Case Study of Three Airlines

CASE STUDY OF THREE AIRLINES
SUMMARY OF THE CASE STUDY: Air India comes to Airways in the year 1948. Air India covers the designation of 44 designations. Air India signed in code sharing agreement with number of foreign Airlines. In 1990 government of India (GOI) divest 40% stake in Air India. So Air India looking for new strange partner. Meanwhile VA began the operations in 1984; it always focused on international routes. Till 1999 VAs route network in the Asian region are very small only. Every year an estimated 0.3 million passengers travelled from Delhi to London which was nearly 40 percent of the total bound traffic from India. The only available direct routes codes was held by ba (British Airways) and Air India VA was the first Airline offer TV monitor with every seat. It offered in flight beauty throaty including the service of measures. And also it offers internet facility also to the passengers. Analysts felt that once VA start operation AI would suffer a lot. As VA promised to offer tickets at 15 percent less than ba, Delhi to London VA ticket would be cheaper than AI. N 1999 both VA and AI comes to agreement were they get benefit equally. The entry of VA on London to India was likely to bring down the fare on the sector. According to the agreement VA can fly the Airway three services a week from London to Delhi from July 2000.the agreement was for 5 years. According to some analysts government of India was interested in foreign alliance with VA because of group of interest in entertainment. Branson said that we are paying a significant amount to the Air India as per code sharing agreement. Our upper class and premium class as we call them areas competitively priced the first class and the business class fares and other Airlines respectively. Hence we computing with Air India too despite the agreement the pricing and services will be competitive.
Analysts felt that with the entry of VA the Indian skies would see some fierce price wars between VA and ba. Barons said that VAs first class fares would be equivalent to the business class fares of ba and that the economy fare would be 30-50% cheaper than bas. If ba brought down the ticket fare and it had done in may 2000 VA would fly for less. At the same time VA would respect the government the government sentiments on fares since it was regulated market. Analysts felt that VA would give ba some stiff competition not only in terms of fares but also with its array of services. Air India feared there would be an exodus of its already decreasing in passenger list. VA planned to launch a third weekly flight around October. Virgin entry will certainly be boost to services between India and Europe. According to analysts consumers were at last getting the benefits of a liberalized completive sector. By October 2000 VA was to start its third code share flight as per the agreement with Air India. In addition to the rs 100 million per flight per annum the Air India got from VA. The third flight would fetch Air India rs 300 million per annum. However till late 2001 VA was not launching the third flight. Also there was no progress on the remaining three flights that VA was entitled to fly from 2001. This seemed to the bone of contention between VA and Air India. VA officials were particularly unhappy that ba was granted rights to fly three additional flights per week from Kolkata to London against the prevailing norms. By dec 2000 it became clear that VA would have to wait a bit longer for final clearance from Air India to commence that third code share flight on the Indian London sector. Air India was opposed to as the Indian carrier also had a Delhi to London flight on Monday morning. But its not acceptable to Air India which pointed out that according to the agreement signed between VA and Air India VA was to operate flights only on those days when Air India did not operate services to London. VA officials said that the delay in granting permission to VA to operate third flight was proving financial disastrous for AI. In late 2001 VA was in some trouble because of the down turn in the translantic aviation business and shrinking revenues.
PROBLEM IDENTIFIED: Goi (government of India) divest the 40% of stake holder in Air India. Air India may not leave Goi. But it left it out. While VA entering into India route code was in hand of AI and ba. While entering itself Air India would not give the route code. But for the sake of agreement it gave to VA. After the arrival of VA the fares were comparatively less comparing to other flies with VA gives many features. VA starts to reduce the fares. On seeing this ba also starts to reduce the fares. It gives the competitive to both the Airway. Without knowing the capacity of them VA gives very les fare. So it comes to some problematic situation. But at last VA decide to launch 3 rd flights. Meanwhile ba gets ready to launch another three flights in the same route. These are some problems which I identified in this case study.
SOLUTION TO THE PROBLEM: Before AI left the relationship of Goi it had analysis why Goi wants to go out partnership. If it go means how it will affects our business. How to retain the partners with us. These are the process AI should held While entering to VA itself AI accepts the partnership. It has to evaluate the capacity of VA In this time either BA and A-I wants to reduce the ticket cost or provide any innovative services. After VA come into partnership AI not worry about their own Airways. It has to look after it. So only AI met loss.
VA plans to help the A-I in reduction the ticket cost according to market
conditions. VA and A-I are both competitive in the market in this time VA help to A-I it may good in nature but in Competitive it is big risk taken by VA
BEST ALTERNATIVE: One of the best alternative solution is VA has to redevelop their plans and service model and come out with a new idea how to hit the market. If not means there is already existing competitor ba is in strong position. To overtake ba VA has to being strong position. Air India has the responsible to overtake the VA also. Because while AI is in loss VA gives the hand to get back the AI. Now while VA in problem it has to take care of the VA also. And before come into market it has to do market analysis and then enter into the market.
RECOMMENDATIONS FOR IMPLEMENTING: VA has to know what is the strength and weakness. What is the threats and opportunities while entering. It has to fix the target and work towards the target to achieve it. It has to do the market analysis. It must know how to tackle the problem, and before reducing fare and all it have to do analysis if we reduce fare means how it affects the business how it attracts the passengers etc.. These are the points which I highly recommending to develop the VA (virgin Airways).
BUSINESS COMMUNICATION
NAME TOPIC COURSE DATE : MAHENDRAN.N : CASE STUDY : PGPM-MBA : 26-11-2011.
COLLEGE : SMI BUSINESS SCHOOL

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CASE STUDY OF THREE AIRLINES

COLLEGE : SMI BUSINESS SCHOOL

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