Strategic Alliances, Collaboration and Joint Ventures Case Study

Indian Aviation Market: Impact of Kingfisher-Air Deccan Deal on LCCs

OR

Abstract:
Kingfisher Airlines, a subsidiary of UB Group (United Breweries Holdings Ltd), founded in May 2005 operates a passenger airline in India. It was the first airline in India to provide premium first class service on domestic routes with all new aircraft. In May 2007, it announced it would acquire a 26% stake in Air Deccan, a low cost carrier (LCC) for 5.5 billion rupees ($135 million). In the loss-making Indian aviation industry, the Kingfisher-Air Deccan deal was the third after Air India-Indian Airlines and Jet Airways-Air Sahara. Analysts were of the opinion that the trend of consolidation in the aviation industry would help airlines to improve yield, but the anti-consumer environment due to a hike in air fares, might hinder its growth. On the other side, LCCs like IndiGo, SpiceJet, and GoAir airlines were also facing uncertainty due to the ongoing mergers and acquisitions in the highly competitive Indian aviation industry. Analysts fear that as a result, in the long run, the industry might be controlled by a few players.

Pedagogical Objectives:

This case study aims at achieving the following pedagogical objectives:
• To understand the structure, trend and dynamics of the Indian aviation industry.
• To discuss in detail how the full cost carriers and the low cost carriers are striking strategic alliances in this competitive arena, in order to tap the huge potential available in India.
• To analyse whether the consolidation would improve the business and bring out the best of the synergies, or will power be vested in the hands of the few?.

Keywords :  Strategic alliance, Civil aviation in India, Kingfisher Airlines, Air Deccan, Consolidation, Full cost carriers (FCCs), Low cost carriers (LCCs), Market share, Competition, Jet Airways, Air Sahara, Indian Airlines, Air India, Growth strategy

Contents : 
Aviation Industry at a Glance
Air Fares Vs Rail Fares – The Narrowing Gap
Passenger Traffic Growth Between 1999 and 2006
Trend of Consolidation: Leading to New Competitve Dimension
Kingfisher - Air Deccan Airlines Deal
Impact of the Deal on the Aviation Industry
Domestic Air Transport Policy