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Service Sector Marketing

‘Airline Industry’
Prepared By: The 6 4’s Of TYBMS B

04 – Urvi Parikh 14 – Kartik Raichura 24 – Sumit Satardekar 34 – Krupa Shah 44 – Aditi Sharma 54 – Karan Valecha
Prepared For:

Prof. (Mrs) Neela Nair

INDEX
1. Introduction  History Of Civil Aviation  The New Policy  Changing Pattern of Government Regulations  Recent Developments in Civil Aviation  Domestic Air Carriers  Airport Infrastructure  Low Cost Airlines: A Preview 2. PEST Analysis 3. Segmentation 4. Unique Service Characteristics(4 I’s) 5. The Goods-Service Continuum 6. The Services Marketing Triangle 7. The Marketing Mix (7 P’s)  Product  Price  Place  Promotion  People  Process  Physical Evidence

8. Flower Of Service 9. Quality Dimensions: RATER  Servqual 10. Factors influencing Services  Service encounter  Moments of truth  Critical Incidents  Service Gap  Blue Printing  Zone of Tolerance 11.Service Recovery 12.Complaint Handling 13.Union Budget Analysis 2004 14.Conclusion 15.Bibliography

Introduction
India occupies an eminent position in the civil aviation sector with a large fleet of aircrafts. In all, 56 airlines are operating scheduled air services to and through India and 22 foreign airlines are flying over Indian Territory. There are over 450 airports and 1091 registered aircraft in the country. In addition to the three public sector airlines Air India, Indian Airlines, Alliance Air - there are three private operators -Jet Airways, Sahara India Airlines & Air scheduled air transport Deccan. There are also 41 nonoperators. Additionally 34 applicants have been

granted NOC by the Ministry of Civil Aviation for setting up non-scheduled air transport operation. Estimates show that the domestic and international passenger traffic in India is projected to grow annually at 12.5% and 7% respectively over the next decade. handle By the year 2005, Indian airports are likely to 60mn international passengers and 300,000 tons of domestic

and 1.2mn tons of international cargo.

SIGNIFICANCE OF AIR TRANSPORTATION There are two main significances of air transportation, namely: 1. Quickest mode of transport: Airways is the most modern, the quickest and the latest addition to the modes of transport. Because of the speeds with 2. which aero planes can fly, travel by air of both passengers and goods has become highly popular. Suitability: Air transport is highly appreciated by people who want to travel in utmost comfort and/or reach their destination re a l fast. Airways are also suitable for high value light goods, perishable goods and spontaneous delivery of mails.

History of Civil Aviation Sector
Travel by air in the modern sense began in India only in 1877, when Joseph Lyna took off from the Lalbagh Gardens in Bombay, and ascended to an altitude of about 7,500 feet and landed at Dadra. In the years that followed, there was a tremendous development of air transportation in India as in any other countries due to t e c h n o l o g i c a l advances and coope ra tion from the government. India also has the distinction of organizing the first flight by an aero plane in the world in February 1911. This flight piloted by French pilot M. Picquet flew from Allahabad to Naini. However, it took more than 20 years for the country to have its own airline. In October 15, 1932, Tata Son’s Ltd – which later become Air India International – commenced weekly airmail service with a Puss Moth aircraft between Karachi and Madras via Ahmedabad and Bombay, covering over 1,300 miles. Later two more airlines – Indian National Airways in 1933 and Air Services of Indian in 1937 came up. At the time of independence, the number of air transport companies, which were operating within and beyond the frontiers of the company, carrying both air cargo and passengers, was nine. It was reduced to eight, with Orient Airways shifting to Pakistan. These airlines were: Tata Airlines, Indian National Airways, Air service of India, Deccan Airways, Ambica Airways, Bharat Airways and Mistry Airways. In early 1948, a joint sector company, Air India International Ltd., was established by the Government of India. Its first flight took off on June 8, 1948 on the Mumbai (Bombay)-London air route. The joint venture was headed by J.R.D. Tata, a visionary who had founded the first India airline in 1932 and he had himself piloted its inaugural flight. The Government then nationalized the airlines industry in 1953, with enactment of Air Corporation Act, and assets of nine existing air companies were transferred to the two new corporations – Air India International and the Indian Airlines. After 40 years, in 1994 Air Corporation

Act was repealed ending the monopoly of the national air corporations and enabling entry of private operators. Today, with new entrants in the airline sector particularly with the modus oprandi of being low-cost airlines, the airline industry is in for a major shake-up. The new 5-10 years will decide and shape-up the future for the Indian aviation industry.

The New Policy

The liberalization in civil aviation industry began in 1986 with the introduction if Air Taxi system to boost development of tourism. Though there were several restrictions relating to seat capacity, airports, timing and fare, the scheme was liberalized over a period of time. Even the fare was totally deregulated, allowing air taxi operators to charge any fare. With Open Sky Policy many private operators began operation in the domestic sector. The carriage increased from a modest 15,000 passengers in 1990 to more than 0.4 M i l l i o n i n 1992. Of the total of 12.23 million passengers c a rr i e d on domestic sector, private carriers carried about 5.7 million passengers. The civil aviation industry got a major boost with the announcement of Airport Infrastructure Policy in November,1997 which envisages development of international hubs and regional hubs to provide a hub and spoke for arrangement connecting all It airports. has allows Under the policy, opened foreign up equity infrastructure development of airport public and in private participation. the participation been 74%

airport infrastructure with automatic approval and

100 % equity on case-to-case basis. A new policy on domestic air transport has also been evolved. Salient features are: 40% foreign equity participation in domestic airlines.  100% equity participation for NRIs/Overseas Corporate Bodies.  Foreign airline equity, either directly or indirectly is not permissible.  Operators to have freedom to determine fares for each sector.  Domestic carriers to be allowed to fly international routes.

Changing Pattern of Government Regulations

Civil Aviation sector in India is perhaps the most striking example of the progress made in the liberalization of the Indian economy, a process that began a decade ago. Civil air transport business which hitherto had been the Government's monopoly has been completely liberalized, as a result of which private airlines have been flourishing. The process of disinvestment of Government equity in national carriers has been initiated, private participation in turn for has airports opened up has been further liberalized and the bilaterals for operation of international services are being further encouraged. This immense opportunities for investment in the civil aviation sector in India. The steps taken by th e government are as follows: 1. Investments Opportunities Foreign Equity Foreign Equity upto 40% and NRI investment upto 100% is permitted in domestic air transport services. Equity from foreign airlines is not permitted directly or indirectly. 2. Disinvestment of the Government Equity in airlines Government of India decided to disinvest partly its shareholding in both Air India and Indian Airlines, presently wholly owned companies of the Government. But with general elections round the corner this issue has been put on the backburner with constant opposition from various sections of the society. 3. Entry-Exit barriers removed Barriers to entry and exit from this sector have been removed. Only pre-entry security operator. 4. Private participation in Airports Foreign equity participation is allowed in ventures for airports, upto scrutiny to verify of financial operations soundness, and maintenance, resource and safety aspects human

development proposals is done. Choice of aircraft type and size left to the

74% automatic approvals and upto100%

with

special

permission.

Participation is also open to foreign airport authorities. A variety of fiscal incentives has been provided to airport project, as decided by Government from time to time. They are as follows:  100% deduction in profits for purposes of Income Tax for first five years.  30% deduction in profits for Income Tax purposes for next five years.  Full deduction to run for continuous 10 out of 20 fiscal years of assessee's choice.  40% of profits from infrastructure also deductible for financial institutions providing long term projects. 5. Bilaterals for operation of international air services The Government has been more liberal in granting additional entitlements to foreign airlines both in terms of capacity as well as in terms of points of call. The existin g air services agreement with United States of America is an extremely liberal one as it allows any number of US airlines to operate services from/to India. US airlines are also allowed to decide the size of aircraft and their frequencies. 6. Taxes and Tariffs In order to facilitate acquisition of aircraft Government of India has reduced tariffs for import of aircraft from 8% to Nil. Even aircraft taken on lease liberal do not attract customs duties. India also has a Corporate Tax/Income Tax regime for airlines and encourages finance for airport infrastructure

investment by allowance of high depreciation rates. 7. Civil Aviation Policy Having drawn up a successful growth model for the civil aviation sector, the Government is now engaged in evolving a comprehensive and integrated new civil aviation policy, some of the major highlights of which are:  All players and stakeholders are assured of a level playing field.

 Private  Rapid

participation upgradation of

is

encouraged

and

opportunities to world class

are is

created for investors to realize adequate returns on their investments. airport to in infrastructure the aviation best Civil busiest and encouraged with  International with After in four priority airports and in those tune

handling international flights. cooperation development with international trends and decades of control, practices, Aviation sector consistent has been

airspace sovereignty is promoted.

liberalized with a view to draw benefits of efficiency, safety and quality service. Government has also opened doors to foreign participation in investment in this sector.

Recent Developments in Civil Aviation
Civil Aviation: The different types of civil aviation are:  Domestic airlines (Indian Airlines)  International airlines (Air India, Lufthansa)  Chartered airlines (Evergreen, Deccan Aviation)  Private helicopter services (Pawan Hans)  Corporate aircraft (Reliance)  Transport (Fed EX owns planes) Airports: The airplanes don’t own the airports. These are controlled by the agencies like Airports Authority of India. AAI maintains the airports in India. Airlines get the routes and landing rights. These can be either used by them or swapped (e.g. Air India gave unused Delhi-London route to Virgin) Classes:  Passengers can avail different types of classes in airlines:  Economy class  Business class  First class The difference lies in various facilities like reclining seats etc. There is a significant difference in prices. Marketing: Airlines use conventional marketing methods for attracting customers. E.G.  Advertising – The Singapore Girl campaign of Singapore Airlines  PR- Public Relations by Richard Branson of Virgin  Brand Mascot- Maharaja of Air India  Schemes—Frequent flyer programmes of various airlines

Domestic Air Carriers – The Players
Indian Airlines

Indian Airlines was founded in 1953. Today, together with its fully owned subsidiary Alliance Air, it is one of the largest regional airline systems in Asia with a fleet of 62 aircraft(4 wide bodied Airbus A300s, 41 fly-by-wire Airbus A320s, 11 Boeing 737s, 2 Dornier D-228 aircraft and 4 ATR-42). It has many firsts to its credit, including introduction of the wide-bodied A300 aircraft on the domestic network, the fly-by-wire A320, Domestic Shuttle Service, Walk-in Flights and Flexi-fares.

The airlines network spans from Kuwait in the west to Singapore in the East and covers 75 destinations - 57 within India and 20 abroad. The Indian Airlines international network covers Kuwait, Oman, UAE, Qatar and Bahrain in West Asia, Thailand, Singapore, Yangon and Malaysia in South East Asia and Pakistan, Nepal, Bangladesh, Myanmar, Sri Lanka and Maldives in the South Asian sub-continent. Indian Airlines is presently fully owned by the Government of India and has total staff strength of around 18562 employees. Its annual turnover, together with that of its subsidiary Alliance Air, is well over Rs.4000 crores (around US$ 1 billion). Indian Airlines flight operations centre around its four main hubs- the main metro cities of Delhi, Mumbai, Calcutta and Chennai. Together with its subsidiary Alliance Air, Indian Airlines carries a total of over 7.5 million passengers annually.

Air Sahara Air Sahara has established itself as one of the leading players in the Indian Aviation industry. Air Sahara is part of the multi-crore Sahara India Pariwar. Sahara India Pariwar has interests in Public Deposit Mobilization, Media & Entertainment, Housing & Infrastructure, Tourism, Consumer Products and Information Technology. Starting on a modest scale and a capital of only Rs.2000 in 1978, Sahara India Pariwar has traversed a long way to become an icon in Indian entrepreneurship. Air Sahara began operations on December 3, 1993 following the Indian government's decision to open the skies to the private sector. It operated with a fleet of only two Boeing 737-200s. Today, its fleet includes advanced aviation technology New Generation Boeings 737-700s and 737-800s and Classics 737-400s and a fleet of 7 Canadair Regional Jets. The fleet also includes four highly advanced Helicopters (Dauphin and Ecureuil), which provide efficient charter services. Offering 119 flights with 11800 seats on a daily basis, Air Sahara flies to various destinations in India, which include important cities like Delhi, Bangalore, Mumbai, Kolkata, Lucknow, Hyderabad, Pune, Chennai and others. The airline has recently added Colombo, Srinagar, Coimbatore, Ahmedabad, Jaipur, Gorakhpur, Allahabad, Bhubaneshwar, Ranchi and Kochi to its route network. Air Sahara also operates flights to Dibrugarh, Guwahati, Varanasi, Patna and Goa. The airline is currently undergoing a complete overhaul and restructuring exercise. Air Sahara has redefined itself in terms of an efficient and punctual airline with a high record of on-time-performance and dispatch reliability. Efforts are being made to increase connectivity and offer convenient timings. A major investment programme has been launched for the modernization and enhancement of its fleet. Fleet review and route rationalization have become the focus points of Air Sahara's strategy. Five new Boeings have been added to the fleet in the last one year. These were used to add new destinations and

increase frequency on existing routes. In the second phase of its expansion four Canadair Regional Jets have been added to the fleet this year serve on regional routes. Air Sahara has introduced initiatives such as Steal-a-seat flexi fare options, Sixer/Super Sixer and Square Drive/Super Four. The Sixer initiative recently won the 'The Pacific Asia Travel Association' (PATA) award for the year 2003, at Bali, Indonesia. Air Sahara's frequent flyer programme called Cosmos offers faster accruals, lower redemption bars and requires no minimum balance for redemption.

Jet Airways

In May 1974, Naresh Goyal founded Jetair (Private) Limited with the objective of providing Sales and Marketing representation to foreign airlines in India. In 1991, as part of the ongoing diversification programme of his business activities, Naresh Goyal took advantage of the opening of the Indian economy and the enunciation of the Open Skies Policy by the Government of India, to set up Jet Airways (India) Private Limited, for the operation of scheduled air services on domestic sectors in India. Jet Airways has emerged as India's largest private domestic airline and has been acclaimed by frequent travelers as the most preferred carrier offering the highest quality of comfort, courtesy and standards of in flight and ground service and reliability of operations. It currently has a market share of 46.7% per cent and operates a fleet of Boeing and ATR72-500 turbo-prop aircraft. Jet Airways has been voted India's 'Best Domestic Airline' consecutively and won several national and international awards, including the 'Market Development Award' for 2001 awarded by Air Transport World.

Air Deccan Air Deccan is a unit of Deccan Aviation Private Limited, India's largest private heli-charter company. Formed in 1995, Deccan Aviation Private Limited has carved a niche for itself in the Indian aviation scene with its reputation for providing speedy and reliable heli-services for company charters, tourism, medical evacuation, off-shore logistics and a host of other services. The company has a modern fleet of ATR-42-320 aircraft, one of the finest and most efficient Turbo-Prop aircraft flying. ATR is a European joint venture between Alenia Aeronautica and EADS. The ATR 42 has become a reference aircraft amongst airlines around the world, by offering a safe, easy to maintain and comfortable aircraft operating on the regional market with the best economics on short haul sectors. To date, ATR has sold over 650 aircraft to more than 100 operators in 73 countries all around the world. The company has adopted a 'lean-and-mean' approach to staffing and aims at maintaining a low aircraft-to-employee ratio. A good work culture coupled with a skilled workforce is the backbone of the company.

Airport infrastructure

In India, airports were totally owned and managed by central government or the armed forces. The Airport Authority of India (AAI), a body functioning under the Ministry of Civil Aviation was responsible for managing the airports in India. It owns 122 airports, 61 of which are operational. The breakdown is as follows: 11 international 94 civil and 27 civil enclaves at defense airfields.

The AAI operate most aspects of the airport (including air traffic control) and procure most of their equipment directly (via global/local tenders). India’s airports handle 42 million passengers, of which the four Metro gateway airports (Delhi, Mumbai, Kolkata and Chennai) account for 47% of revenue and 66% of the passengers.

Until 2000, there were five major international airports, - Mumbai, Kolkata, Delhi, Chennai and Trivandrum. But the GoI announced a further six airports including Amritsar, Bangalore, Hyderabad, Cochin during the course of 2002.

According to projections, Indian air passenger traffic was estimated to grow to 100 million passengers by 2012 from 36.98 million in 1998-99. Growth projections in the cargo front were also promising. Airport infrastructure is linked to development of India's international competitiveness and her ability to attract foreign investments. The policy opened the doors of private investment in this sector, including investments from foreign airport authorities.

The AAI has drawn ambitious long term plans to meet challenges posed by ever increasing air traffic and advancement in aircraft technology. Some of the

major plans for implementation are:



Replacement

of

ground

based

Communication,

Navigation and Surveillance (CNS) with Satellite based CNS system.  Establishment of Differential Global Positioning System (DGPS).  Automation in the air Traffic Control Services.  Establishment of Automatic Dependent Surveillance (ADS).  AAI earned a profit (after tax) of Rs. 208.41 Crore during 1998-99 as compared to Rs. 196.14 crore during 1997-98.

Low-cost Airlines: A Preview

‘Operating on low-cost flying models, airlines can provide air travel at 40 to 45 per cent of the existing economy airfare’

Travelling by air is no longer a dream for many. Not after Air Deccan's blockbuster announcement to offer Rs 500 air ticket for the one hour 55 minutes flight between Delhi no frills and air Mumbai. travel Sounds has arrived incredible? in Pinch yourself. Low cost, India. In practical terms, this too good to be true offer may not last in perpetuity, but air tickets at 40 to 45 per cent of the existing economy airfare is not just feasible but realistic too as proved by Air Deccan. Its attractive pricing has the air travellers succeeded segment also. in broadening

Low cost, no-frills air travel emerged in the US in the 1970s and spread to Europe in 1990s. In Asia, it made inroads some three years ago led by Malaysia's AirAsia. In India, the low-cost business model happened with Air Deccan opening operations in south India. Already half a dozen business houses encouraged by Air Deccan's apparent success and the government's policies to liberalise its aviation policy are all geared up to set the Indian airspace buzzing with activity. Among the low cost carriers waiting to take off are Vijay Mallya's Kingfisher Airlines, Modiluft's Royal airlines and Air India's AirIndia Express. AirOne and Visa to be run by groups of former Indian airlines pilots are also in the offing. The latest entrant to the growing number of private investors is the Rs 2500 crore GMR Group. Low cost carriers have been possible with a different set of economics. Unarguably, the major cost of flying is attributed to fuel, maintenance and salaries. In addition there are parking and landing charges as well, which are quite high. So Europe and Southwest how Airlines does in Air Deccan US manage in India, RyanAir in to sustain low cost

carriers? How does a low cost model work? Low cost carriers generally operate with only one kind of aircraft

in their fleet, such as Airbus 320s or Boeing 737s, to lower the maintenance costs. There is no business class just economy class; this increases the number of seats per flight. Typically, they have quick turn around time, which means higher aircraft utilisation, online ticket reservation to save costs on commission to agents, reduction in flight services — no free meals, no newspapers and no frequent flier programmes either. There are no aerobridges or bus services to ply passengers to the aircraft. What's more, many of them do not even promise seat allocation. Usually the crew size is also small: Air Deccan operates with just one air hostess on board. Low cost carriers manage to wring more by lowering their fixed costs. Shorter hauls with smaller crew means not just each aircraft being airborne longer but also spending less on hangerage along with savings on hotel and layover allowances for the crew. Trimming down the frills like no hot meals means no extra storage space for food trolleys, this again is utilised to add more seats to the aircraft. Another source to manage low airfares is to sell advertising space within. Air Deccan for instance, has the head rest space open for advertising. Globally, low-cost airlines operate from secondary airports where landing and parking charges are much lower. So in London, a low cost carrier uses Luton airport instead of the Heathrow. In India however, there are no secondary airports and no cost advantage thereof. Nonetheless, to be on board a no-frills aircraft you need to brace yourself with minimal expectation and a high degree of patience. Above all, one needs to come out of the concept of maharaja style luxury associated with air travel. No-frills for the traveller translates to lesser leg space, no free meals and no smiling air hostesses. But the 'value for money' air traveller is not complaining. In addition, it is also attracting to its fold many of the AC II rail travellers who save hugely on time and don't mind paying the premium for the time thus saved. For full service airlines though, it is a time to worry as the no frills airlines are certainly making a dent into their markets and profits. To take up the impending challenge, the full service airlines are also

harnessing themselves. Air-India is set to launch a new subsidiary airline with 25 per cent lower fares to gulf and south East Asian countries in April 2005. Air Sahara also plans to restructure and cut down on its operational costs so as to offer full service at cheaper tickets to domestic destinations and SAARC and ASEAN countries. Media reports also say Air Arabia; a Middle East based international carrier is keen to begin lowcost flights to India. The abundance of private investors keen to set up low-cost airlines is a positive signal. Hopefully, the government would relax the bundle of taxes and liberalise the air space to actually make flying inexpensive in India as it is in the US and Europe. Globally, no-frills airlines hold 25 per cent of the market share. What per cent will it hold within India is still arguable and premature to predict but it certainly will win the hearts of travellers with more choice and better prices.

PEST Analysis: The Indian Airline Industry

A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the external macro-environment. Such external factors usually are beyond the firm's control and sometimes present themselves as threats. For this reason, some say that "pest" is an appropriate term for these factors. Let us look at the PEST analysis of the Indian aviation sector: POLITICAL FACTORS In India, one can never over-look the political factors which influence each and every industry existing in the country. Like it or not, the political interference has to be present everywhere. Given below are a few of the political factors with respect to the airline industry:  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 India’s recent political environment has been largely unstable due to international events & continued tension with Pakistan.  The recent Gujarat riots & the government’s inability to control the situation have also led to an increase in the instability of the 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.

 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)  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 from 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.

ECONOMIC FACTORS 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. In India, even a company like Citibank was forced to cut costs to increase profits for which even the top level managers were given first class railway tickets instead of plane tickets.

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 fuelled the recession as spending decreased due to the rise in unemployment. Even the SARS outbreak in the Far East was a major cause for slump in the airline industry. Even the Indian carriers like Air India was deeply affected as many flights were cancelled due to internal (employee relations) as well as external problems, which has been discussed later.

SOCIAL FACTORS The changing travel habits of people have very wide implications for the airline industry. In a country like India, there are people from varied income groups. The airlines have to recognize these individuals and should serve them accordingly. Air India needs 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. Especially, since India is a land of extremes there are people from various religions and castes and every individual traveling by the airline would expect customization to the greatest possible extent. For e.g. A Jain would be satisfied with the service only if he is served jain food and it should be kept in mind that the customers next to him are also jain or at least vegetarian. Another good example would be the case of South West Airlines which occupies a solid position in the minds of the US air travelers as a reliable and convenient, fun, low fare, and no frills airline. The major element of its success was the augmented marketing mix which it used very effectively. What South West did was it made the environment inside the plane very consumer friendly. The crew neither has any uniform nor does it

serve any lavish foods, which indirectly reduces the costs and makes the consumers feel comfortable.

TECHNOLOGICAL FACTORS The increasing use of the Internet has provided many opportunities to airlines. For e.g. Air Sahara has introduced a service through the internet, wherein the unoccupied seats are auctioned one week prior to the departure. Air India also provides many internet based services to its customer such as online ticket booking, updated flight information & handling of customer complaints. 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, surveillance, and air traffic management systems for India's aviation sector that will help the 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. A good example of the impact of technology would be that of AAI, wherein with the help of technology it has converted its obsolete and unused hangars into profit centers. AAI is now leasing these hangars to international airlines and is earning huge profits out of it. AAI has also tried to utilize space that was previously wasted installing a lamination machine to laminate the luggage of travelers. This activity earns AAI a lot of revenue.

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.

Segmentation: The Airline Industry

Most airlines use a very traditional segmentation strategy, dividing passengers into business travelers and economy travelers (mostly leisure travelers). The common strategy is to squeeze as much profit as possible from business class passengers who are attracted by superior services and corresponding high prices and, at the same time, to try and fill the rest of the seats and ensure growth by attracting economy class passengers with lower fares. Business passengers They are crucial for airlines' profitability. With less spare time and more cash in their pockets, they agree to pay a premium price for a premium service. Today business passengers account for approximately 48% of passengers, and these 48% contribute 66% of airlines' revenue. The premium prices they pay provide wider and more comfortable seats, better choice of meals and seats, luxurious lounges. Airlines can choose from a multitude of premium services to offer to business travelers. Some of these extras range from seats equipped with faxes and telephones, to gambling machines, showers, massage services and suit ironing services in the recently introduced arrival lounges. Business passengers believe it is worth extra money if they can save time and arrive looking fresh for an important meeting. Business passengers will avoid transit flights even if a longer flight could save them money. But amongst other perks, flexible reservation services are probably the most important to them. Reservations for business trips are often made just a couple of days in advance. A no penalty cancellation policy is also very important to business passengers. The best way to reach business travelers is through printed advertising. Business news media, such as "The Economist" or "The Wall Street Journal" are some of the best publications through which airlines can reach business travelers. Many airlines design special promotional programs that target corporate bookers and meeting planners, who are responsible for business trips reservations. Frequent flyer programs are an added bonus for business passengers.

Leisure Travelers They represent a totally different market. The most important consideration for most of them is the price. The lower the airfare, the more people will fly the respective airline. By and large, with the exception of wealthy travelers, this segment will not pay extra for premium services and will agree to change several planes during their trip if this option costs less than a direct flight. Despite lower margins provided by this segment, leisure travelers are very important to an airline's bottom line. Part of the reason is that technological progress in the area of tele-conferencing and increased use of the internet for business communications is expected to reduce the number of business travelers. Thus, airlines are counting on the leisure segment to provide further growth. How can airlines benefit from the growth opportunities in the leisure segment without losing immediate profit opportunities in the business segment? This is a tough issue in airline marketing management. By improving services and reducing prices for economy class passengers, airlines risk that some business passengers will switch to economy class.

This has already happened with Japan Airlines, for example, which was forced to eliminate business class seats on some of its flights. On the other hand, if an airline focuses on business class passengers, it risks losing its economy class passengers to another airline. Since business class passengers are not many, a company relying mostly on business travelers will often end up flying half-empty planes, losing the potential revenue generated by lower priced economy seats. On the other hand, few airlines catering solely to economy class passengers can be successful because a low fare carrier must fill the entire plane if it is to generate revenue from its low-margin operations. The allocation of business and economy class seats on a plane is determined through a process called yield management. A good yield

manager knows the approximate proportion of business and leisure travelers for each flight in advance, based on sophisticated statistical models. Thus he/she tries to sell early, the economy seats at a cheaper price, while keeping enough seats reserved for business travelers, who usually book at the last minute. Keeping just the right amount of business seats reserved is important: selling too few economy seats in advance may result in a lessthan-full plane while selling too many economy seats may result in a full plane, but with insufficient revenue to gain a profit. This kind of segmentation serves airlines well enough when implemented within one company. It would be very difficult for any single airline to target just one of these two segments - business or leisure successfully. There are exceptions - small regions that serve destinations where the majors do not fly, for example, are in a better position to implement a low price policy. They can even get business travelers to fly them despite the lack of premium services because no other airline would get them there. Southwest is a classic example, proving that low cost carriers can thrive. Major international carriers, however, need to target both the business and the leisure segments they may also target different ethnic and geographical segments differently, depending on the markets from which they draw the majority of their customers. For example, even though Japan Airlines advertise extensively to the American public, their message -"Your needs. Your Airline," seems to work best for the traditional Japanese audience. Inside one country, two national carriers may also focus on different destinations, which is the case with Canadian Airlines and Air Canada. Passengers' tastes determine airlines' strategies. While British Airways focuses on comfort and luxury, valued by European passengers, Air Canada equips its business class seats with plugs for laptops and telephones, appreciated by North American business travelers. Overall, airlines seem to achieve best results when they subscribe to the segmentation theory, supported by yield

management techniques and a careful monitoring of the economic changes in their geographical markets.

Unique Service Characteristics
Commonly known as the 4 I’s of Services, it is very important to look into this aspect and check their relationship with the service industry. INTANGIBILITY Intangible services are difficult to sell because they cannot be produced and displayed ahead of time. They are therefore harder to communicate to prospective customers. It means that services are high in credence qualities whereas goods are high in search qualities. Marketers of services can reduce these risks by stressing tangible cues that will convey reassurance and quality to the prospective customers. These tangible cues range from the firm's physical facilities to the appearance and demeanor of its staff to the letterhead on its stationery to its logo. In it the airline i n d u s t r y in nature transportation a service is the core can product. Since itself is intangible company distinguish

from its competitors by providing several tangible clues like:  Food / Beverages  Newspapers  Movies  Music  Staff uniforms- Air India’s staffs always wears a printed blue sari. Logos - Air India's centaur is the logo and maharaja is the mascot. tickets.  Seats and cushions  Audio / Video facilities for work or pleasure  Fax, laptops, etc.  Baggage retrieval  Flight bookings INSEPARABILITY Many services require customers to participate in creating the service product. In the airline industry, it is very important for the company to consider the customers as a part of the company in order to serve them better. 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 face 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. In the airline industry, the customer has to be physically present in the service factory. Hence, he is coming in direct contact with the service provider as well as other customers of the airline. Colour and design - Jet airways have blue colour

INCONSISTENCY Inconsistency refers to leads image the to variability in in the a service. Service variability consistent difficulty projecting

and developing a strong brand.

As it is difficult to standardize to blueprint the service process there is inconsistency in service quality. Different front-line personnel have different abilities. at different involving times of day. Services are Even the same often service provider has good days and bad days or may be less focused performances, the cooperation and skill of several individuals, and are therefore

unlikely to be same every time. This potential variability of service quality raises the risk faced by the consumer. The service provider must find ways to reduce the perceived risk due to variability. One method is to design services to be as uniform as possible - by training personnel to follow closely defined procedures, or by automating as many aspects of the services as possible. E.g.: most airlines include online booking resulting in a standardized procedure & fewer mistakes due to human errors. A second way to deal with perceived risk from variability is to provide satisfaction guarantees or other assurances that the customer will not be stuck with a bad result. Another way of reducing inconsistency instructions given at the beginning of the flight. in airlines is the standardization of in-flight procedures for example the security

INVENTORY Service businesses cannot normally stockpile their output, because the time bound nature of service delivery makes it impossible to inventory the finished goods. For example, the potential income from an empty seat of an airline flight is lost forever once the flight takes off. Conversely, when demand for service exceeds supply, the excess business may be lost. If someone cannot get a seat on one flight

another carrier gets the business or the trip is cancelled or postponed. The inventory for airline industry is mainly the food and the aircrafts spares and pa rts . Airlines face the problem of inv en tory mainly due to irregular demand patterns.

The Goods – Services Continuum
The airline industry is a sector where the goods that are being sold could be either classified as the traveling service rendered by the airline company or the actual purchase of the aircraft. When we consider the purchase of an aircraft, we must understand that only large corporate houses could afford that and that too for its top executives only (McDowell’s owns a small plane). Here the plane is the core product hence the manufacturer (BOEING) has to extend a few services to attract more sales to corporate as well as airlines. For example, free servicing, or may be a maintenance contract with the plane is required. Even in case of airline companies where travel is their core product, they have to render additional benefits or services to the passengers to increase the number of sale of tickets. but only the sale of the plane by the manufacturer does not completely fulfill the desire of the customer,

Hence, in marketing terms there could not be any pure goods or pure services. Without either of them the other wouldn’t be effective. So in order to increase sales and grab a larger market share, every good must be supported by a service and vice versa. In the above diagram there are 4 parts related to sale: purely goods, goods related to services, services related to goods and purely services. But in each case a loophole could be identified if considered in isolation. Hence for a service marketer to be very accurate with the sales figures and forecasts, he must concentrate on the second and third type, i.e. goods related services and services related goods as according to the business they are into, i.e. if the company is into manufacturing of planes they must consider the second option and if they are an airline company, they must opt for the third for maximum benefits.

Pure Goods

Goods related

Service Related

Pure Services

The 7P’s of Marketing Mix
PRODUCT MIX
Getting the product right is the single most important activity of marketing. If the product isn't what the market wants, no amount of price adjustment or brilliant promotion will encourage consumers to buy it. The airline product is quite a complex one since it comprises of a service of incorporating the temporary user of airline seat and certain tangible products such as free flight bags or a free bottle of duty free spirit to encourage booking. The airline product includes of two types of services: 1. on the ground services, 2. In-flight services. The on-the-ground services include a convenient airport with car parking facilities, duty free' shopping quick and efficient checking of baggage, efficient service at reservation counter, transport to the airport, etc.

The service provided inside is intangible and is highly variable. The airhostesses are trained to provide polite, warm and courteous service. The courteous service that the representatives at the baggage counter, reservation counter provide goes a long way in developing customer loyalty. The travel agents of the airlines also need to be efficient and polite. Differentiating the Product It is important to recognize that what the consumers are demanding are not products, or features of products but the benefits they offer. Producing added benefits thus helps the marketer to distinguish one product from another. Good design or style of service can form the basis of differentiation. This enables the company to create a personality for its service. The design and decor of the aircraft provides opportunities to personalize their product as well as periodically to update them when differentiation under IATA regulations was virtually excluded, nonetheless, certain airlines were able to develop distinct personalities. Eagle Airlines created an entirely new market between New I York and Bermuda, for e.g. by developing an image of a friendly airline distinctive from other airline serving the route. A similar style was evident in Richard Branson's Virgin Airways.

LEVELS OF PRODUCT
FIVE PRODUCT LEVELS The Core Service The core service of the airlines industry is to transport goods and services to various destinations. As the needs of the people increased the entire system became more organized and formal. After this stage come the various supplementary services.

The Supplementary Services The airline industry has many players they had a brand name like ‘Air India’,’ Jet Airways’,’ British Airways’. All of them had some common services to offer like connecting flights, through check-in, tele check in, food on board, and complementary gifts etc. Different classes like economy class, business class were introduced. Air concessions are given to school students, old people etc. Singapore airlines were the first to introduce small 8”television screen for every passenger. The freebies are actually win-win deals between airlines and other services.

Sahara, for example, offers its passengers a ‘business-plan’ on two-way economy class ticket, which includes a night’s stay with breakfast, STD facility for 3 minutes and boardroom facility at the Park Hotel, New Delhi. To Delhi based fliers to Mumbai, it offers a night’s stay with breakfast, airport transfers and VIP amenities at The Orchid, Mumbai. For business class, the plan includes a stay at The Leela, with buffet breakfast and late checkout. All these added service helps the customer to decide upon which airlines he wants to travel. As competition increased and the customers wanted more the next phase evolved and that is the augmented service.

The Augmented Service This phase is where the customer’s expectations are met; the service providers kept working on new methods to meet the ever-changing customers’ demands. The players introduced online booking, which was very convenient for the service users. British Airways business class has showers; it’s more spacious and comfortable. Sahara airlines offer its passengers six different types of cuisine like vegetarian, fat free, diabetic etc. They also have auction going on board. Virgin airlines have gambling on board, they also have body massage to offer to their passengers. Air Emirates has something called cab service, they have customized pick up and drop cab service. This phase is the most crucial one; with increased competition service will become the final differentiation. Future Service As mentioned above the customer needs keep changing, the future is unknown. The customers may be looking in for more frequent inexpensive air travel, something like air taxis, super sonic speed. This decreases the time thus reducing the cost.

The diagrammatical representation of the core and supplementary services in the airline industry is shown below:

COMFORT/ SPACE

TICKETS

AUCTION

Core TRANSPOR T BRAND NAME CONCESSIO (Air India, Jet NS Airways) COMPLEMENTA RY GFITS

CONNECTI NG FLIGHTS

FOOD MULTICUISINE

CAB SERVICE

PRICE MIX
Price plays as much a tool of marketing as promotion plays a critical role in the marketing mix. The concept of 'fair price' is paramount. Buyers judge whether a product is fairly priced by seeing whether it represents value for money. Pricing can be classified in three ways. DIVISION OF FARES: The final fares charged to the passengers include the following components:  Basic fares  Insurance  Inland Aviation Travel Tax (IATT).  Passenger Service Fee (PSF) The basic fares include the operating cost incurred by the airlines and the profit margin. The major constituents of the operating cost in respect of domestic airlines in India are the Aviation Turbine Fuel (ATF) the basic raw material for this service industry, varies 30-40 % depending on aircraft utilization; Navigation, Landing & Parking costs 7-10%; Repair and Maintenance 13%, Manpower 12%; Acquisition/ Depreciation & Insurance 13% and balance other expenses.

How are fares arrived at? When Airlines put in capacity (seats) and frequency (flights) between any two points, they market research the route in order to arrive at the total potential for that segment. In other words, the capacity and frequency is tailored to the size of the market. Accordingly, the pricing structure is also arrived at. Pricing or fare levels are arrived at after taking into consideration various factors; type of aircraft, configuration of aircraft (number of seats), density of route, competitor activity, and minimum breakeven cost. In order to achieve the breakeven seat factor and thereafter maximize loads, the airline embarks upon a serious of marketing activities. These will vary from a publicity campaign highlighting various facets of the Product, to sales, service, punctuality, ideal departure and arrival timings, connections and so on. In short, the entire focus is to increase the yield and load factor (seat factor). The yield or the bottom line is the income generated from ticket sales less costs incurred on the route.

Why do fares fall? When the yield drops or the seat factor falls, the airline is immediately alerted to enquire into the causes for this. This leads to a fare war wherein the airline either tries to protect its market share or responds to another airline which tries to increase its own market share. The reasons for these can be multifarious.

 It could be that the route is not profitable due to intrinsic reasons such as a very short haul route, or the potential or total size of the market for this route is too small to sustain a profitable flight or there is too much capacity deployed by various airlines on the route

 Yields may also fall due to increase in costs. Then the airline has two options; increase fares to compensate for the increased costs. The second option is, to drop fares in order to increase the seat factor. (Increase in volume number with low fares can achieve breakeven cost)

 It could be that the type of aircraft deployed on the route is not suitable and hence is making cash loses.

 Extraneous reasons also contribute to non-profitability of routes. The event of September 11, 2001 is an instant example wherein passengers simply stopped flying and several airlines went into bankruptcy. Also poor economic conditions lead to shrinkage of market. Prices of fuel also fluctuate and can result in sudden Insurance premiums have recently increase in basic costs.

increased considerably, further adding to the burden.

 Apart from the above.

Competitor activities can also lead to a For example, the most

drop in market share or drop in yields.

common cause is a reduction in fares by one airline forces the other to reduce fares. This reduction in fares could be due to any of the above three reasons enumerated above. Reduction in fares, apart from the above reasons is also due to introduction of a more suitable aircraft, which is fuel efficient, modern, and with greater seating capacity at lower cost. In other words reduction in fares is not always due to negative factors but can be due to modernization. Pricing Strategies

Premium Pricing:

The airlines may set prices above the market price either to reflect the image of quality or the unique status of the product. The product features are not shared by its competitors or the company itself may enjoy a strong reputation that the 'brand image' alone is sufficient to merit a premium price. Value for Money Pricing: The intention here is to charge the average price for the product and emphasize that it represents excellent value for money at this price. This enables the airline to achieve good levels of profit on the basis of established reputation. Cheap Value Pricing: The objective here is to undercut the competition and price is used to trigger the purchase immediately. Unit profits are low, but overall profits are achieved. Air India and Indian Airlines have slashed their prices to meet the competition of private airlines so that they can consolidate their position in the market. Airlines usually practice differential pricing. There are three classes: The First Class, The Executive or Business Class and The Economy Class. Fares for each class are different since the facilities provided and the comfort and luxury level is different in each class. Seasonal fares are also fixed, fares rise during the peak holiday times. Low-cost Pricing: With the advent of the low-cost airlines in the Indian aviation industry, a different low-cost flying concept has come up. Since these low-cost airlines are trying to woo the customers by providing air travel in exceptionally low prices, a price-band kind of pricing has to be designed. In low-pricing strategies, the airlines provide very low prices for the flight tickets. Also, they prices are made cheaper by booking the tickets long before the flight date.

APEX Fares In this scheme, people are given very cheap rates only if tickets are booked atleast before the specified time period. But the draw-back here is that if the booking is cancelled, a substantial amount of money is not returned.

PLACE MIX
Marketing-channel distributions are among the most critical decisions facing the management. The companies chosen channel ultimately affect all the other marketing decisions. "Marketing channels are sets of ‘interdependent’ organizations involved in the process of making consumption". Understanding what, where, why, when, and how the target market buy, is the first step in designing the marketing channel. The marketer must understand the service output levels desired by the target market and types and levels of services that the people want and expect when they purchase the service. ‘Special convenience’ expresses the degree to which the marketing channel makes it easy for customers to purchase the service. For example, Jet Airways' ticket counters are conveniently located at all destinations within its network, both in the city and at the airport and with a computerized ticketing facility at most airports. Airlines also provide all the essential information required by their customers, with the help of polite front line office staff and airhostess on board the flight. the service availablefor

The

airline

industry

has

adopted with

different

distribution 24-hour check-in

channels

for marketing their services to their target audience. On the ground there are many ticket counters many computerized designed reservation counters for systems. They have specially

club and premiere passengers. There are two principal methods of booking seats on an airline.  The first is the group of traditional method such as the phone, fax, and email. Corporates or vacationers generally approach travel agents who book the tickets form the airline & take the commission from them.  The second & increasingly popular method of reservation is the online booking method. Here the customer fills in his details online & he receives an instant booking of his ticket. His payment is generally through credit card. Although not as popular in India, this booking system has achieved much success in the developed countries that travel agents are losing their jobs. An example of how distribution is carried out: The place mix of airlines consists of mainly the distribution channels. The number of destinations that an airline flies to can also contribute to its place mix. Distribution channels The Four methods of distribution are as following:  Consolidation: The direct sale of tickets from airport to the passenger on the airline desk.  Tour Operator/ Travel Agent: Customers approach travel agents or tour operators who book the tickets from the airline and take commission. E.g. SOTC  Affiliated with companies: As the name defines, airlines gets affiliated with companies who carry all its trips with a same airline who in turn gives special discounts or offers in return.  Direct through home leased system, e.g. Phone, fax, email and also

online e-booking. E.g. If one makes reservations and purchase tickets Center, by phone will through South-west airlines’ Telephone Reservations they

allow you to cancel those reservations and/or tickets without penalty if you call us back within 24 hours. This will give you the opportunity to check for lower fares through other distribution systems, such as Internet-specific fares.

PROMOTION MIX
The formulation of an ideal promotion mix is essential to inform sense and persuade the users. In the Indian perspective, we need more creative efforts because the potential users in a majority of the cases don’t prefer to use air services. The business magnets, executives, politicians, actors, high spending tourists etc are some of the users of the air services. The users appears to be more conscious, aware of their rights and in a majority of the cases are found to be sophisticated and therefore the promotional efforts have to be creative. Many airlines are facing financial crunch, it is pertinent that they make optimum use of different components of promotions  Advertising Airlines need creative advertisements to promote their business. In the view of rising cost of inputs on and the the increasing impact of worldwide should be economic depression airlines, advertisements

budget optimistic vis-à-vis optimal. The telecast media and print media are important for promoting the air business.

The airlines have to make sure that whatever strategic decision they make to promote the businesses are in a position to establish an edge over competitor’s promotional measures. Also the airlines should keep in mind the quality and the nature of the target markets and the level of expectations. This is essential to make advertisements proactive for the expansion of business. They are also required to assign due weight age to the efforts made for projection of positive image. We can’t deny the fact that both Indian airlines and Air India have been facing image problems. The ads may be efficacious in transmitting the facts and removing the image problem. It is also essential that while advertising airlines should also keep in mind the image of our country, the scenic beauty, tourist attractions, rich cultural heritages or which would attract number of tourists. While advertising it is impact generating that one should select an opportune moment of flight is an attractive scene of take off, and so on. Airlines can also use broadcast media. The domestic flights should use radios because due to increasing access to FM.  Publicity Publicity is an important component of promotion mix. It is a process of persuasive sensitizing communication. the persuasion It process is very provided instrumental the media in people,

public relations officers provide their help. Media people are very important business. The media people by organizing people dinners,

Strengthening the PR activities in publicizing get together, the press

is essential to promote airlines business. The PRO, Receptionist, Travel agents, marketing professionals can seek the cooperation of meetings,

conference etc, also giving them small gifts and motivating them to publish news items which are in favor of airlines.  Sales promotion The sales promotion measures are meant for both the related

sources channel sing and using the business, such as the travel agents, tour operators and all of them who process the services and the passengers and business houses who use the services. The travel agents contribute a lot to the promotion of airlines business and therefore the need to think of them in their favor on their priority basis. In addition the tour operators, the frontline staff also must be given priority. Hence they should be offer some incentives this will motivate them to promote the product. The user also deserves incentives. The incentives may be in the form of confessional services, a small gift etc. E.g. EMIs, which allow customers to pay in installments.

 Judo Tactics ‘EasyJet’ A] GO flight which was supposed to be the media event for BA resulted into a Disaster because ‘easyJet’ bought 10 tickets of the flight and gave free coupons of easyJet to the 148 passengers. b] Awareness on the wing of its Rivals: Contest on web offering FREE flight vouchers for guessing how much BA’s GO would lose during the year.

 Word of mouth ‘Customer Loyalty Ladder’ This happens to be an important constituent of the promotion mix in which the promoters act as a hidden sales force. The satisfied groups of users, opinion leaders narrate outstanding merits or salient features of

services used by them. If you travel by Air India and are satisfied with the services offered by them then it is natural that you will share your experiences with your friend’s relatives, they trust in you and therefore the stimulation process is on. The moment your friends and relatives get an opportunity to travel they find Air India their first choice. Ads may be ineffective, publicity may also be ineffective but word of mouth can never be ineffective

PEOPLE MIX
In the service industry, service personnel come in direct contact with their customers in the course of production and consumption of the services. Because people provide most services, the selection, training, and motivation of employees can make a huge difference in attaining customer satisfaction. goodwill. Ideally, employees should exhibit competence, caring initiative, problem solving ability, and attitude, responsiveness,

Many service organizations trust their people enough to empower their

front-line personnel to resolve customer problems. The airhostess in any airline come in contact with the customers in the process of providing the service, while the cock-pit crew are employees who contribute to the service product but do not come in direct contact with the customers. The physical presence and the percentage of time the customer is present reflect the customer contact and extent of contact respectively. Services with high contact are more difficult to control and manage because of the degree of variability in the quality, demand and

nature of service. The polite service is contact expected personnel to in the a airline industry personality possessing is an with high airhostess who possess personnel, pleasing require

service handling. and

While on the other hand the cock pit crew, being

categorized as a low analytical

contact

technical attributes. In the airline industry, there is also the

ancillary service personnel, the travel agent who helps to create the service exchange but is not a part of the service. While delivering services, airlines ensure that the service is delivered as promised and this is often totally with in the control of the front-line staff. This ensures some amount of reliability. This in turn affects the degree Of responsiveness sought from customers. The quality of service that the front-lonestaff provides is highly depended communicate their c re d i b i li t y . will on his/herability delive r and to and in Airlines listen, caring be flexible

individualized attention to customers through their airhostesses. Empathy implies that these personnel delivering what adapt, individual customers need. Also the appearance of an

employee are important aspects as it forms the tangible dimensions of quality along with other factors like service quality, decor etc. To start off, airlines hire the right personnel them to deliver effective manner, they quality stick service. These support to with essential requirements. They recruit the right people and develop, and train employees are provided with and are motivated in a and sufficient systems

the organization. They are more treated as

customers, rather than employees. For example, Delta Airlines recruits an employee, and moulds him to cater to their demands. These employees are sent to places like the US and Frankfurt on a 21 day training programme. The successful completion of this training motivates the staff to stay on with the airline. They are provided with offers such as one-month bonus or some incentive, on the achievement of the sales target.

PROCESS MIX
The process of airline service lays emphasis on the involvement of channels, front line staff, travel agency offices, offices of the tour operators or so form where the services flow & reach to the ultimate users. The process begins at the time of reservation goes on to of the confirmation of seats. For e.g.: Computer reservation system

Indian Airlines enables any reservation request from anywhere in the world to be auctioned in minutes. The reservation facility is accessible through all-major computerized reservation system of the world. By giving details of where to book and how to book airlines help in providing quality services to the customers. They also offer concession, by not charging any cancellation charges and also giving them the option to make a change in the reservation status if he requests so on the presentation of ticket, all these facilities go a long way in increasing passenger convenience. Then facilities at the airport, the baggage handling, flight information, etc. also helps in delivering quality service and making travel a pleasure. In the aircraft the meal service, in-flight entertainment, reading material, in-flight amenities, etc. help the customers, the travelers to have

an enjoyable and convenient travel. All these procedures form a part of the total process designed to deliver quality service. Airlines are making every effort to constantly redefine service procedures to enhance service satisfaction levels.

PHYSICAL EVIDENCE
Physical Evidence refers to the environment in which the service is delivered and where the service industry and customer interact. The aircraft by itself, the seating configuration meant to be comfortable and spacious, and the in-flight food provide physical evidence to the airline service. The Boeing Company and The Airbus Industry are the best commercial aircraft makers and almost all airline industries make use of one of these airlines. The seating is such that it is comfortable and there is enough leg space. The in-flight food is another, important aspect, a wide selection of meals is offered to the passengers. Passengers are requested to indicate their reference at the time of reservation itself. Delta Airlines has introduced new sleeper seats with electric controls for reclining lumbar support, leg rest extension, expanded seat back height for a more insulated environment etc. thus providing highly comfortable seating. Booking offices, ticket counters, etc. must be spacious and well designed with good looks. Further the air crafts must be given good exteriors and must be maintained wel1. The aircraft must have elegant interiors and must be incorporated with

all basic facilities. The aircrafts must have well designed seats with more leg room especially in the business class. Domestic and lounges are enhanced with good interiors basic amenities which will make it an ideal place to conduct

business, entertain or relax. The jet logo prominently displayed on each of its aircrafts, is used a cue to trigger of a reminder of the customer’s experience at Jet & also of all the values that jet airways stands for. The physical evidence would also include the other facilities in the aircraft. Some of the bigger aircrafts have more than the usual facilities on board. These sort of tangible clues act as identification marks for the airline & help the customer to evaluate on airline from another. Kingfisher Airlines The kingfisher airline, which is soon going to be launched, has hired a high profile Fashion designer for designing clothes for the employees. This leaves an impression on the minds of the customers and they are easily able to relate to the airline. EASY-JET Easy-Jet airline has also created an impression in the minds of the customers as the color of the employee’s clothes is orange and the interiors are also in orange color.

SOUTHWEST AIRLINES On the dawn of our 30th year, Southwest saluted our past and toasted our future with a fresh new look—a bird of a different color. On January 16, 2001, we proudly unveiled the look that launches us into the new millennium. Inspired by a canyon sunrise and dedicated to our loyal Customers, Canyon Blue was added to Southwest’s traditional gold, red,

and orange colors. Beauty, however, is more than skin deep. The interiors of our 737s also are new. The Canyon Blue will team with Saddle Tan in Southwest’s n e w all-leather s e a t i n g configuration. Brushed aluminum surfaces, deep blue carpet, and newly designed windscreens complete a comfortable interior look and feel for Customers, which calms the mind and comforts the body.

THE FLOWER OF SERVICE
The core service of an airline is the service of transport. The supplementary services are classified into eight clusters & each one is analyzed with respect to the airline industry: Information This aspect of supplementary service is common for every person that needs information about the organization. In case of airline industry, upto date information regarding flight schedules, ticket fares, information about promotion schemes etc available to customers. Customers can avail of this information literally at their fingertips today with every airline starting its own website which gives complete details to the customer & also entertains queries.

It also includes providing information to employees regarding new policies affecting the airline & equipping them with enough information, which the customers might demand. Extensive training is provided to in-flight attendants regarding handling customer queries, knowledge about the airplane itself, knowledge about cuisine etc.

Consultation This aspect of supplementary services can be customized according to the needs of the customer. It is more in the case of people processing and high personnel-contact services. Airlines are moving more actively into the role of consultant today. They are doing away with the travel agents & designing & selling packaged tours to consumers directly. In this aspect they often act as consultants to the customer, by giving him advice & suggestions regarding the type of plan he can choose, the benefits he will get the mode of travel he should choose etc. Another aspect to consultation at airlines is when the customer approaches the airline regarding traveling to particular destination, the airline gives him a variety of choices of routes that he can take. In some cases airline may also design special menus & benefits in consultation with its frequent fliers by keeping in constant touch with them & asking them for suggestion as to what they want in their airline which will make their experience more comfortable. Order taking The order taking procedure is essentially the booking procedure of the airlines. The important aspect to be noted here is that the procedure is smooth, easily understood & fast. Reservation of airline tickets is now easy and reliable since it is fully computerized. There are 24 hours reservations. Passengers can specify their seat preferences at the time of reservation. Most airlines use the telephone, fax, and email methods of booking. The emphasis here is on fast booking & at the same time getting the required information form the customer. This is done by establishing a standard reservation procedure & format thus reducing the risk of inconsistent service delivery. The online booking system also facilitates better order taking & processing.

The scheduling aspect assumes importance as reservations on the wrong flight to the wrong place are likely to be unpopular. Hospitality & Caretaking With the increased competition today in the airline industry & the increasing similarity of services offered by each airline, hospitality has emerged as a key-differentiating factor between one airline & the other. The hospitality aspect of an airline is tested right form the time of the reservation (courtesy of the booking official) to the airline’s desk at the airport to the actual in-flight travel (the attitude of the flight attendants) to the post flight help extended. Safekeeping In airlines the safekeeping issue is that of safeguarding the customer’s baggage. Baggage allowances are offered about 30 kegs of check-in baggage is allowed. Passengers carrying international tickets are given further allowance of around an added 3Okgs Priority baggage delivery is offered to members. The customers entrust his baggage o the airline & it is the airline’s responsibility to keep it in a proper condition. Children and infants usually travel along with their parents and guardian. In case of unaccompanied minors, customer service staff renders all assistance like checking in and escorting up to the aircraft and handing over to the senior-most cabin attendant on board the flight. He is looked after on board the flight right upto the point flight reaches the destination and he is received by his guardian. Exceptions Special requests – airline very often receive special requests form customers with regards to meal preferences, special amenities for elderly

people or children., medical needs etc. these needs have to considered & acceded to wherever possible Handling of customer suggestions / complaints – every airline today has a customer service center which entertains customer suggestions & complaints. On the flight, customers are often asked for their opinion regarding service equality. Many corporate frequent travelers are consulted when the airline decides to make any new change. Billing & payment The billing procedure in airlines is simple. The options available to the customer are plenty including credit card & travelers cheque. Airlines use the open account system with their corporate clients. Frequent fliers are also given special payment privileges.

Quality Dimensions: RATER Analysis
Customers don’t 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. In the early 1970’s the strategy adopted generally by the service provides was: Work faster and more efficiently to reduce the costs. During the 1980’s and the early 1990’s: Improving the quality aspect rose as a major priority. This requires efforts to improve customer’s satisfaction by creating better service processes and outcomes. We are now seeing a growing emphasis on linking the two strategies in order to create better value for customers and the firm. Because of the intangibility and multifaceted nature of many services, it may be harder to evaluate the quality of a service than a good. Because the customers are often involved in the service production a distinction needs to be drawn between the process of service delivery and the actual output of the service. The most extensive research into service quality is strongly user oriented. Services are broadly classified into 10 dimensions namely: Tangibility Reliability







Responsiveness Competence Courtesy Credibility









Security Access Communication Understanding the customer







Since most of these dimensions are overlapping they were pooled down to five dimensions as given below:  Reliability Assurance Tangibles Empathy Responsiveness









When we look at these dimensions with respect to the airline industry we find that the following service qualities are expected by the customer.

 Reliability

– flights to promised destinations depart and o arrive on schedule

 Assurance employees  Tangibles  Empathy

– trusted name, good safety record, Competent – aircraft, ticketing counters, baggage area, uniforms – understanding of special individual needs,

anticipates customer needs  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 basicfacilities like: some functional infrastructure provided to him, the flight leaving & taking off on time, the luggage reaching safely. ASSURANCE – Employees’ knowledge and courtesy and their ability to inspire trust and confidence Assurance relates to knowledge and accuracy of employees and their ability to convey trust and confidence. This dimension is of great significance for services where a customer perceives high risk and is not sure of the outcomes. The employees should have a positive morale & should

be motivated if they have to promote the firm & create a sense of assurance in the flyer’s 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 so that a little confidence in the consumer’s mind, the government paid greater emphasis on security in the aviation policy. This was a l l time they t r a v e l e d by a ir. people would f e e l s a f e n ex t

`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 seen by the customer. These would be the physical proofs, which would help the customer to judge the quality of service. The customers evaluate the quality of these services on the basis of the tangibles provided by the service providers. The intangibles. Incase of the airline it’d be the aircraft that the airline uses, how old they are, and 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 service provider. The kind of skilled staff that they have marketers of services emphasize on tangiblising the

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 aircraft’s which doesn’t 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, making 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 is willingness to help the customers and provide

prompt service 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. Incase, a certain passenger doesn’t like a certain meal served on the plane, the cabin crew should be in a position to offer him an alternative meal in little time, as his perception or opinion of the airline company would mainly depend upon whether he goes satisfied on this complaint or not. Care should be taken that prompt response and top quality service is provided to satisfy all of the customer’s needs.

SERVQUAL
It is based on the premise that customers can evaluate a firm’s service quality by comparing their perceptions of its service with their expectations. It is seen as a generic measurement tool that can be applied to the airline industry very prominently.

Airlines Criteria SERIVCE Courtesy Speed Facility Accuracy Comfortability

Indian Airlines

Air India

Jet Airways

Sahara Airlines

Air Deccan

        

        

        

        

        

FOOD Appearance Taste Quantity PROCEDURE Tickets Service

Guidance Security Check Baggage Handling CLEANLINESS Outside(Airpor ts) Aircrafts Toilets

        
Good

        
O.K.

        
Bad

       

       

Value MONEY Overall Experience

for

Factors influencing Service Sector
Product It includes the core product services) along that with up the additional with

benefits, ‘Supplements’ the product Sales activity (value added bundle together

By sales activity we mean the message that the company sends out through its advertising and promotion campaigns. Sales activity also includes the way in which the company monitors its sales intermediaries and the attitude that it projects towards its customers. After Sales Service After sales service forms a very important part in customer satisfaction towards the company. The company has to be very efficient in complaint handling, should seek a time-to-time feedback on its services from its customers and act promptly if there are any flaws. The company should also inform the customer about new offers and schemes as and when they come into existence. Culture Culture forms a significant part of customer satisfaction. If the customer can relate to a particular culture projected by the company, then his level of satisfaction would be far higher than if the company projects a hostile environment perception. Basically to the customer’s culture comprises company

of all intrinsic values and beliefs as well as tangible and intangible symbols that it uses to instill these values into employee behavior at all times.

SERVICE ENCOUNTER
The interaction between the customer and service provider in the airline industry means that the employee often represents the company to the airline travelers (customers). Especially in the airline industry the service encounter comes plays a significant role because here the customer in direct contact with the employees of the airline company and

spends a lot of time in the service factory (the aircraft). Hence the issue of staff presentation is a major tangible factor in the airline industry. This in turn influences the satisfaction level of the customer.

The airline company’s organizational structure and culture dictates the extent to which responsibility for staff recruitment, training and motivation is shared b e t w e e n m a r ke t i n g operations and interaction between those providing services human re s o u rc e s . and the customer For is service marketers in this industry, the core of service element is the known as service encounter. The airline sector is considered under the high contact services as the customer is in continuous direct contact with the companies personnel.

MOMENTS OF TRUTH
A moment of truth exists when a customer comes into contact with the organization. At every point of contact, he experiences the service and makes an evaluation about it being good or bad. That is the moment, which creates satisfaction, is dissatisfaction. That is a moment when a problem may occur. If a problem doesn’t occur and the problem passes off as expected, there is no dissatisfaction. That perception Jan of is also the moment when the experience could be very different than from what was expected, resulting in a intense delight and the expression of ‘wow’. That is the president of Scandinavian moments Airlines, is credited took over with as defining moment of reality. Carlzon, originating the concept of of truth. Carlzon

president

when

the airline

had

lost

30

million

dollars

in

the

two

previous years. In his single- minded focus for becoming the best airline of the frequent business traveler in Europe, he determined that the first 15second encounter between a passenger (Customer) and his front-line people (employees) set the tone or image of the entire company in the mind of that customer. Thus, each encounter with a customer is a moment of truth. Carlzon carefully reviewed every step of the customer contact process, and identified 5 critical times when the airline interacted with For airlines, they are:  Making a reservation  Getting tickets  Boarding  Flying  Retrieving baggage the customer. He called these 5 points of contact

"the Moments of Truth," and they work for any business.

CRITICAL INCIDENTS
Critical incidents are specific encounters between customers and service employees that are especially satisfying or dissatisfying for one or both parties. In the airline industry critical incidents are very important satisfaction encounters. as they level help of the company evaluate and measure the customers. The critical incident technique is a

methodology for collecting and categorizing such incidents in service

SERVICE GAP
A service firm may win b y delivering consistently h i g h e r quality service expectations. experiences, service. If than competitors mouth and exceeding by with customer’s their the past These expectations a re word o f the formed

and advertisement. After receiving the expected service falls below the expected

service customers compare the perceived service perceived service

customers lose interest in the provider. If the perceived service meets or exceeds the expectations they are apt to use the provider again. The model shown identifies 5 gaps that cause unsuccessful delivery in the airline industry. Check NOTES for Diagram 1) Gap between consumer expectation does to not and always management company other way. 2) Gap between management Management Air India perception and service might who correctly quality the might perception: perceive its Management target

perceive correctly what customers want. In the airline industry, the customers be ambience driven and not price driven but in reality it might turn out to be the

specification: company like

perceive

customers wants but not set a specified performance standards. A thoroughly understands what its customers want but due to external factors like lack of resources and the fact that it is a government run organization due to which there is a lot of political interference restricting the company from performing at its best. 3) Gap between service-quality specifications and service

delivery: The personnel might be poorly trained or incapable or unwilling to meet the standards. Or they may be held to conflicting standards such as taking time to listen to customers and serving them fast. This had happened in the case of Air India during the SARS outbreak

where the pilots refused to fly on the last moment after the flights had been declared scheduled. 4) Gap between service delivery and external communications: Consumer expectations company are affected by statements made by representatives and ads. Air India boasts in its hoarding

advertisements about the companion of the customer flying free i.e. buy 1 and get 1 free but it is only applicable for 5) 1st class passengers which is no where mentioned and there are many such examples or campaigns that can be mentioned about. 6) Gap between perceived service and expected service: This gap occurs when the consumer misperceives the service quality. This is a combination of one or more of the previous gaps and provides a clear indication of the degree of which service quality exists in the service organizations.

BLUE PRINTING
Blue printing is a technique which is used to portray an existing service situation and provides a useful tool to assess and identify service evidence opportunities. customers and employees The process of service delivery, the role of and the visible elements of the service

are simultaneously displayed by the service map.

Blue Print of a typical Indian Airline company Such a blue print provides 2 additional features to add to the

management information. 1. provides greater attention to customer interaction;

2. Provides a visual representation of the structure of the service. However, this blueprint is of a typical Indian airline company which has many loopholes. It starts right from reservation, wherein even obtaining of tickets takes a lot of time due to manipulation by agents. Even after arriving at the airport most of the Indian airline companies do not direct their customers properly creating a lot of confusion especially for first time fliers, and faces indirectly increases the lead time for service delivery. At the time of service delivery in the service factory the customer problems tackling nuisance from other customers, poor quality of food etc. To add to this, most Indian airline companies do not take feedback from their customers, which is one of the vital elements of effective service marketing. communications. Verbal may include direct interaction with the on flight crew, on ground employees and call centre representatives who interact with the customers while giving them necessary details. Non-verbal may include feedback forms at the airports and business reply cards sent directly to the customer’s residence or office. It is important for airline companies to encourage customer feedback because only 5% of the customers come up with complaints on their own and the ones who don’t complain just decide that the service provider is not worthy of further patronage. Airline companies must encourage customers to give feedback through verbal and non-verbal

ZONE OF TOLERANCE
The nature of of services the same makes consistent and delivery by the difficult same across employees company even

employee from one day to another. The extent to which customers are willing to accept this variation is called the zone of tolerance. It can increase or decrease for individual customers depending on factors such as competition, price or service attributes. In the airline industry, the customer expects a minimum level of service below which he is dissatisfied with the service provided by the airline company. This includes easy availability of tickets, quick information about rescheduling of fights or any other immediate changes made, clean aircrafts, hygienic food, safe keeping of baggage and adequate safety measures (oxygen masks, parachutes) in case of an emergency. Many a times a customer desires a particular level of service for complete satisfaction especially in those cases where he/she pays a high premium for it. This includes on time service, customized food service, additional supplementary tangibles such as teddy bears for children, shaving kits for men etc., on-board auction (conducted by Air Sahara) to keep the customer interested, transport service from the airport to the final destination of the customer etc. This gap between the desired and the minimum level of service is known as ‘the zone of tolerance’. When a customer pays a high premium i.e. first class passenger, he definitely expects the best service possible and in such a case the zone of tolerance flows from top to bottom. In this case the zone of tolerance will be at a higher par than that of an economic class traveler. If the service delivered is below the minimum level of expectation then the customer will be dissatisfied and he is likely to move to other air carriers for his traveling needs and may even spread a bad word of mouth. On the other same. hand if the delivered service surpasses the zone of tolerance, the customer will be delighted and will praise the company for the

Service Recovery
When the company fails to stand for its promises made to the customer on the basis they build expectation, it’s to be said that there is service failure. When the service failure occurs, there can be again severe ramification. Customer is considered to be the bread and butter, hence retaining them is the biggest challenge, and however service failure acts as an obstacle to it. In such failures, 1) The customer wants what they were promised. 2) Customer wants personal attention 3) Customer wants a decent apology 4) Customers want that they should not be made to feel that they are the cause of the problem. (Though in many cases they are responsible for nuisance) There are again five steps involved in order to deal with service failure. They are mentioned as below 1st step: acknowledgement and apology for the fact. 2nd step: listening to the customers. 3rd step: avoid defending the company and offer a rational explanation. 4th step: offer some extra benefits 5th step: have a proper follow up and make sure no mistakes this time, so that he can easily forget about the service failure and is retained. (Example covered while presentation)

A customer expects 3 shorts of fairness in case of service recovery. They are mentioned as below. 1. Interaction fairness: - when there is service failure, first the company

is supposed to acknowledge the customer. Due to this the customer might turn erate, but he still expects fairness and courtesy in the language and tone used by the addresser 2. Procedure fairness: - to know in detail about the incidence of service failure simplicity concern. 3. Outcome fairness: - now when the company realizes that there is service failure they should end up compensating, arranging for some alternative mode of transporting or complies with the customer condition. The outcome should be taken by considering the customer, his needs and the company’s policy. or to avail the compensation. There should be in procedure, which is involved. Service failure and complexity in

procedure both together might result in a disaster as far as customer is

Complain Handling
Handling complaints is a big challenge for every company today. Before understanding how to handle, let us see what are the factors, which can result in customer’s complaints The Fish-Bone diagram for the Airline Industry The best airlines cannot have 100 % security as far as complaints are concerned. Whatever the airlines does, the customer who feels that they are not treated properly are going to complain. In dealing such situation, it is important to know how to diffuse them and turn them into positive experience for all involved. People complain In airlines because they have received service below tolerance zone.

generally complaints are regarding weight penalties, no attention from the front office, no guidance by the crew member on the flight, flight delay, bad quality of food and so on. If these complaints are not resolved to the satisfaction of the customer there can be serious ramifications. In particularly, the customer is likely to convey about the bad service to other people. But if the things are done well, there also positive ramifications. It has been observed that those customers who have had problems and proper solution are provided, are the most loyal customers of the company. Employees play a vital role in handling these complaints. There are ten steps involved in handling complaints effectively. mentioned below. 1) 2) 3) The frontline employee handling complaints should stay calm under any circumstances. Let the customer get the story off their chest- do not interrupt, this will only cause irritation. In this case listening skills comes into picture. Avoid admitting any liability at this stage. The officer just need to show concern like, “I’m sorry for the inconvenience, let me see what I can do”. Give attention to the customer, make him feel important. 4) 5) Get facts by using question and try to find out the real and whole story behind it. After listening and collecting data, just identify appropriate action considering They are

company’s policy and customer’s expectation. 6) 7) Take action if you have authority or involve manager or concerned person. If corrective action cannot be taken immediately, tell the customer. It’s better to give bad news rather giving false news. 8) Record the a c t i o n t o b e taken and inform a n y on e else i n the

organization involved. 9) Look into the matter, provide a proper follow-up. This ten approaches if followed effectively, complaints can be handled properly and possibly a customer can be retained.

Union Budget Analysis 2004

Aviation In the previous budget, two new international The airports, one be at Bangalore and developed through recently signed the o t h e r at H y d e r a b a d private participation. the were p ro p o s e d t o Bangalore airport has

airport been

a concession agreement and is expected to start its Hyderabad

operations by 2007. The scale of

reduced from 10 million-passenger capacity to 5 million. Also, the project cost has been trimmed to Rs.12 billion in the first phase. Bids for privatization of the Mumbai and Delhi airports have been invited. However, the AAI staff has come out strongly against the privatization move. We expect the privatization to be on track soon. Other infrastructure The AAI has earmarked Rs.54 billion for upgradation of airports, which would provide a major fillip to the aviation industry. Air traffic in the domestic sector has increased by 9.3 per cent for the nine months ended December 2003 against the same period last year, on account of lower airfare and higher connectivity. The government’s commitment to provide equity and debt support to PSEs in select infrastructure sectors, including aviation, will also benefit the sector. The aviation sector will also benefit from the rise in FDI levels from 40 per cent to 49 per cent. The imposition of service tax on airport service would not impact the airfares, as the impact on cost for airlines would be less than 0.5 per cent (airport services contribute less than 5 per cent of the overall cost of an airline). The withdrawal of exemption on payments made by an Indian company to acquire an aircraft, or an aircraft engine, on lease from a foreign state, or a foreign enterprise, will negatively impact airline companies, as most of the aircraft and aircraft engines used by airlines are leased. These exemptions will cease prospectively from September 1, 2004.

Conclusion
Marketing of airlines may not be on the same lines of those of other services, but it surely has borrowed in a lot from them and refined itself over the years and has become the point of study of many-a-marketers. Today marketers of airlines in India have got a wake-up call. They need to be very pro-active and act effectively & efficiently today if they want to survive even till the near future. The Indian aviation industry is totally shaken-up and is certainly in the lime-light. With the advent of a new kind of airline structure in India, they existing players have taken notice and are taking utmost measures possible to cut-out the competition even before it comes into being. The Government in India has to take many positive steps to make the industry much stronger than it is today. There are many issues with need to be to studied and corrected. Foremost, the existing airports need be modernized. The non-used airports need to have an increase in

air traffic. More money needs to be pumped into the airport infrastructure. There has to be massive reduction in the air turbine fuel charges. The airport charges too are among the highest in the world and have to be normalized. Apart from all this, the government should allow the industry to be as de-regulated as possible, strong on its own and has required today. In a few words, “What started as a Dream of two brothers about a century ago, Has enabled man-kind to do something which it can’t FLY HIGH!!” so that the industry becomes the competitive global advantage which is

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 White

Paper

on

‘India

Initiative:

Issues

in

Civil

Aviation’ by the World Travel and Tourism Council The Civil Aviation Act, 2000 (Draft)
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Businessline, Sept. 15, 2004
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1, 2004
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