Air India

2. Introduction
Objective
Background
Situation Analysis –current situation , SWOT, BCG
Growth strategy
Segmentation and Target Market

3. Positioning
Product
Price
Placement
Promotion
Recommendation

4. Objective
Analyse the background and current situation
Apply marketing concepts learnt during course
Suggest marketing plan using primary and secondary research

5. Background
Air India is the flag carrier airline of India. It is part of the government owned Air India Limited(AIL).
Headquartered at theIndian Airlines HouseinNew Delhi
Third largest airline in India (afterIndiGoandJet Airways) in domestic market share
Became the 27th member ofStar Allianceon 11 July 2014
It has highest number of employees, aircrafts and assets
Hasoneofthehighestmanpowertoflightratiointheworld

6. Kill Air India, if you want to revive it.
That is the prescription aviation industry veteran and Emirates' President & CEO Tim Clarke has given to rescue India's so-called national airline.13 March,2014

7. SituationAnalysis(goodandbadpoints)
Ondomesticfront,AirIndiaismakinglossesonevery2routesoutof3itoperates.Thatmeansitislosingmoneyon300flightsoutof450flightsdaily.
Totallossesaremorethanallotherairlinescombined
Onsomeroutes,itisnotevenabletorecoverfuelcosts.
Aircraftutilizationrateisabysmallylowforit.Atanypointoftime,itusesonly100outof120oddaircraftsithas.
PoliticalandRegionalbiasinfluence
HasoneoftheworstflightsafetyrecordamongallIndiancarriers.

8. The airline's current avatar is a result of the merger of state- run carrier Indian Airlines with Air Indiain 2007.
Both airlines posted profits in 2005/06. But rising competition, worsening operational performance, massive aircraft purchases, and the ill-conceived merger pushed the combined airline deep into the red. Total losses have accumulated to almost Rs20,000 crore while the debt burden is at a staggering Rs43,000 crore.
Combined market share of both companies fell from 60 per cent to less than 15 per cent in 2012, and is now hovering near 20 per cent.
Even seven years after the merger, only 80 per cent merger has been completed. Pay scales, HR policies and promotions are still different in both companies.

9. Recent Consumer affairs report
Maximum number of complaints
Unhygienic food(worm inside food)
Customer dissatisfaction
Source: http://www.consumeraffairs.com/travel/air_india.html

11. Good points
Bright spot-The airline's Ebitda(Earnings Before Interest, Taxes,Depreciation, and Amortisation) —a measure of comparing profitability between companies —rose to Rs770 crore from Rs19.45 crore.
If it's any consolation though, private airlineJet Airwaysreported its highest-ever annual loss of Rs4,129 crore in 2013-14.
Air India's on-time performance improved to 82 per cent in May this year from 80 per cent a year earlier, according to data from industry regulator Directorate General of Civil Aviation.

12. Strategies in Place
Air India's structural and systemic weaknesses were recognised decades ago. In fact, in 1997, Air India was one of the first public sector companies to be referred to the newly constituted DisinvestmentCommission of India(DC).
Downsized its operations. Grounded some airlines. Some of its loss making international operations are being shut down.
National Carrier Air India in talks with OnAirto have Wifion board
Advertisements
TheModigovernmentin its first 90 days hasn't really spelt out its plan for Air India except stating that it wouldn't be privatised

13. Planned to speed up its international expansion this year, adding eight Boeing Dreamliner 787 aircraft to its fleet –fuel efficient aircraft.
Air India will also start flying to Moscow, Rome and Milan this year
Replacement on almost all the routes in South-East Asia with the 787 aircraft which is more economical
Celebration of Air India day to commemorate the merger of erstwhileIndian Airlinesand Air India on 27 Aug in 2007 –target towards employees satisfaction and customer connect.
Air India offers tickets for Rs100.

15. Strengths
Weakness
1. Strong Backing by the government of India2. Brand New Fleet of aircraft. 108fleets (31 on orders)
3. Known for its unique and high quality "Maharaja" advertising
4. Present in nearly 19 countries
5. Covers 60 destinations in India and 31 destinations Worldwide
1.Poor management decisions
2.Labour problems and political intervention is a cause of worry
3.Financial crisis leading to payment issues of employees
4.Financial debts
5.High Cost structure
6.Compulsions of being a Public Sector Unit
Internal and External analysis

16. Opportunity
Threats
1.DomesticMarket Growth
2.Dedicated set of customers. Can leverage on brand new fleet
3.Expansion of routes and international destinations
4.Targetlow income groups
5.Solving internal issues regarding workforce can hugely boost image and operations
6.Targeting the passengers who travel by 1stAC/2ndAC coaches in trains over long distances
1.Rising Labour Costs
2.Rising Fuel Costs
3.Growing Competitor base and entry of Low-Cost Carriers(LCC’s)
4.Price Wars
5.MiddleEast Aviation
6.Terrorist Threats

17. AIR INDIA
Threat of New Entrants
•Vistara–A Tata and Singapore Airlines Joint Venture for premium segment
•AirAsiaand Tata Joint Venture for low cost segment
Bargaining Power of Sellers
•Air India is not dependent on a single supplier
•Its has many suppliers like Airbus, Boeing, Bombardier and ATR
Bargaining Power of Buyers
•Buyers are the flight passengers
•They have a good bargaining power as many competitors are willing to offer low cost flights
Threat of Substitutes
•1stclass, AC class coaches of Indian Railways
•Video Conferencing instead of face to face meetings
Threat of Competitors
•Lot of competitors domestically and internationally
•IndiGo, JetAirways, GoAir, SpiceJet
•Leads to Price Wars

18. BCG Matrix of AIR INDIA’s travel routes

19. Segmentation
and
Target Market

20. Title
Segment 1
Low Income
Segment2
Middle Income
Segment 3
High Income
Income
Low
Moderate
High
Usage Rate
Low
Moderate
High
Value for Money
High
High
Low/High
Identification of Segments:

21. Psychographic Segmentation:
•Air India has a strong image of an official national carrier.
•Most of the government officials, bureaucrats including the President and Prime Minister of India travel by Air India.
•People who are travelling by Air India since the past few decades are still loyal to it.

22. Market SegmentationDemographic Segmentation: (Income Based)
Business Class:
Boeing 787 Dreamliner
18 business class seats

23. Market Segmentation
Economy Class:
Boeing 787Dreamliner
238 economy seats

24. Geographic Segmentation
International Market:
31 international destinations in 19 countries across Australia, Asia, Europe and North America.

25. Domestic Market:
Air India serves 60 domesticdestinations in India
Geographic Segmentation:

26. Justificationfor Choosing the Segments
Segment1
Low Income
Segment 2
Middle Income
Segment 3
High Income
Measurability
Thecurrentsalesinthissegmentislow.Preferredonlyincaseofemergencies
Thesalesinthissegmentisincreasingastheynowconstituteamajorshareofpassengers
Thissegmentconstitutesthemajorportionofbusinessclasstravel.Salesinthissegmentingrowing
Accessibility
Newspapers,Radio, Television
Newspapers,Radio, Television,OnlineAds, E-mails,Mobile-ads
Newspapers,Radio, Television,Online,Ads,E- mails,Mobile-ads
Substantiality
Amajorportionofdomesticmarketbelongstolowincomegroup
Middleincomegroupinthecountryisgrowing
Highincomegroupisalsogrowinginthecountry
Actionability
Lowfaresonadvancebookingcanattractthissegment
Lowfaresandgoodcustomerserviceandin-flightcrewservicewillattractthissegment
Customerservice,in-flightcrewserviceandFrequentFlyermilescanattractthissegment

27. Target Market Strategy
•Air India should follow a Multi-Segment strategy to target different segments.
Marketing Mix 1
LowFares,EconomyClassTravel,Easyticketbookingviatraveldesk/online,Adsthroughpapers,radio,TVs
Marketing Mix 2
Low/MediumFares,EconomyClassTravel,ticketbookingviawebsites/traveldesks/mobiles,Adsthroughpapers,onlinemedia,mobile-ads.
Marketing Mix 3
Normal/HighFares,Business/EconomyClassTravel,Ticket-bookingviawebsites/ traveldesks/mobiles/agents,Adsthroughpapers,onlinemedia,mobile-ads.
Segment 1
Low Income
Segment 2
Middle Income
Segment 3
High Income

28. POSITIONING

29. Positioning Statement
To the travelers who have to travel long distances in a short span of time, Air India is the airline that gives you the best on-flight experience with on-time performance and low cost ticket pricing.
Value Proposition
The value proposition of Air India will be to provide good customer service, faster connectivity at convenient timings and at a cheaper price.

30. Current Perceptual Mapping of Domestic Airlines
High price
Low price
High OTP
Low OTP

31. Future Perceptual Mapping of Domestic Airlines
High price
Low price
High OTP
Low OTP

32. Product

33. Air India Products:
FlightTickets
Seating Configuration
In-Flight Entertainment
CrewInfoSystem
Frequent FlierProgram
Convenient Flight Timings
Customer Friendly Service
SpecialIncentiveForCorporateClients
Drinks
Easy Ticket
Booking
Easy Check-In And Boarding
Quick Transportation of Passengers and Cargo
CORE
ACTUAL
AUGMENTED

34. Air India Products
•Fleet of 21 B737 Aircraft
•Capacity of 180 seats
•13 International destination from 12 Indian cities
Air India Express

35. Air India Products
Air India Regional/ Alliance Air
•Fleet of 4 CRJ and 4 ATR aircraft
•Operated mostly to Tier 2 and 3 cities
•196 flights per week
•easy connections to/from smaller cities via the hubs of Delhi, Kolkata, Mumbai & Bengaluru .

36. Air India Products
Air India Cargo
•58 Domestic and 29 International destinations.
•An active member of IATA.
•Logistic Management System (LMS)
•Odd-Sized Cargo, Dangerous Goods, Valuables, Couriers etc.

37. Product by Involvement
Air Travel can be classified either as a convenience product or as a shopping product.
•Convenience:
If the pricing and convenient timings are the major factors influencing the customer’s decision, then it falls under Convenience product
•Shopping:
When factors like customer service, available leg space, food quality influence the decision to buy the flight tickets, the customer spends some time analyzing the available options before choosing the airlines.

38. Branding
•Air India will be portrayed as a Functional Brand.
•To be a functional brand, the following factors should be addressed:
Pricing
Check-In and Boarding procedures
On-time performance
Convenient flight timings
Customer service

39. PRICING

40. Pricing
•Pricing should take into account the following factors into account:
•Fixed and variable costs.
•Competition
•Company objectives
•Proposed positioning strategies.
•Target group and willingness to pay

41. Data from yatra.com taken on 28thAug 2014

42. Value or cost based pricing approach
A value-based pricingcompany considers the value of its product or service, as opposed to the cost the company incurred to create and produce it. To do this, the company determines how much money or value its product or service will generate for the customer. This value could originate from factors such as increased efficiency, happiness or stability.
Cost-based pricinguses manufacturing or production costs as its basis for pricing. The cost-based pricing company uses its costs to find a price floor and a price ceiling.

43. PRICEELASTICITYCONSIDERATIONS
Thedemandforairtravelissensitivetochangesinairtravelpricesandincomes.However,thedegreeofsensitivity(i.e.itsdemandelasticity)willvaryaccordingtodifferentsituations.Toensurethatair
transportpoliciesareeffective,reliableestimatesfordemandelasticity'sareessential.
Theelasticityofairtraveldemandvariesaccordingtothecoverageandlocationofthemarketinwhichpricesarechangedandtheimportanceoftheairtravelpricewithintheoverallcostoftravel.
IndiaistheonlydomesticmarketintheworldtoseeadeclineinairtrafficdemandthisFebruarycomparedtolastyear,evenasglobaltrafficcontinuedtoshow"solid"growthinthesamemonth.
Highlyelasticmarket

44. India is the only domestic market in the world to see a decline in air traffic demand this February compared to last year, even as global traffic continued to show "solid" growth in the same month.
Route Level: -1.4
National Level: -0.8
Supra-National Level: -0.6

45. Estimated Price Elasticity's of Passenger Demand

46. Skimming vs Penetration vs Parity strategy
skimming pricing, a strategy wherein the initial price for the product is set quite high for a relatively short time after introduction.
Penetration pricingis a strategy employed by businesses introducing new goods or services into the marketplace. With this policy, the initial price of the good or service is set relatively low in hopes of "penetrating" into the marketplace quickly and securing significant market share
Skimming pricing results in much sloweracceptanceof a new product, but higher unit profits. Penetration pricing results in greater initial sales volume, but lower unit profits
PARITY method takes the total budget to be allocated for marketing communication at par with what competitors spend on the same.

47. Placement

48. Air India’s distribution channels
Air India
Travel agent
Customer
Customer

49. •About 80 per cent of airline tickets sold in India are through travel agents and online portals.
•The rest is sold through airline websites and booking offices.
•Airlines are moving towards differential pricing so as to promote travel agents and online portals.
•This will help airlines save on sales and distribution costs
Source : http://www.business-standard.com/article/companies/ differential-pricing-to-lift-ticket-sales-through-airline-websites-113092601069_1.html

51. •From our primary and secondary data we saw that Air India is doing quite well in the international sector
•Alliance Air is a fresh brand with very little customer opinion so we recommend Alliance Air take over the domestic operations by following LCC model
•Air India should operate exclusively on international routes
Recommendations

52. Recommendations
•Focus must be given to customer centric development
•Appoint a very pragmatic MD with full authority to radically restructure Air India, financially and operationally. This has worked for Malaysian Airlines and Garuda Airlines.
•Privatize the airline??. Divest. Use FDI in aviation industry. Sell 49% stake in the airlines to foreign players.

53. Promotion

54. Developing Effective Marketing Strategy
Awareness
Knowledge
Liking
Preference
Conviction
Purchase
•Above steps has been followed to develop promotion/marketing strategy for Air India and Alliance Air
•Air India is been in airlines industry since past 60 years and so they have effectively went through the above stages.
•Due to various negative things going on with the airline above stages needs to be revisited so that a powerful and likeable promotion is created for Air India.

55. Applying the buyer readiness stages to Air India
Awareness& Knowledge
•Air India has not created enough buzz about its star alliance membership which needs to be done immediately
•Alliance air must start creating awareness through its prices
Liking & Preference
•Air India : Provide free tickets to 1000 people and collect testimonials
•Alliance air: Just needs to provide on time services and create a buzz regarding this
Conviction & purchase
•The promotional campaigns for both Air India and Alliance Air must succeed in all stages of the AIDA framework.

56. Benefits for passengers due to Star Alliance
•Better connectivity
•Greater flexibility for passengers
•Low prices due to shared ticketing
•More destinations than any one airline offers
•The chance to earn miles or points
•Round the world tickets with multiple airlines at good prices

57. Maharaja of Air India
•Continue with Maharaja as Air India’s Brand Ambassador
•He symbolizes graciousness and high living
•Naughty diminutive Maharajah of Air India has become a world figure
•He has completed 56 years and become the most recognizable mascot the world over

58. Use messages like “Fly royally” or “Fly with the Maharaja” in their campaigns
http://www.mbaskool.com/hwdphotos/uploads/64/10/qnqakkf0ty2h74.jpg

59. Aam Aadmi for alliance airLike Narendra Modi suggested make Aam Aadmi the symbol of Alliance air
Alliance air must work on similar lines as Indigo airlines
Focus on On-time performance and cheap rates in advertisements