Airlines: Service Industry ACKNOWLEDGEMENT I take this opportunity to thank Dr. Vijay Wash for giving us an opportunity to work on the project on Airline Industry for the subject ‘Product & Service Management’, which has helped us understand the Service Industry to certain extent. I also thank Prof. P. L. Arya (Director NLDIMSR) for providing us with the facility of the Computer center and a very good library which has helped us doing our project. NLDIMSR 1
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Airlines: Service Industry
ACKNOWLEDGEMENT
I take this opportunity to thank Dr. Vijay Wash for giving us an opportunity to work
on the project on Airline Industry for the subject ‘Product & Service Management’,
which has helped us understand the Service Industry to certain extent.
I also thank Prof. P. L. Arya (Director NLDIMSR) for providing us with the facility
of the Computer center and a very good library which has helped us doing our
project.
NLDIMSR1
Airlines: Service Industry
Index
Sr No. Topic Page
1 Executive summary 2
2 Service marketing 4
3 Unique characteristics of service industry 4
4 Marketing mix for service industry 8
5 Airline industry 12
6 Introduction to airline industry 15
7 History of industry 15
8 Structure of the industry 17
9 Indian aviation industry 21
10 Players in the airline industry 23
11 Airport infrastructure 26
12 Development of civil aviation in India 28
13 Civil aviation policy 30
14 Infrastructure development 31
15 Airport privatization 33
16 Alliance strategy 36
17 Recent development 39
18 Case study- Jet airways 41
SUMMARY
NLDIMSR2
Airlines: Service Industry
We owe it to the Wright brothers for having invented airplanes. The
Wright brothers could not have imagined how airplanes would
change the way people live & do business.
The airline industry has witnessed a sea change from two wheeler
bi-planes to the Boeing 747's that are visible in our skies today. The
passage of time has witnessed competition grow from leaps to
bounds. Today airplanes are present in every country around the
world with expectation of a few places. Even the industry has been
growing year on year
It was JRD Tata who made the first move to build up an airline
industry in India. He with the help of Nevil Vincent, a former RAF
pilot, went ahead and drew a plan for the operation of first flight
from Karachi to Mumbai with single stopover at Ahmedabad. This is
how Tata Airlines was born which was donated to Indian
Government. On 28th May 1953, Air Corporation Act – 1953, the
government of India nationalized the airlines industry. In accordance
with this act, the two air corporations, viz. Indian Airlines
Corporation and Air India International were established. In 1994 the
monopoly was ended and Indian skies were opened for any carriers
who fulfills the statutory requirement
The Indian aviation industry can be broadly classified into two main
segments - Civil and Cargo. In fact, the birth of civil aviation is
attributed to air cargo and mail. In the beginning, mail and air cargo
were the important elements of air carrier services than passengers.
The major players in the Indian context are Air India in the
international segment and Indian Airlines, Jet Airways and Sahara in
the domestic segment.
NLDIMSR3
Airlines: Service Industry
Over the years, the aviation sector in India has evolved and today it
is on the threshold of a major shake out with the divestment of the
Indian government's stake in Air India and Indian Airlines on the
cards. A number of domestic and foreign parties have evinced
interest in the divestment process. Recently, foreign airlines like
Virgin Atlantic of Britain and Singapore Airlines have also entered
the Indian skies.
The Indian aviation sector till recently was highly regulated by the
government. As recently as the eighties saw the introduction of
some new initiatives like the air taxi scheme, whose main objective
was to boost tourism.
Domestic and international passenger traffic in India is projected to
grow annually at 12.5% and 7% respectively over the next decade.
At the same time, domestic and international cargo traffic is
expected to grow at 4.5% and 12% respectively. By the year 2005,
Indian airports are likely to handle 60mn international passengers
and 300,000 tons of domestic and 1.2mn tons of international
cargo.
SERVICES MARKETING
NLDIMSR4
Airlines: Service Industry
Service industry is witnessing a major boom in India. Services like
banking, car financing, consumer durable credit, cellular, paging,
express, hospitality, travel and tourism, airlines, and, educational
services on are today realizing the importance of marketing. Along
with these big service businesses, many small businesses ranging
from beauty saloons, pubs, gyms, play schools and so on are
realizing the importance of marketing.
UNIQUE CHARACTERSTICS OF SERVICES
What is a service? And why should services receive special
treatment from marketers? A popular definition describes services
as
"any act or performance that one party can offer to another that is
essentially intangible and does not result in the ownership of
anything. Its production may or may not be tied to physical
product."
Although, the distinction between goods and services is somewhat
artificial, since the success of goods manufacturers is vitally
dependent on the service they provide, there are four commonly
cited characteristics of services that make them different to market
from goods: Intangibility, Inseparability, Variability and Perishability.
Intangibility
Pure services such as baby-sitting cannot be seen or touched. They
are ephemeral performances that can be experienced only as they
are delivered. As the above definition of service suggests,
intangibility may represent the most critical difference between
services and goods, and its implications for marketing are great.
Intangible services are difficult to sell because they cannot be
produced and displayed ahead of time. They are therefore harder to
communicate to prospective customers. A passenger cannot feel the
NLDIMSR5
Airlines: Service Industry
service that he would encounter in the airplane, however person
may talk to other travelers who have experienced the same service,
but their experience does not necessarily be the same.
Marketers of services can reduce these risks by stressing tangible
cues that will convey reassurance and quality to the prospective
customers. These tangible cues range from the firm's physical
facilities to the appearance and demeanor of its staff to the
letterhead on its stationery to its logo. Life insurance companies are
particularly savvy about this problem. Their service is, after all, the
most intangible service: by definition, the buyer will never know the
ultimate result of what he or she has bought! To compensate for this
intangibility the major companies over the world have developed
strong visual symbols for their firms.
Prudential -The rock of Gibraltar
All state -Protective hands
Traveler’s -A red umbrella
Nationwide -A blanket
Wausau -A train station
Inseparability
Different service marketing marketers interpret this characteristic
differently, but all interpretations point out those special operations
problems exist for the firm's managers. One interpretation of this
term is the inseparability of customers from the service delivery
process. In particular, many services require the participation of the
customer in the production process. A child getting a haircut must
sit still; otherwise, the family photo may have to be delayed for a
month. The person who comes to a Chartered Accountant (C. A.) at
the last minute with boxes of disorganized records may cause the C.
A. to overlook some possible deductions. These examples illustrate
the fact that, unlike goods, which are often produced in a location
far removed from the customer and totally under the control of the
NLDIMSR6
Airlines: Service Industry
manufacturing firm, service production often requires the presence
and active participation of the customer - and of other customers.
Depending upon the skill, attitude, and cooperation so on that
customers bring to the service encounter, the results can be good or
bad, but in any event are hard to standardize.
A second interpretation of inseparability refers to the fact that in
some service industries the service delivered is inextricably tied to
particular individual service providers. Customers may have ground
for complaint if their service is not provided by, for example, the
surgeon or lawyer they thought they were paying for.
Variability
The fact that service quality is difficult to control compounds the
marketer's task. Intangibility alone would not be such a problem in
customers could be sure that the services they were to receive
would be just like the successful experiences their neighbors were
so pleased with. But in fact, customers know that services can vary
greatly. Different front-line personnel have different abilities. Even
the same service provider has good days and bad days or may be
less focused at different times of day. Services are performances,
often involving the cooperation and skill of several individuals, and
are therefore unlikely to be same every time. This potential
variability of service quality raises the risk faced by the consumer.
The service provider must find ways to reduce the perceived risk
due to variability. One method is to design services to be as uniform
as possible - by training personnel to follow closely defined
procedures, or by automating as many aspects of the services as
possible. The appeal of some service personnel - particularly, those
involved in such expensive personnel services as beauty parlors
treatments or home decoration - lies in their spontaneity and
flexibility to address individual customer needs. The danger with too
NLDIMSR7
Airlines: Service Industry
much standardization is that these attributes may be designed right
out of the services, therefore reducing much of their appeal. A
second way to deal with perceived risk from variability is to provide
satisfaction guarantees or other assurances that the customer will
not be stuck with a bad result.
Perishability
The fourth characteristic distinguishing services from goods is their
time dependence. Services cannot be inventorised, since they are
performed in real time. And time periods during which service
delivery capacity sits idle represent revenue-earning potential that
is lost forever. Periods of peak demand cannot be prepared for in
advance by producing and storing services, nor can they be made
up for after the fact. A service opportunity occurs at a point in time,
and when it is gone, it is gone forever. This can present great
difficulty in facilities planning. A survey of service firms found that
the greatest operational challenges facing them were posed by the
perishability of their products.
Matching service capacity to demand patterns can involve
managing one or both elements. Perishability often puts a greater
burden on service marketers to manage demand than it does on
goods marketers, who can build up inventories to meet peak
demand or can reduce prices later to move the unsold inventory.
The cited survey found that the firm's principal method for
controlling demand was to increase personnel selling during
potentially slow periods. Surprisingly, few firms claimed to use the
standard economic solution of price changes to increase or decrease
demand, although some service industries, such as resort hotels
with seasonal demand, do this routinely.
Few service providers had opinion that they developed alternative,
counter seasonal service products to use slack capacity, although
NLDIMSR8
Airlines: Service Industry
that has long been a common practice by goods marketers. Many
service providers also control demand by requiring appointments.
The alternative to controlling demand is to make service capacity
flexible. Some service firms keep on call frontline personnel who can
arrive on short notice to meet the surges in demand, or cross train
support personnel to assist with customer service during busy
periods.
MARKETING MIX FOR SERVICES MARKETING
NLDIMSR9
Airlines: Service Industry
The marketing mix refers to the blend of ideas, concepts & features
which marketing management put together to best appeal to their
target market segments. Each target segment will have a separate
marketing mix, tailored to meet the specific needs of consumer in
the individual segment.
Service marketing managers have found that the traditional four P's
of marketing are inadequate to describe the key aspects of the
service marketer's job. The traditional marketing mix is said to
consist of the following elements of the total offering to consumers:
the product (the basic service or good, including packaging,
attendant services etc.); its price; the place where the product is
made available (or distribution channels - not generally a real issue
for most services, except perhaps for repair and maintenance); and
promotion (marketing communication: advertising, public relations
and personal selling).
NLDIMSR10
Price
Product
Physical Evidence
People
Place
Promotion
Process
ServiceQuality
7 P’s of Service Marketing
Airlines: Service Industry
The product mix
The product here refers to Airline service offering. Although service
products are essentially intangible, there are certain pyhsical
characteristics which consumer assess in their evaluation of product
choice. It the service mix , there is passenger services , cargo
services, & the mail services.
Attractiveness of the offering in terms of pyhsical features such
as consumers have high expectation, the food & drinks offered ,
entertainment.
Facilities available, associated level of services such as, quality of
seats & interior decoration.
The promotional mix
The aims of promotion fall into three main
categories: to inform, to remind, & to
pursuade. It will always be necessary to
inform prospective consumers about new
products & services, but other issue may also
need this type of communication to
consumers; new uses, price changes,
information to build consumer confidence &
to reduce fears, full description of service offering, image building.
Similarly consumers may need to get reminded about all these
types of issues, especially in the off-peak season.
It is vitally important to recognisse that promotion, or marketing
communications generally, may not always be aimed at potential
consumer or end user of service. In many business areas, it is to
design promotions aimed at channel customers to complement end
user promotion.for e.g Airlines will need to promote their services to
tour operaters as well as end user.
The pricing :
NLDIMSR11
Airlines: Service Industry
Pricing in airlines is a fairly complex issues, since there are price
variations because variations in the level of demand, particularly
due to seasonality, when every Airlines gives price discounts &
competition is tough. Airlines will always faced by high levels of
fixed costs, leading to variants of cost-plus pricing or ROI as key
determinants of pricing levels. It is important to includde pricing
tactics which exploit price sensitivities fully. It differentiates service
levels & offer higher price ‘ value added ‘services, as in business
class air travel.
The Distribution:
In Airlines, they utilise more than one
method of distribution.for e.g they sell
tickets through travel agents & sell seats
on flights to tour operators , whilst also
operating direct marketing. Whichever
distribution strategy is selected, channel
management plays a key role. For channels to be effective they
need realiable updated information. For these reason, I.T has been
widely adopted such as on-line booking system.
Some marketers suggest that the unique requirements of selling
services require the manager attend to three additional P's. These
are people, physical evidence and process.
People:
Many services require personal interactions between customers and
the firm's employees and these interactions strongly influence the
customer's perception of service quality. For example, a person's
stay at a hotel can be greatly affected by the friendliness,
knowledge ability and helpfulness of the hotel staff - in most cases
the lowest paid people in the organization. One's impression of the
hotel and willingness to return are determined to a large extent by
NLDIMSR12
Airlines: Service Industry
the brief encounters with the front-desk
staffs, bellhops, housekeeping staff,
restaurant wait staff and so on, many of
which take place outside the direct
control of the hotel management. In fact,
the average hotel patron has very little
contact with the hotel supervisors and
managers.
Therefore, management faces a tremendous challenge in selecting
and training all of these people to do their jobs well, and, perhaps
even more important, in motivating them to care about doing their
jobs well, and, perhaps even more important, in motivating them to
care about doing their jobs and to make an extra effort to serve
their customers. After all, these employees must believe in what
they are doing and enjoy their work before they can, in turn, provide
good service to customers.
For this reason, human resources management policies and
practices are considered to be of particular strategic importance for
in delivering high-quality services. Establishing a customer-oriented
culture throughout the firm and empowering employees to provide
quality service cannot be established merely by putting up inspiring
posters. Management leadership, job redesign and systems to
reward and recognize outstanding achievement are among the
issues that a successful service manager must address. The term
"internal marketing" has been coined to characterize the sets of
activities a firm must undertake to woo and win over the hearts and
minds of its employees to achieve service excellence.
The "people" component of the service marketing mix also includes
the management of the firm's customer mix. Because services are
often experienced at the provider's facilities, other customers who
NLDIMSR13
Airlines: Service Industry
are being served there can also influence one’s satisfaction with a
service. Ill mannered restaurants customers at the next table, crying
children in a nearby seat on an airplane and commercial bank
customers whose lengthy transactions take up the teller's are all
examples of unpleasant service conditions caused by a firm's other
patrons.
On the other hand, the right mix of customers can greatly increase
the enjoyment of experience - for example, at entertainment
services, such as nightclubs or sporting events. Determining the
desirable customer mix for a service, segmenting the market into
compatible groups and managing customer arrivals to avoid conflict
and enhance the service experience are essential components of
service management.
Physical Evidence
This element of the expanded marketing mix addresses the
"tangible" components of the service experience and firm's image
referred earlier. Physical surroundings and other visible cues can
have a profound effect on the impressions customers form about
the quality of the service they receive. The "services cope" - that is,
the ambience, the background music, the comfort of seating and
the physical layout of a service facility - can greatly affect a
customer's satisfaction with a service experience.
The appearance of the staff, including clothes and grooming, may
be used as important clues. Promotional materials and written
correspondence provide tangible reassurance, they can be
incorporated into the firm's marketing communications to help
reduce customer anxiety about committing to the purchase. Service
firms should design these items with extreme care, since they will
play a major role in influencing a customer's impression of the firm.
In particular, all physical evidence must be designed to be
NLDIMSR14
Airlines: Service Industry
consistent with the "personality" that the firm wishes to project in
the marketplace.
Process Of Service Production
Because customers are often involved in the production of services,
the flow and progress of the production process is more important
for services than it is for goods. A customer who buys a television
set is not particularly concerned about the manufacturing process
that made it. But the customer at a fine restaurant is not merely
interested in the end result - the cessation of hunger. The entire
experience of arriving at the restaurant - of being seated, enjoying
the ambiance, ordering, receiving and eating the meal - is
important. The pace of the process and the skill of the provider are
both apparent to the customer and fundamental to his or her
satisfaction with the purchase.
The importance of the process is true even for less 'sensual"
experiences. A customer who applies for a loan at a bank evaluates
the purchase not only by the amount of the loan received and the
interest rate paid. The speed and sensitivity of the approval process,
the interaction with the bank officers, the accuracy of bank
statements and the ease of getting redress if mistakes are found all
affect the person's attitudes about doing further business with the
bank and his or her willingness to recommend it to others.
Therefore, when designing service production processes, particular
attention must be paid to customer perceptions of that process. For
this reason, marketing and operations are closely related in service
management.
NLDIMSR15
Airlines: Service Industry
INTRODUCTION
We owe it to the Wright brothers for having invented airplanes. The
Wright brothers could not have imagined how airplanes would
change the way people live & do business. The airline industry has
witnessed a sea change from two wheeler bi-planes to the Boeing
NLDIMSR16
Airlines: Service Industry
747's that are visible in our skies today. The passage of time has
witnessed competition grow from leaps to bounds. Today airplanes
are present in every country around the world with expectation of a
few places. Even the industry has been growing year on year.
Technology has also made a significant contribution to the airline
industry; over the years technological advances have been
incorporated into the science of flying airplanes. The industry has
also propelled the growth of ancillary services like travel agents,