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Journal of Indian Institute of Management Bangalore

IIM Bangalore offers Degree-Granting Programmes, a Diploma Programme, Certificate Programmes and Executive Education Programmes and specialised courses in areas such as entrepreneurship and public policy.

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Emerging Landscape and New Value Propositions in the Civil Aviation Sector

Volume 17, Number 1 Article by Murali Patibandla March, 2005

Emerging Landscape and New Value Propositions in the Civil Aviation Sector: In conversation with Captain G R Gopinath, Managing Director, Air Deccan :

The entry of Air Deccan into Indian civil aviation heralds a new era in air travel and points to several impending changes 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, 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.

The model is basically driven by the airline's vision of making air travel accessible to every Indian. Air Deccan provides air travel at 30-40% of the cost of regular airline tickets. This is based on a unique value-chain model, both on the supply side and on the demand side. Some of its features - more flying hours per aircraft, rejection of the hub-and-spoke model, elimination of frills, no inter-line arrangements for baggage, and a low cost distribution model - are common to all low cost airlines, but some are unique to Air Deccan, and designed especially to suit the Indian context. These include strategic outsourcing, the use of indigenously developed software for airport networks and the reservation system, innovative distribution systems and the use of mobile phone technology. While Capt Gopinath looks forward to more players entering the low cost segment, which would expand the market and result in better infrastructure, he believes Air Deccan has some sustainable advantages over new entrants. He also discusses the infrastructure and policy climate in Indian civil aviation.

Reprint No 05103