Emerging landscape and new value propositions in the civil aviation sector

Abstract

The entry of Air Deccan into Indian Civil aviation heralds a new era in air travel and points to several important changes that are likely to happen in the competitive landscape. While the success of South West Airlines in the US and that of Ryan Air in the UK are well known today, it is not clear how this experiment is likely to influence the travel industry in India. However, the business model promises to have huge application potential in the near future. In addition, addressing as it does the bottom of the pyramid, the model has the potential to bring about a sea change in the economic life of the country. In an effort to understand the strategic, operational and policy implications arising out of the Air Deccan business model, Prof Murali Patibandla spoke to Captain G R Gopinath. Air Deccan provides air travel at 30 to 40 percent of the cost of regular airline tickets. This is based on a unique value-chain model, both on the supply side – procuring aircraft, maintenance, etc., and on the demand side – ticketing, on-flight services, cancellation, and so on. Some of these are common to all low cost airlines, but some are unique to Air Deccan, and designed especially to suit the Indian context. Partly intended as a market positioning strategy, the airline’s vision of making air travel accessible to every Indian is what has driven the model. Capt Gopinath describes in detail the operational elements of the business model that differ significantly from a full fare service provider, such as the rejection of the hub-and-spoke model. He also discusses the sustainable advantages Air Deccan has over competitors, and the infrastructure and policy climate in Indian civil aviation.