Indian Airline Industry

ANALYSIS OF STRATEGIC FRAMEWORKS

Noel Roychoudhury 19/211

Rupal Khandelwal
19/223
Sahil Sharma
19/226

Shankho Bag
Sushrut Helwatkar
Vignesh K.R

19/225
19/234
19/204

Index
Stage 1: Industry analysis

History of the Indian airline industry

Global/Local Market description
Porters five forces analysis
Strategic groups

Stage 2: Competitor analysis

History of firms
Profile of the firms
SWOT analysis , RBV analysis
Core competencies

Stage 3: Generic strategy analysis

Identification of generic strategy for individual firms

Challenges faced based on industry analysis and competitive advantage analysis
Identification of single major strategic issue
Recommendations

PAGE 1

History of the Indian Airline

Industry
The Indian civil aviation industry is on a high growth trajectory, not without hiccups though. India
is the ninth largest civil aviation market in the world with a market size of US $16 billion. India
has a vision of becoming the third largest aviation market by 2020 and is expected to be the largest
by 2030.
The civil Aviation in India traces back to 18 February 1911, when the first commercial civil
aviation flight took off from Allahabad for Naini over a distance of 6 miles (9.7 km). Tata sons
limited was the first Indian airline to start regular service between Karachi and Madras in 1915,
without any backing from the Indian government. In 1932, J.R.D Tatas airline service became the
Air India. It was only in 1948, when the Government of India and Air India set up a joint sector
company- Air India international to further strengthen the aviation industry in India.
Today, the industry is experiencing a new era of expansion. The emergence of low cost carriers,
modern airports, foreign direct investments in domestic airlines, technology inventions, rapid
economic growth, growing middle class population and high disposable incomes are a few factors
that make India the worlds fastest growing air travel market. And yet, Indian airlines are in
distress. The major hurdles faced by the Indian airlines today are high jet fuel prices, rupee
depreciation, lack of aircraft maintenance infrastructure, choked airports working beyond their
capacities, and intense competition that outweighs the benefits of growth in passenger traffic.
In an attempt to minimize the industrys growing pains, the ministry of civil aviation (MoCA)
released the draft national civil aviation policy (DNCAP) on October 30, 2015, aimed at providing
a favorable ecosystem and a level playing field to various sub-sectors of the industry like Airlines,
Airports, Cargo, Maintenance Repairs and overhaul (MRO) services, and to make flying affordable
for the passengers.
Since FY15, the operating environment for the airline industry has been gradually improving due
to steady recovery in domestic passenger traffic and sharp reduction in global crude oil prices. Fuel
PAGE 2

prices have declined by nearly 57% during the period March 14 to present, which has provided
respite for airline companies in India. With fuel cost accounting for about 40-50% of operating
expenditure for Indian airlines, the lower fuel price has resulted in ~12-13% reduction in operating
cost. Considering the competitive intensity though, the airlines are partly passing on the benefit of
reduced fuel prices to customers in order to attract passenger traffic. In addition to declining fuel
prices, efficiency gains through process improvements, route rationalisation and careful balancing
of capacity with demand are other factors which have supported the improved operating
performance of the Indian airlines.
Although airlines continued to report weak financial performance in FY15, there has been a
reduction of 35-40% in losses (at ~Rs. 75-85 billion) as compared to that in FY14. It is expected
domestic airlines will report improved performance in FY16 on account of favourable jet fuel
pricing environment and the sector is hopeful that the new aviation policy will address all issues
obstructing growth in due course of time.

Evolution of Indian aviation

Source: ICRA research

PAGE 3

Market description
Global market size:
The revenues of the global
industry has doubled from
US$369 billion in 2004 to a

projected $746 billion in 2014

Commercial air transport sales is
expected to grow at 9.2% per year
in nominal USD terms over 2016-

2020.
Demand for passenger and freight aircraft is expected to increase to 32,600 by 2034
Yearly RPK is projected to grow at 5.8% from 2015-2034 in emerging economies like
India, China, Middle East, Europe, Africa. For developed economies, expected RPK

growth is 3.8%.
No. of aviation mega cities
expected to grow from 47 in 2014

to 99 by 2034
Asia Pacific is expected to lead in
world traffic by 2034. At present,
the number of Asian airlines has
increased to 230, nearly 27% of
the world commercial aircraft
fleet.

NOTE:RPK= Measure of passenger traffic. Calculated as no. of revenue passengers*kms of

segment
Source: Airbus:Global market forecast 2015-2034

PAGE 4

ECONOMIC PERFORMANCE OF AIRLINE INDUSTRY

Source: IATA industry forecast

PAGE 5

Local market opportunities

Indian airline industry is growing at 10%

The Indian civil aviation industry is amongst the top 10 in the world with a size of around

USD 16 billion.
Airlines are expected to operate about 800 aircraft's by 2020 as compared to 450 presently
Indias demand for aircraft would constitute 4.3% of global volumes
Domestic and international passenger traffic expected to grow at annual average rate of
12% and 8% in next five years (estimated 163 million passengers in 2013 and 60 million

international passengers by 2017)

Freight traffic is expected to be five times the current level ~11.4 million tonnes by 2032.
MRO industry to triple in size from INR 2250 crore in 2010 to INR 7000 crore by 2020

PRODUCTS

Service type:

Low cost carriers- Domestic and international

Characteristics: Uniform fleet, single class configuration, cost efficient model
Full service carriers- Domestic and international
Characteristics: Multiple fleet, multiple class configuration, amenities/ services like
entertainment, drinks

Aircraft type:
Single aisle
Twin aisle
Very large aircraft

Cargo/Freight aircrafts:

Provides for transportation of animals, dangerous goods, perishables/non-perishables

CUSTOMERS: Internal customers

PAGE 6

Employees are the face of the airlines and by all means, the aviation industry is highly
labor intensive. There are huge requirements of skilled pilots and technicians and other
workforce. It is expected to create an employment for around 40 lakh people by 2035, 8-10
lakh personnel will be directly employed by airport, airlines, cargo, maintenance repair and
overhaul facility and ground handling and another three million indirect jobs will be
created. Thus, it is essential that internal customer satisfaction is high so that the end users
can have a delightful experience and the airline can rise and fly.

Airlines consistently rank low in customer satisfaction, as per a customer satisfaction survey by
IBM institute for business Valueanalysis.

PAGE 7

CUSTOMERS: External customers /end users

Type 1: Time sensitive and price insensitive customers:

These are usually business travelers where time is of essence. These customers may be willing to
pay a premium price for travelling or extra amenities. Last minute booking or time flexibility may
be essential.
Type 2: Time sensitive and price sensitive customers:
Travelers who have to necessarily make trips but would be delighted to secure a low cost fare
ticket.
Type 3: Time insensitive and price insensitive customers:
These are the passengers who would prefer comfort and amenities above anything else.
Type 4: Time insensitive and price sensitive customers:
Vacation travelers, willing to modify their date of travels based on low fare seats.

PAGE 8

External environment analysis

PORTERS FIVE FORCE ANALYSIS (WITH INDUTRY TRENDS & DRIVERS)

Rivalry: High

No of service providers in this industry is high. Players in Indian aviation industry can be

classified into:
o Public players- Air India
o Private players- Indigo, Spice Jet, Jet Airways etc.
o Start-ups- FLYeasy, Air Pegasus, Vistara
Intense price competition amongst players, thus eroding one anothers market share by
reducing number of passengers carried.

Industry trend:

IndiGo was the biggest

domestic airline in India in
2015. It carried 297.43 lakh
passengers and commanded
an overall annual market

share of 36.69%
Spicejets financial troubles
which became public in late
2014 eroded passenger
confidence and market share.

PAGE 9

Threat of new entrants: Low

Existing airlines benefit from economies of scale, rights on airport slots, hence can expand
easily than new players.
Capital requirement is high and can deter new airlines from entering:
o personnel cost:15% of total costs; engineering and maintenance cost:12%
o Cost of buying or leasing aircrafts is very high ~10-14% of total cost
o Various taxes levied by state and airport authority like landing charges, parking
charges, route navigation charges, terminal navigation landing charges are very

high, nearly ~8-10% of total costs.

Govt regulations like the 5/20 rule (minimum 5 years of operation and fleet size of 20) will
detain new players from entering the market

Industry trend:

New players like Air Asia, Air Costa, Air Pegasus, Trujet have very negligible market
shares and operate in huge

losses.
Consolidation resulting from
mergers and acquisitions or
Joints ventures reduce
competition and enhance
operational efficiency and
market shares. Ex- Vistara, joint
venture between Tata sons and
Singapore airlines, Jet Sahara
merger

Threat of substitutes: Medium

Domestic airlines can be substituted by road transport, however no substitutes for
international carriers.
Negligible switching cost: Business meetings can be accomplished via video conferencing
or Skype, hence eliminating any need for travelling at all.
PAGE 10

Bargaining power of suppliers: High

Airline suppliers include: aircraft manufacturers, lessors, air navigation service providers,
travel agents, fuel providers, freight forwarders, MRO, catering, ground services.
Bargaining power of manufacturers is high because there are only limited number of
suppliers: Only 5 major manufacturers for the aircrafts- Boeing, Airbus, Emirates,
Bombardier and Cessna aircrafts.
Aviation fuel is a commodity- hence, no price negotiations with suppliers is possible.
Airports and ground handling companies are usually local monopolies, hence bargaining
power is high.

PAGE 11

Bargaining power of buyers: Medium to high

Internet makes it easier to compare price and time schedules and hence, switching costs
between airlines is low.
Airlines have limited options to differentiate themselves from rivals
With airlines competing for the same passenger group, the concentration of power is high
with travelers. Companies have to increase their operational efficiency or customer service
to differentiate

Industry

PLF is the measure of

how many seats an
airline manages to fill on
its flights.

Spicejet was the leader,

maintaining 89.4% for
the year. Its strategy of
repeated fare sale
helped it attract
passengers, despite the
financial crisis people
knew about.

The laggard was the

Tata-SIA airline, Vistara.

PAGE 12

OTHER INDUSTRY TRENDS

1.

Rising in passenger traffic: Passenger boarding is expected to double by 2025.The airline

industry is heavily dependent on macroeconomic factors like GDP growth, disposable income
and consumer confidence as passenger revenue accounts for 75-80% of total revenues and

cargo services ranges from 8-12%.

2. Increasing capacity addition and fleet expansion: The overcapacity in Indian industry is
likely going to aggravate due to intense competition. Currently, the airlines provide heavy
discounts, utilizing the buffer available due to low fuel prices. However, any upturn in the fuel
price would eradicate the pricing cushion, hence, sustainable improvement of the industry
hinges on recovery in demand. The operating performance of the airlines will gradually
improve and resultantly giving rise to better pricing power. However, rationalizing capacity
additions in order to maintain the pricing power remains crucial for structural viability of the
3.

industry.
Outsourcing: Airlines are opening new sustainable revenue streams by outsourcing core
services like accounting, cargo operations, customer relation management, ticketing or check-

in activities.
4. Regional connectivity scheme: Thrust on enhancing regional connectivity to improve regional
penetration through incentivizing airlines and developing no-frills airports
5. The 5/20 Rule: There have been enough indications from the ministry in favour of abolishing
this law. However, the DNCAP and the MoCA does not take any stand on this policy presently.
Opinions of various stakeholders are awaited and the debate is mainly around whether the
existing rule should be replaced by Domestic Flying credit (DFC)mechanism, key factors of
which are as listed below:
Multiplication factor for available seat kilometers (ASKMs) deployed on various category

routes is not specified

No difference between existing and new airlines for DFC accumulation as against earlier
proposal of 300 and 200 DFCs for existing and new airlines, respectively. Hence, no head-

start for the new airlines

The airlines will be able to trade DFCs with other airlines under intimation to DGCA
Positive for new airlines
Thus, increasing the threat to new entrants in the aviation industry.

PAGE 13

Strategy group mapping

Strategic groups of Airlines can be done on the basis of various characteristics.

Variety of fleet
Geographic coverage
Prices charged
Service levels
Ownership models

Out of these the Prices charged and Service levels are used for strategic mapping due to their
importance in the decision making behaviour of the customers.

Prices charged- Customers are highly price sensitive and have a tendency to switch
from one airline to another based on low fares. Hence, price plays a very crucial role in

defining the airline firm.

Service level: The service levels also decide the choice of airline by the customers.
There are two broad segments - No frills and full service. No frills generally refer to an
airline that provides fewer comfort and luxury services, and even if they are provided, they
are charged separately whereas full service airlines provide a range of services for the
comfort and luxury of the passengers, including in-flight meals, lounge services, in-flight
entertainment, priority check-ins, business class options etc.

PAGE 14

Hig
Vistara

Air India

Prices Charged

Go-Air

Jet
Airways

Indigo

Spicejet

Low
w
Low

Service Level

High

Strategy group mapping of airline firms

PAGE 15

History of the firms

Firms selected for analysis:
1.
2.
3.
4.
5.

Indigo Airlines
Spice Jet
Air India
Jet Airways
Go Air
6. Vistara
INDIGO AIRLINES

IndiGo was started in 2005 and is operating as a private low-cost airline based in Gurgaon. It was
set up by Rahul Bhatia and Rakesh Gangwal. Rahul Bhatias InterGlobe Enterprises holds 51.12%
stake in IndiGo and 48% by Caelum Investments. In June 2005, IndiGo, to begin its operations,
placed an order for 100 Airbus A320-200 aircraft. The airline completed its initial order ahead of
schedule on November 2014. In July 2006, IndiGo received its first Airbus A320-200 aircraft and
commenced operations on August 2006, with a service from New Delhi to Imphal via Guwahati.
IndiGo has a stated a three-point corporate mantra: Offer fares that are always low, flights that are
on time, and a courteous, hassle-free travel experience. In order to keep operational costs down,
IndiGo buys only one type of aircraft. Being a low-cost carrier, IndiGo offers only Economy Class
seating and does not provide in-flight entertainment or complimentary meals. As of September
2015, IndiGo with a market share of 36.5% became the largest airline in India in terms of
passengers flown. Indigo has been making profits since 2009 despite its rivals Spicejet and Jet
suffering losses. IndiGo operates more than 647 daily flights to 39 destinations, 34 in India and 5
international

PAGE 16

SPICEJET:

SpiceJet was launched in May, 2005, and is being promoted by Ajay Singh and the Kansagra
family. The goal of the airline is to compete with the Indian Railways air conditioned coaches and,
obviously, offer a better deal to its passengers. By 2008, SpiceJet became Indias second-largest
low-cost airline in terms of market share. The airline flies Boeing 737-800 and 900ERs and
Bombardier Dash 8 Q400s. Spice Jet names all its aircraft with a name of Indian Spices like Haldi,
Dhaniya, Sauf, Fenugreek etc. After operating domestically for 5 years, it started international
operations in October, 2010. In early 2012, SpiceJet suffered losses as fuel prices were reported to
have increased by as high as 90%. The money spent on fuel exceeded well over 50%, spiraling the
airline into losses. In December 2014, Spicejet faced severe cash-crunch with DGCA putting the
carrier on cash-and-carry mode and oil companies refusing to refuel its planes. But by the end of
2015 SpiceJet's operations experienced a significant upswing with 93% of available seats on
flights being filled and only 0.13% of scheduled flights canceled each month. SpiceJet was
profitable in three consecutive quarters, in contrast to previous five quarters when they lost money.
AIR INDIA

Air India was founded by JRD Tata in 1932 when it won a contract to carry mail for Imperial
Airways. Initial service included daily airmail services. It became a public limited company on 29th
July 1946. The Government of India acquired 49% of the airline in 1948. In 1953, Indian
Government acquired majority stake in the company and established Air India International
Limited. The domestic operations were transferred to Indian Airlines in a restructuring in 1954. In
1962 it became the Worlds first all Jet airline.
During the early 2000-01, attempts were made to privatize Air India. In 2004, a wholly owned low
cost subsidiary called Air-India Express was launched. In 2007, Air India and Indian Airlines were
remerged under Air India Limited. It was invited during this period to be a part of Star Alliance,
which was later rescinded in 2011 due to failure to meet minimum standards for membership.
The airline posted its first positive EBITDA in 2013 after almost 6 years of losses. It split its
business into two subsidiaries Air India Engineering Services and Air India Transport Services. It
finally became a member of the Star Alliance in 2014.
As of 2015, Air India is the 3rd largest carrier inn India.
PAGE 17

JET AIRWAYS

Jet Airways was incorporated as an air taxi operator on 1 April 1992 to compete against the stateowned Indian Airlines. It began international operations in March 2004. The company is listed on
the Bombay Stock Exchange, but 80% of its stock is controlled by Naresh Goyal, the owner. On
2007 Jet Airways bought Air Sahara, which was renamed JetLite, and marketed between a lowcost carrier and a full service airline. In October 2008, Jet Airways laid off 1,900 of its employees,
resulting in the largest lay-off in the history of Indian aviation. On May 2009 Jet Airways launched
its low-cost brand, Jet Konnect. For the third quarter of 2010, Jet Airways had a market share of
22.6%in terms of passengers carried, thus making it a market leader in India. Jet Airways and
SpiceJet initiated the price war in the Indian airline industry, followed by IndiGo and GoAir. On
December 2014, Jet Konnect was fully merged with Jet Airways with complementary meal
services to take on the competition from the new airline Vistara. Jet Airways discontinuation of its
low fare arm JetKonnect and JetLite made it the third full service airline in India besides Air
India and Vistara in 2014.
GOAIR

GoAir is a low cost carrier that commenced its operations in 2005. The company is wholly owned
by the Wadia group. It made a profit of a little less than Rs.100 crore in the fiscal year 2014, when
most of other airlines had reported losses. It was the fifth largest airline in India by market share as
of 2014..
GoAir has been maintaining an average load factor of 76% since 2007. But the companys growth
has been slow as compared to its competitors like Indigo and SpiceJet with respect to market size,
fleet size, and destinations served as of 2013. However, the company defines this as a strategy to
meet competition and maintain profitability rather than capturing market share and increasing fleet
size. Since inception, it focused on flexibility. During economic slowdown, it chose to shut down
its non-operating routes and fly only on the busier routes like Delhi-Mumbai. However,
government rules require domestic airlines to fly a certain percentage of its flights to smaller towns
with poor connectivity. Alternatively, they may buy seats from other operators providing such
services. GoAir chose to buy seats from regional airlines in north India in order to comply with the
rule and stopped flying on the non-profitable routes.
PAGE 18

VISTARA

Vistara was founded as a joint venture (JV) between Tata Sons and Singapore Airlines (SIA) in
2013. This was Tatas third attempt at starting an airline, first one being Air India which was
nationalized in 1946 and the second attempt being an unsuccessful one in mid 1990s to form a
joint venture with Singapore Airlines with the government denying regulatory approval. However,
the duo were successful this time around as India opened up its airline sector to 49% FDI. Tata SIA
Airlines Limited (TSAL) was formed with Tata Sons owning 51% of the stake and SIA owning the
remaining 49%. It has started as a premium full-service airline targeting the high-end business
travellers demands and its only the third full-service airline after Air India and Jet Airways.
After the very first month of its operation, Vistara achieved a very high On-Time Performance
(OTP) records of 90% which was highest among Indias domestic careers. Within seven months of
operation, it had carried half a million passengers.

PAGE 19

SWOT ANALYSIS using Value

chain and VRIO framework
The figure below gives the value chain of airline industry. From the value chain analysis,
the resource of the firm that it excels, is chosen and VRIO is performed.

Fig: Value
Chain of
Airline
Industry

PAGE 20

INDIGO

PAGE 21

VISTARA

JET AIRWAYS

PAGE 22

SPICE JET

AIR INDIA

PAGE 23

GOAIR

PAGE 24

COMPARATIVE VRIO ANALYSIS

Airline

Indigo

Vistara

Jet
Airways

Spicejet

Resource

Valuable?

Rare?

Costly to
Imitate?

Organized
Properly?

Competitive
Implications

Turnaround
time

Yes

Yes

Yes

Yes

Sustained Advantage

On-time
performanc
e

Yes

Yes

Yes

Yes

Sustained advantage

Crew
hospitality

Yes

No

On-time
performanc
e

Yes

Yes

Yes

Customer
service

Yes

Yes

No

In-flight
services

Yes

Yes

Yes

No

Sustained advantage

Brand
reputation

Yes

Yes

Yes

Yes

Sustained advantage

Passenger
load factor

Yes

Yes

No

Strong
regional
connectivity

Yes

No

Information
systems

Yes

Yes

Yes

Yes

Sustained advantage

R&M
expertise

Yes

Yes

Yes

Yes

Sustained advantage

Operational
flexibility

Yes

No

Parity

Yes

Sustained Advantage

Temporary advantage

Temporary advantage

Parity

Air India

Go Air

Parity
PAGE 25

PAGE 26

COMPARATIVE SWOT ANALYSIS:

1. FLEET SIZE: Most of the LCCs operating in India are moving towards bulk buying of identical

aircrafts for price discounts and standardization of R&M procedures. Here full-cost carriers like Jet
Airways and Air India have a competitive advantage as their larger fleet size of varied aircrafts
allows them to expand and adapt quickly to changing industry dynamics. Smaller fleet size can
lead to quick expansion problems. Hence it can be considered as a weakness for operators like
Spicejet, Vistara and Go Air. However they can overcome this weakness by forming a strong leasebuying policy and consolidating their fleet in coming years.
2. LOAD FACTOR: Load factor is the prime indicator of the operational profitability of an airline.

It basically means the number of seats occupied in a plane w.r.t. the total plane capacity. Spicejet is
the market leader here with load factor more than 90% throughout 2015. It basically depends how
a company chooses its operational routes. As and when oil prices again shoot up, load factor will
become a deciding factor in keeping the airline afloat amidst paper-thin margins in LCC
operations. Vistara and Air India need to immensely improve this parameter for sustainable profits.
3. CUSTOMER SATISFACTION: The quality of customer service offered by an airline can be

judged from the number of the quality of customer service offered by an airline can be judged
from the number of registered complaints filed against an airline in a particular year. Higher
customer complaints lead to increased customer dissatisfaction and a potential switch away from
the airline. Spicejet faced the wrath of high customer complaints during Dec 2014 when it had to
cancel all its flights owing to cash crunch situation. It also negatively impacts the firms market
valuation. Indigo and Jet Airways too have faced customer dissatisfaction issues but it provides
them an opportunity to improve and capture the market segment that is being lost by Spicejet and
Go Air due to continuous poor service. Vistara on the other hand has proved to be the most
promising firm on this parameter which is increasingly becoming its core competency.

4. PUNCTUALITY On time arrival and departures as well as low turn-around times are essential

for the profitability as well as popularity of any airline. The Airlines employ various strategies to
ensure punctuality, including inflight cleaning by cabin crew, collection of waste before landing,
baggage handling etc.
PAGE 27

5. INTERNATIONAL CONNECTIVITY This provides an alternative for the Airlines to expand

their operations and make higher profits. The airlines which have only domestic services have this
opportunity to expand. Go-air and Vistara have not extended their services to international
destinations yet. Hence, in the future they can expand. Other airlines have entered this space, but
they still have the opportunity to expand by making major hubs online.
6. R&M EXPERTISE this denotes the level of expertise and services in the Repair and

Maintenance of the aircrafts. It also includes various engineering services for training, testing and
development. Air India offers a variety of maintenance services like line maintenance, base
maintenance, Engine and Auxiliary power unit overhauling to name a few. It also provides
engineering services like training, asset management, project management and quality assurance. It
also gives specialized testing services like non-destructive testing, aircraft weighing, proof load
tests etc.
7. RISING LABOUR COSTS AND CHANGING GOVERNMENT POLICIES The labour used in

airline industry can be categorized into two categories Skilled and Unskilled.
Skilled staff there is a small pool of talent, from which the industry has to pick candidates from.
Due to the imbalance of demand and supply, the cost of the skilled labor is high. These include
pilots, air traffic controllers Engineers etc. They are also protected by unions.
Unskilled staff is high in availability but is protected by the unions and hence the negotiating
power is high. This leads to higher costs in terms of unskilled labour.

PAGE 28

COMPARATIVE SWOT ANALYSIS:

PARAMETERS

STRENGTH

WEAKNESS

Fleet size

Indigo

Spice Jet, Go
Air, Vistara

Load factor

Spice jet

Vistara, Air
India

Customer satisfaction

Vistara

Punctuality

Vistara, Indigo
Indigo, Jet
Airways, Air
India, Spice
Jet

Network presence
International
connectivity
R&M expertise
Rising Labour costs
and changing govt
policies
Investment in R&D,
Information systems

OPPORTUNITIE
S
Jet
Airways,
Air India

Indigo, Jet
Airways

THREAT

Spice jet, Air India,

GoAir

SpiceJet, Air
India

Vistara, GoAir

Air India
Indigo, Jet Airways,
Air India, Spice Jet,
Vistara, GoAir
Spice jet, Air
India

Indigo

PAGE 29

Core competencies of firms

Indigo:

Involved and visionary management team

High Operational excellence
High on time performance
Turnaround time less than 30 mins
Excellent crew hospitality.

Jet Airways:

High marketing and operational efficiencies

Excellent customer service
Reputed and trusted brand name
Best in class in-flight services and amenities

Air India

Reputation in both domestic and international services

High level of customer services
Advanced information systems
Expertise in repairs and maintenance

SpiceJet:

Strong regional connectivity

Highest passenger load factor

GoAir:

Flexibility in operations
Well timed expansion

VISTARA:

Cost effective services

Organizational capabilities- skilled manpower
High punctuality
High customer satisfaction

PAGE 30

COMPARATIVE ANALYSIS

PAGE 31

SPICEJET
Primary Activities
Activity

Inbound
Logistics

Analysis

Implemented a transparent bidding process on renowned software platform, which has

helped the Company to get the best rates on goods and services received
Efforts to bring the cost of financing down significantly by way of efficient working

capital management, and aided by profitable operations

Expenditure on aircraft fuel dropped by 26% to Rs.24,096 million in Financial Year 201

15 from Rs.32,527 million in Financial Year 2013-14. This decrease is due to decrease in
consumption of aviation turbine fuel and average price decrease
Conclusion: Renewed effort by the management to cut-down on inbound logistics cost by
virtue of improving supplier relations, stable cash-flows etc

Operating more than 235 daily domestic and international flights

Provides connectivity to various smaller airports in India, which are serviced by the

Companys Bombardier Q400 regional aircraft

Capacity utilization (Load factor) of SpiceJet has been highest (more than 90%) for last
months as per DGCA statistics. This is due to superior product offering and efficient

deployment of network
Considerable improvement in On-time performance with a figure of 85.1% for

September,2015
Spicejet leads Indian carriers with 2.26 complaints per 10,000 passengers carried in 201

Operations

Several near-misses were also reported last year which put a question-mark over the safe
of passengers in a SpiceJet aircraft.
Conclusion: Operational efficiency is the biggest factor in the complete turn-around of

SpiceJets fortunes in the last one year. But at the same time there is urgent need to look into
the safety standards followed in SpiceJet
Outbound
Logistics

Unlike its peers SpiceJet has used a dual-fleet strategy by using a combination of Boeing
737-800s & 900s for medium-haul flights, alongside Bombardier Q400s for short-haul

flights.
This dual strategy has helped SpiceJet in capturing market share in smaller cities where

flies its 78-seater Bombardier Q400s which are considered to be the most technologicall
advanced turboprop airliner
PAGE 32

Conclusion: Focus on cost-effective utilization of delivery fleet and also ensuring market
capture in smaller cities

SpiceJets mission is to become Indias preferred low-cost airline, delivering the lowest
fares with the highest consumer value, to price sensitive consumers. They aim to fulfill

everyones dream of flying

Fly for Sure entitles a customer booked on Spicejet, a guarantee of flying in the next 24
hours in case of a flight delay beyond 90 minutes, missing a flight not exceeding 30

minutes from airport check-in closure of the original flight or a flight cancellation by the
Marketing &
Sales

airline.
SpiceClub The Red Hot Rewards card that lets you make cashless transactions within
SpiceJet ecosystem. One can purchase meals, merchandise, add-on services using the

SpiceClub card.
Innovative pricing like every 99th online ticket free, 10 lakh seats for Rs2013 etc to attra
price-conscious customers
Conclusion: SpiceJet has successfully managed its marketing campaigns which is also
evident from its industry-leading PLF figures

Services

Bag out first facility allows passengers to get their bags out first on priority basis by ju

paying a nominal fee of Rs 100/- per bag.

Lounge service, a Spice Add-on for SpiceJet travelers to unwind and enjoy the comfort

SpiceJets hospitality
Priority check-in option at major airports across the country for a hassle-free check-in

experience
Carry-more onboard option gives travelers the option to carry more cabin luggage with
nominal charge of Rs 300/kg

Conclusion: SpiceJet is trying to cater to the semi-premium customers who wish to avail bet
facilities at nominal prices.

Support Activities
Activity

Analysis
PAGE 33

SpiceJet is a public listed company with market capitalization of about Rs 40 billion and

close to 139000 shareholders

SpiceJet had to return several aircraft on account of some lease-end obligations and som
on lessorss request to reduce their exposure in India and SpiceJet. SpiceJet fleet was

Firm
Infrastructure

reduced to 32 aircraft from a level of 56 aircraft by the end of financial year 2014-15
Generated net profits worth Rs 238 crore in Q3 2015-16 by taking advantage of low fue
prices and efficient fleet utilization

Conclusion: The firms financials are in good shape currently but better preventive measures
required to avert cash-crunch situations like the one in Dec,2014

Human
Resource
Management

The Company had 4,185 employees as on March 31, 2015

Increased the productivity on the human resources by over 10% in 2014-15
SpiceJet launched the SpiceJet alumni group to build on existing relationships. Employe

who have been part of the organization are a member in the alumni group
Recently gave a 20-25% salary hike to its Bombardier Q-400 fleet pilots, thereby bringin

them at par with the Boeing pilots. This move was made to arrest the increased migratio
of such pilots to the cash-rich gulf airlines

Conclusion: No major dissatisfaction amongst SpiceJet employees reported in media which

shows that the firm is doing well on this front

Technology
Development

SpiceJet launched its Mobile app last year which provides following features:
Flight Booking
Manage your booking
Pre-book spice add-ons
Check flight status
Deals

Conclusion: Still there is a lot of scope for improvement and innovation

PAGE 34

In March 2014, Spice jet signed a $4.4 billion deal with Boeing for procurement of 42 7

8 MAX aircraft
SpiceJet wet-leased three planes from TVS, a firm-based out of Czech Republic. In wet
lease, besides aircraft, pilots and crew are included whereas there is only aircraft in dry

Procurement

lease. This deal caused several on-time performance issues as the turnaround time of the
Czech firm was 45 minutes compared to 25 minutes for SpiceJet

Conclusion: Need for more sound procurement policies to avoid operational issues, and for
reducing procurement costs
From the Value Chain Analysis performed above, we can conclude that the generic strategy of
SpiceJet is OVERALL COST LEADERSHIP

Major points for strengthening this conclusion are as follows:

The companys vision is to make flying affordable for everyone

Focus on smaller cities for capturing market share which generally have price-conscious

customers
Focus on metrics like Passenger Load Factor and On-time performance to reduce costs and

achieve operational excellence

Successful marketing campaigns based on lowest airfares in the domestic airline industry
Effort to cater to those travelers as well who are price-conscious but wont mind paying a little
extra for better customer service

MAJOR STRATEGIC ISSUE FOR SPICEJET:

Frequent safety incidents damaging airlines reputation: Airlineratings.com, the worlds only
safety and product rating website rated SpiceJet 4/7 in its airline safety ratings. All the other
airlines analyzed for this project had safety ratings of 6 or more out of 7. This shows that there is a
significant need for improvement in safety standards of SpiceJet for it to compete with the likes of
Indigo and Jet. The following incidents corroborate our analysis of the lack of safety standards in
SpiceJet:

PAGE 35

On 29 July 2013, SG 3291 a Spice jet bombardier Q-400 carrying 49 passengers from Chennai
to Tuticorin had a tail strike while landing on the short runway triggering panic among
passengers.

On 3 September 2013, SG 3291, a Spice Jet Bombardier Q400 from Chennai to Tuticorin landed
and the engine started smoking due to an oil spillage.

PAGE 36

GoAir
Identification of generic strategy using Value chain analysis:
GoAir started its operation in 2005 and since then has positioned itself as a no-frill carrier. It has
opted to cut costs to a minimum and pass their savings on to customers in lower prices. This helps
them grab market share, maintain their profitability and ensure their planes are as full as possible,
further driving down cost.
The airline targets (i) the middle class population, travelling for leisure or work and (ii) small
and medium enterprises in the corporate sector.
It serves the common middle class population by its regular low cost carrier services. For the
corporate sector, GoAir has launched a business class product called GoBusiness and sells only
eight seats in the two front rows of its Airbus A320, keeping the middle seats vacant.

Primary Activities
Activity
Inbound
Logistics

Analysis

Planned and structured strategy for expansion: GoAir expects to receive 72 Airbus
A320 neo by 2020, at the rate of 15 aircraft each year
GoAir focusses exclusively on improving its fleet utilisation, thus maximizing number

passengers per flight and hence gaining more revenues and reducing overall cost of flyin

GoAir's aircraft utilisation -number of hours one aircraft flies in a day - is about 13 hour

Operations

or at least 90 minutes more than its nearest competitor.

It uses aircrafts which are more fuel efficient - A320s are 4% more fuel efficient than oth

similar aircrafts, thereby reducing nearly 10-12% of fuel costs.

Minimizing overall maintenance costs: It adheres to regular aircraft wash to remove d
and dust that can cause a drag and excess weight resulting in higher fuel consumption.
These are various measures that GoAir takes to minimize fuel cost besides fuel price

Outbound
Logistics

hedging
GoAir flies to 22 destinations and 44 cities with 144 daily flights and approx. 975 weekl

flights.
It operates only on domestic routes
Its major hubs are Chhatrapati Shivaji Iternational Airport, Mumbai and Indira Gandhi

International airport, Delhi

Its focused cities are Ahmedabad and Banaglore
PAGE 37

Marketing &
Sales

GoAir maintains very conservative pricing strategy to gain market share

GoAir has minimal marketing spends and hence low existing visibility.

GoAir focusses on providing an affordable and convenient transportation which is

evident from the low/average fare prices it keeps and its strategy to expand from tier2 an

Services

tier3 cities. It is also the first airline to provide direct connect on remote routes like
Mumbai-Leh, Bangalore-Port Blair, Patna Ranchi

Support Activities
Activity

Analysis

The airline is mulling over raising $150 million via IPO in the coming fiscal year.

Currently, GoAir has 19 A320s in its fleet operating 144 daily flights across 22 domestic
destinations and plans to expand to 72 aircrafts over 52 cities. Rapid aircraft induction
could lead to high costs in opening new stations and an overall spike in operational

Firm
Infrastructure

expenses. An IPO would help the company become cash rich before the rapid inducti
GoAir's small size ensured that it did not burn cash the way some of its peers did and h
made a profit for three consecutive years.

The management believes in very cautiously but firmly ste GoAirs CEO, Mr ProckSchauer, is a visionary leader with well-established network and lot of experience in

Human
Resource
Management

airline operation, both domestic and overseas and low cost and full service airlines. He w
formerly associated with Jet Airways, Austrian airlines and contributed tremendously in
expansion of both the airlines

Technology
Development

SpiceJet launched its Mobile app last year which provides following features:
Flight Booking
Manage your booking
Pre-book spice add-ons
Check flight status
Deals

Conclusion: Still there is a lot of scope for improvement and innovation

Procurement

Aircraft procurement on lease which helps GoAir save nearly 50 cr. GoAir is Airbus's
first global customers to take its new A320s with sharklets

PAGE 38

Thus, the generic strategy followed by GoAir is: FOCUSSED COST DIFFERENTIATION

CHALLENGES FACED BY GOAIR BASED ON INDUSTRY ANALYSIS

GoAir has been able to survive competition, price wars and fuel price spike in the last

decade but now, as it embarks massive expansion, it faces its biggest tests.
With the government thinking of scrapping the 5/20 rule, GoAirs biggest fear is entrant
of new players such as Vistara, will hinder GoAirs expansion plans to international

operations.
Since a large part of its expansion strategy is dependent on procurement of new aircraft,
delay in aircraft delivery schedule by its supplier Airbus, will largely impact GoAirs

performance. Thus, there is high dependency on the suppliers.

The passenger loyalty towards GoAir is limited even when they offer low ticket prices
because: (i) presence of strong competitors like IndiGo or SpiceJet, (ii) the airline received
PAGE 39

the second highest number of passenger complaints, thus, faring poorly on customer
satisfaction, and increasing consumer bargaining power
.
CHALLENGES FACED BY GOAIR BASED ON COMPETITIVE ADVANTAGE ANALYSIS:
The major competitive advantage that GoAir has is in its operations. Because of the small fleet
size, the operations are more flexible- there is excessive focus on maintenance, in-flight
customer service, enhancement of regional connectivity, etc. Despite this, the airline faces a
tough time to grow big and faster because of the following issues:
1. The pilot attrition rate for GoAir has been high over the last year. The carrier is now hiring
expat commanders. To ensure smooth and effective operations, GoAir should be able to hire
and retain employees, which is indeed one of the major challenges faced by the airline.
2. Challenges in stepping up marketing: With growth plans in place, GoAir must focus on
advertising to create a distinctive identity and reach out to its target customers. Consequently,
the airline should significantly increase advertising activities and an increase in ad spends to
gain more visibility.
3. Frequent changes in leadership and absence of a specific strategy
MAJOR STRATEGIC ISSUE:

As mentioned before, GoAir has competitive advantage in its operations. Though flexible,
however it is not the best in industry, backed by the fact that its on time performance is below
industry average (as shown in graph above: page 30) and number of flight cancellations is higher
than its competitors such as Indigo, Air Asia and Vistara. With a new management in place, and a
clear focus on maintaining profitability, the airline should now excessively focus on building its
core competencies and improving the operations. In my opinion, this is a major strategic issue
that should be resolved by the company.
On time performance, pricing and customer service are the three most important parameters that
help in building passenger loyalty towards any airline. GoAir maintains an average industry price,
provides minimal customer service (but still has high passenger complaints), and is not great on
the time factor. All this may support the airline to maintain profitability, but since the bargaining
power of buyers is high in this industry, it would not take much time for GoAir to lose its
customers and hence the revenues. Good performance is essential to grab market share and hold its

PAGE 40

position in such a competitive scenario. Building trust and loyalty amongst the customers is
necessary for a sustainable business model, which GoAir is vying for.
Besides its own internal reasons, there are other external factors which will increase competition
and make it tough for GoAir to gain market share. These are:
(i)

Abolition of 5/20 rule: The carrier currently has 19 fleets. As per governments 5/20
rule, GoAir can start off with its international expansion plan only on receiving the 20th
aircraft, which is scheduled to be received this year, assuming there are no delay in
delivery schedules. However, the cost of flying international is high. Thus, starting off
international operations would make sense only if the carrier can lower its variable
costs and maintain its margin. Without which, the company feels no incentive to expand
right away.
On the other hand, new entrants like Vistara are prepared to go international as soon as
the government policies allow them to. Once Vistara gains popularity on international
routes, with its satisfying services, it can also gain domestic market share. Thereby

(ii)

putting GoAirs business on high risk.

The existing FDI airlines policy (Up to 49% FDI is permitted in domestic scheduled
passenger airlines under the automatic route) also pose threat to the domestic airlines.
Allowing FDI means letting foreign airlines to dump their excess capacity in India and
this dumped capacity then picks up the Indian customers and pose threat to the Indian
airlines.

At the best what GoAir can do to protect itself from these external factors is negotiate with the
government and abolish such policies (which it is trying to do). Secondly and most
importantly, it must strengthen its own operations and services.
RECOMMENDATIONS TO SOLVE THIS STRATEGIC ISSUE:

We make the following recommendations for GoAir to strengthen its capabilities:

1. GoAir has to build a culture of its own to promote its values, vision and mission.
2. Robust hiring program to hire pilots and staff who possess both skill and will to perform
dedicatedly and deliver the best performance.
3. It should conduct extensive training for all its staff members (pilots, air hostess, ground
staff etc.) to ensure delightful customer experience

PAGE 41

4. Management should consider expanding its international operations by leveraging the

current CEOs experience.
5. Better incentive plans to retain employees, especially pilots
6. On time payment to employees

PAGE 42

Indigo
Primary Activities
Activity

Analysis

Sale - leaseback Program: This was the first in the Indian aviation industry

As the name suggests it refers to buying an aeroplane from the manufacturer

and selling it to a leasing company. This ensures that the company's balance
sheet remains relatively debt free. This has helped the company to have
relatively young fleet at any point if time as they have the option of not
renewing the lease of older planes. This ensures safety and builds the
confidence of the passengers in the airline.
While Kingfisher and once market-leading Jet Airways bought rivals, flew

multiple plane models and struggled to mix full-service and low-fare options

IndiGo stuck with its policy of offering one class of no-frills service on a sin

type of plane. Indigo has chosen to stick to the world's best-selling single-ais
aircraft, the Airbus A320
Deft planning: It also helps to capture the local market better. For instance,
Inbound Logistics

IndiGo has connecting flights to four destinations from Ranchi: Delhi, Patna,

Mumbai and Bangalore. It now wants to add Kolkata and Raipur to the list. T
strategy ensures that a traveller from Ranchi will not have to look at a nonIndiGo flight to go to any of these destinations. So he becomes a loyal
customer and IndiGo gets a larger share of the Ranchi market and adds new
customers. Cost-consciousness is reflected in the fact that it will not go to a
new destination until it can fly from there to at least four different cities and
amortise costs. IndiGo carried 27 per cent more passengers in the domestic
skies last year, while the industry carried 5 per cent less, and added only one
new destination in the whole year but flew more flights from existing cities.

Conclusion: Renewed effort by the management to cut-down on inbound logistic

cost by sale leaseback program, wise selection of fleet and deft planning has pai
a lot of benefits
PAGE 43

 On time performance: It has one of the best on-time performance which it

strives to maintain even in the face of poor infrastructure. This actually helps

build a positive image in the minds of the passenger.

Low Cancellation: According to the DGCA data, Indigo has 0% cancellatio
of flights. This is the best in the industry where every player complains of
poor airport management and infrastructure. They have showed to the entire

industry how to run an efficient airline and could be a role model to others.
One of the key costs is the maintenance and spares which constitute about 10
per cent of the operational costs. The strategy of Indigo is to ensure that an
aircraft doesn't stay grounded for too long because they make money only
Operations

when they are in air.

IndiGo closely monitors turnaround time and fixes tough targets: currently it

gets an aircraft ready for its next flight in 31 minutes compared to 35 minute
few years ago
They followed a contrarian strategy last year amidst the slowdown and

increased capacity and introduced new flights in order to get more passenger
The airline increased its capacity by over 39 per cent, even while the total
industry capacity fell by 4 per cent

Conclusion: Indigo focusses heavily on operational efficiency which leads to cos

reduction and hence Indigo is able to provide better service at a cheaper price
Outbound Logistics

High Passenger load factor: The focus is purely on offering the cheapest an

affordable fares. This has ensured the airline to have high passenger load fac

One could argue that Air Deccan was offering cheaper fares. Yes they were b
it was irrational pricing which could not be sustained. They are very
transparent in their pricing and this was what is helping them to fill up their

planes and people flocking to Indigo than to others.

Indigo tied up with Carzonrent to offer cab booking services to its customers
It has also got tieup with Expedia Affiliate Network (EAN) which enables th
customers to book hotels across the country through the carriers website
Indigo has a fleet of 70 aircraft, yet it flies to only 29 domestic and four

international destinations. In contrast, SpiceJet has 56 planes but it flies to 45

domestic and 10 international destinations. Thus, IndiGo's strategy is to prov

PAGE 44

more capacity on select routes, rather than spread itself thinly over several

Conclusion: Value for money and providing additional services has provided the
airline to boost its ancillary revenue.
While all other customer are low fares, indigo positions itself as an on-time
airline which values customers time
Marketing & Sales
Conclusion: The ads of Indigo positions itself as on-time airline thereby making
valuing customers needs

Indigo has only single class of service offered to its customers

Food is available on order basis and the food provided are also branded and n

normal food.
IndiGo's success model largely relies on consistent low fares, regular on-time
Services

performance and minimal flight cancellations. However, the airline's biggest

edge over others is its focus on customer focus

Conclusion: Though Indigo is able to save costs a lot by cutting some services, t
additional services by itself have a huge potential

Support Activities
Activity

Analysis

Indigo announced a fivefold increase in net profit to Rs 787 crore for 2012-1
IndiGo's fifth straight year of profit, while the industry lost Rs 46,000 crore i

Firm Infrastructure

the five-year period

Data compiled by the Centre for Asia Pacific Aviation shows IndiGo has mad
cumulative profit of Rs 2,200 crore in the last five years

Conclusion: The firms financials are in good shape currently

Human Resource
Management

IndiGo's employee-aircraft ratio has improved from around 120 two years ag

to 100-102 now. In striking contrast, Jet Airways has a ratio of 130, while Ai
India's ratio is 262
Lean Workforce: It has one of the leanest workforce amongst the airline
PAGE 45

companies. They operate a fleet of 40 planes with just 4000 people which
translates into a ratio of 1:100 which is better than the worldwide industry

average of 1:125. Obviously this helps in saving costs and ultimately drives u

their profits. Also their top management is less heavy and hence the decision
could be taken faster and better
Conclusion: No major dissatisfaction amongst SpiceJet employees reported in
media which shows that the firm is doing well on this front

Unlike manual systems used by other airlines, IndiGo planes are equipped w
a digital link system for for transmission of short, simple messages between
aircraft and ground stations via radio or satellite called Aircraft

Technology
Development

Communications Addressing and Reporting System (ACARS)

Before every IndiGo flight departs an automatic message is triggered from th

aircraft to its operations control centre - and immediately the same departure
time gets recorded in the software. Similarly, the moment the flight lands an
automatic message is triggered from aircraft to control centre

Conclusion: These kind of technology actually helps in real-time monitoring of t

airlines that helps in on-time performance

Indigo has ordered A-320 Neos which are 15 per cent more fuel-efficient and

can make a substantial difference to the economics of the game in terms of fu

Procurement

efficiency
Ancillary revenues have inched up to 9 per cent of the total, an increase of on
percentage point, in the last one year
Conclusion: Clear Balance sheet gives IndiGo good bargaining power with the
suppliers and is able to get good deals with the help of its social power

From the Value Chain Analysis performed above, we can conclude that the generic strategy of
SpiceJet is OVERALL COST LEADERSHIP
PAGE 46

Major points for strengthening this conclusion are as follows:

Indigos brand message is low fares, on-time flights and a hassle-free experience
Indigo has high operational reliability and thus is able to cut costs
Focus on smaller cities for capturing market share which generally have price-conscious customers
Focus on capturing the entire market in a particular city by increasing the number of flights in that
particular city rather than increasing the spread. This helps the airline in reducing costs in terms of
recruiting new employees in the new cities

Major strategic issue for IndiGo:

Indigo does not have any serious strategic issues facing it right now. However, it has some issues
facing it regarding expansion. IndiGo is able to maintain its low price by operating more flights on a
known route than starting in a new city. This, over the years, has helped the airline to reduce costs by
investing in a known route with known personnel without the need to hire new personnel. This has also
contributed to the lowest work force in the industry. With the entry of new players, this position of Indigo
might be challenged with more airlines fighting for the passengers in the same city.

Recommendations for overcoming this problem:

Indigo should go for expansion. Having achieved expertise over the domestic market, the airline
should focus on expanding its business operations. This would help Indigo to have a wider market to focus
upon and its pure-play LCC strategy would help to improve upon its services. The expertise would help
IndiGo to compete in the International arena as well.

KEY RATIOS:

1. Available Seat Kms (ASK) = (total no of seats available for transporting passengers) X (no
of miles flown during period)
2. Revenue Passenger kms (RPK) = (no of revenue paying passengers) X (no of miles flown
during period)
PAGE 47

3. Revenue per Available Seat Kms = Revenue/ (no of Seats Available)

4. Air Traffic Liability (ATL): An estimate of the amount of money already received for
passenger ticket sales and cargo transportation that is yet to be provided. It is important to find
out this figure so you can remove it from quoted revenue figures (unless they specifically state
that ATL was excluded).
5. Load Factor: This indicator, compiled monthly by the Air Transport Association (ATA),
measures the percentage of available seating capacity that is filled with passengers. Analysts
state that once the airline load factor exceeds its break-even point, then more and more revenue
will trickle down to the bottom line. Keep in mind that during holidays and summer vacations
load factor can be significantly higher, for that reason it is important to compare the figures
against the same period from the previous year.

JET AIRWAYS:

Primary Activities
Activity
Inbound
Logistics

Analysis

Embraces new technology like latest flight techniques and flight

PAGE 48

planning systems from aircraft and engine manufacturers to achieve

fuel efficiency
Improved flight planning through all flight stages
Improvements in flight operation procedures such as continuous
descent operations, reduced engine taxi-in procedure, participation
in route planning/restructuring at various levels and decrease in
uplift of unnecessary surplus fuel further contribute to fuel savings
and emissions

Conclusion: Since fuel cost is among the major cost contributors, the
company ensures smart management and procurement of fuel to
achieve improved profitability

Operations

Operating more than 400 daily flights to 68 locations worldwide (47

locations within India, 21 outside India)
Primary hub and maintenance base : Mumbai
Secondary bases : Bengaluru, Chennai, Brussels, Delhi, Kolkata,
Pune
Passenger load factor on an average has been around 82% as per
DGCA statistics
On time performance record by DGCA shows an average of 79.98
which is higher than the industry average
Annual passenger complaints are as low as 1.40 per 10,000
passengers which is almost same as the industry average

Conclusion: Jet Airways aims to achieve its mission by comfortable and

efficient operations thereby achieving healthy, long term returns for the
investors

Outbound
Logistics

Operate one of the most modern fleet in the world including Boeing,
Airbus and ATR aircrafts
Ensures that passengers experience the best in comfort, cabin
design and reliability
Recently with arrival of its new Airbus A330-200 and Boeing 777300ER aircraft, a new cabin with upgraded seats have been
introduced in all classes
Short-haul destinations are served using Boeing 737 Next
Generation. ATR 72-500s are used only on domestic regional routes,
while long-haul routes are served using its Airbus A330-200, Airbus
A330-300 and Boeing 777-300ER aircraft

Conclusion: The company strives to live up to their slogan, The Joy of

Flying
Marketing &
Sales

Immense focus on building customer relations and branding the

service as an experience e.g. Jet Privilege
Heavy emphasis on marketing via social media which is clear from
more than 2.6 million likes on its Facebook page as well as close to
150K followers on Twitter
Special offers like Luck-e-Ticket to attract frequent flyers
PAGE 49

Celebration of festivals like Republic Day and Valentines day with

passengers onboard

Conclusion: Jet Airways values customers and strives to retain warm

relationships with them

Services

JetPrivilege program and its associated membership tiers offers

various benefits and privileges given as under:
E-booking services
Web/Kiosk Check-in
Tele Check-in
Guaranteed reservations up to 24 hours prior to departure
Seat Select feature on Domestic Flights
Priority stand-by at airport
Priority baggage tagging
Lounge access
Priority boarding

Conclusion: The premium quality services provided by the company

allows it to maintain its position among one of the market leaders in the
aviation industry and enhances customer experience

Support Activities
Activity

Analysis

Firm
Infrastructur
e

Total operating revenues of INR 1,957,343 lakhs in Financial Year

2014-15 compared to INR 1,730,189 lakhs in Financial Year 2013-14
shows an increase of 13% mainly due to increase in capacity by 10%
and increase in load factor by 4%.
Decrease in maintenance and repair costs by 4% in Financial Year
2014-15 essentially due to reduction in aircraft variable rentals,
which was slightly offset by increase in consumption and
obsolescence of spares
Reduction in consolidated capacity in domestic market by 6.1%
Proper and adequate system of internal controls commensurate with
its size and nature of operations to provide reasonable assurance
that all assets are safeguarded, transactions are authorized,
recorded and reported properly and applicable statutes, codes of
conduct and corporate policies are duly complied with
Practice of leasing out bulk of its wide body Boeing 777s and A330200s to foreign airlines

Conclusion: While the companys current infrastructure is currently in

line with the industry standards, the Indian aviation market is still
subject to ongoing structural challenges and robust competition is
placing pressure on yields, so there is a need to progress by focusing on
delivering an enhanced experience for our guests and improving
efficiency throughout the business
Human
Resource

The total number of permanent employees of the Company as on

PAGE 50

Management

31st March, 2013, was 12,082 (as on 31st March, 2012: 12,849)
The company has a whistle blowers Policy aimed at encouraging
employees to report to the Whistle Blowing Investigation Committee
(WBIC) for addressing and redressing any unethical and improper
practices or any other wrongful conduct in the Company
Jet Airways benefits and perks, include insurance benefits,
retirement benefits, and vacation policy
In October, 2008 1900 employees were laid off but were later asked
to join back, this was the largest layoff in the history of Indian
aviation industry

Conclusion: The company follows and empathetic approach to the

welfare of the employees and this approach enables them to promote a
sense of stability among the employees which helps employee retention
in the long run

Technology
Developmen
t

Jet Airways mobile app provides the following features:

Flight Booking
Check flight status
Avail special offers
Manage JetPrivilege account on the go
Get news updates
Check-in
Check low fares

Conclusion: Jet Airways believes in making passengers travel

experience convenient, simple and smart

Procurement

Aircraft are leased without insurance and crew

Monthly rentals paid are in the form of fixed and variable rentals
Variable Lease Rentals are payable at a pre-determined rate based
on actual flying hours, these predetermined rates of Variable Rentals
are subject to annual escalation as stipulated in respective lease
agreements
The Lessee neither has an option to buyback nor has an option to
renew the leases; dry leases are non-cancellable.
The Salient features of Wet Lease agreements are as under:
Operational control and maintenance of aircraft remains the
responsibility of the Lessor
The aircraft remains on Indian registry and is operated with
the Lessors crew
Monthly rentals are receivable on predetermined rates based
on minimum guaranteed utilization
The Wet leases are non-cancellable

Conclusion: The company follows strict guidelines and policies of

leasing which enables them to set standards for the rest of the players
in the industry
PAGE 51

From the Value Chain Analysis performed above, we can conclude that the generic strategy of
SpiceJet is OVERALL DIFFERENTIATION
Major points for strengthening this conclusion are as follows:

Jet Airways mission statement states that it will achieve the position of the most preferred
domestic airline in India by offering a high quality of service and reliable, comfortable and
efficient operations
The airline offers free meals and in-flight entertainment experience along with on-time
performance whereas its peers have removed the free meals services as a cost cutting
mechanism, this way it continues to distinguish itself from its competitors

Jet Airways continuously works for improving aircraft utilization by adding more red-eye
flights & early hour departures, thereby continuing to stay relevant for multiple customer
segments

On the commercial front, they are focusing on increasing corporate penetration and
improving Premiere Loads. There is a dedicated team now in place focusing solely on
global key accounts

The airline continues to offer an overall flight experience to its passengers thereby
positioning itself as a premium brand and appealing to the psychological instincts of the
customers

Major strategic issue for Jet Airways: On-time performance is

low as compared to the market leader
Punctuality and price of tickets are the major drivers that influence customer choices while
selecting a particular airline. Whereas Jet Airways can leverage on its superior values provided
in terms of services to claim a better price, its on-time performance is 79.98 as compared to
94.33 of Vistara and 83.80 of Indigo. This leads to increased passenger complaints which
reduces the reliability on the airlines service quality and hence tampers the brand image that
the company has built over the course of its journey from its inception in 1993.
The following facts further support the conclusion:

According to flightstats.com, Indigo has emerged as the best Indian airlines in terms of
reliability and punctuality in 2015 followed by Jet Airways
The average delay in arrival has been found to be the least in Indigo closely followed by Jet
airways which is roughly around 15-17 mins
As per data released by the Ministry of Civil Aviation, low-fare airline IndiGo saw the least
cancellations at just 0.2 %, low passenger complaints at just 2.5 per 10,000 but high OTP
of 94.6%

PAGE 52

Recommendations for overcoming this problem:

One of the key points that is identified from the conclusion above is that there is a basic
difference between the services and operations of Indigo and Jet airways. Firstly because
Indigo operates on its on-time performance and uses it to attract customers, and secondly
since its mission is faster reach to destinations instead of the overall flight experience as
ensured by Jet, it will be difficult for Jet as a company to reduce the delays as easily as Indigo
does. Since Jet offers meal services to its customers, the problem of delay is further enhanced
as much time is wasted in cleaning and getting the aircraft to get ready for the next flight. For
this they can ensure that such delays can be avoided by adopting Indigos policy of gathering
the waste and litter some time before the flight reaches its destination. That way although
passengers experience wont be hampered, reliability can be ensured by decreasing the
delays to some extent. Another issue is Jet airways leases its wide-body aircrafts for lease to
foreign airlines. So there are times when flight cancellations occur due to natural phenomenon
like fog in Delhi during winter etc. If some aircrafts are removed from lease and kept to be
used during such incidents, these procedural delays can be reduced, however there will be a
definite trade-off between this and the cost of operations. However, in order to gain
sustainable competitive advantage as compared to its competitors, the company can think of
working along these lines to overcome this problem and reach their mission of being the most
preferred domestic airline in the country in all respects.

VISTARA

PAGE 53

Primary Activities
Activity

Analysis

Inbound
Logistics

Made Delhi a hub since it has low Aviation Turbine Fuel (ATF) prices
and a comparatively less congested airport.
The Vistara management were aware that airport charges will be
reviewed after 2014 and expected the new charges to be much
lower. In February 2015, a cut close to 78.4 per cent in airport
charges for Delhi was proposed. Fuel costs account for around 45-50
per cent of the airline's cost whereas airport cost is less than 10 per
cent.
Outsources services such as IT, engineering services, airport
handling and line maintenance. Line maintenance includes regular
checks and proper handling of spare parts. This minimizes their
costs.
Relied on Singapore Airlines' expertise to get competitive contracts
in areas such as engineering maintenance and aircraft leasing.

Conclusion: A lot of emphasis is given on costs and the time taken to

get things ready. It has a low cost base similar to LCCs and a premium
front-end.

Operations

Operating more than 325 weekly domestic flights.

Has a very high On-Time Performance (OTP) of 89% as of 2015.
Commenced single engine taxiing on arrival in order to burn less
fuel.

Conclusion: Vistara focuses on operational efficiency with a high OTP

whilst also looks for avenues to reduce cost

Outbound
Logistics

Marketing &
Sales

Customer facing activities have been premium.

Recently commenced a state-of-the-art lounge in Delhi.
There are more services such as separate check-in, priority tagging
of bags, segmented handling of customer calls, separate boarding
queues and more menu options.

Conclusion: Believes that a full service is more than just offering inflight meals. Differentiates itself by providing a complete end-to-end
service to the customer.
Differentiated its frequent flyer program Club Vistara by offering
points based on the money spent rather than on the miles flown.
Partnership with Singapore Airlines and SilkAir with which Club
Vistara members will earn points while flying those two airlines.
Looking at fly-and-stay tie ups with Taj Hotels and Resorts which is
owned by Tata Sons.
Intensive marketing campaign targeted towards companies whose
executives frequently fly business class.
Conclusion: Vistara aims to be closer to their potential customers
and spends less on marketing.

Services

Differentiates by offering three classes: business, economy and

premium economy
Competitors such as Air India and SpiceJet have tried premium
economy seats in the past by reserving the first few rows. Vistara
have differentiated by offering an exclusive cabin to these
customers.
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The premium economy class offers three to six inches more legroom,
5 kg more baggage and more menu options than the economy class.

Obtaining Generic Strategy of Vistara using Value

Chain Analysis
From the Value Chain Analysis performed above, we can conclude that the
generic
strategy
of
SpiceJet
is
INTEGRATED
COST
LEADERSHIP/DIFFERENTIATOR
Major points for strengthening this conclusion are as follows:
The companys motto is every rupee counts. They have kept their noncustomer facing costs low whilst having a premium front-end.
Kept Delhi as a hub due to lower fuel prices and lesser airport charges. It
even started operations to Hyderabad due to its low ATF sales tax.
Only airline to offer a premium economy class with exclusive services.
Offers extra leg-room space and more menu options to their customers.
Leverages the expertise and resources of both the parent brands to reduce
overhead costs and offer better service.

Major strategic issue for Vistara: Lagging behind its peers in

terms of passenger load factor.
Vistara has an average load factor of 60% which is lower than the industry
average of 80%. The loading factor especially in the business class is not what
they had anticipated initially. The reason being that the customers are already
finding their required value in the premium economy class. Theyd not want to
spend an excessive amount on short haul flights (the average flight duration in
India is approximately 80 minutes). This model would ideally work for the long
duration international flights which Vistara plans to introduce in the long term.
Recommendations for overcoming this problem:
1) The first recommendation to overcome this problem would be to start
international operations. The biggest hindrance to Vistaras international
operations is the infamous 5:20 rule in India. An airline needs to operate
domestically for at least 5 years and have a fleet of at least 20 aircrafts
in order to start international operations. However, the new government
PAGE 55

has indicated that they are in favor of abolishing the rule. There is some
uncertainty with regards to the rule being abolished or not since the
Federation of Indian Airlines (FIA), comprising of Jet Airways, Indigo,
GoAir and SpiceJet is lobbying against it. So Vistara may just continue
with their normal operations and wait to see if this rule is abolished. If
this rule remains, Vistara should consider acquiring GoAir. This would
enable them to fly international since GoAir has a fleet of 19 Airbus A320
aircrafts and have been operating in India for five years. Also, GoAirs
route dispersal complies with the governments rule of deploying
capacity to Tier II cities.
2) The second recommendation would be to reconfigure the aircrafts and
completely do away with the unprofitable business class. The premium
economy and the economy classes have done well. Doing away with the
business class and adding more seats to the premium economy and
economy would help increase the load factor till Vistara can commence
its international operations.

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REFERENCES

http://www.livemint.com/Companies/NjHGKS5smpmDUsH6m6xrUK/Indias-domestic-aviation-marketfastest-growing-in-the-worl.html
http://www.ibef.org/industry/indian-aviation.aspx
http://www.makeinindia.com/sector/aviation - Makeinindia
http://www.india-aviation.in/pages/view/38/an_overview.html - MoCA- conference
http://www.airbus.com/company/market/forecast/- airbus
http://timesofindia.indiatimes.com/business/india-business/Two-startup-airlines-may-fly-from-Bengaluru-thissummer/articleshow/46628050.cms -startups planes
http://www.bangaloreaviation.com/2016/02/2015-annual-review-the-best-airlines-in-india.html - 2015 trends competitor analysis
http://dgca.nic.in/reports/Traffic_reports/Traffic_Rep0315.pdf - competitor analysis
http://marketrealist.com/2014/12/top-airlines-revenue-passenger-kilometers/
http://www-935.ibm.com/services/multimedia/uk_en_airlines_2020.pdf strategic groups example

GoAir
http://articles.economictimes.indiatimes.com/2013-11-26/news/44486913_1_giorgio-de-roni-net-profit-port-blair
http://articles.economictimes.indiatimes.com/2015-01-12/news/57983225_1_giorgio-de-roni-budget-carrier-goair against 5/20 rule
http://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/goair-becomes-first-indian-airline-to-start-night-flights-to-portblair/articleshow/50681422.cms port blair to Bangalore
http://www.businessinsider.in/CEO-Prock-Schauer-envision-to-take-GoAir-to-new-heights/articleshow/47936098.cms - Prock Schauer HRM
http://www.businessinsider.in/GoAir-wants-to-do-an-IndiGo-mulling-to-raise-150-million-via-IPO/articleshow/49578327.cms
http://www.exchange4media.com/marketing/goair-%E2%80%93-taking-flight-on-marketing--digital-wings_41001.html marketing
http://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/how-ceo-wolfgang-prock-schauer-plans-to-scale-up-goairsoperations/articleshow/47932825.cms
http://www.business-standard.com/article/companies/goair-s-big-test-begins-from-2016-115062600217_1.html
http://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/After-CEO-Giorgio-De-Roni-30-GoAir-pilotsquit/articleshow/47009195.cms
http://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/a320neo-delivery-to-goair-likely-to-bedelayed/articleshow/50255307.cms
http://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/wadia-owned-goair-opposes-scrapping-of-5/20-rule-that-willbenefit-tatas-airlines/articleshow/50661279.cms
http://economictimes.indiatimes.com/opinion/interviews/new-airlines-like-vistara-airasia-trying-to-influence-aviation-policy-says-goairs-jehwadia/articleshow/47535683.cms

http://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/a320neodelivery-to-goair-likely-to-be-delayed/articleshow/50255307.cms

Jet Airways
https://en.wikipedia.org/wiki/Jet_Airways
http://www.jetairways.com/doc/InvestorRelations/WhistleBlowerPolicy.pdf
http://www.jetairways.com/EN/JP/InvestorInformation/policies.aspx
http://www.jetairways.com/EN/JP/InvestorInformation/policies.aspx
http://www.jetairways.com/doc/InvestorRelations/AnnualReport2012-13.pdf
http://www.jetairways.com/en/in/jetexperience/mission-statement.aspx
http://www.bangaloreaviation.com/2016/02/2015-annual-review-the-best-airlines-in-india.html
http://www.jetairways.com/EN/IN/JetExperience/in-flight.aspx
http://www.jetairways.com/EN/IN/JetPrivilege/Promotions.aspx
http://www.jetairways.com/EN/IN/JetExperience/about-jet-airways.aspx
http://www.jetairways.com/doc/FactSheet_JetAirways.pdf

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