SERVICES MARKETING

STUDY OF THE CASE AND ANALYSIS: WAR FOR THE SKY

Group:
Ajay Kumar S002
Giri K S023
Shrish Khare N062
Sunil Mathews N065
-----------------------------------------------------------------------------------------------BRIEF BACKGROUND
The case is about the competitive strategy and challenges faced in
the Air transportation Industry of India. The era of liberalization and procompetition regime in the nineties saw the monopoly of the national
carrier getting thrashed and various private players entering the Industry.
However, insufficient infrastructure, lack of experience and other glitches
forced these players to quit the market. A new phase started in the year
2004, where few players resorted to aggressive price-driven strategy
and promotions to capture the market share. The case discusses the
driving strategy of Tactics and short-term success in Air South and Spice
Air. The case also brings out the way Air Deccan offered cheaper air
travel by reducing the frills associated, thereby focusing on the
marketing strategy formulation framework and applying strategic service
vision concepts.

THE INDUSTRY
The domestic Air travel market is growing at 8-10% per annum.
The economic, cultural and psychological changes emerging in the
country have created a favourable condition for growth of the industry.
The three big players who dominate the industry and the analysis of their
strengths and weaknesses can be tabulated as follows:-

Airline and its

credential
Bharat Airlines
Government owned

Biggest player in the

industry.
Has the latest fleet of

aircraft

Set Airways
Challenged
the
monopoly.
Has the latest fleet of

aircraft
Specialises on the Joy

of flying.
Depend Air
Started in 1993

Value for money airline.

Truly Indian company

with Indian values

Projects
itself
as
Emotionally yours.

Strength
Increased number
flights & destinations.
Widest connections.
Frequency
Trained manpower
Experience of flying

Weakness
of Image crisis, due to it
being a public sector
undertaking.
Lack of superior service
quality.

Professional

management.
Young fleet.

Best cabin services

Reputation for excellence

Service Innovation

Poor
airport
infrastructure.
Limited network.
Very high investment

Fairly higher number of Infrastructure

flights & destinations.
drawbacks.
Widest connections.
Huge initial fixed cost.
Differentiation from its
competitors as a Value
for money airline.

THE NEW PHASE AND SERVICE INNOVATION

Air South spotted a huge opportunity in the increasing affordability
and intent in resorting to air travel. It resorted to low fare, no frills model.
It challenged the existing model which entailed huge costs. It did so by
targeting secondary airports, leasing aircraft, hiring fewer people per
aircraft, avoiding agents for ticketing, ensuring low cost and faster
turnaround and allotting more seats per aircraft. This buzz drew the
attention of many other players, thereby increasing competition. Few
players resorted to the low cost model, while others worked out value
models. However, the shift from excess demand to excess supply due to
increased competition ensured that the model was no more sustainable.

The year 2003 also saw the arrival of Air Deccan into the low cost
airline market, which was no more than a point to point ferry, thus
enabling cheaper air fares to passengers. Air Deccan also resorted to
20% more seats per aircraft by cutting down gallery space to hold foot
trays.

STRATEGIC SERVICE VISION OF AIR DECCAN

The Vision of Air Deccan is to Empower every Indian to fly. Its
mission is 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. The target market for Air Deccan has
been Upper middle class for short term and lower middle class
aggressively in long term.
Marketing Strategy of Air Deccan.
The Brand Ambassador for Air
Deccan, the peoples airline is Mr. R.K Laxmans Common Man. The
salient features of the marketing strategy of Air Deccan are as follows:(a)

Advertisement through print, radio and billboards

(b)

In flight magazine for revenue generating

(c) In flight shopping scheme called Brand for less AVA

Merchandising
(d)

Tie-up with Caf Coffee Day

(e)

ICICI-Travel agent purchase card

(f)

Tie-ups with HPCL and Reliance Web World

Cost cutting by Air Deccan.

The airline has been able to cut
costs, owing to the following measures:(a)

Quicker turnaround time

(b)

Lower distributions costs

(c)

All economy seating configuration

(d)

No free catering on board

(e)

Alternative revenue channels

(f)

100% web enabled bookings e ticketing

(g)

Enhanced cash flow management

Strategies Model adopted by Air Deccan.

Three strategic
have been adopted by Air Deccan. The details are as under:(a)

models

Cost Leadership Strategy:(i)

Single Air Hostess per flight.

(ii)

48 seater aircraft to lower maintenance and service fee.

(iii)

Unique Online Reservation system.

(iv)

No Frills airline but food / beverage can be bought inside

the aircraft.

(v)

Prices are almost 50% lower than the full service airlines.

(b)

Differentiation Strategy:(i)

Single Passenger class system

(ii)

Tie ups with Cafe Coffee Day, HPCL and Reliance Web
World

(iii)

Provides flights even to the hinterland

(iv)

Allocation of prices to various percentage of seats

(c)

Focus Strategy:(i)

Frequent business travelers

(ii)

AC train travelers

BUILD SUSTAINABLE COMPETITIVE ADVANTAGE & VALUE CHAIN

In order to enable building a sustainable competitive advantage,
the company under took the following measures:(a)

Renaming from Air Deccan to Deccan

(b)

New Tagline - The Choice is Simple

(c)

Blue and yellow name replaced by Red and White

(d)

Sold 26% stake to Kingfisher Airlines in May 2007.

(e)

No outsourcing of check- in staff

(f)

Replacement of Ailing Aircrafts

(g)

Cost incurred in rebranding process : Rs. 15 crore.

It is technology that is aiding the vision of keeping costs ultra-low

by allowing Air Deccan to offer tickets a minimum of 30 percent lower
than those of full-service carriers. The value chain which could be prime
drivers to achieving Sustainable competitive advantage can be listed
down as under:(a) By implementing a system that allows tickets to be booked over
the Internet, Air Deccan has ensured that the no-frills airline saves close
to 20 percent in distribution costs alone.
(b) Much of the savings are due to Air Deccan deploying its own
reservation and ticket distribution system, though there are other
benefits too.
(c) The creation of Air Deccans own Airline Distribution System is a
great value enhancer.
(d) Another major advantage of e-ticketing was to allow passengers to
book tickets directly without involving travel agents, thus cutting out the
agents commission

CONCLUSION
Globalisation of business, increasing customer affluence and
increasing desire for pleasure have paved a way explosive growth in the
Airline Industry. Paucity of time and affordability have enabled abundant
opportunity to the industry. This opportunity can only be sustained by a
consistent service delivery system. The target market, service concept
and marketing strategy must dictate the design of the service delivery
systems.