AN

ANALYTICAL STUDY
ON
AIR TRAVEL IN INDIA

SUBMITTED TO:
MR. MANINDER SINGH

BY:

ASHI KALRA
MEHA KAPUR
RAHUL AGARWAL
RAVI SHEKHAR SINGH
SEWALINI KASERA
SHVETA MITTAL
SUMIT BHARDWAJ

GROUP 2
F/W 2003-05

THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT, NEW DELHI

EXECUTIVE SUMMARY
ACKNOWLEDGEMENT
TABLE OF CONTENTS
 HISTORICAL PERSPECTIVE

One summer day in 1929, late Mr Nevill Vintcent, a former Royal Air Force
pilot came to India from Britain on a tour during which he surveyed a number
of possible air routes. He saw the immense potential for aviation in India. It
came to pass that he met late Mr J.R.D. Tata, who was the first to get his A-
license in India and that too in the shortest number of hours.

Mr Vintcent worked out a scheme, secured Mr Tata’s approval and together

they showed it to Mr Peterson, a Director of Tata Sons and Mr J.R.D. Tata’s
mentor. Sir Dorab Tata, the then Chairman of Tata Sons, pleasantly
surprised all by giving the scheme his okay. So they went ahead and drew
plans for the operation of an air service from Karachi to Mumbai with one
stop at Ahmedabad.

All that they asked from the Government was a guarantee for only a year for
the sum of Rs.1, 00,000. This, however, was turned down. The Tata-Vintcent
combination was naturally disappointed, but not dismayed. A second scheme
was prepared. This time the guarantee asked for was only Rs.50, 000 for the
first year, Rs.25, 000 for the second year and after that no guarantee at all.
This scheme too was not accepted. The team tried a third time. This time
they offered to donate an air service to the Government of India, with no
strings attached. The Government agreed and thus was born Tata Airlines,
which later became Air-India.

On October 15, 1932, a light single-engine Puss Moth took off from Karachi
on its flight to Mumbai via Ahmedabad. At the controls of the tiny plane was
Mr Tata, operating the first scheduled air service in the country. He landed
with his precious load of mail on a grass strip at Juhu. There were no
runways, no radio facilities in the aircraft or on the ground. There were no
pretty hostesses, no aerodrome officers and no airport buildings.
The introduction of the Empire Airmail Scheme in February 1938 brought the
opportunity for further expansion and renovation of fleet. Tata Airlines
received a ten-year contract under the Scheme with guaranteed minimum
payment for the carriage of first class mail on the Karachi-Colombo and
Karachi-Lahore routes. A little later Deccan Airways was founded on 21
September 1945 along with a bunch of few new airlines to serve domestically
in India. Deccan Airways served the Hyderabad region.

The transition to civilian status immediately after the world war caused few
problems to the airline, since it had already acquired considerable operating
experience. To stress on its new civilian status and its role as a public utility,
Tata Airlines was converted into a Public Limited Company on July 29, 1946
and renamed AIR-INDIA. Around this time, the airline moved its operating
base from Juhu to its present location at Mumbai Airport.

At the beginning of 1947, Air-India turned its attention to the international

scene. Towards the end of the year, an agreement was reached with the
Government of India for the formation of Air-India International Limited to
operate international services. At Air-India’s request, the Government agreed
to limit their capital participation to 49 per cent, subject to an option to
acquire, at any time, a further two per cent from Air-India. Air-India was
appointed technical manager on a ten-year contract.

For many years in India air travel was perceived to be an elitist activity. This
view arose from the “Maharajah” syndrome where, due to the prohibitive
cost of air travel, the only people who could afford it were the rich and
powerful. In recent years, however, this image of Civil Aviation has
undergone a change and aviation is now viewed in a different light - as an
essential link not only for international travel and trade but also for providing
connectivity to different parts of the country.
Aviation is, by its very nature, a critical part of the infrastructure of the
country and has important ramifications for the development of tourism and
trade, the opening up of inaccessible areas of the country and for providing
stimulus to business activity and economic growth. Until less than a decade
ago, all aspects of aviation were firmly controlled by the Government.

Thus in the early fifties, all airlines operating in the country were merged into
either Indian Airlines or Air India and, by virtue of the Air Corporations Act,
1953; this monopoly was perpetuated for the next forty years. The
Directorate General of Civil Aviation controlled every aspect of flying
including granting flying licenses, pilots, certifying aircrafts for flight and
issuing all rules and procedures governing Indian airports and airspace.

Finally, the Airports Authority of India was entrusted with the responsibility of
managing all national and international airports and administering every
aspect of air transport operation through the Air Traffic Control.

As the Sixties closed, Air-India in keeping with its tradition of ordering the
latest and the best planes available placed an order for the Boeing 747-200s,
the first of which was delivered in April 1971. Over the next nine years, Air-
India received nine more planes at regular intervals, thus achieving the
biggest ever expansion of its fleet and capacity in its history, with
simultaneous expansion of all other facilities.

Later with the opening up of the Indian economy in the early Nineties,
aviation saw some important changes. Most importantly, the Air Corporation
Act was repealed to end the monopoly of the public sector and private
airlines were reintroduced. Thus the partial deregulation of selected
segments initiated in the nineties and the consequent competition has
transformed domestic airline operations.
As a result, Sahara India Airlines which was also founded in 1978 began
operations on December 3, 1993 following the Indian government's decision
to open the skies to the private sector. Simultaneously, Jet Airways founded
in 1995 made an entry as a domestic airline for India.

Since then choice and flight quality of service, especially on trunk routes, has
increased dramatically. Flexible tariff structures are making flying
increasingly more affordable. Customer interface and the quality of ancillary
services are better. Innovative airline operations models are being
introduced. Responses of the government to economic exigencies have also
paid dividends; its decision to announce open skies for winter schedules has
led to increased tourist arrivals, even in a volatile international environment,
and there is now a clamor for extending this policy for three more years.

Thus, today the Government of India has recognized the need for privatizing
the national carriers although the procedure for this is yet to be decided.
Recently, changes have been made in the Airports Authority of India Act in
order to permit the privatization of the two Metro airports of Delhi and
Mumbai.
 ECONOMIC HEALTH OF THE AIRLINE INDUSTRY
The linkage between civil aviation sector and economic activity and its
catalytic impact on general development are now well recognized.

In a 1998 study, the Air Transport Action Group (ATAG) had estimated
that the total direct economic impact of aviation on gross world output
would increase from US$1.36 trillion in 1998 to $1.7 trillion by 2010; 28
million jobs – including direct, indirect and induced employment – are
affected by the civil aviation sector.

The aviation sector in India is rapidly gaining importance, although its

many impacts have not been rigorously quantified. It is estimated that
foreign exchange transactions of $22.5 bn are directly facilitated by civil
aviation and another $96 bn indirectly through civil aviation services. 95%
of tourist arrivals are by air. Airports facilitate growth of high-value and
perishable trade; 40% of exports and imports in India by value are
carried by air. The sector might one day also serve to routinely provide
connectivity to remote areas otherwise inaccessible by other modes of
transport.

Today, Indian Airlines plays a dominant role in the field of Indian aviation.
Together with its fully owned subsidiary Alliance Air, Indian Airlines
carries a total of over 7.5 million passengers annually and around 23,000
passengers daily with a fleet that includes 11 Airbus A300, 30 Airbus
A320 and 11 Boeing 737 aircrafts, covering 63 domestic and 16
international destinations.

The airline has total staff strength of around 22,000 employees. And its
annual turnover, together with that of its subsidiary Alliance Air, is well
over Rs.4000 Crores (around US$ 1 billion).
Sahara airlines had a turnover of Rs.300 Crore in 2001 and a turnover of
Rs. 750 crore in 2002. The company has signed on 500 large corporate
clients including GE, Reliance, ITC, E&Y, PWC, Pepsi, Coke, Electrolux,
Samsung, M&M , ONGC, Gail and Indian Oil.
 FACILITIES PROVIDED
Jet Airways operates two classes of service - Club Premiere and Economy
class. Club Premiere is the exclusive Business Class and the preferred mode
of travel for businessmen and senior personnel in the corporate world.

Club Premiere

As a Jet Airways passenger, one deserves every comfort possible. With the
passenger’s convenience in mind, they have introduced Business Class, "Club
Premiere" to make the passenger feel at home in the skies.

Economy Class

All their flights operate Economy Class with a 3x3 seat configuration and with
a seat pitch of 30''. They offer hot meals on their flights which are presented
in improved and cheerful designer crockery. Their in-flight services personnel
ensure that cabin interiors are consistent with continuous quality check and
they constantly endeavor to upgrade their product.

Seat Preference

The Club Premiere passengers have the privilege of selecting their seat at the
time of reservation.

Check-in

The Tele Check-in facility saves precious time. All one has to do is call their
special Tele Check-in numbers at the airport up to 45 minutes before
departure and confirm that they will be at the airport at least 30 minutes
before the scheduled flight. They keep the boarding card ready to expedite
the check-in. This facility is also available for Jet Privilege Silver and Gold
card members.
Dedicated Check-in Counters

For quicker, more convenient check-in, Jet has dedicated check-in counters
exclusively for Club Premiere passengers at most airports.

Airport Lounges

The Club Premiere passengers have the privilege of relaxing and enjoying
complimentary snacks and beverages at the plush airport lounges at Delhi,
Mumbai (Bombay), Chennai (Madras), Kolkata, Bangalore, Hyderabad and
Jaipur.

Priority Baggage

Club Premiere passengers enjoy priority baggage delivery. Their baggage is

off-loaded at the carousel first so that they can disembark and collect their
bags without having to wait at the baggage retrieval area.

Dining Experience

They have enhanced their in-flight meal service in Club Premiere, to give the
finest dining experience in domestic air travel. One can enjoy the luxury of a
course-by-course personalized meal starting from hot refreshing soups to a
variety of rich desserts - a choice that will surprise you.

If one is traveling on their late morning or late evening flights on the

Mumbai-Delhi or Mumbai-Kolkata sectors, the in-flight crew will serve a
delicious selection of snacks. They serve both vegetarian and non-vegetarian
snacks, along with pastries, mocktails and more.

They have restricted the Club Premiere dining experience to just food. One
can now expect the meals to be served on the finest bone china, designed
exclusively for Jet Airways, by Noritake accompanied by crisp fresh linen.
PERSONALISED SERVICES

Jet Privilege members enjoy a whole new world of comfort, convenience and
personalized services, including:

More membership tiers

Jet Privilege now offers 5 tiered membership levels. New members begin
their membership at the JP Blue level, move up to the JP Blue Plus tier and
then on to the elite tiers based on their travel pattern on Jet Airways. The
programme now offers 3 elite tiers: JP Silver, JP Gold and JP Platinum which
are now not only more achievable but also each tier offers even greater
membership benefits.

Better opportunities for tier qualification

Members continue to have two opportunities for membership qualification.

They can upgrade / retain their tiers based on:

• The JPMiles earned on Jet Airways flight or,

• The number of flights taken on Jet Airways

The Dynamic Tier Review system

A world first, pioneered by Jet Airways, the new Tier evaluation process will
enable them to provide the members with quicker tier upgrades as well as
more opportunity to retain their tier status.

Greater Online access

With the new website, members can now login using their JP Number and
Password to access their personal Jet Privilege programme information, and
manage their Jet Privilege account, anytime anywhere through this website.
ADDITIONAL BENEFITS & PRIVILEGES

Jet Airways has also added a wide range of new benefits to the
tiers. What’s more while Jet Privilege now includes a host of new benefits and
privileges, the well-established features such as the auto mileage accrual,
multiple mileage earning opportunities, global redemptions etc., continue to
be the cornerstone of the JP Programme.

Jet Airways believes in providing the passengers with the best experiences
possible. And as a member of the new Jet Privilege programme, you can
enjoy a variety of enhanced benefits that transcend beyond traditional forms
of Frequent Flyer programmes.

The benefits and privileges are based on the membership tier, which is
upgraded when one qualifies with the necessary number of flights or miles.

The new Jet Privilege programme offers its members:

• 5 Membership Levels
• Unique Dynamic Tier Review System
• 13-quarter validity of JPMiles
• Personalized Web Access
• Membership Tier Bonus
• Tele Check-in facility
• Complimentary Upgrade Vouchers
• No Blackout periods for Jet Awards
• Access to Club Première lounges at domestic airports
• Additional baggage allowance on Jet Airways
• Guaranteed reservation up to 24 hours before departure
• Check-in at Club Première Desk
• Priority Standby
• Partner Benefits
• Dedicated customer service centre
5 Membership Levels

In addition to the 3 existing tiers, the new Jet Privilege programme

introduces 2 new tier levels.

JP Blue continues to be the entry level into the JP Programme.

JP Blue Plus is a new tier, introduced for the JP Blue members who are on the
fast track to an upgrade; they can start enjoying the facility of Tele Check-in
as soon as they complete 10 flights or 10,000 Status JPMiles in a six-month
period.

JP Silver & JP Gold continue to remain the elite tier levels of the JP
Programme.

JP Platinum is an exclusive elite tier level, specially created for the most
frequent flyers.

The Dynamic Tier Review (DTR) System

To make the tier upgrade and retention easier for the JP Members, Jet
Privilege has developed a multiple criteria based tier assessment system.
This innovative system, which is referred to as the DTR System, is totally
unique to Jet Airways and has no precedent anywhere in the world.

With this system, they will be able to provide members with quicker tier
upgrades as well as more opportunities to retain their tier status.

13-Quarter validity of JP Miles

The JPMiles are now valid for 13 quarters including the quarter they were
earned in. Moreover, the JPMiles will only lapse on a quarterly basis (at the
end of the 13th quarter) and not on an annual basis, as it was in the earlier
system.
How the 13-Quarter validity system works.

E.g: JPMiles earned in the 1st quarter of 2005 (Jan-Mar 2005) expire on the
last day of the 1st quarter of 2008 (i.e., 31st March 2008). Hence only the
JPMiles earned in that quarter will expire, and not the entire JPMiles
earned in that year (January–December 2005). The validity cannot be
extended beyond 13 quarters, and JPMiles that are not redeemed before
expiry, will lapse.

Personalized Web Access

Jet Privilege Members can now login using their JP Number and Password to
access and manage their Jet Privilege account, anytime, anywhere through
our website www.jetairways.com

With online access to your JP Account you can:

 Update your personal information

 Purchase Jet Airways tickets
 Access customized offers based on your preferences
 Verify the JPMiles & Activities in your account
 View your qualification requirements
 Check your mileage expiry details
 Online redemption of your JPMiles for Jet Airways flights
 Request Online redemption of your JPMiles on our Airline Partners
 Claim JPMiles for your missing Jet Airways flights
 Request for information from Jet Privilege Service Centre

Membership Tier Bonus

JP members earn Bonus JPMiles on all eligible flights, based on their elite
membership tier.

Tier JP Silver JP Gold JP Platinum

Tier bonus 10% 20% 30%

Tier Bonus is not available when using Programme Partners. Bonus

JPMiles do not count towards evaluation for tier upgrade/retention.

Tele Check-in facility

All JP members (except JP Blue) who hold confirmed reservations can call the
local Jet Airways reservations counter up to 24 hours (48 hours for JP Gold
and JP Platinum members) prior to their flight and Tele Check-in. Then, they
can report at the airport counter a minimum of 45 minutes before flight
departure.
Note: JP Platinum, JP Gold and JP Silver members can report at the airport
counter a minimum of 30 minutes before flight departure.

Complimentary Upgrade Vouchers

As a JP member, one can enjoy a complimentary upgrade from Economy

to Club Première by using an upgrade voucher. These vouchers are sent to
the member by Jet Privilege from time to time, depending on the tier, use of
Jet Airways Citibank Gold Card or as a special offer.

Confirmed Upgrade Vouchers

In recognition of their tier status, the JP Silver, JP Gold and JP Platinum

members receive 1, 3 and 5 Confirmed upgrade vouchers respectively each
time their tier status changes.

The Upgrade offered is on a Confirmed basis, where a seat will be blocked in

Club Premiere as long as the upgrade is requested at any Jet Airways
Reservations office, a minimum of 48 hours prior to departure.
Space-available Upgrade Vouchers

Space available upgrade vouchers are currently only given to the JACC Gold
cardholders who have earned more than 4500 JPMiles on their JACC card
spends.

To be eligible to avail of the upgrade, the member / passenger must get

himself listed at least 6-8 hours prior to the departure of the flight on which
he wishes to use the voucher on. This however, is a listing only and the
upgrade will be offered subject to a seats being available in Club Premiere at
the time of the flight check-in closure.

Access to Club Première lounges at domestic airports

Members of the elite JP Silver, JP Gold and JP Platinum tiers, along with one
guest (who is traveling with them on the same flight) have access to Club
Premiere lounges at Bangalore, Kolkata, Chennai, Delhi, Jaipur, Mumbai and
Hyderabad airports, irrespective of their class of travel.

Additional Baggage Allowance on Jet Airways

On Jet Airways flights within India and other SAARC sectors, JP members are
allowed additional baggage allowance; over and above the normal allowance.
Jet Airways Citibank Gold Credit Card holders get an additional 15 kilos
baggage allowance. Jet Airways Citibank Gold Credit Card holders who also
are JP Silver, JP Gold or JP Platinum members will only receive only the
higher of the two excess baggage allowances and not a cumulative total.

Tier JP Silver JP Gold JP Platinum

Extra baggage allowance 10 kilos 20 kilos 35 kilos
Special Services

Jet Airways understands that some of the passengers have special needs. It
is their constant effort to meet these needs to the best of their ability. This
section gives a glimpse into some of the special requirements that they cater
to so that all of the passengers can travel in comfort.

• Infant and Child Care: Special attention is always given to

our younger patrons of Jet Airways.
• Wheel Chair Assistance: Handicapped and infirm passengers can
also look forward for a comfortable, safe and hassle free journey.
• Expectant Mothers: Expectant Mothers till 36 weeks of pregnancy
can be permitted to fly on Jet Airways flights.
• Unaccompanied Minors: Parents / guardians can be rest assured
regarding our ability to look after your children whilst traveling with
us.
• Medical Emergencies: Visit this section for detailed information on
medical care and emergencies.
• Traveling with Pets: Carriage of pets are permitted only on
our Boeing 737 aircraft.

Product and Services

At Jet Airways we always endeavor to make your travel comfortable,

convenient and seamless. From our on ground to in-flight services
we constantly strive to innovate and upgrade our services. As India's best
airline, we have always come up with many firsts by offering new services
and have set standards in Indian Aviation. Find out all you would want to
know about our Product and Services.

On Ground Services: Learn about everything from check-ins to airport

lounges, baggage allowance to our 24 hour Helpdesk.
In-flight Services: When flying Jet Airways, expect a world-class service.
Experience one of the few ISO 9001:2000 certified in-flight service.

Special Services: Jet Airways understands that some of our passengers

may have special requirements - be it a special meal, or wheel chair
assistance..

JetMobile: Get flight information at your fingertips. With JetMobile, get

information on flight schedules, automatic flight status alert or simply
request for a flight alert.

JetKids: When you fly Jet Airways with your family, we promise that your
kids will have a great time. There is assistance if and when you need it.

JetMail - Newsletter: Get Updates on the latest offerings from Jet Airways
and its partners.

Cargo: Jet Airways cargo with its huge network and infrastructure is
equipped to handle just about all your cargo requirements.

JetKids is a special program for the younger patrons, children between the
ages 2 to 12 years, of Jet Airways. The new JetKids kit contains a kid’s
magazine and a bag. The magazine has great content to interest children and
also lots of promotions and interactions.

JetMobile
Waiting at the airport can be quite tiresome and often times very time
consuming. Therefore to save some of the valuable time and make things a
little more convenient, Jet initiated the JetMobile service. This service enables
the passenger to check flight information on your mobile phone, at places
where this service is being provided. One can use JetMobile for information
on Flight Schedules, Flight Status or to set Flight Alerts. This facility puts
flight information virtually at your fingertips.
Passengers will henceforth receive automatic SMS flight alerts on their mobile
phones informing them about their flight status when a flight is delayed
beyond 30 minutes of scheduled departure. This facilitates passengers to
pack more into their busy schedules. To avail JetMobile service, passengers
have to provide their mobile phone numbers when they book their tickets
through their travel agent or the airline.

As a Jet Privilege member, one need not give their mobile number each time
they book the ticket, provided the Jet Privilege membership account is
updated with the current mobile number.

While the airline has one of the best on-time records, there are, at times,
factors beyond human control, such as fog in the northern region during
winter, which lead to unforeseen delays. This service will obviate spending
unproductive time at airports.

Jet Mobile allows users to retrieve Jet Airways flight information on the
mobile phone. Passengers flying Jet Airways can also check their flight
status, flight schedules and even set flight alerts on their mobile phone.
Jet Mobile service has been made available across the network and is
compatible with all the service providers.

Introduction of e-Ticketing @ www.jetairways.com

One can book, pay and print his e-Ticket (itinerary receipt) on
www.jetairways.com. On a successful purchase the system generates an
Electronic Ticket and a printable itinerary receipt is displayed. The itinerary
receipt is confirmation of travel. One also receives an email with the status of
booking. One can print the confirmation shown on the screen or print the
email. Then all one has to do is, walk in to the airport and check-in with valid
photo identification and printed itinerary receipt. The boarding pass is issued
against the itinerary receipt.
Passenger’s safety

The passenger’s safety is of vital importance to Jet. Hence, they lay great
emphasis on the maintenance of the aircraft. Their staff of 560 engineers and
technicians, with 5 to 20 years of aviation experience, ensures that they
conform to international safety standards.

They have developed in-house engineering and maintenance capability to

carry out annual C checks of their aircraft. They have installed the Aircraft
Maintenance and Engineering System (AMOS) for better inventory control.
Since their inception, they have had a tie up with Airlines Rotables Limited
for supply and overhaul of spares and maintaining a consignment stock.

To further strengthen the engineering infrastructure, they have recently been

allotted their own hangar in Delhi, which will be operational soon. They are
also in the process of acquiring land to build their own hangar in Mumbai.

Safety inside the aircraft

Cabin Baggage

Experience has shown that excess cabin baggage is a safety hazard and can
increase accidents in-flight. It can impede quick and safe evacuation in an
emergency. Overloading the overhead bins can cause luggage to fall out, and
increase the possibility of injury. The comfort of passengers is also
compromised when the cabin is cluttered with unstowed cabin baggage. To
ensure our passengers' safety and comfort, they urge all passengers to
observe the Indian Government's regulations permitting ONE piece of cabin
baggage per adult passenger.
Comfort

The passenger’s comfort comes right up with safety which is why Jet has
designed their aircraft with your comfort in mind. Club Première seats are
fitted with armrest tables, arranged in a two-by-two configuration so that
every passenger has a window or aisle seat. The seat pitch is a luxurious 38
inches to give enough legroom. Even in Economy Class, the seat pitch is a
spacious 31 inches with a three-by-three configuration.

Jet Elite Surprizes

Jet Airways has partnered with Contests2win.com to present to you the Jet
Elite Surprizes program on board Jet Airways flights can now win exciting
prizes by participating in this program.
Apex Fares

Jet has always made it easy for passengers to fly and their Advance and
Instant Purchase Fares makes it even simpler. One now has the choice of 3
Advance and Instant Purchase Fares – 15, 21 and 30 days – to suit your
budget and convenience. One can plan travel well in advance and avail of
these schemes. Jet Airways is constantly innovating and introducing new
features for passenger benefit, and this has made them India’s best domestic
airline.

Jet Escapes

The exciting Jet Escapes holiday packages that they have designed make for
a memorable holiday. One can choose from the host of fascinating
destinations around India: Cochin, Rajasthan, Ooty, Trivandrum, Srinagar
and Goa.

Jet also has a great incentive for passengers who book their packages 15
days or 30 days in advance. They can choose from special Apex and Super
Apex Fare Packages that are available for much less than any standard Jet
Escapes package.
 UNIQUE SELLING PROPOSITION/UNIQUE BUYING
PROPOSITION

DISTINGUISHING
SERVICES

Average Fleet
3 years 5-6 years 10 years
Age
4 Airbus A300,
39 Airbus A320.

12 B737's, Its subsidiary

32 Boeing 737 jets
Operational Fleet 7 Bombardier CRJ- Alliance Air has
8 ATR-72-500's
200 jet. 11 B737, 2
ATR-42 2
Dornier 228
aircrafts.

Specialty
Yes Yes No
Lounges

Check –in Adequate check-in Adequate check-in

Inadequate
facilities counters counters

Variety of Food &

Yes Yes No
Beverages

(i) Air Sahara aims

at making the
passenger's
journey more
exciting,
interactive &
On-Board On board Music, Magazine
enjoyable has
Entertainment Magazine (Jet Age) (Swagat)
taken a unique
initiative of on
board bidding,

(ii) Magazine
(Sahara)

Coverage Moderate Moderate Wider coverage

USP/UBP
 FUTURE OF AIR TRAVEL

A lot more Indians will be romancing the skies in the coming months as air
fares keep tumbling down. Competition and threat of new budget airlines are
fast turning flying into an almost-viable alternative to train travel. Already,
government-owned Indian Airlines (IA) and private carriers like Jet Airways
and Air Sahara have introduced new set of apex fares under which a traveller
has to book in advance to avail the benefits.

Besides, several innovative strategies have been evolved to boost air travel
and make it more affordable. These include metro shuttle, point-to-point
fares, domestic and international holiday packages, frequent flier
programmes, e-auctions, co-branded cards, super-saver fares, positioning
flight fares, metro-non-metro fares, specific flight fares and flexi-fares.

Aviation experts say low-cost, no-frills airlines being launched over the next
18 months will boost seat availability by over 40% to 35 to 40 million from
the current level of 25 million. This will help reduce air fares by 35 to 50%.

About 15 million Indians travelled by air within the country in the fiscal year
ended March 2004, a little more than the number that travel on Indian trains
in a single day. The air travel market is forecast to expand by 9 to 10 per
cent annually over the next few years along with the expected 6 to 7 per
cent growth in GDP.

It is clear that Indian aviation has entered the era of

commoditization, at least in short and medium haul sectors. Air Deccan,
which is all set to launch its services all over the country, has announced
fares as low as Rs 500 for the Delhi-Bangalore sector. Of course, a passenger
will have to book up to three months in advance and the tickets start getting
more expensive the later you book.
But growth may be much higher if fares decline with the entry of budget
airlines. Keeping this factor into consideration 10 to 12 new no-frills carriers
are planning to launch services in the high-cost Indian air travel market
which will increase competition and lure passengers away from using trains.
These include Kingfisher from United Breweries, another from textile group
Bombay Dyeing, Indus Air, Yamuna Airways, Reliance, Air One and Visa as
well as low-cost subsidiaries floated by the four existing carriers. Two airlines
that folded in the 1990s -- Royal Airways, which was formerly called
ModiLuft, and East West -- have also drawn up revival plans and will begin
flying over the next year.

No-frills carriers achieve cost savings of 10 to 15 per cent by using the

Internet to sell tickets and another 10 to 20 per cent by increasing the
number of seats in planes. They can shave a further 20 to 30 per cent off
operating costs by using a single type of aircraft, reducing crew costs and
cutting premium services such as frequent flyer programmes.

Recent reports of international airports at Bangalore and Hyderabad thinking

of offering cheaper terminals to low cost airlines may soon see another
competitive advantage for these airlines.

That means a passenger carries his own food and water or buys it on the
flight. No fancy service from the lone flight attendant. Low cost airlines,
aviation experts say, will attract three kinds of customers - the price
conscious business traveller, the leisure traveller and people visiting families
or friends on long notice.

There were 1.15 million people who travelled by first AC last year, 13.5
million who travelled by second AC, and a further 24 million passengers in
third AC. That is an additional 40 million people who could theoretically be
lured by low cost airlines. The real number will obviously be much lower due
to several reasons.
But if even 20 per cent of these 40 million, say 8 million passengers, can be
lured to migrate to air travel, it's a win-win situation for low cost airlines.
Before they have been launched nationally, benefits of lower priced air
tickets are already a reality.

Internationally, as a rule of thumb, a 35 per cent reduction in fares

leads to 15 per cent growth in traffic. But since these price cuts are a
new phenomenon, it has yet to be experienced in India.

Indian air travel is in for a serious shakeup. Today, Air Deccan alone carries
the no-frills banner in competition with four full-fare airlines, which together
make just 400 daily flights. By next year, that figure will rise to 600 as
discounters invest some $1.2 billion in the sector. With prices as low as 30%
of current fares -- often as cheap as a train ticket -- the newbies could boost
India's annual air traffic by 30%, to 20 million passengers within a year.
The entry of discount airlines will open up the bottom of the market
in India.

Price cut is not the only change being experienced; the freebies for air
passengers continue to fly in. Jet Airways has also recently upgraded its
frequent flier programme, and is focusing on its yield-management strategy.
The airline is seeking to lure passengers who fly less frequently. Under this
scheme, if the airline believes that seats won't be occupied on a flight, it will
offer them at lower rates.

Air Sahara is now planning blanket coverage of small towns. It plans to

increase the frequency of its flights to the hinterland by 50-60 per cent in the
current year.
The airline will also introduce the hub-and-spoke system, with metros as
hubs. Passengers flying from a metro to another and then to a small town
could perhaps pay the standard fare on the metro leg of their trip but a far
lower fare on the leg to the small town. State-owned carrier Indian Airlines
had introduced this scheme recently.

Air Sahara is also working on an upgraded frequent flier programme, apart

from introducing innovative in-flight services, including increased
entertainment. Drawing a leaf from Jet Airways yield management
programme book, Air Sahara is planning to launch a 'dynamic fare' model.
Under this model, fares will be based on the daily market demand. In short,
Air Sahara, too, will sell seats at lower fares if they are not in demand.

One can now jump onto the Indian Airlines frequent flier club with a single
boarding pass. Indian Airline’s frequent flyer club earlier had a Rs 1,000
enrollment fee. That gave way to the three boarding pass norm. Now
passengers need to fly just once and produce a single boarding pass to
qualify for the frequent flyer club.

Along with this, the Indian Airlines frequent flyer programme has been
merged with Air-India's programme to enable international passengers earn
mileage points. If you fly Indian Airlines, you'll get Air-India mileage points,
though the offer is valid only till September.
SERVICE INITIATIVES

Alliance Airlines is a small domestic sheduled airline flying between Indian

regional destinations. The airlines uses the Boeing 737-200 jet. The
airline made world news in September 2001 after it's jet was hijacked to
an Indian city.
The Sahara Indian Airline uses modern Boeing 737-400 jets and flies a
wide domestic network of schedules for passengers and freight. Boeing
737-700s were introduced at the end of the 1990s.
The Indian Airlines' online facility provides services like Passenger
Reservation, Ticketing, Message Switching, and Fare Display. An
interactive voice recording system for providing flight information is also
integrated with the Reservation system.
FUTURE OF THE INDUSTRY
RECOMMENDATIONS
Improvement and expansion of infrastructure
The new players face some serious hurdles. The biggest: infrastructure.
Indian airports are dismal -- when cities are lucky enough to have one. Even
cities with millions of inhabitants -- such as Dehra Dun, the capital of the
new northern state of Uttaranchal -- have no commercial airport. Therefore
the government should improve the existing infrastructure and expand the
Bombay and New Delhi airports.

Automated Ticketing counters

With the fast evolving technology the airports should be brought at par with
the technological world by setting up automated ticketing counters that
would make the ticket issuance process faster and easier. This would lead to
cost reduction and bring in efficiency in the working of the entire system. The
industry should re-engineer the business process.

Privatization of Indian Airlines

The government should consider the fact that the private players in the
aviation industry have been performing far better than the publicly owned
airline. Although Indian Airlines has a wide coverage yet it has been going
into losses for many years and also people are slowly switching over to the
private players because of their high quality services provided at the same
price. These reasons are strong indicators for going in for privatization.
Indian Airlines has immense potential which can be exploited in the right
manner if put in the right hands.

Privatization of Indian Airports

A group of foreign institutional investors (FIIs) and banks agreed to develop
a package to help rehabilitate private airlines, offering credit without
collateral to the ailing sector. Domestic banks and lending institutions had
proved reluctant to extend credit to what they see is a "highly volatile"
sector.

The foreign institutions have said they consider the carriers are viable and
the sector has a tremendous growth potential.
Private airlines have suggested the creation of a separate financial institution
(FI), along the lines of the erstwhile Shipping Credit and Investment
Corporation of India (SCICI) to fund purchase of aircraft.
Air Deccan Aims To Operate 120 Flights Per Day By December 2004

After having established themselves as India's first 'No Frills' carrier, Air Deccan is
set to take on the Indian aviation scene with gusto. Bejan Dinshaw, head -
marketing and sales, Air Deccan, was recently in Mumbai to make a presentation to
the TAAI western region agents on the airline. Talking about Air Deccan's plan for the
coming year, he added, "Our road show in Mumbai was a great success. Taking that
into consideration, we want to consolidate our position as a regional carrier in the
western and northern region. In the coming months, two aircraft will be based full
time in Mumbai, which will cater to the Goa-Belgaum, Ahmedabad- Baroda routes.
While in April-May, our focus will move to Delhi where we will incorporate two to
three ATRs catering to the Jaipur, Agra, Lucknow, Ludhiana, Chandigarh, Jammu and
Kullu routes."

With a strategic plan well in place, Air Deccan certainly does not feel that there exists
competition with India's domestic carriers. Dinshaw adds, "We cater to a different
segment altogether so competition with our national carriers does not arise. We want
to make air travel affordable to every Indian and our prime targets are the upper
end rail travellers. On a more progressive note, we want to increase our frequencies
from just two flights to 38 flights and now 60 flights. Our aim is to have 120 flights
per day by the end of 2004. Besides, we want to replace the existent ATRs based in
Hyderabad, Chennai and Bangalore and gradually move on to Jets and link the
metros."

Air India enters no-frills market

India's state-owned carrier Air India has said it plans to launch a budget
airline serving destinations in the Middle East and South East Asia.

The new airline, as yet unnamed, is scheduled to make its debut in April next year
with a fleet of 14 specially-leased Boeing aircraft.

It will fly from the Indian capital, New Delhi, as well as India's financial centre,
Bombay, also known as Mumbai.

Air India said it hoped the new service would undercut its rivals by about 25%.

A spokesman said the budget airline plan now requires government backing, having
won the approval of Air India's board last week.

Competition threat

Air India - the country's main international carrier - hopes the new service will help
fend off growing competition on its lucrative routes to the Gulf states, where there is
a large Indian expatriate community.

Many Indian expats in the region have recently switched to Gulf Traveller, a no-frills
operation launched last year by Bahrain-based Gulf Air.
No frills air travel, pioneered by South West Airlines in the US and successfully
introduced to Europe in the 1990s by Easyjet and Ryanair, is a relative newcomer to
Asia.

Last year, Singapore Airlines set up a budget carrier, Tiger Airways, with a range of
partners including Ryanair founder Tony Ryan.

In India, privately-owned Deccan Airlines offers cut-price travel on domestic routes

in the south of the country.

India's state-owned domestic carrier, Indian Airlines, is also reported to be weighing

up the launch of a no-frills subsidiary.

Air Travel Comes To India's Masses

Lots of discount carriers are springing up in India, roiling the industry

Amid the crowd of passengers and well-wishers on the sun-baked tarmac at Bangalore's
airport, a tall man in an open-necked white shirt stands out. Captain G.R. Gopinath, the
founder of Air Deccan, India's pioneering discount airline, is overseeing the carrier's first
long-haul flight, from Bangalore to New Delhi. The 11 a.m. flight is sold out with 180
passengers, who paid an average of $100 a ticket -- half what other carriers charge.
Ravinder Bakshi, who usually travels by train, is delighted as he settles into his black
leather seat. "At such low fares, I'll definitely fly again," he says.
Soon Bakshi and other travelers will have a lot more cheap seats to choose from.
By next summer nearly a dozen cut-rate carriers are expected to ply the skies over India.
Why the surge of interest? The success of discounters such as Malaysia's Air Asia has
caught the eye of investors seeking to profit from growing demand for transportation in
India. says Kapil Kaul, a consultant with the Sydney-based Centre for Asia Pacific
Aviation.

INAUSPICIOUS START
Gopinath plans to play a big role in that increase. The 52-year-old former Army captain,
who also runs an air charter service, dreams of the day "when every Indian can fly."
Despite an inauspicious launch a year ago -- on Air Deccan's inaugural flight the engine
caught fire before the plane even took to the air -- the company is starting to soar. Air
Deccan now offers 54 daily flights to 19 cities. By March, Gopinath hopes to offer 100
flights a day to 65 cities. "We have 1 billion hungry consumers in India," he says.

Others are just as keen to get India's millions airborne. Flamboyant liquor king Vijay
Mallya in January plans to launch a low-cost carrier, named after his Kingfisher beer,
with $20 million in financing from GE Capital Aviation Services (GE ). Following
closely will be Go, promoted by textile scion Jehangir Wadia. And charter carrier Jagson
Airlines plans to expand as a regional discounter next year.

All this activity has spurred India's state-sector airlines to jump into the discount fray.
Air-India plans to launch Air-India Express, which will take over routes to the Middle
East, where some 4 million Indians hold service jobs. Indian Airlines, meanwhile, is
planning to turn money-losing affiliate Alliance Air into a cut-rate carrier.

. "We'll completely revamp these airports," Patel promises.

Of course, not all the discounters will be successful -- or even take off. Munesh Khanna,
director for India at Paris-based investment bank N.M. Rothschild & Sons Ltd., which is
helping raise funds for Air Deccan's expansion, says the infrastructure pressures are
enormous and expects only four or five of the newcomers to survive. Even that, though,
would likely benefit traveling Indians.

Jet Airways and Indian Airlines slash fares by nearly half

Saturday, July 6, 2002 (New Delhi):

The fare war between Jet Airways and Indian Airlines has caused a massive reduction in
ticket prices. Air fares have been cut by almost half in all the major sectors, bringing
them close to upper class rail fares.

Under the Jet Airways scheme called "Everyone can fly", the fares have been reduced on
37 sectors, while under Indian Airlines APEX Fares scheme, the reduced rates would be
effected on 40 sectors. The schemes are valid from August 1 to October 31.

For airline companies, August to October is usually a lean season made worse this time
by the dip in tourism.

Almost on cue, the Civil Aviation Minister announced Indian Airlines will follow suit.

Both IA and Jet said the passengers would be required to make bookings on a firm basis
at least three weeks prior to travel.

Players in the tourism industry are extremely happy and hope their flagging fortunes will
now revive. "It will increase the competition and boost the flagging sector," maintained
Subhash Goel, Chairman, STIC Travels.

The fare cuts will also greatly benefit the domestic business traveller, especially those
who have been forced to shift to train journeys to counter the economic slowdown. (With
8PTI inputs)

The Centre for Asia Pacific Aviation (CAPA), a Sydney-based private consulting and
information services company, says
Even before Air Deccan could launch its metro routes, existing private airlines have
responded by slashing 30-day apex fares. Air Sahara's new apex fares of Rs 4,444
for a return ticket from Delhi to Mumbai costs an insignificant Rs 24 more than the
second AC return fare. Jet Airways and Indian Airlines offer a one-way Delhi-Mumbai
ticket under apex schemes for just Rs 2,500.
"Nobody took the low-cost airlines very seriously some years ago,'' said CAPA's vice-
president for Indian subcontinent Kapil Kaul. ''But they have changed tourism and
business travel behaviour.''

Airlines brace for dogfight

Rumi Dutta in Mumbai | August 03, 2004 08:00 IST

All this is over and above the competitive fares that are giving the railways a run for their
money.

What's behind this flying frenzy? The scheduled carriers are bracing for competition from
no-frills carrier Air Deccan and a host of airlines waiting in the wings.

Airline experts say around nine low-cost carriers have applied for licences and are taxiing
for take off. These include UB group's Kingfisher Airline, an offering from Bombay
Dyeing, Yamuna Airways and Indus Air.

Says an Indian Airlines source: "It is a compounded effort to take low-cost carriers head
on. Be it in terms of fares, service, miles or network expansion, we have to adopt a
dynamic approach to retain our market share. Moreover, it is too early to judge the ability
or success of the low-cost carriers."

Adds an Air Sahara executive: "Besides our discounted fare schemes, far superior
connectivity with metros as hubs will enable us to fight any kind of competition. Our
quality service and new generation fleet will give us an edge over low-cost airlines."

According to industry officials, airlines compete primarily on three fronts -- low fares,
customer service and value-added services like frequent flier programmes. While low-
cost carriers fight on the price platform, service is something their larger counterparts are
harping on.

Already, Air Deccan's fares are 30 per cent lower than the better known carriers. While
its operations are currently restricted to flights among smaller cities, it plans to take on
the biggies with new aircraft connecting major metros. It recently announced fares as low
as Rs 500 (plus Rs 200 as taxes) on the Mumbai-Delhi sector. It just can't get better than
this.

Future perspective

Despite these advances, India has lost out in aviation; it has missed the travel boom of
the nineties, ceded its natural geographic and economic advantages as a cargo and
courier hub to other countries and air travel still remains confined to a tiny section of
the domestic population. The share of India in total world aviation traffic continues to
remain minuscule. India accounted for a mere 24 lakh tourist arrivals in 2002,
compared to 71.5 cr. worldwide and 13 cr. in Asia Pacific (a 0.38% share).
Worldwide, tourism accounts for 10.2% of GDP, while in India, it is just 4.8%. OAG,
a respected industry information service estimates that while air seat capacity has
increased 485% in China over 1989-2000, in India, this has increased by a mere 40%.
Total world scheduled passenger traffic was 161.5 cr. and cargo traffic by scheduled
airlines alone was 30 MT. The 25 largest airports in the world1[8] handled some 102
cr. passengers and 1.1 cr. commercial air transport movements in 2002. Mumbai and
Delhi airports are ranked the 80th and 109th busiest airports, respectively, in the
world, in terms of passenger movement.