Airline Marketing Submitted by Nair Asha Vinod: University of Mumbai A Project Report On

Airline marketing
UNIVERSITY OF MUMBAI
A PROJECT REPORT ON
AIRLINE MARKETING
SUBMITTED BY
NAIR ASHA VINOD
PROJECT GUIDE
PROF.NITAL KOTHARI
THIRD YEAR
BACHELOR OF MANAGEMENT STUDIES
TOLANI COLLEGE OF COMMERCE

149-151 SHERE-e-PUNJAB
ANDHERI (EAST) MUMBAI 400093.
IN ACADEMIC YEAR 2008-2009.
Nair Asha Vinod

Tolani college of commerce 1
Airline marketing
UNIVERSITY OF MUMBAI
A PROJECT REPORT ON
AIRLINE MARKETING
SUBMITTED BY
NAIR ASHA VINOD
PROJECT GUIDE
PROF.NITAL KOTHARI
THIRD YEAR
BACHELOR OF MANAGEMENT STUDIES
TOLANI COLLEGE OF COMMERCE

149-151 SHERE-e-PUNJAB,
ANDHERI (EAST), MUMBAI 400093.
IN ACADEMIC YEAR 2009-2010.
Nair Asha Vinod

Airline marketing
DECLARATION
I, Miss. NAIR ASHA VINOD., student of Tolani College of

commerce, of T.Y.B.M.S. hereby declared that I have completed my
project on ‘AIRLINE MARKETING’. In the academic year 2009-
2010. The information submitted in this project is true and original
to best of my knowledge.
Date: ________ 2009 Signature

_____________
Nair Asha Vinod

Airline marketing
CERTIFICATE
I, Miss. NITAL KOTHARI certify that Miss. NAIR ASHA

VINOD student of Tolani College of Commerce of T. Y.
BMS hereby declared that she has completed this project on
‘NAIR ASHA VINOD’. In the academic year 2009-2010.
Date: ______2009
Sign of Project Guide Sign of Coordinator Sign of Principal
--------------------- ------------------------ -------------------
Nair Asha Vinod

Airline marketing
ACKNOWLEDGEMENT
It’s is great pleasure to acknowledge the assistance and

contribution of the number of individuals who have helped me
in presenting my project on “AIRLINE MARKETING”.
I would like to express my thanks to my

Prof. Miss. NITAL KOTHARI who helped me, time to time
by guiding me in my project.
I am also thankful to all those seen and
unseen hands and heads, which have been of direct and
indirect help in completion of this project work.
Nair Asha Vinod

Airline marketing
SUMMARY OF PROJECT
Airline Marketing gives a basic idea of

how the airlines undergoes marketing process and
what strategies airline industries undertake to
provide best services to its customers with a gain
of good amount of profitability.
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Index
Chapter. Topic Page no.

no
1. Introduction and history of 9-11

airline marketing
2. Definition of marketing and
nature of airline services. 12-16
3. Market segmentation 17-19
4. Product analysis and pricing
of marketing mix. 20-32
5. Promotion, people, place,
physical evidence, process. 33-28
6. Pest analysis of Airlines. 39-44
7. Communication mix. 45-47
8. Case studies and Articles. 48-57
9. Newspaper articles 58-59
10. Bibliography 60
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Nair Asha Vinod

Airline marketing
Chapter 1:-Introduction and History of

Airline Marketing
Introduction
The most efficient c omponent of the transport system is the air-

transport. After the Second World War the air-transport started expanding.
India did not lag behind in developing air transport.
Keeping in view the growing economic activities in the country the

progress of the airline industry has been accelerated. As far as passenger
traffic is concerned in the field of air transport passengers originating or
terminating in a particular destination is very important. In international
passenger traffic, air transport is developing fast and capturing the traffic
handled by sea transport.
Air transport handled almost an equal number of passengers as sea

transport but today it accounts for nearly four times the traffic by sea.
In the tourism world airlines play an important role. They have taken
different measures to increase their speed and capacity and have sought to
increase their traffic by using modern aircraft and by a pricing policy taking
into account the purpose of travel and elasticity of demand.
Airlines play an important role in international tourism. Tourism

contributes significantly to the nation’s earnings. Developing airline services
and offering attractive airfares have largely contributed to the success of
world tourism. Around 85% of the foreign tourists arrive by air.
As far as India is concerned Indian Airlines and Air India have

contributed to the national economy in terms of financial performance.
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History
The first airlines
DELAG, Deutsche Luftschiffahrts-Aktiengesellschaft was the world's first

airline. It was founded on November 16, 1909 with government assistance,
and operated airships manufactured by The Zeppelin Corporation. Its
headquarters were in Frankfurt. The five oldest non-dirigible airlines that still
exist are Australia's Qantas, Netherlands' KLM, Colombia's Avianca, Czech
Republic's Czech Airlines and Mexico's Mexicana. KLM first flew in May
1920 while Qantas (for the Queensland and Northern Territory Aerial Services
Limited) was founded in Queensland, Australia in late 1920.
About Indian Airlines

Indian Airlines is fully owned enterprise of the Govt. of India. The airline was
launched in 1953 with the aim of connecting domestic destinations and our
adjoining countries to India by air. Indian Airlines has set standards for
domestic aviation industry in India. It has been the first to bring in wide
bodied aircrafts in the domestic segment and was the first to launch on the
spot walk-in tickets and also introduced low priced tickets.
Indian Airlines was renamed and repositioned in the aviation industry to meet
the cosmopolitan requirements of today's traveller. Today it's now known as
'Indian'. The logo is inspired by the chariot wheel of the famous Konark's sun
temple in Orissa.
Indian Airline's main objective behind revolutionizing itself was improving

quality and making its services efficient. The airline is now equipped with
world class standards and technology. To further enhance the image, Indian
Airline was given new colourful look which brings in a lively charm and
meets the expectations of the new-generation traveler.
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Indian Airlines Flights

To meet the new age practices and provide comfort to its customers, Indian
Airlines tickets are made available online. Travellers can make online airline
ticket reservation and cancellations. These features were introduced to gain
popularity and walk hand in hand with the new players in the aviation
industry.
Indian Airlines flights are supported by a strong fleet of aircrafts with which it
flies to 58 domestic and 18 international destinations. The Airlines has 70
aircrafts including wide bodied airbus A- 300, A- 320, A- 319, Boeing 737,
Dornier Do- 228 aircraft and ATR- 42.
Indian Airline connect India with countries of west Asia like Bahrain, Kuwait,
Oman, Qatar, UAE; flies to Malaysia, Myanmar, Singapore and Thailand in
South East Asia and countries like Afghanistan, Bangladesh, Maldives, Nepal,
Pakistan and Sri Lanka in the Indian sub-continent.
Indian Airlines flights well network between the metropolitan cities of India
including Delhi, Bangalore, Mumbai, Kolkata, Hyderabad, Chennai and also
connect them with other IInd and IIIrd tier towns and cities in the country.
Indian airlines tickets can be obtained on good deals as the airline offers
various packages for corporate travellers or other frequent travelers. Low cost
Indian Airline tickets can be availed with their time to time offers.
Indian Airlines is known for its matchlessly reliable services and undeterred
competent services for above 50 years.
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Chapter 2: Definitions of marketing and

nature of Airline services.
What is marketing?
Marketing is everything you do to place your product or service in the hands

of potential customers.
"If a young man tells his date she's intelligent, looks lovely, and is a great
conversationalist, he's saying the right things to the right person and that's
marketing. If the young man tells his date how handsome, smart and
successful he is that's advertising. If someone else tells the young woman how
handsome, smart and successful her date is that’s public relations."
Marketing is basically your interaction with your consumer. This interaction

with your consumer is done so that you can get the consumer to purchase your
product or service. Basically that is what marketing is all about, getting the
customer to purchase your product or service!
There is a tendency to confuse “marketing” with other terms like

“advertising” or “publicity” etc. However, advertising is only a small part of
marketing. Advertising is one of the ways in which you can get the customer
to purchase your product or service. There are many other ways. Like
"publicity" though newspapers will increase awareness about your product or
service and thus may get the customer to purchase your product or service.
If business is all about people and money and the art of persuading one to part
from the other, then marketing is all about finding the right people to
persuade.
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Marketing is your strategy for allocating resources (time and money) in order
to achieve your objectives (a fair profit for supplying a good product or
service).
Though it may feel counter-intuitive, marketing doesn't begin with a great

idea or a unique product. It begins with customers -- those people who want or
need your product and will actually buy it.
A good marketing plan can help you focus your energy and resources. But a
plan created in a vacuum, based solely on your perceptions, does not advance
the agenda. That's why market research, however simple or sophisticated, is
important.
The point is that marketing is a mixture of all the activities of advertising,

promotion, publicity, deciding the look and feel of the product, how it will be
sold and sent to the consumer etc. All of these are the different parts of
marketing. They are not marketing.
Marketing can be thought of as a mixture of all these activities that will get
the consumer to buy your product. In fact, this gives us one of the important
terms related to marketing called "marketing mix". Marketing mix, as stated
above is a mixture of all the above stated activities designed to get a particular
set of consumers to buy your product.
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The Marketing Mix

The marketing mix is probably the most famous marketing term. Its elements
are the basic, tactical components of a marketing plan. Also known as the
Four P's, the marketing mix elements are
 Price,
 Place,
 Product, and
 Promotion.
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The service industries will extend the marketing mix to Seven P's, to include
 People,
 Physical evidence (such as uniforms, facilities, or livery) and
 Process (i.e. the whole customer experience e.g. a visit the Disney
World).
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Nature of Airline services
Services are intangible by nature. They cannot be sampled in advance

of their purchase, therefore there is an element of risk on the part of purchaser.
The comfort of travelling can be felt but not seen and this makes marketing
much more difficult.
Services are heterogeneous in nature and airline services are not

exception to this. The airline product is a highly perishable one. An airline
seat not sold today is lost for ever. While pricing the product this factor is of
great importance. The ‘stand-by’ fares offered by airlines shows their need to
off-load products before their sale potential is lost.
During off-season or periods of low-demand substantial reductions are

offered.
Furthermore airline services are highly personalized as production being

the outcome of the seller. In case of airline service however attractive the
decors is, or however comfortable the seating is or whatever may be the
quality of food in the flight, service is much an integral part of the product.
The airline steward who caters to our needs is an essential element of the
product.
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Chapter 3: Market segmentation
Definition:-
Market segmentation -- Division of the market or population into

subgroups with similar motivations. Widely used bases for segmenting
include geographic differences, personality differences, demographic
differences, use of product differences, and psychographic differences.
Market segmentation is another important concept in marketing

management which is very much close to target marketing.
Market segmentation is very much misunderstood for target market and vice-
versa. Market segmentation as a strategy in a marketing plan comes before
target market; here the market is divided on a larger scale to understand where
the prospective customers might come from. Experts say that if the market
segmentation is done properly then the business can hope for the maximum
return for its market expenditure by selling the right products to the right
customers.
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Segmentation: The Airline Industry
Most airlines use a very traditional segmentation strategy, dividing

passengers into business travelers and economy travelers (mostly leisure
travelers). The common strategy is to squeeze as much profit as possible from
business class passengers who are attracted by superior services and
corresponding high prices and, at the same time, to try and fill the rest of the
seats and ensure growth by attracting economy class passengers with lower
fares.
Business passengers They are crucial for airlines' profitability. With less
spare time and more cash in their pockets, they agree to pay a premium price
for a premium servce. Today business passengers account for approximately
48% of passengers, and these 48% contribute 66% of airlines' revenue. The
premium prices they pay provide wider and more comfortable seats, better
choice of meals and seats, luxurious lounges.
Airlines can choose from a multitude of premium services to offer to

business travelers. Some of these extras range from seats equipped with faxes
and telephones, to gambling machines, showers, massage services and suit
ironing services in the recently introduced arrival lounges. Business
passengers believe it is worth extra money if they can save time and arrive
looking fresh for an important meeting. Business passengers will avoid transit
flights even if a longer flight could save them money. But amongst other
perks, flexible reservation services are probably the most important to them.
Reservations for business trips are often made just a couple of days in
advance. A no penalty cancellation policy is also very important to business
passengers.The best way to reach business travelers is through printed
advertising. Business news media, such as "The Economist" or "The Wall
Street Journal" are some of the best publications through which airlines can
reach business travelers. Many airlines design special promotional programs
that target corporate bookers and meeting planners, who are responsible for
business trips reservations. Frequent flyer programs are an added bonus for
business passengers.
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Leisure Travelers They represent a totally different market. The most

important consideration for most of them is the price. The lower the airfare,
the more people will fly the respective airline. By and large, with the
exception of wealthy travelers, this segment will not pay extra for premium
services and will agree to change several planes during their trip if this option
costs less than a direct flight. Despite lower margins provided by this
segment, leisure travelers are very important to an airline's bottom line. Part of
the reason is that technological progress in the area of tele-conferencing and
increased use of the internet for business communications is expected to
reduce the number of business travelers. Thus, airlines are counting on the
leisure segment to provide further growth.
By improving services and reducing prices for economy class

passengers, airlines risk that some business passengers will switch to economy
class. On the other hand, if an airline focuses on business class passengers, it
risks losing its economy class passengers to another airline. Since business
class passengers are not many, a company relying mostly on business
travelers will often end up flying half-empty planes, losing the potential
revenue generated by lower priced economy seats. On the other hand, few
airlines catering solely to economy class passengers can be successful because
a low fare carrier must fill the entire plane if it is to generate revenue from its
low-margin operations. This kind of segmentation serves airlines well enough
when implemented within one company. It would be very difficult for any
single airline to target just one of these two segments - business or leisure -
successfully.
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Airline marketing
Chapter 4: Product analysis and pricing of

marketing mix
Definition of a product
The end result of the manufacturing process, to be offered to the

marketplace to satisfy a need or want.
Airline Product
Getting the product right is the single most important activity of marketing.
If the product isn't what the market wants, no amount of price adjustment or
brilliant promotion will encourage consumers to buy it. The airline product is
quite a complex one since it comprises of a service of incorporating the
temporary user of airline seat and certain tangible products such as free flight
bags or a free bottle of duty free spirit to encourage booking.
The airline product includes of two types of services:

1. on the ground services,
2. In-flight services.
The service provided inside is intangible and is highly variable. The

airhostesses are trained to provide polite, warm and courteous service. The
courteous service that the representatives at the baggage counter, reservation
counter provide goes a long way in developing customer loyalty. The travel
agents of the airlines also need to be efficient and polite.
Differentiating the Product
It is important to recognize that what the consumers are demanding are not
products, or features of products but the benefits they offer. Producing added
benefits thus helps the marketer to distinguish one product from another.
Good design or style of service can form the basis of differentiation. This
enables the company to create a personality for its service. The design and
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decor of the aircraft provides opportunities to personalize their product as well

as periodically to update them when differentiation under IATA regulations
was virtually excluded, nonetheless, certain airlines were able to develop
distinct personalities. Eagle Airlines created an entirely new market between
New I York and Bermuda, for e.g. by developing an image of a friendly
airline distinctive from other airline serving the route. A similar style was
evident in Richard Branson's Virgin Airways.
Core Product and Supplementary Services

Many services products consist of a bundle that includes a variety of service
elements and even some physical goods. It is important to distinguish between
the core product that the customer buys and the supplementary services that
accompany that product.
The Flower of Services
Core product surrounded by clusters of supplementary services.

The core service of an airline is the service of transport. The supplementary
services are classified into clusters & each one is analyzed with respect to the
airline industry:
* Facilitating elements
* Enhancing elements
o Information
This aspect of supplementary service is common for every person that
needs information about the organization. In case of airline industry, up
to date information regarding flight schedules, ticket fares, information
about promotion schemes etc must be available to customers.
Customers can avail of this information literally at their fingertips today
with every airline starting its own website which gives complete details
to the customer & also entertains queries.
It also includes providing information to employees regarding new
policies affecting the airline & equipping them with enough
information, which the customers might demand. Extensive training is
provided to in-flight attendants regarding handling customer queries,
knowledge about the airplane itself, knowledge about cuisine etc.
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o Consultation
This aspect of supplementary services can be customized according to
the needs of the customer. It is more in the case of people processing
and high personnel-contact services.
Airlines are moving more actively into the role of consultant today.
They are doing away with the travel agents & designing & selling
packaged tours to consumers directly. In this aspect they often act as
consultants to the customer, by giving him advice & suggestions
regarding the type of plan he can choose, the benefits he will get the
mode of travel he should choose etc.
Another aspect to consultation at airlines is when the customer
approaches the airline regarding traveling to particular destination, the
airline gives him a variety of choices of routes that he can take.
In some cases airline may also design special menus & benefits in
consultation with its frequent fliers by keeping in constant touch with
them & asking them for suggestion as to what they want in their airline
which will make their experience more comfortable.
o 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 is
smooth, easily understood & fast. Reservation of airline tickets is now
easy and reliable since it is fully computerized. There are 24 hours
reservations. Passengers can specify their seat preferences at the time of
reservation.
Most airlines use the telephone, fax, and email methods of booking.
The emphasis here is on fast booking & at the same time getting the
required information form the customer. This is done by establishing a
standard reservation procedure & format thus reducing the risk of
inconsistent service delivery. The online booking system also facilitates
better order taking & processing.
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The scheduling aspect assumes importance as reservations on the wrong

flight to the wrong place are likely to be unpopular.
o Hospitality & Caretaking

With the increased competition today in the airline industry & the
increasing similarity of services offered by each airline, hospitality has
emerged as a key-differentiating factor between one airline & the other.
The hospitality aspect of an airline is tested right form the time of the
reservation (courtesy of the booking official) to the airline’s desk at the
airport to the actual in-flight travel (the attitude of the flight attendants)
to the post flight help extended.
o Safekeeping
In airlines the safekeeping issue is that of safeguarding the customer’s
baggage.
Baggage allowances are offered about 30 kgs of check-in baggage is
allowed. Passengers carrying international tickets are given further
allowance of around an added 30 kgs Priority baggage delivery is
offered to members. The customers entrust his baggage to the airline &
it is the airline’s responsibility to keep it in a proper condition.
Children and infants usually travel along with their parents and
guardian. In case of unaccompanied minors, customer service staff
renders all assistance like checking in and escorting up to the aircraft
and handing over to the senior-most cabin attendant on board the flight.
He is looked after on board the flight right up to the point flight reaches
the destination and he is received by his guardian.
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o Exceptions
Special requests – airline very often receive special requests form
customers with regards to meal preferences, special amenities for
elderly people or children., medical needs etc. these needs have to
considered & acceded to wherever possible. Handling of customer
suggestions / complaints – every airline today has a customer service
centre which entertains customer suggestions & complaints. On the
flight, customers are often asked for their opinion regarding service
equality. Many corporate frequent travelers are consulted when the
airline decides to make any new change.
o Billing & payment

The billing procedure in airlines is simple. The 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.
LEVELS OF PRODUCT
FIVE PRODUCT LEVELS
The Core Service

The core service of the airlines industry is to transport goods and
services to various destinations. As the needs of the people increased the
entire system became more organized and formal. After this stage comes the
various supplementary services.
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The Supplementary Services
The airline industry has many players they had a brand name like ‘Air
India’,’ Jet Airways’,’ British Airways’. All of them had some common
services to offer like connecting flights, through check-in, tele check in, food
on board, and complementary gifts etc.
Different classes like economy class, business class were introduced.
Air concessions are given to school students, old people etc. Singapore
airlines was the first to introduce small 8”television screen for every
passenger. The freebies are actually win-win deals between airlines and other
services.
Sahara, for example, offers its passengers a ‘business-plan’ on two-way
economy class ticket, which includes a night’s stay with breakfast, STD
facility for 3 minutes and boardroom facility at the Park Hotel, New Delhi. To
Delhi based fliers to Mumbai, it offers a night’s stay with breakfast, airport
transfers and VIP amenities at The Orchid, Mumbai. For business class, the
plan includes a stay at The Leela, with buffet breakfast and late checkout. All
these added service helps the customer to decide upon which airlines he wants
to travel. As competition increased and the customers wanted more the next
phase evolved and that is the augmented service.
The Augmented Service

This phase is where the customer’s expectations are met; the service
providers kept working on new methods to meet the ever-changing customers’
demands. The players introduced online booking, which was very convenient
for the service users.
British Airways business class has showers; it’s more spacious and
comfortable. Sahara airlines offer its passengers six different types of cuisine
like vegetarian, fat free, diabetic etc. They also have auction going on board.
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Virgin airlines have gambling on board, they also have body massage to offer
to their passengers. Air Emirates has something called cab service, they have
customized pick up and drop cab service.
This phase is the most crucial one; with increased competition service will
become the final differentiation.
Future Service
As mentioned above the customer needs keep changing, the future is
unknown. The customers may be looking in for more frequent inexpensive air
travel, something like air taxis, super sonic speed. This decreases the time thus
reducing the cost.
The diagrammatical representation of the core and supplementary services is
COMFORT/ SPACE
TICKETS
CONNECTING FOOD
FLIGHTS
AUCTION Core MULTI-

TRANSPORT CUISINE
BRAND NAME CONCESSIONS

(Air India, Jet
Airways)
COMPLEMENTARY
GIFTS
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CAB SERVICE
Airline marketing
Product Life Cycle
Pre-Introduction: Light advertising, pre-introduction publicity
Introduction: Heavy use of advertising, public relations for awareness, sales

promotion for trial
Growth: Advertising, public relations, branding and brand marketing,

personal selling for distribution
Maturity: Advertising decreases, sales promotion, personal selling, reminder

& persuasion
Decline: Advertising and public relations decrease, limited sales promotion,

personal selling for distribution
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 PRICE MIX:
Pricing is one of the most important elements of the marketing mix, as it

is the only mix, which generates a turnover for the organisation. The
remaining 3p’s are the variable cost for the organisation. It costs to produce
and design a product; it costs to distribute a product and costs to promote it.
Price must support these elements of the mix. Pricing is difficult and must
reflect supply and demand relationship. Pricing a product too high or too low
could mean a loss of sales for the organisation.
In managing the business of air transport pricing decisions play a

decisive role. Some of the important factors influencing the strategic decisions
for setting fare and freight rate is air transport are:
• The mounting competition.

• Increasing operational cost.
• Falling occupancy ratio.
• Imbalance in demand and supply and
• Increasing pressure of inflation.
We have different authorities to manage and control domestic as well

international air transport business. The ministry of Tourism and Civil
Aviation, the Indian Airline Authority of India and the Air India Corporation
are the boolies directly or indirectly influencing the process of marketing
pricing decisions.
Price plays as much a tool of marketing as promotion plays a critical role

in the marketing mix. The concept of 'fair price' is paramount. Buyers judge
whether a product is fairly priced by seeing whether it represents value for
money.
DIVISION OF FARES:
The final fares charged to the passengers include the following components:
 Basic fares
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 Insurance
 Inland Aviation Travel Tax (IATT).
 Passenger Service Fee (PSF)
The basic fares include the operating cost incurred by the airlines and the
profit margin. The major constituents of the operating cost in respect of
domestic airlines in India are the Aviation Turbine Fuel (ATF) the basic raw
material for this service industry, varies 30-40 % depending on aircraft
utilization; Navigation, Landing & Parking costs 7-10%; Repair and
Maintenance 13%, Manpower 12%; Acquisition/ Depreciation & Insurance
13% and balance other expenses.
How are fares arrived at?
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. In other words, the capacity and frequency is tailored to the
size of the market. Accordingly, the pricing structure is also arrived at.
Pricing or fare levels are arrived at after taking into consideration various
factors; type of aircraft, configuration of aircraft (number of seats), density of
route, competitor activity, and minimum breakeven cost.
In order to achieve the breakeven seat factor and thereafter maximize loads,
the airline embarks upon a serious of marketing activities. These will vary
from a publicity campaign highlighting various facets of the Product, to sales,
service, punctuality, ideal departure and arrival timings, connections and so
on. In short, the entire focus is to increase the yield and load factor (seat
factor). The yield or the bottom line is the income generated from ticket sales
less costs incurred on the route.
Why do fares fall?
When the yield drops or the seat factor falls, the airline is immediately alerted
to enquire into the causes for this. This leads to a fare war wherein the airline
either tries to protect its market share or responds to another airline which
tries to increase its own market share. The reasons for these can be
multifarious.
1. It could be that the route is not profitable due to intrinsic reasons such as a
very short haul route, or the potential or total size of the market for this
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route is too small to sustain a profitable flight or there is too much capacity
deployed by various airlines on the route
2. Yields may also fall due to increase in costs. Then the airline has two
options; increase fares to compensate for the increased costs. The second
option is, to drop fares in order to increase the seat factor. (Increase in
volume number with low fares can achieve breakeven cost)
3. It could be that the type of aircraft deployed on the route is not suitable and
hence is making cash loses.
4. Extraneous reasons also contribute to non-profitability of routes. The
event of September 11, 2001 is an instant example wherein passengers
simply stopped flying and several airlines went into bankruptcy. Also poor
economic conditions lead to shrinkage of market. Prices of fuel also
fluctuate and can result in sudden increase in basic costs. Insurance
premiums have recently increased considerably, further adding to the
burden.
5. Apart from the above. Competitor activities can also lead to a drop in
market share or drop in yields. For example, the most common cause is a
reduction in fares by one airline forces the other to reduce fares. This
reduction in fares could be due to any of the above three reasons
enumerated above.
Reduction in fares, apart from the above reasons is also due to introduction of
a more suitable aircraft, which is fuel efficient, modern, and with greater
seating capacity at lower cost. In other words reduction in fares is not always
due to negative factors but can be due to modernization.
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PRICING STRATEGIES
Premium Pricing:
The airlines may set prices above the market price either to reflect the image
of quality or the unique status of the product. The product features are not
shared by its competitors or the company itself may enjoy a strong reputation
that the 'brand image' alone is sufficient to merit a premium price.
Value for Money Pricing:
The intention here is to charge the average price for the product and
emphasize that it represents excellent value for money at this price. This
enables the airline to achieve good levels of profit on the basis of established
reputation.
Cheap Value Pricing:
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. Air India and Indian Airlines have slashed their prices to meet the
competition of private airlines so that they can consolidate their position in the
market. Airlines usually practice differential pricing. There are three classes:
The First Class, The Executive or Business Class and The Economy Class.
Fares for each class are different since the facilities provided and the comfort
and luxury level is different in each class. Seasonal fares are also fixed, fares
rise during the peak holiday times.
Low-cost Pricing:
With the advent of the low-cost airlines in the Indian aviation industry,
a different low-cost flying concept has come up. Since these low-cost airlines
are trying to woo the customers by providing air travel in exceptionally low
prices, a price-band kind of pricing has to be designed. In low-pricing
strategies, the airlines provide very low prices for the flight tickets. Also, their
prices are made low expensive by booking the tickets long before the flight
date.
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APEX Fares:
In this scheme, people are given very cheap rates only if tickets are
booked at least before the specified time period. But the draw-back here is that
if the booking is cancelled, a substantial amount of money is not returned.
Domestic carriers were able to mobilize close to 30-40% of the total working
capital from advance sale of ticket. Today with travelers being resistant to
flying, airlines are able to raise only 15 – 20% cash from advance sales. This
is one of the reason they have introduced attractive schemes for passengers to
get them onboard early.
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Chapter 5: Promotion, Process, Physical

Evidence, People and Place of
Marketing Mix.
 PROMOTION MIX:
The formulation of an ideal promotion mix is essential to inform sense and
persuade the users. In the Indian perspective, we need more creative efforts
because the potential users in a majority of the cases don’t prefer to use air
services. The business magnets, executives, politicians, actors, high spending
tourists etc are some of the users of the air services. The users appears to be
more conscious, aware of their rights and in a majority of the cases are found
to be sophisticated and therefore the promotional efforts have to be creative.
Many airlines are facing financial crunch, it is pertinent that they make
optimum use of different components of promotions
• Advertising:
Airlines need creative advertisements to promote their business. In the view

of rising cost of inputs and the increasing impact of worldwide economic
depression on the airlines, advertisements should be budget optimistic vis-à-
vis optimal. The telecast media and print media are important for promoting
the air business.
The airlines have to make sure that whatever strategic decision they make to
promote the businesses are in a position to establish an edge over competitor’s
promotional measures. Also the airlines should keep in mind the quality and
the nature of the target markets and the level of expectations.
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It is also essential that while advertising airlines should also keep in mind the
image of our country, the scenic beauty, tourist attractions, rich cultural
heritages or which would attract number of tourists. While advertising it is
impact generating that one should select an opportune moment of flight is an
attractive scene of take off, and so on. Airlines can also use broadcast media.
The domestic flights should use radios because due to increasing access to
FM.
• Publicity:
Publicity is an important component of promotion mix. It is a process of

persuasive communication. It is very instrumental in sensitizing the
persuasion process provided the media people, public relations officers
provide their help. Strengthening the PR activities is essential to promote
airlines business. The PRO, Receptionist, Travel agents, Media people are
very important people in publicizing the business. The marketing
professionals can seek the cooperation of media people by organizing dinners,
meetings, get together, press conference etc, also giving them small gifts and
motivating them to publish news items which are in favour of airlines.
• Sales promotion:
The sales promotion measures are meant for both the related sources
channelising and using the business, such as the travel agents, tour operators
and all of them who process the services and the passengers and business
houses who use the services.
The travel agents contribute a lot to the promotion of airlines business and
therefore the need to think of them in their favour on their priority basis. In
addition the tour operators, the frontline staff also must be given priority.
Hence they should be offer some incentives this will motivate them to
promote the product. The user also deserves incentives.
The incentives may be in the form of concessional services, a small gift etc.
E.g. EMIs, which allows customers to pay in instalments.
• Word of mouth
‘Customer Loyalty Ladder’
This happens to be an important constituent of the promotion mix in which the

promoters act as a hidden sales force. The satisfied groups of users, opinion
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leaders narrate outstanding merits or salient features of services used by them.

If you travel by Air India and are satisfied with the services offered by them
then it is natural that you will share your experiences with your friend’s
relatives, they trust in you and therefore the stimulation process is on. The
moment your friends and relatives get an opportunity to travel they find Air
India their first choice.
Ads may be ineffective, publicity may also be ineffective but word of mouth
can never be ineffective.
 PEOPLE MIX:
In the service industry, service personnel come in direct contact with their
customers in the course of production and consumption of the services.
Because people provide most services, the selection, training, and

motivation of employees can make a huge difference in attaining customer
satisfaction. Ideally, employees should exhibit competence, caring attitude,
responsiveness, initiative, problem solving ability, and goodwill. Many
service organizations trust their people enough to empower their front-line
personnel to resolve customer problems.
The airhostess in any airline come in contact with the customers in the
process of providing the service, while the cock-pit crew are employees who
contribute to the service product but do not come in direct contact with the
customers.
The physical presence and the percentage of time the customer is present
reflect the customer contact and extent of contact respectively. Services with
high contact are more difficult to control and manage because of the degree of
variability in the quality, demand and nature of service.
The service contact personnel in the airline industry is an airhostess who

is expected to possess a pleasing personality with polite service handling.
While on the other hand the cock pit crew, being categorized as a low contact
personnel, require to possess high analytical and technical attributes. In the
airline industry, there is also the ancillary service personnel, the travel agent
who helps to create the service exchange but is not a part of the service.
While delivering services, airlines ensure that the service is delivered as

promised and this is often totally with in the control of the front-line staff.
This ensures some amount of reliability. This in turn affects the degree of
responsiveness sought from customers. The quality of service that the front-
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lone staff provides is highly depended on his/her ability to communicate their

credibility. Airlines deliver caring and individualized attention to customers
through their airhostesses. Empathy implies that these personnel will listen,
adapt, and be flexible in delivering what individual customers need. Also the
appearance of an employee are important aspects as it forms the tangible
dimensions of quality along with other factors like service quality, decor etc.
To start off, airlines hire the right personnel with essential requirements.
They recruit the right people and develop, and train them to deliver quality
service. These employees are provided with effective and sufficient support
systems and are motivated in a manner, they stick to the organization. They
are more treated as customers, rather than employees.
 PHYSICAL EVIDENCE:
Physical Evidence refers to the environment in which the service is

delivered and where the service industry and customer interact. The aircraft by
itself, the seating configuration meant to be comfortable and spacious, and the
in-flight food provide physical evidence to the airline service.
The Boeing Company and The Airbus Industry are the best
commercial aircraft makers and almost all airline industries make use of one
of these airlines. The seating is such that it is comfortable and there is enough
leg space
The in-flight food is another, important aspect, a wide selection of meals
is offered to the passengers. Passengers are requested to indicate their
reference at the time of reservation itself. Delta Airlines has introduced new
sleeper seats with electric controls for reclining lumbar support, leg rest
extension, expanded seat back height for a more insulated environment etc.
thus providing highly comfortable seating.
Booking offices, ticket counters, etc. must be spacious and well

designed with good looks. Further the air crafts must be given good exteriors
and must be maintained wel1.
The aircraft must have elegant interiors and must be incorporated with all
basic facilities. The aircrafts must have well designed seats with more leg
room especially in the business class.
Domestic lounges are enhanced with good interiors and basic amenities
which will make it an ideal place to conduct business, entertain or relax.
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The jet logo prominently displayed on each of its aircrafts, is used a cue
to trigger of a reminder of the customer’s experience at Jet & also of all the
values that jet airways stands for.
The physical evidence would also include the other facilities in the
aircraft. Some of the bigger aircrafts have more than the usual facilities on
board. These sort of tangible clues act as identification marks for the airline &
help the customer to evaluate on airline from another.
 PROCESS:
The process of airline service lays emphasis on the involvement of

channels, front line staff, travel agency offices, offices of the tour operators or
so form where the services flow & reach to the ultimate users.
The process begins at the time of reservation goes on to the confirmation
of seats. For e.g.: Computer reservation system of Indian Airlines enables any
reservation request from anywhere in the world to be auctioned in minutes.
The reservation facility is accessible through all-major computerized
reservation system of the world.
By giving details of where to book and how to book airlines help in
providing quality services to the customers. They also offer concession, by not
charging any cancellation charges and also giving them the option to make a
change in the reservation status if he requests so on the presentation of ticket,
all these facilities go a long way in increasing passenger convenience.
Then facilities at the airport, the baggage handling, flight information,
etc. also helps in delivering quality service and making travel a pleasure.
In the aircraft the meal service, in-flight entertainment, reading material,
in-flight amenities, etc. help the customers, the travelers to have an enjoyable
and convenient travel.
All these procedures form a part of the total process designed to deliver
quality service. Airlines are making every effort to constantly redefine service
procedures to enhance service satisfaction levels.
 PLACE:
Understanding what, where, why, when, and how the target market
buy, is the first step in designing the marketing channel. The marketer must
understand the service output levels desired by the target market and types and
levels of services that the people want and expect when they purchase the
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service.
The airline industry has adopted different distribution channels for
marketing their services to their target audience. On the ground there are
many ticket counters with computerized 24-hour reservation systems. They
have many specially designed check-in counters for club and premiere
passengers.
There are two principal methods of booking seats on an airline.
• The first is the group of traditional method such as the phone, fax, and email.
Corporates or vacationers generally approach travel agents who book the
tickets form the airline & take the commission from them.
• The second & increasingly popular method of reservation is the online
booking method. Here the customer fills in his details online & he receives an
instant booking of his ticket. His payment is generally through credit card.
Although not as popular in India, this booking system has achieved much
success in the developed countries that travel agents are losing their jobs.
An example of how distribution is carried out:
The place mix of airlines consists of mainly the distribution channels. The
number of destinations that an airline flies to can also contribute to its place
mix.
Distribution channels
The Four methods of distribution are as following:
A] Consolidation: The direct sale of tickets from airport to the passenger on
the airline desk.
B] Tour Operator/ Travel Agent: Customers approach travel agents or tour
operators who book the tickets from the airline and take commission. E.g.
SOTC
C] Affiliated with companies: As the name defines, airlines gets affiliated
with companies who carry all its trips with a same airline who in turn gives
special discounts or offers in return.
D] Direct through home leased system, e.g. phone, fax, email and also online
e-booking.
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Chapter 6: Pest analysis of Airlines.
PEST Analysis: The Indian Airline Industry
Political Factors
In India, one can never over-look the political factors which influence
each and every industry existing in the country. Like it or not, the political
interference has to be present everywhere. Given below are a few of the
political factors with respect to the airline industry:
The airline industry is very susceptible to changes in the political environment

as it has a great bearing on the travel habits of its customers. An unstable
political environment causes uncertainty in the minds of the air travellers,
regarding travelling to a particular country.
o Overall India’s recent political environment has been largely unstable due
to international events & continued tension with Pakistan, which also leads to
fear of terrorism.
o The recent Gujarat riots & the government’s inability to control the
situation have also led to an increase in the instability of the political area.
o The most significant political event however has been September 11. The
events occurring on September had special significance for the airline industry
since airplanes were involved. The immediate results were a huge drop in air
traffic due to safety & security concerns of the people.
o International airlines are greatly affected by trade relations that their

country has with others. Unless governments of the two countries trade with
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each other, there could be restrictions of flying into particular area leading to a
loss of potential air traffic (e.g. Pakistan & India)
o Another aspect is that in countries with high corruption levels like India,
bribes have to be paid for every permit & license required. Therefore constant
liasoning with the minister & other government official is necessary.
Economic Factors
Business cycles have a wide reaching impact on the airline industry.

During recession, airline is considered a luxury & therefore spending on air
travel is cut which leads to reduce prices. During prosperity phase people
indulge themselves in travel & prices increase.
The loss of income for airlines led to higher operational costs not only
due to low demand but also due to higher insurance costs, which increased
after the WTC bombing. This prompted the industry to lay off employees,
which further fuelled the recession as spending decreased due to the rise in
unemployment.
Social Factors
The changing travel habits of people have very wide implications for the
airline industry. In a country like India, there are people from varied income
groups. The airlines have to recognize these individuals and should serve them
accordingly. Air India needs to focus on their clientele which are mostly low
income clients & their habits in order to keep them satisfied. The destination,
kind of food etc all has to be chosen carefully in accordance with the tastes of
their major clientele.
Especially, since India is a land of extremes there are people from

various religions and castes and every individual travelling by the airline
would expect customization to the greatest possible extent. For e.g. A Jain
would be satisfied with the service only if he is served jain food and it should
be kept in mind that the customers next to him are also jain or at least
vegetarian.
Another good example would be the case of South West Airlines which
occupies a solid position in the minds of the US air travelers as a reliable and
convenient, fun, low fare, and no frills airline. The major element of its
success was the augmented marketing mix which it used very effectively.
What South West did was it made the environment inside the plane very
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consumer friendly. The crew neither has any uniform nor does it serve any
lavish foods, which indirectly reduces the costs and makes the consumers feel
comfortable
Technological Factors
The increasing use of the Internet has provided many opportunities to

airlines. For e.g. Air Sahara has introduced a service through the internet,
wherein the unoccupied seats are auctioned one week prior to the departure.
Air India also provides many internet based services to its customer such as
online ticket booking, updated flight information & handling of customer
complaints.
USTDA (US trade & development association) is funding a feasibility

study and workshops for the Airports Authority of India as part of a long-term
effort to promote Indian aviation infrastructure. The Authority is developing
modern communication, navigation, surveillance, and air traffic management
systems for India's aviation sector that will help the country meet the expected
growth and demand for air passenger and cargo service over the next decade.
A proposal for restructuring the existing airports at Delhi, Mumbai,

Chennai and Kolkata through long-term lease to make them world class is
under consideration. This will help in attracting investments in improving the
infrastructure and services at these airports. Setting up of new international
airports at Bangalore, Hyderabad and Goa with private sector participation is
also envisaged.
A good example of the impact of technology would be that of AAI,

wherein with the help of technology it has converted its obsolete and unused
hangars into profit centers. AAI is now leasing these hangars to international
airlines and is earning huge profits out of it. AAI has also tried to utilize space
that was previously wasted installing a lamination machine to laminate the
luggage of travelers. This activity earns AAI a lot of revenue.
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Porter’s five force model
According to Porter, the five forces model should be used at

the industry level; it is not designed to be used at the industry
group or industry sector level. An industry is defined at a lower,
more basic level: a market in which similar or closely related
products and/or services are sold to buyers. A firm that competes
in a single industry should develop, at a minimum, one five forces
analysis for its industry. Porter makes clear that for diversified
companies, the first fundamental issue in corporate strategy is the
selection of industries (lines of business) in which the company
should compete; and each line of business should develop its
own, industry-specific, five forces analysis.
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The Five Forces
The threat of substitute products
The existence of products outside of the realm of the common product

boundaries increases the propensity of customers to switch to alternatives:
• Buyer propensity to substitute.

• Relative price performance of substitutes
• Buyer switching costs
• Perceived level of product differentiation
• Number of substitute product available in the market
The threat of the entry of new competitors
Profitable markets that yield high returns will draw firms. This results in many
new entrants, which will effectively decrease profitability. Unless the entry of
new firms can be blocked by incumbents, the profit rate will fall towards a
competitive level
The existence of barriers to entry (patents, rights, etc.)
• Economies of product differences

• Brand equity
• Switching costs or sunk costs
• Capital requirements
• Access to distribution
• Customer loyalty to established brands
• Absolute cost advantages
• Learning curve advantages
• Expected retaliation by incumbents
• Government policies
The intensity of competitive rivalry
For most industries, the intensity of competitive rivalry is the major

determinant of the competitiveness of the industry.
• Sustainable competitive advantage through improvisation
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The bargaining power of customers

The bargaining power of customers is also described as the market of outputs:
the ability of customers to put the firm under pressure, which also affects the
customer's sensitivity to price changes.
• Buyer concentration to firm concentration ratio

• Degree of dependency upon existing channels of distribution
• Bargaining leverage, particularly in industries with high fixed costs
• Buyer volume
• Buyer switching costs relative to firm switching costs
• Buyer information availability
• Ability to backward integrate
• Availability of existing substitute products
• Buyer price sensitivity
• Differential advantage (uniqueness) of industry products
• RFM Analysis
The bargaining power of suppliers
The bargaining power of suppliers is also described as the market of inputs.

Suppliers of raw materials, components, labor, and services (such as
expertise) to the firm can be a source of power over the firm. Suppliers may
refuse to work with the firm, or, e.g., charge excessively high prices for
unique resources.
• Supplier switching costs relative to firm switching costs

• Degree of differentiation of inputs
• Presence of substitute inputs
• Supplier concentration to firm concentration ratio
• Employee solidarity (e.g., labor unions)
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Chapter 7: Communication Mix
Communication mix
The Marketing Communications Mix is the specific mix of

advertising, personal selling, sales promotion, public relations, and
direct marketing a company uses to pursue its advertising and
marketing objectives.
Definitions:
Advertising - Any paid form of nonpersonal presentation and

promotion of ideas, goods, or services by an identified sponsor.
Personal selling - Personal presentation by the firm’s sales force for

the purpose of making sales and building customer relationships.
Sales promotion - Short-term incentives to encourage the purchase

or sale of a product or service.
Public relations - Building good relationships with the company’s

various publics by obtaining favorable publicity, building up a good
"corporate image", and handling or heading off unfavorable rumors,
stories, and events.
Direct marketing - Direct communications with carefully targeted

individual consumers to obtain an immediate response and cultivate
lasting customer relationships.
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AIDA Model
The traditional conceptual model for creating any advertising or marketing
communications message is the AIDA Model:
get Attention,
hold Interest,
arouse Desire,
and then obtain Action.
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AIDA model helps airline industries to undertake an effective advertising.
Chapter 8: Case studies and Articles
Case 1:- Airline Industry

Several airlines have initiated wireless projects for providing superior
customer service, especially for their regular and high-income customers. The
following customers have reported use of wireless (or Radio Frequency)
network based solutions:
1. American Airlines (AA)

AA has initiated a pilot scheme to implement a cellular circuit switched
network that will provide any of its flight assistance staff without a physical
terminal access to the entire reservation system. The following type of
information will be available on hand-held PCs used by agents at the gates
and on the floor:
• Check in
• Ticketing including buying via cell phones
• Schedule information
• Maintenance — fueling and de-icing information
• Baggage handling
American Airlines is also testing these applications on a CDPD network. The

objective is to reduce passenger line-ups and take-off delays and to improve
customer service.
2. Scandinavian Airlines
Symbol Technology’s LRT 3800 hand-held scanner/terminal are being used
by Scandinavian Airlines (SAS) to match individual bags with passengers in
real-time. The objective was to improve productivity, speed up baggage
handling process at transfer points, reduce lost bags and improve passenger
security. Similarly at the Franfurt airport, baggage handlers are using Eagle
hand held terminal that contains a code reader for scanning baggage tags and a
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Mobidem M2060 integrated radio modem. The scanner is connected to the

host computer system. This terminal is being used in a new baggage
reconciliation system called FRA-BRS, which is designed to improve security
and service at the airport. The system has replaced manual baggage handling
procedures and is resulting in greater efficiency, security and reliability.
Because of baggage reconciliation with passengers, opportunities for terrorist
attacks are also greatly diminished.
3. Delta Airlines
Delta started offering wireless access through Palm handhelds and other
devices in March 2000. Delta has also announced an agreement with AT&T
Wireless Service to provide a direct link for digital PocketNet service.
Delta has been using mobile scanners to scan bar-coded information from
baggage tickets directly into a database. KLM is using mobile notebooks in its
maintenance operations. Technicians on site can enter status information,
order parts and schedule routine or emergency repairs right from their
notebook computers.
4. NorthWest Airlines
The airline lets its passengers to check in and print boarding passes from their
PCs, even before leaving home. The pilot was started in Memphis in mid
2000. Is planning smartphone-based check in.
4. British Airways (BA)

As reported in eWeek in January 2001, BA awarded a 17.5 million dollar
contract to IBM for a two-year project to implement several web-based
applications, including access to departure and arrival information by WAP-
enabled smart phones.
5. Japan Airlines
JAL offers wireless reservation and ticket sales through imode smart phones.
6. Online Travel Companies (Travelocity.com and Expedia.com)

Planning WAP projects in 2001.
7. Virgin Atlantic Airways of UK Launches In-Flight Internet Access

In march 2001, U.K.-based Virgin Atlantic Airways Ltd. announced the
deployment of in-flight Internet and e-mail services for all passengers,
traveling on board its fleet of Boeing 747-400 and 747-200 aircraft, as well as
its Airbus 340-300 aircraft.
Working with Seattle, W.A.-based Tenzing Communications, the airline can

offer its passengers an advanced in-flight entertainment system enabling them
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to send and receive e-mail using their laptops or send personal notes via the
seat back video screen.
"The introduction of e-mail and Internet capabilities will enhance our in-flight
entertainment for all our passengers—unlike other airlines who focus solely
on those in business class. Economy passengers will be able to e-mail friends
and surf the Web while business passengers will be able to remain connected
and up-to-date with their e-mails throughout the flight," Richard Branson,
chairman of Virgin Atlantic.
The American company said it will utilize satellite communications

equipment for air-to-ground communications with an on board proxy server
delivering content to passengers over a cabin LAN.
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Case 2:- E- marketplaces in the aviation/airline

industry
The airline/aviation industry is a very competitive industry characterised by a

small number of firms who control the majority share of the market. Half of
the world’s fleet is operated by 17 large airlines.
It is estimated that the airline/aviation industry generates 29 million jobs

worldwide and its global economic impact is estimated at USD 2,960 billion,
which is equivalent to 8% of world GDP.
Recent times have been difficult for the industry. Of note have been the loss
of consumer confidence due to terrorism threats and SARS and the increasing
cost of fuels reducing yield per customer. It seems though that the industry
has weathered this well and is coming out the other side. Growth in seat
demand is forecast across all regions, with the most significant growth
expected to come from Asia.
A 2005 study conducted by the National Institute for Transport and Logistics
in Dublin, Ireland, of Senior Procurement personnel from airlines around the
globe focussing on B2B e-markets in the airline industry, delivered some
interesting findings.
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• 25% of study respondents are involved financially in an e-market (full

service airlines making up the majority of this group at 68% and low
cost at 23%)
• 65% report using e-markets for procurement (full service at 82%, low-
cost at 79%, regional at 50%, and charter at 27%)
E-markets reduce search costs of airlines mostly in the areas of spares and
repairs, tools, and office supplies.
Case 3:- Low-cost Carriers in US: Pricing Pressures for Major

Airlines
Abstract:
The entry of low-cost carriers into commercial aviation had a legacy of factors
– both environmental and operational – that contributed to their business
models. If the Airline Deregulation Act of 1978 helped them scale their
operations, their 'no-frills' approach eased their entry strategies. The success
of their business model can be inferred from the fact that they survived one of
the worst downturns (the September 11 terrorist attacks) in the history of
commercial aviation, while the major airlines were desperately seeking for
bankruptcy protection.
Pedagogical Objectives:
• To discuss how the low cost carriers exerted an enormous pricing

pressure on the major airlines with their low fare, point-to-point services.
• To discuss the major airlines’ fight-back, which eventually extended
their operations to the low cost segment.
Keywords : Low cost carriers, The major airlines, Airport hubs, The 1978
Airline Deregulation Act, Southwest Airlines, People Express Airlines, New
routes and new airlines, Competitive Strategies Case Study, Operating
revenues, Operating costs, The grip of bankruptcy, Major carriers adopting the
low-cost model, In-flight food services, JetBlue's savvy approach, Delta's
Song and United's Ted, Union concessions
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Case 4:- The New 'Indian' Airlines
The case discusses how Indian Airlines Limited (IA), a public sector
undertaking (PSU) in India, lost its grip on the market as a result of the
increasing competition from the private air carriers.
It shows how IA, once a monopoly in the airline industry, was reduced to a
mere competitor by the early 2000s, as it was unable to match its service
levels with those of private airline companies.
The case also looks at the increasing competition being faced by IA from low-
cost carriers and other major full-service airline companies in India since the
early 2000s.
It explains the various measures taken up by IA with a view to fighting the

fierce competition from private carriers especially the low-cost carriers. The
case further discusses whether these measures are sufficient to take on the
increasing competition from private players.
Issues:
• Gain an understanding of marketing communication campaigns and their

components.
• Gain insights into the factors that contribute to the success of a

communication campaign.
• Appreciate the complexities of tourism marketing.
• Understand the unique challenges in conducting a worldwide campaign to

promote a country as a tourist destination, particularly with regard to the
number and variety of stakeholders involved, and their possible responses.
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• Understand the current status of the Indian tourism industry and to analyze
its future prospects.
ARTICLES
Article 1:-
Low-cost domestic carriers raise airfares on busy routes
Mon, Dec 7 05:28 AM
Crippled by financial setbacks and a dip in revenues, domestic air carriers

have more than doubled the fares on select metro routes ahead of a long
festive season, as compared to the fares four months ago. While a Delhi-
Mumbai one-way ticket priced at the lowest fare cost around Rs 2,300 in
August this year, it has more than doubled to Rs 4,900 now, if booked 10 days
in advance.
All the five low-cost carriers ï¿½ Go Air, Indigo, SpiceJet, JetLite (erstwhile
Air Sahara), Kingfisher Red (erstwhile Air Deccan) ï¿½ are charging upwards
of Rs 4,500 one-way to connect any two of the four major metro cities. Flyers
will have to shell out around Rs 5,700 as one-way fare from Delhi to
Bangalore, which used to cost around Rs 2,500 four months ago. Similarly,
the Delhi-Chennai one-way fare totals to around Rs 5,400 now as compared to
Rs 2,900 four months ago.
Aviation experts say that the recent hike could be explained by multiple
factors which have affected the airline industry. "Airlines have posted
significant losses recently; now they are trying to maximise the recoveries by
hiking fares on metro routes that have high load factors," said Kapil Arora,
partner (advisory services), Ernst and Young Pvt Ltd. The pricing that was
adopted by domestic carriers till a few months ago, said Arora, was highly
irrational and was even below cost. "Airlines have started pricing rationally in
select sectors to bring closer the break-even point," he added. In the second
Nair Asha Vinod
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Airline marketing
quarter of 2009-10, the balance sheet of all listed airlines was splattered with
red. Vijay Mallya-promoted Kingfisher Airlines posted a loss of Rs 419 crore,
Jet Airways suffered a loss of Rs 409 crore and low-cost carrier SpiceJet
incurred a loss of Rs 101 crore in Q2 2009-10.
Even though the domestic market remains highly price sensitive, aviation
industry experts rule out the possibility of the traffic taking a beating due to
high fares in the coming quarter. "With the macro economy picking up and
GDP growth clocking 7.9 per cent, the demand story is back. While the fares
are on the higher side, they are not unreasonably high. The traffic has risen
steadily by 25-26 per cent in the last couple of months and is unlikely to be
impacted by the rise in fares," said SpiceJet COO Samyukta Sreedharan.
While fares have also been impacted with the airlines withdrawing most of the
promotional offers that were introduced a few months ago, aviation fuel price
also had a role to play. In the last six months, the aviation fuel prices have
risen by around 12.5 per cent, forcing all domestic carriers to raise the fuel
surcharge by up to Rs 200.
"Airlines cannot absorb the rise in fuel prices any more and have been forced
to pass on the impact to the customer," said Arora.
By Smita Aggarwal
Nair Asha Vinod

55
Airline marketing
Article 2:-
Airline marketing increasingly difficult

By: Chris Moerdyk
News that the European Union is to consider prohibiting airline passengers
from taking drinks on board is yet another security irritation that is going to
make marketing a lot more difficult for airlines in the future. Particularly with
the EU having decided that this ban would not apply to liquor bought at the
airport duty-free shops prior to a flight.
Why? Well, simply because airports saw this as the thin end of the wedge of
passengers not being able to take anything on board which would collapse the
whole duty-free industry, which in turn would deprive airports authorities of
whacking great bundles of revenue.
Powerful perceptions
Now the problem, whether airlines like to admit it or not, is that passengers do
not separate responsibility for their trips from among airlines, baggage
handling companies, airports authorities and so forth. They buy their tickets
from an airline and much as airlines try desperately to separate airport taxes
from ticket prices, for example, passengers perceive the airlines to be
responsible for the entire cost, as well as the handling of baggage, airport
security, parking and, in some cases, even exorbitant charges for so-called
duty-free products.
And it is no good airlines protesting that everything, barring actually flying, is

beyond their control. Passenger simply will not accept that even if it is the
truth.
Double standards
Nair Asha Vinod

56
Airline marketing
All of which is going to make the marketing of airlines a lot more difficult
going forward because already travellers are getting more and more frustrated
with what they see as double-standards in the whole airline security setup.
Why, they may well ask, does the EU intend banning liquor being brought
onto flights unless it comes from the duty-free shops? Smacks of
protectionism of the worst kind and the perception will be that duty-free
prices, with no competition, will rocket. And surely, no matter how tight
airport security might be, it would not be all that difficult for terrorists to bribe
duty-free suppliers into delivering explosives among their thousands of cases
of liquor delivered every day to duty-free shops. There is no way airport
security can check every single bottle of Scotch.
With leaving such a big loophole, the entire exercise becomes pretty pointless.
It is hardly surprising that Ryanair has sued the UK government for its last
security crack down and it would not be surprising if British Airways follows
suit, having announced recently that this same security clampdown cost it
R400 million.
The romance of travelling by air is waning fast because of increasing airport

trauma. It's unfair that airlines have to bear the brunt, and the challenge of
marketing their way out of this mess will be huge.
DIY airports
Frankly, the only way out of it seems to be if they'd all get together and
establish their own airports because if the public perceives them to be
responsible for airports, now they might as well get on with it and turn that
perception into reality.
Nair Asha Vinod

57
Airline marketing
BIBLIOGRAPHY
Websites
 www.marketingteacher.com
 www.managementparadise.com
 www.davedolak.com
 www.highbeam.com
 www.findarticles.com
 www.en.wikipedia.org
Book
• Airline marketing and management by Stephen Shaw
Nair Asha Vinod

58

Airline Marketing Submitted by Nair Asha Vinod: University of Mumbai A Project Report On

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Airline marketing

TOLANI COLLEGE OF COMMERCE

IN ACADEMIC YEAR 2008-2009.

Nair Asha Vinod

TOLANI COLLEGE OF COMMERCE

IN ACADEMIC YEAR 2009-2010.

Nair Asha Vinod

I, Miss. NAIR ASHA VINOD., student of Tolani College of

Date: ________ 2009 Signature

Nair Asha Vinod

I, Miss. NITAL KOTHARI certify that Miss. NAIR ASHA

Sign of Project Guide Sign of Coordinator Sign of Principal

--------------------- ------------------------ -------------------

Nair Asha Vinod

It’s is great pleasure to acknowledge the assistance and

I would like to express my thanks to my

I am also thankful to all those seen and

unseen hands and heads, which have been of direct and

indirect help in completion of this project work.

Nair Asha Vinod

Airline Marketing gives a basic idea of

Nair Asha Vinod

Chapter. Topic Page no.

1. Introduction and history of 9-11

Nair Asha Vinod

Nair Asha Vinod

Chapter 1:-Introduction and History of

The most efficient c omponent of the transport system is the air-

Keeping in view the growing economic activities in the country the

Air transport handled almost an equal number of passengers as sea

Airlines play an important role in international tourism. Tourism

As far as India is concerned Indian Airlines and Air India have

Nair Asha Vinod

The first airlines

DELAG, Deutsche Luftschiffahrts-Aktiengesellschaft was the world's first

About Indian Airlines

Indian Airline's main objective behind revolutionizing itself was improving

Nair Asha Vinod

Indian Airlines Flights

Nair Asha Vinod

Chapter 2: Definitions of marketing and

Marketing is everything you do to place your product or service in the hands

Marketing is basically your interaction with your consumer. This interaction

There is a tendency to confuse “marketing” with other terms like

Nair Asha Vinod

Though it may feel counter-intuitive, marketing doesn't begin with a great

The point is that marketing is a mixture of all the activities of advertising,

Nair Asha Vinod

The Marketing Mix

Nair Asha Vinod

Nair Asha Vinod

Nature of Airline services

Services are intangible by nature. They cannot be sampled in advance

Services are heterogeneous in nature and airline services are not

During off-season or periods of low-demand substantial reductions are

Furthermore airline services are highly personalized as production being

Nair Asha Vinod

Chapter 3: Market segmentation

Market segmentation -- Division of the market or population into

Market segmentation is another important concept in marketing

Nair Asha Vinod

Segmentation: The Airline Industry

Most airlines use a very traditional segmentation strategy, dividing