- Critical analysis of the macro-environment impacting on the Indian airline industry.
The Indian airline industry is passing through difficult times as is the worldwide airline industry. But as any other major industry of the country, even the airline industry is influenced heavily by the events occurring in other sectors of the Indian and world economy. Globalization has led to a significant rate to the interdependence of world and local economies. This is also true for different sectors of the economy. As we can see from the case study, the Indian airline industry relies heavily on the business companies thriving internally and their relationships with partners, especially in the Middle and Far East. The flow of goods transported from the Indian airlines industry from India to the world and vice versa (import-export relation) has been growing the last decades (Timmons, 2009, pg. 1).
Basically, the problem is a productivity one and the lack of credit, or the flow of cash (liquidity) by the carriers. The impact of the financial crisis into the real economy has led to a slowdown of the production rates of cheap goods from business companies in India and neighboring China. This slowdown has impacted the exports of these countries, part of which is the airlines industry. Also, the impact of the financial crisis has led to unemployment problems which have resulted in a constant decreasing number of passengers for the carriers.
Many of the new carriers that had entered the market required crediting from different financial institutions in order to have the necessary resources in investing to expand their capabilities. The financial crisis has impacted negatively this sector and now it is more difficult to have a crediting institution that wants to credit, to invest, in the Indian airlines industry.
- Analyze the Indian airline industry as described in the case.
As shown in the case study described by Dr Salma Ahmed & Yasser Mahfooz, we see the clear intention on part of the carrier companies to respond to the negative impacts described above by mergers, acquisitions and liquidations. This is clearly demonstrable by the moves that Jet Airways has performed during the last years. Its movement toward the acquisition of former Air Sahara, now JetLite, is a factual demonstration of this strategy. In order to be strong in the face of different crises that can happen you have to get your company to become a “cash cow” in the marketplace. In other words, this is the market position most aspired by companies. It is when the company has a significant part of the market share, it has a large capital and slowly generates profits from the vast different products and services on offer. This way, even if one sector, product or service, of the company has difficulties, the other compensate for the loss of the first. This way the company will be able to resist to crisis resulting from the macro environment and be steps ahead of the competition. The same can be said for the other carriers who in response to Jet Airways have begun talks with each other in order to come out with a strategy against the dominant positioning of Jet Airways. Basically, this means that in order to “survive” and “prosper” the small companies have to merge in becoming a “big” company.
This situation will limit competition to two or three major companies which will divide the majority of the market share making it very difficult for new starting companies to enter in the market and compete equally with the existing ones.
- Identify the core competencies that provide Jet Airways with competitive advantage and how Jet Airways can overcome existing or impending problems that they may face in the future.
As I have already mentioned above, the acquisition of Air Sahara by Jet Airways was a strategic achievement by this last company. This way it expanded the reach to clients and consolidated its market share, positioning. Two other important aspects that provide Jet Airways with competitive advantage are its agreements with different non-Indian airline carriers and the expansion of products and services the company has been performing the last years. The reservation service that is run online facilitates their ticket booking. Another service is the City Check-In facility for passengers that fly domestically and have only hand baggage. This helps eliminate the waiting time in rows at the airport for the check-in. Another important customer-facilitation service offered by Jet Airways is the Interactive Voice Response. With this new technology the company made payment and ticketing service easily accessible to its clients.
A final service that has impacted the ability of the company to be ahead of the competition is its Kiosk Check-in facilities. This service enables passengers carrying only to proceed directly for security check and thus experience a hassle-free check-in. all of these factors together have given to Jet Airways a competitive advantage in the market toward other companies.
But there is a difference with the competencies of Kingfisher Airlines. From the merger with Air Deccan the new company born has managed to cut some of its costs. These costs are mainly technical and engineering costs related to maintenance and security of the aircrafts. Another different advantage from Jet Airways is that the company is born out of two previous companies with different focus: Air Deccan was a major domestic player in the market while Kingfisher was a major international player of the market. After the merger, it is expected that Kingfisher will focus more on the international routes while Air Deccan will give it a wider domestic reach. Also Air Deccan plans to continue as a low cost carrier while Kingfisher will function as a full-service carrier expanding the company in both markets, domestic and international.
Anyway, regarding the future “shock” or problems that can have Jet Airways will be able to manage them without suffering major consequences. The reasons for this lies in the explanation made above regarding the market positioning consolidation of the company. With the formation of Jetlite from the merger with Air Sahara it has ensured greater liquidity because it has expanded its capabilities. This merger combined with the applying of new technological innovations in offering new services that serve as facilitating tools for the passengers, with be an important tool in resolving different future problems, or “shocks”, that can result in the market.
References
Timmons, Heather. “India’s airline industry runs into turbulence”. The New York Times Newspaper. 2009. Web.