Domestic Airlines In India : Leveraging Price

• Q: How many of you have travelled through Air??

Case

• Till 2002 High Fares Few Travelers• In 2002 Market Changed

• Why?• The industry efforts were made to

make Air Travel affordable to a large section of population.

Reason for change In strategy of a Industries

• As there were 3 Major player’s (a) Jet Airways(JA) (b) Air Sahara (Sahara) (c) State Owned Indian Airlines (IA)

• Competition Counter reduce Prices

Beginning Of New Strategies

• Stated in June 2002 when• IA Announced (D-Srn,Jk,Kh) 3%-15% in fares.

• JA Economy Class (Mum-Nag, Goa)Rs. 635 in Prices.

Introduction Of APEX Strategy

• Advanced Purchase Excursion fare scheme

• Most innovative offer• Book tickets 3 weeks in advance and

receive huge discount.• IA introduce APEX fares under “ U Can Fly”• JA introduce APEX Under Its “Everyone Can fly”

Problems With APEX

• Passenger faced 2 Problems: (a) Planning Air travels 3 weeks in

advance is not Convinent (b) Cancellation Fees were very High i.e

50% of Ticket Price.• Despite of Disadvantage APEX was

successful i.e 1600 passengers were flying everyday

• JA introduction of APEX Fares No. of Passenger• Saroj Dutta ,Executive Director,JA• says”that the Av. No of passenger

flying out on advance purchase scheme is around 1500/day.that means we said 1850-2000 seats offered everyday from their concessional window.

Sahara Initial strategy

• Adoption of intelligent marketing strategies as compared to the Apex strategy.

• The strategy adopted by Sahara was free of the necessities of advance booking and photo-identity.

• It also provided with high discount on the fares thus tapping into consumer base of their customers.

Contd…

• In march 2002, Sahara launched a unique Wings and wheels.

• This wings and wheels scheme offered air-conditioned coaches to pick up the passengers.

• This service was available at certain fixed set of points in the city.

• The passengers were offered add-ons like magazine, news papers, mineral water and refreshments.

Sahara’s aggressive strategies

• Launches the “ Sixer ” offer.• Enabled travelers to buy a six – flight

coupon ticket.• Travelers can travel on any six sectors

of Sahara’s network.• The scheme was a huge success,

because of the flexibility it offered.• The price of the tickets was also low

then IA or JA.

Contd..

• It launched an online bid scheme known as “ Steal A Seat “ in august 2002.

• The base price was Rs 1 per ticket for passengers who plan to travel 25 days later.

• For unsuccessful bidders it launched another scheme known as “Steal Buys”.

• Booking 24-15 days in advance at a reserve price much cheaper than Apex fares of IA, JA.

IA Strategy

• Launched Scheme “Wings of Freedom”, validate from august 15, 2002 to march 31, 2003.

• Unlimited travel on domestic airlines for 7 days for Rs 15000 (economy) and 20000 (business).

• Also launched Bharat Darshan which allowed Unlimited travel for passengers who bought tickets worth more than 80,000.

• IA also increased the commission of its agents to increase the Sale of its tickets,

JA Strategy

• JA introduced the “Everyone Can Fly” under Apex scheme corresponding to the “u can fly” scheme of IA.

• As there were mainly 3 major players in domestic airlines market.

• Advance purchase excursion fares scheme(APEX) was proving to be very popular for increase in the no. of passengers.

The substitution v/s income effect

Conclusions

• Challenges faced by aviation industry:-• Employee shortage – there’s a clear shortage of

skilled and trained employee as a consequence of which so aviation sector has to pay high wages to the current skilled employee.

• Regional connectivity – lack of airports.• Ever rising fuel prices – which leads to increase in

air fares.• Declining yields – increase in growth attracts

more players which increases competition thus declining yields of all operators.

Contd..

• Gaps in infrastructure – inadequate air traffic control which hinders the growth of the aviation sector of India

• High input costs – due to high input costs because of tax on interest repayment on foreign currency loan for aircraft acquisition.

• Inspite of all these problems the aviation industry keeps reducing their prices which puts extra pressure on their margins.

• This resulted in incurring of huge losses.

Suggested strategies

• The Govt has to provide some subsidy in Fuel prices.

• New Airports should be made.• The govt. should make a policy

Controlling the Price Cutting strategy of the Aviation Industries.

Thankyou