A report onThe Aviation Industry in Bangladesh

COURSE: Travel Agency and Tour Operation ManagementCOURSE CODE: THM 517

Submitted to

Prof. Mohammed Ahsan UllahDept. of Tourism and Hospitality Management

Faculty of Business StudiesUniversity of Dhaka

Submitted by

Sadia Salam Roll# 4

Azra Rifat Roll# 8

Tanjina Rahman Roll#19

MBA 3rd BatchDept. of Tourism and Hospitality Management

Faculty of Business StudiesUniversity of Dhaka

Date of Submission:April 24, 2011

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Letter of Transmittal:

April 24, 2011

Prof. Mohammed Ahsan Ullah

Department of Tourism and Hospitality Management

Faculty of Business Studies

University of Dhaka

Dear Sir,

It is a matter of great pleasure to submit this report you asked for

about the insight scoop of the aviation industry and its development in

Bangladesh.

We are no short of conveying our deepest gratitude on this occasion

for your proper guideline with the clear vision of reaching the

perfection. Your inspiration has been the strength of the creation of

this report. It has helped us to improvise the multifarious aspects of

writing a real-life report that has motivated our thriving for acquiring

knowledge.

With this end in view, we made the effort to present the related facts

from books, websites, Company Annual reports, pamphlets and

interviews. We also bestow our regret for the restraint source of

primary data. Apart from this, any comment or suggestion of yours

would greatly inspire us.

At last but not the least we would like to thank Mr. M M Rahman

(Javed), Deputy General Manager-Sales and Nure-E-Tazrian Khan,

Executive- Marketing & Sales of GMG Airlines for their valuable time

and co-operation.

Thank You.

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Yours Sincerely,

Sadia Salam Roll# 04Azra Rifat Roll# 08Tanjina Rahman Roll# 19

MBA (3ed Batch)Dept. of Tourism & Hospitality ManagementFaculty of Business StudiesUniversity of Dhaka

Executive Summary

Aviation industry as a whole has changed the world's overview about

time and distance. The improvisation that has been taken place world

wide needs to be adopted and magnified in order to cope with the

highly competitive market. Bangladesh with its long history has

concentrated deeply with its recent activities to propel forward. The

content of its report spotlights on its overall development and an

overview of its evaluation.

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Table of Contents

# Contents Page1 Chapter

1.1 Introduction 61.2 Objective of the study 61.3 Methodology 61.4 Limitation of the study 62 Chapter

2.1 Advent of the aviation system 72.2 The commencement & evolution of aviation system in

Bangladesh9

2.3 Comparative Analysis between Bangladesh Aviation Services to The World Standard

15

2.4 Some improvisations for our national flag carrier for upgrading its world ranking

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2.5 Some foreign Airlines rendering services in Bangladesh 193 Chapter

3.1 5 Marketing Ps for effective aviation in Bangladesh 203.2 Porter’s 5 Forces analysis in aspect of Bangladesh

aviation industry4 Chapter

4.1 Case 1: GMG Airlines Ltd. 224.2 Case 2: Biman Bangladesh Airline Ltd.4.3 Case 3: Saudi Airlines 28

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5 Chapter5.1 Recommendations 345.2 conclusion 355.3 Bibliography

Table of Illustrations

# Illustrations Page1 Design for a Flying Machine by Leonardo da Vinci 72 The Montgolfier Brothers (Joseph & Etienne) &

their balloon 7

3 Orville Wright's famous first airplane flight 84 George Cayley, and his 'Governable Parachute',

'Man Carrier' 18528

5 Jeanette Van Tassel died in an attempt at the first manned flight in Bangladesh in 1882

6 Bir Sreshtho Flight Lieutenant. Matiur Rahman 107 Foreign visitors’ arrival by months (2007) 138 Biman been awarded as a 2 Star airline 14

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Chapter 11.1 Introduction

"First class all the way" - creative it may sound but the reality has gone way ahead in the aviation industry today than on its early days. The ups and downs in this sector has brought the evolution much rapidly world wide, but how far Bangladesh has come across or how much it lags behind is depicted here in this report.

1.2 Objectives of the report

The primary objectives of this report are To get an insightful scoop of the current scenario of aviation

industry in Bangladesh To put up with the hurdles it poses to propel foreword.

With this end in view the tracking of customer’s expectations and perception as well as the world ranking has been presented.The aforementioned objectives served our ultimate objective of

Minimizing the gap between the formal learning and its practical implementation in the real world business scenario.

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1.3 Methodology

The information in this report has flown from the string of relevant secondary sources like websites, pamphlets, and company annual reports and from primary sources like interviews of people from real walks of life and pros and corns to make it a balanced combination of primary and secondary source with an effort to cover the complete surface.

1.4 Limitations of the report

The confronted limitations of preparing this report include: The scarce samples of primary data taken from interviews

are too limited to represent the view of the total population. A few part of the relevant information is inaccessible since

it is classified as commercial secret. Therefore, it was not possible to gather all relevant data.

The accuracy of all data is not assured since they are generated from subjective and qualitative perceptions

Chapter 22.1 Advent of the aviation system

Spreading wings in the air like a bird to see what lies beyond the horizon has been cherished for long in the inquisitive mind of every human being. A huge metamorphosis in Leonardo's approach to flying machines and flying occurred, as he went from the theory of flight to actually attempting flight when in 1488 he drew ''Design for a Flying Machine'' named as “Ornihopter.”

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Illustration 1: ''Design for a Flying Machine'' by Leonardo da Vinci

In 1783, the year that England lost its North American colonies, two French brothers were watching the smoke rise up the chimney from their fireplace. Joseph and Etienne Montgolfier came from a family of papermakers. They noticed that piece of paper on a fire were carried out of the flames and up the chimney. They concluded that smoke had lifting properties and built a ‘receiver’ to catch the rising smoke – the first balloon. Their experiments grew bigger and bigger until in June 1783 they went public with a 112ft circumference balloon heated by a brazier. This aerostat rose to 1000ft.

Illustration 2: The Montgolfier Brothers (Joseph & Etienne) & their balloon

The 1902 glider by the Wright brothers was actually the first fully controlled heavier-than-air craft, and some historians believe it was the main invention - essentially the invention of the airplane - and more important than the 1903 biplane. So it was on March 23, 1903 - nine months before the famous first airplane flight of December 1903 - that Orville and Wilbur Wright filed a patent application for a "Flying Machine." The patent was awarded May 22, 1906. That's when the aviation world started to copy the Wright's designs, and from that

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point remarkable progress was made in the development of powered flight.

Illustration 3: Orville Wright's famous first airplane flight. Kitty Hawk, NC (North Carolina), December 17, 1903.

Sir George Cayley is one of the most important people in the history of aeronautics. Many consider him the first true scientific aerial investigator and the first person to understand the underlying principles and forces of flight. It was not until 1853 that Cayley managed to build a machine that could carry the weight of a man. He also built a triplane and in 1853 persuaded his coach driver to fly 900 feet (275 m) across a small valley. This was the first recorded flight by a person in an aircraft and Cayley has been described as the "true inventor of the modern aeroplane". It is generally believed that it was the first practical heavier-than-air flying machine.

Illustration 4: George Cayley, and his 'Governable Parachute', 'Man Carrier' 1852

It’s the combined effort of many devotees that brought aviation technology to where it stands today.

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2.2 The commencement & evolution of aviation system in Bangladesh

Illustration 5: Jeanette Van Tassel died in an attempt at the first manned flight in Bangladesh in 1882 on a balloon

The commencement

The first flight of aviation history in Bangladesh dates way back in 18 th century when Jeanette Van Tassel, a young balloonist from the United States, was hired by the then incumbent Nawab Khwaja Ahsanullah. She was a member of a family troupe of professional balloonists and arrived with her mother, Jenny Rumary Van Tassel. At 6.20pm on the 16th March 1892, she set off to fly from the southern bank of the River Buriganga to the roof of Ahsan Manzil, lying across the river. But a gusting wind carried her off to the gardens of Shahbag, where her balloon became stuck in a tree. She was killed in her fall to the ground, and lies interred in the Christian graveyard at Narinda, Dhaka. Before this tragic incident took place the dream of flying on air was confined only on traditional kite flying festivities. But the dream didn’t stop from booming into a great aviation system of an independent nation.

Developments during World War II

Modern aviation in Bangladesh began when the British Raj built a military airstrip in Tejgaon during World War II to fly warplanes towards the battle fields of Kohima and war theaters in Burma. Other airstrips were built in Comilla, Feni, Chittagong, Cox's Bazar, Chakaria, Sylhet, Jessore, Rajshahi and Lalmonirhat.

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Civil aviation

After the world war II : The colonial government decided to build the Tejgaon Airport along with a landing strip at Kurmitola to meet the needs of a Royal Indian Air Force (RIAF) station in Dhaka.

In 1946: The Mirza Ahmad Ispahani and his partners formed an airline - Orient Airways - which soon started using the airport as a civil airport, Shifting its base from Kolkata to Karachi when Pakistan was born.

In 1948: The Eastern Pakistan Flying Club was established

On 7 June 1954: Orient Airways started DC-3 flights from Karachi to Dhaka forming a critical connection between the capitals of geographically separated East and West Pakistan.

On March 11, 1955: Orient Airways merged with the government's proposed airline, became Pakistan International Airlines Corporation, later rechristened as Pakistan International Airlines (PIA).

By 1960: British Airways and Pan American Airways had started operating flights out of Dhaka, PIA had started operating Boeing jet services, and new airports had been constructed at Jessore, Chittagong, Thakurgaon, Ishwardi, and Comilla.

During the 1962: Sino-Indian War, services to East Pakistan were proving to be difficult, therefore PIA placed their Sikorsky S-61 helicopters on these routes until 1966 when conditions improved.

Liberation war: Bangladesh Indian Air Force (IAF) and the Pakistan Air Force (PAF) fought had extensive engagements in the sky over Bangladesh. In the process Tejgaon Airport suffered extensive damage.

Illustration 6: Bir Sreshtho Flight Lieutenant. Matiur Rahman

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On August 20, 1971: Flight Lieutenant Matiur Rahman attempted to pilot a T-33 trainer from Karachi, Pakistan to India in order to defect from the Pakistan Air Force and join the liberation movement of Bangladesh. However, Matiur could not take the plane out of Pakistani territory, as reportedly, Pilot Officer Rashid Minhas, the other pilot in the plane, forced it to crash in Thatta, a place near the Indian border. Matiur was awarded Bir Sreshtho the highest military honors in Bangladesh and has air bases named after them, in Jessore.

Post-Independent

Resumption of civil Aviation: The first civil flight of independent Bangladesh operated from Dhaka Airport

on 1 January 1972 at 1130 hrs with a Mark SB-AUZ Type of Air Craft Cessna 150 flown by Captain A. Rahim CFI. while the flight was engineered by Nasiruddin Ahmed Chief Engineer (C.C) and his team.

The first international flight from Independent Bangladesh destined to Calcutta was flown on 10 January 1972 at 1500 hrs which was flown by Captain A. Rahim and Captain K.Q. Huda while the flight was engineered by Nasiruddin Ahmed and his team.

After the independence, the flying establishment of defunct PIA at Dhaka Airport was handed over to Mozammel Hoque by Major M. Singh of the Indian Army.

The flying establishment of Government Flight, Plant Protection and Flying Club were handed over to Nasiruddin Ahmed, by Major M. Singh of the Indian Army.

The newly formed Bangladesh Flying Club under joint command of Captain A. Rahim and Nasiruddin Ahmed.

Bangladesh Air force:

Bangladesh Air Force was formed at Dimapur, Nagaland, India on 28 September 1971 under the command of Air Commodore AK Khondakar (later Air Vice Marshal and Chief of Air Staff, Bangladesh Air Force). At that time, the embryo of Bangladesh Air Force (BAF) was formed as 'Kilo Flight' to assist the Mukti Bahini (Freedom Fighters). Initially, 'Kilo Flight' consisted of three aircraft (given by Indian Air Force), 09 officers and 47 airmen. Squadron Leader Sultan Mahmud (retired as Air Vice Marshal and Chief of the Air Staff of BAF) was appointed as the commander of the 'Kilo Flight'. After having some basic training on air to ground weapon delivery, 'Kilo Flight' successfully bombed Fuel storage in Chittagong and Narayangonj area and thus the journey of BAF had commenced. During the last phase of the Bangladesh Liberation War the newly formed Bangladesh Air Force carried out 12 successful attack missions over Pakistani targets.

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After liberation in 1971, Bangladesh Air Force received equipment from the Soviet Union and the People's Republic of China, a clutch of MiG-21s, An-24s, An-26s, and Mi-4 helicopters. In 1995 Bangladesh Air Force made its largest purchase from the U.S to date in the form of 12 T-37 jet trainers. More recently, Bangladesh procured four C-130B Hercules transport aircraft (from old US Air Force stock). Since now Bangladesh air force does not run any commercial air flights thus in this report from now on we will focus on the commercial air flights of Bangladesh.

Ministry of Civil Aviation and Tourism 

MoCAT was a ministry under central government before independence. After independence of Bangladesh in 1971 matters relating to communication and tourism were vested with the Ministry of Commerce.    In 1972, Civil Aviation Division was created and brought under the Ministry of Shipping, Inland Water Transport and Civil Aviation. However, an independent Ministry of Civil Aviation and Tourism was created in August 1975. This again became a Division under the Ministry of Communication in January 1976. A separate Ministry of Civil Aviation and Tourism was created again in December 1977. On 24th March 1982 the ministry was abolished and Civil Aviation and tourism Division became a new Division under the Ministry of Defense. In 1986, Ministry of Civil Aviation and Tourism was re-established as a ministry and has been continuing as such since then.

Civil Aviation Authority, Bangladesh (CAAB)

CAAB functions as the regulatory body for all aviation related activities in Bangladesh. It is also the aeronautical service provider and is responsible for safe, expeditious and efficient flow of air traffic within the Flight Information Region (FIR) bounded by the International geographic boundary of Bangladesh. This organization is the custodian of all airfields and allied facilities including air navigation facilities.

The national airline- Biman

The first Bangladeshi commercial passenger airline, Biman Bangladesh Airlines, was born in 1972 soon after the independence of Bangladesh. As the national flag carrier, Biman operated as a monopoly for over two decades and was fully owned by the Bangladesh government.

However, corruption at all levels of management and sub-standard services have hindered the airline significantly to the extent that it has had to cut back on many destinations

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during 2007. As Biman in the year 2006 recorded Tk 828 crore in losses, up from about Tk 283 crore a year ago owed about Tk 564 crore to Bangladesh Petroleum Corporation in bills until Dec 31 and scrapped flights to Tokyo, New York, Paris, Brussels, Frankfurt and Mumbai to reduce losses, finally the the-then President Iajuddin Ahmed approved an ordinance to convert Biman Bangladesh Airlines into a public limited company, according to a government circular on July 12, 2007.

This has enabled new private airlines to startup and existing ones to gain footholds in countries which were previously not possible.

Private airlines

Year of commencement

Airline Type of service Type of Aircraft Status

1996Aero Bengal Airlines

Passenger service, Aeroplane service

Y-12, Antonov An-24 RV

Defunct

1997

Mission Aviation Fellowship Sweden

Aeroplane service DHC-3

1997 Air ParabatFlight training, Passenger service

Y-12, LET-410, Antonov An-24, Antonov An-26

Defunct

1998GMG Airlines

Passenger service, Aeroplane Service

MD-82, Dash 8-100

1999Bismillah Airlines

Cargo service Antonov An-12 B

1999 Youngone Private aircraft

Cessna Grand Caravan, Piaggio P.180 Avanti II, Pilatus PC-12

1999Best Aviation

Passenger Service, Helicopter service, Cargo service

BK 117, Antonov An-26, Boeing 707, Boeing 737

2000 Air Maximus Cargo service Boeing 747

2000Aero Technologies

Helicopter service Eurocopter AS-350 B

2005Zoom Airways

Passenger service, Aeroplane service

BAe 748 Series 2B

2005Air Bangladesh

Passenger service, Aeroplane service

Boeing 747-269 B (SF)

Defunct

2007United Airways

Passenger service, Aeroplane service

Dash 8-100, McDonnell Douglas MD-83

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2007Royal Bengal Airline

Passenger service, Aeroplane service

Dash 8-100

2010Regent Airways

Passenger service, Aeroplane service

Dash 8-300

Statistics regarding Bangladesh Aviation Industry

 Foreign Visitors Arraival by Months (2007)

Source: Ministry of Civil Aviation and Tourism

Illustration 7: Foreign visitors’ arrival by months (2007)

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Sl. Month Arrival Year

1. Jan 16,733 2007

2. Feb 17,308 2007

3. Mar 17,579 2007

4. Apr 23,956 2007

5. May 20,853 2007

6. Jun 27,483 2007

7. Jul 32,223 2007

8. Aug 20,614 2007

2.3 Comparative Analysis between Bangladesh Aviation Services to the World Standard

Since Biman is the operational manager of the largest international terminal at Shahazalal International Airport, in Dhaka - which handles over half the country's international and domestic arrivals, equating to almost five million passengers, as well as some 105,000 tones of freight and mail, annually it has the highest market share to the date in the aviation industry in Bangladesh. Thus Biman has been taken in account as the representative of Bangladesh to compare aviation services in the world arena in this report. Due to the huge bulk of information regarding both the private and public contribution in this sector all the existing airlines in Bangladesh hasn’t been taken into account.

SKYTRAX introduced the World Airline Star Rating programme in 2000 - the Quality Analysis system that ranks airline product and service standards, based on professional evaluation by airline audit specialists. Every airline is ranked on the basis of the "delivered" front-line Product and Service quality - with Star Ranking levels representing  "international" product and service standards. Star Ratings reflects the reality of delivered product and service supplied to customers.  SKYTRAX do NOT include commercial factors (eg fares, schedules, frequent flyer rewards etc) in an Airline Star Rating, because they are interested in the "front-line" product and services that customers receive from each airline.

.

Illustration 8: Biman been awarded as a 2 Star airline

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With this backdrop in view Biman has been evaluated on the following scale:

QUALITY RANKING USED IN AIRLINE RATING SUMMARY BELOW

 = Excellent  = Good  = Fair

 = Poor = Very

poor  

::  BIMAN BANGLADESH  ::

a 2 Star Airline

Home Base Airport Ranking =  Dhaka Airport

SUMMARY RANKING 

Combined Quality of Product / Staff service in airport and onboard environments

Business Class 

Economy Class 

Airport Services 

Check-In service - Business Class

Check-In service - Economy Class

Transfer Services - Business Class

Transfer Services - Economy Class

Arrival Services

Business Class Lounge - product facilities

Business Class Lounge - staff service

Onboard Features 

In-flight entertainment may vary according to aircraft type

Cabin Safety Procedures

In-flight Entertainment

Amenities, Blankets, Pillows, Towels etc

Airline Magazine, Newspapers & other mags

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Cabin Seat Comfort                                               Seat Guide

Seating may vary according to aircraft type

Business Class  - long haul

Business Class  - regional

Economy Class  - long haul

Economy Class  - regional

Onboard Catering 

Business Class meals  - long haul

Business Class meals  - regional

Economy Class meals  - long haul

Economy Class meals  - regional

Cabin Staff Service 

Business Class - service efficiency

Business Class - staff attitude & friendliness

Economy Class - service efficiency

Economy Class - staff attitude & friendliness

Responding to Passenger requests

Cabin presence through flights

Assisting Parents with children

Staff Language Skills

2 STAR RANKING is for a poor Quality performance - falling below the industry average in the different competitive rankings of Product and Service standards. This Ranking is assessed by SKYTRAX after detailed Product and Service standards analysis for each featured airline.  2 Star ranking represents a poor standard of Product and / or poor and inconsistent standards of Staff Service delivery in Onboard or Airport environments.

2.4 Some improvisations for our national flag carrier for upgrading its world ranking

With legacy networks and increasing competition in the local market, Biman needed to restructure and transform itself into an effective, modern, competitive airline.

"The immediate short term goal of this restructuring process is to allow Biman to address the identified critical business issues of scheduling performance and fleet capacity," says Mohammad Shahnewaz, Director Marketing and Sales of Biman

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Bangladesh Airlines Limited. "It's the only way we can successfully address Bangladesh's growing passenger and cargo market in a competitive environment."

"We're also focused on a number of priority initiatives," he adds. "which include maintaining load factors of 70-80%, reducing our reliance on GDSs for sales and distribution, and rebuilding our image for our principal traveler markets - including tourists, Bangladeshi nationals working abroad and Hajj pilgrims."

In line with its restructuring plans, Biman Bangladesh Airlines Limited engaged SITA Professional Services to help ensure its IT and Communications strategy would stay closely aligned to its business strategy, supporting both the new corporate entity and Biman's future business vision.

The specific consulting activities open for using a hybrid model of SITA proprietary methodologies and industry best practice frameworks such as CobIT and ITIL - comprised:

IT Consultancy - defining key business objectives and developing an IT strategy roadmap that aligns with Biman's business drivers, enabling investment to be optimized and long-term, measurable cost savings to be delivered

Network Security Consultancy - providing an objective and comprehensive evaluation and gap analysis of Biman's entire information security program and including an ethical hacking component to verify vulnerabilities

IP Consultancy / Services - providing Biman's IT department with skills and tools that allow them to obtain maximum benefit from their move to an IP environment in both the WAN end Campus LAN environments

"These consulting activities are a great opportunity for Biman to clearly define both its short and long term business vision, and to align its efforts to support this vision," says Maneesh Jaikrishna, SITA's (a professional business solution provider) regional Director for South Asia and India. "We're delighted to be working closely with Biman as it moves forward with its modernization programme, and moves from legacy to IP networks."

"The combination of consultancy plus IP migration means Biman is now able to start looking at applications such as e-ticketing and online reservations, which will clearly help the bottom line as well delivering better services to passengers," he adds.

"We aspire to be as good as the best, so it's great to be working closely together with SITA now as we turn around the airline," responds Biman's Mohammad Shahnewaz..

Business benefits SITA's combination of consultancy and IP migration delivers a

number of key business benefits to Biman Bangladesh,

including:

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A proven business case, demonstrating tangible savings over the

airline's existing IT spend

The chance to better share information, company-wide

The opportunity to harness new technologies as they become

available, and to stay abreast of the competition

Increased staff productivity and optimized performance

Better tracking and visibility of business issues

Having the right infrastructure and strategies in place to

develop both international and domestic business-to-business

(B2B) and business-to-consumer (B2C) applications

Improved reliability

2.5 Some foreign airlines rendering services in Bangladesh

Foreign airlines operating in Bangladesh

IATA Code ICAO Code Airline Country of origin

TH BRT British Airways UK

Dragon Air Chain

KB DRK Druk Air Bhutan

EK UAE Emirates United Arab Emirates

GF GFA Gulf Air Bahrain

IC IAC Indian Airlines India

Iran Airways Iran

KU KAC Kuwait Airways Kuwait

MH MAS Malaysia Airlines Malaysia

PK PIA Pakistan International Airlines

Pakistan

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QR QTR Qatar Airways Qatar

SV SVA Saudi Arabian Airlines Saudi Arabian

SQ SIA Singapore Airlines Singapore

TG THA Thai Airways Thai

HY UZB Uzbekistan Airways Uzbekistan

RKM RAK Airways United Arab Emirates

EY ETD Etihad Airways United Arab Emirates

Chapter 3

3.1 5 Marketing Ps for effective aviation in Bangladesh

3.2 Porter’s 5 Forces analysis in aspect of Bangladesh aviation industry

What Does Porter's 5 Forces Mean?Named after Michael E. Porter, this model identifies and analyzes 5 competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths. 

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1. Competition in the industry2. Potential of new entrants into industry3. Power of suppliers4. Power of customers5. Threat of substitute products

Porter's 5 Forces Analysis in Bangladesh 1. Threat of New Entrants.  At first glance, it might seem that the

airline industry is pretty tough to break into, but that’s not how it is. One will need to look at whether there are substantial costs to access bank loans and credit. If borrowing is cheap, then the likelihood of more airliners entering the industry is higher. The more new airlines that enter the market, the more saturated it becomes for everyone. Brand name recognition and frequent fliers point also play a role in the airline industry. An airline with a strong brand name and incentives can often lure a customer even if its prices are higher. 

2. Power of Suppliers. The airline supply business is mainly dominated by Boeing and Airbus. For this reason, there isn't a lot of cutthroat competition among suppliers. Also, the likelihood of a supplier integrating vertically isn't very likely. In other words, one probably won't see suppliers starting to offer flight service on top of building airlines. 

3. Power of Buyers.  The bargaining power of buyers in the airline industry is quite low. Obviously, there are high costs involved with switching airplanes, but also if we take a look at the ability to compete on service. Is the seat in one airline more comfortable than another? Probably not unless one is analyzing a luxury liner like the Concord Jet. 

4. Availability of Substitutes. What is the likelihood that someone will drive or take a train to his or her destination? For regional airlines, the threat might be a little higher than international carriers. When determining this one should consider time, money, personal preference and convenience in the air travel industry. 

5. Competitive Rivalry. Highly competitive industries generally earn low returns because the cost of competition is high. This can spell disaster when times get tough in the economy. 

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Chapter 4

4.1 Case # 1

GMG Airlines Ltd.

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Backdrop of GMG Airlines:

Mission Statement

To be the most preferred airlines of Bangladesh.

History

GMG Airlines Commenced life in 1997, the idea behind its creation was to take advantage of a specific gap that existed in the Bangladesh Air Transport industry for quality oriented local airline but with a global reach. The repeated failures of the national carrier and the even enhancing shares of foreign air carriers in Bangladesh market only made the country, its intelligentsia and its business community more determined than even before to have an air carrier of Bangladeshi origin, free of state interference that could challenge the hegemony of foreign airlines and help the country to gain its rightful place on the global air transport map.

The economic crisis of 2008-2009 resulted in severe losses for the global airlines industry and Bangladesh was no exception. GMG Airlines however used the opportunity to reinvent itself and learn from the experience. Despite the trail of failed private airlines ventures in Bangladesh, the BEXIMCO Group identified the existence of a gap for a cost rationalized, service oriented airline and decided to financially back GMG Airlines by picking up a majority stake in the carrier.

With the entry of the BEXIMCO Group as strategic investors in June 2009, GMG Airlines’ vision of expanding its horizons to become a

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global player with a distinctly regional touch started becoming a reality.

GMG at a glance:

Founded 1997

Hubs Shahjalal

International

Airport

Secondary hubs Shah Amanat

International

Airport

Frequent-flyer

program

Golden Deer Club

Fleet size 8

Destinations 14

ICAO code GMG

IATA code Z5

Number of airports

flown to

13

Company slogan First Class All the

Way

Parent company GMG Group &

Beximco

Headquarters Dhaka, Bangladesh

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Destinations

GMG Airlines currently operates services to the following destinations

(September 2010):

Bangladesh

Chittagong - Shah Amanat International Airport

Cox's Bazar - Cox's Bazar Airport

Dhaka - Shahjalal International Airport Hub

Jessore - Jessore Airport

Sylhet - Osmani International Airport

India

New Delhi - Indira Gandhi International

Airport Temporarily Suspended

Kolkata - Netaji Subhash Chandra Bose International

Airport

Malaysia

Kuala Lumpur - Kuala Lumpur International Airport

Nepal

Kathmandu - Tribhuvan International Airport

Pakistan

Karachi - Jinnah International Airport

Saudi Arabia

Jeddah - King Abdulaziz International Airport

Riyadh - King Khalid International Airport

Thailand

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Bangkok - Suvarnabhumi Airport

United Arab Emirates

Abu Dhabi - Abu Dhabi International Airport

Dubai - Dubai International Airport

Rebranding

On 1 May 2010, GMG Airlines initiated their new logo and livery with

their newly acquired Boeing 767-300ER. After the rebranding, the

main body of the planes are white. A small bit of the engine are

imprinted with colorful butterfly wings. The tail is also partially

embedded with the colorful wings of a butterfly.

At GMG the brand new service is all about assisting the clients’

imagination to go places where they desire. GMG believes where the

journey where the imagination takes flight. So when the clients

embark GMG they ask them to EXPLORE- the branding motto.

Fleet

The GMG Airlines fleet includes the following aircraft (as of 8 December 2010):

GMG Fleet

AircraftIn

Fleet

Seats

Orders

Notes

Boeing 767-300ER

2250 &

2691

In the new livery. Second 767-300ER Reg: N948AV. Landing in Bangladesh 14/1/11.

Bombardier Dash 8 100

1 37 0 In the new livery

Bombardier Dash 8 300

2 50 0

McDonnell Douglas MD-82

2 150 0 In the new livery, ex Lion Air

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McDonnell Douglas MD-83

1 153 0

Total 8 ' 0

Services and activities:

The new, rejuvenated GMG operated during 2009 and the first quarter of 2010 from Dhaka to four domestic and eight international points with a fleet of 3 MD80 aircrafts, 3 Dash 8 aircrafts. With the arrival of a Boeing 767-300 wide-body aircraft in May 2010 the Company was able to start its operations to the Royal Kingdom of Saudi Arabia (RKSA). The arrival of this aircraft also meant that destinations such as Dubai and Abu Dhabi could be served non-stop.

Another important step during the second quarter of 2010 was that the airline embarked upon an ambitious and exciting program of fleet refurbishment and regeneration which will see all MD80 and Dash 8 aircraft returned to operation with new interiors and new livery incorporating the new and widely acclaimed logo unveiled in May of 2010.

This multi-million dollar investment is expected to pay dividends in terms of enhancing the service standards of the airline and helping it to operate on time schedules.Operating a comfortable two class service across the fleet it is expected that a second Boeing B767 wide-body aircraft and a Boeing 757 aircraft will augment the fleet by end of October 2010. This will then enable GMG to increase its frequencies and number of destinations in RKSA and give GMG the ability to explore and serve other destinations in South East Asia and the Indian sub continent during the course of 2011.

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Operating and Financial Status:

particulars

2009 2008 2007 2006

Total Sales Tk. 2,908,066,0

00

Tk. 3,717,470,0

00

Tk. 2,467,485,0

00

Tk.709,626,00

0Net profit 375,061,00

0(38,275,000

)63,592,000 7,963,000

Number of employees

578 478 400 266

Findings:

According to the claim of the GMG management why customers should prefer GMG comes with the following depictions:

GMG concentrates on for spelling out its marketing objective mainly on increasing sales volume.

Corporate people are their target customers. The customer profile of each customer includes age, income level, compassion. GMG’s market segmentation mainly is formed under geographic basis. GMG’s promotional strategies includes: Advertisement based on any major

theme, Personal selling enticements, Price changes, Special product offer, Sales promotion.

GMG’s up coming products includes special offers targeting students and medical tourism.

GMG uses all medias to reach the customers like, websites, billboards, newspapers and magazines, television and radio.

GMG Airlines uses external media house to make its advertisement and they are selected by the BEXIMCO and as they also does the creative brief.

According to the GMG officials they are quiet successful to reach the customers’ attention and in this case the sales point and customer care centers are playing a curtail role since can directly reach to the customers according to their needs.

Currently GMG Airline is promoting their brand philosophy “EXPLORE” for making it a success.

“Full Service airline” focusing on high quality service at a competitive price. Established brand name in Bangladesh renowned for reliability and quality for

over a decade. Best domestic Airline in Bangladesh now on a rapid expansion plan to

international destinations.

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Named as the first designated airline by the Civil Aviation Authority of Bangladesh

Bangladesh to serve Dubai, Bahrain, Kuwait, Oman, Doha and Saudi Arabia in Middle

East; India, Pakistan Sri Lanka & Nepal in Indian sub-continent; Thailand, Malaysia, Burma, Indonesia & China in Far East and London & Milan in European continent.

Online in 8 international sectors with a plan to double its international network of destinations by 2011.

Recommendations:

The predominant problem GMG suffers most unwontedly is technical failure of airplanes that is responsible for flight delays, huge costing of using in other airports and hangers. This also results customer dissatisfaction in flight delaying and some times cancellations.

As the recommendation GMG can look foreword to partnerships with other companies which could provide them with sufficient flow of financing. Despite the trail of failed private airlines ventures in Bangladesh, the BEXIMCO Group identified the existence of a gap for a cost rationalized, service oriented airline and decided to financially back GMG Airlines by picking up a majority stake in the carrier.

With the entry of the BEXIMCO Group as strategic investors in June 2009, GMG Airlines’ vision of expanding its horizons to become a global player with a distinctly regional touch started becoming a reality.

Conclusion:

As a booming company in airline industry GMG should keep track of their customers so they may reach to them more effectively to raise their profitability.

4.2 Case # 2

Historical overview

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Saudi Arabian Airlines started out in 1945 with a single twin-engine DC-3 (Dakota) HZ-AAX given to King Abdul Aziz as a gift by the U.S. President Franklin D. Roosevelt. This was followed months later with the purchase of two more DC-3s, and these formed the nucleus of what in few years later was to become one of the world's largest airlines.

 

Today Saudi Arabian Airlines has some one hundred and thirty-nine (139) aircrafts, including the latest and most advanced wide-bodied jets presently available: B747-400s, B747-300s, B747-100s, B777-200s, Airbus A300-600s, MD-11s and MD90s.

 

Saudi Arabian Airlines since its establishment until becoming one of the best airlines in the world.

Esteemed clients..

In these times where steps are moving fast, Saudi Arabia Airline enter today to the world of advanced stage of air transport in particular; the atmosphere is now open to internal competition from local companies, which started its operations already in a number of cities in the Kingdom.

 

Through their website, they ensure steps to facilitate the reservation and provide new options for travel and tourism program.

About Saudi catering

Saudi Arabian Airlines Catering (SAAC) Ltd., part of Saudia Arabian Airlines, was established in Jeddah in 1981. The continued efforts have resulted in the inauguration of

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four more units located at Riyadh, Dammam, and Madinah, international airports in Saudi Arabia, and one unit a Cairo international airport – Egypt.

 

To meet ahead every challenge, a cosmic expansion plan of infrastructure, facilities, equipment and professionals was put together in all the five units. As a result Catering Division have rooted it’s services at par excellence emerging to an ideal facility to needs and most importantly their customers in the region and thought the world.

 

Remaining within core business and to match the ongoing commercialization and expansion plan of airport facilities, the existing catering physical layout will be expanded or the construction of new catering premise will be initiated as a priority agenda in the development plan that will determine ideal floor area, footprint and plot size to the magnitude of requirement.

Rules and regulationRules and regulations governing carriage by air

Warsaw Convention / Hague Protocol

The Kingdom of Saudi Arabia having recognized the advantage of regulating in a uniform manner, the conditions of international transportation by air in respect of the documents used for such transportation and of the liability of the carrier, ratified the Warsaw Convention (1929) and the Hague Protocol (1955), on 27.01.1969, the article of which are the governing laws for the contracts for international carriage (of passengers, cargo and baggage) by air.

Saudi Arabian Airlines endorses the action program adopted by the IATA legal committee and cooperates to the maximum feasible extent in achieving its objectives of modernization of the Warsaw System, for the purpose of unification of laws to meet the global developments.

 

IATA (International Air Transport Association)

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Saudi Arabian Airlines became a member of IATA on 17.04.1967, which actively contributes to its efforts in bringing up the uniform rules and regulations to ensure quality in Air Transportation.

 

Saudi Airlines conditions of carriage

Saudi Arabian Airlines international carriage (of passengers, cargo and baggage) by air is subject to the rules and limitations relating to liability established by the Warsaw Convention as amended by the Hague Protocol.

To the extent not in conflict with the foregoing carriage and other services performed by Saudi Arabian Airlines are subject to:

 

Provision contained in the passenger ticket.

 

Applicable tariffs.

 

Saudi Arabian Airlines' conditions of carriage and related regulations.

 

Except in transportation between a place in the United States or Canada and any place outside thereof to which tariffs in force in those countries apply.

About ground services

Since 1988, SAUDIA GS (Saudi Arabian Airlines-Ground Services) has been providing range of ground handling services for Saudi Arabia Airlines, local carriers, and foreign

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carriers, hajj and Umra flights, and Royal and VIP flights. Our service professionals handle over 150,000 flights annually in 26 international, regional, and domestic airports.

 

Where services include all ground handling activities such as:

 

1. Station managing and company representation2. Passenger Services (Terminal Services)3. Heavy equipment operation4. Baggage services5. Cabin services6. Water & fleet services7. Ground support equipments8. Weight & balance control9. Aircraft marshalling & parking10. Ramp operation11. Shipment escorting12. Coordinate with Catering and Fueling Companies

Saudi fleets

Saudi Arabia Airlines has traveled a long way to modernize its fleet. This was done after conducting comprehensive studies for the Airline requirements which included; both the long and short run operational needs, determining the optimal type of aircrafts, and the analysis of several operational factors such as; the distance, number of passengers, number of flights, and finally both regional and international competition.

 

Our Fleets and Contain includes:

 

PERIOD QUANTITY

Boeing 747-400 4

Boeing 747-300 9

Boeing 777-268 22

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Boeing 777-300 12*

Boeing MD-90 29

Airbus 320 35

Airbus 321 15

Airbus 330 8

Embraer 170 15

TOTAL 149

 

* introduce in end of 2011

Classes of travel

Saudi Arabian Airlines offers its valuable customers three classes of travel in most of its aircraft; First Class, Business Class, and Guest Class. 

 

Customer satisfaction is a top priority both in the air and on the ground, beginning with reservations, check-in, boarding, in-flight service, deplaning, baggage handling and assistance upon arrival. 

 

This is the type of customer care that we want to provide you with, as manifested in our slogan “A New Era...

Online fare

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destination Starts FromOne way fare USD Return fare USD

JEDDAH/MADINAH 345 690RIYADH/DAMMAM 280 560

US & Other DestinationNEW YORK 660 1110WASHINGTON 660 1110CAIRO 345 690JOHANNESBURG 345 690NAIROBI 345 690TUNIS 345 690

European destinationLONDON 345 690ROME/MILAN 345 690PARIS 345 690MADRID 345 690GENEVA 345 690FRANKFRUT 345 690

4.3 Case # 3

Chapter 5

5.1 RecommendationsTo have some recommendation before we need to focus on the problems lies on Bangladesh ‘s eviation industry . based on the problem and form above discussion we should take measurable action which will help us to have a sound ,safe and profitable eviation industry

Capital:

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Bangladesh is a third world country. So to open a aviation company is a beg deal with

10 to 15 air. Though the company can run their operation in domestic but it also takes

huge amount of money. That’s why we think that government and as well as foreign

investor should come forward to invest in this field mostly.

License from the Government:

To get a airline operation license from the government is very

long and hazard procedure in Bangladesh, long and procedure decrease the investors and

creditors to invest in this sector. So , government should be careful in this issue to

make it easier to get the license for the sake of development in aviation industry.

Few Cargo Service:

UPS, Fed.Ex, DHL and Biman are the main cargo service provider in

Bangladesh. It is very beg barrier to proper in this industry. Though other few airline

provides very few amount of cargo Service. So cargo service should be increased.

Training centre:

only one government training centre can not provide enough trained people to

this sector, whereas every year needs more than 1000 people for this sector. So ,

openining new training center to make skilled person on this sector is important.

Non government organization can come forward to train up local people.

security system:

For the reason of low security system our airline companies are not

getting enough revenue as they want or need to touch for target line. So security system

should be enhanced.

Not enough airbus for rush time:

In the summer and other pick time our aviation company’s

airbus is not good enough .They should have more airbus. Like:HAJ time, New year and

on different festival time they does not provide extra airbus for handle rush. So we

should pay head here.

Cargo facilities:

Less cargo facilities brings less revenue from a huge potential arena. That’s why cargo

service should be increased.

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Moreover we should do such actions which is mentioned below:

Attracting Customers

1)the attractiveness of the airline's service and 2) the effectiveness of the airline's

promotional expenditures. 3) attractiveness of the price of tickets

The base was the attractiveness of the price of tickets. In this analysis only the relative

price of tickets has been used because ticket price was by far the most significant factor

in attractiveness. A lower relative price would generally be more attractive to most

travelers

Managing the Fleet

In the area of fleet management, the same factors are used for this analysis as in the

earlier study. Airplane utilization in hours per day deals with how well the companies'

major assets (airplanes) are used as a group. The load factor relative to the industry

average indicates how well the average individual airplane is used. Simply stated, the

load factor is that proportion of an airplane's seats that are sold and actually filled at

departure

Managing People

We use two factors with respect to how well the airline manages its people. Productivity,

in airline capacity per employee is a measure of how effectively the employees work

together in providing the physical service of getting passengers from one place to

another. Morale is a measure of how committed employees are to providing good service

to the airline's customers. As in the original study, productivity is measured in available

seat miles per employee. Morale is measured using proxies since the original morale

model is complex and requires information not currently available for the airlines being

examined. In this case, lost bags per 1000 passengers and complaints per 100,000

enplanements derived from the Air Travel Consumer Report are used as indicators of

how committed airline employees are to serving their customers. The activities that result

in lost bags or in poor enough treatment of passengers that they file complaints are

indicative of the morale of the airline employees. Labor-management relations (including

strikes and threatened strikes) are one example of a driver of these effects

Managing Finances

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The last of the four areas is financial management, for which six factors are used. Unit

revenue and unit cost are important by themselves, but their relationship is also

important. Therefore, we have compared both unit revenue and unit cost as well as the

unit margins among the airlines. A measure of capacity to normalize these factors is used

since the airlines fly all their available seats, not just those that are occupied. Better unit

revenue may not be an advantage for an airline whose unit costs are out of line.

In addition to unit revenues and unit costs, funding for growth is an important factor for

an organization's long-term success. Most successful organizations choose to grow over

time. In the case of the airlines, growth is measured in terms of capacity growth.

Furthermore, in order to grow, an airline needs adequate funds. To be attractive for most

equity investors, an airline must grow its equity over time. Moreover, to be attractive to

most debt investors, a reasonable debt-to-assets ratio is desirable. In this realm of

funding, this study is less precise. However, in light of this study's prior research, the

measures in this case appear to indicate the likelihood of enduring success for the

airlines.

5.2 ConclusionFrom the above discussion its now very much clear to us that aviation industry is part and parcel of a country and we feel the importance it most in today’s world when communication has been increased widely at a range throughout the world. So , there is no option not paying head at this sector. Of a country wish to develop its economy and other sector it must try to develop its aviation industry both at civil and military aviation. And not only the government the public and private sector should come forward to develop and enhance the sector as much as possible.

5.3 Bibliography:1. en.wikipedia.org2. www.gmgairlines.com3. Annual report GMG Airlines 2009

4. www.sita.aero5. www.airlinequality.com6. www.airlinecodes.co.uk

7. www.mocat.gov.bd

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5.4 Appendix: Questionnaires

Marketing communication effectiveness of GMG Airline in the context of Bangladesh Tanjina RahmanMBA 3rd Batch

Roll# 19Department of Tourism and Hospitality Management

University of Dhaka

Name of the interviewee:………………………………………………………….Designation:………………………………………………………………………. Date:……………………………………………………………………………….

Questionnaire:

1. Which following area GMG concentrates on for spelling out its marketing objective? Increase sales volume Market share Competitive positioning Profit Return on investment Others If ‘others’ then kindly mention………………………………………………………..

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2. Who are your target customers?

3. The fields of categorizing customer profile include: Age Income level Occupation OthersIf ‘others’ then kindly mention………………………………………………………..

4. Your market segmentation falls into the following categories: Gender Age Income level Geographic area Benefit segmentation Usage segmentation Psychographic demographic

5. Which promotional strategies you follow currently? Advertisement based on any major theme Personal selling enticements Price changes Special product offer Sales promotionKindly be more elaborate……………………………………………………………

6. What products do u currently offer now?

7. What upcoming products do you have in mind ready to be lunched?

8. Do you have any potential product to satisfy the customer?

9. Which media you use for reaching the customers? Websites Billboards Newspapers and magazines Television Radio OthersIf ‘others’ then kindly mention………………………………………………………..

10. Do you have an in-house advertising team working for or you hire an external advertising agency?

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11. Kindly explain the decision making process of selecting an advertising agency that promote your product.

12. do you think the advertising agency somewhat can manipulate or use prefer any particular customer group?

13. Do you leave the creative brief to the advertising agency or do it as you prefer? If you do it by yourself then which of the appeal you focus on your advertisement?

Fear Humor Music Rationality Emotions Scarcity

14. How much effective do you think you are in communicating to your customers despite the existing constraints you face? 15. If there is any future plans to develop effective communication means please describe

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