Service Sector

Marketing
‘Airline Industry’
Prepared By:
The 6 4’s Of TYBMS B

04 – Urvi Parikh
14 – Kartik Raichura
24 – Sumit Satardekar
34 – Krupa Shah
44 – Aditi Sharma
54 – Karan Valecha

Prepared For:
Prof. (Mrs) Neela Nair
 INDEX
1. Introduction
 History Of Civil Aviation
 The New Policy
 Changing Pattern of Government Regulations
 Recent Developments in Civil Aviation
 Domestic Air Carriers
 Airport Infrastructure
 Low Cost Airlines: A Preview

2. PEST Analysis

3. Segmentation

4. Unique Service Characteristics(4 I’s)

5. The Goods-Service Continuum

6. The Services Marketing Triangle

7. The Marketing Mix (7 P’s)

 Product
 Price
 Place
 Promotion
 People
 Process
 Physical Evidence
8. Flower Of Service

9. Quality Dimensions: RATER

 Servqual

10. Factors influencing Services

 Service encounter
 Moments of truth
 Critical Incidents
 Service Gap
 Blue Printing
 Zone of Tolerance

11.Service Recovery

12.Complaint Handling

13.Union Budget Analysis 2004

14.Conclusion

15.Bibliography
 Introduction

India occupies an eminent position in the civil aviation sector with

a large fleet of aircrafts. In all, 56 airlines are operating scheduled air
services to and through India and 22 foreign airlines are flying over
Indian Territory. There are over 450 airports and 1091 registered
aircraft in the country. In addition to the three public sector airlines Air
India, Indian Airlines, Alliance Air - there are three private operators -Jet
Airways, Sahara India Airlines & Air Deccan. There are also 41 non-
scheduled air transport operators. Additionally 34 applicants have been
granted NOC by the Ministry of Civil Aviation for setting up non-scheduled air
transport operation.
Estimates show that the domestic and international passenger traffic in
India is projected to grow annually at 12.5% and 7% respectively over the
next decade. 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.

SIGNIFICANCE OF AIR TRANSPORTATION

There are two main significances of air transportation, namely:
1. Quickest mode of transport: Airways is the most modern, the quickest
and the latest addition to the modes of transport. Because of the
speeds with which aero planes can fly, travel by air of both
passengers and goods has become highly popular.
2. Suitability: Air transport is highly appreciated by people who want to
travel in utmost comfort and/or reach their destination re a l
fast. Airways are also suitable for high value light goods, perishable
goods and spontaneous delivery of mails.
 History of Civil Aviation Sector

Travel by air in the modern sense began in India only in 1877,

when Joseph Lyna took off from the Lalbagh Gardens in Bombay, and
ascended to an altitude of about 7,500 feet and landed at Dadra. In the
years that followed, there was a tremendous development of air
transportation in India as in any other countries due to t e c h n o l o g i c a l
advances and coope ra tion from the government.
India also has the distinction of organizing the first flight by an
aero plane in the world in February 1911. This flight piloted by French pilot
M. Picquet flew from Allahabad to Naini.
However, it took more than 20 years for the country to have its
own airline. In October 15, 1932, Tata Son’s Ltd – which later become
Air India International – commenced weekly airmail service with a Puss
Moth aircraft between Karachi and Madras via Ahmedabad and Bombay,
covering over
1,300 miles. Later two more airlines – Indian National Airways in 1933 and
Air Services of Indian in 1937 came up.
At the time of independence, the number of air transport
companies, which were operating within and beyond the frontiers of
the company, carrying both air cargo and passengers, was nine. It was
reduced to eight, with Orient Airways shifting to Pakistan. These airlines were:
Tata Airlines, Indian National Airways, Air service of India, Deccan
Airways, Ambica Airways, Bharat Airways and Mistry Airways.
In early 1948, a joint sector company, Air India International Ltd., was
established by the Government of India. Its first flight took off on June 8,
1948 on the Mumbai (Bombay)-London air route. The joint venture was
headed by J.R.D. Tata, a visionary who had founded the first India airline in
1932 and he had himself piloted its inaugural flight.
The Government then nationalized the airlines industry in 1953,
with enactment of Air Corporation Act, and assets of nine existing air
companies were transferred to the two new corporations – Air India
International and the Indian Airlines. After 40 years, in 1994 Air Corporation
Act was repealed ending the monopoly of the national air corporations
and enabling entry of private operators.
Today, with new entrants in the airline sector particularly with the
modus oprandi of being low-cost airlines, the airline industry is in for a major
shake-up. The new 5-10 years will decide and shape-up the future for
the Indian aviation industry.

The New Policy

 The liberalization in civil aviation industry began in 1986 with the
introduction if Air Taxi system to boost development of tourism. Though
there were several restrictions relating to seat capacity, airports, timing
and fare, the scheme was liberalized over a period of time. Even the
fare was totally deregulated, allowing air taxi operators to charge any fare.
With Open Sky Policy many private operators began operation in the
domestic sector. The carriage increased from a modest 15,000 passengers
in 1990 to more than
0.4 M i l l i o n i n 1992. Of the total of 12.23 million passengers c a rr i e d
on domestic sector, private carriers carried about 5.7 million passengers.
The civil aviation industry got a major boost with the announcement of
Airport Infrastructure Policy in November,1997 which envisages
development of international hubs and regional hubs to provide a hub
and spoke arrangement connecting all airports. Under the policy,
infrastructure development of airport has been opened up
for public and private participation. It allows 74% foreign equity
participation in the airport infrastructure with automatic approval and
100 % equity on case-to-case basis.
A new policy on domestic air transport has also been evolved.
Salient features are:-
 40% foreign equity participation in domestic airlines.

 100% equity participation for NRIs/Overseas Corporate Bodies.

 Foreign airline equity, either directly or indirectly is not permissible.

 Operators to have freedom to determine fares for each sector.

 Domestic carriers to be allowed to fly international routes.

Changing Pattern of Government Regulations

 Civil Aviation sector in India is perhaps the most striking example of the
progress made in the liberalization of the Indian economy, a process that
began a decade ago. Civil air transport business which hitherto had been
the Government's monopoly has been completely liberalized, as a result of
which private airlines have been flourishing.
The process of disinvestment of Government equity in national carriers
has been initiated, private participation for airports has been
further liberalized and the bilaterals for operation of international services
are being further encouraged. This in turn has opened up immense
opportunities for investment in the civil aviation sector in India. The
steps taken by th e government are as follows:

1. Investments Opportunities Foreign Equity

Foreign Equity upto 40% and NRI investment upto 100% is permitted
in domestic air transport services. Equity from foreign airlines is
not permitted directly or indirectly.

2. Disinvestment of the Government Equity in airlines

Government of India decided to disinvest partly its shareholding in both Air
India and Indian Airlines, presently wholly owned companies of the
Government. But with general elections round the corner this issue has
been put on the backburner with constant opposition from various sections
of the society.

3. Entry-Exit barriers removed

Barriers to entry and exit from this sector have been removed.
Only pre-entry scrutiny to verify financial soundness, maintenance,
security and safety aspects of operations and human resource
development proposals is done. Choice of aircraft type and size left to the
operator.

4. Private participation in Airports

Foreign equity participation is allowed in ventures for airports, upto
74% automatic approvals and upto100% with special permission.
Participation is also open to foreign airport authorities.
A variety of fiscal incentives has been provided to airport project,
as decided by Government from time to time. They are as follows:
 100% deduction in profits for purposes of Income Tax for first five
years.
 30% deduction in profits for Income Tax purposes for next five years.
 Full deduction to run for continuous 10 out of 20 fiscal years of
assessee's choice.
 40% of profits from infrastructure also deductible for financial
institutions providing long term finance for airport infrastructure
projects.

5. Bilaterals for operation of international air services

The Government has been more liberal in granting
additional entitlements to foreign airlines both in terms of capacity as well
as in terms of points of call. The existin g air services agreement with
United States of America is an extremely liberal one as it allows any
number of US airlines to operate services from/to India. US airlines are also
allowed to decide the size of aircraft and their frequencies.
6. Taxes and Tariffs
In order to facilitate acquisition of aircraft Government of India
has reduced tariffs for import of aircraft from 8% to Nil. Even aircraft
taken on lease do not attract customs duties. India also has a
liberal Corporate Tax/Income Tax regime for airlines and encourages
investment by allowance of high depreciation rates.

7. Civil Aviation Policy

Having drawn up a successful growth model for the civil aviation
sector, the Government is now engaged in evolving a comprehensive and
integrated new civil aviation policy, some of the major highlights of which
are:
 All players and stakeholders are assured of a level playing field.
  Private participation is encouraged and opportunities are
created for investors to realize adequate returns on their investments.
 Rapid upgradation of airport infrastructure to world class is
encouraged with priority to the busiest airports and those
handling international flights.
 International cooperation in aviation and development in tune
with international trends and best practices, consistent
with airspace sovereignty is promoted.
After four decades of control, Civil Aviation sector has been
liberalized with a view to draw benefits of efficiency, safety and quality
in service. Government has also opened doors to foreign participation in
investment in this sector.
 Recent Developments in Civil Aviation

Civil Aviation:
The different types of civil aviation are:
 Domestic airlines (Indian Airlines)
 International airlines (Air India, Lufthansa)
 Chartered airlines (Evergreen, Deccan Aviation)
 Private helicopter services (Pawan Hans)
 Corporate aircraft (Reliance)
 Transport (Fed EX owns planes)

Airports:
The airplanes don’t own the airports. These are controlled by the
agencies like Airports Authority of India. AAI maintains the airports in India.
Airlines get the routes and landing rights. These can be either used by them
or swapped (e.g. Air India gave unused Delhi-London route to Virgin)

Classes:
 Passengers can avail different types of classes in airlines:
 Economy class
 Business class
 First class
The difference lies in various facilities like reclining seats etc. There is a
significant difference in prices.

Marketing:
Airlines use conventional marketing methods for attracting customers. E.G.
 Advertising – The Singapore Girl campaign of Singapore Airlines
 PR- Public Relations by Richard Branson of Virgin
 Brand Mascot- Maharaja of Air India
 Schemes—Frequent flyer programmes of various airlines
 Domestic Air Carriers – The Players

Indian Airlines

Indian Airlines was founded in 1953. Today, together with its fully owned
subsidiary Alliance Air, it is one of the largest regional airline systems in Asia
with a fleet of 62 aircraft(4 wide bodied Airbus A300s, 41 fly-by-wire Airbus
A320s, 11 Boeing 737s, 2 Dornier D-228 aircraft and 4 ATR-42).

It has many firsts to its credit, including introduction of the wide-bodied A300
aircraft on the domestic network, the fly-by-wire A320, Domestic Shuttle
Service, Walk-in Flights and Flexi-fares.

The airlines network spans from Kuwait in the west to Singapore in the East
and covers 75 destinations - 57 within India and 20 abroad. The Indian Airlines
international network covers Kuwait, Oman, UAE, Qatar and Bahrain in West
Asia, Thailand, Singapore, Yangon and Malaysia in South East Asia and
Pakistan, Nepal, Bangladesh, Myanmar, Sri Lanka and Maldives in the South
Asian sub-continent.

Indian Airlines is presently fully owned by the Government of India and has
total staff strength of around 18562 employees. Its annual turnover, together
with that of its subsidiary Alliance Air, is well over Rs.4000 crores (around US$
1 billion).

Indian Airlines flight operations centre around its four main hubs- the main
metro cities of Delhi, Mumbai, Calcutta and Chennai. Together with its
subsidiary Alliance Air, Indian Airlines carries a total of over 7.5 million
passengers annually.
 Air Sahara

Air Sahara has established itself as one of the leading players in the Indian
Aviation industry. Air Sahara is part of the multi-crore Sahara India Pariwar.
Sahara India Pariwar has interests in Public Deposit Mobilization, Media &
Entertainment, Housing & Infrastructure, Tourism, Consumer Products and
Information Technology. Starting on a modest scale and a capital of only
Rs.2000 in 1978, Sahara India Pariwar has traversed a long way to become an
icon in Indian entrepreneurship.

Air Sahara began operations on December 3, 1993 following the Indian

government's decision to open the skies to the private sector. It operated with
a fleet of only two Boeing 737-200s. Today, its fleet includes advanced
aviation technology New Generation Boeings 737-700s and 737-800s and
Classics 737-400s and a fleet of 7 Canadair Regional Jets. The fleet also
includes four highly advanced Helicopters (Dauphin and Ecureuil), which
provide efficient charter services. Offering 119 flights with 11800 seats on a
daily basis, Air Sahara flies to various destinations in India, which include
important cities like Delhi, Bangalore, Mumbai, Kolkata, Lucknow, Hyderabad,
Pune, Chennai and others. The airline has recently added Colombo, Srinagar,
Coimbatore, Ahmedabad, Jaipur, Gorakhpur, Allahabad, Bhubaneshwar,
Ranchi and Kochi to its route network. Air Sahara also operates flights to
Dibrugarh, Guwahati, Varanasi, Patna and Goa.

The airline is currently undergoing a complete overhaul and restructuring

exercise. Air Sahara has redefined itself in terms of an efficient and punctual
airline with a high record of on-time-performance and dispatch reliability.
Efforts are being made to increase connectivity and offer convenient timings.

A major investment programme has been launched for the modernization and
enhancement of its fleet. Fleet review and route rationalization have become
the focus points of Air Sahara's strategy. Five new Boeings have been added
to the fleet in the last one year. These were used to add new destinations and
increase frequency on existing routes. In the second phase of its expansion
four Canadair Regional Jets have been added to the fleet this year serve on
regional routes.

Air Sahara has introduced initiatives such as Steal-a-seat flexi fare options,
Sixer/Super Sixer and Square Drive/Super Four. The Sixer initiative recently
won the 'The Pacific Asia Travel Association' (PATA) award for the year 2003, at
Bali, Indonesia.

Air Sahara's frequent flyer programme called Cosmos offers faster accruals,
lower redemption bars and requires no minimum balance for redemption.

Jet Airways

In May 1974, Naresh Goyal founded Jetair (Private) Limited with the objective
of providing Sales and Marketing representation to foreign airlines in India.

In 1991, as part of the ongoing diversification programme of his business

activities, Naresh Goyal took advantage of the opening of the Indian economy
and the enunciation of the Open Skies Policy by the Government of India, to
set up Jet Airways (India) Private Limited, for the operation of scheduled air
services on domestic sectors in India.

Jet Airways has emerged as India's largest private domestic airline and has
been acclaimed by frequent travelers as the most preferred carrier offering
the highest quality of comfort, courtesy and standards of in flight and ground
service and reliability of operations. It currently has a market share of 46.7%
per cent and operates a fleet of Boeing and ATR72-500 turbo-prop aircraft.

Jet Airways has been voted India's 'Best Domestic Airline' consecutively and
won several national and international awards, including the 'Market
Development Award' for 2001 awarded by Air Transport World.
Air Deccan

Air Deccan is a unit of Deccan Aviation Private Limited, India's largest private
heli-charter company. Formed in 1995, Deccan Aviation Private Limited has
carved a niche for itself in the Indian aviation scene with its reputation for
providing speedy and reliable heli-services for company charters, tourism,
medical evacuation, off-shore logistics and a host of other services.

The company has a modern fleet of ATR-42-320 aircraft, one of the finest and
most efficient Turbo-Prop aircraft flying. ATR is a European joint venture
between Alenia Aeronautica and EADS. The ATR 42 has become a reference
aircraft amongst airlines around the world, by offering a safe, easy to maintain
and comfortable aircraft operating on the regional market with the best
economics on short haul sectors. To date, ATR has sold over 650 aircraft to
more than 100 operators in 73 countries all around the world.

The company has adopted a 'lean-and-mean' approach to staffing and aims at

maintaining a low aircraft-to-employee ratio. A good work culture coupled with
a skilled workforce is the backbone of the company.

Airport infrastructure
In India, airports were totally owned and managed by central government or
the armed forces. The Airport Authority of India (AAI), a body functioning
under the Ministry of Civil Aviation was responsible for managing the airports
in India. It owns 122 airports, 61 of which are operational. The breakdown is
as follows:

11 international
94 civil and
27 civil enclaves at defense airfields.

The AAI operate most aspects of the airport (including air traffic control) and
procure most of their equipment directly (via global/local tenders). India’s
airports handle 42 million passengers, of which the four Metro gateway
airports (Delhi, Mumbai, Kolkata and Chennai) account for 47% of revenue and
66% of the passengers.

Until 2000, there were five major international airports, - Mumbai, Kolkata,
Delhi, Chennai and Trivandrum. But the GoI announced a further six airports
including Amritsar, Bangalore, Hyderabad, Cochin during the course of 2002.

According to projections, Indian air passenger traffic was estimated to grow to

100 million passengers by 2012 from 36.98 million in 1998-99. Growth
projections in the cargo front were also promising. Airport infrastructure is
linked to development of India's international competitiveness and her ability
to attract foreign investments. The policy opened the doors of private
investment in this sector, including investments from foreign airport
authorities.

The AAI has drawn ambitious long term plans to meet challenges posed by ever
increasing air traffic and advancement in aircraft technology. Some of the
major plans for implementation are:

 Replacement of ground based Communication,

Navigation and Surveillance (CNS) with Satellite based CNS system.

 Establishment of Differential Global Positioning System (DGPS).

 Automation in the air Traffic Control Services.

 Establishment of Automatic Dependent Surveillance (ADS).

 AAI earned a profit (after tax) of Rs. 208.41 Crore during 1998-99 as
compared to Rs. 196.14 crore during 1997-98.

Low-cost Airlines: A Preview

‘Operating on low-cost flying models, airlines can provide air travel
at 40 to

45 per cent of the existing economy airfare’

Travelling by air is no longer a dream for many. Not after Air Deccan's
blockbuster announcement to offer Rs 500 air ticket for the one hour
55 minutes flight between Delhi and Mumbai. Sounds incredible?
Pinch yourself. Low cost, no frills air travel has arrived in
India.
In practical terms, this too good to be true offer may not last
in perpetuity, but air tickets at 40 to 45 per cent of the existing economy
airfare is not just feasible but realistic too as proved by Air Deccan. Its
attractive pricing has succeeded in broadening
the air travellers segment also.
Low cost, no-frills air travel emerged in the US in the 1970s and spread
to Europe in 1990s. In Asia, it made inroads some three years ago led
by Malaysia's AirAsia. In India, the low-cost business model happened with
Air Deccan opening operations in south India.
Already half a dozen business houses encouraged by Air Deccan's
apparent success and the government's policies to liberalise its aviation
policy are all geared up to set the Indian airspace buzzing with activity.
Among the low cost carriers waiting to take off are Vijay Mallya's
Kingfisher Airlines, Modiluft's Royal airlines and Air India's AirIndia Express.
AirOne and Visa to be run by groups of former Indian airlines pilots are
also in the offing. The latest entrant to the growing number of private
investors is the Rs 2500 crore GMR Group.
Low cost carriers have been possible with a different set of economics.
Unarguably, the major cost of flying is attributed to fuel, maintenance
and salaries. In addition there are parking and landing charges as well,
which are quite high. So how does Air Deccan in India, RyanAir in
Europe and Southwest Airlines in US manage to sustain low cost
carriers? How does a low cost model work?
Low cost carriers generally operate with only one kind of aircraft
in their fleet, such as Airbus 320s or Boeing 737s, to lower the maintenance
costs. There is no business class just economy class; this increases the
number of seats per flight.
Typically, they have quick turn around time, which means higher
aircraft utilisation, online ticket reservation to save costs on commission
to agents, reduction in flight services — no free meals, no newspapers
and no frequent flier programmes either. There are no aerobridges or bus
services to ply passengers to the aircraft. What's more, many of them
do not even promise seat allocation. Usually the crew size is also
small: Air Deccan operates with just one air hostess on board.
Low cost carriers manage to wring more by lowering their fixed costs.
Shorter hauls with smaller crew means not just each aircraft being
airborne longer but also spending less on hangerage along with savings on
hotel and layover allowances for the crew. Trimming down the frills like no
hot meals means no extra storage space for food trolleys, this again is
utilised to add more seats to the aircraft. Another source to manage
low airfares is to sell advertising space within. Air Deccan for instance,
has the head rest space open for advertising.
Globally, low-cost airlines operate from secondary airports
where landing and parking charges are much lower. So in London, a low cost
carrier uses Luton airport instead of the Heathrow. In India however,
there are no secondary airports and no cost advantage thereof.
Nonetheless, to be on board a no-frills aircraft you need to
brace yourself with minimal expectation and a high degree of patience.
Above all, one needs to come out of the concept of maharaja style luxury
associated with air travel. No-frills for the traveller translates to lesser leg
space, no free meals and no smiling air hostesses.
But the 'value for money' air traveller is not complaining. In addition, it
is also attracting to its fold many of the AC II rail travellers who save hugely
on time and don't mind paying the premium for the time thus saved.
For full service airlines though, it is a time to worry as the no
frills airlines are certainly making a dent into their markets and profits. To
take up the impending challenge, the full service airlines are also
harnessing themselves. Air-India is set to launch a new subsidiary airline with
25 per cent lower fares to gulf and south East Asian countries in April
2005. Air Sahara also plans to restructure and cut down on its operational
costs so as to offer full service at cheaper tickets to domestic
destinations and SAARC and ASEAN countries. Media reports also say
Air Arabia; a Middle East based international carrier is keen to begin low-
cost flights to India.
The abundance of private investors keen to set up low-cost airlines is a
positive signal. Hopefully, the government would relax the bundle of
taxes and liberalise the air space to actually make flying inexpensive in India
as it is in the US and Europe.
Globally, no-frills airlines hold 25 per cent of the market share.
What per cent will it hold within India is still arguable and premature to
predict but it certainly will win the hearts of travellers with more choice and
better prices.
PEST Analysis: The Indian Airline Industry

A PEST analysis is an analysis of the external macro-environment that

affects all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and
Technological factors of the external macro-environment. Such external
factors usually are beyond the firm's control and sometimes present
themselves as threats. For this reason, some say that "pest" is an appropriate
term for these factors. Let us look at the PEST analysis of the Indian aviation
sector:

POLITICAL FACTORS
In India, one can never over-look the political factors which influence
each and every industry existing in the country. Like it or not, the political
interference has to be present everywhere. Given below are a few of the
political factors with respect to the airline industry:

 The airline industry is very susceptible to changes in the political

environment as it has a great bearing on the travel habits of its
customers. An unstable political environment causes uncertainty in the
minds of the air travelers, regarding traveling to a particular country.
 Overall India’s recent political environment has been largely unstable
due to international events & continued tension with Pakistan.
 The recent Gujarat riots & the government’s inability to control the
situation have also led to an increase in the instability of the political
arena.
 The most significant political event however has been September 11.
The events occurring on September had special significance for the
airline industry since airplanes were involved. The immediate results
were a huge drop in air traffic due to safety & security concerns of the
people.
  International airlines are greatly affected by trade relations that their
country has with others. Unless governments of the two countries trade
with each other, there could be restrictions of flying into particular area
leading to a loss of potential air traffic (e.g. Pakistan & India)
 Another aspect is that in countries with high corruption levels like India,
bribes have to be paid for every permit & license required. Therefore
constant liasoning with the minister & other government official is
necessary.

The state owned airlines suffer the maximum from this problem. These
airlines have to make several special considerations with respect to selection
of routes, free seats to ministers, etc which a privately owned airline need not
do. The state owned airlines also suffers from archaic laws applying only to
them such as the retirement age of the pursers & hostesses, the labour
regulations which make the management less flexible in taking decision due
to the presence of a strong union, & the heavy control &interference of the
government. This affects the quality of the service delivery & therefore these
airlines shave to think of innovative service marketing ideas to circumvent
their problems & compete with the private operators.

ECONOMIC FACTORS
Business cycles have a wide reaching impact on the airline industry.
During recession, airline is considered a luxury & therefore spending on air
travel is cut which leads to reduce prices. During prosperity phase people
indulge themselves in travel & prices increase.

After the September 11 incidents, the world economy plunged into

global recession due to the depressed sentiment of consumers. In India, even
a company like Citibank was forced to cut costs to increase profits for which
even the top level managers were given first class railway tickets instead of
plane tickets.
 The loss of income for airlines led to higher operational costs not only
due to low demand but also due to higher insurance costs, which increased
after the WTC bombing. This prompted the industry to lay off employees,
which further fuelled the recession as spending decreased due to the rise in
unemployment.

Even the SARS outbreak in the Far East was a major cause for slump in
the airline industry. Even the Indian carriers like Air India was deeply affected
as many flights were cancelled due to internal (employee relations) as well as
external problems, which has been discussed later.

SOCIAL FACTORS

The changing travel habits of people have very wide implications for the
airline industry. In a country like India, there are people from varied income
groups. The airlines have to recognize these individuals and should serve
them accordingly. Air India needs to focus on their clientele which are mostly
low income clients & their habits in order to keep them satisfied. The
destination, kind of food etc all has to be chosen carefully in accordance with
the tastes of their major clientele.

Especially, since India is a land of extremes there are people from

various religions and castes and every individual traveling by the airline would
expect customization to the greatest possible extent. For e.g. A Jain would be
satisfied with the service only if he is served jain food and it should be kept in
mind that the customers next to him are also jain or at least vegetarian.

Another good example would be the case of South West Airlines

which occupies a solid position in the minds of the US air travelers as a
reliable and convenient, fun, low fare, and no frills airline. The major element
of its success was the augmented marketing mix which it used very
effectively. What South West did was it made the environment inside the
plane very consumer friendly. The crew neither has any uniform nor does it
serve any lavish foods, which indirectly reduces the costs and makes the
consumers feel comfortable.

TECHNOLOGICAL FACTORS

The increasing use of the Internet has provided many opportunities to

airlines. For e.g. Air Sahara has introduced a service through the internet,
wherein the unoccupied seats are auctioned one week prior to the departure.

Air India also provides many internet based services to its customer
such as online ticket booking, updated flight information & handling of
customer complaints.

USTDA (US trade & development association) is funding a feasibility

study and workshops for the Airports Authority of India as part of a long-term
effort to promote Indian aviation infrastructure. The Authority is developing
modern communication, navigation, surveillance, and air traffic management
systems for India's aviation sector that will help the country meet the
expected growth and demand for air passenger and cargo service over the
next decade.

A proposal for restructuring the existing airports at Delhi, Mumbai,

Chennai and Kolkata through long-term lease to make them world class is
under consideration. This will help in attracting investments in improving the
infrastructure and services at these airports. Setting up of new international
airports at Bangalore, Hyderabad and Goa with private sector participation is
also envisaged.

A good example of the impact of technology would be that of AAI,

wherein with the help of technology it has converted its obsolete and unused
hangars into profit centers. AAI is now leasing these hangars to
international airlines and is earning huge profits out of it. AAI has also tried to
utilize space that was previously wasted installing a lamination machine to
laminate the luggage of travelers. This activity earns AAI a lot of revenue.
 These technological changes in the environment have an impact on Air
India as well. Better airport infrastructure, means better handling of airplanes,
which can help reduce maintenance cost. It also facilitates more flights to
such destinations.

Segmentation: The Airline Industry

 Most airlines use a very traditional segmentation strategy, dividing
passengers into business travelers and economy travelers (mostly leisure
travelers). The common strategy is to squeeze as much profit as possible from
business class passengers who are attracted by superior services and
corresponding high prices and, at the same time, to try and fill the rest of the
seats and ensure growth by attracting economy class passengers with lower
fares.

Business passengers
They are crucial for airlines' profitability. With less spare time and more
cash in their pockets, they agree to pay a premium price for a premium
service.
Today business passengers account for approximately 48% of
passengers, and these 48% contribute 66% of airlines' revenue. The premium
prices they pay provide wider and more comfortable seats, better choice of
meals and seats, luxurious lounges.
Airlines can choose from a multitude of premium services to offer to
business travelers. Some of these extras range from seats equipped with
faxes and telephones, to gambling machines, showers, massage services and
suit ironing services in the recently introduced arrival lounges.
Business passengers believe it is worth extra money if they can save
time and arrive looking fresh for an important meeting. Business passengers
will avoid transit flights even if a longer flight could save them money. But
amongst other perks, flexible reservation services are probably the most
important to them. Reservations for business trips are often made just a
couple of days in advance. A no penalty cancellation policy is also very
important to business passengers.
The best way to reach business travelers is through printed advertising.
Business news media, such as "The Economist" or "The Wall Street Journal"
are some of the best publications through which airlines can reach business
travelers. Many airlines design special promotional programs that target
corporate bookers and meeting planners, who are responsible for business
trips reservations. Frequent flyer programs are an added bonus for business
passengers.
Leisure Travelers
They represent a totally different market. The most important
consideration for most of them is the price. The lower the airfare, the more
people will fly the respective airline.
By and large, with the exception of wealthy travelers, this segment will
not pay extra for premium services and will agree to change several planes
during their trip if this option costs less than a direct flight.
Despite lower margins provided by this segment, leisure travelers are
very important to an airline's bottom line. Part of the reason is that
technological progress in the area of tele-conferencing and increased use of
the internet for business communications is expected to reduce the number of
business travelers. Thus, airlines are counting on the leisure segment to
provide further growth.
How can airlines benefit from the growth opportunities in the leisure
segment without losing immediate profit opportunities in the business
segment? This is a tough issue in airline marketing management. By
improving services and reducing prices for economy class passengers, airlines
risk that some business passengers will switch to economy class.

This has already happened with Japan Airlines, for example, which was
forced to eliminate business class seats on some of its flights. On the other
hand, if an airline focuses on business class passengers, it risks losing its
economy class passengers to another airline.
Since business class passengers are not many, a company relying
mostly on business travelers will often end up flying half-empty planes, losing
the potential revenue generated by lower priced economy seats.
On the other hand, few airlines catering solely to economy class
passengers can be successful because a low fare carrier must fill the entire
plane if it is to generate revenue from its low-margin operations.
The allocation of business and economy class seats on a plane is
determined through a process called yield management. A good yield
manager knows the approximate proportion of business and leisure travelers
for each flight in advance, based on sophisticated statistical models.
Thus he/she tries to sell early, the economy seats at a cheaper price,
while keeping enough seats reserved for business travelers, who usually book
at the last minute. Keeping just the right amount of business seats reserved is
important: selling too few economy seats in advance may result in a less-
than-full plane while selling too many economy seats may result in a full
plane, but with insufficient revenue to gain a profit.
This kind of segmentation serves airlines well enough when
implemented within one company. It would be very difficult for any single
airline to target just one of these two segments - business or leisure -
successfully.
There are exceptions - small regions that serve destinations where the
majors do not fly, for example, are in a better position to implement a low
price policy. They can even get business travelers to fly them despite the lack
of premium services because no other airline would get them there.
Southwest is a classic example, proving that low cost carriers can thrive.
Major international carriers, however, need to target both the business
and the leisure segments they may also target different ethnic and
geographical segments differently, depending on the markets from which they
draw the majority of their customers.
For example, even though Japan Airlines advertise extensively to the
American public, their message -"Your needs. Your Airline," seems to work
best for the traditional Japanese audience.
Inside one country, two national carriers may also focus on different
destinations, which is the case with Canadian Airlines and Air Canada.
Passengers' tastes determine airlines' strategies. While British Airways
focuses on comfort and luxury, valued by European passengers, Air Canada
equips its business class seats with plugs for laptops and telephones,
appreciated by North American business travelers.

Overall, airlines seem to achieve best results when they

subscribe to the segmentation theory, supported by yield
management techniques and a careful monitoring of the economic
changes in their geographical markets.

Unique Service Characteristics

Commonly known as the 4 I’s of Services, it is very important to look

into this aspect and check their relationship with the service industry.

INTANGIBILITY
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. It means that services are high in credence qualities
whereas goods are high in search qualities.
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.
In the airline i n d u s t r y transportation is the core product. Since
it is intangible in nature a service company can distinguish itself
from its competitors by providing several tangible clues like:

 Food / Beverages
 Newspapers
 Movies
 Music
 Staff uniforms- Air India’s staffs always wears a printed blue sari.
Logos - Air India's centaur is the logo and maharaja is the
mascot. Colour and design - Jet airways have blue colour
tickets.
 Seats and cushions
 Audio / Video facilities for work or pleasure
 Fax, laptops, etc.
 Baggage retrieval
 Flight bookings

INSEPARABILITY
Many services require customers to participate in creating the
service product. In the airline industry, it is very important for the
company to consider the customers as a part of the company in order to
serve them better. The inseparability of services leads to:
 Customer being co-producer;
 Often customer being co-consumers with other customers and;
 Customer traveling to the point of service production.
All the above three problems are face by the service marketer in the
airline industry. So the service marketer has to think of ways in which he
can satisfy his consumers in an efficient manner.
In the airline industry, the customer has to be physically present in
the service factory. Hence, he is coming in direct contact with the service
provider as well as other customers of the airline.
INCONSISTENCY
Inconsistency refers to the variability in the
service. Service variability leads to difficulty in projecting a
consistent image and developing a strong brand.
As it is difficult to standardize to blueprint the service process
there is inconsistency in service quality.
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.
E.g.: most airlines include online booking resulting in a standardized procedure &
fewer mistakes due to human errors.
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.
Another way of reducing inconsistency in airlines is
the standardization of in-flight procedures for example the security
instructions given at the beginning of the flight.

INVENTORY
Service businesses cannot normally stockpile their output, because the
time bound nature of service delivery makes it impossible to inventory
the finished goods. For example, the potential income from an empty seat of an
airline flight is lost forever once the flight takes off.
Conversely, when demand for service exceeds supply, the
excess business may be lost. If someone cannot get a seat on one flight
another carrier gets the business or the trip is cancelled or postponed.
The inventory for airline industry is mainly the food and the aircrafts
spares and pa rts . Airlines face the problem of inv en tory mainly due to
irregular demand patterns.

The Goods – Services Continuum

The airline industry is a sector where the goods that are being
sold could be either classified as the traveling service rendered by the
airline company or the actual purchase of the aircraft.
When we consider the purchase of an aircraft, we must
understand that only large corporate houses could afford that and that
too for its top executives only (McDowell’s owns a small plane). Here the
plane is the core product but only the sale of the plane by the
manufacturer does not completely fulfill the desire of the customer,
hence the manufacturer
(BOEING) has to extend a few services to attract more sales to
corporate as well as airlines. For example, free servicing, or may be a
maintenance contract with the plane is required.
Even in case of airline companies where travel is their core
product, they have to render additional benefits or services to the
passengers to increase the number of sale of tickets.
 Hence, in marketing terms there could not be any pure goods or pure
services. Without either of them the other wouldn’t be effective. So in order
to increase sales and grab a larger market share, every good must be
supported by a service and vice versa.
In the above diagram there are 4 parts related to sale: purely
goods, goods related to services, services related to goods and purely
services. But in each case a loophole could be identified if considered in
isolation. Hence for a service marketer to be very accurate with the
sales figures and forecasts, he must concentrate on the second and third
type, i.e. goods related services and services related goods as according
to the business they are into, i.e. if the company is into manufacturing
of planes they must consider the second option and if they are an
airline company, they must opt for the third for maximum benefits.

Pure Goods Goods related Service Related Pure Services

 The 7P’s of Marketing Mix

PRODUCT MIX

Getting the product right is the single most important activity of

marketing. If the product isn't what the market wants, no amount of price
adjustment or brilliant promotion will encourage consumers to buy it. The
airline product is quite a complex one since it comprises of a service of
incorporating the temporary user of airline seat and certain tangible products
such as free flight bags or a free bottle of duty free spirit to encourage
booking.

The airline product includes of two types of services:

1. on the ground services,
2. In-flight services.
The on-the-ground services include a convenient airport with car parking
facilities, duty free' shopping quick and efficient checking of baggage,
efficient service at reservation counter, transport to the airport, etc.
 The service provided inside is intangible and is highly variable. The
airhostesses are trained to provide polite, warm and courteous service. The
courteous service that the representatives at the baggage counter,
reservation counter provide goes a long way in developing customer loyalty.
The travel agents of the airlines also need to be efficient and polite.

Differentiating the Product

It is important to recognize that what the consumers are demanding are
not products, or features of products but the benefits they offer. Producing
added benefits thus helps the marketer to distinguish one product from
another. Good design or style of service can form the basis of differentiation.
This enables the company to create a personality for its service. The design
and decor of the aircraft provides opportunities to personalize their product as
well as periodically to update them when differentiation under IATA
regulations was virtually excluded, nonetheless, certain airlines were able to
develop distinct personalities. Eagle Airlines created an entirely new market
between New I York and Bermuda, for e.g. by developing an image of a
friendly airline distinctive from other airline serving the route. A similar style
was evident in Richard Branson's Virgin Airways.
 LEVELS OF PRODUCT

FIVE PRODUCT LEVELS

The Core Service

The core service of the airlines industry is to transport goods and
services to various destinations. As the needs of the people increased the
entire system became more organized and formal. After this stage come the
various supplementary services.

The Supplementary Services

The airline industry has many players they had a brand name like ‘Air
India’,’ Jet Airways’,’ British Airways’. All of them had some common services
to offer like connecting flights, through check-in, tele check in, food on board,
and complementary gifts etc.
Different classes like economy class, business class were introduced. Air
concessions are given to school students, old people etc. Singapore airlines
were the first to introduce small 8”television screen for every passenger. The
freebies are actually win-win deals between airlines and other services.
 Sahara, for example, offers its passengers a ‘business-plan’ on two-way
economy class ticket, which includes a night’s stay with breakfast, STD facility
for 3 minutes and boardroom facility at the Park Hotel, New Delhi. To Delhi
based fliers to Mumbai, it offers a night’s stay with breakfast, airport transfers
and VIP amenities at The Orchid, Mumbai. For business class, the plan
includes a stay at The Leela, with buffet breakfast and late checkout.
All these added service helps the customer to decide upon which
airlines he wants to travel. As competition increased and the customers
wanted more the next phase evolved and that is the augmented service.

The Augmented Service

This phase is where the customer’s expectations are met; the service
providers kept working on new methods to meet the ever-changing
customers’ demands. The players introduced online booking, which was
very convenient for the service users.

British Airways business class has showers; it’s more spacious and
comfortable. Sahara airlines offer its passengers six different types of cuisine
like vegetarian, fat free, diabetic etc. They also have auction going on board.
Virgin airlines have gambling on board, they also have body massage to offer
to their passengers. Air Emirates has something called cab service, they have
customized pick up and drop cab service.

This phase is the most crucial one; with increased competition service will
become the final differentiation.

Future Service
As mentioned above the customer needs keep changing, the future is
unknown. The customers may be looking in for more frequent inexpensive air
travel, something like air taxis, super sonic speed. This decreases the time
thus reducing the cost.
 The diagrammatical representation of the core and supplementary
services in the airline industry is shown below:

COMFORT/ SPACE

TICKETS

CONNECTI FOOD
NG
FLIGHTS Core MULTI-
TRANSPOR CUISINE
AUCTION
T
BRAND NAME CONCESSIO
(Air India, Jet NS
Airways)

COMPLEMENTA
RY GFITS

CAB SERVICE
 PRICE MIX

Price plays as much a tool of marketing as promotion plays a critical role

in the marketing mix. The concept of 'fair price' is paramount. Buyers judge
whether a product is fairly priced by seeing whether it represents value for
money. Pricing can be classified in three ways.

DIVISION OF FARES:
The final fares charged to the passengers include the following components:
 Basic fares
 Insurance
 Inland Aviation Travel Tax (IATT).
 Passenger Service Fee (PSF)
The basic fares include the operating cost incurred by the airlines and the
profit margin. The major constituents of the operating cost in respect of
domestic airlines in India are the Aviation Turbine Fuel (ATF) the basic raw
material for this service industry, varies 30-40 % depending on aircraft
utilization; Navigation, Landing & Parking costs 7-10%; Repair and
Maintenance 13%, Manpower 12%; Acquisition/ Depreciation & Insurance 13%
and balance other expenses.
How are fares arrived at?

When Airlines put in capacity (seats) and frequency (flights) between

any two points, they market research the route in order to arrive at the total
potential for that segment. In other words, the capacity and frequency is
tailored to the size of the market. Accordingly, the pricing structure is also
arrived at. Pricing or fare levels are arrived at after taking into consideration
various factors; type of aircraft, configuration of aircraft (number of seats),
density of route, competitor activity, and minimum breakeven cost.

In order to achieve the breakeven seat factor and thereafter maximize

loads, the airline embarks upon a serious of marketing activities. These will
vary from a publicity campaign highlighting various facets of the Product, to
sales, service, punctuality, ideal departure and arrival timings, connections
and so on. In short, the entire focus is to increase the yield and load factor
(seat factor). The yield or the bottom line is the income generated from ticket
sales less costs incurred on the route.

Why do fares fall?

When the yield drops or the seat factor falls, the airline is immediately
alerted to enquire into the causes for this. This leads to a fare war wherein
the airline either tries to protect its market share or responds to another
airline which tries to increase its own market share. The reasons for these can
be multifarious.

 It could be that the route is not profitable due to intrinsic reasons

such as a very short haul route, or the potential or total size of the
market for this route is too small to sustain a profitable flight or
there is too much capacity deployed by various airlines on the
route
  Yields may also fall due to increase in costs. Then the airline has
two options; increase fares to compensate for the increased costs.
The second option is, to drop fares in order to increase the seat
factor. (Increase in volume number with low fares can achieve
breakeven cost)

 It could be that the type of aircraft deployed on the route is not

suitable and hence is making cash loses.

 Extraneous reasons also contribute to non-profitability of routes.

The event of September 11, 2001 is an instant example wherein
passengers simply stopped flying and several airlines went into
bankruptcy. Also poor economic conditions lead to shrinkage of
market. Prices of fuel also fluctuate and can result in sudden
increase in basic costs. Insurance premiums have recently
increased considerably, further adding to the burden.

 Apart from the above. Competitor activities can also lead to a

drop in market share or drop in yields. For example, the most
common cause is a reduction in fares by one airline forces the
other to reduce fares. This reduction in fares could be due to any
of the above three reasons enumerated above.
Reduction in fares, apart from the above reasons is also due to
introduction of a more suitable aircraft, which is fuel efficient, modern, and
with greater seating capacity at lower cost. In other words reduction in fares
is not always due to negative factors but can be due to modernization.

Pricing Strategies

Premium Pricing:
 The airlines may set prices above the market price either to reflect the
image of quality or the unique status of the product. The product features are
not shared by its competitors or the company itself may enjoy a strong
reputation that the 'brand image' alone is sufficient to merit a premium price.

Value for Money Pricing:

The intention here is to charge the average price for the product and
emphasize that it represents excellent value for money at this price. This
enables the airline to achieve good levels of profit on the basis of established
reputation.

Cheap Value Pricing:

The objective here is to undercut the competition and price is used to

trigger the purchase immediately. Unit profits are low, but overall profits are
achieved. Air India and Indian Airlines have slashed their prices to meet the
competition of private airlines so that they can consolidate their position in
the market.

Airlines usually practice differential pricing. There are three classes: The
First Class, The Executive or Business Class and The Economy Class. Fares for
each class are different since the facilities provided and the comfort and
luxury level is different in each class. Seasonal fares are also fixed, fares rise
during the peak holiday times.

Low-cost Pricing:
With the advent of the low-cost airlines in the Indian aviation industry, a
different low-cost flying concept has come up. Since these low-cost airlines
are trying to woo the customers by providing air travel in exceptionally low
prices, a price-band kind of pricing has to be designed.

In low-pricing strategies, the airlines provide very low prices for the
flight tickets. Also, they prices are made cheaper by booking the tickets long
before the flight date.
APEX Fares
In this scheme, people are given very cheap rates only if tickets are booked
atleast before the specified time period. But the draw-back here is that if the
booking is cancelled, a substantial amount of money is not returned.

PLACE MIX

Marketing-channel distributions are among the most critical decisions

facing the management. The companies chosen channel ultimately affect all the other
marketing decisions.
"Marketing channels are sets of ‘interdependent’ organizations involved
in the process of making the service availablefor
consumption".
Understanding what, where, why, when, and how the target market buy, is
the first step in designing the marketing channel. The marketer must
understand the service output levels desired by the target market and types and
levels of services that the people want and expect when they purchase the
service.
‘Special convenience’ expresses the degree to which the
marketing channel makes it easy for customers to purchase the service. For
example, Jet Airways' ticket counters are conveniently located at all
destinations within its network, both in the city and at the airport and with a
computerized ticketing facility at most airports. Airlines also provide all the
essential information required by their customers, with the help of polite
front line office staff and airhostess on board the flight.
 The airline industry has adopted different distribution channels
for marketing their services to their target audience. On the ground there
are many ticket counters with computerized 24-hour reservation
systems. They have many specially designed check-in counters for
club and premiere passengers.

There are two principal methods of booking seats on an airline.

 The first is the group of traditional method such as the phone,
fax, and email. Corporates or vacationers generally approach travel
agents who book the tickets form the airline & take the commission
from them.
 The second & increasingly popular method of reservation is the
online booking method. Here the customer fills in his details online &
he receives an instant booking of his ticket. His payment is generally through
credit card. Although not as popular in India, this booking system has
achieved much success in the developed countries that travel agents
are losing their jobs.
An example of how distribution is carried out:
The place mix of airlines consists of mainly the distribution channels. The number of
destinations that an airline flies to can also contribute to its place mix.

Distribution channels

The Four methods of distribution are as following:

 Consolidation: The direct sale of tickets from airport to the
passenger on the airline desk.
 Tour Operator/ Travel Agent: Customers approach travel agents or
tour operators who book the tickets from the airline and take
commission. E.g. SOTC
 Affiliated with companies: As the name defines, airlines gets
affiliated with companies who carry all its trips with a same
airline who in turn gives special discounts or offers in return.
 Direct through home leased system, e.g. Phone, fax, email and also
 online e-booking.
E.g. If one makes reservations and purchase tickets by phone
through South-west airlines’ Telephone Reservations Center, they will
allow you to cancel those reservations and/or tickets without penalty if
you call us back within 24 hours. This will give you the opportunity to check
for lower fares through other distribution systems, such as Internet-specific
fares.

PROMOTION MIX

The formulation of an ideal promotion mix is essential to inform sense and

persuade the users. In the Indian perspective, we need more creative
efforts because the potential users in a majority of the cases don’t
prefer to use air services. The business magnets, executives, politicians,
actors, high spending tourists etc are some of the users of the air services.
The users appears to be more conscious, aware of their rights and in a
majority of the cases are found to be sophisticated and therefore the
promotional efforts have to be creative. Many airlines are facing financial
crunch, it is pertinent that they make optimum use of different
components of promotions

 Advertising
Airlines need creative advertisements to promote their business. In the view
of rising cost of inputs and the increasing impact of worldwide
economic depression on the airlines, advertisements should be
budget optimistic vis-à-vis optimal. The telecast media and print media are
important for promoting the air business.
 The airlines have to make sure that whatever strategic decision they
make to promote the businesses are in a position to establish an
edge over competitor’s promotional measures. Also the airlines should keep
in mind the quality and the nature of the target markets and the level of
expectations.
This is essential to make advertisements proactive for the expansion
of business. They are also required to assign due weight age to the efforts
made for projection of positive image.
We can’t deny the fact that both Indian airlines and Air India have
been facing image problems. The ads may be efficacious in transmitting
the facts and removing the image problem. It is also essential that
while advertising airlines should also keep in mind the image of our country,
the scenic beauty, tourist attractions, rich cultural heritages or which
would attract number of tourists. While advertising it is impact
generating that one should select an opportune moment of flight is an
attractive scene of take off, and so on. Airlines can also use broadcast
media. The domestic flights should use radios because due to increasing
access to FM.

 Publicity
Publicity is an important component of promotion mix. It is a process of
persuasive communication. It is very instrumental in
sensitizing the persuasion process provided the media people,
public relations officers provide their help. Strengthening the PR activities
is essential to promote airlines business. The PRO, Receptionist, Travel agents,
Media people are very important people in publicizing the
business. The marketing professionals can seek the cooperation of
media people by organizing dinners, meetings, get together, press
conference etc, also giving them small gifts and motivating them to publish
news items which are in favor of airlines.

 Sales promotion
The sales promotion measures are meant for both the related
sources channel sing and using the business, such as the travel agents, tour
operators and all of them who process the services and the passengers
and business houses who use the services.
The travel agents contribute a lot to the promotion of airlines business
and therefore the need to think of them in their favor on their priority
basis. In addition the tour operators, the frontline staff also must be
given priority. Hence they should be offer some incentives this will
motivate them to promote the product. The user also deserves incentives.
The incentives may be in the form of confessional services, a small gift etc.
E.g.
EMIs, which allow customers to pay in installments.

 Judo Tactics

‘EasyJet’
A] GO flight which was supposed to be the media event for BA resulted
into a Disaster because ‘easyJet’ bought 10 tickets of the flight and
gave free coupons of easyJet to the 148 passengers.
b] Awareness on the wing of its Rivals: Contest on web offering FREE flight
vouchers for guessing how much BA’s GO would lose during the year.

 Word of mouth

‘Customer Loyalty Ladder’

This happens to be an important constituent of the promotion mix in
which the promoters act as a hidden sales force. The satisfied groups
of users, opinion leaders narrate outstanding merits or salient features of
services used by them.
If you travel by Air India and are satisfied with the services offered by
them then it is natural that you will share your experiences with your friend’s
relatives, they trust in you and therefore the stimulation process is on.
The moment your friends and relatives get an opportunity to travel they
find Air India their first choice.
Ads may be ineffective, publicity may also be ineffective but word
of mouth can never be ineffective

PEOPLE MIX

In the service industry, service personnel come in direct contact

with their customers in the course of production and consumption of the
services.
Because people provide most services, the selection, training,
and motivation of employees can make a huge difference in attaining
customer satisfaction. Ideally, employees should exhibit competence, caring
attitude, responsiveness, initiative, problem solving ability, and
goodwill. Many service organizations trust their people enough to empower their
front-line personnel to resolve customer problems.
The airhostess in any airline come in contact with the customers in the
process of providing the service, while the cock-pit crew are employees who
contribute to the service product but do not come in direct contact
with the customers.
The physical presence and the percentage of time the customer
is present reflect the customer contact and extent of contact
respectively. Services with high contact are more difficult to control and
manage because of the degree of variability in the quality, demand and
nature of service.
The service contact personnel in the airline industry is an
airhostess who is expected to possess a pleasing personality with
polite service handling. While on the other hand the cock pit crew, being
categorized as a low contact personnel, require possessing high
analytical and technical attributes. In the airline industry, there is also the
ancillary service personnel, the travel agent who helps to create the service
exchange but is not a part of the service.
While delivering services, airlines ensure that the service is delivered as
promised and this is often totally with in the control of the front-line staff.
This ensures some amount of reliability. This in turn affects the degree
Of responsiveness sought from customers. The quality of service that the
front-lonestaff provides is highly depended on his/herability to
communicate their c re d i b i li t y . Airlines delive r caring and
individualized attention to customers through their airhostesses. Empathy
implies that these personnel will listen, adapt, and be flexible in
delivering what individual customers need. Also the appearance of an
employee are important aspects as it forms the tangible dimensions of
quality along with other factors like service quality, decor etc.
To start off, airlines hire the right personnel with essential
requirements. They recruit the right people and develop, and train
them to deliver quality service. These employees are provided with
effective and sufficient support systems and are motivated in a
manner, they stick to the organization. They are more treated as
customers, rather than employees. For example, Delta Airlines recruits an
employee, and moulds him to cater to their demands. These employees
are sent to places like the US and Frankfurt on a 21 day training programme.
The successful completion of this training motivates the staff to stay on with the
airline. They are provided with offers such as one-month bonus or some
incentive, on the achievement of the sales target.
 PROCESS MIX

The process of airline service lays emphasis on the involvement

of channels, front line staff, travel agency offices, offices of the tour
operators or so form where the services flow & reach to the ultimate users.
The process begins at the time of reservation goes on to
the confirmation of seats. For e.g.: Computer reservation system of
Indian Airlines enables any reservation request from anywhere in the
world to be auctioned in minutes. The reservation facility is accessible through
all-major computerized reservation system of the world.
By giving details of where to book and how to book airlines help
in providing quality services to the customers. They also offer concession, by
not charging any cancellation charges and also giving them the option to
make a change in the reservation status if he requests so on the
presentation of ticket, all these facilities go a long way in increasing
passenger convenience.
Then facilities at the airport, the baggage handling, flight information,
etc. also helps in delivering quality service and making travel a pleasure.
In the aircraft the meal service, in-flight entertainment, reading
material, in-flight amenities, etc. help the customers, the travelers to have
an enjoyable and convenient travel.
All these procedures form a part of the total process designed
to deliver quality service. Airlines are making every effort to constantly
redefine service procedures to enhance service satisfaction levels.

PHYSICAL EVIDENCE

Physical Evidence refers to the environment in which the service

is delivered and where the service industry and customer interact. The
aircraft by itself, the seating configuration meant to be comfortable and
spacious, and the in-flight food provide physical evidence to the airline
service.
The Boeing Company and The Airbus Industry are the best commercial
aircraft makers and almost all airline industries make use of one of
these airlines. The seating is such that it is comfortable and there is
enough leg space.
The in-flight food is another, important aspect, a wide selection of meals
is offered to the passengers. Passengers are requested to indicate
their reference at the time of reservation itself. Delta Airlines has introduced
new sleeper seats with electric controls for reclining lumbar support,
leg rest extension, expanded seat back height for a more insulated
environment etc. thus providing highly comfortable seating.
Booking offices, ticket counters, etc. must be spacious and well designed
with good looks. Further the air crafts must be given good exteriors and
must be maintained wel1.
The aircraft must have elegant interiors and must be incorporated with
all basic facilities. The aircrafts must have well designed seats with
more leg room especially in the business class.
Domestic lounges are enhanced with good interiors
and basic amenities which will make it an ideal place to conduct
business, entertain or relax.

The jet logo prominently displayed on each of its aircrafts, is used a cue
to trigger of a reminder of the customer’s experience at Jet & also of
all the values that jet airways stands for.
The physical evidence would also include the other facilities in the aircraft.
Some of the bigger aircrafts have more than the usual facilities on
board. These sort of tangible clues act as identification marks for the airline & help
the customer to evaluate on airline from another.

Kingfisher Airlines
The kingfisher airline, which is soon going to be launched, has hired a
high profile Fashion designer for designing clothes for the employees. This
leaves an impression on the minds of the customers and they are
easily able to relate to the airline.

EASY-JET
Easy-Jet airline has also created an impression in the minds of the
customers as the color of the employee’s clothes is orange and the
interiors are also in orange color.

SOUTHWEST AIRLINES
On the dawn of our 30th year, Southwest saluted our past and toasted
our future with a fresh new look—a bird of a different color. On January
16, 2001, we proudly unveiled the look that launches us into the new
millennium. Inspired by a canyon sunrise and dedicated to our loyal
Customers, Canyon Blue was added to Southwest’s traditional gold, red,
and orange colors. Beauty, however, is more than skin deep. The interiors of
our 737s also are new. The Canyon Blue will team with Saddle Tan in
Southwest’s n e w all-leather s e a t i n g configuration. Brushed aluminum
surfaces, deep blue carpet, and newly designed windscreens complete
a comfortable interior look and feel for Customers, which calms the
mind and comforts the body.

THE FLOWER OF SERVICE

The core service of an airline is the service of transport. The

supplementary services are classified into eight clusters & each one is
analyzed with respect to the airline industry:

Information
This aspect of supplementary service is common for every person that
needs information about the organization. In case of airline industry, upto
date information regarding flight schedules, ticket fares, information about
promotion schemes etc available to customers.

Customers can avail of this information literally at their fingertips today

with every airline starting its own website which gives complete details to the
customer & also entertains queries.

It also includes providing information to employees regarding new

policies affecting the airline & equipping them with enough information, which
the customers might demand. Extensive training is provided to in-flight
attendants regarding handling customer queries, knowledge about the
airplane itself, knowledge about cuisine etc.
Consultation
This aspect of supplementary services can be customized according to
the needs of the customer. It is more in the case of people processing and
high personnel-contact services.

Airlines are moving more actively into the role of consultant today. They
are doing away with the travel agents & designing & selling packaged tours to
consumers directly. In this aspect they often act as consultants to the
customer, by giving him advice & suggestions regarding the type of plan he
can choose, the benefits he will get the mode of travel he should choose etc.

Another aspect to consultation at airlines is when the customer

approaches the airline regarding traveling to particular destination, the airline
gives him a variety of choices of routes that he can take.

In some cases airline may also design special menus & benefits in
consultation with its frequent fliers by keeping in constant touch with them &
asking them for suggestion as to what they want in their airline which will
make their experience more comfortable.

Order taking
The order taking procedure is essentially the booking procedure of the
airlines. The important aspect to be noted here is that the procedure is
smooth, easily understood & fast. Reservation of airline tickets is now easy
and reliable since it is fully computerized. There are 24 hours reservations.
Passengers can specify their seat preferences at the time of reservation.

Most airlines use the telephone, fax, and email methods of booking. The
emphasis here is on fast booking & at the same time getting the required
information form the customer. This is done by establishing a standard
reservation procedure & format thus reducing the risk of inconsistent service
delivery. The online booking system also facilitates better order taking &
processing.
 The scheduling aspect assumes importance as reservations on the
wrong flight to the wrong place are likely to be unpopular.

Hospitality & Caretaking

With the increased competition today in the airline industry & the
increasing similarity of services offered by each airline, hospitality has
emerged as a key-differentiating factor between one airline & the other.

The hospitality aspect of an airline is tested right form the time of the
reservation (courtesy of the booking official) to the airline’s desk at the airport
to the actual in-flight travel (the attitude of the flight attendants) to the post
flight help extended.

Safekeeping
In airlines the safekeeping issue is that of safeguarding the customer’s
baggage.
Baggage allowances are offered about 30 kegs of check-in baggage is
allowed. Passengers carrying international tickets are given further allowance
of around an added 3Okgs Priority baggage delivery is offered to members.
The customers entrust his baggage o the airline & it is the airline’s
responsibility to keep it in a proper condition.

Children and infants usually travel along with their parents and
guardian. In case of unaccompanied minors, customer service staff renders all
assistance like checking in and escorting up to the aircraft and handing over
to the senior-most cabin attendant on board the flight. He is looked after on
board the flight right upto the point flight reaches the destination and he is
received by his guardian.

Exceptions
Special requests – airline very often receive special requests form
customers with regards to meal preferences, special amenities for elderly
people or children., medical needs etc. these needs have to considered &
acceded to wherever possible

Handling of customer suggestions / complaints – every airline today has

a customer service center which entertains customer suggestions &
complaints. On the flight, customers are often asked for their opinion
regarding service equality. Many corporate frequent travelers are consulted
when the airline decides to make any new change.

Billing & payment

The billing procedure in airlines is simple. The options available to the
customer are plenty including credit card & travelers cheque. Airlines use the
open account system with their corporate clients. Frequent fliers are also
given special payment privileges.
 Quality Dimensions: RATER Analysis

Customers don’t assess the quality of service on one dimension

only, they use multiple parameters to judge the quality of the service that
they are being offered. These characteristics which people consider vary from person
to person, industry to industry. Even depend upon the product on offer.
In the early 1970’s the strategy adopted generally by the
service provides was: Work faster and more efficiently to reduce the
costs. During the 1980’s and the early 1990’s: Improving the quality aspect
rose as a major priority. This requires efforts to improve customer’s
satisfaction by creating better service processes and outcomes. We are
now seeing a growing emphasis on linking the two strategies in order to create
better value for customers and the firm.
Because of the intangibility and multifaceted nature of many services,
it may be harder to evaluate the quality of a service than a good. Because
the customers are often involved in the service production a distinction
needs to be drawn between the process of service delivery and the actual
output of the service. The most extensive research into service quality is
strongly user oriented.
Services are broadly classified into 10 dimensions namely:

 Tangibility

 Reliability
  Responsiveness

 Competence

 Courtesy

 Credibility

 Security

 Access

 Communication

 Understanding the customer

Since most of these dimensions are overlapping they were pooled down to
five dimensions as given below:
 Reliability

 Assurance

 Tangibles

 Empathy

 Responsiveness

When we look at these dimensions with respect to the airline industry we

find that the following service qualities are expected by the customer.
  Reliability – flights to promised destinations depart and
o arrive on schedule
 Assurance – trusted name, good safety record, Competent
employees
 Tangibles – aircraft, ticketing counters, baggage area, uniforms
 Empathy – understanding of special individual needs,
anticipates customer needs
 Responsiveness - prompt and speedy system for ticketing, in- flight,
baggage handling

RELIABILITY –

Ability to perform the promised service dependably and accurately.

This would basically be that company delivers to the customer what is
promised & the customers basically like to deal with companies that
can fulfill their promises.
When we look at the airline industry we can see the following things
the customer would expect certain basicfacilities like: some
functional infrastructure provided to him, the flight leaving &
taking off on time, the luggage reaching safely.

ASSURANCE –
Employees’ knowledge and courtesy and their ability to inspire trust
and confidence
Assurance relates to knowledge and accuracy of employees and their ability to
convey trust and confidence. This dimension is of great significance for
services where a customer perceives high risk and is not sure of the
outcomes. The employees should have a positive morale & should
be motivated if they have to promote the firm & create a sense of
assurance in the flyer’s mind.

Jet Airways is generally considered the more customer friendly of the

domestic airlines. The staff there is nicer to old people or little kids who
might be traveling. Though Jet has a very young staff, so some of the
members could possibly not match the kind of experience the Indian Airlines
crew has. Suppose some senior citizen is traveling alone in an aircraft for
the first time the crew should see to it that he is given proper instructions &
is comfortably settled in his seat.
Besides this, after the September 11 crisis, there was a lot of
skepticism in the fliers & to instill a little confidence in the
consumer’s mind, the government paid greater emphasis on security in
the aviation policy. This was a l l so that people would f e e l s a f e n ex t
time they t r a v e l e d by a ir.
`They would appoint a committee and look into the recommendations
provided by them to better the security arrangements in the airplanes
& airports.

TANGIBLES –
Appearance of physical facilities, equipment, personnel and
written materials
Tangible features would be those physical features, which can be seen
by the customer. These would be the physical proofs, which would help the
customer to judge the quality of service. The customers evaluate the quality
of these services on the basis of the tangibles provided by the service
providers. The marketers of services emphasize on tangiblising the
intangibles.
Incase of the airline it’d be the aircraft that the airline uses, how old
they are, and the kind of facilities that are provided inside the aircraft or in
the waiting area. The technology used for baggage handling. The coaches
used to transport the customer to the aircraft, all of these speak leaps &
bounds about the service provider. The kind of skilled staff that they have
the uniform that the staff wears.
The tangibles would also include the infrastructural facilities present at
the airports. This is where we find most of the Indian airports lacking. They
have no proper arrangements to handle the customers.
When we look at the aircraft fleet that is a very important tangible
feature, and we find that Indian Airlines has a really ancient fleet of aircraft’s
which doesn’t make it extremely safe as older planes are more prone to
damage. Whereas, Jet Airways has the youngest fleet in the business.

Empathy –

Caring, Individualized attention given to customers

Empathy basically is when the employees of the organization make the
customer feel at home, at ease, making him feel wanted. The customers are
mostly offered the same service from most of the airlines. The easiest way
for an airline the maintain and grow its client base is to be empathetic
towards their customers, to understand their specific needs and to cater to
them & they should make each customer feel like he is a unique asset to the
company
& like their single most important client. Addressing the clients by their first
names, keeping a track of their usual flying routes, their preferences in flight
& catering to all of those, maybe giving him his favorite seat each time
he travels.
Customers like to be treated properly for the money that the pay and
the airline should try and offer the maximum benefit to the flyer for the
money that he pays. Air India in April invested 15 crores in the first class
segment to give it a face-lift and started providing full-recline seats since
they give minimum fatigue on long trips (exceeding 8 hours of flying).

Responsiveness –

Willingness to help customers and provide prompt service.

Responsiveness is willingness to help the customers and provide
prompt service the degree of responsiveness shows the level of commitment
that the people of the company have towards their work. It is very necessary
for the company to concentrate on prompt & the right kind of responsiveness
to the needs of the customer.
Incase, a certain passenger doesn’t like a certain meal served on
the plane, the cabin crew should be in a position to offer him an alternative
meal in little time, as his perception or opinion of the airline company
would mainly depend upon whether he goes satisfied on this complaint or
not. Care should be taken that prompt response and top quality service is
provided to satisfy all of the customer’s needs.
 SERVQUAL

It is based on the premise that customers can evaluate a firm’s service

quality by comparing their perceptions of its service with their expectations.
It is seen as a generic measurement tool that can be applied to the
airline industry very prominently.

Airlines Indian Air Jet Sahara Air

Criteria Airlines India Airways Airlines Deccan

SERIVCE
Courtesy
    
Speed
    
Facility
    
Accuracy
    
Comfortability
    
FOOD
Appearance
    
Taste
    
Quantity
    
PROCEDURE
Tickets Service
    
Guidance
    
Security Check
    
Baggage
Handling     
CLEANLINESS
Outside(Airpor
ts)     
Aircrafts
    
Toilets
    
Value for
MONEY     
Overall
Experience     
  
Good O.K. Bad

Factors influencing Service Sector

Product

It includes the core product along with the additional

benefits,
‘Supplements’ (value added services) that bundle up together with
the product
Sales activity
 By sales activity we mean the message that the company sends
out through its advertising and promotion campaigns. Sales activity also
includes the way in which the company monitors its sales
intermediaries and the attitude that it projects towards its customers.
After Sales Service
After sales service forms a very important part in customer satisfaction
towards the company. The company has to be very efficient in complaint
handling, should seek a time-to-time feedback on its services from
its customers and act promptly if there are any flaws. The company should
also inform the customer about new offers and schemes as and when
they come into existence.
Culture
Culture forms a significant part of customer satisfaction. If
the customer can relate to a particular culture projected by the company,
then his level of satisfaction would be far higher than if the company
projects a hostile environment to the customer’s
perception. Basically company culture comprises
of all intrinsic values and beliefs as well as tangible and intangible symbols
that it uses to instill these values into employee behavior at all times.

SERVICE ENCOUNTER
The interaction between the customer and service provider in
the airline industry means that the employee often represents the company
to the airline travelers (customers). Especially in the airline industry the
service encounter plays a significant role because here the customer
comes in direct contact with the employees of the airline company and
spends a lot of time in the service factory (the aircraft). Hence the issue
of staff presentation is a major tangible factor in the airline industry.
This in turn influences the satisfaction level of the customer.
 The airline company’s organizational structure and culture dictates the
extent to which responsibility for staff recruitment, training and motivation is
shared b e t w e e n m a r ke t i n g operations and human re s o u rc e s . For
service marketers in this industry, the core of service element is the
interaction between those providing services and the customer is
known as service encounter.
The airline sector is considered under the high contact services as the customer
is in continuous direct contact with the companies personnel.

MOMENTS OF TRUTH
A moment of truth exists when a customer comes into contact with the
organization. At every point of contact, he experiences the service and
makes an evaluation about it being good or bad. That is the moment, which
creates satisfaction, is dissatisfaction. That is a moment when a problem
may occur. If a problem doesn’t occur and the problem passes off as expected, there
is no dissatisfaction. That is also the moment when the experience
could be very different than from what was expected, resulting in a
perception of intense delight and the expression of ‘wow’. That is the
defining moment of reality.
Jan Carlzon, president of Scandinavian Airlines, is credited with
originating the concept of moments of truth. Carlzon took over as
president when the airline had lost 30 million dollars in the two
previous years. In his single- minded focus for becoming the best airline of
the frequent business traveler in Europe, he determined that the first 15-
second encounter between a passenger
(Customer) and his front-line people (employees) set the tone or image of
the entire company in the mind of that customer. Thus, each encounter with a
customer is a moment of truth.
Carlzon carefully reviewed every step of the customer contact process,
and identified 5 critical times when the airline
interacted with the customer. He called these 5 points of contact
"the Moments of Truth," and they work for any business.
For airlines, they are:
 Making a reservation

 Getting tickets

 Boarding

 Flying

 Retrieving baggage

CRITICAL INCIDENTS
Critical incidents are specific encounters between customers
and service employees that are especially satisfying or dissatisfying for
one or both parties. In the airline industry critical incidents are very
important as they help the company evaluate and measure
satisfaction level of the customers. The critical incident technique is a
methodology for collecting and categorizing such incidents in service
encounters.
SERVICE GAP
A service firm may win b y delivering consistently h i g h e r
quality service than competitors and exceeding customer’s
expectations. These expectations a re formed by their past
experiences, word o f mouth and advertisement. After receiving the
service customers compare the perceived service with the expected
service. If the perceived service falls below the expected service
customers lose interest in the provider. If the perceived service meets
or exceeds the expectations they are apt to use the provider again.
The model shown identifies 5 gaps that cause unsuccessful delivery in the
airline industry.
Check NOTES for Diagram
1) Gap between consumer expectation and
management perception: Management does not always
perceive correctly what customers want. In the airline industry, the
company might perceive its target customers to be ambience
driven and not price driven but in reality it might turn out to be the
other way.

2) Gap between management perception and service quality

specification: Management might correctly perceive the
customers wants but not set a specified performance standards. A
company like Air India who thoroughly understands what its
customers want but due to external factors like lack of resources and
the fact that it is a government run organization due to which there is
a lot of political interference restricting the company from performing
at its best.

3) Gap between service-quality specifications and service

delivery: The personnel might be poorly trained or incapable or
unwilling to meet the standards. Or they may be held to conflicting
standards such as taking time to listen to customers and serving them fast.
This had happened in the case of Air India during the SARS outbreak
 where the pilots refused to fly on the last moment after the flights had
been declared scheduled.

4) Gap between service delivery and external communications:

Consumer expectations are affected by statements made by
company representatives and ads. Air India boasts in its hoarding
advertisements about the companion of the customer flying free i.e.
buy 1 and get 1 free but it is only applicable for
5) 1st class passengers which is no where mentioned and there are
many such examples or campaigns that can be mentioned about.

6) Gap between perceived service and expected service: This gap

occurs when the consumer misperceives the service quality. This is a
combination of one or more of the previous gaps and provides a clear
indication of the degree of which service quality exists in the service
organizations.

BLUE PRINTING
Blue printing is a technique which is used to portray an existing service
situation and provides a useful tool to assess and identify service
evidence opportunities. The process of service delivery, the role of
customers and employees and the visible elements of the service
are simultaneously displayed by the service map.
Blue Print of a typical Indian Airline company

Such a blue print provides 2 additional features to add to the

management information.

1. provides greater attention to customer interaction;

2. Provides a visual representation of the structure of the service.
However, this blueprint is of a typical Indian airline company
which has many loopholes. It starts right from reservation, wherein even
obtaining of tickets takes a lot of time due to manipulation by agents.
Even after arriving at the airport most of the Indian airline companies do not
direct their customers properly creating a lot of confusion especially for
first time fliers, and indirectly increases the lead time for service
delivery. At the time of service delivery in the service factory the
customer faces problems tackling nuisance from other customers, poor
quality of food etc. To add to this, most Indian airline companies do not take
feedback from their customers, which is one of the vital elements of effective
service marketing. Airline companies must
encourage customers to give feedback through verbal and non-verbal
communications.
Verbal may include direct interaction with the on flight crew, on
ground employees and call centre representatives who interact with
the customers while giving them necessary details. Non-verbal may
include feedback forms at the airports and business reply cards sent
directly to the customer’s residence or office.
It is important for airline companies to encourage customer
feedback because only 5% of the customers come up with complaints on
their own and the ones who don’t complain just decide that the service
provider is not worthy of further patronage.
ZONE OF TOLERANCE
The nature of services makes consistent delivery difficult
across employees of the same company and even by the same
employee from one day to another. The extent to which customers are
willing to accept this variation is called the zone of tolerance. It can
increase or decrease for individual customers depending on factors
such as competition, price or service attributes.

In the airline industry, the customer expects a minimum level of

service below which he is dissatisfied with the service provided by the airline
company. This includes easy availability of tickets, quick information about
rescheduling of fights or any other immediate changes made, clean
aircrafts, hygienic food, safe keeping of baggage and adequate safety
measures (oxygen masks, parachutes) in case of an emergency.
Many a times a customer desires a particular level of service
for complete satisfaction especially in those cases where he/she pays a
high premium for it. This includes on time service, customized food
service, additional supplementary tangibles such as teddy bears for
children, shaving kits for men etc., on-board auction (conducted by Air
Sahara) to keep the customer interested, transport service from the airport
to the final destination of the customer etc.
This gap between the desired and the minimum level of service
is known as ‘the zone of tolerance’. When a customer pays a high premium
i.e. first class passenger, he definitely expects the best service possible and
in such a case the zone of tolerance flows from top to bottom. In this case
the zone of tolerance will be at a higher par than that of an economic class
traveler.
If the service delivered is below the minimum level of expectation then
the customer will be dissatisfied and he is likely to move to other air
carriers for his traveling needs and may even spread a bad word of mouth. On
the other hand if the delivered service surpasses the zone of
tolerance, the customer will be delighted and will praise the company for the
same.
 Service Recovery

When the company fails to stand for its promises made to the customer
on the basis they build expectation, it’s to be said that there is service
failure. When the service failure occurs, there can be again severe
ramification. Customer is considered to be the bread and butter, hence
retaining them is the biggest challenge, and however service failure acts as
an obstacle to it. In such failures,
1) The customer wants what they were promised.

2) Customer wants personal attention

3) Customer wants a decent apology

4) Customers want that they should not be made to feel that they are the
cause of the problem. (Though in many cases they are
responsible for nuisance)

There are again five steps involved in order to deal with service failure.
They are mentioned as below
1st step: acknowledgement and apology for the fact.

2nd step: listening to the customers.

3rd step: avoid defending the company and offer a rational explanation.

4th step: offer some extra benefits

5th step: have a proper follow up and make sure no mistakes this time, so
that he can easily forget about the service failure and is retained.
(Example covered while presentation)

A customer expects 3 shorts of fairness in case of service recovery. They are

mentioned as below.
1. Interaction fairness: - when there is service failure, first the company
is supposed to acknowledge the customer. Due to this the customer might
turn erate, but he still expects fairness and courtesy in the language
and tone used by the addresser
2. Procedure fairness: - to know in detail about the incidence of
service failure or to avail the compensation. There should be
simplicity in procedure, which is involved. Service failure and complexity in
procedure both together might result in a disaster as far as customer is
concern.
3. Outcome fairness: - now when the company realizes that there is
service failure they should end up compensating, arranging for some alternative
mode of transporting or complies with the customer condition. The outcome
should be taken by considering the customer, his needs and the company’s
policy.
 Complain Handling

Handling complaints is a big challenge for every company today.

Before understanding how to handle, let us see what are the factors,
which can result in customer’s complaints
The Fish-Bone diagram for the Airline Industry
The best airlines cannot have 100 % security as far as
complaints are concerned. Whatever the airlines does, the customer
who feels that they are not treated properly are going to complain. In
dealing such situation, it is important to know how to diffuse them and
turn them into positive experience for all involved. People complain
because they have received service below tolerance zone. In airlines
generally complaints are regarding weight penalties, no attention from the
front office, no guidance by the crew member on the flight, flight delay,
bad quality of food and so on. If these complaints are not resolved to
the satisfaction of the customer there can be serious ramifications. In
particularly, the customer is likely to convey about the bad service to
other people. But if the things are done well, there also positive
ramifications. It has been observed that those customers who have had problems
and proper solution are provided, are the most loyal customers of the
company. Employees play a vital role in handling these complaints.
There are ten steps involved in handling complaints effectively. They are
mentioned below.
1) The frontline employee handling complaints should stay calm
under any circumstances.
2) Let the customer get the story off their chest- do not interrupt, this will
only cause irritation. In this case listening skills comes into picture.
3) Avoid admitting any liability at this stage. The officer just need to show
concern like, “I’m sorry for the inconvenience, let me see what I
can do”. Give attention to the customer, make him feel important.
4) Get facts by using question and try to find out the real and whole story
behind it.
5) After listening and collecting data, just identify appropriate action considering
 company’s policy and customer’s expectation.
6) Take action if you have authority or involve manager or concerned
person.
7) If corrective action cannot be taken immediately, tell the customer. It’s
better to give bad news rather giving false news.

8) Record the a c t i o n t o b e taken and inform a n y on e else i n the

organization involved.

9) Look into the matter, provide a proper follow-up.

This ten approaches if followed effectively, complaints can be handled
properly and possibly a customer can be retained.

Union Budget Analysis 2004

Aviation
In the previous budget, two new international airports, one
at Bangalore and the o t h e r at H y d e r a b a d were p ro p o s e d t o be
developed through private participation. The Bangalore airport
recently signed a concession agreement and is expected to start its
operations by 2007. The scale of the Hyderabad airport has been
reduced from 10 million-passenger capacity to 5 million. Also, the project
cost has been trimmed to Rs.12 billion in the first phase. Bids for privatization
of the Mumbai and Delhi airports have been invited. However, the AAI staff
has come out strongly against the privatization move. We expect the
privatization to be on track soon.

Other infrastructure
The AAI has earmarked Rs.54 billion for upgradation of airports,
which would provide a major fillip to the aviation industry. Air traffic in the
domestic sector has increased by 9.3 per cent for the nine months
ended December 2003 against the same period last year, on account of
lower airfare and higher connectivity. The government’s commitment to
provide equity and debt support to PSEs in select infrastructure sectors,
including aviation, will also benefit the sector. The aviation sector will also
benefit from the rise in FDI levels from 40 per cent to 49 per cent. The
imposition of service tax on airport service would not impact the airfares, as
the impact on cost for airlines would be less than 0.5 per cent (airport
services contribute less than 5 per cent of the overall cost of an airline). The
withdrawal of exemption on payments made by an Indian company to
acquire an aircraft, or an aircraft engine, on lease from a foreign state,
or a foreign enterprise, will negatively impact airline companies, as most
of the aircraft and aircraft engines used by airlines are leased. These
exemptions will cease prospectively from September 1, 2004.
 Conclusion

Marketing of airlines may not be on the same lines of those of

other services, but it surely has borrowed in a lot from them and refined
itself over the years and has become the point of study of many-a-marketers.
Today marketers of airlines in India have got a wake-up call. They
need to be very pro-active and act effectively & efficiently today if they
want to survive even till the near future. The Indian aviation industry is totally
shaken-up and is certainly in the lime-light. With the advent of a new kind of
airline structure in India, they existing players have taken notice and
are taking utmost measures possible to cut-out the competition even
before it comes into being.
The Government in India has to take many positive steps to make the
industry much stronger than it is today. There are many issues with need
to be studied and corrected. Foremost, the existing airports need
to be modernized. The non-used airports need to have an increase in
air traffic. More money needs to be pumped into the airport infrastructure.
There has to be massive reduction in the air turbine fuel charges. The
airport charges too are among the highest in the world and have to be
normalized. Apart from all this, the government should allow the industry
to be as de-regulated as possible, so that the industry becomes
strong on its own and has the competitive global advantage which is
required today.
In a few words,
“What started as a Dream of two brothers about a century ago,
Has enabled man-kind to do something which it can’t
FLY HIGH!!”
 Bibliography

 White Paper on ‘India Initiative: Issues in Civil

Aviation’ by the World Travel and Tourism Council
The Civil Aviation Act, 2000 (Draft)
 Aviation Week & Space Technology

 Low-fare Airlines, (2004, July 8). Economist.com.

 Crisis at 50, Business World, Sept. 15, 2004

Businessline, Sept. 15, 2004

 The Sky’s The Limit, Indian Express

 Oil Prices drown out Airlines profit, Star Tribune, Sept.

1, 2004
 A Feel for Airline Security. Time Canada, Sept. 13, 2004

 To Cope With Travel Slump, Airlines Turn to Smaller

Jets. (cover story) Wall Street Journal - Eastern Edition,

Sept. 2004
Wikipedia, the free content encyclopedia
India Transportation Infrastructure Blueprint
 Discounted IA fares to take on no-frills Deccan Times

of India