Domestic Airlines in India:

Leveraging Price
2002: The scenario in the skies
– An Oligopoly

• The Big Three: Major players in Indian aviation market

• Air fares much higher than road and rail fares

June 2002: The pricing war begins
 Indian Airlines:
 3 – 15% cut in fares
 All classes
 Western sector, Delhi  Srinagar, Jammu, Khajuraho

 Jet Airways: The very next day

 Reduced prices by Rs. 635
 Economy Classes
 Mumbai  Nagpur, Goa
The APEX (Advanced Purchase Extension) Scheme
• Huge discount for tickets booked three weeks in advance
• Indian Airlines – ‘U Can Fly’ Scheme
• Jet Airways – ‘Everyone Can Fly’ Scheme
• Disadvantages:
• Planning three weeks in advance was difficult for passengers
• Cancellation charges – 50% for cancellations done 21 days before
travel date
• Passenger Response:
• Indian Airlines – 1600 passengers everyday under this scheme
• Jet Airways – 1500 passengers everyday under this scheme
Air Sahara: Soaring High
• Sixer and Super Sixer schemes-
A six flight coupon ticket to fly any six sectors on the
carrier’s network for Rs. 25000.
• Wings & Wheels – complementary air-conditioned coaches
• Steal a Seat online bid scheme- Open for the passengers
flying 25 days after booking.
• Steal Buys- For unsuccessful bidders
• Delhi – Mumbai fare-
AS: Rs. 4000 IA: Rs. 5535 JA: Rs. 5405
Indian Airlines Vs. Air Sahara
 Wings of Freedom scheme – unlimited
domestic travel for 7 days.
 Economy Class: Rs. 15000
 Business Class: Rs. 20000
 Bharat Darshan – unlimited travel for
passengers who bought tickets worth more
than Rs. 80000
Corporate Viability?
 Players with the following features will survive.
 Pan-India presence

 Adequate fleet size

 Low/Optimum cost coupled with consumer service

 Connecting cities where growth potential exists

Is the intense rivalry through price-cutting
undermining airlines’ viability in the long run?
Yes.
The Rise and Fall of Air Deccan
The Rise and Fall of Air Deccan
The Rise and Fall of Air Deccan
The Rise and Fall of Air Deccan
 In 2006, Air Deccan’s IPO flopped, even after extending the
issue closing date.
 In 2007, it posted a loss of 213 crores.
 Consequence: The Kingfisher – Air Deccan Merger.
 Other mergers:
 Air India – India Airlines
 Jet Airways – Air Sahara
Environmental factors influencing pricing
decisions
 Microenvironment:
 Fares offered by competing airlines
 Macroenvironment:
 Inflation, particularly, rise in fuel prices
 Cost of Labour
 Incidents like the WTC attack
 Taxes levied by Government on airlines
Strategies to enhance market share and
increase customer base
 Optimum fares
 Attractive incentives
 Personalised ground and flight service to
customers
 Sticking to flight schedules
 Never canceling any scheduled flight
 WHAT THEN?
 Fierce competition between all players
 LCC’s and FSC’s price war – impacted bottom- ine
of carriers’ , but consumers made merry!
 Even though fuel prices were rising, airlines kept
slashing prices
 Faulty premise that ridiculously low prices could
win long term business
 Could not even break-even and even operated at
losses
 WHAT NOW?
 Eventually suffering airlines were taken over by
stronger players – eg. Air Sahara by Jet and Air
Deccan by Kingfisher
 Prices since then slowly rose and are higher now
 Increase in prices has a direct adverse impact on
demand
 Today also Indian aviation sector is making big losses
 Cost-cutting and innovative strategies need of the day
“FLYING IS STILL A DREAM
FOR
A
‘MIDDLE-CLASS INDIAN’!”