Introduction

Objective

Background

Situation Analysis – current situation , SWOT, BCG

Growth strategy

Segmentation and Target Market

Positioning

Product

Price

Placement

Promotion

Recommendation

Objective

Analyse the background and current situation

Apply marketing concepts learnt during course

Suggest marketing plan using primary and secondary research

Background

Air India is the flag carrier airline of India. It is part of the government

owned Air India Limited(AIL).

Headquartered at the Indian Airlines House in New Delhi

Third largest airline in India (after IndiGo and Jet Airways) in

domestic market share

Became the 27th member of Star Alliance on 11 July 2014

It has highest number of employees, aircrafts and assets

Has one of the highest manpower to flight ratio in the world

Kill Air India, if you want to revive it.

That is the prescription aviation industry veteran and Emirates'

President & CEO Tim Clarke has given to rescue India's so-called

national airline. 13 March,2014

Situation Analysis (good and bad points)

On domestic front, Air India is making losses on every 2 routes out of 3 itoperates. That means it is losing money on 300 flights out of 450 flightsdaily.

Total losses are more than all other airlines combined

On some routes , it is not even able to recover fuel costs.

Aircraft utilization rate is abysmally low for it. At any point of time, it usesonly 100 out of 120 odd aircrafts it has.

Political and Regional bias influence

Has one of the worst flight safety record among all Indian carriers.

The airline's current avatar is a result of the merger of state-

run carrier Indian Airlines with Air India in 2007.

Both airlines posted profits in 2005/06. But rising competition,

worsening operational performance, massive aircraft purchases,

and the ill-conceived merger pushed the combined airline deep

into the red. Total losses have accumulated to almost Rs 20,000

crore while the debt burden is at a staggering Rs 43,000 crore.

Combined market share of both companies fell from 60 per cent to

less than 15 per cent in 2012, and is now hovering near 20 per

cent.

Even seven years after the merger, only 80 per cent merger has

been completed. Pay scales, HR policies and promotions are still

different in both companies.

Recent Consumer affairs report

Maximum number of complaints

Unhygienic food(worm inside food)

Customer dissatisfaction

Source: http://www.consumeraffairs.com/travel/air_india.html

Good points

Bright spot- The airline's Ebitda (Earnings Before Interest,

Taxes, Depreciation, and Amortisation) — a measure of comparing

profitability between companies — rose to Rs770 crore from Rs19.45

crore.

If it's any consolation though, private airline Jet Airways reported its

highest-ever annual loss of Rs4,129 crore in 2013-14.

Air India's on-time performance improved to 82 per cent in May this

year from 80 per cent a year earlier, according to data from industry

regulator Directorate General of Civil Aviation.

Strategies in Place

Air India's structural and systemic weaknesses were recognised

decades ago. In fact, in 1997, Air India was one of the first public

sector companies to be referred to the newly constituted

Disinvestment Commission of India (DC).

Downsized its operations. Grounded some airlines. Some of its loss

making international operations are being shut down.

National Carrier Air India in talks with OnAir to have Wifi on board

Advertisements

The Modi government in its first 90 days hasn't really spelt out its

plan for Air India except stating that it wouldn't be privatised

Planned to speed up its international expansion this year, adding

eight Boeing Dreamliner 787 aircraft to its fleet – fuel efficient

aircraft.

Air India will also start flying to Moscow, Rome and Milan this year

Replacement on almost all the routes in South-East Asia with the

787 aircraft which is more economical

Celebration of Air India day to commemorate the merger of

erstwhile Indian Airlines and Air India on 27 Aug in 2007 – target

towards employees satisfaction and customer connect.

Air India offers tickets for Rs 100.

Strengths Weakness

1. Strong Backing by the government of India2. Brand New Fleet of aircraft. 108 fleets (31 on orders)3. Known for its unique and high quality "Maharaja" advertising4. Present in nearly 19 countries5. Covers 60 destinations in India and 31 destinations Worldwide

1. Poor management decisions

2. Labour problems and political intervention is a cause of worry

3. Financial crisis leading to payment issues of employees

4. Financial debts5. High Cost structure6. Compulsions of being a

Public Sector Unit

Internal and External analysis

Opportunity Threats

1. Domestic Market Growth2. Dedicated set of

customers. Can leverage on brand new fleet

3. Expansion of routes and international destinations

4. Target low income groups5. Solving internal issues

regarding workforce can hugely boost image and operations

6. Targeting the passengers who travel by 1st AC/2nd AC coaches in trains over long distances

1. Rising Labour Costs2. Rising Fuel Costs3. Growing Competitor base

and entry of Low-Cost Carriers (LCC’s)

4. Price Wars5. Middle East Aviation6. Terrorist Threats

AIR INDIA

Threat of New

Entrants• Vistara – A Tata and

Singapore Airlines

Joint Venture for

premium segment

• AirAsia and Tata Joint

Venture for low cost

segment

Bargaining Power

of Sellers• Air India is not

dependent on a

single supplier

• Its has many

suppliers like Airbus,

Boeing, Bombardier

and ATR

Bargaining Power

of Buyers• Buyers are the flight

passengers

• They have a good

bargaining power as

many competitors

are willing to offer

low cost flights

Threat of

Substitutes• 1st class, AC class

coaches of Indian

Railways

• Video Conferencing

instead of face to

face meetings

Threat of

Competitors• Lot of competitors

domestically and

internationally

• IndiGo, JetAirways,

GoAir, SpiceJet

• Leads to Price

Wars

BCG Matrix of AIR INDIA’s travel routes

Segmentation

and

Target Market

TitleSegment 1

Low Income

Segment 2

Middle Income

Segment 3

High Income

Income Low Moderate High

Usage Rate Low Moderate High

Value for Money High High Low/High

Identification of Segments:

Psychographic Segmentation:

• Air India has a strong image of an

official national carrier.

• Most of the government officials,

bureaucrats including the

President and Prime Minister of

India travel by Air India.

• People who are travelling by Air

India since the past few decades

are still loyal to it.

Market Segmentation

Demographic

Segmentation: (Income

Based)

Business Class:

Boeing 787 Dreamliner

18 business class seats

Market Segmentation

Economy Class:

Boeing 787Dreamliner

238 economy seats

Geographic Segmentation

International Market:

31 international

destinations in 19

countries across

Australia, Asia, Europe

and North America.

Domestic Market:

Air India serves 60 domestic

destinations in India

Geographic Segmentation:

Justification for Choosing the Segments

Segment 1Low Income

Segment 2Middle Income

Segment 3High Income

Measurability The current sales in thissegment is low. Preferredonly in case ofemergencies

The sales in thissegment is increasingas they now constitutea major share ofpassengers

This segment constitutes themajor portion of businessclass travel. Sales in thissegment in growing

Accessibility Newspapers, Radio,Television

Newspapers, Radio,Television, Online Ads,E-mails, Mobile-ads

Newspapers, Radio,Television, Online, Ads, E-mails, Mobile-ads

Substantiality A major portion ofdomestic market belongsto low income group

Middle income group inthe country is growing

High income group is alsogrowing in the country

Actionability Low fares on advancebooking can attract thissegment

Low fares and goodcustomer service andin-flight crew servicewill attract thissegment

Customer service, in-flightcrew service and FrequentFlyer miles can attract thissegment

Target Market Strategy

• Air India should follow a Multi-Segment strategy to target different

segments.

Marketing Mix 1Low Fares, Economy Class Travel, Easy

ticket booking via travel desk/online, Ads

through papers, radio, TVs

Marketing Mix 2

Low/Medium Fares, Economy Class

Travel, ticket booking via websites/travel

desks/mobiles, Ads through papers, online

media, mobile-ads.

Marketing Mix 3Normal / High Fares, Business / Economy

Class Travel, Ticket-booking via websites /

travel desks / mobiles / agents, Ads

through papers, online media, mobile-ads.

Segment 1

Low Income

Segment 2

Middle Income

Segment 3

High Income

POSITIONING

Positioning Statement

To the travelers who have to travel long distances in a short span of

time, Air India is the airline that gives you the best on-flight experience

with on-time performance and low cost ticket pricing.

Value Proposition

The value proposition of Air India will be to provide good customer

service, faster connectivity at convenient timings and at a cheaper

price.

Current Perceptual Mapping of Domestic

Airlines

High

price

Low

price

High OTP

Low OTP

Future Perceptual Mapping of Domestic

Airlines

High

price

Low

price

High OTP

Low OTP

Product

Air India Products:

Flight

Tickets

Seating

Configuration

In-Flight

Entertainment

Crew

Info

System

Frequent Flier

Program

Convenient

Flight

Timings

Customer

Friendly

Service

Special

Incentive

For

Corporate

ClientsDrinks

Easy

Ticket

Booking

Easy

Check-In

And

Boarding

Quick

Transportation

of Passengers

and Cargo

CORE

ACTUAL

AUGMENTED

Air India Products

• Fleet of 21 B737 Aircraft

• Capacity of 180 seats

• 13 International destination from 12 Indian cities

Air India Express

Air India Products

Air India Regional/

Alliance Air

• Fleet of 4 CRJ and 4 ATR aircraft

• Operated mostly to Tier 2 and 3 cities

• 196 flights per week

• easy connections to/from smaller

cities via the hubs of Delhi, Kolkata,

Mumbai & Bengaluru .

Air India Products

Air India Cargo

• 58 Domestic and 29

International destinations.

• An active member of IATA.

• Logistic Management System

(LMS)

• Odd-Sized Cargo, Dangerous

Goods, Valuables, Couriers etc.

Product by Involvement

Air Travel can be classified either as a convenience product or as a shopping

product.

• Convenience:

If the pricing and convenient timings are the major factors influencing

the customer’s decision, then it falls under Convenience product

• Shopping:

When factors like customer service, available leg space, food quality

influence the decision to buy the flight tickets, the customer spends

some time analyzing the available options before choosing the airlines.

Branding

• Air India will be portrayed as a Functional Brand.

• To be a functional brand, the following factors should be addressed:

Pricing

Check-In and Boarding procedures

On-time performance

Convenient flight timings

Customer service

PRICING

Pricing

• Pricing should take into account the following factors into account:

• Fixed and variable costs.

• Competition

• Company objectives

• Proposed positioning strategies.

• Target group and willingness to pay

Data from yatra.com taken on 28th Aug 2014

Value or cost based pricing approach

A value-based pricing company considers the value of its

product or service, as opposed to the cost the company incurred

to create and produce it. To do this, the company determines

how much money or value its product or service will generate for

the customer. This value could originate from factors such as

increased efficiency, happiness or stability.

Cost-based pricing uses manufacturing or production costs as

its basis for pricing. The cost-based pricing company uses its

costs to find a price floor and a price ceiling.

PRICE ELASTICITY CONSIDERATIONS

The demand for air travel is sensitive to changes in air travel

prices and incomes. However, the degree of sensitivity (i.e. its

demand elasticity) will vary according to different situations. To

ensure that air

transport policies are effective, reliable estimates for demand

elasticity's are essential.

The elasticity of air travel demand varies according to the

coverage and location of the market in which prices are changed

and the importance of the air travel price within the overall cost

of travel.

India is the only domestic market in the world to see a decline in

air traffic demand this February compared to last year, even as

global traffic continued to show "solid" growth in the same month.

Highly elastic market

India is the only domestic market in the world to see a decline in

air traffic demand this February compared to last year, even as

global traffic continued to show "solid" growth in the same month.

Route Level: -1.4

National Level: -0.8

Supra-National Level: -0.6

Estimated Price Elasticity's of Passenger

Demand

Skimming vs Penetration vs Parity strategy

skimming pricing, a strategy wherein the initial price for the product is set quite

high for a relatively short time after introduction.

Penetration pricing is a strategy employed by businesses introducing new goods

or services into the marketplace. With this policy, the initial price of the good or

service is set relatively low in hopes of "penetrating" into the marketplace quickly

and securing significant market share

Skimming pricing results in much slower acceptance of a new product, but higher

unit profits. Penetration pricing results in greater initial sales volume, but lower

unit profits

PARITY method takes the total budget to be allocated for marketing

communication at par with what competitors spend on the same.

Placement

Air India’s distribution channels

Air India

Travel agent

Customer

Customer

• About 80 per cent of airline tickets sold in India are

through travel agents and online portals.

• The rest is sold through airline websites and booking offices.

• Airlines are moving towards differential pricing so as to promote

travel agents and online portals.

• This will help airlines save on sales and distribution costs

Source : http://www.business-standard.com/article/companies/

differential-pricing-to-lift-ticket-sales-through-airline-websites-113092601069_1.html

• From our primary and secondary data we saw that Air India is doing quite well in the international sector

• Alliance Air is a fresh brand with very little customer opinion so we recommend Alliance Air take over the domestic operations by following LCC model

• Air India should operate exclusively on international routes

Recommendations

Recommendations

• Focus must be given to customer centric development

• Appoint a very pragmatic MD with full authority to radically restructure Air India, financially and operationally. This has worked for Malaysian Airlines and Garuda Airlines.

• Privatize the airline??. Divest. Use FDI in aviation industry. Sell 49% stake in the airlines to foreign players.

Promotion

Developing Effective Marketing Strategy

Awareness Knowledge Liking Preference Conviction Purchase

• Above steps has been followed to develop promotion/marketing strategy for Air India and Alliance Air

• Air India is been in airlines industry since past 60 years and so they have effectively went through the above stages.

• Due to various negative things going on with the airline above stages needs to be revisited so that a powerful and likeable promotion is created for Air India.

Applying the buyer readiness stages to Air India

Awareness&

Knowledge

• Air India has not created enough buzz about its star alliance membership which needs to be done immediately

• Alliance air must start creating awareness through its prices

Liking & Preference

• Air India : Provide free tickets to 1000 people and collect testimonials

• Alliance air: Just needs to provide on time services and create a buzz regarding this

Conviction & purchase

• The promotional campaigns for both Air India and Alliance Air must succeed in all stages of the AIDA framework.

Benefits for passengers due to Star Alliance

•Better connectivity•Greater flexibility for passengers•Low prices due to shared ticketing•More destinations than any one airline offers•The chance to earn miles or points•Round the world tickets with multiple airlines at good prices

Maharaja of Air India

• Continue with Maharaja as Air India’s Brand Ambassador

• He symbolizes graciousness and high living

• Naughty diminutive Maharajah of Air India has become a world figure

• He has completed 56 years and become the most recognizable mascot the world over

Use messages like “Fly royally” or “Fly with the Maharaja” in their campaigns

http://www.mbaskool.com/hwdphotos/uploads/64/10/qnqakkf0ty2h74.jpg

Aam Aadmi for alliance air

Like Narendra Modi suggested make Aam Aadmi the symbol of Alliance air

Alliance air must work on similar lines as Indigo airlines

Focus on On-time performance and cheap rates in advertisements