Positioning the Carrier in India

Shivani PalMansi Baranwal

Aditya Mukherjee

Driven by increase in tourism and disposable income, outbound aviation sector has grown ~4X

Introduction of low cost outbound airlines and rising

disposable income

Growing international trade and international tourism

industryOpen sky policy

•

•

•Exports grew at at a CAGR 14.76 per cent between 2009-10, Imports grew at a CAGR of 17.91 per cent

• Bilateral agreements with foreign countries

1 2 3

Growth Drivers

10%1%

89%

FTAs by mode of transport, 2008

Land

Sea

Air

2007-08 2008-09 2009-10

136.6

175.2 176.2

210.9

286.3 284.1

Export Import

The government is taking steps to encourage air travel and meet infrastructure deficits

Aviation Sector in

India

Growing air traffic

Increasing

scheduled air

services

Growing investment for developing

airport infrastructure

Enhancing ecosystem

Strong focus on safety

Domestic passenger traffic is estimated to reach 150–180 million by 2020, while

international passenger traffic is expected to grow to around 50 million by 2015.

In 2009–2010, scheduled air services are available between 82 airports as against

50 in early 2000.

The Airports Authority of India (AAI) is upgrading and modernising 35 non-metro airports in the country at

an estimated cost of around US$ 1 billion (INR

46.6 billion), as well as modernising the airports of

Chennai and Kolkata.

In 2009, only 1accident per 1.4 million flights was recorded, making airlines the safest way to travel.

Under the revised Eleventh Five Year Plan (2007–2012), the Government of India (GoI) estimated an investment of around

US$ 7.5 billion (INR 361.3 billion) for the development of airport infrastructure.

Source:* ―Performance of Select Industries,‖ Department of Industrial & Promotion website, http://dipp.gov.in/industry/content_industries/index.htm, accessed 25 January 2010; Ministry of Steel 2008–09 and 2009–2010 annual reports; ―Sector focus: Civil aviation,‖ Indian Infrastructure, October 2010; Ministry of Civil Aviation 2009–2010 annual report.Airports November 2010

Horizon Neighborhood Pure Biz Special Routes

US, EU SE Asia, Middle East

Russia, China, Japan

Pakistan, Saudi Arabia, SE Asia

Less families, affluent, biz &

leisure

Family holidays, price-conscious,

biz & leisureAlmost purely business travel

Pilgrimage, Islamic commerce, income

variation

Business

Labour

Low end holidays

High end holidays

The Indian international travel market can be segmented based on routes

New evolving passenger routes from India:-Jordan, Greece-Turkey, Egypt-Macau, Bermuda-Scandinavian countries

India

Most large business destinations like US, Europe, Singapore, UAE are also leisure travel spots

Additionally, high overlap between distance and affordability; thus we segment existing routes as:

There is also emergence of new travel routes for leisure

These routes set to grow; flights, load factor remain low

Italy, France ~ 3% each

Switzerland, UK ~ 6% each

US ~9%

Analysis of destinations shows high attractiveness of Horizon and Pure Biz

Source:* ―

Outbound data and primary calls helps us size and break the 4 segments

Clearly showing the attractiveness of Horizon and Pure Biz segments

Horizon (excluding scattered) total value 28%

Business IT, Multinationals, Family biz, affluent Leisure Elderly rich, couples, less

families, luxury vacations

Australia, HK, Thailand ~ 4% each

Singapore (excl. labor, SR) ~ 4%

UAE (excl. labor) ~3%

Neighborhood (excluding labor) total value 21%

Business IT, Multinationals, Family biz, wider income range Leisure Families, couples, first-time

travelers, wider income range

China ~ 2%

Japan ~ 2%

South Korea ~1%

Pure Business total value 5%

Business IT, Multinationals, Family biz, affluent Leisure Negligible

Malaysia, Pakistan ~ 1% total

Singapore (percentage) ~ 1%

UAE (percentage) ~1%

Special Routes total value 3%

Business Islamic commerce, family biz, wider income range Leisure Pilgrimage, family ties, wider

income range

•Emirates primarily targets Quality seekers being a premium airline•Thus, it has to strongly target Horizon and Pure Biz routes

•However, it should also be competitive in the large Neighborhood segment

1

2

Emirates core capabilities can be used to create competitive advantage for Indian consumers

Source:* ―

EMIRATES CORE CAPABILITIES

The Dubai Advantage

• Geographical and route wise center of international travel from and to India

• Home turf advantages due to ownership – Dubai visa services, Stop over packages

• Expertise in oil price hedging

Emirates Group Advantage

• Group consists of companies providing ground services, cargo, catering, hospitality & tour packages – bundling opportunity

Deep Pockets

• Equity investment by the Government of Dubai• Useful for initial market penetration & loyalty

PROFILE OF A TYPICAL INDIAN TRAVELER

LEISURE

BUSINESS

•Value conscious•Like to get freebies•Information asymmetry allows marketing to play role in choices•Will spend money if it makes them look better amongst peers•Like Indian food•Travel heavy

•Like to splurge on corporate money•Will spend money if feel pampered•Large disposable income – impulsive buyers. Want to feel powerful and respected•Most are 1st/2nd gen urban

Differentiated strategy will allow domination in Horizon, Pure Biz; compete in Neighborhood

Source:* ―

HO

RIZO

N

1. Higher travel agent incentives in India • Agents have perception of Emirates undercutting them• 80%+ of international tickets booked through agents

2. Combine flight packages with Dubai shopping incentives especially during DSF or discount hampers for gold, electronics, etc

3. Promote the flight as an ’experience’ of staying in a five star hotel for the long flight duration – not just a transition but destination

4. On board travel agent services – rail pass, calling card, forex, tour plan, travel cards etc. Travelers can just pack bags, get visa and come

1. Price is the basis of competition• Need for disguised air fare discounts in packages as actual fare

reduction works against brand value and long term margins• Marketing should justify price differential as an extension of

the holiday onboard Emirates – first holiday destination2. New unexplored destinations with holiday packages e.g. Jordan

1. Position companies booking Emirates for their employees as caring2. Corporate travelers want to splurge on company money

• Gift hampers covered in ticket price• On board spa, chocolates, lounge, destination etiquettes video

NEI

GH

BORH

OO

DPU

RE

BUSI

NES

S

“Staying at the 5 star Emirates” “Just pack your

bags..”

“Holiday starts in the 5 star Emirates”

“Because your company cares”

• Growth of SE Asian countries such as Malaysia, Thailand as tourist destinations

• Increasing lobbying by competitors in core home markets (India, Canada, Australia, Germany)

• Aggressive growth plans of other Gulf-based carriers; Qatar Airways and Etihad Airways

Core capabilities for countering environmental & competitive threat

Our recommendations help counter the threat of low cost carriers

Cost advantage Competition in Neighborhood segment

New form of low cost carriers

Threats to be countered include entry of LCCs into Neighborhood segment; Regulatory issues

Wel

l-est

ablis

hed

Inno

vatio

ns

• LCCs which attach social significance to experience

• Leather seats, video games, XM satellite radio

As mentioned, cost advantage has to be countered without diluting brand value:

• Disguised lowering of prices in packaged tours and Dubai shopping vouchers•Getting travel agents to push Emirates•Justifying the cost differential as extension of holiday experience

• SE Asian countries not geographical centre for Horizon flights•Leveraging deep pockets, elite brand and Dubai’s support

Emirates India can build sustainable advantage as a premier outbound carrier

Source:* ―

The recommendations we’ve given are direct actions Emirates India can take to gain market share. However, to build sustainable advantage over the long term we recommend the following organizational structure :

Central Management

Central Strategy

India Management

India OperationsIndia Strategy

India Market Research

The inherent advantage Dubai and the Emirates Group gives Emirates India, and the importance and growth potential of India as a market, leads us to propose a direct link between Emirates India’s Strategy team and Central Management in the UAE