Air deccan

HOW AIR DECCAN FUNCTION

1. Case Analysis: Simplifly Deccan Evolution of Low Cost Carrier in India. By: sujithBhaskarR

2. Air Deccan Captain Gopinath was the founder of Air Deccan. Air Deccan was the largest private low cost carrier in India. It was launched in 2003 serving only 2 destinations. Vijay Mallya , the liquor tycoon, bought 26% controlling stake in Air Deccan for 5.5 million. Vijay Mallya’s UB holdings owned Kingfisher airlines.

3. Reason for Air Deccan to be in hands of Mallya Air Deccan had grown from serving 2 destinations to 65 destinations in 2007 by stretching its financial limits. The image of airline was quite unreliable due to its services at that time. Many new low cost airlines were coming in with distinguishable good services and strategy for market expansions. Air Deccan needed a strategy to sustain in the market with a remarkable good growth. The immediate concern for them to seek financial viability.

4. Aviation Industry in India Indian aviation market grow at more than 25% in 2007-08 The Indian aviation sector, deregulated in 1994, was the fastest growing aviation market in the world. According to a Confederation of Indian Industry (CII) report released in 2000, between 45 to 70 million passengers were expected to fly domestically by 2010.

5. Demand Pattern The customer demand for air travel in India was mainly driven by the leisure, visiting friends and relatives category. By 2010 more than 2/3 rd of the domestic air travelers were expected to come from this VFR segment.

6. Airport Infrastructure The airport infrastructure was not able to keep up with the growth in air traffics. Out of 94 civil airports managed by AAI, 65 was reported to be in active use. Out of these 65, only 40 airports have a runway of 5000 feet. During winter season, many airports face the problem of fog because of poor infrastructure.

7. Other major problems Acute shortage of Air Traffic Controllers The increase in air traffic led to a corresponding increase in the demand for pilots and cabin crew. Airlines became infamous for poaching staff from one another. There was a lack of maintenance and repair facilities in India. High tax rate on Aviation Turbine Fuel by Central and State Govt. are another major concern.

8. Low cost air travel: A substitute for travel by train Air travel in India was considered to be a luxury and privilege of rich people. Captain Gopinath launched Air Deccan with a vision to enable to fly at least once in his life time. The target market segment was the upper class train passengers. Used different pricing strategies.

9. Target Market and Product Positioning Leisure travelers Business travelers Corporate travelers Owners-managers of SME Self employed professionals Visiting friends and relative travelers

10. Sales and Distribution They did not use third party operations They have their own central computerized system for ticket booking Route selection: routes are selected on the basis of volume and capacity of travelers To have a dominant position on non metro routes where its competitors have least interest, while competing with other players in national routes by cheaper fares Operations: point to point connectivity Introduced a procedural change in MRO

11. Competitors FSC Segment Jet Airways Air Sahara Kingfisher Low Cost Segment Spicejet Indigo Go Air

12. Air Deccan in 2007 Employee turnover Not able to get landing slots at metros Unfavorable media Predatory pricing by competitors FFP by competitors Leased aircrafts had technical problems CFO resigned COO resigned due to difference of opinion with captain Gopinath Infrastructure problems Bird Hits

13. Options left by Vijay Mallya for the future of Air Deccan Merge Air Deccan with Kingfisher Make Air Deccan subsidiary Maintain status quo

14. Thank You