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Strategic Marketing Plan for Domestic Airline Industry
In SRI LANKA
(Cinnamon Air)
Prepared by
G.T.C .Jayasiri
Individual Assignment
December 2012 Examination
Page 1 of 50
Diploma in Travel Tourism Economics and Hospitality Management- DTTEHM
UNIVERSITY OF COLOMOB
SRI LANKA
Table of Content
1. Executive Summary
A. Summary of Situation Analysis
B. Summary of Marketing Objectives.
C. Summary of Marketing Strategies.
D. Summary of Financial Projections.
2. Vision and Mission
3 The Company
3.1. Brief history
3.2. Current size, the areas where the company is operating, growth and profitability etc.
3.3. Internal Environment
a. Staff Relations
b. Resource Constraints
c. Corporate Structure and Culture
4. The Product / Service
4.1. General Product Story
a. Development, introduction and history.
b. Product category and characteristics
c. Stage of Product Life Cycle.
d. Product uses
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5. The overall Market ( customers)
5.1. Market size estimates
a. Current
b. Trends and Future growth
c. Expected market ( demand estimates)
5.2. Market Segments
a. Geographic
b. Demographic
c. Psychographic
d. Behavioral
5.3. Description of the characteristics of target customers
a. Needs and benefits sought
b. Product usage
who is using, why they use, when do they use, how it is used
d. Attitudes of the customers
i. As to product category
ii. As to company’s product)
iii. Why they like our product or not, If it is a new product, support with
specific research done with your product)
iv. Any unique character of our customers
5.4. Description of the purchasing process
a. Buying decision making process
b. What sources of information is sought
c. Who makes the purchase?
d. Is purchaser the consumer?
e. Who or what may influence the purchase?
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6. Competition and Market share
6.1. Identification of competitors
a. Primary competitors
b. Secondary competitors
c. Possible new competitors
6.2 Market Share
a. Total industry sale by market
b. Company market share
c. Comparative analysis of Market share held by competitors
d. Market share potential for the company
6.2 Describe following details of top three players in the market and any
other competitor that would pose a threat to you or that you would be
fighting with in order to enter into the market-
a. Background of competitors
i. Company and its size/type
ii. Reputation
iii. Sales force and their expertise
iv. Financial strength
v. Technology used
vi. Research and development capabilities
vii. Any other important aspect
b. Current Product Strategy of competitors
Comparative analysis of competitor’s product strategy
i. Product Mix
ii. Branding and packaging
iii. Positioning
iv. Image and reputation of brand
v . Product Strengths and weaknesses
c. Current distribution strategy of competitors
Comparative Analysis about the competitor’s distribution
strategy
i. Type of distribution network used
ii. Evaluation of how distribution targets accomplished
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iii. Relationship with channel members
iv. Strength of the channel members
v. Comparative analysis of Competitors prices
d. Current Pricing Strategy
i. Pricing objectives
ii. Pricing strategies
iii. Buyers attitude about the company prices
iv. Channel attitude of about the company’s prices
e. Current Promotional Strategy
Comparative Analysis of Competitor promo tools and campaigns
i. Promotional Objectives
ii. Strategies and themes used
iii. Promotional Budgets and methods of allocation
iv. Promotional tools used
a. Advertising
b. Sales Promotions
c. Public Relations
d. Direct marketing
e. Personal Selling
vi. Success and failures of promo campaigns
6.3 Summary of the competition
7.0 External Environmental factors
7.1 PESTEEL Factors
1. Political
2. Economical
3. Social
4. Technological
5. Ecological
6. Environmental
7. Legal
8. SWOT Analysis
3. G.1. Strengths
3. G.2. Weaknesses
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3. G.3 Opportunities
3. G. 4 Threats
9. Sales Objectives:
It represents projected level of sales to be achieved. This is the most
important element because it creates the direction for entire marketing plan.
It should be SMART. Everything that follows in the plan designed to meet
the sales objectives.
10. Marketing Objectives
Marketing Objectives: Clearly defines what need of the market that we serve
and what behavior we want from the market. This basically covers the
SMART. Objectives would be for retaining existing customers, increasing
sales from existing customers, developing new customers, increasing usage
of the product etc.
11. Overall Marketing Strategies
11. 1 Targeting and Positioning
11.1.1. Targeting
11.1.2. Positioning
11.2 Tactical Marketing Mix Strategy Development ( 7 ps)
11.2.1 Product Strategy
11.2.2 Pricing Strategy
11.2.3 Promotional Strategy
11.2.4 Distribution Strategy
11.2.5 Physical Evidence Strategy
11.2.6 Process Strategy
11.2.7 People Strategy
12. Marketing Strategy Implementation (Action plans)
13. Monitoring and Evaluation
Graphical illustration plus a detailed explanation should be given and maximum of 2
A 4 pages can be used.
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List of References
(Harvard Format)
Appendix
Executive Summary
Market factors favor inauguration of a new airline to meet the demand for additional, higher-quality
passenger and cargo service linking all over Sri Lanka with the rapidly expanding markets of
tourism industry .
This new airline will base its business and marketing strategies on achieving high, and profitable,
load factors through absorption of unmet demand in three key air-traffic categories: unserved and
under-served routes on which high unmet demand currently exists or can be readily developed;
serving key niche markets where demand is either unmet or poorly served; and meeting peak traffic
demands on certain key regional, seasonal, and variable routes where very high load factors can be
predicted despite existing but lower-quality competition, or where competition cannot meet the
demand.
In addition, the proposed new airline will be designed around, and operated utilizing, the most up-to-
date electronic, informational, and aviation technologies to ensure low operating and marketing costs,
maximum efficiency in deployment of its resources, and a high level of customer service and
convenience. And it is this final element - dedicating the airline, its staff, and its organization to
providing a high level of customer service and convenience, and efficiently meeting the needs, wants,
comfort, and safety of the passenger - that will assure the proposed airline's rapid acceptance in the
marketplace and its long-term growth and success.
D. Summary of Financial Projections.
The six key characteristics leading to the success and profitability of this new carrier will be:
Provision of high-quality service on routes and in markets that currently are either unserved,
poorly served, or under-subscribed by existing carriers, thereby setting both a new trend and a
new pace in air service for the clients.
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Employment of cost-effective, up-to-date regional aircraft that will be sized right for the market
and the route, leading to higher load factors, reduced costs, improved efficiency and flexibility,
greater passenger comfort and satisfaction, and higher net profits. Outfitting these aircraft with
the latest aviation technologies and navigational equipment will help ensure the highest level of
reliability, punctuality, safety, and customer satisfaction.
Utilization of the latest electronic and informational technologies in sales and marketing;
reservations, ticketing and check-in; scheduling and resource planning; cargo tracking; and
operational oversight. Such techniques as internet marketing, reservations, and sales; electronic
ticketing and check-in; online quality control, resource planning, operational oversight, cargo
and baggage tracking, and customer service, all will reduce staffing requirements while offering
ease-of-use and greatly enhanced access by, and convenience to, the customer.
Recognition that not everyone is geared for the electronic world, leading the proposed airline to
provide a high level of non-electronic service as well, particularly to the many newer, less-
experienced travelers - but future loyal customers - found in the region.
Ensuring a friendly, cooperative, enjoyable, yet highly professional face to the customer.
Development and implementation of cooperations, associations, and partnerships with other
larger, more established, and highly regarded airlines both within and beyond the region to
provide an extensive range of connections, through fares, frequent-flyer mileage sharing, and
other passenger and client advantages through interline arrangements, code shares, common
hubbing, and so forth.
In short, the goal of this new airline is to be known to the passenger and the cargo customer by its
proposed motto: "We've got a job to do, and we do it every day - for you!"
Primary financial results anticipated during the first year of operations include:
Average passenger load factors in the 60-80 percent range, depending on route and season,
reached within the first year of flight operations, and increasing thereafter to the 75-90 percent
range.
Revenues approaching [XYZ] million USD within the first six months of flight operations,
exceeding [XYZ] million USD by the end of the first year, [XYZ] million USD in the second
year of operations, and nearly [XYZ] million USD in the third.
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A gross operating margin of close to [XYZ] percent achieved within the first year of operations,
reaching close to double that by the third year, and with steady growth enabling rational
expansion of the airline thereafter. Even in the first year of operations, a pre-tax profit of [XYZ]
million USD is anticipated. This is applying a very conservative business model, and is achieved
on an initial investment of less than [XYZ] million USD, yielding a return on equity of [XYZ]
percent. The accompanying chart illustrates the growth and profit potential present.
1.1 Objectives
The proposed airline will have as its primary objectives the following elements:
1. To establish and operate a new domestic airline aiming specifically at linking all the air hubs with
the rapidly expanding Tourism markets of Middle East, Far East & Europe..
2. To provide service and absorb unmet demand in three key traffic categories: unserved and under-
served routes on which high demand currently exists or can be developed; serving key niche markets
where demand is either unmet or poorly served; and meeting peak traffic demands on certain key
regional, seasonal, and variable routes where very high load factors can be predicted despite existing,
but lower-quality, competition.
3. To implement an organizational and marketing strategy that will, beginning in the first year of
flight operations, achieve average passenger load factors in the 65-85 percent range, depending on
route and season, and increasing thereafter to the 75-90 percent range, thereby maximizing revenues
and return on investment while minimizing risk.
4. To achieve revenues in excess of [XYZ] million USD per quarter within the first six months of
flight operations, and exceeding [XYZ] million USD per quarter, by the end of the first year.
5. To achieve net operating profits in the [XYZ] percent range within the first 12 months of flight
operations, an annualized return-on-investment of approximately [XYZ] percent by the end of the
second year of operations, and steady growth enabling rational expansion of the airline thereafter.
6. To achieve the projected results starting with two mid-to-large-size domestic aircraft, growing to
five by the end of the first year of operations, similar to the 28-passenger British Aerospace Rav199
Cesna Grand Caravan / Ceasna 208 domestic Passenger air crafts, obtained on either a dry-lease or
purchase basis; supplementing those aircraft with larger, longer-range passenger aircraft and cargo
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liners on a charter or wet-lease basis to serve peak-demand and intermittent routes and periods, as
well as cargo demands, as called for by the business plan; and incrementally expanding the fleet size
and scope on a dry-lease or purchase basis to at least double its initial capacity by the beginning of
the third year of operations to accommodate projected passenger and cargo growth in the business
plan's out-years.
7. To gear operations, and present a professional, serious, growth-oriented image from the outset, that
will set the stage for reasoned, planned expansion, mirroring growth rates projected for the first year
of operations, and that will enable the airline to extend its regional scope and, in future years, to
transition from its initial regional status into a larger continental and intercontinental carrier.
8. As an element critical to achieving the airline's other key objectives, to identify and develop key
interline alliances, cooperations, associations, and partnerships with other larger, more established,
and highly regarded airlines both within and beyond the target region that will enable the proposed
airline to provide an extensive range of connections, through fares, frequent-flyer mileage sharing,
and other passenger and client advantages through interline arrangements, code shares, common
hubbing, and so forth.
A. Summary of Situation Analysis
DOMESTIC FLIGHTS IN SRI LANKA
Sri Lanka’s domestic air travel market has seen resurgence since the dawn of peace to the island
nation in 2009. There are a number of airlines presently operating domestic flights within Sri Lanka
offering scheduled service as well as charter flights.
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Given below is the Sri Lanks’s domestic scheduled air routes map as of 26th January 2012.
Maps used in this section have been generated using the Great Circle Mapper
In red is the main domestic trunk route of Sri Lanka, connecting the Colombo Ratmalana Airport
(RML) with Jaffna. Shown in blue are the routes operated by Helitours, the commercial airline unit of
the Sri Lanka Air Force. In green are routes operated by SriLankan AirTaxi, operated by SriLankan
Airlines. The ‘crosshair’ signs depict floatplane stations.
Main domestic airlines of Sri Lanka
SriLankan AirTaxi
Helitours
ExpoAir
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Deccan Aviation
Air Senok
Cosmos Aviation
Daya Airlines
Cinnamon Air ( from 2012 )
Main domestic airports of Sri Lanka
Colombo City, Ratmalana Airport (RML)
Jaffna Airport (JAF)
Colombo Peliyagoda Waterdrome
Nuwara Eliya (NUA)
Koggala (KCT)
Bentota (BJT)
Kandy (KDZ)
Dambulla (DBU)
Batticaloa (BTC)
Trincomalee, China Bay Airport (TRR)
The following map depicts the present domestic route map of Sri Lanka. I have referred to Colombo
Ratmalana Airport (RML) as Colombo Domestic to differentiate it from the main international
airport. In red is the Ratmalana - Jaffna route, which is presently flown by Helitours with scheduled
flights as well as by a number of other airlines on a charter basis. This is also the route which
aforementioned ExpoAir will soon begin operation on.
In green are the routes presently operated by SriLankan AirTaxi (as of this writing). Shown in green
'crosshairs' are the floatplane-dromes that it is operating into. While the routes are shown as
originating from Colombo, CMB - the floatplane routes in fact originate from a floatplane-drome
nearby the city centre of Colombo - which puts it in equal distance between Colombo, CMB and
Colombo, RML airports.
In blue are the routes operated at the time of writing by Helitours.
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Maps used in this section have been generated using the Great Circle Mapper
The following map shows Tiruchirapally in southern India for reference.
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Maps used in this section have been generated using the Great Circle Mapper
Jaffna (JAF) in the Northern Peninsular was in fact an international airport till the early 1980s, when
its operations were halted due to the terrorist activities in Northern Sri Lanka. Prior to this, then
national carrier of Sri Lanka, Air Ceylon used to operate a number of routes into India from Jaffna,
while Indian Airlines too is known to have operated into Jaffna. Until the opening of Colombo
Bandaranaike Airport (CMB) in 1969, Colombo Ratmalana (RML) airport was the key international
airport in Colombo. While Ratmalana operated some cargo flights in early 2000s, the shorter runway
at the airport has made it unfavorable for jet aircraft, and at present the airport is being planned to be
converted into a business airport with an extension of the runway.
Koggala (KCT) airport at one time catered to the world's longest nonstop flight, operated by Qantas
Catalina Flying boats from Perth. Known popularly as "The Dou ble Sunrise", this route formed the
vital air link between Australia and England during the 1943-1945 era. The flight between Perth and
Koggala could take anywhere between 27-33 hours at this time.
With the dawn of peace, major investments in aviation facilities, and a growing economy, Sri Lanka's
domestic aviation sector sure looks to have a brighter future ahead.
B. Summary of Marketing Objectives. (¼ A4 page)
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:
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C. Summary of Marketing Strategies. (One A4 page)
Marketing Strategies:
”Official airline” or “Official alliance” status.
Exclusive logo presence in all printed material.
Complimentary advertisements in conference programmes and other association publications.
Providing a list of potential and actual attendees for the conference in order for airline to
promote transport to the event.
Exclusive mention in association and event websites, including links to airline booking
working with airlines engines (NB if the association members have a particularly valuable
business profile, the opportunity for the airline to market to the entire membership should not
be under estimated, especially if member numbers are significantly higher than likely
delegate numbers).
Proactive marketing to inform delegates about promotional flight offers and about the range
of potential routes using the “official airline” and its partners, and to encourage early
booking. Meeting planners to provide sales lead contacts, subject to the approval of the
delegates and the applicable legislation.
Distribution of airline collateral material to delegates (eg invitations to join Frequent Flyer
programme).
Recognition of airline during the event (eg invitations to VIP events; logo presence on
signage; name mention during key elements of the event; airline executive as speaker if the
conference is on a subject relevant to airlines).
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Complimentary participation in the conference programme or workshop if deemed relevant to
airline/alliance.
Monitoring of how effective the partnership has been. This is important not just for securing
support for one event, but also if the association wishes to develop a longer term partnership
with a particular alliance.
Further …
Employing an experienced, highly professional management team that combines vision; realism;
financial ability; solid knowledge of the aviation business; familiarity with, and belief in, the
utilization and benefits of the latest aviation, electronic, and informational technologies; on-the-
ground knowledge of the region and markets to be served; realization of the crucial importance
of an organization's personnel to its success; and a total familiarity with, and commitment to, the
overall mission and goals of the proposed new airline.
Intelligent, progressive, and aggressive marketing that identifies the airline as a different kind of
player, one that is sharper and smarter, and with a higher level of professionalism and
operational standard than is the norm in the target region. Concentration on safety, with highly
trained, dedicated, and professional personnel, caring for the passenger and the passenger's
needs and wants, the advantages offered by advanced technology, and straightforward,
understandable, highly competitive tariffs and fare pricing, all will form key pillars of the
marketing strategy.
Identification, through careful market research, of unserved or under-served routes and city
pairs in the target market area with sufficient passenger demand to enable high load factors and
profitable operations utilizing the category of aircraft envisaged.
Use of an all-jet fleet of newer, modern, Western-built regional aircraft that offer a high level of
comfort, safety, and fuel and operational efficiency and flexibility, which meet all normal
aviation standards, and which offer sufficient, but not excessive, passenger and cargo capacity
on the envisaged routes.
Use of advanced electronic and information technology to reduce staffing and other operational
costs; expand the potential market base; readily capture sales opportunities; simplify and speed
passenger, baggage, and cargo handling; and enhance customer convenience and satisfaction.
Additional important, though less critical, keys to assuring the airline's success include the
following:
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Identifying, negotiating, and entering into, in the pre-operational stage and early on, beneficial
associations, cooperations, and partnerships with larger, more established, highly regarded
carriers both within and beyond the target market region to offer interline arrangements, through
fares, frequent-flyer mileage sharing, and convenient hubbing and long-distance onward
connections to passengers. Successful execution of this element of the business plan is crucial to
the overall success and growth of the airline, and must be kept in mind in the organizational plan
and structuring of the airline.
Establishing a high level of operational oversight and quality control that will ensure that the
airline always lives up to its marketing commitments and fulfills the promise of a high level of
service, customer satisfaction, convenience, and safety, at a reasonable, highly competitive fare.
Avoiding the temptation to go head-to-head with established carriers on routes that already are
well-served, unless solid evidence exists of additional, significant pent-up demand, or
widespread customer dissatisfaction with existing services.
Maintaining flexibility that enables the airline to always respond and adapt to changing market
conditions and opportunities, without being erratic, and employing equipment, scheduling, and
staffing on a basis that is sufficient to get the job done properly, efficiently, and at a high rate of
return, without "overkill" or fielding costly excess capacity or, conversely, unduly cancelling
scheduled flight operations.
Identifying, developing, and quickly and cost-effectively exploiting opportunities for new
markets, new market concepts, and expanded sales potential.
Supplementing regularly scheduled passenger service with both regularly scheduled and also
special cargo services when and where sufficient demand exists, and also with seasonal, peak-
period, and other intermittent passenger services on certain key regional, seasonal, and variable
routes where very high load factors can be predicted despite existing but lower-quality
competition, or where competition cannot meet the demand. Larger, longer-range, or specialized
aircraft may be employed on a charter or wet-lease basis to provide these supplemental, but
potentially highly profitable, passenger and cargo services.
Looking to combine the core aviation business with ancillary marketing concepts and
activities and ground-based operations that support, supplement, and complement the aviation
elements of the business, including such activities as package-, group-, and charter-travel
program offerings; value-added sales and customer services, both land- and Internet-based;
construction and operation of enhanced passenger-, baggage-, and cargo-handling facilities and
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services; and other logical business pursuits both within and outside the immediate aviation
business.
Avoiding growth for growth's sake, and instead looking for solid niche-enlargement
opportunities that will allow incremental, but always profitable, expansion.
D. Summary of Financial Projections.
FINANCIAL PLAN
This section of the plan offers the core elements for evaluating the financial viability of the proposed
new airline. Both in text and in charts and tables, all the key elements are presented to offer a frank
appraisal of the venture and the opportunity it presents.
Of particular importance is the following section which presents the key "Important Assumptions" on
the core cost and revenue aspects of the airline. These assumptions are based on cost factors
involving the proposed Cesna 208 aircrafts, and assume dry leasing of new aircraft (a comparison is
also given for a purchase option, although that option, as will be apparent from the numbers, demands
a much larger up-front cash outlay, and does not necessarily lead to economies of operation,
particularly in the short run).
Among the assumptions made were that the airline will begin operating with just three 99-passenger
regional jets, with very low load factors, beneath 25 percent of capacity, and at fare levels that in all
likelihood are lower than reasonably expected on the planned route network. These assumptions were
taken to ensure a conservative approach to the financial planning, and to demonstrate that even with
these constraints the proposed airline can be profitable as early as the first year of operations.
It also was assumed that the aircraft will receive maximum utilization, up to six, seven, or more
segments per day. A "wave" or "W" route pattern, and reciprocating or circular routes, was assumed,
rather than simply a spoke-and-hub route pattern, to enable service to more destinations and to
maximize use of the aircraft. A major feature of the route planning has been to enable business
travelers to go and come back from destinations generally in the same day, and certainly in the same
week. Crew requirements and hour restrictions also were considered in the planning.
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Again, it should be stressed that even with the considerable constraints employed in the calculations,
the airline can be expected to carry upwards of 600 passengers in its first year, and possibly up to a
1000 passengers, and to reach profitability within the first year of operations, with significant growth
in both revenues and cash generated thereafter.
The Important Assumptions section also includes information on the third prong of the proposed
marketing strategy, which is to employ wet-leased or chartered aircraft to serve high-demand
regional, seasonal, and peak-traffic markets as a supplement to the regular scheduled service of the
airline. A conservative approach also was taken with this segment, and again it was shown to be a
profitable area to pursue, although relatively modest particularly at the outset in terms of overall
revenues.
It is strongly suggested that the Important Assumptions section be reviewed carefully prior to more
in-depth examination of the financials since it explains the premises on which the financials are
based. It also should be noted that the aircraft costing section is based on a segment approach, with
aircraft acquisition, operating and crew costs, and some direct sales costs, as well as revenues,
apportioned on a "segment" basis. Note that some elements that go into the segment costing are based
on hourly costs, extrapolated to the segment length, and others are strictly on a "per segment" basis.
The number of aircraft employed are stated at the top, on a "full-time equivalent" (FTE) basis,
allowing for variance in fleet size during the year as new aircraft are brought into the fleet.
7.1 Important Assumptions
In addition to the general financial and business assumptions presented in the following table, the
key parameters presented on the next page also were included as Operating Assumptions in
formulating the financial portions of this business plan.
Every effort was made to be realistic in these Assumptions, and if anything they were formulated
conservatively, particularly in calculating initial load factors and revenue yields which, in practice,
should be considerably higher than offered here. Additionally, passenger and cargo fares were
considered to be flat over the entire period covered by this plan to compensate for the possibility that
additional competition could force fares to remain relatively constant over the period. However, the
objective of this exercise was to show that the proposed operation will be profitable even with much
lower revenues than would normally be expected, and the numbers do in fact confirm a profitable
outcome.
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Operating Assumptions FY 2012 FY 2013 FY 2014
Aircraft in service (FTE) 2.83 5.33 7.33
Aircraft in service at end of FY 5 7 9
Cost per aircraft if purchased $26,000,000 $26,000,000 $26,000,000
Annual leasing cost per aircraft $3,120,000 $3,120,000 $3,120,000
Insurance rate % of aircraft cost 1.50% 1.50% 1.50%
Annual insurance cost per aircraft $390,000 $390,000 $390,000
Captain's Annual Salary $60,000 $66,000 $69,300
First Officer's Salary % of Captain 80% 80% 80%
Flight Attendant's Salary % of Capt 30% 30% 30%
Salary Burden as percent of Salary 20% 20% 20%
Crew members per flight Flght-2/Cab-3 Flght-2/Cab-3 Flght-2/Cab-3
Crew contingents per aircraft 3 3 3
Total crew per aircraft (min.) Flght-6/Cab-9 Flght-6/Cab-9 Flght-6/Cab-9
Flight Hours/Month for Crew 80 80 80
Average Total Salary Cost/Hour $202.50 $222.75 $233.89
Total aircraft maint. cost/hour $800 $800 $800
Fuel burn kg/hour 2,100 2,100 2,100
Fuel cost per kg $0.35 $0.35 $0.35
Handling cost/segment (ave.) $360 $400 $440
ATC cost/segment (ave.) $120 $130 $140
Land/depart charge per seg. (ave.) $150 $180 $210
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Parking fee/aircraft/night $150 $170 $190
In-flight items/pax -- Value $6 $7 $8
In-flight items/pax -- Premium $8 $9 $10
Percent/revenues commissionable 40% 35% 30%
Commission payable 9% 9% 9%
Ave. reservations cost/pax/seg $2 $2 $2
Average segment (hours) 1.25 1.3 1.35
Annual segments 6,520 11,808 15,638
Ave. total capacity/segment (pax) 99 99 99
Ave. Annual Load Factor (%) 50% 65% 75%
Ave. split Value/Premier 79/20 79/20 79/20
Average fare per Value pax/seg. $110 $110 $110
Average fare per Premier pax/seg. $143 $143 $143
Cargo per segment (kgs) 700 700 700
Ave. cargo tariff per segment/kg. $0.50 $0.50 $0.50
Ave. cargo tariff per segment $350 $350 $350
Average pax revenues/segment $5,775 $7,507 $8,933
Average cargo revenues/seg. $350 $350 $350
Total ave. revenues/segment $6,125 $7,857 $9,283
Total ave. costs/segment $4,972 $5,449 $5,741
Total ave. net yield/segment $1,153 $2,408 $3,542
Total revenues/year $39,935,000 $92,775,456 $145,167,550
Total operating costs/year $32,417,440 $64,341,792 $89,777,758
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Total net operating. revenues/year $7,517,560 $28,433,664 $55,389,792
Additionally, expected net revenues from offering peak-demand special flights also are calculated.
They are set apart separately from the scheduled-service revenues to show that both types of service -
and particularly the more important scheduled service - are viable and the airline will be profitable
even without these additional revenues.
The assumptions utilized here are based on dry leasing new Cesan 208/208 Grand Caravan has at a
high level of outfitting and with necessary spares included.
2. Vision and Mission
Vision
Trendsetter of the Domestic Air Line Market in Sri Lanka
Mission
To be the Market Leader
The Company
3.1. Brief history
The origins of John Keells Holdings lie in a produce and exchange broking business started by two
Englishmen, Edwin and George John, in Colombo, Ceylon, in the early 1870s. E. John & Co. was one
of a handful of broking companies that helped build tea production and export into the mainstay of
the colonial Ceylonese economy.
In 1948, the year of Ceylon's Independence, E. John & Co. merged with two London-based broking
companies to form the private limited company of E. John, Thompson, White & Co. Ltd. Business
opportunities in a fledgling post-Independence economy spurred growth and expansion throughout
the Fifties and Sixties. The name that is now synonymous with Sri Lankan business leadership came
into existence following the acquisition of another Colombo broking company, Keell & Waldock Ltd,
in 1960, the resulting entity being named John Keells Thompson White Ltd.
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As Ceylon modernized, becoming the Republic of Sri Lanka in 1972, social and political change
helped drive John Keells' expansion and diversification. The growing economic importance of travel
and tourism was reflected in the acquisition of Walkers Tours & Travels, the leading inbound tour
company of the time, and the Mackinnons' Group, which had extensive interests in shipping. Thus
began a process of diversification that has resulted in today's 70-member conglomerate. The parent
firm, now known as John Keells PLC, became a public quoted company in 1974.
In October 1986 a newly incorporated John Keells Holdings Ltd. (JKH) acquired a controlling stake
in John Keells Limited and obtained a quotation on the Colombo Stock Exchange amidst a heavily
over-subscribed public share issue.
In terms of market capitalization, John Keells Holdings PLC is the largest listed conglomerate on the
Colombo Stock Exchange. Other measures tell a similar tale; our group companies manage the largest
number of hotel rooms in Sri Lanka, own the country's largest privately-owned transportation
business and hold leading positions in Sri Lanka's key industries: tea, food and beverage manufacture
and distribution, logistics, real estate, banking and information technology. Our investment in Sri
Lanka is so deep and widely diversified that our stock price is sometimes used by international
financial analysts as a benchmark of the country's economy.
For 140 years, we have remained proudly independent, forcefully committed to private ownership
and private dividends, and relying on foresight, expertise and integrity for success and growth.
Having a significant portion of our shares held by foreign investors, our Group has also partnered
with some of the world's finest business establishments, from DHL to American Airlines, from IBM
to Toshiba, and from Thomas Cook to Kuoni. For emerging-market investors and those seeking a
business partner in Sri Lanka, John Keells is an option that simply cannot be ignored
John Keells Holdings PLC (JKH) is one of the largest conglomerates operating in Sri Lanka and in
terms of market capitalisation, is the largest listed conglomerate on the Colombo Stock Exchange.
Other measures tell a similar tale; the group of companies manages the largest number of hotel rooms
in Sri Lanka, own the country's largest privately owned transportation business and hold leading
positions in Sri Lanka's key industries: tea, food and beverage manufacture and distribution, logistics,
real estate, banking and information technology. Its investment in Sri Lanka is so deep and widely
diversified that its stock price is sometimes used by international financial analysts as a benchmark of
the country's economy.
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For 140 years, JKH have remained proudly independent, forcefully committed to private ownership
and private dividends, and relying on foresight, expertise and integrity for success and growth.
Having a significant portion of its shares held by foreign investors, the Group has also partnered with
some of the world's finest business establishments, from DHL to American Airlines, from IBM to
Toshiba, and from Thomas Cook to Kuoni.
3.2. Current size, the areas where the company is operating, growth and profitability etc.
Operational Sectors
Consumer Foods & Retail
The Consumer Foods Sector Group is home to a portfolio of leading brands in the Beverage, Frozen
Confectionary and Processed Meats categories, which include "Elephant" Carbonated Soft Drinks,
"Elephant House" Ice Creams and the "Keells & Krest" ranges of Processed Meats. All brands are
market leaders in their respective categories and are supported by a well-established distribution
channel of almost 80,000 outlets island-wide.
I. Ceylon Cold Stores PLC
II. Keells Food Products PLC
III. Nexus Networks (Pvt) Limited
IV. JayKay Marketing Services (Pvt) Limited
Financial Services
Financial services sector operates in the banking, leasing, insurance and stock brokering industries.
This sector has been identified as a key growth sector in its portfolio.
I. John Keells Stock Brokers (Pvt) Limited
II. Nations Trust Bank PLC
III. Union Assurance PLC
Information Technology
Providing quality, world-class Information Communication Technology services from consultancy,
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software services and information integration to office automation, JKH offer end-to-end ICT
services and solutions to customers in Sri Lanka and South Asia, as well as the UK, Middle East,
Scandinavia and the Far East. With an unparalleled customer base, including local blue chip
companies and industry leaders and international Fortune 500 companies.
John Keells Holdings has a joint venture with Quatrro a Knowledge Process Outsourcing company
headed by Raman Roy, widely regarded as the father of the Indian BPO industry. The JV has
operations in India with the brand name Quatrro Business Support Services and in Sri Lanka with the
name AuxiCogent providing specialized Information Technology enabled Services (ITeS). The
companies leverage process delivery expertise of Quatrro and domain expertise of John Keells
Holdings to provide Offshore Technical support, Internal Service Desk, Inbound and Outbound
Customer Service, Transcription, Reservations, Holiday Package sales to Fortune 500, Global and
Medium Enterprises in Telecom, Healthcare, Travel, Airlines, Media and Entertainment verticals.
Quatrro Business Support's Customer Relationship Management services have been recognized in the
IAOP's 20 best CRM services' global list.
I. InfoMate (Pvt) Ltd
II. John Keells Computer Services (Pvt) Limited
III. John Keells Office Automation (Pvt) Limited
IV. John Keells BPO
Leisure
Representing JKH's single largest net asset exposure, JKH’s Hotel chain encompasses two city hotels
that offer 40% of the five star room capacity in Colombo and seven resort hotels spread in prime
tourist locations all over Sri Lanka and three located in the Maldives, offering beaches, mountains,
wildlife and cultural splendour.
JKH owns Walkers Tours Limited, the premier Destination Management Company (DMC) in the
country which represents a large network of global Tour Operators, including Thomas Cook,
Hotelplan, Virgin Holidays and many others which are household names internationally. Under the
umbrella of Walkers Tours, our separate brands, Nature Odyssey, Mackinnons Tours and John Keells
Conventions, focus on specific niches of the tourism sector. Meanwhile, Whittall Boustead (Travel)
Limited, exclusively represents Kuoni International, the single largest generator of tourists to Sri
Lanka.
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Its comprehensive expansion into South Asia includes a fully owned subsidiary - Serene Holidays
(Pvt.) Ltd - which has offices in Delhi, Mumbai and Ahmadabad for both in-bound and out-bound
tourism in India.
I. Walkers Tours Limited
II. Serene Holidays (Pvt) Limited
III. John Keells Hotels PLC
IV. Cinnamon Hotels & Resorts
V. Chaaya Hotels and Resorts
VI. Cinnamon Air
Property
Owning a significant land bank in prime areas of Colombo and the rest of the country, the Property
Group is one of the largest private sector proprietors of real estate in Sri Lanka. As the controlling
shareholder of Asian Hotels and Properties PLC – the owners and promoters of ‘Crescat City’ which
houses the five star hotel ‘Cinnamon Grand’, the up-market shopping mall ‘The Crescat Boulevard’,
the 30-storey luxury apartment complex ‘The Monarch’, the 35-storey luxury apartment complex,
‘The Emperor’ and the ‘Angsana City Club & Spa’, the Property Development arm concentrates
primarily on the development and sale of residential apartments. The Property Management arm of
the group concentrates on the operations of the Crescat Boulevard and the management of the office
sites within the city.
The Property Group has launched a new condominium project known as "On Three 20" which
consists of 475 apartments in the heart of the city of Colombo. Reservations for apartments units are
currently being accepted and construction is scheduled to start in April 2011.
I. Asian Hotels & Properties PLC
Transportation
With a vision to be a leading provider of transportation solutions related services and infrastructure in
the region, the Sector Group at present operates in three strategic business units - Ports & Shipping,
Integrated Logistics and Airline & Aviation services that offer a complete array of transportation
related services in Sri Lanka and the region. Businesses in the Sector Group include and operation of
South Asia Gateway Terminals in the Port of Colombo, Sri Lanka's only private Port Operator and
the largest private sector investment; Lanka Marine Services, primary supplier of marine fuels and
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lubricants; and joint ventures/associations with leading transportation multinationals such as Maersk
Line, DPWN (DHL), American Express, the Keppel Group and MISC, in the areas of Shipping, Air
Express, Travel, Inland Container Depots, Warehousing and Haulage.
Other businesses include International Freight Forwarding and NVOCC Operations and Airline
representation with global partners such as American Airlines, Jet Airways, Leisure Cargo Gmbh,
Gulf Air, Air Mauritius and Asiana Airlines. The Sector Group also has a regional network of its own
offices covering key cities and gateways in India and the Maldives and will shortly commence
operations in Pakistan and Bangladesh.
Airline Strategic Business Unit (SBU):
a. John Keells Air Services (Pvt) Limited
b. Mack Air (Pvt) Limited
c. Mack Air Services Maldives (Pvt) Limited
d. Mackinnons American Express Travel (Pvt) Limited
Logistics SBU:
a. DHL Keells (Pvt) Limited
b. John Keells Logistics India (Pvt) Limited
c. John Keells Logistics Lanka (Pvt) Limited
d. John Keells Logistics (Pvt) Limited
e. John Keells Logistics Maldives - Maldives Freight & Logistics (Pvt) Ltd
Shipping & Ports SBU:
a. Lanka Marine Services Limited
b. Maersk Lanka
c. South Asia Gateway Terminals (Pvt) Limited
Plantation Services
Tea Smallholder Factories PLC produces the best CTC and are amongst the top manufactureres of
orthodox low grown teas, which are produced from green leaf supplied by 14,000 Tea Small Holders.
With over 130 years of experience in the tea trade, John Keells PLC is the leading tea broker in the
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country. Its facility is Asia's largest and best state-of-the-art warehousing complex for pre-auction
produce. Continuing to infuse international best practices in the production and sale of high quality
teas, JKPLC has been a steadfast partner to Sri Lanka's top income earning tea industry.
John Keells PLC
A. Staff Relations
3.3. Internal Environment
3.1 Management Team
A complete management team, covering the elements of administration, aviation, and finance, is
being assembled. This team brings together a wide range of skills and backgrounds covering the key
areas needed to form, launch, and operate the airline, and from a range of national origins.
3.2 Management Team Gaps
It is premature to speak of management team gaps until a core management team is named. The
individuals who will play leading roles with the new airline will need to possess the widest possible
range of the requisite skills. The current project team believes investors in the airline will want to play
a key role in helping formulate core management. Once primary investment is established, that step
can be undertaken, and it is anticipated that the core team will be finalized quickly.
The new airline will need people with skill, experience, energy, and vision to head up and serve in
such areas as information management, flight safety, aviation operations, aviation maintenance,
ground operations, sales and marketing, communications, and human resources management. Also
good pilots, co-pilots, cabin crew members, and ground staff, and administrative staff.
Cinnamon Air anticipates putting together the best possible airline management team in the business,
one that also shares the common vision of what this new airline truly can be and what it can become.
3.4 Personnel Plan
Along with aircraft acquisition and operating costs, personnel costs represent one of the two largest
cost factors faced by the new airline. Additionally, the airline's personnel will largely determine the
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success of the venture. Therefore, it is crucially important to develop and implement an effective
personnel operations and compensation plan.
The Personnel Plan for the new airline reflects the stress on the use of technology to reduce staffing
and costs, and the concomitant stress on customer service. Consequently, staffing is heavier (with
individual function directors) in such areas as information technology and oversight of such functions
as human resources, flight safety, flight maintenance, and ground operations than might otherwise be
the case with a smaller regional airline. On the other hand, functions such as sales and marketing,
bookkeeping and finance, and personnel management are reduced, with the assumption being that the
effective use of advanced, cost-efficient informational technologies in these areas will make up for
the reduced staffing, resulting in significant cost savings while providing superior results at less
effort.
It is assumed, based on the experience of other domestic airlines in the country, that something on the
order of 60-70 percent of all reservations and bookings will be made electronically, and such
passengers will be ticketed and checked-in electronically using special electronic check-in kiosks
such as those employed successfully by the U.S. carrier Continental Airlines, leading to major cost
savings in areas such as sales, reservations, and ground check-in staffing, as well as in commissions
paid out to outside travel agencies.
Staffing in the sales and marketing area is aimed at targeted customer contact to generate corporate
and group business, rather than individual sales, and to develop special marketing programs designed
to generate significant increases in both passenger and cargo business. Responsibilities will be
divided along both regional and functional lines, with one regional sales and marketing manager,
notionally responsible for business generation and three marketing managers (one responsible for
special sales aimed specifically at the peak traffic/special flights/holiday travel/charters market, the
other for air cargo sales), reporting to one director of sales and marketing. Additional personnel will
answer customer inquiries and take reservations on the telephone at central headquarters, with phone
calls forwarded to them from throughout the airline market area, and also will respond to
e-mail/website-forwarded inquiries.
All key functional positions throughout the airline, including in the sales and marketing area, are
backed up by professional support personnel, most of whom will be cross-trained in different areas,
so there will always be coverage of all key functional areas as well as back-up support when work
demand requires it.
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In the ground-service area, the airline will utilize its own personnel to the extent practical in order to
assure a more consistently positive experience for the passenger. All major destinations will be
staffed by airline personnel, while at some smaller and more remote destinations, or where local
practice or requirement dictates it, ground handling and service may be contracted out to local service
providers.
Even in such cases, efforts will be made to utilize spare flight crew personnel to assist with oversight
of ground services and respond to customer needs, again stressing the airline's focus on cross-training.
Finally, as revenues and passenger demand increases, the Personnel Plan can be expanded to provide
additional ground service personnel at key locations and to expand the number of locations where the
airline provides its own ground-service staffing.
Again through the use of e-ticketing, e-check-in, and e-baggage tracking, ground-service staffing
requirement will be very light compared with a more traditional organization. Particularly given the
fairly light flight scheduling at most locations and the convenient size of the projected aircraft, check-
ins should be quick and easy, with little waiting in line or fighting with crowds - major marketing
advantages as well.
Given the airline's motto, "We have a job to do, and we do it every day - for you!", cross-training and
cross-functioning will be core elements of the new airline's personnel-management approach.
Everyone will be inculcated with the spirit that she or he is personally responsible for the passenger
and the client having a positive experience when in contact with the new airline. Everyone, from the
president on down, will be familiar with (and participate in) virtually every aspect of the work and
customer-service process (a method employed successfully by the former PEOPLExpress and other
"people-oriented" carriers and other successful service businesses). While no one will expect (nor
want) a receptionist to fly the airplane, nor a sales manager to perform engine repairs, nor for that
matter a pilot or flight attendant to tend to the bookkeeping, common customer-service functions like
check-in, gate monitoring, baggage handling, and answering customer inquiries can and should be
performed from time to time by any and all available personnel. This process also requires, however,
that personnel receive actual training and experience in these various areas, so they do not become
more of a hindrance than a help.
Even the airline's uniforms will project an image of ordinary people doing extraordinary work to
please and make the passenger feel comfortable. There will be a stress on informality, utilizing "non-
uniform" uniforms to again stress the airline's work ethic and customer-service orientation, making
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both employee and client feel more at home. This approach also is in keeping with today's trend
toward greater informality and equality in the work place, and away from the stilted authoritarian way
of the past.
Finally, the proposed hierarchy and salary structure is designed to be both economical as well as
sufficiently attractive and competitive to enable the airline to recruit good, qualified personnel. At the
same time, in keeping with the overall ambience of the airline, it also stresses relative equality and
fairness in its structure. A good benefits package, consistent with, and perhaps better than, available
elsewhere in the industry or related industries, and the more abstract benefits of being part of a well-
respected, well-functioning, professional, winning team, also will be elements attracting good
employees to the new airline and keeping them on the team.
There are only about 10 pay grades provided for in the salary plan for the entire airline, including
executive-level salaries, with jobs that may be markedly different in terms of function, but similar in
terms of experience required, difficulty, and importance, sharing the same pay grade.
Most subordinate grades within given functions are based on a set percentage of higher-level salaries
within the same general function. In addition, the plan for pay increases is straightforward and fosters
clarity and understanding, rather than anxiety and unhealthy competition, among employees.
Everyone, across the board, from top to bottom in the organization, who performs satisfactorily will
receive a 10 percent pay increase at the end of the first year of service (deemed to be the most
difficult), and a 5 percent pay increase at the end of each subsequent year of service (with adjustments
made only on the basis of specific across-the-board or localized issues like inflation, currency
devaluations, and so forth).
Unsatisfactory performance merits only one of two remedies: Dismissal, or placement on a limited
probationary regime to determine if problems can be remedied and the employee brought up to
standard within a given time limit. Otherwise, there is no room, and no cause, for protracted anxiety
on the part of the satisfactory employee concerning such issues as pay raises and related issues. The
only other issue is the possibility of promotion to a higher position within the organization, and the
airline will endeavor to promote its best from within whenever possible.
One other issue worth considering, though it is not included in the current plan, is the possibility of
offering a bonus to all employees, as a specific percentage of their pay, when the airline shows a
particularly profitable year to encourage additional "pride of ownership" and esprit de corps.
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B. Resource Constraints
The most important resources that project managers have to plan and manage on day-to-day basis are
people, machines, materials, and working capital. Obviously, if these resources are available in
abundance then the project could be accelerated to achieve shorter project duration. On the other
hand, if these resources are severely limited, then the result more likely will be a delay in the project
completion time. Depending on the type of resources, the costs of providing an abundance of such
resources to accelerate project completion time can be very high. However, if resources are readily
available and excess premiums are not incurred to use them on the project, then project cost should be
low, as some project costs are resource related while others are likely to be time dependent. In
general, projects with a shorter duration are less expensive. The longer the duration of the project, the
higher will be overall project cost due to the increase in fixed costs such as overheads. The reality is
that as long as the work on a project is ongoing it will continue to draw resources into its orbit.
Whatever the parameters of the project, it is unlikely that the relationship between cost and duration
is linear. For any particular project, the decision to place the project on the curve between the point of
least duration with its associated higher resource requirements and a point of increased duration with
its associated lower resource requirements depends on the particular parameters of the project.
C. Corporate Structure and Culture (one A 4 page)
JKH has a culture in which performance is deeply embedded. As an employee of John Keells you are
what you do. Through our policies and processes we ensure that our employees get the maximum
opportunity they need to perform at their best. With the strength of our diversity you are able to gain
experience in a multitude of industries which we hope will eventually lead you to become a leader in
one of our businesses in Sri Lanka or overseas.
We hire the right people with the right attitude and our employees never fail to deliver.
JKH is committed to the highest standards of business integrity, ethical values and professionalism in
all its activities towards rewarding all its stakeholders with greater creation of value, year-on-year.
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Our governance framework which has been communicated to all levels of management and staff in
individual businesses and functional units is based on the following –
CINNAMON AIR – ORGANIZATIONAL STRUCTURE
Reflecting the overall nature of the organization envisaged, there is very little hierarchy in the
organizational plan for the airline. In an operation where safety and accountability are so much at
issue, obviously someone has to be in charge, and there also have to be clear lines of authority (and
expertise) in the operational aspects of the airline. But beyond that, the organization is designed
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around flexibility, a high level of personal accountability and responsibility, and common cross-
training and sharing of responsibilities as need arises and circumstances permit.
The levels of organization (reflected in the personnel and salary chart in the Personnel section of this
plan) are as follows:
President and chief executive officer (who reports to the Board of Directors of the airline
company).
Vice president and general manager.
Functional vice presidents for the core areas of commercial activities, finance, and operations.
Directors covering sales and marketing, communications, human resources, flight safety, flight
operations, ground operations, maintenance, and information systems.
Managers in sales and marketing, as well as in station management functions.
Professional, engineering, ground handling, service, and other support personnel.
On the flight side, which reports to the director of flight operations and also responds to the director
of flight safety, there are only three levels of personnel:
Captain;
First officer;
Flight attendant.
Salary scales and levels of authority have been simplified and based on a rational scale allowing for
similar levels, though of different natures, of functional work to be compensated at the same pay
levels. The overall objective is to foster an atmosphere of cooperation and shared responsibility to the
overall mission, which is to provide the customer and client with the best possible, safest, and most
satisfying experience with the airline. Cross-training and cross-functioning are important parts of the
organization plan, as explained in more detail elsewhere in this document.
4. The Product / Service
4.1. General Product Story
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a. Development, introduction and history.
Saffron Aviation (Pvt) Ltd, a joint venture between John Keells Holdings PLC (JKH), MMBL
Leisure Holdings (Pvt) Limited and Phoenix Ventures Limited, signed an agreement with the Board
of Investment of Sri Lanka last week, to establish a domestic air taxi service in Sri Lanka with an
initial investment of US$ 6.8Mn out of a total planned investment of US$ 8.4Mn.
The start-up fleet will consist of two Cessna 208 Caravan Amphibian aircraft (seating 9 passengers
each) and one wheeled Cessna 208B Grand Caravan aircraft (seating 12 passengers) that would
provide the flexibility for the airline to operate from any of the domestic and international airports as
well as from waterdromes in Sri Lanka.
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Cessna 208 Grand Caravan
Cessna 208 Amphibian aircraft
The domestic air taxi service, flying under the brand name ‘Cinnamon Air’ will fill a critical void in
the current tourism offering in Sri Lanka by providing a unique service of scheduled daily flights
linking the Bandaranaike International Airport (BIA) with key holiday locations on the South West
coast, the East Coast (in the summer season), Kandy, the Cultural Triangle and Hambantota/Yala.
Flights to and from the BIA will largely connect with arrival and departure flight timings of the
National Carrier and all major international airlines serving Colombo. Commercial operations of
Cinnamon Air are expected to commence in the last quarter of FY 2012.
The air taxi service will augment the overall visitor experience in Sri Lanka by significantly reducing
the time spent by tourists on road transfers between the airport and hotels and on excursions, whilst
providing passengers with a unique, panoramic view of the outstanding countryside and scenery. The
service will also be an important value addition to benefit several investments in upscale boutique
hotel properties in the recent past, thus contributing significantly towards attracting high end tourism
traffic to Sri Lanka. Whilst scheduled services will be retailed through all Tour Operators and Travel
Agents and directly to customers via the internet, ‘Cinnamon Air’ will also offer short scenic flights
and charter flights to any part of the island for groups, cruise passengers and corporate travelers.
MMBL Leisure Holdings (Pvt) Limited is a fully owned subsidiary of Mercantile Merchant Bank
Limited set up to explore investment opportunities of the tourism sector. Phoenix Ventures Limited is
an investment holding company that is also the parent company of Brandix Lanka Limited and
Phoenix Industries Limited.
Why JKH Entered in to the Domestic Air Line Business?
Latest seat capacity data compiled by the Centre for Asia Pacific Aviation shows an interesting fact –
Sri Lanka is Asia Pacific’s fastest growing aviation market.
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The island nation, rich of cultural and bio-diversity variety, has recorded a staggering growth in
tourist arrivals ever since the war against the world’s second fiercest terrorist group ended with
victory, in 2009. For the month of April, 2011 alone, tourist arrivals to Sri Lanka have grown by
66.7%.
As per the data compiled by Centre for Asia Pacific Aviation, Sri Lanka has achieved a 25.9% growth
in airline seat capacity for May 2011, versus May 2010. ( Sri Lanka had a total of 78,992 weekly
airline seats offered in May 2011. ) This makes Sri Lanka the fastest growing aviation market in Asia
Pacific and puts it ahead the growth rates of Asian heavyweights Hong Kong ( 13.5% ), India
( 18.4%), Indonesia ( 15.9%), Malaysia (12.6%) and Singapore (13.5%).
For your interest on this fast growing, unique, aviation market – Airline Industry Review has now
compiled a special section on Sri Lanka. This includes latest news, fleet info and airport info. And it
is free! So have a look at it right away!
While Sri Lanka is at present ranked 15 in the aforementioned report, it will not be hard for Sri Lanka
to come to a much higher position if developments such as opening up the international market for
local private carriers and marketing the country’s attractions better, are taken place. As the Trend
setters of the Hospitality Industry JKH put a giant leap towards the Sri Lankan Domestic Air Line
Market
b. Product category and characteristics (one A4 page)
Airport drop and pick-up
• Transfers between hotels (Selected Destinations)
• Sight visits (Southern Coast, Sigiriya, Ancient Cities, Some other Beach areas)
• Corporate transfers
• Sightseeing tours
• Wedding transfers
Arrival by Sea Plane
Going away by Sea Plane
Flower drop for wedding
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Photography with Air Craft
Sightseeing honeymoon
Other Tours
• Golf tours
• Joyrides
• Aviation sports
• Aerial filming and photography
Charter Flight Schedule of Cinnamon Air
MON/ WED/ FRI
EXV 711 – Departure Ratmalana – 0700 hours Arrival Palaly – 0830 hours
EXV 712 – Departure Palaly – 0900 hours Arrival Ratmalana – 1030 hours
EXV 713 – Departure Ratmalana – 1430 hours Arrival Palaly – 1600 hours
EXV 714 – Departure Palaly – 1630 hours Arrival Ratmalana – 1800 hours
TUE/ THU/ SAT
EXV 711 – Departure Ratmalana – 0700 hours Arrival Palaly – 0830 hours
EXV 712 – Departure Palaly – 0900 hours Arrival Ratmalana – 1030 hours
SUN
EXV 713 – Departure Ratmalana – 1430 hours Arrival Palaly – 1600 hours
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EXV 714 – Departure Palaly – 1630 hours Arrival Ratmalana – 1800 hours
(Subject to change)
Pricing Strategy
Airfares:-
Adults/Child fares:-
Return Rs 24.000/-
One way Rs 12.500/-
Infants no charges
Baggage Allowance:-
Adult/child – 15 kgs
Infants – no baggage allowance
Excess luggage charges – Rs 150.00/- per kilo
Maximum checked baggage dimensions:-
a. Length - 44 inches
b. Height – 14 inches
c. Breadth – 22 inches
Operational Process:
Details required
To make a reservation we require name in full, NIC or Passport details, address and telephone
contacts, and email if any.
General Product Details.
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Competitive Comparison
In comparing the proposed new airline to its competitors, there are at least two levels of
comparison that must be considered; the usually lower-standard airlines, both scheduled and
charter, flying out of the within the country, and the higher-standard, more highly regarded
airlines operating out in Sri Lanka ( Eg – Sri Lanka Heli Tours. Expo Air)
Beating the former source of competition is both a reasonable and an essential goal. But
comparing favorably, and even standing notably above, the latter also is an important
objective since these airlines will represent direct competition to the new airline on many of
its projected key routes, despite efforts to avoid such competition to the extent feasible.
Fortunately, several of the key distinguishing characteristics planned for the new carrier not
only will enable it to fare extremely well in both levels of competitive comparison, but will
actually be achievable at a savings in cost and resources. In other words, by being smart, the
new airline can be significantly better than its competition while at the same time accruing
lower overall costs, a remarkably good combination.
In comparing the proposed new carrier to Domestic Air Line Market, it is important to look at
those factors that determine how most travelers choose an airline. They include the following
(and the order of importance is different for each traveler and each situation, but the most
important factors are listed):
• Safety, actual and perceived;
• Cost, and range of the fares offered;
• Destinations served;
• Availability of seats;
• Availability of fares;
• Convenience of flight schedules, times of arrivals and departures;
• Frequency of flights;
• Connections, including reliability and convenience of connections;
• Nature of flights: non-stop, direct, number of stops, aircraft changes;
• Availability of different classes of service;
• Onboard comfort, service, meals, and amenities;
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• Type of aircraft, including jet or non-jet, size, and speed;
• Age and condition of aircraft;
• Ease and efficiency of reservations and ticketing;
• Reliability and on-time departures and arrivals;
• Ground service;
• Reliability and quality of baggage handling;
• Friendly, competent service in reservations, check-in, and in the air;
• Overall reputation of airline;
• Nationality of carrier;
• Factors of personal preference.
While no airline probably can excel in every one of these areas, the closer an airline comes to
"excellent," or at least "good," ratings in each of these key areas, the better it will fare in its
competitive standing.
Both in the overall design of the airline and its basic operational features, as well as in its
management, quality control, and day-to-day operations, the proposed airline is expected to
stand out positively in almost every regard.
c. Stage of Product Life Cycle.
Growth Level
d. Product uses (primary, secondary and potential uses in if any)
Primary target is the Foreign tourist those who are coming to the Sri Lanka
The Challenge is to create awareness of the new features offered by
Cinnamon Air and by targeting television and online audiences
simultaneously, and within a short timeframe.
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7.1 PESTEEL Factors
1. Political
2. Economical
3. Social
4. Technological
5. Ecological
6. Environmental
7. Legal
Terrorism Fears / Political Instability
Assessing the longer-term impact of the fear of terrorist attack on the size of the
aviation market is very difficult. It is; of course, important to keep personal
political opinions out of any analysis as far as possible, but it is this writer’s
opinion that little was learnt as a result of the September 11 attack, or from those
which have followed it. A terrorism threat can only be addressed by seeking to
understand and address the underlying grievances which caused the terrorist
movement to arise in the first place.
The “War on Terror” has simply increased resentment, and has provided the best
imaginable recruitment propaganda for those seeking to foment extremism
Environmental
In many aviation markets today, airline managers are facing the challenge
of change and adaptation. They were formerly able to enjoy the
reassurance of regulated conditions, with limited competition and only a
very slow pace of change. Today, economic liberalization is giving new
opportunities which must be exploited if success is to be achieved. It also
brings new threats which must be countered effectively.
Given the nature of the challenges facing airlines, it would be naïve in
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the extreme to assume that these do not impinge on the marketing area of
their activities. They most certainly do, with sound marketing policies for a
liberal market being quite different for those which might be appropriate
for a regulated one.
Above all other considerations, a deregulated situation requires that
systems should be in place to enable decisions to be made quickly. New
opportunities to enter routes will arise at short notice, and may disappear
equally rapidly if another airline is able to react faster and take advantage
of the potential first. Equally, it may be necessary to change the
specification of the product quickly, if a competitor offers customers better
value-for-money. Also, pricing policies will have to be adjusted frequently,
with changes often being required on a daily basis or sometimes even more
frequently than this. As we will discuss further in Section 6:1:2, a feature of
regulated markets used to be that all airlines charged the same fares, and
fares only changed infrequently, following an often tortuous set of
procedures which needed to be undertaken in order to gain regulatory
approval.
The situation in today’s liberal markets is in strong contrast. The
combination of the ending of regulatory controls on pricing and the advent
of the ability to disseminate fares information instantaneously, through the
spread of so-called Global Distribution Systems and over the Internet, (see
Section 7:3) has meant that millions of fares now often change overnight at
The Marketing Environment 57
times of active price competition. No airline can now afford the luxury of a
slow response at such a time.
If airlines are to make decisions quickly, certain conditions must be
met. Decision-making processes must be streamlined, with flat
organisational structures and, often, a degree of autocracy prevailing in the
most successful carriers. Where possible, too, decision-making must be
decentralised to the managers of small profit centres, where people will
have a better understanding of the detail of local market conditions.
Economical
If there is a clear and important interplay between the world of politics and
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airline marketing, there is a relationship of equal or even greater
importance with economic change and development.
3:3:1 Economic Growth and the Trade Cycle
The demand for air travel is characterised by a very high income elasticity.
The Marketing Environment Therefore, as the world economy grows, so the
demand for air travel can be expected to increase too. This continuing growth
gives both enormous opportunities and great challenges to the airline
industry. The opportunities come with the chance to exploit a growing
market, something which would be the envy of managers in many other
industries. The challenges are to accommodate the growth through suitable
infrastructure development and without unacceptable environmental
consequences, and to exploit the demand whilst achieving the stable profits
which the industry has so often found elusive. Besides a clear pattern of
growth, growth rates are uneven through time. Just as one would expect, air
transport industry growth rates are tied closely to those in the world
economy. If growth in the economy is rapid in a particular year, so is the
increase in air travel demand. Periods of economic stagnation see a
significant slowing of the rate of increase in demand.
Social
Partly, but not exclusively, reflecting trends in age and family structures,
the modern travel industry is having to adjust to a marked broadening in the
range of requirements of vacationers. When holidays by air first began to
become popular in the 1960s, most people wanted little more than a
relaxing opportunity to sunbathe by a hotel swimming pool. This is not so
today. Better education, growing experience of air travel and fears about
the health risks of excessive exposure to the sun are all meaning that to a
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greater and greater degree, holidays must reflect a lifestyle based on
individual choice. People expect to be able to pursue their hobbies while
they are on holiday, with winter sports, golf, history and trekking holidays
all now well-established sub-segments of the market. They expect to be
able to take holidays of different lengths in order to fit in with their
available vacation time. They also require opportunities to visit new and
interesting, often long-haul, destinations.
Overall, the trend in the holiday market is often, and appropriately,
described as “de-packaging the package”. People increasingly want a
holiday experience which reflects their own individual requirements. They
do not expect to be treated as part of a herd of cattle, to suit the
convenience of the travel provider
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Objectives/ Goals of the Action Plan
The negative impacts of economic downturn, rising fuel costs, regional conflicts and terrorism have
not dented confidence
in the future of air travel.
The escalation of air traffic, concentrated in the Asia Pacific region, is driving strong growth within
the aviation industry.
International forecasts predicts over 24,000 (source: Airbus global market forecast report) new
aircraft will be delivered to world
airlines over the next 20 years. The airline industry will need to employ more than 18,000 pilots per
year for aircraft currently on
order.
To leverage this growth potential into an economic opportunity for the State, the Queensland
Government has developed a vision
to be an aviation and aerospace hub for the Asia Pacific region.
Competitive strengths include:
Strategically located regional, national and i • international airports
• Decentralized economy driving a networked and innovative general aviation industry
• Critical mass of globally competitive aerospace firms
• World class aviation training and education system
• Demonstrated commitment to research and development, technology diffusion and
commercialization
• Collaborative partnerships between universities, other research organizations and the
aviation industry.
Growth opportunities arise from:
• The emergence of the Asia Pacific region as a focus for international aviation growth
• increased global demand for aviation training
• local development of emerging and advanced aviation technologies
• international and national route development and airline basing
• increased Defence demand for aerospace manufacture, modification and maintenance.
The Cinnamon Air will play a leading role in the development of the aviation and aerospace industry
and will act to
reinforce the success factors which make this a high performing priority sector. These are:
• accelerated investment
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• financially support research and development
• encourage global business collaborations
• further airline basing
• increased defence aerospace opportunities
• rapid development of local aviation and aerospace capability
• innovative product development
• national and international market development
• strong growth of an advanced local skills base.
1300 363 711 (Interstate callers • 07 3001 6359)
aviation.industry.qld.gov.au
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References
- Specification & Description of Grand Caravan – Jul 2010 publication
- The Airline Industry Challenges in the 21st Century – A. Cento
- Dominate the Market in Apple Style – Harris Consulting LLC
- Strategic Marketing Planning - Colin & Richard -2nd Edition
- CAPA - Aviation Outlook FY 2012/13
- Sri Lankan Airlines Annual Report 2010 , 2011
- Virginia Tourism Corporation Strategic Marketing Plan FY2012
- Decan Aviation Lanka Monthly Newsletter- Nov’12
- Economics and Social Statistics of Sri Lanka
- Airline Marketing & Management – Stephen Shaw – Sixth Eidition
- Segmentation Analysis of Domestic Airline Passenger MarketsEdward R Bruning
Kent state university ,Mary L Kovcic & Larry E Oberdick
- Asia Pacific Aviation Outlook 2009
APENDIX
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