possible to store services. Also the service capacity cannot be increased, as it

can be limited. Services also face irregular demand patterns. Again the service can be short-lived.

The inventory for airline industry is mainly the food and the aircrafts spares and parts. Airlines

face the problem of inventory mainly due to irregular demand patterns.

E.g.: The Boeing Company and British Airways announced today that the airline will be the first

launch customer for the Global Airline Inventory Network(SM), an innovative new service in which

Boeing will manage British Airways' supply chain for expendable airframe

spare parts used in its fleet of Boeing airplanes. This includes parts from Boeing as well as

other suppliers.An expendable part is one that is typically replaced rather than repaired after

use. These range from fasteners and brackets to floor panels and airplane skins.

The Global Airline Inventory Network(SM) is designed to attack costly inventory

inefficiencies in the airline industry, where both airlines and suppliers incur extra costs because

of duplicated distribution channels and unnecessary inventory levels.

Congestion occurs during peak periods like vacations and festivals and at other times

there is unused capacity. Thus special discounts & offers are offered during these periods to

boost seat capacity (called the PLF -- passenger load factor)


50/71


50

CHAPTER SEVEN

RATER Analysis

Customers dont assess the quality of service on one dimension only, they use

multiple parameters to judge the quality of the service that they are being offered.

These characteristics which people consider vary from person to person, industry to

industry. Even depend upon the product on offer. But generally, if we consider a

service industry these are the five basic criterias which the customer will consider to

judge the quality of service being provided to him.

Reliability

Assurance

Tangibles

Empathy

Responsiveness

When we look at these points with respect to the airline industry we find that

the following qualities are expected by the customer.

Reliability flights to promised destinations depart and

arrive on schedule

Assurance trusted name, good safety record,

competent employees

Tangibles aircraft, ticketing counters, baggage area,

uniforms

Empathy understanding of special individual needs,

anticipates customer needs


51/71


51

Responsiveness - prompt and speedy system for ticketing, in flight, baggage

handling

RELIABILITY Ability to perform the promised service dependably and

accurately.

This would basically be that company delivers to the customer what is

promised & the customers basically like to deal with companies that can fulfill their

promises. When we look at the airline industry we can see the following things the

customer would expect certain basic facilities like: some functional infrastructure

provided to him, the flight leaving & taking off on time, the luggage reaching safely.

There was an article in the newspaper, where in the journalist talked about

how Indian airlines was the airline that the public could trust. The journalist basically

talks about them being the national carrier, profit would not be their only objective

and so they would try to provide the right kind of service, they wouldnt fly an aircraft

just so they can save on the costs or dont have to bear the losses even if the plane is

not a 100%, whereas someone like Jet would probably consider the monetary costs

involved in the process, and even that could influence their decision.

The general belief is that the service offered by Indian Airlines is below

standard or not upto the mark. But then they charge lesser than other airlines, so they

are mostly concentrating on the pricing for their market share. But some people even

choose Indian Airlines because they believe that Indian Airlines wont be cutting

costs and so wont run a plane not completely ready. Basically, theyd rather travel in

slightly lower grade airline than risk their lives.


52/71


52

ASSURANCE Employees knowledge and courtesy and their ability to

inspire trust and confidence

Assurance would basically mean the kind of knowledge the employees have

and the courtesy & the ability of the employees to generate confidence in the users

mind about the service being provided. The employees should have a positive morale

& should be motivated if they have to promote the firm & create a sense of assurance

in the flyers mind.

Jet Airways is generally considered the more customer friendly of the

domestic airlines. The staff there is nicer to old people or little kids who might be

traveling. Though Jet has a very young staff, so some of the members could possibly

not match the kind of experience the Indian Airlines crew has. Suppose some senior

citizen is traveling alone in an aircraft for the first time the crew should see to it that

he is given proper instructions & is comfortably settled in his seat.

Besides this, after the September 11 crisis, there was a lot of skepticism in the

fliers & to instill a little confidence in the consumers mind, the government paid

greater emphasis on security in the aviation policy. This was all so that people would

feel safe next time they traveled by air. They would appoint a committee and look into

the recommendations provided by them to better the security arrangements in the

airplanes & airports.

TANGIBLES Appearance of physical facilities, equipment, personnel

and written materials

Tangible features would be those physical features, which can be felt by thecustomer. These would be the physical proofs, which would help the customer to

judge the quality of service. Incase of the airline itd be the aircraft that the airline

uses, how old they are, the kind of facilities that are provided inside the aircraft or in

the waiting area. The technology used for baggage handling. The coaches used to

transport the customer to the aircraft, all of these speak leaps & bounds about the


53/71


53

service provider. The kind of skilled staff that they have the uniform that the staff

wears.

The tangibles would also include the infrastructural facilities present at the

airports. This is where we find most of the Indian airports lacking. They have no

proper arrangements to handle the customers.

When we look at the aircraft fleet that is a very important tangible feature, and we

find that Indian Airlines has a really ancient fleet of aircrafts which doesnt make it

extremely safe as older planes are more prone to damage. Whereas, Jet Airways has

the youngest fleet in the business.

EMPATHY Caring, Individualized attention given to customers

Empathy basically is when the employees of the organization make the

customer feel at home, at ease, make him feel wanted. The customers are mostly

offered the same service from most of the airlines. The easiest way for an airline the

maintain and grow its client base is to be empathetic towards their customers, to

understand their specific needs and to cater to them & they should make each

customer feel like he is a unique asset to the company & like their single most

important client. Addressing the clients by their first names, keeping a track of their

usual flying routes, their preferences in flight & catering to all of those, maybe giving

him his favorite seat each time he travels.

Customers like to be treated properly for the money that the pay and the airline

should try and offer the maximum benefit to the flyer for the money that he pays. Air

India in April invested 15 crores in the first class segment to give it a face-lift and

started providing full-recline seats since they give minimum fatigue on long trips

(exceeding 8 hours of flying).

RESPONSIVENESS Willingness to help customers and provide prompt service.

Responsiveness would basically be the kind of time it would take for the firm

to address a customers complaint or for the firm to provide service to the customer.


54/71


54

The degree of responsiveness shows the level of commitment that the people of the

company have towards their work. It is very necessary for the company to concentrate

on prompt & the right kind of responsiveness to the needs of the customer.

final airlines- kinjals

Documents