Aviation Industry- Fsm

8/8/2019 Aviation Industry- Fsm

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A complete analysis of Segmentation, Targeting andPositioning

With special reference example of Kingfisher Airlines

PUNEET SINGHMBA-1 TRIMESTER 2 SECTION DCHRIST UNIVERSITY INSTITUTE OFMANAGEMENT


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AIR TRAFFIC

y The Airport Authority of India (AAI) manages total 122Airports in the country, which include 23 International

Airports, 71 domestic airports and 28 civil enclaves.y Top 5 airports in the country handle 70% of the

passenger traffic of which Delhi and Mumbai togetheralone account for 50%.

y Passenger and cargo traffic has growth at an average ofabout 9% over the last 10 years.


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GROWTH

y Estimated domestic passenger segment growth is at12% per annum. Anticipated growth for International

passenger segment is 7% while the growth forInternational Cargo is likely to grow at a healthy rate of12%.


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IndianAirlines

IndianAirlines

Jet

Airways

Jet

Airways

KingfisherAirlines

KingfisherAirlines

Others

Others


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y Market segmentation is the division of markets intohomogenous groups of customers, each of them reactingdifferently to promotion, communication, pricing and other

variables of the marketing mix. It is considered to be the beststrategy for targeting the markets.

y The consumers are becoming increasingly particular about theirneeds and preferences and hence there arises a need for going infor segmentation in the market which will suit the needs of allthe different types of customers.

y Segmentation helps marketers understand the needs ofdifferent consumers and serve them with better value

propositions. Marketers can design their marketing mix to suitthe customer in the segment they are targeting. To remaincompetitive companies refine and develop products and servicesto meet the need and preferences of different segments.


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y The following income levels have been drafted keeping inmind prospective flyers.

y High level income group: People who fall under thiscategory have an income level of more than Rs 7-8 lakh per

annum. Generally business men, top level managers of bigcompanies etc fall under this category.y Middle level income group: People who fall under this

category generally earn anywhere between Rs 3 lakh to 6lakh. Young working professionals, middle level managers,small proprietors etc fall under this group.

y Lower level income group: People who earn less than Rs 3lakh fall under this group. Fresh graduates who havestarted working, people at supervisory levels inorganizations etc generally fall under this category.


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y Business Travel: People who travel mainly for the purposeof work and business prefer crisp service, safety andsecurity and plush ambience with all facilities like food,Wi-Fi etc. These are the people who want to reach

destinations fast and hence prefer Hybrid or Full serviceairlines depending on the availability of tickets and incomelevel.

y Leisure Travel: Leisure Travellers are people going forvacations. Among them, those who are on a low budget

might prefer low fare airlines. These are fresh graduates,young working class, etc. Another section of travellers arethose who have enough money to splurge and so theymight prefer hybrid or full service luxury aircraft.


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y Tier I cities: This category includes all metro and bigcities like Delhi, Mumbai, Chennai etc.

y Tier II cities: Under this, semi urban cities like

Ahmedabad, Pune, Jaipur, Chandigarh etc arecategory.

y Tier III cities: Rural areas are categorized under thislevel.


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y Frequent flyers: are those who frequently travel by acertain airline and prefer it over the other airlines.

y First timer: is a person who travels for the 1st time by

a particular airline. Its generally observed that fullservice and premium airlines cater to frequent flyersand a small percentage of first timers as well. Whereasno frill airlines generally carry the first timers who over

a period of time can become frequent flyers dependingon other variables like lifestyle, income group etc.


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It is a variable under behavioral segmentationwhichdefines the commitment of the customers towards thebrands. We can categorize the consumers into threegroups- hard core loyal, split loyal and switchers.

y

Hard core loyal:

are those consumers who are extremelyloyal to those brands with which they have formed a deepemotional bond.

y Split loyal: are those customers who use more than onebrand. Their loyalty is divided among two or three brands.

y Switchers: are those customers who are not loyal to anybrand, they continuously switch from one brand to theother. For example people traveling by low cost airlines maynot be loyal to a single carrier as they prefer to travel bythose airlines that offer the least fare.


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y Seeing the above characteristics, we can infer thatairlines like Kingfisher target the Elite Fliers. There arecertain specific characteristics observed in thissegment:

y Airlines like Kingfisher targets young marriedprofessionals (age group 20-35) with small kids and

with income levels more than Rs 7 lakh per annum;who generally commute between Tier 1 and Tier 2

cities ; travel for business and leisure ; frequent fliers ;enjoy the luxuries of life and have a bent towardsflamboyancy. These fliers are generally observed to behard core loyal


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y Positioning is the aggregate perception the customer hasof a particular company, product or service in relation totheir perceptions of the competitors in the same category.Mr. Vijay Mallya is one of the most flamboyant CEOs in

Asia. A great part of the personality of the Kingfisher brandis based on Mallya's personality. The one word whichpeople associate with Kingfisher Airlines is Experience.

y They encourage people to FlytheGood Times.Consumers know that they just have to pay a bit more for

high level of comfort during the journey. This shows howefficiently they have positioned themselves in the marketas a premium brand that provides high quality service at abit extra cost.


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y Positioning in the truest sense indicates what peopleperceive of a product or a company. Its the brand imagethat people have about the company. From the above table,we can see that Kingfisher has a very distinct style

ofpositioning itself in the minds of the consumers.y Rather than promoting their brand as fast service provider

or reliable etc, they have taken a different tangent by sayingthat flying with Kingfisher is an experience in itself.Taglines like FLY THE GOOD TIMES makes a passenger

feel that Kingfisher is not just about flying from a place toanother but its much more.

y The company is not just selling tickets per say but alsoselling Experience.


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Fuel Cost Crew Cost

Airport Cost

Fleet Write Off andMaintenance

OperatingCosts

Cabin Handling

Passenger Amenitiesand utilities

Service Costs Ticket Revenue Lease Revenue

Depreciation

Recovery


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y Airlines assign prices to their services in an attempt tomaximize profitability.

y Most airlines use differentiated pricing, a form of pricediscrimination, in order to sell air services at varying pricessimultaneously to different segments.

y Factors inf luencing the price include the days remaininguntil departure, the booked load factor, the forecast oftotal demand by price point, competitive pricing in force,and variations by day of week of departure and by time ofday.

y Carriers often accomplish this by dividing each cabin of theaircraft (first, business and economy) into a numberof travel classes for pricing purposes.


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y Full-service airlines have a high level of fixed and operating costsin order to establish and maintain air services: labor, fuel,airplanes, engines, spares and parts, IT services and networks,airport equipment, airport handling services, sales distribution,catering, training, aviation insurance and other costs. Thus all

but a small percentage of the income from ticket sales is paid outto a wide variety of external providers or internal cost centers.y Moreover, the industry is structured so that airlines often act as

tax collectors. Airline fuel is untaxed because of a series oftreaties existing between countries. Ticket prices include anumber of fees, taxes and surcharges beyond the control of

airlines. Airlines are also responsible for enforcing governmentregulations. If airlines carry passengers without properdocumentation on an international f light, they are responsiblefor returning them back to the original country.


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y Airline financing is quite complex, since airlines arehighly leveraged operations. Not only must theypurchase (or lease) new airliner bodies and enginesregularly, they must make major long-term fleet

decisions with the goal of meeting the demands oftheir markets while producing a fleet that is relativelyeconomical to operate and maintain.

y A second financial issue is that

of hedging oil and fuel purchases, which are usuallysecond only to labor in its relative cost to the company.However, with the current high fuel prices it hasbecome the largest cost to an airline.


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y In view of the congestion apparent at manyinternational airports, the ownership of slots at certainairports (the right to take-off or land an aircraft at aparticular time of day or night) has become a significanttradable asset for many airlines.

y Clearly take-off slots at popular times of the day can becritical in attracting the more profitable business travelerto a given airline's f light and in establishing a competitiveadvantage against a competing airline.

y If a particular city has two or more airports, market forces

will tend to attract the less profitable routes, or those onwhich competition is weakest, to the less congested airport,where slots are likely to be more available and thereforecheaper.


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y Code sharing is the most common type of airlinepartnership; it involves one airline selling tickets foranother airline's flights under its own airline code.

y Often the companies combine IT operations, buy fuel,or purchase airplanes as a bloc in order to achievehigher bargaining power. However, the alliances havebeen most successful at purchasing invisible suppliesand services, such as fuel.

y

Airlines usually prefer to purchase items visible to theirpassengers to differentiate themselves from localcompetitors


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Aviation Industry- Fsm