The scope of Marketing in Indian aviation Industry

With a growth rate of 18 percent per annum , the Indian Aviation Industry is one of the fastest growing aviation industries in the world.. The government's open sky policy has led to many overseas players entering the market and the industry has been growing both in terms of players and number of aircrafts. Today, private airlines account for around 75 per cent share of the domestic aviation market. India is the 9th largest aviation market in the world. According to the Ministry of Civil Aviation, around 29.8 million passengers traveled to/from India during 2008, an increase of 30 per cent on previous year. It is predicted that international passengers will grow upto 50 million by 2015. Further, due to enhanced opportunities and international connectivity, 69 foreign airlines from 49 countries are flying into India. 5. Growth Rate 24% annual growth

AAI manages 128 airports, which include 15 International Airport, 08 Customs Airports, 81 Domestic Airports and 28 Civil Enclaves at Defence airfields. There are over 450 airports and 1091 registered aircrafts in the country. The genesis of civil aviation in India goes back to December 1912 when the first domestic air route between Karachi and Delhi became operational. In the early fifties, all airlines operating in the country were merged into either Indian Airlines or Air India. and, by virtue of the Air Corporations Act 1953, this monopoly continued for the next forty years.

Classification Of Indian Aviation Sector

The Indian aviation sector can be broadly divided into the following main categories: 1. Scheduled air transport service - It includes domestic and international airlines. 2. Non-scheduled air transport service - It includes charter operators and air taxi operators. 3. Air cargo service - It includes air transportation of cargo and mail.

Scheduled air transport service: It is an air transport service undertaken between two or more places and operated according to a published timetable. It includes: 1. Domestic airlines, which provide scheduled flights within India and to select international destinations. Air Deccan, Spice Jet, Kingfisher Airline and IndiGo are some of the domestic players in the industry. 2. International airlines, which operate scheduled international air services to and from India.

Non-scheduled air transport service: It is an air transport service other than the scheduled one and may be on charter basis and/or non-scheduled basis. The operator is not permitted to publish time schedule and issue tickets to passengers.

Air cargo services: It is an air transportation of cargo and mail. It may be on scheduled or non-scheduled basis. These operations are to destinations within India. For operation outside India, the operator has to take specific permission of Directorate General of Civil Aviation demonstrating his capacity for conducting such an operation. At present, there are 2 scheduled private airlines (Jet Airways and Air Sahara), which provide regular domestic air services along with Indian Airlines. In addition there are 47 non-scheduled operators providing air-taxi/non-scheduled air transport services. Apart from this, the players in aviation industry can be categorized in three groups: Public players Private players Start up players There are three public players: Air India, Indian Airlines and Alliance Air. The private players include Jet Airways, Air Sahara, Kingfisher Airlines, Spice Jet, Air Deccan and many more. The start up players are those planning to enter the markets. Some of them are Omega Air, Magic Air, Premier Star Air and MDLR Airlines

Trends in Aviation Industry

1. Consolidation in aviation sector: In aviation industries the rise in the number of alliances will help in promote the growth of aviation sector in India. Example of the Jet-Sahara merger is just the beginning. Indian aviation industry is looking forward to more consolidations.

2. The number of passengers traveling by air is on the rise: By 2025 passenger boarding expected to double and by the same time aircraft operations are expected to triple, the number of passengers traveling by air is on rise.

3. For the traveling public, price is paramount in choosing a carrier: Airfares are fully transparent to the public and travelers are choosing the lowest price option because of the Internet and round-the-clock search facility. Even business travelers, who have been less price-sensitive, are resisting fare increases. Travelers are not giving preference to brand but the only premiums they are willing to pay for are time-of day and direct flights.

4. Capacity is growing without much constraint: The new aircraft have been ordered by Indian carriers for delivery in the coming period, without clear plans to retire older planes. Significant numbers of regional jets are also adding by them. Kingfisher Airlines has already ordered 5 Airbus A380 aircrafts that will operate on international routes

5. Cost structures will continue to handicap legacy carriers as they compete with newer airlines, as well as with overseas carriers: Great threats are being posed by the low cost carriers to legacy carriers, as a result of which they are

reshuffle, their pricing policies. Apart from this, they are also facing competition from overseas players.

6. Oil prices are not expected to fall: Aviation Turbine Fuel (ATF) prices have been increased by 3.5 per cent, in line with the rise in international oil prices. Because of this there is a marginal increase in airfares.

7. Outsourcing: Private airlines are famous to hire foreign pilots, get expatriates or retired personnel from the Air Force or PSU airlines, in senior management positions. Airlines are also famous to take on contract employees such as cabin crew, ticketing and check-in agents. Aviation Sector Boom Reason for Boom in Aviation Industry:

1. Foreign equity allowed: Without any Government approval, foreign equity up to 49 per cent and NRI (Non-Resident Indian) investment up to 100 per cent is allowable in domestic airlines.

2. Low entry barriers: Nowadays, to launch an airline venture capital of $10 million or less is enough. Private airlines are hiring foreign pilots, get expatriates or retired personnel from the Air Force or PSU airlines in senior management positions.

3. Attraction of foreign shores: Many private players like Jet and Sahara have gone international by starting operations, first to SAARC countries, and then to South-East Asia, the UK, and the US and many more domestic airlines too will be

entitled to fly overseas by using unutilized bilateral entitlements to Indian carriers.

4. Rising income levels and demographic profile: As compared to the developed country standards, India's GDP (per capita) at $3,100 is still very low but as India is shining, at least in metro cities and urban centres, where IT and BPO industries have made the young generation prosperous. Demographically, In India people in age group of 20-50 among its 50 million strong middle class, has the highest percentage with high earning potential. It contributes the boost in domestic air travel, particularly from a low base of 18 million passengers.

5. Untapped potential of India's tourism: Presently India attracts 3.2 million tourists every year, while China gets 10 times the number. Due to the open sky policy Tourist arrivals in India are expected to grow exponentially.

6. Glamour of the airlines: An airline is as glamorous as the film-making industry. Today Airline tycoons, like J. R. D. Tata and Howard Hughes, Sir Richard Branson, Dr. Vijaya Mallya, have been idolized. Airlines have an aura of glamour around them, and high net worth individuals can always toy with the idea of owning an airline. Indian aviation boom The myth and reality: There is 170 per cent increase from present fleet strength of 158 aircraft as private and public sector airlines from India have placed orders in the last 6 months. As always, among the new entrants, a few may have visions of changing that world and others may be motivated only by money and the glamour of the airline sector.

There is a need of support system of airports and their infrastructure, trained manpower such as pilots, cabin crew and maintenance engineers, passenger amenities such as hotels,, ATF (aviation turbine fuel) availability on a par with international prices, networks of travel agents and Internet penetration for the travelers for the aviation sector to work. More important, there has to be a rise in the per capita income to make air travel affordable.

1. Rush for domestic skies Foreign equity allowed: Without any Government approval, foreign equity up to 49 per cent and NRI (Non-Resident Indian) investment up to 100 per cent is allowable in domestic airlines. Low entry barrier: Nowadays, to launch an airline venture capital of $10 million or less is enough. Private airlines are hiring foreign pilots, get expatriates or retired personnel from the Air Force or PSU airlines in senior management positions. Attraction of foreign shores: Many private players like Jet and Sahara have gone international by starting operations, first to SAARC countries, and then to SouthEast Asia, the UK, and the US and many more domestic airlines too will be entitled to fly overseas by using unutilized bilateral entitlements to Indian carriers. Rising income levels and demographic profile: As compared to the developed country standards, India's GDP (per capita) at $3,100 is still very low but as India is shining, at least in metro cities and urban centre, where IT and BPO industries have made the young generation prosperous. Demographically, In India people in age group of 20-50 among its 50 million strong middle class, has the highest

percentage with high earning potential. It contributes the boost in domestic air travel, particularly from a low base of 18 million passengers. Untapped potential of India's tourism: Presently India attracts 3.2 million tourists every year, while China gets 10 times the number. Due to the open sky policy Tourist arrivals in India are expected to grow exponentially. Glamour of the airlines: An airline is as glamorous as the film-making industry. Today Airline tycoons, like J. R. D. Tata and Howard Hughes, Sir Richard Branson, Dr. Vijaya Mallya, have been idolized. Airlines have an aura of glamour around them, and high net worth individuals can always toy with the idea of owning an airline. All the above factors are created a "me too" rush to launch domestic airlines in India.

2. Domestic market According to the Directorate-General of Civil Aviation statistics, the total size of the domestic market was 18 million in 2003. All scheduled domestic airlines in India carried 42,590 passengers a day in 200304, which was 11 per cent more than the previous year's carriage of 38,222 per day. The average load factor, an indicator of passenger demand and efficiency of the airlines' sales and marketing efforts, was 58 per cent, It was 56% in the previous years.. The reason for low load factor is the new entrants on the domestic scene.

As per DGCA statistics, for the first time in 2003-04 (see Chart 1), domestic airlines were able to record revenue per kilometre (RPKM) higher than costs, with a positive operating margin of 3 per cent, against a negative margin of 3 per cent in previous years.

3 . Pre-requisites for survival Low debt-equity ratio: Airline is a cyclical industry which has alternating short periods of growth and longer periods of recession. Due to the staying power of equity an airline gives the capital to stay afloat during periods of recession. Ideally the debt-equity ratio for new airlines should be less than or equal to 1. Appropriate aircraft type: The most expensive assets of airlines are aircraft and it is having an average aircraft utilization higher than 11-12 hours per day is crucial for its survival. Thus choosing an aircraft that is cost-effectively for the sectors identified, having sufficient number of pilots, as well as maintenance facilities and spare parts is vital.

Aviation value chain : Chart 2 shows low operating margins of airlines against high margins of their monopoly suppliers such as IT providers, airports, aircraft manufacturers. "Airlines do the flying and others make money out of them", says Mr Giovanni Bisignani, Director-General of IATA (International Air Transport Authority).

Challenges for Aviation Industry There are several challenges in front of aviation industry because of the growth in the aviation sector and capacity expansion by carriers. These include shortage of workers and professionals, safety concerns, declining income and the lack of accompanying capacity and infrastructure. Moreover, stiff competition and rising fuel costs are also negatively impacting the industry.

1. Shortage of trained Employee: There is a shortage of trained and skilled manpower in the aviation sector as a result of which there is cut-throat competition for employees which, in turn, is driving wages to unsustainable levels. Moreover, the industry is unable to retain talented employees.

2. Regional connectivity: To provide regional connectivity is one of the biggest

challenges facing the aviation sector in India. The lack of airports is hampering the growth of regional connectivity.

3. Rising fuel prices: As fuel prices have risen, the inverse relationship between fuel prices and airline stock prices has been established. Moreover, it also led to increase in the air fares.

4. Declining yields: As more players are attracted towards Aviation industry because of increasing growth prospects it will lead to more competition. All this has resulted in lower returns for all operators.

5. Gaps in infrastructure: Airport and air traffic control (ATC) infrastructure is insufficient to support growth. While a initiate has been made to upgrade the infrastructure, the results will be visible only after some years.

6. High input costs: The input costs are also very high because of some of the reasons like Withholding tax on interest repayments on foreign currency loans for aircraft acquisition. Increasing manpower costs due to shortage of technical personnel. SWOT Analysis of Industry Strengths: * Growing tourism * Rising income levels * Liberal Environment * Modern Fleet Weakness: * Under penetrated Market * Untapped Air Cargo Market * Infrastructural constraints * Airport Infrastructure

* High Quality * Economic Growth * Political Stability

* Airways Infrastructure * National Carrier * Deep Pockets * High Cost Structure * Skilled Resources

Opportunities: * * * * Expecting Expected Market Geographic

Threats: investments * Shortage of trained Pilots Market Size * Growth * Location * Shortage High Middle East of Airports prices Aviation

* Lower Costs, Higher Quality

* Terrorism

Marketing in Aviation
Effective marketing depends upon effective marketing system employed by an industry or separate companies. Marketing as an activity is carried out in a variety of contexts. The most obvious context is of course the sale of goods and services to end-users. Marketing can be described as one of the functional areas of a business, distinct from finance and operations Marketing can also be thought of as one of the activities that, along with product design, manufacturing, and transportation logistics.

In general, aviation industry is one of the profitable industries today which is characterized by of rapid technological and marketing changes. Nevertheless, the present situation requires cooperation between airlines and airports which should help them to market their services effectively to their clients. Marketing strategies include a wide variety of techniques aimed to deliver customer satisfaction and safety. New product and services development, technological changes mark the main strategic activities in this market segment. Technology, being a universal factor that crosses national and cultural boundaries, plays the crucial role in aviation and aerospace industry. It should be mentioned that technology is truly "stateless"; there are no cultural boundaries limiting its application. Once aviation technology is developed, it soon becomes available virtually everywhere in the world. One essential characteristic of the effective global aviation business is face-to-face communication among employees and between the company and its customers. Without modern jet travel, such communication would be difficult to accomplish. New transportation technology significantly reduces the level of prices. The costs associated with physical distribution both in terms of money and time have been greatly reduced as well. The per-unit cost of shipping automobiles from Japan and Korea to the United States by specially designed auto-transport ships is less than the cost of overland shipping from Detroit to either U.S. coast. Another key innovation has been increased utilization of 20- and 40-foot metal containers that can be transferred from trucks to railroad cars to ships. Another technological innovation, which helps to improve marketing activities is the Internet and World Wide Web. Airlines and aviation can be called boundaryless or global industries, and for this reason Internet and Intranet services has become a driven force for them.

Today's information technology allows airline alliance partners to sell seats on each other's flights, thereby helping travelers get from point to point more easily while boosting revenues for companies such as United Airlines and Lufthansa. Meanwhile, the cost of international telephone calls has fallen dramatically over the past several decades. That fact, plus the advent of new communication technologies such as e-mail, fax, and video teleconferencing, means that managers, executives, and customers can link up electronically from virtually any part of the world without traveling at all. Marketing departments in aviation and airline industry work closely with R&D departments to ensure that the products which are developed are those which cater for the changing needs of target customers and different needs of varying customer segments. In recent years, high failure rates in the introduction of new products have led departments to be very risk averse, with most 'new' products emerging being merely extensions of existing product lines and not truly new and innovative offerings. The marketer's role in aviation and airline new product development is therefore about providing a link between the market and the design department, with customers and R&D technicians both being involved in the process. It also requires involving senior management, as changes in customer demand and purchasing patterns may have serious implications for future business objectives and directions. The main marketing strategy in aerospace and aviation industries is to design a product that consumers did not explicitly request. The challenge of course is to get out in front of consumers; to extrapolate and infer future customer needs. Yet traditional forms of marketing research seldom seem to provide the insight necessary to engage in creative marketing. The basic aerospace initiative include: .

Fund revolutionary, not just evolutionary, changes to the air transportation system to obtain greater capacity, safety, traffic flow and automation It is easy to see the rationale for presenting the marketing department as the linchpin in the new product development process. They are the conduit of information between the market, and the firm and the various departments involved in the new product development process. Taking on a pivotal role means broader involvement of various stakeholders which can be further facilitated by project teams which bring members of all groups together at the same time to discuss and attempt to solve mutual problems. "Infrastructure and air traffic management issues will be a new topic to address both on behalf of aerospace manufacturers and service providers and the SBAC airports segment" The above apparently suggests that new product development is purely finding out what customers want and then delivering it. It is possible to suggest, however, that customers do not always know what they want, or at least cannot articulate it in concrete terms. David Kiley expresses an interesting idea supposing that Airlines "are not marketing even if they think they are". He explains that "consumers are, for the most part, choosing based on where their frequent flyer miles are (that they collect through their jobs) and price. The typical leisure traveler these days is checking online via Orbitz, Expedia or one of the other services for prices and schedules. When the selection of options comes up from United, Northwest, Delta, American, Air France, Virgin Atlantic--how many people are choosing based on how they feel about the airline?" (Kiley, n.d.). On the other hand, it is difficult to deny the role of advertising in airline marketing which has a great influence on consumers preferences and choice. Today, customer service in airlines relies on reputation and trustworthiness and this no less true in the new forms of system-service. In fields such as package delivery and money management, consumers are seeking indications that their risks will be minimised or eliminated. For these kinds of consumer acts, customer service plays an

essential role in assuaging the fears of consumers by projecting an image of trustworthiness and expertise (Johnson, Scholes, 1998). For maximum penetration it may help to select primary (first choice) media that interlock or cross support each other. If deeper penetration into the same target market, for example, is required, then vertical advertising in the media that reach the same target market will be sought. For example, advertising on commercial television may be linked with advertising in the magazine that provides the program schedules for viewers, or local radio advertising in a particular area may be accompanied by direct mail or press advertising. "The airline industry has literally fought for deregulation that has made each company nothing more than a commodity" (Kiley). Without new qualitative service airlines companies will not be capable to achieve the overall objectives, that is why the main objective of a company is to maintain the level of service quality and develop strategies to improve its services. Service concepts are based on understanding the unique environment in which a particular firm operates. Usually, airline companies find specific marketing strategies and then translate them into a detailed plan of action which foresee an efficient marketing effort. Implementing a customer oriented strategy is more important than any other techniques. It also means impressing upon the entire staff the importance of customer service because a satisfied customer is the best marketing tool available. All customers have some expectation of the quality of services which have to be provided. Present day situation is marked by two factors specification, which is to do with the 'design quality' of service, and conformity, which is to do with the 'process' quality which is achieved are of particular importance to customers. Ultimately they are the two factors which determine the quality levels provided by a companies to their customers. These two factors however are themselves determined by other factors.

Specification in the airline industry is determined as a result of an organization's policy, which in turn resulted from decisions on its market policy, and consideration of the market or customer needs and requirements, and the activities of competitors. This is the process of designing quality into the service (Ennew, Reed, Binks, 1993). For instance, "Airlines are scrambling to fill seats and make their customers happy, that's clear. British Airways just this week signed a deal with the Worldwide Travel Exchange (WWTE) hotel-booking arm of Expedia inc company Travelscape, enabling the airline's passengers to book rooms at more than 40,000 hotel properties" (Cox, 2002). Proof of customer contact improvement includes

measuring customer satisfaction, establishing new performance standards, and thereby gaining greater control over, and routinisation of, professional service work. At the same time, quality improvement through self-directed project teams has evolved into a practice whereby task forces adopt goals and use methods that are centrally determined. In this manner, 'success' is evaluated by others through institutionally defined performance improvement measures (Mascarenhas, Kesavan, Bernacchi, 2004). Today, a wide range of Web services are adopted by airlines and aviation to contact with the customers and to ensure customer satisfaction. It is not a unique and a new form of service but still it is one of the most beneficial areas for attracting a new customers and providing new services for target customers. For instance, "Travelocity provides Internet and wireless reservations information for more than 700 airlines, but it doesn't have special marketing relationships with all of them. It did sign a similar deal with Continental in January and has deals with British Airways, JetBlue and America West, among other airlines" (Cox, 2002). For airlines companies, Internet rationalizes the expensive and cumbersome proposition of large-scale customer service. Second, the system serves to

reduce at least the appearance of risk associated with time-space distanciation and the opacity of the expert system. In only a short time, online finance has become immensely popular around the world. This might have something to do with the fact that in climates of risk, especially those involving investments, many customers prefer a 'hands-on' approach. Indeed, online services and trading has several advantages for customers. The main, it is available around the clock. There are, of course, risks for customers associated with online trading In aviation this approach includes maintenance of high standards which is a key factor in effective customer contact. The purpose of maintenance is to attempt to maximize the performance of service by ensuring that it performs regularly and efficiently. Service, however complex or simple, however cheap or expensive, is liable to breakdown. The effective operation of any system is dependent on the maintenance of all parts of the system, e.g. buildings, services. Indeed, company welfare or personnel practice is designed partly as a maintenance activity, e.g. training and retraining to maintain the availability of appropriate skills, facilities to maintain human capacity, counselling to maintain interest and motivation (Joines et al, 2003). The audiences may be geographically dispersed in time, but they share common interests that are perhaps difficult to serve profitably though other international media. The online airlines sites (www.bluejet.net.tc or www.britishairways.com) thrive because they offer their participants the following: a forum for exchange of common interests; a sense of place with codes of behaviour; a meeting place for specialists; the development of stimulating dialogues leading to relationships based on trust; encouragement for active participation by more than an exclusive few. "Customers can book on-line at www.CanJet.com through CanJet's Reservations Sales Centre" (Cox, 2002). Service, however complex or simple, however cheap or expensive, is liable to breakdown. Another alternative is to deliver ads via third-party

ad-server companies which can serve ad messages simultaneously to multiple Web sites, measure results, produce consolidated reports, report on the success of the entire campaign, and analyze these results immediately, enabling advertisers to quickly assess the ongoing effectiveness of the campaign. In traditional markets, dual distribution systems are not uncommon; there are numerous examples of companies using more than one channel of distribution to sell to different groups of customers. However, the process of managing multiple distribution systems can be both tricky and risky. While electronic commerce is creating new opportunities for differential pricing, it can also make such pricing strategies more difficult when it is used to provide customers with better information about their choices. Indeed, customer ignorance -about prices, features and relative product performance - has traditionally been a source of profit for companies. The relationship marketing process involves an iterative cycle of knowledge acquisition, customer differentiation and customization of the entire marketing mix. This process is sometimes referred to as a learning relationship (Johnson, Scholes, 1998). A learning relationship between a customer and an airline comapny gets smarter and smarter with each individual interaction, defining in ever more detail the customer's own individual needs and tastes. A problem with aerospace industry is that although there are only a few major companies, these companies have a majority of the control over the market, requiring an extremely unique spin off of this already established product to have a chance at success. There are many innovative products that enter the sector every year. A talented company management could definitely add these product to the list if they are willing to work hard, think outside of the box, and put their heart into their company (UK aircraft and aerospace industry, 2005) Competitive pressures have prompted many airlines and aerospace companies to involve marketers in design, manufacturing, and other value-related

decisions from the start. This approach is known in some circles as boundaryless marketing. Rather than linking marketing sequentially with other activities, the goal is to eliminate the communication barriers between marketing and other functional area's. Properly implemented, boundaryless marketing ensures that a marketing orientation permeates all value-creating activities in a company (McDonald, Christopher, 2003). A partnership marketing strategy is the quickest and cheapest ways to develop a global strategy in aviation. It allow share control over assigned tasks, a situation that creates management challenges. Partnership in aviation is attractive because high product development costs in the face of resource constraints may force a company to seek partners and the technology requirements of many contemporary products mean that an individual company may lack the skills, capital, or know-how to go it alone (UK aircraft and aerospace industry, 2005). It is possible to conclude that aerospace and airline industries mature, fragmentation is overcome and the industry tends to become a consolidated industry dominated by a small number of large companies. Although industries begin by being fragmented, battles for market share and creative attempts to overcome local or niche market boundaries often result in a few companies' obtaining increasingly larger market shares. When product standards become established for minimum quality and features, competition shifts to a greater emphasis on cost and service. Slower growth combined with overcapacity and knowledgeable buyers put a premium on a firm's ability to achieve cost leadership or differentiation along the dimensions most desired by the market. The increasing opportunities of the Internet offer another area of strength for airlines marketing stretagy. Customers want more help with the Internet, airlines in a better position to give it to them. In the traditional brand relationships, communication flows between the marketer and the consumer. The key to airlines successful relationship marketing program is information. The better information that a

company can propose to a particular customer, the more value that firm will potentially be able to provide that customer.

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