AIRLINES Industry

Airlines: Service Industry
ACKNOWLEDGEMENT
I take this opportunity to thank Dr. Vijay Wash for giving us an opportunity to
work on the project on Airline Industry for the subject ‘Product & Service
Management’, which has helped us understand the Service Industry to certain
extent.
I also thank Prof. P. L. Arya (Director NLDIMSR) for providing us with the facility
of the Computer center and a very good library which has helped us doing our
project.
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Index
Sr No. Topic Page

1 Executive summary 2
2 Service marketing 4
3 Unique characteristics of service industry 4
4 Marketing mix for service industry 8
5 Airline industry 12
6 Introduction to airline industry 15
7 History of industry 15
8 Structure of the industry 17
9 Indian aviation industry 21
10 Players in the airline industry 23
11 Airport infrastructure 26
12 Development of civil aviation in India 28
13 Civil aviation policy 30
14 Infrastructure development 31
15 Airport privatization 33
16 Alliance strategy 36
17 Recent development 39
18 Case study- Jet airways 41
SUMMARY
We owe it to the Wright brothers for having invented airplanes. The

Wright brothers could not have imagined how airplanes would
change the way people live & do business.
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The airline industry has witnessed a sea change from two wheeler
bi-planes to the Boeing 747's that are visible in our skies today. The
passage of time has witnessed competition grow from leaps to
bounds. Today airplanes are present in every country around the
world with expectation of a few places. Even the industry has been
growing year on year
It was JRD Tata who made the first move to build up an airline
industry in India. He with the help of Nevil Vincent, a former RAF
pilot, went ahead and drew a plan for the operation of first flight
from Karachi to Mumbai with single stopover at Ahmedabad. This is
how Tata Airlines was born which was donated to Indian
Government. On 28th May 1953, Air Corporation Act – 1953, the
government of India nationalized the airlines industry. In accordance
with this act, the two air corporations, viz. Indian Airlines
Corporation and Air India International were established. In 1994 the
monopoly was ended and Indian skies were opened for any carriers
who fulfills the statutory requirement
The Indian aviation industry can be broadly classified into two main
segments - Civil and Cargo. In fact, the birth of civil aviation is
attributed to air cargo and mail. In the beginning, mail and air cargo
were the important elements of air carrier services than passengers.
The major players in the Indian context are Air India in the
international segment and Indian Airlines, Jet Airways and Sahara in
the domestic segment.
Over the years, the aviation sector in India has evolved and today it
is on the threshold of a major shake out with the divestment of the
Indian government's stake in Air India and Indian Airlines on the
cards. A number of domestic and foreign parties have evinced
interest in the divestment process. Recently, foreign airlines like
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Virgin Atlantic of Britain and Singapore Airlines have also entered

the Indian skies.
The Indian aviation sector till recently was highly regulated by the
government. As recently as the eighties saw the introduction of
some new initiatives like the air taxi scheme, whose main objective
was to boost tourism.
Domestic and international passenger traffic in India is projected to

grow annually at 12.5% and 7% respectively over the next decade.
At the same time, domestic and international cargo traffic is
expected to grow at 4.5% and 12% respectively. By the year 2005,
Indian airports are likely to handle 60mn international passengers
and 300,000 tons of domestic and 1.2mn tons of international
cargo.
SERVICES MARKETING
Service industry is witnessing a major boom in India. Services like
banking, car financing, consumer durable credit, cellular, paging,
express, hospitality, travel and tourism, airlines, and, educational
services on are today realizing the importance of marketing. Along
with these big service businesses, many small businesses ranging
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from beauty saloons, pubs, gyms, play schools and so on are

realizing the importance of marketing.
UNIQUE CHARACTERSTICS OF SERVICES

What is a service? And why should services receive special
treatment from marketers? A popular definition describes services
as
"any act or performance that one party can offer to another that is
essentially intangible and does not result in the ownership of
anything. Its production may or may not be tied to physical
product."
Although, the distinction between goods and services is somewhat

artificial, since the success of goods manufacturers is vitally
dependent on the service they provide, there are four commonly
cited characteristics of services that make them different to market
from goods: Intangibility, Inseparability, Variability and Perishability.
Intangibility
Pure services such as baby-sitting cannot be seen or touched. They
are ephemeral performances that can be experienced only as they
are delivered. As the above definition of service suggests,
intangibility may represent the most critical difference between
services and goods, and its implications for marketing are great.
Intangible services are difficult to sell because they cannot be

produced and displayed ahead of time. They are therefore harder to
communicate to prospective customers. A passenger cannot feel the
service that he would encounter in the airplane, however person
may talk to other travelers who have experienced the same service,
but their experience does not necessarily be the same.
Marketers of services can reduce these risks by stressing tangible

cues that will convey reassurance and quality to the prospective
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customers. These tangible cues range from the firm's physical

facilities to the appearance and demeanor of its staff to the
letterhead on its stationery to its logo. Life insurance companies are
particularly savvy about this problem. Their service is, after all, the
most intangible service: by definition, the buyer will never know the
ultimate result of what he or she has bought! To compensate for this
intangibility the major companies over the world have developed
strong visual symbols for their firms.
• Prudential -The rock of Gibraltar
• All state -Protective hands
• Traveler’s -A red umbrella
• Nationwide -A blanket
• Wausau -A train station
Inseparability
Different service marketing marketers interpret this characteristic
differently, but all interpretations point out those special operations
problems exist for the firm's managers. One interpretation of this
term is the inseparability of customers from the service delivery
process. In particular, many services require the participation of the
customer in the production process. A child getting a haircut must
sit still; otherwise, the family photo may have to be delayed for a
month. The person who comes to a Chartered Accountant (C. A.) at
the last minute with boxes of disorganized records may cause the C.
A. to overlook some possible deductions. These examples illustrate
the fact that, unlike goods, which are often produced in a location
far removed from the customer and totally under the control of the
manufacturing firm, service production often requires the presence
and active participation of the customer - and of other customers.
Depending upon the skill, attitude, and cooperation so on that
customers bring to the service encounter, the results can be good or
bad, but in any event are hard to standardize.
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A second interpretation of inseparability refers to the fact that in

some service industries the service delivered is inextricably tied to
particular individual service providers. Customers may have ground
for complaint if their service is not provided by, for example, the
surgeon or lawyer they thought they were paying for.
Variability
The fact that service quality is difficult to control compounds the
marketer's task. Intangibility alone would not be such a problem in
customers could be sure that the services they were to receive
would be just like the successful experiences their neighbors were
so pleased with. But in fact, customers know that services can vary
greatly. Different front-line personnel have different abilities. Even
the same service provider has good days and bad days or may be
less focused at different times of day. Services are performances,
often involving the cooperation and skill of several individuals, and
are therefore unlikely to be same every time. This potential
variability of service quality raises the risk faced by the consumer.
The service provider must find ways to reduce the perceived risk
due to variability. One method is to design services to be as uniform
as possible - by training personnel to follow closely defined
procedures, or by automating as many aspects of the services as
possible. The appeal of some service personnel - particularly, those
involved in such expensive personnel services as beauty parlors
treatments or home decoration - lies in their spontaneity and
flexibility to address individual customer needs. The danger with too
much standardization is that these attributes may be designed right
out of the services, therefore reducing much of their appeal. A
second way to deal with perceived risk from variability is to provide
satisfaction guarantees or other assurances that the customer will
not be stuck with a bad result.
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Perishability
The fourth characteristic distinguishing services from goods is their
time dependence. Services cannot be inventorised, since they are
performed in real time. And time periods during which service
delivery capacity sits idle represent revenue-earning potential that
is lost forever. Periods of peak demand cannot be prepared for in
advance by producing and storing services, nor can they be made
up for after the fact. A service opportunity occurs at a point in time,
and when it is gone, it is gone forever. This can present great
difficulty in facilities planning. A survey of service firms found that
the greatest operational challenges facing them were posed by the
perishability of their products.
Matching service capacity to demand patterns can involve

managing one or both elements. Perishability often puts a greater
burden on service marketers to manage demand than it does on
goods marketers, who can build up inventories to meet peak
demand or can reduce prices later to move the unsold inventory.
The cited survey found that the firm's principal method for
controlling demand was to increase personnel selling during
potentially slow periods. Surprisingly, few firms claimed to use the
standard economic solution of price changes to increase or decrease
demand, although some service industries, such as resort hotels
with seasonal demand, do this routinely.
Few service providers had opinion that they developed alternative,

counter seasonal service products to use slack capacity, although
that has long been a common practice by goods marketers. Many
service providers also control demand by requiring appointments.
The alternative to controlling demand is to make service capacity
flexible. Some service firms keep on call frontline personnel who can
arrive on short notice to meet the surges in demand, or cross train
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support personnel to assist with customer service during busy

periods.
MARKETING MIX FOR SERVICES MARKETING

The marketing mix refers to the blend of ideas, concepts & features
which marketing management put together to best appeal to their
target market segments. Each target segment will have a separate
marketing mix, tailored to meet the specific needs of consumer in
the individual segment.
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Service marketing managers have found that the traditional four P's
of marketing are inadequate to describe the key aspects of the
service marketer's job. The traditional marketing mix is said to
consist of the following elements of the total offering to consumers:
the product (the basic service or good, including packaging,
attendant services etc.); its price; the place where the product is
made available (or distribution channels - not generally a real issue
for most services, except perhaps for repair and maintenance); and
promotion (marketing communication: advertising, public relations
and personal selling).
7 P’s of Service Marketing
Price Produc
t
Promotio
n
Service
Quality Physical
Evidence
Place
People Process
The product mix

The product here refers to Airline service offering. Although service
products are essentially intangible, there are certain pyhsical
characteristics which consumer assess in their evaluation of product
choice. It the service mix , there is passenger services , cargo
services, & the mail services.
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• Attractiveness of the offering in terms of pyhsical features such

as consumers have high expectation, the food & drinks offered ,
entertainment.
• Facilities available, associated level of services such as, quality of
seats & interior decoration.
The promotional mix

The aims of promotion fall into three main
categories: to inform, to remind, & to
pursuade. It will always be necessary to
inform prospective consumers about new
products & services, but other issue may also
need this type of communication to
consumers; new uses, price changes,
information to build consumer confidence & to
reduce fears, full description of service offering, image building.
Similarly consumers may need to get reminded about all these
types of issues, especially in the off-peak season.
It is vitally important to recognisse that promotion, or marketing
communications generally, may not always be aimed at potential
consumer or end user of service. In many business areas, it is to
design promotions aimed at channel customers to complement end
user promotion.for e.g Airlines will need to promote their services to
tour operaters as well as end user.
The pricing :
Pricing in airlines is a fairly complex issues,
since there are price variations because
variations in the level of demand, particularly
due to seasonality, when every Airlines gives
price discounts & competition is tough. Airlines
will always faced by high levels of fixed costs, leading to variants of
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cost-plus pricing or ROI as key determinants of pricing levels. It is

important to includde pricing tactics which exploit price sensitivities
fully. It differentiates service levels & offer higher price ‘ value
added ‘services, as in business class air travel.
The Distribution:
In Airlines, they utilise more than one
method of distribution.for e.g they
sell tickets through travel agents &
sell seats on flights to tour operators ,
whilst also operating direct
marketing. Whichever distribution
strategy is selected, channel management plays a key role. For
channels to be effective they need realiable updated
information. For these reason, I.T has been widely adopted such
as on-line booking system.
Some marketers suggest that the unique requirements of selling

services require the manager attend to three additional P's. These
are people, physical evidence and process.
People:
Many services require personal
interactions between customers and the
firm's employees and these interactions
strongly influence the customer's
perception of service quality. For
example, a person's stay at a hotel can
be greatly affected by the friendliness, knowledge ability and
helpfulness of the hotel staff - in most cases the lowest paid people
in the organization. One's impression of the hotel and willingness to
return are determined to a large extent by the brief encounters with
the front-desk staffs, bellhops, housekeeping staff, restaurant wait
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staff and so on, many of which take place outside the direct control
of the hotel management. In fact, the average hotel patron has very
little contact with the hotel supervisors and managers.
Therefore, management faces a tremendous challenge in selecting

and training all of these people to do their jobs well, and, perhaps
even more important, in motivating them to care about doing their
jobs well, and, perhaps even more important, in motivating them to
care about doing their jobs and to make an extra effort to serve
their customers. After all, these employees must believe in what
they are doing and enjoy their work before they can, in turn, provide
good service to customers.
For this reason, human resources management policies and

practices are considered to be of particular strategic importance for
in delivering high-quality services. Establishing a customer-oriented
culture throughout the firm and empowering employees to provide
quality service cannot be established merely by putting up inspiring
posters. Management leadership, job redesign and systems to
reward and recognize outstanding achievement are among the
issues that a successful service manager must address. The term
"internal marketing" has been coined to characterize the sets of
activities a firm must undertake to woo and win over the hearts and
minds of its employees to achieve service excellence.
The "people" component of the service marketing mix also includes

the management of the firm's customer mix. Because services are
often experienced at the provider's facilities, other customers who
are being served there can also influence one’s satisfaction with a
service. Ill mannered restaurants customers at the next table, crying
children in a nearby seat on an airplane and commercial bank
customers whose lengthy transactions take up the teller's are all
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examples of unpleasant service conditions caused by a firm's other

patrons.
On the other hand, the right mix of customers can greatly increase
the enjoyment of experience - for example, at entertainment
services, such as nightclubs or sporting events. Determining the
desirable customer mix for a service, segmenting the market into
compatible groups and managing customer arrivals to avoid conflict
and enhance the service experience are essential components of
service management.
Physical Evidence
This element of the expanded marketing mix addresses the
"tangible" components of the service experience and firm's image
referred earlier. Physical surroundings and other visible cues can
have a profound effect on the impressions customers form about
the quality of the service they receive. The "services cope" - that is,
the ambience, the background music, the comfort of seating and
the physical layout of a service facility - can greatly affect a
customer's satisfaction with a service experience.
The appearance of the staff, including clothes and grooming, may

be used as important clues. Promotional materials and written
correspondence provide tangible reassurance, they can be
incorporated into the firm's marketing communications to help
reduce customer anxiety about committing to the purchase. Service
firms should design these items with extreme care, since they will
play a major role in influencing a customer's impression of the firm.
In particular, all physical evidence must be designed to be
consistent with the "personality" that the firm wishes to project in
the marketplace.
Process Of Service Production
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Because customers are often involved in the production of services,

the flow and progress of the production process is more important
for services than it is for goods. A customer who buys a television
set is not particularly concerned about the manufacturing process
that made it. But the customer at a fine restaurant is not merely
interested in the end result - the cessation of hunger. The entire
experience of arriving at the restaurant - of being seated, enjoying
the ambiance, ordering, receiving and eating the meal - is
important. The pace of the process and the skill of the provider are
both apparent to the customer and fundamental to his or her
satisfaction with the purchase.
The importance of the process is true even for less 'sensual"

experiences. A customer who applies for a loan at a bank evaluates
the purchase not only by the amount of the loan received and the
interest rate paid. The speed and sensitivity of the approval process,
the interaction with the bank officers, the accuracy of bank
statements and the ease of getting redress if mistakes are found all
affect the person's attitudes about doing further business with the
bank and his or her willingness to recommend it to others.
Therefore, when designing service production processes, particular
attention must be paid to customer perceptions of that process. For
this reason, marketing and operations are closely related in service
management.
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INTRODUCTION
We owe it to the Wright brothers for having invented airplanes. The
Wright brothers could not have imagined how airplanes would
change the way people live & do business. The airline industry has
witnessed a sea change from two wheeler bi-planes to the Boeing
747's that are visible in our skies today. The passage of time has
witnessed competition grow from leaps to bounds. Today airplanes
are present in every country around the world with expectation of a
few places. Even the industry has been growing year on year.
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Technology has also made a significant contribution to the airline

industry; over the years technological advances have been
incorporated into the science of flying airplanes. The industry has
also propelled the growth of ancillary services like travel agents,
courier services, cargo handling, clearing & forwarding agents etc
HISTORY OF INDUSTRY
Nevill Vincent, a former RAF pilot came to India from Britain in 1929,
on a brainstorming tour to survey a number of possible routes. It
was through providence that he met JRD Tata, the first Indian to
secure an A-license within the shortest number of hours. Vincent
worked out a scheme, secured JRD's approval and together they
presented it to Mr. Peterson, the director of Tata Sons and also JRD's
mentor. Sir Dorab Tata, the then chairman of Tata Sons, pleasantly
surprised all by giving the scheme his okay. So they went ahead and
drew plans for the operation for the first flight from Karachi to
Mumbai with a single stopover at Ahmedabad. All that they asked
was a guarantee from the government for a year for the sum of
Rs.100,000. This, however, was turned down. The Tata-Vincent
combine was naturally disappointed but not dismayed. A second
scheme was prepared. This time the guarantee asked was
Rs.50,000 for the first year, Rs.25,000 for the second year and no
guarantee at all from the third year onwards. This scheme was
rejected too. The team then tried a third time. This time they offered
to donate an air service to the Government of India with no strings
attached. The Government finally agreed and thus was born Tata
Airlines that later became Air India.
On 28th May 1953, consequent to the coming into force of the Air
Corporations Act, 1953, the Government of India nationalized the
airlines industry. In accordance with this Act, the two air
corporations, viz. Indian Airlines Corporation and Air India
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International, were established and the assets of all the then

existing airline companies (nine) were transferred to the two new
Corporations. The operation of scheduled air transport services was
under the monopoly of these two Corporations and the Act
prohibited any person other than the Corporations or their
associates to operate any scheduled air transport services from, to,
or across India.
However, after 40 years, in 1994, the wheel had turned a full circle
as the Air Corporation Act, 1953 was repealed with effect from 1st
March 1994. That ended the monopoly of the Corporations on
scheduled air transport services. Air transport in India is now open
to any carrier who fulfills the statutory requirements for operation of
scheduled services.
STRUCTURE OF THE INDUSTRY
Types of Airline Certification

All airlines hold two certificates from the federal government: a
fitness certificate and an operating certificate. The Department of
Transportation (DOT) issues fitness certificates - called certificates
of public convenience and necessity - under it's statutory authority.
Basically, the certificate establishes that the carrier has the
financing and the management in place to provide scheduled
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service. The certificate typically authorizes both passenger and

cargo service. Some airlines, however, obtain only cargo-service
authority. Commuter airlines that use aircraft with a seating
capacity of 60 or fewer seats or a maximum payload capacity of no
more than 18,000 pounds can operate under the alternative
authority of Part 298 of DOT’s economic regulations.
Operating certificates, on the other hand, are issued by the Federal

Aviation Administration (FAA) under Part 121 of the Federal Aviation
Regulations (FARs), which spell out numerous requirements for
operating aircraft with 10 or more seats. The requirements cover
such things as the training of flight crews and aircraft maintenance
programs. All majors, nationals and regionals operate with a Part
121 certificate.
How Major Airlines Are Structured

• Line Personnel
These include everyone directly involved in producing or selling an
airline’s services - the mechanics, who maintain the planes; the
pilots, who fly them; the flight attendants, who serve passengers
and perform various inflight safety functions; the reservation clerks,
airport check-in and gate personnel, who book and process the
passengers; ramp-service agents, security guards, etc. Line
personnel generally fall into three broad categories: engineering
and maintenance, flight operations, and sales and marketing. These
three divisions form the heart of an airline and generally account for
85 percent of an airline’s employees.
Operations
This department is responsible for operating an airline’s fleet of
aircraft safely and efficiently. It schedules the aircraft and flight
crews and it develops and administers all policies and procedures
necessary to maintain safety and meet all FAA operating
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requirements. It is in charge of all flight-crew training, both initial

and recurrent training for pilots and flight attendants, and it
establishes the procedures crews are to follow before, during and
after each flight to ensure safety.
Dispatchers also are part of flight operations. Their job is to release
flights for takeoff, following a review of all factors affecting a flight.
These include the weather, routes the flight may follow, fuel
requirements and both the amount and distribution of weight
onboard the aircraft. Weight must be distributed evenly aboard an
aircraft for it to fly safely.
Maintenance
Maintenance accounts for approximately 11 percent of an airline’s
employees and 10-15 percent of its operating expenses.
Maintenance programs keep aircraft in safe, working order; ensure
passenger comfort; preserve the airline’s valuable physical assets
(its aircraft); and ensure maximum utilization of those assets, by
keeping planes in excellent condition. An airplane costs its owner
money every minute of every day, but makes money only when it is
flying with freight and/or passengers aboard. Therefore, it is vital to
an airline’s financial success that aircraft are properly maintained
Airlines typically have one facility for major maintenance work and
aircraft modifications, called the maintenance base; larger airlines
sometimes have more than one maintenance base. Smaller
maintenance facilities are maintained at an airline’s hubs or primary
airports, where aircraft are likely to be parked overnight. Called
major maintenance stations, these facilities perform routine
maintenance and stock a large supply of spare parts.
A third level of inspection and repair capability is maintained at

airports, where a carrier has extensive operations, although less
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than at its hubs. These maintenance facilities generally are called

maintenance stations.
Sales and Marketing

This division encompasses such activities as pricing, scheduling,
advertising, ticket and cargo sales, reservations and customer
service, including food service. While all of them are important,
pricing and scheduling in particular can make or break an airline,
and both have become more complicated since deregulation. As
explained in the next chapter, airline prices change frequently in
response to supply and demand and to changes in the prices of
competitors’ fares. Schedules change less often, but far more often
than when the government regulated the industry. Airlines use
sophisticated computer reservation systems to advertise their own
fares and schedules to travel agents and to keep track of the fares
and schedules of competitors. Travel agents, who sell approximately
80 percent of all airline tickets, use the same systems to book
reservations and print tickets for travelers.
Subcontractors
While major airlines typically do most of their own work, it is
common for them to farm out certain tasks to other companies.
These tasks could include aircraft cleaning, fueling, airport security,
food service and in some instances, maintenance work. Airlines
might contract out for all of this work or just a portion of it, keeping
the jobs in house at their hubs and other key stations. However,
whether an airline does the work itself or relies on outside vendors,
the carrier remains responsible for meeting all applicable federal
safety standards.
Security measures
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The government will most probably accept the recommendations of

the technical up gradation committee, set up to look into the
different aspects of air security.
For international flights Air India & Indian airlines, security personnel
have been trained in passenger profiling, supposed to be the "most
fool-proof" security arrangement to identify suspicious traits among
passengers. The government is willing to spare more highly trained
commands, but the airlines have to be prepared to pay the price of
having the sky on board, it is learnt
THE INDIAN AVIATION INDUSTRY

The civil aviation activities can be broadly classified into three
areas:
• Operational,
• Infrastructure
• Regulatory-cum-developmental.
On the operational front, Air India provides international air services
while Indian Airlines is involved in the field of domestic air services.
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Pawan Hans supplies helicopter support services, primarily to the

petroleum sector. Air India, Indian Airlines and its subsidiary Alliance
Air (which also provides domestic services) and Pawan Hans are
government-owned. Other than them, there are a few private
domestic operators too. Airports Authority of India (AAI), which was
formed in April 1995 through the Airports Authority of India Act, by
merging the separate ‘national’ and ‘international’ airport
authorities that existed earlier supply infrastructural facilities.
In terms of size, the Indian aviation industry's turnover was

approximately Rs.40 billion in FY99. 14 million passengers traveled
using its services in FY99. The growth profile of the industry in the
last three decades is given below.
Year Aircraft Passengers Passengers

(mn km flown) flown ('000 nos) (mn km flown)
1970-71 37.8 2,123 1,559.0
1980-81 41.2 4,850 3,917.2
1990-91 58.7 7,912 7,028.1
1995-96 88.8 10,356 9,249.3
1996-97 112.5 12,312 11,047.3
1997-98 109.4 11,549 10,702.9
1998-99 117.2 12,017 10,820.3
No of Passengers flown During 1970-1999
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14000
12000
10000
8000
6000
4000
2000
0
1970-71 1980-81 1990-91 1995-96 1996-97 1997-98 1998-99
Passengers flown ('000 nos)

Passengers (mn km flown)
Source: Indiainfoline.com
From the above table, it is clear that the aviation industry in the
country has grown by leaps and bounds in terms of kilometers flown
and also number of passengers serviced. However, as compared to
the previous decades, the rate of growth has fallen in recent years.
In fact, in the period FY97 to FY99, the number of passengers has
fallen and so has the length of passenger kilometers traveled.
In terms of characteristics, the aviation industry is seasonal in

nature. In the period April to May and again from November to
December, demand is high. However, in the June-July period
demand falls.
Domestic Players in Airlines

Till recently, Indian Airlines had a monopoly in the sector. However,
in 1993 the skies were opened for private participation and 8
airlines got the nod to commence operations. Of these, only two
have survived - Jet Airways and Sahara Airlines. Another airline,
called Crown Express, has very recently got an approval from the
government to start domestic operations.
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The market share of major players in 2000-01.

Market share
Airlines Percentage Aircraft’s owned
Indian airlines 51 57
Jet airways 42 33
Sahara airlines 7 9
Source: ICMR Research Team
Market Share of Major Players
Source: ICMR Research Team
Market Share
Over the past few years, Indian Airlines has lost market share and is
7%
currently second to private operators. Its market share has fallen
Indian airlines
from 50.5% in 1999 to 46.8% in 2000. The major gainers are the
Jet airways
two domestic operators Jet and Sahara, the major beneficiary being
42% Sahara airlines
Jet Airways. The combined market share of both of them has risen
from 49.5% in 1999 to 53.2% in 2000. In terms of plant load factor
51%
too IA lags behind. While the average for all domestic operators was
around 63.4%, Indian Airlines clocked a performance of 61.9%. Jet
had the highest plant load factor of around 71.8%.
Indian Airlines
The network of Indian Airlines spans from Kuwait in the west to
Singapore in the East and covers 75 destinations - 59 within India
and 16 abroad. The Indian Airlines international network covers
Kuwait, Oman, U. A. E, Qatar and Bahrain in West Asia, Thailand,
Singapore, Yangoon (Rangoon) and Malaysia in South East Asia and
Pakistan, Nepal, Bangladesh, Myanmar, Sri Lanka and Maldives in
the South Asian subcontinent.
Indian Airlines flight operations center on its four main hubs the
main metro cities of Delhi, Mumbai, Calcutta and Chennai. Together
with its subsidiary Alliance Air, Indian Airlines carries a total of over
7.5mn passengers annually.
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At present, Indian Airlines has a fleet strength of 55 aircraft's. Out of

them, are 11 Airbus A300, 30 Airbus A320, 11 Boeing B737 and 3
Dorniers D0228. Indian Airlines has total staff strength of around
22,000 employees. Its annual turnover, together with that of its
subsidiary Alliance Air, is over Rs.40bn.
Other Airline operators:

The number and type of aircrafts owned by the two main private
operators are as follows.
Operator No. of Aircraft Type of Aircraft
Jet Airways 12 B-737-400
Sahara India Airline 2 B-737-200
International Airlines
In the international sector, Air India is the sole Indian service
provider. However, in the international market, the share Air-India is
negligible compared to that of the likes of British Airways and
Emirates Air.
Air India
Air-India International was registered on March 8, 1948 and it
inaugurated its international services on June 8, 1948, with a weekly
flight from Mumbai to London via Cairo and Geneva with a Lockheed
Constellation aircraft. Later on in 1962, the word 'International' was
dropped. Effective March 1, 1994, the airline has been functioning
as Air-India Limited.
At present, Air India has a fleet strength of 23 aircrafts. Out of them

are 6 Boeing 747-400, 4 Boeing 747-200, 2 Boeing 747-300 Combi,
8 Airbus 310-300 and 3 Airbus 300-B4. The airline has plans to
induct 4 more A-310-300 aircraft on dry lease effective December
2000. From a total of three stations served at the time of
nationalization, Air-India's network today covers 44 destinations. In
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addition, Air India has a so-called 'code sharing' arrangement with a

number of foreign airlines. These include Swiss Air, Bellview Airlines,
Austrian Airlines, Asiana Airlines, Air France, Virgin Atlantic,
Scandinavian Airlines, Singapore Airlines, Aeroflot, Air Mauritius,
Kuwait Airways and Emirates.Air India carried a total of 3.35mn
passengers in FY2000 as against 3.17mn in FY99. This made for a
plant load factor of 70.3%.
Financials
Air-India has posted an operating profit of Rs.760mn in FY2000. This
is good news given the fact that the airline had recorded its highest
operating loss of Rs.4.13bn only three years ago i.e. in FY97. The
airline had made its last operating profit in FY95. The net loss has
been contained at Rs.370mn partly due to an additional payout of
Rs.1.78bn during the fiscal due to a hike in global and domestic fuel
prices. Air-India's total turnover during the year was Rs.46.62bn as
compared to Rs.42.36bn last year - a growth of 10%.
While PBIDT was a negative Rs.6.48bn, the firm succeeded in raking

in a cash profit of Rs.4.12bn during the year. Air-India has also
achieved a positive return on its investments of over 5% in FY2000
on capital employed in the business as compared to a negative
return in the last couple of years.
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AIRPORT INFRASTRUCTURE
There are a total of 449 airports/airstrips in the country. Airports are
presently classified as international and domestic airports.
International Airports: These are available for scheduled

international operations by Indian and foreign carriers. Presently,
Mumbai, Delhi, Chennai, Calcutta and Thiruvananthapuram fall into
this category.
Domestic Airports: In this category fall those airports which have

custom and immigration facilities for limited international operations
by national carriers and for foreign tourist and cargo charter flights.
These include airports Bangalore (CE), Hyderabad, Ahmedabad,
Calicut, Goa (CE), Varanasi, Patna, Agra (CE), Jaipur, Amritsar,
Tiruchirapally, Coimbatore, Lucknow.
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Yet another type of airports are known as Model Airports. These

have a minimum runway length of 7,500 feet and are capable of
handing A320 type Airbuses. They can cater to limited international
traffic, if required. These airports are in Bhubaneswar, Guwahati,
Nagpur, Vadodara, Imphal and Indore.
There are 71 domestic airports, which fall in the category of 'Other'

Domestic Airports. There are also 28 civil enclaves (CE) in Defense
airfields. Twenty of them are currently in operation. Mumbai airport
is the busiest in India and handles about 30% of the total passenger
traffic in the country. The Chhatrapati Shivaji international airport's
share of the country's international traffic is around 40%.
Airports Authority Of India

The Airports Authority of India (AAI) was formed after the merger of
International Airports Authority of India and the National Airports
Authority by way of the Airports Authority Act (No.55 of 1994). It
came into existence on 1st April 1995. AAI manages 5 international
airports, 87 domestic airports and 28 civil enclaves. It provides air
traffic services over the entire Indian airspace and adjoining oceanic
areas.
The AAI also undertakes assignments like airport feasibility studies,
airport design project implementation, project supervision and
manpower training. The AAI has undertaken consultancy projects in
Libya, Algeria, Yemen, Maldives, Nauru and Afghanistan.
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DEVELOPMENT OF CIVIL AVIATION IN INDIA

Travel by air in the modern sense began in India only in 1877, when
Joseph Lyna took off from the Lalbagh Gardens in Bombay, and
ascended to an altitude of about 7,500 feet and landed at Dadra. In
the years that followed, there was a tremendous development of air
transportation in India as in any other countries due to technological
advances and cooperation from the government.
In 1920, the Indian Air board was set up as a part of the Department
of Industries and Labour to provide safe navigation and landing
places and live up to its International Commitments.
With a view to draw up a plan in anticipating the post-war needs for

civil air transport, the government of India appointed in 1943 the
Reconstruction of Air Services Committee under the chairmanship of
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the Director of Civil Aviation. Captain F.C. Tymms, M.C., (later Sir
Frederick Tymms). Armed with vast technical and administrative
experience and an alarming capacity for work, Sir Frederick
submitted by September 1943, a series of carefully thought out
papers on all aspects of post-war aviation. Accepting the basic
recommendation of the Tymm’s report, the government appointed a
Committee in 1944 under the chairmanship of Sir Mohammad
Ushman, a member of the Post and Air Department to follow up the
Tymms plan. After a critical examination of the development of civil
aviation in India, USA and European countries, the Committee
suggested certain measures for the construction of new aerodromes
and air routes by recommending that more local air services be
started and that India should participate in the establishment of
governmental assistance in the form of subsidy atleast in the initial
stage, and introduction of the system of licensing for air carrier
companies. However it had not suggested any ceiling on the
number of such licenses as recommended by the Tymms
Committee.
The cabinet after much discussion and deliberation decided to
nationalize the civil air transport scheduled carriers and to create
two monopoly corporations in the public sector. In March 1953,
India’s Parliament passed the Air Corporation Act, which received
the assent of the President on 20th May.
The main provisions of the Act were that:

 “There shall be transferred to and vested in:
 Indian Airlines, the undertaking of all the existing Air
Companies (other than Air India International Limited) and
 Air India International, the undertaking of the Air India
International Limited (AIIC)”.
The saga of Indian Airlines began on the 1st of August 1953,

following the amalgamation of eight private airlines. The journey
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began with a modest fleet but high aspirations and over the years,
Indian Airlines innovated and upgraded its fleet to emerge as one of
the largest domestic airlines in the world. Today, Indian Airlines,
along with its subsidiary airline, Alliance Air, provides an extensive
network, which encompasses the whole of India - a geographical
area equivalent to Western Europe, besides reaching out to 17
International Stations.
In the last four decades, Indian Airlines has progressed by leaps and
bounds and built an excellent track record of manpower and
infrastructural development. It has thus emerged as a proud symbol
of modern India.
Some of the highlights of this glorious period of evolution include:

 Increase in passenger carriage from 0.5 million in 1954-55 to 8.4
million in 1997-98.
 Spread of network from 23,000 kilometres in 1953 to 1,18,000
kilometres in 1997-98.
 Growth of assets from Rs..21 million to Rs.30, 000 million in
1997-98.
 A manifold increase in system seat capacity from 3,070 seats per
day in 1955 to 35,700 seats per day.
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CIVIL AVIATION POLICY

The Ministry of Civil Aviation is the main central agency responsible
for the formulation of national policies and programs for
development and regulation of Civil Aviation and for devising and
implementing schemes for orderly growth and expansion of Civil Air
Transport. Its functions also extend to overseeing the provisions of
airport facilities, air traffic services and carriage of passengers and
goods by air.
The Government recently approved a new policy to promote private

investments in the Aviation Sector. The highlights of the policy are
as follows.
 Foreign equity upto 40% and investment by non-resident
Indians (NRIs) or overseas corporate bodies' (OCBs) upto
100% will be permitted in domestic air transport services.
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 Equity from foreign airlines will not be allowed directly, or

indirectly, in domestic air transport services. Existing
companies in which equity is held by foreign airlines will be
advised to disinvest this equity.
 Entry and exit barriers have been removed. There will be a
scrutiny of applications to verify financial soundness and
maintenance, security and safety aspects of operations.
 The choice of aircraft type and size is left to the operator.
 To achieve economies of scale, the minimum fleet size for a
scheduled operator has been raised from the existing three
aircraft to five. Also the minimum amount of shareholders'
funds has been increased from the existing Rs.50mn (US$
1.4mn) to Rs.100mn (US$ 2.9mn) for aircraft of all-up weight
below 40,000 kg and from Rs.100mn (US$ 2.9mn) to
Rs.300mn (US$ 8.7mn) for all-up weight exceeding 40,000 kg.
 Total capacity requirements in the air transport sector are
being projected for a period of at least five years on an annual
basis, to help the developer make investment decisions.
 In the distribution of this capacity, while preference will be
given to Indian Airlines according to its fleet augmentation
plan, private operators' proposals to induct new capacity will
be considered, based on the demand, load factor, past track
record and financial soundness.
 All scheduled operators are required to deploy 10 per cent of
their capacity in NorthEast, Jammu and Kashmir, Andaman
and Nicobar Islands and Lakshadweep.
New aviation policy to be implemented this year

Mr. Shahnawaz Hussain has announced that the Aviation Policy
would also focus on the need for setting up joint ventures to develop
smaller airports, lease out the bigger airports and improve the
existing aviation infrastructure.
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INFRASTRUCTURE DEVELOPMENTS
Private sector is now allowed in building airports. Among the private
sector-aided airports to be developed in the next five years are
Hassan (Karnataka), Mumbai, Goa and Bangalore. These airports are
capital-intensive projects that have to be run efficiently to make
them commercially profitable. The Mumbai project, for instance, will
cost an estimated Rs.16bn (US$457mn). The Government has also
decided to concentrate on developing existing airports rather than
on new airports. The AAI is investing Rs.4.4bn (US$125.7mn) to
develop model airports in 12 cities, with state-of-the-art equipment.
Part financing of facilities through a tax paid by embarking

international air passengers is an idea being tried out at Kozhikode,
which generates large West Asia-bound traffic. A similar method
may be adopted for development of airports in Rajasthan and Goa
that are popular tourist destinations.
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Among airport construction projects with private participation, the

Kochi International Airport has progressed the furthest. It has
passed the initial planning and the land acquisition stage. The
project is expected to cost around Rs.1.6bn (US$45.7mn) in the first
phase, and go up to around Rs.3bn (US$85.7mn) finally. In the first
phase, equity will account for Rs.640mn (US$18.3mn), 26% of which
the government of the State of Kerala holds, and the rest by non-
resident Indians, banks, users (airline firms) and contractors. Term
loans and short-term borrowings for working capital from banks will
fund the rest of the project.
The AAI has also drawn up a Rs.40bn (US$1.1bn) plan to modernize

and expand its airspace infrastructure to meet the demand growth
projected for the coming five years. The growth strategy envisages
not only better passenger facilities but also improved navigational
and communication systems. The first phase will involve
upgradation of conventional communication, navigational and
surveillance systems as an immediate measure. The second will be
a transition from the present ground-based ATS systems to satellite-
based CNS/ATM by the year 2000.
The internal resources generated at present being inadequate, the

AAI plans to enhance revenues through rationalization of the tariff
structure, as well as from commercial, cargo and duty-free shops.
Association
IATA - The International Air Transport Associations

History:
IATA - The International Air Transport Association- was founded in
Haryana, CUBA, IN APRIL 1945. It is the prime vehicle for inter-
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airline cooperation in promoting safe, reliable, secure and

economical air service - for the benefit of the world's consumers.
The international scheduled air transport industry is now more than

100 times larger than it was in 1945. Few industries can match the
dynamism of that growth, which would have been much less
spectacular without the standards, practices and procedures
developed within IATA.
At its foundation IATA had 57 members from 31 nations, mostly in

Europe and North America. Today it has over 230 members from
more than 130 nations in every part of the globe.
AIRPORT PRIVATIZATION
The Airport Authority of India, which manages five international
airports, 87 Domestic airports and 28 civil enclaves at defense
airfields, is facing an uphill task, as it for funds, management talent
and its adherence to the government procedures. Government
policies provide for privatization of airports at Delhi, Mumbai,
Calcutta and Chennai through long lease and new developments at
existing airports and Greenfield airports through private initiative.
It's true that there is risk in privatization of airports, since airports

essentially provide public utility services in monopolistic situations.
There are apprehensions that private enterprises are profit
motivated and with privatization users may not get quality services
at affordable prices.
To begin with, for four airports which the government has decided
to privatize, consultants should immediately put the website details
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of assets, traffic figures for the past 10 years and figure projections,
revenue figures existing and projected, profit & loss for last 10
Years, details of manpower, business plans, capital investment
programs etc. This would enable potential investor to start
preparatory work on their due diligence investigations.
Consultants should immediately develop draft terms and conditions

governing lease of these airports clearly bringing out obligations of
new managements in terms of service levels, commitment to
minimum investments for development of airport facilities,
operational standards to meet our national and international
obligations, clauses to deal with emergency situations, termination
in event of breach, etc. These should be discussed with the aviation
industry and finalized.
Government should set up a regulatory Authority whose main

functions would be economic regulation and operational safety
audit. This authority through its statutory powers and intervene if
standards of airport services in terms of safety, reliability and cost
effectiveness are not met.
Some of the states are taking initiative for development of

Greenfield airports and they should be assisted by the Ministry of
Civil Aviation in adopting more professional approach. In the first
instance state governments should develop techno -economic
feasibility reports for airport projects through experienced
organizations / consultants of repute.
Airport Authority of India (AAI) has a large number of airports where

the traffic volumes are low. Private entrepreneurs are not likely to
be interested in such airports, which are not financially viable. These
airports should be commercialized by exploiting the commercial
potential of airport lands, cost containment, increased productivity
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and improved cost recoveries. Thus, some of these airports may in

the next few years reach a stage when they can also be privatized.
There are some other airports with AAI, which could be transferred
to state governments, local bodies or tourism agencies who are in
an advantageous position to operate and manage them more cost
effectively. It is conceded that privatisation is not likely to remove
all the hiccups in the development of aviation sector .We need to
have a model tailored to Indian Conditions, keeping in view the local
laws, rules and regulations in tune with the political philosophy and
psychology of local travelers. The funding pattern should be such
that the investment made is beneficial to the investors due to
monopoly nature of airport business.
Foreign investors do not want to investment in aviation sector in

India, due to abnormal delays in decision making, undue
interference, non- consistent policies of government and to some
extent inflated fear of corruption in India. It's therefore essential
that sectors like aviation be left in hands of professional managers
and the role of bureaucracy should be only custodial and regulatory.
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ALLIANCE STRATEGY
Alliances in various manifestations have come to stay and airlines
around the world are spending agonizing hours deciding who they
will marry and on what terms. The basic reason for all these
alliances and equity partnerships is that the competition is growing
and the World Trade Organization (WTO) is spurring the move
towards “open skies” in the real sense of the word. Multilateralism
in the field of aviation would mean any airline could fly anywhere in
the world without being bound by bilateral agreements like that
exist at present. The impact of these global handshakes is being felt
by smaller airlines, as about 70 percent of the large carriers have
become a part of the various groupings. No individual airline can
match the reach and the connectivity of the large groupings and the
smaller carriers can only watch as the globe is carved up among the
various mega alliances.
As a strategy, an alliance involves
1) Extensive code sharing and the frequent flier plans
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Code- Sharing is where an airline flies on behalf of the other on a

particular sector. The Indian example is that of Indian Airlines and
Air India that share codes in the Delhi-Mumbai as well as in the Gulf
sector. The frequent flier programmes are yet another advantage.
The miles earned on domestic flights can be redeemed on
international flights. The Jet Airways has an alliance with
KLM/Northwest and the British Airways. The passenger who flies on
any of these airlines is eligible for the “Jet Privilege” card subject to
the fulfillment of terms and conditions.
2) It also involves co-ordination of schedules to maximize

loads
By this it implies that the two airlines that were earlier competing
with each other on a particular route compete no longer because of
the alliance. They instead time their flights so that their payload is
maximized and they do not compete against each other. Effective
scheduling of flights does this. When a domestic airline goes into an
alliance with an International airline then the scheduling is done in
such a way that the domestic flight can act as a connecting flight for
the passengers of the international flight. The Indian example of
such an alliance is that of Jet Airways with KLM/Northwest and
British Airways. By this not only the domestic airline has an
increased load factor but the international airline also has an
increased load factor through better connectivity.
3) Route planning
In route planning the alliance partners join hands for a particular
route or a combination of routes. For example if Air Lanka has got
scheduled flights from Colombo to Mumbai, then a passenger from
Colombo can be issued a ticket from Colombo to New Delhi. From
Mumbai to Delhi the alliance partner will carry the passenger.
4) Joint pricing
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As stated above the passenger from Colombo to Delhi can be issued

one single ticket though he shall be availing of the services of two
airlines. This is called as joint pricing where in one of the partner
issues a ticket on behalf of the other.
5) Inventory management
In the aviation industry the inventory costs form a major part of the
cost. The inventories are quite expensive as well. The alliance
partners maintain common set of inventories and this helps in the
reduction of the inventory costs, as a large amount of capital is not
blocked for this.
6) Integration of information technology

This is yet another highlight of a successful alliance. The partners
can have joint reservation, check in and check out systems and can
also use the information technology infrastructure of the alliance
partner.
7) Joint purchasing by the alliance partners

The benefit of scale and bargaining powers can provide great
synergies and the cost reduction to the partners.
Benefit To Passenger
Easy connections across the globe
An easy connection across the globe is made possible as the
passenger has the advantage of flying to such locations where the
international flights do not operate. In such a case the alliance
partner provides the connecting services (provided it has the same
in that region).
Lounge access at various airports

The advantage of the frequent flier program is also that the
passenger who holds the frequent flier status is eligible for availing
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of the lounge services of the alliance partner as well. For example

the “Gold Card” holder of Jet Airways is eligible to avail of the
lounge services of KLM/Northwest and British Airways.
Times have changed to an extent that carriers, who were bitter

rivals once, are now talking about joint sales incentives, sharing
revenues and profits.
Though no Indian carrier is yet a part of the giant global alliances,

Air-India, Indian Airlines and Jet Airways are already in other
alliances like code-sharing, joint frequent flier programs. Airlines
hold hands with each other in several ways depending on their
needs. Of course, the most drastic measure is taking an equity
stake, a method that is actually going out of vogue these days.
Other common ways are Code- Sharing where an airline flies on
behalf of the other on a particular sector. Examples in India are Air-
India and Air Lanka on flights to Delhi, Air- India and Indian Airlines
on domestic flights to Delhi and flights to the Gulf, Jet Airways and
KLM / Northwest. Joint marketing and frequent flier programs co-
operation is another popular measure to tie-up. An example is Jet
Airways frequent flier program “Jet Privilege”, where it has a joint
co-operation with British Airways and KLM /Northwest. This primarily
means that the miles earned on domestic Indian routes can be
redeemed on international flights. A corollary of this is the joint
utilization of reservation, through check in and operational systems.
Other ways of alliance between the airlines for greater

synergies:
1. Block seat arrangements- In this the airlines agree to take up
a certain percentage of seats on another carrier on a particular
route.
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2. Block cargo schemes- For cargo, airlines have block cargo

undertaking to provide a certain tonnage to another carrier; they
can also have Cargo Code Shares between them.
3. Strategic partnership- This is another amorphous term
wherein airline tie-up for long-term commercial gains. This sort of
relationship usually ends up in equity partnership or more
permanent commercial arrangements. The latest example is that of
Singapore Airline taking a 49 percent stake in Richard Branson’s
“Virgin Atlantic”.
RECENT DEVELOPMENTS
The government has given the final nod for the divestment of Air
India. It has been proposed that the government will not fix any
price for sale but will let the market decide the price. The
government has put up 40% of the equity in the airline for sale. The
strategic partner, which the airline has been scouting for, will take
up 40% stake with only a 26% cap to foreign airlines. The line up of
suitors is formidable with a combine of British Airways and Jet
Airways, Singapore Airlines and the Tata's, a consortium led by Air-
France and Delta, Reliance and ITC. Then came British steel baron
Laxmi Mittal who has decided to take the plunge along with Kotak
Mahindra, British Airways and Qantas of Australia.
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As far as Indian Airlines is concerned, the Tata group has bid for it in
addition to its bid for Air India. The Hindujas, the SkyTeam
comprising of Air France and Delta, Emirates and the Indian Pilots
Guild have also submitted their expression of interest. Reliance had
earlier pulled out from the race.
The Disinvestment Minister Arun Shourie has said that the end of
FY01 will see the completion of the privatization process for Air-
India. The government is sadly way off the target (Rs.100bn) as far
as the program for disinvestment goes. It remains to be seen
whether the proposed divestment in Air India does come about by
the set date.
lities as a way to encourage air traffic.
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The Take Off:

Naresh Goyal, Chairman of Jet airways was the one-man show
behind Jet airway’s birth. Goyal started his career as a marketing
executive at the General Sales Agent (GSA) with Lebanese
international airlines in Delhi. He than worked with Iraqi airways for
a couple of years, before joining Royal Jordanian Airlines as a
regional manager. Goyal's diligence & incredible ability to memorize
flight schedules caught the attention of Ali Ghandour, who was then
president & chairman of Royal Jordanian Airlines. Ghandour
introduced Goyal to the wider world of aviation outside India.
In 1974, Goyal decided to get into the GSA business himself

establish Jet air Transportation representing Kuwait Airways & Air
France. Simultaneously, Goyal was appointed regional manager of
Philippine Airlines. Over the next few years, Goyal expanded his
network picking up agencies for some more airlines. He was regular
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member at the AGM of International Air Transport Association(IATA)

the global aviation body .
Meanwhile Goyal turned into NRI & shifted his base to London.
During the same time, Goyal also toyed with the idea of setting up
his own airlines. The opportunity came in early 1990s, with the GOI's
open skies policy permitting private investment (including NRI's) in
the domestic aviation. In April 1992, Jet airways India was set up as
a 100 % subsidiary of tailwind ltd., a company registered I Cayman
islands (situated in the northwest Caribbean sea ) . Kuwait Airway's
& Gulf Air had 40 % stake in tailwind ltd. Soon after being
incorporated as a privately owned airline, Jet airways hired lintas
the ad agency to develop Jet airways 's corporate logo, IMRB the
market research firm to do a consumer survey & Anderson
consulting to do feasibility study & help prepare the business plan.
By 1992, goyal put his start-up team in place. Saroj datta &
B.P.balinga, both directors at Air India, Rolland Thomas from
Malaysia Airlines & Steven Jagannathan from Singapore Airlines
joined the board.
The Success Formula

Jet airways started its operation with leased aircraft's. The idea was
to expand faster by using funds to lease more aircraft's than buying
one or two. Boeing 737 could cost anywhere between $ 40 to $ 50
mn, whereas a monthly lease could be as low as $ 0.4 mn. The most
crucial decision was the choice of aircraft. While Damania, East
West & Modiluft who also started their operations at the same time
opted for the older Boeing 737.200s, Jet airways chose newer
737.300s whose least cost were atleast 40 % higher. four planes
(about three years old) were leased from Ansett Airlines. Although
the 737.300s were more expensive to lease they were more fuel-
efficient (consumed 8% less fuel) & were cheaper to maintain. goyal
felt that young fleet would help attracting customers.
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Analyst felt that by having one type of aircraft-the 737-in its fleet,
Jet airways made the maintenance & flight crew training far
simpler. Spares were common & inventories were lower as well. for
engineers, dealing with one type of aircraft. Balinga claimed that Jet
airways technical dispatch reliability was 99.6 % , which meant that
a Jet airways flight was rarely held up on account of technical
snags.
Jet airways also had another advantage in the form of a readymade

distribution network in sister company Jetair's 85 offices
countrywide through which it had access to a larger market beyond
metros. Unlike other start-ups that started with manual
reservations, Jet airways went in for computerized from day one.
This airlines reservation system, though expensive, delivered
superior service.
Jet airways 's number of employee per aircraft was 163 & a total
employee strength of 4,000 as against Indian Airlines's 397. The
focus was on productivity & cost control. Jet airways was not a
lavish paymaster & increments were modest. Salaries provided were
not as high as foreign airlines offered. Jet airways also invested
heavily to train his pilots. An aviation academy housing the state-of-
art Boeing 737 700 /800 flight simulator & flight training device for
737-400s was set up at a cost of $ 10 mn.
Jet airways 's success was mainly due to its service excellence. Jet
airways always ensured that its service surpassed customer
expectations. Goyal ensured that the attendants & front line staff
were fresh recruits trained in the "jet way"& not people from other
airlines who would bring with them old culture. According to the
frequent travelers, the hallmark of Jet Airways's service was its
cheerful attitude. If flight was delayed, travelers were phoned &
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informed in advanced. Jet Airways's managed to achieve service

excellence, because of being strictly disciplined from the start.
Lapses were not tolerated & the focus was on performance.
Innovations in service
• Cabin bag-only passengers can check in at any city counter
• Returning passengers can get two boarding passes at one check
in
• Business class passengers can customize their meal & drinks
• In flight mail-order shopping offers premium products at a
discount
• JetMobile offers automated flight schedules over the cell phone
Jet Airways always focussed on the business traveler. To attract &

retain business traveler, it had to offered superior services. Jet
Airways's picked up Indian Airlines's service module as a framework
& borrowed a few ideas from KLM Royal Dutch Airlines for managing
systems. Jet Airways's always believed in keeping close watch on its
customer's service. On all its flights more than 20 minutes long,
light refreshments were served & on longer flight passengers were
served non-alcoholic drinks, cold towels & a three coarse meal. Jet
Airways received 16,500-service monitor questionnaire (SMQ's)
every month & they were analyzed at various levels to plug
loopholes in service. Every new flight attendant was put through at
least three months of training in the first year & thereafter several
more hours of in-flight & class room training.
In December 1999, Jet Airways relaunched its frequent flier program

under the 'jet privilege' (JP) name the (frequent flier program was
initially launched in 1994). JP customers were not required to pay
membership fees. They also did not have to produce boarding cards
or other proof of travel. A passenger can earn free JP miles (points)
by taking a Jet Airways flight. The new programme offered three
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different levels of privileges: J.P Blue, J.P Silver, J.P Gold, depending
on the number of miles accrued or the number of flights flown. J.P
Silver & Gold members could earn bonus miles on all Jet Airways
flights & enjoyed lounge access, Tele check-in benefits. Jet Airways
tied up with international carriers like KLM Royal Dutch Airlines &
Northwest Airlines as a result of which JP members could earn miles
on these airline networks too. They could redeem their miles when
they had earned atleast 10,000 miles or had flown 10 flights. Jet
Airways had tied up with Oberoi Hotels & Resorts, Radisson
Worldwide. Members of JP could earn miles on each stay at any of
these hotels.
In 2001, Jet Airways launched an in-flight, Jet Airways launched an

in-flight mail order catalogue, JetMall for high quality products. The
in-flight shopping programme enabled passengers to browse
through a specially design mail order catalogue which helped them
select products & get them products delivered at home within two
to four hours anywhere in India. Jet Airways claimed that that the
mail order catalogue was at par with the in-flight shopping
catalogue on international flights.
In early 2001, Jet Airways finalized a Rs. 16 bn loan for the purchase
of 10 Boeing 737s to be delivered over next two years. This was the
first deal in India that involved the US Exim Bank & an Indian Bank
along with two offshore special purpose vehicle (SPVs). According to
analyst, the beauty of the deal was that Jet Airways would finally
end up borrowing from indian investors & not from foreign bank.
Performance of jet airways

Performance of jet airways since its formulation in 1992.Over the
years, jet airways has significantly improved its market share from
6.6 % in 1993-94 to 42 % in 2000-01. Right from the start, jet
airways focussed more on customer service rather than anything
NLDIMSR
50
else. It was because of it's superior customer service, that jet

airway's had become the most popular airline in India.
Strategies of jet airways:

It's operations started in India with leased aircraft because buying
an aircraft would have cost jet airways around $ 0.4 million. Jet
airways also started it's operation with the new Boeing 737-300s &
not the older Boeing 737-200s. This was because the new aircraft
were fuel- efficient & maintenance costs were low. Jet airways'
aircraft utilization & number of flights a per day more than of Indian
Airlines. Another reason of jet airways was it's lean structure.
Compared Air India’s 397 employees per aircraft, Jet airways had
only 163 employees per aircraft.
Flying High In The Indian Sky:

In 2001, with revenues of $ 542.18 MN, Jet Airways emerged as the
most popular domestic airlines in india. Jet Airways stated its
operation in 1993;the number of its passengers increased from
0.663 million in 2000-01.by 2001, when other private airlines had
stopped their operations, Jet Airways not only continued to survive,
but had become a formidable competitor to indias national domestic
airlines -(AIR INDIA). Jet Airways seemed to be lone challenger to AIR
INDIA with Sahara Airlines in the third position. Jet Airways's market
share increased to 42 % in 2001 from 6.6 % in late 1990s. In 2001 ,
Jet Airways ran 215 flights per day compared to INDIAN AIRLINES's
208.Unlike the loss making INDIAN AIRLINES, Jet Airways is making
profits. At the end of the first year, Jet Airways achieved average
seat factor close to break-even level of 71 %. Thereafter it broke
even & has been making profits ever since. In 2001, Jet Airways
recorded profits of rupees 125mn compared to AIR INDIA which
recorded a loss of Rs 1.77bn
Table 1 Table 2
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51
Passenger Carried Market

Share
Years In million Years Numbers
1993-94 0.663 1993-94 6.6
1994-95 1.241 1994-95 11.0
1995-96 1.606 1995-96 12.7
1996-97 2.367 1996-97 19.0
1997-98 3.131 1997-98 25.6
1998-99 4.013 1998-99 32.8
1999-00 4.875 1999-00 38.4
2000-01 5.931 2000-01 41.9
Source: Business Today, July 21, 2001
Table 3
Fleet size
Year Numbers
1993-94 4
1994-95 6
1995-96 8
1996-97 12
1997-98 19
1998-99 25
1999-00 29
2000-01 30
July 2001 33
Source: Business Today, July 21, 2001
Growth of Fleet Size of Jet Airways
NLDIMSR
52
40
30
numbers
20
10
0
9 3 -9 4 9 4 -9 5 9 5 -9 6 9 6 -9 7 9 7 -9 8 9 8 -9 9 9 9 -0 0 0 0 -0 1
y e a rs
Jet airways a favorite with travelers because of its friendlier

approach & new generation cleaner planes more importantly,
seasoned air travelers were that if they have crucial appointments
to keep in other cities, jet airways was reliable than Air India. Jet
airways on time performance & schedules attracted business
travelers who accounted for 80 % of its customer. Jet airways had a
fleet of 33 planes in 2001,(table-3) as against AIR INDIA that had a
57 planes. But Jet airway’s fleet was much younger & average daily
flying time of Jet airways was greater than IA. Greater utilization
meant higher revenues & more efficient utilization of capital assets.
NLDIMSR
53
Bibliography:-
• India info line.com

• Web site of Airport Authority of India.
• CMIE Journal
• MMS (Final) Project on Service Industry By Janet Quadris
• Business Strategy
Author: Sanjib Dutta & A. Mukund
Title of the Book: Business Strategy
Publication: 2002
Publisher: ICFAI Press
NLDIMSR
54

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Airlines: Service Industry

Sr No. Topic Page

We owe it to the Wright brothers for having invented airplanes. The

Virgin Atlantic of Britain and Singapore Airlines have also entered

Domestic and international passenger traffic in India is projected to

from beauty saloons, pubs, gyms, play schools and so on are

UNIQUE CHARACTERSTICS OF SERVICES

Although, the distinction between goods and services is somewhat

Intangible services are difficult to sell because they cannot be

Marketers of services can reduce these risks by stressing tangible

customers. These tangible cues range from the firm's physical

A second interpretation of inseparability refers to the fact that in

Matching service capacity to demand patterns can involve

Few service providers had opinion that they developed alternative,

support personnel to assist with customer service during busy

MARKETING MIX FOR SERVICES MARKETING

7 P’s of Service Marketing

The product mix

• Attractiveness of the offering in terms of pyhsical features such

The promotional mix

cost-plus pricing or ROI as key determinants of pricing levels. It is

Some marketers suggest that the unique requirements of selling

Therefore, management faces a tremendous challenge in selecting

For this reason, human resources management policies and

The "people" component of the service marketing mix also includes

examples of unpleasant service conditions caused by a firm's other

The appearance of the staff, including clothes and grooming, may

Process Of Service Production

Because customers are often involved in the production of services,

The importance of the process is true even for less 'sensual"

Technology has also made a significant contribution to the airline

International, were established and the assets of all the then

STRUCTURE OF THE INDUSTRY

Types of Airline Certification

service. The certificate typically authorizes both passenger and

Operating certificates, on the other hand, are issued by the Federal

How Major Airlines Are Structured

requirements. It is in charge of all flight-crew training, both initial

A third level of inspection and repair capability is maintained at

than at its hubs. These maintenance facilities generally are called

Sales and Marketing

The government will most probably accept the recommendations of

THE INDIAN AVIATION INDUSTRY

Pawan Hans supplies helicopter support services, primarily to the

In terms of size, the Indian aviation industry's turnover was

Year Aircraft Passengers Passengers

No of Passengers flown During 1970-1999

Passengers flown ('000 nos)

In terms of characteristics, the aviation industry is seasonal in

Domestic Players in Airlines

The market share of major players in 2000-01.

At present, Indian Airlines has a fleet strength of 55 aircraft's. Out of

Other Airline operators:

At present, Air India has a fleet strength of 23 aircrafts. Out of them

addition, Air India has a so-called 'code sharing' arrangement with a

While PBIDT was a negative Rs.6.48bn, the firm succeeded in raking

International Airports: These are available for scheduled

Domestic Airports: In this category fall those airports which have

Yet another type of airports are known as Model Airports. These

There are 71 domestic airports, which fall in the category of 'Other'

Airports Authority Of India

DEVELOPMENT OF CIVIL AVIATION IN INDIA