Group3- (Section B)

Esha Grover (80) Ashish Periwal (81) Ila Agarwal (82) Rupesh Jain (83) Ayush Bhandari (84) Mandeep Gill (85)

AVIATION INDUSTRY

INTRODUCTION
Aviation

plays an essential role in economic progress of a nation. Provides connectivity nationally and internationally. Provides stimulus to business activity and economic growth.

HISTORY
In

December 1912, the first domestic air route was unwrapped between Delhi and Karachi by the Indian State Air Services (in collaboration with Imperial Airways of the UK). Countrys first air mail service was started by the Tata Airlines in 1912. Later it endeavored in carrying scheduled passenger traffic. Tata Airlines was renamed as Air India in 1946.

Drivers to Growth of the Indian Aviation Sector

Increase

in Consumerism Increasing Tourists and Business Travel Entry of Low Cost Carriers Untapped Market Rising Disposable incomes Rising Middle Class Population Increasing Competition

Factors affecting consumer perception

Price

Service
Promotional

Schemes Flight Schedules Comfort with the brand Corporate tie-ups

Contribution towards GDP

Currently

contributes Rs 33,000 crores or 0.5 per cent of India's GDP. Supports 1.7 million jobs in the country. Contributes Rs 87,500 crores as taxes and social security. The sector also contributes Rs 14,700 crores through its direct output and Rs 10,700 crores indirectly through the supply chain.

Current Scenario
Closed,

poorly

managed

and

over-regulated

industry. The number of airlines including low cost carriers has increased. This led to subsequent increase in competition and fare reduction which further fuelled the air traffic growth.

Current Scenario
Higher

fuel costs, structure of high taxes and higher user charges are leading to huge margin pressures on airlines, led to a trend of consolidation through mergers and acquisitions of airlines, eg. failures like kingfisher. Stringent government policies & norms.

PLAYERS IN THE INDIAN AVIATION

Market Shares
Kingfisher 7% Air India 11% Go Air 2% Others 6% Indigo 34%

Jet Airways 26%

Spicejet 14%

Ticket booking behavior:

TICKET BOOKING DETERMINANTS(DEMAND)

Various variables were taken into consideration which affect the frequency of travelling through air :

Income Age Profession Price Marital status Gender Preferences etc. Statistical tools were applied using SPSS.

Regression Model

TICKET BOOKING DETERMINANTS(DEMAND)

Findings are as per followed: Age & Price -> are the significant determinants of demand. Income & profession are ignored as they are not significant. Regression model shows 56.4% of demand can be explained by price & 63.2% can be explained by age. Demand= -4.595+1.625(Price)+0.204(Age)

TICKET BOOKING DETERMINANTS(DEMAND)

The

important correlation are : Price & Frequency is 0.751 Age & Frequency is 0.684 Income & Frequency is 0.401

Means of ranks.
Factors: 1) cost 2) Timing

3) Hospitality
4) Flight Hopping 5) Ambience

TICKET BOOKING DETERMINANTS(DEMAND)

Factors

considered by customers before booking an air ticket are : Cost : Most preferred. Timing Hospitality Flight hopping Ambience: Least Preferred

Marital Status.

Marital Status
Marital

Status has an significant bearing on frequency of travelling by air. Married People fly more as their mean value is higher.

Male Vs Female

Male vs Female
The

mean frequency of travel of male and females are almost equal.

Profession
Student Service 4% 20% 27% Business others

49%

Reason of travel
Personal others Business/ Proffesional Emergencies

5%
12% 41%

42%

Cost of tickets
70

60

50

Frequency

40

30

20

10

Less than 5k 17

5k -10k 60

10k-15k 15k- 20k 31 10

20k 25k 6

25k - 30k 6

30k 35k 3

35k 40k 12

40k and above 5

Cost of tickets

Preferred class
140

120

100

Frequency

80

60

40

20

0 Preferred class

Economy class 119

Business class 31

Preferred Airlines

Frequency

Indigo Preferred Airlines 36%

Go Air 9%

Spice 20%

Air India 8%

Jet Airways 22%

Others 5%

Preferred AirlinesAirlines Preferred Offer Discount

Frequency

Indigo Preferred Airlines 36% Preferred Airlines Offer Discount

Go Air 9%

Yes

Spice 20%

52.66%

Air India No 8% 17.99%

Jet Airways Others Sometimes 22% 5% 31%

Ticket Booking Method Preferred Airlines

Frequency

Indigo Ticket Booking Method Preferred Airlines 36%

Online Go Air 84% 9%

Through Travel Agent Spice Air India 14% 20% 8%

On The Counter Jet Airways Others 2% 22% 5%

Travel Packages Influencing The Ticket Booking Preferred Airlines Decision

Frequency Axis Title

Strongly Agree Travel Packages Influencing The Ticket Booking Decision Indigo Preferred Airlines 36% 15.31% Go Air 9%

Agree 50.61% Spice 20%

Neutral 17.32% Air India 8%

Disagree 15.31% Jet Airways 22%

Strongly Disagree 1.33% Others 5%

Reimbursement Preferred Airlines Ticket Booking Affecting The Air

Axis Title Frequency

Indigo Reimbursement Affecting The Air Preferred Airlines 36% Ticket Booking

Very High Go Air 9% 20%

High Spice 20% 38.67%

Neutral Air India 8% 26.67%

Low Jet Airways 22% 11.33%

Very Low Others 5% 3.33%

SUPPLIER SIDE

A qualitative survey of suppliers (ticket booking agencies) was conducted & the following data was obtained There is good mix of corporate & individual customers. Maximum demand is during winter & summer breaks. The preferred destinations are Goa, Kerala & South India during winter break. HP & Kashmir , North East in summer break .

SUPPLIER SIDE
Indigo

is the most preferred airlines by customers. Impact of government policies is very high. The market for corporate customers is relatively price inelastic. Timing & cost are the most important factors while booking the air tickets.

MAJOR LOSS RESULTING FACTORS:

PRICE
ATF

prices in India are higher than the global market. The ATF price accounts for almost 75% of the operational expenses. The industrys operational cost component is dominated by the cost of the ATF. It has been recently hiked by 7.6%.

CONGESTION
Presently

capacity limitations are there at many airports like Delhi , Mumbai, Hyderabad, Bengaluru airports as they are Indias biggest and busiest airports. It is estimated that if a flight hang around in the sky for an additional half an hour due to delay in allocation of landing slot, it can consume between 25 to 30 percent extra fuel thereby increasing the operational cost of the airline

HIGH AIRPORT (AERONAUTICAL) CHARGES

The

airport charges payable at the International airports are higher than those payable at the airports nominated as Domestic airports for domestic flights. As an outcome, the domestic airlines in India are incurring additional costs at the international designated airports without benefiting any additional facilities.

SUBSTITUTES AVAILABILITY
The

Indian Railways took few measures to compete with LCC and to retain and improve its position and passenger base namely, Faster trains between short to medium distances Improving connectivity & maintaining on-time schedules Introducing entertainment amenities Providing a reliable e-ticketing facility and Improving the overall quality of services offered

Conclusion.

Though at present, Aviation sector is facing crisis but as per our survey we found that its only for short run. In India only 3% of population use airways as mode of transportation. So the potential of penetration is very high. Price of air ticket ,age of customers are important determinant of demand. Income of consumers also has an significant correlation with demand.

Scope of our project in future.

Our survey brings out the various challenges faced by the aviation Industry. The regression model we developed will help the airline companies to determine the demand in future. It establishes a relationship between demand and its determinants. The study also brings out the existing trends in the industry like preferred locations, relative price inelasticity of corporate customers. This would help the companies to develop better business strategies.