Rising to the challenge of increasing commoditization in the airline industry: Recommendations for Indian and French airlines

Abstract

Back in 1950, flights from Paris to New York were advertised for $400, one-way. 60 years later, it isn't unusual to find tickets from Paris to New York for the same price. Very little industries have had relatively stable prices in nominal dollar value over 60 years, when in the meantime inflation increased overall dollar prices ten-fold in the same period. Decreasing prices have allowed an increasing share of the population to access the airline market, while putting an important pressure on the revenue yields of the airline industry. While this situation may have been tenable in an age of important technological cost-savings improvements, such as the introduction of jets and wide-body aircrafts, and later the introduction of double-flux engines in the 1980's, the continued decrease in prices of airline travel is proving a near-impossible challenge in today's world where technology only contributes to marginal productivity improvements. As airline travel shifts from a luxury product to a basic commodity, traditional airline carriers suffer from decreasing differentiation over an increasingly diverse customer base, while being heavily attacked by Low Cost carriers on their lower-price but fast growing customer segment. Added to this are the problems of Rising fuel and labour costs, changing Government policies and lack of infrastructure. With the emergence of low cost carriers and price comparison websites, commoditization of the Industry has become a major challenge for carriers that were in the premium space. Objectives: 1) Study and compare the management strategies of Air France and Air India. 2) Make recommendations for how Air France or Air India could learn from one another and other successful Airlines which have some comparable attributes, to face this challenge.