 In 2002 -Market Dynamics Of Aviation industry changed

completely
 Pricing war between 3 Major players
› Jet Airways
› Air Sahara
› Indian Airlines

 Launch of APEX fares Scheme

 Air Sahara’s innovative pricing techniques

 Increase in passenger load factor in 2002

 As of October 30, 2007 the total fleet size of commercial airlines
in India is 439

 122 Airports in the country : Managed by AAI (which include 11

International Airports, 94 domestic airports and 28 civil enclaves)

 Aviation industry going at a rate of 12% p.a.

 Only three people in the country per 100 travel by air annually

 Competition is so cut-throat that carriers lose 10 to 15 dollars

(about Rs 500) a passenger per flight, according to the Center for
Asia Pacific Aviation (CAPA)
S
H
E I
R G
H
V
I
C
E
L
O
W

LOW PRICE
HIGH
S
H
E I
R G
H
V
I
C
E
L
O
W

LOW PRICE
HIGH
Phase 1 Phase 2 Phase 3
Founded in 1993 by Sahara India Parivar.
Founded
Founded
Emerged in 1991
asin by Mr.
a 1953.
leading Naresh
player Goyal.
after the
Has emerged
With
Govt. its fully
decision as India’s
owned
to largest private
subsidiary
open skies to the private
domestic
“Alliance
sector. airline
Air”, it is one of the largest
regional airline system.
 June’02 : 3-15% cut in fares
Apex Fares : “U Can Fly”
Aug’02 : “Wings of Freedom”
and “Bharat Darshan”

Sixer and Super Sixer Schemes

Mar’02 : “Wings & Wheels”
Aug’02 : “Steal a Seat” online
bid

Price reduction for economy

class
Apex Fares: “Everyone Can Fly”
 Characteristics of Indian Aviation Industry
(before 2002)

› Few number of firms contributing to majority of the

market share
› Identical Products
› Products are differentiated in terms of service
quality and offerings
› Significant Entry Barriers
› Firms are price-setter
› Strategy dependent on individual rival firm’s
behaviour
› Oligopoly
 
 I had a Dream of penetrating
deep into the masses and it came
true with Air Deccan

AIRLINE LAUNCH NO. & TYPE OF TOTAL AREA OF

AIRCRAFT INVESTMENT COVERAGE

AIR SEPT’03 SEVEN $50mn – 60mn NATIONAL

DECCAN A320’S
Air Deccan brought “Airlines” in reach
of people who primarily travelled by
“Railways”
AIRLINE LAUNCH NO. & TYPE TOTAL AREA OF
OF AIRCRAFT INVESTMENT COVERAGE

MAY’05 Five Boeing $45mn NATIONAL

737

MAY’05 Four A320 - NATIONAL

Three
OCT’05 Embraer - NATIONAL
175-200LR
Twenty
OCT’05 - NATIONAL
A320

NATIONAL
AUG’06 Six A320 -
 The features of Monopolistic
Competition as seen in the Indian
Airline Industry
› Many sellers
› Product differentiation (LCC & FSC)
› Non Price Competition
Advertising
Discounts
Loyalty Programs
› Control over price within a range
› Non concentration of Market by few
Jet Airways – Air Sahara
Deal
12th April 2007
For Rs.1450 crores
“A Win-Win Deal for both” -
Alok Sharma (President, Air
Sahara)
The outcome – “JetLite”
Combined Market Share : 33-
34%

Jet Airways – Air Sahara Deal

Phase 3: Mergers &
Acquisitions

Kingfisher – Air Deccan

Deal
31st May 2007
26% stake for Rs.550 crores
Kingfisher: eyeing another 25%
Combined Market Share : 30%

Kingfisher – Air Deccan Deal

Phase 3: Mergers &
Acquisitions
Indian Airlines-Air India
Merger
July 2007
As part of the merger process,
a new company called the
National Aviation Company of
India Limited (or NACIL) was
established, into which both Air
India (along with Air India
Express) and Indian Airlines
(along with Alliance Air)
merged.
 Again moving toward Oligopoly
› Carriers are merging up

› Less players - more market share

› Significant control of the market

Price

D1

D2

MR 2
O MR 1 Q
Price

O MR Q
 An instance of Price Discrimination Strategy
 The first 40 seats are available between Rs
3500 - Rs 5000,
 the next 110 seats up to Rs 5,000 – Rs 6000
and t
 the remaining don’t cross Rs 7,500.
Source : www.civilaviationweek.com
29
MUKUND KUMAR

SAGNIK RAY

RAHUL KEJRIWAL

ABHAY KHANDELWAL

RAJENDRA TRIPATHI