Aviation Industry- Fsm

 A complete analysis of Segmentation Segmentation,, Targeting Targeting and an d Positioning  With special reference example of Kingfisher Airlines PUNEET SINGH MBA-1 TRIMESTER 2 SECTION D CHRIST UNIVERSITY INSTITUTE OF MANAGEMENT

 AIR TRAFFIC The Airport Authority of India (AAI) manages total 122  Airports in the country, which include 23 International  Airports, 71 domestic airports and 28 civil enclaves. Top 5 airports airports in the country handle 70% of the passenger traffic of which Delhi and Mumbai together alone account for 50%. Passenger and cargo traffic traff ic has has growth at an average average of  about 9% over the last 10 years.

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GROWTH Estimated domestic passenger segment growth is at 12% per annum. Anticipated growth for International passenger segment is 7% while the growth for International Cargo is likely to grow at a healthy rate of  12%.

Indian  Airlines  Jet  Airways Kingfisher  Airlines

Others

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Market segmentation is the division of markets into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other  variables of the marketing mix. It is considered to be the best strategy for targeting the markets. The consumers are becoming increasingly particular about their needs and preferences and hence there arises a need for going in for segmentation in the market which will suit the needs of all the different types of customers. Segmentation helps marketers understand the needs of  different consumers and serve them with better value propositions. Marketers can design their marketing mix to suit the customer in the segment they are targeting. To remain competitive companies refine and develop products and services to meet the need and preferences of different segments.

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The following income levels have been drafted keeping in mind prospective flyers. High level income group: People who fall under this category have an income level of more than Rs 7-8 lakh per annum. Generally business men, top level managers of big companies etc fall under this category. M iddle level income group: People who fall under this category generally earn anywhere between Rs 3 lakh to 6 lakh. Young working professionals, middle level managers, small proprietors etc fall under this group. Lower level income group: People who earn less than Rs 3 lakh fall under this group. Fresh graduates who have started working, people at supervisory levels in organizations etc generally fall under this category.

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Travel : People who travel mainly for the purpose of work and business prefer crisp service, safety and security 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 service airlines depending on the availability of tickets and income level. Leisure Travel : Leisure Travellers are people going for  vacations. 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 are those who have enough money to splurge and so they  might prefer hybrid or full service luxury aircraft. Business

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Tier I cities: This category includes all metro and big cities like Delhi, Mumbai, Chennai etc. Tier II cities: Under this, semi urban cities like  Ahmedabad, Pune, Jaipur, Chandigarh etc are category. Tier III cities: Rural areas are categorized under this level.

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are those who frequently travel by a certain airline and prefer it over the other airlines. F irst timer : is a person who travels for the 1 st time by  a particular airline. Its generally observed that full service and premium airlines cater to frequent flyers and a small percentage of first timers as well. Whereas no frill airlines generally carry the first timers who over a period of time can become frequent flyers depending on other variables like lifestyle, income group etc. F requent flyers:

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It is a variable under behavioral segmentation which defines the commitment of the customers towards the brands. We can categorize the consumers into three groups- hard core loyal, split loyal and switchers. Hard core loyal : are those consumers who are extremely  loyal to those brands with which they have formed a deep emotional bond. S   plit loyal : are those customers who use more than one brand. Their loyalty is divided among two or three brands.  witchers: are those customers who are not loyal to any  S  brand, they continuously switch from one brand to the other. For example people traveling by low cost airlines may  not be loyal to a single carrier as they prefer to travel by  those airlines that offer the least fare.

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Seeing the above characteristics, we can infer that airlines like Kingfisher target the Elite Fliers. There are certain specific characteristics observed in this segment:  Airlines like Kingfisher targets young married professionals (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 towards flamboyancy. These fliers are generally observed to be hard core loyal

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Positioning is the aggregate perception the customer has of a particular company, product or service in relation to their 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 brand is based on Mallya's personality. The one word which people associate with Kingfisher Airlines is Experience. They encourage people to Fly the Good Times. Consumers know that they just have to pay a bit more for high level of comfort during the journey. This shows how efficiently they have positioned themselves in the market as a premium brand that provides high quality service at a bit extra cost.

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Positioning in the truest sense indicates what people perceive of a product or a company. Its the brand image that people have about the company. From the above table,  we can see that Kingfisher has a very distinct style of positioning itself in the minds of the consumers. Rather than promoting their brand as fast service provider or reliable etc, they have taken a different tangent by saying that flying with Kingfisher is an experience in itself. Taglines like FL Y THE GOOD TIMES makes a passenger feel that Kingfisher is not just about flying from a place to another but its much more. The company is not just selling tickets per say but also selling Experience.

Fuel Cost  Crew Cost   Airport Cost  Fleet Write Off and Maintenance

Service Costs

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Operating Costs

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Cabin Handling Passenger Amenities and utilities

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Ticket Revenue Lease Revenue Depreciation

Recovery 

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 Airlines assign prices to their services in an attempt to maximize profitability. Most airlines use differentiated pricing, a form of price discrimination, in order to sell air services at varying prices simultaneously to different segments. Factors inf luencing the price include the days remaining until departure, the booked load factor, the forecast of  total demand by price point, competitive pricing in force, and variations by day of week of departure and by time of  day. Carriers often accomplish this by dividing each cabin of the aircraft (first, business and economy) into a number of travel classes for pricing purposes.

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Full-service airlines have a high level of fixed and operating costs in 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 out to a wide variety of external providers or internal cost centers. Moreover, the industry is structured so that airlines often act as tax collectors. Airline fuel is untaxed because of a series of  treaties existing between countries. Ticket prices include a number of fees, taxes and surcharges beyond the control of  airlines. Airlines are also responsible for enforcing government regulations. If airlines carry passengers without proper documentation on an international f light, they are responsible for returning them back to the original country.

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 Airline financing is quite complex, since airlines are highly leveraged operations. Not only must they  purchase (or lease) new airliner bodies and engines regularly, they must make major long-term fleet decisions with the goal of meeting the demands of  their markets while producing a fleet that is relatively  economical to operate and maintain.  A second financial issue is that of hedging oil and fuel purchases, which are usually  second only to labor in its relative cost to the company. However, with the current high fuel prices it has become the largest cost to an airline.

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In view of the congestion apparent at many  international airports, the ownership of slots at certain airports (the right to take-off or land an aircraft at a particular time of day or night) has become a significant tradable asset for many airlines. Clearly take-off slots at popular times of the day can be critical in attracting the more profitable business traveler to a given airline's f light and in establishing a competitive advantage against a competing airline. If a particular city has two or more airports, market forces  will tend to attract the less profitable routes, or those on  which competition is weakest, to the less congested airport,  where slots are likely to be more available and therefore cheaper.

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Code sharing is the most common type of airline partnership; it involves one airline selling tickets for another airline's flights under its own airline code. Often the companies combine IT operations, buy fuel, or purchase airplanes as a bloc in order to achieve higher bargaining power. However, the alliances have been most successful at purchasing invisible supplies and services, such as fuel.  Airlines usually prefer to purchase items visible to their passengers to differentiate themselves from local competitors