Aero Asia

Contents Executive summary............. summary.......................... ......................... ........................ ......................... .............................................1 ................................1 Introduction............... Introduction........................... ........................ ......................... ......................... ........................ ........................................... ............................... 2 Findings..................... Findings.................................. ......................... ......................... ......................... ........................ ..........................................3 ..............................3 Analysis................. Analysis............................. ........................ ......................... ......................... ........................ ........................................... ............................... ....5 Conclusion and Recommendations...... Recommendations.................. ........................ ......................... ......................... .............................7 .................7 BIBLIOGRAPHY....... BIBLIOGRAPHY................... ........................ ......................... ......................... ........................ ......................... ...................................8 ......................8

Executive summary Aero Asia International was launched in 1993. It operated on domestic and international routes, mainly serving the Middle East region. At the height of its operations Aero Asia was

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the second largest carrier after the state owned Pakistan International Airlines (PIA) and carried over 1 million people annually. Aero Asia was a low cost airline compared to PIA and its ticket prices were comparable to those of Shaheen Air, the other private Pakistani carrier. Gradually the quality standards of Aero Asia deteriorated over time and less people preferred to travel by it. In 2006 Aero Asia was sold by the Tabani Group of companies who had owned the airline since its inception to a United United Kingdom Kingdom (U.K) based company, company, called the Regal Group. There were also major safety issues with the Aero Asia aircraft fleet and owing to these these reason reasonss eventu eventually ally it was barred barred from from flying flying in May 2007 by the Civil Aviati Aviation on Authority (CAA) of Pakistan. The ban was indefinite and was to stay in place until the safety standards were met. There have been plans by the Regal Group to re-launch Aero Asia soon. A major chunk of the market share of Aero Asia has been taken over by the relatively new entrant to the market, AirBlue which was launched in 2004. When AirBlue was launched it offered low cost tickets along with a high standard of service quality. The re-launch of Aero Asia will have to come with a strong marketing campaign which will aim to shed the poor quality standards of the airline and will have to focus on portraying Aero Asia as an airline that offers high service quality and competitive ticket prices. The management will have to focus on maintaining the high standards which the people will expect and will need to come up with innovative ideas like e-ticketing that attract and facilitate customers. Re-launching Aeor Asia will be a major task but it can be done by focusing on the right things.

Introduction Aero Asia International, commonly known only as Aero Asia, was a private airline ba airline based sed in





owners owners and the top management management of the company company have been sourcing sourcing expertise, expertise, systems systems and aircraft to facilitate a lifting of the suspension in accordance with the 2007 Draft National Aviation Policy issued by the Pakistan Civil Aviation Authority .1 Aero Asia was in business for nearly 14 years, its domestic routes included flights to Islamabad, Islamabad, Faislabad, Faislabad, Karachi, Karachi, Lahore, Multan, Peshawar, Sukkur and its international routes included flights to Abu Dhabi, Al Ain, Ain, Doha Doha,, Duba Dubaii and and Musc Muscat. at. Aero Aero Asia Asia is not not the the only only Paki Pakist stan anii airli airline ne to ceas ceasee operations, in the past Bhoja Air and Hajveri Air also went out of business. At first glance the story of Aero Asia seems to be like that of any other private sector company that went out of business, but a closer look at the story reveals many interesting details for the reason of its fall. Aero Asia is a company that had a major market share when it was operating in its hay days, but then came the downfall which caused it to exit the market altogether. This study based on research and survey method, is basically to explore the reasons for the downfall of Aero Asia and present the possibility and viability of re-launching Aero Asia as a successful airline in the domestic as well as international market. When launched, Aero Asia will have to face stiff completion from the three airlines currently operating in Pakistan, namely namely Pakist Pakistan an Intern Internati ationa onall Airline Airliness (PIA), (PIA), AirBlu AirBluee and Shahee Shaheen n Air Intern Internati ational onal (Shaheen Air).

Findings Aero Asia was formed in 1993. 1993 .2 It started operations on 4 May 1993 and was owned by the Tabani Tabani Group Group of comp compan anie ies. s. Aero Aero Asia Asia made made a prom promis isin ing g star start, t, empl employ oyin ing g exex-PIA





management with a serious growth plan. Operations were started with leased aircraft from the VIP fleet of Romania operated by Roma Ro mani ni an Air A irli line ness, a sister company of the Romanian Airforce. Later, Aero Asia obtained four more aircraft on lease purchase option from Tarom, the national airline of Romania. 3

In its initial years, Aero Asia was fully committed to training its locally-hired staff, following the example of PIA and in line with requirements of the local civil aviation authority. A small training school was also founded, for training of cabin crew. 4 In 1994 Aero Asia started the recruitment recruitment of batch of trainees trainees for aircraft maintenance maintenance,, announcin announcing g that a fully-funct fully-functional ional aircraft maintenance facility was planned. Senior retired staffs from the PIA training centre were employed and approval of the training school from the local civil aviation authority was sought.5 Aero Asia started its international international operation on a route to Bishkek , in Central Asia. Later, Aero Asia started flying to the Gulf Emirate of Sharjah. Sharjah.6 Aero Asia operated a fleet of three three to five five Yakovl Yakovlev ev Yak-42 Yak-42D D on main main trunk trunk routes routes in Pakist Pakistan. an. These were mainly mainly Karachi, Islamabad and Lahore. However, as demand rose through the years, the airline replaced its YAK-42Ds with Boeing 737-200Adv and Douglas DC-9s. DC-9s.7 At the start of 2006, 2006, Aero Asia and Askari Bank MasterCard announced their strategic alliance to offer their card members special discounts. discounts .8

In 2006, Aero Asia was acquired by the Regal Group-a UK based food manufacturers but with a global presence. The Group belongs to people of Pakistani, Kashmiri descent, with headquarters in Karachi and Yorkshire. The brand has a presence in Pakistan, United States, and and Unit United ed King Kingdo dom. m. The The airli airline ne is curre current ntly ly in the the proc proces esss of bein being g re bran brande ded d and and restructured. 3 All Experts, “Aero Asia International,” I nternational,” http://en.allexperts.com/e/a/ae/aero_asia_international.htm 4 Wikipedia, "Aero Asia International," http://en.wikipedia.org/w/index.php? title=Aero_Asia_International&oldid=322136918 5 Ibid. 6 Airline Route Maps, http://www.airlineroutemaps.com/West_Asia/Aero_Asia_pakistan.shtml





In May 2007 the Civil Aviation Authority (CAA) of Pakistan suspended the operations of Aero Asia due to issues related to the safety of operations and passenger convenience. 9 The problems had been highlighted to the management of Aero Asia time and again but the situation, instead of improving, deteriorated.

When Aero Asia was in business, it had a major share of the Airline market in Pakistan. After PIA, Aero Asia was the second largest Pakistani carrier on the domestic routes. According to provisional aviation statistics for the year 2006-07 Airblue carried 1.4 million passengers in 2006-07, up around 7.7 per cent from previous year’s 1.3 million it carried between different cities of Pakistan. The PIA, faced with accumulated losses of more than Rs35 billion, lost domestic market share by 5.7 per cent as it carried five million passengers compared to 5.3 million during the period under review. 10 Majority Majority of the market gap that Aero Asia left was targeted and filled by AirBlue as it marketed itself in a better way to the customers of Aero Asia.

The consumers still remember and can relate to Aero Asia as an airline that has ceased to exist as shown by Fig.1. Our sample group primarily consisted of people from middle and upper middle class. These people have and will use air travel as a means of travel in the future. As shown by Fig.2, there exists a high growth market for air travel. Fig.3 shows that this market is currently led by PIA, followed by AirBlue and Shaheen Air comes at the end. Despite the fact that Aero Asia has been out of business for nearly three years, there a few number number of people people who have travelled travelled by Aero Asia as shown shown by Fig.4. Fig.4. Price of the ticket is more ranks to be less important important to people people when travelling travelling by air, as compared the service quality of the airline is more important, Fig.5 shows this. Fig.6 tells us that majority of the consumers think that Shaheen Air offers the lowest air fare, followed by AirBlue, while PIA is considered to be the most expensive. On the same not Fig.7 compares the service quality of the three airlines. AirBlue takes the lead, while PIA is not far behind and Shaheen Air being ranked the last. (See Annexure for Figures)





Analysis When Aero Asia started operations in May 1993, it was hailed as a breakthrough in the Pakistani Airline industry. The reason for Aero Asia's rise to fame was that it was the only domestic private sector airline of Pakistan at that time as Hajvairy Airlines; another domestic priva private te sector sector airline airline had ceased ceased to exist exist in 1993 1993 after after stayin staying g for only only two years in operations. Aero Asia was in a head-on battle with the Pakistani state owned airline, PIA not only for domestic but also international routes in the gulf region. Aero Asia was successful in capturing capturing a share of the market market from PIA by offering offering better service service quality quality and competitiv competitivee ticket prices.

If we apply the Porter five force analyses to the airline industry in Pakistan, we get a better understanding of the aviation industry. Aero Asia being launched will face major competition from the airlines airlines already existing in the industry, industry, which are PIA, AirBlue AirBlue and Shaheen Air. These airlines would also be the substitutes that the consumers can use instead of Aero Asia. The suppliers won’t be playing a major factor as Aero Asia already has the aircraft needed for the operations. The buyers or the market that would be targeted would be the same for all the airlines in the industry as they are offering the same services. Aero Asia does not face any barrier to entry into the market as it already has the licence from the Civil Aviation Authority (CAA) and there would be no immediate threat of a new entry in the industry as the CAA does not issue new licences very frequently and easily. This shows that the main area that Aero Asia would need to focus if re-launched would be its competition with the other airlines that are already in the market.

Aero Asia carried more than one million passengers in fiscal year 2004-05 but the number shrank to 756,308 in the following year and dropped to 278,900 in 2006-07. In contrast, Airb Airblu lue, e, whic which h start started ed with with only only 22,3 22,320 20 pass passen enge gers rs in 2003 2003-0 -04, 4, carrie carried d 1.4 1.4 mill millio ion n passengers in 2006-07. 2006-07 .11 This drastic fall in the number of passengers travelling by Aero Asia has been linked to the fall in quality standards of the airline along with a decrease in the number of operational flights that were reduced due to safety concerns. This also shows that the consume consumers rs in the Pakista Pakistani ni market market are not very loyal loyal to the brand brand when it comes comes to







over customers customers from the competitors. competitors. At the time of launch AirBlue focused on superior superior service quality standards and highly completive prices. AirBlue also came up services that did not exist in Pakistan previously, like e-ticketing and major discounts on early booking of flig flight hts. s. This This comb combin inat atio ion n of comm commit itme ment nt towa toward rdss grow growth th,, cust custom omer er sati satisf sfact actio ion n and and innovation has help AirBlue in capturing a major share of the air line industry in Pakistan. As PIA and Shaheen Air did not focus on these things, they were not successful in capturing the market share that was up for grabs when Aero Asia left. After realizing the tough competition from AirBlue, PIA and Shaheen Air have been trying to catch up to the service quality standards and innovative services like e-ticketing that AirBlue brought to the market.





Conclusion and Recommendations As our analysis shows that the aviation industry is a cut throat business and to stay in the running, a company needs to focus on a lot of things. As Aero Asia could not meet the demands of the changing market, it had to close its operations. On the other hand, AirBlue a new entrant to market was quickly able to grab a large market share due to its focus customer satisfaction and innovative ideas. PIA and Shaheen Air also lost their customers to AirBlue due to not being able to keep up with the changing trends. Despite the fact that Aero Asia has been out of business for nearly three years, the consumers still recall Aero Asia as a major player in the Pakistani aviation market. Though one might think that there would be a negative stigma attached with Aero Asia due to the fall in quality of service in the years preceding its exit, but very few people remember that now. This strong brand brand recall gives us the opportunit opportunity y to re-launch re-launch Aero Asia in the domestic domestic market. market. This advantage of the known brand name would save time and money at the time of the re-launch and more resources can be focused towards making the air line a success. Aero Asia’s first and foremost priority would have to be competitive ticket prices and quality standards that are better than the other players in the market. Aero Asia would have to focus on the pre flight details, such as the flight information, ticket booking etc by having a user friendly website and a 24hour customer support call centre. One area where Aero Asia can really shine is by keeping its flights on time and informing the customers about any delays/changes in their flight schedule. Flight delays and lack of information about them is one major factor that irritates the consumers. The in flight experience also counts a lot towards the overall air travel experience. experience. Here training training the cabin crew properly is vitally vitally important important as most people cite unfriendly cabin crew for a bad flying experience. The lack of proper training of the cabin crew has been a long standing major issue with PIA and Shaheen Air, and this is the





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QUESTION.1: Do you know about Aero Asia?

Yes No

QUESTION 2: How often do you travel by air?

Never Seldom Often Frequen t

QUESTION 3: Which Airline do you travel by?

PIA AirBlue shaheen

Question 4: Have you ever travelled by Aero Asia?

Yes





PIA AirBlue Shahee n

8 14 28

QUESTION.7: Which airline do you think has the best quality of service?

PIA AirBlue Shahee n

15 22 3

Aero Asia

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