COMPETITIVE ANALYSIS

PRODUCT LEVEL ANALYSIS

The product offered by airlines is essentially a service, although it can be supplemented by a

umber of physical products too. The services offered are:

1.In-flight services

2. On ground services

The services provided inside the flight include the core service of travel, crew, ambience and

comfort, in-flight entertainment etc. This is highly variable across competitors as per brand and

different classes of travel.

The on-the-ground services include a convenient airport with car parking facilities, waiting

lounges, duty free' shopping quick and efficient checking of baggage, efficient service at

reservation counter, transport to the airplane, etc. Although the physical infrastructure part of

the on ground services are usually maintained by the airports authority but airlines like

Kingfisher have gone a step ahead to make separate lounges for their customers to make them

feel special.

CORE PRODUCT AND SUPPLEMENTARY SERVICES

CORE PRODUCT

The core product of the airlines industry is the service of transporting passengers and goods to

different destinations. This is supplemented by various other services mentioned ahead

SUPPLEMENTARY SERVICES

Information

Upto date information regarding flight schedules, ticket fares, promotion schemes, new policies

and systems, etc are available to customers.

Consultation

Airlines are suggesting and designing products like packaged tours to the customer.

Also, providing the customer with various options regarding the route of flight, in-flight cuisine

& benefits asks them to play a role of consultant.

Order taking

The order taking procedure is essentially the booking procedure of the airlines. The important aspect

to be noted here is that the procedure should be smooth, easily understood and fast. Also provision of

instantly updated information about availability of seats and fares is required.

Hospitality & Caretaking

With the increased competition today hospitality has emerged as a key-differentiating factor. It

is tested right from the time of booking till the post flight help extended. It also includes

safeguarding the baggage.

Billing & payment

Billing options available to the customer are plenty including credit card & travelers cheque.

Airlines use the open account system with their corporate clients. Frequent fliers are also given

special payment privileges. It is now being positioned between a full service and low cost carrier.

BRAND MODEL FOR AIRLINES

Branding of airline industry has to be based on delivering on its promises, long term customer

engagement and continuous innovation in its services. For the airlines to build a brand image

consistent with these, the following brand model proposed:

1) Brand Expectation

- Making an authentic promise

This promise is a reflection of the brand’s identity and its

differentiation from other brands. Kingfisher airlines for example

clearly promise its guests an unparalleled experience in the skies. Air deccan (when it existed)

promised the lowest fares.

2) Brand Experience

- Keeping the word

The promise has to be kept as literally as possible. For example

Virgin Airlines in the US promises to “reinvent air travel” and does a great job in not just meeting

them but exceeding them too.

3) Brand Expression

- Engaging the customer

It refers to extending the engagement with the customer beyond the flight hours. The

engagement should ensure constant touch with them. For example: few airlines give away their

headphones and in-flight magazines to passengers, which they subsequently share with more

people. Low cost carriers lose out on this opportunity to invest in engagement with the

customer.

4) Brand Externalities

- Dealing with industry uncertainty

The externalities could be as small as a flight being delayed to a pilot union strike or a

government regulation to a plane crash Nonetheless, all need to be handled effectively to

maintain the brand image. For example: Airlines like Jet Airways and Singapore Airlines have

been upgrading to newer, more fuel efficient planes in good times to hedge fuel costs to counter

the rising oil prices.

5) Brand Extensibility - Staying consistent over time

Delivering an experience requires meticulous planning and persistence. An opinion blog about

Kingfisher Airlines said “The amazing observation on Kingfisher is that all the employees (cabin

crew, ground staff and others) project a consistent and common kingfisher brand image and

lifestyle which is 'live king style and fly good times'. This is proved by very pleasant

approach and attitude of its employees towards all customers. Consumer satisfaction Index

about a particular airline as perceived by consumers is given below :

PRICING

Pricing is the value perceived by the customer. Pricing decisions cannot be made in isolation of

product. Product and pricing decisions are made together. Deregulation in airline pricing has

given the companies an edge to charge fares.

PRICING ENVIRONMENT

With the advent of sophisticated systems for managing the sale of seats it is easier to develop

sound pricing policies. Seats are sold on first-come first-serve basis, so passengers get cheaper

fares by booking earlier. Airlines adjust prices as per demand and there is no difference in

conditions.

SELECTING THE PRICE OBJECTIVE

When Airlines put in capacity (seats) and frequency (flights) between any two points, they

market research the route in order to arrive at the total potential for that segment. Size of the

market is determined to decide the price. Pricing or fare levels are arrived at after taking into

consideration various factors like type of aircraft, configuration of aircraft (number of seats),

density of route, competitor activity and minimum breakeven cost.

PREMIUM PRICING

The airlines may set prices above the market price benefited by its ‘brand-image’ to reflect the

quality of their service. Example: Jet Airways, Kingfisher, Indian Airlines, etc charge a premium

price for providing frills and extra comfort to the customer. They provide options like first class,

executive and economy. A trip from Mumbai to New Delhi will cost anywhere between Rs 6000

to Rs 23000 depending on the class and time of flight.

VALUE FOR MONEY PRICING:

Low Cost Airlines like Air Deccan, Spicejet, Indigo, Goair, etc go for value for money to charge

lower by operating cost cuts. Low cost carrier model go for dynamic pricing strategy. They

follow low and simple fare structure .They point-to-point links between primary and secondary

airports with high frequency. The airlines provide basic services nd just one class. The objective

here is to undercut the competition and price is used to trigger the purchase immediately. Unit

profits are low, but overall profits are achieved by volume. Prices are as low as Rs 4000 which

includes mostly the tax component

DETERMINING DEMAND

This industry is highly price sensitive . With the development of Global Distribution Systems the

customer can assess all the tariffs; they shop on internet where it is easy to compare ticket

price, flight time and number of stops in route. In case of recessionary periods when supply

exceeds demand, airlines find it difficult to fill seats and pricing becomes extremely important to

gather market share. For example, for a flight leaving to a business destination on a Monday

morning, very few seats will be sold at low prices. Almost all the tickets will be sold at high fares

and bookings sold at relatively shorter time.

ESTIMATING COSTS

The aviation turbine fuel (ATF) and staff( flight, ground, reservation and ticketing staff) form the

major part of the operating cost. Other part includes navigation, landing and parking costs,

repair and maintenance. Apart from operating costs there is insurance, Inland Aviation travel

Tax(IATT) and Passenger Service Fee (PSF).

ANALYZING COMPETITOR’S COSTS, PRICES AND OFFERS

LCC reduces their prices by having high seat density, reducing costs by providing no frill. They

also go for uniform aircrafts to share parts; they go for high airtime and generate revenue

through alternate resources. Full Service Providers charge extra premium for extra services like

in-flight cuisines, magazines, entertainment, the flexibility and comfort provided to the

customers.

ADAPTING PRICES

PRICE DISCOUNTS AND ALLOWANCES

Price discounts need to be carefully done otherwise it may result in diluting the revenue of

airlines and affecting their brand-image. Discounts are given on off-peak flights which might go

empty if not filled. Discounts can also be given by provided fewer services to the customer.

DIFFERENTIAL PRICING

Airlines usually practice differential pricing

. There are three classes:

The First Class, The Executive or Business Class and The EconomyClass.

Fares for each class are different since the facilities provided and the comfort and luxury level is

different in each class.

Though all the passengers get the same tangible product features but the intangible features

like flexibility is different. This justifies differential pricing.

INITIATING AND RESPONDING TO PRICE CHANGES

Airlines went for a price cut with the entry of Air Deccan in 2003. It was done to retain their

market share. In a price sensitive market like airlines increasing the price might lead to

considerable drop in market share so any major price increases are done in coordination with

competitor airlines. Price increase leads to higher profits.

MARKETING COMMUNICATIONS

The users of air services typically include business executives, cine artists, politicians and

domestic and international tourists. Hence, creativity becomes an important criterion. With the

looming worldwide financial crisis, airlines are facing financial crunch and it has become

imperative to use different components of marketing communication optimally:

ADVERTISING

Advertising should be done keeping in my mind the quality and nature of the target audience as

well as level of expectations. Advertisement slogans, message and campaigns need to be

proactive. Air India has been facing the image problem but advertising may be efficacious in

transmitting the facts and removing the image problem.

SALES PROMOTION

Many domestic low cost carriers (LCC) like Indigo, Go-Air mainly advertise the low base ticket

prices and promote advance bookings to avoid poor occupancy. Also to improve the brand

recall, promotional incentives are given out e.g. Indigo has a crazy assortment of gifts being

handed out which includes LCD TVs, Refrigerators, laptops, mobile handsets, etc.

PUBLIC RELATIONS

Strengthening public relations activities is essential to promote the nbusiness airlines or airways.

The Public Relations Officer, Receptionists, Travel Agents, Travel Guides, Media people are

some of the important people who publicize the business. But, the most crucial point in this is

the co-operation of media as it directly affects the brand imagemanifold.

TELEMARKETING

Booking counters, enquiries, reception counters, users’ complaints cell, announcers are found

playing an incremental role in promoting the air business because most of the travelers make an

impression about the airlines depending upon the tele-support that they get while using the

airlines service.

IN-FLIGHT ADVERTISING

This concept which is originated overseas has recently been identified as an effective promotion

medium in which audience is hundred percent captive. This is achieved through airing

advertisements during entertainment programs on television sets installed on the aircraft.Other

than advertising via television screens, advertisers hop on board and communicate through

latest ad films inside and outside the aircraft. Kingfisher Red, formerly Air Deccan had partnered

with Cutting Age Media to effectively communicate through this non-traditional niche media.

PRODUCT LEVELS

Various product levels at which the airlines compete are:

THE CORE BENEFIT

It is the benefit which the customer is actually buying. In our case it is the service of traveling or

transportation of goods.

THE BASIC PRODUCT

At this level the core benefit is converted into a basic service package. This includes from buying

the ticket to reaching the destination. The low cost airlines like Indigo, GoAir, Spicejet offer the

product at this level and compete on the basis of price.

THE EXPECTED PRODUCT

This includes a set of services and products that the consumer normally expects to receive

along with the core benefit. For example: In flight snacks, comfortable seats, on time departure

and arrival etc. The low cost model of airlines labels these addition services as ‘frills’ and tries

either to eliminate or charge separately for these.

THE AUGMENTED PRODUCT

An augmented product exceeds customer’s expectations. For example: Serving hot food, warm

and friendly crew, provision of in flight entertainment etc. Jet Airways, Kingfisher Class, Air India

IC compete in this segment.

THE POTENTIAL PRODUCT

At this level all possible augmentations are offered and the companies try to encompass new

and innovative ways to satisfy customers. Where Emirates airline offers onboard shower spas

for the first class customers, Thai Airways offers a limousine service at the airport and Virgin

Atlantic offers an onboard massage. As the level moves from the core benefit to the potential

product, the competition moves from price to service and experience of the customer. Various

competitors operating at different product level in India are shown in the diagram in Annexure.

BRAND RELATED ASPECTS

BRAND POSITIONING

In a highly competitive scenario it is imperative for any airline to build its brand and have a

focused marketing strategy.

POSITIONING OF A FEW AIRLINE BRANDS OPERATING IN INDIA

1. Kingfisher Airlines - Full Frills - True Value Carrier

The Brand Kingfisher has been made synonymous with `Good Times’ in India. Coherent and

clear positioning has also enabled Kingfisher Airlines to differentiate itself in a market. Kingfisher

has implemented this positioning by making service and hospitality their main focus.

2. Spicejet - McDonalds of the skies

SpiceJet seeks to position itself as an innovative, modern, safe and customer friendly airline. The

airline's philosophy is to make air travel accessible to a growing market of time and cost

conscious consumers yet at the same time open newer markets.

3. Jet Airways

Jet Airways is positioned as a global airline with the highest international standards but with a

touch of India. They have retained many of the familiar elements of our corporate identity, but

have contemporized them to make the brand more relevant to global markets.

4. Air Deccan - Simplifly Deccan - Kingfisher Red

Air Deccan had substantial brand equity among the consumers and had became synonymous

with low-cost travel in India. The rebranding followed an exhaustive market study which showed

that although the brand was closely associated with pioneering the low-cost airline business, it

was perceived as a carrier that was consistently late and suffered serious service issues. The

brand’s makeover by Kingfisher to first Simplify Deccan and then to Kingfisher Red has also

brought a change in its positioning. It is now being positioned between a full service and low

cost carrier.

TOP 5 ADVERTISERS OF AIRLINE SECTOR IN 2007 Top five Domestic Airline advertisers together

contributed 98 per cent share of overall Domestic Airline advertising on TV during 2007.

(Merger of Deccan Aviation and Kingfisher Airlines took place in Dec 07. Hence, the two entities

are separate above)

FLIGHT CLASS

The flight class graph indicates that the proportion traveled by business class is very small in

comparison to that traveled by economy class. This indicates that most business travelers are

flying Economy class as well.

Flight Class

Business %Economy %

In the above chart, in the airplanes mostly there are more of economy class (88.4%)seats than

the business class (11.4%)