air deccan –revolutionizing the indian skies. case study
DESCRIPTION
Pertaining to Strategic Management course, here is a case analysis of Air Deccan- India's first low cost carrier.TRANSCRIPT
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AIR DECCAN –REVOLUTIONIZING THE INDIAN SKIES.
PRESENTED BY-
The Assam Kaziranga University- School of
Business.
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Aviation Industry in India : Characteristics
Huge Potential Under penetrated market Total Passenger Traffic : 50 million Passenger trips per annum : India : 0.05
United states : 2.02 Untapped air cargo market Infrastructure Constraint High Fuel Cost
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Air Deccan creates ‘REVOLUTION’ in Indian
Transportation In 2003 Air Deccan came to Birth.
Founder –Capt. G.R. Gopinath. This was the first low cost carrier of India Cheaper than Railway 2- tier AC More advanced than railway system Covered 65 destinations in India 365 destination per day Flew 14 million passengers per year
(maximum) Market Share 21.2 % Investment – USD 50 million
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Vision and Mission4
Vision : Empower every Indian to fly
Mission : To demystify air travel in India by providing reliable, low cost and safe travel to the common man by constantly driving down the air fares as an ongoing mission.
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Air Deccan’s Business
Air Deccan’s first flight took off from Bangalore to Hubli on August 25 , 2003
Positioning as ‘low cost carrier ‘ Offer no in-flight service Single class aircraft configuration Internet booking and cheap fares Two air craft strategy – Airbus and ATR Target market – Upper middle class for
short term and lower middle class aggressively in long term
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Air Deccan’s Business (cont.)
Target to expand fleet-124 aircraft by 2013
The Indian aviation market expected to grow at 20% annually for the next ten years. Air Deccan targeted 18% market share by 2013
Passenger load factors anticipated at 70% Revenues per customer to increase at 5%
in the long run Targets to decease fuel expense as a
percentage of total revenues from 30% to 26%, operating expense from 23% to 16% in 8 years
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PEST Analysis of Air Deccan’s Business
Political Factors: Deregulations in different spheres. Open Sky Policy Low Entry Barriers FDI limits- 49% on airlines and 100%
on airports.
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Economic Factor: Purchasing power increasing rapidly Growing middle class Income Hike in Average Salary in the world at that
period. (14%- highest). Consistent GDP growth and projected
double digit growth. Tourism Industry Growth. 8.8% in 2005
Socio-cultural Factor: Status symbol to travel by air. Growing Middle class households. Increase in leisure travel by tourists by 15 %
in 2005 Foreign tourists in 2006 : 3.2 mn
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Technological Factors:
Modernization & Privatization of Airports
Modern Technology for efficient handling of aircraft, passenger and cargo.
Example : ILS, CAT-3 Developing Greenfield Airports with
Private SectorExample : Bangalore Airport Corporation Ltd. Ticketing increasing becoming Web Based.
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Marketing Strategy10
Common Man :The Brand Ambassador for Air Deccan, the people’s airline is Mr. R.K Laxman’s ‘Common Man’
Free Tickets :
Images courtesy of Air Deccan
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Marketing Strategy11
Advertisement through print, radio and billboards
In flight magazine for revenue generating In flight shopping scheme called “Brand
for less” – AVA Merchandising Tie-up with Café Coffee Day ICICI-Travel agent purchase card Tie-ups with HPCL and Reliance Web World
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How Air Deccan cutscost?
12
Quicker turnaround time Lower distributions costs All economy seating configuration No free catering on board Alternative revenue channels 100% web enabled bookings – e ticketing Enhanced cash flow management
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SWOT Analysis13
Strengths : Leader in LCA segment :
First to target the middle class : First mover advantage
Highest load efficiency Flies to destinations in the
hinterland A ‘Lean-and-Mean’ approach to
staffing
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SWOT Analysis14
Weaknesses : Focuses mostly on South Indian
market Image plagued by frequent
breakdowns and near misses Very limited advertising Reached at the threshold of
cost efficiency
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SWOT Analysis15
Opportunities : Extensive network to capitalize Air
Cargo business Plenty of scope for expansion of
operations Strengthen its position in Chartered
flight segment Could start ‘Contractual
Employment’
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SWOT Analysis16
Threats : High attrition rate The threat of new entrants into
Low Price Segment. Especially IndiGo, Go Air and SpiceJet
High Risk Perception
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Generic Strategies Model.1. Cost Leadership Strategy
Single Air Hostess per flight. 48 seater aircraft to lower maintenance
and service fee. Unique Online Reservation system. No Frills airline but food / beverage can
be bought inside the aircraft. Prices are almost 50% lower than the
full service airlines .
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Generic Strategies Model (Cont.)
2. Differentiation Strategy Single Passenger class system Tie ups with Cafe Coffee Day, HPCL
and Reliance Web World Provides flights even to the
hinterland Allocation of prices to various
percentage of seats
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Generic Strategies Model (cont.)
3. Focus Strategy Frequent business travelers AC train travelers
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Rebranding
Renaming from ‘Air Deccan’ to ‘Deccan’ New Tagline - ‘The Choice is Simple’ Blue and yellow name replaced by Red
and White Sold 26% stake to Kingfisher Airlines in
May 2007. No outsourcing of check- in staff Replacement of Ailing Aircrafts Cost incurred in rebranding process :
Rs. 15 crore.
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Thank you.