The Airline Sector in India: Jet Star Airline - Case Study Example

Contents Executive Summary 2 Introduction 3 Airline Service to India 3 Type of Airline Services 4 Government Regulations for Airlines 5 PESTEL Analysis 6 4 P’s of Marketing 10 Marketing Mix 12 Future Prospects 13 Findings 13 Conclusion 14 Recommendations 15 References 16 Executive Summary The airline sector in India has witnessed growth. With the opening up of economy and the government allowing foreign investment in domestic airline provider will ensure more foreign players entering India. The recent growth rate, rise in population, increase in the living sector and the change in mind set poses a huge prospect for all the providers. India being a religious country with very high on socio-cultural factor loyalty and service plays a very important role. The analysis of PESTEL highlights the stability of the political situation, the economic growth rate, the importance of social factor and technological advancement shows a huge potential the market has. The 4P’s of marketing demonstrates the huge potential the aviation sector in India gives to the providers. The marketing mix shows that working on different factors in India will ensure that the service provider can have a good market share. The findings demonstrate the different opportunity Jet Star Airlines have. The recommendations thereby highlight the different options available to Jet Star Airlines. Thus, India offers a lot of opportunity to Jet Star Airline to tap. The population, rising middle class and proving the services which matches with the culture is the mantra for success in India as the domestic providers have being doing so. Introduction Jet Star Airlines is a low cost airline provider based in Australia. The airlines works on the business model of being cheap which gives it an advantage especially in developing countries. “The airline operates in Australia, Asia, Indonesia, New Zealand and North America and has 48 aircrafts”. (Jet Star Airways, 2010) The lost cost provider covers most cities in Australia. Despite being a low cost Jet Star has ensured that “the fleet matches the modern requirements with leg space, leather seats, good refreshments which needs to be paid on board and all modern amenities to make travelling a pleasure”. (Jet Star Airlines, 2010) This cost provider has an opportunity to start it service in India. The advantage this airline will get is enormous. India being a populous country with people price conscious low cost airlines will succeed. Having flights to India will also ensure more travel and will give an wide market to cater to. Jet Star would also get the advantage to grow as India is growing will provide the airlines a new market. The analysis of the report will help to identify the ways in which India could be a beneficial destination for Jet Star Airlines. Airline Service to India The airline services in India are on a rise. “Presently 56 domestic and 22 foreign airlines are operating which signifies the volume of commuters”. (Pobari, 2009) The market has both public and private operator. “India also has 41 non scheduled air transport operator and another 34 are in line to enter”. (Pobari, 2009) This shows the huge potential this market has. The population acts as an added advantage. People being price conscious prefer low cost providers. With “the recent increase in low cost provider this market provides a huge opportunity for other low cost provider”. (Pobari, 2009) It is also estimated that more foreign low cost provider are eyeing this. This provides Jet Star Airlines to use their same model and improve their business. Jet Star Airlines has an opportunity as “it is estimated that the domestic commuters will increase by 12.5% and foreign travellers by 7%”. (Pobari, 2009) Thus, the growth will help all low cost providers to tap it. Thus, the Indian market provides an opportunity due to the culture and changing mind set of the people. Type of Airline Services The airline service operates in three categories in India proving an opportunity to the service providers to tap the market. The categories are Scheduled air transport service: The services here include “flights which are domestic and well as international and passengers commute according to a printed timetable”. (Justin, 2008) There are many providers but still has a potential for new entrants. This transport service forms a major form of transport and an opportunity for new entrant to tap because of the huge population. Non-scheduled air transport services: The services here include “flights which are chartered planes and air taxi operator who commute passengers but don’t have a printed timetable”. (Justin, 2008) This is a sector which is slowly growing due to more high worth individuals. There are few providers here and have an opportunity to tap the Indian market. Air Cargo Services: The services here include “transportation of goods via flights”. (Justin, 2008) Operators operating in this medium have “to take permission from Directorate General of Civil Aviation”. (Justin, 2008) This sector provides an huge market as it is on an upswing. This has also seen more players enter it and the total players have gone to 47. Thus, airline services in India operate in all modes proving ample scope and room to the operators. This gives an opportunity to Jet Star Airlines to enter Indian market. Government Regulations for Airlines The Indian government is slowly deregulating the airline industry. All the decision regarding this is taken by the Department of Civil Aviation. With “the liberalization of the economy and allowance of foreign players to use Indian soil for airlines has seen many operators like Air France, Swiss Air, Air Canada, South African Airways, North West, Austrian Airlines, Emirates, Lufthansa, Cathay Pacific, Qantas to name a few”. (International Airlines in India, 2010) This is making many new entrants enter the market. The government is also bringing about a change to the foreign direct investment. “The government is on a move ahead to allow foreign airlines to have a 49% stake in domestic airline”. (Phadnis, 2009) This move will make new entrants come and will also result in better services and a wide market. India being a country high on culture and people being price conscious Jet Star Airlines has as opportunity to tap the market. They already have Qantas flying so having a low cost airline in partnership with a domestic player and having 49% stake in it would be beneficial as in the long run more deregulation is bound to take place. PESTEL Analysis This analysis will help to identify the potential Indian market has for Jet Star Airline. Since, these are factors beyond control so it influences all other companies in similar business similarly. This will thus act as a tool to decide the strategy to enter the Indian market. Political Political situation plays a very important role for any industry and more for a developing country. India has a very high influence of “political factors and any changes in decision affect the overall bearing in the sector”. (OPpapers, 2010) The airline industry is “heavily influenced by the political scenario and the commuters travelling via airlines get affected due to change in policies or unstable government”. (OPpapers, 2010) This calls for an understanding of the scenario. Recently, “the Indian political system has been unstable due to international events like September11 and tension with Pakistan”. (OPpapers, 2010) This has affected the policy changes though still the government has reforms supporting growth. The political situation has also been affected by the recent Gujarat riots. In spite, of such situation the stability of the government at the centre has ensured reforms to allow more investment in the airline sector. The political situation is also affecting the “international airlines offered by both countries which depends upon trade relations”. (OPpapers, 2010) Jet Star Airlines can use it as Australia has good trade relations. Another important point here is “the high corruption level where companies have to bribe the government officials for license” (Justin, 2009) is affecting the new entrants entering the market. Economic The economic situation affects the number of commuters. The airline industry for a developing country like India gets affected by “the growth rate and the business cycle as during recession people consider it a luxury but during boom a necessity”. (Justin, 2009) This is also affected by the price of oil. An increase in price reduces commuters as flights become expensive. India, slowly coming out of recession provides an opportunity. The number of commuters has increased due to this. The income level and the growth rate also affect people flying. Like, “the recent breakout of SARS affected the people travelling to Far East thereby affecting the economy and having a deep impact”. (Justin, 2009) The economic situation has also improved for people as the living standards have risen. “The present GDP (per capita) is calculated at $3100 which is low compared to developed countries but the growth of IT and BPO is giving a push and with younger population on the side the per capita GDP is bound to grow”. (OPpapers, 2010) This is a boost and with the economy reviving has seen a jump in travellers. Social The Indian culture is strongly influenced by culture prevalent is social environment. India being a diverse country this plays a prominent role. “With different people from different backgrounds, religion, income level, and habits affect the way a person stays and brings a change in a social outlook”. (Justin, 2008) The social culture affects the way a client can be satisfied. This makes companies use a mix of different culture and ways to satisfy people especially while operating in service industry. For example, “A Hindu would like the environment to be such that he is served vegetarian food and his near ones are also of the same caste”. (Justin, 2008) Thus, the social factor is greatly influenced by religion. Service industry ensures that such an environment is created. This helps to ensure that customers are high on satisfaction and remain loyal. This is a common phenomenon seen in Indians that “they remain loyal to the services which satisfy them and don’t switch easily even for a price”. (Justin, 2008) Thus, social factors have a huge role in India. Technological India has moved ahead in technological advancement. “The increased use of internet and the penetration level has acted as a boost for airlines to get even the far of customers”. (Justin, 2008) This is allowing people to book tickets themselves. This has increased as the literacy level has raised giving rise to more people using it as a medium to book tickets. This can also be supported by the fact that “US trade & development association conducted a feasibility which states that aviation sector has been able to take huge advantage and this has been due to the modernization of communication, air traffic management, surveillance, and cargo services being on a rise due to it”. (Justin, 2008) The use of technology in India has also upgraded the airports and infrastructure which is helping the service providers to capitalize on it. This is a great opportunity for the providers as they can use the advancement and capture the vast market. Environment The Indian government has also framed laws for the environment. A cap has been put and steps taken to keep it within limits. The government has also taken steps for cleaning the rivers and companies are also helping in it. The aviation sector has also contributed to it by domestic players taking steps to reduce emission. This is a step in the right direction and the aviation sector can bank on it. The airlines which ensure that steps are taken to ensure that emission is low fall high on the government list. Those companies are favoured and are a boom for the service providers. Legal The Indian government has rules in place regarding the entry and exit of players. “The government has put a cap on foreign investment in domestic players for the aviation sector”. (Justin, 2008) This is ensuring that airlines which comply with those are allowed a stake. The government has also framed laws regarding “the permission to fly on Indian soil and service providers need to get approval from the government and needs to ensure that also during their journey they comply with the norms like security check, parking and so on”. (Justin, 2009) Companies accompanying with the norms and ensuring that all the legal formalities are met has an edge. It ensures backing from the government and companies find it easy to comply with the regulations and perform. 4P’s of Marketing The 4P’s of marketing helps to understand the marketing strategy that the aviation sector offers in India. The analysis of this will help new entrants to understand the strategy that will help them to be successful. Product The airline sector is divided into luxury and business class depending on the income level in India. This has made the provider differentiate their product. It is a seen phenomenon that “India has service providers who are cost efficient and other who are regular providers thus differentiating themselves on the basis of product offered”. (Justin, 2008) The service plays a huge role but “the socio-cultural factor affects the number of people travelling and this gets altered due to disruption of timing of flights thereby affecting services”. (Pobari, 2009) Thus, India has a mix of services and providers differentiate themselves on some basis. Price The airline sector is India has multiple price mechanism working according to the living standard. The aviation sector in “India offers premium pricing for the business class, value for money for frequent flyer and cheap value pricing for the price conscious customers and apex pricing”. (Justin, 2008) The mix of different pricing gives the service provider to tap the market in different cities as per the living standard. By providing such a variation it also ensures that India offers different service provider to choose their competencies. Promotion The aviation sector in India provides an integrated marketing communication to make the customer aware of the services and ensure that they remain loyal. The aviation sector offers “advertising on television, radio, billboards, newspaper, hoardings, and public relations, personal selling, direct mail and internet”. (Justin, 2008) The technological advancement has allowed companies to use the marketing communication according to their requirements. Thus, India presents a wide avenue to choose to sell the services and also have loyalty programs to retain customers. Place The aviation sector in India offers a variety of means to sell tickets. India has also developed channel management which has ensured that selling is easy. The aviation sector offers “internet, direct selling over the phone or personally at the counter and other means”. (Justin, 2008) Thus, companies get a variety of option and using all they can get a good grasp of the Indian market. Marketing Mix Understanding the marketing mix that companies can use in India will help to better frame strategies and also decide the course and steps to be taken. People People in the aviation sector comprises of employees, customer and the company itself. Companies need to ensure that all this are under control so that proper management is possible. The buyer behaviour in India “plays a huge role due to the socio-cultural influence so companies need to ensure that segmentation and targeting is sound”. (Kalyani & Babu, 2006) This makes it important that airlines identify it properly. The services offered should also be good to retain those. The airline sector in India also ensures that the “employees are well trained and versed according to the culture and also given continuous motivation talks to keep their high spirits”. (Kalyani & Babu, 2006) This makes it possible for the service provider to ensure that they are able to provide continuous service without disruptions. Physical Evidence Since, services can’t be seen but only realized by those who have been a part of it so the airline industry in India ensures that the services offered are as per the cultural requirements. For example, “it is seen that a Jain is offered Jain food so that his satisfaction level is high”. (Chawla, 2003) The provider so ensure that “services offered are differentiated by offering something else from the others so that satisfaction is high”. (Chawla, 2003) Thus the airline services have a lot of offer and based on the different cities the provider mould their services like in Maharashtra it is seen that the crew knows the local language so that conversation is easy. This helps to provide good service. Future Prospects The aviation sector in India has bright prospects for growth. With the already rising GDP the growth in the airline industry is bound to increase. “It is estimated that the number sector will grow by 15%”. (Justin, 2008) The huge population will further act as a boost to grow. It is estimated that the CAGR will be 84%. Thus, the Indian aviation sector has a bright prospect and with the opening of economy to foreign investor this sector is bound to move up. Findings The Indian market “offers a great opportunity for low cost air service provider as the people are price conscious” (Article Base, 2008) The consumer in India are price conscious Socio-cultural factors have a huge impact on the customers as people prefer the environment to the one they have at home The consumers are loyal towards a brand and continue with the same company till the service falls The aviation sector with the opening up of the economy gives an opportunity for foreign players to have a stake and fly airlines within India and abroad India offers the airline provider the infrastructure, technology and advancement needed to provide good services The Indian market offers an opportunity to use all the three services and become a leader. The growth rate, huge population and the rise in per capita income demonstrates the living standard and with the changing mindset the aviation sector poses an opportunity to tap Conclusion The aviation sector in on an upswing as “the income levels have raised and the entry of many low cost providers have changed the mindset of the population to use airlines”. (Ajay, 2006) The opening of the sector and the growth rate is attracting many new service providers. The strong government regulation and the legal aspect ensure that the reforms are in favour of the industry. The growth rate thus will act as an impetus for growth. The aviation sector in India also offers good technological advancement. Service providers who are able to ensure that the same culture is prevalent in their service is able to retain customer. Thus, India has a huge market potential and many new foreign players are eyeing the vast market. Recommendations Jet Star Airlines can tap the huge population by offering low cost airline to Australia as the price conscious population will be attracted towards it. Jet Star Airlines also has an opportunity to have a stake in the domestic players and ensure that their flights commute in the cities in India by offering the price conscious customer extra fun of travelling Jet Star Airlines can also start the cargo and chartered plane service as the rise in high worth individual offers an opportunity to tap Jet Star Airlines need to ensure that while offering the service the adopt the same socio-culture so that the commuters get a sense of belongingness Jet Star airlines can operate on those routes where there are few flights and tap the price conscious customer there References Ajay S, (2006), “Revel in competition”, Airline Sector, Business Week Article Base, (2008), “Low Cost Airlines in India”, Online Articles Directory, Article base Chawla A, (2003), “Marketing Management for Airline Industry in India”, Workshop on Marketing of Educational Institute, Programme and Services International Airlines in India, (2010), “International Airlines in India”, retrieved on March 31, 2010 from http://www.india-travel-agents.com/india-guide/international-airlines.html Jet Star Airways, (2010), “Jet Star Airways” retrieved on March 31, 2010 from http://www.bestaviation.net/jobs/jetstar_airways/ Jet Star Airlines, (2010), “Jet Star Airlines” retrieved on March 31, 2010 from http://www.webjet.com.au/airlines/jetstar/ Justin A, (2008), “Airline Industry”, Service Sector Management, Business Week Kalyani V & Babu P, (2006), “Strategies for developing sustainable airline brands in Indian market”, Sri Krishna School of Management OPpapers, (2010), “PEST Analysis Indian Aviation Sector”, Research paper, OPpapers.com Pobari J, (2009), “Airline Sector in India”, Airline Industry, Jelsoft Enterprise Ltd Phadnis A, (2009), “Proposal to allow 49% stake for foreign players in domestic carriers”, Business Line, The Hindu Group Publications Read More