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Air Deccan
As of January 2006, security personnel accounted for 21.7% of the carrier’s employees
followed by its cabin crew and engineers, who accounted for 20.4% and 19%,
respectively.
The Indian aviation industry, like other industries, is facing the constant
challenge of dealing with employee attrition.
As of January 2006, Air Deccan had an annual attrition rate of 15–20%. Recently, the
DGCA passed a new rule, which required pilots to give a six-month notice before
leaving an airline. This has resulted in a significant decrease in pilot attrition.
Air Deccan’s HR division focuses on recruiting young professionals with little work
experience straight from their university campuses.
The airline’s target passengers comprised leisure, small business and corporate
customers.
Belonging to the middle class and cost-conscious customers of the affluent class.
Air Deccan offered fares which were approximately 30% lower than those
offered by full-service airlines. In order to provide low-cost fares and remain
profitable, the carrier adopted several measures.
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The airline did not provide additional services (such as free meals) to its
customers. It focused on providing basic transportation services to its
customers in an efficient manner.
Route Planning : -
It’s a planned operational route. The carrier operates from six bases,
which are located in the metropolitan cities of Mumbai, Delhi, Chennai,
Kolkata, Bangalore and Hyderabad and are connected by trunk routes. These
bases are connected to other regional locations through regional routes. Air
Deccan followed the worldwide low-cost carrier strategy of flying on point-to-
point routes. It did not time its flights to connect with its other flights or with
other airlines’ flights; thereby eliminating waiting time between flights. This
strategic move contributed significantly towards reducing the carrier’s
operational and logistics costs.
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Dynamic Pricing : -
Cost reduction : -
The merger of Air Deccan into Kingfisher Airlines has given quite a bit of relief to
the Indian aviation industry. The two airlines have different set of business models. In
addition, they cater to totally different passenger segments. Kingfisher Airlines is
confident that they will be able to tap synergies and make the merger successful.
It is worth mentioning in this regard that when there is any financially weak
player, there is price dilution. In other words, the weaker players pay more attention to
cash generation as compared to profitability, and that have an impact on the overall
financial health of the industry. Kingfisher Airlines is planning to minimize the number of
Airbus A320 planes. In my opinion, UB Group will save around Rs 250 crore annually as
a result of combined operations and higher revenues. Another good thing about this
merger is that the combined airline will integrate critical departments such as
maintenance, flight operations, cabin crew, airport terminal services and marketing
support. According to experts, the advantage of the merger will begin to kick at
September / October 2008. This merger is good for both the company as per industrial
view and as far as Air Deccan is concerned, they wouldn’t have got best partner than
Kingfisher Airlines.
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Southwest Airlines
In 1971, Southwest Airlines was formed by Rollin King and Herb Kelleher in an
effort to start an airline company with low fares that gets their passengers to their
destination in a timely manner and that is fun to fly on. Southwest was started in Texas
as a commuter airline between Dallas, San Antonio and Houston. Today, Southwest
Airline is now a major airline, in fact, the fourth largest airliner in the United States that is
trading under the Symbol LUV on NYSE. It took on many marketing strategies in the
beginning to try enter the market and gain some market visibility including having flight
hostesses dress in colorful hot pants and white knee-high boots, giving passengers free
alcoholic beverages on flights, devising plans to lower turnaround time, and cutting
fares.
The mission of Southwest Airlines is dedication to the highest quality of customer
service delivered with a sense of warmth, friendliness, individual pride, and company
spirit. Southwest Airlines' successful and profitable business model has been driven by
several strategies: high aircraft utilization; standard fleet; charismatic leadership; low
fare carrier; excellent customer service practice; attractive frequent flier program;
innovative and creative marketing program; performance focused organizational culture;
strategic human resources management and a lean operations. And all this services
among 58 cities (59 airports) in the United States.
Southwest treats its employee’s right. The airline adopted the first profit-sharing
plan in the U.S. airline industry in 1973. Through this plan, its employees own at least
10 percent of the company stock. It has a highly motivated workforce. The employee
retention rate is 92.3%. Its corporate culture really stands out.
Southwest fully utilizes its resources and capabilities to make up its core
competencies. It focuses on short-haul, point-to-point routes, no-frills service and less-
crowded airports. It minimizes turnaround times and keeps its planes in the air longer
than its competitors. The design of these best-fit activities, the superior management
skills and the employees’ commitment are its core competencies. They demonstrate
three characteristics which are (1) it is valuable to the customers; (2) it is applicable in a
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variety of markets; and (3) it is difficult for competitors to imitate. That is why they
result in a sustainable, competitive advantage.
Culture:-
Southwest places a great deal of importance on hiring people with the right
attitude--people with relational competence--you can't be an elitist. Through training
and "job exchange or "Walk a Mile" employees become familiar with other aspects of
the work process or jobs they aspire to move into.
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Business Strategies
The reason for Southwest Airline's success is due to their low-cost model. The
Southwest Airlines consists solely of Boeing 737s and offers only coach seats.
Southwest Airlines don’t offer in-flight meals, only peanuts and other snacks. Southwest
is simple and direct at the goal of their service; "a primarily short-haul airline that flies
directly from city to city, with just one type of plane--the Boeing 737 - and the lowest
costs".
Air fare structure that was consistently the simplest and most straight forward of
any of the major U.S. airlines. All of Southwest’s different fare options could easily be
perused at the company’s Web site, and the company’s restrictions on tickets were
more lenient than those of its rivals.
Southwest generally added one or two new cities to its route schedule annually,
preferring to saturate the market for daily flights to the cities/airports it currently served
before entering new markets. In selecting new cities, Southwest looked for city pairs
that could generate substantial amounts of both business and leisure traffic.
Management believed that lots of flights were appealing to business travellers looking
for convenient flight times and the ability to catch a later flight if they unexpectedly ran
late.
External parties are treated to the same kind of relationship building efforts that
exist throughout Southwest Airlines. Southwest stands apart from the rest of the airline
industry in the emphasis it places on building partnerships with the airports it serves, air
traffic controllers, and aircraft manufacturers. Southwest effectively extends its sphere
of influence beyond its employees to encompass its entire value chain.
Turnaround Time.
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Southwest serves secondary airports which are typically less congested
than other airline hub airports. This causes southwest to have high asset utilization
because aircraft stay on the ground for the minimum amount of time. This also reduces
the number of aircraft and gate facilities required that thus lowers costs. One unique
aspect of Southwest is that the aircrew themselves turnaround the aircraft during stops,
this also reduces costs, and enhances the speed of the turnaround.
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Appendix
In 1953, the government enacted the Air Corporations Act to merge nine existing
air Companies into two, Indian Airlines, catering to the domestic market, and Air India,
servicing the international market. The government controlled all the key operations of
these entities for almost 40 years. However, in the 1970s, the US government
pioneered the deregulation of its airline industry, which led to benefits such as lower
Fares, improved productivity and better asset and capital utilization. The success of the
US government’s initiative triggered the process of deregulation and privatization of the
airline industry in several other countries also. The Indian aviation industry experienced
similar winds of change, which were further fuelled by the liberalization of the Indian
economy.
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In 1986, private players were permitted to operate only as air taxi operators. This
led a host of private carriers such as Jet Airways, Air Sahara, Modiluft, Damania
Airways, NEPC6 Airlines and East West Airlines to start their operations as air taxi
operators. In 1994, the Air Corporations Act of 1953 was revoked, allowing private
carriers to also provide scheduled services. Now the number had gone up of private air
taxi operators like Jet Airways and Air Sahara, Indigo, Spice jet, Go Air, kingfisher and
Indian Airlines operate in the country currently.
The utilization of a PEST analysis with regard to Southwest and Deccan takes
into account the political, economic, social and technological environment the industry is
embroiled in and how this has, is and will threaten to impact its operations and
profitability. It must be remembered that the number of possibilities concerning macro-
environmental aspects is almost limitless, thus concentration will be paid to those areas
perceived to have the highest impact.
Political
The political stability of the aviation industry was severely shaken by the terrorist
events of September 11, 2001, and this directly resulted in a catastrophic drop in
business as well as personal air travel. The preceding along with the following areas
has impacted negatively on earnings as well as profitability among the majors:
• Pricing regulations
• Wage legislation and union requirements
• Deregulation policies of 1978
• Increased emphasis on national and airport security
Economic
The overall economic climate in United States and India prior to the events of
September 11, 2001 called for a mild recession and the airline industry was wrestling
with discount carriers. The pre 9-11 airline climate forecast a slight contraction as a
result of the reversionary climate which was dramatically impacted by the events of 9-11
and the resulting economic aftermath:
Social
The emphasis on September 11th throughout these varied analysis is due to the
sweeping impact that event had on global events in all theatres. The social implications
thus shaped or amplified are as follows:
Technological
The Internet’s impact on business and consumer purchasing habits heralded in a new
age of information exchange which changed the manner in which airline tickets are sold.
Michael Porter’s ‘Five Forces” model provides a framework to view the airline
industry from the perspective of five forces that influence it:
Rivalry
Threat of Substitutes
Within Porter’s model substitute services come into play when demand exceeds
supply, or vice versa. In the airline industry the excess supply has been attacked by
other low-fare carriers who have continually gained market share. Railways and road
travel too is increasing its supply.
Buyer Power
The airline industry suffers from oversupply as well as fixed costs which served
as the foundation for low fare carriers who offer no frill flights in return for discounted
fares. This approach effectively pulled the casual traveller and spread to frequent
travellers and some classes of business travel for companies seeking to cut costs.
Buyer demand is re-shaping the airline industry as a result of these options. A tough
competition is given by railways and road services
Supplier Power
In terms of this category, fuel is the single largest airline cost expenditure item
which affects all firms equally. Low Fare carriers by eliminating frills lower their per flight
operating costs which have and is attracting scores of travelers to their fold.
Traditionally, the high cost of entry in the airline industry reduced the treat of
entry by competitive companies. However the business model offered by low fare
carriers exploited the lower end segment of the market via price and provided a
foundation for the entry of Jet Blue, America West, Go Air, Indigo, Air Sahara and
others.
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Air Deccan
Southwest Airlines
Vision: - The long term vision for Southwest is very clear. They want to operate the
safest, most reliable, most efficient airline in the world. Southwest must achieve all this
while staying true to their low-fare, low-cost Brand that they made famous. In 2007,
Southwest announced their plans to update their strategy to better equip them to
compete with more low-fare competition and overcome higher fuel prices.
Bibliography:-
1. http://www.southwest.com
2. www.southwest.com
3. www.flyairdeccan.net
4. www.airdeccan.net
References:-