PROJECT REPORT ON JET AIRWAYS STRATEGY SHIFT FROM DIFFERENTIATION TO LOW PRICING

Submitted to: Prof. Sathyapriya IBS, Hyderabad

Submitted by: Prashant Rajan Ankit Nigam Ruchika Khanna Shivani Karwal Shekhar Menon Kawale Sakshi Singhal

ACKNOWLEDGEMENT

The effective completion of this project has been a result of our synchronized effort and the timely support of others. We would like to extend our gratitude to Prof. Sathyapriya, for her effective and continuous guidance towards the completion of this project.

Every project requires a great deal of creativity and dedication. We as a team have really joined our heads together to work on it. We faced many hurdles; however the group members through their sincere efforts were able to overcome them.

COMPANY: AN OVERVIEW Jet Airways was incorporated as an air taxi operator on 1 April 1992. It started commercial operations on 5 May 1993 with a fleet of four leased Boeing 737-300 aircraft. In January 1994 a change in the law enabled Jet Airways to apply for scheduled airline status, which was granted on 4 January 1995. Naresh Goyal who already owned Jet air (Private) Limited, which provided sales and marketing for foreign airlines in India set up Jet Airways as a full-service scheduled airline to compete against state-owned Indian Airlines. Indian Airlines had enjoyed a monopoly in the domestic market between 1953, when all major Indian air transport providers were nationalised under the Air Corporations Act (1953), and January 1994, when the Air Corporations Act was repealed, following which Jet Airways received scheduled airline status. Jet began international operations from Chennai to Colombo in March 2004. The company is listed on the Bombay Stock Exchange, but 80% of its stock is controlled by Naresh Goyal (through his ownership of Jets parent company, Tailwinds). It has 13,177 employees (as at 31 March 2011). In January 2006 Jet Airways announced that it would buy Air Sahara for US$500 million in an all-cash deal, making it the biggest takeover in Indian aviation history. It would have resulted in the country's largest airline but the deal fell through in June 2006. On 12 April 2007 Jet Airways agreed to buy out Air Sahara for INR14.5 billion (US$340 million). Air Sahara was renamed JetLite, and was marketed between a low-cost carrier and a full service airline. In August 2008 Jet Airways announced its plans to completely integrate JetLite into Jet Airways. In October 2008, Jet Airways laid off 1,900 of its employees, resulting in the largest lay-off in the history of Indian aviation. However the employees were later asked to return to work; Civil Aviation Minister Praful Patel said that the management reviewed its decision after he analysed the decision with them. Jet Airways and their rival Kingfisher Airlines announced an alliance which primarily includes an agreement on code-sharing on both domestic and international flights, joint fuel management to reduce expenses, common ground handling, joint utilisation of crew and sharing of similar frequent flier programmes. On 8 May 2009 Jet Airways launched its lowcost brand, Jet Konnect. The decision to launch a new brand instead of expanding the JetLite network was taken after considering the regulatory delays involved in transferring aircraft from Jet Airways to JetLite, as the two have different operator codes. The brand was launched on sectors that had 50% or less load factor with the aim of increasing it to 70% and

above. Jet officials said that the brand would cease to exist once the demand for the regular Jet Airways increases. According to a PTI report, for the third quarter of 2010, Jet Airways (Jet+JetLite) had a market share of 26.9% in terms of passengers carried, thus making it a market leader in India, followed by Kingfisher Airlines with 19.9%. In July 2012, Jet Airways officially sought government approval to join Star Alliance. In June 2011, Jet Airways banned carrying fish, crab, meat, poultry products and liquid items as check-in baggage. Jet is the first domestic airline to impose such a ban. Jet claimed that passengers complained of their baggage getting soiled by seepage from bags containing meat products. Early in 2013, Etihad Airways, on of the flag carriers of the United Arab Emirates based out of Abu Dhabi planned to buy a stake in Jet Airways. Jet announced that they were ready to sell a 24% stake to Etihad at US$330 million. Earlier, in September 2012, the government of India announced that foreign airlines can take up a stake of up to 49% in Indian airlines, thereby making this deal possible. Etihad, which had already purchased stakes in 4 other loss making airlines, said, they were "concentrating on future potential rather than past performance", and were ready to take up the stake in Jet. Initially, Jet announced that they were likely to sign the stake sale deal with Etihad between January 22 and February 3, which they later confirmed to as January 25. JETLITE: JetLite was a wholly owned subsidiary of Jet Airways. It was established as Sahara Airlines on 20 September 1991 and began operations on 3 December 1993 with two Boeing 737200 aircraft. Initially services were primarily concentrated in the northern sectors of India, keeping Delhi as its base, and then operations were extended to cover all the country. Sahara Airlines was rebranded as Air Sahara on 2 October 2000. On 12 April 2007 Jet Airways took over Air Sahara and on 16 April 2007 Air Sahara was renamed as JetLite. JetLite operated a fleet of mixed ownedleased Boeing 737 Next Generation aircraft and Bombardier CRJ200ER. JetLite ceased operations on 25 March 2012 after merger with Jet Konnect. The Bombardier jets were phased out but the Boeings remained in service and operated for JetKonnect. JetLite offered a buy on board service called JetCaf, offering food for purchase. JETKONNECT: JetKonnect is the low-cost brand of Jet Airways. It was launched on 8 May 2009. It operates a fleet of Boeing 737 Next Generation aircraft. The rationale for launching Jet Konnect was

to close down loss-making routes and divert the planes to more profitable routes with higher passenger load factors. Jet already ran a low-cost airline named JetLite. According to Jet Airways, the decision to launch a low-cost brand instead of expanding the existing JetLite was taken to avoid the regulatory delays associated with moving excess aircraft and assets from Jet Airways to JetLite, which have separate operating codes. Jet Konnect offers a no frills flight where meals and other refreshments have to be purchased on board. To identify if the flight is a full service or Konnect the flight numbers for Konnect are in the series 9W 2000-2999. Jet Airways merged the JetLite brand into Jet Konnect on 25 March 2012. Jet Airways offers eight business class seats in Konnect to cash in on Kingfisher Airlines' woes. In December 2012, Jet Airways placed an order for 5 ATR 72-600 aircraft to "enhance regional connectivity." The first aircraft was delivered the same month, leased from GECAS and was operated for JetKonnect. EARLIER STRATEGY FOLLOWED BY JET AIRWAYS WAS: To cater to high end customers by providing them with good quality service. To manage risk & short term crisis on account of any global financial risks. To manage short term spike in crude oil prices. To minimize passing the fuel price fluctuation to customers. To have network expansion mainly in Gulf and Middle East. To focus on improving service, reliability and on time performance. To focus to be the best in no frills sector. To measures to negate effect of unprecedented increase in prices of fuel. To maintain its leadership position in the Indian aviation industry.

REASONS FOR NEW STRATEGY: COMPETITION, MARKET SHARE AND ECONOMIC CONDITION: Jet airways earlier strategy involved keeping operations and growth in line with expected Indian economy growth (7-8% p.a.) , manage risk and short term crisis on account of any global financial risks, manage short term spike in crude oil prices and to minimize passing the fuel fluctuation to customers. It then shifted its strategy to cater to the low cost segment and came up with Jet Connect and JetLite. Why did Jet Airways make this move? The market conditions had the low cost carriers like Indigo and Spice Jet lead and dominate the market. So the main reason for this new strategy was to shift towards low cost and to not be behind the low cost curve. The market trends show that more people go for the low cost carriers and

it is global phenomenons to have prices go down. Jet has to be with the market and follow the trends. A significant portion of the market is playing in the low cost arena. It plans to use 90 percent of its fleet for low cost carriers. Low fare carriers dominate and bearing that in mind it simply went for the low cost carrier option. Jet Airways also came up with holiday packages on its JetEscapes brand and these packages offer destinations within India. The package is inclusive of accommodation and travel. Jet airways have 2 low cost subsidiaries: JetLite and Jet Konnect. JetLite was a wholly owned subsidiary of Jet Airways. It was established as Sahara Airlines on 20 September 1991 and began operations on 3 December 1993 with two Boeing 737-200 aircraft. JetKonnect is the low-cost brand of Jet Airways. It was launched on 8 May 2009. It operates a fleet of Boeing 737 Next Generation aircraft. The rationale for launching Jet Konnect was to close down loss-making routes and divert the planes to more profitable routes with higher passenger load factors. The reason for launching Jet Konnect was to shut down the loss-making routes and divert the planes to more profitable routes with higher passenger load factors. JetLite was already established when Jet Konnect was started. The decision to launch a low-cost brand instead of expanding the existing JetLite was taken to avoid the regular delays related to moving excess aircraft and assets from Jet Airways to JetLite, which have separate operating codes. Jet Airways chief commercial officer Sudheer Raghavan said "Consumer demands are changing rapidly in a dynamic global environment. We believe Jet Airways Konnect service will give us the flexibility and speed to deploy capacity to meet these changing trends. As part of a strategic rebranding exercise, Jet Airways consolidated its low fare service products under the JetKonnect brand to simplify the groups service proposition and enhance brand recall. Jet Airways (India) Limited and JetLite (India) Limited continue as distinct business entities operating under their own airline operating permits. The aircraft was painted in JetKonnect colours over time. JetKonnect offers Premiere services on certain routes where guests may enjoy service identical to that enjoyed by Premiere guests on Jet Airways. This will be further expanded in a phased manner.

As far as market condition and competition go, the trend is that the market has shifted to low cost. More people are flying with low cost airlines such as Spice Jet and Indigo and also flying more frequently as well. Jet Airways is the second largest airline in terms of revenue and passengers carried. A lucrative industry is always a target for new investors. Thus, there is a threat of new entrants. Jet Airways major competitors in the international market are British Airways and South West Airlines. In the domestic market its competitors are Indian

Airlines, GoAir and Indigo. Jet Airways had lost a major part of its market share due to the emergence of new carriers. Some threats which Jet Airways faces is threat of new entrants, fuel price hike and overseas market competition.

JET AIRWAYS NEW STRATEGY FOR JETLITE AND JETKONNECT:

As part of an evolutionary strategy to deliver a superior guest experience, JetLite, the wholly owned subsidiary of Jet Airways India Ltd, has unveiled a new uniform for its staff. The uniform, an important constituent of the companys comprehensive brand experience strategy, has been designed by renowned Italian fashion designer Roberto Capucci. The new blue and white uniforms with embroidered collars draw inspiration from the traditional Jodhpuri style of Rajasthan, while maintaining the contemporary and vibrant outlook for the airline, with the light blue colour representing the sky connoting optimism and calmness. Guests travelling JetLite will also experience more seating comfort, all of which are initiatives undertaken by the airline to offer a truly enjoyable and memorable flying experience. JetLites mission is to be the leading value carrier in India with a reputation for on-time performance and reliability, while offering passengers true value, beyond mere low fares, in terms of a quality product and friendly service. In line with this mission JetLite has evolved to form an integral part of the product offering from the Jet Airways group, embodying important brand values like warmth, reliability and courtesy, delivered by an attentive staff. What we have sought to do is give our JetLite guests a more up-to-date expression of those values, by giving a contemporary look to Indian traditions as a major point of differentiation through the new uniforms. We are confident that JetLite will emerge as the carrier of choice for our guests in the value carrier segment. JetLite today also affords its guests enhanced connectivity across more than 66 domestic and international markets through a code share partnership with Jet Airways. The code share partnership has enabled both the carriers to optimally leverage their respective networks. With this partnership, Jet Airways JetPrivilege (JP) members travelling on these code share flights can also avail of a range of JP benefits, including the accrual of JPMiles based on class of travel. JetLite currently flies to 25 domestic destinations and 2 international destinations (Kathmandu and Colombo), operating over 110 flights a day, and plans to further enhance its connectivity through effective network alignment.

The airline has also made significant improvements to rank amongst the top performing scheduled domestic airlines on the critical service parameter of On Time Performance. JetLite posted an on time performance of 86.3% in June 2010 and 89.9% in May 2010 to signal carriers enhanced reliability. JetLite has also been consistently profitable over the last few quarters, which is a result of the airlines cost initiatives, higher revenues due to fleet and network realignments as well as significant improvements in service, reliability and on time performance. This is clearly reflected in the significant improvement in JetLites operating margins and revenue passengers. The airline ferried over a million guests for the three months ended June 2010. Thus, improved services, enhanced reliability and code shares with Jet Airways, have all enabled the airline to improve its penetration of the travel market in India. The fresh induction of new Boeing 737s in a phased manner, to replace the existing fleet of 6 CRJs will further added to the airlines capabilities. Other measures undertaken by JetLite to give its guests an enhanced brand experience include the introduction of Jet Caf a menu plan on domestic flights. This was followed with the introduction of a new interactive website, which features a state- of the-art online booking engine. A move that has allowed JetLite to afford its guests a flexible web-sale solution with a clear road map to cater to the increasing e-commerce activities in ticket purchasing pattern in the Indian market. MARKETING STRATEGIES

JetLite

Parent Company

Tailwinds Limited

Category

Indian domestic sector

Sector

Airlines

Tagline/ Slogan

Emotionally Yours

USP

Value Airline

STP

Segment

Cost Conscious Passengers

Target Group

Lower Middle Class / Middle Class

Positioning

Value Airline

SWOT Analysis

1. Strong Backing by Promoters Strength 2. Positioned as a value Airline

Weakness

1. Competition from LCC and Premium Airlines

1.Positioning between LCC and Premium can get them Opportunity passengers from both segment

1. Growth of LCCs 2. Rising Fuel Costs Threats 3. Rising Labour Costs

Competition

1. Go Air 2. Spicejet Competitors 3. Kingfisher Red

NOW JETLITE TO JETKONNECT Jet Airways Konnect links seven major metros- Mumbai, Delhi, Chennai, Bangalore, Hyderabad, Ahmedabad and Kolkata - with several destinations across India, operating over 200 flights daily. Konnect Select is a premium economy product introduced on certain Jet Airways Konnect flights. This new front cabin class features wider and more comfortable seats, with a 40 inch seat pitch. The services include complementary in-flight reading material, a welcome drink, and complimentary hot meals on-board. Jet Airways, Jet Airways Konnect, its all-economy, no-frills service, and JetLite have a combined fleet strength of 112 aircraft and operate over 500 flights daily. As part of a strategic rebranding and restructuring exercise announced last July, Jet Airways, on Monday, said, effective March 25, its low-cost arm JetLite would cease to operate, after being merged with the other no-frills brand JetKonnect. Effective March 25, JetLite will cease to operate separately, but will come under the JetKonnect brand, enabling guests to avail themselves of a single superior in-flight product in the full service (Jet Airways) and low-fare categories. Jet Airways and JetLite would continue as distinct business entities operating under their own airline operating permits, Mr. Raghavan said, adding that to achieve brand consistency, JetKonnect will be the dedicated low-fare service with a mixed fleet of Boeings and ATRs to operate on the metro, tier II and III routes. Explaining the rationale behind the merger, Mr. Raghavan said, The launch of JetKonnect is the culmination of a well-coordinated effort and arises from the fact that since its inception in May 2009, JetKonnect has proved to be a successful model. We thought it best to consolidate our product in the low-fare segment with a single brand JetKonnect, for enhanced brand recall. The airline was also looking at opportunities to optimally deploy and cross-utilize common resources of Jet and JetLite wherever possible and this rebranding exercise will help further in synergizing our collective operations. Though low-cost, JetKonnect, he said, would offer premiere services on certain routes, where guests may enjoy service, identical to that enjoyed

by the full-service parent Jet. This would be further expanded in a phased manner. The cockpit and cabin crew would be in the same uniform, as their counterparts from Jet. AWARDS AND ACHIEVEMENTS

Best First-Class Service in the World award at Business Travellers 20th annual Best in Business Travel awards

Best Business Class & Best Economy Class at the Business Traveller Awards Best Program of the Year by Freddie Awards 2007 & 2006 Best Elite Level for the second year in a row, at the 21st Annual presentation ceremony of the Freddie Awards 2008

Best Overall in Entertainment at the Avion Awards 2010 India's Popular Domestic Airline at the SATTE 2006 Awards Indias Airline at the World Travel Awards, 2006 Best Technical Despatch Reliability by Beaver 2002 Best Cargo Airline of North Asia by Cargo Airline of the Year Awards Best Domestic Airline award for the 1st consecutive year and the 5th time in the past two years at the 18th TTG (Travel Trade Gazette) Travel Awards 2007 Indias Most Respected Company in the Travel and Food Sector by Businessworld 2003 Best Long Haul Carrier ex-Brussels award at the Tm Travel Awards 2009. Best Eastbound Airline from India and Best domestic Airline in India awards at the Abacus Tafi Awards 2009. Business Travellers Best Indian Airline Award in London.

CONCLUSION: JetAirways has established itself as the one of the most trusted Airlines in India. It has always endeavored to provide quality services to each segment of the society. It has not only shifted its strategy from differential pricing to low pricing but has also done no compromise in its quality and safety. Its new strategy has shown good result on the companys balance sheets and will do the same in future. It stands apart from other airlines and it means what it says The Joy of Flying.