BBA (Annual Pattern) IInd Year Paper No. 9

School of Distance EducationBharathiar University, Coimbatore - 641 046

Airline and Travel Management

BBAAirline & Airport Management

(Annual Pattern)IInd Year

Paper No. 9

Author: P S Senguttuvan

Copyright © 2014, Bharathiar UniversityAll Rights Reserved

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SCHOOL OF DISTANCE EDUCATIONBharathiar UniversityCoimbatore-641046

Page No.

UNIT I

Lesson 1 Transportation Industry 7

Lesson 2 Market for Air Transportation 22

UNIT II

Lesson 3 International Travel Documentation 49

Lesson 4 Product Analysis 78

UNIT III

Lesson 5 Travel Information Manual 97

Lesson 6 Official Airlines Guide 121

UNIT IV

Lesson 7 Airport Planning 141

Lesson 8 Airport Planning Process 160

UNIT V

Lesson 9 Airline Revenue Management 175

Lesson 10 Distribution and Promotion 197

Model Question Paper 235

CONTENTS

AIRLINE AND TRAVEL MANAGEMENT

SYLLABUS

UNIT I

Transportation Industry: Air Transportation Industry – Land Transportation Industry – Sea TransportationIndustry – Multi-modal Transportation.

Market for Air Transportation: Marketing and Marketing mix Application of Marketing Principles to Airlinemanagement – Airline Business and its Customers – Market segmentation – PESTE Analysis.

UNIT II

International Travel Documentation: Passport VISAs – Airlines Ticket or Authorization – Health Documents– Michel Porter’s Five Factors and their Application to Airline – Cost leadership Focus strategies – AirlineBusiness and Market Strategies Common Mistake.

Product Analysis: Concept of Product and Relation to Airline Fleet and schedules Related Product Features –Customer Service and Controlling Product Quality – Air Freight Product.

UNIT III

Travel Information Manual: Referring the TIM – Passport Requirements: Different Nations – VISARequirements: Different Nations – Tax, Currency, Customs, Immigration requirements.

Official Airlines Guide: Referring the OAG – Aircraft Types and Codes – World Terminals – Calculation ofFlying time, Ground Time and Elapsed Time.

UNIT IV

Airport Planning: Introduction Growth of air transport, Airport organization and associations, Classification ofairports airfield components, Air traffic Zones and approach areas.

Airport Planning Process: Context of Airport system planning, Development of Airport Planning processUltimate consumers, Airline decision – Other Airport operations.

UNIT V

Airlines-Revenue Management: Building Block in Airline Pricing Policy – Uniform and Differential Pricing –The Structure of Air Freight Policy.

Distribution and Promotion: Distribution Channel Strategies – Travel Agency Distribution System – Selling& Distribution Channel in Air Freight Market – Brand Building Strategies in Airline Industry – RelationshipMarketing and Components of Marketing Strategies – Frequent Flyer Programme – Anatomy of Sale andPlanning – Marketing Communication Technique – Airline Advertising – Air Freight Market- Future of AirlineMarket.

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Transportation Industry

UNIT 1

UNIT I

6 Airline and Travel Management

7

Transportation IndustryLESSON

1 TRANSPORTATION INDUSTRY

CONTENTS

1.0 Aims and Objectives

1.1 Introduction

1.2 Air Transportation Industry

1.2.1 Airports

1.2.2 Air Services

1.2.3 Air Cargo

1.3 Land Transportation Industry

1.4 Sea Transportation Industry

1.5 Multi-modal Transportation

1.5.1 Multi-modal Transport Services

1.5.2 Multi-modal Transport Requirements

1.6 Let us Sum up

1.7 Lesson End Activity

1.8 Keywords

1.9 Questions for Discussion

1.10 Suggested Readings

1.0 AIMS AND OBJECTIVES After studying this lesson, you would be able to:

Understand Air Transportation Industry

Explain Land Transportation Industry

Describe Sea Transportation Industry

Discuss Multi-modal Transportation

1.1 INTRODUCTION To fly with the birds has been man’s dream since Neolithic times. Centuries of studies and experiments precede the first successful flight. Only until the beginning of the 20th century have we accomplished flight in a heavier-than-air craft. Throughout the past century of evolution, aviation has acquired a responsibility much greater than ever conceived. The utilization spectrum of aviation extends from air combat and high-altitude surveillance to more mundane functions like shipping mail and cargo. With such versatility, aircraft have contributed to augmenting the fast paced lives we already live.


Air transport has contributed to expansion of the global economy, leisure activities, and influenced governments and industries to diversify. The portrayal of aviation has impacted our society on three stages: socially, politically and economically. Leonardo da Vinci had begun drawing blueprints of a flying machine in the 15th century. At that time, human flight had never been contemplated, beyond a dream. Practicality worked against Leonardo; however, his thoughts were quite contemporary by today’s standards seeing how his drawings resemble those of modern aircraft.

Just over a hundred years ago, the idea of human flight was thought absurd. Flying was something one only did while one was dreaming; but today one can fly to any destination with utmost comfort and safety, thanks to the air transport system. The first flight took place on December 17, 1903, in Kill Devil Hills near Kitty Hawk, North Carolina. The inventors of ‘The Flyer’, the first heavier-than-air machine that actually flew under its power, were Wilbur and Orville Wright, the Wright brothers. Orville made the first successful flight. Although their “air machine” flew for only twelve seconds, the Wright brothers started a revolution that has greatly affected the entire world.

“The time will come when gentlemen, when they are to go on a journey, will call for their wings as regularly as they call for their boots.”

−Bishop Wilkens (Glaeser)

With the success of the Wright brothers’ flight, powered flight has undergone renovations that have made everyday flight possible.

As time went on, the design and mechanics of the plane greatly advanced, cockpits were built for the pilot and suggestions were made to make the plane a weapon, which became a reality with winged warfare in the First World War. Airplanes are used for a variety of activities while travel is only one of them.

1.2 AIR TRANSPORTATION INDUSTRY Transportation sector includes industries providing transportation of passengers and cargo, warehousing and storage for goods, scenic and sightseeing transportation, and support activities related to modes of transportation. Establishments in these industries use transportation equipment or transportation related facilities as a productive asset. The type of equipment depends on the mode of transportation.

Transportation modes are an essential component of transport systems since they are the means by which mobility is supported. Geographers consider a wide range of modes that may be grouped into three broad categories based on the medium they exploit: land, water and air. Each mode has its own requirements and features, and is adapted to serve the specific demands of freight and passenger traffic. This gives rise to marked differences in the ways the modes are deployed and utilized in different parts of the world. More recently, there is a trend towards integrating the modes through inter-modality and linking the modes ever more closely into production and distribution activities. At the same time, however, passenger and freight activity is becoming increasingly separated across most modes.

A system is a group of components that work together as a unified whole. If one component changes in some way, the other components must also change so that the system continues to function effectively. If anyone component fails to work properly, the whole system will be affected.

The components that make up the air transportation system are as follows:

1. Airlines are those companies which operates vehicles for transportation of passengers and cargo through air.

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Transportation Industry2. Airports provide a place for airplanes to land, load and unload passengers and

cargo, and take-off for other destinations. The term airport is commonly used for large airports used by airlines.

3. Air navigation services are those services which monitor and control the movement of aircrafts from one place to another by managing the air traffic.

4. Civil Aviation Authorities is a body that develop and enforce regulations for aviation industry within respective countries.

These components are interdependent − one cannot function without the others. If an airport closes, airplanes cannot land and passengers cannot travel. If the regulations are inadequate, there may be conflicts between airlines, accidents may occur, exports may not leave the region and imports may be lost in transit.

Understanding the relationships between these components is essential for people working in the industry.

It is very important for a large country like India. Through it one can easily reach to remote and inaccessible areas like mountains, forests, deserts, etc. It is very useful during the times of war and natural calamities such as floods, earthquakes, famines, epidemics, hostility and collapse of law and order.

The beginning of the air transport was made in 1911 with a 10 km air mail service between Allahabad and Naini. The real progress was achieved in 1920 when some aerodromes were constructed and the Tata Sons Ltd. started operating internal air services (1922). Flying clubs were opened in Delhi, Karachi, Calcutta (now Kolkata) and Bombay (now Mumbai) in 1928.

In 1933 another company Indian National Airways was constituted to serve between Karachi and Lahore. In 1938, the Empire Air Mail Service was introduced to carry mail between the empire countries. In 1946, the Government set up the Air transport Licensing Board which granted 11 licenses. At the time of Independence four companies were operating their air services (Tata Sons Ltd., Indian National Airways, Air Services of India and Deccan Airways). By 1951, there were four new entrants: Bharat Airways, Himalayan Aviation Ltd., Airways India and Kalinga Airlines.

The ownership of these airlines was taken over by the Government in 1953 and two separate corporations were set up − the Air India international to cater for the international air routes and the Indian Airlines for the domestic services.

Ever since the nationalization there has been improvement in all directions of the air transport.

The revenue earning of Air India has increased from ` 7.56 crore in 1960-61 to ` 152.01 crore in 1998-99 while that of Indian Airlines from ` 10 crore to ` 84.08 crore. The number of passengers carried by these airlines rose from 1.25 lakh to 31.66 lakh (for Air India) and from 7.90 lakh to 80.10 lakh (for Indian Airlines) during the same period.

1.2.1 Airports India has international airports besides 87 aerodromes divided into major, intermediate and minor categories. Its five major international airports are: Mumbai (Santa Cruz), Kolkata (Dum Dum), Delhi (Palam), Chennai (Meenambakkam) and Thiruvananthapuram. The operation, management, planning and development of these airports are the responsibility of the International Airports Authority of India. These airports lie on the International Air routes and are used by Air India and foreign airliners. Here landing facilities are of international standard.

There are 22 major aerodromes at Agartala Ahmadabad, Amritsar, Aurangabad, Barapani, Bhubaneshwar, Bhuj, Delhi (Safdarjung), Guwahati, Hyderabad, Imphal,


(Tulihal), Jaipur, Khajuraho, Lucknow, Nagpur, Panagarh, Patna, Ranchi, Tiruchchirappalli, Udaipur and Varanasi. These are also equipped with modern air services and landing facilities.

Intermediate aerodromes (22) are located at Belgaum, Bhopal, Bhavnagar, Chakulia, Dibrugarh, Mohanbari and Gaya, Indore, Jabalpur, Kandla, Junagadh (Keshod), North Lakhimpur (Lilabari), Port Blair, Raipur, Rajkot, Kumbhigram (Silchar), Tirupati (Ranigunta), Vadodara, Vijayawada, Vishakhapatnam and Madurai. Besides, there are 43 minor aerodromes located at important cities and towns of the country where landing facilities vary from modern to mere unsurfaced airstrips. The Ministry of Defence also maintains some aerodromes for use of defence purposes. There are 20 Flying Clubs, five State government flying schools (Patna, Bangalore, Bhubaneshwar, Kolkata and Jaipur) and eight Gliding Clubs (Ahmadabad, New Delhi, Pilani, Raipur, Nashik, Kanpur, Agra Cantt and Hyderabad) in the country.

1.2.2 Air Services The air services are provided by Civil Aviation and are managed by two public sector corporations. Air India Limited is the major international river of the country. It has bilateral air services agreements with 100 countries of the world and pirates air services to the USA, Europe, the Russian Confederation, the Middle East, East Asia, Far East and Africa. Air India owns a fleet of 37 aircraft consisting of 7 B-474-200, two B 747-300 (Combi), Six B 747-400, three A 300-B4 and eight A 310-300 aircrafts.

It also has joint venture services with three foreign carriers and seven 'Block Space' and 'Code Share Arrangements' with other foreign airlines. During 2004-05 Air India carried 4.45 million passengers as against 2.91 million in 1996-97. Besides Air India, a number of foreign companies also operate in the country on international routes. Recently the Government has decided to disinvest Air India shares to make room for private and foreign companies.

Indian Airlines is the major domestic air carrier of the country. It also provides services to 14 countries, viz. Pakistan, Maldives, Nepal, Sri Lanka, Malaysia, Bangladesh, Thailand, Singapore, UAE, Oman, Myanmar, Kuwait, Qatar and Bahrain. Its operations cover 77 destinations including 19 abroad. It owns a fleet of 67 aircrafts consisting of ten A-300s, thirty A-320s, twelve B-737 and three DO-228 aircrafts. All Boeing 737 aircrafts are operated by its wholly-owned subsidiary Alliance Air.

Besides Indian Airlines there are two private scheduled airlines which provide regular domestic air services. In addition there are 41 non-scheduled operators providing air-taxi/air transport services. Private operators presently cater to nearly 41.4 per cent of the domestic air traffic. The number of passengers availing of private air services has increased from 15,000 in 1990 to 49.14 lakh in 1998. On the other hand, the increase has been marginal in case of Indian Airlines (from 78.66 lakh in 1990-91 to 80.10 lakh in 1998-99).

Pawan Hans Helicopters Limited has been providing helicopter support services to the petroleum sector including ONGC, Oil India Limited, and Hardy Exploration at Chennai. It also provides services to certain State Governments and Public Sector Undertakings and in the north-eastern states. The company presently has an operational fleet of 20 Dauphin helicopters, three Bell 206 L4, two Bell 407, two Robinson R 44 and three Mi 172 helicopters. The fleet has flown approximately 18,500 hours during 1997-98.

The Government under 'Open Sky Aviation Policy' is allowing private operators to fly in the Indian skies and transport passengers and freight. Currently four major private airlines-East-West, Damania, Modiluft and Jet Air are in operation.

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Transportation Industry1.2.3 Air Cargo Air cargo is an important aspect of air services. The total cargo handled at AAI airports was 12.80 lakh tons in 2004-05 which is roughly seven times than that of 1980-81 (1,78,700 tons). Most of the important cargo consists of perishable goods (meat, fish, fruits, vegetables, flowers, etc.), readymade garments, leather goods, machinery, pharmaceuticals, gems and jewellery, professional and scientific equipment. Some mail to principal cities of the country is carried by air. Santa Cruz (Mumbai) airport tops in handling the air cargo, followed by Palam (Delhi) Meenambakkam (Chennai) and Dum Dum (Kolkata).

In order to help the Indian exporters and make their exports more competitive, the Government had introduced in April 1990 an 'open sky policy' for cargo. Under this policy any foreign airlines or association of exporters can bring freighters to the country for upliftment of cargo. The Government has also permitted market forces to determine cargo tariff, with IATA rates as the floor rates.

Economics of the Air Transport Industry

The economics of air transport studies various ancillary services, such as Airport, Ground Handling, Leasing and Catering. The location of airports and the availability of landing slots are the basic determinants for airlines routing to which they serve. Airport charges play an important component of airline expenditure which is accounting 4 per cent approximately of total costs. Given the continued growth of air traffic, capacity constraints are found at a number of airports over the last few years. A number of high growth international airports, such as Hong Kong, China (1998), Osaka (1994), Kuala Lumpur (1998) and Shanghai (2002) have built new airports to deal with the problem. Capacity expansion possibilities for a number of major airports are limited. London Heathrow airport is particularly notable for the capacity constraint problem. Nevertheless, the allocation of landing/takeoff slots at Heathrow, as at other airports, has direct implication on competition policy. A number of airlines have made increasing use of secondary airports in order to circumvent the problem of congestion. In the absence of capacity expansion, the only way to restrain airport congestion is through a mechanism for slot allocation. Slot allocation will be projected in WTO, and most of the nations are favouring to bring “Slot Allocation” under the GATS.

1.3 LAND TRANSPORTATION INDUSTRY Two major modes are composing the land transport system, roads and railways. Obviously, roads were established first, as rail technology only became available by the 18th century, in the midst on the industrial revolution. Historical considerations are important in assessing the structure of current land transportation networks. Modern roads tend to follow the structure established by previous roads, as it was the case for the modern European road network (especially in Italy, France and Britain) that follows the structure established by the Roman road network centuries before. The first land roads took their origins from trails which were generally used to move from one hunting territory to another. With the emergence of the first forms of nation-states trails started to be used for commercial purposes as trade expanded and some became roads, especially through the domestication of animals such as horses, mules and camels. The use of wheeled vehicles encouraged construction of better roads to support the additional weight. However, a road transport system requires a level of labour organization and administrative control that could only be provided by a form of governmental oversight offering some military protection over trade routes.

Road transport, however, possesses significant advantages over other modes.

The capital cost of vehicles is relatively small, which makes it comparatively easy for new users to gain entry. This helps ensure that the trucking industry, for example, is


highly competitive. Low capital costs also ensure that innovations and new technologies can diffuse quickly through the industry.

Another advantage of road transport is the high relative speed of vehicles, the major constraint being government-imposed speed limits.

One of its most important attributes is the flexibility of route choice, once a network of roads is provided. Road transport has the unique opportunity of providing door to door service for both passengers and freight.

These multiple advantages have made cars and trucks the modes of choice for a great number of trip purposes, and have led to their market dominance for short distance trips. The success of cars and trucks has given rise to a number of serious problems. Road congestion has become a feature of most urban areas around the world. In addition, the mode is behind many of the major environmental externalities linked to transportation. Addressing these issues is becoming an important policy challenge at all levels of jurisdiction, from the local to the global. Infrastructures and Investments Road infrastructures are moderately expensive to provide, but there is a wide divergence of costs, from a gravel road to a multi-lane urban expressway. Because vehicles have the means to climb moderate slopes, physical obstacles are less important than for some other land modes, namely rail. Most roads are provided as a public good by governments, while the vast majority of vehicles are owned privately. Capital costs, therefore, are generally assumed by the society, and do not fall as heavily on one source as is the case for other modes. Unlike many transport infrastructures where the network is paid for by the user through a pricing mechanism, 95% of the financing of road infrastructure is covered by the public sector, leaving the reminder covered by tolls. The public offering of free road infrastructure conveys several advantages to the private sector, but can also lead to serious problems. The main advantage is clear; the users of roads commonly do not bear the full operating costs implying that road transportation tends to be below real market price. For road freight transportation, this can be seen as a subsidy as road maintenance is not part of the operating costs, but is indirectly present with taxes and tolls. As long as there is spare road capacity this situation works for the benefit of trucking. However, when congestion starts to arise, users have limited, if any, influence on the construction of new and improved infrastructure to mitigate the problem since they do not own the infrastructure and are using it for free. Lobbying public entities to receive public road infrastructure investments can be a very long process, subject to constant delays and changes. Road users thus become trapped in a situation they can do little to change since it is provided free of charge. This can be labelled as the "free roads curse". An entity owning and operating its own network, such as a rail company in North America, has the advantage of directly implementing improvements with its own capital if congestion arise on a segment of its network. It is thus better placed to cope with congestion. Governments can expropriate the necessary land for road construction since a private enterprise may have difficulties to expropriate without government support. Another important aspect about roads is their economies of scale and their indivisibility, underlining that the construction and maintenance of roads is cheaper when the system is extensive, but to a limit. However, all road transport modes have limited abilities to achieve scale economies. This is due to the size constraints imposed by governments and also by the technical and economic limits of the power sources and what infrastructures can bear weight-wise. In most jurisdictions, trucks and busses have specific weight and length restrictions which are imposed for safety reasons. In addition, there are serious limits on the traction capacities of cars, busses and trucks because of the considerable increases in energy consumption that accompany increases in the weight of the unit. For these reasons the

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Transportation Industrycarrying capacities of individual road vehicles are limited. Roads are thus costly infrastructures, but also sources of revenue:

Costs: They include rights of way, development costs (planning), construction costs, maintenance and administration costs, losses in land taxes (urban environment), expropriation costs (money and time), and external costs (accidents and pollution).

Revenue: They include registration, gas (taxes), purchases of vehicles (taxes), tolls, parking, and insurance fees. Another form of indirect income concerns traffic violations (e.g. speeding) that are using the pretext of public safety to hide revenue generation practices by local governments.

In many cases governments have been inefficient custodians of road infrastructure as it is tempting because of high costs to delay maintenance or improvements. Budgetary problems are also inciting selling assets to increase revenue and reduce expenses. Consequently, a growing number of roads have been privatized and companies specializing in road management have emerged, particularly in Europe and North America. This is only possible on specific trunks that have an important and stable traffic. Unlike governments, private enterprises have vested interests to see that the road segments they manage are maintained and improved since the quality of the road will be directly linked with revenue generation. The majority of toll roads are highways linking large cities or bridges and tunnels where there is a convergence of traffic. Most roads are not economically profitable but must be socially present as they are essential to service populations.

Check Your Progress 1

Fill in the blanks:

1. Air transport has contributed to expansion of the global economy, leisure activities, and influenced governments and industries to …………………

2. ………………… sector includes industries providing transportation of passengers and cargo, warehousing and storage for goods, scenic and sightseeing transportation, and support activities related to modes of transportation.

3. Transportation modes are an essential component of transport systems since they are the means by which ………………… is supported.

4. The ………………… of air transport studies various ancillary services, such as Airport, Ground Handling, Leasing and Catering.

5. ………………… include registration, gas (taxes), purchases of vehicles (taxes), tolls, parking, and insurance fees.

1.4 SEA TRANSPORTATION INDUSTRY Large homogeneous parcels such as iron ore, coal and grain are carried by the bulk shipping industry, small parcels of general cargo are carried by the liner shipping industry and specialised cargoes shipped in large volumes are transported by the specialized shipping industry. These three cargo streams create demand for bulk transport, liner transport and specialized transport. A major distinction is drawn between the fleets of ships owned by companies moving their own cargo in their own ships and the ships owned by independent ship owners and chartered to the cargo owners.

The bulk shipping industry carries large parcels of raw materials and bulky semi-manufactures. This is a very distinctive business. Bulk vessels handle few transactions, typically completing about six voyages with a single cargo each year, so the average revenue depends on a dozen of negotiations per ship each year.


In addition, service levels are usually low so little overhead is required to run the ships and organize the cargo.

The liner service transports small parcels of general cargo, which includes manufactured and semi-manufactured goods and many small quantities of bulk commodities. Because there are so many parcels to handle on each voyage, this is an organization-intensive business. In addition, the transport leg forms part of an integrated production operation, so speed, reliability and high service levels are important. With so many transactions the business relies on published prices, though nowadays the prices are negotiated with major customers as part of service agreement.

Specialized shipping services transport difficult cargoes of which the five most important are cars, forest product, refrigerated cargo, chemicals and liquefied gas. These trades fall somewhere between bulk and liner. Service provides in these trades invest in specialized ships and offer higher service levels than bulk shipping.

The sea transport industry consists of all companies involved in the shipping of goods over bodies of water, both domestically and internationally. The industry also includes all entities that sustain shipping, such as those who offer boat building, repair, operation and rental services. This industry also includes cruise lines, as well as port authorities that receive the vessels.

The three segments of the shipping industry all carry cargo in ships but they face different tasks in terms of the value and volume of cargo, the number of transactions handled and the commercial.

1.5 MULTI-MODAL TRANSPORTATION Multi-modal transport is essentially an international through-transport combination with various modes of transport such as ship, rail, truck, aeroplane, etc., primarily through the use of containers. Containers will ensure the transport of unitised cargo from its origin to its final destination, with efficiency and least possible risk.

According to Woxenius (1998), the concept of using freight containers dates from Roman times but container transport by rail was introduced by the Liverpool & Manchester Railway that used Roll-on/Roll-off containers for the hauling of coal back in 1830. The Birmingham & Derby Railway introduced an early form of multi-modal transport with the transfer of containers between rail wagons and horse carriage in 1839. New York Central Railway developed and inaugurated the first dedicated container service from Cleveland and Chicago on March 19, 1921. Containerisation grew further as a means of ‘door-to-door’ transport, spurred on by the development of the Piggy Back System where trailers themselves were carried aboard specialised ‘Flat cars’.

Containers for sea transport appeared during the 1960s and should be attributed to the innovativeness and the sea/land strategy of Mr. M McLean, the founder of Sea-Land Inc. (UNCTAD, 1993). He was originally an executive of a trucking company who took over a shipping company. As he was familiar with road/rail combination operations for land transport, he decided to apply the concept with sea transport to enable sea/land through transport with the help of standardised dimensions for containers. It followed that containers had to be fitted with special devices for the ease of switch between different modes of transport and that ships had to be equipped with rail structures known as cell-guides for vertical sliding and stowing into the ship’s hold.

Containers ultimately enabled multi-modal transport to be applied to most types of general cargo by means of an international standardised transport unit. Only particularly large (out-of-gauge) and particularly heavy cargoes cannot be containerised. Containerisation is basically the largest form of unitisation. Containers are loaded with products at the shipper’s premises and sealed, and then they are

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Transportation Industrycarried over to the consignee’s premises intact, without the content being taken out or re-packed en route. This is the essence of container transport as well as multi-modal transport, but containerisation is not synonymous with multi-modal transport. Containerisation contributes to a higher efficiency in the development of multi-modal transport operations. The focus, now, is more on the organisation of the transport industry and the synchronisation of the integrated logistical system (Hayuth, 1987). In order to achieve multi-modal transport, intensive co-operation and co-ordination among transport modes are essential.

Where the carrier organising the transport takes responsibility for the entire door-to-door transport and issues a multi-modal transport document.

Multi-modal transport is therefore a concept which places the responsibility for transport activities under one operator, who then manages and co-ordinates the total task from the shipper’s door to the consignee’s door ensuring the continuous movement of the goods along the best route, by the most efficient and, cost-effective means, to meet the shippers requirements of delivery. This means simplified documentation, and increasingly by electronic means such as Electronic Data Interchange (EDI).

A Multi-modal Transport Operator (MTO) acts as a principal and therefore as a “carrier”, because the MTO contracts with the shipper to carry goods by one or more modes of transport as may be necessary. The MTO has accepted total responsibility and liability to perform the transport contract; he has become the sole interface point for the shipper’s transport function.

The advent of the marine container provided the impetus for the development of multi-modal transport which enabled transport service providers to extend their services to provide door-to-door services using a combination of carriers’ notes, consignment notes, waybills, bills of lading, etc., each with their own terms and conditions of service and limit of liability.

It is interesting to note that transport terminology relating to intermodal/multi-modal transport continues to evolve. The term “multi-modalism” is now used in some of the literature (Tai, 1999). It seems that since the 1920s with the introduction of the term “intermodalism”, many authors have tried to attribute different names to what is basically the movement of goods by at least two modes of transport. For the sake of clarity in this thesis, “multi-modal transport” will refer to all types of goods movement by at least two modes of transport and “intermodal transfer” will refer to the change of transport mode.

1.5.1 Multi-modal Transport Services When a multi-modal transport service is provided, the multi-modal transport operator will be liable from the point of origin to the point of destination (UNCTAD, 1995a). He will issue one transport document that will include invoice for freight charges, and also a guarantee for the transit time. From that point onwards, the MTO concludes a number of sub-contracts with individual carriers, road, rail, shipping lines, port authorities, terminal operators, stevedores, etc., on the MTO’s own name, not that of the shipper or the consignee. Only the MTO is entitled to take delivery of the goods from each actual sub-carrier and pass them to the next sub-carrier. The MTO, in acting as a principal, is therefore responsible for the whole transport chain. It is fundamental for the MTO to have the ability to design and provide effective transport arrangements. When goods are moving from the shipper to the consignee, it may take up to ten or twelve distinct transport links. At each transfer point, goods will then be unloaded and loaded, waiting or stored, weighted, checked or recorded, packed/reconsolidated. All of these intermodal transfers cost time and money, thus affecting the competitiveness of particular routes (Beresford & Savides, 1997; Beresford, 1999a).


The MTO will have to rely on transport system analysis for the design and planning of the multi-modal transport operation. According to Manheim (1979), the field of transportation system analysis has the following characteristics:

It is multi-modal, covering all mode of transport.

It is multi-sectoral, encompassing the problems and viewpoints of government, private industry, and the public.

It is multi-problem, ranging from rules, regulations, and policies to customer service levels and financial and economic feasibility.

It is multi-disciplinary, drawing on the theories and methods of engineering, economics, operations research, political science, psychology, other natural and social sciences, management and law.

This means that in the analysis of a transportation system, the total transportation system of a region must be viewed as a single multi-modal system. The consideration of the transportation system cannot also be separated from consideration of the social, economic, and political system of a region.

Through transport systems analysis, the MTO will be able to use an integrated approach in operation, management and control of traffic, so that shorter delivery from origin to destination is made possible. The shorter delivery, and often more reliable delivery, will lower transit time of transport from origin to destination and will enable a greater control of costs, schedules and cargo safety. It is often due to the lack of coordination at the various intermodal transfer points that delay occurs. An UNCTAD (1995a) training module has described that the cost of the main transport leg, usually the sea leg, in the transport chain is not as high as it is generally believed to be. The module focused on multi-modal transport in developing countries. It is an aim of this thesis to verify these figures against field data.

Massive savings on the transport chain are therefore possible, by improving overall efficiency through proactive management techniques and better control over cargo flow. To be able to improve overall efficiency, the MTO must be able to plan a high level of utilisation of transport links in conjunction with a continuity of cargo flow. Intralink storage must also be minimised (MacLeod, 1998).

The MTO is the only responsible party that is able to co-ordinate all modes of transport and organise multi-modal transport. Shippers and consignees are not capable, nor do they have the time to determine the best route or the best price, as they do not have the MTO’s expertise in transport management. They also do not have the capability to determine, forecast and even to solve problems that might occur to their cargo during transit

1.5.2 Multi-modal Transport Requirements The use of multi-modal transport implies overall structural changes covering new trade and transport practices. Various measures are needed to implement multi-modal transport, from the streamlining of commercial regulations to the development of transport infrastructure. The upgrade of three main elements is necessary for an efficient multi-modal transport system. These elements are commercial practices, administrative requirements and transport infrastructure.

Check Your Progress 2 1

State whether the following statements are true or false:

1. Sea transport systems in today's shipping market have evolved into three separate but closely connected segments: bulk shipping, liner shipping and specialized shipping.

Contd…

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Transportation Industry2. The bulk shipping industry carries small parcels of raw materials and

bulky semi-manufactures.

3. The liner service transports large parcels of general cargo, which includes manufactured and semi-manufactured goods and many small quantities of bulk commodities.

4. The sea transport industry consists of all companies involved in the shipping of goods over bodies of water, both domestically and internationally.

5. Multi-modal transport is essentially an international through-transport combination with various modes of transport such as ship, rail, truck, aeroplane, etc.

Case Study: The Boeing Company oeing is the world’s leading aerospace company and the largest combined manufacturer of commercial jetliners and military aircraft. The company’s reach extends to customers in 145 countries. In terms of sales, Boeing is one

of the largest U.S. exporters. Boeing has a long tradition of aerospace leadership and innovation. The company continues to expand its product line and services to meet emerging customer needs. The broad range of capabilities includes creating new, more efficient members of its commercial airplane family; integrating military platforms, defence systems and the war fighter through network-centric operations; creating advanced technology solutions; providing broadband connectivity on moving platforms including airplanes; and arranging innovative customer-financing solutions.

Headquartered in Chicago, Illinois, USA, Boeing employs approximately 151,000 employees in 48 American states and 67 countries, with major operations in the Puget Sound area of Washington State, southern California and St. Louis. Total company revenues for 2004 were $52.5 billion.

Boeing is Organized into Four Business Units

Boeing Commercial Airplanes, Boeing Integrated Defence Systems, Boeing Capital Corporation and Connexion by Boeing (SM). Supporting these units is the Shared Services Group, which provides a broad range of services to Boeing worldwide, and Boeing Technology, which helps develop, acquire, apply and protect innovative technologies and processes.

Boeing Commercial Airplanes

Boeing has been the premier manufacturer of commercial jetliners for more than 40 years. With the merger of Boeing and McDonnell Douglas in 1997, Boeing’s legacy of leadership in commercial jets, joined with the lineage of Douglas airplanes, gives the company a combined 70-year heritage of leadership in commercial aviation. Today, the main commercial products are the 737, 747, 767 and 777 families of airplanes and the Boeing Business Jet. New product development efforts are focused on the Boeing 787 Dreamliner, a super-efficient airplane that is expected to be in service in 2008.

Total Global Fleets

The company has nearly 12,000 commercial jetliners in service worldwide, which is roughly 75 per cent of the world fleet. Through Boeing Commercial Aviation Services, the company provides unsurpassed, round-the-clock technical support to help operators maintain their airplanes in peak operating condition, and Commercial Aviation Services, which offers a full range of world-class engineering, modification, logistics and information services to its global customer base, which includes the world’s passenger and cargo airlines, as well as maintenance, repair and overhaul facilities. Boeing also trains maintenance and flight crews in the 100-seat-and-above airliner market through Alteon, the world’s largest and most comprehensive provider of airline training.

B

Contd…


Boeing Integrated Defence Systems

Being recognized as a commercial airplane producer, Boeing is also the world’s second-largest defence company. Boeing Integrated Defence Systems provides end-to-end services for large-scale systems that combine sophisticated communication networks with air-, land-, sea- and space-based platforms for global military, government and commercial customers. The company offers an extraordinary range of defence and space systems products and services. It designs, produces, modifies and supports fighters, bombers, transports, rotorcraft, aerial refuelers, missiles and munitions and is on the leading edge of military technology through its unmanned systems development efforts. Integrated Defence Systems also supports the U.S. government on several programs of national significance, including the Missile Defence Agency’s Ground-based Midcourse Defence program, the National Reconnaissance Office’s Future Imagery Architecture, the Air Force’s Evolved Expendable Launch Vehicle program and NASA’s International Space Station. The company has become the systems integrator for several new programs, including the U.S. Navy’s Multi-mission Maritime Aircraft Program, the U.S. Army’s Future Combat Systems and Joint Tactical Radio Systems, the Family of Advanced Beyond Line-of-Sight Terminals for the Department of Defence, and the Explosive Detection Systems for the Department of Transportation.

Boeing Capital Corporation

Boeing Capital Corporation is a global provider of financing solutions. Working closely with Commercial Airplanes and Integrated Defence Systems, Boeing Capital Corporation arranges, structures and/or provides financing to facilitate the sale and delivery of Boeing commercial and military aircraft, satellites and launch vehicles. With a portfolio of approximately $10 billion, Boeing Capital Corporation combines Boeing’s financial strength and global reach, detailed knowledge of Boeing customers and equipment, and the expertise of a seasoned group of financial professionals.

Connexion by Boeing

Connexion by Boeing is a mobile information services provider revolutionizing the way people on the move communicate, inform and entertain themselves. It does so by providing high-speed, two-way Internet-based connectivity to aircraft in flight. Connexion by Boeing currently serves two important market segments: commercial aircraft operators and their passengers as well as executive aircraft, including operators of private and government executive jets. Using laptops or Personal Digital Assistants (PDAs), passengers can use secure high-speed access to the Internet, personal and business e-mail accounts and company intranets. They will also be able to send and receive attachments and view entertainment − all at DSL−like speeds. The service also brings value to aircraft operators, enabling them to use Connexion by Boeing’s extraordinary bandwidth to obtain operational efficiencies, improve customer service and enhance security. Leading commercial airlines including Lufthansa German Airlines, Japan Airlines, Scandinavian Airlines System (SAS), ANA and Singapore Airlines are currently introducing the Connexion by Boeing service on major international routes. In addition, Korea Airlines and Asiana have announced plans to equip their long-range fleets with the service. The revolutionary service is also available to the executive services market in the United States, including operators of private and government aircraft. A service offering for the maritime market is also under consideration.

Shared Services Group

Shared Services Group allows business units to focus on profitable growth by providing the infrastructure services required to run their global operations. The group provides a broad range of services worldwide, including computing and network operations, e-business, facilities services, employee benefits and programs, security, transportation, and the purchase of all non-production goods and services. It also gives direction to safety, health and environmental planning and offers comprehensive travel services to Boeing employees and corporate customers through the Boeing Travel Management Company. In addition, Shared Services Group manages the sale and acquisition of all leased and owned property through the Boeing

Contd…

19

Transportation IndustryRealty Company. By integrating services, Shared Services Group delivers greater value, creates “lean” processes and operations, leverages buying power and simplifies access to services.

Boeing Technology

Boeing Technology supports Boeing’s business units and growth strategy by providing the right people, technologies, processes and performance at the right time and in the right place across the company worldwide. This strategy is delivered in various ways by Boeing Technology’s primary organizational groups − Phantom Works, Intellectual Property Business, and Information Technology − its Chairman’s Innovation and Technical Excellence initiatives, and its leadership role in the Engineering, Operations, Quality and Information Technology process councils. Through all its activities, Boeing Technology helps ensure the future success of Boeing by winning strategic new programs, providing innovative technology and process solutions, transforming Boeing into a global network-centric enterprise, enhancing and protecting the company’s intellectual capital, and fostering a culture of innovation.

Questions

1. Analyse the case and interpret it.

2. What do you infer from the given case?

Source: P S Senguttuvan, Fundamentals of Air Transport Management.

1.6 LET US SUM UP Air transport has contributed to expansion of the global economy, leisure activities, and influenced governments and industries to diversify. The four components of the air transportation system are – air-lines, airports, air navigation services and civil aviation authorities – each play a crucial role in the transportation of passengers and goods by air. The growth of air transport is highly correlated to income and economic output growth.

The capital cost of vehicles is relatively small, which makes it comparatively easy for new users to gain entry. This helps ensure that the trucking industry, for example, is highly competitive. Low capital costs also ensure that innovations and new technologies can diffuse quickly through the industry.


Sea transport systems in today's shipping market have evolved into three separate but closely connected segments: bulk shipping, liner shipping and specialized shipping. Although these segments belong to the same industry, each carries out different tasks and has a very different character.

Multi-modal transport is essentially an international through-transport combination with various modes of transport such as ship, rail, truck, aeroplane, etc., primarily through the use of containers. Containers will ensure the transport of unitised cargo from its origin to its final destination, with efficiency and least possible risk.

1.7 LESSON END ACTIVITY Write a magazine type article on multi-modal transportation.

1.8 KEYWORDS Air Transport: Air transport means transportation by air.

Land Transportation: Land transportation simply means any form of transportation that takes place on land. This can be through road, rail or it can be facilitated by animals such donkeys and camels.

Water Transportation: Water transportation is the national as well as intentional movement of water over large distances.

Bulk Shipping: The bulk shipping industry carries large parcels of raw materials and bulky semi-manufactures.

Liner Shipping: The liner service transports small parcels of general cargo, which includes manufactured and semi-manufactured goods and many small quantities of bulk commodities.

Specialized Shipping: Specialized shipping services transport difficult cargoes of which the five most important are cars, forest product, refrigerated cargo, chemicals and liquefied gas.

1.9 QUESTIONS FOR DISCUSSION 1. Explain the developments in air transport system.

2. Explain the concept of Air Transportation Industry.

3. Describe the concept of Land Transportation Industry.

4. Explain the development of Sea Transportation Industry.

5. What is Multi-modal Transportation?

Check Your Progress: Model Answers

CYP 1

1. Diversify

2. Transportation

3. Mobility

4. Economics

5. Revenue

CYP 2

1. True Contd…

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Transportation Industry2. False

3. False

4. True

5. True

1.10 SUGGESTED READINGS Richard H. Wood, Aviation Safety Programs: A Management Hand Book, Jeppesen Sanderson Inc.

P.S. Senguttuvan, Principles of Airport Economics, Excel Books.

Gregory G. Dess and Alex Miller, Strategic Management, McGraw Hill, Irwin McGraw Hill, 9th Edition.

Philip R. Cateora Irwin, International Marketing, McGraw Hill, 9th Edition.

P. S. Senguttuvan, Fundamentals of Air Transport Management, Excel Books.

22 Airline and Travel Management LESSON

2 MARKET FOR AIR TRANSPORTATION

CONTENTS


2.1 Introduction

2.2 Marketing and Marketing Mix

2.2.1 Concept of Marketing

2.2.2 Meaning of Marketing Management

2.2.3 Marketing Mix

2.3 Application of Marketing Principles to Airline Management

2.3.1 Stages in the Application of Marketing Principles

2.4 Airline Business and Its Customers

2.4.1 Who is the Customer?

2.4.2 Apparent and True Needs of Customer

2.5 Market Segmentation

2.5.1 Segmentation Variables in the Air Passenger Market

2.6 PESTE Analysis

2.7 Let us Sum up

2.8 Lesson End Activities

2.9 Keywords




Understand Marketing and Marketing Mix

Explain Application of Marketing Principles to Airline Management

Describe Airline Business and Its Customers

Explain Market Segmentation

Generalize PESTE Analysis

2.1 INTRODUCTION Air transport marketing principles and practices are being examined and re-assessed as the industry strives to become more commercially effective in an increasingly competitive and uncertain business environment.

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Market for Air TransportationThe first seminar aims to create a forum to discuss the key elements of marketing strategy for airlines and airports and to address some of the current and future challenges. Low-cost airlines, together with regional carriers using small aircraft have been the fastest growing sectors of the aviation industry in recent years. These are characterised by their use of less congested airports away from the major hubs. Such services are often underdeveloped in comparison with the trunk routes and many new markets are being opened up. Good air transport links are also of vital importance to the economy of a region. The second seminar considers some of the roles that regional and low-cost air services can fulfil and addresses the challenges in realising this potential traffic.

The seminars have been designed to appeal to a wide range of participants. In particular, they aim to bring together airline and airport issues for mutual benefit. They will be of interest to airline and airport planning and marketing managers, aviation and planning specialists from regional and national government, aircraft manufacturers and consultants who are working in the field of air transport.

2.2 MARKETING AND MARKETING MIX During the past decade marketing have increasingly assumed an important role in the Indian economy. Marketing has developed gradually over a highly long period of time. Marketing is defined from ancient times. In those ancient days, people discovered to exchange things they needed with others. It can be presumed that the consequence of such exchanges was satisfying for both the parties. Marketing as a field of study is comparatively quite new.

However, the aim of exchanges then and now is the same i.e., to satisfy needs and wants. Marketing identifies and satisfies the needs of customer. This facilitates business enterprises to forecast the customer demand and creates satisfaction in customers through invention, production, promotion and physical distribution of products and services.

Nowadays, airlines marketing is a fascinating subject as the contemporary competitive market including the functions of marketing becomes more substantive. Let us look on the market share of some major airlines in India.

2.2.1 Concept of Marketing The concept of marketing begins with customers and ends with customers. Creating superior value for customer and delivering high levels of customer satisfaction are at the essence of present day marketing.

Philip Kotler says, “Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others.”

“It (marketing) is the whole business seen from the point of view of its final result, that is, from the customer’s point of view.”

−Peter F. Drucker, Practice of Management (1954)

Pride and Ferrell’s definition says, “Marketing is a total system of business activities designed to plan, price, promote, and distribute want-satisfying products to target markets to achieve organisational objectives.”

We define marketing as “the process of creating, distributing, promoting, and pricing goods, services, and ideas to facilitate exchange relationships in a dynamic environment.”


The American Marketing Association defines marketing as:

“Marketing is an organisational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organisation and its stakeholders.”

The heart of all these definitions of marketing is satisfying the needs and wants of customer.

In view of above definitions of marketing, following are some important aspects of modern marketing that can be distinguished:

1. Marketing is said to be a societal process.

2. Marketing works around customer needs, wants, products, pricing, distribution, and promotion.

3. Marketing revolves around the delivery of value and satisfaction to customers with the help of products, services, ideas, and so on.

4. Marketing helps in satisfying the exchange relationships.

5. Marketing occurs in a dynamic environment.

6. Marketing is applied in both organisations i.e., profit and not-for-profit.

7. Marketing is enormously essential part of businesses and the economy of a country.

Defining a Market

Being a student of aviation marketing, you need to know the dissimilarity between a market and marketing. We have already studied about the marketing as a practice by which customers’ needs and wants are satisfied by superiority products and services offered. Earlier, a market was defined as a place where buyers, potential buyers, sellers, resellers, intermediaries met for exchange of goods and services. But in the modern marketing terminology, marketing has grown to become a mass social event, the distance among marketer and consumer has improved many a mile and there is hardly any personal communication between the marketer and consumer in the exchange of goods and services.

Consequently market can be defined as a set of consumers, sellers, resellers and intermediaries who are either involved in the process of exchange or are in the course of getting involved in an exchange process. A market place is said to be a physical place wherever buyers and sellers meet for the exchange of products, services or ideas, and market space is the virtual place where buyers and sellers meet through Internet and World Wide Web.

The markets can be classified as a consumer markets, business (industrial) markets, non-profit markets and worldwide (or international) markets. Consumer market is the final output of the firm that goes for the consumption of individual consumers. Level of production and the marketing effort of a firm is depends on the demand of end consumer.

On contrary, a business (industrial) market is the market where product of one firm goes to another industry either in the form of raw material, unfinished goods or consumables.

Here the buyer is an organisation whose consumption depends upon how the end consumer’s demand will change. In addition, non-profit organizations also use marketing for generating donations and assists for greater social cause. Organisations like Save the Children, Help Age Foundation are some good example where they try to draw attention of donors for social causes.

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Market for Air TransportationNowadays, there are many multinational and transnational firms that operate in more than one country. Introducing a foreign product to a new country and adapting it to the consumption process and culture of that country is difficult for the managers involve in global marketing. Then, the need of segmentation and targeting of countries people, redesigning an offer to best suits to each of these markets and managing prices and distribution channels to suits the tastes of the host country starts.

Understanding Airlines Market

Now let us understand the concept of market involvement in airline industry. There are some common components in marketing services or product. In marketing it is required to understand the characteristics of product before formulating marketing strategy.

Therefore, we need to first understand the special features of airlines marketing. Following are some of these features:

1. Perishable Product: The products of airlines are tremendously perishable since it cannot be stored for the sales in future event. On a particular flight once boarding is closed, all the unused seats on that flight go totally waste. Airlines productivity and success of marketing functions depends on its capability to fill-up the existing capacity with revenue generating traffic viz. passenger and cargo.

2. Requirement of Fine Market Segmentation: An airline’s market comprises of a variety of market segments with dissimilar service opportunity, dissimilar price sensitivities, dissimilar travel motivations, etc.

Let’s take an example of passengers of first class reservations who are least concern about the price of an air ticket but are looking forward to the most excellent and most luxurious service standards and require to be pampered by the airline’s staff every inch of the way. One more case is business traveller, who frequently travels on an expense account and awaits good schedules and connections, well-organised ground service and comfortable on-board service. Family holiday traffic is more anxious with discounts in air fares than the schedules or service standards, and so on. For shoppers’ traffic or labour traffic, price is the key factor. It is very important for an airline to utilise its returns and revenue from various market segments by positioning itself rightly in the market place.

3. Dynamic Market: In view of the fact that airline’s product is a service products essentially consist of an experience for the passenger, it has to provide satisfaction or dissatisfaction from that experience at different level. This consecutively affects perception about the airline service. Moreover, the competition in airline industry is so tough and the market dynamics of pricing, promotion and distribution are accountable to change very fast.

The biggest challenge for marketing in airline is lies in operating its marketing mix namely, product, price, promotion and place. This will be done to get a passenger in front of its checking-in counter prepared and ready to fly with that particular airlines once paid good money; and after that sending him or her away gladly to the destination so that the passenger is keen to come back one more time and all the time to the similar airline on any route. This is the core of airline’s marketing. No matter what an airline’s marketing manager do, but he cannot give up to lose the basic purpose of the marketing function, that is to utilise the return and build an airline’s operation equally balance and profitable.

Whatsoever marketing manager do for the improvement of product, for the promotion of sales, publicity and advertising, for service distribution in the market place, by providing discounts and incentives in the end these all has to result in making income for the airline in surplus of it cost of operation of air services.


4. Dependency: The airlines services are reliant on certain external factors like facilities, rules, regulations and security check ups and so on at the airports. However, these are similar for the passengers of all the airlines but the customers over and over again relate them with the airline they are flying with.

2.2.2 Meaning of Marketing Management As we know human is a social animal. Human needs and wants are shaped by interaction of a variety of social forces. Marketing develops through this particular social system. It implies interaction among members of the society. It assists business enterprises to figure out consumer demand and construct for their satisfactory utilisation. It facilitates in finding out customer demand and making highly satisfied customers through commencement, production, promotion and physical distribution of products and services in a socially relevant exchange process. Marketing activities start with the development of new product concepts and designs are analysed and formulated to meet particular consumer needs. A successful marketing effort is in accordance with ethical business practices and should be successful from both the social and business standpoint. This approach emphasises the requirement for efficiency in distribution. The nature, kind and level of efficiency are basically dependent upon the type of marketing environment among which the enterprise functions. Finally, we assume that the customer ascertains the marketing program. The marketer describes those consumer segments that will be satisfied in the course of production and marketing behaviour of the enterprise before actual production of the products and services. There are a variety of misconceptions about marketing. Regrettably, these misconceptions have come out, more out of grapevine than solid research. People are of the view that marketing is a division of economics, but it also consist of learning from psychology and other social science disciplines like semiotics, literature, sociology and anthropology. Now let us take a case of advertising, the most accepted and perceptible aspect of marketing. Advertising is taken as expenditure by many consumers. They believe that advertising raises overall cost of the product. However, advertising also helps in establishing mass consumption and, therefore, companies economise in the cost of production and customers get the product at a minimum cost, than they have else. It also presumes that marketing constantly needs middlemen, which is false. As we have seen direct marketing companies, for example, Amway, Eureka Forbes sells products or services from their own sales people structure. Marketing management employs various tools from economics and competitive strategy to analyse the industry context in which the firm operates. These include Porter's five forces, analysis of strategic groups of competitors, value chain analysis and others. Depending on the industry, the regulatory context may also be important to examine in detail. In competitor analysis, marketers build detailed profiles of each competitor in the market, focusing especially on their relative competitive strengths and weaknesses using SWOT analysis. Marketing managers will examine each competitor's cost structure, sources of profits, resources and competencies, competitive positioning and product differentiation, degree of vertical integration, historical responses to industry developments, and other factors. Marketing management often finds it necessary to invest in research to collect the data required to perform accurate marketing analysis. As such, they often conduct market research (alternately marketing research) to obtain this information. Marketers employ

27

Market for Air Transportationa variety of techniques to conduct market research, but some of the more common include:

Qualitative marketing research, such as focus groups and various types of interviews

Quantitative marketing research, such as statistical surveys

Experimental techniques, such as test markets

Observational techniques, such as ethnographic (on-site) observation

Marketing managers may also design and oversee various environmental scanning and competitive intelligence processes to help identify trends and inform the company's marketing analysis. A brand audit is a thorough examination of a brand’s current position in an industry compared to its competitors and the examination of its effectiveness. When it comes to brand auditing, five questions should be carefully examined and assessed. These five questions are how well the business’ current brand strategy is working, what are the company’s established resource strengths and weaknesses, what are its external opportunities and threats, how competitive are the business’ prices and costs, how strong is the business’ competitive position in comparison to its competitors, and what strategic issues are facing the business.

Generally, when a business is conducting a brand audit, the main goal is to uncover business’ resource strengths, deficiencies, and best market opportunities, outside threats, future profitability, and its competitive standing in comparison to existing competitors. A brand audit establishes the strategic elements needed to improve brand position and competitive capabilities within the industry.

Once a brand is audited, any business that ends up with a strong financial performance and market position is more likely than not to have a properly conceived and effectively executed brand strategy.

A brand audit examines whether a business’s share of the market is increasing, decreasing, or stable. It determines if the company’s margin of profit is improving, decreasing, and how much it is in comparison to the profit margin of established competitors.

Additionally, a brand audit investigates trends in a business’s net profits, the return on existing investments, and its established economic value. It determines whether or not the business’s entire financial strength and credit rating is improving or getting worse.

This kind of audit also assesses a business’s image and reputation with its customers. Furthermore, a brand audit seeks to determine whether or not a business is perceived as an industry leader in technology, offering product or service innovations, along with exceptional customer service, among other relevant issues that customers use to decide on a brand of preference.

A brand audit usually focuses on a business’s strengths and resource capabilities because these are the elements that enhance its competitiveness. A business’s competitive strengths can exist in several forms. Some of these forms include skilled or pertinent expertise, valuable physical assets, valuable human assets, valuable organizational assets, valuable intangible assets, competitive capabilities, achievements and attributes that position the business into a competitive advantage, and alliances or cooperative ventures.

The basic concept of a brand audit is to determine whether a business’s resource strengths are competitive assets or competitive liabilities. This type of audit seeks to ensure that a business maintains a distinctive competence that allows it to build and reinforce its competitive advantage. What’s more, a successful brand audit seeks to establish what a business capitalizes on best, its level of expertise, resource strengths,


and strongest competitive capabilities, while aiming to identify a business’ position and future performance.

2.2.3 Marketing Mix Have you ever watched a commercial on TV and wondered how somebody created some of these crazy ideas/schemes to entice people to buy things? Make no mistake about it, it's not just some lucky person developing slogans; it's a specialized team that is highly trained to analyse customer needs and carefully develop a strategy to market their goods/services in the economy. The field of marketing is fast becoming the most effective way for businesses to improve their overall performance to compete in today's global economy.

Most successful companies have learned by trial and error that catering to needs of their customers, providing quality goods/services, and providing good customer service strengthens continued sales and profits. Marketing-oriented companies are also customer-oriented and take into account customer needs by focusing on creating goods and services that will outshine their competition. Conducting research is crucial when attempting to identify specific requirements of both existing and potential customers.

Marketers maintain open lines of communication between a company and its customers to ensure the success of any marketing method. Over time, customers become loyal and will buy again-and-again as well as provide free word-of-mouth advertising undoubtedly resulting in increased profits.

Marketing Mix of Services

When you are developing your marketing plan, there are many factors that need to be considered. So many, that it could be easy to miss an important element. And since all these elements are interlinked, overlooking one factor could mean that the decisions you make about the others are not fully informed. This section will let you understand the marketing mix of services. The marketing mix was developed for the fast moving consumer goods sector, and there were 4 Ps: Product, Price, Promotion, and Place (or distribution). As service sectors have become more aware of marketing, this marketing mix has been developed to also include: People, Process and Physical Evidence.

Even if you think you only sell a product, so the original 4 Ps will suffice, it can be useful to think how much of a service element there is to your business. Indeed, the goods-service continuum demonstrates that very few products are purely goods and very few are purely services.

Source: http://www.clarity-in-communication.com/getattachment/5efd93e3-cdf7-489e-a0b6-9cb5fb19cf 2d /7-Ps-of-the-marketing-mix.aspx

Figure 2.1: Goods-Service Continuum

Most of us sell either products with a surrounding service element (for example, a customer care help line for a software retailer) or services with a tangible element (the skill of a hair stylist is a service but tangible products are required to deliver it). So it could be wise, even for product manufacturers, to consider all 7 Ps in their marketing mix.

The service marketing mix is also known as an extended marketing mix and is an integral part of a service blueprint design. The service marketing mix consists of 7 P’s

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Market for Air Transportationas compared to the 4 P’s of a product marketing mix. Simply said, the service marketing mix assumes the service as a product itself. However, it adds 3 more P’s which are required for optimum service delivery.

Source: http://www.marketing91.com/service-marketing-mix/

Figure 2.2: Marketing Mix

The product marketing mix consists of the 4 P’s which are Product, Pricing, Promotions and Placement. These are discussed in my article on product marketing mix – the 4 P’s. The extended service marketing mix places 3 further P’s which include People, Process and Physical evidence. All of these factors are necessary for optimum service delivery. Let us discuss the same in further detail.

Traditional and Extended Marketing Mix for Services are explained in the following section.

Traditional Marketing Mix for Services

Following is the traditional marketing mix for services:

Product

The product in service marketing mix is intangible in nature. Like physical products such as soap or a detergent, service products cannot be measured. Tourism industry or the education industry can be an excellent example. At the same time service products are heterogeneous, perishable and cannot be owned. The service product thus has to be designed with care. Generally, service blue printing is done to define the service product. For example, a restaurant blue print will be prepared before establishing a restaurant business. The service blue print defines exactly how the product is going to be.

Place

Place in case of services determine where is the service product going to be located. The best place to open up a petrol pump is on the highway or in the city. A place where there is minimum traffic is a wrong location to start a petrol pump. Similarly a software company will be better placed in a business hub with a lot of companies nearby rather than being placed in a town or rural area.

Kingfisher Airlines operates services to 80 destinations domestic as well as international. International operations started on 3rd September 2008, with a flight from Bangalore to London. One of the reasons to acquire Air Deccan was to gain entry on to the international circuit, by gaining advantage on Air Deccan’s eligibility to fly international (as per DGCA rules). It also has plans to add several international destinations such as Bangkok, Hong Kong, Karachi, Kuala Lumpur, Lahore, Malé and Singapore in 2009.

Promotion

Promotions have become a critical factor in the service marketing mix. Services are easy to be duplicated and hence it is generally the brand which sets a service apart


from its counterpart. You will find a lot of banks and telecom companies promoting themselves rigorously. Why is that? It is because competition in this service sector is generally high and promotions are necessary to survive.

Pricing

Pricing in case of services is rather more difficult than in case of products. If you were a restaurant owner, you can price people only for the food you are serving. But then who will pay for the nice ambience you have built up for your customers? Who will pay for the band you have for music? Thus these elements have to be taken into consideration while costing. Generally, service pricing involves taking into consideration labour, material cost and overhead costs. By adding a profit mark-up you get your final service pricing. You can also read about pricing strategies.

Kingfisher Airlines being a premium airline adopts a premium pricing strategy Kingfisher Red its low fare arm adopts a low fare pricing. The pricing strategy of aviation industry is highly dependent on the behaviour of the crude oil prices, dollar rates and competition. Fuel, at present, accounts for 45 per cent of an airline’s total operating cost.

Extended Marketing Mix for Services

Here on we start towards the extended service marketing mix:

Source: http://www.slideshare.net/biswajit_86/service-marketing-mix-in-airlinesindustry

Figure 2.3: Complete Service Marketing Mix

People

People are one of the elements of service marketing mix. People define a service. If you have an IT company, your software engineers define you. If you have a restaurant, your chef and service staff defines you. If you are into banking, employees in your branch and their behaviour towards customers define you. In case of service marketing, people can make or break an organization.

Thus many companies nowadays are involved into specially getting their staff trained in interpersonal skills and customer service with a focus towards customer satisfaction. In fact many companies have to undergo accreditation to show that their staff members are better than the rest; definitely a USP in case of services.

Being a service industry it has two types of customers: External Customers (Passengers) and Internal Customers (Employees). Kingfisher Airlines uses the term “Guests” for its external customers. Dr Mallya tells his crew to treat every guest “In the same way as if they have visited his home.” In an airline, Cabin Crew plays an

31

Market for Air Transportationimportant role because they are the ones who deliver the service and therefore they are termed as the “Walking Billboards” of an organization.

Process

Service process is the way in which a service is delivered to the end customer. Let’s take the example of two very good companies – McDonald’s and FedEx. Both the companies thrive on their quick service and the reason they can do that is their confidence on their processes. On top of it, the demand of these services is such that they have to deliver optimally without a loss in quality. Thus, the process of a service company in delivering its product is of utmost importance. It is also a critical component in the service blueprint, wherein before establishing the service, the company defines exactly what should be the process of the service product reaching the end customer.

Kingfisher’s Tickets through ATMs the Roving Agent Web Check− In FlyBuy SMS, Flight Updates Mobile Ticketing.

Source: http://business-fundas.com/2012/7-ps-of-services-marketing-frameworklimitations/

Figure 2.4: Components of Services Marketing Mix

Physical Evidence

The last element in the service marketing mix is a very important element. As said before, services are intangible in nature. However, to create a better customer experience tangible elements are also delivered with the service. Take an example of a restaurant which has only chairs and tables and good food, or a restaurant which has ambient lighting, nice music along with good seating arrangement and this also serves good food. Which one will you prefer? – The one with the nice ambience. That’s


physical evidence. Several times, physical evidence is used as a differentiator in service marketing. Imagine a private hospital and a government hospital. A private hospital will have plush offices and well-dressed staff. Same cannot be said for a government hospital. Thus physical evidence acts as a differentiator.

Kingfisher Airlines started its operations on May 9, 2005 with a fleet of 4 Airbus A320 aircrafts. Kingfisher Airlines was the first airline in India to operate with all new aircraft. On June 15, 2005 Kingfisher Airlines became the first Indian airline to order the Airbus A380, to be delivered by 2014 Fleet size of 73 and 137 orders placed. The planes have the best in-flight facilities that match world class standards. This is the service marketing mix (7p) which is also known as the extended marketing mix.

Global Importance of Services

The services sector plays an increasingly important role in the global economy and the growth and development of countries. Services are becoming crucial in a country’s development, including for the achievement of the Millennium Development Goals, such as poverty reduction and access to basic services, including education, water and health services.

Facts

International trade in services covers trade in intangibles, such as peoples’ skills. Services trade is carried out through four modes of supply namely: cross-border supply, consumption abroad, commercial presence and presence of a natural person. International trade in services through these modes does not physically crossnational border and thus is not affected by customs tariffs and other taxes applied to merchandise trade. Services trade is affected by domestic regulations in force in the sectors concerned in countries. International trade in services is thus sensitive to behind the border, national regulations that affect the supply of services.

World Bank has pointed to the higher contribution of growth in the services sector to poverty reduction than the contribution of growth in the agriculture or manufacturing sectors. Strengthening the domestic services sector by increasing its backward and forward linkages with the primary and the secondary sectors, as well as its linkage with trade, can be an effective component of a comprehensive development strategy.

The 2011 World Development Indicators show that the services sector accounted for almost 71% of global GDP in 2010 and is expanding at a quicker rate than the agriculture and the manufacturing sectors. Moreover, trade in services is growing at a pace faster than trade in goods since the 1980s. In 2011, commercial services exports grew 11% to US$ 4.1 trillion: 29.82% coming from developing countries and 2.85% from transition economies.

Trade in services demonstrated relative resilience in the latest financial and economic crises in terms of lower magnitude of decline, less synchronicity across countries and earlier recovery from the crises. Such resilience has led many countries to incorporate services trade into their post-crisis national trade and growth strategies.

For developing countries and Least Developed Countries (LDCs), service trade is the new frontier for enhancing their participation in international trade and, in turn, realizing development gains. However, positively integrating developing countries, especially LDCs, and Land-Locked Developing Countries (LLDC) into the global services economy and increasing their participation in services trade, particularly in modes and sectors of export interest to them, remains a major development challenge.

It is, therefore, imperative to increase public and private sector advocacy and awareness, to mobilize policy attention and resources to boost the sector’s contribution to growth and development in developing countries and LDCs.

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Market for Air TransportationGiven the multifaceted contribution of services to national economy and trade, it is critically important to design and implement a services-driven development strategy within a coherent and comprehensive policy framework, ensuring linkages with other policy areas and overall national development objectives.


Fill in the blanks:

1. Nowadays airlines marketing is a fascinating subject as the ……………………….. competitive market including the functions of marketing becomes more substantive.

2. The concept of marketing begins with ……………………….. and ends with ………………………...

3. ……………………….. can be defined as a set of consumers, sellers, resellers and intermediaries who are either involved in the process of exchange or are in the course of getting involved in an exchange process.

4. A ……………………….. examines whether a business’s share of the market is increasing, decreasing, or stable.

2.3 APPLICATION OF MARKETING PRINCIPLES TO AIRLINE MANAGEMENT Marketing involves a range of processes concerned with finding out what consumers want, and then providing it for them. This involves four key elements, which are referred to as the 4Ps. A useful starting point therefore is to carry out market research to find out about customer requirements in relation to the 4Ps. There are two main types of market research – quantitative research involving collecting a lot of information by using techniques such as questionnaires and other forms of survey.

Qualitative research involves working with smaller samples of consumers, often asking them to discuss products and services while researchers take notes about what they have to say. The marketing department will usually combine both forms of research.

The marketing department will seek to make sure that the company has a marketing focus in everything that it does. It will work very closely with production to make sure that new and existing product development is tied in closely with the needs and expectations of customers. Modern market focused organisations will seek to find out what their customers want. For example, financial service organisations, will want to find out about what sort of accounts customers want to open and the standard of service they expect to get. Retailers like Argos and Homebase will seek to find out about customer preferences for store layouts and the range of goods on offer.

Airlines will find out about the levels of comfort that customers’ desire and the special treatment that they prefer to receive. A useful definition of marketing is the anticipation and identification of customer needs and requirements so as to be able to meet them, make a profit or other key organisational objectives. There’s so much going on in the marketing arena today, everybody is struggling to keep up. At the same time, every marketing professional feels pressure to be “progressive” and actively integrate emerging media into their marketing program. However, the mark of a good marketing strategy is not how many gadgets and neologisms are crammed into it, but how effectively it achieves worthy goals. Therefore, how you define your intent will have a profound impact on whether you succeed or fail.

Unfortunately, there is a tendency for marketers to try to create a “one size fits all” approach for a portfolio of brands or, alternatively, to want to create complicated


models to formulate marketing objectives. However, most businesses can be adequately captured by evaluating just three metrics: awareness, sales and advocacy (i.e. customer referral). The primary focus of marketing promotion used to be to create compelling advertising campaigns that would get the consumer’s attention and drive awareness. Once potential customers were aware of the product, direct sales and retail promotions could then close the deal.

2.3.1 Stages in the Application of Marketing Principles Following are the various stages in the application of marketing principles to airline management:

1. The Customer: The keystone of effective marketing activity is that the firms must achieve full knowledge of their current and possible customers. This information requires to include information about market size, demographics, customer essentials and attitudes. Also there is a need to forecast the future market size, and expected changes in the future sales. The market research and market analysis is the processes where airlines seek this information.

2. The Marketing Environment: A sound marketing policies will clearly vary in accords with the constraints and opportunities given by the external environment. In examining a firm’s marketing environment it is usual to use the model known as PESTE (Political, Economic, Social, Technological and Environmental) analysis. This model is divides under five headings of Political, Economic, Social, Technological and Environmental. The analyst’s task is to segregate those factors in the external environment which will have an important effect on the expression of sound marketing policies and to evaluate their implications.

3. Formulation of Strategy: It is being clear that it is impossible to formulate marketing policies without the marketing input being a vital one in the explanation of a firm’s overall strategic direction. This strategic direction should recognise the firm’s aims and objectives, the segmented markets and the methods it will apply to make sure successful utilisation of market potential.

Once an overall strategy has been formulated, the following next stages should follow on sequentially.

4. Design and Development of product or services: Design and development in product or services is the process of making a new product or service to be sold by a business or enterprise to its customers. Here design includes activities related to the style, look and experience of the product or service, deciding on the product’s mechanical architecture, selection of materials and processes, and engineering the different components essential to make the product or services work. Similarly, development is the collective process of identifying a market opportunity, formulating a product to persuade to the segmented market, and lastly, testing, modifying and refining the product or service till it is ready for production.

5. Pricing and Revenue Management: Now let us discuss the pricing and revenue factor in aviation industry. As we know pricing is the process of finding out the fare levels, which consist of different service amenities and limitations, for a bunch of fare products in an origin destination market. Various revenues management is the successive process of formative how many seats to make accessible at each fare level.

6. Distribution Channel Selection and Control: Airlines distribution channels comprise airline own direct sales force, retailers, distributors and the Internet. The efficient distribution channel assures that customers in dissimilar locations around the country, or around the world, can buy the products or services of airline and get the sufficient level of service from the airline company. In order to select the efficient distribution channel for the business, we need to take in to account what

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Market for Air Transportationa distribution channel can offer, including the location and reach, skills and resources, management costs and level of control. The seats distribution in aviation industry is earlier dominated by travel agents, but now it is changing rapidly. Traditional and online agencies both are progressively threatened by the growth in websites for consumer in aviation industry, reduced or capped commission levels, and heightened industry cooperation between airlines. As developments in electronic distribution in the travel industry have usually been led by the airline sector, these expansions are likely to have significant and extensive significances for other tourism suppliers. Nowadays, aviation industry offers many possible routes to success. A very clear strategy should be selected and pursued progressively over the long period of time. Every feasible strategic option will result in a requisite for a linked set of Product, Pricing and Distribution decisions.

7. Selling, Advertising and Promotional Policies: The terms “Marketing” and “Selling” are sometimes commonly taken as synonymous, but they are not. The word “Marketing”, is a philosophy for successfully running the whole business. “Selling” is the final stage of a strategically employed marketing process; whereby customers are persuaded to buy the firm’s products or services. “Marketing” is supposed to make “Selling” easier. It is possible to be a great deal to sell something to someone which is accessible in response to a well explored and well-interpreted customer need. In fact, one of the traditional errors of industry in the past has been supposed to Production Orientation where firms made what they wished making, or found it easiest to make, and after that tried to persuade unwilling customers with high pressure selling to buy the ideal products. It must not be thought, though, that “Marketing” will make the skills of Selling out-dated. In today’s competitive markets, customers will generally have plenty of option open to them. Persuading them to implement this choice in a peculiar way will necessitate the use of professional skills of a high order.

Strategically powerful Airlines are those that agree to the principles of marketing that it gives a structure for all they do, and set out to employ these principles as broadly and as strictly as possible.

2.4 AIRLINE BUSINESS AND ITS CUSTOMERS The cornerstone of the successful activity of marketing is that the organisations must have a complete knowledge of their potential and current customers. This encompasses the information related to the demographics, attitudes, market size and needs and requirements of the customers. The Aviation Industry needs to forecast any future changes in the needs of the customers as well as future size of the market. Therefore, the processes through which an airline finds out the information will be the market analysis and market research. In Aviation Industry, there is a great need to identify the difference between a “Consumer” and a “Customer.” Here, consumers are the people who basically travel. Therefore, they are easy to analyse and identify. They make their presence clear by reporting for flights, their needs, requirements as well as their preferences which can be analysed and assessed through questionnaires. However, they are given a great deal of attention by the marketers in the Airline business. These marketers are the related decision makers. These decision-makers are referred to as “Customers”.

2.4.1 Who is the Customer? We now turn to the task of addressing one of the most fundamental and commonest mistakes made in airline marketing – failure to make a proper distinction between the “Consumer” and the “Customer”.


To begin with definitions, “Consumers” are those people who actually travel. They are therefore easy to identify and analyse. They make their existence clear by reporting for flights and their requirements and preferences can be analysed using questionnaires. They are therefore usually given a great deal of attention by those responsible for marketing in the airline business. Unfortunately, they may not be decision-makers about the things that matter. In marketing, such decision-makers are defined as “Customers”.

There are at least four customer decisions which must be analysed:

1. Will a trip be made at all? For many firms today, the cost of travel is a major item of corporate expense. In a recessionary period, firms will attempt to reduce expenditure in order to minimise the effect of recession on corporate profitability or, in extreme cases, to stave off bankruptcy. In such a situation, executives might present a case to their boss that a business trip should be undertaken, only to find that the necessary expenditure is not sanctioned. Instead, they are told to use, say, the phone, email or video-conferencing as a way of conducting the business in question. In such a situation the true “Customer” for the airlines might be the firm’s CEO or VP-Finance.

2. What mode of transport will be selected? As was mentioned in the last section, it is likely that the future will see a significant increase in the amount of competition that airlines face from surface transport operators, especially railways. On short-haul routes, railways are capable of giving superior door-to-door journey times and, arguably, a better quality of service than airlines. Carriers will face a significant challenge for the business travel market, and may well have to target those who formulate corporate travel policies in order to minimise the adverse effect on their traffic.

For leisure travellers, the impact of surface transport competition is likely to be greater still. Besides competition on service quality, surface operators will be able to challenge airlines on price, with both train and bus services likely to become increasingly significant. The “Customer” in such a situation might be the family member who has most influence in travel decisions.

3. For air trips, what class of service will be purchased? With many airlines, passengers have a choice of flying First Class (at least on long-haul routes), Business Class and Economy or Coach Class. In the business travel market, the person who travels will have little or no say in the decision as to which class will be purchased. Almost all firms have a Corporate Travel Policy whereby very senior executives are allowed to travel First Class, those of middle rank in Business Class (at least on long-haul routes), whilst junior employees have to be satisfied with Economy Class. Interestingly, during recessionary periods, almost all firms have a downgrading policy in order to save money with, in particular, much First Class and Business Class travel being eliminated.

In order to maximise the amount of high yielding traffic available to them, carriers will have to target those who make decisions about Corporate Travel policies. They will, in particular, have to persuade these people that the benefits of buying travel in the premium cabins of the aircraft – for example, that these cabins allow better opportunities for sleep or work – outweigh the very substantially higher prices that are charged for access to them.

4. Which airline will be selected? If it has been agreed that a particular journey will be made by air, the question of the choice of airline is clearly a crucial one. In the past, many business travellers did have the choice to make this decision themselves. It has been a major trend of the last ten years that this has become so in fewer and fewer cases. During this time more and more companies have

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Market for Air Transportationcentralised travel purchasing in order to gain access to corporate discounts from airlines.

Such policies narrowed the choice which the individual traveller could exercise, even if they were not restricted to using a single airline. In leisure air travel, the market is still often a wholesale one. Many airlines still mainly confine themselves to selling blocks of seats to Tour Operators and Consolidators. The individuals who travel will therefore have very little say in the airlines that they fly with.

Given the importance of these four decisions, there is a crucial need to take account of them properly if effective marketing policies are to be established. In particular, the mistake of assuming that the “Customer” is the same person who boards the aircraft must be avoided

2.4.2 Apparent and True Needs of Customer While evaluating and analysing the decision making of the customers, it is important for all organisations to understand the factors which are taken up by the customers while making up their minds. For this purpose, they are asked to describe the factors in a properly executed and structured market research survey.

Sometimes, what people say is not true and it may create difficulties and problems for the analyst. To a certain extent, it may give only an acceptable answer instead of the factors they actually take into consideration. Thus, in Marketing, this variation between the truth and the claim is known as the difference between “True” and “Apparent” needs.

However, in order to present this point, one of the business travellers are asked to illustrate the factors which helps them in selecting the airline that may give them sufficient answers. All these answers reveal the best service features that allow them to use their time in more efficient and effective manner as possible in the interest of the employers. For instance, if they do so then issues and matter such as punctuality, a roomy cabin which allows work during flight and flight frequency which permit for travel flexibility, might come up prominently.

Thus, for this the truth may be something else. Nowadays, several business travellers base their decisions for the choice of airline on their desire to support an airline in many occasions. This will maximise the personal advantages which are given to them through that airline’s Frequent Flyer Programme. Therefore, all these benefits and advantages will automatically give rise and even may feed to the “True” need of greed.

In the other example, almost every airline, in order to exploit the business travel market, must serve the ego and pride of its airline’s customers. For instance, features such as a separate check-in desk, separate phone lines for reservations as well as separate cabins on board, which occasionally have a logical reason for permitting the business traveller to access the valuable benefits and advantages.

In marketing, “True Needs” can cover other features as well. For example, you may find some lazy customers who may be in favour of purchasing from their existing vendors instead of making an attempt to modify even if such a transformation may lead to a better value for money. While on the other hand, some customers are risk-averse who prefer to stay with a self-experienced solution instead of going to its substitute which may prove to be better but which may also go terribly incorrect.

“True Needs” are the core of successful marketing. In several ways, they reveal the limitations of the human persona. They are also somewhat stable in their significance in the course of time. Anyone concerned for the success of the airline’s marketing activities may sometimes make the mistake of making presumptions that a confirmed need and requirement of customer is actually a proper depiction of what is encouraging and motivating the purchasing decisions.

38 Airline and Travel Management 2.5 MARKET SEGMENTATION

It is said that all customers are different. For instance, if an airline was to carry out market research into the needs of its customers, the result would not be a uniform set of outcome. Instead, there will be a range of variety of customer’s requirements, and it would be rather not possible for the carrier to fulfil all these requirements accurately while at the same time holding sound production economics.

All areas of marketing encounter with similar problems. Let’s say for instance, a car company may set out with the fair purpose of giving all its customers precisely the colour of car that they would like to have. This would mean, making a number of cars in wildly eccentric colours so as to suit the strangest requirements, with the outcome of very high manufacturing costs. As an alternative, car manufacturers normally manufacture cars in, say, 8 or 10 dissimilar colours. This gives them the advantage of lower cost to a great extent, but they have to admit that they will not be able to satisfy the needs of each and every customer completely. Those with peculiar tastes will only be able to select from cars which by no means give them the colour they are in search of. The customers that are even more traditional may find that a particular shade is very dark or very light.

Thus, Market segmentation is the process of trading off customer needs with respect to production economics that occur in more or less all industries – particularly so amongst airlines. Market segment can be defined as “A group of customers who have adequate in common that they form a feasible basis for a combination of product, price, promotion and place.”

There are generally two mistakes that occur while segmenting a market:

1. Under-segmentation: Under-segmentation takes place when Customers are grouped into segments which is too big, and where there is really a high degree of difference in the requirements of those included in the segment. A finer segmentation might allow at least some of these differences to be incorporated in product, price and promotion policies without an undue cost penalty being incurred.

2. Over-segmentation: Over-segmentation is the state where numerous segments are out-of-the-way, with the outcome that they give inadequate indication with respect to policy development.

The right segmentation depends on the question of the use that will be made of it. In case of product planning, approximately all airlines are handicapped by the reality that only 2 or 3 classes of service at present exist on board aircraft. On the other hand, a much finer segmentation must be used if the purpose is to provide the basis for a Database Marketing campaign.

2.5.1 Segmentation Variables in the Air Passenger Market The air passenger market segmentation is by tradition has been based on the use of three variables: 1. The objective of the passenger’s journey 2. The length of their journey 3. The country or culture of origin

In today’s airline marketing each of these three variables remains very significant and we will study them in turn.

1. Objective of passenger’s journey: The objective of passenger’s journey in the air passenger market has always been the primary segmentation variable in the air

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Market for Air Transportationpassenger market, with the vital division being among business travel and leisure travel.

In using such a distribution, it should not be supposed that all air trips can be placed in either of the two categories. There are few categories that are completely outside the above two categories. For instance, many airlines have important markets that comprises of pilgrims visiting Islam’s holiest places in Saudi Arabia. Such visits can neither be viewed as either business travel or leisure travel – they comprise an exclusively different market segment. Also the medical market should be viewed as a separate market segment as, airlines frequently discover that they get business from the medical market where somebody who falls ill finds that the treatment they require is not available in the vicinity. Therefore such persons travel by air to a destination where medical facilities are better available.

In spite of the clear existence of exceptions, in airline marketing the dissimilarities among the business travel and leisure travel remains a valuable and there is no question that a conveniently high proportion of trips can be placed in either of these two categories.

In looking at the objective of passenger’s journey variable, valuable sub-segments can be categorised, in both the business categories and leisure categories. In business travel category, a useful distinction is among corporate business travellers and Independent business travellers. Corporate travellers are persons who take a trip for a company, and who are able to put the cost of their ticket and other cost related to business travel onto an expense account.

They may adopt a more casual approach to the costs of the services they buy, placing importance instead on high product standards. On the other hand, Independent business travellers are those who are self-employed or who work for smaller companies. These people feel to a greater extent that the price of an air ticket is coming out of their own pocket. As we will discuss further that, some of the requirements of independent business travellers are similar to those of the corporate traveller. They do, for instance, they still consider a high frequency of flights and good punctuality as prerequisites.

They are, on the other hand, often prepared to sacrifice in terms of product frills – for example, by travelling in the rear cabin on board the aircraft instead of choosing costly First or Business Class products, or by using one of the so-called “Cost Leader” airlines. Nowadays it is observed that the sub segment size of the Independent business travel demand is growing when compared to the size of the corporate business travel demand. We shall look at the factors which explain this trend, and at its possible significance. Two sub-segments can be separated in the leisure segment of demand:

(a) Holiday travel: When someone is travelling by air on holiday, they still have to pay for their meals and accommodation at their destination. This restricts the size of the market to those who have relatively high disposable incomes.

(b) Visiting-Friends-and-Relatives (VFR) travel: In case of visiting-friends-and-relatives travel, meals and accommodation are usually provided complimentary. This allows airlines to build up new markets between people with lower disposable incomes, particularly in situations where current population migrations have left strong residual ethnic links among two communities.

2. Length of Journey: There are basic differences among the needs of a short-haul traveller as compared with the needs of someone who is flying a long-haul route. As we shall discuss further, on short-haul routes, the airport experience is an above all an important one, whilst in-flight aspects such as seating comfort or


food assume rather less significance. On the other hand, on long-haul routes the in-flight experience is very important certainly in ensuring customer satisfaction.

An interesting debate is where the cut-off point among short-haul and long-haul services comes. No-one would presumably dispute that a flight of, say, 2700 seconds duration should be considered as short-haul and one of 10 hrs. as long-haul. The difficult area is that of flights of, say, 3 or 4 hrs. Most of the airlines continue to provide their short-haul product because of the reasons of operational convenience, in spite of the fact that passenger expectation is usually for something considerably better. Generally, passengers will almost surely respond adversely to being offered service in a single aisle aircraft with 6 side by side seating and a narrow seat pitch.

3. Country/Culture of Origin of the Traveller: The concept of ‘international brands in recent years in the airline industry have been extensively discussed’ and the possibility of truly international branding is becoming a characteristic of marketing in the business of aviation. Simultaneously, with many airlines grouping together in large alliances, attention has been bought forward on the supposed requirement for seamless service concepts whereby anyone flies, wherever in the world, on the traffic system of the alliance, they must receive a comparable product.

Regrettably, there has been a conflict in the aviation business among the international branding and seamless service concepts because of the marked differences in customer requirements that happen among different cultures. For instance, most people in north-west Europe or North America would make out a stereotype of the ‘Business Traveller’ as a person someone who is middle age group and is dressed soberly and carries only a small amount of baggage. On the contrary in many third-world countries, a quite different meaning exits for ‘Business Travel’ that to a great extent consists of traders who fly to a destination where consumer goods are cheaply available. Such goods are then purchased by them and they fly to the developing country where they are in scarcity/short of supply for such goods and can for that reason can be sold at a premium price. In strong contrast to the product standards that may be usual by a European business traveller, in many developing countries such standards are inappropriate. As an alternative tremendously the most significant customer requirement is that the airline must offer a high free allowance baggage.

There occurs a major market-by-market difference in customer requirements even within the boundaries of market segments derived from developed countries. For instance, different races often vary considerably in terms of weight and height, with people from various far Eastern cultures frequently smaller on average than their European or North American counterparts.

They may for that reason consider seating comfort as being a somewhat lesser priority. Or again, questions of suitable food and drink to be offered will be different from market-to-market.

A proper ‘breakfast’ in France will be very different meal from what you can accept in the U.K. On the whole, in aviation marketing the variable of culture or country of origin of the person who is travelling should be considered as a highly important segmentation.

2.6 PESTE ANALYSIS A sound marketing policy will clearly vary in accords with the constraints and opportunities given by the external environment. In examining a firm’s marketing environment it is usual to use the model known as PESTE (Political, Economic, Social, Technological and Environmental) analysis.

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Market for Air TransportationThis model is divides under five headings of Political, Economic, Social, Technological and Environmental. The analyst’s task is to segregate those factors in the external environment which will have an important effect on the expression of sound marketing policies and to evaluate their implications.



1. Marketing involves a range of processes concerned with finding out what consumers want, and then providing it for them.

2. Quantitative research involves working with smaller samples of Consumers.

3. The primary focus of marketing promotion used to be to create compelling advertising campaigns that would get the consumer’s attention and drive awareness.

4. Pricing is the process of finding out the fare levels, which consist of different service amenities and limitations, for a bunch of fare products in an origin destination market.

5. Strategically powerful Airlines are those that agree to the principles of Marketing that it gives a structure for all they do, and set out to employ these principles as broadly and as strictly as possible.

Case Study: Air Deccan – The Marketing Mantra ow fares will help Air Deccan generate new business throughout India – not only in new and underserved markets, but also in established markets that have so far failed to offer Indian middle class consumers and cost conscious

businesses a choice of sufficiently cost effective fares.

Air Deccan targets leisure, small business and corporate customers, and seeks passengers from the Indian middle class as well as from the cost-conscious segments of more well off Air Deccan is the amazing story of India’s first low-cost airline.

It has become one of the nation’s largest airlines in less than four years. They have done this through a cleaver combination of innovation and outsourcing. More importantly, from a strategic perspective, it gives powerful evidence to how technology can be a key factor in changing industry dynamics, even in what were once considered fairly stable or conservative industry.

While Air Deccan was able to capture the imagination of the public and demand grew rapidly for its services thanks to its throwaway fares, the airline itself was plagued by operational problems as it sought to aggressively expand its network and fleet size. In the process, it developed a reputation for delays, poor service and lack of reliability.

As on November 30, 2005, Air Deccan offers passengers a choice of 62 routes and 44 destinations. As at November 30, 2005, it is the only carrier providing service to 9 of its destinations and one of only two carriers providing service to 7 of its destinations. We believe that Air Deccan’s route strategy will help it grow new markets for air travel in India, as well as help it serve major urban centres with cost-effective fares. In order to help translate its low-fare strategy into positive results of operations, Air Deccan strives to reduce the costs of its operations. It does so in part by seeking to simplify operations, use technology when it can reduce costs, reject technology where it can complicate operations and outsource non-core business processes. Simplifying operations can remove layers of costs, not all of which are obvious.

For example, by arranging flight schedules so that an aircraft ends each crew shift at the same airport where it started that crew shift, Air Deccan can eliminate the cost of putting crews up overnight away from their homes, reduce the need for the airline to monitor crew locations between flights and streamline maintenance and other

L

Contd…


procedures related to the aircraft itself because the aircraft comes back each day to the place where it started. In addition, Air Deccan has outsourced non-core operations in an effort to cut the costs of such operations. The food and drink that is sold on board our aircraft is provided by a third party supplier, as is the in-flight magazine and in-flight screen entertainment.

Air Deccan also seeks to manage costs (and to create revenues) through sales and barter exchanges for advertising space. A variety of internal aircraft spaces, such as storage bins, headrests, tray tables, baggage tags and boarding passes have been leased for advertising. In addition, Air Deccan leased advertising space on the outside surfaces of aircraft.

The Air Deccan Internet site, electronic newsletter and e-brochure are also used for advertising space. In flight, the airline currently offers drop-down TV screens which show freely provided video content and which can also support advertising. Air Deccan provides an in-flight magazine to passengers. The magazine is outsourced at no cost to the airline and is revenue-generating on a shared basis through advertising sales.

As a result of advertising barter exchanges, Air Deccan is also accumulating advertising time on national television channels, newspapers and a radio channel.

Questions

1. What are the target segments for Air Deccan and discuss the innovations of Air Deccan in order to capture larger share of market?

2. Discuss the barter exchange adopted by Air Deccan in a group of 3 students.

Source: http://www.slideshare.net/jauhari_akash/case-study-on-air-deccan-the-marketingmantra

2.7 LET US SUM UP The concept of marketing begins with customers and ends with customers. The markets can be classified as a consumer markets, business (industrial) markets, non-profit markets and worldwide (or international) markets. Marketing activities start with the development of new product concepts and designs are analysed and formulated to meet particular consumer needs. Marketing management employs various tools from economics and competitive strategy to analyse the industry context in which the firm operates. A brand audit examines whether a business’ share of the market is increasing, decreasing, or stable. The basic concept of a brand audit is to determine whether a business’ resource strengths are competitive assets or competitive liabilities.

The marketing mix is the combination of marketing activities that an organisation engages in so as to best meet the needs of its targeted market. The traditional marketing mix which includes product, place, price and promotion could be stretched to compensate for these factors. However, the services marketing mix is an adaptation of the traditional 4Ps to address these characteristics and it sees the addition of another 3Ps which are physical evidence, process and people. We will also consider how the traditional mix alters for a service with sections below on pricing for services, product for services, place for services, and promotion for services.

Market segmentation is the procedure of trading off customer needs, requirements and preferences with respect to production economics which may occur in more or less all industries. Over segmentation is the state where numerous segments are out-of-the- way, with the outcome that they give inadequate indication with respect to policy development. Thus, the basic aim of all the airlines have to prioritise customer’s requirements so that what they are capable to invest and focus on their customers’ most significant needs.

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Market for Air Transportation2.8 LESSON END ACTIVITIES 1. Take a nearby departmental store and list out the various marketing schemes (old

and new) undertaken by the store to promote its products and services. Did you find any drastic change in the marketing efforts or is the store continuously improving its marketing?

2. Create a multiple choice quiz on the extended marketing mix of services.

3. Create a multiple choice quiz on segmentation of air passenger market.

2.9 KEYWORDS Market: Market can be defined as a set of consumers, sellers, resellers and intermediaries who are either involved in the process of exchange or are in the course of getting involved in an exchange process.

Marketing: A societal process, by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others.

Market Segmentation: Market segmentation is the technique used to enable a business to better target it products at the right customers.

Customers: Customer is a person, organisation, or any other entity which purchases goods and services which are produced by other person, organisation, or any other entity.

Consumers: A consumer is an individual or a group of people who are the final users of product and services which are generated within a social system.

Perishable Product: Perishable products are those that worsen in quality over time, and become lesser in value.

Brand Audit: A brand audit is a thorough examination of a brand’s current position in an industry compared to its competitors and the examination of its effectiveness.

Competitive Strategy: Long-term action plan that is devised to help a company gain a competitive advantage over its rival.

Marketing Mix: A planned mix of the controllable elements of a product's marketing plan commonly termed as 4Ps: product, price, place and promotion.

Market Segment: A group of customers who have adequate in common, that they form a feasible basis for a combination of product, price, promotion and place.

Over-segmentation: It is the situation where numerous segments are isolated out-of-the-way, with the outcome that they give inadequate indications with respect to policy development.

Under-segmentation: It is the situation when customers are grouped into segments which are too big, and where there is really a high degree of difference in the requirements of those included in the segment

Product: A products is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want.

Price: A marketing mix variable that can be altered quickly is price.

2.10 QUESTIONS FOR DISCUSSION 1. Define Marketing.

2. What are the important aspects of modern marketing?


3. What is the difference between a market and marketing?

4. Discuss the features of airline markets.

5. Explain the structure of marketing management.

6. What are the techniques which the marketers employ so as to conduct market research?

7. Explain Goods-Service Continuum with the help of diagram.

8. Define Marketing Mix.

9. Discuss traditional marketing mix for services.

10. Describe the extended service marketing mix.

11. What are the modes of services trade?

12. Explain the marketing planning in airline marketing.

13. What do you mean by market segmentation?

14. What is over and under segmentation?

15. Discuss in brief the segmentation variables in case of air passenger markets.

16. What are the customer requirements in case of business travel market?

17. Differentiate Marketing and Marketing mix.

18. Explain Application of Marketing Principles to Airline management.

19. Describe Airline Business and its Customers.

20. Define Market segmentation.

21. Explain PESTE Analysis.


CYP 1

1. contemporary

2. customers, customers

3. Market

4. brand audit

CYP 2

1. True

2. False

3. True

4. True

5. True



45

Market for Air TransportationGregory G. Dess and Alex Miller, Strategic Management, McGraw Hill, Irwin McGraw Hill, 9th Edition.



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International Travel Documentation

UNIT 1

UNIT II

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International Travel DocumentationLESSON

3 INTERNATIONAL TRAVEL DOCUMENTATION

CONTENTS


3.1 Introduction

3.2 Passport

3.2.1 Entitlement to Passports

3.2.2 Types of Passports

3.3 Visa

3.3.1 Conditions of Issue

3.3.2 Types of Visa

3.4 Airlines Ticket and Authorization

3.5 Health Documents

3.6 Michel Porter’s Five Factors and their Application to Airline

3.6.1 New Entry

3.6.2 Power of Customers

3.6.3 Power of Suppliers

3.6.4 Disintermediation

3.7 Cost Leadership Focus Strategies

3.8 Airline Business and Market Strategies

3.8.1 Concept of Airline Marketing

3.9 Common Mistakes

3.9.1 10 Mistakes Regarding Travel Documents (With Suggestions)

3.10 Let us Sum up


3.12 Keywords




Explain Passport and Visa

Understand Airlines Ticket and Authorization


Describe Health Documents

Focus on Michel Porter’s Five Factors and their Application to Airline

Explain Cost Leadership Focus Strategies

Understand Airline Business and Market Strategies

Know about Common Mistake

3.1 INTRODUCTION In Western Europe in the late 19th century and early 20th century, Passports and Visas were not commonly must for journeying from country to another. The comparative high speed and a huge movement of people traveling by train (the closest modern analogy would be commercial supersonic flights) would lead to bottlenecks if a regular passport control were used. Passports and Visas became generally an essential travel documents only since World War I.

During ancient times, passports and visas were generally the same type of travel documents. In the modern world, visas have reached to distinct secondary travel documents, with passports presenting as the primary travel documents.

3.2 PASSPORT A passport is a government-issued document that confirms the identity and nationality of its holder for the aim of international travel. The elements of identity included in all standardized passports comprise information about the holder, including name, date of birth, gender and place of birth.

A passport shows nationality, but not the place of residence of the passport holder. The passport holder is generally entitled to enter (in most cases: return to) the country that issued the passport in accordance with the laws of that country. A passport does not essentially permit the passport holder to have entry into another country, nor to consular protection while abroad or any other privileges, such as immunity from arrest or prison sentences; those rights and privileges, if and when applicable, arise from international contracts.

3.2.1 Entitlement to Passports Traditionally, legal authority to issue passports is founded on the exercise of each nation’s executive discretion (or Crown prerogative, as it is known in constitutional monarchies) concerning to foreign affairs. Few legal tenets follow, namely: that passports are issued in the name of the state; that no person has a legal right to be issued a passport; that each nation’s government, in exercising its executive discretion, has complete, unfettered discretion to refuse to issue or to revoke a passport; and that the latter discretion is not subject to judicial review. However, legal scholars like A.J. Arkelian have contended that evolutions in both the constitutional law of democratic nations and the international law applicable to all nations now render the prevailing archaic principle that passport issuance is founded in the executive discretion of national governments both obsolete and unlawful. In nations with constitutionally engrained bills of rights (such as the United States of America and Canada), constitutional guarantees of freedom of movement are meaningless without a citizen’s right to the requisite ancillary element (a passport) − without which no freedom of movement between states can in fact be exercised. Guarantees of freedom of movement of persons between states are also entrenched in binding international covenants. Those covenants, which have the force of law in signatory nations, likewise necessarily subsume the right of citizens to passports, including a right not to be denied access to passports on arbitrary, capricious, discriminatory grounds. The right guaranteed in many national constitutions and in widely ratified

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International Travel Documentationinternational covenants is a right to travel, and that means the right to travel to and from somewhere else. All such destinations are immediately and effectively prohibited by absence of a passport. By guaranteeing the freedom of movement, entrenched constitutional rights (in nations like Canada and the United States) and binding provisions of international law render unconstitutional the basis of existing passport law in Crown prerogative, and obsolete the notion of absolute executive discretion over passport issuance and hence the right of individuals to travel.

3.2.2 Types of Passports A rough standardization occurs in types of passports throughout the world, although passport types, number of pages and definitions can vary by country.

Ordinary Passport (tourist passport and regular passport): Issued to citizens and other nationals, and generally the most-issued type of passport. Often it is possible to have children registered within the ordinary passport of the parent, rendering the passport functionally equal to a family passport.

Official Passport (service passport, also special passport): Issued to government employees for work-related travel, and to accompanying dependents.

Diplomatic Passport: Issued to diplomats and other government officials for work-related international travel, and to accompanying dependents. Although most persons with diplomatic immunity carry diplomatic passports, having a diplomatic passport is not the equivalent of having diplomatic immunity. A grant of diplomatic status, a privilege of which is diplomatic immunity, has to come from the government of the country in relation to which diplomatic status is claimed. Also, having a diplomatic passport does not mean visa-free travel. A holder of a diplomatic passport must obtain a non-diplomatic visa when traveling to a country where he is not currently nor is going to be accredited as a diplomat, if visas are required to nationals of his country.

In exceptional circumstances, a diplomatic passport is given to a foreign citizen with no passport of his own, such as an exiled VIP who lives, by invitation, in a foreign country. Such is the case of King Constantine II of Greece who has travelled on diplomatic passports for Denmark (the ancestral home of his royal house) and Spain (the adopted country of his sister Queen Sofia).

Emergency Passport (temporary passport): Issued to persons whose passports were lost or stolen, and who do not have time to obtain replacement passports. Sometimes laissez-passer is used for this purpose.

Collective Passport: Issued to defined groups for travel together to particular destinations, such as a group of school children on a school trip to a specified country.

Family Passport: Issued to family members−father, mother, son, daughter. There is one passport holder. The passport holder may travel alone or with one or more other family members. A family member who is not the passport holder cannot use the passport for travel unless accompanied by the passport holder.

Nansen Passport for Refugees (now defunct) Laissez-Passer: These are issued by national governments as emergency passports, or for travel on humanitarian grounds. Laissez-passer is also issued by international organizations (most notably, the U.N.) to their officers and employees for official travel.

Travel Documents in Passport-Booklet Form

Certificate of Identity (Alien's passport): A document issued under certain circumstances - such as statelessness - to non-citizen residents. An example of this


is the "Nansen passport". Sometimes alien's passports are issued as internal passport to non-residents.

Refugee Travel Document: Document issued to a refugee by the state in which she or he normally resides allowing him or her to travel outside that state and to return there. Refugees are unlikely to be able to obtain passports from their state of nationality (from which they have sought asylum) and therefore need travel documents so that they might engage in international travel.

U.S. Re-entry Permit: Passport-like travel document issued by the United States to U.S. permanent residents allowing them to travel outside and return to the U.S.

Japan Re-entry Permit: Passport-like travel document issued by Japan to residents who are stateless or unable to obtain a passport.

Two-way Permit: Passport-like travel document issued by the People's Republic of China to Chinese citizens from the Mainland in order to travel to Hong Kong or Macau only.

Taibaozheng (Taiwan Compatriot Entry Permit): Passport-like travel document issued by the People's Republic of China to citizens of Taiwan who wish to travel to that country, including Hong Kong and Macau.

Dalu Jumin Laiwang Taiwan Tongxingzheng (Permit for Mainland Residents to Travel To and From Taiwan): Passport-like travel document issued to Chinese citizens from the Mainland in order to travel to Taiwan. Used in conjunction with an entry permit issued by the Taiwan government.

Chinese Travel Document: Passport-like travel document issued by the People's Republic of China to Chinese citizens in lieu of a passport. It is valid for travel to all countries.

Special Passport: Issued to Bangladeshis that is valid for travel to India only.

Internal passport: Issued by some countries as an identity document. An example is the internal passport of Russia or certain other post-Soviet countries dating back to imperial times. There's a widespread misconception that internal passports always exist for the purpose of controlling migration within a country.

Camouflage and Fantasy Passports: A Camouflage passport is a document that appears to be a regular passport but is actually in the name of a country that no longer exists, never existed, or the previous name a country that has changed its name. Companies that sell camouflage passports make the rather dubious claim that in the event of a hijacking they could be shown to terrorists to aid escape. There is no known instance of this happening. Because a camouflage passport is not issued in the name of a real country, it is not a counterfeit and is not illegal per se to have. However attempting to use it to actually enter a country would be illegal in most jurisdictions.

A fantasy passport is similar to a document not issued by a standard government and invalid for legitimate travel. Fantasy passports are distinguished from camouflage passports in that they are issued by an actual, existent group, organization, or tribe. In some cases the goal of the fantasy passport is to make a political statement or to present membership in the organization. In other cases they are issued more or less as a joke or for novelty souvenir purposes, such as those sold as "Conch Republic" passports

3.3 VISA A visa (from the Latin Charta visa, lit. "Paper that has been seen") is a document or mark showing that a person is conditionally authorized to enter or leave the territory for which it was issued, subject to permission of an immigration official at the time of

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International Travel Documentationactual entry. The authorization may be a document, but more commonly it is a stamp endorsed in the applicant's passport (or passport-replacing document). The country issuing the visa typically attaches different conditions of stay, such as the territory covered by the visa, dates of validity, period of stay, whether the visa is valid for more than one visit, etc. Visas are linked with the bid for permission to enter (or exit) a country, and are thus, for some countries, distinct from actual formal permission for an alien to enter and remain in the country.

A visa generally gives non-citizens clearance to enter a country and to remain there within specified constraints, such as a time frame for entry, a limit on the time spent in the country, and a prohibition against employment. Some countries do not need a visa in some rare situations, such as a result of reciprocal treaty arrangements. The possession of a visa is not in itself a guarantee of entry into the country that issued it, and a visa can be revoked at any time. A visa application in advance of arrival gives the country a chance to consider the applicant's circumstance, such as financial security, reason for applying, and details of previous visits to the country. A visitor may also be needed to undergo and pass security and/or health checks upon arrival at the border.

Some countries require that their citizens, as well as foreign travellers, obtain an "exit visa" to be allowed to leave the country.

3.3.1 Conditions of Issue Some visas can be granted on arrival or by prior application at the country's embassy or consulate, or through a private visa service specialized in the issuance of international travel documents. These agencies are authorized by the foreign authority, embassy, or consulate to represent international travellers who are unable or unwilling to travel to the embassy and apply in person. Private visa and passport services collect an additional fee for verifying customer applications, supporting documents, and submitting them to the appropriate authority. If there is no embassy or consulate in one's home country, then one would have to travel to a third country (or apply by post) and try to get a visa issued there. The requirement or absence of requirement of a visa primarily relies on the citizenship of the applicant, the intended duration of the stay, and the activities that the applicant may wish to undertake in the country he visits; these may delineate different formal categories of visas, with different issue conditions.

Some countries apply the principle of reciprocity in their visa policy. A country’s visa policy is called reciprocal if it imposes visa requirement against citizens of all the countries which impose visa requirements against its own citizens. The opposite is uncommonly true: a country rarely lifts visa requirements against citizens of all the countries which also lift visa requirements against its own citizens, unless a prior bilateral agreement has been made.

Some examples of countries who apply reciprocity in their visa policy are as follows:

United States (visa policy of United States),

European Union (the visa reciprocity policy in the European Union has not reached full reciprocity for some EU citizens in some countries),

Russia (visa policy of Russia),

Brazil (visa policy of Brazil).

A fee may be charged for issuing a visa; these are often also reciprocal, so if country A charges country B’s citizens US$50 for a visa, country B will often also charge the same amount for country A’s visitors. The fee charged may also be at the discretion of each embassy. A similar reciprocity often applies to the duration of the visa (the period in which one is permitted to request entry of the country) and the amount of


entries one can attempt with the visa. Expedited processing of the visa application for some countries will generally incur additional charges.

3.3.2 Types of Visa Each country has a multitude of categories of visas and with various names. The most common types and names of visas include:

By Purpose:

Transit visa, for passing through the country to a destination outside that country. Validity of transit visas are usually limited by short terms such as several hours to 10 days depending on the size of the country and/or the circumstances of a particular transit itinerary.

Airside transit visa, needed by some countries for passing through their airports even without going through passport control.

Crew member, steward or driver visa, issued to persons employed or trained on aircraft, vessels, trains, trucks, buses and any other means of international transportation, or ships fishing in international waters.

Short-stay or visitor visa, for short visits to the host country. Many countries differentiate between different reasons for these visits, such as:

Private visa, for private visits by invitation of residents of the country.

Tourist visa, for a limited period of leisure travel, no business activities allowed.

Visa for medical reasons, for undertaking diagnostics or a course of treatment in the host country's hospitals.

Business visa, for engaging in commerce in the country. These visas generally preclude permanent employment, for which a work visa would be required.

Working holiday visa, for individuals traveling between nations offering a working holiday program, allowing young people to undertake temporary work while traveling.

Athletic or artistic visa, issued to athletes and performing artists (and their supporting staff) performing at competitions, concerts, shows and other events.

Cultural exchange visa, usually issued to athletes and performing artists participating in a cultural exchange program.

Refugee visa, issued to persons fleeing the dangers of persecution, a war or a natural disaster.

Long-stay visa, valid for longer but still finite stays:

Student visa, which allows its holder to study at an institution of higher learning in the issuing country.

Temporary worker visa, for approved employment in the host country. These are generally more difficult to obtain but valid for longer periods of time than a business visa. Examples of these are the United States' H-1B and L-1 visas. Depending on a particular country, the status of temporary worker may or may not evolve into the status of permanent resident or to naturalization.

Journalist visa, which some countries require of people in that occupation when traveling for their respective news organizations. Countries which insist on this include Cuba, Iran, North Korea, Saudi Arabia, the United States (I-visa) and Zimbabwe.

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International Travel Documentation Residence visa, granted to people obtaining long-term residence in the host

country. In some countries, long-term residence is a necessary step to obtain the status of a permanent resident.

Asylum visa, issued to people who have suffered or reasonably fear persecution in their own country due to their political activities or opinion, or features, or association with a social group.

Immigrant visa, granted for those intending to immigrate to the issuing country (obtain the status of a permanent resident with a prospect of possible naturalization in the future):

Spousal visa or partner visa, granted to the spouse, civil partner or de facto partner of a resident or citizen of a given country to enable the couple to settle in that country.

Marriage visa, granted for a limited period before intended marriage or civil partnership based on a proven relationship with a citizen of the destination country. For example, a German woman who wishes to marry an American man would obtain a Fiancée Visa (also known as a K-1 visa) to allow her to enter the United States. "A K1 Fiancée Visa is valid for four months from the date of its approval."

Pensioner visa (also known as retiree visa or retirement visa), issued by a limited number of countries (Australia, Argentina, Thailand, Panama, etc.), to those who can demonstrate a foreign source of income and who do not intend to work in the issuing country. Age limits apply in some cases.

Official visa is granted to officials doing job for their governments or otherwise representing their countries in the host country, such as the personnel of diplomatic missions.

Diplomatic visa is normally only available to bearers of diplomatic passports.

Courtesy visa issued to representatives of foreign governments or international organizations who do not qualify for diplomatic status but do merit expedited, courteous treatment - an example of this is Australia's Special purpose visa.

By Method of Issuance:

On-arrival visa (also known as Visa on Arrival, VOA), granted at a port of entry. This is distinct from not requiring a visa at all, as the visitor must still obtain the visa before they can even try to pass through immigration. Nearly every country can issue a visa (or another document to the same effect) on arrival to a visitor arriving in unforeseen exceptional circumstances, for example:

Under provisions of article 35 of the Schengen Visa Code, a visa may be issued at border in situations such as diversion of a flight causing an air passenger in transit to pass through two or more airports instead of one. When in 2010 eruptions of Eyjafjallajökull volcano in Iceland caused disruption of air travel throughout Europe, the EU also announced it would issue visas at land borders to stranded travellers.

Under section 212(d) (4) of the Immigration and Naturalization Act, visa waivers can be issued to travellers arriving at USA ports of entry in emergency situations or under other conditions.

Certain international airports in Russia have consuls on-duty, who have the power to issue visas on the spot.

Some countries issue visas on arrival to special categories of travellers, such as seafarers or air crew.


Some countries issue them to regular visitors; however, there often are restrictions.

Belarus issues visas on arrival in Minsk international airport only to nationals of countries where there is no consular representation of Belarus.

Thailand only issues visas on arrival at certain border checkpoints. The most notable crossing where visas on arrival are not issued is the Padang Besar checkpoint for passenger trains between Malaysia and Thailand.

Russia issues visas on arrival for short visits to its Western exclave, Kaliningrad oblast.

Electronic visa. The visa is stored in a computer and is electronically tied to the passport number; no label, sticker or stamp is placed in the passport before travel.

Australia pioneered electronic visa issuance with the Electronic Travel Authority for tourists, and is also issuing the eVisitor for European tourists and businessmen. Recent changes in immigration law mean that almost all visas (including those for permanent residency) are issued electronically by default unless a label is required (for example, to board an airplane).

New Zealand is now also issuing some visas electronically.

The United States has a similar internet system called Electronic System for Travel Authorization, but this is a security pre-screening only and does not technically qualify as a visa under US immigration law.

Turkey is issuing electronic visas as of April 2013 (certain African countries are eligible only if using Turkish Airlines) through the Republic of Turkey Electronic Visa Application System.

Cambodia is issuing electronic visas to most of the visitors through the eVisa system.

Sao Tome and Principe is issuing electronic visas to all passengers through the eVisaST system.

Rwanda is issuing electronic visas.

Myanmar is issuing electronic visas.

Sri Lanka is issuing electronic visas through the Electronic Travel Authorization system.

Armenia is issuing electronic visas to certain eligible countries.

Singapore is issuing electronic visas to certain eligible countries.

This list is not exhaustive. Some countries may have more detailed classifications of some of these categories reflecting the nuances of their respective geographies, social conditions, economies, international treaties, etc. Others, on the contrary, may combine some types into broader categories.

Visa Refusal

A visa may be denied for a number of reasons, some of which being that the applicant:

has committed fraud or misrepresentation in his or her application

has obtained a criminal record (e.g. in the past 5 years [US]) or has criminal charges pending

is considered to be a threat to national security

cannot prove to have strong ties to their current country of residence

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International Travel Documentation intends to reside or work permanently in the country she/he will visit if not

applying for an immigrant or work visa respectively

does not have a legitimate reason for the journey

has no visible means of sustenance

does not have travel arrangements (i.e. transport and lodging) in the destination country

does not have a health/travel insurance valid for the destination and the duration of stay

does not have a good moral character

is applying on excessively short notice

had their previous visa application(s) rejected and cannot prove that the reasons for the previous denials no longer exist or are not applicable any more

is a citizen of a country to which the destination country is hostile

has previously visited, or intends to visit, a country to which the destination country is hostile

has a communicable disease, such as tuberculosis

has previous visa/immigration violations

has a passport that expires too soon

didn't use a previously issued visa at all without a valid reason (e.g., a trip cancellation due to a family emergency)

fails to demonstrate intent to return (for non-immigrants)

3.4 AIRLINES TICKET AND AUTHORIZATION An airline ticket is a document, issued by an airline or a travel agency, to confirm that an individual has booked a seat on a flight on an aircraft. This document is then used to obtain a boarding pass, at the airport. Then with the boarding pass and the attached ticket, the passenger is allowed to board the aircraft.

There are two sorts of airline tickets − the older style with coupons now referred to as a paper ticket and the now more common electronic ticket usually referred to as an e-ticket.

Regardless of the type, all tickets contain details of the following information:

The passenger’s name.

The issuing airline.

A ticket number, including the airline’s 3 digit code at the start of the number.

The cities the ticket is valid for travel between.

Flight that the ticket is valid for. (Unless the ticket is "open")

Baggage allowance.

Fare (Not always visible on a printout but recorded electronically for the airline.)

Taxes (Not always visible on a printout but recorded electronically for the airline.)

The "Fare Basis", an alpha-numeric code that identifies the fare.

Restrictions on changes and refunds. (Not always shown in detail, but referred to).

Dates that the ticket is valid for.


"Form of payment", i.e., details of how the ticket was paid for, which will in turn affect how it would be refunded.

The Rate of Exchange used to calculate any international parts of the fare and tax.

A "Fare Construction" or "Linear" showing the breakdown of the total fare.

Ticket is usually only good on the airline for which it was bought. Though, an airline can ratify the ticket, so that it may be accepted by other airlines, sometimes on standby basis or with a confirmed seat. Usually, the ticket is for a specific flight. It is also possible to purchase an ‘open’ ticket, which permit travel on any flight between the destinations listed on the ticket. The cost for doing this is greater than a ticket for a specific flight. Some tickets are refundable. However, the lower cost tickets are usually not refundable and may carry many additional restrictions.

The carrier is shown by a standardized 2-letter code. The International Air Transport Association is the standard setting organization.

3.5 HEALTH DOCUMENTS Passport and visa needs as well as vaccination certificates and other health needs for travel between your home city and your tour destinations may alter from time to time. It is the main responsibility of the passenger to access with the suitable consulates and embassies to judge if any visas or transit visas are needed, and to consult with medical personnel to determine what health precautions and documents are must. One should get and have available when essential the appropriate valid travel and health documents.

Travel recommends contacting the embassy or consulate representing the countries you plan to visit and transfer through for the most updated information on these requirements. These regulations and requirements are determined directly by the national governments and Travel has no control over these regulations and requirements. Compliance with travel documents and customs regulations are the passenger’s responsibility.

For non-US citizens a multiple entry visa will be needed for some itineraries. Discover Travel accepts no responsibility for failure to notify travel participants of customs and settlements laws or health requirements. Passengers who do not have proper documentation may be prevented from boarding a flight, without refund of the fare, and will be subject to any cancellation fees, fines or other costs that result from the lack of proper documentation.

3.6 MICHEL PORTER’S FIVE FACTORS AND THEIR APPLICATION TO AIRLINE In understanding these strategic options, a useful start can be made by looking at some of the ideas of the Harvard Professor, Michael Porter. Porter states that in different industries, strategic issues are coloured by the interplay of the Five Forces of the rivalry amongst existing firms, substitution, new entry, the power of customers and the power of suppliers. We will examine each of these in turn.

Rivalry Amongst Existing Firms Porter argues that, in many industries, often little of the true competition and the drive for change comes from long-established firms. These long established firms often resemble one another in terms of the strengths which they have, and in their problems and weaknesses. They, therefore, can only identify benefit from aggressive competition at the margins of their activities.

In the air transport industry, the policies of the long-established airlines of Europe illustrate this point only too well, especially in their short-haul markets. Since April 1997, the airlines of the European Union have competed in a Single Aviation Market

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International Travel Documentationwhere there have been only the very loosest controls over entry, capacity and fares. This represented a major change when it took place compared with the tight regulation characteristic of the previous system. Yet, one would hardly know that this change had occurred if one had merely looked at the reaction of the old-established airlines to it. They continued to fly mostly similar aircraft (usually drawn from the Airbus A320 family), and placed in them identical or near-identical seating configurations. Frequencies and timings remained very similar, with few airlines prepared to allow their competitors a frequency advantage. The on-board products were mostly comparable, and did not change. Finally and most tellingly, until recently these airlines pursued an almost identical pricing policy. Very high fares were charged for seats in Business Class, and for access to Economy tickets which allowed full flexibility.

Lower fares were also on offer, but these had had tight restrictions attached to them, restrictions which were mainly designed to prevent business travellers using them. The result of such policies was that they made it much easier than it should have been for new Low Cost Carriers to grow in Europe, and for them to have a dramatic effect on the economics of the long-established firms. British Airways, for example, lost nearly £250 million on its intra-European network during its 2002/2003 financial year. Substitution Porter argues that disturbance to the competitive equilibrium set up by the long-established firms can come from two possible sources, the first of these being that of Substitution. Substitution occurs when firms in another industry find a new and better way of meeting the same customer needs as are being targeted by the existing players.

There are a number of Substitution issues affecting airlines at the present time. Of these, potentially the most serious is the effect of electronic methods of communication on the market for business air travel.

Videoconferencing, teleconferencing and email all have the potential to mean that business travellers will travel less, and still satisfy their needs for effective communication. At the time of writing, there are worrying signs that this is exactly what is happening, an effect which is likely to increase still further during future downturns similar to the one which followed the September 11 attacks in 2001. Surface transport, especially by rail, also raises important substitution issues. As we have seen, unlike airlines, railways can provide city-centre to city-centre travel, and have been shown to severely impact the business travel market once these city-centre to city-centre journey times can be brought down below three hours.

The air freight industry is also being affected by Substitution issues. Email is substantially reducing the market for the movement of urgent documents by air. Also, newspapers do not provide the lucrative air freight commodity they once did. They still lose their value completely soon after they have been published. The problem is, though, that today media publishers are increasingly reaching their readers through the Internet, or by setting up satellite printing stations which enable newspapers to be printed simultaneously in a large number of different markets. They therefore no longer have to make use of air freight.

3.6.1 New Entry The second of the forces which may disturb the competitive equilibrium amongst the existing players is that of new entry. In some industries, new entry is difficult or impossible. In others, it is commonplace. In the modern aviation industry, the latter is very much the case, especially in short-haul, point-to-point markets. This is because of the many possible so-called “Barriers to Entry”; most have become low or are now non-existent.

A first possible barrier to entry may result from regulatory limitations. It is true that, there are still regulatory barriers to entry in many international markets, and airlines


are constrained in their market entry policies by out-of-date and anachronistic limitations on ownership and control. However, it is now the case that many of the world’s largest domestic markets, such as those of the United States and the European Union, now operate without any significant entry controls, apart from those applying to so-called Cabotage Rights.

In others cases, resources may act as a Barrier-to-Entry. If vital resources are unavailable or very costly, entry will clearly be constrained. In the aviation industry, airport slots provide a classic resource barrier to entry. As long as airport slots continue to be awarded under the Grandfather Rights principle, it will be very difficult for new entrants to gain access to attractively-timed slots at congested hub airports. Significant though slot constraints already are, with a likely worsening of them in the future, radical strategies are possible which find a way round them. In particular, Europe’s vibrant low-fares scene has largely grown free of airport slot constraints because of the willingness of the airlines to use uncongested airports, sometimes located a considerable distance from the cities they are designed to serve.

Slot constraints may provide some comfort to existing airlines in Europe today, but they can derive little more from the remaining possible resource constraints to entry. Especially during downturns such as the one experienced during 2002 and 2003, resources to underpin entry can actually be remarkably cheap and plentiful.

This is certainly the case with the question of the aircraft fleet that will be needed by a new entrant airline. In a recessionary period, aircraft manufacturers will be prepared to strike very attractive deals for the white-tailed aircraft which sometimes result from order cancellations. Also, there will be large numbers of parked aircraft – many of them owned by leasing companies – where the owners will offer extremely low lease rates in order to get their idle aircraft flying once again.

Staff resources – especially of pilots and mechanics – will also be important. Again, in a recessionary period many trained people will unfortunately lose their jobs, and may well be prepared to take new ones at relatively low salaries and wages in order to obtain employment.

As a final, and, at first sight, odd feature of resource constraints on entry in the aviation industry, it will always be possible for a new entrant to buy the support services, such as maintenance and ground handling that it needs. Many airlines have built subsidiary businesses offering such services and they will be prepared to sell these to a new entrant, even if the new entrant’s business plan involves competing with them. They will reason that if they do not meet the need, this will not stop the new entrant.

Instead, the required services will be bought elsewhere, denying the first airline some useful revenue. Several more issues need to be covered in assessing the nature of barriers to entry in the airline business. Some industries are characterised by marked Economies of Scale, where lower unit costs can be obtained by large-scale producers. Many heavy industries such as steel, chemicals and car-making are like this. In them, existing firms are likely to be protected against entry because they will have been able to achieve a scale of production which is unlikely to be available to a new entrant.

In the airline business, there are some aspects where existing players are protected against new entry by scale economies. In particular, hubbing operations where short-haul passengers are collected together in order to feed long-haul services are increased in their effectiveness by being undertaken at a substantial scale. It is hard for small new entrants to break in. In point-to-point markets, however, no such protection for incumbents exists.

Economies of Scale in areas like pilot training and maintenance quickly run out with increasing size, and are counterbalanced by the bureaucracy and poor staff morale

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International Travel Documentationoften characteristic of large airlines. In some industries, incumbents have a lot of protection against new entrants because of so-called Learning Curve effects.

One final issue with regard to entry into the airline industry is difficult to analyse, but very important. Over the last twenty years, the list of airlines which have entered the industry and then left it again through bankruptcy is a depressingly long one. All the evidence one could possibly require is there to illustrate the point that investing in and setting up a new airline is, at best, highly speculative, with an overwhelming likelihood of failure. From this, one might assume that new entry into the aviation industry would largely be a thing of the past, especially given the depressed state of the industry in the early years of the new century. Nothing could be further from the truth, with the pressure of entry seemingly as strong, or stronger, than ever. One explanation for this apparent contradiction is that aviation is seen as a glamorous and exciting industry by many, and that the dream to set up and own one’s own airline is a continuing one for those with large egos and deep pockets. Industries with dirty, unpleasant processes at their heart do not have the same appeal, despite the fact that profits and returns on capital may be much better within them. The English expression, “where there’s muck there’s brass” is a telling one.

As an overall conclusion to the question of entry, incumbent airlines must prepare themselves for a continuing challenge from new entrants, especially in their short-haul, point-to-point markets.

3.6.2 Power of Customers Porter argues that the power of their customers will be a crucial determinant of profitability for the firms in any industry. In turn, customer power will be related to two variables: the number of customers a firm has, and the existence – or otherwise – of so called Switching Costs.

In principle, the point about the number of customers is an obvious one. If a firm has many customers and some of these defects to the competition, there will still be a large number of customers remaining. If, on the other hand, the firm has only two or three customers, the loss of one of them will result in a third or more of its business being lost. In such a situation, customers will have extreme amounts of bargaining power. They will be able to cut deals on terms which are extremely favourable to them, holding down the profits of the companies from which they are buying.

Despite the unambiguous nature of this point, a series of industry trends during the 1990s suggested that airlines were ignoring it. They allowed the size of their customer base to decline steadily, with serious consequences for their profitability. This decline resulted from at least three factors. Firstly, as we have seen, there was an increase in the extent to which firms in business travel were prepared to use their bargaining power to conclude corporate deals in which a degree of loyalty was traded for substantial price discounts. This changed the nature of the business travel market. Instead of the airline’s ‘Customers’ being the business travellers who actually flew, they were increasingly negotiating with a relatively small number of finance and purchasing people who had been given the responsibility of negotiating corporate deals.

The structure of the travel agency industry also changed during the 1990s. In many countries, life became harder for the smaller, independent agent. Instead, an increasing share of the market was held by large, often multinational, agency chains, who achieved substantial power as a result of their ability – often exaggerated, but still significant – to switch passengers between airlines according the commissions they were being paid. Such a trend did not arise by accident. Many airlines adopted a policy of paying so-called over-ride commissions to agents according to the volume of business delivered to them. In the shortterm, such a policy gained them the greatest amount of


revenue. It did, though, give important advantages to large travel agents who could meet their revenue targets for over-rides. These agents were in turn able to use their higher commissions to fund market share battles against their smaller rivals, further cementing their domination. A further issue regarding the size of the airline customer base concerned the selling of seats to price-sensitive leisure travellers. The last five years have seen a revolution in the distribution channels used by airlines. The Internet has become a very important channel, and from the issues raised in this section, it is easy to see why. The Internet allows carriers to begin the process of broadening their customer base once again, and to make better contact with the true sources of their revenue. They are therefore able to address the problems of escalating commission costs and falling yields, which were a clear consequence of the mistaken polices of the 1990s. A final question with the size of the airline customer base is in some senses the most worrying of all. Porter warns that if one, or a small number of the firm’s customers become too big, they may take the view that it would be more cost-efficient to take on the resources to do the job themselves. If they do, a firm may lose the entire large amount of business currently being obtained from a single source. Worse still, the former customer may decide that there is actually money to be made in the new area of activity. If it does, it will not only cease to supply business to the firm in question, but will actively begin to compete with the firm for its remaining customers. In the aviation industry, a common situation where a customer turns into a competitor occurs when a tour operator grows bigger and bigger, giving larger amounts of business to existing charter airlines. Often, a point arrives where it will make sense for the tour operator to buy its own aircraft, in order to set up an airline to carry its own passengers and perhaps also the complete in the open market for other airlines’ passengers as well. The tax benefits associated with aircraft ownership can be an added incentive to do this, given that tour operators normally do not have significant capital assets to use to offset against their tax liabilities. Overall, the question of the Power of their Customers is a very difficult one for airlines to address, and goes a long way towards explaining the poor profit performance of many carriers in recent years.

3.6.3 Power of Suppliers This depressing conclusion is equally applicable to Porter’s remaining point, that of the power of a firm’s suppliers. Porter argues – again, the point is straightforward – that when a firm is totally dependent on monopoly suppliers of crucially-needed resources, these suppliers will be able to charge prices which ensure handsome profits for themselves, but which severely limit profits of the firms that they supply.

For airlines, the list of suppliers who either actually or potentially have this monopoly power is a depressingly long one. Most obviously, suppliers of Air Traffic Control and airport services may have it, with many airlines having no choice but to pay whatever ATC and airport charges are levied on them. It is most noticeable that at the time of writing airline profits have been severely affected in a major industry downturn, but the pain of this is not being evenly distributed across the industry. Many airports are continuing to show strong financial returns, reflecting the monopoly power that many of them have. Often, it has been necessary to regulate landing fees in order to control the use of this power.

3.6.4 Disintermediation Sometimes, in the application of the Five Forces model, situations arise where relationships between firms change radically. This is especially likely when a

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International Travel Documentationparticular player or group of players is not adding sufficient value to justify the prices that they are charging.

An attempt may then be made to by-pass them, in a process which Porter describes as Disintermediation. Two examples, one actual and one potential, illustrate this process in the aviation industry. Returning to the example of the GDS firms given above, the recent rapid growth in the use of the internet as a distribution channel reflects a clear attempt by airlines to dis-intermediate the GDS companies, one which has already saved them substantial amounts in terms of booking fees.

Overall, Porter’s Five Forces model provides a valuable backcloth against which to view airline strategic decision-making. Any airline strategy, if it is to be successful, must deal with a complex interplay of often conflicting forces.


Fill in the blanks:

1. In Western Europe in the late 19th century and early 20th century, passports and visas were ………………….. for moving from country to another.

2. A ………………….. is a government-issued document that certifies the identity and nationality of its holder for the purpose of international travel.

3. A passport displays nationality, but not the ………………….. of the passport holder.

4. A passport does not necessarily grant the passport holder ………………….. into another country, nor to consular protection while abroad or any other privileges, such as immunity from arrest or prison sentences; those rights and privileges, if and when applicable, arise from international treaties.

5. A ………………….. is a document or mark showing that a person is conditionally authorized to enter or leave the territory for which it was issued, subject to permission of an immigration official at the time of actual entry.

3.7 COST LEADERSHIP FOCUS STRATEGIES By assessing the influence, airport operators can justify from the price and product features, to consider how this relates to the actual competitive strategies, which airports have developed. A starting point is to consider the relevance of Porter's generic competitive strategies. Price (or at least cost) and product characteristics or differentiation are the two major sources for the competitive advantage and also it takes the competitive scope of targeting customers. This means that it is possible to provide products on a broad target, which will appeal to most of the market or pick a narrow target and focus on a niche within the market. This led Porter to define his key generic competitive strategies as being cost leadership, differentiation and focus.

Cost Leadership Strategy

The cost leadership strategy aims to place the organization amongst the lowest cost producers. This is realized by reducing costs, such as low cost inputs, low distribution and location costs, by offering a standardized product, and by achieving high volume of sales and economies of scale. This will then enable the organization to offer lower prices than its competitors. There is little evidence of such strategies within the airport industry. On the cost side, the ability of the airport to achieve many cost savings is fairly limited because of its fixed location and also because of the apparent lack of economies of scale beyond a certain size. More generally, the relevance of such a


strategy to airports has to be questioned given the relative price insensitivity of many of the markets and thus, the lack of competitive pressures to produce a reduction in costs. Moreover, the issue is complicated by the weak relationship between airport costs and prices at some airports. For example, when public sector owners subsidize airport operations to achieve some broader objectives such as economic development or when an airport is operated as a part of a group with uniform prices across the group, which do not link very closely to the costs of the individual airports.

Product Differentiation Strategy

The next generic strategic option is differentiation when an organization will develop a product or products, which are perceived as being different or unique from its competitors. This is more appropriate for a more price insensitive market. This may be achieved through enhanced service features, brand image, promotion, technology, distribution or other dimensions. In other words, it can be achieved if there are real (by product design) or perceived (by advertising) differences between its products and competitors.

Within the airport industry, there appears to be some scope to pursue differentiation strategies. For example, there could be the development of a new airport in a city centre position with its ‘uniqueness’ being its proximity to the urban population. Alternatively, the uniqueness could be the airport’s design, which enables it to handle passengers in a very short period of time, or its lack of environment restrictions compared to neighbouring airports, which enables it to operate for 24 hours.

There may be a number of differentiated products to suit the needs of different customer groups. Zurich airport rebranded itself as 'Unique Zurich Airport’ in 2002 to reflect a new management structure, partial privatisation and expanded facilities but does not really seem to follow a true differentiation strategy. BAA London airports were gives preferential treatment through 'fast track' concept at various airport processes, to first class and business passengers. Typically larger airports with more than one terminal have separated services for different types of passengers or airlines, for example, short-haul and long-haul, domestic and international, or by alliance members. However the quality standards do not usually vary significantly between terminals. There is also the option of having competing terminal products offered by different operators. In the USA, for example at JFK, the terminals are operated by different airlines but practice elsewhere has been very limited with the notable exceptions of Birmingham and Toronto. However, in recent years there has been growing interest, particularly with LCCs, in the possibility of having different terminals with varying quality standards and facilities, either under common or different ownership.

Focus or Niche Strategy

The third generic strategy, in addition to cost leadership and differentiation, is the focus or niche strategy, which is built to satisfy a particular small target market. Airports, with a particular type of airline (charter, low cost, freight) or services to a particular geographic area adopt this form of strategy in the growth of airport business. This is suitable for organizations, which are not large enough to target the whole market. These strategies can either have a cost or differentiation focus. Within the airport industry, secondary airports, which offer price deals to LCCs, are examples of organizations pursuing a cost focus strategy, which seeks a cost advantage in its target segment. There are also examples of airports who are following a differentiation strategy for instance by providing specialist cargo facilities such as Liege airport in Belgium or facilities for short-haul business such as at London City Airport. In India, Amritsar, Ahmedabad, Jaipur, Nagpur, Pune airports are playing strategic role for attracting new airlines and to decongest hub airports, which are close to their periphery.

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International Travel DocumentationIn summary, there are a number of airports which can fall into differentiation or focus strategy, there are many airports which have high cost base to be considered a cost leader, too standardized a product to compete against 'differentiation airports' and which have too broad an appeal to be considered as a 'niche airport'. Porter defined such organizations that do not conform to one of the strategies as 'Lost-in-the-Middle'. In reality, this is very much related to the less competitive environment within which these types of airports operate. Therefore, whilst these generic models are of limited use within the airport industry, they do have some relevance when considering the strategic directions and methods, which airports need to adopt.

Airport leadership must have a financial obligation to the airport and to the airline users, especially the air carriers who serve the airport. In order to meet the best needs of the market, an airport operator must keep the airport affordable and adaptable by:

Managing the airport's expenses.

Developing new business opportunities and non-aero revenue sources, particularly revenue sources that are not dependent on connecting travellers, such as rental car facilities.

Functioning of the airport in a competitive manner.

Fostering customer-focused environment.

Promoting competitive access and encouraging new entrants.

Deferring capital projects to restrain costs whenever necessary or in the periods of uncertainty.

Delivering airport projects on schedule and on or below budget by ensuring that the designs are appropriate for the project, and that construction projects are to be bided competitively.

Maintaining established, written policies that include strategic goals, investment and debt policies.

3.8 AIRLINE BUSINESS AND MARKET STRATEGIES Even in a depressed economy, if an airport wants to attract their passengers by offering them new carriers or extra concessions then it has to make a commitment so as to make marketing as a top priority with scarce overall operational budgets. Thus, it is mandatory that every airport requires adopting the current marketing strategies which can be frequently assessed as well as which keeps up with industry, environmental and economic issues.

The strategy of marketing may differ from each airport, relying on its relative size, its executive leadership, brand strength, geographical location and industry rank. Thus, adjustment in strategies must be made as per the economic realities of today such as overall demand for travel and performance of the airline industry.

Market dominance strategies: There are the identified market leaders such as LAX, Chicago O’Hare and JFK. Then, you may see that there are challengers also such as Dallas Love Field with a hostile strategy so as to gain the share in the market. The followers are in a strong but not dominant position, and they play it moderately safe by taking on the overflow of the market leader. The players of the niche market basically emphasis on few markets with the ability so as to meet the needs and desires of those markets. Regional airports can dominate in their own geographic areas and thrive.

Innovation strategies: It comprises of how aggressively airports adopt future business opportunities and new technology. You may find some pioneers who are the close followers, risk-takers and early adopters who are basically comfortable


with lower risk but also identify and recognise the investment value. You can also see the late followers also who adopt the technology after everyone else.

Growth strategies: It lays emphasis on the growth and development of the airport. It needs the analysis in its community, physical, regulatory and economic constraints so as to develop a plan which meets the business goals. For instance, the LAX master plan is a strategic framework for future development of Los Angeles International Airport.

Therefore, developing a marketing strategy is a time-intensive process which may lead to the success of the business. It is thus a foundation which sets out the more global objectives so that a specific roadmap can be both implemented and developed. If the strategy is not solid and weak then the communication and marketing plan is ineffective.

The environment of the market of Airline Industry will generally remain volatile and complex. The allocation of airport slot is wholly based on the principles of market but the main question arises here is that who should keep the proceeds from slot sales will always be a difficult one. The future is unlikely to see greater stability in airline pricing structures with pricing policy. The most important feature of with the differentiation airlines is that they are successful identifying and determining the most essential clients as well as also in establishing a deep, warm and long lasting relationship with them. Thus, to understand the market of the Airline Industry, it is important to appreciate the complex institutional framework from which it has been created and developed. Though, many airlines provide brands which depict first business and economic categories and also there are those which give standard services to their customers.

3.8.1 Concept of Airline Marketing In marketing, we do not only want to satisfy the needs and preferences of the customers, but at the same time the basic objective of every business is to bring profit into the business. Thus the word “marketing” refers to identify goods. Thus, after identifying the goods, the next important step in marketing is to create awareness and to attract sale with the result of making profitable ventures. Profitable ventures are the main point to stress up in marketing.

For example, an aircraft which has seat configuration divided into three categories like First Class, Business Class and Economy Class. First class and business class which offers better services with high cost for customer and high yield for airlines can cover up the cost for the aircraft and give profit to the airlines. Thus, with all the seats in first and business classes sold out, an airline can just let go the economy class by zero because the both classes already cover the cost and give profits to the airlines. That is mean by profitable ventures or profit-oriented.

There are four basic fundamental principles or concepts in marketing that is applicable to every business which is further termed as “Marketing Mix.” It may comprise the following:

Product: In marketing research, the concept of Product is basically to determine and identify the potential and current customers. It needs the basic information such as characteristic of particular country, market size and demographic. For instance, most of the people of Australia either prefer to spend their leisure time at beach-side or to go to the beach, and then the main motive of most of the airlines in order to attract Australian to buy their ticket has to sell the product that is destination which has either beautiful seaside or beach. Thus, it is based on the characteristic of Australian country.

Pricing: Price refers to a certain set of figures which helps in attracting people to buy the product. It can be configured into two major target areas that are industry

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International Travel Documentation(business traveller) and customer (individual). For most of the customers, they basically prefer to spend their leisure time by travelling, visiting relatives and friends, so for it they want cheap price of the ticket as compared to the business traveller whose price of the ticket is either paid by the Industry or by the company. So with the variant in target market, the product price must be affordable and attractive for the customers.

Promotion: The main objective of the promotion is to create an awareness of the particular product with the help of strategies which can be used to attract the sale of their product. For instance, advertising in airline’s website, newspaper, social networking, magazine, etc. Thus, with the help of great and good promotional techniques and methods, an airline can able to persuade and convince people to travel who do not want to travel.

Place: Place is a distribution channel in any business which plays a vital role in order to attract customer as well as at the same time provides them the level of satisfaction by doing business with their firm. For instance, place of tour operators and ticket agent. It also comprises of the online method of booking which helps the customers to easily access the product which they want to purchase.

In today’s marketplace, the airline industry is considered to be one of the most competitive industries. An airline’s bottom line is a perfect measure of satisfaction of customer which reflects customer loyalty and reliability. The concept of marketing is a philosophy in management which helps the company to attain its objectives through identification and satisfaction of customer’s stated and unstated wants and needs. Therefore, Airline Marketing helps in adding the operational support to the efforts of new service promotion for airport airline co-operation opportunities and access to our global network of airline customers.

3.9 COMMON MISTAKES Travelling is a fun. There’s nothing comparable to the excitement you feel when you travel. You get to see the world and go to places you only ever dreamed of going and you get to create a rich selection of memories and experiences your family will treasure for a lifetime. However, if you don’t plan carefully and you ignore the important details of your trip, an exciting adventure may turn into a complete disaster. Travel can be a complex and irritating thing when you make these common mistakes. Don’t let your travels become a burden laced with unhappy memories by avoiding these common travel mistakes. 1. Forgetting Documents: What happens when you get to the airport and realize that

you neglected to grab your passport or your license? Your entire trip could be ruined. There’s no easy way to remember to pack these documents, so be cautious and “DON’T FORGET PASSPORT, VISA, LICENSE, CARDS, MONEY, CHARGERS” and hang it on the door for days. Try to make a double check for the same.

2. Not Carrying Cash: Sometimes you might fail to find an ATM, especially in a location you are unfamiliar with. Some countries do not accept certain cards and some stores don’t accept certain cards. So carrying some cash is also an essential need.

3. Your passport is expired. 4. You arrived at the wrong airport terminal. 5. You pack more than what you need. 6. Your budget is too little. 7. You book too late.


8. You have no itinerary. 9. You ignore plans and policies. 10. You rely solely on pre-made group tours and packages.

3.9.1 10 Mistakes Regarding Travel Documents (With Suggestions) The most common misconceptions about passport and ID card are summarized below:

1. "Travellers in the European Union do not need a travel document anymore."

Wrong: If someone is traveling within the EU you always need to be able to identify yourself with a valid passport or identity card. Schengen Member State or not does not matter.

2. "The driving license is a sufficient travel document."

Wrong: A national driving license is not a valid travel document.

3. "One may travel to any country with a valid identity card."

Wrong: Currently 36 European countries accept the ID as a travel document. "Travellers outside Europe generally need a passport," said the ÖAMTC expert. "In addition, the respective entry requirements must be taken into account such as visas or the remaining validity period of the passport."

4. "One can enter any country with a passport that expired up to 5 years ago."

Wrong: As for now, Austria only has such agreements with Belgium, Germany, France, Greece, Italy, Liechtenstein, Luxembourg, Malta, Monaco, Netherlands, Portugal, San Marino, Switzerland, Slovenia, Spain and Hungary. Attention: "Some Airlines do not let passengers on board with expired passport," said the ÖAMTC.

5. "Travelling with an expired ID is OK."

Wrong: An ID card must always be valid.

6. "One can easily travel with an emergency passport."

Wrong: The emergency passport is only valid on certain occasions (e.g. loss, theft) and for a limited period of time. In some countries, such as Turkey or the United States special rules apply.

7. "Because the United Kingdom and Ireland belong to the EU travel documents are not controlled when crossing the border."

Wrong: Both countries are in the EU, but not in the Schengen area, so there are border controls.

8. "On a trip to the neighbouring country, one does not need a passport."

Wrong: Although all the neighbouring countries of Austria belong to the Schengen area, a passport or ID card may be required anywhere and everywhere.

9. "There are no special requirements if taking a pet with a person on holiday.”

Wrong: Dogs and cats need the EU pet passport available at the vet.

10. "When kids travel with grandparents, other relatives or friends the child's passport is enough."

Often wrong: "Minors travelling with grandma, aunt, other accompanying persons or alone, it is often necessary or advisable always to carry the consent of the guardian.

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International Travel DocumentationCheck Your Progress 2


1. By assessing the influence, airport operators can justify from the price and product features, to consider how this relates to the actual competitive strategies, which airports have developed.

2. An end point is to consider the relevance of Porter's generic competitive strategies.

3. The cost leadership strategy aims to place the organization amongst the highest cost producers.

4. The strategy of marketing may differ from each airport, relying on its relative size, its executive leadership, brand strength, geographical location and industry rank.

5. Price refers to a certain set of figures which helps in attracting people to buy the product.

Case Study: Auckland International Airport Limited (AIAL)

AIAL Mission Outlook

Auckland Airport dedicated towards delivering long-term sustainable services to the travelling public, freight customers, carriers, government agencies, on-airport businesses, and to local and wider communities. In 2006, AIAL insisted to focus on its core value of commitments to operate safely and securely, and to carry sustainable value to all key stakeholders.

Table 1: Highlights of Auckland International Airport (AIAL) Performance

Pax Throughput 11.46 Million

Air Transport Movements 00.16 Million

Revenue $ 305.81 Million

EBITDA $ 240.16 Million

Airport Surplus (After Tax) $ 103.15 Million

Ordinary Dividends $ 100.09 Million

Investments $ 109.54 Million

Revaluation Gain $ 1399.33 Million

Financial Results (2005-06)

AIAL achieved recorded revenue of above $ 300 million in 2006, for the first time. Operating expenses were well controlled and given an increase in AIAL’s operating capacity and asset base, and the impact of inflation. The surplus after-tax was again in excess of $100 million, an increase on last year’s result, after adjusting asset sales and increased interest costs associated with the capital restructuring. Following a comprehensive asset revaluation process, the value of AIAL’s total non-current assets, including land, terminals, runways, car parking assets, retail assets and investment properties, stood to increase from $1,399 million to $2,698 million during 2006.

Tourism

Tourism is the single largest sourced industry of New Zealand and export earner. In 2005-06, the airlines, accommodation providers, tourism operators and government agencies unrelenting to promote New Zealand’s strong international tourism profile. Recent decline in the New Zealand dollar is projected to grow further and support tourism growth. Auckland Airport is the first and last experience for many of New

Contd…


Zealand’s international tourists. AIAL is enhancing the facilities and services to make their experiences with more enjoyable.

Aviation Business

Aeronautical and non-aeronautical activities are the two broad types of AIAL operations in terms of revenue and expenses. Aeronautical activities include the provision of runways, taxiways and aprons, passenger terminals, and aircraft and freight facilities. For the financial year 2005-06, total aeronautical revenue increased to $145.030 million (11.8%). AIAL is committed to have a positive and constructive engagement with airline partners, with a view to reaching a negotiated outcome of both parties, responsibilities towards the travelling public. To sustain the quality and capacity of its aeronautical services, AIAL ensuring an appropriate return on its growing investment base. Equally, the airlines can properly expect such services to be supplied efficiently at a price that is cost effective to them. A separate aeronautical division was established with the objective of restructuring AIAL’s aeronautical activities, including aeronautical revenues, operations and route development, within one fully integrated business. This will allow AIAL to engage with our airline customers in a seamless manner on matters of service, quality, supply and pricing.

Government Agencies

AIAL has continued to work with the New Zealand Customs Service, Ministry of Agriculture and Forestry (MAF) and the Aviation Security Service to improve passenger processing. A number of changes to the approach to queuing for the MAF inspection have enhanced processing. The company continues to work closely with Customs to develop an automated border processing system. This technology is expected to provide benefits to both parties and, most importantly, to passengers. A pilot scheme will be introduced in arrivals first and then gradually expanded into a more comprehensive system.

Airlines

International: The 2006 year has been a relatively stable year in terms of carriers and seat capacity into and out of Auckland Airport. Air New Zealand has continued the progressive upgrading of its aircraft fleet by replacing its Boeing 767 aircraft with the larger Boeing 777. Air New Zealand increased its services to San Francisco from three flights per week to six flights per week. In addition, new services to London via Hong Kong and Shanghai were commenced in October and November, respectively. Cathay Pacific has confirmed four additional flights per week to Hong Kong from 30th October 2006 to 31st March 2007. The 2006 year has been the first full year with Pacific Blue at Auckland Airport. The airline is now providing seven services across the Tasman every week. In addition, Polynesian Blue commenced operations in November 2005, taking over from Polynesian Airlines. Thai Airways commenced flights direct from Bangkok (as opposed to via Australia).

Domestic: Domestic traffic accounted for 76 per cent of all aircraft movements, which, again, was largely unchanged from the previous year.

New Large Aircraft (NLA)—A380

AIAL is committed to serve for the NLA; accordingly AIAL has committed to be A380-capable. Seven airlines currently servicing Auckland have placed orders for the new aircraft. At this stage, it appears that the first services to Auckland will be introduced by Emirates in 2008, given its importance to New Zealand trade and tourism.

Non-Aero Revenue Business Potential

Airport Retail

International Side: AIAL has made a considerable progress in the company’s retail business over the 2006 year. Key developments include the reconfiguration of the international terminal pier, the opening of the new retail environment in the pier, the planning for the major new arrivals retail offering in the expanded international

Contd…

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International Travel Documentationterminal, and the planning of the new retail precinct between the domestic terminals. Retail income increased to $86.712 million (2.4%). To augment the non-aero revenue business AIAL started the construction activity associated with the airside passenger separation of the international terminal pier impacted the retail environment during the first six months of the 2006 financial year. A large number of airside retailers were directly affected by the project, and sales were adversely impacted. In addition, with the exception of the Collection Point (which facilitates off-airport retail sales); the company closed all of its own direct retail stores in August 2005. The new replacement stores did not open until December 2005. Unsurprisingly, this negatively impacted retail income in the first half.

The new retail precinct in the international terminal pier was fully completed in December. This provides an overall increase in airside retail space of 600 square metres. This project also gave the opportunity to provide a better location for some of the existing airside stores, and to create a new ‘destination product’ precinct aimed at the non-New Zealand passenger market. Through its joint venture, HMSC-AIAL Limited, the company also substantially increased its airside food and beverage offering with fast food, a café and a bar with attractive views over the airfield and Manukau Harbour.

The company has seen an improvement in the international departures retail environment in the second half of the 2006 year. Retail income per international passenger was $13.34, an increase of 1.3 per cent over the 2005 year. More importantly, however, the rate increased 6.1 per cent from $12.95 in the first half of the year to $13.74 in the second half of the year. The completion of construction activity and improved passenger facilitation has assisted the retail performance. In addition, the closure of AIAL’s own direct retail stores resulted in the available shop space being released using a more conventional concessionaire model to third-party retailers. This increased AIAL’s yield from this space, while at the same time reducing AIAL’s risk and investment. More recently, the decline in the New Zealand dollar has made the product range on offer more cost-competitive on a relative basis. This has also benefited passenger spend-rates.

Other new developments during the period included the opening of a new Rip Curl surf wear store, a last-minute duty free arrivals kiosk in the baggage hall aimed at better servicing the regular trans-Tasman traveller, a free internet service operated in association with Samsung, and a new Juice Bar. The company has enjoyed strong revenue growth from advertising, news and books, and destination products, following new agreements completed in late 2004 and early 2005. At the international terminal airside, a new traveller massage service has been introduced, whilst an airside Kiwi-market is under consideration. Plans are also under development to redevelop the landside retail precinct, including the Jean Batten food court. This will see a broader range of products and services introduced that better reflect the modern traveller’s appetite for authentic food and beverages.

The new expanded arrivals project at the international terminal will double the size of AIAL’s existing arrivals duty free offering. This will allow a considerable increase in the product range and services for arriving passengers, with an expected increase in retail revenues. Planning is currently underway to optimise this new retail space. The project is anticipated to be completed in the first quarter of the 2008 calendar year. Planning is also underway to significantly increase the size of the departures retail area, including emigration processing, at the international terminal.

Domestic Side: The construction of a new 2,200 square metre retail precinct between the existing domestic terminals commenced in April 2006, and is expected to be completed by December 2006. The new area, which has been fully leased, will include a book store, a bank, a destination product store, a florist, and a wide range of food and beverage outlets, including a specialist premium coffee operator, an authentic Asian sushi and noodle bar, as well as a new contemporary bar, and fast food. This new precinct will significantly enhance the scale and scope of the domestic retail and food and beverage offering. The area will link the two terminals, and benefit from a direct elevated walkway from the new multi-level domestic car park.

Contd…


Car Parking: Car parking performed well in the 2006 year, with revenue up 6.2 per cent to $24.847 million. This has been driven by the overall increase in passenger traffic, including New Zealanders travelling domestically, in particular. As at year-end, the company had 8,449 car parking spaces, an increase of 10.6 per cent over the previous year. This includes the new 850-bay multi-level car park opposite the domestic terminals opened on 10 July 2006. This car park facility provides a range of car parking services, including a premium product which is branded business parking, standard parking spaces, and new car rental facilities, including offices for on-airport operators. All parking bays are under cover. Much improved service levels will be achieved with covered access via an elevated walkway over the road. AIAL will continue to expand its car parking services and facilities, and introduce further initiatives to meet the needs of the various car park user market segments.

Airport Rental Services: The company earns rental revenue from tenants in its terminals and cargo buildings, and from leasing stand-alone investment properties. Rental from these property assets totalled $31.502 million for the year, an increase of 7.7 per cent compared with $29.243 million last year. The increase was due to the commencement of a number of new leases associated with completed developments and rental uplift on existing leases following rent reviews. During the 2006 year, several new commercial property projects were completed. These included seven new retail outlets in the Airport Shopping Centre, a vehicle servicing outlet for Pit Stop, a retail warehouse for J A Russell, and an expansion of facilities for freight forwarder Kiwibond, and New Zealand Post.

Warehousing Facilities: In addition, new design and build development, worth $23.1 million, was signed during the period. These include: a new 800 square metre office and 6,000 square metre warehouse facilities for New Zealand relocation and storage specialists, New Zealand Van Lines Limited. This is currently being constructed, at a cost of $7.8 million, in AIAL’s new north airport development area; a 3,800 square metre extension to the Fliway Logistics warehouse in Manu Tapu Drive in AIAL’s existing commercial precinct. This has a construction cost of $5.0 million; a $3.1 million expansion and upgrading of Air New Zealand’s import and export freight terminals; a new $6.1 million building for US-based logistics company facility and a 5,000 square metre warehouse. It will also be located in the new north airport development area; a new $1.1 million childcare centre for Lollipops Educare, located in AIAL’s designated recreation area. This new facility is intended to provide a bright, fun and educational environment for children in the airport community.

As at 30 June 2006, the property portfolio had a market value of $189.557 million. This compared with $172.767 million as at 30 June 2005. The master plan process clearly identified an appropriate location for a hotel to serve the international and future domestic terminal. In conjunction with the development of the international terminal, the company will begin a process with a suitable hotel chain to undertake development. This will provide an additional valuable service for travellers. AIAL have more than 180 hectares of land available for continued commercial property development. The company will look to further accelerate the pace of development in order to expand its portfolio of investment grade industrial, commercial, office and retail properties while maintaining its prudent approach to managing development risk.

Information technology and Telecommunications: Information technology and telecommunications (IT&T) continues to be an increasingly important aspect of airport management. It assists in managing passengers, providing flight information data, working with airlines and government agencies, and managing operational and commercial activities.

Surface Transport Access: Forecasts show there is no room for complacency by local and central government in planning and providing additional land transport infrastructure that will facilitate swift and convenient access to and from the airport. In particular, public transport systems servicing the airport require expansion, initially through dedicated bus services, but possibly also in the longer term by rail services. AIAL, has continued to strongly encourage the appropriate authorities to improve surface access to the airport. The authorities are responding, and plans are underway to achieve this.

Contd…

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International Travel DocumentationMajor Projects undertaken and Completed: A number of major projects were completed or commenced this year. AIAL, is concerned to ensure its investment programme closely matches the current and anticipated demand environment, as well as the requirements of airline customers and passengers in terms of services and costs. The company continues to refine the specification, cost and timing of its proposed international terminal development programme.

International Terminal Pier Separation

The construction of a new upper level on the existing pier, and the separation of arriving and departing passengers, in accordance with Civil Aviation Authority regulation, was completed on time in December 2005 at a cost of $47 million. This was an extremely complex project which required construction activity to take place within an operating terminal environment.

Hold Stow Baggage Screening Facility

A new hold stow baggage screening facility at the international terminal, in accordance with Civil Aviation Authority regulation, was commissioned on time in October 2005 at a cost of $28 million. This facility houses a new baggage sorting and screening facility which will enhance passenger safety by screening all bags stowed in aircraft holds.

Domestic Terminal Upgrade

The master planning process confirmed that the domestic terminals will remain in their current location for at least the next 10 years. Accordingly, a major upgrade to the Air New Zealand domestic terminal was announced. It is now being progressed in conjunction with Air New Zealand. AIAL is also developing a new retail facility between the two domestic terminals. This major upgrade to the domestic terminal will significantly enhance the facilities and services to passengers, airlines and other staff. The retail precinct is expected to open in late December 2006, with the remainder of the renovation being completed in December 2007. In addition, the company completed a $1.5 million upgrade to the Qantas domestic terminal forecourt which will reduce congestion, and provide a better flow for commercial and private vehicles.

International Terminal Expansion

The board has also approved an expansion to the international terminal. This will significantly improve the processing of arriving international passengers by providing increased space for border agency checks and reducing bottlenecks and delays currently experienced at peak times. This project will also allow the company to considerably enhance and increase the size and scope of its arrivals duty free retail offering, a key contributor to AIAL’s retail business. The cost of the expanded arrivals processing project is anticipated to be just under $100 million incurred over two years, with financial returns being derived from aeronautical charges and additional retail income.

The company has committed to developing a new Pier B at the international terminal, subject to final agreement on pricing. This will provide an additional two contact gates. The new Pier B will provide much needed gate capacity at peak hour at the international terminal. AIAL has worked co-operatively with its airline partners to develop the appropriate specification and timing for this project. Pier B will also provide twin air bridges capable of handling the new Airbus A380 aircraft. The development is expected to cost $50 million, and is expected to be completed in the middle of calendar year 2008. Returns will be derived from the airport development charge and, to a lesser extent, the terminal services charge.

Runway

The company completed the final stage of the rehabilitation of its main runway over April and May 2006. This included the final widening of the runway to allow A380 operations. In conjunction with Airways Corporation of New Zealand Limited, the company is also in the process of installing Category III approach lighting on its runway, a visual navigation aid, which will enable aircraft to land at Auckland

Contd…


Airport during conditions of very limited visibility such as fog. The company installed infrastructure for this project in conjunction with its recent runway rehabilitation programme.

Additionally, the company expects to be commencing geotechnical assessments of ground conditions for its second runway located in the north airport area.

Looking Ahead

AIAL has made significant progress in 2006. We have continued to establish a very solid foundation for our future growth. We continue to be optimistic about the long-term growth prospects for the aviation industry, for New Zealand’s tourism and travel industries and for our business.

Table 2: Financial Performances of Auckland International Airport

Particulars 2006 2005 % Change

OPERATING REVENUE (in Million $)

Airfield Revenue 67,351 66,281 1.61

Development Charges 60,405 49,531 21.95

Terminal Services Charge 17,274 13,866 24.58

Retail Income 86,712 84,681 2.40

Rental Income 31,502 29,243 7.72

Rates Recoveries 2,285 2,096 9.02

Car Parking Income 24,847 23,396 6.20

Interest Income 517 144 259.03

Other Income 14,921 13,488 10.62

Total Operating Revenue 305,814 282,726 8.17

OPERATING EXPENDITURE (in Million $)

Staff Costs 25,950 24,024 8.02

Repairs & Maintenance Costs 20,500 18,469 11.00

Rates & Insurance 5,793 5,482 5.67

Others 13,410 13,232 1.35

Total Operating Expenditure 65,653 61,207 7.26

Earnings Before Interest/Taxation & Depreciation & Amortization (EBITDA) 240,161 221,519 8.42

Depreciation & Impalements Expenses 38,546 31,895 20.85

Earnings Before Interest & Tax (EBIT) 201,615 189,624 6.32

Interest Expenses 54,911 36,229 51.57

Surplus Before Taxation 140,704 153,395 -8.27

Taxation Expenses 43,549 47,753 -8.80

Airport Surplus After Tax 103,155 105,642 -2.35

Table 3: Capital Expenditure

Particulars 2006 2005 2004 2003 2002 Airfield 30.10 51.30 19.90 3.40 37.8

International Terminal 42.8 59.5 16.70 5.50 26.00

Domestic Terminal 4.20 1.10 00.20 00.40 01.80

Car Parking 16.50 1.30 06.70 01.50 01.60

Infrastructure & Other 9.80 6.90 03.80 02.70 01.60

Property Development 06.10 07.70 28.10 23.90 12.90

Contd…

75

International Travel DocumentationTable 4: Financial Performances

2006 2005 2004 2003 2002

EBITDA Margin % 78.50 78.40 77.70 76.70 75.40

Return on Assets (%) 3.7 8.3 8.1 6.9 6.5

Earnings per share (cents) 8.44 8.61 7.74 6.14 4.24

Table 5: Financial Position and Gearing

Debt/Debt+Equity (%) 31.7 58.4 49.2 49.8 32.4

Debt/EBITDA (times) 3.6% 2.9% 2.8% 3.0% 2.3%

EBITDA Interest cover (times) 4.2% 5.7% 6.0% 5.6% 7.4%

EBIT Interest cover (time) 3.5% 4.9% 5.1% 4.7% 5.8%

Table 6: Auckland International Airport Efficiency Parameters (2001-2005)

Efficiency Parameters 2005 2004 2003 2002 2001 Pax per Employee (in No’s) 4122 3977 3897 3416 3360

Operating Rev per Operating Staff (in $)

1,100,051 999,028 953,576 832,891 770,553

Operating Revenue per Pax (in $) 26.69 25.12 24.47 24.38 22.93

Retail Revenue per International Pax (in $)

13.34 13.17 13.44 14.06 11.19

Car Park Revenue per Pax (in $) 2.22 2.14 1.77 1.64 1.50

Operating Staff Costs/Operating Revenue

8.5% 8.5% 8.5% 10.0% 10.0%

Questions




3.10 LET US SUM UP Marketing involves a range of processes concerned with finding out what consumers want, and then providing it for them. Modern market focused organisations will seek to find out what their customers want. The keystone of effective marketing activity is that the firms must achieve full knowledge of their current and possible customers. This information requires including information about market size, demographics, customer essentials and attitudes Airlines distribution channels comprise of airline own direct sales force, retailers, distributors and the Internet. The terms “Marketing” and “Selling” are sometimes commonly taken as synonymous, but they are not.

The strategy of marketing may differ from each airport, relying on its relative size, its executive leadership, brand strength, geographical location and industry rank.

3.11 LESSON END ACTIVITY Elaborate how services marketing mix differs from marketing mix of goods.

3.12 KEYWORDS Principles: A fundamental truth or proposition that serves as the foundation for a system of belief or behaviour or for a chain of reasoning.

Market Research: Market research is the process of collecting valuable information to help you find out if there is a market for your proposed product or service.


Quantitative Research: Quantitative Research involving collecting a lot of information by using techniques such as questionnaires and other forms of survey.

Qualitative Research: Qualitative research involves working with smaller samples of consumers, often asking them to discuss products and services while researchers take notes about what they have to say.

Customer: A person or organization that buys goods or services from a store or other business.

Marketing Environment: The market environment is a marketing term and refers to factors and forces that affect a firm’s ability to build and maintain successful relationships with customers.

Design: Design includes activities related to the style, look and experience of the product or service, deciding on the product's mechanical architecture, selection of materials and processes, and engineering the different components essential to make the product or services work.

Development: Development is the collective process of identifying a market opportunity, formulating a product to persuade to the segmented market, and lastly, testing, modifying and refining the product or service till it is ready for production.

Pricing: Pricing is the process of finding out the fare levels, which consist of different service amenities and limitations, for a bunch of fare products in an origin-estimation market.

Revenue Management: Revenue Management is the successive process of formative how many seats to make accessible at each fare level.

Strategy: A method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem.

Innovation Strategies: It comprises of how aggressively airports adopt future business opportunities and new technology.

Growth Strategies: It lays emphasis on the growth and development of the airport.

3.13 QUESTIONS FOR DISCUSSION 1. “Modern market focused organisations will seek to find out what their customers

want.” Elucidate.

2. What is the primary focus of marketing promotion?

3. Discuss various stages in the application of marketing principles to airline management.

4. Explain the substitution issues that are affecting airlines at the present time.

5. Describe the power of a firm’s suppliers in airline industry.

6. Explain why developing a marketing strategy is a time-intensive process?

7. Differentiate between Passport and VISAs.

8. What is the significance of having Airlines Ticket and Authorization?

9. Define Health Documents.

10. Describe Michel Porter’s Five Factors and their Application to Airline.

11. Explain cost leadership focus strategies.

12. Analyse Airline Business and Market Strategies.

13. What are the Common Mistakes we do make while travelling?

77

International Travel DocumentationCheck Your Progress: Model Answers

CYP 1

1. not generally necessary

2. passport

3. place of residence

4. entry

5. visa

CYP 2

1. True

2. False

3. False

4. True

5. True







4 PRODUCT ANALYSIS

CONTENTS


4.1 Introduction

4.2 Concept of Product and Relation to Airline

4.2.1 Product Life Cycles in the Aviation Industry

4.3 Fleet and Schedules Related Product Features

4.4 Customer Service and Controlling Product Quality

4.5 Air Freight Product

4.6 Let us Sum up


4.8 Keywords




Understand Concept of Product and Relation to Airline

Explain Fleet and Schedules Related Product Features

Describe Customer Service and Controlling Product Quality

Discuss Air Freight Product

4.1 INTRODUCTION After deciding upon its strategy, airline can shift its attention needs to in translating this strategy into the product design process and further into managing its various services. This lesson looks at the theory of product designing and managing aviation services in marketing and discusses the ways in which it can be applied to marketing in today’s airline industry.

The work is divided into two. In this section, product features which relate to the aircraft and the way in which it is used are considered. In the next, we will look at more general customer service related product decisions. In all cases, we will be seeking to define the current areas of controversy and to define the ways in which an airline can achieve a Sustainable Competitive Advantage.

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Product Analysis4.2 CONCEPT OF PRODUCT AND RELATION TO AIRLINE Applying theoretical product principles to the airline industry is said to be inappropriate, as these principles have mainly been developed for industries dealing with tangible consumer products.

The airline industry’s “product” is, of course, an intangible one which is immediately perishable and cannot be stored. The airline industry’s product may be insubstantial and many facetted.

It is capable of providing or sometime failing to provide − customer satisfaction. It is also the case that many of the analytical models developed for analysing products in Fast Moving Consumer Goods industries can also be used in the air transport industry. They do, though, have to be used in a similar way, to take account of the intangible nature of the airline product.

4.2.1 Product Life Cycles in the Aviation Industry A particular marketing mix often required at the introductory stage of a product’s Life Cycle, if the introductory period is to be carried off successfully that can lead to a profitable Growth phase.

The product must be positioned as novel, innovation and agitating. Advertising and promotional policies must emphasise it as position-enhancing, and something which only the smartest of consumers are yet able to value. High price often needed as a further way of stressing a product’s exclusivity.

Lately in the product life cycle, the product will be seen as outmoded by innovators and a completely different type of customer need to be targeted at this stage. The target market is said to be consist of laggards, i.e. those people who will only buy a product when it is very well-testified. A completely different marketing mix is required in bringing laggards into the markets, compared to the one which will need to be used to attract innovators. Prices will have to be kept low and the product must be positioned as well as tested, tried, and proven to work.

Another example is seen in marketing of holiday destinations in airline service industry, where the theory of innovator and laggard behaviour can be applied in airline marketing. Innovators, when choosing their holiday, will often be prepared to travel to new, untested places, because of their adventurous intent or a place which is status-enhancing. However, Innovators make up only a small percentage of the population − perhaps only 5% of people.

This is best seen in case of Spain’s holiday resorts, where the history of visitors illustrates the theory of the Product Life Cycle very well. Spanish resorts such as Benidorm, Torremolinos and Lloret del Mar were seen as exciting and different at a time when most people were still taking their holidays close to home in around 1960’s. By 1980s the reverse was the case, the resorts were related with noise, jamming and disorderly behaviour, and were no longer visited by the well-off travellers who could contribute the most to the local economy, with the result by 1990s, it became necessary to spend large amounts in cleaning up the resorts in an attempt to revoke these adverse trends.

The Product Life Cycle is exemplified by applications which can be found both in the aerospace industry, and, by analogy, in airline marketing as well. In aerospace, an excellent example of a booming product management comes with the world’s biggest-selling commercial aircraft, the Boeing 737.


Boeing 737

The first 737s were introduced in 1967 and persists in to sell well even today. It does so because, at all stages of its Life Cycle, Boeing has handled its product skilfully. When the first 737s were delivered in the late 1960s, early sales were slow, and the initial aircraft designated 737-100s did not perform well. Boeing came very near to withdrawing the aircraft and discontinuing production, since its early disappointments, when it looked at a financial crisis in 1972. Thus, the 737 was close to being one of the many product innovations that fall short to get beyond the introductory stage of their Life Cycle. With the result an improved version of the aircraft, the 737-200, was put into the market, which come out as success and able to enter a very clear Growth phase in the 1970s, attaining more than 1000 sales during the decade.

However, by the early 1980s, it became apparent that the success enjoyed by the 737-200 could not continue indefinitely. The aircraft was not particularly fuel efficient at a time when fuel prices were very high. Besides, it was also noisy and it was becoming visible that extremely noisy aircraft would be banned on environmental safety grounds. Finally, during early 1980s, Boeing’s was becoming increasingly confident about its product position in market, as the B737 was reaching the Maturity stage of its Product Life Cycle.

Figure 4.1: Boeing 737 Aircraft

The reaction of the company was a very positive one. Instead of ceasing production as they might have done, Boeing invested further by introducing three new versions of the aircraft, the –300, –400 and –500 series. These featured a fuselage stretch (in the case of the –300 and –400).

The 737–500 was the same size as the –200, a more up-to-date cockpit and quieter, more fuel-efficient engines. These new models revitalised the product, to the extent that more than 2000 aircraft were sold between the beginning of the 1980’s and the early 1990s.

By 1994, the 737 was again under threat as the Airbus A320 family expanded and became better established. Then, though, Boeing launched further developments in the form of the –600, –700, –800 and –900–737’s. These aircraft have again sold well, confirming the 737 as by far the most successful aircraft family ever in terms of the number of units sold.

Running a Product Range − the “Boston Box” Today, the management of Product Life Cycles is important in airline marketing. Although it does not provide the sole basis for effective product management; most firms not only dealt in a single product, instead, they are probably dangerously over specialised.

Many firms have an extensive range or portfolio of varied products, which could run into hundreds or even thousands of different products. To maximise the contribution of each of the products to corporate profitability, they need a structure which can

81

Product Analysisdirect decision-making. Boston Box is a classic method for analysing a Product Portfolio. It was developed by the US Boston.

Consulting Group and was first introduced in 1963, and has stayed as a cornerstone of product management policies ever since. It is illustrated in its most basic form in the Figure 4.2 given below:

(a) (b)

Figure 4.2 (a) and (b): Product Portfolio – The Boston Box

The model classifies products using two variables: (1) the size of the total market and (2) the share of the market detained by the product of the firm. This permits a division into so-called Wildcats, Stars, Cash Cows and Dogs. Each of these types of product needs to be handled in varied ways.

1. “Wildcat” products are defined as those where the firm’s product only holds a small share of the market, but the overall market is budding quickly. In Airline Marketing, an instructive use of the Boston Box is evident by applying it to an airline’s route network. By comparison, this can give useful messages as to how each route must be handled.

A Wildcat route is the one where traffic as a whole is growing steadily, but where the airline simply has only a little share of this rapidly maturing market. Wildcats require both patience and continuing investment. Patience is important as in short term a Wildcat may be a loss-maker. If the growth aspects of the route are good, these losses should be accepted and a presence can be maintained, particularly, for a controlled nature of competition in air transport markets, and the ways in which airport slots generally assigned.

Routes to China, India and other developing Asian counties are presently demonstrating a "Wildcat” characteristics for several airlines. Due to rapid growth in these countries, carriers should maintain a long-term presence, even if they are incurring short-term losses.

2. The “Star” position is one where on the whole market is growing rapidly and the firm’s product has a good share of the market. Star products are evidently sturdy ones for the firm, and provide a significant source of profit, although, they do require intensive and pricey management. This is because the rapid growth in the total market allow for persisting incentive for a fresh competitors to enter. Well-known firms consequently have to spend a lot to protect their market position. This spending will need to include continuing product investment and significant efforts in the direction of advertising and promotion. Pricing will also likely to be very keen, with lean profit margins. All-in-all, Star products are often those which provide an eminent proportion of a firm’s sales volumes, but a significantly lower ratio of its profits.

For cost leader airlines, intra-European routes exemplify Star principles. Although the market for this is quite large and rapidly growing, but due to growth new entrant are attracted which is likely to hold down profit margins.


3. Another Boston Box category is the “Cash Cow”: Such products still has a good share of the market, but the total market is no longer growing strongly.

The basic difference between Stars and Cash Cows is that the Cash Cow market generally doesn’t attract new entrants. Established firms will have invested to gain their place in the market, and should be able to continue to exploit it successfully. New entrants have to spend especially a great deal if they are to challenge the existing players. Entering a new market will always be costly. Although it is expensive to enter a market which is not growing; a growing market allows a new firm to hope that it will be able to become set up on the basis of new demand rather than by having to take existing customers away from their suppliers. This will not be possible in an inactive market. Success can only possible for any new entrant only if it succeeds in taking market share from other firms. Growing by taking share from others will always be a costly and risky activity, which is unlikely to yield a return to a new entrant. Growing with a market can be attained relatively economically.

Cash Cows should be a major source of profit, especially for existing firms, because they will not have to defend themselves so much from the actions of newcomers. Although the milking of Cash Cows may be extremely profitable, the problem is the lack of growth in the total market which makes these milking opportunities may not prolong for long.

The aero-engine market yet again provides a fine picture. For some years, one of the firms in this market, Rolls-Royce, seemed to have a product which fitted with the Cash Cow principles. As in this market, the big firms have to invest heavily to maintain their position. Alongside its larger engines, Rolls-Royce offered its Tay product, a small engine of 15,000-17,000 lbs of thrust. The Tay was itself a comparatively un-ambitious investment based on the core of an older Rolls engine, the Spey. The Tay, however, enjoyed superiority, because Whitney, and General Electric and Pratt for a long time had offered no engine under this class. The Tay therefore had a virtual monopoly in the three markets where it was used, for the Fokker 70, Fokker 100 and the Gulfstream business jet, as well as in the re-engining of older noisy jets.

The Tay also exemplifies the point that Cash Cow products may not be available to milk for very long. The Fokker Company filed bankruptcy in 1996, and it has to stop production of the Fokker 100 and Fokker 70. It has never restarted, despite various efforts.

For airlines, Cash Cow situations can occur on any route where future growth prospects might be poor. An example is routes between London and Paris, and London and Brussels.

These routes had been affected by railway competition due to opening of the Channel Tunnel and this competition had further become intense due to fast rail link between London and the Tunnel in 2008, which can reduce city centre journey times to below critical three hours duration.

Because of these poor growth prospects, it would be a foolish on part of airline to enter such market. There come a time, when the effect of competition can change a profitable Cash Cow into the next Boston Box class, the Dog.

4. “Dog” products are those where the total market is not growing and the firm has only a low share of the existing small market. Once a product has been finally classified as a Dog, it should be abandoned and the resources which might otherwise have been spent on attempts to improve market share and maintaining it should instead be dedicated to much more promising Wildcat situations.

83

Product AnalysisBritish Aerospace’s decision to withdraw its ATP (later, Jetstream 61) aircraft from the market presumably be so because it matched the characteristics one would expect of a Dog. The ATP being a 64 seat turboprop aircraft, growth prospects for the market of turbo-props in this size bracket at the time were poor. The reason was that regional jets of similar size were being produced in increasing numbers, and in terms of passenger appeal these aircraft seemed to have a clear edge over turbo-props. It can be inferred that despite their somewhat higher operating costs, more and more airlines were choosing them. At the same time, the ATP achieved only a low share of the market with sales being subjugated by its rivals the Canadian Bombardier Dash-8 and Franco-Italian ATR 72.

For airlines, therefore, the use of the Dog category is decision for route withdrawal. Almost all airlines find from time to time that they have routes where traffic is not growing, where losses are being incurred and where they have a poor market share.

They must give up their services on such routes and take the resources to serve more promising markets.

4.3 FLEET AND SCHEDULES RELATED PRODUCT FEATURES Optimum decision-making for an airline in a Cost Leadership position will be quite different from one aiming at multi-product differentiation. In making this trade-off, the overriding factor to be taken into account will be the business strategy of the airline concerned.

The Fleet and Schedules-related Product Features are categorized as under:

1. Cabin Configuration and Classes of Service: The principle of trading off product quality against production costs is well illustrated by this first area of decision-making. These will reflect both the structural capabilities of the aircraft and the need to meet standards for emergency evacuations. An airline looking for lowest costs of operation will configure its aircraft in a single class, and place as many seats as possible in each plane. Safety considerations will give an absolute limit.

Another problem is that of passenger comfort, with generally accepted norm is a seat pitch of 28 inches, the minimum which passengers would accept. 29 inch or 30 inch seat pitches are usually given, even by airlines focusing on the European leisure air travel market where low production costs have been a traditional preoccupation. Yet with modern, lightweight seats, this representation is a poor standard of comfort.

Decisions about essential seating comfort standards have a very considerable impact on unit cost levels. For instance, leisure-orientated airlines will usually place 235 seats into one of their most commonly-used aircraft, the Boeing 757. This has resulted from a blend of seats at 28 and 29 inch seat pitches.

Raising the seat pitch to 33 inches (typically used by scheduled airlines), reduces the number of seats that can be placed in the same aircraft to 180. Thus a decision about cabin comfort can affect unit costs by even more than 30%.

Until very recently, airlines that had such a cabin configuration used a uniform standard of seating comfort throughout the aircraft. Seat pitches were the same throughout at 32 or 33 inches, as was the number of seats abreast. On Boeing and Airbus single aisle aircraft such as the 737, 757 and A320, this meant six-abreast seating with three seats either side of the aisle. (McDonnell-Douglas aircraft such as the MD-80, being slightly narrower have been used at 5-abreast. This has also been the case with the Boeing 717.) The division between Business Class and


Economy Class was made by using a flexible cabin divider which could be moved up and down the aircraft according to the relative demand for Business and Economy seats.

Such a system can gave the airlines the benefit of valuable operational flexibility, but it was probably only sustainable in the tightly-regulated market that then prevailed. The problem it gave was that seating comfort standards were very poor in Business Class, particularly for those people who on busy flights had to sit in the middle seat of three. Business passengers came to feel that not enough was being done to recognise the fact that they had paid very much higher fares (often four or five times as high) as those who sat in the rear cabin.

The solution which has been adopted recently is to install convertible seats. These seats are expensive and also rather heavier than standard seats. They do, though, allow a row of six-abreast seating to be converted into one of four or five abreast very quickly, during an aircraft turnaround period.

This is a costly option because, besides the capital costs of the seats, it also means that fewer seats are available for sale on busy peak-time flights. Given the changing competitive scene in the industry, it might probably is an inevitable move.

Further, history of First Class and Business Class cabin configurations illustrates this point very well. When three classes were adopted as the standard configuration on these routes, the principles came out clear. First Class would accommodate passengers prepared to pay high fares for exuberant standards of comfort. Business class would be for all other passengers who paid full, flexible fares. The Economy cabin would offer only a low product requirement for passengers paying promotional and discounted fares.

Today, a competitive long-haul First Class cabin will have seats which fold down into horizontal beds. In order to accommodate this, a seat pitch of around 70 inches is needed.

In Business Class, a competitive seat pitch is now around 55 inches, an increase from the 38 or 40 inches typical of only ten years ago. In some cases, airlines have opted out of at least few aspects of competition over cabin service. For instance, Air Canada, Aer Lingus, KLM and Northwest are all examples of airlines which have withdrawn from the First Class market completely and have instead put their faith in a much-enhanced Business Class product. Although, they risk losing some of their highest-yielding business, yet they manage to have greater freedom of action. Particularly, they can improve upon Business Class to make it fully competitive with highest standards, without the concern that by doing so, they might be competing with their own First Class market.

This cabin configuration and classes of service are rather different for short-haul routes, as on these routes, almost all airlines have started given up First Class, on the grounds that it has become difficult to convince passengers to pay higher fares for sectors of only an hour or so. Now, short-haul flights are usually based on a two-class cabin, divided between Business and Economy seating.

The other current argument with classes of service and cabin configuration is a similar one, but it applicable to airlines’ long-haul instead of short-haul routes. As time has passed, earlier principles of three class system have become blurred. Business Class product specifications have risen steadily, and the fares that allow passengers to sit in Business Class have been increased substantially, in an attempt to get a return on airlines’ money. Consequently, the market demand lead to introduction of lower flexible fares. These fares permit passengers to travel without restrictions, mainly for seating in the Economy Cabin.

85

Product AnalysisHere again the problem is that despite the fact that although flexible Economy Fares are lower than Business Class Fares, they are still very high compare to restricted discount fares.

With the result, a passenger who has paid a relatively high fare can end up sitting next to someone who has paid very much less. The answer to this problem lie in four-class aircraft, with the Economy cabin sub-divided so that a section of the aircraft made available exclusively for those people paying the higher economy fares. For instance, British Airways has introduced this idea with its World Traveller Plus cabin by introducing Airbus A380.

2. Network, Frequencies and Timings: The planning of an airline’s schedule is another area where compromise between cost and product quality is needed. Practical constraints in route entry decisions are still often restricted or limited by government regulation of market access. For instance, on international routes, it may still be necessary for an airline to gain designation by the host government under the terms of the pertinent Air Services Agreement. Even when such designation can be obtained, decisions regarding frequencies and capacities are often constrained by regulatory factors.

Airport slot availability might present a constraint on route entry and scheduling. At present, the industry had based its slot allocation at congested airports on the ‘Grandfather Rights’ principle. However, opportunities to take off and landing at particular times are mainly retained by established airlines from one season to the next on a more-or-less permanent basis. There are constraints in obtaining slots to allow the frequencies of established airlines to be matched.

Environmental factors are often another practical constraint. Many airports now impose restrictions on the amount of night flying, and some even banned it altogether. Night flying is still a way for leisure-orientated airlines to boost aircraft utilisation and lower their unit costs, as many airlines try to avoid ‘dead-of-night’ arrivals and departures because of difficulties with airport access and their unpopularity with passengers.

Airline market has now been transformed in terms of the ways in which carriers serve them. On long-haul routes, nowadays passengers prefer non-stop flying to hoping flights or those involving intermediate stops. To meet such requirement, aircraft manufacturers have reacted by producing families of aircraft with longer ranges. For instance, almost all services between Southeast Asia to the West Coast of the USA, and Southeast Asia and Europe are now non-stop, and any airline which attempted to serve them with an intermediate stop would find itself at a serious competitive disadvantage. The industry’s enthusiasm for longer range non-stop services still appears to be significant. For example, Boeing is marketing a comparable long-range variant of its 777 family, known as the B777-200LR. Airbus offers a variant of its A340 family (the A340-500), which is able to fly non-stop over routes requiring 16-17 hours of flying time.

Main advantage of non-stop flights is that it allows for higher aircraft utilisation, besides that the landing fees and turnaround costs associated with the intermediate stop can be effectively averted. In principle, non-stop flying assists airlines to achieve low operating costs, but only up to a point. Very large quantities of fuel need to be carried early in a flight for use later on, which in turn can raise aircraft weight and fuel burn (something of great significance with increasing oil prices per barrel). Moreover, extra crews have to be carried to permit proper rest periods, which can increase seating capacity and accompanying costs. Another main area of argument is the debate over the related issues of hub-and-spoke networks and so-called ‘market fragmentation’. Many airlines have founded their strategic response to the market competition or challenges of deregulation on principle of hub-and-spoke model. Passengers benefit significantly from networks


based on this principle, as on each of the spokes, frequencies can be much higher because the airline is carrying the traffic heading to the end destination from all the origin points, rather than just passengers in one city-pair market. From the airline’s point-of view, Hub-and-spoke concepts allow them to exploit a far larger number of origin-and-destination markets than with a route network based on the point-to-point principle. Also, it become possible for larger aircraft to be used, giving access to lower seat-kilometre costs, that resulted in lower fares. It can also help them in protecting from competitive attacks, by the dominance they achieve at the hub airport and the higher frequencies achievable on each of the spokes. Main disadvantage of using this principle is that they are extremely resource-intensive because of the need to group flights together in co-ordinated pools, at certain stage of the day a hub airport would be the scene of frantic activities. At others, it might almost deserted and costly resources in terms of equipment and staff, which might be resting idle. It is further illustrated that one of the most successful carriers, Southwest Airlines, is not a hub-and-spoke operator. Rather, it uses a network based clearly on line-haul, i.e. point-to-point principles. It does, though, achieve low unit costs through the intensive utilisation of resources. This means that the airline has to use a relatively small aircraft (e.g. the Boeing 737). Besides South-West airline also appears to be a remarkably popular airline with passengers. Thus increasingly, aircraft manufacturers are producing smaller jet aircraft with practical operating costs. One of the main markets for these is airlines seeking to attack their rival’s hubs with “hub over flying” strategy. The regional jets produced by Bombardier and Embraer are examples of such aircraft. On long-haul routes, parallel trends can now be seen, though they are usually referred to as the trends towards market fragmentation rather than hub-over flying.

3. Punctuality: Planning to make certain high standards of punctuality is an essential product issue for all airlines. Although, it is true that some of the punctuality problems experienced by airlines at the present time can reflect only outside factors such as air traffic control congestion and airport. Trade-offs exists where airlines prepared to spend more might fare significantly better than those which opt for the lowest possible costs of operation. These carriers in turn have an important advantage in securing long-term customer loyalty. Generally, an airline will obtain the best punctuality performance if it operates new aircraft of established technology. This means that an airline seeking the best possible punctuality performance ought to avoid being a launching customer for a fresh aircraft containing substantial amounts of new technology. An especially difficult situation is when the airframe and systems, as well as the aircraft engines are completely new. Although, it would lose any opportunity to take advantage of any attractive discounts manufacturers, who would be offer to launching customers. The airline ought to have a policy of replacing aircraft with new planes after a few years. Some airlines, for instance Singapore Airlines is one such example, which appears to gain significant punctuality benefits out of it. This is to be noted that aircraft despatch reliability tends to decline with the age of an aircraft. Another punctuality-related decision is whether or not an airline should invest in the automatic landing capability, which would enable its aircraft to operate in conditions of deprived visibility. Besides some heavy costs is related with such decisions. The capital costs of buying and maintaining the equipment’s, and flight crew training costs would also be considerably raised both in early training, and also due to regular opportunities which must be given for crews to rehearse their blind landing skills. Customers now expect that fog must not delay an aircraft

87

Product Analysisunduly and in spite all these problems, investment in automatic landing is now a necessity for many airlines as competition has forced more and more carriers to make the mandatory investment. Maintenance is one more area where trade-offs stuck between cost levels and punctuality performance. A substantial line maintenance capability is required for an airline seeking to achieve the best possible punctuality record, to ensure that technical problems can be corrected as soon as they arise. For the same reason, a considerable investment in spares is required. A carrier aiming at the lowest possible cost of operation will build up a schedule which would be giving a high annual utilisation of each aircraft in the fleet. Such a policy will lower costs because it might result in the fixed costs of aircraft ownership or lease rentals being spread over the greatest quantity of output. “Thus it is in the area of schedules planning where the most significant trade-offs have to be made if an airline is to achieve a good punctuality performance.” Although, high aircraft utilisation, often bring significant product penalties, for instance, it might result in some customers having to accept inconvenient departure and arrival times, because high utilisation will require aircraft to be kept flying for a longer period apart from essential maintenance and turnaround periods. Even more significantly, a policy of high aircraft utilization may bring problems with punctuality. This is due to lack of slack in the schedule in case an airline experiences an initial delay, to allow the delay to be made up. Thus, if an aircraft is delayed early in the day for reasons outside the airline’s control such as air traffic difficulties, all the remaining flights, it is due to operate during the day would also be late. The best possible solution to such problem is to have uncongested, often remote, airports, where delays due to congestion are less likely to occur. Such policies are mainly adopted by many Low Cost Carriers for example by Ryanair. However, when it is united with cautious attention to the thorough analysis of the aircraft turnaround process, it does indeed seem to be possible to combine high aircraft utilisation with a good punctuality performance.

Check Your Progress 1 Fill in the blanks: 1. After deciding upon its strategy, airline can shift its attention needs to in

translating this strategy into the product design process and further into …………………… its various services.

2. The airline industry’s “product” is, of course, an intangible one which is immediately …………………… and cannot be stored.

3. A particular marketing mix often required at the …………………… stage of a product’s Life Cycle.

4. Today, the management of …………………… Life Cycles is important in airline marketing.

5. Optimum decision-making for an airline in a …………………… position will be quite different from one aiming at multi-product Differentiation.

4.4 CUSTOMER SERVICE AND CONTROLLING PRODUCT QUALITY Some of these product features are described below: 1. Point-of-Sale Service: Point-of-sale service is the term used to illustrate service

offered to the customer at the point where they are actually making a booking. It is an area where ground-breaking changes have occurred over the last decade.


Point-of-sale service has always been difficult for airlines because of wide variety of sales outlets used and their large number. The traditional methods to allow this have been downtown ticket offices, call centres or airport ticket desks. In addition to this, airlines need to be approachable to travel agents, with over 80% of bookings traditionally being made through such travel agents. A final source of business has been on inter-line basis from other airlines. Although the nature of interline relationships is changing, however, passengers wishing to book a multi-sector journey using several different airlines can do so by reaching through the first carrier (assuming that they are projecting to use a relatively costly flexible ticket). This airline will then contact the others to make the required bookings.

Given this range of outlets, the point-of-sale task would always have been difficult for airlines. In particular, by adopting very complex reservations procedures and fare structures, they ought to increase point-of-sale transaction times and also ascertained that the systems could only be accessed or utilized by trained experts. In turn, this further raised the proportion of bookings coming through the travel agency system and increased booking fee costs and commission.

It has taken the Cost Leader revolution as well as the growth of widely-available internet access, to completely change the position. With a high proportion of bookings being made online by passengers themselves now, by making fares and reservations procedures simpler, these airlines have been able to move to a “self-service” approach effectively. This has further resulted in large cost savings in terms of commissions and administration.

2. Reservations and Overbooking: For most air travellers, a pre-booked reservation remains an integral part of the product that is expected from airlines today. Further that the availability of cheap computing power with most of the technical problems associated with it have been resolved.

Source: http://www.firstpost.com/business/us-transportation-fines-air-india-80000-for-poor-customer-service-297949.html

Figure 4.3: Airline Reservation Service

If reservations are needed in almost all cases, airlines have to address another difficult problem: many passengers do not turn up or use the reservation they have made. The proportion of occasions where this is so varies from market to market, but it is quite common to find about 10% of bookings coming into the “no-show” category. There are many reasons for this, for example some passengers fully intend to get to the airport to check in for their flight but are prevented from doing so, they comprise accidental no-shows; last minute illness or death will be an obvious reason for accidental no-showing; other reasons would incorporate interruptions like traffic on the way to the airport and the passenger experiencing a late in-bound connecting flight, etc. Besides accidental, few happen to be

89

Product Analysisdeliberate. For instance, business travellers who are uncertain about the time at which their meetings will end may book seats on more than a few flights with different airlines, to have convenient return flight whatever be the real finishing time. Another problem may occur when a dodgy passenger holding a Standby ticket for a particular flight, making false bookings using fictitious names. Today, better-managed airlines are more advanced at handling such bumping situations. Their aim is to identify, and to compensate, the passengers who are prepared to accept a delay. These are clearly unlikely to include business travellers, only leisure travellers, though, would find the offer of compensation an attractive one. Airlines should therefore seek provide such offers for off-loading on those flights where they expect to have problems. In doing so, they can provide a valuable protection for their marketable, commercial reputation.

3. Controlling Product Quality: Quality control is an essential part of the product design phase of marketing for any airline. Without it, the carrier cannot know which parts of its product are weak, and where improvements are needed.

Many aspects of the airline product can be measured: For instance, with point-of-sale service, modern telephone equipment can provide statistics on the proportion of calls answered within a given time period. It can also provide information regarding the proportion of calls that are lost at busy hours, in the sense that caller become exhausted of waiting for someone to help him/her and instead might had chosen to abandon the call.

Monitoring of customer complaints and as well as compliments should also be attempted: All airlines entertain unjustified or fraudulent complaints, which require vigilance. Consequently, comparing the number of customer compliments with the number of complaints will provide a first quality control statistic. Airlines should also examine the nature of the complaints they receive. This will be a strong indicator of the areas where management attention is needed, only if the focus is an increasing degree of only a small number of product components.

Punctuality and regularity performance should also be studied carefully: The ratio of flights arriving and departing within prescribed limits of the scheduled time is a basic measure, with on-time to within 5 minutes a suitable standard for short-haul routes, and on-time to within 15 minutes for long-haul. Requisites for regularity (which include the proportion of flights advertised in the timetable and those were actually operated), the standard should be set near to 100%.

Baggage service (or the lack of it) must also be quantified: The proportion of bags which are failed to arrive at the destination at the same time as their owners or are mishandled is one such crucial statistic. Another measure could be, monitoring the baggage delivery times by recording the time taken for the first bag and the last bag to reach the baggage delivery carousel.

The opinions of the airline’s own customer contact and sales staff: Another important area of quality control work is one which should never be ignored Airline staff regularly comes into contact with customers and they have to listen to their complaints as well. Hence, their feedback can provide a reliable barometer of the airline’s performance.

4.5 AIR FREIGHT PRODUCT Airlines with a curiosity in penetrating the air freight market need to splurge a great deal of time in detailed planning of the freight product. There are, of course, many


differences between the air cargo businesses and air passenger, but the basic principles of product planning are almost same. The design of the freight product is an interesting aspect of airline marketing. The total market airline can use the synergies available from the belly-hold space in its passenger aircraft. For that reason it can offer flight frequency and cheaply available capacity as its main advantages. The pure freight airline, on the other hand, can supply capacity which will meet the needs of the freight customer without any need for compromise. It is these advantages that are becoming increasingly important.

Air Freight Capacity Planning: By means of air freight capacity, the advantages from the customer’s point-of-view of an airline investing in pure freighter aircraft, is to allow the capacity to be provided on the routings that the freight customer wants, at times, which suit their demand pattern as well. This might also offer a greater firmness that goods might actually be flown on the flight on which they are booked.

With questions of air freight capacity, there is an interim solution possible, with the use of so-called “Combi” and “Quick-Change” aircraft.

A Combi is an aircraft where the main deck can be divided between passengers and freight with a moveable bulkhead to separate the two.

A Quick-Change (QC) aircraft is one which can be converted from a passenger to a freighter aircraft quickly – generally in less than an hour. This is because the seats can be removed in a short time as they are placed on pallets.

Both Combis and QCs are more expensive and heavier than equivalent passenger aircraft because they need a large cargo door and a strengthened floor. Theoretically, both can bring significant benefits.

Combis have allowed routes to be opened up where there has been insufficient passenger demand to allow a service to begin at a marketable frequency. They have also permitted carriers to enter the large-shipment market without the risks associated with investing in pure freighters.

QC aircraft have sometimes been valuable in short-haul operations. Here, passengers have not generally wished to travel at night, so aircraft have had to be left on the ground then, with a significant penalty in annual utilisation. Converting the aircraft into a freighter allowed for extra, night-time flights to be operated. Despite these advantages, Combi flying has declined recently whilst the QC concept has never achieved the popularity for which the aircraft manufacturers must have hoped.

Combis have generally been unpopular with passengers, resulting as they do in a smaller-sized passenger cabin. Recent years have also seen the introduction of new fire suppression rules which have caused increases in both capital costs and aircraft weight. These in turn have challenged the economics of Combis.

With QC aircraft, these have generally been opposed by the passenger departments of airlines. Using an aircraft as a night-time freighter may mean that there will delays to early morning passenger flights if technical problems have occurred overnight. Also, in the past, QC aircraft have suffered from the way in which the nightly conversions have damaged aircraft interiors.

Decision regarding the type of aircraft used need to be selected, which might utilise the similar considerations they generally employ when selecting a passenger aircraft. For example, they might require information on the payload/range capabilities of the different aircraft types compare to their traffic flows and routing networks. Data on capital and ownership costs, field-length performance, fuel consumption and available operating costs is needed for such decisions to be made.

91

Product AnalysisThe second important performance measure for a freighter is its design density. Freighters do not only have a weight-limited payload. They also generally have a fixed volumetric capacity. If an aircraft only has a small volume relative to its maximum payload it will often become volumetrically full before its maximum payload is reached. To illustrate further, an older narrow-bodied jets such as the B707 and DC-8 had significant design density problems as it had insufficient cabin volumes. The Boeing 747 has a design density approximately 40% below that of the 707.

Although, this aircraft has a very large payload/range potential, therefore, in practice it can only be utilised on the busiest long haul services (as in case of A380F).

On the whole, airlines with a main interest in building their presence in the air freight market needed to operate a fleet of freighters. They may operate these aircraft themselves, or wet lease them from specialists such as the US firm Atlasair. If airlines choose to operate the aircraft by themselves, an attractive option may be to use conversions of obsolete passenger aircraft, instead of buying new and expensive specialist freighters from any producers.

Both Boeing and Airbus are offering freight conversion schemes for used aircraft, as a way of providing a service to airlines as well as a way of protecting the residual values of their older aircraft.

Incorporating Ground Handling Systems: Besides the questions of freight capacity, an airline hoping to penetrate the air freight market have to make decisions to employ ground handling systems, and to invest in information technology.

In the late 1960s and early 1970s a number of airlines installed advanced on-airport automated freight handling systems. These were specified to allow them to lower their ground handling costs and to meliorate the service they offered to their customers.

During the later 1970s, many airlines gave up automated on airport handling and returned to labour-intensive methods. By this time, the coming of wide-bodied aircraft meant that more and more freight was loaded into aircraft in palletised or containerised form. The process, operating under the so-called Bulk Unitisation Programme, reclaimed airlines from otherwise difficult problem of on-airport cargo handling. With this trend, airlines manage to found at least a short-term answer to their handling troubles by offering concessionary rates to those air freight forwarders who were devised to take the Unit Load Devices (ULDs), load them and present them to the airlines in a ready-for-carriage form. It however resulted in increase in the number of costly Unit Load Devices which they needed to purchase. This had also contributed in raising the bargaining power of air freight forwarders relative to the airlines. It was therefore significant that large integrated carriers such as FedEx, DHL and UPS grew rapidly during the 1980s and 1990s. With the policy of substantial investment in airport handling facilities, these firms largely choose to by-pass the forwarding industry. Some airlines, like British Airways and Air France are few good examples, who have now invested again in automated on-airport handling, in spite of having their fingers badly burnt in the industries with their first move into this direction. They are depending on the fact that since then the state of-the-art in cargo handling has advanced considerably.



1. Point-of-sale service is the term used to illustrate service offered to the customer at the point where they are actually making a booking.

2. For most air travellers, a pre-booked reservation remains an integral part of the product that is expected from airlines today.

Contd…


3. Quality control is an essential part of the product design phase of marketing for any airline.

4. Airlines with a curiosity in penetrating the air freight market need to splurge a great deal of time in detailed planning of the freight product.

5. Baggage services (or the lack of it) need not to be quantified.

Case Study: Asia Pacific Airports sia Pacific region is now driving the world's economic growth including aviation sector, with Singapore, Thailand, Vietnam, China and India leading a centre-stage and going to occupy the prominent share in the aviation growth.

Asia pacific region share has gone up in the world’s aviation market during the last one decade. The prospective market for air transport has exposed cryptogram of a sturdy global resurgence, with Asia Pacific region’s performance far exceeding the world average growth during the last one decade. Governments in Asia have been spending huge investments on national carriers and there is a sign of ploughing private sector investments into private airlines. Asia Pacific region traffic has zoomed to 760.90 million from 615.70 million in 2000, with an average growth of 6% approximately. By, 2014, the region will touch 1 billion passengers and above travelling to and from, and within Asia Pacific. The region’s share in total international scheduled passenger traffic will be touching 36% by 2014, primarily as a result of trade expansion, and liberalization and globalization policies.

Trade normalization and market liberalization would help China and India to achieve the highest growth as compared to other countries in the Asia Pacific region. China will become the largest Asia Pacific country for domestic and international scheduled passengers followed by India, Japan, Vietnam and other countries. The most rapid growth has been seen in the Europe-Asia Pacific and Trans-Pacific traffic. The current globalization trends have encouraged airlines to intensify hobbing activities at major airports in the Asia Pacific. During the last ten years, significant progress has been made in the airport and air space development to enhance growing demand. Accordingly, the region has started building "New Brand Airports" at Hong Kong, Kuala Lumpur, Shanghai, Seoul, Bangkok, Beijing, Tokyo − Narita and Osaka Kansai airport. Other countries like Singapore, Indonesia, Philippines and India are also expanding the terminal to accommodate the growing traffic in the region.

Proliferation of Low-cost Airlines in Asia

Many Asian countries have undergone transformations during recent years. The number of airlines has multiplied. Singapore has three low cost airlines (Jet Star, Tiger Airways and Valuair), which have launched their operations in 2004. Indonesia has over 20 commercial airlines. Malaysia is home to Air Asia, the region's largest and fast growing low cost carrier. Thailand has also several leisure carriers such as Phuket Air and Bangkok Airways as well as a raft of new low cost carriers: Nok Air, Thai Air Asia and One-Two-Go. Chinese government sweeping reforms and has opened the domestic civil aviation market to the private sector. India is also experiencing extraordinary growth, which is setting to accelerate the air traffic in the country. Air Deccan, Spice Jet, and Paramount Airlines are the low cost carriers operating in the country. Around half a dozen new low-cost air carriers are planning to launch and may fly in the Indian air space.

Questions




A

93

Product Analysis4.6 LET US SUM UP The airline industry’s product may be insubstantial and many facetted. It is capable of providing or sometime failing to provide − customer satisfaction. A particular marketing mix often required at the introductory stage of a product’s Lifecycle, if the introductory period is to be carried off successfully that can lead to a profitable Growth phase. The first 737s were introduced in 1967 and persists in to sell well even today. It does so because, at all stages of its Life Cycle, Boeing has handled its product skilfully.

The model classifies products using two variables: (1) the size of the total market and (2) the share of the market detained by the product of the firm. This permits a division into so-called Wildcats, Stars, Cash Cows and Dogs. Optimum decision-making for an airline in a Cost Leadership position will be quite different from one aiming at multi-product Differentiation. Maintenance is one more area where trade-offs stuck between cost levels and punctuality performance.

4.7 LESSON END ACTIVITIES 1. List various parameters which are used by aircraft or freight carrier manufacturers

in their designing.

2. Throw light on various standards used or implemented in designing of various airline products and services.

4.8 KEYWORDS Wildcat Products: These are defined as those where the firm’s product only holds a small share of the market, but the overall market is budding quickly.

Star Position: The position where on the whole market is growing rapidly and the firm’s product has a good share of the market.

Dog Products: Products where the total market is not growing and the firm has only a low share of the existing small market.

Point-of-Sale Service: Point-of-Sale service is the term used to illustrate service offered to the customer at the point where they are actually making a booking.

4.9 QUESTIONS FOR DISCUSSION 1. Explain the Concept of Product and Relation to Airline.

2. Specify the features of Fleet and schedules Related Product.

3. Define Customer Service.

4. Explain the means of Controlling Product Quality.

5. What are Air Freight Products?

6. Define the product in Airline Industry.

7. Discuss the product lifecycle in Aviation Industry.

8. Explain the following terms:

(a) In-Flight Service

(b) Point of Sale Service

(c) Cash Cow

(d) Problem Child


9. Briefly explain the Boston Box.

10. What are the fleet and schedules related product features?

11. What is the customer service related product features?

12. What is air freight product?


CYP 1

1. Managing

2. Perishable

3. Introductory

4. Product

5. Cost Leadership

CYP 2

1. True

2. True

3. True

4. True

5. False






95

Travel Information Manual

UNIT 1

UNIT III

97

Travel Information ManualLESSON

5 TRAVEL INFORMATION MANUAL

CONTENTS


5.1 Introduction

5.2 Referring the TIM

5.2.1 Key Benefits

5.3 Passport Requirements in Different Nations

5.3.1 India

5.3.2 United Kingdom (UK)

5.3.3 United States (US)

5.4 Visa Requirements in Different Nations

5.4.1 India



5.5 Customs, Currency and Airport Tax Regulations

5.5.1 India



5.6 Immigration Requirements

5.6.1 Immigration Formalities in India

5.6.2 Currency Declaration, Customs and Baggage Rules

5.7 Let us Sum up


5.9 Keywords




Explain Passport Requirements in Different Nations

Specify Visa Requirements in Different Nations

Analyse Customs, Currency and Airport Tax Regulations

Discuss Immigration Requirements

98 Airline and Travel Management 5.1 INTRODUCTION

TIM (Travel Information Manual) has been the trusted name in the air travel industry since 1963, supplying reliable and comprehensive up-to-date country destination information on entry and health requirements as well as customs and currency regulations. The TIM booklet, which is issued on a monthly basis, offers a complete package for airline offices, travel agents, multinationals, tour operators and government agencies to help travellers save time and avoid fines and delays.

5.2 REFERRING THE TIM The TIM (Travel Information Manual) is the world's leading source of Passport, Visa and Health documentation regulations for passengers.

Airlines and Travel Agents use TIM to provide advice on border requirements to passengers at the time of booking, and airlines use it at the time of boarding to ensure passengers have sufficient travel documents for their destination and any transit points. If your passengers do not have sufficient travel documents the airline will not carry them!

TIM is a practical and handy manual containing up-to-date entry regulations for air travellers.

TIM is the world's leading source for information on air travel requirements – Reliable and comprehensive information for people serving the travel industry.

An extensive network of sources from the travel industry, immigration authorities and World Health Organization ensure reliability and continuity for this unique publication.

TIM lists information on subjects such as:

Passports: Exemptions, validity, admission and transit restrictions and rules for minors, crew and the military.

Visas: Exemptions, issue, re-entry permits, transit without visa, merchant seamen requirements.

Health Information: Required vaccinations, malaria and yellow fever risk areas, HIV/AIDS and other diseases, World Health Organization recommendations, and useful information regarding passengers’ healthcare.

Airport Tax: Amount, place of payment and possible exemptions for departure tax.

Customs and Currency: Import and Export regulations, pets, wild flora and fauna.

Duty-free allowances: baggage clearance.

TIM is available by annual subscription which includes monthly issues. The annual subscription runs January to December of each year however subscribers may also order part-way through the year at a pro-rated cost. Single month's issues also available

5.2.1 Key Benefits The TIM is a must for all who are involved in the travel industry. This unique manual details rules and regulations for every nationality going to every country worldwide on subjects such as:

Passport regulations and recommendations

Visa regulations and recommendations

99

Travel Information Manual Health regulations and recommendations

Airport Tax to be paid by the traveller at either departure or arrival airport

Customs regulations relating to import/export of goods and small pets by a passenger

Currency regulations relating to import and export by a passenger

Designed for Travel Professionals

The information found in TIM is consulted by thousands of users around the world every day, including airline offices, travel agents, corporate accounts, tour operators, GDS and government agencies.

5.3 PASSPORT REQUIREMENTS IN DIFFERENT NATIONS The passport requirements for different nations are as follows:

5.3.1 India 1. While applying for a fresh passport, attach two copies of the following

documents:

(a) Proof of address (attach one of the following): Applicant’s ration card, certificate from Employer of reputed companies on letter head, water /telephone/electricity bill/statement of running bank account/Income Tax Assessment Order/Election Commission ID card, Gas connection Bill, Spouse’s passport copy, parent’s passport copy in case of minors. (Note: If any applicant submits only ration card as proof of address, it should be accompanied by one more proof of address out of the above categories.)

(b) Proof of Date of Birth (attach one of the following): Birth certificate issued by a Municipal Authority or district office of the Registrar of Births & Deaths; Date of birth certificate from the school last attended by the applicant or any other recognized educational institution; or an Affidavit sworn before a Magistrate/Notary stating date/place of birth as per the specimen in ANNEXURE A by illiterate or semi-illiterate applicants.

Note: In the case of applicants born on or after 26.01.89, only Birth Certificate issued by the Municipal Authority or the Office of the Registrar of Births & Deaths is acceptable.

(c) Citizenship Document if applicant is a citizen of India by Registration or Naturalization.

(d) Government/Public Sector/Statutory body employees should submit “Identity Certificate” in original (ANNEXURE B) along with Standard Affidavit Annexure I.

(e) If the applicant is eligible for “ECNR” attach attested copy of supporting document (see COLUMN 15 of the INSTRUCTIONS AND GUIDELINES FOR FILLING UP THE APPLICATION FORM).

(f) If the applicant was repatriated at Government cost, enclose documents to show that the expenditure, if any, incurred by the Government of India on his/her repatriation has been fully refunded to the Government of India, Ministry of External Affairs.

(g) If the applicant was ever deported to India, give details of Emergency Certificate/Passport.


2. When applying for reissue of a passport after 10 years, attach:

(a) Old passport in original with self-attested photocopy of its first four and last four pages, including ECR/ECNR page.

(b) Document mentioned at (1) (d), if applicable.

(c) Document mentioned at (1) (e), if the old passport did not have ECNR stamp or it was issued when the applicant was a minor.

(d) If there is any change in address, document mentioned at 1 (a).

(e) If the old passport does not contain spouse name, copy of marriage certificate issued by the Registrar of Marriage or affidavits per specimen in Annexure D.

3. When applying for a minor’s passport attach:

(a) A Declaration affirming the particulars furnished in the application about the minor child as per ‘Annexure-H (signed by both parents), Annexure “C” (Single parents who are separated but not formally divorced/Single parent of the child born out of wedlock), Annexure “G” (when passport is being applied for by single parent or legal guardian). Annexure “I” (when a minor between 15-18 years of age applies for a full validity 10 year passport OR in case either parents who do not hold valid Indian passport while applying passport for their minor child), as the case may be.

(b) Attested photocopy of passport, if any, of both parents, applicable.

(c) Original passports of parents should be presented for verification of particulars.

(d) If one parent is resident abroad, a sworn affidavit by the parent resident abroad attested by the Indian Mission along with affidavit from parent residing in India as will be submitted.

Note: Ordinarily the consent of both parents is required for issue of a passport to a minor (below 18 years of age). However, if it is absolutely not possible due to any reason, the parent applying for a passport for his/her minor child may submit an affidavit (Annexure G) and based on the same passport application will be processed. In case where the parent(s) is/are resident outside India, such consent from the parent(s), in the form of a sworn affidavit, duly attested by the Indian Mission abroad, is acceptable. In the cases where the minor children who are less than 18 years of age, the details of valid passports held by both or either parents should be furnished. In such cases, passport to their minor child will be issued without any police verification basis. Further, in the cases where the parents do not hold valid passports, applications for such minors can be made on the basis of three documents of parents details of which are given in para C (B) of Section IV of the Passport Information Booklet along with Standard Affidavit Annexure I. In all such cases, passport to their minor child will be issued on post-police verification basis. Children of all ages including new born must apply for separate passports. However, those below 15 years will be given 5 years validity passport or passport till 18 years of age. In case the minor child who is between 15 and 18 years of age wishes to obtain a full validity passport for 10 years, the same can be issued only on post-police verification basis on submission of Standard Affidavit as in Annexure “I” and three of the 14 document of parents details as mentioned in para C (B) of Section IV of Passport Information Booklet and on payment of fee equivalent to the normal passport fee i.e. ` 1000 for a 36 pages passport, as applicable for an adult. In the case of single parents or of parents who are separated but not formally divorced, an affidavit at Annexure C is to be submitted.

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Travel Information Manual4. For Adopted Children:

In case of Adopted Children the following documents are to be furnished:

(a) Valid adoption deed registered as per Indian laws.

(b) In the case of Christians, Muslims and Parsis, a court order granting guardianship and allowing the child to be taken out of the Country.

(c) Copy of the guarantee executed before the Court concerned.

5.3.2 United Kingdom (UK) To enter the United Kingdom, a passport valid for at least three months beyond length of stay is required by all nationals, except EU nationals holding a valid national ID card.

EU nationals are only required to produce evidence of their EU nationality and identity in order to be admitted to any EU member state. This evidence can take the form of a valid national passport or national identity card. Either is acceptable. Possession of a return ticket, any length of validity on their document, or sufficient funds for the length of their proposed visit should not be imposed.

A passport is not required for travel between Great Britain and Ireland (an official form of identification, such as a driver's licence, is required), Northern Ireland, the Channel Islands or the Isle of Man.

Passengers transiting the UK destined for the Republic of Ireland are advised to hold return tickets to avoid delay and interrogation.

5.3.3 United States (US) You can prove your US citizenship with one of the following:

Original Birth Certificate (if born in the United States); or

Old (undamaged) passport; or

Original Certificate of Citizenship or FS-240, DS-1350 (if born outside the US); or

Original Certificate of Naturalization issued by the Immigration and Naturalization Office.

Note: A certified birth certificate has a registrar's raised, embossed, impressed or multicolored seal, registrar's signature, and the date the certificate was filed with the registrar's office, which must be within 1 year of your birth.

A Delayed Birth Certificate filed more than one year after your birth may be acceptable if it:

Listed the documentation used to create it; and

Signed by the attending physician or midwife, or, lists an affidavit signed by the parents, or shows early public records.

If you changed your legal name by way of marriage or otherwise you will need to provide evidence of the name change: a certified copy of either:

A marriage certificate, or

A name change court decree.


If you do not have a previous US passport or a certified birth certificate, you will need:

1. Letter of "No Record" issued by the State with your name, date of birth, which years were searched for a birth record and that there is no birth certificate on file for you; and

2. As many of the following as possible:

baptismal certificate

hospital birth certificate

census record

early school record

family bible record

doctor's record of post-natal care

Note: These documents must be early public records showing the date and place of birth, preferably created within the first five years of your life. You may also submit an Affidavit of Birth, form DS-10, from an older blood relative (i.e. parent, aunt, uncle, sibling) who has personal knowledge of your birth. It must be notarized or have the seal and signature of the acceptance agent.

If you were born abroad and do not have a Consular Report of Birth Abroad or Certificate of Birth on file, you will need:

If you claim citizenship through birth abroad to one US citizen parent:

Issued by the State with your name, date of birth, which years were searched for a birth record and that there is no birth certificate on file for you;

Foreign birth certificate;

Proof of citizenship of your US citizen parent;

An affidavit of your US citizen parent showing all periods and places of residence or physical presence in the United States and abroad before your birth.

If you claim citizenship through birth abroad to both US citizen parents:

Your foreign birth certificate;

Parent's marriage certificate;

Proof of citizenship of your US parents and an affidavit of your US citizen parents showing all periods and places of residence of physical presence in the United States and abroad before your birth.

Requirements for a proof of US citizenship for adopted children.


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Travel Information Manual5.4 VISA REQUIREMENTS IN DIFFERENT NATIONS The visa requirements for different nations are as follows.

5.4.1 India Visa requirements for Indian citizens are as follows:

According to passport information from the International Air Transport Association (IATA), some 52 countries and territories provide visa-free or visa-on-arrival access to holders of Indian passports Indians may access 50 countries without a pre-issued visa, out of these 33 countries and territories offer visa-upon-arrival, while 28 countries and territories are accessible visa-free.

Where visa-free access is permitted, such access is not necessarily a right, and admission may technically be at the discretion of border enforcement officers. Visitors engaging in activities other than tourism, including unpaid work, may require a visa or work permit.

The country of residence − either temporary or permanent − is a factor in determining the visa requirements for Indian passport holders when visiting some countries. For example, an Indian Citizen residing in the United States holding a Green Card does not need a visa to travel to Canada, Mexico, and many countries and territories in the Caribbean. Indian citizens resident in Japan (with valid Alien Registration Cards) can travel to the Republic of Korea (South Korea) for tourism and short business trips. Similarly, Indian citizens who possess GCC residency will not need a visa to enter other GCC member countries. Indian citizens do not need a visa to travel and work in Nepal or Bhutan.


Table 5.1: Visa and Passport Requirement in Different Countries

Passport required Return ticket required Visa required Australian Yes No No

British N/A N/A N/A

Canadian Yes No No

Other EU 1 No No

USA Yes No No

Visas for the United Kingdom are not required by nationals referred to in the chart above for stays of up to six months.

Visa Note: Nationals not requiring visas are advised to be in possession of either a return ticket or, if arriving on a one-way ticket, proof of sufficient funds to accommodate and support themselves for the duration of stay.

Nationals not referred to in the chart are advised to contact the embassy/high commission to check visa requirements for the United Kingdom.

Types and Cost: Short-term visit visa (single- or multiple-entry): £80; long-term visit visa: £278 (up to two years), £511 (up to five years) and £737 (up to 10 years).

Validity: Short-term visit visas: six months (or 12 months if you're accompanying an academic visitor); long-term visit visas: one, two, five or 10 years, with a maximum stay of six months per visit.

Application to: Consulate (or consular section at embassy/high commission). In some countries, you can apply online. See the Home Office UK Border Agency website for details (www.ukba.homeoffice.gov.uk).


Schengen Visas: The United Kingdom is not part of the Schengen area.

Working Days: The length of time taken to process visa applications depends on the nationality of the applicant and the country where you're applying.

Sufficient Funds: If you do require a visa to visit the United Kingdom, you may be asked to provide information about your finances.

Extension of Stay: If you are initially given permission to enter for three months, you may apply to the UK Border Agency to extend your stay to six months from your original date of entry. You must do this at least four weeks before your permission to stay ends.

The maximum total time you can stay in the United Kingdom is six months (or 12 months if accompanying an academic visitor). When your permission to stay as a visitor expires, you must return home. You cannot transfer to a different immigration category.

Entry with Pets: If bringing a pet from another EU or 'listed' country, your animal must have a microchip, pet passport or official third country veterinary certificate, rabies vaccination administered at least 21 days before travel, and tapeworm treatment (dogs only).

If bringing a pet from an unlisted country, your animal must have a microchip, official third country veterinary certificate, rabies vaccination, blood test taken at least 30 days after the rabies vaccination and at least three months before travel, and tapeworm treatment (dogs only).

5.4.3 United States (US) Visa requirements for the United States citizens are administrative entry restrictions by the authorities of other states placed on citizens of United States. According to the "Henley Visa Restrictions Index 2013," holders of a United States passport can visit 172 countries and territories visa-free or with visa on arrival, and the United States is currently ranked 2nd (tied with German, Danish and Luxembourgish) in terms of travel freedom.

5.5 CUSTOMS, CURRENCY AND AIRPORT TAX REGULATIONS The customs, currency and airport tax regulations for various countries are as under:

5.5.1 India

Customs Rules

Import Regulations

Free import (import by non-residents, however, is only permitted if they enter India for a stay of not less than 24 hours and not more than 6 months, provided they visit India not more than once a month):

1. Persons of 17 years of age and older: 200 cigarettes or 50 cigars or 250 grams of tobacco; 2 litres of alcoholic liquor or wine;

2. Medicines in reasonable quantities;

3. 2 ounces of perfume and 1/4 litre of toilet water;

4. Jewellery, up to a combined value of INR 50,000 for male travellers or INR 100,000 for female travellers;

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Travel Information Manual5. Travel souvenirs imported by nationals and residents of India or if being of Indian

origin provided being 10 years of age or older:

(a) If returning from Bhutan, China (People's Rep.), Myanmar or Nepal: up to INR 6,000.

(b) If stayed outside for more than 3 days. If stayed outside up to 3 days: nil.

(c) If returning from other countries: up to INR 35,000.

(d) If stayed outside for more than 3 days.

(e) If stayed outside up to 3 days: INR 15,000.

(f) Persons under 10 years are allowed 1/4 of the value admitted to adults.

(g) Nationals of, or being of origin, Bhutan and Nepal and coming from respective countries: nil.

(h) If coming from other countries: up to INR 8,000.

(i) Nationals of, or being of origin, Pakistan and coming from Pakistan: up to INR 6,000.

(j) If coming from other countries: up to INR 8,000.

(k) All other nationals: up to INR 8,000.

(l) If coming from Pakistan: up to INR 6,000.

6. Goods for personal use. Goods in excess of the maximum permitted amount will be subject to an import duty of 60%.

Additional Information on Regulations

Firearms: It is advisable to obtain a possession licence in advance (or hold proof of exemption) in order to avoid delay and inconvenience on arrival. A Tourist Baggage Re-Export Form (TBRE) will be issued upon arrival to tourists for re-exportation of their expensive items duty free.

Replica guns: Require a Permit for Import.

Radio controlled helicopters: Only those operating at 27 MHz are permitted. Those operating on other bands will be inspected on a case by case basis and could be destroyed based on their technical specifications.

Seeds and plants: The import of seeds and plants for the purpose of sowing, planting and propagation, consumption, research and breeding requires an import permit. Import is restricted to the airports of Amritsar (ATQ), Bengaluru (BLR), Chennai (MMA), Delhi (DEL), Guwahati (GAU), Kolkata (CCU), Mumbai (BOM), Patna (PAT), Hyderabad (HYD), Thiruvananthapuram (TRV), Tiruchchirapalli (TRZ), Varanasi (VNS).

Livestock and livestock products: The import of these, by any means including cargo or baggage is restricted and requires a sanitary import permit, as well as a "No Objection Certificate" (NOC). A NOC must be obtained in advance from the Animal Quarantine and Certification Services (AQCS). Products include: meat and meat products of all kinds of fresh, chilled and frozen meat, tissue or organs:

egg and egg powder;

milk and milk products;

bovine, ovine and caprine embryos, ova or semen;

pet foods of animal origin;


gelatine, fur, animal skin, wool, leather, carpets, horns, bone and bone grist, feathers, shuttle cock, etc.

prohibited: The following livestock and livestock products are prohibited:

All kinds of birds and bird products (incl. eggs, feathers, meat etc.); and

pigs and pig meat products.

A minimum of 48 hours is required by the Airport Health Office for the importation of human remains or ashes. A death certificate is also required (in English or translated into English). A death certificate indicating cause of death as unknown or pending will not be accepted. Please contact airline for further requirements that apply to the carriage and importation of bodies.

Crew members’ customs regulations: No duty-free allowance. Crew members must declare all dutiable goods on the PPL (Private Property List).

Pets (Cats and Dogs): Import of a maximum of two pets as baggage is allowed only:

Through Bengaluru (BLR), Chennai (MAA), Delhi (DEL), Kolkata (CCU), Mumbai (BOM) and Hyderabad (HYD); and

If a pet is being imported for the first time by an owner who is transferring residence to India, after a minimum two years of continuous stay abroad; or if the pet is being re-imported into India; and

Upon presentation of health certificates from country of origin; and

Presentation of a "No Objection Certificate (NOC) arranged at least 15 days prior to import from the Animal Quarantine and Certification Services (AQCS); and

After Quarantine Officer examination upon arrival. In all other cases, a license from DGFT (Directorate General of Foreign Trade) is required.

Baggage Clearance regulations: Baggage is cleared at the first airport of entry in India. Baggage of transit passengers with a destination outside India is exempt.

Airport Embarkation Tax

No airport tax is levied on passengers upon embarkation at the airport.

Currency Rules

Currency Import Regulations

Foreign currencies: Unlimited. However, amounts exceeding USD 5,000 (or equivalent) in cash, or USD 10,000 (or equivalent) in traveller's cheques must be declared.

Local currency (Indian Rupee-INR): INR 7,500 for residents of India, except when arriving from Bhutan and Nepal. For residents arriving from Bhutan and Nepal, there no limit in amount of INR but notes no bigger than INR 100 may be carried.

Foreign currencies include currency notes, traveller's cheques, cheques, drafts, etc. (Re)exchange only through banks and authorized money exchange points.

Currency Export Regulations

Foreign currencies: Up to the amount imported and declared.

Local currency (Indian Rupee-INR): INR 7,500 for residents of India, except when departing to Bhutan and Nepal. For residents departing to Bhutan and Nepal, no limit in amount of INR but notes no bigger than INR 100 may be carried.

Foreign currencies include currency notes, traveller's cheques, drafts, etc. (Re)exchange only through banks and authorized money exchange points.

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Travel Information Manual5.5.2 United Kingdom (UK) Customs Rules

Import Regulations

Free import to passengers arriving with goods purchased within the EU which are for personal use only. Goods obtained duty and tax paid in the EU; unlimited, provided being for personal use, which includes personal consumption and gifts for family and friends.

However, if bringing large quantities of alcohol or tobacco and stopped by Customs, questions may be asked regarding journey, purchases and purpose of the goods, particularly if the amounts exceed:

1. Tobacco products:

800 cigarettes;

400 cigarillos (max. 3 g each);

200 cigars;

1 kg of pipe or cigarette tobacco;

2. Alcoholic beverages:

10 litres of spirits over 22%;

20 litres of alcoholic beverages less than 22%;

90 litres of wine (though no more than 60 litres of sparkling wine);

110 litres of beer.

Free import to passengers arriving from non-EU Member States (including the Canary Islands, Channel Islands, Gibraltar and similar territories):

1. Tobacco products, for passengers 17 years of age and over:

200 cigarettes; or

100 cigarillos (max. 3g each); or

50 cigars; or

250 g tobacco; or

a proportional assortment;

2. Alcoholic beverages, for passengers 17 years of age and older:

1 litre of spirits over 22% volume, or non-denatured ethyl alcohol with more than 80% volume; or

2 litres of spirits or aperitifs made of wine or similar beverages less than 22% volume, or sparkling wines or liqueur wines; or

A proportional mix of these products; and in addition 4 litres of wine; and 16 litres of beer;

3. Other goods (for air travellers) up to a value of GBP 390:

Prescription Drugs: Passengers carrying medication upon entry to the UK do not have to declare them by entering a red channel or present their licence, but should be able to produce this if questioned.

Prohibited: Anabolic steroids and certain other performance-enhancing drugs, in the form of medicinal products, are prohibited unless they are imported by an individual for self-administration. Products of animal origin, not originating from an EU Member


State, Andorra, Liechtenstein, Norway, San Marino or Switzerland, are not permitted to be imported into an EU Member State, with the exception of limited amounts from Andorra, Faeroe Isl., Greenland, Iceland and small amounts of specific products from other countries.

Arms and Ammunition Regulations: Import of firearms (incl. sporting guns and shotguns) and ammunition must be supported by an appropriate license/certificate plus a permit. This permit can be obtained at the relevant police authority by a sponsor who is resident in the UK. The sponsor may be an individual or a representative of a club, shooting syndicate, country estate or national shooting organization. The completed permit will be sent to the sponsor who can forward it to the visitor. The sponsor may also produce the permit at the time and place of the importation by arrangement.

If a visitor has no permit, then the weapon will be detained by UK Border Agency until a permit is produced.

Weapons taken from passengers prior to embarkation for safe stowage in the aircraft must be returned to the passenger by a responsible officer of the airline or handling agent in the presence of an officer of UK Border Agency in the red channel of the arrival customs hall. Furthermore such items must be clearly "identified" so that they can be presented to UK Border Agency for clearance in accordance with the prevailing instructions. The use of a sticker/label will ensure that all firearms and ammunition therefore are quickly and easily identified on arrival, thus obviating difficulties with customs clearance.

Passengers are allowed to tranship sporting guns and ammunitions via the United Kingdom under the open general transhipment licence subject to following:

weapons must travel with passenger as checked personal baggage;

if there is a stopover in the United Kingdom, weapons must be declared and must not remain in the United Kingdom longer than 30 days. However, passengers are not permitted to transit through the United Kingdom with checked baggage containing sporting guns to the following destinations: Iran, Iraq, Liberia, Libya, Macedonia (FYROM), Montenegro, Myanmar, Rwanda, Serbia, Sierra Leone, Somali and Sudan.

Important: All handguns are restricted under UK law and may only be carried on BA aircraft with prior permission of the Security Duty Manager. Small arms ammunition for sporting purposes shall not be carried in passenger's baggage in quantities exceeding 5 kg per person.

Additional Information on Regulations

Prohibited: Indecent or obscene books, films or videos.

Foodstuffs (for personal consumption):

The following may be brought into the UK if arriving from:

An EU Member State , Andorra, the Canary Islands, the Isle of Man, Norway and San Marino: meat and meat products, milk and dairy products (not applicable to unpasteurised milk and its products) and other animal products (e.g. fish, shellfish, honey, eggs) provided obtained in the EU and free from disease;

The Faroe Islands, Greenland, Iceland, Liechtenstein and Switzerland: 5kg max combined total weight of meat and meat products, milk and dairy products (not applicable to unpasteurised milk and its products) provided obtained these countries and free from disease; generally 1kg (rules vary per product/country) of other animal products (e.g. fish, shellfish, honey, eggs) provided free from disease;

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Travel Information Manual All other countries: generally 1kg (rules vary per product/country) of other animal

products (e.g. fish, shellfish, honey, eggs) provided free from disease. No meat and meat products, milk and dairy products are permitted. All travellers may carry a limited quantity of powdered infant milk, infant food and special foods required for medical reasons, provided items do not require refrigeration prior to opening and must be in commercially branded packaging, unopened unless in current use.

Fruit, vegetables, plants and plant products (all for personal use and must be free from signs of pests and diseases): The following may be brought into the UK if arriving from:

An EU Member State, Andorra, the Canary Islands, the Isle of Man and San Marino: all plants or plant products provided they were grown in these countries;

Other specific European Member States and other countries in the Euro.

Mediterranean area and all other countries: A limited amount of certain fruits, vegetables, plants and plant products, with restrictions on many others. Applicable in Northern Ireland: Passengers having visited farms or being in contact with farm animals should contact the Imports Inspectors on arrival. All animals are subject to pre-importation conditions and licence. Import of all kinds of meat or poultry meat only allowed if:

Packed in tins or sealed glass containers provided these are capable of storage for extended periods; or

Accompanied by a veterinary certification;

Declared upon arrival to the Department of Agriculture (Northern Ireland) Imports Inspectors.

Crew Members’ Customs Regulations:Same regulations as for passengers apply.

Pets: Pet cats, dogs (incl. assistance dogs) and ferrets entering the UK, must meet the rules of Regulation (EC) No. 998/2003. This regulation is operated in the UK as the Pets Travel Scheme (PETS).

At present, carriers on certain routes are participating in PETS to transport pets.

Pet cats, dogs and ferrets, which do not comply with the Regulation, are subject to rabies control measures (quarantine). They must not be shipped as baggage and must be carried in the hold of the aircraft in a "nose and paw proof crate or container" as manifested cargo covered by an Air Waybill. Prior advice by telex or other suitable means to the Cargo Department of the airline concerned at the station of arrival is mandatory prior to shipment. It should quote license number shown on "boarding document", name of shipper and owner, species of animal, date and flight of arrival and departure.

Cats, dogs and ferrets must be accompanied by a "boarding document" as an indication that the Department for Environment, Food and Rural Affairs has issued an import licence. When they enter UK, they will be vaccinated against rabies. This may be waived if they have already been vaccinated.

Transit: Pets arriving and departing from the same airport must do so within 48 hours or be transferred to an official quarantine by an authorized carrying agent. Arrangements must be made prior to arrival. Pets may not pass the customs control. Pets arriving and departing from different airports within 48 hours require a transit license from the Animal Health, Specialist Service Centre for Imports. The pet must be transported from the point of landing to the point of export by an authorized carrying agent.


Prohibited: All imports of birds and bird eggs are subject to restrictions for reasons of animal health and some are also restricted under the Convention on International Trade in Endangered Species (CITES). Import of five or less pet birds may be permitted subject to certain conditions. Warning: In case of illegal imports into Great Britain the owner may be fined up to GBP 5,000. (or more if convicted in the Crown Court) and/or imprisoned and the animal destroyed. An owner who knowingly uses false documentation to transport a pet into Great Britain can also be fined up to GBP 5,000 and/or imprisoned. An airline which lands an illegal pet in Great Britain (i.e., one that fails to meet the entry rules and does not have an import licence) may be fined up to GBP 5,000 (or more if convicted in the Crown Court). Note: Different fines may apply in Northern Ireland. With approval of the carrier trade dogs may enter the UK provided following conditions (Balai directive 92/65/EEC) have been met: – dogs must be from registered establishments, must have microchip identification, rabies vaccination and blood tests. The dog has to be available for checking by a Veterinary Officer within 24 hours after arrival in the UK. A red "rabies control" label (sent to all applicants for licenses) should be affixed to the crate/cage or container. Baggage Clearance regulations: If Aberdeen (ABZ) is the first airport of entry, baggage is cleared at Aberdeen. Baggage of transit passengers with a final destination of Heathrow (LHR) or Gatwick (LGW) will be cleared at the first airport of entry. In all other cases, baggage is cleared at the airport of final destination or at an International Community Airport (ICA) in the United Kingdom, provided it is labelled accordingly. Exempt: 1. Baggage of transit passengers with a destination outside the United Kingdom,

provided it is labelled to that destination; 2. Baggage of passengers who embarked in another EU Member State will not be

cleared at all (use Blue Exit). Airport Embarkation Tax No airport tax is levied on passengers upon embarkation at the airport. Currency Rules Import and Export: Local currency (Pound Sterling-GBP) and foreign currencies: no restrictions if arriving from or traveling to another EU Member State. If arriving directly from or traveling to a country outside the EU: amounts exceeding EUR 10,000 or more or the equivalent in another currency (incl. banker’s draft and cheques of any kind) must be declared.


Customs Rules Import Regulations Articles from certain developing countries are given special duty preferences when imported into the USA. Information regarding the countries concerned and the eligible articles may be obtained directly from the US International Trade Commission, 701 E Street N.W., Washington, D. C. 20436, USA or from the nearest overseas US Consulate. Residents 1. Returning residents of the USA are allowed to import free of duty up to USD 800

worth of articles acquired abroad, provided their stay abroad was at least 48 hours and their duty-free exemption was not used in the preceeding 30 days.

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Travel Information ManualFor arrivals directly from the US possessions of American Samoa, Guam and the US Virgin Islands, a duty-free exemption of USD 1600 is allowed (not more than USD 800 of which may be acquired elsewhere than in these islands). The duty-free allowances may include the following maximum quantities of: (a) Tobacco products: 200 cigarettes, a reasonable amount of tobacco and 100

cigars. For arrivals from the US Virgin Islands, Guam or American Samoa: 1000 cigarettes, not more than 200 of which may be acquired elsewhere than in these islands.

(b) Persons of 21 years or older: 1 US quart of alcoholic beverages. For arrivals from the US Virgin Islands, Guam or American Samoa: 1 US gallon, not more than 1 quart of which may be acquired elsewhere than on these islands.

(c) Perfumes, lotions, Eau de Cologne, etc. if not under a trade mark restriction recorded in the US Treasury Department (importation of one trademarked article per passenger will usually be allowed, unless the trade mark owner has authorized a greater number of imports of its article).

(d) Other goods for personal use. Above exemptions are also applicable if shipped as cargo provided arriving by same aircraft and date as owner. It is advisable that US residents have valuable articles of foreign manufacture registered by a customs inspector before leaving the USA. Generally, persons leaving the USA for the purpose of travelling, working or studying abroad and returning to resume residency in the USA, are considered returning residents by the US Customs. Mexico and the Virgin Isl. (USA) are exempt from the 48-hour minimum time requirements.

State restrictions: Quantities in excess of one US quart of alcoholic beverages per person imported into certain states (e.g. New York) are subject to local state taxes. E.g: the New York State Tax is for liquors USD 3.25 per gallon, for champagne and for wines USD 0.80 per gallon. Passengers returning directly from the Virgin Isl. 9USA) may import one gallon duty free. Any amount in excess of one gallon is subject to US duties and N.Y. Taxes. For possible restrictions of US states other than those mentioned above, apply to "Distilled Spirits Council of the USA", 1300 Pennsylvania Building, Washington D.C. 20004.

Members of a family residing in one household travelling together on their return to the USA will group articles acquired for application of the flat duty rate without regard as to which member of the family may be the owner of the articles. For example, an eligible family of four would have their articles grouped for a total of USD 3,200 fair retail value for entry at the flat rate of duty.

2. If not entitled to the USD 600, USD 800 or USD 1200 exemption (because the exemption was previously used within the past 30 days or stay outside the USA was less than 48 hours) articles not exceeding a value of USD 50 may be brought in, to include not over 50 cigarettes or 10 cigars or 4 ounces of alcoholic beverages (age: 21 years or older) or 4 ounces of alcoholic perfume. This USD 50 exemption may not be grouped together for members of a family. If the USD 50 exemption is exceeded, the whole quantity is dutiable.

3. US Customs will allow non-commercial importation of up to USD 800 worth of goods from Cuba, Cambodia, Korea (Dem. People's Rep.), and Viet Nam provided:

This USD 800 allowance is used only once every 6 months;

The goods are actually purchased in that country;


They are for personal use and not for resale and

Accompany the traveller at time of entry into the USA.

Note: Articles from Cuba, Cambodia, Korea (Dem. People's Rep.) and Viet Nam brought to the USA from other countries may still be restricted. It is prohibited to import Cuban cigars from any country. Further information may be obtained from the nearest US Consulate or by writing to the US Customs Service, Washington D.C. 20229, USA.

4. USA residents returning from the USA possessions of American Samoa, Guam or the Virgin Isl. (USA) may apply their personal duty-free exemption to articles acquired in, and sent directly from, these islands. Further information regarding unaccompanied shipments should be obtained from the local US Customs Office.

Non-residents

Non-residents are allowed to import the following articles for personal use free of duty (see also additional gifts below):

1. 50 cigars or 200 cigarettes or 4.4 lbs. (2 kg.) of smoking tobacco (persons of 21 years or older). Combination of proportionate parts of the three quantities is permitted;

2. 1 US quart of alcoholic beverages (persons of 21 years or older); In addition each non-resident (including minors accompanied or unaccompanied) is allowed to import gifts free of duty not exceeding USD 100 in value, provided:

(a) the stay in the USA is not less than 72 hours, and

(b) this USD 100 gift exemption has not been claimed within the preceeding 6 months.

False statements made to a US Customs Officer are punishable by Law.

State restrictions: Quantities in excess of one US quart of alcoholic beverages per person imported into certain states (e.g. New York) are subject to local state taxes. E.g: the New York State Tax is for liquors USD 3.25 per gallon, for champagne and for wines USD 0.80 per gallon. Passengers returning directly from the Virgin Isl. 9USA) may import one gallon duty free. Any amount in excess of one gallon is subject to US duties and N.Y. Taxes. For possible restrictions of US states other than those mentioned above, apply to "Distilled Spirits Council of the USA", 1300 Pennsylvania Building, Washington D.C. 20004.

No alcoholic beverages or cigarettes may be included in the USD 100.00 gift exemption.

However 100 cigars may be included in this gift exemption. If not entitled to the USD 100 gift exemption, articles not exceeding a value of USD 50.- may be brought in which may include up to 50 cigars or 3 lbs. of tobacco. This USD 50 exemption may not be grouped together for members of a family.

Prohibited to Import: For both residents and non-residents importing prohibited items can result in significant fines, penalties and/or imprisonment.

1. Narcotics, marijuana, dangerous drugs, absinthe (and any other liquor/liquors containing artemisia absinthium).

2. Fresh, dried or canned meat or meat products, poultry meat, plants , seeds (including rice, soybeans and chickpeas), , vegetables, fruits, soil, live insects, snails and other living plant or animal pests.

3. Fish - unless certified as disease-free - including salmon and trout, or their eggs, if not canned, pickled or smoked may not be imported from anywhere except North America.

113

Travel Information Manual4. Imports from or exports to Iran and leather souvenirs imported from Haiti

(e.g. drums).

5. Wildlife and fish and endangered wildlife species are subject to certain prohibitions and restrictions. This includes wild birds, mammals, reptiles, crustaceans, fish, molluscs and any part or product such as feathers, skins or eggs. Also prohibited are articles or products manufactured from wildlife such as articles of clothing (i.e. leopard skin coats, crocodile shoes etc.), purses, carvings, etc.

Further information may be obtained from the US Bureau of Sport Fisheries and Wildlife, Washington, D.C. 20240 or at a US Embassy or Consulate overseas.

6. Lighters without fuel are permitted in checked baggage or a maximum of two lighters with fuel if properly enclosed in a Department of Transportation (DOT) approved case.

7. One book of safety (non-strike anywhere) matches are permitted as carry-on items, but all matches are prohibited in checked baggage.

8. Dairy products and eggs from certain countries. For up-to-date information contact the nearest US Consulate.

9. Cuban cigars from any country.

Small quantities of cut flowers without soil are generally allowed into the USA. However, they should be pest-free. Certain plants and plant products are admissible under permit obtained in advance of importation. For information, write to: US Dept. of Agriculture, Animal and Plant Health Inspection Service (APHIS), National Centre for Import and Export, 4700 River Road, Unit 39; Riverdale, MD 20737.

Seeds of certain flowers, shrubs, vegetables and field crops may be admitted into the USA. Further information may be obtained by writing to Quarantines; US Department of Agriculture (see address quoted above) or at a US embassy or consulate.

Arms and Ammunition Regulations

For alien non-residents only: Import of firearms and ammunition unless holding an approved Form 6 "ATF Form 6, Part 1 (Application and Permit for Importation of Firearms, Ammunition and Implements of War)".

Export Regulations

Free export of an unlimited quantity of tobacco products and alcoholic beverages.

Crew members’ customs regulations: Crew are allowed to import:

1. one open litre of alcoholic beverage; and

2. 300 cigarettes or 50 cigars or 2 kilograms of smoking tobacco, or a proportionate amount of each; and

3. merchandise not exceeding USD 200 in value, which may include gifts the crew member has purchased for persons in the United States, free of duty. A special crew line is available.

Pets: Cats and dogs are inspected by quarantine officer at port of arrival. If there is evidence of ill-health, the owner must pay for the veterinarian for further examination of the animal.

In addition, dogs (except for puppies less than three months of age) require rabies vaccination not less than one month before arrival. 1. A valid certificate of rabies vaccination signed by a licensed veterinarian must

accompany the dog. This certificate should identify the dog and specify the date of vaccination and expiration, and the type of vaccine used. If no expiration date


is stated, the vaccination must be no more than 12 months before arrival. No rabies vaccination is required for dogs that during 6 months or more preceding their arrival in the USA have been in Anguilla, Antigua, Aruba, Australia, Bahamas, Barbados, Bermuda, Chinese Taipei, Curacao, Faroe Isl., Fiji, Guadeloupe, Guam, Iceland, Ireland (Rep.), Jamaica, Japan, Martinique, Montserrat, New Zealand, Norway, Saipan, Samoa (American), St. Kitts and Nevis, St. Lucia, St. Martin, St. Vincent, Sweden, United Kingdom or Virgin Isl.

2. The above pet requirements apply to all US ports of entry EXCEPT the territory of Guam and Samoa (American). Dogs arriving from other areas than mentioned in 1. Without rabies vaccination certificate may be admitted provided owner confines the dog at home for 30 days and has the dog vaccinated within 4 days after arrival at destination and not more than 10 days after arrival at port of entry.

Pets entering Hawaii need a health certificate issued by an accredited veterinarian within 14 days prior to arrival. Dogs (including special aid dogs) and cats must undergo a mandatory 120 day quarantine period in the State Animal Quarantine Station. Only if specific requirements are met, animals can qualify for a 30-day quarantine period or the “5-days-or-less” quarantine program. Pets may only enter Hawaii at Oahu, Honolulu International Airport. All dogs and cats entering Hawaii are required to have an implanted microchip, which has to be obtained from the State of Hawaii Department of Agriculture. Quarantine charges are: USD 25 registration fee, USD 10 health record fee and USD 7 per day for dogs and USD 6.50 per day for cats. Animals entering Hawaii on direct flights from the British Islands, Australia or New Zealand may be exempt from quarantine requirements. Pets transiting Hawaii must be quarantined at the state facility for the transit period. The Animal Quarantine Station must be notified of the complete itinerary at least 72 hours prior to departure from Hawaii. Passengers travelling via Houston must stay on board the aircraft during the transit stop there when they have their pets in the cabin. Birds: Entry or transit of birds is strictly controlled. Only one or two personally owned pet birds may be brought into the USA. The US Department of Agriculture (USDA) Animal Import Centres that contain quarantine facilities for pet birds are located only at the following special ports: Alaska (transit only); Los Angeles, CA; Miami, FL; Mission, TX (only for abandoned or smuggled birds); New York JFK, NY. Note that the US laws restrict the entry of psittacine birds (parrots, parakeets, cockatoos, etc.) to two pet birds per family per year. All pet birds (with certain exceptions for Canadian-origin birds) must be accompanied by a Health Certificate issued within 30 days prior to entry by the national government veterinary office of the country of export and are subject to a minimum 30 day isolation period at a US Department of Agriculture (USDA) operated quarantine facility. An advance reservation must be obtained from the quarantine facility and a deposit of USD 40 must be paid prior to import. Warning: Unauthorized importation of birds can result in seizure. Pet birds originally obtained in the USA and returning to the USA with the owner are allowed to re-enter without a USDA import permit. The pet bird may be quarantined in the owner's home for the 30-day quarantine period. Baggage Clearance regulations: All baggage, regardless of next destination, is cleared at the first point of entry in the USA. This also applies to baggage of passengers making an international transfer. Crew: A special crew line is available. Airport Embarkation Tax No airport tax is levied on passengers upon embarkation at the airport.

115

Travel Information ManualCurrency Rules

Currency Import Regulations and Currency Export regulations

Local currency (United States Dollar-USD) and foreign currencies: no restrictions, provided that arriving and departing passengers must report to US customs any money or other monetary instruments exceeding USD 10,000.

Gold: Importation of gold coins or small, non-commercial quantities of gold must be declared upon arrival.

5.6 IMMIGRATION REQUIREMENTS Immigration is the movement of people into another country or region to which they are not native in order to settle there. Immigration is a result of a number of factors, including economic and/or political reasons, family re-unification, natural disasters or the wish to change one's surroundings voluntarily.

India is rapidly gaining ground in the international scenario as a popular destination for foreign travellers, international students, and even for some others who opt to migrate to this mystical land, which has caught much of their fancy and amazement. The country, which had been reeling under the onslaught of a British colonial rule, managed to fight all odds and create a niche for itself in less than 60 years since its independence. It has metamorphosed into one of the most sought after destinations for travel, much due to the presence of several renowned world heritage sites, and an inherent spiritualistic force, which pulls enthusiastic travellers towards it. But, in spite of being a major revenue puller for the Indian economy, tourism is not the only contender, as an international standardization of Indian education has made its presence known amongst other stalwarts.

India provides a unique picture of herself in the global map. Since long, travellers of all sorts have made their way to the country to catch a glimpse of some of the world’s most famous historic sites and monuments that are reminiscent of the country’s rich cultural heritage. Taj Mahal in Agra is one such landmark, which has been inducted into the list of the Seven Wonders of the World, owing to its unique architectural beauty and historic relevance. Moreover, the spiritual fervour that the country evokes is another reason for which foreigners come to the country, and also inculcate traces of it into their lives.

5.6.1 Immigration Formalities in India There is no provision of 'Visa on Arrival' in India and no fee is charged for immigration facilities at the airports. However, there is a provision of granting TLF (Temporary Landing Facility)/TLP (Temporary Landing Permit) to allow entry of foreigners arriving in emergent situations like death/serious illness in the family, without an Indian Visa on cash payment of US$ 40 (Indian Rupee equivalent i.e. ` 1935).

This facility can also be extended to transiting foreigners having confirmed onward journey tickets within 72 hours. Apart from this, foreign tourists in groups of four or more arriving by Air or Sea, sponsored by recognized Indian Travel Agencies and with a pre-drawn itinerary can be granted collective landing permit for a specified period of time on the written request of the Travel Agencies to the Immigration officer giving full personal and passport details of the group members and undertaking to conduct the group as per the itinerary and an assurance that no individual would be allowed to drop out from the group at any place.

The immigration services at the major International Airports in India and the foreigners' registration work in five major cities, are handled by the Bureau of Immigration (BOI).


The above mentioned provisions of TLF/TLP, however, are not available to the nationals of Sri Lanka, Bangladesh, Pakistan, Iran, Afghanistan, Somalia, Nigeria, Ethiopia and Algeria.

Citizens of all countries, except Nepal and Bhutan, require a national passport or travel documents and a visa granted by Indian Missions abroad for entering India. Nepalese or Bhutanese citizens need no passport or visa but should possess documents for their identification when proceeding from their countries.

If your baggage is mishandled or lost in transit, obtain a certificate to this effect from the airline and have it countersigned by the Customs.

Customs Enquiry/Complaints

Assistant Collector of Customs at the International Airport or Commissioner of Customs, New Customs House, Near IGI Airport, New Delhi - 110 037.

A Foreign Travel Tax must be paid by all tourists on departure; ` 150 for departures to Afghanistan, Bangladesh, Bhutan, Burma, Nepal, Pakistan, Sri Lanka and Maldives and ` 500 for all other countries.

Lost of Passport

Foreigners should file a report with the local police regarding loss of passport.

After obtaining new travel document the foreigner should approach for grant of Visa/Exit Permit with the following details, Date & type of visa.

Name of Indian Mission from where visa was granted, Port of arrival including flight number/details of vessel,

Places visited in India,

At least one week time is required for confirming the details and Visa/Exit Permit can be granted after one week.

5.6.2 Currency Declaration, Customs and Baggage Rules

Currency Declaration The unit of the Indian currency is the Rupee. Travellers can bring into India any amount of foreign exchange, subject to the condition that on arrival a declaration is made to the custom authorities in a Currency Declaration Form. It is necessary to fill out a declaration form if the foreign exchange exceeds US$ 10,000 or its equivalent and/or the aggregate value of foreign currency notes is US$ 5,000 or its equivalent. Travellers Cheques in US$ and pounds are easily exchangeable and ATMs are available in major Indian cities. Credit cards are accepted in hotels and large stores.

Table 5.2: Financial Year in India (1st April to 31st March)

Exchange Rate 1 USD 47.8600

1 Euro 66.8100

1 GBP 79.1147

1 Yen 40.6300

Source: Reserve Bank of India (as on 31st March, 2009)

Customs and Baggage Rules There are two channels for customs clearance:

Green Channel for passengers not having any dutiable goods. Red Channel for passengers having dutiable goods.

117

Travel Information ManualPassengers walking through the Green Channel with dutiable/prohibited goods are liable to prosecution/penalty and confiscation of goods.

Instructions for Foreigner – On Arrival

However, there is a provision of granting TLF (Temporary Landing Facility)/TLP (Temporary Landing Permit) to allow entry of foreigners arriving in emergent situations like death/serious illness in the family, without an Indian Visa on cash payment of US$ 40 (Indian Rupee equivalent i.e. ` 1935). This facility can also be extended to transiting foreigners having confirmed onward journey tickets within 72 hours. Apart from this, foreign tourists in groups of four or more arriving by Air or Sea, sponsored by recognized Indian Travel Agencies and with a pre-drawn itinerary can be granted collective landing permit for a specified period of time on the written request of the Travel Agencies to the Immigration officer giving full personal and passport details of the group members and undertaking to conduct the group as per the itinerary and an assurance that no individual would be allowed to drop out from the group at any place.

The above mentioned provisions of TLF/TLP, however, are not available to the nationals of Sri Lanka, Bangladesh, Pakistan, Iran, Afghanistan, Somalia, Nigeria, Ethiopia and Algeria.

Immigration check is done for all passengers, Indians or foreigners, both at the time of arrival and departure. The passports are duly stamped at arrival as well as departure. Passengers should be careful to see that their passports are duly stamped before leaving the immigration counter.

All passengers, Foreigners as well as Indians, coming to India or departing from India are required to fill-up D (Disembarkation) Card and E (Embarkation) Cards on arrival and departure respectively. The following information’s are required to be provided by the passengers in these cards:

Name and Gender

Date of Birth, Place of Birth, Nationality

Passport details viz. number, place and dates of issue/expiry

Visa details viz. number, place and dates of issue/expiry (for arriving foreigners only)

Address in India

Flight number and date of arrival/departure

Occupation

Purpose of visit to/from


State whether the following statements are true or false: 1. The country of residence - either temporary or permanent - is a factor in

determining the visa requirements for Indian passport holders when visiting some countries.

2. Immigration is the movement of people into another country or region to which they are not native in order to only tour visit there.

3. Immigration is a result of a number of factors, including economic and/or political reasons, family re-unification, natural disasters or the wish to change one's surroundings voluntarily.

4. There is no provision of 'Visa on Arrival' in India and no fee is charged for immigration facilities at the airports.

Contd…


5. All passengers, Foreigners as well as Indians, coming to India or departing from India are required to fill-up D (Disembarkation) Card and E (Embarkation) Cards on arrival and departure respectively.

Case Study: Philippine Aviation Industry his part examines the effects of domestic competition brought about by the deregulation of the air transport industry in Philippines. The paper also identifies areas where competition policy is required for the continuity and

effectiveness of competition in the air transport industry. The study notes that since deregulation, five new airlines have entered the market, in addition to the already existing Philippines airline (PAL). Further, it also discusses an impact of deregulation in the airline industry in terms of market structure; inter-modal competition, airfares, revenue, and growth in domestic air travel. The case study finds that:

The degree of competition has increased.

Deregulation has resulted in the creation of niche markets, with the bigger airlines concentrating on the major routes, and the smaller airlines flying through the secondary and tertiary routes.

Inter-modal competition has increased due to the deregulation of the shipping industry and improvements in the land transportation and thus providing more choices for travelling between the country’s islands.

Increased competition has led to lower airfares leading to a growth in domestic travel, however, in the secondary and tertiary routes, where the airlines face less competition, they are able to charge ‘higher-than-market’ fares.

Competition enables more efficient, low cost airlines to operate with low fares (compared to the pre-competition days) and still remain profitable but the financial problems of smaller airlines indicate that only a few large airlines may survive in the long-run.

The policies and regulations under a liberalized and deregulated environment are necessary to ensure that competition is effective. The following points are kept in mind to frame regulation effectively, in order to serve the customers with defined and formulated policy goal on air transport.

Mergers and Acquisitions: Policies should ensure that mergers do not result in reduced service and less competition.

Essential Air Service: A system should be set up to give airlines incentives to provide air services to some routes that would otherwise be loss making, but to which, services are necessary on social grounds.

Inter-modal Competition: Government incentives for air transport should be designed in such a way that efficiency arising from inter-modal competition is not distorted.

Airfares: These should be regulated, mainly in routes where only one airline is operating.

Public utility industries (Telecommunication, Electricity, Water, Gas) and Transport (Port, Airports, Roads and Railways) endowed with significant structure wedge for nation’s growth and development. During the last two decades, we have observed a major wave of utility reforms was gaining a high altitude in both developed and developing economies, encircling privatization, liberalization and new move towards regulation. UK was the first country in the world, who was pioneer in privatizing public utility industry during 1980s under the Thatcher’s Government. Airport infrastructure is considered as one of the public utility industry and this was privatized in UK in 1987. Later on, other countries were adopting this model of airport privatization. Today, globally, there are 120 airports under the management of private sector. It is expected that another 100-120 airports would fall in this category by 2010-2015. Many studies demonstrate that private sector involvement in airport infrastructure would evolve drastically in the years to come. ICAO, IATA, and ACI,

T

Contd…

119

Travel Information Manualthe world bodies for civil aviation, started enlightening the member countries about the “Private Sector Participation” in civil aviation industry. In order to curb the abuse of market power by private sector in the coming competitive edge of airport industry, certain regulation is required through inducting economic mechanism in airport infrastructure industry to safeguard the consumers as well as shareholders’, interests. There are currently divergent trends in the regulation of airport industry globally.

Traditionally, airports have been regulated by the government, based on cost and given the basic objectives of economic welfare and efficiency, but today in global competitive boundary, airport industry is rejuvenated and re-engineered for business and commercial transactions. Therefore, this reveals that the old system was inefficient and resulted in misallocation of resources. Capping prices and quality standards through stringent measures should reform regulation. An independent regulatory authority should be established to oversee certain common standards or norms in pricing structure, quality standards and safety/security measures in airside and landside management of airport infrastructure. Further, the regulatory authority should be combined with reforms to intensify competition in slot allocation, privatization with cross ownership controls and open skies management.

Questions




5.7 LET US SUM UP Airlines and Travel Agents use TIM to provide advice on border requirements to passengers at the time of booking, and airlines use it at the time of boarding to ensure passengers have sufficient travel documents for their destination and any transit points. If your passengers do not have sufficient travel documents the airline will not carry them!

TIM is available by annual subscription which includes monthly issues. The annual subscription runs January to December of each year however subscribers may also order part-way through the year at a pro-rated cost. Single month's issues also available.

To enter the United Kingdom, a passport valid for at least three months beyond length of stay is required by all nationals except EU nationals holding a valid national ID card.

A certified birth certificate has a registrar's raised, embossed, impressed or multicolored seal, registrar's signature, and the date the certificate was filed with the registrar's office, which must be within 1 year of your birth.

According to passport information from the International Air Transport Association (IATA), some 52 countries and territories provide visa-free or visa-on-arrival access to holders of Indian passports Indians may access 50 countries without a pre-issued visa, out of these 33 countries and territories offer visa-upon-arrival, while 28 countries and territories are accessible visa-free.

Where visa-free access is permitted, such access is not necessarily a right, and admission may technically be at the discretion of border enforcement officers. Visitors engaging in activities other than tourism, including unpaid work, may require a visa or work permit.

Immigration is the movement of people into another country or region to which they are not native in order to settle there. Immigration is a result of a number of factors, including economic and/or political reasons, family re-unification, natural disasters or the wish to change one's surroundings voluntarily.

120 Airline and Travel Management 5.8 LESSON END ACTIVITY

Write a magazine type article on TIM.

5.9 KEYWORDS TIM: The TIM (Travel Information Manual) is the world's leading source of Passport, Visa and Health documentation regulations for passengers.

Immigration: Immigration is the movement of people into another country or region to which they are not native in order to settle there.

5.10 QUESTIONS FOR DISCUSSION 1. What do you mean by TIM?

2. What are the inclusions of TIM?

3. What are the exceptions to TIM?

4. Define the term immigration.

5. What are the needs of having immigration?

6. Explain Currency Declaration, Customs and Baggage Rules.


CYP 1 1. Travel Information Manual 2. Regulations 3. Travel 4. not required 5. annual

CYP 2 1. True 2. False 3. True 4. True 5. True





121

Official Airlines GuideLESSON

6 OFFICIAL AIRLINES GUIDE

CONTENTS


6.1 Introduction

6.2 Referring the OAG

6.3 Aircraft Types and Codes

6.4 World Terminals

6.5 Calculation of Flying Time, Ground Time and Elapsed Time

6.6 Let us Sum up


6.8 Keywords




Explain Referring the OAG

Understand Aircraft Types and Codes

Explain World Terminals

Understand Calculation of Flying Time, Ground Time and Elapsed Time

6.1 INTRODUCTION OAG, formerly Official Airline Guide, is a United Kingdom-based business providing aviation information and analytical services sourced from its proprietary airline schedules, flight status, fleet, MRO and cargo logistics databases. OAG is best known for its airline schedules database which holds future and historical flight details for more than 1,000 airlines and over 4,000 airports. This aggregated data feeds the world’s global distribution systems and travel portals, and drives the internal systems of many airlines, air traffic control systems, aircraft manufacturers, airport planners and government agencies around the world. The organisation operates globally and has offices in Europe (UK and Netherlands), Asia (Singapore, China and Japan) and the Americas (United States and Canada). OAG is organised into three customer-facing channels: OAG Aviation, OAG Cargo and OAG Travel.

6.2 REFERRING THE OAG OAG is organized into three customer-facing channels: OAG Aviation, OAG Cargo and OAG for the Traveller.


OAG Aviation: OAG Aviation provides the air transport industry with the most accurate single source of global airline information and analytical services. Its portfolio includes airline schedules distribution; real time flight status information; timetables; codeshare synchronization and flight connection marketing. OAG utilizes its databases to provide market intelligence on aircraft fleets, capacity supply, traffic demand, financial and operating performance, and MRO (maintenance, repair & overhaul) forecasting. Its customers include airlines, airports, travel distributors, aircraft manufacturers, financial institutions, government agencies and aviation service providers.

OAG Cargo: OAG Cargo delivers decision support tools that can be integrated into an organization’s workflow to optimize the planning of shipments by air. Its portfolio includes solutions for routing and shipment planning; dangerous goods regulations and compliance information; real-time access to air freight rates and schedule data; operational announcement services; cargo tracking and analysis solutions and multi-media cargo schedule products. Its customers include freight forwarders, airlines and logistics providers.

OAG for the Traveller: OAG for the Traveller provides comprehensive and unbiased online, mobile and print planning tools for travel arrangers and travellers. Travel planners use OAG products for access to all scheduled flight options for efficient itinerary planning, choices and changes. Travellers use OAG products for in-trip access to flight schedules and services to make their travel more convenient.

6.3 AIRCRAFT TYPES AND CODES Below is a list of IATA Aircraft Type Codes with ICAO tie-ups used in Airline Computer Reservation Systems, Timetables, Airport Information Systems and Schedule Data Publications, e.g. OAG Airline Guides and Pocket Guides.

Category L − Light M − Medium H − Heavy

Bottom of Form

IATA ICAO Wake

Code Code Manufacturer and Aircraft Type / Model Category

100 F100 Fokker 100 M

141 B461 BAe 146-100 Pax M

142 B462 BAe 146-200 Pax M

143 B463 BAe 146-300 Pax M

146 BAe 146 all pax models M

14F BAe 146 Freighter (-100/200/300QT & QC) M

14X B461 BAe 146 Freighter (-100QT & QC) M

14Y B462 BAe 146 Freighter (-200QT & QC) M

14Z B463 BAe 146 Freighter (-200QT & QC) M

IATA ICAO Wake


310 A310 Airbus A310 all pax models H Contd…

123

Official Airlines Guide312 A310 Airbus A310-200 pax H

313 A310 Airbus A310-300 pax H

318 A318 Airbus A318 M

319 A319 Airbus A319 M

31F A310 Airbus A310 Freighter M

31X A310 Airbus A310-200 Freighter M

31Y A310 Airbus A310-300 Freighter M

320 A320 Airbus A320-100/200 M

321 A321 Airbus A321-100/200 M

32S n/a Airbus A318/319/320/321 M

330 A330 Airbus A330 all models H

332 A332 Airbus A330-200 H

333 A333 Airbus A330-300 H

340 A340 Airbus A340 all models H

342 A342 Airbus A340-200 H

343 A343 Airbus A340-300 H

345 A345 Airbus A340-500 H

346 A346 Airbus A340-600 H

380 Airbus A380 pax H

38F Airbus A380 Freighter H

IATA ICAO Wake


703 B703 Boeing 707-300 pax H

707 n/a Boeing 707/720 all pax models H

70F B703 Boeing 707 Freighter H

70M B703 Boeing 707 Combi H

717 B712 Boeing 717 M

721 B721 Boeing 727-100 pax M

722 B722 Boeing 727-200 pax M

727 n/a Boeing 727 all pax models M

72B B721 Boeing 727-100 Mixed Configuration M

72C B722 Boeing 727-200 Mixed Configuration M

72F n/a Boeing 727 Freighter (-100/200) M

72M n/a Boeing 727 Combi M

72S B722 Boeing 727-200 Advanced pax M

72X B721 Boeing 727-100 Freighter M

72Y B722 Boeing 727-200 Freighter M

731 B731 Boeing 737-100 pax M

732 B732 Boeing 737-200 pax M

733 B733 Boeing 737-300 pax M

734 B734 Boeing 737-400 pax M

735 B735 Boeing 737-500 pax M

736 B736 Boeing 737-600 pax M

737 n/a Boeing 737 all pax models M

738 B738 Boeing 737-800 pax M

Contd…


739 B739 Boeing 737-900 pax M

73F n/a Boeing 737 all Freighter models M

73G B737 Boeing 737-700 pax M

73H B738 Boeing 737-800 (winglets) pax M

73M B732 Boeing 737-200 Combi M

73W B737 Boeing 737-700 (winglets) pax M

73X B732 Boeing 737-200 Freighter M

73Y B733 Boeing 737-300 Freighter M

741 B741 Boeing 747-100 pax H

742 B742 Boeing 747-200 pax H

743 B743 Boeing 747-300 pax H

744 B744 Boeing 747-400 pax H

747 n/a Boeing 747 all pax models H

74C B742 Boeing 747-200 Combi H

74D B743 Boeing 747-300 Combi H

74E B744 Boeing 747-400 Combi H

74F n/a Boeing 747 all Freighter models H

74J B744 Boeing 747-400 (Domestic) pax H

74L N74S Boeing 747SP H

74M n/a Boeing 747 all Combi models H

74R B74R Boeing 747SR pax H

74T B741 Boeing 747-100 Freighter H

74U B743 Boeing 747-300 / 747-200 SUD Freighter H

74V B74R Boeing 747SR Freighter H

74X B742 Boeing 747-200 Freighter H

74Y B744 Boeing 747-400 Freighter H

752 B752 Boeing 757-200 pax H

753 B753 Boeing 757-300 pax H


75F B752 Boeing 757 Freighter H

75M B752 Boeing 757 Mixed Configuration H

762 B762 Boeing 767-200 pax H

763 B763 Boeing 767-300 pax H

764 B764 Boeing 767-400 pax H


76F n/a Boeing 767 all Freighter models H

76X B762 Boeing 767-200 Freighter H

76Y B763 Boeing 767-300 Freighter H

772 B772 Boeing 777-200 pax H

773 B773 Boeing 777-300 pax H


IATA ICAO Wake

Code Code Manufacturer and Aircraft Type/Model Category

A26 AN26 Antonov AN-26 L

A28 AN28 Antonov AN-28 / PZL Miele M-28 Skytruck L

Contd…

125

Official Airlines GuideA30 AN30 Antonov AN-30 L

A32 AN32 Antonov AN-32 L

A40 A140 Antonov AN-140 M

A4F A124 Antonov AN-124 Ruslan H

AB3 A30B Airbus Industrie A300 pax H

AB4 A30B Airbus Industrie A300B2/B4/C4 pax H

AB6 A306 Airbus Industrie A300-600 pax H

ABB A3ST Airbus Industrie A300-600ST Beluga Freighter H

ABF A30B Airbus Industrie A300 Freighter H

ABX A30B Airbus Industrie A300C4/F4 Freighter H

ABY A306 Airbus Industrie A600-600 Freighter H

ACD n/a Gulfstream/Rockwell (Aero) Commander/Turbo Commander L

ACP AC68 Gulfstream/Rockwell (Aero) Commander L

ACT AC90 Gulfstream/Rockwell (Aero) Turbo Commander L

ALM LOAD Ayres LM-200 Loadmaster M

AN4 AN24 Antonov AN-24 M

AN6 n/a Antonov AN-26 / AN-30 /AN-32 M

AN7 AN72 Antonov AN-72 / AN-74 M

ANF AN12 Antonov AN-12 M

APH n/a Eurocopter (Aerospatiale) SA330 Puma / AS332 Super Puma n/a

AR1 RJ1H Avro RJ100 Avroliner M

AR7 RJ70 Avro RJ70 Avroliner M

AR8 RJ85 Avro RJ85 Avroliner M

ARJ n/a Avro RJ70 / RJ85 / RJ100 Avroliner M

ARX n/a Avro RJX85 / RJX100 M

AT4 AT43 Aerospatiale/Alenia ATR 42-300 / 320 M

AT5 AT45 Aerospatiale/Alenia ATR 42-500 M

AT7 AT72 Aerospatiale/Alenia ATR 72 M

ATP ATP British Aerospace ATP M

ATR n/a Aerospatiale/Alenia ATR 42/ ATR 72 M

AX1 RX1H Avro RJX100 M

AX8 RX85 Avro RJX85 M

IATA ICAO Wake


B11 BA11 British Aerospace (BAC) One Eleven/RomBAC One Eleven M

B12 BA11 British Aerospace (BAC) One Eleven 200 M

B13 BA11 British Aerospace (BAC) One Eleven 300 M

B14 BA11 British Aerospace (BAC) One Eleven 400/475 M

B15 BA11 British Aerospace (BAC) One Eleven 500/RomBAC One Eleven M

B72 B720 Boeing 720B pax M

BE1 B190 Beechcraft 1900/1900C/1900D M

BE2 n/a Beechcraft twin piston engines L

BEC n/a Beechcraft light aircraft L

BEH B190 Beechcraft 1900D M

BEP n/a Beechcraft light aircraft - single engine L

Contd…


BES B190 Beechcfrat 1900/1900C M

BET n/a Beechcraft light aircraft - twin turboprop engine L

BH2 n/a Bell Helicopters n/a

BNI BN2P Pilatus Britten-Norman BN-2A/B Islander L

BNT TRIS Pilatus Britten-Norman BN-2A Mk III Trislander L

BUS n/a Bus n/a

IATA ICAO Wake


CCJ CL60 Canadair Challenger M

CCX GLEX Canadair Global Express M

CD2 NOMA Government Aircraft Factories N22B / N24A Nomad L

CL4 CL44 Canadair CL-44 M

CN1 n/a Cessna light aircraft - single piston engine L

CN2 n/a Cessna light aircraft - twin piston engines L

CNA n/a Cessna light aircraft L

CNC n/a Cessna light aircraft - single turboprop engine L

CNJ n/a Cessna Citation L

CNT n/a Cessna light aircraft - twin turboprop engines L

CR1 CRJ1 Canadair Regional Jet 100 M




CRJ n/a Canadair Regional Jet M

CRV S210 Aerospatiale (Sud Aviation) Se.210 Caravelle M

CS2 C212 CASA / IPTN 212 Aviocar M

CS5 CN35 CASA / IPTN CN-235 M

CV4 CVLP Convair CV-440 Metropolitan pax M

CV5 CVLT Convair CV-580 pax M

CVF n/a Convair CV-240 / 440 / 580 / 600 / 640 Freighter M

CVR n/a Convair CV-240 / 440 / 580 / 600 / 640 pax M

CVV CVLP Convair CV-240 Freighter M

CVX CVLP Convair CV-440 Freighter M

CVY CVLT Convair CV-580 / 600 / 640 Freighter M

CWC C46 Curtiss C-46 Commando M

IATA ICAO Wake


D10 DC10 Douglas DC-10 pax H

D11 DC10 Douglas DC-10-10/15 pax H

D1C DC10 Douglas DC-10-30/40 pax H

D1F DC10 Douglas DC-10 all Freighters H

D1M DC10 Douglas DC-10 all Combi models H

D1X DC10 Douglas DC-10-10 Freighter H

D1Y DC10 Douglas DC-10-30 / 40 Freighters H

Contd…

127

Official Airlines GuideD28 D228 Fairchild Dornier Do.228 L

D38 D328 Fairchild Dornier Do.328 M

D3F DC3 Douglas DC-3 Freighter M

D6F DC6 Douglas DC-6A/B/C Freighter M

D8F n/a Douglas DC-8 all Freighters H

D8L DC86 Douglas DC-8-62 pax H

D8M n/a Douglas DC-8 all Combi models H

D8Q DC87 Douglas DC-8-72 pax H

D8T DC85 Douglas DC-8-50 Freighter H

D8X n/a Douglas DC-8-61 / 62 / 63 Freighters H

D8Y DC87 Douglas DC-8-71 / 72 / 73 Freighters H

D91 DC91 Douglas DC-9-10 pax M





D9C DC93 Douglas DC-9-30 Freighter M

D9F DC94 Douglas DC-9-40 Freighter M

D9F n/a Douglas DC-9 all Freighters M

D9X DC91 Douglas DC-9-10 Freighter M

DC3 DC3 Douglas DC-3 pax M

DC6 DC6 Douglas DC6A/B pax M

DC8 n/a Douglas DC-8 all pax models H

DC9 DC9 Douglas DC-9 all pax models M

DF2 n/a Dassault (Breguet Mystere) Falcon 10 / 100 / 20 / 200 / 2000 M

DF3 n/a Dassault (Breguet Mystere) Falcon 50 / 900 M

DFL n/a Dassault (Breguet Mystere) Falcon M

DH1 DH8A De Havilland Canada DHC-8-100 Dash 8 / 8Q M

DH2 DH8B De Havilland Canada DHC-8-200 Dash 8 / 8Q M

DH3 DH8C De Havilland Canada DHC-8-300 Dash 8 / 8Q M

DH4 DH8D De Havilland Canada DHC-8-400 Dash 8Q M

DH7 DHC7 De Havilland Canada DHC-7 Dash 7 M

DH8 n/a De Havilland Canada DHC-8 Dash 8 all models M

DHB n/a De Havilland Canada DHC-2 Beaver / Turbo Beaver L

DHC DHC4 De Havilland Canada DHC-4 Caribou M

DHD DOVE De Havilland DH.104 Dove L

DHH HERN De Havilland DH.114 Heron L

DHL DHC3 De Havilland Canada DHC-3 Turbo Otter L

DHO DHC3 De Havilland Canada DHC-3 Otter / Turbo Otter L

DHP DHC2 De Havilland Canada DHC-2 Beaver L

DHR DH2T De Havilland Canada DHC-2 Turbo-Beaver L

DHS DHC3 De Havilland Canada DHC-3 Otter L

DHT DHC6 De Havilland Canada DHC-6 Twin Otter L


IATA ICAO Wake


E70 E170 Embraer 170 M

E90 E190 Embraer 190 M

EM2 E120 Embraer EMB.120 Brasilia L

EMB E110 Embraer EMB.110 Bandeirnate M

EMJ Embraer 170/190 M

ER3 E135 Embraer RJ135 M

ER4 E145 Embraer RJ145 Amazon M

ERD Embraer RJ140 M

ERJ n/a Embraer RJ135 / RJ140 / RJ145 M

IATA ICAO Wake


F21 F28 Fokker F.28 Fellowship 1000 M




F27 F27 Fokker F.27 Friendship / Fairchild F.27 M

F28 F28 Fokker F.28 Fellowship M

F50 F50 Fokker 50 M

F70 F70 Fokker 70 M

FA7 n/a Fairchild Dornier 728JET M

FK7 F27 Fairchild FH.227 M

FRJ J328 Fairchild Dornier 328JET M

IATA ICAO Wake

Code Code Manufacturer and Aircraft Type / Model Category GRG G21 Grumman G.21 Goose L

GRJ n/a Gulfstream Aerospace G-1159 Gulfstream II / III / IV / V M

GRM G73T Grumman G.73 Turbo Mallard L

GRS G159 Gulfstream Aerospace G-159 Gulfstream I M

IATA ICAO Wake

Code Code Manufacturer and Aircraft Type / Model Category H25 n/a British Aerospace (Hawker Siddeley) HS.125 M

HEC COUC Helio H-250 Courier / H-295 / 385 Super Courier L

HOV n/a Hovercraft n/a

HS7 A748 Hawker Siddeley HS.748 M

IATA ICAO Wake


I14 I114 Ilyushin IL114 M

I93 IL96 Ilyushin IL96-300 pax H

I9F IL96 Ilyushin IL96 Freighters H

Contd…

129

Official Airlines GuideI9M IL96 Ilyushin IL96M pax H

I9X IL96 Ilyushin IL96-300 Freighter H

I9Y IL96 Ilyushin IL96T Freighter H

IL6 IL62 Ilyushin IL62 H

IL7 IL76 Ilyushin IL76 H

IL8 IL18 Ilyushin IL18 M

IL9 IL96 Ilyushin IL96 pax H

ILW IL86 Ilyushin IL86 H

IATA ICAO Wake

Code Code Manufacturer and Aircraft Type / Model Category J31 JS31 British Aerospace Jetstream 31 L

J32 JS32 British Aerospace Jetstream 32 L

J41 JS41 British Aerospace Jetstream 41 M

JST n/a British Aerospace Jetstream 31 / 32 / 41 L/M

JU5 JU52 Junkers Ju52/3M M

IATA ICAO Wake


L10 L101 Lockheed L-1011 Tristar pax H

L11 L101 Lockheed L-1011 1 / 50 / 100 / 150 / 200 / 250 Tristar pax H

L15 L101 Lockheed L-1011 500 Tristar pax H

L1F L101 Lockheed L-1011 Tristar Freighter H

L49 CONI Lockheed L-1049 Super Constellation M

L4T L410 LET 410 L

LCH n/a Launch - Boat n/a

LMO n/a Limousine n/a

LOE L188 Lockheed L-188 Electra pax M

LOF L188 Lockheed L-188 Electra Freighter M

LOH C130 Lockheed L-182 / 282 / 382 (L-100) Hercules M

LOM L188 Lockheed L-188 Electra Mixed Configuration M

LRJ n/a Gates Learjet M

IATA ICAO Wake


M11 MD11 McDonnell Douglas MD11 pax H

M1F MD11 McDonnell Douglas MD11 Freighter H

M1M MD11 McDonnell Douglas MD11 Mixed Configuration H

M80 MD80 McDonnell Douglas MD80 M







Contd…


MBH B105 Eurocopter (MBB) Bo.105 n/a

MD9 EXPL MD Helicopters MD900 Explorer n/a

MIH MI8 MIL Mi-8 / Mi-17 / Mi-171 / Mil-172 n/a

MU2 MU2 Mitsubishi Mu-2 L

IATA ICAO Wake

Code Code Manufacturer and Aircraft Type / Model Category ND2 N262 Aerospatiale (Nord) 262 M

NDC S601 Aerospatiale SN.601 Corvette L

NDE n/a Eurocopter (Aerospatiale) AS350 Ecureuil / AS355 Ecureuil 2 n/a

NDH S65C Eurocopter (Aerospatiale) SA365C / SA365N Dauphin 2 n/a

IATA ICAO Wake

Code Code Manufacturer and Aircraft Type / Model Category PA1 n/a Piper light aircraft - single piston engine L

PA2 n/a Piper light aircraft - twin piston engines L

PAG n/a Piper light aircraft L

PAT n/a Piper light aircraft - twin turboprop engines L

PL2 PC12 Pilatus PC-12 L

PL6 PC6T Pilatus PC-6 Turbo Porter L

PN6 P68 Partenavia P.68 L

IATA ICAO Wake

Code Code Manufacturer and Aircraft Type / Model Category RFS n/a Road Feeder Service - Cargo Truck n/a

IATA ICAO Wake


S20 SB20 Saab 2000 M

S58 S58T Sikorsky S-58T n/a

S61 S61 Sikorsky S-61 n/a

S76 S76 Sikorsky S-76 n/a

SF3 SF34 Saab SF340A/B M

SH3 SH33 Shorts SD.330 M

SH6 SH36 Shorts SD.360 M

SHB BELF Shorts SC-5 Belfast M

SHS SC7 Shorts SC-7 Skyvan L

SSC CONC Aerospatiale/BAC Concorde H

SWM n/a Fairchild (Swearingen) SA26 / SA226 / SA227 Metro / Merlin / Expediter

L

IATA ICAO Wake

Code Code Manufacturer and Aircraft Type / Model Category T20 T204 Tupolev Tu-204 / Tu-214 M

TRN n/a Train n/a

Contd…

131

Official Airlines GuideTU3 T134 Tupolev Tu134 M

TU5 T154 Tupolev Tu154 M

A ICAO Wake


VCV VISC Vickers Viscount M

IATA ICAO Wake

Code Code Manufacturer and Aircraft Type / Model Category WWP WW24 Israel Aircraft Industries 1124 Westwind M

IATA ICAO Wake

Code Code Manufacturer and Aircraft Type / Model Category YK2 YK42 Yakovlev Yak 42 M

YK4 YK40 Yakovlev Yak 40 M

YN2 Y12 Harbin Yunshuji Y12 M

YN7 AN24 Xian Yunshuji Y7 M

YS1 YS11 NAMC YS-11 M


Fill in the blanks: 1. OAG stands for …………………. 2. OAG Aviation provides the air transport industry with the most accurate

single source of global airline information and …………………. services. 3. OAG Cargo delivers decision support tools that can be integrated into an

organization’s …………………. to optimize the planning of shipments by air.

4. …………………. for the Traveller provides comprehensive and unbiased online, mobile and print planning tools for travel arrangers and travellers.

5. Travel …………………. use OAG products for access to all scheduled flight options for efficient itinerary planning, choices and changes.

6.4 WORLD TERMINALS The globalization of the economy depends progressively more on air transport with airports acting as the focal technical support. The growth of air traffic, both in terms of passengers and freight has placed increased pressures on terminals. Existing airport terminals have been expanded and new terminals have been constructed to replace airports, which are no longer able to cope with the increased traffic. The geography of air terminals is embedded at two scales:

International/Regional: At this scale, the airport site represents its role and function in the international and regional urban system. As a component of the global air transport system, the location of an airport expresses its centrality (being an origin and destination of air traffic) and intermediacy (a hub or a gateway between destinations). This consideration is strategic and linked with future growth in passengers and freight traffic.

Local: Mainly concerned about the level of accessibility of the airport over the metropolitan area it services. Such considerations are mainly operational and


linked with daily flows of planes, passengers, and freight to and from the airport terminals.

Airports have significant economic impacts on their region with improved economic opportunities, especially direct impacts such as employment. For instance, airports accounted for more than $500 billion of economic activity in the United States in 2001, including 1.9 million direct and 4.8 million indirect jobs (ACI, 2002). Since many airports have the size of a small city, they are organized as such with a number of departments involving a diversity of functions, which are servicing both terminals and airfield activities.

The economic features of the region, where the airport is located, are important in its functions. The level of development of the tertiary and quaternary sectors is directly linked to the traffic of an airport as well as the high technology sector that uses air transport to ship high value/low mass goods (computer components). As a result, some airports are predominantly focused on passenger, while others are more focused on freight. Like most transport terminals, airports have a centrality function, as origins and destinations of passengers and freight, and an intermediacy function, as a place of trans-shipment or stage between other origins and destinations. The importance of an airport as a hub is mainly a function of the size of the metropolitan area it services, the complexity of its economy, but also can be the choice of airline companies seeking a low cost and centrality located airport in their networks.

Passengers taking a flight will typically take an automobile, taxi, bus or train to an airport and then enter the terminal. Within the terminal, passengers purchase tickets, transfer their luggage, and go through security. The buildings that provide access to the airplanes (via gates) are typically called concourses. However, the terms "terminal" and "concourse" are sometimes used interchangeably, depending on the configuration of the airport. Smaller airports have one terminal while larger airports have several terminals and/or concourses. At small airports, the single terminal building typically serves all the functions of a terminal and a concourse.

Some larger airports have one terminal that is connected to multiple concourses via walkways, sky bridges, or underground tunnels (such as Denver International Airport). Some larger airports have more than one terminal, each with one or more concourses (such as New York's La Guardia Airport). Still other larger airports have multiple terminals each of which incorporates the functions of a concourse (such as Dallas/Fort Worth International Airport). Most of the airport terminals are built in a plain style. However, some, such as Baghdad International Airport, are monumental in stature, while others are considered architectural masterpieces, such as Terminal 1 at Charles de Gaulle airport near Paris. A few are designed to reflect the culture of a particular area, an example being the terminal at Albuquerque International Sunport in New Mexico which is designed in the Pubeblo revival style popularized by architect John Gaw Meem.

Local site requirements are extremely important for air terminals as its two major components, the airfields and the terminals. Each component has specific requirements.

6.5 CALCULATION OF FLYING TIME, GROUND TIME AND ELAPSED TIME Flying time indicates the actual time an aircraft is in the air flying from its departure point to its destination point. The computed flight time is a simple equation of T = D/S or Time equals Distance divided by Speed. Convert the decimal answer to our 60-minutes-to-an-hour and the flight time will be expressed in hours and minutes.

133

Official Airlines GuideIn airline timetables, departure and arrival times are always expressed in local time. Time differences must, therefore, always be taken into account when calculating the duration of a flight for a given journey.

Total Travel Time is the amount of time it takes to go from one point to another. Including “Ground time at intermediate stops”.

Note 1: If a flight departs and arrives in the same time zone, it is a simple subtraction problem.

HOW?

Simply deduct the departure time from the arrival time. The answer will be the flying time. And for ground time simply deduct the arrival time in the intermediate stop from the departure time at the intermediate stop.

Example:

HKT-BKK DEP 1310 ARR 1435 = 1 Hour and 25 minutes

BKK-CNX DEP 1515 ARR 1625 = 1 Hour and 10 minutes

Plus: Ground time at intermediate (BKK)

Arr. BKK 1435 DEP. BKK 1515 = 40 minutes

Total Travel Time = 3 Hours and 15 minutes

Note 2: If the departure time and the arrival time are in the different time zones, it is needed to adjust the departure time to local time in to the arrival zones.

Example:

BKK (GMT +7) DEP 1700 (Local time)

HKG (GMT +8) ARR 2040 (Local time)

HKG (GMT +8) DEP 2240 (Local time)

LAX (GMT –7) ARR 2050 (Local time)

Answer:

DEP BKK local time at 1700

ARR HKG local time at 2040

Convert 1700 to local time in HKG = 1800

Therefore, from arrival time 2040 in HKG deduct the adjusted departure in BKK.

ARR HKG 2040 local time

DEP BKK 1800 adjusted departure time

Flying Time = 2 Hours and 40 minutes

DEP HKG 2240 (Local time)

ARR LAX 2050 (Local time)

Convert 2240 to local time in LAX = 0740

Therefore, from arrival time 2050 in LAX deduct the adjusted departure in HKG.

ARR LAX 2050 local time

DEP BKK 0740 adjusted departure time

Flying Time = 13 Hours and 10 minutes

Plus: Ground time in HKG


DEP HKG 2240

ARR HKG 2040

Ground time = 2 Hours

Therefore, the Total travel time from BKK to LAX via HKG is

= 13 Hours and 10 minutes

Let's take another example, that a pilot will fly a small Cessna aircraft a distance of 560 miles. The airplane will have an average airspeed of 130 miles per hour moving with the wind which is blowing at 30 mph. How long will the flight take? Take the total number of miles and divide it by the ground speed (airspeed + or - wind speed). The quotient will give the pilot the flight time.

Doing the calculation: 560 / (130 + 30) = 560 / 160 = 3.5. Since there are 60 minutes in an hour, the decimal .5 will need to be converted to our 60-minutes-to-an-hour clock. To do that, take the answer 3.5 and convert as shown below:

3.5 = 3 + (.5 × 60 minutes) = 3 + 30.0 = 3 hours and 30 minutes

What if the pilot in the example above is flying against the wind? Calculating flight time would look like this:

560/ (130 − 30) = 560 / 100 = 5.6

Then convert the answer to minutes:

5.6 = 5 + (.6 × 60 minutes) = 5 + 36.0 = 5 hours and 36 minutes.

Elapsed Flying Time is the amount of time it takes to go from one point to another point which ground time at intermediate stops deducted.

Example:

HKG – BKK DEP 1310 ARR 1435 = 1 Hour and 25 minutes

BKK – CNX DEP 1515 ARR 1625 = 1 Hour and 10 minutes

Elapsed flying time is = 2 Hours and 35 minutes

Actual Flying Time can be computed only after a flight is completed, since it is the actual air time from take off to landing.


State whether the following statements are true or false: 1. The globalization of the economy is independent to air transport with

airports acting as the focal technical support. 2. The growth of air traffic, both in terms of passengers and freight has placed

increased pressures on terminals. 3. Existing airport terminals have been expanded and new terminals have

been constructed to replace airports, which are no longer able to cope with the increased traffic.

4. At International/Regional scale, the airport site represents its role and function in the international and regional urban system.

5. Local level mainly concerned about the level of accessibility of the airport over the metropolitan area it services.

135

Official Airlines GuideCase Study: Doing What Others Couldn’t

hree months before its grand opening, the American Airlines’ flagship World Gateway Terminal at New York’s John F. Kennedy Airport was missing a ceiling. The original design by DMJM Harris had specified perforated metal

panels painted white and installed throughout the terminal’s three levels of expansive ticketing, baggage claim and boarding gate areas. However, the job of manufacturing and fitting the panels proved to be much more difficult than anticipated.

Two failed attempts at producing properly fitting panels from two different manufacturers had left frustrated project managers scrambling for a solution. Accurate was called in to see if they could achieve the impossible by fabricating 170,000 square feet of perfectly-fitting perforated panels in time for the grand opening just 90 days away.

Nearly forty years after being built, the terminal originally known as the American Airlines Terminal at New York’s JFK International Airport needed to be replaced. A top priority for American, Terminal 8, renowned for its colourful 317-by-23-foot stained-glass façade created by the American artist Robert Sowers, was starting to show its age under the use of 16,000 passengers a day. So in 1999, American Airlines broke ground on the new World Gateway Terminal. This seven-year, $1.3 billion project would be JFK’s largest terminal, the airline’s largest non-aircraft asset and American’s gateway for European travel.

Addressing one of the major complaints about the older terminal, the World Gateway Terminal features an abundance of light from both large windows and interior light installations. The DMJM design further increases interior illumination by using glossy white ceiling panels to reflect the natural and artificial light within the terminal. The aluminium panels are found throughout the space, including the angular 250-foot tunnel to Concourse C, baggage claim and gating areas. The small .125"-on-.250" staggered perforations along the surface of the panels, aid in HVAC flow and noise reduction. It still allows the panels to serve their primary job of reflecting light.

The perforated design also flowed into other terminal elements, such as concourse store signage. Because of the panels’ functional and aesthetic roles, proper fit was critical, as any irregularity would significantly impact the look and operation of the terminal. A ceiling tile manufacturer fabricated the first set of panels.

Unfortunately, they were not rigid enough and bowed out. This distortion in the panel’s surface caused shadowing and ruined the seamless look of the ceiling. The problem came to the attention of Don Kelley at Infrastructures during a terminal planning meeting, as Infrastructures was working on the terminal’s closed-circuit TV system and wall panels. When he heard of the ceiling panel issue, he offered to help find a solution. Using their broad fabrication capabilities, Infrastructures built more than two dozen panels to determine the cause of the problem. Although the panels had the proper fit, their large size caused them to lose their shape. Infrastructures discovered that the ends of the panels needed to be formed twice, instead of the single bend that was used on the pre-fabricated panels, in order for them to stay rigid and retain the proper shape once installed. However, his discovery posed a problem: only a few perforators in the country were able to fabricate the perforated panels with multiple formed edges. Infrastructures found a perforator that had experience with aviation facilities and assigned them the project.

They began submitting samples, which looked satisfactory, and a production run was approved. In five months, the panels were completed and installed. While rigid enough to retain their shape, there was a problem with their finish. Once installed, the panels produced a patchwork/shadowing effect due to the uneven application of paint. Leaned against a wall, the panels looked perfect. Once installed, however, the lack of uniformity of the panels ruined the clean look of the terminal’s design and required the second round of perforated panels to be replaced.

Infrastructures then contacted Accurate Perforating. Mike Zarnott and the Accurate team responded at once, heading to NY from their Chicago headquarters. Once the job was evaluated, Mike confirmed that Accurate could come through with the 2'-by-5' and 2'-by-3' perforated panels within budget and on time. Because of the time lost

T

Contd…


installing the two previous sets, the new panels would have to be perfect on the first try. Too much precious time had been wasted, placing Accurate in an all-or-nothing situation. American Airline’s World Gateway was set to open its doors in three months and a grand opening would not be possible with the terminal missing 90 per cent of its ceiling. The time shortage and budget strains would limit production and reduce the number of spare panels to a bare minimum.

During his initial survey of the project, Mike and his team noticed that a number of the panels from the previous installation had arrived damaged. Because of the tight production volume, he knew that they must successfully minimize any damage to the delicate panels during packaging and shipping. Additionally, to aid in quelling the noise generated by the high-traffic terminal, each panel would be lined with Soundtex™ acoustical backing. Of course, the exterior needed the seamless white finish that had eluded the previous attempt. Infrastructures had yet to determine why the second run of panels was distorting the light, and the acoustical backing would be something entirely new for Accurate. Fortunately for the project, Accurate’s longstanding experience with finishes allowed them to resolve the problem of uneven paint application.

Another of Accurate’s strengths is developing custom-made solutions for new applications, such as the panel’s acoustical backing and shipping packaging. For quality assurance, Accurate produced a large lot of samples. The samples were approved and the job was set for production. However, while Infrastructures were pleased with the samples, the question still remained if the same quality would be represented in the production run. As the panels were being fabricated, Mike worked with a corrugated box manufacturer to design a custom box that would hold the panels and guard against damage caused during shipping. After two prototypes, they had a container that held the maximum amount of panels, safely and securely. This not only led to the safe shipment of the panels, but expedited the shipping process by fitting the most amounts of panels within a tractor-trailer container.

The result of Accurate’s work was 170,000 square-feet of perfectly fitting panels with the mirror-smooth finish that reflected the terminal’s ambient light with a warm, even glow and a seamlessly applied Soundtex™ backing. Once again, Accurate proved that it can handle the most detailed jobs, from beginning to end.

“Accurate was probably the only [metal perforator] that could have done the job,” stated Don Kelley. The effort was worth it. Throughout the expansive lobby and concourses, the panels offer a soothing but dynamic canvas that is fitting for the airline’s flagship terminal. On July 27, 2005, soon after the Accurate panels were installed, Mayor Michael Bloomberg and American Airlines Chairman and CEO Gerard J. Arpey opened the World Gateway Terminal underneath thousands of seamlessly integrated perforated panels. Accurate proved once again that when time is essential and fit and finish are crucial, Accurate is the one to call.

Questions

1. How are Accurate’s strengths developing?

2. What do you infer from the given case study?

Source: http://accurateperforating.com/our-work/case-studies/architects/american-airlines-terminal-9-jfk-interna-tional-airport

6.6 LET US SUM UP OAG is best known for its airline schedules database which holds future and historical flight details for more than 1,000 airlines and over 4,000 airports. This aggregated data feeds the world’s global distribution systems and travel portals, and drives the internal systems of many airlines, air traffic control systems, aircraft manufacturers, airport planners and government agencies around the world. OAG Cargo delivers decision support tools that can be integrated into an organization’s workflow to optimize the planning of shipments by air. Its portfolio includes solutions for routing and shipment planning; dangerous goods regulations

137

Official Airlines Guideand compliance information; real-time access to air freight rates and schedule data; operational announcement services; cargo tracking and analysis solutions and multi-media cargo schedule products. Its customers include freight forwarders, airlines and logistics providers. The globalization of the economy depends progressively more on air transport with airports acting as the focal technical support. The growth of air traffic, both in terms of passengers and freight has placed increased pressures on terminals. Existing airport terminals have been expanded and new terminals have been constructed to replace airports, which are no longer able to cope with the increased traffic. Total Travel Time is the amount of time it takes to go from one point to another. Including “Ground time at intermediate stops”.

In airline timetables, departure and arrival times are always expressed in local time. Time differences must, therefore, always be taken into account when calculating the duration of a flight for a given journey.

6.7 LESSON END ACTIVITY Using net, collect more information on ground time and elapsed time.

6.8 KEYWORDS OAG: OAG, formerly Official Airline Guide, is a United Kingdom-based business providing aviation information and analytical services sourced from its proprietary airline schedules, flight status, fleet, MRO and cargo logistics databases.

OAG Aviation: OAG Aviation provides the air transport industry with the most accurate single source of global airline information and analytical services.

OAG Cargo: OAG Cargo delivers decision support tools that can be integrated into an organization’s workflow to optimize the planning of shipments by air.

OAG for the Traveller: OAG for the Traveller provides comprehensive and unbiased online, mobile and print planning tools for travel arrangers and travellers.

6.9 QUESTIONS FOR DISCUSSION 1. What do you mean by OAG?

2. Explain Referring the OAG.

3. Describe Aircraft Types and Codes.

4. What are World Terminals?

5. Explain Calculation of Flying Time.

6. Explain Calculation Ground Time.

7. Explain Calculation Elapsed Time.


CYP 1 1. Official Airlines Guide 2. Analytical 3. Workflow 4. OAG 5. planners

Contd…


CYP 2

1. False

2. True

3. True

4. True

5. True






139

Airport Planning

UNIT 1

UNIT IV

141

Airport PlanningLESSON

7 AIRPORT PLANNING

CONTENTS


7.1 Introduction

7.2 Concept of Airport Planning

7.2.1 Short-term vs Long-term Planning

7.2.2 Principles of Airport Management

7.3 Growth of Air Transport

7.4 Airport Organization and Associations

7.4.1 Airports under Civil Aviation Administration

7.4.2 Autonomous Airport Authorities

7.4.3 Multi-purpose Authorities

7.4.4 Autonomous Civil Aviation Authority

7.4.5 Private Involvement in Airport Ownership and Operations

7.4.6 Airport as a Business Enterprise Engine

7.5 Classification of Airport’s Airfield Components

7.5.1 Functions of Airfield

7.5.2 Airfield Components

7.6 Air Traffic Zones

7.7 Approach Areas

7.7.1 Customer-focused Approach Area

7.7.2 Business Approach Area

7.8 Let us Sum up


7.10 Keywords




Explain Growth of Air Transport

Understand Airport Organization and Associations


Analyse Classification of Airports Airfield Components

Describe Air Traffic Zones and Approach Areas

7.1 INTRODUCTION Airport is a terminal facility that functions as an interface between air and surface vehicles. It is a processing centre providing the necessary facilities for ticketing, documentation and control of passengers, and cargo (Ashford N. Martin - Stanton, H.P. and Moore CA, 1984).

United Nations (UN) body for civil aviation, (International Civil Aviation Organization, ICAO) defines 'Airport as an area on land or water (including any building, installations and equipment) intended to be used either wholly or in part for the arrival, departure and surface of aircraft' (Airport Economic Manual, 1991).

Airport means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance, and passenger facilities which includes aerodrome as defined in clause (2) of the Indian Aircraft Act, 1934.

An airport is a facility where aircraft can take-off and land. Airports vary in size, with smaller or less-developed airports often having a single runway shorter than 1,000 m (3,300 ft). Larger airports for international flights generally have paved runways 2,000 m (6,600 ft) or longer. The longest public-use runway in the world is at Ulyanovsk- Vostochny International Airport, in Ulyanovsk, Russia. It has a length of 5,000 m (16,404ft). As of 2005, there are approximately 50,000 airports around the world (Small, Medium and Large Scale airports). United States holds the top rank across the globe in number of airports and has 19,815 airports (Large, Medium, Small), which is scattered in the regions of North and South America.

7.2 CONCEPT OF AIRPORT PLANNING Airport Infrastructure planning is a very important aspect of the civil aviation industry. It helps the airport administration to oversee the airport capacity and to provide adequate capacity (airside and landside), runways, taxiways and terminals of the new airports or modernizing airports. The plan also amalgamates the various agencies, like aircraft operators, national and local government planners, government control authorities (customs, immigration and health), national and local authorities, aircraft and equipment manufacturers and international aviation agencies for consultation and joint planning.

The most efficient plan for the airport as a whole is to provide the required capacity for aircraft, passenger, and freight and vehicle movements with maximum ease at lowest operating costs. Planning of airports is made more intricate by the diversity of facilities and services, which are compulsory for the movement of aircraft, passenger, cargo, ground vehicles coupled with them. These facilities include:

Runways

Taxiways

Aircraft Aprons

Terminal Buildings

Aircraft Hangars for maintenance of aircraft

Roads and parks for vehicles used by passenger, visitors, aircraft operators and all occupants of the airport

Cargo Terminal – Dispatch and Receipt of air cargo

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Airport PlanningThe operation of an airport basically mixes with the functions of many of these facilities. Therefore, these facilities should be planned as a whole to provide the efficient services to the users' community. Aircraft apron areas have to be functionally incorporated with the buildings with which they are coupled. Likewise, vehicle parks need to be allied with the buildings, which those people occupy. Further, the planning of an airport must encourage movements of terminals toward airfields. Indeed, transit efficiency is primordial, especially if the airport plays the role of an international or regional hub. However, the planning of new airport terminals involves several considerations, namely access to local markets and availability of land. Airports constructed over the last few decades' involved locations far from city centres, since they are heavy consumers of land. In the case of Hong Kong Chek Lap Kok, 34 km from downtown) and Osaka (Kansai), this has involved the construction of an entirely new island. For Tokyo (Narita; 60 km from downtown), Seoul (Incheon; 50 km) and Denver (30 km), the terminals are located far from the city centre with the commuting delays that go with it. In other cases, such as Dun Huang, China, specific geographical constraints had to be respected.

7.2.1 Short-term vs Long-term Planning There is a broad range of measures to prevent and control congestion of airports. These may be classified into short-term and long-term planning. The short-term planning occupies minimal building of new facilities and long-term measures seek to increase physical capacity to meet the current and future demand. Implementation of any one of these measures is often fraught with problems. For example, the main complexity focused in many cities is that the extensive land requirements of airport development and their environmental impacts pretence severe constraints on the provision of extra runway capacity and terminal capacity (ICAO, 1992).

Short-term Planning

Short-term planning and management of airport facilities generally revolve around three main strategies:

Applying better management tools and new technologies to improve the traffic flows at the different facility systems

Efforts directed at eliminating restrictions on capacity use

Redistribution of demand management during the peak hour periods

Formulating to modify the facilities and equipment and devising new methods for a more efficient use of existing facilities constitute the most common step towards improving the airport flow management. All such measures serve to increase the turnaround time of aircraft. Steps should be taken to increase productivity of existing resources like, modifying the layouts, introducing better gate management and improved ATC techniques. Further, the airport authorities should take care of better terminal systems in order to examine carefully the possibilities of implementing flexible allocation strategies for various passenger facilities like, Check-in-counters, immigration counters and customs checkpoints in line with changes in traffic composition. In the runway system, overall efficiency may be increased by properly locating exits, departure queues and bypasses. Consequently, runway occupancy time may be reduced and will have greater flexibility in managing departure queues (FAA, 1996).

Long-term Planning

The long-term plan reveals the development of new physical capacities i.e., building new terminal and runways if the traffic is growing significantly and exploding the terminal as well as runway. There are a number of important issues, which need to be considered in the implementation of long-term expansion of capacity.


7.2.2 Principles of Airport Management There are eight general guiding principles, which are mentioned below, have guided federal involvement in the airport development for the prosperity of an economy on the global scale.

1. Safe and Efficient Uniform Standards: Airports should be safe and efficient, located near a large population base with a good geographic location. They must be developed and maintained to appropriate and uniform standards.

2. Affordable: Airports should be affordable to both users and to the government, relying primarily on user fees and placing minimal burden on the general revenues of the local, state and federal governments.

3. Flexible in Nature: Airports should be flexible and expandable to meet the growing demand and to accommodate new aircraft types.

4. Permanent and Long-Term: Airports should be permanent, with assurances from an operator that they will remain open for aeronautical use over the long-term.

5. Compatible and Vicinity: Airports should be compatible with surrounding communities, maintaining a balance between the needs of aviation and the requirements of people living in the vicinity of the airport.

6. Accessibility: The airport system should be extensive and provide as many people as possible with access – in the United States we strive to have 98% of the United States population within 20 miles of an airport.

7. Significance and Contribution to the Economy: Airports should help air transportation to contribute to a productive national economy and to international competition.

8. Close Link with ATC System: Airports should be developed in concert with improvements in the ATC system.

Of these eight doctrines, definitely one of the most important principles is affordability. Airports must be affordable to both users and the government, and that airports should rely primarily on user fees, and placing minimal burden on the general revenues of the local, state and federal governments.

7.3 GROWTH OF AIR TRANSPORT The most substantial developments of air transportation came in the late 1960s and early 1970s where fast growth in traffic came with the convergence of four processes: Technical improvements Technology has significantly extended the range of aircraft that were now capable of crossing the Atlantic (this was first demonstrated by Charles Lindbergh’s solo flight that made him a national hero) without stopping at intermediate places, making trips of up to 18 hours duration. The introduction of the jet engine considerably reduced distances because of greater speeds and improved ranges. Transnational movements are favoured by the usage of polar crossings, which enables a considerable reduction of distances.

Rising Affluence

The growth of air transport is highly correlated to income and economic output growth. As the population of developed countries became more affluent, a greater amount of disposable income became available for leisure. Remote destinations and intercontinental tourism (mainly between Europe and North America) experienced significant growth in popularity.

International tourism and air transportation are thus mutually interdependent, which is characterized by significant elasticity.

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Airport PlanningLower Airfares

As a consequence of technical improvements, growing demands and competition, airfares have been reduced considerably, making air transportation affordable to the general public. This in turn triggered additional passengers and airfreight demands.

Globalization

Trade networks established by multinational corporations imply important movements of passengers and freight over the economic space. About 40% of the value of global manufactured exports is carried by air transportation (about 50% of the value of American overseas – non-NAFTA – exports).

A key structural factor in the development of air transport networks is the emergence of major hubs around which air traffic converges. This trend is mainly the result of decisions made by airline companies in the organization of their services.

7.4 AIRPORT ORGANIZATION AND ASSOCIATIONS Every state has its own organizational format under which their airports should operate. This will depend on the situation in the state concerned and will often be strongly influenced by government policy. Airport organizational structure is categorized as follows:

1. Airports under civil aviation administration

2. Autonomous airport authorities

3. Multipurpose authorities

4. Autonomous civil aviation authority

5. Private involvement in airport ownership and operations

6. Airport as a Business Enterprise Engine

7.4.1 Airports under Civil Aviation Administration The number of autonomous airport authorities has been growing globally. Most of the international airports are operated by a civil aviation administration or by another government department with parallel tasks. In such a state of affairs, airport operations are usually one of the many functions assigned to the civil aviation administration. These functions generally include the operation of route facilities and services, inspection of aircraft, issue of certificate and licenses, activities related to the approval or filling of air carrier forces and rates, negotiation of bilateral agreements etc. are directly view under the government administration.

Airport is the separate body or department within the civil aviation administration under the chief or head directly reporting to the Director General of Civil Administration (DGCA). The decision-making authority is vested with the head of the airport department, who will be overseeing the day-to-day operations of the airport. Globally, this type of airport administration is found very few. For instance, Singapore Changi Airport, which is under the Civil Aviation Authority of Singapore (CAAS). The performance of this type of airports is efficient as compared to other type of airport administration.

7.4.2 Autonomous Airport Authorities An autonomous airport is an independent authority established with an objective of operating and managing one or more airports. These types of airport administration were found in Europe, United States and some parts of Asia Pacific regions. The scope of autonomous authorities has expanded to its operation with an additional management of overseeing the air route facility as well. The number of airport


authorities is growing in all the regions, and today it is seen that most of the major international airports are under autonomous airport authority. ICAO recommends the states, considering for establishing the authorities to manage airports and route facility or both with an aim of attaining improved efficiency and financial results. For instance, Airports Authority of Thailand and Airports Authority of India fall under this category. In the US, 50% of the airports are under autonomous airport authorities.

Scope and Areas of Responsibility under Autonomous Authority Before an airport authority becomes operational its charter or document has to be developed for the functioning of airport, describing the scope of the services, which an airport authority is to be responsible for providing and operating. The major services or areas are:

Aircraft Movement Areas Passenger Terminal Facilities

Cargo Facilities

Aircraft Parking Areas

Hanger Services

Air Traffic Control including Communication and Metrological Services

Airport authorities are governed by the Board of Directors, Chairman or Managing Director or Chief Executive would be the senior in the governing structure of the authority. Board of Directors would oversee the expertise areas like − Commercial, Technical operations, and Engineering and Financial management. Further, the Board is responsible for framing policy development, final decision on major investments and other matters relating to over all operations of the authority. However, organizational structure would vary between authorities and would depend largely on the scope, and functions of the airport authority.

Objectives of Forming Autonomous Airport Authority

To improve the efficiency and finances of the airport(s) concerned.

To defray airport expenses.

It permits and encourages airport management to control over revenues and costs.

Responsible for levying and collecting of charges on air traffic as well as for the promotion and development of non-aeronautical activities.

To provide airport facilities and services in the most cost efficient manner.

High-tech professionals, which in turn increase productivity.

Advantages of Establishing Autonomous Authorities The formation of autonomous airport authorities or entities brought distinct advantages in the management, and operation of airports and air navigational services. They are:

Allowing service donor through financial and operational sovereignty. Optimistic intensification of business ethnicity. Restraining expenses per traffic unit relative to other airports of comparable size. Cast-off diversion in aviation user charges into aviation. Sinking financial burden on government. Enhanced quality of services. Established apparent dissimilarity amid in the regulator and the service provider.

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Airport Planning7.4.3 Multi-purpose Authorities Multi-purpose authorities operate not only airport facilities but also for one or more other modes of transport, covering such facilities as ports, bridges and tunnels. This approach has been found useful where cities operating airports wish to centralize the operation and management of these, and other major transportation facilities that they are accountable for providing. In the US, multi-purpose authorities operate fifty per cent of airports. A separate department of aviation usually operates the airports by multipurpose governments. The aviation department operates under the general constraints of the local authorities, including procurement rules, contracts and personnel policies. The basic objective of this type of airports is maximizing local welfare. Airports operated by multipurpose local governments are often operated under a separate enterprise fund. To name a few airports under the multipurpose authorities are San Francisco, Omaha, Harlingen (Texas) governed by city authorities. Reno, Cincinnati and Fort Lauderdale airports are under county authorities. The largest port authority operated airports are JFK, La Guardia, Newark, Seattle and Sandiego.

7.4.4 Autonomous Civil Aviation Authority The operation of one or more airports to an autonomous airport authority may not, in certain circumstances, be a good approach to improving airport operational efficiency. In smaller state with limited aviation activity and where the operation of an international airport is the dominant function of the civil administration. If anything gained little by separating the airport operation from the civil aviation administration, and assigning it to an autonomous airport authority established exclusively for that purpose. In fact, costly duplication could result if each of the two bodies carries out functions previously performed more efficiently and at a lower total cost by the civil aviation administration. This applies particularly to administrative costs and overheads.

The reduced responsibilities of the civil administration would normally include aviation safety and various licensing, monitoring and policy functions. As a result, of having been divested of airport operations, however, the administration would no longer have the financial benefit of the common use of premises and equipment, the costs of which were at least in part, financed by airport revenues. With its revenue generating capacity severally restricted, it could also be more difficult for the reduced civil aviation administration to acquire from the government funds require to perform its activities. Another factor to be considered in these circumstances is the potential for rivalry between the new autonomous airport authority and the civil aviation administration with its consequential detrimental effects on aviation development.

7.4.5 Private Involvement in Airport Ownership and Operations In the recent past, there was movement towards liberalization in the ownership and management of airports and a limited extent of air navigational services by involving private sector participation. Privatization in airport infrastructure started way back to 1987. British Airports Authority (BAA Plc) was the first airport to privatize during 1987. Privatization in airport connotes transfer of full ownership or majority ownership by private interest of operating airport facilities and services. Therefore, a management contract, a lease as well as minority participation in the equity of airports.

Private participation means that the private sector has a role in the ownership and /or management in the provision of airport services, that majority or ultimate ownership remains with the government. However, the management of commercial concessions in particular retaining outlets at an airport by a private entity is not considered as private participation. Although airports are owned in a majority states by the


government, a growing number of airports are now under some form of private ownership or involvement. In some countries, airport entities have now been privatized. It is projected that plans are underway for private involvement in airports in a number of ways, including leasing, part ownership or the ownership of parts of an airport such as terminal buildings etc. Most common form of private involvement used for airport management and operations are:

Management contract

Lease or concession

Transfer of minority ownership or control

Private sector ownership or operation of parts of the activities of an airport.

7.4.6 Airport as a Business Enterprise Engine Aviation industry in 21st century is moving away from public support towards self-sufficiency and privatization. The main task for airports today is to build and operate as efficiently as possible to reduce dependency on tax revenues and other subsidies. Most progressive airports today are undergoing a radical change by increasing efforts on revenue enhancement. These airports are becoming an enterprise and increasing their incomes by generating new revenue streams and business opportunities in the airport. For instance:

Amsterdam Airport (SCHIPOL) provides a considerable contribution to the Dutch economy, accounting for 1.9% of the GNP. In addition, airport provides employment opportunities directly and indirectly to thousands of people in the regions.

Los Angeles International Airport has an annual economic impact of US $ 43.5 billion exceeding the GDP of many small countries.

Hong Kong's new Chek Lap Kok Airport is being developed with over 80 hectares of land to support real estate development such as a commercial centre; business park and airport freight forwarding. A new town is also under construction to provide a community of about 20,000 people to support the airport.

The above-mentioned examples, evidently demonstrate that an airport is an economic powerhouse and no more regarded as transportation centres. Although their first mission may move to passengers and cargo but their main emerging role is as an economic generators, which is powering the growth of an entire regions.

Airport as a Shopping Mall

In the middle-east region, an important business shift has occurred since the Gulf war in 1991. Many international companies serving this wealthy region have consolidated their operations in Dubai. Dubai sits on the western shore of the Persian Gulf and has pursued liberal economic development policies, and encouraged foreign direct investment (FDI). Dubai has become the premier location for MNCs in the Middle East. Dubai International Airport has experienced growth rate of 10-15% a year for the last four years and was expected to protect 14 million passengers by 2003. $ 700 million (US dollars) are invested for the expansion project for the airport, including a 28 Satellite concourse. As the centre piece of this facility, a 9300 sq.m. shopping complex will be expanded for the duty free area. The development will take the form of a sophisticated shopping mall with stores and boutiques built around the perimeter. The scale of the mall will be comparable to international terminal 4 at Heathrow, well known for its shopping facilities.

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Airport PlanningAirport as a Technological Park

In addition to retail facilities, Dubai international airport is also planning and developing the concept of a trade and technology park of 2.2 million sq.m. on the northern boundary of airport terminal. The development strategy behind the park is to diversify Dubai's economy by moving into 21st century products and services. The park has ample apron front property and is very attractive to business with a need for rapid airside access. This park will be operated as a free trade zone, offering 100% foreign ownership, elimination of duties and unrestricted repetition of profits. Other innovative operations, which include a one-stop service, centre to facilitate tenant applications and operations on site training facility to provide focused instruction, creating a high skilled labour in the aviation technology. More than 150 MNCs are on the waiting list to occupy this airport. This enormous interest allows Dubai's airport management to be very selective, building a tenant list of top quality international companies. As a result, the airport will reap the premium returns on land that was previously underutilized.

Airport for Entertainment

Las Vegas is now the fastest growing 'Entertainment City' in the US and has also become a premier convention city, hosting major events than any other city in the world. McCarran International airport is the fastest growing airport in the country. Growth has been surging ahead at an average of approximately 10% a year for the past five years, with traffic now over 30 million annual passengers. As a result, the airport is projected to keep up its astonishing rate of expansion holding as the 10th busiest airport in the US and the 15th busiest airport in the world. Despite this rapid pace, this innovative airport will pay in its own way as it fulfils its function as the city's gateway for entertainment.

Economic Progress and Financial Strength

Airport Industry plays a vital role in the world economic activity, and fuels the growth and financial strength of the country. In today's rapidly changing global economy, aviation infrastructure industry drives economic progress, promoting leisure and business activities.

Network Links

Airport infrastructure segment provides high value of communication and distribution links with the developed, developing and interdependent markets. A region can neither attract major investment nor can be marketed as a centre for venturing new business without an efficient air transport. It makes possible the rapid movement of millions of people and billions of dollars worth of goods to market them around the world.

International Tourism

Airport provides the foundation for international tourism. International tourism receipts constitute a higher proportion of the value of exports compared to other products. In 1999, aviation sector contributed US $ 820 billion approximately to the world economy. Asia-Pacific countries are the best examples of experiencing tourism led economic boom by the means of aviation industry.

Economic Efficiency

Economic efficiency is increased by ability of airport industry to deliver the stock and personnel anywhere in the world within 24 hours. Companies with foreign source of components and materials in their products depend heavily on the aviation sector. Therefore, international business opportunities are tremendously enhanced by the support of an aviation infrastructure. The total impact of aviation on gross world


output amounts to US $ 1200 billion in 1999. The close relationship between economic propensity and aviation activity is further visionalized in comparing per capita GDP with the per capita demand for air travel. An increase in aviation activity provides a useful indicator to identify the status of the national economy.

Generation of Labour Market

The total economic impact of aviation on the labour market is estimated to be more than 21 million jobs, directly or indirectly worldwide. This shows that an employment opportunity in the aviation industry is growing vastly when compared with the other sectors.

Fiscal Benefits

Airport plays an important role in the fiscal benefits, and pays substantial amounts of taxation to the local, provincial and national governments around the world.


Fill in the blanks: 1. Airport is a terminal facility that functions as an ………………………

between air and surface vehicles. 2. ICAO stands for ……………………… 3. Airport Infrastructure planning is a very important aspect of the

……………………… industry. 4. The ……………………… of an airport basically mixes with the functions

of many of these facilities. 5. The ……………………… term plan reveals the development of new

physical capacities.

7.5 CLASSIFICATION OF AIRPORT’S AIRFIELD COMPONENTS Airport facilities have been recognized which are based on the accrual of inventory information and forecast demand elements, and planned according to FAA airport design standards and airspace criteria. It should be carefully observed that identification of needed facilities does not create a need in terms of complete and accurate design standards or goals, but rather an option for facility improvements to resolve different kinds of facility or operational shortfalls, or to make advances as demand warrants.

7.5.1 Functions of Airfield The chief functions of airfield are to oversee the Runway, Parking stands, Apron, Safety and Security to aircraft while landing and take-off in the airport. Further, it also manages the function of allocation of bay to the aircraft as per their size and nature of traffic.

7.5.2 Airfield Components Airfield facility components comprise runways, taxiways, navigational aids, airfield marking/signage and lighting. Terminal area facility components includes hangars, terminal building, apron parking area, fuel quantity and storage size, public vehicle parking, and airport access needs.

Runways must be sufficient large to provide the take-off and landing of commercial planes. About 3,300 meters (10,000 feet) are needed for a 747 to take-off. Other

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Airport Planningcharacteristics likeslope (less one per cent), the altitude (affect the length of runways as air density) and meteorological conditions (temperature, precipitation, prevailing wind, visibility, etc.) influence the site. Around 32 movements (landings and take-offs) per hour are possible on a commercial runway under optimal conditions. Airfield activities are concerned with loading and unloading planes, maintenance and traffic control. Their main objective is to entail services to aircrafts.

Runways and Taxiways

Airport infrastructure is acting as an imperative role in the growth of an economy. Runways, taxiways, apron and terminals are the key areas in influencing the functioning of airside management. These amenities act as a "Production Unit" in the airport infrastructure industry. This generates economies of supply in the aviation industry. Today, most of the global mega airports in Asian region (Hong Kong, Kuala Lumpur, London Heathrow Terminal-5, Bangkok, Singapore and Seoul's Incheon) are constructed with adequate supply to meet the growing demands.

ICAO's Annex-14 (Aerodrome Manuals) which is used as a Standard and Recommended Practices (Specifications), has laid down the physical characteristics for planning of an airport facilities and technical services. To a great extent, the specifications for individual facilities have been consistent by a reference code system and the designation of the type of runway specified by the definitions. To provide a guide for airport planners', ICAO has established uniformity in airport landing facilities criterion (Annex 14 Aerodrome Manuals). For the purpose of identifying standards for various sizes of airports and the functions they serve, reference codes have been developed. The purpose of this reference code is to provide a simple method for correlating with the numerous specifications in designing a series of airport facilities, which are matched with aircraft to operate on the runway.

Aerodrome Reference Code

Aerodrome reference code is selected for aerodrome-planning purposes in accordance with the characteristics of the aircraft for which an aerodrome facility is planned.

Airport Category Determination

Airport category is determined on the bases of maximum aircraft weight and type, which is operating at the airport.

Runways: Runway is defined as a "rectangular area on a land aerodrome prepared for the landing and take-off aircraft". Runways and their associated taxiways are a starting point for airport layout. Therefore, they have to be planned in relation with other major operating elements such as passenger and cargo areas including apron and buildings, vehicle parking, ground access and air traffic services, with the basic purpose of supporting all parts of the system in balance. Runways are categorized into:

Primary Runway, and

Secondary Runway

Primary runway is used in preference to others whenever conditions permit. 95 per cent of the aircraft take-off and land on the primary runway, whereas the secondary runway is used as a replacement of primary runway. Runway basic length, wingspan and wheel span of aircraft determines the aerodrome code.

Table 7.1: Code Element – 1

Code Number Aeroplane Reference Field Length (Metres) 1 Less than 800 M

2 800 M up to but not including 1200 M Contd…


3 1200 M up to but not including 1800 M

4 1800 M and above

Table 7.2: Code Element – 2

Code Letter Wing Span (Metres) Wheel Span (Metres) A Up to but not including 15 M Up to but not including 4.5 M

B 15 M up to but not including 24 M 4.5 M up to but not including 6 M

C 24 M up to but not including 36 M 6 M up to but not including 9 M

D 36 M up to but not including 52 M 9 M up to but not including 14 M

E 52 M up to but not including 65 M 9 M up to but not including 14 M

F 65 M up to but not including 80 M 14 M up to but not including 16 M

Source: ICAO, Annex 14 Aerodrome Design Manual

Taxiway: Taxiway is defined as a "path on a land aerodrome established for taxing the aircraft and intended to provide a link between one part of the aerodrome and another", including:

Aircraft stand taxi lane: A portion of an apron designated as a taxiway and intended to provide a thorough taxi route across the apron.

Apron Taxiway: A portion of a taxiway system located on an apron and intended to provide a thorough taxi route across it.

Rapid Exit Taxiway: A taxiway connected to a runway at an acute angle and designed to allow landing airplanes to turn off at higher speeds are achieved on other exit taxiways thereby, minimizing runway occupancy times. The location of exit taxiways depends on the mix of aircraft, the approach and touchdown speeds, the exit speed, the rate of deceleration, which in turn depends on the condition of pavement and the number of exits. The location of exit taxiways is also influenced by the location of the runways relative to the terminal area. Taxiway system planning efforts should be made to avoid unnecessary taxing since these efforts increase taxing time, fuel consumption and aircraft wear, and extremely long distances may result in dangerous high temperature tire conditions.

7.6 AIR TRAFFIC ZONES The world's navigable airspace is mainly divided into 3-dimensional segments, each of which is assigned with a particular class. Most nations follow the classification stated by the International Civil Aviation Organization (ICAO) and explained below, though they might use only some of the classes stated below, and considerably change the particular rules and essentials. likewise, individual nations may also entitle specific Use Airspace with further rules for reasons of national security or safety. Air traffic control is concerned with keeping aircraft operating under IFR distinguished; assisting pilots spot other aircraft and commonly suggesting or limiting aircraft in real time.

Air traffic zone in aviation is a mass of limited airspace, normally around an airport, which moves from the surface to a particular upper limit, put to save air traffic operating to and from that airport. As CTRs are, by definition, controlled airspace, aircraft can only fly in it after getting a particular clearance from air traffic control.

This reveal that air traffic control at the airport is quite familiar with exactly which aircraft are under that airspace, and can proceed to ensure aircraft are aware of each other, either utilising separation or by forwarding traffic information.

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Airport PlanningSome main key concepts are as follows:

1. Separation: Keeping a specified least distance between an aircraft and another aircraft or terrain to save collisions, generally by needing aircraft to fly at set levels or level bands, on set routes or in any directions, or by controlling an aircraft's speed.

2. Clearance: Permission granted by ATC for an aircraft to move under some conditions included under the clearance.

3. Traffic Information: Information provided by ATC on the position and, if known, intentions of other aircraft likely to pose a hazard to flight.

4. Flight Rules: Aircraft may generally operate under Visual Flight Rules (VFR) or Instrument Flight Rules (IFR). There is also an intermediate form, Special visual flight rules

In the USA the term control zone is no longer used and has been substituted with airspace class D. Typically, it reaches five miles in diameter with a height of 2500 feet AGL (above ground level) around small commercial airports. Aircraft are needed to establish radio contact with the control tower prior to entering and to keep in contact while in class D airspace. This entails that an aircraft must be equipped with at least a portable radio to fly in Class D airspace.

In the UK, control zones are generally class D airspace (but also class A at Heathrow and Jersey) and generally move from the surface to 2000 feet AGL. They generally can be observed as rectangular, extending along the axis of the main runway, although irregular shapes may be utilised where more complex airspace dictates this. A control area (CTA) is usually placed between a CTR and nearby airways to provide uninterrupted controlled airspace to airways arrivals and departures.

In Germany, control zones are a specific type of class D airspace, called D (CTR). The major difference to the regular German class D airspace is that within a CTR there are no minimum-distances for VFR-traffic to keep from clouds (though clouds may not be touched).

7.7 APPROACH AREAS Following are the approach areas:

7.7.1 Customer-focused Approach Area The air transport industry, one of the world’s fastest growing industries, is assuming greater importance in the economic and social development of countries worldwide. The growing diversification of airports’ revenue sources is an indicator of an embryonic amalgamation of airports into the economies in which they operate. Accordingly, airports are becoming striking business centres, which aid in boosting urban economic growth; the trend is ensuing in enhanced focus on customer-driven profiles and the quality of airport facilities. In recent times, airport traffic in big hubs has exhibited a noticeable increase. Accordingly, a remarkable level of consolidation of air traffic away from secondary hubs and towards big ones has emerged and an anticipated consolidation of the hub system is expected to drastically transform the distribution of air traffic among airports.

Airports across the world are seeking to limit their reliance on aeronautical revenues to generate resources to meet rising infrastructure demands. As a result, the market is witnessing greater focus on commercial revenues from “retailing, advertisements, ground transport and property development to generate profits”. The importance of non-aeronautical revenues is a superior gauge to measure the new model of business-oriented airport operators entering into the industry and developing a significant value added in providing customer service. Hence, multiple commercial opportunities are


being used to exploit the airports business and are viewed as more than air service providers.

7.7.2 Business Approach Area Airports are flattering profitable business enterprises based on the mounting revenues generated by non-aeronautical activities, in particular, Retailing, Car parking and Catering. This trend is expected to create opportunities for airport management firms and other companies keen on intensifying their businesses in the catchment areas of airports. Currently, due to the demand from air carriers for the reduction of charges and the aversion of governments to offer subsidies, airports can no longer rely exclusively on aeronautical revenues to generate the resources needed for infrastructural improvements. Therefore, to overcome this trend, airport professionals are looking to boost the commercial revenues from retailers, advertisements, ground transport and property development which offer a huge increase in the infrastructural investments and even to directly generate profits (Frost & Sullivan).

The growing diversification of airports’ revenue sources reflects their stronger integration with the economies in which they operate. Airports have turn out to be attractive business centres and are sustaining economic growth in the areas where they are located. “The importance of non-aeronautical revenues is a good indicator of the new model of business-oriented airport operators entering the industry and the growing importance being given to the customer service”. As a result, ‘airports are now increasingly seen not only as air-service providers but also as potential providers of multiple commercial opportunities such as shopping and entertainment’. However, airport operators who are eager to succeed in the marketplace will have to demonstrate competencies in core airport operations, such as technical operations, facility management or safety, besides the management of traditional airport activities such as airport planning. Ultimately, the challenge would help in building an organization to achieve better economic returns. Success in a globalized and highly competitive airport industry would require marketing and new business development skills beyond those that currently exist in the industry.


State whether the following statements are true or false: 1. Airport facilities have been identified based on the accumulation of

inventory information and forecast demand elements, and planned in accordance with FBB airport design standards and airspace criteria.

2. The major functions of airfield are to oversee the Runway, Parking stands, Apron.

3. Airport infrastructure is acting as an imperative role in the growth of an economy.

4. Aerodrome reference code is selected for aerodrome-planning purposes in accordance with the characteristics of the aircraft for which an aerodrome facility is planned.

5. Airport category is determined on the basis of maximum aircraft weight and type, which is operating at the airport.

Case Study: WSDOT-Managed Airports uring the LATS effort, it became apparent that there was a need for more detail regarding the purpose and role of the 17 state-managed airports within Washington State. Specifically, due to growing uncertainty in traditional

airport funding sources, it had become necessary for WSDOT Aviation to examine why it maintained these airports and what role they served in the state-wide aviation

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Airport Planningsystem. As such, WSDOT Aviation requested that an additional planning study be conducted to evaluate, analyse and develop a strategic plan for those 17 state-managed airports. Completed in 2008, the WSDOT-Managed Airports: System Evaluation and Strategic Plan was integrated into LATS and final recommendations of the Washington Aviation System Plan and Aviation Planning Council recommendations.

Airport Master Planning

An airport master plan is a conceptual plan that reflects the ultimate development goal of a specific airport over a given period of time (typically 20 years). According to the FAA, the goal of an airport master plan is to provide guidelines for future airport development that will satisfy aviation demand in a financially feasible manner, while at the same time resolving the aviation, environmental, and socioeconomic issues existing in the community.

Objectives of Airport Master Planning

The following are the objectives of an airport master plan. 1. Developing or modifying physical facilities on an airport to meet existing and

projected demand.

2. Developing or modifying land on and/or adjacent to an airport, including establishing land use/zoning controls on lands adjacent to an airport.

3. Determining the environmental effects of airport development and operations.

4. Supporting the plan technically and procedurally through a thorough investigation of concepts and options of a technical, economic, or environmental nature.

5. Establishing airport access requirements.

6. Establishing a realistic schedule for the implementation of the development plan proposed in the plan, particularly for the short-term Capital Improvement Program (CIP).

7. Proposing an achievable financial plan to support the implementation schedule.

8. Establishing a mechanism for formal communications with key airport stakeholders.

9. Presenting for public consideration, in a convincing and candid manner, a plan that adequately addresses the issues and satisfies local, state, and federal regulations.

10. Documenting policies and future aeronautical demand for reference in municipal deliberations on spending, debt incurrence, and land use controls.

11. Providing an effective graphic presentation of the future development of the airport and future land uses in the vicinity of the airport.

12. Establishing a continuing planning process that will monitor conditions and adjust plan recommendations as circumstances warrant.

The content of an airport master plan varies in both level of detail and specific requirements, depending upon the type of planning effort undertaken. However, the master plan should include at least the following elements:

Primary Airport Master Planning Elements

1. An inventory of existing airport facilities, current conditions, and issues related to the airport, and an identification of other planning studies that may impact the airport plan.

2. The demand forecast including aircraft operations, number of passengers, volume of cargo and mail, and vehicular traffic. The forecast should be made not only on an annual basis but also for the busiest hours of the day. Typically, the forecast is for a period of 20 years.

Contd…


3. An analysis of the interaction between the various demand parameters and the capacity of the relevant airport facilities, including those that affect airfield, terminal, and ground access system operations.

4. The development of alternative concepts and solutions to reasonably satisfy forecasted demand by taking into account such factors as the functional role of the airport under study and the impact on the environment, safety, economy, and fiscal resources of the area. An examination of alternative sites, including land-use and ground access plans and development concepts, is essential for the proper consideration and identification of viable alternatives.

5. The determination of the cost-effectiveness of alternative concepts and recommended solutions, including both tangible and intangible benefits and costs. Many important benefits are significant in the decision-making process but which are also difficult to quantify.

6. A financial feasibility analysis which differs from economic feasibility, for there is no guarantee that if a proposed development is economically feasible, it is also feasible to finance that development. Investment priorities must be established among the various individual airport improvements. Frequently airport planning is separated from financial and management planning. The latter may be undertaken only after a physical plan is adopted. Because of financial constraints, financial planning should be undertaken concurrently with planning of the physical facilities.

7. The environmental impact of alternative concepts and recommended solutions must be considered and incorporated into the cost-effectiveness analysis. Although aircraft noise is the principal environmental problem faced by airport authorities, other factors must be considered.

8. The preparation of implementation schedules and costs and sources of revenue for the various phases of proposed development.

9. The preparation of an associated airport layout plan (ALP) that graphically represents the key existing and proposed elements of the airport in terms of facilities, properties, land use/zoning, airspace, etc.

For the state-managed airport system, WSDOT Aviation will establish formal airport master plans that comply with all related FAA regulations for all airports listed within the NPIAS. For non-NPIAS Airport, WSDOT Aviation will utilize airport design standards that are similar to those used by other states. These standards generally follow the FAA’s framework, but recognize that the State-Managed Airports are relatively small unimproved airports located in rural and or mountainous regions of the state, and are operated under Visual Flight Rules (VFR). These master plans should be reviewed by WSDOT every five years, and updated as needed to reflect the management objectives set forth in Chapter I of this document. The specific federal regulations that should be reviewed and considered include the following:

FAA AC 150/5070-6, Airport Master Plans

FAA AC 150/5300-13, Airport Design

FAA Order 5100.38, Airport Improvement Program Handbook

During the development of the master planning documents, WSDOT Aviation will develop a public outreach and communication plan to ensure that all stakeholders and the public can participate in the planning effort. An Airport Layout Plan (ALP) drawing set depicts existing airport facilities and proposed developments as determined from the planners’ review of the aviation activity forecasts, facility requirements, and alternatives analysis. It is typically prepared as part of a complete airport master plan effort; however, it can also be prepared as part of a stand-alone planning effort that may include supporting documentation and narrative.

Airport Layout Plans are prepared either as first time ALPs, formal revisions based on changes to the airport, or informal revisions based on minor improvements to the airport. Informal revisions, often referred to as pen-and-ink revisions, can be made to individual sheets of the ALP drawing set, although the responsibility for review and

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157

Airport Planningapproval must still be coordinated with the state and if a NPIAS Airport, the FAA. These and other requirements are discussed in FAA Order 5100.38, Airport Improvement Program Handbook and WSDOT Airport Aid Grant Procedures Manual.

The preparer of the ALP must work closely with the WSDOT Airport Manager, airport owner, and if appropriate, the responsible FAA office, to define the requirements, standards, and criteria to be employed. To ensure that the ALP is comprehensive, all parties must agree to its content and standards

Principal Functions of an Airport Layout Plan

1. An ALP depicts existing airside and landside facilities, traffic pattern and future facility needs and improvements. The plan is used as a tool for financial planning and assistance.

2. An ALP creates a blueprint for airport development by depicting proposed facility improvements that should be consistent with the state aviation system plan, airport master plan and community plans.

3. The ALP is a public document that serves as a record of aeronautical requirements, both present and future, and as a reference for community deliberations on transportation and land use proposals as well as budget resource planning.

4. The approved ALP enables the airport sponsor, the state and the FAA to plan for facility improvements at the airport. It also allows for anticipation of budgetary and procedural needs. The approved ALP will also allow the FAA to protect the airspace required for facility or approach procedure improvements.

5. The ALP can be a working tool for the airport sponsor, including its development and maintenance staff.

Note: The ALP drawing set is a set of planning drawings and is not intended to provide design engineering accuracy. Individual items such as runway coordinates, obstruction survey data, and application of airport design standards must comply with Federal survey standards.

For each of the state-managed airports, WSDOT Aviation has some flexibility on what specific sheets shall be required to comprise an ALP set. However, regardless of the actual sheets included, WSDOT Aviation shall establish and maintain current ALP sets whose individual sheets meet the current FAA standards.

For those state-managed airports included in the NPIAS, WSDOT Aviation shall establish and maintain an ALP plan set in full compliance with FAA and WSDOT requirements.

At a minimum for all state-managed airports, WSDOT Aviation shall establish and maintain an Inventory Summary Report of each airport. This information may be similar to the information found in the Airport Master Plan or as an addendum to supplement existing information in the master plan.

Other Planning Efforts

There are a wide variety of other potential airport planning efforts that could potentially be undertaken by WSDOT Aviation with respect to the state-managed airports. For those studies not addressed within this handbook, it will be incumbent upon the WSDOT Aviation Airport Manager to coordinate with the WSDOT Aviation Planning staff to ensure that appropriate guidelines and requirements are followed.

Questions



Source: http://www.wsdot.wa.gov/publications/manuals/fulltext/m3072/chapter6.pdf

158 Airline and Travel Management 7.8 LET US SUM UP

Airport is a terminal facility that functions as an interface between air and surface vehicles. It is a processing centre providing the necessary facilities for ticketing, documentation and control of passengers, and cargo (Ashford N. Martin − Stanton, H.P and Moore CA, 1984). Airport Infrastructure planning is a very important aspect of the civil aviation industry. It helps the airport administration to oversee the airport capacity and to provide adequate capacity (Airside and Landside), Runways, Taxiways and Terminals of the new airports or modernizing airports. The plan also amalgamates the various agencies, like Aircraft operators, National and Local Government Planners, Government Control Authorities (Customs, Immigration and Health), national and local authorities, aircraft and equipment manufacturers and international aviation agencies for consultation and joint planning. The most efficient plan for the airport as a whole is to provide the required capacity for aircraft, passenger, and freight and vehicle movements with maximum ease at lowest operating costs. There is a broad range of measures to prevent and control congestion of airports. These may be classified into short-term and long-term planning. The short-term planning occupies minimal building of new facilities and long-term measures seek to increase physical capacity to meet the current and future demand. Implementation of any one of these measures is often fraught with problems. For example, the main complexity focused in many cities is that the extensive land requirements of airport development and their environmental impacts pretence severe constraints on the provision of extra runway capacity and terminal capacity (ICAO, 1992). The long-term plan reveals the development of new physical capacities i.e., building new terminal and runways if the traffic is growing significantly and exploding the terminal as well as runway. There are a number of important issues, which need to be considered in the implementation of long-term expansion of capacity

7.9 LESSON END ACTIVITY Write a magazine type article on Airport infrastructure planning.

7.10 KEYWORDS Airport: An airport is a facility where aircraft can take-off and land. Airports vary in size,

Airport Infrastructure planning: Airport Infrastructure planning is a very important aspect of the civil aviation industry that helps the airport administration to oversee the airport capacity and to provide adequate capacity (Airside and Landside), Runways, Taxiways and Terminals of the new airports or modernizing airports.

7.11 QUESTIONS FOR DISCUSSION 1. What do you mean by airport? 2. Explain the Growth of air transport. 3. Describe Airport organization and associations. 4. Explain the classification of airports airfield components. 5. What are air traffic zones? 6. What are approach areas?

159

Airport PlanningCheck Your Progress: Model Answers

CYP 1 1. Interface 2. International Civil Aviation Organization 3. civil aviation 4. operation 5. long

CYP 2

1. False

2. True

3. True

4. True

5. True







8 AIRPORT PLANNING PROCESS

CONTENTS


8.1 Introduction

8.2 Context of Airport System Planning

8.2.1 Aims and Scope of Airport Planning System

8.3 Development of Airport Planning Process

8.3.1 Purpose of Airport Master Plan

8.3.2 Steps in Preparing Airport Master Plan

8.3.3 Goals and Policy Objectives of Airport Master Planning

8.3.4 Strategic Planning System

8.4 Ultimate Consumers

8.5 Airline Decisions

8.5.1 Consumer Decision-making Process

8.6 Other Airport Operations

8.7 Let us Sum up


8.9 Keywords




Understand Context of Airport System Planning

Discuss Development of Airport Planning Process

Describe Ultimate Consumers

Explain Airline Decision

Analyse Other Airport Operations

8.1 INTRODUCTION Airport operation is a complex system, which has various intercepts to function efficiently and use to the optimum level. Airport operates round the clock. There are some airports in UK, US and other countries that have night curfew. Large teams of people work in concert to ensure safe aircraft landing and take off. These processes

161Airport Planning Process

are largely invisible to passengers, but they can be extraordinarily complex at large-scale airports like Atlanta, which handles around 80 million passengers per annum, 0.22 mppd and 9000-10000 pph.

8.2 CONTEXT OF AIRPORT SYSTEM PLANNING Planning is a systematic utilization of available resources in order to put in use efficiently for better management. Airports are integral parts of the total air transport system. The airport system planning is presented in flow chart form below:

Airport Planning System

Physical Components

Owner/Operators Controlling Regulating Authorities

Figure 8.1: Airport Planning System

Airport planning system (APS) is unswervingly inclined towards the needs of its

Ultimate consumers;

Social and Economic characteristics of the national setting within which it operates;

Impacts on the local and global environment;

Acceptance by the communities it serves.

APS is formally recognize and resolve as many of these conflicts as possible prior to implementation, even more than to harmonize standards (facility, provision, safety and reliability) and to produce an economically efficient system by ensuring the use of best practice. The discipline of planning arose from a need to foresee and present future problems, which might arise from an uncoordinated set of developments.

Airport Planning System (APS) implies a broader perspective and encompasses in the development of airspace and Air Traffic Control (ATC) system and even the way in which air services is provided. Further, it also addresses the financial pattern in investing the navigational aids, ATC infrastructure, and aviation weather monitoring/information system. The major objective of the APS is how best we utilize the air service system. It also examines the role and purpose of the system its play. Further it acts as a controlling system to provide large developed market. APS supports in the airport development to handle the rapidly increasing traffic levels. It also extends to oversee the Airport Development Aid Program (ADAP) funded from the aviation taxes and a Planning Grant Program (PGP).

8.2.1 Aims and Scope of Airport Planning System The broad aim and scope of APS is outlined below for efficient planning and to use the facilities to the optimum:

Coordination: It is an incessant and iterative process, which necessitates coordination and support between Federal/State/Regional and local aviation planning agencies.

Top-up and Bottom-up Guidance: Planning process engrosses both the top-down guidance and bottom-up classification of needs, options and proposed developments.


National Interest: It should wrap the requirements of all sectors of civil aviation and replicate a balance of their individual interests and the national need.

Economic and Social Objectives: The system plan should gaze ahead of aviation demand and infrastructure needs and consider economic/social objectives to be advanced by commercial and private air transport.

Futuristic: ASP should portray current conditions and present a vision for futuristic state, with the goals to be met in enumerating the criteria of success. This would lay out a path of evolution from where we are to where we want to be.

Think Tool: ASP is used as a thinking tool, evaluating options via what ‘if’ scenarios. It should be useful in establishing and defending priorities and should be corollary of business and marketing plans.


Fill in the blanks: 1. The ……………………….. plan should gaze ahead of aviation demand

and infrastructure needs and consider economic/social objectives to be advanced by commercial and private air transport.

2. Planning is a ……………………….. utilization of available resources in order to put in use efficiently for better management.

3. ……………………….. process engrosses both the top-down guidance and bottom-up classification of needs, options and proposed developments.

4. Airport operation is a ……………………….. system, which has various intercepts to function efficiently and use to the optimum level.

5. Airport operates ………………………..

8.3 DEVELOPMENT OF AIRPORT PLANNING PROCESS Development of an airport master plan is recommended by ICAO, FAA, as the basis for the comprehensive planning of individual airports. The major objective of master plan is “to allow an orderly development compatible with the framework of local, regional, national economic and transport plans with compiling national and international aviation policies in protecting the environment aspects”. The process should also inform public and private interest of aviation requirements, providing a planning framework, which enables affected political entities to participate in the planning and result in optimal use of land. It also demonstrates an airport’s commitment to a sound business plan and so as to the airlines, to the users and to its contribution to the local and regional plans helping to remove uncertainties in the community.

The Airport Master Plan presents the planners' conception of the definitive development of a specific airport. It efficiently presents the research and logic form to evolve and artfully display the plan in a graphic and written form. Master Plans are applied to the modernization and expansion of existing airports and to the construction of new airports, regardless of their sizes or functional roles.

The master plan includes the phased physical planning of Airspace, airfield, passenger and cargo terminals, circulation, support and service facilities, ground access and suitable disposition of these facilities. It also includes economic planning of capital requirements and the associated costs/revenue streams together with a potential mitigation measures. All these aspects of the planning follow forecasts of aviation activity.


8.3.1 Purpose of Airport Master Plan The prime objective of master planning process is to enable the management to oversee the eventual site capacity and then to guard it from the consequences of ill considered development of facilities on the airport and from encroachments of mismatched land uses around the airport which might confine either its physical expansion or result in traffic limits due to environmental impacts. Airport Master Plan is used as a guide for the modernization and expansion of existing airports and to the construction of new airports. It comprises of suggested land use on land adjacent to the airport. The actual construction of each physical facility design on the master plan should be undertaken after assessing the Economic Feasibility of an Airport in terms of traffic volume and economics obligatory for meeting the demand. Therefore, an airport master plan should establish a schedule of priorities in phasing out the various improvements described in the master plan.

8.3.2 Steps in Preparing Airport Master Plan There are four steps in preparing the master plan for airport. They are: 1. General Consideration or Guide 2. Types of Activity involved 3. Steps in Planning Process 4. Plan update Recommendations The steps are explained below: 1. General considerations:

(a) An airport master plan is only a guide for: Development of physical facilities of an airport Development of land uses for areas surrounding an airport. Determination of the environmental effects Establishment of access requirements of the airport

(b) Among other things, aerodrome master plans used to: Provide Short/Long Term Policy/Decision Guidance Identify Potential Problems and Opportunities Assist in Securing Financial Aid Negotiations between aerodrome authority and concessionaire interest Create local interest and support

2. Types of Activity involved in the Master Plan Process: (a) Policy/Co-ordinate Planning:

Project Goals and Aims Develop work Programme, Schedules and Budget Prepare an Evaluation and Decision Format Establish Co-ordination and Monitoring Procedures Establish Data Management – Public Information System

(b) Economic Planning: Study Analysis of Aviation Market features and Forecasts Determine the Economic and Social Benefits Study and Assessment of Area Economy


(c) Physical Planning Development: Air Space and ATC Provision

Airfield Configuration (Including Approach Zones) Terminal Complex Circulation/Utility and Communication Networks Support and Service Facility Ground Access System Overall Land use Patterns

(d) Environmental Planning:

Prepare an Assessment of Natural Environment Conditions

Document present and Projected Development Patterns

Determine Community Attitudes and Options

(e) Financial Planning:

Determine Airport Funding Source and Constraints

Prepare a Financial Feasibility Study

Prepare Preliminary Financial Plans

Programme for the Finally Agreed upon Concept

3. Steps in the Planning Process:

(a) Prepare a Master Planning Work programme

(b) Inventory and Document Existing Condition

(c) Projection of Air Traffic Demand

(d) Determine Gross Facility Requirement and preliminary time phase Development

(e) Evaluate Existing and potential constraints

(f) Agree upon relative importance or priority of various elements:

Airport Type

Constraints

Political and other considerations

(g) Develop Several Conceptual for Purpose of comparative analysis

(h) Review and Screen alternative Conceptual Plans.

(i) Select Most Acceptable and appropriate alternative prepare in the Final Form

4. Plan Update Recommendation:

(a) Master Plan or Specific elements should be reviewed annually

(b) Master Plan should be thoroughly evaluated and modified every year, if changes in economic, operational, environmental and financial conditions indicate an earlier need for such revision.

8.3.3 Goals and Policy Objectives of Airport Master Planning The airport master planning process involves the preparations of both broad and specific policies, plans and programmes needed to establish a viable airport.


The goals of the airport master planning are:

Provide orderly and timely development of an airport.

Place aviation in its proper perspective.

Protect and enhance the environment.

Promote the establishment of master plan in a systematic fashion.

Ensure compatibility with standards – ICAO and IATA.

Co-ordinate with the state airport system and regional air transportation plans, when they exist.

Coordinating plans for air navigation facilities, airspace use, and air traffic control procedures.

Create general awareness to the general public.

Optimize the use of land and airspace resources

Having completed the Master Plan, the appropriate authorities must take the broad guidelines of the master plan and decode them into a programme, which recognizes specific constraints and opportunities presented in the competitive world in which the airport operates and exist.

8.3.4 Strategic Planning System The concept of strategy has been borrowed from the military and latter it was adopted in the modern business prospects. Strategy bridges the gap between policy and tactics. Together, strategy and tactics bridge the gap between ends and means. George Steiner, a professor of management and one of the founders of The California Management Review, reveals that the strategic planning are:

Basic directional decisions – Purpose and Missions

Actions necessary to realize these directions

Answers the questions

Henry Mintzberg, in his book, The Rise and Fall of Strategic Planning (1994) points out that people use “strategy” in several different ways, the most common being used are:

Strategy is a plan, a “how,” a means of getting from here to there.

Strategy is a pattern in actions over time; for example, a company that regularly markets very expensive products is using a “high-end” strategy.

Strategy is position; that is, it reflects decisions to offer particular products or services in particular markets.

Strategy is perspective, that is, vision and direction. Kenneth Andrews, a Harvard Business School professor and an editor of the Harvard Business Review, gave lengthy definition of strategy in his book, The Concept of Corporate Strategy, “Corporate strategy is the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities.” According to Kepner-Tregoe, in Top Management Strategy, Benjamin Tregoe and John Zimmerman of Kepner-Tregoe, Inc., defined strategy as “the framework, which guides those choices that determine the nature and direction of an organization.”


Tregoe and Zimmerman urge executives to base these decisions on a single “driving force” of the business. Although there are nine possible driving forces, only one can serve as the basis for strategy for a given business. These nine possibilities are listed below:

Table 8.1: Nine Possibilities

Product offered Production capability Natural Resources

Market Needs Method of Sale Size/Growth

Technology Method of distribution Return of profit

Strategy According to Michel Robert

Michel Robert takes a similar view of strategy in, Strategy Pure & Simple, where he argues that the real issues are “strategic management” and “thinking strategically.” For Robert, this boils down to decisions pertaining to four factors:

Table 8.2: Decisions Pertaining to Four Factors

Products and services Market segments

Customers Geographic areas

Like Tregoe and Zimmerman, Robert claims that decisions about which products and services to offer, the customers to be served, the market segments in which to operate, and the geographic areas of operations should be made on the basis of a single “driving force.” Robert claims that several possible driving forces exist but only one can be the basis for strategy.

Strategy According to Treacy and Wiersema

Treacy and Wiersema assert that companies achieve leadership positions by narrowing, not broadening their business focus. Treacy and Wiersema identify three “value-disciplines” that can serve as the basis for strategy: operational excellence, customer intimacy, and product leadership. As with driving forces, only one of these value disciplines can serve as the basis for strategy. Treacy and Wiersema’s three value disciplines are briefly defined below:

Table 8.3: Value Disciplines

Operational Excellence Strategy is predicated on the production and delivery of products and services. The objective is to lead the industry in terms of price and convenience.

Customer Intimacy Strategy is predicated on tailoring and shaping products and services to fit an increasingly fine definition of the customer. The objective is long-term customer loyalty and long-term customer profitability.

Product Leadership Strategy is predicated on producing a continuous stream of state-of-the-art products and services. The objective is the quick commercialization of new ideas.

Each of the three value disciplines suggests different requirements. Operational Excellence implies world-class marketing, manufacturing, and distribution processes. Customer Intimacy suggests staying close to the customer and entails long-term relationships. Product Leadership clearly hinges on market-focused R&D as well as organizational nimbleness and agility. Treacy and Wiersema strategy definition is the right choice for airport strategic planning in order to achieve the operational excellence, customer intimacy and product leadership.

By seeing and noting the strategic views of George Steiner, Henry Mintzberg, Kenneth Andrews, Kepner-Tregoe, Michel Robert, Treacy and Wiersema for the general management, the same can be applied to the airport management planning for better results and to achieve the goal of the airport services.


Airport Strategic process determines a company’s long-term goals and then identifying the best approach for achieving those goals. The airport planning strategic process is described in Federal Aviation Administration (FAA) advice on state airport system planning (FAA, 1989), which is illustrated below through chart.

Policies Issues/Goals/Objectives Legislation

Assess Existing System Inventory

Population Projection Employment

Air Carrier System Deficiencies General

Aviation

Performance Analysis Preferred

System

Recommended System

Implementation Milestone

Source: Federal Aviation Administration (1989)

Figure 8.2: Airport Strategic Planning Process The above chart discloses the continuous planning process through policies, population, air carriers and performance. Further this is processed under the goals, objectives, existing systems, projection, system efficiencies and deficiencies, analysis, recommended and implementation. The goals/objectives are legislated and these are made up in bringing inventory, generation of employment, and how general aviation is selfed in performed system.

Figure 8.3: Planning Relationship Strategic planning system process enables the management to oversee the responsibility of funding, ownership or management of more than one airport, it needs some structured way of determining investment priorities, promoting cost effective development of air transport and its infrastructure and establishing standards and the roles for the airports. This often result in categorization of airports by size and functions with the implication that airports in the same category would be treated as equally with respect to the criteria used for making decisions about their facilities and operational capability. This is frequently true in meeting the ICAO standards and requirements for airport categorized as international gateways, and for deciding the extent to which domestic airports should also meet those standards. The primary problem faced in the national system planning has usually been the division between local and national funding coupled with differences in the perceived role of airports across the various regions of a country.


The appropriate level of capacity at each airport cannot be decided without a system wide analysis, whether the desire to invest in new capacity arises from individual airports (bottom up) or from national or state-wide concerns (top-down). The interaction, in both supply and demand between the system elements is normally too strong to be ignored. It is becoming more constraints to add capacity to existing airports due to a combination of factors including a shortage of land, environmental impacts from aircraft, ground traffic, opposition from those questioning the need for further air travel; inappropriate planning processes, would attempt to manipulate the process, funding problems and investment risks in the face of uncertainty about future traffic. Also, airport capacity has been shown to be somewhat elastic in the face of increased demand and further opportunities are available to relive congestion at existing airports. All these problems are needed to be addressed through system planning process.

New Era of Transformation in the Airport Planning In the era of liberalization, globalization and privatization, air transport industry is growing tremendously in order to maintain the orderly growth of traffic, the development and use of formal master and system plans is very much needed. Airport roles and levels of traffic were largely in the hands of predictable route licensing regulators. Capacity must be provided in an adequate and appropriate manner, if the industry is to continue to grow in a way that is useful and acceptable to society. Moreover, the appropriate capacity implies a distribution of capacity in which the level of its utilization is justifiable by local social cost benefits analysis. Strategic system planning provides a basis for decisions affecting the geographical distribution of facilities and in the balance of capacity across the system elements at each location, establishing the best practice and assessing each location potential to meet the demand imposed on it by the different development options.

8.4 ULTIMATE CONSUMERS Ultimate consumer is an individual or organization that purchases a product to use, rather than to sell it to someone else. Consumer is a person who buys and utilise products and services in contradiction to manufacturers who make the goods or services and wholesalers or retailers who dispense and sell them. A member of the general category of persons who are saved by state and federal laws regulating price policies, financing practices, quality of goods and services, credit reporting, debt collection, and other trade practices of U.S. commerce. A buyer of a product or service who has a legal right to enforce any implied or express warranties relating to the item against the manufacturer who has introduced the goods or services into the marketplace or the seller who has prepared them a term of the sale. Individual, i.e., a housewife or a group, i.e., a family, which actually consumes or uses a good or service, is different from the buyer or shopper who may only be a buying agent. Marketers try to recognize the ultimate consumers to purpose their promotional efforts at them. For practice aim it is desired to allow in very narrow situations, suppliers to ‘look through ‘the supply an immediate customer that is not an airline and on to the ultimate consumer of the supply. The critical point being that the ultimate consumer of the supply of either goods or services must be an airline (or a State institution) operating qualifying aircraft and that the entities in the supply chain are completely taxable for the aim of the transaction such that no input tax restriction would observe anywhere in the chain were the zero-rating not to be allowed.

8.5 AIRLINE DECISIONS Airline Decisions permits practice down further than most applications to recognize the specific causes of trends and movements in customer behaviour.


Always use big data analytics to take critical decisions on when to open or close inventory on existing flights to avoid overbooking issues with Airline Decisions. On the base of the proven airline Database, this revolutionary analytic tool:

Leverages Integrated Passenger Name Record (iPNR) data warehouse with sophisticated analytics on overbooking and passenger no-shows.

Highlights the impact of customer behaviour on demand and show-rate trends hidden in PNR details.

Provides detailed descriptions of each metric and report layout, including the value and audience for the report.

The air transport system incorporates several aircraft diversion activities of intended magnitude that are prepared with little notice to airports, affected airlines, and last but not least to those passengers on aircraft being diverted. First and foremost, airports have no say in where diverted aircraft go. It is entirely up to the airline, excluding unpredicted conditions at a selected airport. Airlines base their decision(s) on factors such as where the airline has satisfactory staff and facilities, and how most efficiently to acquire aircraft back into the network with the least overall customer disruption, among other deliberations.

8.5.1 Consumer Decision-making Process What consumers think and the social environment they live in determine what they buy and how that purchase decision is made. Typically, the decision process is described as a series of five stages. The first stage, need recognition, occurs when consumers perceive a difference between their ideal and actual states. Persuasive advertising often prompts need for recognition. Consumers then begin the information search process by conducting an internal search of their own knowledge structures, followed by an external search for information from friends, family members, salespeople, and advertisements. This step can clarify the problem, providing criteria to use for assessing product alternatives and resulting in a subset, or "consideration set," of potential choices. These options are then assessed more completely in the third stage, alternative evaluation. In this stage, products in the consideration set are compared with one another. Sometimes a simple heuristic rule of thumb, such as "I'm going to buy the cheapest product" is used. At other times a more complex strategy, such as a weighted-average model that compensates for product strengths and weaknesses, is used. After examining each alternative, consumers are ready to purchase, the fourth step is the decision process. Finally, after buying, the consumers enter the post-purchase phase of the process, during which the performance of the chosen alternative is evaluated in light of prior expectations. Consumers will be satisfied with the product if it meets or exceeds expectations. Increase of dissatisfaction, the product does not meet expectations.

8.6 OTHER AIRPORT OPERATIONS Safety and security is an imperative role in all airport planning. Civil aviation authorities must take appropriate initiative and must be vigilant to make safety a priority. Among the most urgent safety issues are:

Preventing Runway Incursions: Improve airport geometry to reduce the risk of incursion caused by airport design.

Design Standards: Ensuring that the airports must meet current design standards, which continue to play a major role in enhancing safety. Civil aviation authority of a state should take care in overseeing the Runway Safety Areas (RSAs) at all certificated airports in the country to reduce the risk of damage causing to airplanes in the event of an under shoot, overshoot, or excursion from the runway.


Improving Wildlife Hazard Management: The aviation losses worldwide because bird strikes are staggering in the last 40 years. Civil aviation authority should act as a proactive role at the national and international level in addressing bird-strikes and other wildlife hazards, as well as assisting individual airports in developing wildlife hazard mitigation plans. We should focus more time and energy on airport efficiency and growth, without compromising essential safety mission. The greatest challenge to growth is to remain vigilant in safety oversight and instil a culture of safety in airport management.

Finally, the most important point is the cooperative nature of airport planning. For example, the planning associated with flight planning from an airport in one state may easily impact an airport in another, especially in tight geographic quarters. Understanding the needs of the market, the locations it wants to serve, and how to make the facilities it requires affordable and efficient is essential. Likewise, aviation users must be sensitive to the economic development goals and environmental needs of the community they serve.


State whether the following statements are true or false: 1. Development of an airport master plan is recommended by ICAO, FAA, as

the basis for the comprehensive planning of individual airports. 2. The major objective of master plan is “to allow an orderly development

compatible with the framework of local, regional, national economic and transport plans with compiling national and international aviation policies in protecting the environment aspects.

3. The Airport Master Plan presents the planners' conception of the definitive development of a specific airport.

4. The airport master planning process does not involve the preparations of both broad and specific policies, plans and programmes needed to establish a viable airport.

5. Strategy is a pattern in actions over time; for example, a company that regularly markets very expensive products is using a “high-end” strategy.

Case Study: Industrial and Commercial Consumers

Electricity Supply to Airlines at Auckland Airport

The issue Airlines operating out of Auckland Airport wanted to connect their aeroplanes to ground power while they are connected at the airport gate for disembarking and loading the aeroplane. Ground power is both cheaper and has an environmental benefit from lowering emissions as opposed to running ancillary jet engines.

However the large number of different airlines connecting and dis-connecting across multiple gates meant a non-stand supply solution was required that could accurately record and bill for the power used by the specific airline.

The Solution Working with Auckland Airport and a Software partner, Simply Energy implemented a wholesale supply arrangement that integrated swipe card data from the airport gate management system with electricity consumption metered across 8 separate gates to provide billing to each airline on the basis of their actual usage.

Value Created The airlines have reduced their costs by accessing ground power and switching off ancillary engines. The wholesale supply arrangement has provided a circa 20% (more

Contd…


for airlines operating outside of morning and evening peaks) saving over tariff arrangements supply through the initial term of the agreement. The billing system has provided traceability in energy use reducing ‘unaccounted for energy’ that would otherwise have been paid for by all airlines.

Questions

1. What is the reason for connecting and dis-connecting different airlines across multiple gates?

2. How do airlines have reduced their costs?

Source: http://simplyenergy.co.nz/case-studies/industrial-commercial-consumer-case-study/

8.7 LET US SUM UP Airport operation is a complex system, which has various intercepts to function efficiently and use to the optimum level. Airport operates round the clock. There are some airports in UK, US and other countries that have night curfew. Large teams of people work in concert to ensure safe aircraft landing and take off.

Planning is a systematic utilization of available resources in order to put in use efficiently for better management

The Airport Master Plan presents the planners' conception of the definitive development of a specific airport. It efficiently presents the research and logic form to evolve and artfully display the plan in a graphic and written form. Master Plans are applied to the Modernization and Expansion of existing airports and to the Construction of New Airports, regardless of their size or functional role.

Airport Master Plan is used as a guide for the modernization and expansion of existing airports and to the construction of new airports. It comprises of suggested land use on land adjacent to the airport. The actual construction of each physical facility design on the master plan should be undertaken after assessing the Economic Feasibility of an Airport in terms of traffic volume and economics obligatory for meeting the demand. Therefore, an airport master plan should establish a schedule of priorities in phasing out the various improvements described in the master plan.

The airport master planning process involves the preparations of both broad and specific policies, plans and programmes needed to establish a viable airport.

Ultimate consumer is the person or organization that buys a product to use, rather than to sell it to someone else. Consumer is an individual who purchases and uses products and services in contradistinction to manufacturers who produce the goods or services and wholesalers or retailers who distribute and sell them.

Safety and security is an imperative role in all airport planning. Civil aviation authorities must take appropriate initiative and must be vigilant to make safety a priority.

8.8 LESSON END ACTIVITY Write a magazine type article on Airport Master Plan.

8.9 KEYWORDS Planning: Planning is a systematic utilization of available resources in order to put in use efficiently for better management.

Coordination: It is an incessant and iterative process, which necessitates coordination and support between Federal/State/Regional and local aviation planning agencies.


Airport Master Plan: Airport Master Plan is used as a guide for the modernization and expansion of existing airports and to the construction of new airports.

8.10 QUESTIONS FOR DISCUSSION 1. Explain the context of airport system planning.

2. Describe the development of airport planning process.

3. Who are ultimate consumers?

4. What is airline decision?

5. Explain other airport operations.


CYP 1 1. System 2. Systematic 3. Planning 4. Complex 5. round the clock

CYP 2 1. True 2. True 3. True 4. False 5. True






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Airline Revenue Management

UNIT 1

UNIT V

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Airline Revenue ManagementLESSON

9 AIRLINE REVENUE MANAGEMENT

CONTENTS


9.1 Introduction

9.2 Revenue Management System

9.3 Building Block in Airline Pricing Policy

9.3.1 Direct Operating Costs

9.3.2 Indirect Operating Costs

9.3.3 Overheads

9.4 Uniform and Differential Pricing

9.5 Structure of Air Freight Policy

9.6 Let us Sum up


9.8 Keywords




Understand Building Block in Airline Pricing Policy

Explain Uniform and Differential Pricing

Describe the Structure of Air Freight Policy

9.1 INTRODUCTION Of all the different aspects of airline marketing, none has changed further or faster in recent years than the question of appropriate pricing policies.

Nowadays airline managers have to learn and apply skills which were either unknown or not needed by their predecessors, and where some of the fundamentals which have served the industry well in the past are being brought into question. It is also a high profile area, where mistakes can result in large losses in a very short-time.

9.2 REVENUE MANAGEMENT SYSTEM Today’s Pricing Environment is a far more ambitious one. However there is one major change which has made it much easier for airline managers to build up sound pricing policies, i.e., the advent of advanced systems for handling the sale of seats.


While deciding pricing policies which will optimise financial returns, carriers must determine the number of seats they will sell, at what prices and in what currencies. They must also make often difficult decisions about traffic which will be accepted, and which refused on the grounds that the yield obtained from it is too low. About 20 years ago, there were no effective tools that would allow this process to be in a controlled manner. Modern airline reservations computers allow the capacity on board each aircraft to be divided up into a large number of booking classes currently 26 in the more sophisticated systems with larger numbers than this likely to be possible in the future. Decisions can then be made about the number of seats to be allocated to each class, and the time at which these seats will be made available for sale. These decisions will show different patterns of demand. For example, for a flight leaving to a business destination on a Monday morning, few if any seats will be allocated to those classes allowing for early sale at low prices. Almost all of them will be in classes where sale will only be permitted at high fares, with many bookings only being made a relatively short-time before flight departure. In contrast, a flight leaving to such a destination early on a Sunday morning will be given a completely different profile. Here, almost all the seats will be allocated to booking classes allowing for sale at low prices (or for their use by people redeeming Frequent Flyer Programme credits) as the airline attempts to obtain at least some revenue from seats which might otherwise remain empty. A detailed problem in Airline Revenue Management at the moment is the question of connecting versus point-to-point traffic. Generally, airlines earn a better yield on short-haul routes from customers who are only flying out and back on the route, rather than from those who are using the short sector to fly to a hub, from where they will connect onto a long-haul service. Unless a Revenue Management system is monitored carefully, there will be a tendency for long-haul connecting traffic to be turned away, and point-to-point passengers to be accepted. It will automatically improve the financial performance of the airline’s short-haul routes whilst declining the carrier’s overall financial results because of the loss of so-called network revenue. In terms of the development of Revenue Management technology, most of the airlines are now attempting to produce the systems which will allow them to optimise revenue through taking account of the correct origin and final destination of passengers. This is, though, a challenging problem of software development.

9.3 BUILDING BLOCK IN AIRLINE PRICING POLICY It is common practice for airlines to have different fares for peak and off-peak seasons. Pricing is regarded as most vital marketing function. The commercial viability of the operations in airline, its survival and its financial soundness depends on its ability to work profitably. In turn, profitability may depend on cost control and pricing. Success of marketing depends wholly on his ability to generate and create profits by the optimum exploitation of revenue generating opportunities in the market place. It is important for a successful marketing manager to understand the cost structure of the airlines industry and make sure that total cost of airlines are covered by the revenues generated through the marketing efforts. Thus, airline cost structure is divided into three categories which are as follows:

Direct Operating Costs Indirect Operating Costs Overheads

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Airline Revenue Management9.3.1 Direct Operating Costs Direct Operating Costs which is also called DOCs arise if and only if a given flight is really operated. In this context, two types of Direct Operating Costs are as follows:

Aircraft-related DOCs

Aircraft-related DOCs include:

Handling Fees

Fuel and Oil

Landing Fees

Crew Expenses

Navigation Fees

Maintenance excluding in-house labour

Traffic-related DOCs

Traffic-related DOCs include:

General Passenger Related Costs

Airport Load Fees

Passenger and Cargo Commission

In-flight Catering

Therefore, the main difference between the above two DOCs is that Aircraft Related DOCs are relevant to the type of aircraft being operated while Traffic Related DOCS are independent of the aircraft type given a certain level of traffic.

9.3.2 Indirect Operating Costs These types of costs are usually come under the category of fixed assets which includes:

Cabin Crew Pay

Aircraft Standing Charges

Handling Costs at Base Stations

Maintenance Labour that is in-house labour

Flight Crew Pay

Thus, these costs remain the same once a certain level of flying programme has been selected. Therefore, if the flight programme is modified for example because of the cancellation of flight then none of the costs in any of the above categories will be minimised. All of the costs which are mentioned above are directly affected by the type of the aircraft.

9.3.3 Overheads It consists the following:

General Management Sales costs Employment/personnel departments Accounts Administration (areas of the various line departments)


Most of these are moderately unaffected by both the level of flying operations undertaken as well as the type of aircraft used. It is very important to know how they are allocated and also a clear understanding of cost comparison parameters as well as the profitability analysis which is very important to an airline marketing manager.


Fill in the blanks: 1. Now-a-days airline managers have to learn and apply skills which were

either unknown or not needed by their …………………….. 2. Today’s Pricing Environment is a far more …………………….. one. 3. While deciding pricing policies which will optimise financial returns,

…………………….. must determine the number of seats they will sell, at what prices and in what currencies.

4. A detailed problem in Airline Revenue Management at the moment is the question of connecting versus …………………….. traffic.

5. The commercial viability of the operations in airline, its survival and its financial soundness depends on its ability to work ……………………..

9.4 UNIFORM AND DIFFERENTIAL PRICING Table 9.1 represents data which describes the current pricing system of one of the airlines on the Heathrow Toronto route. This route has not been selected on account of it having any special features. The situation there is a typical one, replicated on thousands of different routes around the world.

Table 9.1: Fare Structure, Heathrow-Toronto, October 2005

The situation presented is one of considerable complexity. Prices vary tremendously from the seemingly outrageous levels of Business Class fares down to the very low so-called “World Offer” fare. They also vary in terms of the conditions attached to each fare, with some fares the more expensive ones being fully flexible, and others having tightly restrictive restrictions attached to their use.

To some extent, such wide differences in price levels are easy to understand and explain. In particular, very high prices are charged for seats in first class and Business Class cabins reflect substantial, tangible differences in the product supplied. A modern state-of-the-art First Class cabin will have seats which fold down into full-length beds. These will require a Seat Pitch of seventy inches or more. First Class passengers gain from extravagant standards of entertainment and In-flight services. It is also generally the case that airlines operate their First Class cabins at low average load factors. Figures of only 40-50% are typical.

Amongst the reasons for this is that First Class cabins are generally not overbooked as airlines regard the risk of having to off-load such commercially important people as unacceptable. It is clearly correct, though, that First Class passengers should pay both for the seat they occupy, and also for the vacant seats in a low load-factor operation.

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Airline Revenue ManagementThough the specification of a typical Business Class is still somewhat lower than for First Class, it is still a very highly priced one for airlines to provide. A typical Business Class seat pitch is now over 70″, to permit the seat to be folded down into the flat bed that the state-of-the art requires should be made available. The passenger also gains from better food, a higher proportion of cabin staff to passengers, and more choice in terms of in-flight entertainment.

Overall, whilst First Class and Business Class fare levels appear very high, it is at least possible for airlines to justify them in terms of differences in the product offered. It is very difficult for them to do this for the fares of Economy class. Here people paying very different prices will sit in the same part of the aircraft, in the same type of seat, and will experience exactly the same entertainment and In-flight Services. In many cases, there have been complaints that the previous fare structure is discriminatory. The customers who are paying the higher fares argue that they are overcharged in order to subsidize the losses made on “below-cost” cheap fares.

It is possible to controvert such arguments to a degree, but they should not be dismissed lightly. Customers who pay higher fares and those who pay lower fares may benefit from a properly-applied Differential fare structure. This is common in the case of low-fare passengers who are able to travel at a price they can afford. It is less common, but still in this case, that the high-fare payers also take benefit from Differential pricing.

The critic of differential fares might argue that airlines should instead adopt a uniform approach to pricing in the Economy cabin. For instance, the data given in Table 9.1, stated that people in the Economy cabin could be paying a fare somewhere between £1,171 and £543 for a return ticket. A uniform approach to pricing would require that everyone should pay the same. The high fare would be lowered perhaps to £700, and the lower fares would be raised to the same level.

Whilst such a situation might appear to be an ideal one, this might not be the case, for 2 reasons. Firstly, Economy passengers do not all have the same needs, despite the fact that they all sit in the same cabin. Particularly, business travellers often have a requirement for flexibility which is absent in the typical product needs of the leisure traveller. Those flying on business may sometimes have a requirement to obtain a booking shortly before a flight departs, because of an unexpected business crisis arising.

They may also need to cancel a booking once they have made it and rebook on another flight due to their plans changing. On the other Hand Leisure Travellers will generally book weeks or months before they fly and will only need to change or cancel a booking on rare occasions due to factors such as illness.

If an airline is to meet these 2 sets of needs effectively they can adopt a different philosophy for capacity management in the part of the aircraft given over to business travellers, compared to that occupied by leisure flyers. If flexibility is given to the business travellers they need, a comparatively low year-round load factor will be inevitable. This is because the approach pattern of demand from such people has a random, unforecastable component to it. If seats are to be available at the last minute for a high proportion of the people who really need them, significant numbers of seats will have to be kept back in the airline’s capacity management system a number well in excess of the average demand for such seats. This will, of course, result in vacant seats at take-off on days when the actual demand is low.

In other words, an airline offering last minute seats and full ticketing flexibility to those of its customers who need them will do well to achieve a year-round load factor of 65–70% in the part of the aircraft allocated to this segment of the market. In contrast, an airline not seeking to give an on-demand product will be able to operate at much higher load factors, often in excess of 90%. Indeed, if we are speaking about


charter airlines in Europe which are certainly not in the “on-demand” business do achieve these very high load factors consistently.

These differences in load factor give a first, important clue as to why fares may need to vary in the Economy cabin, despite all the passengers there experiencing the same tangible product features. Most of the tangible features are same but there is no flexibility in intangible features. Prices can show the costs of providing these different degrees of flexibility.

Some of the arguments that are in favour of differential pricing can thus be based on questions of costs. Others and ones of greater importance still, can be inferred from the nature of airline market segmentation. The advocate of a Uniform approach to pricing might argue that such an approach would be an optimal one because people presently paying high prices would pay considerably less. This, however, is a wrong view. In the long-run the might end up paying more for an inferior product.

If we discuss the data given in Table 9.1, we could suggest that that uniform pricing would see the fares charged to those paying the higher fare fall from the present level of nearly £1,200 down to, say, £700. They would be pleased by this, arguing that this signifies the price by which they are now being overcharged. The situation would not be very good, though, for the passengers who are presently paying fewer prices. The suggestion for these people is that their fares would have to rise to the Uniform level, reflecting the end of the cross-subsidy of their fares by those presently paying higher prices.

In these types of situations, this is not possible that the people interested to travel in the same airline will continue to pay extra. As we have discussed earlier, most leisure air travellers are having a greater price elasticity reflecting the concept that they are paying fares of their own. Due to this, a sudden steep increase in the prices of ticket would result in some customers not travelling at all. But most of the passengers will continue to travel in those airlines who will continue will lower fares as part of a Differential fare structure. Overall, any airline changing from such a fare structure to uniform pricing might easily find that the number of passengers it carried fell by 40 per cent or more.

The starting response of customers travelling in business class to such a development might be to welcome it. They might contend that their air trips will be more enjoyable without revelling holiday makers. They might also see it as a vindication of their arguments about cross-subsidy. The over-charging of travellers of business class to provide such cross-subsidy ceased, large numbers of leisure travellers cannot afford to fly.

Such an attitude could be short-sighted. There is a synergy available to airlines which carry significant numbers of both leisure and business travellers and the customers flying in business class is a major beneficiary of this. Particularly the airlines which participate in both the leisure and business markets are able to maintain a much broader network, with a better flight frequency than those which do not. We know that frequency and network are 2 of the important product requirements of the customers travelling in business class. Moreover, these types of airlines are able to sustain frequencies whilst using larger aircraft.

Aircraft show Economies of Scale whereby lower seat-kilometre costs can be received from larger planes. These advantages of costs can in turn be transferred to the passengers in terms of cheaper fares. Eventually, most of the airlines have a proportion of their costs which must be regarded as fixed overheads. Disbursements such as those associated with the revenue and reservation accounting systems, and brand-building advertising, come into this category. Bigger numbers of passengers allows these costs to be spread more widely, and waiting for the fares to be more cheap.

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Airline Revenue ManagementOn the other hand, a significant fall in the numbers of passengers carried would almost certainly not be followed by a pro-data fall in overheads. If passenger numbers fell by 40%, an airline might do very well to bring down overheads by, say, 20%. The final result would be that the remaining passengers would each have to cover a higher proportion of overhead costs if the airline is to achieve a profit. This in turn leads to higher fares instead of lower fares.

In other words, we can say that the risk is that in uniform pricing business class travellers continue to pay higher products for a worst product that they are receiving now. It is not in their interests that such a pricing policy should be adopted, despite its superficial attractions.

The situation regarding air services across the Atlantic between the UK and USA helps make the case for the advantages of differential pricing. Around 20 years ago, there were only a small number of gateway points in the USA for travellers from Britain.

Direct services were available from the UK only to New York, Washington, Boston, Chicago, Miami and Los Angeles. Any traveller whose final destination was different from these cities, had to take a time-consuming and tiring domestic flight in the USA. In addition, the frequencies of flight were very low, with some of the gateways served only on an inconvenient less-than-daily basis.

Today’s situation is significantly better. The number of gateways which are receiving direct services has increased to over 20, with almost all of them served with frequency of a daily flight. The reason for the betterment is that during this time, the market has developed, by a factor of more than 4 times. Some of the growth has admittedly come from increased amounts of business travel, but apart from this a greater ratio has been the result of a speedy growth in leisure air travel. This has in turn been stimulated by an increasing availability of cheap fares as airlines have adopted a Differential pricing policy and have refined their ability to control the resulting low fares through more sophisticated Revenue Management systems.

We have now made mandatory that airlines should base their pricing principles on Differential pricing. In spite of all the advantages, though, an airline decision to adopt a Differential pricing system should not be taken lightly. Indeed, competitive conditions in the industry today suggest that in the past, Differential pricing is to be applied in too extreme a form, and that many of the problems being experienced by today’s ‘Legacy’ airlines result from the fact that this has been done. We will now look at some of the counter-arguments.

The prime drawback of differential pricing is that, necessarily it leads to tariff structures that are very hard. The watchword adopted by the revenue manager is often that they should ‘Capture the string’ available in the market – in other words, that each segment of the market should be charged a fare which is as near as possible to its willingness-to-pay. This will mean many different fares, reflecting the varying demand elasticity of the different segments. Worse still, as we shall discuss in the next section, in this mix of fares, all the cheaper fares will need to have constraining conditions associated with them. If these are not in place, people with a higher willingness-to-pay may take benefit of lower prices aimed at more elastic segments.

It is not possible to exaggerate the drawbacks that a complex tariff brings with it. Nowadays airlines will be faced with a very highly priced training task. The distinctive time taking to train a new reservations and ticketing agent joining a ‘Legacy’ airline in the past has been a matter of several weeks. All we need is to explain the new recruit that how to use reservations, ticketing and pricing concepts the airlines themselves have dreamed up. Once they have been giving training for such a long period, these people rarely stay for more than one year or so, such is the boring and repetitive nature of the work they are asked to do.


Tariff complexity also gives airlines a very difficult selling task. When someone thinks of buying a ticket, they will presumably look for the best value-for money. If we are trying to find out, which fare will give them this, they will have to evaluate not only the level of prices, but also the accessibility of reservations and the level to which they can meet the fare conditions applying to each of the various prices which are available. This will mean either a time-consuming phone call or the demand to navigate an airline website. The latter is a notoriously difficult thing to do when each of the cheaper fares on offer may have a page or more of restrictive conditions associated with it.

In such conditions, it’s very surprising that in the past most of the people have determined that the attempt is just not worthwhile. Rather, they have turned to a travel agent to do the hard work for them. In the past, this will generally have been an off-line agent, but increasingly today there are a large number of on-line agents which can be used. In maximum cases, the customer can expect a ‘best-buy’ recommendation, based on a study of the whole market.

From the airline view point, though, such activity can only lead to a hike in the prices of sale as incentives have to be offered to the travel agents and search engine firms to ensure that the ‘best buy’ proposition goes in their favour.

9.5 STRUCTURE OF AIR FREIGHT POLICY The Policy of Pricing for air freight is just as controversial as that on the travellers’ side of the industry. It is also an area where significant, and long overdue, change has come about in current years.

The Policy of Air Freight Pricing has principle to comprehend almost all of the troubles which occur on the passenger side of the business. In addition, a way must be found to taking account of substantial differences which are unique to air freight. For example, air freight dispatches vary in size from very small packages to consignments of 30,000 kilos or more. Prices, though, do not change in the same way. Many prices, such as those of documentation and customs clearance are fixed regardless of consignment size. Also, commodity types differ, often with an effect on price levels. Some goods may need extra security. Perishable goods should be refrigerated, whilst especially fragile items may need special handling. Finally, Pricing Policy must as far as possible reflect these differences. A further problem is that of density. Airlines must charge shippers of low density freight on a volumetric basis. If they do not, they run the risk that they will attract exuberant amounts of low density cargo which will fill the volumetric capacity of aircraft without their payload potential being fully exploited.

All these effects are important in air freight pricing. Possibly the most hard problem, though, is to find a cost base for pricing in a situation where airlines are using various types of capacity to carry freight.

Where freight is carried in a pure freighter aircraft, the appropriate cost base is crystal clear. Airlines must calculate to recover all the costs of operation including such items as depreciation, maintenance, crew salaries and landing fees. When the belly-hold of an aircraft carrying passenger is used the situation is by no means as apparent. Then, some of the costs will clearly be attributable to freight, such as those of freight handling and selling, and the costs of extra fuel burnt as an outcome of the weight of freight carried. Most of the prices in these flights will, though, be joint costs. This will be the case, for example, with costs such as those for Maintenance, crew salaries and landing fees.

Most of the airlines now ascertain to allocate these costs between the freight output and passenger of a specific flight. This may make some sense at peak times for cargo, and on long-haul routes, where it might be argued that the use of belly-hold space

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Airline Revenue Managementsaves the prices of the airline’s cargo department from operating pure freighters. It does not do so at off-peak times, or on routes with small cargo demand. Then, the cargo department would not operate services at all if it was free to make its own commercial results. In attempting a cost base for pricing, airlines must clearly never offer prices which fall below the level of the differential costs of selling and freight handling. They must, though, aim to do a great deal better than this. Cargo must make a substantial contribution to the entire costs of flights where a significant ratio of the aircraft’s potential payload consists of belly-hold cargo capacity. This will especially be the case if the airline is also functioning freighter aircraft. Costs based merely on marginal belly hold costs will come nowhere near the levels essential to cover the operating prices of a freighter. Given these various restraints, it should not be surprising that the subject of air freight pricing has been a disputable one. In the past, it was possible to separate freight pricing into two different parts. Firstly, airlines offered so-called General Freight Rates. These were pitched at a very high level, with an even higher Minimum Charge for the smallest shipments. Cheap Rates were then provided for larger consignments, to reflect lower handling and documentation. The highest rates applied only to shipments weighing 45 kilos or less. The second part of the traditional air freight rate structure was much more debatable. In addition to General Freight Rates carriers offered a range of lower so-called Specific Commodity Rates. These were normally available only for larger shipments. Also, they could only be used for particular, named types of cargo. IATA set up a composite system to allow its member airlines to define the commodities which would, and would not, be charged a cheaper rate. In the so-called “Express” market of small, urgent shipments, pricing policies have been led by the integrated carriers such as Federal Express, UPS, TNT and DHL. As we have discussed earlier these firms have not relied on the air cargo forwarding industry for their traffic. Alternatively, they have invested in building strong brands, and promoting these heavily to the retail market. The brands have been divided between those which offer guaranteed next-morning delivery at a premium price, and ones which give a slower, but still time-definite, delivery. Again, this allows carriage to be delayed from peak into an off-peak period. Such a product-based approach to pricing is easier to administer and fundamentally fair between various types of customer. Not surprisingly it has been followed by many combination airlines which have launched their own branded products in an attempt to compete with the Integrators. Generally, though, these have been offered on an airport-to-airport basis with the ground transportation provided by air cargo forwarders who have been encouraged to sell the products on a commissionable basis. All-in-all, the field of pricing is one of the most quickly changing and most challenging in the whole area of airline marketing activity. Only by a flexible adherence to a set of clear principles can costly errors be avoided. If we are studying about the question of appropriate policies for airlines it very necessary to accentuate that pricing decisions cannot be framed in isolation they can only be seen in the context of the Marketing Mix model. In specific, product and pricing decisions must clearly be made together. In recent years, most of the airlines have invested large sums in meliorating the specification of their First and Business Class products. Costly investments have been made in such things as better (usually flat-bedded) seats, higher quality catering and greatly improved in-flight entertainment. At the same time, they have generally and correctly raised the prices of First and Business Class tickets in real terms, to provide a return on the investment that has been made. As we have discussed, whether or not they will be able to


maintain these higher prices and the same return when recessionary conditions re-affirm themselves is another question.

Deregulation

In the recent years, the question of government regulatory policy was a major drawback on airlines’ pricing freedom in international aviation. Almost all intergovernmental Air Services Agreements were written in terms which were designed to stop airlines competing on price. The airlines assigned under these agreements were required to meet together, agree on what the fares should be, and file these fares with their respective governments for approval.

Assuming that this approval was forthcoming and it normally was the airlines in question would implement a fare structure based on the principle that all those on a route would change exactly the same fares. Even in domestic markets notably so in the USA government regulation was imposed to prevent price competition, presumably in the hope of maintaining a stable industry.

Today’s situation is totally different. Most of the domestic markets have been completely deregulated with regard to price, with airlines free to price as they choose. In some international markets, too, a virtual deregulation of pricing has taken place. This is notably so with respect to the so-called Single Aviation.

Market of the European Union

It is impossible to amplify the significance of the moves towards low regulated pricing. They have allowed many airlines to develop a low fares philosophy, something which they could never have done under the old regulated pricing authorities. This in turn has challenged incumbents to become more effective and efficient at the same time, managers responsible for pricing policy had to develop a completely new set of skills. Under the former authorities, the skills required were those of attending often interminable IATA Tariff Coordination meetings and engineering a compromise between supposed competitors. Nowadays, the skills are those of forming an appropriate speedy response to the pricing initiatives of these competitors, and determining when the airline should lead the market in a change of pricing policy.

Dissemination of Fares Information

Recently, the tempo of change in airline fares was very low. In regulated competition all the prices were very low and reaching such a compromise was usually a drawn-out affair. In the meanwhile, the system for disseminating fares information precluded speedy changes. The method for such dissemination was a printed tariff manual. These manuals are prepared for a fare change which would itself take many weeks, as distributing them to travel agents would take a lot of time.

The effect of all these factors leads to change in fares once in a year or twice in a year. Nowadays the situation is totally different. The growth of Global Distribution Systems has signified that almost all travel agents have instant access to a fares database which is already updated many times in a day if necessary. In the meantime, an increasing ratio of airline tickets are being dealt through carriers’ own websites, where the process of updating the tariff can be even more fast if necessary. As a result of these trends the fare structure is now highly unstable at times of active price competition. Such Competition will be especially dominant during recessionary periods, when supply and demand increases and airlines are competing to fill otherwise vacant seats. It will also break out in the autumn of each year on many routes as the Peak period of summer comes to an end and airlines contend for their share of the slumping market. At times such as these, millions of fares in the industry’s main fares databases may change every day, challenging airline pricing managers not only to get their pricing

185

Airline Revenue Managementdecisions right, but to make these decisions swift and under huge pressure. For a number of years, air freight was the “poor relation” of the passenger business. Freight income is made up of only a small percentage of revenue in the airline industry, and it was as a result starving of both, the attention of the management and the resources. It was generally seen as a by-product operation and nothing more than that, to fill belly-hold space in passenger aircraft that would be available anyhow.

Such attitudes are no longer adequate. A number of airlines are currently able to focus in carrying nothing but air freight, and to be extremely profitable in doing so. For various others, highly significant and increasing proportion of profits is given to freight now. With the omission of 2001 – a deprived year for air freight − average yearly escalation rates in the air freight business have exceeded those in the passenger markets by 2 or 3% points, for a number of years. This is a trend which is probable to carry on, making freight’s involvement through time greater still. Simultaneously as freight revenues have improved, competition in the air freight market has increased progressively, and it is becoming less and less possible that airlines treating freight purely as a by-product will be unbeaten. Professional marketing is as a result a major necessity and it is necessary that we must give appropriate thought to the marketing of air freight, starting with the segmentation of the air freight market.


State whether the following statements are true or false: 1. The Policy of Pricing for air freight is just as controversial as that on the

travellers’ side of the industry. 2. The Policy of Air Freight Pricing has principle to comprehend almost all of

the troubles which occur on the passenger side of the business. 3. A way must be found to taking account of substantial differences which are

unique to air freight. 4. In attempting a cost base for pricing, airlines must clearly never offer prices

which fall below the level of the differential costs of selling and freight handling.

5. Almost all intergovernmental Air Services Agreements were written in terms which were designed to explore airlines competing on price.

Case Study: Yield Management in Budget Airlines at EasyJet he budget sector of the airline industry in both the UK and USA started during the 1950s. The growth in demand for new holiday destinations and in air transportation was also witnessed. Initial budget airlines concentrated on the

holiday market, offering charter flights. In Europe this meant Spain, France, Greece and the Balearic Islands in the summer and European ski resorts in the winter. Although this market still exists with specialist companies in the UK like Britannia Air, the start of low-cost flights began with ‘the battle for the transatlantic business’ as seen by Freddy Laker, with Laker Airways and The People’s Express. The true budget airlines, however, took shape with deregulation in the United States.

The most successful budget airline to develop in America was SouthWestern Airlines, while the main player in recent years in the UK has become easyJet. easyJet is probably following the SouthWestern formula in its operations and development of service and routes. The earliest European low-cost or budget airline still operating with significant passenger numbers and routes in the European market is the Irish carrier Ryanair. The basic premise of business in the budget airlines is of course similar to that of the major intercontinental air carriers. There are, however, major differences between the intercontinental carriers and the budget airlines in both the United States and Europe, which have knock-on effects throughout the budget airline operations.

T

Contd…


The major differences between the operating processes and cost base of both types of carriers are outlined in Figure 1.

Figure 1: Intercontinental Airline Costs

To be effective easyJet operates from low-cost airports (Luton and Liverpool) and flies to low-cost airports (the costs charged to the airline operators are lower at airports like Luton than major international centres like Heathrow or Gatwick). Additionally, it operates only one type of plane, the Boeing 737-500, which again helps to reduce operating and running costs. This has benefits for yield management as it mans only one type of capacity, consisting of 159 seats or units.

Yield management within the airline industry may be a prerequisite, but in the budget airline sector it is still developing. Whether it is called yield management, revenue management or revenue maximization its aim or purpose is clear: to achieve the highest possible income from every single flight within an airline’s portfolio of flights

Contd…

187

Airline Revenue Managementand routes. To investigate how budget airlines use and gain competitive advantage from this technique, easyJet is used as an example.

easyJet easyJet began in November 1995, with two aircraft operating three flights a day programme between Glasgow, Edinburgh and its base at Luton. Business was brisk and turnover rose from £25 million in 1996 to over £50 million by the end of 1997. Routes began to expand and by 1998 these included Aberdeen, Edinburgh, Glasgow, Inverness and Belfast, complemented by Holland, Switzerland, Spain, France and Greece on mainland Europe, and adding Liverpool as a second English base. The company was conceived and run by a charismatic chairman, Stelios Haji- Ioannou, then a 31-year-old Greek graduate of the London School of Economics, who admits the idea came as a result of Virgin Airlines’ first attempt to operate a franchise on the Athens to London route. The company operates a no-frills airline, based on shorthaul flights, aiming at maintaining a low-cost strategy and providing a quality low-price flight. In the autumn of 1997 Haji-Ioannou signed a $500 million order for a number of brand new Boeing 737-500 planes, due to enter service by the end of 1999, to provide the needed capacity for the company’s expansion up to six million passengers. Haji- Ioannou’s declared ambition is for easyJet to be the ‘McDonalds’ of flying, and he is perhaps on course for this aim. The image easyJet is creating is one of simple efficient service, for quick easy use. From the attractively simple but functional black trousers or skirts with orange shirts of the inflight crew, to the very effective and efficient online internet booking system which offers you a simple quick way to book your tickets (thus also providing a good view of a yield management system working minute by minute), easyJet has developed an effective and efficient operation, a single positive brand image and a successful marketing strategy. easyJet and Haji-Ioannou’s commitment to Luton has probably done more in its first two years for Luton airport than any other single company or person, including Lorraine Chase and Campari! Future development plans for easyJet, to allow it to achieve its growth potential and fill the capacity created by the new plane acquisitions, include considering additional destinations, such as Munich, Copenhagen, Oslo, Hamburg, Berlin and Stockholm, long with plans to develop further the facilities at Luton airport. Complementary company developments include a chain of internet cafés and a low-cost car hire operation, both of which have implications for the use of yield management. Has easyJet been successful in its aims and objectives to date? By most methods of judgement, the answer must be yes. But perhaps British Airways’ attitude is the best measure. In 1996, it described easyJet as the ‘peanut airline’ at the time of its launch, but just two short years later British Airways had announced the launch of its own low-cost airline, GO. Imitation, it is said, is the greatest of compliments. If you are uncertain of the success of easyJet the best answer is to try it for yourself. easyJet has seen an opportunity to develop direct marketing and sales of short-haul European flights and has used all the operational tools necessary to ensure its success, one of the main tools being the development of its own dedicated yield management programme.

Yield Management at easyJet easyJet uses an automated yield management system based around maximizing the revenue on each flight, everyday. The easyJet reservation system is somewhat different from those of most of its competitors in that all its booking must be made directly with the airline reservations staff, via either the phone system or the internet, as no agency bookings are accepted. The yield management system, managed by the revenue manager, is one specifically developed for and by easyJet, and is modified on a regular basis and adjusted as operations mature. easyJet has developed the model to cover each flight route, for every flight and every day. The principal aim is maximization of revenue, while ensuring that the appropriate balance of passengers is met.

Contd…


easyJet does not segment its customers. However, it does segment its flights into the following categories: 1. destination/route:

business leisure

2. flight time: morning and evening flights daytime flights.

easyJet considers that there are, in its sector, two kinds of destination. The first is business destinations, like Glasgow, where the highest percentage of passengers are usually going for a short stay for business reasons. The second destination type is a non-business or leisure destination, like Palma, where the greatest percentage of passengers is going for non-business reasons with a longer stay over. The second segmentation is that of flight time, where the early morning, early evening, weekday flights tend to be regarded as business sector, while the middle day, late evening and weekend flights are non-business or leisure. Each segment/ sector has differing booking patterns. Figures 2–7 show different patterns of bookings.

Figure 2: Airline Booking Patterns – Leisure Segments

Figure 3: Airline Booking Pattern – Business Segment

Figure 4: Combined Booking Pattern (Date, Time, Destination)

Contd…

189

Airline Revenue Management

Figure 5: Booking Plan Showing Yield Forecast and Actual

(Date, Time, Destination)

Figure 2 shows non-business customers, and Figure 3 business customers, with Figure 4 combining them into a yield booking pattern. The prices can then be established around these expected patterns. The cheapest are available until, say, 25 seats are sold, then the next price bracket until 65, then 80, when the almost full price becomes available. The full price opens approximately ten days from take-off, when the majority of business segment fliers can be expected. Figure 5 shows actual bookings received as well as the yield plan.

Figure 6: Yield Plan for Non-Business Destination

Figure 7: Actual Booking Chart – Non-business Destination

(Date, Time, Destination)

Figures 6 and 7 indicate the yield plan for non-business/leisure flights, or weekend flights, together with an actual booking flow.

Contd…


Figure 8: Yield Pattern of Actual Bookings Received and

Sales Bookout Price Levels

Figure 9: Booking Pattern for Late Demand

Figure 8 shows a flight yield pattern with the actual bookings received, along with the sales book-out price levels. This indicates that if the bookings received exceed 40 by or before 45 days from take-off, then the rate increases, and if it exceeds 60 seats sold by or before 35 days before take-off, the price increases to the next level, and so on.

Figure 9 highlights a similar booking pattern, but with late demand (business sector), and shows the price levels closing later and reopening again as the take-off date comes nearer, in the aim of increasing demand by offering a lower-cost seat.

Why is yield so important to easyJet?

1. Unlike the major airlines, easyJet has a price structure with only a small degree of flexibility: the range in price available for any destination at easyJet is low. For example, Nice starts off at a low of £35 per seat, extending up to £129 depending upon level of bookings and number of days out from take-off. At BA, for a similar flight, the prices ranges from £284 standard fare, to £351 for business class, and the reduction can be very wide nearer take-off, depending upon source, e.g. bucket shop, travel agents’ special late offers. This gives the major airlines a larger range of discounting opportunities, and more chance of a contribution to their fixed costs. (Both examples of prices are current at time of writing and one way.)

2. easyJet offers no agency bookings, and passengers can only book or inquire directly via the telephone sales staff and the internet. Therefore it is essential to have an easy and quick reservation system that shuts out and opens the various pricing levels as the take-off date nears, and the booking pattern becomes clearer.

Contd…

191

Airline Revenue ManagementAny problems or delays within the computer yield management booking system could result it:

(a) staff giving different rates,

(b) lower rates than are necessary being given, and therefore loss of revenue occurring,

(c) staff being able to differentiate prices as a personal choice,

(d) customers receiving unequal treatment, and thus becoming dissatisfied.

3. A system which instils confidence in the operation for management, sales staff and customers.

4. This system permits the staff to achieve a high level of operator efficiency, due to certainty, accuracy and simplicity, which is important to the company, and the operators who are paid on results (bookings achieved).

5. The easyJet internet system is only possible with the use of a real-time yield management system. This system has proved so successful that during November 1999 it set a world record for airline bookings achieved via the net, 60 per cent of all bookings for a specific day.

How does this system vary from the traditional yield system operated by the major carriers?

1. The major carriers have interconnecting flights, which means that yield management can be used to maximize the income over more than one flight. The use of lowcost flights encourages use of other flights, usually more profitable ones. easyJet does not have interconnecting flights or arrangements with other carriers.

2. easyJet does not have cancellations, whereas the major carriers offer this opportunity, with varying complexity.

3. easyJet does not use travel agents, or any form of agency bookings, and this makes the reservations system easier and fully centralized.

4. easyJet does not operate tickets, thus making last-minute bookings easier to operate.

5. easyJet operates from fewer airports, has only one central reservations base and has only a limited number of destinations.

Other major differences between easyJet and the majority of other airlines include:

1. easyJet runs only one type of plane, the Boeing 737-500, which makes operations and reservations much simpler.

2. easyJet offers few on-board services, no duty-free and only limited catering service, which is outsourced.

3. easyJet operates without a ticket and has no actual boarding cards.

4. easyJet runs with very few ground handling crew, and an extremely sales-orientated central head office.

5. New plane purchases have been made and fit into the easyJet model, i.e. Boeing 737-500s.

6. No external sales offices, or airport sales offices, are operated by easyJet. It has no linked or joint sales.

7. Pricing is based strictly upon a revenue maximization process that matches the aims and objectives of yield management.

All these factors help the company to maintain a low variable cost, a key component in any successful yield management system, and provide an opportunity for leverage against its major competitors.

Contd…


Why do airlines pay so much attention to yield? Airlines operate in a highly competitive market, and the lowcost operators, by the nature of this, are fiercely competitive. The environment in which they operate is one of high fixed costs, fixed capacity in the short term, a perishable product and seasonal variable demand. According to Arthur Andersen (1997), easyJet fulfils all the established criteria for the effective use of yield management. Dr Scot Hornick of Andersen Consulting has identified five ‘functional aspects of yield management’, as outlined below:

1. Market segmentation: An area that easyJet feels is inappropriate, only segmenting by destination and flight time.

2. Price management: Systematically offering different prices to different customer segments in response to demand, the main issues for easyJet.

3. Demand forecasting: Forecasting future demand on the basis of past sales and known future events. Initially easyJet has obvious problems, as past history was short and demand was increasing. It was through good forecasting of future events that yield management was successful. Now easyJet’s historic records are becoming more useful, as it is becoming more established. But, with each new route easyJet opens, problems restart.

4. Availability and/or capacity management: Limiting or shifting the availability of certain products or services according to customer demand. This is the main backbone of yield management in the airline sector. The capacity in terms of seats at easyJet is fixed, and is managed by good pricing to maximize the use of the limited seat capacity to obtain the maximum sales volume and to satisfy customer demand.

5. Reservation/Negotiation: In some sectors, management can achieve better yield with the management of price and availability, through the ‘up-selling’ of specific areas to higher more expensive products or ‘cross-selling’ to alternative products, so ensuring an even spread of sales. Here easyJet is restricted as it operates a single class product, and the pricing is fixed irrespective of the type or segment of customer. The price offered will be dictated by the yield management system, related to the seat availability and the closeness of take-off date.

Pre-conditions for Yield Management are:

1. Perishable inventory/or seasonal demand: Seats on an aircraft are extremely perishable, for if easyJet fails to sell seats on say the 7.00 a.m. flight to Glasgow, those seats sales are lost for ever.

2. High fixed costs or sunk costs: Resulting in a low or relatively low marginal cost of selling one extra unit. Here the cost of a Boeing 737-500 is a very high fixed cost, while easyJet’s marginal cost of selling one extra seat on, for example, the 7.00 a.m. flight to Glasgow is very low.

3. Fixed capacity either overall or in the short term: easyJet operates a fixed seat capacity throughout the fleet, on all routes and flights.

4. Advance purchase of service/product: easyJet will only accept pre-booked flights.

The use of a yield management system has enabled easyJet to operate its low-price policy successfully from its conception. The main skills needed are developing a good forecasting plan and history to permit the yield system to be successfully developed. The differences between the levels of yield management within the industry are based upon the level of sophistication and actual understanding of the techniques and markets. Lack of systemization, improper use or lack of understanding of the system can lead to erroneous results and decisions. easyJet ensures successful operation through simple systematic operations, and constant modification of the system as the market continues to develop.

Obstacles and Success Factors The barriers to the use of yield management in the airline industry are few, but the level of operation and sophistication will depend upon the complexity of the flight

Contd…

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Airline Revenue Managementprogrammes and price structures. Table 1 summarizes them. Kimes (1989a) identifies seven key techniques necessary for the success of a yield management system.

1. Ability to segment: easyJet has identified two major segments within its operations.

2. Perishability of inventory: Clearly airline seats, like hotel rooms, are a highly perishable commodity.

3. Product sold in advance of use: easyJet, more than most airlines, insists on 100 per cent sales and payment in advance, and offers no in-airport sales desks.

4. Fluctuation in demand: Clearly with a number of destinations and a number of flights at different times per day each day of the week, the demand for the product is subject to considerable variation.

5. High fixed costs: The cost of a 737-500 airline is relatively high compared to the ticket price.

6. Low marginal sales costs: EasyJet has a competitive advantage over most of its competitors, having very low variable costs.

7. High marginal production: All airlines have a high marginal production cost. If the plane is full, and an extra seat is required for a customer, they are unable simply to produce one more seat and must decline, upgrade, provide an additional plane or compensate. It is here that easyJet, which operates a full-plane policy, with no standby and no interconnecting flights that can cause problems, has a cost advantage. Kimes (1989b) also identifies five core requirements for the operation of a yield management system:

(a) Booking patterns: Yield management systems require information on how the reservations are made for a specific date. It is from this information that the system tracks and creates a picture of the booking process in the future, and from the past for the future. It is through this process that easyJet is able to: (a) operate is online live reservation system, and (b) create the necessary historic bookings profiles.

(b) Knowledge of the demand patterns by market segments: As stated above, easyJet has identified, and operates with, two specific flight segments.

(c) An overbooking policy: Most airlines operate an overbooking policy, which when it goes wrong results in upgrades and stand-down discounts. easyJet works with very tight margins, without the back-up of business or first-class upgrades to cover this situation; hence it operates to a pre-booked full-seat capacity.

(d) Knowledge of the effect of price changes: The team in charge of yield management need to know how changes in price will affect their customers, their occupancy and profitability. The major airlines change prices thousands of times a day, mainly in response to competitive pressure (Kimes 1989b). Clearly this level of yield management system is sophisticated beyond the current needs of easyJet.

(e) A good information system: To match all the requirements of a successful yield management system, the operator requires a great deal of accurate information. It is in this area that the company has its greatest problem, since it is very young, and therefore lacks the in-depth history of a company like British Airways. Additionally, the capturing of such data is very costly, in terms of both the methods used and staff time. This has resulted in easyJet only capturing information on actual bookings. The history on denied bookings is not recorded, an item which most writers (e.g. Orkin 1988; Kimes 1989a, 1989b; Jones and Hamilton 1992; Leiberman 1993) suggest is a prerequisite for successful yield management. However, it is an area in which the company acknowledges information is desirable, and hence this is more a question of the cost of collection and the time involved. The collection would need to be undertaken by sales staff, whose job is designed to be as time efficient as possible to help to maximize both the company’s and the employees’ income.

Contd…


Table 1: Barriers to Effective Yield Management

Questions

1. How does this system fit in with senior management plans?

2. What do you conclude from the given case?

Source: http://cws.cengage.co.uk/page2/students/cases/8-2.pdf

9.6 LET US SUM UP The airlines assigned under these agreements were required to meet together, agree on what the fares should be, and file these fares with their respective governments for approval. It is impossible to amplify the significance of the moves towards low regulated pricing. They have allowed many airlines to develop a low fares philosophy, something which they could never have done under the old regulated pricing authorities. Recently, the tempo of change in airline fares was very low. In regulated competition all the prices were very low and reaching such a compromise was usually a drawn-out affair. Today’s Pricing Environment is a far more ambitious one. However there is one major change which has made it much easier for airline managers to build up sound pricing policies, i.e. the advent of advanced systems for handling the sale of seats. The critic of differential fares might argue that airlines should instead adopt a uniform approach to pricing in the Economy cabin.

The Revenue Management System can be used to decide the number of seats with low prices available in different airlines. Many rebate fares in the past have required travellers to spend a minimum amount of time at their terminus. Maximum Stay Conditions define a maximum length of time that passengers can stay at their destinations and even return home using a discounted fare. Advanced purchase rules are even sometimes applied to discount fares. They imply that travellers must book and pay for their ticket a defined minimum period in advance. The Policy of Pricing for air freight is just as controversial as that on the travellers’ side of the industry. It is also an area where significant, and long overdue, change has come about in current

195

Airline Revenue Managementyears. Where freight is carried in a pure freighter aircraft, the appropriate cost base is crystal clear. Airlines must calculate to recover all the costs of operation including such items as depreciation, maintenance, crew salaries and landing fees.

9.7 LESSON END ACTIVITIES 1. With the help from internet and various newspapers try to identify new segments

in air freight market and prepare a presentation on the same.

2. Discuss the application of Uniform and Differential Pricing in aviation industry.

3. Make a report on economic and environmental drivers and impacts on air freight.

9.8 KEYWORDS Revenue Management: Revenue Management is the successive process of formative how many seats to make accessible at each fare level.

Pricing: It is the procedure of identifying and determining what a firm will receive in exchange for its goods and services.

Overheads: It is related to those costs which are required to run a company but which cannot be directly attributed to any particular activity of the business goods and services.

9.9 QUESTIONS FOR DISCUSSION 1. Discuss the cost structure of in airline marketing industry.

2. Explain the structure of air freight pricing.

3. What is the building block in airline pricing policy?

4. Define uniform and differential pricing.

5. Explain the structure of air freight policy.

6. What is air freight market?

7. Briefly describe freight revenues.

8. Elaborate the pricing decisions in aviation.

9. What is deregulation?

10. What are revenue management systems?

11. Define the dissemination of Fares Information.

12. What is uniform and differential pricing?


CYP 1

1. Predecessors

2. Ambitious

3. Carriers

4. Point-to-point

5. profitably

Contd…


CYP 2

1. True

2. True

3. True

4. True

5. False






197

Distribution and PromotionLESSON

10 DISTRIBUTION AND PROMOTION

CONTENTS


10.1 Introduction

10.2 Distribution Channel Strategies

10.2.1 Distribution Channel Types

10.2.2 Concept of “Super-Profits”

10.3 Travel Agency Distribution System

10.3.1 Merits and Demerits of Agency Distribution System

10.3.2 Today’s Distribution Channels

10.3.3 Future of Distribution

10.4 Selling and Distribution Channel in Air Freight Market

10.5 Brand Building Strategies in Airline Industry

10.5.1 Brand Building in Airline Industry

10.5.2 Positioning Brands

10.5.3 Brand-building Process

10.6 Relationship Marketing and Components of Marketing Strategies

10.6.1 Why Relationship Marketing?

10.6.2 Components of Marketing Strategies

10.7 Frequent Flyer Programme

10.8 Anatomy of Sale and Planning

10.9 Marketing Communication Technique

10.10 Airline Advertising

10.11 Air Freight Market

10.12 Future of Airline Market

10.12.1 Growing Indian Market

10.12.2 Action Plan for India

10.13 Let us Sum up


10.15 Keywords



198 Airline and Travel Management 10.0 AIMS AND OBJECTIVES

After studying this lesson, you would be able to: Explain Distribution Channel Strategies Understand Travel Agency Distribution System Describe Selling and Distribution Channel in Air Freight Market Explain Brand Building Strategies in Airline Industry Understand Relationship Marketing and Components of Marketing Strategies Explain Frequent Flyer Programme Focus on Anatomy of Sale and Planning Explain Marketing Communication Technique Explain Airline Advertising and Air Freight Market Ascertain Future of Airline Market

10.1 INTRODUCTION There is a unique relationship between the product and the customer in every marketing field. This unique relationship is called as Distribution Channels. In aviation sector, there is a wide scope of these distribution channels. In present days, all aviation companies are competing in number of different aspects whether they may be different costs or different services.

This is an area where revolutionary change is taking place, as aircraft carrier are increasingly becoming proficient at tapping the potential open to them from on-line distribution. For aviation industries, there must be a proper and effective distribution channel.

In this competitive world, it is important to make the customer more comfortable at the time of air ticket booking process. This gives more chance to the customer to switch to the different alternatives. Airline products are perishable in nature which enhances the significance of effective distribution. Those seats which remain vacant or left unsold in a specific flight cannot be restored again but after few days subsequently sold at a particular date. Due to this situation, company has to face the position of revenue loss forever. With a high proportion of fixed costs, firm cost structures must be treated irrespective of level of sales.

Further importance of selling increases in terms of every flight seat with an optimum price. As a single pound increases with a sale of flight ticket, it directly leads to enhance the firm’s profitability. In order to meet this challenge, airlines introduced the highly sophisticated systems of yield management which manipulate the demand and supply and maximise the revenue part.

If the external environment as well as the historical trends are to be analysed periodically then these yield management systems helps in determining the prices and policies for air ticket booking which results in full flights.

Though, the techniques of yield management have developed to the extent that it is difficult to make further improvements on the revenue side of the equation. These techniques become more standardised in such a way that even not a single firm can take additional competitive advantage while using it. Hence, the main focus is on costs control. This trend is introduced by the growth of budget or 'no-frills' airlines, which give challenge to the existing business practices and act as a catalyst for doing modifications in distribution of airline sector.

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Distribution and PromotionThe aim of this lesson is to consider all these arguments, and to analyse the current developments in the airline distribution sector.

10.2 DISTRIBUTION CHANNEL STRATEGIES To understand the Distribution channel strategies, we will start from understanding the types of distribution channel.

10.2.1 Distribution Channel Types There are various options of distribution channel, it depends upon suitability of firm to firm which option to choose. Few firms go with the direct route and many of firms go with another. The producers of the firms who particularly use the direct route can make direct contact with the ultimate customers. They do not need to involve the other intermediary sources for their product. Generally, industrial marketing use this type of distribution channel for their capital goods. However in many cases, the increase in the number of specialist operating lease companies has now allowed the mediator among the aerospace firms and their ultimate customers, the airlines.

A direct approach can still be used in those activities of marketing which involves less costly items. For instance, few firms in the industry opt for direct route to sell their goods with the help of mail order supported by broad advertising targeted at ultimate customers, or increasingly, with the help of Internet.

Direct distribution channels give the benefit of not to pay the commissions or mark-ups to the intermediaries of distribution channel. The direct route channel allows the manufacturers to keep track on their entire activities of marketing. It also allows the producers to be in touch with the real sources of demand for their products. The main issue is that they may make it unmanageable for the manufacturer to accomplish adequate coverage of geographical area, though in many areas for instance, insurance, this is being overpower by an increasing willingness among the customers number to purchase through telephone or internet.

Producers of many industries utilise the services of wholesalers. Wholesalers are the firms which buy the products in bulk from a range of manufacturers on the basis of their purchasing power in order to get heavy discounts.

After purchasing in bulk these firms in turn sell these products or goods by two means either by directly approach to the ultimate customers or take the help of retailers. Retailers in turn sell these goods or products to their ultimate customers. Risk taking is the main crux of wholesalers and retailers from manufacturer’s point of view. With the help of offering discounts to the intermediaries, they can add on their mark-up values and enhance profits. However, in turn, the risks of the manufacturer are minimised as once the goods or products are purchased by the wholesalers or retailers, there is no chance to return the remaining unsold goods.

Agency is that type of remaining channel relationship. In service industries, this type of relationship is very common in situation where there is only intangible product instead of tangible product which is offered for sale. In such type of industries, manufacturers often need wide coverage of geographical area, but find it expensive to provide this in their own. Thus agents are hired by them on paid basis. On behalf of a particular firm, they get commission for selling the products at each time. On the basis of selling goods or items to the customers, these agents earn their source of living in what should be a mutually beneficial relationship. Of course, the main issue is that on behalf of many other firms, agents sell their products they may be influenced to use their market leveraging by hard working to sell the firm’s goods or items which pay them higher commissions. Suppliers may in turn increase each other’s commissions to undertake for securing the support of agents, resulting in an inexorable rise in commission costs. Exactly in 1990s, this process was prevailing in airline marketing.


The aviation industry exemplifies all of these different forms of relationship channel. In many modes, the function of the airlines leasing company is that of a wholesaler. Firms like ILFC and GE Capital Aviation Services purchase huge numbers of aircraft from the producers and for doing so they are paid substantive price discounts. Then they lease out these aircrafts to their ultimate customer airlines, and in cheerful times they make huge benefits accordingly. They do, though, assume considerable risks. In a market downturn, lessees return a large number of aircraft, and, due to the market having a glut of capacity it becomes unmanageable to place these airplanes with new clients or sell them in order to realise their residual value.

Certainly, in early 1990’s recession period, GPA, then-largest operating lease company, could not survive in the market and finally was taken over due to bankruptcy. Another instance of a distributor/wholesaler relationship has been that between tour operators and charter aircrafts in the European package holiday industry. Here the principle is that the airlines have manufactured the plane-loads of capacity which is sold to tour operators. In turn, the operators have added on the surface transfers, accommodation, and other features of a holiday like sporting opportunities or cultural tours or, to organise a complete package. The tour operators are responsible to retail these packages to the ultimate customer.

In concern with agency relationships, of course it is the travel agency system which is dominant distribution channel for aircrafts in the past, and it remains so in aviation markets which are less developed. The decline in the percentages is now markedly in many countries, but for many years airlines found that travel agent sold 80% of their tickets. Recently, the trend until was in fact for this percentage to rise, with the deregulation forces which allows the industry of travel agency to build its position because it is the dominant channel of distribution of the industry. Deregulation means rapid changes in aircrafts’ fares and schedules. Often, the confused consumer was pushed to turn to an agent in order to find latest data without the job of contacting each of the airlines serving a route on an individual basis.

In recent years, direct selling becomes very crucial, as traditional aircrafts have added on supplemented direct selling by sales stores and call centres by giving more emphasis on web-based business. New aircrafts are highly visible or totally neglect the industry of travel agency.

10.2.2 Concept of “Super-Profits” An important section of this lesson will be concentrated to the question of channels of distribution, and the normal reader may query why this should be in such a way. There is a simple reason for this situation: for any industry, command over channels of distribution is the most powerful key factor which can enhance the profits and in airline business this is a special case.

The concept related to command over the channels of distribution is a straightforward one. In any distribution channel where agents, retailers and wholesalers are included, manufacturers must ascertain that they are in a situation to hold the benefits received by these intermediaries of distribution channel. If any one of these intermediaries like wholesaler, retailer or agent is in a strong position, they will not be capable of doing do so. Rather, these intermediary parties will be able to act one manufacturer off against another, only supporting those who outdo the others concerned with their offer of mark-ups or commissions. In turn, manufacturers will get only the benefits required to retain them in the business yearly. The “Super Profits” – profits over and above these basic payoffs – will accrue to the intermediary parties who are able to work out command.

There are a number of danger signals which indicate a probability that manufacturers will lose effective channel control. One is that each intermediary controls a significant share of the market. For instance, in grocery market of United Kingdom, the scene is

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Distribution and Promotiondominated by 3 chains of giant supermarket, Sainsbury’s, Asda/Wallmart and Tesco. In today’s world, any manufacturer of grocery items has to ascertain that goods are stocked by these firms. If they are not, then they will not be able to reach something like seventy per cent of the United Kingdom market. Thus firms of the supermarket are in a strong position of bargaining, a position emphasised by their robust profit performance in recent years. The other worrying indicator of issues for manufacturers is that their product is taken as a “Commodity” rather than a “Brand.”

The subject of Brands Management is very significant in Airline Marketing Concisely, although, a commodity situation is one where customers comprehend the goods or items of competing suppliers to be identical. The brands case is the opposite of this, where customers see significant deviations between the goods of Substitute suppliers. The product situation is the ideal one for the intermediaries like wholesalers, retailers and agents looking for establishing and retaining the control of a distribution channel. This is because customers have no better choice as to which goods or items of the firm they buy. Thus the intermediaries will be in a perfect position to play one supplier off against another intermediary, as it will be not relevant from the point of view of customer as to which manufacturer is supported.

In some industries, product commoditisation has become so complete that the only means for manufacturers hoping to secure their “Super-Profits” is to at least franchise, or to own, their own channels of distribution. This is the situation; for instance, in the industry of petrol where in most of the firms which refine petrol also franchise a filling stations’ network. It is not easy or impossible indeed for a complete refiner of petrol to gain a reasonable profit, given the clear perception of many people that petrol is a commodity. One’s car runs exactly the same whichever brand of petrol is put into it.

Another sector where the distribution channel of ownership by manufacturers has become the standard is in that of the European package holiday/charter airline area. Seats on charter aircrafts are often taken as a commodity by vacationers, in terms that very few will specify their particular choice of airline with which they hope to travel at the time of booking their holiday. Certainly many passengers are unaware about the identification of their airline until they reach the airport for boarding their flight on their departure date. Due to this reason, it is difficult for independent aircrafts which have no connection to their channels of distribution to exist.

Such aircrafts can often make reasonable benefits when demand is capacity limited, as will generally be the case during the upswing period of the Trade Cycle. In a recession time, they will search the life much more difficult, when demand is less than the capacity and where market power will swing powerfully to tour operator intermediary parties. These firms will simply be able to play the autonomous charter aircrafts off against each other, as preferences for passengers are very little as to which airline they board. For the tour operators, the result will be strong profits but weaker ones for the aircrafts, at the extent where some of the aircrafts may not be able to exist.

In the recession of the early 1990s there was a case of United Kingdom airline Dan-Air, which became invisible through a takeover by British Airways. A better position in the market of tour operators and airplanes is where the airline either owns, or is owned by, its channels of distribution. For instance, Thomson fly, the United Kingdom’s biggest charter airline, Lunn-Poly and Thomson Holidays, the travel agency with the biggest high-street presence, are all subsidiary company of the same parent company. Therefore, the airline acknowledges that with the help of such vertical integration it has an assured way out for its production even at times when circumstances of the market are unmanageable.

In this introductory section another point to be kept in mind is related to the management of channel of distribution. In almost all sectors of the economy there are


very substantive variations in the capital invested by manufacturers and by intermediary parties.

This is surely the case in the travel field. Aircrafts have to invest truly huge amounts in aircraft in order to develop and expand their businesses. For instance, today the buying of just a wide bodied aircraft may include an outlay of possibly $180-$200 million. A fleet of these airplanes will require a speculative investment of billions of dollars. In counterpoint, investments made by travel agents and tour operators will be very small by comparison. This becomes even more the case as the business of travel agency becomes progressively on-line one without the need to invest inexpensively high street shops. It is perfectly necessary that aircrafts should be in control of their channels of distribution so that they can realise the “Super-Profits” which will provide their shareholders a fair return on their money. As we can see, there are now concerning signs that the growth of search engines like Google provides an even stronger threat to this control than has subsisted in the past.

10.3 TRAVEL AGENCY DISTRIBUTION SYSTEM In this section, we will study the system of travel agency distribution starting from its merits and demerits.

10.3.1 Merits and Demerits of Agency Distribution System After the establishment of the general principles, it is required now to focus in more detail at the specific issues aroused by the past general reliance on the travel agency channel of distribution in the airline industry.

In this concern, it cannot be emphasised too strongly that this trust always brought aircrafts very significant profits. Precisely it can be expected with an agency relationship, one of these was geographical area. An airline would have ascertained it prohibitively valuable to have its own sales stores in every high street and shopping mall all around the world. Even some passengers liked a personalised source of tickets, and someone they could turn to for help and advice. A travel agent provided such a presence by selling tickets on behalf of all tour operators and aircrafts, and by also offering services like car, hotel rental, and bookings of theatre. Agents could – and still can − identify and explore specialist niche markets like those dealing with hobbies like golf and winter sports, and those focusing on specific ethnic groups.

Another benefit of relationships with agency is that they are not a heavy overhead burden on the airlines. It is perfect that all aircrafts had to incur the expenses of agency support in the form of things like agency staff training and to deal with enquiries of agents by providing them special telephone lines. The rule of the agency relationship is that the airlines only have to offer benefits to the agent when the agent provided a piece of business on its behalf. This is in contrast, for example, to airline-owned-and operated sales stores in the centre of the city, which is an operating cost burden on the aircraft carrier at all times, whether or not any business is actually being transacted.

An ultimate point about the agency relationship or traditional airline is that agents certainly let off aircrafts at a great deal of the costly work of administration associated with air travel. For instance an agent may issue air tickets, provide assistance with applications of visa and deal with queries of passengers about airport check-in times, rules of baggage rules and so on. If the agents did not do so, aircraft carriers need to hire extra staff with resources. In general, as well, airlines give their staff more prominent salaries than the poor levels of pay which were mostly predominant in the sector of travel agency. Travel agents could therefore likely to accomplish this work at lower costs than would have prevailed if airlines had done it themselves.

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Distribution and Promotion10.3.2 Today’s Distribution Channels The position concerning to today’s channel of distribution can be followed to a process of reform which dates back many years. In 1996, some airlines started to make revolutionary changes. Market considerations at the time were very buoyant, something which is always probable to favour manufacturer at the expense of intermediaries. At the same time, it began to become clear that the Internet held out the promise of being another distribution channel which could challenge the dominance of the travel agency system.

It was already being applied by some of the new starter Cost Leader aircrafts, which were accomplishing substantial cost savings as a result, further enhancing the pressure on traditional carriers.

The initial changes occurred when Delta Airlines declared that payments of commission for domestic ticket sales in the USA would be restricted at a maximum of $50, irrespective of the percentage calculation of the fare. The essence of doing this was to highly cut down the percentage of commission paid on overpriced First Class and Flexible Coach tickets. In a short duration, Delta’s scheme was pursued by almost all major airlines in the USA, and, regardless of lots of anticipations in contrast, it remained the test of time. In fact, the procedure of reform has been toughened as well as broadened. Commissions have been brought down or even eradicated in many markets now. Where tour operators are still being compensated straightaway by aircrafts, this is now frequently done using the so-called “Task Based” approach.

Consequently, operators are not compensated with a portion of the cost of the ticket they sell. Rather, flat rate payments are made for every activity the tour operator has tackled –for making the reservations, for booking the ticket (a rare payment, as the use of electronic tickets grow rapidly) and for dealing with payment. The result of such policies has been to cut down the tour operators’ costs significantly, again especially on First and Business Class tickets, and on Flexible Economy fares, where high prices implied particularly high payments to operators.

The overall outcome of these reforms has been little short of revolutionary. The share of airline tickets which are sold by traditional tour operators has gone down, as airline internet sites have turned more popular as well as user-friendly and a new variety of online tour operators have emerged. Simultaneously, the relation between airlines and travel agents has varied primarily, as agents have had to look for new sources of income.

This has been particularly the case in the business aviation market. Here, in many markets, agents have modified their function by becoming a travel advisor for their customers, instead of being an airline sales agent. They have debated, with good reason in some cases, that they expertise in making travel reservations, in negotiating corporate transactions with airlines and other travel providers, and in tracking and tracing travel expenditure to assure that the firm gets the best value-for-money from its travel expenses. In exchange for such expertise, management fees has been asked by and paid to travel agents by their commercial customers.

As a result of this change, many former travel agency firms have now declared themselves as Companies of Travel Management, to give a more effective reflection of the working methods that they now apply.

The transition from commission-based rewards to management fees paid by customers has had combined results for airlines, but on equilibrium it has proven to be a suitable policy. The truth is that agents are no more the airlines’ associates in selling higher yielding tickets. Any kind of reward for intermediates based on commissions can be irritating for the ones paying them, with often an opinion that the commission does not appropriately reveal the work performed. Commissions do, although, give a common


concern to both principal and intermediary to ensure the highest potential income. Management fees can have an opposite outcome.

For a tour operator to justify their work, and to ensure that they continue to hold their travel accounts, they must reveal their commercial customers that they have handled the travel budget well, and that they have attained the greatest possible cost savings. This implies that they persuade reservation on low yielding promotional fares, even if restricting terms implement to them, or book people on Cost Leader airlines via these airlines’ websites, despite the fact that they get no commission for doing so.

In spite of this possible contrary outcome, modifying the foundation for the rewarding of tour operators has been a requisite and long overdue reform. This has saved airlines huge sums of money which they otherwise would have shed off to the travel agency sector, and has granted them an improved command over their distribution channels than would have been the case had the reforms not come about.

10.3.3 Future of Distribution The Indian system of travel distribution is split and diverged across the country. Although there are a few national retail agencies, most agents are small, independent businesses and lend a different percentage of business to Australia. Indian consumers are exploring and reserving travel using a combination of traditional travel agencies and online options, though retail agencies still manage the bulk of outbound travel bookings.

Wholesalers/Large Agents

Commission Level: 15-18%

The traditional wholesaler model is not far-flung in India, though there are a few conventional wholesalers, such as Saltours and Nijhawan Group that are expanding their business from the small-scale retail agents.

Most large retail agencies catalogue and market their own travel options by their own stores as well as via smaller external travel agencies.

Some of the big retail tour operators are also enlarging their distribution network, selling their goods or items via smaller independent agents.

The major agencies with a pan-India presence are Kuoni.

Travel, Thomas Cook, Cox & Kings, Kesari, Club7, TUI, Make My Trip, JTB Travels, Vacations Exotica, and Mercury Travel.

These companies operate across all segments of travel including group tours, Free Independent Travel (FIT), business events and luxury.

Retail Agents

Commission Level: 10%

The distribution of travel options in India is split and predominately through retail agencies. There are a few national agencies but most operators are small, independent businesses.

There is a cutthroat rivalry between the large-scale tour operators, with violent marketing and tactical promotions in print media. Promotions involve price-driven tactical offers and add-ons such as discount schemes, ‘buy now, pay later’, early bird discounts and free travel for children or companions.

A large number of agents are beginning to sell Australia as consumer demand for the destination grows.

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Distribution and PromotionOnline

Commission Level: 5% to 20%

With the growth in the Indian outbound market, more consumers are using online modes to explore and make the reservations. The top five Online Travel Agencies (OTAs) include Yatra, Make My Trip, Expedia, Cleartrip and Travelocity.

With most international airlines carrying out a zero commission structure, there has been a rise in online bookings for international transportations.

Aussie Specialists

As at March 2012 there were 686 Aussie Specialists in India. New potential Aussie Specialist agents are identified in conjunction with airlines and Inbound Tour Operators (ITOs).

The Department of Immigration and Citizenship (DIAC) runs a Preferred Agency Scheme, where a few Aussie Specialist retail operators are capable of processing visa applications as per the DIAC requisites. Electronic lodging services for visas are also available to nominated tour operators in India.

Inbound Tour Operators

Commission Level: Up to 20%

Inbound Tour Operators (ITOs) are the fundamental connections in the distribution chain, with several ITOs actively formulating the market.

In spite of the upcoming changes recently, the question of distribution channels for airlines is yet very uncertain. Can we yet anticipate what the fully developed situation will be? It is already well-defined that in the coming time a larger share of airline seats will be sold through direct distribution channels.

Airline call centres, sales offices and airport ticket desks will continue to exist, but the increase in direct sales will not be served by them. Evidently, major share of this growth will occur from more usage of airline websites. Internet access is dispersing speedily all over the world, and use of the Internet is now a daily activity for almost every literate person. These people are, naturally, pulled out of proportion from groups who are potentially frequent air travellers. Also, airlines are growingly acquiring the simpler bookings and ticketing processes, which are essential to make internet reservation commonplace. The newer Cost Leader airlines have always done this, and the “Legacy” airlines that they are threatening are more and more reacting.

This does not imply an elimination of the travel agents’ role from the airline distribution channel in the upcoming years. Lots of well- managed agents will be capable of maintaining their position by acquiring policies which their customers will consider as contributing value. The business tour operators are repositioning themselves as travel advisors instead of airline sales agents. On the other side, the expert agents may search for niche positions by specialising in specific activities such as golf, trekking, winter sports, etc. Customers may then go forward to aid them because they value their skills.

The favourable possibilities for the tour operator industry in the upcoming years will originate from the one quality that they will persist to control airline websites. When a passenger refers an airline website for consultation, they will normally be informed only regarding travel products and fares on that airline (and, possibly, on its code share partners). With the objective to search for the most suitable choice amongst the various available, they may have to pay out a significant amount of time going through the websites of all the competitor airlines in the market. If they ask advice from a good tour operator, the tour operator will be able to tell all the flight and fares choices that are available and make a “best-buy” suggestion.


This service can be offered in some form by a traditional off-line travel agency, but it turns into a yet more feasible one when it is made available over the Internet. In the recent years, there have been seen the rapid growth of a various large and well-capitalise online tour companies such as Travelocity (begun by American Airlines, but later on sold) and the Expedia service initiated by Microsoft.

This has successively brought up interrupting openings for airlines. Their websites have permitted them to relax the once tight hold that big travel company chains held over them, but the emerging of companies such as Expedia and Travelocity has brought up the shade of a new domination, this time by online instead of off-line companies. Such a threat made airlines to react.

In both the USA and Europe, group of airlines set up what added up to their own online travel companies, branded Orbitz in the US and Opodo in Europe. Although in both cases, these companies have now been sold by the group that possessed them, presumptively as a means to raise cash.

In the majority of cases, airlines have taken the evidently bizarre course of exhibiting not only their own flights on their websites, but also those of their rivals. They have done so as a way of allowing their customers with an intensive reservation tool, and as a way of claiming to be the online travel agents that only they can be.

Overall, it is capable of reaching a more affirmative judgment about airline distribution than would have been possible about a decade ago. The use of the internet and the reform of the reward systems for tour operators have both played significant role in correcting what was previously a totally dissatisfactory position.

10.4 SELLING AND DISTRIBUTION CHANNEL IN AIR FREIGHT MARKET The word “Marketing”, is a philosophy for successfully running the whole business. “Selling” is the final stage of a strategically employed marketing process; whereby customers are persuaded to buy the firm’s products or services. “Marketing” is supposed to make “Selling” easier. It is possible to be a great deal to sell something to someone which is accessible in response to a well explored and well-interpreted customer need. In fact, one of the traditional errors of industry in the past has been supposed to Production Orientation where firms made what they wished making, or found it easiest to make, and after that tried to persuade unwilling customers with high pressure selling to buy the ideal products. It must not be thought, though, that “Marketing” will make the skills of Selling out-dated. In today’s competitive markets, customers will generally have plenty of option open to them. Persuading them to implement this choice in a peculiar way will necessitate the use of professional skills of a high order.

Strategically powerful Airlines are those that agree to the principles of Marketing that it gives a structure for all they do, and set out to employ these principles as broadly and as strictly as possible.

In additional evidence of airlines' newly-started management of their allocation can be seen in their treatment of the conventional travel agent. Having seen the reduction in cost yielded by capping commissions given to agencies that are, and having option revenue stream from their own websites, many have started to put off business from travel agents by cutting down, or in some cases totally removing, payments of commission. For instance, Delta Airlines has cut down commission to five per cent up to an utmost of twenty-five dollars for a one-way or fifty dollars for a round-trip ticket.

Likewise, British Airways gives agents a booking fee of between six dollar and twenty dollar, depending upon the seat class and whether the flight is long-haul,

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Distribution and Promotiondomestic or European, along with a payment of 1.3% for money collection. BA points out that on few domestic routes this strategy of compensation will effect in higher instead than lower payments. Whilst, on long-haul and business tickets, payments will be to a great deal less. For instance, on a London-New York Club World ticket, wherever commission would conventionally have been about £250, agents will now received only £70.

Generally, the airlines have began to aggressively handle their distribution channels – discouraging use of, but not eliminating, the less favourable and encouraging the most favourable. The advantage of this strategy can be considerable. British Airways have stated that for each proportion of business that they can shift from conventional to online channels, they will produce an estimated twenty per cent reduction in cost, which translates into savings of £6m a year.

The subject of product distribution is no less divisive on the freight side of airlines’ activities – certainly it might be indicated that airlines are encouraging to find a solution for their problem of freight distribution that they are for those on the side of the passenger.

We have discussed that the air freight forwarder is equivalent to the travel agent in air freight. Forwarders furnish the same sales function of an agency as the travel agent performs. They also have a significant role to execute in the handling and freight consolidation.

The forwarders have only a little function in the so-known “Express” market of little urgent packages. The Integrated Carriers that command Express have built influential retail brands and have put large amounts in ground handling systems, which for the most part go against the role of the forwarder. In case of “Heavy Freight”, though, the command of the forwarding industry is almost total. The share of heavy freight in the hands of forwarders is well over ninety per cent.

Such a dependence on a sole distribution channel would be harmful in itself, but the arrangement of the forwarding industry makes it still worse. Forwarding seems to be an industry where there are considerable Economies of Scale, and where significant benefits accumulate to the largest firms. Fewer than fifteen international forwarders now have a controlling effect in the market, with this number tending to decrease gradually with time on account of what seems to be almost continuous merger and takeover action between the leading players. The extent of consolidation is now escalating further still as the Integrators and the largest forwarders begin to associate together.

The effect of airline reliance on channel of distribution is completely as one would require. Gains in the airline industry of the air freight industry have been under immense pressure in current years. A serious market downswing in 2000 and 2001 was followed by overburden and falling yields on many routes with only a minor improvement coming about in 2004 and 2005. In the firmest possible contrast, reported benefits of publicly-quoted air freight forwarders during this time had never been better.

Overcapacity amongst the airlines profited them, as they were able to play carrier off against another, bringing down the rates that they paid and in turn increasing the gains they made on their integrations. Instead than getting low, forwarders ability to play one airline off against another may be changing. Most of the airlines now constitute consortia, the aim of which is to contour the process of booking in the air cargo industry by the use of the Internet. At the instance, booking is mostly an archaic process using the telephone and appears ripe for reform. Internet platforms such as that catered by the GFX Company are revolutionary. They are surely achieving a streamlining of the process, though the charges delivered by GFX promise an argument comparable to that yielded by Global Distribution Systems on the traveller


side of the industry. The charges made by the GFX company on the airlines that use it have been high enough to discourage many carriers from bringing together, whilst the question of the display which each carrier’s flights are given in the system is likely to be disputed. Most seriously of all, GFX may finish the commoditisation of the air cargo product, with forwarders able to make a quick comparison between the rates on offer from the different challengers in a market. Great ability will then accrue to the cheapest-pricing airline, giving an endemic tendency towards rate cutting, especially in an over-supplied market.

It is easy to summarise that the current situation concerned with channels of distribution for air freight is not up to the mark. Aircrafts have too little market power in spite of making the bulk of the capital investment in the company. In recent years progress on the passenger side is totally negligible, Even though current situation is better in comparison to the late 1990s. Unluckily, reaching to the solutions to the issue will be a tough task.

In the past times, few airlines have undertook to point out the issues to buy into the forwarding industry, or by establishing the subsidiary company which helps in competing with the forward moving industries in the areas like off-airport ground handling.

Success has not been achieved while attempting these issues. Whatever profits they may have earned related to the improvement in market control have been overbalanced by the fact that remaining autonomous forward-moving industries have ordinarily responded angrily, regarding such proceeds as an intrusion of their territorial dominion. The commercial loss that they have been capable of imposing has normally overbalanced the profits.

In recent years, a brighter opening move has been imbibed, nearly notable by Air France. Air France airline seems to have studied from the computer chip industry and the Intel strategies. Intel does not produce its own computing machine, but preserves a strong positioning with those firms who do by cracking a great deal in developing a potential brand for its microprocessors. Based on different segments of the market and on time-definite deliveries, Air France has modernised their brands by doing modifications in air freight. The airline clearly wishes that more requests will be received on these brands when forwarders and shippers are deciding which airline they should choose to utilise their services.

In today’s competitive world questions related to distribution strategies are amongst the most disputative in the whole Airline Marketing field. It is all important that airline business should check their channels of distribution, as it is mostly their money i.e. at risk with the help of these distribution channels. The main issue is to safeguard long-term channel control it can create conflict with short-term targets to maximise the profits, especially given the powerful positions that their retailers and wholesalers of the industry have been capable to build up.

Successful Airlines

Acknowledge that effective control of distribution channels is one of the most important drivers of profitability in the airline industry, and act to establish and sustain such control.


Fill in the blanks:

1. There is a unique relationship between the product and the customer in every marketing field. This unique relationship is called as ……………………

Contd…

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Distribution and Promotion2. There are various options of distribution channel, it depends upon

…………………… of firm to firm which option to choose.

3. A …………………… approach can still be used in those activities of marketing which involves less costly items.

4. …………………… is the main crux of wholesalers and retailers from manufacturer’s point of view.

5. …………………… means rapid changes in aircrafts’ fares and schedules.

10.5 BRAND BUILDING STRATEGIES IN AIRLINE INDUSTRY Brand Management is nowadays receiving an increasing attention in Airline Marketing today. The prominent players in the aviation industry feel that there stands an optimisation towards usage of brand management since it is perceived that by adopting the concept of branding as developed in other industries, the aviation carriers will be able to secure better control of their distribution channels as well as will be able to add value to their product. This lesson aims to set out the ways using which airlines can formulate the best use of branding strategies to achieve their desired goal of profitability, market competitiveness and enhanced market share Brands are different from products in a way that brands are “what the consumers buy”, while products are “what concern/companies make”. Brand is an accumulation of emotional and functional associations. Brand is a promise that the product will perform as per customer’s expectations. It shapes customer’s expectations about the product. Brands usually have a trademark which protects them from use by others. A brand gives particular information about the organization, good or service, differentiating it from others in marketplace. Brand carries an assurance about the characteristics that make the product or service unique. A strong brand is a means of making people aware of what the company represents and what its offerings are. To a consumer, brand means and signifies:

Source of product Delegating responsibility to the manufacturer of product Lower risk Less search cost Quality symbol Deal or pact with the product manufacturer Symbolic device

Brands simplify consumers purchase decision. Over a period of time, consumers discover the brands which satisfy their need. If the consumers recognize a particular brand and have knowledge about it, they make quick purchase decision and save lot of time. Also, they save search costs for product. Consumers remain committed and loyal to a brand as long as they believe and have an implicit understanding that the brand will continue meeting their expectations and perform in the desired manner consistently. As long as the consumers get benefits and satisfaction from consumption of the product, they will more likely continue to buy that brand. Brands also play a crucial role in signifying certain product features to consumers. To a seller, brand means and signifies:

Basis of competitive advantage Way of bestowing products with unique associations


Way of identification to easy handling

Way of legal protection of products’ unique traits/features

Sign of quality to satisfied customer

Means of financial returns

A brand, in short, can be defined as a seller’s promise to provide consistently a unique set of characteristics, advantages, and services to the buyers/consumers. It is a name, term, sign, symbol or a combination of all these planned to differentiate the goods/services of one seller or group of sellers from those of competitors. Some examples of well known brands are McDonald’s, Mercedes-Benz, Sony, Coca Cola, Kingfisher, etc.

A brand connects the four crucial elements of an enterprise customers, employees, management and shareholders. Brand is nothing but an assortment of memories in customers mind. Brand represents values, ideas and even personality. It is a set of functional, emotional and rational associations and benefits which have occupied target market’s mind. Associations are nothing but the images and symbols associated with the brand or brand benefits, such as, the Nike Swoosh, the Nokia sound, etc. Benefits are the basis for purchase decision.

10.5.1 Brand Building in Airline Industry

In building up the strategy for a brand-building, first of all the airlines must make a decision which will be used for the development of brand. Thus, here, it is very helpful to differentiate corporate brands with Sub-brands.

Corporate brands refer to those brands which are based on a principle of company’s trading name such as Ford cars, Philips electrical goods, etc. The degree to which they are emphasized differs from industry to industry. In some, the business of airline is a good example. Most of the activities of brand-building have taken place around corporate brands. In others, such brands are of little or no significance. For instance, in the market of cigarette, smokers are often not aware of which firm has essentially manufactured the cigarettes they are smoking. Sub-brands refer to those brands which present under a corporate umbrella. In the car market, for instance, some of the brand values are corporate, but under the corporate umbrella few are related to individual models. Ford is in itself a main corporate brand, but models like Focus, Mondeo, and Fiesta (to use the UK brand names) are aimed at dissimilar market segments and each has dissimilar brand values which are linked with it.

There are not many successful developments of sub-brands in the airline industry. Most of the airlines have tried to commence subbrands which are based on cabin classes, especially on their business classes, but only some of these have made an actual impact. Exceptions have been made in the British Airways Club World brand as well as also the Upper Class brand developed by Virgin Atlantic.

In the airline industry, another attempt at sub-branding has been to make such brands which are based on the service concept. “Shuttle” became a well-recognised brand both in the north-east of the USA as well as in the UK domestic markets, whilst the service concept of Air France “La Navette” is same both in the manner in which plan has been made so as to make an attempt to construct a sub-brand around high-frequency short-haul services concept as well as in the nature of the operation it describes. At the contrary end of the market, for instance Concorde was a Sub-brand for Air France and British Airways until it was withdrawn from service in the autumn of 2003.

In the airline industry y, the most remarkable example of subbranding was that of the “Skytrain” brand which was developed in late 1970s by Laker Airways for North

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Distribution and PromotionAtlantic services. Laker Airways was lost to insolvency in 1982, but whatsoever mistakes were there, they were lay outside the brand-building area.

“Skytrain” was an influential as well as well-recognised brand, which is backed by a strong mixture of both Psychological as well as Tangible brand values. The successors to Skytrain have been the brands which some airlines have developed at a very low fare subsidiary like Delta’s Song and SAS’s Snowflake, though these have generally turned out to be unsuccessful enterprise.

You may see a significant change while undergoing the relationship between Sub-branding and Corporate in the airline industry at the time of writing. We have already noted that the trend towards airlines may come together in a few large global alliances. If these alliances are to stay together and to attain what the airlines which are members hope will come from them, branding may have a vital role to play. Until now, the names of the airlines’ have formed the corporate brands, with, as you have already seen the corporate umbrella some degree of development and growth of Sub-brands. At some point, the brands of individual airlines might come to be recognised as the Sub-brands, under the umbrella of an alliance-based corporate brand. Hence in this direction, the first alliance to move has been the Star Alliance, even though in recent times the Skyteam alliance has begun a same kind of programme. Thus, it is a point of argument as to the degree to which alliance-based brands should subsume the brands of individual airlines within an alliance.

10.5.2 Positioning Brands Once a choice has been made as to the basis for building of brand, airlines must make a decision on the values which will position their brand. These must include a proper combination of both the Tangible and Psychological brand values, so that the brand is both defendable as well as powerful.

The initial stage in the procedure of brand positioning is the strategy of airline’s business. Few airlines target mostly the business air traveller. While others are more leisure-market orientated, or work wholly in the business of air freight. Most of the carriers aim at a presence in all the main segments of market, a strategy that carries with it especially the problems related to the brand positioning. The right brand positions for these various categories of airline will themselves be very dissimilar.

In terms of the needs and requirements of the customer, safety is common in all of them. It can be said that while flying most of the passengers are frightened. There is simply a spectrum which is widening from those who are mildly concerned about it to those who are terrified of the entire experience. Due to this, almost of the airlines have to construct their brands on the basis of a brand value of safety, as well as also those that do anything to compromise this (for instance, by getting involved in the sponsorship of a risky sport like motor racing which can make a serious mistake.

Once the primary value of safety has been adopted, a wide range of customer needs and preferences provide airlines with important selections while positioning the brands. For instance, an airline targeting the business air traveller will have to lay emphasis on the values of Tangible brand like punctuality, reliability as well as frequency. In terms of Psychological values, it is famous that most of the business flyers are status-conscious and prestige. An airline are thus seeking so as to attract them which helps in turning up the position of its brand in such a manner so as to recommend that it is the carrier of option for successful people, who know the sort of airline they like to be seen to be flying. Precisely this attempt is being made at the time of writing by the transatlantic ‘All Business Class’ airline, Eos Air.

The airlines which are targeting the leisure market, will know that most of their clients will have the price of the ticket as a major factor while making their selection-of-airline decisions. Hence, airlines have to position themselves as the value-for-money


selection, by giving at the cheapest rates as possible at the same time maintaining the standards of safety and providing satisfactory levels of punctuality along with passenger amenities.

For instance, Southwest Airlines depicts exactly this positioning. With respect to the needs and requirements of the passenger, the most intricate problems in brand positioning are faced by the most of the airlines which are looking for well-represented for both in business travel due to its high yields as well as in leisure travel which at least somewhat due to its higher-than-average growth rates. These carriers have to represent themselves as the airline of selection for those who are the status-conscious business traveller, as well as the value-for-money key for the leisure flyer who is looking for a cheap rate. These two positions depict an opposition, one that has not often been dealt with successfully. Perhaps, British Airways has been as successful as any with the launch of its “World Offers” sub-brand. This allowed cheap-rate offers to be separated from promotion, advertising and brand-building which aimed at the business traveller.

In the aspect of Airline Marketing, the question of the Trade Cycle has to be brought into conversations about brand positioning. People’s feelings about spending money lean to be very dissimilar in the times of up-swing of the Cycle as compared with times of recession or slowdown. In successful times, spending in an extravagant, prominent way may be commonplace which will not be seen during the time of recession. Few poorly-positioned brands have brand values that are appropriate for up-swing times, but leave the brand poorly exposed when things get tougher. For instance, some of the car and jewellery brands which suffered during the recession of the early 1990s, and are did so again in the early years of the new century.

The major question of the analysis of the market gap is a vital in successful brand positioning. The fundamental nature of a brand is that it is recognised as being distinctive and different from the offerings of opponent suppliers. Thus, such an opinion is not likely if clients believe that all characteristics of competing products are same. Thus, in positioning brands, companies need make a research into the ways in which opponents are perceived, and to position their brand in such a manner that it is emphasised on those parts where they are seen as strong and their opponents weak. One can presume that this was the perception behind the brand positioning which was adopted by the airline Lauda Air when it was established by the former racing driver Nikki Lauda.

Lauda positioned itself as a light-hearted “fun” brand, in strong contrast to the instead of building a stolid picture of its major opponent Austrian Airlines. A concluding factor to be thought in the proper brand positioning may be that of the national interest. This will be of obvious significant to a state-owned airline which might be in the requirement and need of continuing monetary support from the taxpayers. Even though for privately-owned airlines, some can successfully operate successfully and manage without quantifying its favourable support from governments. However, this may be required in such locations in the granting of international route rights, or in favourable access to capability at a congested airport. Branding messages may be very helpful when the airline is behaving patriotically, or offering substantial advantages to the national economy.

Whatsoever criteria are applied, the appropriate positioning of an airline brand will be a difficult and demanding procedure. It is definitely a procedure which should be based on analysis and proper research instead of guesswork and hunch.

10.5.3 Brand-building Process One of the utmost fallacies is that brand-building is an easy task, and that it gives a cheap and speedy panacea for a company’s problems. Once agreement has been

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Distribution and Promotionreached on the values which will position the brand, it is important that the procedure must make. It focuses on the promises delivery which is implicit in its positioning.

This vital requirement is mainly with the question of values of Tangible brand. It will be a brand-building failure if an airline has a critical accident, or, worse sequence of such accidents. Punctuality is also a good example. With product limitations in aspect of Tangible brand values, it should be kept in mind that their effect will not be an impartial. An airline which has a bad record of punctuality will always disaffect its clients every time a flight is late. The effect on client opinions of the airline will be especially severe if the carrier has been attempting to get across a branding message with a media advertising campaign which is based on a slogan like “Europe’s most punctual airline”.

With Psychological brand values, delivery, or the failure to do so, may be more understated, but still essential in the brand building. For instance, an airline might select a positioning based on the scheme that it is a “Winner” – a successful firm with which successful people will want to be linked. Then, it would be a major fault to get into a deal of sponsorship with an unsuccessful football team that lost every game it played. Once an airline is confident that it can convey on the values which will position its brand, it can then move further to the next phase of brand-building, that of marketing communication. At some point, it should lay emphasis on almost all marketing communication which can play a vital role in brand-building, and also that very significant spending will almost surely be essential if a powerful brand is to be sustained and built.

Advertising through media must be developed that includes messages which reflect steady, underlying brand values, as will any marketing activity of which is carried out by the airlines. Sponsorship policy can be particularly the most powerful element of brand-building, but it must be used in the proper manner. If it does not then it will have a negative impact instead of a positive impact on a brand. A crucial and concluding element of an airline’s marketing communications and interactions activity will be that of media relations. The airline industry is considered as mainly high profile by media editors and owners. Bad news will frequently be played up, and will have a possibly devastating impact on an airline’s brand if media attacks are survived on a long-term basis.

Positive stories will have a powerfully useful outcome, and the maintenance of strong relations with the media will be of great importance in getting the coverage to assist long-term brand building. A last point about brand-building is that strong brands are hardly ever built rapidly although they can be destroyed very fast. It is of crucial significance that companies accept a stick-with-it principle of emphasising strong, core brand values on a very long-term basis.

Here only one has to look at the power attained by the Marlboro brand, where the core values have been not changed now for nearly 40 years to see the truth of this statement. In the airline industry, Singapore Airlines provides an equally excellent picture of the importance of stability in successful development of the brand.

10.6 RELATIONSHIP MARKETING AND COMPONENTS OF MARKETING STRATEGIES The term relationship marketing was first coined in America in the early 1980s. Although it has no single, agreed meaning, most definitions have common factors defined in the dictionary of marketing terms of American Marketing Association (1995), “Relationship Marketing is marketing with the conscious aim to develop and manage a long-term and/or trusting relationship with customers, distributors, suppliers, or other parties in the marketing environment”.


The building and management of relationship with customers has always been a key approach to marketing practices and some companies habitually market on a relationship basis without consciously calling it that. However, use of the term relationship marketing suggests that deliberate efforts are being made to retain customers, provide effective communication with them and use different approaches to marketing that are:

Based on development of two way communication between suppliers and customers.

Affordable by technology.

Usually guided by highly technical analysis of customer purchasing and profitability.

The building of a good personal relationship with the customer is usually integral to small business management and the example of the owner of a small corner shop is often used to illustrate the essence of relationship marketing. The small shopkeeper has direct knowledge of all regular customers and becomes familiar with their needs and their likes and dislikes. This enables the shopkeeper to provide services tailored to individual needs, planned on the basis of known customer requirements. Over time, a bond of loyalty is likely to develop between shopkeeper and regular customer.

10.6.1 Why Relationship Marketing? Because of the deregulation policies of the government and competition because of internationalization, many industries have faced far reaching effects on the competitive environment like:

The ability to replicate physical products at lower and lower costs has facilitated price undercutting by domestic and international competitors. This encouraged many manufacturers to augment their physical products with services in order to compete and even to survive. Many large firms have been transformed from predominantly manufacturing organizations into predominantly service organizations by bundling services with products.

The need to keep existing customers became a priority in the face of intense competition and the higher comparative marketing costs of acquiring new customers.

Increased competition and deregulation in many service-dominated industries has resulted in emphasis on service quality as a means of achieving a competitive advantage.

Definition of Relationship Marketing

Pathmarajah (1993) has defined relationship marketing as “the process whereby the seller and the buyer join in a strong personal, professional and mutually profitable relationship over time”.

Relationship marketing is characterized as having the following properties:

Effective

Efficient

Enjoyable

Enthusiastic

Ethical

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Distribution and PromotionCompanies which are genuinely committed to the 5 Es are far less common than one may expect, but those who are aim to:

Offer the most value, personally and professionally.

Become a unique source in helping the buyer build something better, e.g. better peace of mind.

Become a partner with the buyer in his or her objective and establish a long-term trusting relationship with the buyer.

10.6.2 Components of Marketing Strategies Marketing is the process that comprises planning and execution. It also involves the conception, pricing, promotion, and distribution of ideas, goods, and services. A marketing strategy is comprises of different co-related elements which are termed as marketing mix: The Marketing mix comprises answers to a sequence and series of product and customer related queries concerning the following:

Marketing Mix

1. Market selection

(a) Who are the customers or subset (segment) of customers you are targeting?

2. Product planning

(a) What products are the company going to design or OEM for the selected customers?

(b) What are the product features that are uniquely targeting this market?

(c) How will the product be packaged?

3. Pricing

(a) Whether pricing is a quantitative expression of the value of the product to the customer.

(b) Whether pricing should be designed like a feature consistent with the use of the product.

(c) What will you charge for and how much?

(d) How will the customer pay and when?

Price/features Matrix

1. Place

(a) Which channel, direct, wholesale or retail channels best moves and delivers the product and its benefits to the selected market?

2. Promotion

(a) Positioning: What is the message that states the purpose and benefits of the product in the market and how it competes?

(b) Selling: Direct or indirect through others.

(c) Communications: How will people be informed about your product, showing them how it can be useful, and persuading them to buy it?

(d) Branding: What role should branding play?

(e) Support and Service: How does the customer get help if needed to make the product work and replacing or repairing it when it’s broken?


Decision Making Unit and the Decision Making Process

The actual selling process breaks down into two components called the decision making unit (DMU) and the decision making process (DMP).

Decision Making Unit (DMU)

The DMU consists of all of the people who will play a role in the decision to buy a product. The marketing mix program must understand the requirements of each of these people and search a mode to communicate the marketing message to each of them. These people are typically recognized as:

Buyer: The person who actually issues the check. (For example the buying agent, or the individual consumer).

Decider: The person or group that actually says this is the product we want, i.e. the MIS manager.

Influencer: Who helps the decider decide, i.e. the press, analysts, peers, evaluation groups.

User: The individual or group who actually utilise the product and derives advantages from it.

Decision Making Process (DMP)

The people involved in the Decision Making Unit (DMU) interact to make the buying decision.

The DMP is a detail of this interaction. By understanding this process a salesperson can most appropriately get who, how, and when to work on receiving the customer order.

For instance:

A company has decided to pick a workstation standard

The engineering VP will make the decision.

Since the standard affects all software engineers within the company, an evaluation team is made to frame the recommendation.

The evaluation team hires a consultant to research alternatives. The consultant has great influence due to his strong technical background.

Latest magazine articles are also reviewed.

After a few months, the evaluation team makes a recommendation and the VP R&D decides to accept it and go ahead.

The buying manager is asked to negotiate the best deal.

The salesperson for the winning workstation company was on top of and influenced every person at every stage of the decision making process.

10.7 FREQUENT FLYER PROGRAMME A frequent-flyer program (FFP) is a loyalty program provided by several airlines. Normally, airline customers registered in the program amass frequent-flyer miles (kilometres, points, segments) agreeing to the distance moved on that airline or its partners. There are many different ways to accrue miles. In latest years, more miles were presented for utilising co-branded credit and debit cards than for air travel. Acquired miles can be redeemed for air travel, other goods or services, or for increased benefits, such as travel class upgrades, airport lounge access, or priority bookings.

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Distribution and PromotionThe very first modern frequent-flyer program was created in 1972 by Western Direct Marketing, for United Airlines. It gave plaques and promotional materials to members. In 1979 Texas International Airlines created the first frequent-flyer program that utilised mileage tracking to give 'rewards' to its passengers, while in 1980 Western Airlines created its Travel Bank, which ultimately became part of Delta Air Lines' program upon their merger in 1987. American Airlines' Advantage program was launched in 1981 as a modification of a never-realized concept from 1979 that would have given special fares to frequent customers. It was quickly followed later that year by programs from United Airlines (Mileage Plus) and Delta Air Lines (SkyMiles), and in 1982 from British Airways (Executive Club).

Since then, frequent-flyer programs have grown extremely. As of January 2005, a total of 14 trillion frequent-flyer miles had been accrued by people worldwide, which resembles to a total value of 700 billion US dollars.

10.8 ANATOMY OF SALE AND PLANNING Sales and planning involves more than just explaining that a treatment works or that it is a safe and cost-effective choice. Sales planning is a key skill that all salespeople need to master.

Business today runs at the speed of information. Companies dearth good visibility into their markets and supply chains, causing executives to ascent to adjust to rapidly changing conditions, but they can't analyse their options precisely enough or fast enough. Many firms have applied Lean principles to their global supply chains and now find that they are so "Lean" that they are brittle, and cannot react to changes in the marketplace. The influences of these challenges to a company's supply chain are:

High inventory with an increasing percentage of obsolete items

Increased manufacturing costs from shortages and "bullwhip" changes

Increased expediting and higher logistics costs

Poor customer service levels and lost revenue opportunities

10.9 MARKETING COMMUNICATION TECHNIQUE Marketing communication techniques are what most people think of as marketing. It's only a part of marketing. There are more then 50 different forms of marketing communications techniques, generally grouped into these categories:

Advertising is well-known by the truth that you pay the media for space on their pages or time in their broadcasts, in return for having pretty much full control over your message. The best advertising focuses on one product or service, and creates a convincing message to buy it now. Big companies like Tyco, GE and BASF often do what is called image advertising. They have so many products and services, often sold under different brand names that people can lose sight of the fact that one company is making them, and investing in their stock is a good idea.

Small businesses are not expected to make mistake. Create a demand for a specific product or service, and promote its profits (how it can assist the customer) instead of its features (size, weight, horsepower etc.). People want advantages as they are searching to satisfy a requirement, and the best ads say, "You got this need? Here's the answer to it." Local newspapers, radio and TV stations will often produce your ad or commercial for little or no money, but they usually won't provide the creative guidance and support that a marketing or advertising agency like Lawrimore will. Public relations is distinct from advertising as you do NOT pay the media for their space or time, but in return you do not have full control over the message. Public relations is probably the most under-utilized, high-value form of promotion there is. It


takes skill to write a news story that will interest busy news reporters or editors in publishing it, so hiring a PR firm can be an excellent investment. Many smaller marketing and PR agencies like Lawrimore can provide PR services inexpensively for small businesses. Keep in mind that the media are looking primarily for NEWS. This means you have to provide them with something NEW and interesting. This might include a new product or service, a new personnel hire, or an exciting story about how your product or service support a customer to solve a problem. These "application stories" are primarily demanding to the thousands of trade magazines, typically published monthly, and often it can be easier getting publicity in a national publication than a local one, depending on how broad or focused the interest is. Personal selling is vital to get customers to give you their money. This is what happens between you or a representative of your business, and the customer or client, when it comes time to agree that they will pay you X dollars for a specific product or service. For some small business people this comes naturally, and for others it is difficult. What is key is to listen closely to what your customer says they want, ask clarifying questions to be sure you understand their need, then explain how a specific product or service you offer will meet that need very well. Many people make the mistake of thinking that selling is just talking and "closing" till the customer reaches for his or her wallet. But it is a big no! Show that you care genuinely about their needs, take time to understand, and then respond in a way that shows you understand. Of course in a fast-food restaurant, this might be overkill, but in the vast majority of small businesses, it will pay handsome dividends. Promotions include special events, sales, themes and other short-term "pushes" to acquire additional customer interest in buying. Promotions are distinct to personal selling as it is a company-wide attempt that usually comprises multiple forms of communication. An after-Christmas sale, a grand opening event, or a special bundle of products/services available at a discount price, are all examples of promotions that can drive higher revenues. Generally promotions are counter-cyclical. That means that they are held at times when sales are usually low, such as January or July, depending on your type of business (if you sell snow skis, January might be peak). Plan your promotions to give your sales a boost, and provide them a good advertising push, for best results. Of course be sure that what you are offering (product and price) are what customers want, and not just clearing out non-desired merchandise. Internet marketing is technically a state of both advertising and public relations, as often you are paying for the media and controlling the message, and often you are communicating to the public at no charge. Internet marketing is more important as more and more people shop online or start their search for a supplier of products and services online. Latest surveys reveal that about 85% of potential buyers like to check out a company online prior to they buy from them.

10.10 AIRLINE ADVERTISING It has a very high profile and is the most noticeable of all the promotional tools. So in order to be effective and efficient, it must reach the target market of airline and lay emphasis on their needs, requirements and wants. It thus creates awareness of the airline as well as draws the customer's attention to it. It is essential to understand that the decisions which are linked directly with the airline's overall marketing tactics and strategy plans. It must:

inform the customer about new or improved product features and new routes being served.

remind the customer of existing product features and its routes served. be successful in reaching the airline's target markets.

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Distribution and PromotionCaselet: Airport Advertising

very year, millions of people travel through the Cincinnati/Northern Kentucky International Airport (CVG), creating a captive audience in need of services, entertainment and direction. Corey Airport Services, the airport’s advertising

concessionaire, realized that the facility’s traditional static signage was losing its effectiveness and they needed a better way to reach visitors in crucial areas of the two-million-square-foot facility.

CVG occupies more than 7000 acres and handles more than 16 million travellers annually. The airport has two active terminals and three concourses, four runways and operates an average of 425 flights daily. It is currently ranked #1 in the U.S. for on-time arrivals, and the International Air Transportation Association has named it the #1 airport in the U.S. and #10 in the world.

The Challenge

The challenge for CVG lay in transferring the airport’s traditional static signage to innovative digital signage displayed through large LCD video wall clusters. While posters may pose less of a hassle to construct, they lack the pizzazz and flair necessary to attract passing travellers and convey a message. Not only did stationary advertisements come across as uninteresting, they ere difficult to update, which is essential in such a time-sensitive atmosphere. Corey Airport Services needed the flexibility to update information more quickly, not only for advertising usage, but in cases of emergency.

Important areas where signage would have high visibility and recognition needed to be determined. The transportation mall, where two underground trains connect concourses to terminals, became a key area for development. Other important areas of interest for new digital signage were airline gate hold rooms and escalator passages. After determining the installation areas, the final challenge of suspending several large LCD clusters presented itself to planners. Installing the signage 30 feet above long escalators would be difficult, but Corey Airport Services representatives and Alpine Systems technicians knew working with NEC would make the airport more engaging and give CVG a signage makeover.

Corey Airport Services has been in the airport advertising business since 2001 and is a division of U.S. Enterprises, Inc., headquartered in Atlanta. For the past 25 years, U.S. Enterprises, Inc. has been engaged in the operation and management of large-scale advertising display programs. The company has served thousands of advertisers, utilizing all types of out-of-home displays, including airport and stadium advertising, mobile billboards, broadcast media and interstate/highway billboards.

Alpine Systems, the integrator of this digital signage project, provides public information display systems for transportation, airport, conference, parking and point-of-sale applications. The company excels in providing custom software solutions with exceptional user interfaces.

The Solution

Nearly 50 of NEC´s 46" MultiSync LCD4620 displays were used to create video wall configurations in seven key areas of the airport, including airline gate hold rooms, escalator passages and the transportation mall. Display clusters include two 3x5 arrangements, four 2x2 arrangements and a single 57" display in a high passenger traffic area. When put together, the displays provide advertisers a lot of space with which to work.

Not only has the digital signage created new advertising opportunities, it has allowed for new and engaging city welcome messages, public address announcements and urgent emergency messages, all of which were impossible with static signage. Corey Airport Services will soon have the flexibility to change and update content with the click of a mouse, creating opportunities for month-long features.

"Corey Airport Services brought in some innovative ideas on how we could improve the airport’s advertising revenue," said Dave Kellerman, retail manager for the airport. "The versatility of NEC’s LCD displays lets advertisers segment their ads and

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Contd…


choose when and where they want their ads to run. The images look incredible, and we’ve been thrilled with the performance so far."

"We think these displays raise the bar in terms of what airport advertisers can do with their creative message," said Steve Moody of Corey Airport Services. "The NEC LCD4620 displays are commercial-grade and made specifically for digital signage purposes and displaying high-quality graphic design, so advertisers can now create dynamic animations that have a greater impact on the travelling public."

The first three advertisers to take advantage of the new setup are Christ Hospital, University of Cincinnati and Rusty McClure, co-author of the best-selling book Crosley. The new signage has allowed Christ Hospital to inform travellers of its eight-year run as one of "America’s Best Hospitals" by U.S. News & World Report. The displays have allowed McClure to target the holiday season for his advertising, and he will be utilizing digital signage to let passengers know his book is available for sale at select news, gift and book store locations throughout the airport.

"Businesses advertising with us are now able to make more detailed ads and make decisions that will drive their revenue, which in turn is beneficial for CVG," said Kellerman. "The decision to add digital signage has been valuable for the airport’s business, and the use of video walls brings something unique to our spaces while maintaining a constructive purpose."

Source: http://www.nec-display.com/ap/case/corey/index.html

10.11 AIR FREIGHT MARKET Air freight markets are initiating to present signs of changed growth. Global freight tonne kilometres were up 1.2% in July year-on-year, slightly much better than the 0.9% growth in June. There was a solid 0.5% raise in air freight volumes in July compared to June.

The rise in global FTKs over the month adds to the likelihood that the market might break out of the stagnation of the past 18 months. The first chart below shows there have been modest monthly increases in air freight volumes since April. As a result, global FTK volumes in July are the highest they have been since mid-2011.

However, the factors supporting the current improvement in air freight volumes remain shaky. European airlines contributed to the rise in global FTKs in July, for the second consecutive month. European airline FTKs were up 1.5% in July year-on-year, and 0.3% in July compared to June. Recent economic indicators have been positive for the region, leading to the end of the Eurozone’s 18 month-long recession in Q2. But recovery has been patchy and question marks remain over the Eurozone’s ability to sustain growth.

Moreover, airlines in Asia Pacific, the key manufacturing centre, have not seen any improvement in air freight demand. Airlines in this region experienced yet another contraction in FTKs in July on a year ago, down 1.4%, with no expansion over the previous month either. The regional demand environment is offering little support to air freight markets, with the latest trade data showing a significant fall in emerging Asia trade volumes.

Air freight load factors have stabilized on the back of the modest improvements in demand. Even so, capacity continues to increase which is keeping load factors at low levels. Middle Eastern and Latin American carriers experienced a rise in freight load factors in July compared to a year ago.

The outlook for air freight markets is cautiously positive. There have been slight improvements in global business confidence and a pickup in export orders which should support a modest expansion of trade volumes in months to come. However, positive developments in Europe and the US have yet to translate into

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Distribution and Promotiongrowing demand for Asian manufactured goods, which will be an important determinant of air freight growth in the second half of the year.

Figure 10.1: Outlook for Air Freight Markets

Air freight markets have sustained the improvement in volumes seen at the end of Q2 with another rise in global FTKs in July. Air freight markets were up 1.2% in July year-on-year, slightly better than the 0.9% growth in June. The July result is also an improvement on year-to-date growth of 0.2%.

Seasonally adjusted global FTKs show a 0.5% increase in July compared to June, which continues a sequence of modest increases since the start of Q2. Currently, global FTK volumes are the highest they have been since mid-2011. But at this stage, the outlook for air freight markets is tentatively positive as the factors supporting the current improvement in air freight volumes remain shaky.

European airlines were one of two regions to contribute to the rise in global FTKs in July compared to June, with a 0.3% expansion over the month. European airline FTKs were also up 1.5% in July year-on-year. Recent economic indicators have been positive for the region, leading to the end of the Eurozone’s 18 month-long recession in Q2. There was also a recent uptick in trade volumes and a slight


improvement in the Eurozone’s new export orders index, led by Germany. But with question marks over the Eurozone’s ability to sustain growth, the regional outlook remains cautiously optimistic. There is significant variation in economic performance within the region – Portugal, Germany and France led the Eurozone Q2 GDP expansion, while Italy, Spain and the Netherlands showed continued contraction. Furthermore, although France recorded a surprisingly strong GDP growth result in Q2, Markit’s measures of manufacturing and service sector activity continue to show weakness (contraction) and consumer confidence remains at close to all-time lows, all of which raise doubts over growth prospects in H2.

Airlines in Asia Pacific, the key manufacturing centre, have not seen any improvement in air freight demand. Airlines in this region experienced yet another contraction in FTKs in July on a year ago, down 1.4%, with no expansion over the month either. So far this year, Asia Pacific airlines have seen air freight contract 2.1%, the largest fall among regions. Chinese business activity remains sluggish, with Markit/HSBC Purchasing Managers Indices for manufacturing and export orders continuing to show weakness. But the weakness is actually more widespread within the region, with emerging Asia trade volumes shrinking almost 5% in the first half of the year.

Middle East was the other region to contribute to the rise in global FTKs in July compared to June, with strong expansion of 2.1% over the month. Carriers in the Middle East also recorded a significant 14.5% increase in July year-on-year, an improvement on the 12.7% growth result June. Part of the rise in year-on-year growth rates in July is a result of the timing of Ramadan, which took place mostly in July 2013, while in 2012 a bulk of the holiday spanned August. Ramadan typically gives a boost to air freight demand for Middle Eastern carriers, as air transport of perishable foods and gift parcels increases to/from the region. But even after adjusting for the impacts of the holiday, the month-on-month expansion (mentioned above) confirms the continuation of a strong growth trend for Middle Eastern carriers.

Airlines in other emerging regions experienced mixed results. Air freight carried by Latin American carriers was up 3.1% in July compared to a year ago, (broadly in line with performance year-to-date, which shows expansion of 3.4%. Trade volumes in particular exports in Latin America have shown strong growth momentum over recent months. This growth momentum is providing a sound foundation for expansion in air freight demand. African airlines, by contrast, experienced a 4.9% contraction in July year-on-year. And over the month, there was a significant fall in volumes of 5.0%, which has caused the growth trend in air freight to show signs of weakness. Despite a relatively supportive demand environment – with trade volumes continuing to rise and economic growth in several local economies tracking at the fastest rates globally – airlines in the region continue to face intense competition.

Airlines in North America experienced another month of weak demand for air freight. FTKs fell 1.1% in July compared to a year ago, contributing to a 1.7% contraction year-to-date. There was deterioration over the month, with a 0.4% contraction in July compared to June, but the month-on-month growth rates for this region have been particularly volatile so it is difficult to know whether the deterioration will continue. Furthermore, latest indicators suggest a more supportive demand environment, with the US economy showing signs of improvement as July business confidence reaches levels not seen since March. Moreover, new export orders rebounded in July compared to June, re-entering expansion territory and suggesting better condition for trade activity ahead.

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Distribution and Promotion The outlook for air freight markets is cautiously positive. On the positive side, the

flatline in global business confidence seen throughout most of H1 appears to be coming to an end with recent small improvements in manufacturing activity recorded in July. Moreover, there was an uptick in export orders at the start of Q3, as shown in the adjacent chart, which is a positive signal for both trade growth and air freight demand in months to come. However, positive developments in Europe and the US which are driving the improved global picture have yet to translate into demand for Asian manufactured good, which will be an important determinant of air freight growth in the second half of the year.

Figure 10.2: Growth of Air FRKs and New Export Orders Index

10.12 FUTURE OF AIRLINE MARKET Many trends have alleviated the industry in recent years. First, the airlines finally realized that they required to be attentive for putting capacity and the only way to grow without dying is to associate. This has kept airlines from expanding too speedily and touched off the recent wave of mergers. Second, the airlines have reckoned out that adding fees for earlier complimentary facilities such as baggage or food can boost their bottom line. While passengers have met negatively, they are gradually receiving used to this new normal. Finally, barriers to entry have speeded up as lenders have started to realize that a new airline is not a great investment. For years this real fact was overviewed in part due to the glamour and prestige involved in owning an airline. But the bottom line seems to have met with investors and the number of new entrants has reduced vividly.

This period of relative stability has been positive for the industry, but what about its customers? Customers like to complain about the airlines, especially their new fees for baggage and better seats, but the fact is that the commercial aviation system in this country remains amazingly effective and affordable. Congestion is down as airports aren’t flooded with capacity by carriers looking to acquire market share. More flights are full, which may be difficult for passengers but is also a sign of a more stable industry. Of course, people would always prefer to move to lower fares and empty planes, but that dream—along with free lunches, sunshine, and lollipops—may be impractical.

US Airways merger will observe in higher fares for consumers. We should not be finding our national transportation policies through legal means – that should be a last resort. The high fixed costs and potential for aggressive competition that plagued the industry prior to deregulation still plagues it today, and consumers could face monopolistic pricing if obstacles to entry become too much and alliance continues. The only things keeping the industry in check are the airlines themselves.


10.12.1 Growing Indian Market India is a big nation, a land of great diversity. Geographically, culturally, and socially, the sub-continent swings from one end of the scale to the other. Its aviation sector doesn’t blame the trend.

The potential is vast. The market already has some 150 million travellers passing through its airports, and if Indians start to move with the same frequency as Americans, then the years ahead could observe the market boom beyond the two billion mark. This will not happen rapidly and is dependent on an expected rise in per capita GDP. Even so, by 2020 traffic at Indian airports is expected to reach 450 million, making it the third-largest aviation market in the world. Some 90 million passengers per annum (mppa) are projected to pass through Delhi alone.

At the same time, a multifaceted crisis has taken hold of the industry that threatens to nip any progress in the bud. Air India and Kingfisher Airlines, for example, are in critical condition. Airline losses approached $2 billion in the year ending March 2012—on the back of a $3.5 billion loss over the previous three years. The Centre for Asia-Pacific Aviation (CAPA) believes Indian airlines’ debt burden will soon reach $20 billion. Indian banks and financial institutions are exposed to about half of this amount.

Indian domestic traffic fell 1.1% in July compared with a year ago. After expanding at 20%-plus rates through 2010 and early 2011, the Indian market stopped growing at the end of 2011. July capacity rose 2.1%, roping the load factor from 71.8% last year to 69.6%.

At least the crisis has pushed aviation to the forefront of national thinking. But current aviation policy has a fragmentary approach that is not connecting the dots in the value chain. Airports and fuel are getting more expensive even as airlines struggle.

A coordinated “India Inc.” approach that addresses the central challenges of infrastructure, costs, and taxes is urgently required.

A Different Picture

In terms of airport infrastructure, India has got a great deal right in previous years. The Public-Private Partnerships (PPP) model has delivered world-class facilities at Hyderabad, Cochin and Bangalore. And the benefits of these developments are clear to see. Bangalore’s international services have more than doubled over the past decade, for example, enabling India’s “Silicon Valley” to earn contracts throughout the world.

“In India, the PPP model for developing greenfield airports as well as upgrading existing airports has provided the opportunity to develop integrated airport cities on the lines of Dubai and Hong Kong,” says Promananda Elangbam, Manager of Marketing at Bangalore International Airport Ltd. “A holistic approach to airport infrastructure and its management is the need of the hour. Done in a transparent and effective manner, this can help boost international trade and tourism considerably.”

But at Mumbai a different picture emerges. A delayed new terminal that will push capacity to 40 mppa should finally open for business at the end of 2013. Traffic growth is such, however, that the airport will become congested again by 2017. And there is no possibility of significant further expansion at this facility.

Mumbai is India’s financial capital and an important part of the country’s economic wellbeing. A jam-packed airport will undoubtedly curtail the many benefits of healthy air connectivity.

Prime Minister Manmohan Singh has recognized the urgency of the situation and backed the Navi Mumbai airport project that dates back to the mid-90s. Even fast-tracking the development may not be enough, though. Projections suggest there will

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Distribution and Promotionbe nearly 275 million passengers in the Indian system by 2017, the majority of whom filter through Mumbai and Delhi.

Tax Increase

India is becoming increasingly expensive. Taxes are everywhere in India’s aviation sector, a clear indication that the government views the sector as a revenue source rather than a revenue generator. Including taxes on domestic fuel, India’s aviation sector contributes in the region of $2.15 billion (INR120 billion) in taxes annually according to an Oxford Economics India Benefits of Aviation study.

In contravention of International Civil Aviation Organization (ICAO) policy, India’s Ministry of Finance has put a service tax on tickets as well as landing and navigation charges. Fuel taxes—an excise duty of 8.2% and domestic charges that can add up to 30% to the bill—mean fuel is 45% of Indian carriers’ operating costs. This compares unfavourably with the global average of 33%.

“For the industry to recover from its current travails and achieve long-term sustainable growth, there is a need to address problems created by high input costs,” says Goyal.

It is little wonder that the sub-continent’s airlines are struggling. The difficulties being faced by Air India and Kingfisher Airlines in particular have been well documented. Aside from the structural issues, industry observers have cited Air India’s artificially low fares as the main factor behind the struggles of Indian carriers. It is reported that the average Indian ticket price of $95 is about $11 shy of a break-even figure. A weak rupee isn’t helping and has caused further cost increases in dollar-denominated expenses.

The contraction by Air India and Kingfisher Airlines does have a slight upside. CAPA reports yield increases for Indian airlines in the region of 10% in the fourth quarter of the 2011-12 financial year, improving toward 15% in the first quarter of 2012-13.

And capacity management will remain tight. Approximately 24 aircraft are due to be delivered in the next 12 months, eight of which will be Bombardier Q400s. This will lead to an increase in domestic capacity of 7% to 8%, only half of the increase seen in the previous financial year. India’s carriers are not part of the global alliance scene and there has been little enthusiasm to revamp a number of bilateral agreements. Emirates—one of the few carriers looking to increase its presence on the sub-continent—has exhausted its entitlements, for example. The government may be loosening the shackles slightly. In March 2012, then Finance Minister Pranab Mukherjee said the government would allow foreign airlines to take up to a 49% investment in Indian carriers. Closer ties with international airlines could make a crucial difference, although there has been little enthusiasm to date. For many, though, it is putting the cart before the horse, as investment won’t be forthcoming while the fundamental aviation framework is so weak. “India is an attractive destination for us to serve, but I am not sure if India will be an attractive destination for us to invest in,” Willie Walsh, Chief Executive of International Airlines Group has noted. Other challenges loom on the horizon. The policy on ground handling needs to be resolved. Airlines have argued against the government proposal to limit airports to a maximum of three competing handlers and no final decision has yet been made. It is also expected that much-needed investment in air traffic management could translate into higher fees. It is estimated that Indian aviation will need about 350,000 new employees to facilitate growth in the next decade. Shortfalls in skilled labour would see staff salaries rise above inflation, adding further cost pressure. Robust training programs


will be the key to a sustainable future, especially considering that India will probably continue to provide a significant workforce for Gulf carriers.

Numbers in the Wings If India can resolve the crisis, the economic and social benefits that derive from improved competitiveness and air connectivity would be enormous. Already, the aviation industry supports close to 0.5% of Indian GDP and some 1.7 million high-productivity jobs. The annual value added by each employee in air transport services in India is approximately 10 times higher than the Indian average. Tourism is an obvious area of improvement. The Indian Tourism Ministry is targeting 10 million tourists by 2017, nearly double the 5.7 million arrivals expected in 2012. Foreign visitors—around 89% of which arrive by air—contribute $9.8 billion (INR548 billion) every year. Stronger air services would make a notable difference, not only to the tourism sector, but also to the bottom line of the Indian economy. Indian exports could also acquire substantially from a more competitive and cost-efficient air transport sector. The Commerce Ministry wants to double India’s exports to $500 billion by 2013-14 compared with the 2010-11 level. The Indian government must utilize the determination it has shown in fighting the European Emissions Trading Scheme to put its aviation sector back on track. “The world is focused on Indian aviation—from manufacturers, tourism boards, airlines, global businesses to individual travellers, shippers and businessmen,” notes Tyler. “If we can find common purpose among all stakeholders in Indian aviation, a bright future is at hand. The benefits of such an effort will be shared across the entire economy.” The optimism is echoed by Jet Airways’ Goyal. “In an emerging economy like India where the need for connectivity is critical to facilitate the growth of trade and travel, one can only be optimistic about the future.”

10.12.2 Action Plan for India A Knowledge Paper on India: The Emerging Aviation Hub by the Federation of Indian Chambers of Commerce and Industry in collaboration with KPMG released in March 2012 suggested the following eight-point action plan for Indian aviation:

Ensure collaboration between the Ministry of Civil Aviation, other related ministries, regulators, and the industry.

Promote other sectors that can both support and benefit the aviation sector.

Reduce fuel sales tax. The long-term benefits in terms of higher economic activity and employment generation would more than compensate for the notional loss of tax revenue in the short run.

Create an Essential Air Services Fund (EASF) to support air connectivity to second and third-tier airports. Greater private sector investment in airports should also be encouraged.

Implement recent policy decisions such as the 49% Foreign Direct Investment limit, and establish safeguards to prevent excessive and predatory ticket pricing.

Establish an Air Cargo Promotion Board (ACPB) to address the significant challenges in the air cargo sector and make India an air cargo hub for the region.

Promote the domestic Maintenance, Repair and Overhaul industry by removing the anomalous tax structure and providing a “deemed export” status to help prevent business moving abroad.

Establish a world-class National Aviation University and promote private sector investments in training academies to produce highly-skilled human resources.

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Distribution and PromotionCheck Your Progress 2

State whether the following statements are true or false: 1. Brands are different from products in a way that brands are “what the

consumers buy”, while products are “what concern/companies make”. 2. Brand is an accumulation of emotional and functional associations. 3. Brand is a promise that the product will not perform as per customer’s

expectations. 4. The term relationship marketing was first coined in America in the early

1980s. 5. Air freight markets are starting to show signs of renewed growth.

Case Study: Digital Signs used for Airport Advertising C Decaux Momentum Shanghai Airport Advertising Company Ltd., a joint-venture company affiliated with outdoor-advertising giant JCDecaux, wanted to deploy a network of digital displays throughout Pudong International Airport and

Hongqiao International Airport, both located in Shanghai. The company’s goal was to sell advertising time on the displays, which would be located in high-traffic areas.

Pudong International Airport handles an average of 400 aircraft movements per day, accounting for 60 per cent of Shanghai’s air travel. Hongqiao handles 300 aircraft movements per day.

A welcome diversion for travellers walking through the airport, digital signage also can help boost revenue.

Yael Elstein, vice president of marketing for C-nario, which offers software-based digital signage solutions, said the time was ripe for the airports to invest in a visually dynamic media.

“There is a trend today of airports implementing digital signage—not only for advertisements and messaging, but also for creating a customer experience,” she said. “Today, when airports are so huge and the walkways are hundreds of meters long, it’s important to have something in between to entertain and attract passengers’ attention.”

Not only would the displays be used as advertising platforms, but they also would serve as a means for airport authorities to communicate to travellers.

“They use the system—especially in the domestic airport—for public announcements,” said Eyal Vardi, sales director of the Asia Pacific region for

J

Contd…


C-nario. “The airport authority, from time to time, asks passengers not to bring sharp objects, liquids, etc. They can utilize part of the network to distribute this type of public messaging.”

The Challenge

C-nario was charged with creating a solution that could drive more than 200 displays. Some of those displays would be placed in four video walls, one of which would consist of 64 synchronized, 40-inch high-definition screens. The remaining video walls would boast nine 40-inch screens each, also synchronized with high-definition content. Among the 200 displays were Mobilier Urbain Pour Information (Urban Furniture for Information), or MUPI, a type of advertising display about two square meters in size.

In addition, content had to move from one screen to another, which might be positioned several meters away. The content could not “jump” instantaneously. Instead, the software had to take into account the desired velocity of image movement and geographical distance between screens so the image could appear on the destination screen at the appropriate time.

C-nario would only have two months to finish the project; it had to be completed before the opening of the 2008 Summer Olympics in Beijing. Not only would C-nario be required to implement the solution quickly, but it also would have to do it in a unique culture that often stresses form and regulation.

The Solution

Ke George, airport development technical director for JCDecaux Momentum Shanghai Airport Advertising Company Ltd., said he felt the software platform would be the most critical aspect of the project. If the software platform was effective, the project would be a success.

“Hardware was not the key point when we were developing it,” he said. “Same as IT, the core of this project is how to choose the right broadcasting system.

“In the beginning, our project team defined a function checklist, which included all of the requests from each related department, even potential clients,” George added. “Then we invited several vendors who are the top level in this area and prepared a demo meeting.”

C-nario impressed JCDecaux with its experience and its proprietary software platforms, so JCDecaux opted to give the Israeli company the contract.

C-nario built the system around its C-nario Messenger software, a digital signage display, distribution and management platform that provides better-than-broadcast quality playback. C-nario Messenger is characterized by its open-systems architecture, which employs plug-in technology.

“The plug-in technology saves time and gives you a lot of flexibility,” Vardi said. “If the customer decides to use the system a little bit differently, you just add a module as a plug-in, and the core system will recognize it. You don’t have to do a major change, waste time or rebuild the system.”

C-nario’s Universal Player, a proprietary playback engine, was used to process and synchronize the high-definition 1920 × 1080 display content.

“C-nario’s media player was written from the ground up,” Vardi said. “We are directly accessing the hardware of the computer. That’s the reason we had our own HD decoder software base a long time ago.”

Contd…

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Distribution and Promotion

To drive the four video walls called for by JCDecaux, C-nario Cube, the company’s video-wall-processing software, came into play.

As for the multicultural challenges of working in China, Vardi said his company, which has offices in the United States, Europe, Asia and Israel, has a history of engaging with other cultures.

“You need to know how Asia works, especially in China,” Vardi said. “You cannot show up and think that you know everything. You need to rely on your local partners — and of course, you can’t mess up.”

While in China, C-nario trained a local third-party company to provide technical support for the network. Vardi said the opportunity to combine the experience and expertise of so many unique cultures really paid off.

The Results

The project was completed in two months, well within JCDecaux’s required window, and the company recognized the benefits of digital signage almost immediately. A dynamic, programmable digital advertising medium—instead of the conventional posters that had been in place before—has increased the revenues to a great extent.

“We’re talking about better management of the property and the ability to sell more,” Vardi said. “Before, maybe they could sell to four advertisers. Now they can sell to 10.”

As far as George is concerned, the deployment was a success.

“C-nario’s software met and surpassed all the requests we needed,” he said.

Questions



Source: http://www.ycdmultimedia.com/sites/default/files/Shanghai%20Airports%20-DST%20Case%20 Study. pdf

10.13 LET US SUM UP The main objective of the Airline Industry promotion is to create an awareness of the particular product with the help of strategies which can be used to attract the sale of their product. Airline Marketing helps in adding the operational support to the efforts of new service promotion for airport airline co-operation opportunities and access to our global network of airline customers. Airlines business comprises of proper


marketing planning as well as huge investments. The schedule of airline's schedule constructed through the schedules planner. Pricing is regarded as most vital marketing function. Promotion regarded as an integral element of the airline's overall marketing strategy.

Advertising creates awareness of the airline as well as draws the customer's attention to it. Within the airline industry, sales promotions are used to give support during the launching period of a new route or service.

There are various options of distribution channel, it depends upon suitability of firm to firm which option to choose. Few firms go with the direct route and many of firms go with another. The producers of the firms who particularly use the direct route can make direct contact with the ultimate customers. Direct distribution channels give the benefit of not to pay the commissions or mark-ups to the intermediaries of distribution channel. The concept related to command over the channels of distribution is a straightforward one. In any distribution channel where agents, retailers and wholesalers are included, manufacturers must ascertain that they are in a situation to hold the benefits received by these intermediaries of distribution channel. After the establishment of the general principles, it is required now to focus in more detail at the specific issues aroused by the past general reliance on the travel agency channel of distribution in the airline industry.

Indian consumers are exploring and reserving travel using a combination of traditional travel agencies and online options, though retail agencies still manage the bulk of outbound travel bookings.

Airlines at regular time intervals released their times of arrivals and departures in brochures which were made available to tour operators. The airlines had another problem – dealing with data regarding seat availability, fares, flight schedules, and passenger bookings. The total amount of data and the rate at which it updated led the airlines to turn to computerised systems in the late 1950s.

A strong brand is a means of making people aware of what the company represents and what its offerings are. Brands simplify consumers purchase decision. Over a period of time, consumers discover the brands which satisfy their need. A brand, in short, can be defined as a seller’s promise to provide consistently a unique set of characteristics, advantages, and services to the buyers/consumers. A Brand can be defined as a situation where a customer actually perceives a significant amount of difference in the products or services of the competing suppliers. Therefore it becomes beneficial for an aviation firm to achieve “Brand” status rather than “Commodity” status where significant problems are created by commodity situation. For almost all types of brands, tangible brand differentiation holds significant importance. Indeed the problem of counterfeiting is suffered by the firms that lack tangible brand differentiation or possess them in insufficient quantities.

Brand management refers to the marketing of a certain brand or product to increase its popularity among consumers and increase market share. It differs from general marketing in that it concentrates on one trade name. Branding as a marketing strategy has seen a significant increase in interest in recent years due to a variety of factors. Strong brands add value to the product or services offered thereby allowing the branded products or services to be sold at a premium price compared with the ones who are perceived merely as commodities. In building up the strategy for a brand-building, first of all the airlines must make a decision which will be used for the development of brand.

10.14 LESSON END ACTIVITIES 1. Critically examine the different channels used by the airlines to reach the

customers along with their importance.

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Distribution and Promotion2. In building up the strategy for a brand-building, first of all the airlines must make

a decision which will be used for the development of brand. Comment.

10.15 KEYWORDS Product: A good, method, object, service, information or idea which is the final outcome of a procedure as well as serves as a need or want satisfier.

Promotion: It is an activity which is designed so as to increase sales or visibility of a product.

Place: It is a distribution channel in any business which plays a vital role in order to attract customer as well as at the same time.

Advertising: It is a form of communication for marketing as well as used to convince, persuade and encourage an audience which involves listeners, viewers or readers to take some new action.

Personal Selling: It is a face-to-face selling in which a seller attempts to convince a buyer to make a purchase of the particular product.

Sales Promotion: It is any initiative which is undertaken by a firm so as to promote an increase in sales, trial or usage of a goods or services.

Public Relations: PR is the practice of managing the flow of information between an individual or a firm and the public.

Publicity: It refers to getting media news coverage.

Distribution Channel: A distribution channel for a product is the route taken by the title to the goods as they move from the producer to the ultimate customer.

Sales Promotion: Sales-stimulation achieved through contests, demonstrations, discounts, exhibitions or trade shows, games, giveaways, point-of-sale displays and merchandising, special offers, etc.

Distribution or Place: The decisions regarding distribution channel will revolve around making the product available in sufficient quantities at the places where customers are generally anticipated to shop for them to fulfil their needs.

Distribution Channels: A unique relationship between the product and the customer in every marketing field.

Wholesalers: The firms which buy the products in bulk from a range of manufacturers on the basis of their purchasing power in order to get heavy discounts.

Retailers: Sell these goods or products to their ultimate customers.

Freight: Cargo (or freight) is goods or produce transported, generally for commercial gain, by ship or aircraft, although the term is now extended to intermodal train, van or truck. In modern times, containers are used in most long-haul cargo transport.

Travel Agent: Travel agents are professionals who provide assistance with organizing and booking travel.

Brand: It is a Name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers.

Brand Image: It can be defined as a unique brand of associations within the mind of target customers.

Brand Equity: It is a phrase used in the marketing industry which describes the value of having a well-known brand name.

Brand Management: It is the application of marketing techniques to a specific product, product line, or brand.


Brand Positioning: Brand positioning refers to target consumers’ reason to buy your brand in preference to others.

10.16 QUESTIONS FOR DISCUSSION 1. “Airline products are perishable in nature which enhances the significance of

effective distribution”. Elaborate.

2. Explain the types of distribution channels. 3. Explain the concept of “Super-Profits”. 4. Describe the travel agency distribution system. 5. Discuss the merits and demerits of travel agency distribution system. 6. Elaborate the distribution channels in present context. 7. Write about the future of distribution. 8. What are the four basic fundamental principles or concepts in marketing? 9. Elucidate the promotional mix in airline marketing strategy. 10. Elucidate the distribution channels in the air freight market. 11. What do you understand by a brand? 12. What is Brand management? 13. “Brand management includes managing the tangible and intangible characteristics

of brand”. Elucidate. 14. What is the aim of branding? 15. What do you know about the Distribution Channel Strategies? 16. State the meaning and concept of positioning brands. 17. Mention the strategies that can be employed in Brand. 18. Describe the Marketing Communication Technique. 19. What is Airline Advertising? 20. What is Air Freight Market? 21. Explain the Future of Airline Market.


CYP 1 1. Distribution Channels 2. Suitability 3. Direct 4. Risk taking 5. Deregulation

CYP 2

1. True

2. True

3. False

4. True

5. True

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Distribution and Promotion10.17 SUGGESTED READINGS Richard H. Wood, Aviation Safety Programs: A Management Hand Book, Jeppesen Sanderson Inc.





Model Question Paper

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MODEL QUESTION PAPER BBA (Annual Pattern)

Second Year

Sub: Airline and Travel Management

Time: 3 hours Total Marks: 100

Direction: There are total eight questions, each carrying 20 marks. You have to attempt any five questions.

1. Explain the developments in air transport system. Describe multi-modal Transportation.

2. Discuss traditional and extended marketing mix for services.

3. Describe Michel Porter’s Five Factors and their Application to Airlines.

OR

Explain the different ways to control Product Quality.

4. Explain the contents of travel information manual. Discuss its need and importance.

5. “OAG is best known for its airline schedules database which holds future and historical flight details”. Comment.

6. Describe Airport organization and associations, explain Air traffic zones and different approach areas.

OR

Who are Ultimate consumers? Explain the significance of Airline decisions.

7. Discuss the application of Uniform and Differential Pricing in aviation industry.

8. “Airline products are perishable in nature which enhances the significance of effective distribution”. Elaborate.

International Business

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BBA (Annual Pattern) IInd Year Paper No. 9

Documents

Transcript of BBA (Annual Pattern) IInd Year Paper No. 9