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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 !resent themselves as threats. "or this reason, some say that #!est# is an a!!ro!riate term for these factors. $et us loo% at the PEST analysis of the Indian aviation sector: Political Factors In India, one can never over-loo% the !olitical factors &hich influence each and every industry existing in the country. $i%e it or not, the !olitical interference has to be !resent every&here. 'iven belo& are a fe& of the !olitical factors &ith res!ect to the airline industry: o The airline industry is very susce!tible to changes in the !olitical environment as it has a great bearing on the travel habits of its customers. An unstable !olitical environment causes uncertainty in the minds of the air travellers, regarding travelling to a !articular country. o (verall India)s recent !olitical environment has been largely unstable due to international events * continued tension &ith Pa%istan. o The recent 'u+arat riots * the government)s inability to control the situation have also led to an increase in the instability of the !olitical arena.

o The most significant !olitical event ho&ever has been Se!tember ,,. The events occurring on Se!tember had s!ecial significance for the airline industry since air!lanes &ere involved. The immediate results &ere a huge dro! in air traffic due to safety * security concerns of the !eo!le. o International airlines are greatly affected by trade relations that their country has &ith others. -nless governments of the t&o countries trade &ith each other, there could be restrictions of flying into !articular area leading to a loss of !otential air traffic .e.g. Pa%istan * India/ o Another as!ect is that in countries &ith high corru!tion levels li%e India, bribes have to be !aid for every !ermit * license re0uired. Therefore constant liasoning &ith the minister * other government official is necessary. The state o&ned airlines suffer the maximum from this !roblem. These airlines have to ma%e several s!ecial considerations &ith res!ect to selection of routes, free seats to ministers, etc &hich a !rivately o&ned airline need not do. The state o&ned airlines also suffers from archaic la&s a!!lying only to them such as the retirement age of the !ursers * hostesses, the labour regulations &hich ma%e the management less flexible in ta%ing decision due to the !resence of a strong union, * the heavy control *interference of the government. This affects the 0uality of the service delivery * therefore these airlines shave to thin% of innovative service mar%eting ideas to circumvent their !roblems * com!ete &ith the !rivate o!erators. Economic Factors

1usiness cycles have a &ide reaching im!act on the airline industry. 2uring recession, airline is considered a luxury * therefore s!ending on air travel is cut &hich leads to reduce !rices. 2uring !ros!erity !hase !eo!le indulge themselves in travel * !rices increase. After the Se!tember ,, incidents, the &orld economy !lunged into global recession due to the de!ressed 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 o!erational costs not only due to lo& demand but also due to higher insurance costs, &hich increased after the 3T4 bombing. This !rom!ted the industry to lay off em!loyees, &hich further fuelled the recession as s!ending decreased due to the rise in unem!loyment. Even the SA5S outbrea% in the "ar East &as a ma+or cause for slum! in the airline industry. Even the Indian carriers li%e Air India &as dee!ly affected as many flights &ere cancelled due to internal .em!loyee relations/ as &ell as external !roblems, &hich has been discussed later. Social Factors The changing travel habits of !eo!le have very &ide im!lications for the airline industry. In a country li%e India, there are !eo!le from varied income grou!s. The airlines have to recogni6e these individuals and should serve them accordingly. Air India needs to focus on their clientele &hich are

mostly lo& income clients * their habits in order to %ee! them satisfied. The destination, %ind of food etc all has to be chosen carefully in accordance &ith the tastes of their ma+or clientele. Es!ecially, since India is a land of extremes there are !eo!le from various religions and castes and every individual travelling by the airline &ould ex!ect customi6ation to the greatest !ossible extent. "or e.g. A 7ain &ould be satisfied &ith the service only if he is served +ain food and it should be %e!t in mind that the customers next to him are also +ain or at least vegetarian. Another good exam!le &ould be the case of South West Airlines &hich occu!ies a solid !osition in the minds of the -S air travelers as a reliable and convenient, fun, lo& fare, and no frills airline. The ma+or element of its success &as the augmented mar%eting mix &hich it used very effectively. 3hat South 3est did &as it made the environment inside the !lane very consumer friendly. The cre& neither has any uniform nor does it serve any lavish foods, &hich indirectly reduces the costs and ma%es the consumers feel comfortable. Technological Factors The increasing use of the Internet has !rovided many o!!ortunities to airlines. "or e.g. Air Sahara has introduced a service through the internet, &herein the unoccu!ied seats are auctioned one &ee% !rior to the de!arture. Air India also !rovides many internet based services to its customer such as online tic%et boo%ing, u!dated flight information * handling of customer com!laints.

-ST2A .-S trade * develo!ment association/ is funding a feasibility study and &or%sho!s for the Air!orts Authority of India as !art of a long-term effort to !romote Indian aviation infrastructure. The Authority is develo!ing modern communication, navigation, surveillance, and air traffic management systems for India s aviation sector that &ill hel! the country meet the ex!ected gro&th and demand for air !assenger and cargo service over the next decade. A !ro!osal for restructuring the existing air!orts at 2elhi, 8umbai, 4hennai and 9ol%ata through long-term lease to ma%e them &orld class is under consideration. This &ill hel! in attracting investments in im!roving the infrastructure and services at these air!orts. Setting u! of ne& international air!orts at 1angalore, :yderabad and 'oa &ith !rivate sector !artici!ation is also envisaged. A good exam!le of the im!act of technology &ould be that of AAI, &herein &ith the hel! of technology it has converted its obsolete and unused hangars into profit centers. AAI is no& leasing these hangars to international airlines and is earning huge !rofits out of it. AAI has also tried to utili6e s!ace that &as !reviously &asted 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 im!act on Air India as &ell. 1etter air!ort infrastructure, means better handling of air!lanes, &hich can hel! reduce maintenance cost. It also facilitates more flights to such destinations.

Segmentation: The Airline Industry

8ost airlines use a very traditional segmentation strategy, dividing !assengers into business travelers and economy travelers .mostly leisure travelers/. The common strategy is to s0uee6e as much !rofit as !ossible from business class !assengers &ho are attracted by su!erior services and corres!onding high !rices and, at the same time, to try and fill the rest of the seats and ensure gro&th by attracting economy class !assengers &ith lo&er fares. Business passengers They are crucial for airlines !rofitability. 3ith less s!are time and more cash in their !oc%ets, they agree to !ay a !remium !rice for a !remium service. Today business !assengers account for a!!roximately ;<= of !assengers, and these ;<= contribute >>= of airlines revenue. The !remium !rices they !ay !rovide &ider and more comfortable seats, better choice of meals and seats, luxurious lounges.

Airlines can choose from a multitude of !remium services to offer to business travelers. Some of these extras range from seats e0ui!!ed &ith faxes and tele!hones, to gambling machines, sho&ers, massage services and suit ironing services in the recently introduced arrival lounges. 1usiness !assengers believe it is &orth extra money if they can save time and arrive loo%ing fresh for an im!ortant meeting. 1usiness !assengers &ill avoid transit flights even if a longer flight could save them money. 1ut amongst other !er%s, flexible reservation services are !robably the most im!ortant to them. 5eservations for business tri!s are often made +ust a cou!le of days in advance. A no !enalty cancellation !olicy is also very im!ortant to business !assengers. The best &ay to reach business travelers is through !rinted advertising. 1usiness ne&s media, such as #The Economist# or #The 3all Street 7ournal# are some of the best !ublications through &hich airlines can reach business travelers. 8any airlines design s!ecial !romotional !rograms that target cor!orate boo%ers and meeting !lanners, &ho are res!onsible for business tri!s reservations. "re0uent flyer !rograms are an added bonus for business !assengers. Leisure Travelers They re!resent a totally different mar%et. The most im!ortant consideration for most of them is the !rice. The lo&er the airfare, the more !eo!le &ill fly the res!ective airline. 1y and large, &ith the exce!tion of &ealthy travelers, this segment &ill not !ay extra for !remium services and &ill agree to change several !lanes during their tri! if this o!tion costs less than a direct flight. 2es!ite lo&er margins !rovided by this segment, leisure travelers are very im!ortant to an airline s bottom line. Part of the reason is that

technological !rogress in the area of tele-conferencing and increased use of the internet for business communications is ex!ected to reduce the number of business travelers. Thus, airlines are counting on the leisure segment to !rovide further gro&th. :o& can airlines benefit from the gro&th o!!ortunities in the leisure segment &ithout losing immediate !rofit o!!ortunities in the business segment? This is a tough issue in airline mar%eting management. 1y im!roving services and reducing !rices for economy class !assengers, airlines ris% that some business !assengers &ill s&itch to economy class. This has already ha!!ened &ith 7a!an Airlines, for exam!le, &hich &as forced to eliminate business class seats on some of its flights. (n the other hand, if an airline focuses on business class !assengers, it ris%s losing its economy class !assengers to another airline. Since business class !assengers are not many, a com!any relying mostly on business travelers &ill often end u! flying half-em!ty !lanes, losing the !otential revenue generated by lo&er !riced economy seats. (n the other hand, fe& airlines catering solely to economy class !assengers can be successful because a lo& fare carrier must fill the entire !lane if it is to generate revenue from its lo&-margin o!erations. The allocation of business and economy class seats on a !lane is determined through a !rocess called yield management. A good yield manager %no&s the a!!roximate !ro!ortion of business and leisure travelers for each flight in advance, based on so!histicated statistical models. Thus he@she tries to sell early, the economy seats at a chea!er !rice, &hile %ee!ing enough seats reserved for business travelers, &ho usually boo% at the last minute. 9ee!ing +ust the right amount of business seats reserved is im!ortant: selling too fe& economy seats in advance may result

in a less-than-full !lane &hile selling too many economy seats may result in a full !lane, but &ith insufficient revenue to gain a !rofit. This %ind of segmentation serves airlines &ell enough &hen im!lemented &ithin one com!any. It &ould be very difficult for any single airline to target +ust one of these t&o segments - business or leisure successfully. There are exce!tions - small regions that serve destinations &here the ma+ors do not fly, for exam!le, are in a better !osition to im!lement a lo& !rice !olicy. They can even get business travelers to fly them des!ite the lac% of !remium services because no other airline &ould get them there. South&est is a classic exam!le, !roving that lo& cost carriers can thrive. 8a+or international carriers, ho&ever, need to target both the business and the leisure segments they may also target different ethnic and geogra!hical segments differently, de!ending on the mar%ets from &hich they dra& the ma+ority of their customers. "or exam!le, even though 7a!an Airlines advertise extensively to the American !ublic, their message -#Aour needs. Aour Airline,# seems to &or% best for the traditional 7a!anese audience. Inside one country, t&o national carriers may also focus on different destinations, &hich is the case &ith 4anadian Airlines and Air 4anada. Passengers tastes determine airlines strategies. 3hile 1ritish Air&ays focuses on comfort and luxury, valued by Euro!ean !assengers, Air 4anada e0ui!s its business class seats &ith !lugs for la!to!s and tele!hones, a!!reciated by Borth American business travelers. verall! airlines seem to achieve "est results #hen they su"scri"e to the segmentation theory! supported "y yield management techni$ues

and a careful monitoring of the economic changes in their geographical mar%ets.

Product &i'

'etting the !roduct right is the single most im!ortant activity of mar%eting. If the !roduct isn t &hat the mar%et &ants, no amount of !rice

ad+ustment or brilliant !romotion &ill encourage consumers to buy it. The airline !roduct is 0uite a com!lex one since it com!rises of a service of incor!orating the tem!orary user of airline seat and certain tangible !roducts such as free flight bags or a free bottle of duty free s!irit to encourage boo%ing. The airline !roduct includes of t&o ty!es of services: ,. on the ground services, C. In-flight services. The on-the-ground services include a convenient air!ort &ith car !ar%ing facilities, duty free sho!!ing 0uic% and efficient chec%ing of baggage, efficient service at reservation counter, trans!ort to the air!ort, etc. The service !rovided inside is intangible and is highly variable. The airhostesses are trained to !rovide !olite, &arm and courteous service. The courteous service that the re!resentatives at the baggage counter, reservation counter !rovide goes a long &ay in develo!ing customer loyalty. The travel agents of the airlines also need to be efficient and !olite. (ifferentiating the Product It is im!ortant to recogni6e that &hat the consumers are demanding are not !roducts, or features of !roducts but the benefits they offer. Producing added benefits thus hel!s the mar%eter to distinguish one !roduct from another. 'ood design or style of service can form the basis of differentiation. This enables the com!any to create a !ersonality for its service. The design and decor of the aircraft !rovides o!!ortunities to !ersonali6e their !roduct as &ell as !eriodically to u!date them &hen

differentiation under IATA regulations &as virtually excluded, nonetheless, certain airlines &ere able to develo! distinct !ersonalities. Eagle Airlines created an entirely ne& mar%et bet&een Be& I Aor% and 1ermuda, for e.g. by develo!ing an image of a friendly airline distinctive from other airline serving the route. A similar style &as evident in 5ichard 1ranson s Dirgin Air&ays. ) *E P* (+)T A,( S+PPLE&E,TA*- SE*.I)ES 8any services !roducts consist of a bundle that includes a variety of service elements and even some !hysical goods. It is im!ortant to distinguish bet&een the core !roduct that the customer buys and the su!!lementary services that accom!any that !roduct. T/E FL 0E* Source: Christopher Lovelock pg. 2 The core service of an airline is the service of trans!ort. The su!!lementary services are classified into eight clusters * each one is analy6ed &ith res!ect to the airline industry: F SE*.I)E

4ore !roduct surrounded by clusters of su!!lementary services

Information This as!ect of su!!lementary service is common for every !erson that needs information about the organi6ation. In case of airline industry, u!to date information regarding flight schedules, tic%et fares, information about !romotion schemes etc available to customers.

4ustomers can avail of this information literally at their fingerti!s today &ith every airline starting its o&n &ebsite &hich gives com!lete details to the customer * also entertains 0ueries.

It also includes !roviding information to em!loyees regarding ne& !olicies affecting the airline * e0ui!!ing them &ith enough information, &hich the customers might demand. Extensive training is !rovided to inflight attendants regarding handling customer 0ueries, %no&ledge about the air!lane itself, %no&ledge about cuisine etc. )onsultation This as!ect of su!!lementary services can be customi6ed according to the needs of the customer. It is more in the case of !eo!le !rocessing and high !ersonnel-contact services. Airlines are moving more actively into the role of consultant today. They are doing a&ay &ith the travel agents * designing * selling !ac%aged tours to consumers directly. In this as!ect they often act as consultants to the customer, by giving him advice * suggestions regarding the ty!e of !lan he can choose, the benefits he &ill get the mode of travel he should choose etc. Another as!ect to consultation at airlines is &hen the customer a!!roaches the airline regarding traveling to !articular destination, the airline gives him a variety of choices of routes that he can ta%e.

In some cases airline may also design s!ecial menus * benefits in consultation &ith its fre0uent fliers by %ee!ing in constant touch &ith them * as%ing them for suggestion as to &hat they &ant in their airline &hich &ill ma%e their ex!erience more comfortable. rder ta%ing The order ta%ing !rocedure is essentially the boo%ing !rocedure of the airlines. The im!ortant as!ect to be noted here is that the !rocedure is smooth, easily understood * fast. 5eservation of airline tic%ets is no& easy and reliable since it is fully com!uteri6ed. There are C; hours reservations. Passengers can s!ecify their seat !references at the time of reservation. 8ost airlines use the tele!hone, fax, and email methods of boo%ing. The em!hasis here is on fast boo%ing * at the same time getting the re0uired information form the customer. This is done by establishing a standard reservation !rocedure * format thus reducing the ris% of inconsistent service delivery. The online boo%ing system also facilitates better order ta%ing * !rocessing. The scheduling as!ect assumes im!ortance as reservations on the &rong flight to the &rong !lace are li%ely to be un!o!ular. /ospitality 1 )areta%ing 3ith the increased com!etition today in the airline industry * the increasing similarity of services offered by each airline, hos!itality has emerged as a %ey-differentiating factor bet&een one airline * the other.

The hos!itality as!ect of an airline is tested right form the time of the reservation .courtesy of the boo%ing official/ to the airline)s des% at the air!ort to the actual in-flight travel .the attitude of the flight attendants/ to the !ost flight hel! extended. Safe%eeping In airlines the safe%ee!ing issue is that of safeguarding the customer)s baggage. 1aggage allo&ances are offered about EF %gs of chec%-in baggage is allo&ed. Passengers carrying international tic%ets are given further allo&ance of around an added E(%gs Priority baggage delivery is offered to members. The customers entrust his baggage o the airline * it is the airline)s res!onsibility to %ee! it in a !ro!er condition. 4hildren and infants usually travel along &ith their !arents and guardian. In case of unaccom!anied minors, customer service staff renders all assistance li%e chec%ing in and escorting u! to the aircraft and handing over to the senior-most cabin attendant on board the flight. :e is loo%ed after on board the flight right u!to the !oint flight reaches the destination and he is received by his guardian. E'ceptions S!ecial re0uests G airline very often receive s!ecial re0uests form customers &ith regards to meal !references, s!ecial amenities for elderly !eo!le or children., medical needs etc. these needs have to considered * acceded to &herever !ossible

:andling of customer suggestions @ com!laints G every airline today has a customer service center &hich entertains customer suggestions * com!laints. (n the flight, customers are often as%ed for their o!inion regarding service e0uality. 8any cor!orate fre0uent travelers are consulted &hen the airline decides to ma%e any ne& change. Billing 1 payment The billing !rocedure in airlines is sim!le. The o!tions available to the customer are !lenty including credit card * travelers che0ue. Airlines use the o!en account system &ith their cor!orate clients. "re0uent fliers are also given s!ecial !ayment !rivileges.


F P* (+)T

FI.E P* (+)T LE.ELS The )ore Service The core service of the airlines industry is to transport goods and services to various destinations. As the needs of the !eo!le increased the entire system became more organi6ed and formal. After this stage comes the various su!!lementary services.

The Supplementary Services The airline industry has many !layers they had a brand name li%e HAir India),) 7et Air&ays),) 1ritish Air&ays). All of them had some common services to offer li%e connecting flights, through chec%-in, tele chec% in, food on board, and com!lementary gifts etc. 2ifferent classes li%e economy class, business class &ere introduced. Air concessions are given to school students, old !eo!le etc. Singa!ore airlines &as the first to introduce small !"television screen for every !assenger. The freebies are actually &in-&in deals bet&een airlines and other services. Sahara, for exam!le, offers its !assengers a Hbusiness-!lan) on t&o&ay economy class tic%et, &hich includes a night)s stay &ith brea%fast, ST2 facility for E minutes and boardroom facility at the Par% :otel, Be& 2elhi. To 2elhi based fliers to 8umbai, it offers a night)s stay &ith

brea%fast, air!ort transfers and DIP amenities at The (rchid, 8umbai. "or business class, the !lan includes a stay at The $eela, &ith buffet brea%fast and late chec%out. All these added service hel!s the customer to decide u!on &hich airlines he &ants to travel. As com!etition increased and the customers &anted more the next !hase evolved and that is the augmented service. The Augmented Service This !hase is &here the customer)s ex!ectations are metI the service !roviders %e!t &or%ing on ne& methods to meet the ever-changing customers) demands. The !layers introduced online "oo%ing, &hich &as very convenient for the service users. 1ritish Air&ays business class has sho&ersI it)s more s!acious and comfortable. Sahara airlines offer its !assengers six different ty!es of cuisine li%e vegetarian, fat free, diabetic etc. They also have auction going on board. Dirgin airlines have gambling on board, they also have body massage to offer to their !assengers. Air Emirates has something called cab service, they have customi6ed !ic% u! and dro! cab service. This !hase is the most crucial oneI &ith increased com!etition service &ill become the final differentiation. Future Service As mentioned above the customer needs %ee! changing, the future is un%no&n. The customers may be loo%ing in for more fre0uent inex!ensive air travel, something li%e air taxis, su!er sonic s!eed. This decreases the time thus reducing the cost.

The diagrammatical re!resentation of the core and su!!lementary services in the airline industry is sho&n belo&:

) &F *T3 SPA)E






Price &i'

Price !lays as much a tool of mar%eting as !romotion !lays a critical role in the mar%eting mix. The conce!t of fair !rice is !aramount. 1uyers +udge &hether a !roduct is fairly !riced by seeing &hether it re!resents value for money. Pricing can be classified in three &ays. (I.ISI , F FA*ES:

The final fares charged to the !assengers include the follo&ing com!onents: 1asic fares Insurance Inland Aviation Travel Tax .IATT/. Passenger Service "ee .PS"/ The basic fares include the o!erating cost incurred by the airlines and the !rofit margin. The ma+or constituents of the o!erating cost in res!ect of domestic airlines in India are the Aviation Turbine "uel .AT"/ the basic ra& material for this service industry, varies EF-;F = de!ending on aircraft utili6ationI Bavigation, $anding * Par%ing costs J-,F=I 5e!air and 8aintenance ,E=, 8an!o&er ,C=I Ac0uisition@ 2e!reciation * Insurance ,E= and balance other ex!enses. /o# are fares arrived at4 3hen Airlines !ut in ca!acity .seats/ and fre0uency .flights/ bet&een any t&o !oints, they mar%et research the route in order to arrive at the total !otential for that segment. In other &ords, the ca!acity and fre0uency is

tailored to the si6e of the mar%et. Accordingly, the !ricing structure is also arrived at. Pricing or fare levels are arrived at after ta%ing into consideration various factorsI ty!e of aircraft, configuration of aircraft .number of seats/, density of route, com!etitor activity, and minimum brea%even cost. In order to achieve the brea%even seat factor and thereafter maximi6e loads, the airline embar%s u!on a serious of mar%eting activities. These &ill vary from a !ublicity cam!aign highlighting various facets of the Product, to sales, service, !unctuality, ideal de!arture 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 tic%et sales less costs incurred on the route.

0hy do fares fall4 3hen the yield dro!s or the seat factor falls, the airline is immediately alerted to en0uire into the causes for this. This leads to a fare &ar &herein the airline either tries to !rotect its mar%et share or res!onds to another airline &hich tries to increase its o&n mar%et share. The reasons for these can be multifarious.

,. It could be that the route is not !rofitable due to intrinsic reasons such as a very short haul route, or the !otential or total si6e of the mar%et for this route is too small to sustain a !rofitable flight or there is too much ca!acity de!loyed by various airlines on the route

C. Aields may also fall due to increase in costs. Then the airline has t&o o!tionsI increase fares to com!ensate for the increased costs. The second o!tion is, to dro! fares in order to increase the seat factor. .Increase in volume number &ith lo& fares can achieve brea%even cost/

E. It could be that the ty!e of aircraft de!loyed on the route is not suitable and hence is ma%ing cash loses.

;. Extraneous reasons also contribute to non-!rofitability of routes. The event of Se!tember ,,, CFF, is an instant exam!le &herein !assengers sim!ly sto!!ed flying and several airlines &ent into ban%ru!tcy. Also !oor economic conditions lead to shrin%age of mar%et. Prices of fuel also fluctuate and can result in sudden increase in basic costs. Insurance !remiums have recently increased considerably, further adding to the burden.

K. A!art from the above. 4om!etitor activities can also lead to a dro! in mar%et share or dro! in yields. "or exam!le, the most 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.

5eduction in fares, a!art from the above reasons is also due to introduction of a more suitable aircraft, &hich is fuel efficient, modern, and &ith greater

seating ca!acity at lo&er cost. In other &ords reduction in fares is not al&ays due to negative factors but can be due to moderni6ation.

Pricing Strategies Premium Pricing: The airlines may set !rices above the mar%et !rice either to reflect the image of 0uality or the uni0ue status of the !roduct. The !roduct features are not shared by its com!etitors or the com!any itself may en+oy a strong re!utation that the brand image alone is sufficient to merit a !remium !rice. .alue for &oney Pricing: The intention here is to charge the average !rice for the !roduct and em!hasi6e that it re!resents excellent value for money at this !rice. This enables the airline to achieve good levels of !rofit on the basis of established re!utation. )heap .alue Pricing: The ob+ective here is to undercut the com!etition and !rice is used to trigger the !urchase immediately. -nit !rofits are lo&, but overall !rofits are achieved. Air India and Indian Airlines have slashed their !rices to meet the com!etition of !rivate airlines so that they can consolidate their !osition in the mar%et. Airlines usually !ractice differential pricing. There are three classes: The "irst 4lass, The Executive or 1usiness 4lass and The Economy 4lass.

"ares for each class are different since the facilities !rovided and the comfort and luxury level is different in each class. Seasonal fares are also fixed, fares rise during the !ea% holiday times. Lo#5cost Pricing: 3ith the advent of the lo&-cost airlines in the Indian aviation industry, a different lo&-cost flying conce!t has come u!. Since these lo&cost airlines are trying to &oo the customers by !roviding air travel in exce!tionally lo& !rices, a !rice-band %ind of !ricing has to be designed. In lo&-!ricing strategies, the airlines !rovide very lo& !rices for the flight tic%ets. Also, they !rices are made chea!er by boo%ing the tic%ets long before the flight date. APE6 Fares: In this scheme, !eo!le are given very chea! rates only if tic%ets are boo%ed atleast before the s!ecified time !eriod. 1ut the dra&-bac% here is that if the boo%ing is cancelled, a substantial amount of money is not returned.

+nion Budget Analysis 7889

Aviation In the !revious budget, t&o ne& international air!orts, one at 1angalore and the other at :yderabad &ere !ro!osed to be develo!ed through !rivate !artici!ation. The 1angalore air!ort recently signed a concession agreement and is ex!ected to start its o!erations by CFFJ. The scale of the :yderabad air!ort has been reduced from ,F million-!assenger ca!acity to K million. Also, the !ro+ect cost has been trimmed to 5s.,C billion in the first !hase. 1ids for !rivatisation of the 8umbai and 2elhi air!orts have been invited. :o&ever, the AAI staff has come out strongly against the !rivatisation move. 3e ex!ect the !rivatisation to be on trac% soon. ther infrastructure The AAI has earmar%ed 5s.K; billion for u!gradation of air!orts, &hich &ould !rovide a ma+or filli! to the aviation industry. Air traffic in the domestic sector has increased by L.E !er cent for the nine months ended 2ecember CFFE against the same !eriod last year, on account of lo&er airfare and higher connectivity. The government)s commitment to !rovide e0uity and debt su!!ort to PSEs in select infrastructure sectors, including aviation, &ill also benefit the sector. The aviation sector &ill also benefit from the rise in "2I levels from ;F !er cent to ;L !er cent. The im!osition of service tax on air!ort service &ould not im!act the airfares, as the im!act on cost for airlines &ould be less than F.K !er cent .air!ort services

contribute less than K !er cent of the overall cost of an airline/. The &ithdra&al of exem!tion on !ayments made by an Indian com!any to ac0uire an aircraft, or an aircraft engine, on lease from a foreign state, or a foreign enter!rise, &ill negatively im!act airline com!anies, as most of the aircraft and aircraft engines used by airlines are leased. These exem!tions &ill cease !ros!ectively from Se!tember ,, CFF;.


8ar%eting of airlines may not be on the same lines of those of other services, but it surely has borro&ed in a lot from them and refined itself over the years and has become the !oint of study of many-a-mar%eters. Today mar%eters of airlines in India have got a &a%e-u! call. They need to be very !ro-active and act effectively * efficiently today if they &ant to survive even till the near future. The Indian aviation industry is totally sha%en-u! and is certainly in the lime-light. 3ith the advent of a ne& %ind of airline structure in India, they existing !layers have ta%en notice and are ta%ing utmost measures !ossible to cut-out the com!etition even before it comes into being. The 'overnment in India has to ta%e many !ositive ste!s to ma%e the industry much stronger than it is today. There are many issues &ith need to be studied and corrected. "oremost, the existing air!orts need to be moderni6ed. The non-used air!orts need to have an increase in air traffic. 8ore money needs to be !um!ed into the air!ort infrastructure. There has to be massive reduction in the air turbine fuel charges. The air!ort charges too are among the highest in the &orld and have to be normali6ed. A!art from all this, the government should allo& the industry to be as de-regulated as !ossible, so that the industry becomes strong on its o&n and has the com!etitive global advantage &hich is re0uired today.

Air Sahara launches family fare scheme #ur Corporate $ureau %arch 2&&' ,e# (elhi: As a !art of its strategy to attract more air travellers, Air Sahara yesterday launched a ne& scheme lin%ed &ith its bul% tic%eting !rogrammes li%e the Sixer and S0uare 2rive to encourage families to travel &ith fre0uent flyers. As a !art of this scheme, along &ith the Sixer and S0uare 2rive schemes, !assengers can buy additional tic%ets for family members for as little as 5sC,KFF. #Almost all the schemes so far have focused on the individual flier. This time &e have come out &ith the fly-your-family scheme to attract family members,# 5ono 2utta, chief executive, Air Sahara, said here. 3ith the ne& !rogramme, Air Sahara ex!ects to target both individual and business travellers. -nder the Sixer scheme, a !assenger has to buy six tic%ets for 5sE>,FFF or four tic%ets under S0uare 2rive for 5s C>,KFF. As !er the ne& scheme, one can avail of tic%ets for family members by !aying an additional 5s,K,FFF for six cou!ons or 5s,F,FFF for four cou!ons, along &ith the t&o schemes. #So a tic%et for a family member costs only 5sC,KFF for a domestic destination. The only condition is that they &ill have to travel together,# 2utta said. A maximum of three family members !lus the original traveller under the t&o schemes &ill be allo&ed to fly under the ne& scheme, named Sixer-inthe-Air.

$o& cost, frills chic %ohini $hatnagar ( )ebruary 2&&' 2ingfisher Airlines promises a ne# :high: ; economy fares on frills5filled flights. 9ingfisher Airlines .9A$/, !romoted by maveric% li0uor baron, Di+ay 8allya, chairman, -nited 1re&eries, is taxiing on the run&ay. Scheduled to ta%e off on 8ay J, CFFK, the birthday of 8allya s ,<-year old son, Siddharth, 9A$ has already signed contracts &ith Airbus Industries, to ac0uire ,F A-ECF aircraft on firm order &ith o!tions to buy another CF until CFF<. A!art from these aircraft, &hich come at a combined !rice tag of u! to M,.< billion or 5s <,,FF crore, the airline &ill lease four A-ECF aircraft. The ac0uisition of the ne& aircraft is over and above the four leased aircrafts for &hich the com!any has already signed agreement. 2eliveries of the leased aircraft are due to begin in A!ril this year, &hile those of the ordered aircraft &ill start in Se!tember FK. All the aircraft &ill be !o&ered by International Aero Engines DCKFFs. In that sense, 9A$ has ta%en a lead over lo&-cost airline Air 2eccan, &hose A ECF aircraft are arriving later. :o&ever, 9A$ !romises to be different from Air 2eccan in many &ays. "or starters it &ill not com!ete &ith Air 2eccan in fares. 8allya !romises to offer fares that are about CK !er cent lo&er than those of 7et Air&ays, but &ith some frills. Thus the airline &ill not have the traditional first, business or economy class seating. Instead, the entire aircraft &ill com!rise a single cabin, dubbed "unliners. Each of the AECFs &ill seat ,J; !assengers in the single cabin and, for the first time in the country, !ersonal video screens &ill be fitted in the bac% of each seat. The seats &ill also be an inch &ider than the economy class seats in other airlines.

Airbus AECF family is the ac%no&ledged technological leader in the singleaisle class, &ith advanced features such as fuel-saving &ingti! fences, &eight-saving com!osites, and the reliability that comes from its modern design and ease of maintenance. It also consistently leads in inde!endent !assenger and o!erator surveys. Says 8allya, #3e are offering our !assengers more than +ust value-based fares, &e &ill offer a com!lete lifestyle ex!erience.# According to him, 9ingfisher s lo& cost translates into a cost efficient airline &ith the lo&est seat mile cost in the industry, ex!ected to to be achieved through online reservations and outsourcing of services &ithout com!romising 0uality and safety. "or 9A$, lo& costs mean no elaborate meals on board and no !a!er tic%ets, though the interiors &ill be aesthetic and classy and, if 8allya is to be believed, the airline &ould have fashion models as in-flight attendants to ma%e flying 9ingfisher a more memorable ex!erience. In the !ast fe& years, stiff com!etition in the mar%et!lace has led to a number of com!anies in the -S and Euro!e offering u!mar%et !roducts and services at no frill !rices also called masstige or no frills chic !roducts. -S airlines li%e 7et1lue and Song are cases in !oint as they !rovide &ide, all-leather seats, free TD &ith C; channels, ,FF audio channels and !ay-!ervie& movies. According to 8allya, 7et1lue and Song are the ins!irations behind 9A$ more than the lo& cost, no frills 5yan Air and -9 s Dirgin Air. Though 8allya is reasonably u!beat about the future of 9ingfisher Airlines and !lans to offer flights to Singa!ore and 8alaysia, the government has allo&ed only airlines &ith five years flying ex!erience to fly abroad, &hich may be detrimental to the airline in the long run. Also, the fact that 9ingfisher Airlines &ill not be significantly chea!er than Indian Airlines or 7et Air&ays may not exactly &or% in its favour, not&ithstanding fashion models and individual videos. :o&ever, &hat &ill &or% for it is the fact that air travel in India is gro&ing at CK !er cent !er annum and there is !lace in the domestic mar%et for at

least t&o more carriers. 8oreover, since the airline is going in for only ne& aircraft, 9ingfisher &ill have the youngest fleet in the &orld till mid-CFFJ, &hich could &or% in its favour later. Airlines get fancy-free %ohini $hatnagar ' *ugust 2&&+ Than%s to Air (eccan! other airlines find that it pays to drop fares At the rate at &hich airlines are slashing fares, a time may soon come &hen $alu Aadav s rail&ay ministry &on t matter much. The credit for triggering this !rice offensive goes to Air 2eccan, &hich commenced o!erations less than a year ago &ith t&o ;<seater aircraft, obtained on dry lease from the "rench-based aviation ma+or AT5. Ins!ired by the Irish carrier 5yan Air, Air 2eccan offers airfares as lo& as 5s KFF !lus taxes on the 8umbai-2elhi sector. 3hile one has to boo% a seat three months in advance to avail of this roc%bottom fare, Air 2eccan s normal fares are much lo&er than &hat !assengers are used to !aying for air travel on 7et Air&ays, Indian Airlines or Air Sahara. All this is !ossible on Air 2eccan because it is a no frills airline , meaning that the airline has cut out all the add-on costs of travel and focuses on getting !eo!le from one location to another safely. Thus frills li%e meals, attendants and air!ort lounges among others have been done a&ay &ith. Instead, additional seats to carry as many extra !assengers as !ossible, have been added. "or instance, by not serving &arm meals, the s!ace occu!ied by the aircrafts !antry area and inflight service trolleys is used for seating additional !assengers. The best !art of it is that all this is not at the cost of safety. The carrier uses the standard Airbus aircraft currently being used by Indian Airlines and 7et Air&ays. Air 2eccan has already ta%en three state-of-the-art ,<F-seater Airbus-ECF +ets on dry lease of &hich one has already landed.

3hat is ma%ing things easier for Air 2eccan is that states li%e Andhra Pradesh and 9arnata%a have announced a reduction in sales tax for no frills regional airlines to im!rove air connectivity in those states. 3hile Andhra has com!letely abolished sales tax, 9arnata%a has reduced it from CK !er cent to +ust ; !er cent. "ollo&ing the enthusiastic res!onse to Air 2eccan s announcement from the traveling !ublic a number of other lo& cost airlines have a!!lied for licences. These include Aamuna Air&ays, Indus Air, -1 grou! s 9ingfisher Airline, Busli 3adia s .of 1ombay 2yeing/ no frills airline, and Arab Ex!ress. The last &ill o!erate bet&een India and the 'ulf region only. -1 for instance has signed a deal &ith the Euro!ean aircraft ma%er Airbus Industrie to !urchase four !lanes and an o!tion to buy eight more to boost the 9ingfisher Airline fleet. All this seems to have sent the leading domestic carriers N Indian Airlines, 7et Air&ays and Air Sahara into a ti66y and each airline is no& going all out to ensure they it doesn t lose out to the ne& lo&-cost airlines N or to each other. Bo& it seems a lot de!ends on &ho gets there first. Indian Airlines has announced that !assengers flying bet&een t&o metros need !ay only an extra 5s,,FFF to ta%e a connecting flight to a smaller city. Indian Airlines officials say the scheme is aimed at ta!!ing air travel demand among those living in smaller to&ns and cities, &ho usually o!t for road or rail&ay travel. Air Sahara no& !lans to increase the fre0uency of its flights to the interiors of the country by KF to >F !er cent this year. The airline &ill also introduce the hub-and-s!o%e system, &ith metros as hubs. Passengers traveling from one metro to another and then on to a small to&n could !ay the standard fare on the metro leg of the +ourney, but a lo&er fare to the small to&n. The airlines are also &or%ing on u!grading their fre0uent fliers !rogrammes .""P/. 7et Air&ays has u!graded its ""P and is focusing on its yieldmanagement strategy. The airline is see%ing to lure !assengers &ho fly less fre0uently. -nder this scheme, seats that are not occu!ied on a flight, &ill be

offered at lo&er rates. Indian Airlines has revised its fre0uent flier !rogramme to enable those &ith even a single boarding !ass &ith a single boarding !ass. Indian Airlines fre0uent flyer club earlier had a 5s,,FFF enrollment fee &hich gave &ay to the three boarding !ass norm and no& +ust a single boarding !ass 0ualifies travelers to enter the fre0uent flyer club. The Indian Airlines ""P has been merged &ith Air-India s !rogramme, &hich &ill allo& international !assengers to earn mileage !oints. If you fly Indian Airlines, you ll get Air-India mileage !oints, though the offer is valid only till Se!tember, this year. Air Sahara is also !lanning to launch a dynamic fare model. -nder this model, fares &ill be based on the daily mar%et demand. In short, Air Sahara, too, &ill sell vacant seats at lo&er fares. The established airlines %no&ing they can t fight the lo&-cost carriers in terms of !rice are em!hasising the coverage and service !art of flying. The price #ar :o&ever, Air Sahara, &hich has al&ays been 0uic% to react on the fare front, last &ee%, announced its sur!rise fare !ac%age. The airline announced a reduction in fares by KL to >L !er cent on the busy revenue-earning metro routes lin%ing 8umbai, Be& 2elhi, 9ol%ata and 1angalore &ith the return air fare bet&een 2elhi and 8umbai being brought do&n >L !er cent to 5s ;,;;; N com!ared to 5s ;,;CF for air-conditioned rail travel along the same route. :o&ever, the !rices are sub+ect to the tic%ets being !urchased at least EF days in advance. #This initiative &ould give an o!!ortunity to the train traveller to o!t for air travel,# said Air Sahara !resident 5ono 7 2utta. The airline is also !lanning to launch a dynamic fare model that &ould fix fares bet&een various domestic destinations based on daily mar%et demand. Indian Airlines has announced a ne& a!ex fare slab for !urchase of tic%ets in eight sectors, C< days in advance N t&o days less than those offered by Air Sahara and 7et Air&ays.

The ne& 2-C< segment &ould be valid for travel on the 2elhi-8umbai, 2elhi-9ol%ata, 2elhi-:yderabad, 2elhi-1angalore, 2elhi-4hennai, 9ol%ata-8umbai, 9ol%ata-1angalore and 4hennai- 9ol%ata sectors. IA earlier had only t&o segments, 2-J .one &ee% advance/ and 2-C, .three &ee%s advance/, under the smart a!ex scheme. The 2-C< fares &ould be available for sale on one &ay or round tri!s as against round tri! fares offered by Air Sahara. :o&ever, the EF-day advance fare offered by Air Sahara is valid throughout the year, &hile IA s 2-C< fare is valid till (ctober ,K. Bot to be left behind, 7et Air&ays has announced the su!er a!ex monsoon fares and s!ecial monsoon !oint-to-!oint economy class fares and return excursion fares &hich are available on K> and C> sectors res!ectively. A !assenger availing himself of the 7et Air&ays !oint-to-!oint economy class fares can travel on the :yderabad-2elhi-4handigarh route .or in the return direction/ for 5sL,LFF or bet&een the 4hennai-2elhi-Patna sector .or in the return direction/ for 5s,,,L;F. Similarly, a !assenger travelling under the s!ecial monsoon economy class return excursion fare of 7et Air&ays on the 4hennai-2elhi-Daranasi can fly for 5sCC,,FF. -nder this scheme, the :yderabad-2elhi-7ammu sector .or return/ can be covered for 5s,<,CFF. The "iggest :P: of mar%eting Industry ex!erts say !rice remains the biggest !art of travel and even though Air 2eccan offers no frills it does offer television sho&s and recorded music to ma%e the +ourney !leasant. Also in a t&o-hour +ourney most travellers don t need more. Air 2eccan s fares are EF !er cent lo&er than those of the established carriers. So far most of the airline s o!erations are restricted to flights bet&een big metros and smaller cities, but the carrier !lans to ta%e on the ma+or !layers soon &ith ne& aircraft on the main routes connecting the ig metros. The airline has recently ta%en three Airbus ECF !lanes on lease to com!lement its fleet of seven "rench-made AT5 ;<-seater aircraft &ith

&hich it !lans to start o!erations on metros. Air 2eccan s, '5 'o!inath has said he !lans to %ee! cutting fares as the number of !assengers for his airline rises. It seems certain that IA 7et and Air Sahara &ould have to come u! &ith their o&n lo&-cost tic%ets and not +ust seasonal schemes to remain com!etitive. At !resent the three airlines together command the largest share of the domestic aviation mar%et but Air 2eccan !romises to start sni!!ing a&ay at their long held bastion. "or Indian travellers, no frills airlines are a bonan6a as flights to destinations abroad are often chea!er on foreign carriers than those &ithin the country on domestic airlines.

industry O aviation Economics of lo&-cost air travel Shubha %adhukar (, -uly 2&&+ perating on lo#5cost flying models! airlines can provide air travel at 98 to 9< per cent of the e'isting economy airfare Travelling by air is no longer a dream for many. Bot after Air 2eccan s bloc%buster announcement to offer 5s KFF air tic%et for the one hour KK minutes flight bet&een 2elhi and 8umbai. Sounds incredible? Pinch yourself. $o& cost, no frills air travel has arrived in India. In !ractical terms, this too good to be true offer may not last in !er!etuity, but air tic%ets at ;F to ;K !er cent of the existing economy airfare is not +ust feasible but realistic too as !roved by Air 2eccan. Its attractive !ricing has succeeded in broadening the air travellers

segment also. $o& cost, no-frills air travel emerged in the -S in the ,LJFs and s!read to Euro!e in ,LLFs. In Asia, it made inroads some three years ago led by 8alaysia s AirAsia. In India, the lo&-cost business model ha!!ened &ith Air 2eccan o!ening o!erations in south India. Already half a do6en business houses encouraged by Air 2eccan s a!!arent success and the government s !olicies to liberalise its aviation !olicy are all geared u! to set the Indian airs!ace bu66ing &ith activity. Among the lo& cost carriers &aiting to ta%e off are Di+ay 8allya s 9ingfisher Airlines, 8odiluft s 5oyal airlines and Air India s AirIndia Ex!ress. Air(ne and Disa to be run by grou!s of former Indian airlines !ilots are also in the offing. The latest entrant to the gro&ing number of !rivate investors is the 5s CKFF crore '85 'rou!. $o& cost carriers have been !ossible &ith a different set of economics. -narguably, the ma+or cost of flying is attributed to fuel, maintenance and salaries. In addition there are !ar%ing and landing charges as &ell, &hich are 0uite high. So ho& does Air 2eccan in India, 5yanAir in Euro!e and South&est Airlines in -S manage to sustain lo& cost carriers? :o& does a lo& cost model &or%? $o& cost carriers generally o!erate &ith only one %ind of aircraft in their fleet, such as Airbus ECFs or 1oeing JEJs, to lo&er the maintenance costs. There is no business class +ust economy classI this increases the number of seats !er flight. Ty!ically, they have 0uic% turn around time, &hich means higher aircraft utilisation, online tic%et reservation to save costs on commission to agents, reduction in flight services N no free meals, no ne&s!a!ers and no fre0uent flier !rogrammes either. There are no aerobridges or bus services to !ly !assengers to the aircraft. 3hat s more, many of them do not even !romise seat allocation. -sually the cre& si6e is also small: Air 2eccan o!erates &ith +ust one air hostess on board. $o& cost carriers manage to &ring more by lo&ering their fixed costs. Shorter hauls &ith smaller cre& means not +ust each aircraft being

airborne longer but also s!ending less on hangerage along &ith savings on hotel and layover allo&ances for the cre&. Trimming do&n the frills li%e no hot meals means no extra storage s!ace for food trolleys, &hich again is utilised to add more seats to the aircraft. Another source to manage lo& airfares is to sell advertising s!ace &ithin. Air 2eccan for instance, has the head rest s!ace o!en for advertising. 'lobally, lo&-cost airlines o!erate from secondary air!orts &here landing and !ar%ing charges are much lo&er. So in $ondon, a lo& cost carrier uses $uton air!ort instead of the :eathro&. In India ho&ever, there are no secondary air!orts and no cost advantage thereof. Bonetheless, to be on board a no-frills aircraft you need to brace yourself &ith minimal ex!ectation and a high degree of !atience. Above all, one needs to come out of the conce!t of mahara+a style luxury associated &ith air travel. Bo-frills for the traveller translates to lesser leg s!ace, no free meals and no smiling air hostesses. 1ut the value for money air traveller is not com!laining. In addition, it is also attracting to its fold many of the A4 II rail travellers &ho save hugely on time and don t mind !aying the !remium for the time thus saved. "or full service airlines though, it is a time to &orry as the no frills airlines are certainly ma%ing a dent into their mar%ets and !rofits. To ta%e u! the im!ending challenge, the full service airlines are also harnessing themselves. Air-India is set to launch a ne& subsidiary airline &ith CK !er cent lo&er fares to gulf and south east Asian countries in A!ril CFFK. Air Sahara also !lans to restructure and cut do&n on its o!erational costs so as to offer full service at chea!er tic%ets to domestic destinations and SAA54 and ASEAB countries. 8edia re!orts also say Air Arabia, a middle east based international carrier is %een to begin lo&-cost flights to India. The abundance of !rivate investors %een to set u! lo&-cost airlines is a !ositive signal. :o!efully, the government &ould relax the bundle of

taxes and liberalise the air s!ace to actually ma%e flying inex!ensive in India as it is in the -S and Euro!e. 'lobally, no-frills airlines hold CK !er cent of the mar%et share. 3hat !er cent &ill it hold &ithin India is still arguable and !remature to !redict but it certainly &ill &in the hearts of travellers &ith more choice and better !rices

The L)) Invasion5Part II 1hisham 8ansu%hani - 8umbai *fter the first phase of the Low Cost Invasion by *ir .eccan, /ingfisher, *ir0India 12press, *ir *rabia and Spice-et, the second phase is 3ust about to take off. 4he line up of new entrants includes Indi5o *irlines, 5o *irlines, 4iger *irways, %agic *ir, 6aramount *irways, 1ast 7est *irlines and many more. Express Travel & Tourism brings you an exclusive tete-atete with Rahul Bhatia 8Indi5o9, Jeh Wa ia 85o *irlines9 and Ton! "avis 84iger *irways9 who share their vision for this segment in India... 0e #ill adopt a travel agent first approach! follo#ed "y a #e"5"ased distri"ution model

/o# #ould you position Indi=o against other ne# L))s in the Indian mar%et4

*ahul Bhatia, 82, Inter'lobe Enter!rises, !romoter of Indi'o Airlines

Indi'o aims at becoming the next South&est. It is distinguished by the fact that its !arentage has a very strong aviation and services bac%ground. Is the order of a >88 aircraft a confirmed deal #ith Air"us4 0hat is the structure of the aircraft delivery4 3e have committed a firm order of ,FF aircraft to Airbus. 3e are ex!ecting bet&een ,K and ,L aircraft in the first t&o years, and thereafter, an average of one aircraft every month. /o# does Indi=o plan to fund its +S? si' "illion order for aircraft4 The start-u! ca!ital investment for this !ro+ect &ill be in the range of 5s EKF-;FF crore. The !urchase &ill be through the debt-financing route. 0hat is the rationale "ehind setting up Indi=o4 "irstly, the Indian mar%et dynamics are strong. As a country, &e are doing extremely &ell economically and the !olitical &ill to o!en u! the aviation sector and u!grade infrastructure ma%es a great business climate to o!erate &ithin. Secondly, India has one of the least ex!lored aviation mar%ets in the &orld. 3e ma%e F.F, tri!s !er ca!ita as against F.,C tri!s made in 4hina, C.CF tri!s made in -SA and E.CF tri!s made in Singa!ore. 'iven the geogra!hic si6e of the country, our !o!ulation, economic gro&th !ro+ections, increased consumer s!ending and traffic !ro+ections on all modes of trans!ort, it ma%es !erfect sense for a successful lo& cost model to emerge. 'iven our bac%ground in aviation services, &e have &hat it ta%es to succeed. )ould you ela"orate on the proposed distri"ution net#or% for Indi=o4

3e are currently studying various o!tions for distribution. 3e &ill ado!t a travel agent first, follo&ed by a &eb-based distribution model. 0hat #ould the "usiness model "e #ith regards to "oth the trade and the consumer4 Indi'o is being !ositioned to fill the fast emerging need for reliable, efficient and economical air travel. All elements of our strategy- be it !roduct, mar%eting, distribution, o!erations or customer service - &ill be to cater to this !ositioning. 3e recognise the im!ortance of the trade and travel agents that &ill be an integral com!onent of our distribution strategy. 0hy did you choose *a%esh =ang#al to promote Indi=o4 Is he investing a significant amount into the airline4 5a%esh 'ang&al is an aviation ex!ert, having s!ent over CF years at senior management !ositions at -nited Airlines, Air "rance and -S Air&ays. 3e feel that his endorsement of the !ro+ect, cou!led &ith a &orld-class management team, &ill lead to a distinct differentiation in our !roduct offering and business model. 3hile Indi'o is +ointly !romoted by Inter'lobe Enter!rises and 'ang&al, Inter'lobe &ill have the ma+ority sta%e. Being an e'5+S Air#ays employee! #hich is a full service carrier! #hat synergies could "e formed "et#een his prior e'perience and your ne# "usiness model4 The synergies are by &ay of his diverse ex!erience in the airline industry in a mature mar%et, &hich &ill clearly hel! us achieve our ob+ective of !roviding economical, efficient and reliable air travel. This is of course over and above the excellent relationshi! that &e have shared for the !ast t&o decades. 0e Are 2een To Tap Southern And Eastern Indian )ities: (avis 4harmaine "ern6 - 8umbai

0ith a host of carriers loo%ing at the potential of Indian s%ies! is Tiger Air#ays loo%ing at venturing into India4 If so! #hen and #hich destination #ould you "e loo%ing at4 Tony 2avis, 4E(, Tiger Air&ays 3e &ill consider flying &ithin a four-hour radius from our base so as to ensure o!timum utilisation of both - our aircraft and service cre&. 3ithin this radius are a number of Indian cities !articularly the southern and the eastern cities. 3e have underta%en feasibility studies that sho& &hich city &ill best serve our !otential Indian customers from the ,F cities &e currently service. 0hat is your strategy for success4 Tiger Air&ays is a lo&-cost carrier .$44/ and &e follo& the basic $44 business model. 3e %ee! fares lo& by maintaining our costs. 3e &ill maximise aircraft utilisation across our net&or% of ,F cities in six countries, and &ill maintain stringent cost controls throughout our o!erations &hile !roviding a reliable and on-time service &ithout com!romising on safety and security. Increased air travel brings about mutual socio-economic benefits to Singa!ore and the Asia-Pacific region by develo!ing its tourism and hos!itality industry. 0hat are your plans for the coming year4 Tiger Air&ays &ill strive to maintain its to! slot in the lo&-fares segment and &ill announce ne& destinations in the coming months. 3e have also !urchased eight ne& Airbus ECFs bringing our fleet si6e to a total of ,C aircraft. This &ill hel! us gro& into a regional lo&-fare airline in the AsiaPacific region. 3e believe in stic%ing to our true lo&-cost model. 4om!etition is about delivering the best !ossible !roduct at the lo&est !ossible !rice and &e are confident to be able to deliver efficient service for a long time. In addition, &e &ould li%e to see o!en-s%ies !olicies among all countries in the future. 0hat according to you differentiates the L)) from the other airlines4

Tiger Air&ays has the largest net&or% of lo& fare destinations served from 4hangi Air!ort, Singa!ore. 3e &ill %ee! our fares consistently lo&I our lead-in fares are as much as <F !er cent lo&er then full service airlines, and !assengers &ho boo% early &ith us en+oy a host of discounts. Indian Travellers /ave )hanged Their &ode 0adia f Transportation:

7eh 3adia, 82, 'o Airlines 4harmaine "ern6 - 8umbai A !rudent financial investor and an aviation enthusiast, @eh 0adia 5 &( of =o Airlines - is !assionate about the ne& airline. 4iting a host of factors res!onsible for the conce!tion of the airline, 3adia s dream is to commodify air travel. In an exclusive rende6vous &ith Express Travel & Tourism, 3adia tal%s about his strategy for his dream airline. 3hen every inch of the Indian s%ies is s!routing a ne& lo& cost airline every month, one more launch seems li%e no sur!rise. So &hat &ould set this one more !roduct a!art from all the others? A focussed strategy and a lot of !assion. #3ith a !o!ulation of one billion, India has a huge middle class that still remains unex!lored. And my !rimary aim is to get these !eo!le to travel,# says 3adia. :e says that travellers across the country have changed their mode of trans!ortation &ith a definite incline to&ards air travel. $o&er !rices have hel!ed but &hat has also hel!ed this shift is a change in their mindsets. #It is all these factors and much more that has strengthened my belief in launching 'o Air&ays,# 3adia adds. The Travelling Pyramid

5eminiscing about the !ast, 3adia says that he had actually &or%ed on an airline executive summary in CFFF, &hich for some reason did not &or% out. #It &as only in CFF; that I re-o!ened this summary and decided to !ut my thought into action,# he adds. Elaborating on the strategy of his airline, 3adia says, #(ne only has to loo% at the travelling !ublic !yramid and realise the vast o!!ortunity that it offers. The customer base that &e !lan to target lies at the bottom of this !yramid that has a huge unta!!ed base.# The !rimary focus for 'o Air&ays &ould therefore add u! to rail&ay !assengers travelling in I@II@III-tier A4 and Dolvo bus !assengers. 1ut they are still &or%ing out the cost structure and su!!ly strategy for the airline. #Since lo& cost aviation is a high volume but lo& margin business, it is tric%y to sustain a !rofitable business module,# 3adia informs. Although it !lans to begin o!erations by Se!tember-(ctober this year, it is still in tal%s &ith aircraft leasing com!anies. #3e have a t&o-!ronged strategy. Initially, &e &ill lease about CF used AECF aircraft but go on to !lace CF firm orders for ne& aircraft by CFF<,# he divulges. Auality is Important $o& cost carriers, &ithout dis!ute, stimulate the mar%et and hel! bring the !rice do&n. 'o air&ays, therefore, !lan to follo& the 5yan Air model &ith an all-economy configuration. 3adia says, #And as far destination is concerned, &e &ill begin &ith the &estern and southern regions follo&ed by the north and the east. 1ut &hat &e &ill really stress on is 0uality service and time efficiency. 1ut &e &ill let our actions and delivery s!ea% for it.# A!art from online boo%ings and &eb transactions, 3adia &ill also loo% at agents and tour o!erators since the trade constitutes a big share of the mar%et. 1ut as far as its !ublic !resence goes, 'o Air&ays has yet to finalise on its tagline. #3e have narro&ed do&n three o!tions: The Peo!le s Airline, A Dalue 4hoice or A Smart 4hoice,# 3adia concludes. It remains to be seen &hat &ill &or% for the buyer. S!ice7et Airlines and 4astrol have tied u! &ith Interactive Television, a &ell-%no&n movie mar%eting com!any, for their !romotions.

S!ice7et Airlines, for the uninitiated, is an about-to-be-launched lo&-fare, no-frills airline brand from the erst&hile airline com!any 8odiluft. As !art of the airline s launch cam!aign, large re!licas of aero!lanes bearing the S!ice7et logo &ill be hung from the ceilings of select malls@multi!lexes across S!ice7et s %ey destinations. Interactive &ill be also arranging for various !romotions centered around the dis!lays. Bures Sayeed, vice !resident - cor!orate communications, S!ice7et, says, #3ith this !romotion, &e ho!e to occu!y a C;!-of-mind of our consumers. 3e selected sho!!ing malls because our T' is based here. (ur ob+ective is to ta%e flying to the masses and the masses are ta%ing to malls and multi!lexes. Therefore, malls for us are a great meeting !lace.# "or the record, S!ice7et is being launched by 5oyal Air&ays, &hich is the reincarnation of 8odiluft. 8odiluft &as among the first !rivate com!anies that ste!!ed into the Indian aviation sector before it ceased its o!erations in ,LL>. As for 4astrol, the lubricants ma+or has tied u! &ith 1roadmind Entertainment, a 'rou! 8 com!any, and Interactive to conduct rural film festivals in Pun+ab, :aryana and -ttar Pradesh for the !romotion of 451 Plus, a lubricant for tractors. The festival begins in the first &ee% of 8ay. The movie list includes 5adar, $andhan, *wara 6agal .eewana and four other titles. The festival is being organised &ith the !rimary !ur!ose of gaining visibility and reaching out to 4astrol s T' G the farmers. This !romotion &ould cover CK-EK villages in each of the states. A+ay 8ehta, 4E(, Interactive Television, says, #8ovies are a !assion for us, Indians. It is Interactive s constant endeavour to use movies and create clutter-brea%ing media !ro!erties for our clients to reach out to and connect to their target audience.# Interactive is an im!ortant !layer in the fast gro&ing mar%et of movies and cinema-based activation. 3ith offices across the country, Interactive has the &idth to execute mar%eting !rogrammes for cor!orates in cities as &ell as in villages &ith a !o!ulation of as little as C,FFF.

Interactive has been res!onsible for immense value-adds to !romotions for cor!orates such as Samsung, :$$, 8aruti, :ero :onda, 5ec%itt 1enc%iser, Seagram, :utch, 8otorola, 4oca-4ola, Bestle, IT4 "oods, 2abur, 1P$, Perfetti Dan 8elle, :e&lett Pac%ard, 1acardi, -1, Eveready, 5eebo%, and I4I4I. The services offered to clients range from s!onsorshi! of films, film festivals .urban * rural/, tic%eted film !romotions, in-film branding, intheatre branding, s!ecial screenings and !remieres. Q CFFK agencyfa0sR