ETM on Indian Aviation

8/9/2019 ETM on Indian Aviation

1/7

www.economictimes.com | Mumbai | 32 pages | `10

February 24-March 02, 2013

Even as Malaysias AirAsia gets

set to enter India, its the

funds-flushed troika from the

Gulf Emirates, Etihad and

Qatar that are well placed

to catch the tailwinds on

the Indian flight path

p.06-11

PRE-BUDGET SPECIAL

p.13

p.04

A prototype of a composite

car is part of Tata Motorsgrowth ambitions

TATAS NEXT-GENLOW-COST CAR

A DECADE OF FISCAL

IRRESPONSIBILITY


2/7

cover storyFEBRUARY 24-MARCH 02, 2013

6

ven for an industry that has always been inher-ently vibrant, last week was unusually eventfulfor aviation. It began with the news that a sale ofstake by Jet Airways, Indias second-largest carri-er by passengers carried, to Abu Dhabis fast-growing airline, Etihad Airways, will be delayed.If the news was disconcerting, Jet didnt show it.The airline cut fares by nearly a half on Tuesday,

mimicking a move by budget carrier SpiceJet inJanuary, when Indian air travellers had becomeaccustomed to the idea that the era of cheap air-fare was history. A day later, the Tatas said theywere taking another shot at aviation partneringMalaysian budget carrier AirAsia. Turns out run-

away airfares will be history.Understandably, in the euphoria over lower air-

fare, the news concerning Jet receded into thebackground. Yet for Indian aviation, a Jet-Etihaddeal trumps the other developments in signifi-cance. Falling airfares are a flash in the pan. Spice-Jets offer was a buffer against a lean travel seasonand Jets price cut was nothing but a counter. As for

the Tatas and AirAsia, these are early days to ascer-tain the success of their venture (see A New Kid..).A Jet-Etihad deal has the potential to be a game-

changer, according to consultancy Capa. Despitethe early hiccup, most aviation analysts say a deal isat hand because of the substantial benefits for both

:: Binoy Prabhakar

ven as Malaysias largest budget carrier AirAsia gets set to enter India

with the Tata group as a partner, its the funds-flushed troika from the

ulf Emirates, Etihad and Qatar that are well placed to catch theailwinds on the Indian flight path

E

AirAsias plan to enter the

domestic aviation market

partnering the Tatas is

surprising on many counts.

The airline's wariness

about the Indian market is

well-known because of its

struggles on overseas

routes from India since the

launch in December 2008.

According to consultancy

Capa, the brand has

struggled partly because of

its inability to access local

distribution networks.

Travel agents still account

for most bookings in India

but they have not

supported AirAsia as they

do not use the fee-for-serv-

ice model," it noted in a

recent report. Another

impediment was its

exclusive partnership with

reservation website

Expedia. India happens to

be the only Asian market

where the group has

reduced capacity in the

past year. It dropped out of

three of the nine routes due

to losses. The two busiest

Mumbai and Delhi were

dropped from the networkin 2012 as part of a

rationalisation exercise. Al-

ready, AirAsia CEO Tony

Fernandes has indicated

that he is skittish about

flying between Delhi and

Mumbai due to the high air-

port charges. Today, the

carrier accounts for just

10% of seat capacity in the

India-Southeast Asia

market compared with 14%

a year ago, says Capa.

That said, the

consultancy also noted that

securing the right local

partner could resolvemany of the challenges

AirAsia has faced in India.

The airline seems to have

done exactly that by roping

in the Tatas.

The Indian aviation

industry as a whole may

be in a shambles because it

is a competitive and

largely unprofitable

market thanks to high fuel

taxes and airport charges,

but long-term growth

opportunities are vast.

Mohan Ranganathan, an

air safety consultant, says

the venture is likely to

succeed. Focussing on

tier-2 and tier-3 routes in

the south will feed

AirAsias larger network,

he says. Then there is the

credibility of the Tatas.

A NewKid on the

Air Block

Sheikh, RattleAnd Fly
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3/7

cover story 07FEBRUARY 24-MARCH 02, 2013

QatarAirways

EmiratesAirline

EtihadAirways

Fast Fact Dubais flagship airline

OwnershipWholly owned by theDubai government

Key Financials 2012-13* 2011-12* Change (%)

Revenue ($ billion) 9.7 8.3 16.8

Net profit ($ million) 464 225 106

* First six months of financial years 2011-12 and 2012-13

Key Financials 2012 2011 Change (%)

Revenue ($ billion) 4.8 4.1 17

Net profit ($ million) 42 14 200

Fast Fact National carrier of UAE

OwnershipWholly owned by theAbu Dhabi government

Fast Fact National carrier of Qatar

Ownership Government of Qatar (50%)and private shareholders (50

Tim Clark

President

carriers (see Why Jet & Etihad). Jet isstarved for capital and Etihad, which haspushed alliances that give it strategic ac-cess in specific geographies, stands to

grow in one of its most important markets.

India ShiningTo fully understand Etihads gains, weneed to look at the airline from the lens ofthe other two big carriers based in the Per-sian Gulf Emirates Airline and Qatar Air-

ways. At a time when global rivals arepinching pennies, all the three carriers arehankering for new routes, shopping forplanes and building or expanding their

home airports. It is not hard to see why:they are wrapped in a cocoon of oil wealth.If a deal with Jet materialises, it will be

Etihads fifth acquisition in a shade over ayear. Being the youngest, Etihad is playingcatch-up with its larger Gulf rivals by snap-ping up stakes in overseas airlines. Qatar

for now is keen to tap opportunities closerhome. Emirates has been content growingits network individually.

Indeed, all three have pressed ahead

with different growth plans. Yet there is acommon thread running through theirstrategies and fortunes India. Essa Su-laiman Ahmad, vice-president, India andNepal, Emirates, says India is the largestoperation in the airlines network. Etihadflies to six cities in India, the most in any

country. Akbar Al Baker, the chief execu-tive of Qatar Airways, says India is a keypart of the airlines growth strategy, whichis evident from its services to the most

number of destinations compared withany other country in our network or by anyother international airline.

Indians also form the l ions share of theirworkforce (see The Gulfs Big Three). It isanother matter that its because they areinexpensive, deployed largely for the least

Global Operations Global Operations Global Operations

Indian Operations Indian Operations Indian Operations

October 25, 1985

Dubai InternationalAirport

Destinations in75 countries129

Hub

Launch

Fleet in service197Fleet ordered202

Employees42,800Indians11,263

January 20, 1994

Doha InternationalAirport

Destinations in70 countries124

Hub

Launch

Fleet (Mix of Airbus andBoeing aircraft)119Fleet ordered250


November 2003

Abu DhabiIntl Airport

Destinations in 55countries86

Hub

Launch

Fleet (Mix of Airbus andBoeing aircraft)70Fleet orderedincluding 10 Airbus A380s

90


James Hogan

President and CEO

Akbar Al Baker

Chief Executive Officer

Increase in profit onEbitda level in 2011-12

"Small" Net Loss, according to Al Baker

*Qatar Airways, which is not listed on a stock market, rarely

discloses its earnings or market share

Launch 1997

95 Flights a week

12 Destinations Ahmedabad, Amritsar, BengaluruChennai, Kochi, Delhi, Goa, Hyderabad, Kolkata,Kozhikode, Mumbai, and Thiruvananthapuram

3.3% Qatars market share of Indiasinternational passenger traffic in 2010-11

0.85 million Passengers who travelledQatar's Indian flights in 2011-12

Launch 2004

63 Flights a week

9 Destinations Ahmedabad, Bengaluru,Kozhikode, Chennai, Kochi, Delhi, Hyderabad,Mumbai, Thiruvananthapuram

1.5% Etihads market share of Indiasinternational passenger traffic in 2010-11

0.7 million Passengers who travelledEtihads Indian flights in 2012

Launch October 25, 1985

185 Flights a week

10 Destinations Ahmedabad, Bengaluru, Chennai,Delhi, Hyderabad, Kochi, Kolkata, Kozhikode,

Mumbai and Thiruvananthapuram

12.3% Emirates market share of Indiasinternational passenger traffic in 2010-11

4.71 million Passengers who travelledEmirates Indian flights in 2011-12

Key Financials*

Takeaway Right now, Emirates has a clear lead over the other two carriers

THE GULFS BIG THREE
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4/7

glamourous tasks in aviation such as han-

dling baggage or catering.Given this backdrop, a direct con-

frontation with each other is inevitable.To date, Emirates is by far the most suc-cessful of the three. Its progress in Indiamirrors its global push, building routes toa country that was simply ignored or for-gotten by rivals.

Indians who form the biggest expatri-ate population in the region have longbeen one of Emirates principal growthengines. More than 1.7 million Indians livein the UAE (of this, nearly half live inDubai) while 0.5 million Indians live inQatar, according to the Ministry of Over-seas Indian Affairs.

Geography too was critical to its suc-

cess. Roughly two-thirds of the globalpopulation live within an eight-hourflight while the rest live within fourhours from Dubai.

It shouldnt then be a surprise that sev-en airlines, including five from India, fly to

Dubai alone from as many as 17 Indiancities. In an earlier interaction, Lorne Ri-ley, head of corporate communications ofDubai Airports, said India was the top-most market, accounting for 6.84 millionair travellers in 2011.

A Three-Way RaceAs an early mover, the biggest beneficiaryof this growth has been Emirates. Still,that does not explain how the carrier hascome to fly 185 times a week from Dubaito 10 cities in India, considerably higherthan any other international carrier. Emi-rates edge over rivals stems from the air

traffic rights that Dubai secured from In-dia as part of the open skies policy pur-sued by the government since 2004-2005. These arrangements, known as AirService Agreements or bilaterals (seeWhat are Air Service Agreements) in

aviation parlance, are one of the darkestlegacies of former aviation minister Pra-ful Patel. Patel has on many occasions de-nied any wrongdoing.

But the audacious manner in which fly-ing rights were handed to foreign carrierswas severely criticised by Indias nationalauditor. In a 2011 report, the CAG chroni-cles events relating to the India-Dubai sec-tor to illustrate the liberal grant of rights.Between 2005 and 2010, Dubais bilateralentitlements grew from 10,400 seats to54,000 through a series of MoUs. TheCAG notes that Emirates was able to de-rive substantially greater traffic under theDubai bilateral (due to 6th freedom traffic passengers flying between two coun-

tries while stopping in ones own country and access to 10 points of call in India)while Indian carriers were essentially car-rying only 3rd or 4th freedom traffic (be-tween India-Dubai).

The 6th freedom traffic is not, in astrict sense, illegal. Saj Ahmad, chief ana-lyst of StrategicAero Research.com, aconsultancy based in London, says as airtravel continues to grow, the increase in

bilaterals and other open skies agree-ments are par for the course. In turn,6th freedom traffic rights have also ex-panded as a result; so in a way you couldargue that this is indeed the new norm

for the industry and is also part of thereason why co-operation, not competi-tion on treaties is the way forward.

Nevertheless, the CAG report draws at-tention to the one-sided nature of benefitsto Emirates despite state-run Air Indiasrepeated protests at the lack of reciproci-ty. It highlighted the Dubai authoritiesrefusal to agree to requested reciprocalarrangements for Air India, citing acuteinfrastructural constraints at the Dubaiairport. Indian officials overlooked theDubai airports status as one of the biggestin the world. Terminal 3, which is re-served for Emirates, is not only theworlds largest air terminal, it is also theworlds largest building.

The Bilateral FactorThe India head of a foreign airline speakinganonymously pointed out that the UAE isthe only country that has managed to ob-tain bilaterals from India for four of its emi-rates Dubai, Sharjah, Abu Dhabi and RasAl Khaimah. It is the same as Kerala andKarnataka asking for traffic rights.

A former official of the aviation ministrysays the arrangement with the UAE is pe-culiar and very suspicious. Air India is es-sentially servicing probably five airportsand in return we have opened up nearly20 airports to airlines from that region,he says, asking not to be named.

It is not for nothing that Emirates isknown as Indias national carrier. But

the airline is hardly the sole beneficiaryof the generosity of Indian authorities.Entitlements to Qatar, for example, havegrown from 5,372 seats in 2005 to24,292 currently.

The bilaterals remain a prickly topic forthe aviation ministry. Information on thesubject on the website of the aviation reg-ulator DGCA dates back to 2005. A seniorDGCA official says the agency has strictorders from the aviation ministry againstupdating the rights to foreign carriers.This official too did not want to benamed, fearing repercussions.

Indian private airlines, meanwhile,have complained repeatedly against thelack of opportunities in a lucrative sector.

In an earlier interview, SpiceJet CEO NeilMills said he wanted to diversify into moreinternational routes to take pressure offthe domestic market, but was yet to hearfrom the aviation ministry. Today, bothSpiceJets and budget competitor IndiGosoperations on the Dubai route (see HowThey Stack Up) are modest.

That is partly due to the fact that theyare late starters; IndiGo launched servic-

cover story8FEBRUARY 24-MARCH 02, 2013

Emirates

27.15%

Etihad

11.24%

Air Arabia

17.23%SpiceJet4.08%

FlyDubai

1.46%

r India

16.5%

Air India Express

7.01%

IndiGo

8.18%

Jet Airways

7.15%

How They Stack UpTHE BUZZING INDIA-UAE AVIATION MARKET*

Richard Aboulafia, AVIATION CONSULTANT

Source: Martin Consulting LLC

* R A S A L K H A I M A H & F U J A I R A H A R E N O T I N C L U D E D

Flight attendants of anEmirates flight

Flights per week

56

48

49

28

10

63

185

113

118

TakeawayEmirateshasgrabbedthe biggestmarket

sharethanks to alargernumberof flights

The Gulf carriers, compared with

rivals, have better geography andan awful lot more cash
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5/7

es to Dubai in September 2011 and Spice-Jet in June 2012 to comply with a rule thatsays Indian carriers must fly on domesticroutes for five years before they expandoverseas. Yet, the total number of seatsapportioned to Indian carriers is still only42,978 compared with the 54,200 allot-ted to Emirates and FlyDubai, Dubaisbudget airline, according to data collatedfrom the Dubai airport.

Not EnoughHowever, Emirates is still hungry for moreseats from India. Last year, the carrier ap-proached the National Council of AppliedEconomic Research (NCAER) to push its

case with the Indian government. By con-trasting the increase of seat allocation

from the present 54,200 a week to60,000, 70,000 and 80,000, a study byNCAER notes that if the seats allocated toEmirates are increased, then the corre-sponding benefits to the economy andtourism sector will also increase.

The study establishes Emirates advan-tage due to the extensive use of the 6th

freedom right, revealing that 55% of itspassengers flew to destinations beyondDubai from India compared with the 45%traffic between India and Dubai. But it isalso careful to highlight that only 18% ofthe 6th freedom traffic flies between

points served by Indian carriers.According to Tushar Nandi, the princi-

pal author of the study, the NCAER teamworked on a brief laid down by Emirates.They [Emirates] wanted to highlightthat allocating more seats can be onlygood for India.

Nandi, who has since joined the Centre

for Studies in Social Sciencesin Kolkata, says the adverse ef-fects of market concentration,a euphemism for Emiratesdomination over the Dubai

route, did not fall under thescope of study. Adverse im-

pacts in this regard are obviousfor any sector, not just aviation.So far, Emirates has benefited

from generous approvals from Indi-an authorities. But the advantage may

soon come to naught. One of the criticalimpacts of the Jet-Etihad deal is likely tobe a relaxation of the India-UAE bilateral,according to Capa. Emirates Ahmad saysany further growth in the Indian marketwill be determined by government ap-provals. The rub is that with more playerson the scene and greater media scrutiny,the bilateral is unlikely to be as one-sidedas before.

Capa notes that Qatar apart, TurkishAirlines and Singapore Airlines too arewaiting in the wings to expand bilateralsas they have exhausted their current enti-tlements. Indeed, Qatars Al Baker saysthe airline plans to seek more landingrights in India, incorporate new destina-tions to its list and increase frequency onexisting routes. The advent of AirAsiameans there is another attractive alterna-tive for Indian expatriates.

Bilaterals are important to the Gulf car-riers because there is little to choose fromthe three in terms of fares or facilities. Allthree are known to woo travellers whorepresent the crowded and cosmopolitanfacets of aviation. So, economy-class pas-sengers are pampered with lavish meals

and entertainment options while businessand first-class flyers are welcomed withstunning interiors and showers onboard.

Manish Chheda, managing director ofconsultancy firm Auctus Advisors, says ina sense, they are all fighting for the samepassenger. If I am flying to Madrid, I couldchoose either of these airlines.

Whole New Ball GameEtihads deal with Jet must be viewed in thecontext of these realities. Mark Martin ofMartin Consulting, a consultancy based inDubai, says the rivalry between the Gulf car-riers is becoming more and more aggres-sive. Etihads potential purchase of a Jetstake is, in a manner of speaking, sidestep-

ping codesharing [reciprocal agreementsbetween airlines that offer passengers moredestinations and easier connections] or bi-laterals. According to Capa, a key rationaleof the proposed investment for Etihad is toprovide greater feed from the Indian marketto support its intercontinental services toEurope and the Americas.

The India head of the foreign airlinewho sought anonymity says Qatar cancatch up with Emirates on bilaterals, butEtihad cant. Hence, the deal with Jet.

Craig Jenks, president of Airline/Air-craft Projects Inc, a consultancy based inNew York, says the Emirates versus Etihadbattle is global in scope. Etihad, he says, issubstantially behind in size, global mar-

keting clout and its home airport. How-ever Etihad is Abu Dhabi while Emirates isDubai. This is the big difference. The for-mer can still buy whatever it wants Imean anything not just airlines. Dubaigot burnt by its property boom its air -

cover story 09FEBRUARY 24-MARCH 02, 2013

Air Service Agreements (ASAs)specify traffic rights for globalair services

ASAs are also referred to asbilateral agreements or simplybilateral

These are concluded on thebasis of reciprocity andfair/equal opportunity, andprovide the legal frameworkfor scheduled air servicesbetween two countries

Traffic rights and capacityentitlements are exchangedbetween the countries on thebasis of market requirements

Bilaterals specify entitle-ments of airlines of bothcountries in terms of frequencyof operations, number of seats,destinations etc

International commercial aviationtraffic rights that grant a countrysairlines the privilege to enter and land

in another countrys airspace

THE 3RD, 4TH AND 5TH FREEDOMS ARE NEGOTIATED BETWEEN

COUNTRIES THROUGH BILATERALS

Freedom Description Example

The right to fly from one's New Delhi-London forown country to another country Air India

The right to fly from another London-New Delhicountry to one's own country for Air India

The right granted by one New Delhi-London-country to another to put down New York for Air Indiaand take on in the territory ofthe first country traffic comingfrom or destined to a third country

The right to fly from a foreign Emirates flies passengerscountry to another foreign from India through Dubaicountry while stopping in (its home state) to the UKin one's own country or the US

What are AirServiceAgreementsor Bilaterals?

What are Freedomsof the Air?

... Several other freedoms exist and the most popular is

How are Bilaterals related to Freedoms of the Air?

3

4

5

6

The right to flyover a foreigncountry withoutlanding

1The right to refuel orcarry out maintenance ina foreign country onroute to another country

2

freedoms have

been officiallyrecognised by inter-national treaties5

Source: CAG

nd

rd

th

th

st

th

A first-class

lounge ofQatar

Airways
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6/7

cover story0FEBRUARY 24-MARCH 02, 2013

line does very well, but the boss cant go out and buy any-thing and everything.

Jenks says the Etihad airline acquisition policy is a wayto ramp up its global market share. For example, an AirBerlin or [soon] Jet Airways frequent short-haul passengerwithin EU or India will be more likely to connect in AbuDhabi airport when it flies long-haul.

Indeed, long-haul flights are key to the ambitions of allthe three Gulf carriers. Passengers, particularly businesstravellers who are the source of most airline profits, willpay more to not change planes, says Richard Aboulafia,an aviation consultant at the Teal Group, an Americanconsulting company.

That explains their big strides in markets like the US.Emirates launched direct services to Washington DC lastSeptember and Etihad is due to follow this summer. Eti-

hads strategy in India centres on creation of substantialtraffic to destinations in Europe and North America and ofcourse, the Gulf. Both are offering passengers from Indiaa one-stop connection to the US capital, says Strategi-cAero Research.coms Ahmad.

Not to be outdone, Qatar will start flights to Chicago

from April 10. The airline has also announced the launchof six new international gateways in recent months, in-cluding Gassim in Saudi Arabia and Najaf in Iraq.

A New OrderA few Indian competitors are fighting back. IndiGo, In-dias biggest airline by passengers carried and the only

one known to make consistent profits, is expanding oper-ations to the Gulf, according to its president Aditya Ghosh.The carrier currently flies 16 times (to and fro) a day be-tween India and Dubai and will connect Thiruvanantha-puram with the city-state from March 1. Ghosh says keep-ing in mind the high travel demand, IndiGo will look tolaunch operations between Kozhikode and Dubai as apart of its summer schedule this year.

Yet, other financially-strapped Indian carriers shouldbe worried. Aboulafia says most other airlines and lessorscare solely about profit, pricing their products and run-ning their businesses accordingly. But these players (fromthe Gulf ), he says, are trying to preserve oil and gas wealthby converting it into something tangible airlines, aircraftleasing, and aviation services. They dont need to makemoney, at least not in the short term.

That makes them the best bets to inherit the future of

air travel. Already, they have pulled global airline al-liances, which offer passengers more destinations, easierconnections and transfer of frequent-flier miles, to theirhubs. Al Baker was quoted as saying: When you cannotdefeat someone, youve got to join them.

That sounds like bravado, but it also reflects the reali-ties of a new era of aviation. The Capa report says the in-ternational aviation industry is adjusting to the impact ofthe unfettered global ambitions of these carriers.

According to Capa, the historical weakness of interna-tional services by Indian carriers means that nearly 40%of Indian international traffic travels to its final destina-tion via an intermediate offshore airport. The Gulf hubscapture more than half of such flows. Most of the airlinesseeking additional rights are 6th freedom carriers, whichwill further squeeze the foreign routes of Indian carriers.Not to forget AirAsia, whose operations will open a new

line of confrontation on domestic and foreign routes.The India head of the foreign airl ine quoted earlier sayswhen the bilaterals are due for review, nothing is going tochange. Obviously, he is referring to the poor prospectsof Indian carriers thanks to the staggering ambitions ofthe three Gulf carriers.

Extensive codesharing arrangement

Network and schedulingcoordination

Integration of frequent-flyerprogrammes

Sharing of resources

Joint purchasing andnegotiations with suppliers

Why Jet & EtihadNeed the Other

And why Emiratesdoesnt need a Jet

For example

The BilateralDivide

WIN-WIN

Bilaterals have ensured a sizeablelead over rivals

Traditionally focused on growingnetwork in-house

Indian carriers provide little value

in terms of expansion

FEW BENEFITS

EMIRATES

Brings in much-needed capital

Clearer strategy

International expansion

BENEFITS FOR JET

Greater feed from India to supportintercontinental services

Develop Canada & other marketswhere there are no bilaterals

Source: Capa

BENEFITS FOR ETIHAD

Last MoU April 23, 2008

54,200Entitled seats a week in each

direction to Indian destinations

1,701Seats reserved from this quotafor FlyDubai

ETIHAD

Last MoU* February 4, 2008

13,330Entitled seats a week in each directionto Indian destinations

*The Indian external affairs ministry issuednotes verbales (diplomatic notes) onFebruary 10, 2009 and May 11, 2010

The flexibility or margin abilateral provides beyond thespecified seat entitlementsbecause sticking to the exact seatentitlements may not always beoperationally feasible

Entitled seats for

airlines of Dubai

Entitled seats

after applying

the 2% flexibility

QATAR AIRWAYSLast MoU February 6, 2009

24,292Entitled seats a week in each directionto Indian destinations

Takeaway The bilaterals

are clearly skewed infavour of Emirates

AirAsia CEO Tony Fernandes is

entering a competitive and largelyunprofitable market


7/7

arlier in the week when Jet Airways flagged offa fresh round of price wars by announcingthat it would offer 2 million tickets at dis-counts of up to 50%, frequent flyers may haverubbed their hands in glee. However, Jets sec-

ond stab at prices in less than five months inOctober, the Naresh Goyal-promoted airlinehad slashed fares on the Mumbai-Londonroute to take on Richard Bransons Virgin At-lantic may not be doing Indias premier avi-ation brand too many favours.

In recent years Jets visibility is more dueto the fare schemes it has offered, says busi-ness strategy specialist Harish Bijoor. Thesecommoditised schemes make some peoplehappy and some very unhappy. And that iswhere one has to be very careful while offer-ing schemes, as schemes eat into brands.

The recourse to discounts, point out ex-perts, is a surefire sign that even as rivals likeIndiGo have upped their game, the Jet brandhas descended into confusion. The offering of

multiple services under the mother brand has-nt help matters. Although the no-frills JetLitehas since been merged into JetKonnect theslightly oxymoronic high-end low-cost carrier,the dissonance that three brands from one air-line created hasnt entirely disappeared.

Mid-air ConfusionJet acquired Sahara [in 2007] and thenrechristened it JetLite. Later it added moreconfusion by adding eight business class seatsto its JetKonnect service. But the businessclass seats on the JetKonnect flights offer me adifferent experience than the flights on Jet fullservice. This has a huge negative impact onthe Jet brand, points out Bijoor.

Initially, Jet Airways had a much clearer

brand proposition. Among the several low-cost airlines that were available at the time, itstood out as a brand that delivered high-quality, customer-focused service, though ata premium, points out Rishtee Batra, assis-tant professor of marketing at the Indian

Manish Dureja, vice-president, marketing,products and merchandising at Jet Airways,points out that the creation of low-fare brandJetKonnect was a successful strategy to improveyields. The launch of brand JetKonnect is the

culmination of a well-coordinated effort. Webelieve that the JetKonnect rebranding initia-tive has proven to be extremely popular withguests and helped us augment our revenues.He adds that customer feedback on the re-branding, done on March 2012, indicates thatthere is no confusion at all among passengers.Jet Airways will continue as a full-service carri-er, while JetKonnect will emerge as the low-farebrand catering to price-sensitive market by of-fering competitive fares in the economy cabin.

Hitting an Air PocketPrior to the arrival of Kingfisher, Jet was theonly premium carrier that offered nationwideconnectivity. Batra adds that people werecomfortable paying a premium for travelling

on Jet Airways because of its adherence toquality (flight timeliness, staff training, atten-tion to aesthetics). Slowly, not only did thelandscape become more competitive but JetAirways also started slipping along these met-rics. Competitors began beating Jet Airways attheir own game and were able to do it at a low-er cost, explains the professor.

Ironically, this is a period in which Jetshould be consolidating its position, whatwith its only rival in the full-service space,Kingfisher Airlines, grounded. This advantagewont last for long, what with the no-frillsbrigade closing in. What is more, the Indone-sia-based airline AirAsias imminent entry intoIndia via a three-way joint venture will giveGoyal some more to think about. After all,

AirAsia boasts of operational efficiencies andcombines them with the trick of selling thecheapest air fares and still being able to holdon to its margins.

The bigger worry for the moment, though,is IndiGo whichhassuccessfullypositionedit-

cover storyFEBRUARY 24-MARCH 02, 2013

11

Jet, Set...IndiGo!Indias most preferred full-service airline brand is in desperate need of anoverhaul if it has to counter the threat from the value-for-money brigade

E:: Manisha Singhal

Harish Bijoor Consults Inc recently did andit by identifying 47 touch points at whicairline interacts with consumers, like airkiosks, staff, hostesses and the like. Of ththe audit suggested that IndiGo had perfe

46 touch points, right from the badges wby the hostesses, to the way food is packethe uniqueness of those boxes. The botline: IndiGo respects detail, which helps gia singular, conscious identity.

Brand PushIn an airline industry, brand consultantgue, two aspects are critical: one is operatand the other is branding. An airline seatcommodity and a differentiation in that cmodity is what gives you a kick. Experts sadid a brilliant job for long time on brandand a good job on operations but today itcus is more on operations and less on braing but IndiGo has done both.

IndiGos delivery on the whole is good

there is clarity in terms of what the airline ifering. They sell themselves as full value atcost, says Santosh Desai, MD & CEO atturebrands, a consultancy. He adds that IGos brand equity in terms of perception iperior to that of Jet in the current scenario

IndiGo may have done enough to put Jtag of being the most-preferred airline undcloud. Latest numbers for the peak Decemended quarter show that Jets passenger nbers have declined by 13% on domestic rou

Jets Dureja counters that today we ardias largest private-airline group and contito retain our undisputed market leadershthe airline is also constantly working very hon several initiatives such as on time perfoance, constant product and service inn

tion, which would manifest itself in the formsuperior service quality, greater reliabilityenhanced connectivity for all our guests.

A deal with Etihad, which is still some from being inked, and the resultant finaninfusion may be just what Jet needs to refr

Santosh Desai,MD & CEO,

FUTUREBRANDS

IndiGos

delivery isgood & thereis clarity interms of whatthe airlineis offering

Manish Dureja,VICE-PRESIDENT,

JET AIRWAYS

Jet is workingon severalinitiatives:on time

performance,constant

product andserviceinnovation

Documents

ETM on Indian Aviation