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IMPLEMENTATION
AVIATION SECTOR
INTRODUCTION TO THE AVIATION INDUSTRY
The 1884 La France, the first fully controllable airship
Although many people think of human flight as beginning with the aircraft in
the early 1900s, in
fact people had been flying repeatedly for more than 100 years.
Wright brothers’ first successful flight in Kitty Hawk in 1903.
American Airlines in 1928 and United Airlines in 1931.
Development of the mail system by the U.S. Postal Service helped create
the airline
industry.
Increased R&D of aircraft after World War II: World War II saw a drastic
increase in the
pace of aircraft development and production. All countries involved in the
war stepped up
development and production of aircraft and flight based weapon delivery
systems.
After World War II commercial aviation grew rapidly, used mostly ex-military
aircraft to
transport people and cargo. This growth was accelerated by the glut of
heavy and super-heavy
bomber airframes like the B-29 and Lancaster that could be converted into
commercial aircraft.
The DC-3 also made for easier and longer commercial flights. The first North
American
commercial jet airliner to fly was the Avro C102 Jetliner in September 1949,
shortly after the
British Comet. By 1952, the British state airline BOAC had introduced the De
Havilland Comet
into scheduled service.
OVERVIEW OF THE GLOBAL AIRLINE
INDUSTRY
The global airlines industry grew by 11.3% in 2007 to reach a value of
$429.9 billion
In 2012 the industry is forecast to have a value of $711 billion, an
increase of 65.4%
since 2007
The industry grew by 5.6% in 2007 to reach a volume of 2,076 million
passengers.
In 2012 the industry is forecast to have a volume of 2,362 million
passengers, an
increase of 13.7% since 2007
The domestic segment dominated in the global airline industry and
accounted for 1.4
billion passengers in 2007, equivalent to 66.5% of the industry's overall
volume
The Americas region is the largest airline industry in the world
accounting for
51.1% of the global industry's value
The report informs business decisions, enabling the reader to spot future
trends and
developments. Furthermore, the information contained in the report adds
weight to
presentations and helps the reader to save time carrying out entry-level
research.
The global airline industry consists of over 2000 airlines operating more
than 23,000
aircraft, providing service to over 3700 airports.
In 2010, the world’s airlines flew almost 28 million scheduled flight
departures and
carried over 2 billion passengers.
The growth of world air travel has averaged approximately 5% per year
over the past
30 years, with substantial yearly variations due both to changing economic
conditions
and differences in economic growth in different regions of the world.
Historically, the annual growth in air travel has been about twice the
annual growth
in GDP.
Even with relatively conservative expectations of economic growth over
the next 10-15
years, a continued 4-5% annual growth in global air travel will lead to
a doubling of
total air travel during this period.
In the US airline industry, approximately 100 certificated passenger
airlines operate over
11 million flight departures per year, and carry over one-third of the world’s
total air
traffic – US airlines enplaned 745 million passengers in 2010.
US airlines reported over $160 billion in total revenues, with approximately
545,000
employees and over 8,000 aircraft operating 31,000 flights per day.
The economic impacts of the airline industry range from its direct effects
on airline
employment, company profitability and net worth to the less direct but very
important
effects on the aircraft manufacturing industry, airports, and tourism
industries, not to
mention the economic impact on virtually every other industry that the
ability to travel by
air generates.
Commercial aviation contributes 8 percent of the US Gross Domestic
Product, according
to recent estimates.
OVERVIEW OF THE INDIAN AIRLINE INDUSTRY
Indian aviation industry is growing at 17% rate for the last few years with
more than 40
million passengers have travelled in domestic sectors and more than 20
million
passengers have travelled in international sectors in India in 2008.
The number of airports in India has also been increased significantly with
15
international airports, 87 domestic airports, 27 civil enclaves and more than
300 small
airstrips.
Also air cargo is growing at a rate of 13%-14% and contributes around
0.2% of India’s
GDP. Besides the year old public company Air India the major private players
operating
in Indian market are Jet Airways, Kingfishers, Spice Jet, Indigo, Paramount,
Go Air etc.
Among this Kingfisher has the largest market share of 21% closely
followed by Jet
Airways with 19.5% market share.
Indian airline have maintained a seat factor of 70% to 80% in 2009.
Aviation Industry in India is one of the fastest growing aviation industries
in the world.
With the liberalization of the Indian aviation sector, aviation industry in India
has
undergone a rapid transformation.
From being primarily a government-owned industry, the Indian aviation
industry is now
dominated by privately owned full service airlines and low cost carriers.
Private airlines account for around 75% share of the domestic aviation
market.
Earlier air travel was a privilege only a few could afford, but today air
travel has become
much cheaper and can be afforded by a large number of people.
The sector deals with the transport of passenger and cargo from one place
to another,
using the aerial route.
About 75 million passengers are use the service contributing $5.6billion
every year.
Around 15% growth rate is been registered in last 10 years.
Growth in 2020 statement predicts handling 280 million customers by
2020
MAJOR CHANGES IN AVIATION INDUSTRY
1986: Private Sector Players permitted as Air taxi operators. Jet, Air
Sahara, etc started
service.
1994: Private Carriers permitted to operate scheduled services. Six
operators granted
license, however only Jet and Air Sahara able to service.
2003: Entry of low cost carriers. Air Deccan, Spice Jet, Go Air, Indigo.
PLAYERS IN INDIAN AVIATION INDUSTRY ARE
The players in aviation industry can be categorized in three groups:
Public players : Indian Airlines
Private players: Jet Airways, Kingfisher Airlines, Spice Jet, Air Deccan.
Start up players : Omega Air, Magic Air, Premier Star Air & MDLR Airlines
KINGFISHER AIRLINES
UB group based in Bangalore, is a conglomerate of different companies with
a major focus on
the brewery (beer) and alcoholic beverages industry. The company markets
most of its beer
under the Kingfisher brand. The group is headed by Dr Vijay Mallya. The UB
Group was
founded by a Scotsman, Thomas Leishman in 1857. Kingfisher, the Group's
most visible and
profitable brand, made a modest entry in the sixties. During the 1950's and
60's, the company
expanded greatly by acquiring other breweries. First was the addition of
McDowell as one of the
Group subsidiaries, a move which helped United Breweries to extend its
portfolio to wines and
spirits business. Strategically, the Group moved into agro-based industries
and medicines when
Mallya acquired Kissan products and formed a long-term relationship with
Hoechst AG of
Germany to create the Indian pharmaceutical company now known as
Aventis Pharma, the
Indian subsidiary of the global pharma major Sanofi-Aventis. The UB Group’s
Brewing Entity -
called United Breweries Limited (UBL) - has also assumed undisputed market
leadership with a
national market share in excess of 50%. Through a process of aggressive
acquisition and market
penetration, The UB Group today controls 60% of the total manufacturing
capacity for Beer in
India.
Of the many private aviation companies in India, Kingfisher Airlines is one
name that has
established itself in a short time span as the hallmark of quality. Today the
main hub of this
aviation giant is at the Chattrapati Shivaji International Airport in Mumbai
and its registered
office is in Bangalore, India. Owned by the United Breweries group which has
made rapid
strides under the leadership of Vijay Mallya, Kingfisher Airlines is the top
airlines in the region
and has also been awarded a five star status. The company also has a low
cost cousin which
operates by the name of Kingfisher Red and is a pioneer in the Indian low
frills airlines industry
just like its bigger brother.
A plane of the Kingfisher Airlines can be easily identified by the official logo
of the company
which is a flying kingfisher bird with red, blue and green colors forming the
background. This is
one of the major luxury carriers in India and its flights take off for more than
70 destinations.
People in India now prefer Kingfisher over other airlines because of the
remarkable on-board
services. When it comes to the in-flight services, Kingfisher is simply the
best.
One of the key reasons of the very high popularity of Kingfisher Airlines is the
fact that its entire
staff is considered among the best dressed and best trained. Kingfisher also
excels in a number of
other areas like courteous service, cheap airfares, and a huge set of special
discounts and offers.
Compared to nearly every other air carrier in India, the interiors of Kingfisher
aircraft are like
heaven. They offer truly world-class luxurious amenities and when flying with
Kingfisher you
really feel special. At a number of times, Kingfisher Airlines offers cheaper
airfares for the
people who prefer online ticketing. Kingfisher Airlines has a website that
allows not just online
booking of flights but also allows you to check flight status, applicable air
fare and much more.
One more reason of the huge success story that the airline has become is
the fact that the
company takes its social and environmental responsibility very seriously. The
company is always
committed and makes regular efforts to reduce its carbon footprint. The
most recent step by
Kingfisher Airlines and Kingfisher Red in this direction is their collaboration
with Anna
University to explore alternative fuel choices like biodiesel along with the
possibility to mix and
use this fuel with the jet fuel. In India, Kingfisher Airlines is the way to fly.
THE ENVIRONMENT
PESTEL ANALYSIS
Political Factors
Indian political scenario has, is and will undergo various changes. Following
are the various
policy changes which might have an impact on aviation industry in coming
years:
1. Open Sky Policy :
India had this agreement with 40 countries and lately it signed the policy
with UK, USA
and European Union. According to this policy, the signatories are allowed to
fly over the
skies of India. Under this arrangement, airlines from EU member nations will
be allowed
to operate flights to India from any of the 25 EU nations regardless of the
carrier's
country of origin. Effect: Tourist arrivals in India are expected to grow
exponentially,
especially due to the open sky policy between India and the SAARC countries
and the
increase in bilateral entitlements with European countries, and the US. The
increase in
number of international tourists will percolate down to increase in domestic
passengers.
2. Modernization Of Airports:
The Indian Cabinet has approved a proposal mandating the state-run airport
operator to
modernize 35 airports in second-tier cities within the next two years. The
modernization
process will cost the government between Rs. 70 to 80 billion. Delhi
(Rs.8,700 cr) to
GMR and Mumbai Airport Modernization (Rs.6,400 cr)to GVK are two biggest
investment projects . Total investment on hand in airport infrastructure
crossedRs.35,000
crore in the quarter ended January 2006.This investment was spread over 89
projects.
Upgradation of Kolkata and Chennai airports is on anvil. Simultaneously, 20
non-metro
airports will be developed. Two biggest active projects are the Bangalore
International
Airports Authority Ltd (Rs.1.5 crore) and GMR Hyderabad International
Airport Ltd
(Rs.1.5 crore). Effect: Improved infrastructure would lead to rise in no. of
travelers and
also so would encourage more operators.
3. Reduction on Excise Duty:
From January 9, 2004, the excise duty on ATF was reduced from 16 to 8
percent. The
average domestic price of ATF is 99 per cent higher than prices in foreign
countries and
affects domestic airlines drastically as ATF accounts for 30 to 40 per cent of
operating
costs Effect: It would lead to low fares thus giving a boost to air travel. The
government
has reduced the average age of aircraft being imported into India for
commercial airline
operations by five years. Effect: It would lead to increase in imports of
aircraft thus can
discourage more operators coming in and improve services.
Economic Factors
India, ranked tenth in the world in 2004, is expected to be holding eighth
rank in the world by
2014 and fourth rank in next year’s with a GDP of $1.15-1.4 trillion and $2.1-
3 trillion
respectively, and a projected growth rate of 6-8%.
Effect: This rise in income levels along with introduction of no-frills flights will
lead to:
• Rise in no of travelers,
• More investments in aviation,
• More competition and
• Rise in industrialization leading to more need of air transport
Socio – Cultural Factors
The growing rate of technology & workforce the airline sector generates
employment
opportunities for well qualified people.
It is the responsibility of the airline department to safeguard the interest of
the passengers.
As new and reasonable airlines are coming into existence there has been an
change in the
lifestyle of people now prefer to travel through flight to distances where they
can afford. This has
brought in a change in lifestyle.
1. Change in Lifestyle :
Average income of middle class household is expected to rise to 194000 Rs
by 2010 from
169000 Rs in 2001-02.No of households projected to be 43.6million in 2010.
Effect: So
there is going to be change in lifestyle and spending of people Due to this
change people
will prefer Low cost airlines instead of Railways first air-conditioned thus rise
in air
traffic.
2. Rise in Leisure travel:
Tourism industry grew 8.8 per cent over 2003- highest growth rate in the
world. 3.2
million Foreign tourists visited India last year. There has been an increase in
leisure
travel by tourists of 15% in 2004. Effect: It will lead to increase in number of
tourist
passengers thus more encouragement for new operators.
Technological Factors
1. Growth of electronic ticketing:
The electronic industry continues to be plagued by spiraling costs, making
cost
cutting is a necessary survival tool. One sure method for airline to cut cost is
by
increasing the use of e-ticketing. It cuts distribution cost and it also reduced
back
office accounting and traveler’s can also book ticket sitting on their personal
computer.
2. Modernization and privatization of airport:
Installation of new technology, modernization of infrastructure and
participation of
private players fuel the growth of airline sector.
Ex- Sahara airport.
3. Developing Greenfield airport with private sector:
Greenfield airport means a new airport which is built from scratch in a new
location
because the existing airport is unable to meet the projected requirement of
traffic. It
will add to a rapidly expanding network of domestic airport fuelling socio-
economic
growth across the length and breadth of country.
Environmental Factors
1. Increase in global warming: Aviation impacts the environment because
aircraft
engines emit noise, particulate gases, contribute to climate change and
global dimming
and the rapid growth of air travel in recent years contributes to an increase
in total
pollution attributable to aviation contribute to global warming.
2. The sudden and unexpected behavior of the atmosphere and the
dependency
on weather: The sudden and unexpected behavior of the atmosphere
causes cancellation
and delay in flight. Increment weather can affect air travel in any season,
even on the
clearest days, whether its high winds, rains, sleet or snow.
3. Shortage of infrastructure capacity: Aircraft spend useless time
circling round
airport for want of landing slots and parking bays. Aircraft have to be parked
at night at
airports which do not have any viable commercial traffic on account of the
shortage of
parking bays at major airport.
4. Tourism saturation: Tourism receiving areas have a finite capacity due
to
factors such as the limited amount of accommodation that can be provided
and the other
reason is increase price of air tickets.
Legal Factors
1. FDI Limits:
Forty nine per cent foreign direct investment (FDI) is permitted in financing
airport
infrastructure as well as in airport ground handling. The government has
recently
increased FDI from 40 per cent to 49 per cent in domestic air carriers.
However foreign
airlines are not permitted to pick up a stake directly or indirectly. Non-
resident Indians
and corporate bodies are allowed to hold up to 100 per cent equity in
domestic airlines.
2. Bilateral Treaties:
3. Safety Regulation:
Current Scenario
Change in business of aviation industry from October 2008 to October 2009
There were 2 main reasons for decline in the aviation industry:
1. Worldwide economic slowdown: The worst to be hit by it was USA but
its effect could
be seen all over the world. The leading airlines started giving lay-offs to bear
less loss of the
economic slowdown.
2. Terror attack in Mumbai: This might be the second reason in recession
of the airline
sector as there were cancellations and postponed visits sue to security and
safety reasons.
The industry was affected by the record of high fuel prices and financial
markets going globally
down. The industry accounts only 2% o the world aviation market and the
losses were us$2
billion.
October 2008:
The growth of aviation industry saw a dip of 15% decline in air passenger
traffic. During
third time many airline started i.e. Jet and Kingfisher started giving lay-offs to
reduce cost in
business. Several private sector owners sat together and demanded
concessions from
government to protect against high aviation turbine fuel and airport charges.
The impact of
global slowdown and high price of aviation has turbine fuel. It accounts to
40% of the Indian
carrier operating cost compared with 25% to 30%carriers globally. The
growth slowed by
4.7% in 2008.net losses were forecasted to to reach 4.7 billion US $ up from
2.5 billion US $
in December 2008.premium passenger numbers fell from 17% while cargo
fell by 23%. The
biggest ever annual falls in revenue in 2009 with drop of us$62billion or 12%
to US $467
billion.
October 2009:
The slowdown hit aviation industry has started witnessing some stability in
passenger traffic.
The figures showed marginal improvement in air traffic from 3.63 million
passengers in
august 2009 to 3.59 million in months before. Other has been 14 to 15 % rise
in passenger
traffic.
In November 2009 the aviation industry is showing a boom where there has
been double digit
growth in October with 37% growth in passenger against growth of 19% in
august and 11% in
September these figures include both domestic and international. Also one of
the reasons for
growth during this time was seen as to be low fare and attractive packages
by the airlines. a
source from the industry had mentioned, “ if the oil prices stay below $50,
air traffic for 2009
would be same to 2007 -08”. Airlines like spice jet, indigo have been hiring
pilots and cabin
crew. While kingfisher warned its employees of delayed salaries reporting to
loss of Rs 240 crore
and declared it5s flight to cut cost.
PORTERS FIVE FORCES
Threat of New Entrants.
At first glance, you might think that the airline industry is pretty tough to
break into, but don't be
fooled. You'll need to look at whether there are substantial costs to access
bank loans and credit.
If borrowing is cheap, then the likelihood of more airliners entering the
industry is higher. The
more new airlines that enter the market, the more saturated it becomes for
everyone. Brand name
recognition and frequent fliers point also play a role in the airline industry.
An airline with a
strong brand name and incentives can often lure a customer even if its
prices are higher.
Power of Suppliers.
The airline supply business is mainly dominated by Boeing and Airbus. For
this reason, there
isn't a lot of cutthroat competition among suppliers. Also, the likelihood of a
supplier integrating
vertically isn't very likely. In other words, you probably won't see suppliers
starting to offer
flight service on top of building airlines.
Power of Buyers.
The bargaining power of buyers in the airline industry is quite low. Obviously,
there are high
costs involved with switching airplanes, but also take a look at the ability to
compete on
service. Is the seat in one airline more comfortable than another? Probably
not unless you are
analyzing a luxury liner like the Concord Jet.
Availability of Substitutes.
What is the likelihood that someone will drive or take a train to his or her
destination? For
regional airlines, the threat might be a little higher than international
carriers. When determining
this you should consider time, money, personal preference and convenience
in the air travel
industry.
Competitive Rivalry.
Highly competitive industries generally earn low returns because the cost of
competition is high.
This can spell disaster when times get tough in the economy.
SWOT ANALYSIS OF INDIAN AVIATION
INDUSTRY
STRENGTH
1. Growing tourism: Due to growth in tourism, there has been an increase
in number of the
international and domestic passengers. The estimated growth of domestic
passenger segment is
at 50% per annum and growth for international passenger segment is 25%.
2. Rising income levels: Due to the rise in income levels, the disposable
income is also higher
which are expected to enhance the number of flyers.
3. Opening of domestic aviation sector to private airlines and strong
economic growth are the
major reasons for rapid growth in aviation sector. Also as Indian aviation
industry is relatively
new, the planes are relatively new which results in better operational
efficiency, passenger
comfort and longer lifetime.
WEAKNESS
1.Under penetrated Market : The total passenger traffic was only 50
million as on 31st Dec
2005 amounting to only 0.05 trips per annum as compared to developed
nations like United
States have 2.02 trips per annum.
2. Untapped Air Cargo Market: Air cargo market has not yet been fully
taped in the Indian
markets and is expected that in the coming years large number of players
will have dedicated
fleets.
3. Infrastructural constraints: The infrastructure development has not
kept pace with the
growth in aviation services sector leading to a bottleneck. Huge investment
requirement for
physical infrastructure for airports.
4. Despite rapid growth and entrants of several new players there are
certain issues which are
haunting aviation sector till now. One of them is the deficiencies of airport
infrastructure across
the country. Nearly all the major airports in India are heavily congested and
operating
environments too are inefficient. Though recently new airports built in
Bangalore and Hyderabad
and modernization of Delhi and Mumbai airports have result in relatively
better airport
infrastructure. Also most of airlines have not been able to break even till
now. Unless they
achieve profitability within a short time period some of these airlines will find
it difficult to
compete in this competitive market.
5. Another big obstacle to reaching profitability for Indian airlines is the high
fuel cost. Due to
high sales tax the fuel cost for airlines is sometimes 60% higher than
international price. The
rapid growth has also been resulted in scarcity of resources particularly for
pilots, technical
people, management people and airlines have to depend on the expats
which costs them heavily.
Also India does not have high quality training institutes which can generate
required number of
pilots or technical people.
OPPRTUNITIES
1. Expecting investments: investment of about US $30 billion will be
made.
2. Expected Market Size: Average growth of aviation sector is about 25%-
30% and the
expected market size is projected to grow upto100 million by 2010.
With expansion of tourism business this industry will grow directly
proportional to it.
3. Indian aviation industry is still in nascent stage and further economic
growth will increase
both number of passengers opting for air travels as well as cargo transported
through airlines.
Also India is slowing becoming a tourist destination and the number of
foreign national coming
to India for both tourism and business activities are increasing. India’s
geographical position is
also very suitable for it to become an aviation hub at the cross roads
between Europe/ Middle
East and Asia pacific. Also increasing outsourcing of aerospace design and
manufacturing to
India has been resulted in creation of domestic talents which can be utilized
to grow Indian
aviation sector.
THREATS
Huge investments are expected to take place in aviation sector in near
future. It is estimated that
by 2012.
1. Shortage of trained Pilots: There is a shortage of trained pilots, co-
pilots and ground staff
which is severely limiting growth prospects.
2. Shortage of Airports: There is a shortage of airport facilities, parking
bays,air traffic control
facilities and takeoff and landing slots.
3. High prices: Though enough number of low cost carriers are already
existing in the industry,
majority of the population is still not able to fly to other destinations.
4. One of the biggest threats to Indian airlines particularly in the
international segments is the
entrant of more matured and cost effective foreign airlines. Also the security
issues sometimes
become matter of concern to the air traffics particularly in the international
segment.
SWOT ANALYSIS OF KINGFISHER AIRLINES
STRENGTHS
Strong brand value and reputation in the minds of customers.
Quality of the service.
Route rationalization.
First airline to have a new fleet of airbuses.
Quality and continuous innovation.
WEAKNESSES
Still a not in profit organization.
High ticket pricing.
Facing a tough competition from competitor
OPPORTUNITIES
The expanding tourism industry.
The non penetrated domestic market.
International market.
Untapped air cargo market.
THREATS
Competitors
Infrastructure issues.
Fuel price hike.
Tourism saturation
Economic slowdown.
Promotions and sponsorship declining
STRATEGIC CAPABILITIES
RESOURCES AND COMPETENCE
A larger-than-life brand image and promises of good times have
helped Kingfisher
Airlines soar.
About Kingfisher Airlines:
Since its launch carrier in terms of domestic passenger carried, daily
departures (an
average of 383 daily departures), customer service quality and innovation.
Kingfisher Airlines carried 10.9 million passengers in the financial year
ended 31 March
2009 with a share of 27 per cent of the domestic Indian air travel market. For
the nine
months to 31 December 2009, it carried 8.2 million passengers.
It is India's only five star airline, as rated by Skytrax, the independent
airline quality
research organisation.
Besides being the first and only airline in India to offer in-flight
entertainment at every
seat, Kingfisher Airlines offers Live TV with 16 channels. It has received
numerous
awards for innovation, customer responsiveness and was voted the “Best
New Airline of
the Year”, within months of its launch. It covers all segments of air travel –
from low
fares to premium service.
The airline launched its first international routes in September 2008 and
now serves
oneworld hubs Bangkok, Hong Kong, London Heathrow and Singapore.
Internationally,
it also currently serves Colombo, Dubai and Dhaka. In total, it flies to 70
destinations
worldwide – 63 of them in India – in eight countries, with its main hubs at
Mumbai,
Delhi and Bangalore.
Kingfisher Airlines’ network has been covered since 1 June 2009 by the
Global Explorer
round-the-world fare offered by all oneworld member airlines and selected
carriers that
are not part of the alliance.
Its fleet of 66 modern aircraft, with an average age of five years, includes
five Airbus
A330s, eight A321s, 23 A320s, three A319s and 25 ATR 72-500s and two
ATRs. It
employs 7,400 staff.
During the financial year ended 31 March 2009, it generated revenues
totalling INR55.8
billion (US$1.1 billion), with INR50.9 billion (US$975 million) of that from its
passenger business.
For the nine months to 31 December 2009, it generated revenues totalling
INR38.2
billion (US$817 million), with INR35 billion (US$753 million) of that from its
passenger
business.
The 58 destinations across India that Kingfisher Airlines will add to the
oneworld map
include Agartala, Agatti, Agra, Ahmedabad, Aizwal, Amritsar, Aurangabad,
Bagdogra,
Bhavnagar, Bhubaneswar, Bhuj, Calicut, Chandigarh, Coimbatore, Dehradun,
Dharamsala, Goa, Guwahati, Hubli, Imphal, Indore, Jabalpur, Jaipur, Jammu,
Jodhpur,
Kandla, Khajuraho, Kochi, Kolhapur, Kolkata, Kullu, Latur, Leh, Lucknow,
Madurai,
Mangalore, Nagpur, Nanded, Nasik, Patna, Port Blair, Pune, Raipur,
Rajahmundry,
Ranchi, Salem, Sholapur, Silchar, Simla, Srinagar, Tirupati, Trichy,
Trivandrum,
Tuticorin, Udaipur, Varanasi, Vijayawada, and Vishakapatnam.
Kingfisher Airlines is a part of The UB Group – one of India’s largest
conglomerates
with diverse interests and a global presence. The UB Group is also the
largest Indian
alcoholic beverages (beer and spirits) company and the third largest drinks
group in the
world.
THINGS WHICH CREATED IT A BIG BRAND
In seven months after the launch KFA has earned Rs 200 crore (Rs 2
billion), flown over
500,000 passengers, grown to a fleet of nine Airbus A320 and expanded
from four flights
a day to 56.
Equally important, Kingfisher Airlines bagged the third place in this year's
Brand Derby:
64 per cent of those interviewed ranked it the third-most successful brand
launch, while
11 per cent felt it deserved top slot.
KFA's success carries a simple, yet vital lesson: do your homework. When
the decision to
enter the aviation industry was taken in early 2004, Mallya and his team
knew the going
would be rough.
The 25-million seats Indian aviation industry was growing at 20 per cent,
but it was on
the backs of the new, low-cost players. Entrenched players like Indian
Airlines and Jet
Airway, too, were slashing ticket prices to cater to the new breed of have-
ticket-willtravel
passengers.
The challenge for the new airline was to stand out in the crowd, for all the
right reasons.
So, Kingfisher approached market research agency IMRB to assess a
possible niche.
IMRB interviewed 2,500 frequent air travellers, aged 21-45 years
from SEC A1, A2
and B in the top 15 metros, where air travel markets are strong.
"The study revealed people wanted a young, trendy, fun and yet
premium product,"
says Girish Shah, head, marketing, KFA.
The way ahead was clear: extend the Kingfisher brand into aviation, and
focus on the
young business traveller.
"The challenge was to make the mother brand slightly more serious and
relevant to air
travelers.
" Backed with an ad budget of Rs 25 crore (Rs 250 million), KFA began its
ad campaign
a few weeks before the launch, booking every possible touchpoint relevant
to the
business traveller.
Newspaper ads, radio spots, and a presence in upmarket stores like
Westside and
Shoppers' Stop, premium clubs like the Cricket Club of India. . . even with-it
restaurants
like Tendulkar's. Competitions and quizzes with free KFA tickets as prizes
ensured
customer interest.
In mid-August, KFA launched its second campaign -- "Freedom from boring
air travel" --
to coincide with Independence Day..
Customer interest was definitely hooked, not least because of Mallya
himself. Media
analysts credit a large part of KFA's success to its flamboyant promoter
and his
directly addressing the press and customers.
"Kingfisher's is a PR-driven communication instead of a regular,
advertising-driven
communication,". "It's inspired from Virgin, where Richard Branson , too,
focuses more
on PR and value-adds."
The value-adds have been critical for KFA, too. Attractive cabin
crew in designer
uniforms, gourmet meals and personal screens for each seat add to
the premium
experience.
On board, passengers watch a safety video featuring model-actress Yana
Gupta and can
then choose from five video channels and 10 radio channels. They are called
"guests" and
given gifts at the end of the flight -- sachets of flavoured tea and umbrellas
during the
monsoon.
All of which ensured good times for the passenger. But Indians don't like
their good
times to be accompanied by huge price tags, so KFA clubbed its other selling
points with
a biggie -- moderate price points.
Initially, KFA flights on the crowded Mumbai-Bangalore route were offered
for just Rs
1,999 in a direct bid to lure passengers. Once the fish bit, it was reeled in
with special,
same-day return offers. That was a hit with business travellers, who usually
return within
the day.
To cast its net wider, KFA then offered special fares for Central
government and defence
personnel and their families. "Kingfisher has conveniently sandwiched itself
between the
upper end of Air Deccan customers and the lower end of Jet Airways, thus
roping in both
the segments,"
Now it was time to land the catch. KFA managed to bag access to the
Indian Airlines'
terminals at major airports, allowing it to glide past the inevitable delays at
the private
airlines' terminals and ensure timeliness. IA staff was also roped in for the
ground
handling and kitchen duty handed over to Sky Gourmet.
"Outsourcing functions allows Kingfisher to cut cost and increase
efficiency," Plus,
like low-cost airlines, Kingfisher effectively uses online ticketing, saving up
on travel
agents' commissions.
All of which adds up to an effective brand. But KFA still has a long way to
fly.
KINGFISHER RED AIRLINE CAPABILITIES
Kingfisher Red Airlines is a subsidiary of the premier Indian airline
Kingfisher
Airlines.
The company has designed Kingfisher Red to serve affordable flights to
and
from domestic and international destinations.
Growing bigger and better each passing year, the airlines has been re
branded
twice. Previously known as Simplifly Deccan, Kingfisher Red Airlines was also
earlier
known as Air Deccan. Air Deccan was picked up by the Kingfisher group from
Deccan
Aviation.
A part of United Breweries group of Dr. Vijay Mallya, Kingfisher Red
Airlines
came about when Kingfisher acquired a major stake in Deccan Aviation, the
holding
company of Air Deccan.
The company has been relocating, reorganizing and speckling their
carriers in
dazzling red since, to become a favourite among budget friendly fliers.
Kingfisher Red Airlines has its major headquarter at HAL Bangalore
International Airport. The airline is one of the pioneers to provide cheap
airfares to
domestic and international fliers in the economy class.
Even so, they have also been successful in maintaining standards on board
and in
attracting more clientele with their comforting in-flight services and
specialized features.
The secondary hub for the airlines is at Chennai International Airport,
making it
a convenient and accessible option for clients in South India.
Connectivity
Kingfisher Red has flights to 64 varied destinations within India. Important
destinations
covered by the airline are Delhi, Jaipur, Mumbai, Bangalore, Srinagar,
Ahmedabad,
Ranchi, Kolkata, Guwahati, Bhopal, Hyderabad, Goa, Chennai, Coimbatore,
and Port
Blair. Operating about 337 flights daily, Kingfisher Red is gaining popularity
because of
their scheduled flights, their reach to important destinations, and their in-
flight services.
BIGGEST ACHIEVEMENT FOR KINGFISHER WHICH
ADDS
TO ITS RESOURCES.
Oneworld brings together some of the best and biggest names in the
airline business -
American Airlines, British Airways, Cathay Pacific, Finnair, Iberia, Japan
Airlines, LAN,
Malév Hungarian Airlines, Mexicana, Qantas and Royal Jordanian, and around
20
affiliates including American Eagle, Dragonair, LAN Argentina, LAN Ecuador
and LAN
Peru.
Russia’s S7 Airlines will join the alliance in 2010 with Kingfisher now on
track to follow
during 2011. Between them, these airlines:
• Serve 800 airports in nearly 150 countries, with some
9,000 daily departures.
• Offer nearly 550 airport lounges for premium customers.
• Carry some 340 million passengers a year on a fleet of
almost 2,500 aircraft.
• Generate more than US$100 billion annual revenues in
total.
It is the only alliance with any airlines based in South America, Australia or
Asia’s
Middle East.
The alliance enables its members to offer their customers more services
and benefits than
any airline can provide on its own.
These include a broader route network, opportunities to earn and redeem
frequent flyer
miles and points across the combined oneworld network and more airport
lounges.
oneworld also offers more alliance fares than any of its competitors.
Oneworld was voted the World's Leading Airline Alliance for the seventh
year running
in the latest (2009) World Travel Awards. It is the only winner of this award
since it was
introduced in 2003.
India’s leading domestic carrier and only five-star airline, Kingfisher
Airlines, is lining
up to join oneworld after signing a memorandum of understanding as its first
step
towards full membership of the world’s leading quality airline alliance,
subject to Indian
regulatory approval.
The agreement was concluded at a meeting between Kingfisher Airlines’
Chairman Vijay
Mallya and Chief Executives from oneworld’s 11 existing member airlines,
which
include some of the best and biggest names in the industry.
Kingfisher Airlines today applied to India’s Ministry of Civil Aviation for
authority to
proceed with its membership of oneworld.
Kingfisher Airlines’ addition to oneworld will link India’s most extensive
domestic
network with oneworld’s unrivalled global network, as the only alliance with
airlines
based on every continent. It will add 58 cities to the oneworld map – all of
them in India.
This will expand oneworld’s network to 800 destinations in almost 150
countries, served
by a combined fleet of 2,350 aircraft operating some 9,000 flights a day,
carrying some
340 million passengers a year.
Established oneworld members American Airlines, British Airways, Cathay
Pacific,
Finnair, Japan Airlines, Qantas and Royal Jordanian already serve five
gateways in India
between them – Bangalore, Chennai, Delhi, Hyderabad and Mumbai.
British Airways will support Kingfisher Airlines through its alliance
implementation
programme, as its oneworld sponsor.
Kingfisher Airlines Chairman and Chief Executive Vijay Mallya said:
“Kingfisher
Airlines is proud to be lining up to join the world’s leading quality global
airline alliance.
Becoming part of oneworld would be one of our most significant steps so
far - and is
right in line with our vision to become one of the world’s top airlines.
It will enable us to offer our guests a truly global network served by
partners who include
some of the best known and most admired airlines in the world, with
frequent flyer
benefits extended throughout this network.
It will also strengthen us financially, through revenues from passengers
transferring to
our network from our oneworld partners and the cost reduction opportunities
the alliance
offers.”
Willie Walsh, Chief Executive of British Airways, oneworld’s sponsor of
Kingfisher
Airlines, said: “Kingfisher Airlines is an ideal fit for oneworld. It has a strong
focus on
customer service and its network expands what the alliance
currently offers.
oneworld’s priority is the quality rather than quantity of our member airlines,
which is
why British Airways is delighted to be developing our relationship with
Kingfisher
Airlines further by acting as its sponsor into the alliance.”
Kingfisher Airlines will fill one of oneworld’s few remaining membership
spaces with
a carrier that matches our alliance’s demanding requirements,
benefiting customers
by expanding our global reach and helping us ensure oneworld remains the
pre-eminent
global alliance with members unmatched in brand and service quality.”
RESOURCES COMPETENCES
THRESHOLD
CAPABILITIES
It has matched with all the
minimum capabilities i.e from
finances to aircraft to enter in
the industry and required to be
in the industry
It is registered company which
meets all the safety and other
issues to continue to be in
business.
CAPABILITIES FOR
COMPETITIVE
ADVANTAGE
UNIQUE RESOURCE
- High focus on
customer satisfaction.
- Strong financial back
up
- Tie up with one world
for targeting the
international routes.
- Coverage of maximum
numbers of domestic
routes.
- Celebrity association
- Luxury and comfort
- Strong PR directly
addressing the
customers.
- Strong marketing stg.
CORE COMPETENCE
- Strong brand value
- Flamboyant image of
airline
- Finance
- Unique service
experience.
PHYSICAL AND FINANCIAL RESOURCES
Kingfisher Airlines is an airline group based in India. Through its parent
company
United Breweries Group, has a 50% stake in low-cost carrier Kingfisher Red.
Kingfisher Airlines is one of the seven airlines to be ranked as a 5-star
airline by the
independent research consultancy firm Skytrax Kingfisher operates more
than 375 daily
flights to 71 destinations, with regional and long-haul international services.
In May 2009, Kingfisher Airlines carried more than a million passengers,
giving it the
highest market share among airlines in India
Kingfisher Airlines, India’s fastest growing airline and the first Indian
carrier to offer Full
Service at True Value today has placed an order for 20 ATR72-500 Aircraft at
the Dubai
Air Show in a deal valued at US $350 million.
The order represents the first addition of regional aircraft to the fleet of
Kingfisher
Airlines. 20 Aircraft are on firm order with options for another 15.
It has four new Airbus A320-200s airlines also.
HUMAN RESOURCES
Prior to launch, KFA signed a “non-poaching alliance” with Air Deccan under
which both the
airlines agreed not to hire each other’s employee. KFA’s flight attendants
called “Flying models”
were selected through a national level model contest.
KFA also stressed the fact that its employees had to be capable enough to
meet the airlines’ high
service standards.
Among one of the biggest HR move for KFA was addition of Nigel Harwood as
Chief Operating
Officer with effect from August 1, 2005, to strengthen its management team.
Mr. Mallya said “Kingfisher Airlines Limited has a first class management
team not just at top
most level but also in the second line. This is part of the UB group’s
commitment to human
resources”.
Kjglg
VALUE OF STRATEGIC CAPABILITIES
Kingfisher has been able to create a successful brand only because of the
value which it
has to offer to its customers.
Customers have opted for kingfisher for the premier level of services
provided.
Attractive cabin crew in designer uniforms, gourmet meals and
personal screens for
each seat add to the premium experience.
It is a young, trendy, fun and yet premium product to which
customers look upon.
Hence customers have attached value to its strategic capabilities.
Kingfisher Airlines is among the most renowned airline companies this is
one of the
fastest growing airline, which has its bas in Mumbai.
The ownership of the Kingfisher Airlines is leadership of Dr. Vijay Mallya
and is under
the United Beverages Group.
This Airline has a Kingfisher bird as its logo due to which it can be
distinguished from
other airlines quiet easily.
The logo of the flight is of red, blue and green colours. This is the one of
the most
important Indian luxury airline with an extensive network which spreads to
more than 30
destinations.
The trained staff never fails to fulfil the requirement of the passengers
which make their
journey pleasurable.
The chief component of Kingfisher flights is the entertainment system
which one can
avail.
This popular Airlines has beautiful interiors and the brightly dressed staff
which provide
courteous services to the passengers at low rates.
The interiors of this flight offer to you world of luxuries and one can avail
cheap
discounted rates all the year round.
The passengers can book the tickets online and avail the benefits which
are given by the
company from time to time. All details related to Flight schedules and status
is mentioned
on the web.
Kingfisher started its operations on 9th May2005 with 4 Airbus aircraft
which were taken
on lease. This company was launched by the business tycoon Vijay Mallya
with the
motive of making it number one airline company in India.
This was the first Indian airline to start its operations with all new aircrafts.
Beyond any
doubts we now see Kingfisher Airlines to be the best in Indian aviation
industry.
In India the flights of Kingfisher Airlines fly to numerous destinations like
Ahmadabad,
Bangalore, Chennai, Delhi, Mumbai, Hyderabad, Kolkatta, Mangalore and
many others.
Kingfisher airline at present operates with 11 brand new aircrafts, everyday
there are
there 70 flights which cover around 16 important key destinations in India.
The airline also provides you with ample of entertainment facilities which
include on
demand audio and television shows which are played on LCD monitors. The
most
commendable quality of Kingfisher Airline is that it offers all services in the
most
affordable price.
RARITY OF STRATEGIC CAPABILITIES
Kingfisher has been able to create a rarity in terms of service level.
It has also achieved to qualify in oneworld group which has given it an
extra edge over
all the other Indian airline.
Oneworld brings together some of the best and biggest names in the
airline business -
American Airlines, British Airways, Cathay Pacific, Finnair, Iberia, Japan
Airlines, LAN,
Malév Hungarian Airlines, Mexicana, Qantas and Royal Jordanian, and around
20
affiliates including American Eagle, Dragonair, LAN Argentina, LAN Ecuador
and LAN
Peru.
Russia’s S7 Airlines will join the alliance in 2010 with Kingfisher now on
track to follow
during 2011. Between them, these airlines:
• Serve 800 airports in nearly 150 countries, with some
9,000 daily departures.
• Offer nearly 550 airport lounges for premium customers.
• Carry some 340 million passengers a year on a fleet of
almost 2,500 aircraft.
• Generate more than US$100 billion annual revenues in
total.
It is the only alliance with any airlines based in South America, Australia or
Asia’s
Middle East.
The alliance enables its members to offer their customers more services
and benefits than
any airline can provide on its own.
These include a broader route network, opportunities to earn and redeem
frequent flyer
miles and points across the combined oneworld network and more airport
lounges.
oneworld also offers more alliance fares than any of its competitors.
Oneworld was voted the World's Leading Airline Alliance for the seventh
year running
in the latest (2009) World Travel Awards. It is the only winner of this award
since it was
introduced in 2003.
India’s leading domestic carrier and only five-star airline, Kingfisher
Airlines, is lining
up to join oneworld® after signing a memorandum of understanding as its
first step
towards full membership of the world’s leading quality airline alliance,
subject to Indian
regulatory approval.
The agreement was concluded at a meeting between Kingfisher Airlines’
Chairman Vijay
Mallya and Chief Executives from oneworld’s 11 existing member airlines,
which
include some of the best and biggest names in the industry.
Kingfisher Airlines today applied to India’s Ministry of Civil Aviation for
authority to
proceed with its membership of oneworld. .
Kingfisher Airlines’ addition to oneworld will link India’s most extensive
domestic
network with oneworld’s unrivalled global network, as the only alliance with
airlines
based on every continent. It will add 58 cities to the oneworld map – all of
them in India.
This will expand oneworld’s network to 800 destinations in almost 150
countries, served
by a combined fleet of 2,350 aircraft operating some 9,000 flights a day,
carrying some
340 million passengers a year.
Established oneworld members American Airlines, British Airways, Cathay
Pacific,
Finnair, Japan Airlines, Qantas and Royal Jordanian already serve five
gateways in India
between them – Bangalore, Chennai, Delhi, Hyderabad and Mumbai.
British Airways will support Kingfisher Airlines through its alliance
implementation
programme, as its oneworld sponsor.
Kingfisher Airlines Chairman and Chief Executive Vijay Mallya said:
“Kingfisher
Airlines is proud to be lining up to join the world’s leading quality global
airline alliance.
Becoming part of oneworld would be one of our most significant steps so
far - and is
right in line with our vision to become one of the world’s top airlines.
It will enable us to offer our guests a truly global network served by
partners who include
some of the best known and most admired airlines in the world, with
frequent flyer
benefits extended throughout this network.
It will also strengthen us financially, through revenues from passengers
transferring to
our network from our oneworld partners and the cost reduction opportunities
the alliance
offers.”
Willie Walsh, Chief Executive of British Airways, oneworld’s sponsor of
Kingfisher
Airlines, said: “Kingfisher Airlines is an ideal fit for oneworld. It has a strong
focus on
customer service and its network expands what the alliance
currently offers.
oneworld’s priority is the quality rather than quantity of our member airlines,
which is
why British Airways is delighted to be developing our relationship with
Kingfisher
Airlines further by acting as its sponsor into the alliance.”
Kingfisher Airlines will fill one of oneworld’s few remaining membership
spaces with
a carrier that matches our alliance’s demanding requirements,
benefiting customers
by expanding our global reach and helping us ensure oneworld remains the
pre-eminent
global alliance with members unmatched in brand and service quality.”
Hence this has became a rare resource for kingfisher.
ROBUSTNESS OF STRATEGIC CAPABILITIES
COMPLEXITY :- the
complexity is formed due
to inter linkage of external
PR activities,
advertisement,
flamboyancy with internal
backup of excellent service
level which is rare.
ROBUSTNESS
The culture at kingfisher
is made up of excellent
hard working employees
who are courteous and
yet flamboyant which is
rare.
ENABLING SUCCESS
Managing People
People as a resource
Kingfisher will succeed or fail as a team.
Each one of them must respect their colleagues regardless of their
rank, and they work
together to ensure their mutual success.
Kingfisher takes their employee as resources.
They train them in such a way that the do a value addition in the
organization.
Kingfisher employee work in team and they have collective behavior
among themselves.
Performance Management
The Company provides its employees with suitable training and
development
opportunities to help them grow and develop their skills which are
unmatched in
the industry.
This aspect of their training has helped their employees in creating a
sound impression on
their customers and they have become a highly admired airline
company in India.
The employees are paid good salaries and performance based
incentives to motivate them
even more.
HR function
Recruiting quality people is a major plus point of the kingfisher.
They hire the best people in the industry and pay them handsomely so that
they contribute to the
company’s goals and ambitions to the best of their capabilities.
Managing People
The crew members of Kingfisher are paid more than their counterparts in any
other airline
company in India.
Kingfisher has HR Management Information System which keeps record on
performance of the
human resource.
Training/ Learning Management System (LMS)
Performance Record
Structure and Processes
IATA
IT
ICAO
KFR
Callsign
KINGFISHER
Founded 2002
Hubs Bengaluru International Airport
( Primary Hub)
Chhatrapati Shivaji International Airport
( Secondary Hub)
Indira Gandhi International Airport
( Secondary Hub)
Focus cities Ahmedabad
Chennai
Hyderabad
Kolkata
Frequent flyer program King Club
Fleet size 75 (+139 Orders, 25 Options)
Destinations 77 (Including routes servedKingfisher
Red)
Parent company UB Group
Company slogan Fly The Good Times
Headquarters Bangalore, India
Key people Dr. Vijay Mallya, CMD
Mr. Hitesh Patel, EVP
Mr. Rajesh Verma, EVP
Mr. A. Raghunathan, CFO
Kingfisher Airlines currently operates with a brand new fleet of 8 Airbus A320
aircraft, 3 Airbus
A319-100 aircraft and 4 ATR-72 aircraft. It was the first airline in India to
operate with all new
aircrafts. Kingfisher Airlines is also the first Indian airline to order the
Airbus A380. It placed orders for 5 A380s, 5 A350-800 aircrafts and 5 Airbus
A330-200
aircrafts in a deal valued at over $3 billion on June 15, 2005.
With the sign of trouble in aviation industry, Kingfisher airlines and Jet
airways (used to be
competitors), formed alliance (October, 2008) to significantly rationalize and
reduce costs and
provide improved standards and a wider choice of air travels options to
consumers with
immediate effect
• Kingfisher airline has won global awards at the SKYTRAX World Airline
Awards
ceremony held recently in Hamburg , Germany(2009).
• Air France –KLM is in talks with Jet Airways and Kingfisher Airline for having
a codeshare
agreement .The conclusion of this agreement could help passengers ,
especially
from smaller cities ,to travel further on the network of these global airline.
• Kingfisher Airlines has launched “Five Star Privileges” ,an exclusive
program that
entitles guests to avail of great deals at partner establishment around the
country.
• Kingfisher Airlines captures market share with strong passengers in
February 2009 as per
the latest ministry of Civil Aviation data.
• Kingfisher Airlines has deferred deliveries of some Airbuses (EAD,PA)
aircraft, wary of
overcapacity as airlines struggles to cut costs to offset high fuel prices and
softer demand.
The Airline , a unit of alcoholic drinks maker UB Group , has negotiated with
Airbus to
defer deliveries of 32 A320-family aircraft to 2010-2012 from2008/09,
Kingfisher,
which owns discount carrier Deccan Aviation DECA.BO, has five A380 super
jumbos on
order , scheduled for delivery from 2012 , as well as 20 A350 Aircraft
scheduled for
delivery from 2013.
It also has a further 20 A330/200 aircraft on order , making it one of the
single largest
stakeholders in the Airbus order backlog by
number of planes.
• Indigo ,paramount Mull joining Jet Airways (India) limited and Kingfisher
Airlines Ltd
ties up
• Kingfisher Airlines Ltd plans to sell 25% stake to allow foreign airlines to
invest in
domestic carriers, with a cap of just below 26%.
• Kingfisher Airlines Ltd in talks to lease out two of its Airbus A330 planes to
Nigeria’s
Ank Air.
• Recently, it has announced management change .
• Air India has rejected the Jet Airways(India) Limited-Kingfisher Airlines Ltd
offer to join
their Alliance.
• Deccan aviation Ltd has changed its name to Kingfisher Airlines Ltd.
• Private air carrier Kingfisher Airlines has inked an agreement with Citibank
Cards which
allows members of its 'King Club' holding the bank's cards redeem their
points for flights
on Kingfisher Airlines or its partner airlines.
King Club is the airline's frequent-flyer programme.
"The association will benefit members of King Club, the frequent-flyer
programme of
Kingfisher Airlines and Citibank cardholders who are King Club members
Managing Information
New Business Model
To further its expansion plan KFA put in its bid to buy Sahara in November
2005.How ever
negotiation came to a standstill when KFA felt the valuation of Sahara
Airlines of around
US$750mn to US$1 bn. was too high.
KFA has plans to make an Initial Public Offer (IPO) and raise around US$200
mn that would be
used for its fleet acquisition and route expansion activities.
KFA set up Kingfisher International Inc. (KII), a subsidiary in US for its
international
operations. KFA plans to operate international routs by end of 2007. But KFA
had yet to
receive permission from the Indian government.
According to Indian government domestic air carriers are not allowed to fly
international routes
without five year of domestic flying experience. But Mr. Mallya said if he
failed to
convince the government to change its rules, it would start an airline in a
foreign country
and fly it to India.
May go for other services like international flights (concentric diversification).
May go for arrangement fashion shows (horizontal diversification).
Mergers and Acquisitions
Dec. 2007Low-cost carrier Deccan and Vijay Mallya-led Kingfisher Airlines
decided to merge
and create a single corporate entity to cut down operational costs and
accelerate their
journey to profitability. Shares of Deccan Aviation have doubled in a little
over a month
in anticipation of a reverse merger of Kingfisher Airlines into Deccan
Aviation. Details
of Deccan-Kingfisher merger, valuations and swap ratio will be worked out by
accountancy firm KPMG.
Mallya would be the chairman and CEO of the merged entity, while executive
chairman of
Deccan, Captain G R Gopinath would be the vice-chairman.
Managing Finance
Mallya made it clear that KFA would not be positioned as a low cost carrier as
passengers would
attribute the features of low cost carriers like low quality of service, delayed
flight
timings, etc., to KFA as well.
Hence, the airline was called a budget airline and not an LCC. Fares were
above those of LCCs
but lower than the economy class fares of Jet, Sahara, and IA. KFA also
allowed multiple
fare options and auctioning of tickets on all traffic routes.
Kingfisher follows a dynamic fare policy and the fare levels fluctuate
depending on the number
of bookings made / anticipated on a particular flight.
It is their commitment to Guests that at any given point of time the lowest
available fare
at that time would be made available on all booking mediums.
The Company offers world class services at the most competitive prices.
Their services are rated
as the best in the Indian aviation industry and their pricing strategy aims at
acquiring
customers from their competitors by providing state of the art services at
very
competitive prices.
The company carefully analyzes its load factors in order to optimize their
investments in the
operations and to break even because they are operating in a very dynamic
industry and it
is very crucial for them to have a measure their costs so that they can
optimize the
profitability of their operations.
KFA came up with many new financial strategic moves that made it one of
the leaders of
aviation industry the company had adopted following strategies:
The company is planning to spend close to Rs 40 crore on various
media and below-the-line
marketing activities for the year 2009-10
Cut down the salaries of the staff like trainee pilot now drawing Rs20k as
compare to Rs2.0lacs.
To come over the financial crisis the KFL is considering an option of
retrenchment.
It purchased brand new A320 aircrafts powered by the cockpit that was a
paperless
environment.
KFA was first Indian carrier to place an order for A380s. The ROI (return on
interest) for
Kingfisher Airlines turns out to be low since the capital investments done by
them are
very high and profits incurred are low.
ROI = Profit / Capital Employed
The strategy proposed for Kingfisher Airlines in this assignment would help
Kingfisher Airlines
to recover from their losses by a substantial amount but the strategy of Vijay
Mallya is to
conquer the Indian Aviation market by any cost.
Managing technology
The cargo sector in the domestic industry is very much unexploited
and the company can
exploit this because they have access to some of the most profitable
routes in the
industrial towns and cities in India. The company has got a sound
infrastructure to
support its cargo operations and they should take advantage of this
before their
competitors.
• The company has hangers at the major airports in order to increase their
revenues while
cutting down the costs. For Example, if they have their own hangers then
they will not
pay the parking charges to the competitors and at the same time if they
have their own
hangers then they can charge their competitors for using their hangers
which will increase
their revenues.
Seek additional distribution channels such as more tie ups & collaboration,
try seeking
collaboration with international carriers, bilateral discussions over seats and
code-sharing
between the carriers.
Easy accessibility to Guests.
Telephone numbers are accessible 24 hours
Easy availability of tickets.
Amendments and Cancellations up to one hour before the scheduled
departure.
Keep their guests informed in case of known delays, cancellations and
diversions.
Valet Service
Checking-In, multiple checking counters.
Guests are offered refreshments in case the delay is more than one hour
Inflight entertainment
Meal options
World class crew
Managing Strategic Change
Diagnosing the change situation
The fluctuating aviation turbine fuel (ATF) prices are always a concern for low
cost airlines,
according to analysts. Many doubt how long these no-frills airlines can
survive in the
market. In Europe, low cost airline boom was followed by a bust, which only a
few
competitors survived. Since low cost airliners depend on maximum utilization
due to lack
of stand-by aircraft, any technical snag would adversely affect on the
travellers as only a
refund is made and no alternative travel arrangements are done
Experts say that airlines compete primarily on three fortes such as price,
customer service and
value-added services. While no-fillers fight the price war, service is the main
thing
provided by their larger peers.
The critical factor will be the ability to keep costs low and the offer of an on
time service at an
affordable price, despite the infrastructure constraints, for survival.
The next issue to tackle is to properly position itself in the aviation market.
The Indian customers are not that much mature as compared to their
American contemporaries.
They will not pay more for just mere entertainment or watching TV in a flight
of one or a
half hour journey.
Poor airport infrastructure such as few landing slots, Inefficient Air traffic
controllers, not yet
automated systems prone to human delays and errors, shortage of skilled
personnel.
The revenue per seat is low.
It cannot rely solely upon the direct selling model for sell of the tickets as the
Internet and credit
card penetration is not that remarkable.
The dishonesty of travel agent who usually do not push their seats as that of
the rival’s.
A certain amount of churn and turmoil for players who don’t have the deep
pockets. For
example, as happened in USA, many smaller airlines without deep pockets
fell by the
wayside unable to sustain the predatory pricing techniques adopted by their
strong
opponents.
The outdated Aviation rules in India which compels the airlines to add more
to their operating
cost, which could have been easily, do away with.
Taxes like passenger service fee which is Rs. 221 on one seat looks
ridiculous for a ticket worth
Rs. 99.
Overhauling costs is another major hurdle.
Current number of pilots in India is over 1,500.
According to aviation ministry sources, the money that is coming to the
sector is from dubious
origin in several cases & is from investor seeking quick returns. So it may be
possible
that some of the players may not even be in the game for long. They may
sellout after
listing on the stock market or get bought out, once the market starts
consolidating.
Types of change
It planned to re-launch its commercial air service called UB Airway again
which it had to
withdraw it due to government restrictions.
The company gave best services to its customers that were like providing
world class interiors,
and in-flight entertainment systems.
The company came up with only one class airlines rather than other airlines
that had Business
Class; Economy Class the idea was to combine Business Class experiences
and Economy
Class experiences in one.
Having a single class freed up more leg space for passengers when
compared to normal economy
class flights.
The company started addressing its customers as “GUEST” rather than
passengers.
The company made its mark by providing its guests with more legroom and
bigger seats so as to
provide better comfort.
KFA has set its sight to become India’s largest airline both is capacity and in
market share.