Aviation

AVIATION INDUSTRY ANALYSIS
2011
A STUDY ON AVIATION INDUSTRY IN INDIA

UNDER THE GUIDANCE OF PROF.SAMIK SHOME
SUBMITTED BY:
GROUP-8, MARKETING A MBA (2010-2012)
GROUP MEMBERS:
KOMAL R.HIREMATH SOURABH AGARVAL GAURAV CHOUDARY GYANPRAKASH PODALI SHRUTI PATEL NASARAIAH BHEEMA
2011
ALLIANCE UNIVERSITY- SCHOOL OF BUSINESS
2011
ACKNOWLEDGEMENT
At the successful Completion of our project, we the students of Marketing A would like to express our sincere gratitude to all the people without whose support this project would not be completed. At the onset, we would like to thank the Management of School of Business, Alliance University for giving us the opportunity to undergo this research project.
We would also like to acknowledge the constant help and encouragement of our project guide Prof SAMIK SHOME, who has given his valuable suggestion, expert guidance and support throughout. We would also like to thank all those who have directly or indirectly helped us in the preparation of this report.
Group-08 Marketing A
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DECLARATION
We, the members of Group 8, Marketing A, MBA (2010-2012), would like to declare that the project on THE AVIATION INDUSTRY is an exclusive and detailed analysis carried out by us. The information, facts and figures in the report have been taken from reliable sources such as Capitaline, annual reports of companies and corporate websites.
SERIAL NO 1 2 3 4 5 6
NAME OF THE STUDENT KOMAL R HIREMATH SOURABH AGARVAL GAURAV CHOUDHARY GYANPRAKASH PODALI SHRUTI PATEL NASARAIAH BHEEMA
REGISTRATION NO, 10SBCM0452 10SBCM0202 10SBCM0507 10SBCM0324 10SBCM0417 10SBCM0156
SIGNATURE
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CERTIFICATE
This is to certify that the members of group 8, Marketing A, MBA (2010-2012), have completed the analysis on AVIATION INDUSTRY under my guidance for the partial completion of the course: Industry Analytics, term III, MBA (2010-2012).
NAME OF THE FACULTY GUIDE: PROF.SAMIK SHOME SIGNATURE: DATE:
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TABLE OF CONTENTS:
CONTENTS Executive Summary 1. Introduction 1.1Introduction 1.2 Genesis of Airlines in India 1.3 Origin of Airlines in India 1.4 Objectives 1.5 Conclusion 2. Literature Survey 3. Industry Analysis 3.1 Introduction 3.2 Classification of Indian Aviation 3.3 Major Players in the Market 3.4 Market Shares 3.5 Market Segmentation 3.6 Nature of Competition 3.7 Analysis of Industry 3.7.1 PESTLE Analysis 3.7.2 Porters Five Forces Analysis 3.7.3 SWOT Analysis 3.8 Business Diversification 3.9 Mergers and Acquisition 3.10 Marketing Initiatives 3.11 Technology Intensity
PAGE NO. 01 02 03 03 05 05 06 07 12 13 13 15 20 21 22 23 23 29 31 33 36 38 40
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3.12 Current Scenario 3.13 Future Outlook 3.14 Future Outlook on Global Scenario 3.15 Comparison with U.S and Other Countries 4. Conclusion 5. References
42 43 43 45 54 55
LIST OF TABLES
Table 3.1 Status of Various Airlines Prevalent In India Table 3.2 Passenger Miles as A Proportion of Available Seat Miles Table 3.3 Number of Passenger Travelling Through U.S Airspace Table 3.4 Load Factor of European Aviation Table 3.5 African Aviation Statistic Table 3.6 Regional Traffic Performance Table 3.7 Statistic across the Continent
34 47 47 48 49 50 51
LIST OF FIGURES
Figure 1 Comparison of Market Share in the years 2010 and Feb. 2011
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EXECUTIVE SUMMARY: The global airline industry consists of over 2000 airlines operating more than 23,000 aircrafts, providing service to over 3700 airports. The global aviation industry is growing at an average rate of 5% per year over the past 30 years, with substantial variations due to changing economic conditions and different economic growth in different regions. The annual growth in air travel is twice the GDP growth. This airline industry provides service to virtually every corner of the globe and is an integral part of the global economy. Deregulation and Liberalization worldwide: Since the deregulation of the US airlines in 1978, the pressure on the governments to reduce their involvement in the economics of airline competition has spread to most of the world. This US airline deregulation is perceived to be a success by other countries as it benefits a vast majority of travelers. This deregulation saw the entry of many successful new entrants and low-fare airlines which had a great impact on the airline pricing practices and publics expectations of a low-priced air travel. But this deregulation also had some negative impacts. The pressure to cut down costs, combined with increasing profit volatility, mergers and bankruptcies of several airlines led to periodic job losses, reduced wages and airline labor unions with less power than they previously enjoyed. Also all travelers did not enjoy the benefit of deregulation equally.
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CHAPTER 1 INTRODUCTION
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1.1. INTRODUCTION:
The aviation industry in India is one of those sectors that saw a constant pace of growth among other industries in the world over the past many years. The Indian aviation industry has witnessed an impressive growth of around 19%, with major contribution from the civil aviation segment. The government open sky policy has led to many overseas players entering the market and the industry has been growing both in terms of players and aircraft. From being primarily a government owned industry, the Indian aviation industry is now dominated by privately owned full service airlines and low cost carriers. Earlier air travel was a privilege, only few can afford but today air travel has became much cheaper and can be afforded by many people. The Aviation industry in India encompasses a wide range of services related to air transport such as passenger airlines which are scheduled, cargo airlines and unscheduled air operators like private jets and helicopters. This regulation of air transport services to/from/within India and for enforcement of civil air regulations, air safety and airworthiness standards is done by the Directorate General of Civil Aviation (DGCA). The DGCA is the regulatory body in the field of Civil Aviation primarily dealing with safety issues and also co-ordinates all regulatory functions with International Civil Aviation Organization.
1.2. GENESIS OF AIRLINES IN INDIA:

1910: The first Indian to have an airplane was the young Maharaja of Patiala, Bhupinder Singh, who sent his Chief Engineer to Europe for a study with orders to buy three planes, including a Bleriot monoplane and Farman biplanes, which arrive in the Punjab later that year. 1912: The first domestic air route between Karachi and Delhi was opened by Indian State Air Service in collaboration with Imperial Airways. 1932: JRD Tata launches first scheduled airline, Tata Airlines, by piloting the first flight himself from Karachi to Mumbai via Ahmadabad on a single-engine.
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1933: In its first year of operation. Tata Airlines flies 160,000 miles, carries 155 passengers and 10.71 tones of mail. Tata Airlines launches its longest domestic flight: Mumbai to Trivandrum with a six-seater Miles Merlin. 1945: Second domestic airline, Deccan Airways, is founded. Deccan Airways is the first of a bunch of new airlines to serve domestically in India. The first services began in July 1946. 1946: Tata Airlines changes its name to Air India. 1947: Air India signs an agreement with the government of India to operate international services with a weekly flight from Bombay to London via Cairo and Geneva. 1953: Indian Airlines formed by merging eight independent domestic airlines; Deccan Airways, Airways India, Bharat Airways, Himalayan Aviation, Kalinga Air Lines, Indian National Airways, Air India, Air Services of India,. Air India International takes over the international routes. 1960: India enters the jet age with an Air India B707; USA and India are connected for the first time with an Indian airline. 1990: East West Airlines becomes the first private airline after the government decided to end Indian Airlines monopoly over domestic civil aviation. 2003: Air Deccan, Indias first ever budget airline begins operations on 25th August from Bangalore to Mangalore. 2004: On August 26, Air Deccan launched its A320 flights on the Delhi- Bangalore route.
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1.3. ORIGIN OF AIRLINES IN INDIA:

The concept of Airline came in mid 19th century when Rufus Porter and Frederick Marriott, an American started an airline in the form of airship. However, their attempt was floundered due to mishap in the airship catching fire. Later in 1909, with the assistance from the government, German based DELAG was the first one to operate airline successfully. India was also one of the first countries to embrace civil aviation. One of the first West Asian airline companies was Air India, which had its beginning as Tata Airlines in 1932, a division of Tata Sons Ltd. (now Tata Group). The airline was founded by India's leading industrialist, JRD Tata. On October 15, 1932, J. R. D. Tata himself flew a single engine De Havilland Puss Moth carrying air mail (postal mail of Imperial Airways) from Karachi to Mumbai via Ahmadabad. The aircraft continued to Madras via Bellary piloted by Royal Air Force .Tata Airlines was also one of the world's first major airlines which began its operations without any support from the Government.
1.4. OBJECTIVES OF THE STUDY :

The objective of this research is to conduct an in-depth analysis of the various aspects of the Indian Airline Industry, which would facilitate in analyzing different aspects such as market structure, growth, nature of competition, research & development, import export, merger & acquisition etc. All this would finally reflect Indias standing in global market. 1. To study the overview of Indian aviation industry. 2. To study about the major players and their market share. 3. To study about the market segmentation with respect to aviation industry. 4. To study the nature of competition existing in the Aviation industry. 5. The PEST analysis of aviation industry. 6. To study about the business diversification of the different companies. 7. To find out the various mergers and acquisitions of the sector.
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8. To understand the level of impact of growing technology on the aviation industry. 9. To find out the contribution of Indian aviation industry to the economic growth. 10. The scope of expansion of the aviation industry in concern with the future outlook. 11. To study the global scenario of the aviation industry. 12. To compare the Indian industry with U.S and other countries.
1.5. CONCLUSION:
This section talks briefly about the major players in Indian Airlines industry and also shows the major objectives of the study. The following chapter will be laying emphasis on the overview, history and evolution of the Indian Airline industry.
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CHAPTER 2 LITERATURE REVIEW
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2.1. INTRODUCTION:
As part of this Industry analysis, 15 articles and reports on the topics related to the Airline industry are taken into consideration. Various aspects of the industry have been studied as follows:
2.2. STRATEGIC PLANNING FOR THE INDIAN CIVIL AVIATION INDUSTRY:
Research article by Somshekhar & Chandra(1996) mainly focuses on the strategies that are needed to be implemented by the Indian civil aviation industry to stay afloat with the on growing competition worldwide throughout the world be it American or European or Asia-pacific civil aviation. Now, the term strategic should be used broadly and need not necessarily be associated with defense, where individual technology will have to be developed especially when unavailable for other countries. Many developed countries regard the civil aviation sector very important because of its influence on the national economy, technological capability & strategic influence. Now, aviation industry is an industry that involves one of the largest variations of technologies and number of equipments and components. It also tells, countries in Asia pacific region which entered the industry much later, have emerged as important players in the past decade, while in comparison, Indian civil aviation industry which is much older, still operates from small base even though its domestic market potential and skilled man power should have given it intrinsic advantage to emerge as a globally important player in the civil aviation industry by now.
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2.3. ICTs INTERNET ADOPTION IN AVIATION INDUSTRY: SIMILARITIES IN INDIA AND CHINA:
According to Leena & Neha(2010), the aviation sector has adopted latest information communication technology initiatives throughout. The fast development of information communication technologies (ICT) and the expansion of the Internet have changed tourism industry structures around the world. Aviation industry is one of the important elements of tourism system. New technologies have been adopted in the aviation industry in Europe and America for more than 30 years, and the trend is likely to continue into the future. India and China, as fast-growing developing Countries in Asia, are gaining importance in the international tourism market for their historical and cultural attractiveness as a destination. This article examines how the ICT and Internet gradually modifying the aviation industries in India and China thus indirectly improve the tourism industry structure, how important such changes are and also measures that has to be taken in near future. Therefore, this article focus on a exploratory research which is conducted based on information collected from websites and authorities of several tourism organizations, such as airlines, hotels, tour operators, visitor attractions and the tourism authorities.
2.4. CAN IBSA COUNTRIES COOPERATE IN CIVIL AVIATION MANUFACTURING? MANAGING AMBITION WITH RATIONALITY:
Research article by Parashar(2005), basically talks about a initiative by three countries namely India , brazil and south Africa which are playing major part in their respective fields of expertise vis a vis india for information technology , brazil for manufacturing and south Africa for equipments and components. It also talks about the factors which led to the initiative and the feasibility of such association for longer duration of time while competing with major players such as Boeing and airbus which actually possess a complete monopoly over the manufacturing sector as far as aviation sector is concerned.
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2.5. ISSUES AND CHALLENGES IN AVIATION INDUSTRY:

Research article by Neha , Kamal and Swati(2007), talks about the major issues and challenges that are prevalent in the aviation industry or are about to be faced by the Indian aviation industry in the near future. For instance, the major issues that are currently making their presence felt in the aviation industry at a major level are: 1. Shrinking profitability of airlines 2. Ground handling policy 3. High ATF prices 4. Shortage of technical manpower 5. Safety issues 6. Land acquisition 7. Closure of old airports
This also discusses the current trends and the reasons that are responsible for the current boom in the aviation sector.
2.6. LOW COST CARRIER MODEL IN INDIA: SUSTAINABILITY CHALLENGES:

The research article by Manisha(2010), basically talks about the sustainability challenges that are prevalent in front of low cost carrier model or lost cost airlines which is very popular right now and seems to be very promising as well as far as current situation is concerned. However the model is yet to acquire a competitive pricing position in the domestic Indian market
Thus, this paper actually reviews the existing aviation industry literature to reason the policy challenges, including the policy of fee waiver cap on aircrafts with less than 80 seats or weighing less than 21 tonnes.
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Also, finally the paper concludes that the environmental impact of local air pollution around the airport is a function of an aircrafts seating configuration and maximum seating capacity demand on the given route instead of the size of aircraft.
2.7. A COMPARATIVE STUDY BETWEEN INDIAN PUBLIC AND PRIVATE (LOW COST) AIRLINES WITH RESPECT TO THEIR PASSENGER SERVICE:
Research article by Mitra(2010), focuses on maintenance of healthy relationships with passengers by the players prominent in the Indian aviation industry. The organization today not only aim at delivering a service to the passenger but also focus on satisfying the passengers with excellent service so that the customer is left with a untarnishing image of the service provided to them and keeps that in his/ her mind forever . This study compares and contrasts the service on the basis of collected data and to suggest some adequate measures to improve their service with respect to their beloved customers.
2.8. CONCLUSION:
The literature review have not only covered the present scenario but also they have provided significant insights of the Indian Airlines Industry including the various opportunities, production trends, major competitors, factors that influence foreign companies to enter the Indian market.
This report on the Indian Airlines Industry will give a comprehensive insight of the industry with respect to the various parameters such as market structure, growth, research and development, merger & acquisition, future outlook etc. All this would finally reflect Indias standing in global market.
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CHAPTER 3 INDUSTRY ANALYSIS
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3.1. INTRODUCTION:
Industry analysis is a market strategy tool used by a business to determine if they want to enter a product or service market. In the report a careful analysis of several aspects of the Airlines industry is done to determine if they can make profit selling goods and services in the market. Analyzing economic factors, competitors, market share, export and imports, merger and acquisitions, technology and advertisements, future conditions and government regulations helped a lot in the report. Finally an analysis is done in terms of PESTLE analysis, and SWOT analysis to get a clear understanding of the industry.
3.2.4 CLASSIFICATION OF INDIAN AVIATION SECTOR:

The Aviation sector is classified into three types mainly:
1. Scheduled air transport service: Scheduled Air Transport Service means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public. They are classified as : A) Domestic airlines, which provide scheduled flights within India and to select international destinations. Jet Airways, Spice Jet, Kingfisher Airline and IndiGo are some of the domestic players in the industry. B) International airlines, which operate scheduled international air services to and from India.
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Further, these domestic and international airlines are demanded by the travelers based on three types of class offered by them which are:
a) Business class, also known as executive class is the most expensive class offered by airline, which are mostly preferred by business travellers and found on airlines operating on international routes. More leg room, complimentary food and beverages, personal TV laptop power ports, increased cabin staff to passenger ratio are some of the basic amenities which are offered in this class by the operators. b) Premium class is a travel class positioned between business class and economy class and around 65 % less in cost as compared to business class. c) Economy class is the lowest class offered by the airlines and are common on airlines operating in domestic route. In flight magazine, duty free catalogue food on purchase etc. are some of the basic amenities offered in this class.
2. Non-scheduled air transport service: It is an air transport service which is also known as air taxi service. These are the air transport service other than the scheduled air transport service and may be on charter basis and/or non-scheduled basis. The operator is not permitted to publish time schedule and issue tickets to passengers.
3. Air cargo services: It is an air transportation of cargo and mail. It may be on scheduled or non-scheduled basis. These operations are to destinations within India. For operation outside India, the operator has to take specific permission of Directorate General of Civil Aviation demonstrating his capacity for conducting such an operation.
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3.3. THE MAJOR PLAYERS AND THEIR MARKET SHARE: The major players in the Airline industry are Indian airlines, Kingfisher airlines, Jet Airways, Indigo airlines, Spice Jet, Kingfisher Red, Jet Lite, and Go Air. India's booming economy, and the deregulation of the aviation industry, has brought about a huge increase in the number of domestic airlines in India in the recent years. Passengers have now a variety of option to chose either from one government owned full service airline, three privately owned full service airlines, or five privately owned low cost carriers.
3.3.1 INDIAN AIRLINES:
Indian Airlines is India's government owned, full service domestic airline, based in Mumbai. The airline was merged with Air India; the government owned international airline, in 2007 and effective from February 26, 2011 all flights of Indian airlines have now become Air India which marks the end of Indian airlines. Indian Airlines has its share of inefficiencies. Flights are often delayed, flight attendants and in-flight service leave a lot to be desired, and the airline has been involved in as many as 12 fatal accidents in its history. On the positive side, it has well planned routes and flight schedules, flies to most destinations in India. Today Air India is the 16th largest airline in Asia.
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3.3.2 KINGFISHER AIRLINES:
Kingfisher Airlines is another highly regarded full service airline. This is the one airline in the world to have five star rating from Skytrax. The airline, which has the same "King of Good Times" owner as India's Kingfisher beer, started operating in mid 2005.Its headquarters are in Bangalore, with bases in Mumbai, Hyderabad, and Delhi. In total, the airline covers almost 40 destinations across India. Passengers are treated as guests, seating is spacious and comfortable, and the airline puts significant effort into recruiting charming and attractive staff. It also leads the way in regard to in-flight entertainment on domestic flights in India and serving delicious food.
3.3.3 JET AIRWAYS:
Jet Airways is widely regarded as India's biggest and best airline. It's a privately owned, full service airline that commenced operating in mid 1993. It has bases in Delhi, Mumbai, Pune, Kolkata, Hyderabad, Chennai, and Bangalore. According to DGCA, this airline is the market leader of Indian aviation industry with the highest market share. This airline has won many awards for quality service for its outstanding in-flight service, food, punctuality, and baggage handling.
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3.3.4 INDIGO AIRLINES:
Indigo Airlines is based in Delhi and flies to around 15 destinations all over India. This privately owned airline started operating in mid 2006 and is considered to be India's best low cost carrier. Despite keeping fares low, the airline hasn't compromised on punctuality, connectivity of flights, safety, or customer service. Indigo incorporates the best hardware, software, interface design and personnel from around the world. The Indigo team uses all of these resources to design processes and rules that are safe and simple, that make sense, and that cut waste and hassles, which in turn ensures a uniquely smooth, seamless, precise, gimmick-free customer experience at fares that are always affordable.
3.3.5 SPICE JET:
Spice Jet is another decent, privately owned, low cost carrier. The airline, which is based in Delhi, started operating in mid 2005. Spice Jets new generation fleet of aircraft is backed by cutting edge technology and infrastructure to ensure the highest standards in operating efficiency. Spice Jet invests heavily in safety, impeccable maintenance and a high level of
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expertise. Spice Jets key management personnel are all senior, seasoned professionals and have significant international experience in both launching and managing low-cost airlines. With thousands of cumulative man hours in the industry, the management is committed to bring to customers in India all the benefits of the global revolution in the skies. Spice Jet aims to make travel comfortable, affordable and refreshingly efficient experience for all.
3.3.6 KINGFISHER RED:
Kingfisher Red, originally called Air Deccan, is a privately owned low cost airline based in Bangalore. It started operating in mid 2003 and was India's first low cost carrier. Kingfisher Airlines took over the airline, in early 2008 and from then the airline has improved a lot. It now accepts international credit cards for bookings, seat numbers are allocated, and staffs are more committed and friendly. However, the flight unlike previously has stopped serving food at free of cost and has started the business of selling the foods in flight.
3.3.7 JETLITE:
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Jetlite used to be Air Sahara until Jet Airways successfully took the company over in mid 2007. The low cost airline focuses on providing flights that connect India's capital cities. In addition to its headquarters in Delhi, it also has bases in Mumbai and Hyderabad. Positioned as a Value based Airline, JetLite promises to offer value for money, economical fares, 'Buy on board' inflight meals, in-flight shopping and much more.
3.3.8 GO AIR:
Go Air is a small privately owned, low cost airline that started operating in late 2005. It operates a fleet of brightly colored airplanes to twelve cities in India. Its remote destinations include Jammu, Srinagar, and Guwahati. Go Air now has the youngest fleet of aircraft in India, with the average age of its eight A320 Airbus airplanes being approximately seven months. Go Air is positioned as 'the Smart People's Airline'. Its captivating theme, 'Fly Smart' is aimed at offering passengers a consistent, quality-assured and time-efficient service through 'pocket-friendly' fares.
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3.4. MARKET SHARE:

The Indian aviation industry has witnessed an impressive growth during the past few years, with major contribution from the civil aviation segment. The market has been strongly supported by the government and the private sector. The market share is the percentage of an industry or market's total sales that is earned by a particular company over a specified time period. Market share increases can allow a company to achieve greater scale in its operations and improve its profitability. Companies are always looking to expand their share of the market, in addition to trying to grow the size of the total market by appealing to larger demographics, lowering prices, or through advertising.
Fig:1
COMPARISON OF MARKET SHARE IN YEAR 2010 AND FEB 2011.(IN
PERCENTAGE)
JET AIRWAYS JET LITE KINGFISHER SPICE JET GO AIR INDIGO AIR INDIA 0 5 10 15 6.9 6.6 13.3 13.8 7 8.1
19.2 18
19.1 19 2010 2011 17.3 18.7 17.1 15.8 20 25
SOURCE: MINISTRY OF CIVIL AVIATION, GOVT. OF INDIA

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The above bar graph shows a comparison between the market share of airlines in the year 2010 and 2011(Feb). From the figure it can be inferred that Jet Airways is still the market leader with an overall market share of 26.1 %( Jet Airways + Jet Lite) as compared to 26.2 in the previous year. Kingfisher ranks second with a market share of 19 % as compared to 19.1 in 2010. Indigo ranks third with 18.7% of market share in current year as compared to 17.3 in previous year.
NACIL market share has been decreased from 17.1 to 15.8 in 2011. Spice Jet and Go Air have a market share of 13.8% and 6.6% respectively in the year 2011.
3.5. MARKET SEGMENTATION:

Market Segmentation is the division of a market into different groups of customers with distinctly similar needs and product/service requirements. The customers are differentiated on the basis of their travels, as leisure travelers and business travelers. The business travelers are generally time sensitive, whose opportunity cost of time, is very high whereas leisure travelers have lots of time on their hand to choose the airlines which offer best service according to their budget. The segmentation of market is also done on the basis of level of luxury travelers want, which are offered by different class of airlines. Some travelers prefer combination of prices and other features, some give greater preferences to the brand name, whereas others want value for money. This segmentation is done on the business class, economy class and premier class offered by the airlines. Business class and premier class are generally found on international airlines whereas economy classes are found on domestic airlines. Business class are the most costliest and is suitable for those personality for whom price of tickets is not that important when it
comes to having a ride and they want to enjoy every minute of it. Premier class is cheaper than business class but costlier than economy class and caters to people above middle class, whereas economy class are for people who are middle class and below it who value for money and dont care much about comfort.
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3.6. NATURE OF COMPETITION:

The nature of competition in Indian aviation industry is in shift mode from late 1980s . Earlier it was monopolistic market but later due to coming up of liberalization policy, the market has been changed to oligopolistic structure where many private players like Jet Airways, Spice jet have entered in the market. The entry barrier also has been reduced much considerably which has given opportunities for many private players to operate and many entry level players are still on process to start up their service. Airlines faces two type of customers which are either leisure or business travelers. The leisure travelers are flexible in planning their travel as compared to business travelers who are time sensitive. Hence major competition is focused on time sensitive passengers as their opportunity cost of time is low. Hence airline uses variety of ticketing practices, most of which are anti-competitive in nature. Some popular practices adopted by airlines are: (a.) Frequent flier programs which reward loyal customers with free air travel. Once a customer has flown on a particular airline with a frequent-flyer program, the value of subsequent flights is enhanced by the increased opportunities for free travel. The marginal value of the reward increases as the customer builds up miles or points on a single airline, therefore frequent-flyer programs encourage travellers to choose the airline that they are most likely to fly on in the future. (b.) Through negotiating special arrangements with large corporate customers where incentives are provided to the travellers for all travel with single airline. (c.) Through travel agent incentive schemes, that rewards travel agents for directing bulk of their travels to specific airlines. Most travel agents earn increased commission rates from at least one airline in return for steering passengers to those airlines. Just as with frequent-flyer plans, the rewards for increased bookings on an airline are designed to Encourage the agent to concentrate bookings on a single carrier. Travel agent incentive schemes appear to be particularly effective at increasing demand.
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(d.) Price Transparency where different airlines offer different prices, thereby attracting more number of travellers. There is a high degree of transparency in prices offered by the airlines. The future prices of airlines are available over computer reservation system which is easily accessible by the rivals who can use it for their advantage. For instance if there is increase in price , then the rival will also follow with small increase, but will return to its original price after the increase in price has been implemented by the opposing airlines.
3.7. ANALYSIS OF THE INDUSTRY:

A qualitative analysis of the industry is done using various measures. The various measures are PESTLE analysis, Porters five forces analysis and the SWOT analysis.
3.7.1 PESTLE ANALYSIS:

PESTLE analysis is an external analysis of the various macro environmental factors used in the environmental scanning component of strategic management. The macro environmental factors that affect the aviation industry are defined below: POLITICAL FACTORS: Political interference is present in every industry. The airline industry is very susceptible to changes in the political environment and this has great impact on the travel habits of the customers. An unstable political environment causes uncertainty in the minds of air travelers, regarding travelling to a particular country. Some examples are: Deregulation of the aviation industry: It has resulted in the fares getting plummeted and also affecting the employment conditions. The wages for airline mechanics were
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same all over the country before deregulation. But with the deregulation the successful airlines are paying higher and less successful ones are paying lower. Liberalisation of skies: The liberalization of the skies has resulted in the airlines choosing a network of routes which will reduce their operational cost, which means the airlines can choose their hubs which will help them earn maximum profits. Ownership rules relaxed: Since the ownership rules are relaxed the airline industry is also globalizing at a faster rate. This has led to foreign players investing in private national airlines. Taxation policy: The airline industry today faces thousands of taxes and fees on its operations and services, including taxes on income, property, fuel, equipment and taxes for social and economic purposes such as development aid, the environment and tourism expansion. Other laws, regulations, taxes and airport rates and charges have also been imposed from time to time that significantly increase the cost of airline operations or reduce revenues. For example, the Aviation and Transportation Security Act, which became law in November 2001, mandates the federalization of certain airport security procedures and imposes additional security requirements on airports and airlines, most of which are funded by a per ticket tax on passengers and a tax on airlines. EU enlargement: The EU enlargement has resulted in removal of significant entry barriers by setting common rules which will govern the safety, security and financial issues. The EU airlines can now fly between members and within member states and are subjected to same control on fares and capacity.
ECONOMIC FACTORS: The aviation industry is particularly susceptible to external economic factors because it affects and depends on a substantial number of industries. Also, because the industry involves operating between borders, then economic factors from other parts of the world other than the domestic market also affect it. Issues such as fiscal policies, wage inequality and positive and negative externalities have a way of changing operations within this industry. It contributes less than 1% to the GDP and is increasing its contribution by 5% every year.
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The aviation industry causes positive externalities such as, encouraging tourism, heightening employment and boosting investment within any one country. This could bring about an overall increase in the GDP. However, some of the negative externalities associated with the industry include emission of noise, excessive emission of harmful gasses into the atmosphere thus causing pollution. The aviation industry is affected by monetary and fiscal policies in that government decisions to tax airlines eats into their operating costs. Also investments in infrastructure have a large role to play. It can also be asserted that the decision to liberalize the aviation industry can bring about many positive effects into the industry. Closely linked to fiscal and monetary policy is the issue of wage inequality. Companies that operate in countries with job losses are likely to witness the same within aviation. However, statistics show that inter-firm disparities in wages are quite high especially with regard to pilots. Lastly, the aviation industry is affected by elasticity in supply and demand depending on the size of the industry and how long it has been in operation. Impact of positive and negative externalities: The aviation industry has the capability of exposing a certain country to new markets. The overall effect of this is an increase in the following
y y y y y
Trade improvement Business efficiency Increasing number and quality of growth sectors Boosts investments Improves other aspects of the economy.
Negative externalities Top on this list is environmental emission. The aviation industry utilizes the highest amount of fuel in the transport sector. Consequently, it is also responsible for the rising amount of carbon emissions into the atmosphere. This is the reason why many governments have passed laws intended on regulating the quantity of emissions emanating from aircrafts.
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SOCIAL FACTORS: Social factors have a major impact on businesses. Airline companies alone have to spend a great deal of time and money revising their policies, procedures and prices to accommodate the everchanging influences of their customers over the years. Obesity One controversy surrounds the issue of airline companies tightening their seat restrictions for obese passengers. Some companies have gone as far as to charge an overweight individual the cost of two seats because of their size. This has created a stir, as it brings up the question of discrimination. As indelicate as this issue is, airline companies contend that it simply costs more to fly those more portly passengers as it requires an additional amount of fuel. So it would seem that this issue has less to do with discrimination and more to do with simple arithmetic. Security Airline companies have undergone a dramatic shift in the safety precautions they take, due to recent terrorist attacks. And while the increase in security may, on some level, ease the mind of the pilots, passengers and their families, it also increases the anxiety and frustration with the amount of time and effort it takes to get from the airport ticket counter to the terminal gate. Ethnicity Perception is a major factor in how one views the world. It is also one of the oldest studies in psychology. How we perceive ethnicity, as it relates to air travel, has much to do with September 11, 2001. Since then the eyes of the world have grown increasingly sensitive to the ethnicity of passengers travelling on airplanes. It has created something of a negative perception for particular races and religions. Bloomberg Business week reports, "Airline experts and executives say it's important not to exaggerate the effects of terrorism fears." However, because airline companies have had to exercise increased security measures because of terrorism, and because passengers have grown increasingly aware of possible threats, those perceptions are not easily dismissed.
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TECHNOLOGICAL FACTORS: Economies of scale in production due to expanding market size, e-commerce method of selling tickets; therefore fewer infrastructures required which result in overhead savings. Modern aircraft are safer and more economic to run than in the past making possible cheap air travel. Social networking sites like Twitter, Face book, and Orkut are giving a boom to the industry with their widespread reach and huge number of users. There are possibilities that every time an individual is searching for airfares he or she may not get into a specific airline website but with the help of social networking sites word can be spread out. This online booking of tickets has helped travellers compare prices of different airlines flying to their desired destination and then choose the best offered price.
LEGAL FACTORS: These factors are related to the legal environment in which firms operate. In recent years in the UK there have been many significant legal changes that have affected firms' behavior. The introduction of age discrimination and disability discrimination legislation, an increase in the
minimum wage and greater requirements for firms to recycle are examples of relatively recent laws that affect an organizations actions. Legal changes can affect a firm's costs (e.g. if new systems and procedures have to be developed) and demand (e.g. if the law affects the likelihood of customers buying the good or using the service).Different categories of law include:
y
Consumer laws: these are designed to protect customers against unfair practices such as misleading descriptions of the product.
Competition laws: these are aimed at protecting small firms against bullying by larger firms and ensuring customers are not exploited by firms with monopoly power. This prevents the market leader or dominant player in the industry from acquiring rest of the minor players and thereby having a monopoly in the industry and exploiting the customers.
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Employment laws: these cover areas such as redundancy, dismissal, working hours and minimum wages. They aim to protect employees against the abuse of power by managers.
Health and safety legislation: these laws are aimed at ensuring the workplace is as safe as is reasonably practical. They cover issues such as training, reporting accidents and the appropriate provision of safety equipment.
Prohibited items: prohibited items include explosives, firearms, tools and other sharp objects.
Liquid restrictions: TSA (Transportation Security Administration) regulations for airlines specify limitations on liquids, gels and aerosols carried onto an aircraft.
ENVIRONMENTAL FACTORS: Environmental factors include the weather and climate change. Changes in temperature can impact many industries including aviation industry. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries (for example, more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities.
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3.7.2 PORTERS FIVE FORCES ANALYSIS :

Porter's Five Forces is a framework for the industry analysis and business strategy development formed by Michael E. Porter. These five forces determine the competitive intensity and therefore attractiveness of the market. Attractiveness refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven down to zero. Porters five forces analysis helps to analyze everything from the intensity of competition to the profitability and attractiveness of an industry. 1. Threat of New Entrants: There are many factors that allow the entry of new players in industry. Some of them are: If borrowing is cheap, then the chances of more airlines entering the industry are higher. Brand recognition gives an added advantage to the new entrants in the market; in fact this is the most important attribute for a player to enter the industry. As a high level of differentiation is required to capture a large share in the market from the existing players. Existing loyalty to major brands. A change in the business strategy can also force the entry of a new player in the industry. But in spite of all these factors still there are barriers to entry and exit in aviation industry.
2. Barriers to entry and exit: The barriers to entry and exit are very high and difficult.
The industry involves high infrastructure costs, high manufacturing costs thus has a requirement of huge capital to enter the industry. The cost of new fleets like Airbus or Boeing is highly expensive.
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Availability of well trained pilots and cabin crews are limited. High compensation needs to be paid for departing employees namely pilots. Costs of the aircraft supporting machinery are high. Involves government policies, permission from state and central governments in order to enter the market as a player. High compensation needs to be paid for departing employees namely pilots.
3. Bargaining power of Suppliers: There isn't a lot of cut throat competition among suppliers because there are only a few major players in the industry like Boeing, Airbus, etc and the industry is dominated by them and they form cartels between themselves. The high fuel prices can also reduce the power of the suppliers.
4. Bargaining power of Buyers: The bargaining power of buyers in the airline industry is quite low. There are high costs involved in switching airplanes, since there is aggressive competition on the service provided. Travel agents try to exploit the business and leisure travellers, which reduces the bargaining power of the buyers. Sometimes they may also come up with low travel packages impacting the airlines. The buyers are conscious of the quality of service experienced for the cost incurred.
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5. Availability of Substitutes: When considering the availability of substitutes in the airline industry the reasons to be considered are time, money, personal preference and convenience. There are many others modes of travel such as railways (fast trains), sea routes (boats, cruises) and private transportation which act as substitutes. But the degree to which these substitutes are preferred over air travel is very low. It is described below. For regional or national travel, the customers might prefer railways or road travel over air travel while taking cost into consideration. For international carrier, there is a very low degree of the other substitutes being preferred. Therefore airways have a kind of monopoly here. In case of emergency it is very likely that customers might prefer air travel since the time taken is really less.
6. Competitive Rivalry: Highly competitive industries like airline industry can have high degree of intra industry rivalry and can generally earn low returns because the cost of competition is high. This can spell disaster when times get tough in the economy. Highly fragmented industry: organised players like Kingfisher and Jet airways account for 53% of the market share. Intense competition: there is intense competition because of low switching cost, reduced product differentiation and diversity of rivals.
3.6.3 SWOT ANALYSIS:

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.
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STRENGTHS: One of the unique strength of Aviation industry is that it saves time. As compared to other means of transport, there is a large gap in terms of speed which saves a lot of valuable time, and hence is preferred by most business travelers to fly frequently. Also, fliers are assured of safety in terms of robbery, theft which are common in bus, railways etc. Beside this the atmosphere of airlines are added with nice ambience and interiors which make flying a pleasant experience. WEAKNESSES: One of the major weaknesses of airline is that if the seats are not completely filled then the losses incurred are very high. Other weaknesses faced by airlines are that, due to some natural problem like poor visibility, heavy rain etc flights are often delayed causing inconvenience to the travelers. Also, shorter distances airline are not preferred except for the people using connecting flights. For example: Flight by Kingfisher between Bangalore and Mysore are generally not suitable for people staying in city, because travel time to airport takes one hour and travelers have to reach airport at least one hour before departure for security checkup. The same time travelers can reach Mysore by their own transport which is much more economical and time saver than flights. OPPORTUNITIES: Major opportunities for airline industry are untapped market especially in Tier II cities and Tier III cities. Newer territories are almost untapped and provide good opportunities especially for low cost airlines to provide service to these sectors. Link-ups with other carriers can greatly increase passenger volumes. By coordinating schedules, airlines can offer service to destinations via a code share agreement with a partner carrier.
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THREATS: The constant rise in crude oil prices leads to sharp rises in the cost of ATF (Aviation Turbine Fuel).This leads to slower growth in the sector as the profit margins decrease and higher ticket prices lead to sub normal sales. The price of fuel is now the greatest cost for many airlines. Also, a plague or terrorist attack anywhere in the world can negatively affect air travel.
3.7. BUSINESS DIVERSIFICATION:

Diversification is the measure taken to spread industrial commitment over a large range of activities so that there is no overdependence on one. Diversification can be conglomerate which is the growth of industry into new areas as a result of change in markets, technology and products or it can be stand alone where the players are focused on a single business. Diversification basically involves expansion of a business into different direction altogether where the new business is not at all related to the existing business, in order to increase the profitability and longevity of a company or group as a whole. In other words, the company markets new products or services that have no technological or commercial synergies with current products but that may appeal to new groups of customers. The conglomerate diversification has very little relationship with the firm's current business. Therefore, the main reasons of adopting such a strategy are first to improve the profitability and the flexibility of the company, and second to get a better reception in capital markets as the company gets bigger. Even if this strategy is very risky, it could also, if successful, provide increased growth and profitability.
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The following table describes the status of various airlines prevalent in India.
TABLE 3.1: STATUS OF VARIOUS AIRLINES PREVALENT IN INDIA AIRLINES Jet Airways & Jet Lite Kingfisher Airlines Air India Limited Indigo Spice Jet Go Air STANDALONE/CONGLOMERATE Standalone Conglomerate Standalone Standalone Conglomerate Conglomerate
Jet airways Jet Airways is a major Indian airline based in Mumbai, Maharashtra. It is India's largest airline and the market leader in the domestic sector. It operates over 400 flights daily to 67 destinations worldwide. Its main hub is Chhatrapati Shivaji International Airport. According to a PTI report, for the third quarter of 2010, Jet Airways (Jet+JetLite) had a market share of 26.9% in terms of passengers carried, thus making it a market leader in India, followed by Kingfisher Airlines with 19.9%. The parent company is tailwinds limited headed by its chairman Mr. Naresh Goyal.
Kingfisher airlines Kingfisher Airlines is an airline group based in India. Its head office is Kingfisher House in Vile Parle (East), Mumbai. Kingfisher Airlines, 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
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Airlines carried more than a million passengers, giving it the highest market share among airlines in India. Kingfisher Airlines is also the sponsor of F1 racing outfit, Force India, which Vijay Mallya also owns. Also, the diversification of united breweries and kingfisher group extends to many more businesses ranging from breweries to a cricket team playing in Indian premier league known as royal challengers. Thus,making the group a large conglomerate..
Go air airlines Go Air is an Indian low-cost airline based in Mumbai, Maharashtra. It operates domestic passenger services to 18 cities with 131 daily flights and approximately 917 weekly flights. Its main base is Chhatrapati Shivaji International Airport, Mumbai. The airline was established in 2005. It launched commercial operations in November 2005. It is now wholly owned by the Wadia Group, Mumbai based and majority owners of Bombay Dyeing and Britannia Industries, thus, making it part of a large conglomerate as well.
Spice jet airlines SpiceJet is a low-cost airline headquartered in Gurgaon, India. It began service in May 2005 and by 2008, it was India's second-largest low-cost airline in terms of market share. Spice Jet was voted as the best low-cost airline in South Asia and Central Asia region by Skytrax in 2007,following the acquisition by Kalanithi Maran. Spice jet went to be part of Kal Airways, Sun Group in 2010. Sun Group is divided in two holdings: Kal Media Services Pvt. Ltd. and Kal Airways Pvt. Ltd.. While Kal Media Services manages the TV, Radio, Newspaper and Magazine business, Kal Airways focuses on the development of its airline Spicejet.
Indigo airlines Indigo is a private domestic low-cost airline based in Gurgaon, Haryana, India. It operates domestic services linking 25 destinations. Its main base is Delhi's Indira Gandhi International Airport.It was awarded the title of Best Domestic Low Cost Carrier in India for 2008.
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Rakesh Gangwal and Rahul Bhatia are the two founders of Indigo airlines. The airline is owned by the Gurgaon-based InterGlobe Enterprises, which actually is a standalone company and focus on their airline business only.
Air India Air India is a state-owned flag carrier, the oldest and the largest airline of India. It is a part of the Indian government-owned Air India Limited (AIL) which is renamed as Air India Ltd. Thus, making it a standalone company which focus on aviation sector only.
3.8 MERGERS AND ACQUISITIONS:

Airline mergers and acquisitions are on the rise across the globe. The airlines industry is abuzz with news of mergers and acquisitions. In the last few years airline mergers and acquisitions have been a growing trend in several countries across the globe. However mergers and acquisitions in the aviation industry are highly strategic in nature and are undertaken after taking into consideration several important factors. Some of the important factors considered by airlines in taking merger and acquisition decisions are y
The coverage area of the other airline. Strategically an airline would like to merge with or acquire an airline that operates in routes different from its own. This helps in expanding service coverage and avoiding overlapping of flight schedules.
y y y y
The quality of service and brand image of the other airline. If the other airline has any partnership with a rival group of airlines. Globalizing competition. Financial circumstances prevailing in the market.
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The major concerns that airline employees are faced with in case of mergers and acquisitions are:
y y
Layoffs - Mergers and acquisitions in most cases are accompanied by layoffs. Salary concerns - The new acquiring airline or the new group arising out of a merger may not pay the old salaries.
y y
Pensions and other benefits, new salary rules. Seniority - A senior employee of an airline that is acquired may find himself to be not considered senior by the new employer.
Three major mergers that happened in the Indian airlines industry are namely:
3.8.1 KINGFISHER AND AIR DECCAN:

Air Deccan, presently known as Kingfisher Red was a low cost airline which started its operation from 2003. It has been operational for more than five years which is a prime requirement for an operator to go overseas. Kingfisher, which was new in the market wanted to expand its business by operating its service to overseas. Hence, Mr. Vijay Mallya owner of Kingfisher and Mr. G.R Gopinath owner of Air Deccan agreed on merger vested upon the best interest of both the companies to achieve the profitability in the two companies by overcoming the loss incurred by the company and certain other objectives like to fly overseas. Kingfisher and Air Deccan have exactly the same fleet of aircraft and almost same equipment which provides a huge opportunity on saving in engineering and maintenance cost. It was a case of reverse merger. The reasons for M&A from the perspective of Kingfisher Airlines and Air Deccan were To start overseas business(2005) For the purpose of expansion Air Deccan agreed to recover from its losses.
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3.8.2 AIR INDIA AND INDIAN AIRLINES:

The merger of Air India and Indian Airlines is one of the recent mergers in the Indian aviation industry. This merger was expected to create one of the biggest airlines in the world in terms of fleet size. This combined fleet size placed the merger entity among the top 10 airlines in Asia and top 30 in the world. This merger was viewed as a step in the right direction because it positioned Air India well with respect to rivals Jet and Kingfisher since Air India was globally and nationally a well recognized brand name. The two airlines were merged to a new company National Aviation Company of India Ltd. (NACL).
3.8.3 JET AIRWAYS AND AIR SAHARA:

The merger between Jet Airways and Air Sahara happened on 12 June 2006 when Jet agreed to buy Air Sahara at 1450 crores. Air Sahara was renamed as JETLITE and was marketed between a low cost carrier and full service airlines. On august 2008, Jet Airways announced its plan to completely integrate Jetlite into Jet Airways thereby transferring all shares of Air Sahara to Jet airways.
3.9. MARKETING INITIATIVES OF THE INDIAN AVIATION SECTOR:

Marketing initiatives are generally very important for the advertisements and promotion of a company, be it into manufacturing or services, as far as any industry is concerned. It basically involves functions such as marketing, advertisements, promotions through hoardings, television commercials, etc on a very large scale in order to attract potential customers towards the product or services. Indian aviation industry is also not much different from other industries, when it comes to advertisements and promotions, even though the commercials and promotions are not on that larger scale as other Indian sectors such as retail and FMCG.
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Now the most important aspects rendering which the promotions and advertisements are done, depends basically on following factors, namely 1. Providing excellent service to the customer. 2. Making their travel more comfortable and economical. 3. Making their travel speedier. Now, if we consider these factors , almost every airlines has based their promotions on these factors only whenever and wherever they have chosen to do so .For instance , Singapore airlines have focused their advertisements and promotions on total customer satisfaction by promoting Singapore girls which is now synonymous with them , and acts as the face of Singapore airlines everywhere . Thus, we can say that a promotion, if done in the correct direction, can lead to great brand recall in the eyes of customers and will lead the company forward for many years to come. Similarly, Lufthansa, a German carrier, has become the symbol of excellent services worldwide which they reflect through their advertisements as well. Comparing with the Indian scenario , even though , not much promotions and advertisements are there , but still , whatever promotions and advertisements , the airlines carriers are displaying , they have been able to identify themselves and stand out in the eyes of customers when it comes to service . For example, kingfisher, with its slogan of king of good times , has been able to project themselves as the premier airlines, offering excellent services, in a comparative smaller duration of time. Also, indigo airlines, through their advertisements, are now synonymous with no frills airlines, which simply provide basic services at the lowest prices available in the market. Thus, we can say that, by focusing onto the factors such as services, an airline is able to differentiate itself and stand out from the competition, through the help of different marketing initiatives.
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3.10. TECHNOLOGICAL INTENSITY:

There have been significant changes in the technology in the recent year in the aviation industry. A number of new technologies have been introduced and many new technologies are expected to come in the upcoming years.
3.10.1 GLOBAL NAVIGATION SATELLITE SYSTEM (GNSS):

GNSS is a satellite system that is used to pinpoint the geographic location of users receiver in the world. Satellite navigation is achieved by using a global network of satellites that transmit radio signals from approximately 11000 miles in high orbit. The technology is accurate enough to pinpoint locations anywhere in the world, 24 hours a day. There are two global system in operation namely the Navigation Satellite Timing and Ranging system (NAVSTAR), commonly referred to as the Global Positioning System (GPS) and owned by the United States of America, and GLONASS (Globalnaya Navigatsivannaya Sputnikovaya Sistema) of the Russian Federation. India is planning to launch its own GNSS announcing plan to have regional operational in 2011-2012.
3.10.2 AUTOMATIC DEPENDENT SURVILLENCE SYSTEM:

ADS (Automatic Dependent Surveillance) is a surveillance technique in which aircraft automatically provide, via a data link, data derived from on- board navigation and positionfixing systems, including aircraft identification, four-dimensional position and additional data as appropriate. ADS data is displayed to the controller on a screen that resembles a radar screen. Several different forms of ADS are currently in use or under development, including: Automatic Dependent Surveillance-Broadcast (ADS-B) is a function on an aircraft or surface vehicle that broadcasts position, altitude, vector and other information for use by other aircraft, vehicles and by ground facilities. It has become the main application of the ADS principle. Automatic Dependent Surveillance-Contract (ADS-C) functions similarly to ADS-B but the data is transmitted based on a contract between a ground system and an aircraft: Demand contract, periodic contract, event contract and emergency contract. This application is most likely to find application to sparsely trafficked transcontinental or transoceanic crossings.
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3.10.3 INSTRUMENT LANDING SYSTEM:

An instrument landing system is a ground-based instrument approach system that provides precision guidance to an aircraft approaching and landing on a runway, using a combination of radio signals and, in many cases, high-intensity lighting arrays to enable a safe landing during instrument meteorological conditions (IMC), such as low ceilings or reduced visibility due to fog, rain, or blowing snow.
3.10.4 RFID BAGGAGE SYSTEM:

In order to avoid the loss or mishandling of bag, the aviation industries are in process of implementing RFID Baggage System. The average statistic shows that out of per 1000 bags, around 5-7 bags are mishandled. So, in order to avoid this, the airline generates bar code of six digits and whenever any baggage is lost, the customer is asked to report loss of bag with that bar code number so that based on that bar code; the authorities can look on that loss baggage on previous airlines in which the passenger made a travel.
3.10.5 DEDICATED CARGO AIRPORTS:

The civil aviation ministry is seriously considering setting up dedicated cargo airports across the country. These airports will be able to solve the current problems of the cargo carriers like the slot availability and high rentals charged by the existing metro airports.
3.10.6 ULTRA LIGHT AIRPORT:

There are airports wherein, the infrastructure will be developed entirely by the private sector with private resources and with absolutely no Government funding. However Government will be involved with regards to the safety and security at these airports. The Government would also have to provide a license for such airports to operate. These projects would also need clearances from various Central Government Ministries including Defense and Environment among others.
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3.11. CURRENT SCENARIO OF THE AVIATION INDUSTRY:

With airline industry shifting from monopoly to oligopoly based market structure, there have been a number of changes in the Aviation industry after the intervention of private parties. Aviation industry in the year 2010 has shown a tremendous growth as compared to 2009. At present, Indian aviation industry is the 9th largest industry in the world with a passenger base of around 95 million. Passengers carried by domestic airlines during January-February, 2011 were 95.11 lakh as against 79.51 lakh in the corresponding period of previous year thereby registering a growth of 19.6%. Also, in order to meet the projected requirements of traffic, which is constantly increasing due to coming of more number of private players and due to increasing of fleet of service by the existing player to different destination, more number of Greenfield
airport are being constructed. These are the airports which are constructed from scratch in a new location, because the existing airport is unable to meet the projected traffic requirement. Bangalore International Airport is a live example of Indias first Greenfield airport, and there are many other proposal for the Greenfield airport in the country which can be seen in the few upcoming years.
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3.12. FUTURE OUTLOOK OF INDIAN AVIATION INDUSTRY:

As long as the Indian economys growth is strong, the long-term outlook for the airlines in India appears to be bright. The airlines plans to expand capacity and replace ageing fleet aggressively will enable them to meet this growing demand more efficiently. But in the near term, they may face significant challenges such as: 1) Pursuing aggressive cost reduction; 2) The availability of capital; 3) Constraints due to poor infrastructure for aviation in India; 4) Increasing jet fuel prices. The above mentioned challenges can be put back if the most efficient factor of a country namely the government takes on for successful and timely execution of the envisaged aviation projects which can be done through proper planning, formulating, executing and overseeing the implementation of such large size projects. Co-ordination between the government and the private players has to get stronger in order to optimize efficiency and productivity of the aviation sector. The government can seek participation of all the concerned stakeholders in policy formulation by inviting their views and addressing issues faced by them. This framework would help Indian aviation sector as one of the leaders in global aviation industry and to reach new heights.
3.13. FUTURE OUTLOOK ON GLOBAL SENARIO:

In todays date aviation industry is said to be one of the best sectors with wider efficiency in serving their customers across the globe. This industry has also provided numerous advantages to the society and economy among which creation of employment opportunities is the major one. This has provided the people to make a successful career in this industry. The centre for Asia Pacific Aviation (CAPA) had made a prediction which states that domestic air traffic will increase by 25 to 30 per cent till 2010 and international traffic growth by 15 per cent by 2010. CAPA also says that by 2020, 400 million Indian passengers are likely to be flying and Indian airports would be handling more than 100 million passengers.
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The Aviation industry has to be guarded against foreign carriers especially from the Middle East. The global meltdown and decrease in air travel due to terrorist activity have ended up becoming the major threats which has resulted down swing of the profitability of aircraft operators in India and other countries MAJOR FACTORS TO BE CONSIDERD TO MEET THE COMPETITIVE NEEDS: The airlines industry has to consider certain factors in order to maintain the ever growing competitive needs of the airlines sector. These major factors constitutes of the restructuring of AAI which seems to be one of the critical point has AAI is a very complex company with over 120 airports to be managed, may need to break into smaller groups that may be more viable and efficient. AAI also needs to adopt a more commercial focus to airport charges, traffic development and non-aero revenue. The result of privatization has made 60 per cent of traffic to lie in private hands which has resulted in the decline of revenue. Increasing competition among the private players has resulted in lowering air fairs to a great extent which in turn resulted in many major issues such as cutting down labour costs and increased work pressure to the human resource employed in the industry. Infrastructure is another major issue which has to be concerned to handle the growing competitive needs. Airports cannot be built in a vacuum hence there needs to be seamless coordination with other state agencies to develop ground transport and logistics. Airport planning needs to take greater responsibility for coordination and viability of different airport projects within similar catchments. Finally in the next stage of modernization, the objective of airport development must be clearer, to ensure that the outcome is better aligned with requirements. Some of the other key issues are financial incentives to be considered for stimulating air taxis, key concern that policies are introduced with little industry consultation.
The following factors can be speculated to be the success factors behind the futuristic image of Indian airlines industry. y National Agenda: A long term structured national plan with appropriate term, institutional framework necessary to attract capital. y Regulation: A modern and professional technical regulatory framework in line with global y standards such as EASA/FAA.
Safety: Implementation of safety systems and culture.
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y y y y
Vision: Ministry to concentrate on policy and providing strategic leadership. Profile: Enhanced profile and recognition of aviation within government. Taxation: Less punitive fiscal regime particularly sales tax on fuel. HR World class education & training infrastructure is essential for safe and efficient aviation.
Capital: Streamlined foreign direct investment regulations.
3.14. COMPARISON WITH U.S AND OTHER COUNTRIES:

The civil aviation industry is dominated by the United States of America in the manufacture and export of aircraft and remains the world's largest market for the industry. The size of the domestic market alone makes it attractive for aircraft design, manufacture and maintenance of aircraft in that country. Recent mergers and acquisitions in the manufacturing sector and airline operations have created corporations with the wherewithal to survive the capital intensive and long gestation nature of the industry. Europe is the next major player now undergoing radical changes in the form of collaboration and mergers, for manufacture, export and airline operations. However, Asia-pacific including China is the most promising region, with maximum growth predicted in nearly all sectors of the civil aviation market. The main reason for this development has been the growth in the, liberalized economies in the region The North American market is presently the largest in the world. The Asian market which is growing rapidly is expected to overtake Europe as the next in the number of aircraft operated and the revenue passenger kilometers (RPKS) generated. China already provides the aircraft manufacturers the biggest single market in this part of the world. With liberalization and growth, the Indian market could also emerge as the next single important one in ten years.
It is expected that the world jet airline fleet will be around 20,000 by 2015. A major share of this fleet will be in North America and Asia. However, manufacture of these aircraft is
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Predominantly by Boeing and Airbus Industries with McDonald Douglas having less than 15% market share. The battle to increase market share by Airbus has ensured the development of new products in the form of the A319, A340 by Airbus and the 777 and 737-800 by Boeing. This situation may not change substantially for a number of years, except if the plan to build a 100 seater by Asian companies in China and South Korea goes ahead. Investment in a very large capacity transport is being seriously considered by Airbus and Boeing, though it is estimated to cost between $ 1 0 15 billion.
Regional aircraft manufacture is dominated by Europe, except for the Bombardier group in Canada and Embraer in Brazil the European situation is however, undergoing substantial reorganization with Fokker filing for bankruptcy, and British Aerospace, Aerospatiale (ATR) and Alenia considering joint development, manufacture and marketing. It is now expected that larger organizations with an ability to sustain the huge investments required for the development of new aircraft will emerge out of the restructuring.
Also, in all the aircraft manufacturing countries, governments are aware of the strategic nature of aerospace industries. In countries like Brazil, Indonesia, Malaysia Governments have played active facilitator roles even if the industry was not owned by the Governments themselves. In the west, however, government has accepted that subsidies, government funds and participation in management may not be efficient and could lead to macro-economic problems, given the capital intensive and long gestation periods involved. Market forces have tended to dominate in the past decade and have forced restructuring of organizations and governments have privatized a number of companies that were once state owned. Also, in western countries, government play active roles in the marketing of the country's aerospace products, invest in aerospace R&D, provide tax shelters for plants in areas aircraft for airworthiness and air safety issues are generally handled by Government agencies as well (Somshekhar and Chandra).
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U.S AVIATION: According to Air Transport Association (2010), the contribution of commercial aviation towards US GDP is US$731.5 billion (5.2%). U.S. ranks first in the aviation market. There are 19,750 airports in U.S.as of now. U.S Aviation sector also provides 11 million jobs approximately. U.S AVIATION STATISTICAL DATA TABLE 3.2: LOAD FACTOR (PASSENGER MILES AS A PROPORTION OF AVAILABLE SEAT MILES IN PERCENT (%) (ALL CARRIERS ALL AIRPORTS)
YEAR 2000 2010
DOMESTIC 71.22 82.19
INTERNATIONAL TOTAL 74.97 81.6 72.93 81.91
SOURCE: BUREAU OF TRANSPORTATION STATISTICS T-100 SEGMENT DATA
TABLE3.3:NUMBER OF PASSENGERS TRAVELLING THROUGH U.S AIR SPACE. Passengers 2000 2010 domestic 599563678 629457532 international 134287145 153178694 Total 733850823 782636226
SOURCE: BUREAU OF TRANSPORTATION STATISTICS T-100 SEGMENT DATA
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EUROPEAN AVIATION The European Aviation sector contributes around 275 billion (3.1%) to European Union GDP. It also provides employment to 1.6 million people directly and generates 2.9 million additional jobs. Around 14% of the industrys turnover is invested in R&D to lower carbon emissions. A combination of 35 major European Airlines form The Association of European Airlines. Out of 650 million passengers who avail the European Airlines around 340 million passengers travel through AEA member airlines. Also, Currently European air space is fragmented into 31 national systems. By 2012, EU governments have agreed to provide a single European Sky. These are some of the advantages of Single European Sky: y y y y Prime importance to safety Single authority to make decisions Reduction in delay and flight times Centralized crisis management expertise
Implementation of Single European Sky would result in saving 3.7 billion per year. It would reduce the carbon emissions by 12% and save 500,000 tons of fuel per year. TABLE 3.4: LOAD FACTOR OF EUROPEAN AVIATION STATISTICS Year 2004 2009 load factor 56.1 63.0
SOURCE: ERA (EUROPEAN REGIONS AIRLINE ASSOCIATION)
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AFRICAN AVIATION The African aviation industry is currently is least growing aviation industry throughout the world as far as this particular sector is concerned. Right now, the number of passengers travelling through African skies are around 56.2 million which is way less than its counterparts in north American and asian territories. Also the passenger load factor is very less when compared to other regions. The reasons for this less than expected growth inspite of its being highly
populated and having great potential , can be speculated to be the turbulent political and social status of the countries situated within Africa which are worsening day by day. Therefore, the aviation industry is getting affected as well.
TABLE 3.5: AFRICAN AVIATION STATISTICS IN TERMS OF PASSENGERS. Year 2000 2009 Passengers 31.5 millions 56.2 millions SOURCE: AFRAA (AFRICAN AIRLINES ASSOCIATION)
2011
TABLE 3.6: JANUARY TO DECEMBER - 2010 VS 2009: REGIONAL TRAFFIC PERFORMANCE RPK 2.00% 9.30% 10.40% 11.10% 11.90% 13.20% 13.10% 12.70% 13.10% 13.10% 13.30% 12.90% ASK 1.50% 7.00% 8.20% 8.10% 7.90% 8.60% 9.20% 9.10% 9.30% 9.10% 9.60% 9.60% PLF 66.70% 66.90% 67.00% 68.00% 67.80% 67.90% 68.30% 68.70% 68.90% 69.20% 69.10% 69.10% FTK -9.20% 28.20% 34.60% 43.80% 46.30% 46.30% 45.20% 42.70% 35.40% 31.20% 28.50% 23.80% AFTK 2.00% 6.20% 7.40% 10.90% 13.10% 14.80% 13.40% 13.20% 13.60% 12.10% 11.80% 12.10% FLF 24.00% 24.60% 27.00% 28.50% 28.80% 28.50% 28.70% 28.30% 27.10% 27.40% 27.60% 26.90%
Jan Jan Feb Jan Mar Jan Apr Jan May Jan Jun Jan Jul Jan Aug Jan Sep Jan Oct JanNov Jan Dec
SOURCE: AFRAA/IATA The table shown above actually explains the various statistics regarding African aviation industry in terms of revenue passenger kms ( RPK) , passenger load factor(PLF) , Freight tones kms ( FTK) and Freight load factor ( FLF). All these data are monthly data depicting the statistics per month as it happens till the end of the year. Also, the most important parameter which indicates the actual growth of the sector i.e PLF, in this table indicates the percentage to be less than 70 % , which is quite low in comparison to other regions prevalent in aviation industry .
2011
A comparison of growth statistics across the different regions The aviation industry has been growing on a steady rate since last ten years because of the rise of many countries such as India, china from south east Asian region and brazil and south Africa from south American and African regions respectively .all these regions have been the catalysts as far as the rising growth in aviation industry is concerned. But , in spite of the excellent growth displayed by these regions , north American aviation industry is still the leader followed by Europe having the passenger load factor of 82% and 79 % respectively. The reason behind this can be speculated to, their being the most developed regions throughout the world and also their political and economic structures which is way better than other regions dominant in aviation sector. TABLE 3.7: VARIOUS STATISTICS ACROSS THE CONTINENTS
Region Africa Asia/Pacifi c Europe Latin America Middle East North America Industry Average
RPK 12.90% 9.00% 5.10% 8.20% 17.80% 7.40% 8.20%
ASK 9.60% 3.60% 2.60% 2.90% 13.20% 3.90% 4.40%
PLF 69.10% 77.60% 79.40% 76.70% 76.00% 82.20% 78.40%
FTK 23.80% 24.00% 10.80% 29.10% 26.70% 21.80% 20.60%
AFTK 12.10% 14.30% 0.50% 12.60% 15.70% 6.10% 8.90%
FLF 26.90% 65.90% 52.10% 44.30% 46.70% 43.40% 53.80% .
SOURCE: AFRAA / IATA The above table clearly indicates that the highest load factor is evidently highest in north American region which is also the market leader as per the aviation industry is concerned.
2011
Also, it indicates that the passenger load factor is lowest in African region because of the low turnover of passengers throughout the region because of many political , social and environmental factors . It clearly indicates that the overall industry average of the aviation industry is 78.40 % which actually signifies a good growth across the sector.
2011
CHAPTER 4 CONCLUSIONS
2011
4.1. INTRODUCTION: This chapter primarily concludes the study of the Indian Airline
industry.
4.2. FINDINGS:
The Indian aviation industry has witnessed a tremendous growth in the recent years driven by a number of macroeconomic, demographic, government reforms and market lead dynamics. After a thorough analysis of the aviation industry and its main aviation we can easily come to a conclusion that not even a single player in the entire industry is making profits. The industry suffers huge losses because its operational costs are very high, its not even reached break-even. But there are some instances when some players have made profits but then they had to compensate them for the debts and interests they incurred in the previous years. Price transparency of the system is both a boon and a bane. A bane as it enhances the chances of collusion. Parties entering the collusion find it easy to ensure cooperation as the follower will implement the price increase only after seeing the leader make the agreed changes. If anyone deviates then the other airline can at a very short notice revert back to the original prices without bearing much cost. So its a win-win situation. Slot constraint is another problem. Landing and taking off rights are referred to as slots. These slots are an important consideration for the entrant as peak timed slots register heavy passenger load factors as compared to the oddly timed slots. Also the capacity of airports is fixed. The capacity cannot be increased all of a sudden due to rising demand hence this creates a scarcity of infrastructure. There are some regulatory barriers that regulate the smooth functioning of airports and aircrafts like DGCA, AAI etc.
2011
The government open sky policy has led to many overseas players entering the market and the industry has been growing both in terms of players and aircraft. From being primarily a government owned industry, the Indian aviation industry is now dominated by privately owned full service airlines and low cost carriers. Earlier air travel was a privilege, only few could afford but today air travel has became much cheaper and can be afforded by many people. The Aviation industry in India encompasses a wide range of services related to air transport such as passenger airlines which are scheduled, cargo airlines and unscheduled air operators like private jets and helicopters. As compared to other means of transport, there is a large gap in terms of speed which saves a lot of valuable time, and hence is preferred by most business travelers to fly frequently. The airline industry provides service to virtually every corner of the globe and is an integral part of the global economy.
Hence it can be concluded that domestic demand for aviation is tremendously increasing in India.
2011
REFERENCE:
1.)Bhatia, L., & Agarwal ,N.(2010). ICTs Internet Adoption in Aviation Industry Similarities in India and China. South Asian Journal of Tourism and Heritage (2010), 3(2). 2.) Mitra ,D.(2010). A Comparative Study Between Indian Public And Private (Low Cost) Airlines With Respect To Their Passenger Service. International Review of Business Research Papers ,(6) 6 ,48-65.
3.)Somasekhar ,B. ,& Chandra , S.(1997). Strategic Planning For Indian Civil Aviation Industry .National Aerospace Laboratories, Bangalore. 4.)Gupta ,M.(2010). Low cost carrier model in India: sustainability challenges. Retrieved from http://www.sxm.com/abstract=1538704
5.)Arora, N., Vishnoy, K, Atraya, S.(2010). . Issues and challenges in aviation industry. 6.) Classification of seats from http://www.seatguru.com/charts/premium_economy.php 7.) Aviation Classification from http://civilaviation.nic.in/moca/acvl.htm 8.) Information about DGCA from http://dgca.nic.in 9.) Bureau of Transportation Statistics (2009). National Transportation Statistics
http://www.bts.gov/publications/national_transportation_statistics/html/table_01_03.html 10.) Genesis of airline from http://ashwinnaik.com/blog/?p=36 11.) News on Aviation from http://www.ibef.org/industry/aviation.aspx 12.) Indian Aviation information from http://indianaviationnews.net/
2011
13.) www.civilaviation.com 14.) www.dgca.com 15.) www.aai.com
2011

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AVIATION INDUSTRY ANALYSIS

A STUDY ON AVIATION INDUSTRY IN INDIA

GROUP-8, MARKETING A MBA (2010-2012)

AVIATION INDUSTRY ANALYSIS

ALLIANCE UNIVERSITY- SCHOOL OF BUSINESS

AVIATION INDUSTRY ANALYSIS

REGISTRATION NO, 10SBCM0452 10SBCM0202 10SBCM0507 10SBCM0324 10SBCM0417 10SBCM0156

ALLIANCE UNIVERSITY- SCHOOL OF BUSINESS

AVIATION INDUSTRY ANALYSIS

NAME OF THE FACULTY GUIDE: PROF.SAMIK SHOME SIGNATURE: DATE:

ALLIANCE UNIVERSITY- SCHOOL OF BUSINESS

AVIATION INDUSTRY ANALYSIS

AVIATION INDUSTRY ANALYSIS

ALLIANCE UNIVERSITY- SCHOOL OF BUSINESS

AVIATION INDUSTRY ANALYSIS

ALLIANCE UNIVERSITY- SCHOOL OF BUSINESS

AVIATION INDUSTRY ANALYSIS

ALLIANCE UNIVERSITY- SCHOOL OF BUSINESS

AVIATION INDUSTRY ANALYSIS

1.2. GENESIS OF AIRLINES IN INDIA:

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AVIATION INDUSTRY ANALYSIS

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AVIATION INDUSTRY ANALYSIS

1.3. ORIGIN OF AIRLINES IN INDIA:

1.4. OBJECTIVES OF THE STUDY :

AVIATION INDUSTRY ANALYSIS

ALLIANCE UNIVERSITY- SCHOOL OF BUSINESS

AVIATION INDUSTRY ANALYSIS

CHAPTER 2 LITERATURE REVIEW

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AVIATION INDUSTRY ANALYSIS

2.2. STRATEGIC PLANNING FOR THE INDIAN CIVIL AVIATION INDUSTRY:

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AVIATION INDUSTRY ANALYSIS

ALLIANCE UNIVERSITY- SCHOOL OF BUSINESS

AVIATION INDUSTRY ANALYSIS

2.5. ISSUES AND CHALLENGES IN AVIATION INDUSTRY:

2.6. LOW COST CARRIER MODEL IN INDIA: SUSTAINABILITY CHALLENGES:

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AVIATION INDUSTRY ANALYSIS

CHAPTER 3 INDUSTRY ANALYSIS

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3.2.4 CLASSIFICATION OF INDIAN AVIATION SECTOR:

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3.3.1 INDIAN AIRLINES:

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3.3.2 KINGFISHER AIRLINES:

3.3.3 JET AIRWAYS:

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3.3.4 INDIGO AIRLINES:

3.3.5 SPICE JET:

AVIATION INDUSTRY ANALYSIS