SNHU & ITM
MBA (TERM- TWO)
MARKETING STRATEGY
CASE STUDY ASSIGNMENT
COMPETITIVE ADVANTAGE
Report documented by Syed Tauseef Raza.
JHL 2010 SMBA1 POO2
Submitted to: Prof: Rajiv Vyas
STRATEGIES FOLLOWED BY LOW COST CARRIERS
IN INDIA
AIR DECCAN
Air Deccan started its operations in August 2003, offering a low budget, no frills airline
service. It was operated by Deccan Aviation Pvt. Ltd and headquartered in Bangalore. It
started operations on non-trunk short-haul routes in South India and offered fares that were
compared to high-end railway fares. The airline also offered flights on trunk routes on
significant discounts to the full-service operators like Jet Airways and Air Sahara. Air Deccan
had positioned itself as the first domestic low cost carrier.
There was demand for airways in various small towns that had airports but did not have any
connectivity. This pointed to a dormant need for scheduled air services to connect the
hinterland. Air Deccan was launched as a low cost airline to meet this need. Mr. Gopinath did
not dream for Deccan to be the biggest airline in the country, but one that was tapping into a
niche market. It initially connected only the smaller towns with metropolitan cities, starting
with airports in South India.
Once Air Deccan got experience in connecting the unconnected airports, it ventured on the
trunk-routes by seeking to connect the larger airports. Leveraging on its initial success, the
enterprise entered the trunk route segment with an Airbus A320 jet aircraft.
Vision
Empowering every Indian to fly.
Mission
To demystify air travel by providing reliable, low cost and safe travel to the common man by
constantly driving downs the fares as an ongoing mission. For the same reason Mr. R. K.
Laxman’s ‘Common Man’ was chosen as the brand ambassador.
Air Deccan’s Icon: The Common Man
Air Deccan’s targeting corporate (middle-level employees), small and medium enterprises
(SMEs), and AC / Second class travellers (middle class) of Indian Railways. This can be
again divided into two parts :(a) Travellers who dream to travel by air at least once in their
life time (b) Travellers who did care about time but couldn’t afford the price which was being
charged by the full service airline.
Here, we can see that Air Deccan is competing with other airlines on fares equivalent to the
railways.
The Business Strategy
Typically, LCCs provide point-to-point service avoiding connecting flights and baggage
transfers while FSCs base their operation on a hub-and-spoke system. Air Deccan has
deviated from the LCC business model in the sense that instead it has a hub-and-spoke type
operation to connect metros with smaller towns. It also provides point-to-point service
between metros and large cities. However, industry analysts have pointed out that this has
increased the costs for Air Deccan.
Pricing Strategies for Low Cost Carriers
Selecting the Pricing Objective
Determining Demand
Estimating Costs
Analyzing Competitor’s Costs, Prices and Offers.
Selecting Pricing Method
Selecting the Final Price
Constituents of Low Cost Airline Model
A single passenger class.
A single type of airplane reducing service and training costs.
No-Frills such as free food/drinks, lounges, etc.
Emphasis on direct selling of tickets through Internet, Direct phone lines avoiding
the fee and commission paid to agents.
Three Strategies Model – Air Deccan
Cost Leadership Strategy
Differentiation Strategy
Focus Strategy
Cost Leadership Strategy
Single Air Hostess per flight.
48 seated aircraft to lower maintenance and service fee.
Unique Online Reservation system.
No-Frills airline but food/beverage can be bought inside the aircraft.
Prices are almost 50% lower than the full-service airlines.
Single passenger class system.
Tie ups with Café Coffee Day, HPCL and Reliance Web World.
Provides flights even to the hinterland.
Allocation of prices to various percentages of seats.
Differentiation Strategy
Frequent Business travellers.
AC Train travellers.
Focus Strategy
Criticisms of Air Deccan’s Marketing Strategies
Too much focus on South India.
CNN-IBN had accused it of deliberately slowing down at check-in & overbooking.
No lounges to attend the passengers of delayed flights.
Shortage of airport personnel.
Frequent breakdowns and near misses.
Dynamic fare and Refund Policy.
Acquisition and Post Acquisition Issues
Air Deccan in May 2007 sold 26% stake to Kingfisher Airlines.
Combined Market share of 33%. Second largest player after Jet-Sahara.
Air Deccan will continue to have independent identity.
Capt. Gopinath – Exec. Chairman and Dr. Vijay Malaya – Vice Chairman
Rebranding
Renaming from ‘Air Deccan’ to ‘Deccan’.
New Tagline: ‘The Choice is Simple’.
Blue and Yellow theme replaced by Red and White.
No outsourcing of Check-in Staff.
Replacement of Ailing Aircrafts.
Cost incurred in rebranding process: Rs. 15 Crore.
Future Recommendations for Air Deccan
Make available flight services in North India.
More friendlier and trained ground staff required.
Slow check in can be removed by using automated check in process.
Strengthening of reservation system to handle overbooking.
Venturing into air cargo.
Strengthening of its position in the industry.
Lounges to attend the passengers of delayed flights.
