A CASE STUDY ON AIR DECCAN Presented By: Megha Thacker(2011MB0016) Lopamudra pattnaik(2011MB0006) Sandeep Kumar Singh(2011MB0060) Sandeep Kumar Singh(2011MB0054) Amit Manish Khalkho(2011MB0010) Pradeep Kumar(2011MB00) Dipu Kumar(2011MB00)

Air Deccan: An Overview• Started by Captain G.R. Gopinath in 2003.• India’s first Low Cost Carrier.• Referred as Common Man’s Airline.• First airline to introduce E-Ticketing in India.• By November 2005 it was the 2nd largest

privately owned airline in India.• It expanded the size of the Aviation pie.• It operated 537 flights to 69 cities.• USP- its advance booking facility

Vision : Empower every Indian to fly

Mission : To demystify air travel in India by providing reliable, low cost and safe travel to the common man by constantly driving down the air fares as an ongoing mission

Entrepreneurial Traits

• Visionary• Risk taker• Innovative• Leadership• Responsibility taking

Cont.….

• Confidence to succeed• Enthusiastic• Future-vision• Physical and Mental Strength• Opportunity Seeker and Creator

Entrepreneurial Strategies

• Cost Leadership Strategy:– Single flight Attendant.– 48 seater aircraft to lower maintenance and

service fee.– Unique online reservation system.– No frills airline but food/beverages can be bought

inside the aircraft.– Prices are almost 50% lower than full service

airline.

Cont.….• Differentiating Strategy:– Single passenger class system.– Tie ups with HPCL and Reliance Web World.– Provides flights even to the hinterland.– Allocation of prices to various percentage of seats.

• Focus Strategy:– Frequent Business Travellers.– AC Train Travellers.

Innovative Techniques

• Flight food and drinks were served for a price.• Reduced cost of printing and processing.• Cabin crew consisted of single flight attender.• No toll-free number.• Advertisement as a tool to earn revenue.• Aircraft utilization by investing in technology

which made flights fly for more hours as compared to the competitors.

Marketing Strategies

Common Man :The Brand Ambassador for Air Deccan, the people’s airline is Mr. R.K Laxman’s ‘Common Man’

Free Tickets :

Cont.…

• Advertising

• Brand name

• Promise of low fare to costumers

• Tie up with HCL-Technologies

Swot Analysis

• Strengths:– Cost Differentiation– First Mover Advantage– Brand Equity

• Weaknesses:– Fixed cost perishable product– Questionable on-time performance– No previous industry experiance

Cont.…

• Opportunities:– Growing size of the middle class– Air charters– Product Differentiations

• Threats:– Indian Railways– Over capacity– Open Sky Policy

Porters Industry Analysis

• Threats of new entrants– High start up cost– Capital involvement– Government licensing and approvals

• Bargaining power of buyers– Decreases in peak season– More transparency

Cont.…

• Bargaining power of suppliers:– No control of Air traffic Fuel Prices.– Leased aircrafts. – Specialised spare parts and limited number of

manufacturers.• Threat of substitute:– Superfast trains for short hault flights

• Power of Competitors:– Other airlines with low cost strategies.

PEST ANALYSIS

• POLITICAL– Open Sky Policy– National and Airport Security– Government decided fuel prices

• ECONOMICAL– Upgradation of Airport Infrastructure– Surcharge and Other Taxes– Airport Authority Handling Charges– Increase in Salary range– International petrol prices

Cont…

• SOCIAL– Main focus on tours– Growing middle class size– Empowerment- power to fly

• TECHNOLOGY– Call Centre– Internet booking and boarding passes– High quality engine for more efficiancy

BCG MATRIXFor the year 2005:

Market growth rate

Relative Market Share

26.8%

10%

0.31

BCG MATRIXFor the year 2006:

Market growth rate

Relative Market Share

25%

10%

0.28

Financial Analysis

2003 2004 20052006 (6 months)

Current Ratio 1.81 1.87 1.63 0.85

Quick Ratio 1.29 1.40 0.79 0.64

Asset Turnover Ratio 0.97 1.36 1.41 0.77

Debtors Turnover Ratio 8.45 18.78 58.11 46.56

For Air Deccan:

Cont.…

Current Ratio 1.22 0.78 0.64 0.97 0.80

Quick Ratio 0.62 0.58 0.52 0.88 2.20

Asset Turnover Ratio 2.83 2.53 2.85 4.61 5.37

Debtors Turnover Ratio 16.34 18.35 41.01 46.67 74.53

2011 2010 2009 2008 2007

For Kingfisher Airlines:

http://www.moneycontrol.com/financials/kingfisherairlines/ratios/KA02

Problems

• Too much focus on South India• Problem with cancellation of Air Tickets• No lounges to attend the passengers of

delayed flights• Shortage of airport personnel• Frequent Breakdowns• Slow check-in process• Overbooking

Challenges

• High Aviation Turbine Fuel (ATF) Prices• Excess Capacity• High Debt Burden• Poor Infrastructure• Regional connectivity

What Kicked The Deal?• To start overseas business• Expand the business • Survive from the losses• Competition from low-cost airlines• Market share • Ever Increasing Cost and cash crunch

All the above factors led to the acquisition of Air Deccan by Kingfisher Airlines and it was renamed as “Simplifly Deccan” and further changed to “Kingfisher Red”

Conclusion• The case narrates about how he took the risk of starting low cost

airlines for the first time in India by implementing sound strategies to fulfil his vision of “empowering every Indian to fly.”

• The idea of creating a new market without eating from the plate of existing airlines by competing with the railways and roadways, talk volumes about him being innovative and intuitive

• Gopinath wanted to create a new market but also wished to bring in a new era where there will be change of expectations, triggering democratization of travel and all psychological barriers of the common Indian man of not being able to afford to fly in an airline would be done away with

Therefore it is a true entrepreneurial case

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