"NOTE: European Decimal System is used.ANALYSIS OF AIR TRAVEL TRANSPORTATION SERVICE PROVIDER: JET AIRWAYS INTRODUCTIONst Founded on 1 April 1992 by Naresh Goyal, Jet Airways is an Indian airline company assimilated as aprivate limited company. It has its headquarters in Mumbai, India. The corporate vision of the company is“To be amongst the most innovative and admired brands, renowned for service excellence” . The(1) company commenced its operations with a small commercial aircraft (air taxi) in 1993. Till 1995, IndianAirlines was the only domestic airline which had monopoly in the Indian Flight market. Jet Airways started with four aircrafts of Boeing 737-300 in 1993. Now, Jet Airways has internationalflights along with the domestic flights. The airline has a fleet consisting of 112 aircrafts (domestic andinternational) which includes Airbus A330, ATR 72, Boeing 737 and many more. The company hascodeshare agreements with number of airlines all over the world. It covers 65 destinations all over theworld with 48 destinations with India. The map below shows the domestic routes for Jet Airwaysirrespective of their frequency.Jet Airways Domestic Network(2) Jet Airways has two subsidiaries: Jet Lite and Jet Konnect. In April 2007 for 4 Million Rupees, JetAirways bought Air Sahara and changed the name to Jet Lite. Jet Lite is the low cost carrier of JetAirways with widespread distribution all over India. Due to legal problems, Jet Airways could not expandJet Lite. So, to increase their coverage in beneficial routes and to close the non profitable ones, thecompany started second low cost carrier Jet Konnect in May 2009. Jet Konnect is operated on the routeswhich have high passenger capacity. Jet Lite had small aircrafts with limited services for its passengers.In March 2012, Jet Lite concluded its operations and united with Jet Konnect. Jet Airways has wide range of services like Jet Privileges, Jet Mobile, Jet Viva and Jetkids for itscustomers. Jet Privilege is a loyalty program in which the passengers earn JP miles in their JetPrivilegeaccount every time they travel by Jet Airlines or its airline partners. Jet Mobile is app created by JetAirways so that passengers get information regarding flight details and fares and also, they can receivemessages regarding flight status.Government policies, economical situations, policies related to money,etc. affect the demand elasticity for Jet AirwaysCOMPARISON BETWEEN JET AIRWAYS AND ITS DOMESTIC COMPETITORS The main competitors are IndiGo airlines, AirIndia, Go Air and Spice Jet. The number of passengerstravelling within India (domestic) has been increasing every year and had reached 95,79 lakhs in (3)January 2017 (approx. 25,13% increase). In terms of operations, IndiGo has one type of aircraft and onlyeconomy class whereas Jet Airways has nine types of aircrafts and economy as well as business class.Hence, in terms of operations IndiGo is much more flexible than Jet Airways as people do not spend a lottime while purchasing the ticket. As shown in the pie chart below, the market share of Jet Airways as of February 2017 was 15,5% whichincreased by 0,5% from previous years. However, IndiGo has been at the number 1 position in terms ofmarket share with 39,8% in February 2017 though it is lower than its market share in December 2016(40,3%). The full service airline Jet Airways could not provide low ticket prices to the passengers ascompared to IndiGo thereby losing market share in the domestic market.Market Share of Jet Airways (Data Obtained from Bloomberg)(4)REVENUESPassenger load factor (PLF) is calculated to measure the number of passengers who utilize the serviceof airlines (i.e. travel by the airline) and generate revenue for that specific airline. The PLF for JetAirways in March 2017 was 79,8%which had decrease by 8,06% from February 2017 as it was a low(5) season for all airlines during that time of year.Jet airways have expanded its wings into international destinations too but it still highly depends on thedomestic market share for the company’s revenue. Between October 2016 and December 2016, the totalnumber of people travelling by flight in India was 27,2 million out of which Jet Airways accounted for17% i.e. 4,7 millionpeople. The cancellation rate of Jet Airways has been 0,09% for March 2017. The(6) cancellations of aircrafts by the airline are mainly due to technological, operational, weather, commercialor other miscellaneous reasons.Revenuevs GDP(7) (8)The aviation industry in India has been continuously contributing to the Gross Domestic Product (GDP)of the country. The industry contributes 4627,84 ?\tbillion (3,38% of GDP) in GDP. From 2013 to 2016,the revenues generated by Jet group are 0,17% of the GDP of India.Between January 2016 and March 2016, the growth trend for revenue of Jet group and GDP of India aremirror images of each other. During that quarter, the capacity which is measured in terms of ASKM(available seats kilometers: measurement of capacity of the flight to carry passengers) grew by 9% yearover year and the revenues grew by 2% year over year.In financial terms, recorded net margins of the airlines show negative figures in past few years, in spite ofits growing revenues.As a result of consistency of the margins being negative, it could also negativelyaffect the shareholder’s confidence and trust in the company. It also impacts the future growth plan of acompany.Retaining employees is also a problem for the company as their salaries are not as high ascompared to other airlines, but with certain collaborations underway, this situation is manageable. In the domestic market, other airlines are cheaper than Jet airways, therefore its market share is not thathigh. The main reasons which drive the revenue for the airline are: Capacity, Load factor, Passenger yield,cargo and other fees charged by the airline. For Jet Airways the capacity increased by 0,52% from Q2FY17 to Q3 FY17. This increased the revenue for the airline. Other fees charged by Jet Airways refers tothe sale of products in the flight, cost for extra baggage allowance, change in flight ticket, etc. Low costcarrier (Jet Lite) relies on these extra costs. OPERATING COSTThere are different drivers for operating cost of Jet Airways. Labor costs have the highest contribution.As the average labor costs are on a hike, it is making difficult for Jet Airways to retain employees. Othercost drivers are fuel, commissions for passenger traffic, food supply in aircrafts, landing fees,advertisements and promotions and many more. Adding of more profitable routes and getting rid of thepoor ones has been one of the key strategy of Jet Airways to keep a check on their costing. Jet Airwayshas hubs in all the hot spots of aviation because they can carry more payload. This helps in having lowmaintenance cost for the airline. The whole aviation industry depends on the cost of the fuel which is very fluctuating. Around February2017, Jet Airways made a wise decision to reduce their operating cost in terms of fuel usage (approx. 25- 30% of operating cost depends on the usage of fuel). The airline adopted GoDirect Fuel Efficiencysoftware by Honeywell. The software is a part of the family Connected Aircraft Technologies –(GoDirect Flight Services). The software helps in the analysis of the data. It also recommends potentialfor fuel conservation. Jet Airways have outsourced few of its operations so that they can focus on their core business i.e. toprovide proper transportation service. This helps them in reducing operating cost and achieve betterresults in terms of productivity, thereby generating more revenue for the airline. In September 2010, JetAirways signed a 10 year contract with IBM to outsource its activities related to information technology.This deal has helped the airline to excel in operational activities such as management of revenues, crew,baggage & cargo, maintenance of aircraft, security services, etc. For ground operations, Jet Airways havetheir own staff as ground handling is a fundamental part of the services offered by them. Jet airways hasbeen paying their debts to keep their books clean.PROFITJet Airways has been generating profit for seven consecutive quarters i.e. from the first quarter of fiscalyear 2016 (2015-2016) to the third quarter of fiscal year 2017 (2016-2017. Similar trend is seen for theentire Jet group. The continuous profitability for Jet Airways is mainly due to low cost of fuel and crudeoil, increase in revenue because of more traffic generated by passengers and low cost for financingoperations. These lead to more demand for airline tickets. According to the airline the main reason for itsbetter performance is proper utilization of fleet of aircrafts and optimization of network for domestic aswell as international network, along with the partnership with Etihad. (9) rd Till the 3 quarter of FY17, the profits earned by Jet Airways as reported are 3534 ?\tmillion . Despite(10) having profits, the aviation industry is facing difficulties due to heavy regulations, burden of debt, costlyinfrastructure of airports and high government taxes. Mostly for Jet Airways the profits are generatedduring off-seasons when there is more traffic and the airline provides seasonal discounts.The recent policy changes by the Indian government has increased the allowance of foreign directinvestments (FDI) in the sector. This change poses a threat to Jet Airways as it invites foreign companiesin Indian market, resulting in launch of new airlines and intensifying the competition. Elusive fuel pricesalso play with margins and profitability of the company. Jet fuel is the important and key raw material inthe industry, so cost of fuel is a major component in the total expense and can affect the profitability ofthe airline.DEMAND AND SUPPLYThe market structure for aviation industry in India is oligopoly type structure. For the aviation industry inIndia, there are few characteristics which help in understanding the market structure. There are not manyairlines for the Indian market which means a person has limited options to decide from. All these airlinesare somewhat similar in terms of their products but mostly differ based on the quality of service offered.The decision to set the price is taken by the airlines but the decision also depends on how theircompetitors are pricing during that situation.In aviation industry, the demand is regarded as the number of passengers travelling by the airline andgenerating traffic for that specific airline. This is measured by RPKM (revenue passenger kilometers).The supply is regarded in terms of the number of seats available in the flight which is offered to thepeople travelling by aircraft. The number of seats is measured by ASKM (available seat kilometers).Demand and Supply (11) As seen in the graph above, for the two subsequent quarters in fiscal year 2017, the number of seatsoffered (supply) is more than the total number of passengers on board (demand). Hence the supply ismore than the demand indicating excess supply situation because the price is above equilibrium. At a bigger picture, the demand for number of passengers travelling within India (domestic) has beenincreasing (around 20%) and Jet Airways still needs to take some action to take benefit of this situation.The number of aircrafts have been stagnant for past few years. Hence making it less possible to fulfill thedemand in its industry. Jet airways strategic partnership with Etihad airways has given the company newopportunities to grow into new markets. As we know, more the price of the ticket charged by the airline, less will be the number of peopletravelling by that flight i.e. there will be a decrease in the demand for the flight ticket. The oligopolystructure for aviation industry can be understood by drawing the Cournot Model for Jet Airways andIndiGo airlines. Both airlines have identical pricing for their flight tickets and they are providing the sameservice i.e. air travel facility to their passengers. In this Jet Airways assumes the output of IndiGo to begiven and vice-versa. Suppose the output of IndiGo is assumed to be constant, then Jet Airways tries tomaximize their profit by When we plot, we see that the best response curves for the two airlines intersectat a point. This point is Cournot equilibrium.Cournot Model(12)During festival times, more traffic is generated as people tend to travel more in order to reach theirrespective destinations. Every airline wants to satisfy the demand in the market at that time. Let’s consider a scenario for this situation. Suppose, to increase their market share, Go Air decreases theirprice. This does not mean that Jet Airways will have no market share even if they do not revise theirticket fare. The more economically feasible option for both the airlines would be to keep the ticket priceat a cost more than the marginal cost.The main factors which help the passengers in decision making process of flight booking are:1. Price 2. Service 3. Promotion Schemes 4. Loyalty Programs 5. Brand name6. Flight Schedules Jet Airways excel in all these factors. Therefore, people consider travelling by Jet Airways. Price is one ofthe important factors which is related to the demand and supply. The service provided by the staff of theairline is incredible. They offer easy check In process for the passengers. Promotional schemes are usedto get attraction of the people to increase the amount of tickets sold i.e. supply more number of seats.Loyalty programs are offered in form of Jet Privilege service which has ample benefits for its frequentfliers. The airline offers various flight schedules thereby making it convenient for people to chooses thebest possible option for them. PRICEPrice plays a vital role in the decision making process of buying airline tickets. There are various factorswhich affect the price of the airline ticket like oil price, taxes, distance between the places, timing,competition, etc. If there are more number of people wanting to buy the flight ticket, the airline can vary the ticket fare. Jetrd Airways follows 3 Degree Price discrimination for flight tickets. The price structure of Jet Airwaysgreatly varies depending on the type of class the passenger in travelling in. It has different prices forpeople travelling in business class and economy class for the same flight. But the case is not same for lowcost airlines. The price difference results in the type of service offered by the airline. In the third quarterof fiscal year 2017, the average fare per passenger collected by Jet Airways was 7306 rupees. The elasticity of demand depends on how the market is changing which means it is unstable. Jet Airwaysis elastic in terms of price as there is relation between the change in price and the demand for tickets.With a small change in cost of tickets, the decision of people buying air tickets diverts. It is seen morewhen people travel for leisure. At that time they search for the cheapest option possible.In August 2016, in order to compete with the low priced airlines, Jet Airways announced different faretypes which can be chosen by the people while making flight reservations. These different classificationsof fare options allow people to choose the low fare option if they do not want to avail all the servicesoffered by the airlines. The different fare types are given below:• Economy Classo Economy Dealo Economy Savero Economy Classico Economy Flex• Business Classo Premiere Savero Premiere Classic o Premiere Flex• First Class These fare classifications are non identical on the basis of baggage allowance, refund of the ticket, toupgrade the ticket, seat option, insurance, meal preference option, airport service (access to Jet Airwayslounge) Jet Airways offers privileges in terms of flight fares to its frequent fliers. In association with the Citibank,the airline offers Jet Airways Citibank Credit Card. They also have corporate deals, student discounts anddiscounts during festival season. The decisions increase the demand for their airline.As shown in the graph below, the change in oil prices are related to the airline fares. In December 2016,oil prices increased but Jet Airways lowered their prices by giving promotional offers to generateth revenues as the demand was low during the period. On 8 November 2016, after the announcement byPrime Minister Mr. Narendra Modi to ban Rs. 500 and Rs. 1000 currency (demonetization), the airlinesdecreased their fare prices by 20% as the flight ticket sales went down by 7-10 %. The bookings for jetAirways declined during the same period but overall it did not affect the company as they have a strongcorporate traffic. But the demonetization had an impact on their leisure traffic.Comparison between fuel price and average fare (13) Porter’s five force analysis: To analyse the competitive advantage for Jet AirwaysBargaining\tPower\tof\tSuppliers\t Threats\tof\tNew\tEntrants\t Industry\trivalry\t Threat\tof\tSubstitutes\t Bargaining\tPower\tof\tCustomers\t \t 1. Threat of SubstitutesOther low cost airlines which have the same working structure as Jet Airways like IndiGo, GoAir. It may happen when the substitutes come up with better promotional schemes and henceattract more customers. There are various websites (ClearTrip, Goibibo, MakeMyTrip, Ixigo)which compare the rate of flight tickets of different airlines making it possible for people tochoose the cheapest and most reliable option. 2. Threat of New EntrantsThe policies laid down by the government affect the entry of new airlines in the Indian market.Once the government makes the rules and regulations much more flexible, it will be possible forinternational airlines to provide services in India. Hence the current government policies are infavor of Jet Airways as they can compete with limited number of airlines and manage theiroperations smoothly. 3. Bargaining Power of Suppliers The airline charges passengers for the fuel, food which is supplied on board, etc. If the prices offuel go up, the cost of flight ticket is changed accordingly. Jet Airways do not have control overthe cost of the fuel. Fuel is the most important as there can be no substitute for the same.4. Bargaining power of CustomersDifferent types of aircrafts are available like the low cost flights, full service carriers, etc. Theseoptions make people incline more towards the most appropriate option. This can have a negativeeffect on the airline if it cannot offer the similar or a much better deal. Jet Airways have beenpaying attention in this respect. After their deal with IBM they have made the whole paymentprocess work smoothly for the customers with better utilization of internet.5. Industry RivalryPresence of other international as well as domestic airlines in Indian market create a degree ofthreat with which Jet Airways is competing on the basis of the services offered and cost of flighttickets. Some of the airlines are IndiGo, Air India, GoAir, Vistara, etc. MACRO LEVEL: FOCUS ON BUSINESS EXPANSIONTo increase their traffic from India to rest of the world, Jet Airways partnered with Etihad in 2013 and ithas turned out to be profitable for both the airlines. The airline lined up all activities to work all theoperations with Etihad Airways in a year. Jet Airways also has agreements with various otherinternational airlines. In order to diversify their network Jet Airways has created a separate section JetXtras. There arenumerous services offered by the airline which are mentioned in this section that are not related to theircore business. In collaboration with Carzonrent and Jetfleet, the airline allows people to rent car withinIndia and with Hertz they can rent it outside India. The airline also has the option of hotel booking. List oftours and activities at various places are also mentioned so that people can have the best experiencepossible.Jet Airways caters to vast range of customer needs like providing food, economy class travel, businessclass travel, points system and providing better services as the customer becomes more regular. Theairlines also provide cargo transports throughout the globe. Thus, operations, which are integratedvertically, give a competitive edge to the airline over its competitors.Continuously Jet Airways have been placing new orders for aircrafts to increase their fleet size. Theyhave also leased few planes to increase their capacity in the domestic market.Hence, Jet Airways started with a small business and now has expanded its wings throughout thedomestic as well as international market. By looking at the yearly results of full service carrier (jetAirways) and low cost carrier (Jet Lite and Jet Konnect), , there is a remarkable growth despite all the upsand downs. These ups and downs were mainly because of the economic policies which tied the hands ofthe Jet Network.REFERENCES\t Jet Airways. (1993). Corporate Vision. Available:http://www.jetairways.com/EN/IN/jetexperience/mission-statement.aspx . Lastaccessed 28th May 2017.\t Routes in India. jet Airways Network Map. Available:http://www.routesinindia.com/airlines/jetroutemap.htm. Last accessed 29th April2017.\t Ians. (2017). India's domestic air passenger traffic up 25% in January: DGCAdata. 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