Marketing Myopia in Airline Industry

Marketing Myopia Failure of management is the major contributor in the downfall of an industry Industries need to be customer oriented instead of being product oriented Complacency in the assumed perception of the monopoly of a product can lead to its demise No such thing as a growth industry, companies capitalize on growth opportunities Manufacturing of product is not the sole requirement, effective marketing and creation of generic products are also required

Marketing Myopia (contd) Population growth cannot sustain growth forever, innovation is required to lead Growth of an industry can also occur due to innovation in other sectors Mass production needs cater to the uncertain future ahead Innovative products replacing the existing profit making products to suit customer needs Management should be oriented the people who consume the product rather than towards the product An industry should be a customer satisfying process, not a goods-producing process

Air Asia Malaysian based low cost airline Asia's largest low-fare, no-frills airline and a pioneer of lowcost travel in Asia Operates scheduled domestic and international flights to over 400 destinations spanning 25 countries World's lowest operating costs at $0.035/seat-kilometre in 2010 First airline in the region to implement fully ticketless air travel system

http://en.wikipedia.org/wiki/AirAsia#Operations

Current status of Air Asia Group Revenue RM 3.95 billion Total Expenses RM 2.88 billion Profit after tax RM 1.06 billion Total assets - RM 13.24 billion

http://www.airasia.com/iwovresources/my/common/pdf/AirAsia/IR/AirAsia_AR10.pdf

Total assets of Air Asia - 2010

http://www.airasia.com/iwovresources/my/common/pdf/AirAsia/IR/AirAsia_AR10.pdf

Air Asias Growth Factors Operates with the worlds lowest unit cost of US$0.023/ASK due to no frills offered onboard Passenger break-even load factor of 52% It has hedged 100% of its fuel requirements for the next three years Achieves an aircraft turnaround time of 25 minutes Has a crew productivity level that is triple that of Malaysia Airlines Achieves an average aircraft utilisation rate of 13 hours a day

http://en.wikipedia.org/wiki/AirAsia#Operations

Delta Airlines Based in the United States Formed to carry out aerial crop dusting operation, moved to carrying passengers in late 1929 Delta and its subsidiaries operate over 4,000 flights every day Filed for bankruptcy on Sep 14, 2005 Reemerged from bankruptcy on April 30, 2007 October 29, 2008, Delta merged with Northwest Airlines to form the world's largest airline

http://en.wikipedia.org/wiki/Delta_Air_Lines http://en.wikipedia.org/wiki/History_of_Delta_Air_Lines

Current Status of Delta Airlines Revenue - US$ 31.755 billion (2010) Operating income - US$ 2.217 billion (2010) Net income - US$ 593 million (2010) Total assets - US$ 43.188 billion (2010) Total equity - US$ 897 million (2010)

http://www.sec.gov/Archives/edgar/data/27904/0000 95012311014364/g24877e10vk.htm

Consolidated Summary of OperationsConsolidated Summary of Operations - 2010 Operating revenue Operating expense Operating income (loss) Interest expense, net Miscellaneous, net Income (loss) before reorganization items, net Reorganization items, net Income (loss) before income taxes Income tax (provision) benefit Net income (loss)http://www.sec.gov/Archives/edgar/data/2790 4/000095012311014364/g24877e10vk.htm

In millions of dollars 31,755 29,538 2,217 -1,185 -424 608 608 -15 593

Deltas Growth Factors Delta grew through a path of innovation and the adage the bigger the better. Delta grew through the addition of routes The acquisition of other airlines It replaced propeller planes with jets in the 1960s Entered international competition to Europe in the 1970s and across the Pacific in the 1980s The recent growth that Delta had seen was majorly due to its acquisition spree

http://en.wikipedia.org/wiki/Delta_Air_Lines

Air India State-owned flag carrier, the oldest and the largest airline of India Air India merged with Indian Airlines in 2007 Combined losses for Air India and Indian in 2006-07 were Rs 770 crores (7.7 billion). After the merger of the airlines, this went up to Rs 7,200 crores (72 billion) by March 2009

http://en.wikipedia.org/wiki/Air_India

Air Indias Balance SheetMar ' 09 Sources of funds Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Net current assets Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total http://money.rediff.com/companies/airindia-ltd/16600003/balance-sheet 145 63.35 2,365.95 28,542.07 31,116.37

24,329.40 1,838.05 22,491.35 5,011.37 123.18 8,746.02 5,255.55 3,490.47 31,116.37

Air India Downturn Lack of innovation and the lack of focus on customer needs have been the reasons for the decline of the once profitable airline Monopoly enjoyed by Air India had moved it into a period of complacency and it was unable to compete once the market opened Acquisition of aircrafts without the customer centric focus, showed the move towards product centric focus

Pan Am Pan American World Airways was the principal United States international air carrier since 1927 Started as a scheduled air mail and passenger service, The airline became a major company credited with many innovations that shaped the international airline industry The widespread use of jet aircraft and jumbo jets was started by PanAm Computerized reservation systems

http://en.wikipedia.org/wiki/Pan_American _World_Airways

Pan Ams Downturn Though a well established brand with a widespread loyal passenger base, the airlines struggled to sustain growth and eventually lost out to its competitors due to the lack of innovations on part of the management The downfall of Pan Am began with the acquisition of National Airlines for $ 400 million. Pan Am's balance sheet hurt, due to its buying binge of its Boeing 747 aircraft fleet. Pan Am was forced to declare bankruptcy on January 8, 1991 This was an example where in the airline focused on the product and lost out on the customer needshttp://en.wikipedia.org/wiki/Pan_American _World_Airways

Changing trends in the Airline Industry Airline industry has moved from being a highly profitable industry to a loss making industry Some exceptions are visible due to their innovation and customer oriented thinking Most airlines have failed to evolve with the needs of the customers With spiraling operating costs, the cost of flight has been passed onto the customers by the ailing industry Product innovation has helped airlines like Air Asia, Delta Mammoths such as Pan Am and Air India have died out or are dying due to their inability to cope with the customer needs and lack of innovation

Thank You!!!Group 7: -Dhwanil - Nanjappa - Uday - Sumit - Pavitra