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INTRODUCTION
The airline business provides transportation services for passengers and cargo via flights.
Airlines may rent or own aircraft to perform these services, and they may at times combine existing services with those of
competing airline for mutual advantage.
Airlines in the sector are commonly characterized by a licence granted by only a government aircraft committee or by an
aviation operating certificate.
The airline sector includes a wide range of services, from a single aircraft used to transport freight or mail to full-service
airlines that operate globally with a variety of aircraft.
Airlines are classed according to the services they provide: intra-continental, domestic, regional, transcontinental, or
international.
They can be used as charters or planned services.
Throughout the next ten years, India, which is currently the world's seventh-largest civil aviation industry, is anticipated
to overtake the United States as the third-largest civil aviation market.
With the major share, Indigo is India's biggest airline carrier.
India has overtaken the UK to become the third-largest domestic aviation market worldwide, and by 2024, it is predicted to
surpass the UK to occupy that position.
In India, there are close to 15 airline operators, a mix of major and minor regional firms.
The third-largest civil aviation market in the world is India.
In 2016, it registered 131 million passengers flying across its airspace, from which 100 million comprised domestic
travellers.
Airlines are highly indebted, and as such, they must acquire or lease new planes and engines on a frequent basis, as well as
make fleet decisions with the purpose of satisfying market demand while managing an affordable fleet for the industry.
To sustain the services provided by an airline, the accompanying expenditures must be managed successfully.
Workers, information technology services and connections, aviation security, engines, repair parts, fuel, management
services, training, sales division, cuisine, and equipment are just a few examples of the costs associated with running an
airline.
The majority of an airline's income from ticket revenue is utilised to keep the company running. Airlines are however held
responsible for following government rules.

INDIA’S AIRLINE MARKET

India's aviation sector had emerged as a rapidly rising business. The industry had established itself as a cost-effective and
trustworthy alternative to the time-consuming and lengthy excursions by road or rail.

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With a discernible growth pattern, it was predicted that India would become one of the world's largest aviation markets
by 2034.
As of fiscal year 2022, IndiGo was the market leader in the segment, accounting for around 55% of the market.

IndiGo - the market leader

In the same year, the Indian aviation sector handled approximately 188 million passengers at Indian airports. As of 2018,
Jet Airways had the second-largest market share, after only IndiGo. However, the former passenger airline ceased
operations in April 2019 due to financial issues, leaving the field open for the latter with little competition from other
market players.
A flight for the budget airline market

Indigo's low-cost, no-frills approach to domestic flight has been mentioned as one of the factors contributing to the
airline's success in India.
IndiGo airline carried over 46.6 million passengers during fiscal year 2022, according to the Directorate-General of Civil
Aviation. With about 84 percent on-time arrivals, it placed fourth among the country's most punctual airlines. IndiGo's
popularity with the domestic base was high, and it was expected to grow in the next years as a provider with the fewest
customer complaints.

IDENTIFY THE MARKET TO WHICH THE PRODUCT BELONGS….

Oligopoly:

An oligopoly is a market structure in which only a few enterprises can prevent the others from having a significant
influence. The fixation or concentration ratio measures the largest enterprises' market share.
In oligopoly markets, a limited number of suppliers control the market.
They are present in every nation and a wide variety of industries.
While few oligopoly markets are much more competitive than others, others can at least appear to be so.
Investigations into allegations of coordinated behaviour or a lack of fierce competition are frequently requested from
competition authorities.

The airline sector has an oligopolistic market structure. the reasons are

Few of firms contributing to majority of the market share.

As on January 2023 indigo with major market share 54.6% followed by Air India with 9.2% then Vistara with 8.8% which is
already 72.6% of the total market share in India

p>MC

Due to barriers in entry oligopolist earn sustainable profits over a long period of time. And thus, making price greater than
marginal cost

MR=MC
Products are differentiated in terms of service quality and offerings
Entry Barriers

Airline industry has its main entry barrier as the licencing.

6. Long run profit >= 0

Due to fear of rivals’ reaction, it is impossible to change price.

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Strategy dependent on individual rival firm's behaviour

To remain in competition action taken by competitive firms are to be monetarised.

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 PLAGIARISM SCAN REPORT

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FEATURES OF OLIGOPOLY

The market structure of the airline industry is an example of oligopoly, an imperfect form of competition in which a few
numbers of companies control the majority of the market.

The term ‘Oligopoly’ is derived from the Greek words "oligi," which means few, and "polein," which means to sell. A market
system known as an oligopoly has numerous buyers and few large sellers of a given good. In an oligopoly market, the
suppliers provide distinctive or similar products. Because there are fewer sellers in this market, the pricing and output
decisions of one seller have an impact on the pricing and output decisions of other suppliers. In other words, the sellers of
a commodity are highly dependent on one another.

By deciding on different output levels, oligopoly enterprises have the capacity to determine or change the prices for their
products. Any move an oligopoly firm makes is observed by its rivals because these businesses create comparable outputs
and compete with one another in their industries. As a result, competitors could retaliate by lowering prices or making
other moves to increase market share. Because of this interdependence, an oligopoly is characterized by enterprises that
are each aware of the risk that competitors or new market entrants would erode their market strength.

Features of the Oligopoly Market:

Few Firms: Under Oligopoly market, there are a few firms whose number is not exactly defined. However, every firm
operating in this industry contributes significantly to the overall output. Every firm in an oligopoly market competes with
the others fiercely and seeks to outwit them by manipulating the price and quantity of their products. As a result, each firm
keeps an eye on the actions of the other companies.
Non – Price Competition: In an oligopoly market, firms can affect the price of the good, but they attempt to avoid doing so
because it might cause a price war, which none of the firms want. In other words, if one company tries to reduce the cost
of their product, the other firms will have to reduce their cost as well, and vice versa. This could result in the company
losing customers and defeat the objective of its initial price hike. These businesses therefore favor non-price competition
and follow to a policy of price rigidity.
Interdependence: An oligopoly market has interdependent firms, which means that the decisions made by one firm have
an impact on the decisions made by others in the market. Before determining the price and degree of production for their
products, each firm in this market takes into account the activities and responses of its rival firms. The response of rival
companies engaged in the same market is altered by a change in the pricing or output of one firm.
Barriers to Entry: Under oligopoly, there are only a few firms because of the barriers to the entry of the new firms in this
market. The high capital requirements, need for patents, and other barriers to entry for new firms keep them out of the
oligopoly market. New firms that can get through these barriers ultimately enter the market, which results in long-term
abnormal profits.
Role of Selling Costs: The cost of marketing, sales promotion, and advertising a product is its selling cost. Due to the

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intense competition and dependency among firms, they use selling costs to assist them promote their products. As a
result, firms that operate in an oligopoly market give their advertising and other sales promotion techniques more
attention.
Nature of the Product: The firms operating in an oligopoly market may produce differentiated or homogeneous
products.
Pure oligopolies are firms that produce uniform goods. While imperfect oligopolies are firms that produce heterogeneous
goods.
Group Behavior: Any change in the pricing or output of one firm has an impact on the other competing firms since all of
the firms in an oligopoly market are entirely interdependent on one another. As a result, in order to prevent price wars,
these firms prefer to agree on the product's pricing as a group so that it will be advantageous to all of them.
Intermediate Demand curve: In an oligopoly market, it is impossible to predict a producer's actions with precision. As a
result, the firms operating in an oligopoly market have an intermediate or uncertain demand curve. The demand curve in
an oligopoly market is indefinite and constantly changes or shifts as a result of the interdependence of firms operating in
this market.

FEATURES OF OLIGOPOLISTIC AIRLINE MARKET

There are several high barriers to entry in the airline industry, which make it difficult for new companies to enter and
compete with existing airlines. Some of these barriers include:

High capital costs: Starting an airline requires a significant amount of capital, including the cost of purchasing or leasing
aircraft, hiring staff, and setting up operational infrastructure. This can be a major barrier for new companies, as it requires
a significant upfront investment.
Government regulations: The airline industry is highly regulated, with strict safety and security standards, as well as a
complex web of international and national regulations. These regulations can be difficult for new companies to navigate
and comply with, especially if they are not familiar with the industry.
Limited airport slots: Major airports often have limited slots available for airlines to use, which can make it difficult for new
companies to secure access to these high-demand locations. Existing airlines often have longstanding relationships with
airports, which can make it challenging for new entrants to gain access to the most desirable routes.
Established brand loyalty: Established airlines often have strong brand recognition and customer loyalty, which can make it
difficult for new companies to attract customers away from these established players.

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 PLAGIARISM SCAN REPORT

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In the airline industry, revenue is typically maximized by finding the optimal balance between price and demand. Airlines
need to set their prices at a level that will generate the highest possible revenue, while also ensuring that they fill as many
seats as possible on their flights.

To achieve this goal, airlines typically use sophisticated revenue management systems that take into account a range of
factors, such as the time of day, the day of the week, the season, and the number of seats available on each flight. These
systems use complex algorithms to adjust ticket prices dynamically based on changes in demand, and to optimize the
allocation of seats across different fare classes.

In addition to dynamic pricing, airlines also use a range of marketing and sales techniques to maximize their revenue. This
can include targeted promotions to specific customer segments, bundling of ancillary services and products with the base
fare, and partnerships with other companies to offer joint deals and packages.

Another key strategy for maximizing revenue in the airline industry is to control costs. Airlines need to keep their costs as
low as possible to maintain their profit margins, and this can involve a range of measures, such as optimizing fuel
efficiency, reducing maintenance costs, and negotiating favorable contracts with suppliers.

Overall, maximizing revenue in the airline industry is a complex process that involves a combination of sophisticated
pricing and revenue management strategies, effective marketing and sales techniques, and careful cost control.

Non-price competition is a common strategy used in the airline industry to differentiate airlines and attract customers
without necessarily competing on price alone. There are several ways in which airlines engage in non-price competition,
including:

In-flight amenities: Airlines can differentiate themselves by offering unique in-flight amenities such as high-quality food
and beverages, comfortable seating arrangements, entertainment systems, and Wi-Fi connectivity.
Branding and marketing: Airlines invest heavily in branding and marketing to create a unique brand identity and attract
customers. For example, some airlines may emphasize their focus on luxury and premium service, while others may focus
on low fares and no-frills service.
Loyalty programs: Airlines offer loyalty programs that reward customers for frequent travel, such as free flights, upgrades,
and exclusive access to airport lounges. These programs can create customer loyalty and help airlines retain customers
over the long term.
Partnerships and alliances: Airlines form partnerships and alliances with other airlines to offer customers a wider range of
destinations and services. For example, airlines may join global airline alliances to offer customers access to a larger
network of destinations and benefits, such as shared frequent flyer programs.
Customer service: Airlines differentiate themselves through high-quality customer service, including personalized service,
responsive customer support, and efficient boarding and check-in processes.

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Overall, non-price competition is an important strategy in the airline industry, as it allows airlines to differentiate
themselves and compete on factors beyond price alone. By offering unique services, amenities, and benefits, airlines can
attract and retain customers, even in a highly competitive market.

The airline industry is a complex network of interdependent entities, including airlines, airports, manufacturers, suppliers,
and customers. There are several ways in which these entities depend on each other:

1.Airlines depend on airports: Airlines need airports to take off and land their planes, as well as to provide services such as
baggage handling, security, and ground handling. Without airports, airlines would not be able to operate.

2.Airlines depend on manufacturers and suppliers: Airlines need aircraft, parts, and other supplies to operate. They rely on
manufacturers and suppliers to provide these items on time and at a reasonable cost.

3.Airlines depend on customers: Airlines need passengers to generate revenue. They rely on customers to choose their
airline over competitors and to purchase tickets for their flights.

PRICE DISCRIMINATION

Price discrimination involves charging different prices to different sets of consumers for the same good.
Firms can charge different prices depending on several criteria:

Quantity bought (e.g. lower unit price when higher quantity is bought)
Time of use (higher price at peak times)
Age profile (e.g. discounts for OAPs)
When unit is bought (e.g. discounts for buying early)

The primary idea behind pricing discrimination is that a company tries to take advantage of varied price elasticities of
demand. When certain people have strong inelastic demand, it indicates that they are willing to pay a higher price. If the
company can charge greater pricing to these customers, it will boost its revenue and profits. Other consumers will be more
price sensitive (elastic demand) and will respond to special offers and price reductions. If the firm can segregate these
consumers and so lower their consumer surplus, it will benefit.

HOW AIRLINES PRACTICE PRICE DISCRIMINATION?

TIME OF BUYING THE TICKET: There is no hard and fast rule, but buying a ticket several months in advance tends to be less
expensive. If there is a significant demand for a certain flight, the airline will raise the price of that flight. This indicates that
the remaining tickets will only be purchased by those who are willing to pay a higher price. (inelastic demand). If a flight is
not selling well, the airline will do the opposite and lower the price. This decreased price attracts more price-sensitive
passengers, ensuring that the aircraft is fully booked.

Ideally, the airline would like to fill the plane with passengers ready to pay the highest price. It is pointless to sell extremely
low-cost tickets and have the flight sold out several weeks in advance.

UNSOCIAL HOURS CHEAPER: Because some travel times are less popular, these flights are usually less expensive. For
example, suppose you go away for the weekend. Most individuals would rather return late on Sunday. These late Sunday
flights are typically more expensive than early Sunday morning ones.

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Price discrimination is usually thought of as a way to extract as much consumer surplus as possible from each group of
consumers, given their utility functions (demand elasticities, cross-elasticities, etc.) and income. It is therefore associated
with raising prices for less elastic consumers.
But in the case of airlines, price discrimination is exhibited through fare discounts. Hence, changes in price
discrimination involve changes in discounts given to more price elastic consumers. In this case, if higher competition
reduces fares charged to price-elastic travelers, it may involve an increase in price discrimination—the discount associated
with any given ticket restriction may be greater.

The revenue curve of the airline industry is typically downward-sloping, meaning. This is because in a competitive market,
producers must lower their prices in order to attract consumers and gain market share. As the price of a ticket decreases,
the quantity demanded increases due to the law of demand.

However, the shape of the revenue curve can vary depending on a number of factors, such as the degree of competition
within the industry, the level of product differentiation, and the elasticity of demand for travel.

In a perfectly competitive market, the revenue curve would be a straight line, with a constant price and quantity sold at
each level. However, in the real world, the airline industry is characterized by oligopolistic competition, where firms
differentiate their products to some degree to create a competitive advantage. This can result in a slightly curved
downward-sloping revenue curve.

Additionally, the revenue curve for luxury or high-end tickets like BUSINESS CLASS may be less elastic than for more
affordable tickets like ECONOMY CLASS, meaning that changes in price have less of an impact on the quantity demanded.
This can result in a more gradual downward slope of the revenue curve.

Overall, the revenue curve of the airline industry is typically downward-sloping, but its exact shape can vary depending on
a variety of factors

In the short run, an oligopoly market can reach a state of equilibrium where the industry is in a stable state. In an oligopoly
market, there are typically only a few large firms that dominate the industry and have significant control over the market
price.

In the short run, each firm in the oligopoly market will have a particular level of output and price that maximizes their
profits. These firms will consider their own production costs, as well as the likely reactions of their competitors when
setting their output and price levels.

Assuming that the firms in the oligopoly market are rational and act in their own self-interest, they will strive to produce at
a level where their marginal cost equals their marginal revenue. This will allow them to maximize their profits in the short

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run.

However, the equilibrium price and output level in an oligopoly market are typically higher than in a perfectly competitive
market, as the firms in the oligopoly have significant market power. Additionally, the equilibrium may not be stable, as
firms may attempt to gain a larger market share by lowering their price or increasing their output, which can lead to
retaliation by their competitors. Overall, short run equilibrium in an oligopoly market is characterized by interdependence
and strategic behavior among firms, which can make it difficult to predict market outcomes

In the long run, an oligopoly market can also reach a state of equilibrium where the industry is in a stable state, but the
market structure and outcomes may be different compared to the short run.

In an oligopoly market, entry barriers can make it difficult for new firms to enter the market and compete with the existing
firms. Therefore, in the long run, the number of firms in the market is likely to remain stable, and the existing firms will
continue to have significant market power.

In the long run, each firm in the oligopoly market will consider the potential entry of new firms when setting their output
and price levels. This means that firms will not only consider the reactions of their existing competitors, but also the
potential reactions of new entrants.

The airline market is a complex and dynamic market that is affected by various factors such as externalities and efficiency.

Externalities are the effects of economic activities on third parties who are not directly involved in the activity. Externalities
in the airline market can be both positive and negative. The external factors affecting airline profits are:

Wage inflation + union strikes: As the airline industry's labour demand continues to climb, workers are demanding more
pay and additional perks.
Labour Shortage: While the existing labour force continues to demand higher wages, many airlines are having difficulty
finding talent at all, notably commercial pilots. The 'critical' scarcity has resulted in substantial disruption in the form of
route cancellations. More cancellations mean fewer available flights, especially in smaller areas and regional airports, where
understaffing affects smaller carriers disproportionately. As a result, passengers must either cancel their trip plans entirely
or seek out longer, less convenient alternatives.
Fluctuating Oil Prices: Low oil prices, of course, mean cheaper airline costs. But anything might happen at any time. Those
who hedge on jet fuel, such as European carriers, will feel the effects of increasing fuel prices sooner than those who do
not.
Competition + Consolidation: Strong worldwide economies, along with a drop in oil costs, have contributed to increased
consumer travel demand, and with it, more airlines offering more routes and options for the discriminating traveller.
However, as competition grows, airlines must weigh the benefits of sacrificing customer service, flight costs, and other
cost-cutting measures against the risk of losing consumers to competitors.

Furthermore, more aircraft taking off and airlines operating out of global hubs implies more competition for space at these
airports. Airports are already overcrowded, and increased demand allows them to charge more fees for a place at one of
their gates. However, additional planes and passengers might lead to more delays if operational efficiencies are not
increased in tandem.

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 PLAGIARISM SCAN REPORT

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This study becomes significant in light of the expansion of the aviation industry since individuals are travelling more
frequently and want to do so more quickly and effectively. The demand for air charter services is rising daily as a result of
enterprises expanding more quickly than in the past. As a result, a study of the development and difficulties faced by the
business owners involved in air charter would be valuable to the sector.The airline industry is cyclical and sensitive to a
number of external economicfactors that affect the number of domestic and international travelers, including
consumerconfidence and corporate profit. Improved economic conditions over the five years have increased demand for
both business and consumer travel. The newer aircraftsare continuing to update to satisfy the request from consumers.
There has been atremendous surge in the percentage of people who are now traveling longer distances andbecoming
frequently flyers more than ever before. As far as changes in travel preferencesmillennial are found to be willing to spend
more on business travel than other generationswhen it comes to business travel.
There is an increasing demand forinternational flight and airport are beginning to grow and airports now have a
system tocomply with passengers with connecting flights, it is very important
for airport tostandardize their processes in order to minimize passenger confusion benefiting the foottraffic of airport and
making the airlines more profitable.

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