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Industry Analysis Case Study

Case Title:

Low Cost Airlines in India: Emerging Trends and Survival Strategies

Publication Year : 2006

Authors: Saravanan I B

Industry: Transportation


Case Code: INA0117C

Teaching Note: Available

Structured Assignment: Not Available

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India’s low cost airlines are transforming the way public have been traveling. The boom is associated with sustained economic growth, growth in disposable income and liberalisation of Indian government’s aviation policies.

But, as in the case of low cost airlines world over, there are continued loss making. To compensate the growth in flying seat capacity, the low cost airlines are cutting fares and have started offering lakhs of seats at INR.1 and INR.100/-. As Boeing’s Keskar had observed, offering this low fares would benefit no one and would stop after few eliminations and consolidations.

The challenges in Indian scene are many: rising ATF cost, internal competition, rivalry with Indian railways in short haul markets, shortage of trained and skilled manpower, increasing labor costs, infrastructural hurdles and deficiency of airports, airstrips etc.

To survive the situation resulting from these challenges would be to minimise the operating cost, hedge the fuel pricing, improve load factor and absorb losses for a period of three years. To grow and expand the low cost airlines are expected to tap potential markets by enlarging the size of air traveling segment by aggressive marketing, improving the ancillary revenues by in-flight marketing, selling advertising spaces on board and on flight body, selling packages with tours and hotels along with tickets. Being part of a growing technology trade related to aviation industry like IT service providing, manpower hiring and training, spare building, financing, airframe and hangar maintenance etc., is considered as a tool for growth and dominance.

Pedagogical Objectives:

  • The low cost airlines industry in India in the backdrop of global LCAs
  • Challenges faced by the low cost airlines in India
  • Survival strategies employed by them, specifically on cost cutting
  • Growth strategies adopted by them with an emphasis on participating in growing ancillary trades
  • Analyzing the future of the low cost airlines in India.

Keywords : Low cost airlines; Load factor cost efficiency in low cost airlines; airport modernisation in India; Rise in ATF cost; Rising personnel cost for airlines; Air Deccan; Kingfisher Airlines; GoAir; Restructuring / Turnaround Strategies Case Study; Survival Strategies of Low cost airlines; Indigo; Aircraft leasing and renting; E-ticketing; Inflight advertising; Ancillary revenue for low cost airliness

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