Spice Jet
Strategic Management Assignment on "Low-Cost Carriers in India - Spice Jet's Perspective"
Q1. How did the concept of LCC emerge in India? Which factors encouraged the growth of LCCs?
Ans. After the liberalization policy which was introduced in 1991 the Indian market witnessed the entry of privately owned airlines and LCC. By march 1994, the government had approved six private carriers. However, by 1998 many of these airlines failed. In this closure game, a total of IMR 10 billion of capital was wiped out. By 2003, there were just four carriers operating in India –Air India, Indian Airlines, Jet Airways and Air Sahara - all operating full service models. And private carriers in those days were limited to operating domestic routes only. In 2003 the first LCC entered in India which was the Air Deccan. The entry of this first LCC in India constituted a turning point in Indian aviation industry. It led to a shift from traditional economy and business fares to special discounts, promotional fares, check fares, web fares and corporate discounts. India witnessed a compounded annual growth rate of 19.14% in the air passenger traffic and 9.91 % in cargo movements over the period from 2003-2004 to 2007-2008. This complemented the success of the LCC model referred to as the “no frills airlines” business model. This encouraged other private airlines to emerge. The entry of LCC along with increased FDI inflows, tourist inflows, higher corporate travel, higher household incomes, sustained business growth and supporting government policies, all contributed to the growth of the Indian aviation industry. Today, there are effectively seven major airlines operating 11 different brands. * Air India + Air India Express; * Jet Airways + Jet Konnect + JetLite; * Kingfisher Airlines + Kingfisher Red; * IndiGo; * SpiceJet; * Go Air; * Paramount.
Out of which GoAir, IndiGo, SpiceJet, JetLite are LCC airlines.
The most significant recent strategic development
Q1. How did the concept of LCC emerge in India? Which factors encouraged the growth of LCCs?
Ans. After the liberalization policy which was introduced in 1991 the Indian market witnessed the entry of privately owned airlines and LCC. By march 1994, the government had approved six private carriers. However, by 1998 many of these airlines failed. In this closure game, a total of IMR 10 billion of capital was wiped out. By 2003, there were just four carriers operating in India –Air India, Indian Airlines, Jet Airways and Air Sahara - all operating full service models. And private carriers in those days were limited to operating domestic routes only. In 2003 the first LCC entered in India which was the Air Deccan. The entry of this first LCC in India constituted a turning point in Indian aviation industry. It led to a shift from traditional economy and business fares to special discounts, promotional fares, check fares, web fares and corporate discounts. India witnessed a compounded annual growth rate of 19.14% in the air passenger traffic and 9.91 % in cargo movements over the period from 2003-2004 to 2007-2008. This complemented the success of the LCC model referred to as the “no frills airlines” business model. This encouraged other private airlines to emerge. The entry of LCC along with increased FDI inflows, tourist inflows, higher corporate travel, higher household incomes, sustained business growth and supporting government policies, all contributed to the growth of the Indian aviation industry. Today, there are effectively seven major airlines operating 11 different brands. * Air India + Air India Express; * Jet Airways + Jet Konnect + JetLite; * Kingfisher Airlines + Kingfisher Red; * IndiGo; * SpiceJet; * Go Air; * Paramount.
Out of which GoAir, IndiGo, SpiceJet, JetLite are LCC airlines.
The most significant recent strategic development