Comparative Case Study Between Two Airline

INTRODUCTION India at present has twelve competing airlines in the domestic market as against a single government owned airline in 1991. According to McKinsey Quarterly(2005) the Indian aircraft market is the world’s second largest commercial aircraft market. On-time performance and service levels have risen dramatically and fares have dropped. Passenger traffic is expected to grow by 20 percent annually over the next five years. Only a small percentage of India’s population travels by air partly due to the high costs of domestic flying. According to the Center for Asia Pacific Aviation(CAPA) consultancy, new players will help domestic passenger numbers. The players in the current airline market include airlines like Air Deccan with low-cost, low-fare and no frills along with airlines like Kingfisher, which offers some frills, and premium airline like Jet Airways. Competition has brought in some price advantages to travellers and has converted many railway passengers to airline travellers. This article examines customer satisfaction among travellers of four major domestic airlines in India. Because of proliferated number of players in the airline industry, airlines may enjoy new business opportunities along with high competitive threats. The objective of this study is to understand the customer satisfaction levels of the two major airlines viz. Jet Airways, and Kingfisher. A comparison of customer satisfaction based on service quality was done among the two major airlines based on responses from frequent fliers. A flying experience was divided into three stages- namely, pre-flight, in-flight and post-flight experience. A questionnaire was designed in such a way that the 1

same sets of variables were measured among the customers of the two airlines under study. Fliers who had flown any of the two airlines could answer the questions pertaining to those airlines. The objective of this study was to understand the satisfaction levels of the airline customers. The Indian Aviation Industry Introduction Air India was set up by J.R.D. Tata, who ran it successfully until it was nationalized in 1953. In the 1960s the “Maharaja”, as the national flag-carrier was affectionately known, was flying to 32 destinations (it now flies to 46 destinations) and making profits. For many years in India air travel was perceived to be an elitist activity. This view arose from the “Maharajah” syndrome where, due to the prohibitive cost of air travel, the only people who could afford it were the rich and powerful. In recent years, however, this image of Civil Aviation has undergone a change and aviation is now viewed in a different light - as an essential link not only for international travel and trade but also for providing connectivity to different parts of the country. Aviation is, by its very nature, a critical part of the infrastructure of the country and has important ramifications for the development of tourism and trade, the opening up of inaccessible areas of the country and for providing stimulus to business activity and economic growth. Until less than a decade ago, all aspects of aviation were firmly controlled by the Government. In the early fifties, all airlines operating in the country were merged into either Indian Airlines or Air India and, by virtue of the Air Corporations Act, 1953 this monopoly was perpetuated for the next forty years. The Directorate General of Civil Aviation controlled every aspect of flying including granting flying licenses, pilots, certifying aircrafts for flight and issuing all rules and 2

procedures governing Indian airports and airspace. Finally, the Airports Authority of India was entrusted with the responsibility of managing all national and international airports and administering every aspect of air transport operation through the Air traffic Control. With the opening up of the Indian economy in the early Nineties, aviation saw some important changes. Most importantly, the Air Corporation Act was repealed to end the monopoly of the public sector and private airlines were reintroduced. Domestic liberalization took off in 1986, with the launch of scheduled services by new start-up carriers from 1992. A number of foreign investors took an interest. Modiluft closed after failing to meet financial obligations to lessors and its technical partner, Lufthansa. In 1996-1998, Tata and SIA tried to launch a domestic carrier, but the civil aviation minister had publicly stated his opposition on numerous occasions (Airline Business 1998). The Indian government introduced the open sky policy for domestic players in 1991 and partial open sky policy for international players only in November 2004. Increasing liberalisation and deregulation has led to an increase in the number of players. The industry comprises three types of players full cost carriers, low cost carriers (LCC) and many start-up airlines that are making/planning an entry.

Present Indian Scenario It is a phase of rapid growth in the industry due to huge build-up of capacity in the LCC space, with capacity growing at approximately 45% annually. This has induced a phase of intense price competition with the incumbent full service carriers (Jet, Indian, Air Sahara) dis- counting up to 60-70% for certain routes to match the new entrants ticket prices. This, coupled with costs 3

pressures (a key cost element, ATF price, went up approximately 35% in recent months, while staff costs are also rising on the back of shortage of trained personnel), is exerting bottom-line pressure. The growth in supply is overshadowed by the extremely strong demand growth, led primarily by the conversion of train/bus passengers to air travel, as well as by the fact that low fares have allowed passengers to fly more frequently. There has, therefore, been an increase in both the width and depth of consumption. However, the regulatory environment, infrastructure and tax policy have not kept pace with the industry’s growth. Enactment of the open sky policy between India and Saarc countries, increase in bilateral entitlements with the EU and the US, and aggressive promotion of India as an attractive tourism spot helped India attract 3.2 million tourists in 2004-05. This market is growing at 15% per annum and India is expected to attract 6 million tourists by 2010. Also, increasing per capita income has led to an increase in disposable incomes, leading to greater spend on leisure and holidays and business travel has risen sharply with increasing MNC presence. Smaller cities are also well connected now. Passenger traffic has increased and over 21 million seats have been sold, resulting in a growth of over 50%. The Indian travel market is expected to triple to $51 billion by 2011 from $16.3 billion in 2005-06.

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Key Players in Indian Industry Airlines on International Routes Air India is the national flag carrier airline of India with a network of passenger and cargo services worldwide. It is one of the two state-owned airlines in the country, the other being Indian Airlines. Air India has 44 worldwide destinations. The airline has been profitable in most years since its inception. In the financial year ending March 31, 2006, Air India has made a net profit of Rs.97 million; earned a revenue of Rs.87,480 million representing a growth of almost 15 per cent over the previous year.

Airlines on Domestic Routes SpiceJet is a low-cost airline. Their marketing theme "offering low 'everyday spicey fares' and great guest services to price conscious travelers". Their aim is to compete with the Indian Railways passengers travelling in AC coaches. Air Deccan is an airline based in Bangalore, India. It was India's first lowcost carrier, and as of May 2006, connects 55 cities within India. Air Deccan has grown rapidly since it first started air operations in 2003, and despite its almost disastrous maiden inaugural flight (which caught fire), it continued to grow. The growing Indian economy and the increasing number of middleclass people in India has greatly helped its growth.

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GoAir The People’s Airline, a low cost carrier promoted by The Wadia Group is a domestic budget airline based in Mumbai, India established in June 2004. It’s a relatively small player as compared to other low cost airlines. Kingfisher Airlines is an airline based in Bangalore, India. Services started on 9 May 2005, following the lease of 4 Airbus A320 aircraft. It initially operates only on domestic routes. The airline promises to suit the needs of air travellers and to provide reasonable air fares. Kingfisher are pushing for an amendment of the present Indian government rule which requires an airline to fly a minimum of five years on domestic routes before it can start flying overseas. IndiGo Airlines is a new and a private domestic airline based in India. IndiGo placed an order for 100 Airbus A320 aircraft during the 2005 Paris Air Show. The total order was worth US $6 billion; one of the highest by any domestic carrier during the show. The new low-fare carrier has started operations from August 4, 2006. Indian is India's state owned primarily domestic airline, under the federal Union Ministry of Civil Aviation The Company was formerly known as Indian Airlines. Indian Civil Aviation Minister, Praful Patel, announced Government of India's plan to merge Air India and Indian into one giant airline consisting of 130-140 aircraft.

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Jet Airways a “regular” airline which offers normal economy and business class seats. Jet Airways, along with Air Sahara, is the only airline which survived the dismal period of 1990s when many private airlines in India were forced to close down. Jet Airways is an airline based in India serving domestic and international routes. The airline operates over 300 flights to 43 destinations across the. It currently controls about 32% of India's aviation market

GLOBAL SCENARIO At the macro-economic level Asia Pacific growth is impressive. India and China are growing between 8 and 10% each year. China is now the world's 4th largest economy. Excluding Japan, Asian economic growth was 7%—doubles the world average of 3.5%. Global airline traffic is expected to rise steadily until 2008 in line with an anticipated good performance by the world economy, according to the United Nations'(UN) aviation agency. The UN International Civil Aviation Organization found in its medium-term forecast that airline traffic would grow 6.1 per cent in 2006, 5.8 per cent in 2007, and 5.6 per cent in 2008. And strong economic growth will continue. But growth means nothing if the bottom line is red. Globally airlines lost US$6 billion in 2005. US carriers lost US$10 billion. European carriers made about US$1.3 billion. Asian carriers led profitability with US$1.5 billion. Even within Asia it is a mixed picture. Some carriers are among the most profitable. Others however are struggling. In the region operating margins averaged less than

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2%, still the best performance in the world. Most are below the 7 to 8% needed to cover the cost of capital and give investors an acceptable return.

Impact of Rising Fuel Prices on the Industry The high price of fuel is killing the profitability. In two years the industry fuel bill more than doubled to nearly US$100 billion—23% of operating costs. And there is no relief in sight. So what are airlines to do? Improve efficiency is the answer. Progress to date has been dramatic. The break-even price of fuel rose from US$22 per barrel in 2003 to nearly US$50 in 2005. Unfortunately, fuel prices are above that. Airlines will not return to profitability until 2007 when we expect a break-even fuel price of US$55. Even then the projected profit is only US$6 billion. Asia will remain profitable in 2006 posting US$2 billion in profit. But do not start opening the Champagne. That is still less than a 2% net margin. Global Impact of LCCs Low cost carrier competition is new to this region. Asian network carriers are better prepared than many of their US or European counterparts. Their operating costs are 6 US cents per ATK on route lengths of 1500km. But the competition will also be tough. Air Asia's costs are the lowest in the world— 2.5 US cents per ATK. Labour costs in Asia are the lowest in world—19% of operating cost. This is a significant advantage against US and European carriers with an average cost of above 30%. If we compare Asian network carriers to their low cost rivals, the story changes. Average labour costs can be 8

up to 7 times lower at low-cost startups. There is no finish line in the race to reduce costs and improve efficiency. Some analysts are of the view that Countries in the Asia-Pacific region, which entered the industry much later, have emerged as important players in the past decade. In comparison, the Indian civil aviation industry which is much older still operates from a small base even though its domestic market potential and skilled man power should have given it intrinsic advantages to emerge as a globally important player in the civil aviation industry by now. Path Forward for India The escalating fuel bill would eventually translate into costlier air tickets for the Indian travellers, who have for the first time sampled air travel at fares that match first-class railway tickets. Even as some airlines hiked fares by ten per cent and others toyed with the idea to offset their ballooning fuel bill, the government dealt them another blow by withdrawing the withholding tax exemption on aircraft lease agreements. In the absence of this tax exemption, aircraft leasing cost is expected to shoot up between 20 to 67 per cent - a move that could deter new entrants and existing players from leasing more aircraft. Although poor airport infrastructure remains a concern, we need to maintain a positive outlook on the sector as the government allows private participation and FDIs in construction and maintenance of air-traffic infrastructure. This also hints at the huge opportunity in terms of infrastructure development and maintenance in the aviation sector for foreign construction and engineering companies. For now, as more and more Indians take to the skies, the country is set to emerge as the fastest growing aviation market.

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Overview The history of civil aviation in India began in December 1912. This was with the opening of the first domestic air route between Karachi and Delhi by the Indian state Air services in collaboration with the imperial Airways, UK, though it was a mere extension of London-Karachi flight of the latter airline. Three years later, the first Indian airline, Tata Sons Ltd., started a regular airmail service between Karachi and Madras without any patronage from the government. At the time of independence, the number of air transport companies, which were operating within and beyond the frontiers of the company, carrying both air cargo and passengers, was nine. It was reduced to eight, with Orient Airways shifting to Pakistan. These airlines were: Tata Airlines, Indian National Airways, Air service of India, Deccan Airways, Ambica Airways, Bharat Airways and Mistry Airways. In early 1948, a joint sector company, Air India International Ltd., was established by the Government of India and Air India (earlier Tata Airline) with a capital of Rs 2 crore and a fleet of three Lockheed constellation aircraft. Its first flight took off on June 8, 1948 on the Mumbai (Bombay)London air route. At the time of its nationalization in 1953, it was operating 10

four weekly services between Mumbai-London and two weekly services between Mumbai and Nairobi. The joint venture was headed by J.R.D. Tata, a visionary who had founded the first India airline in 1932 and had himself pilot edits inaugural flight. Significance of Air Transport Air transport is the most modern, the quickest and the latest addition to the modes of transport. Because of speed with which aero planes can fly, travel by air is becoming increasingly popular. As far as the world trade is concerned it is still dominated by sea transport because air transport is very expensive and is also unsuitable for carrying heavy, bulky goods. However, transportation of high value light goods and perishable goods is increasingly being done by air transport. Foreign Airlines Foreign airlines carrying international passenger traffic to and from India existed long before Independence. Their operations are governed by bilateral agreements signed from time to time between the Government of India and the governments of respective countries. In 1980-81, the number of such airlines

was

35.

It

rose

to

49

in

1996-97.

The share of foreign airlines in India's scheduled international traffic has increased. In 1971, their share was 55.58 per cent which went up to 65 per cent and declined to 58 per cent during 1972-75. It fell to 55.72 per cent in 1976 and further to 55.02 per cent in 1977. Between 1978 and 1990 it

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gradually increased and rose to 75.93 per cent. In 1996, the share was nearly 72 per cent.

Open-Sky Policy The Open-sky policy came in April 1990. The policy allowed air taxioperators to operate flights from any airport, both on a charter and a non charter basis and to decide their own flight schedules, cargo and passenger fares. The operators were, however, required to use aircraft with a minimum of 15 seats and conform to the prescribed rules. In 1990, the private air taxioperators carried 15,000 passengers. This number increased to 4.1 lakh in 1992, 29.2 lakh in 1993, 36 lakh in 1994 and 48.9 lakh in 1995. The 1996, private air taxi operators carried 49.08 lakh passengers which amounted to a 41.14 per cent share in the domestic air passenger traffic. Seven operators viz NEPC Airlines, Skyline NEPC, Jet Air, Archana Airways, Sahara India Airlines, Modiluft and East West Airlines have since acquired the status of scheduled airlines. Besides this there were 22 nonscheduled private operators and 34 private operators holding no-objection certificate in 1996. The number of plus 120 category aircraft in the private sector was 34 and the total fleet strength was 75 in June, 1996. Two out of seven scheduled air taxi operators suspended their operations in 1996 because of the non-availability of aircraft.

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Infrastructure and Related Facilities Airport Authority of India: set up on April 1,1995 by amalgamating the international Airport Authority of India and the National Airport Authority of India, the Airport Authority of India was to handle all matters relating to infrastructure for civil air traffic and transport at the international and the domestic airports and enclaves in the country. Indira Gandhi Rashtriya Uran Akademi: It was set up at Fursatganj to standardize and improve the flying training facilities in the country. Till January 1997 it had trained 289 pilots on fixed wing aircraft and 20 pilots on rotary wing aircraft. Flying/gliding training clubs: On December 31,1996, besides the above Akademi, 41 flying clubs/institutes and their branches including nine private institutes were imparting flying

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training. Five gliding clubs, seven gliding wings of flying clubs and a government Gliding Centre, Pune, were imparting training in gliding.

Development of Civil Aviation The repeal of the Air Corporation Act from 1 March 1994 enabled private operators to provide air transport services. Six operators were given the status of schedule doperators on 1February1995. Currently there are five international airports and 87 domestic airport in the country

with

28

civilian

enclaves

for

defence

purposes.

The Airport Authority of India plans to invest Rs 35,000 million for the construction and upgradation of airports. Budgetary support of Rs 485.50 million was allocated to AAI in 1996-97. In august 1996, in a major policy decision, the government allowed the private sector to set up air cargo complexes in a bid to ensure smooth movement of export cargo. Domestic and foreign investors including NRIs have been invited to participate in the development of infrastructure support at select airports. With a market share of 43% Indian airlines is the biggest player in aviation. Rs 24,710 million have been marked for development of the civil aviation sector in the annual plan for 1997-98. 14

The Indian Air Cargo Market The growth of air cargo in India has also been manifold though it might not have kept pace with the progress made all over the world. Table 1 shows how both international and domestic air cargo traffic has increased, reflecting an overall year on year growth. Table 1: Trends in cargo traffic at five international airports in India. (Figures in '000 tonnes) Period 1972-73 1982-83 1992-93 1999-2000

International Cargo Domestic Cargo Total Percentage Increase 47.4 33.6 81 165.4 84.6 250 209% 300.5 90.9 391.4 56.56% 494.2 183.0 677.2 73%

(Source - Transport India 2000)

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Future Outlook Of The Industry Future projections reflect that the air cargo industry both in the domestic sector and the international sector will continue in its upward trend of growth. Fig.1 reflects that the domestic air cargo will continue at a somewhat steady rate of growth whereas the international air cargo movement as illustrated in Fig.2 shows a steeper rate of growth indicating that international air cargo trade will flourish at a higher rate of growth. Both Domestic cargo and International cargo are poised to grow according to the projections. The major reasons, which can be attributed to this increase, are Increase in overseas trade Indian economic policies Customer service orientation Inventory concerns E-commerce development An airline provides air transport services for passengers or freight, generally with a recognized operating certificate or license. Airlines lease or own their aircraft with which to supply these services and may form partnerships or alliances with other airlines for mutual benefit. Airlines vary from those with a single airplane carrying mail or cargo, through full-service international airlines operating many hundreds of

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airplanes. Airline services can be categorized as being intercontinental, intracontinental, or domestic and may be operated as scheduled services or chartered planes. Ticket Revenue Airlines assign prices to their services in an attempt to maximize profitability. The pricing of airline tickets has become increasingly complicated over the years and is now largely determined by computerized yield management systems. Because of the complications in scheduling flights and maintaining profitability, airlines have many loopholes that can be used by the knowledgeable traveler. Many of these airfare secrets are becoming more and more known to the general public, so airlines are forced to make constant adjustments. Most airlines use differentiated pricing, a form of price discrimination, in order to sell air services at varying prices simultaneously to different segments. Factors influencing the price include the days remaining until departure, the booked load factor, the forecast of total demand by price point, competitive pricing in force, and variations by day of week of departure and by time of day. Carriers often accomplish this by dividing each cabin of the aircraft (first, business and economy) into a number of travel classes for pricing purposes.

Operating Cost

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Full-service airlines have a high level of fixed and operating costs in order to establish and maintain air services: labor, fuel, airplanes, engines, spares and parts, IT services and networks, airport equipment, airport handling services, sales distribution, catering, training, aviation insurance and other costs. Thus all but a small percentage of the income from ticket sales is paid out to a wide variety of external providers or internal cost centers. Moreover, the industry is structured so that airlines often act as tax collectors. Airline fuel is untaxed, however, due to a series of treaties existing between countries. Ticket prices include a number of fees, taxes, and surcharges they have little or no control over, and these are passed through to various providers. Airlines are also responsible for enforcing government regulations. If airlines carry passengers without proper documentation on an international flight, they are responsible for returning them back to the originating country. Airlines follow a corporate structure where each broad area of operations (such as maintenance, flight operations, and passenger service) is supervised by a vice president. Larger airlines often appoint vice presidents to oversee each of the airline's hubs as well. Airlines employs lawyers to deal with regulatory procedures and other administrative tasks. The headquarters of Air India are in Mumbai, India.

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Introduction to UB group 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 logo The Pegasus, which is the symbol of the United Breweries, first found its place as the Group logo in 1940. The UB Group’s Brewing Entity - called

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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.

`

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An Introduction to Kingfisher Airlines Kingfisher Airline is a private airline based in Bangalore, India. The airline is owned by Vijay Mallya of United Beverages Group. Kingfisher Airlines started its operations on May 9, 2005 with a fleet of 4 Airbus A320 aircrafts. The airline currently operates on domestic routes. The destinations covered by Kingfisher Airlines are Bangalore, Mumbai, Delhi, Goa, Chennai, Hyderabad, Ahmedabad, Cochin, Guwahati, Kolkata, Pune, Agartala, Dibrugarh, Mangalore and Jaipur. In a short span of time Kingfisher Airline has carved a niche for itself. The airline offers several unique services to its customers. These include: personal valet at the airport to assist in baggage handling and boarding, exclusive lounges with private space, accompanied with refreshments and music at the airport, audio and video on-demand, with extra-wide personalized screens in the aircraft, sleeperette seats with extendable footrests, and three-course gourmet cuisine. Vision: The Kingfisher Airlines family will consistently deliver a safe, value-based and enjoyable travel experience to all our guests.” Safety: This is an overriding value. In this line of business, there is no compromise. 21

Service: In hospitality business customer satisfaction is very important and building trust, goodwill and loyalty of customers is at prime focus. Happiness: Kingfisher seeks to build an organization with people who choose to be happy, and will endeavor to influence their guests and co-workers to be happy too. Teamwork: Kingfisher believes We will succeed or fail as a team. Each one of us must respect our colleagues regardless of their rank, and we must work together to ensure our mutual success. Accountability: Every employee in kingfisher will be held accountable for the successful execution of their duties, commitments and obligations, and they will strive to lead by an example. Product: Premium class seats 1. Sleeperette seats with extendable footrests. 48" seat pitch and a 125°

recline. Fully-adjustable headrests. 2. Laptop

and

mobile

phone

chargers

in

each

seat.

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3. Comfortable pillows and snug blankets.

Price: Initially Kingfisher airlines didn’t differentiate between business class and economy class. But eventually they decreased the prices of business class and called that seats as premium seats. Fares were very average as it had to target middle class as well as premium class people. Place: King fisher airlines connects 23 cities like Ahmedabad, Goa, Delhi, Kolkata, Hyderabad, Guwahati, Jaipur, Udaipur, etc. Promomtion: Various promotional strategies has been adopted by Kingfisher airlines like o The 'Power Flyer' a consumer incentive offer targeted at the

corporate traveler o Passengers are offered in flight entertainment options and

contests like `Kingfisher flying face of the month' and attractive discounts of branded merchandise.

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o Offer in-flight silent auctions for lifestyle products and in-

flight sales of dry packaged food and beverages o The marketing department showcased the airlines as “The new

flying experience”. . o KINGFISHER Airlines has announced special fares for all personnel serving in the Indian Armed Forces, the Union Government, State governments, and employees of all public sector units in the country. The immediate families of these personnel. o The company has just launched Kingfisher First, which is a print campaign to promote its first class service. It is a personalized campaign, which has Vijay Mallya, signing off by saying, "I have created a product which is better than what I would have created for myself." Kingfisher Airlines Limited is an airline based in Bangalore, India. It is a major Indian airline operating 218 flights a day and has an extensive network to 37 destinations, with plans for regional and long-haul international services. Its main bases are Bangalore International Airport, Bangalore, Chhatrapati Shivaji International Airport, Mumbai and Indira Gandhi International Airport, Delhi. Kingfisher Airlines, through one of its holding companies United Breweries Group, has acquired 26% stake in the budget airline Air Deccan and has option to buy further of 20% stake from the secondary market.

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Kingfisher is one of only 6 airlines in the world to have a 5 star rating from Skytrax, along with Asian Airlines, Malaysia Airlines, Qatar Airways, Singapore Airlines and Cathay Pacific Airways.Kingfisher Airlines, through one of its holding companies UB holdings Ltd, has acquired 26% stake in the budget airline Air Deccan and has option to buy further of 20% stake from the secondary market.

Introduction to Jet Airways Jet Airways is India’s premier private airlines. Naresh Goyal is currently the chairman of Jet Airways. Jet Airways operates over 320 flights daily to 43 destinations in India and currently controls about 40% of India's aviation market. Jet Airways was the first private airline of India to fly to international destinations. It operates daily international flights to Colombo, Kathmandu, Singapore, Kuala Lumpur and London (Heathrow). Jet Airways has won a number of awards in recognition of standards of its service and has also received the ISO 9001:2000 certification for its In-flight Services. Jet Airways was established on 3 May 1991 with a fleet of 4 Boeing 737-300 aircraft, with 24 daily flights serving 12 destinations. Jet Airways presently operates 55 aircrafts and is now a public limited company. Jet Airways (India) Ltd. is an airline based in Mumbai, India, operating domestic and international services. It operates over 330 daily flights to 50 destinations across the country and 6 overseas. Its main base is Chhatrapati

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Shivaji International Airport, Mumbai, with hubs at Indira Gandhi International Airport, Delhi, Anna International Airport, Chennai, Netaji Subhash Chandra Bose International Airport, Kolkata, Bangalore International Airport, Bangalore and Brussels Airport, Brussels. According to the latest available figures, its share of India's domestic aviation market has increased to over 43% (up from less than 27% a few months ago), and this is still greater than any other Indian domestic operator's market share. Jet Airways was incorporated as an "air taxi" operator on 1 April 1992. It started commercial airline operations on 5 May 1993 with a fleet of 4 Boeing 737-300 aircraft. In January 1994 a change in the law enabled Jet Airways to apply for scheduled airline status, which was granted on 4 January 1995. It began international operations to Sri Lanka in March 2004. Plans to acquire rival Air Sahara, announced in January 2006, after some rough patches deal got through. The airline is owned by Tailwinds (owned by Naresh Goyal) (80%) and public shares (20%) and has 10,017 employees. On April 12, 2007 Jet Airways agreed to buy out its smaller rival Air Sahara for 14.5 billion rupees ($340m).Air Sahara would be renamed as Jet Lite hereafter and it has been placed between a low cost carrier and full fledged airliner. It may be noted that Jet Airways with the acquisition of Air Sahara is all set to refurbish the fleet and crew with new livery and uniform and plans are in pipeline to start a freighter by the year end. The deal will give the airline a combined domestic market share of about 32%. Jet Airways serves 52 destinations, including 6 cities outside India.

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Jet Airways sought to take maximum advantage of this ruling by adding new international scheduled routes to destinations within the commercially viable flying range of its growing fleet of "Next Generation" Boeing 737-700/800 series narrow bodied jets, such as Singapore and Kuala Lumpur. This first led to a decision to lease three Airbus A340-300E wide-bodied from South African Airways

to enable it to commence non-stop flights to London

Heathrow in the UK and to subsequently place a large order for a fleet of brand-new Airbus A330-200 and Boeing 777-300ER wide-bodied airliners to permit further expansion, especially to additional destinations in Europe and North America. In 2006 Jet Airways has international services to Kathmandu, Colombo, Singapore, Kuala Lumpur, London Heathrow, operating from Mumbai, Delhi, Chennai and Amritsar.

Jet Airways started three times-a-week service from Ahmedabad to London Heathrow on April 3, 2007 to cater to the travel requirements of the ethnic Gujarati community in the UK. The airline is using its recently delivered Airbus A330-200s on both the Amritsar and Ahmedabad services while "Next

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Generation" Boeing 737-800s equipped with winglets are used on all Bangkok sectors. It also claimed that its international operations were profitable, with the sole exception of its long-haul flights between India and London-Heathrow.

Airline Agreements Jet Airways has commercial agreements with the following airlines: •

Air France

•

American Airlines

•

Austrian

•

British Airways

•

Brussels Airlines

•

Gulf Air

•

KLM

•

Lufthansa

•

Northwest Airlines

•

Qantas

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•

South African Airways

•

Swiss International Airlines

•

Thai Airways International

Jet Airways is proud that we are one of the few airlines in the world to receive the ISO 9001 certification for our in-flight services.

PEST Analysis: The Indian Airline Industry

A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the external macro-environment. Such external factors usually are beyond the firm's control and sometimes present themselves as threats. For this reason, some say that "pest" is an appropriate term for these factors. Let us look at the PEST analysis of the Indian aviation sector: 29

Political Factors In India, one can never over-look the political factors which influence each and every industry existing in the country. Like it or not, the political interference has to be present everywhere. Given below are a few of the political factors with respect to the airline industry: o The airline industry is very susceptible to changes in the political environment as it has a great bearing on the travel habits of its customers. An unstable political environment causes uncertainty in the minds of the air travellers, regarding travelling to a particular country. o Overall India’s recent political environment has been largely unstable due to international events & continued tension with Pakistan. o The Gujarat riots & the government’s inability to control the situation have also led to an increase in the instability of the political arena. o The most significant political event however has been September 11. The events occurring on September had special significance for the airline industry since airplanes were involved. The immediate results were a huge drop in air traffic due to safety & security concerns of the people. o International airlines are greatly affected by trade relations that their country has with others. Unless governments of the two countries trade with each other, there could be restrictions of flying into particular area leading to a loss of potential air traffic (e.g. Pakistan & India) o Another aspect is that in countries with high corruption levels like India, bribes have to be paid for every permit & license required. Therefore

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constant liasoning with the minister & other government official is necessary. The state owned airlines suffer the maximum from this problem. These airlines have to make several special considerations with respect to selection of routes, free seats to ministers, etc which a privately owned airline need not do. The state owned airlines also suffers from archaic laws applying only to them such as the retirement age of the pursers & hostesses, the labour regulations which make the management less flexible in taking decision due to the presence of a strong union, & the heavy control &interference of the government. This affects the quality of the service delivery & therefore these airlines shave to think of innovative service marketing ideas to circumvent their problems & compete with the private operators.

Economic Factors Business cycles have a wide reaching impact on the airline industry. During recession, airline is considered a luxury & therefore spending on air travel is cut which leads to reduce prices. During prosperity phase people indulge themselves in travel & prices increase. After the September 11 incidents, the world economy plunged into global recession due to the depressed sentiment of consumers.. The loss of income for airlines led to higher operational costs not only due to low demand but also due to higher insurance costs, which increased after the 31

WTC bombing. This prompted the industry to lay off employees, which further fuelled the recession as spending decreased due to the rise in unemployment. Even the Indian carriers like Air India was deeply affected as many flights were cancelled due to internal (employee relations) as well as external problems, which has been discussed later. Social Factors The changing travel habits of people have very wide implications for the airline industry. In a country like India, there are people from varied income groups. The airlines have to recognize these individuals and should serve them accordingly. Air India needs to focus on their clientele which are mostly low income clients & their habits in order to keep them satisfied. The destination, kind of food etc all has to be chosen carefully in accordance with the tastes of their major clientele. Especially, since India is a land of extremes there are people from various religions and castes and every individual travelling by the airline would expect customization to the greatest possible extent. For e.g. A Jain would be satisfied with the service only if he is served jain food and it should be kept in mind that the customers next to him are also jain or at least vegetarian.

Technological Factors The increasing use of the Internet has provided many opportunities to airlines. For e.g. Air Sahara has introduced a service through the internet, wherein the

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unoccupied seats are auctioned one week prior to the departure. Air India also provides many internet based services to its customer such as online ticket booking, updated flight information & handling of customer complaints. USTDA (US trade & development association) is funding a feasibility study and workshops for the Airports Authority of India as part of a long-term effort to promote Indian aviation infrastructure. The Authority is developing modern communication, navigation, surveillance, and air traffic management systems for India's aviation sector that will help the country meet the expected growth and demand for air passenger and cargo service over the next decade. A proposal for restructuring the existing airports at Delhi, Mumbai, Chennai and Kolkata through long-term lease to make them world class is under consideration. This will help in attracting investments in improving the infrastructure and services at these airports. Setting up of new international airports at Bangalore, Hyderabad and Goa with private sector participation is also envisaged. A good example of the impact of technology would be that of AAI, wherein with the help of technology it has converted its obsolete and unused hangars into profit centers. AAI is now leasing these hangars to international airlines and is earning huge profits out of it. AAI has also tried to utilize space that was previously wasted installing a lamination machine to laminate the luggage of travelers. This activity earns AAI a lot of revenue. These technological changes in the environment have an impact on Air India as well. Better airport infrastructure, means better handling of airplanes, which can help reduce maintenance cost. It also facilitates more flights to such destinations.

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Segmentation: The Airline Industry Most airlines use a very traditional segmentation strategy, dividing passengers into business travelers and economy travelers (mostly leisure travelers). The common strategy is to squeeze as much profit as possible from business class passengers who are attracted by superior services and corresponding high prices and, at the same time, to try and fill the rest of the seats and ensure growth by attracting economy class passengers with lower fares.

Business passengers They are crucial for airlines' profitability. With less spare time and more cash in their pockets, they agree to pay a premium price for a premium service. Today business passengers account for approximately 48% of passengers, and these 48% contribute 66% of airlines' revenue. The premium prices they pay provide wider and more comfortable seats, better choice of meals and seats, luxurious lounges. Airlines can choose from a multitude of premium services to offer to business travelers. Some of these extras range from seats equipped with faxes and telephones, to gambling machines, showers, massage services and suit ironing services in the recently introduced arrival lounges. Business passengers believe it is worth extra money if they can save time and arrive looking fresh for an important meeting. Business passengers will avoid transit flights even if a longer flight could save them money. But amongst other perks, flexible reservation services are probably the most important to them. Reservations for business trips are often made just a couple of days in

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advance. A no penalty cancellation policy is also very important to business passengers. The best way to reach business travelers is through printed advertising Many airlines design special promotional programs that target corporate bookers and meeting planners, who are responsible for business trips reservations. Frequent flyer programs are an added bonus for business passengers.

Leisure Travelers They represent a totally different market. The most important consideration for most of them is the price. The lower the airfare, the more people will fly the respective airline. By and large, with the exception of wealthy travelers, this segment will not pay extra for premium services and will agree to change several planes during their trip if this option costs less than a direct flight. Despite lower margins provided by this segment, leisure travelers are very important to an airline's bottom line. Part of the reason is that technological progress in the area of tele-conferencing and increased use of the internet for business communications is expected to reduce the number of business travelers. Thus, airlines are counting on the leisure segment to provide further growth. How can airlines benefit from the growth opportunities in the leisure segment without losing immediate profit opportunities in the business segment? This is a tough issue in airline marketing management. By improving services and

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reducing prices for economy class passengers, airlines risk that some business passengers will switch to economy class. Since business class passengers are not many, a company relying mostly on business travelers will often end up flying half-empty planes, losing the potential revenue generated by lower priced economy seats. On the other hand, few airlines catering solely to economy class passengers can be successful because a low fare carrier must fill the entire plane if it is to generate revenue from its low-margin operations. Thus he/she tries to sell early, the economy seats at a cheaper price, while keeping enough seats reserved for business travelers, who usually book at the last minute. Keeping just the right amount of business seats reserved is important: selling too few economy seats in advance may result in a less-thanfull plane while selling too many economy seats may result in a full plane, but with insufficient revenue to gain a profit. 7 P‘s of Jet Airways and Kingfisher Airlines Product • Business Class, Economy class Price • Price Mix, Discount as per frequent flyer program Place • It is connected to maximum cities Promotion • TV ads, Hoardings, Internet, Calendars

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People • Well trained crew members Process • On Ground, simpler process for Boarding the Flight Physical Evidence • Good seats, Dinning facilities, Entertainment facilities RESEARCH OBJECTIVES 1. To study the customer preference of service quality of each of the two airlines under study. 2. To compare the service quality of the airlines under study. 3. To find out the dissatisfaction among the passengers if any. 4. After finding out the areas of dissatisfaction, to give related suggestions to the Airlines company. RESEARCH METHODOLOGY Questionnaire Design The respondents were asked to evaluate the service quality of the service provided by the airline, which they have travelled. For example, the on-time services of the airline was measured through the question.

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Similarly, other good ground service – in-flight service and post-flight service were measured. The questionnaire also had a question to check the response to the loyalty programs provided by the airlines to frequent fliers. Other questions relating to the Ticket Counter, Security Check, Express Baggage, Delay of thee Flights etc were asked. Also the frequency and purpose of the flights was asked. Also the reason for travelling by that flight were asked. A sample size of 150 respondents was taken who have travelled by both, Jet Airways and Kingfisher Airlines. Further 75 questionnaires were filled by people on behalf of Jet Airways whereas 75 questionnaires were filled by people on behalf of Kingfisher Airlines. After the survey, a thorough analysis was done. Respective tables and pie charts were formed accordingly. Various percentage were also found out. Analysis of each question was done. After that findings, and limitations were given. Also the suggestions were given.

FINDINGS/ANALYSIS 1) FREQUENCY OF FLIGHTS

Every week Fortnightly Monthly Depends Total

Jet Airways 25 23 14 13 75

Kingfisher 17 40 15 3 75

Total 42 63 29 16 150

Out of 75 responses for Kingfisher, 40 people had flights every fortnight.

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And out of 75 responses for Jet, 25 replied for every week which was highest in it and 23 in fortnightly 2) SERVICES BY RESERVATION AGENT

Highly satisfied Satisfied Average Dissatisfied Total

Jet Airways 12 36 18 9 75

Kingfisher 19 29 17 10 75

Total 31 65 35 19 150

Out of 75 responses for Kingfisher, majority of people, i.e. 29 were satisfied with the services of reservation agent. Whereas 36 people, ie. Almost 50% were satisfied with the services of reservation agent. This shows that reservation services provided by Jet are more satisfactory than that provided by Kingfisher. 3) TIME CONVENIENCE Not Kingfisher Jet Airways Total

Imp 43 10 53

at

all Somewhat Imp 12 16 28

Very

Total

Important 20 49 69

75 75 150

Out of 75 responses for Kingfisher, 43 people responded that time convenience was not at all important for them whereas majority in Jet, i.e. 49 people, summing upto 65.33% said that time convenience was very important factor for them. Thus it shows that to the people for whom TIME CONVENIENCE is an important factor, preferred Jet over Kingfisher.

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FREQUENT FLYER PROGRAM Not

at

all Somewhat

Very

Total

Imp Imp Important Kingfisher 54 19 2 75 Jet Airways 48 21 6 75 Total 102 40 8 150 Out of 75 responses, almost 72%, i.e. 54 people chose Kingfisher irrespective of frequent flyer program.

Also, Jet responses show that frequent flyer

program is not much an important factor in choosing this airline. This throws light on the factor that both the airlines do not have the customers because of frequent flyer program. INFLIGHT SERVICES

Kingfisher Jet Airways Total

Not

Somewhat

Very

Total

important 10 14 24

important 16 23 39

important 49 38 87

75 75 150

Out of the 75 people surveyed for Kingfisher, majority of them i.e.49 people rated the In-flight services as very important. Whereas out of the 75 people surveyed for Jet,38 people rated the In-flight services as very important. Thus In-flight Services is also a major factor for selecting the Airlines. TRAVEL AGENT RECOMMENDATION

Kingfisher

Not

Somewhat

Very

Total

important 20

important 21

important 34

75 40

Jet Airways Total

15 35

20 41

40 74

75 150

Out of the 75 people surveyed for Kingfisher, majority i.e.34 flew with it as their travel agent/Company had made reservations for it. Whereas out of the 75 people surveyed for Jet, majority i.e.40 flew with it as their Travel agent/Company had made reservations for it. 4) Was price a major factor in choosing the airline?

No Yes Total

Kingfisher 65 10 75

Jet 68 07 75

Total 133 17 150

Out of the 150 people surveyed, price was not a major concern for most of the people. That is 133 people had gone for the airline irrespective of the prices. Thus price was not a major factor.

5) What is your main purpose in taking this trip? Jet 38 37

Total

Business Purpose Personal/Pleasure

Kingfisher 41 34

Purpose Total

75

75

150

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The reasons for travelling by Jet and Kingfisher were for business as well as personal and pleasure reasons. There was not much difference between the 2 reasons.

6) Please indicate the amount of time you waited for the following services? Aircraft Boarding 5 minutes 10 minutes 11-20 minutes Total

Kingfisher 30 36 09 75

Jet 24 40 11 75

Total

150

Out of the 75 people surveyed for Kingfisher, almost the same amount of people waited for a period of 5 minutes and 10 minutes. Whereas for Jet, majority of the people i.e. 40 people had to wait for 10 minutes. But in both the cases, very few people had to wait for 11-20 minutes. Boarding 5 minutes 10 minutes 11-20 minutes Total

Kingfisher 10 38 27 75

Jet 11 35 29 75

Total

150

For Boarding in Kingfisher, majority of the people had to wait for 10 minutes and 11-20 minutes.

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Same was the case with Jet. Whereas only 21 people had to wait for 5 minutes. Security Check

5 minutes 10 minutes 11-20 minutes Total

Kingfisher 39 28 08 75

Jet 36 29 10 75

Total 75 57 18 150

For Security Check, both in Jet and Kingfisher, majority of the people had to wait for a period of only 5 minutes and 10 minutes. Whereas only 18 people had to wait for a period of 11-20 minutes.

COURTESY OF THE STAFF

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For Kingfisher, out of the 75 people surveyed, maximum people i.e. 48 people rated the courtesy of the staff as very good, whereas only 2 people rated it as bad.

For Jet, out the 75 people surveyed, maximum people i.e.44 people rated the courtesy of the staff as very good. Whereas only 6 people rated it as bad. SELF ARRANGEMENT OF TICKETS

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Here we see that out of 75 people, only 48 people had made self arrangements to fly whereas remaining 102 people had done their reservations either through an agent or the company they were working for.

In Kingfisher, out of the 75 people only 38 people had done self arrangements whereas 112 people had done their reservations through agents or the company they were working for. DISATISFACTION LEVEL

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Out of the 75 people surveyed for Jet, maximum people i.e. 93 people had complaints at the Security Check, 22 people had complaints at the Ticket Counter, 20 people had complaints at the Express Baggage.15 people had no complaints at all.

Out of the 75 people surveyed for Kingfisher, maximum people i.e. 75 people had complaints at the Security Check, whereas 36 people had complaints at the Express Baggage, 16 people had complaints at the Ticket Counter.23 people had no complaints at all. PERSONNEL COMPLAINTS

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Regarding Personnel complaints, out of the 75 people surveyed for Jet, maximum people i.e. 54 people had complaints at the Security Check personnel, whereas 48 people had personnel complaints at the Ticket Counter, 27 people had complaints at the Express Baggage whereas 21 people had no complaints at all.

For Kingfisher, out of the 75 people surveyed, maximum people i.e.45 and 43 had complaints at the Security Check and Ticket Counter. Whereas 38 people had no complaints at all.

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PERSONAL DETAILS 11) What is your occupation?

Executive Academics Professionals Salesmen Secretary Homemaker Student Self-Employed Retired Total

Jet 35 0 20 0 0 04 08 07 0 75

Kingfisher 25 0 23 0 0 07 10 15 01 75

Total 60 0 43 0 0 11 18 22 1 150

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For Jet, out of 75 people, maximum people i.e. 60 people fell in the age group of 36-45, whereas 51 people fell in the age group of 26-35. Only 17 people were in the age group of 18-25.

For Kingfisher, out of 75 people, it was just vice-versa. Maximum people i.e.60 fell in the category of 26-35, whereas 51 fell in the category of 36-45. Only 18 fell in the category of 18-25.

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FINDINGS 1) More of fortnight flights were taken in Kingfisher and almost equal in every week and fortnight in Jet. The maximum number of people who flew every week or fortnightly were Businessmen, Executives, Professional. Whereas people who flew monthly flew for rare business trips or for pleasure purpose. 2) The dissatisfaction with the reservation agent was mostly due to the failure in informing about the delay of flights. 3) It shows that to the people for whom TIME CONVENIENCE is an important factor, preferred Jet over Kingfisher. 4) Both the airlines do not have the customers because of frequent flyer program. 5) In-flight Services is a major factor for selecting the Airlines. Almost all the respondents were highly satisfied with the in-flight services of the airlines. 6) Price was not a major factor for selecting the airline as both the airlines are at par and are both highly priced. 7) Waiting time was not a major issue by almost all the respondents. The average waiting time did not exceeded 10 minutes in both of the airlines. 8) Very few of the respondents were discontent with the courtesy of the flight attendants. 9) Maximum respondents had dissatisfaction at the Security Check-point level.

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SUGGESTIONS 1. Kingfisher should increase the frequency of flights to the most commonly preferred destinations from Ahmedabad. 2. Kingfisher should focus on the timing of the flights and should introduce early morning and late evening flights specially for the Business Travellers. 3. Since Jet has its competitor as Kingfisher, Jet should also focus more on providing a personalized touch to the services.

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LIMITATIONS 1. The findings of this study are limited to the domestic airline industry in India.

2. This study has not considered industry measures to measure service

quality. 3. We have measured only the customer preference of service quality in Ahmedabad.

4. The survey could be done by taking the sample size of just 150 people.

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FURTHER SCOPE OF STUDY 1) This project can also be used by Jet Airways and Kingfisher Airlines for further improvement.

2) Travel Agencies can also use this project to know the existing scenario among frequent fliers.

3) The three dimensions of the SERQUAL i.e. Tangibles, Reliability and Assurance are related here. But the remaining two dimensions i.e. Responsiveness and Empathy can also be related and studied.

4) This study can be further carried on to the International Airline Industry as well. 5) This study can be further extended to other airlines like Air Deccan, Spice Jet, Indian Airlines, etc.

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BIBLIOGRAPHY REFERENCE BOOKS 1) Zeithaml and Bitner (1996), Services Marketing, Tata McGraw Hill, New Delhi Venkatesh et al, Service Quality. 2) Parasuraman, A., Zeithaml, V. A.,& Berry, L. L.

(1985).A conceptual model of service quality and its implications for future research. 3) Cunningham, L. F., Young C. E., & Lee, M. (2002). Cross-cultural perspectives of service quality and risk in air transportation. 4) Marketing Management, 11th edition By Philip Kotler. NEWSPAPERS 1) The Times Of India.(15/03/2008) 2) Gujarat Samachar.(15/03/5008)

3) Divya Bhaskar.(16/03/2008)

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WEBSITES 1. http://www.jetairways.com/Cultures/en-US/India/ 2. http://en.wikipedia.org/wiki/Airline#Airline_personnel 3. http://www.indianchild.com/india_civil_aviation.html

4. http://kingfisherblog.wordpress.com/2008/03/17/fly-kingfisher-indiasonly-5-star-airline/ 5. http://en.wikipedia.org/wiki/Kingfisher_%28beer%29 6. http://www.iloveindia.com/economy-of-india/aviation-industry.html

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THANK YOU

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