By Vikas Mehta
Now that the dust has settled on the Air India acquisition, let’s look at what the future holds for the airline objectively. With three brands in its wings, how can the Tata group leverage the strengths of the brands and of course it’s other partners like Singapore Airlines and Air Asia.
The airline industry is a heady mix of adventure, glamour and travel for an outsider. But its core is simple. Quick and reliable transport over longer distances. Two things are important here. Reliable and longer distance. Let’s look at these.
Longer distance is a comparative measure. Most domestic flights in India are less than two hours flying time. Many Middle East distances are slightly more than that. For paying customers two, two-and-a-half-hour flights have a simple reliability connotation. On-time performance, clean hygienic aircrafts and sufficient baggage allowance. Leg space, food, entertainment, seat recline etc do not really matter for such shorter flights. Therefore, they will not be too happy paying a premium for such amenities. Long distance flights on the other hand make such amenities a must. Customers are willing to pay more for the same. And let’s not forget Indian flyers are notoriously price sensitive.
What this means is that the domestic offering of Air India needs to be in line with that of Indigo. No frills, no freebies. A basic product. In fact the value equation should be to give less for less. Less amenities for less price. The Air Asia model.
On the other hand, the international routes, bar a few, Air India needs to have a more premium product. More comfortable seats, better recline, better leg space, more food choice, entertainment are some of the immediate things that come to mind. More amenities for more price. The Vistara model.
That is the reason why I ultimately see Air India running two brands. Air India per se which will merge with Air Asia and will run as the domestic carrier with services within 2-21/2 hour flying time including outside India. No business class, no premium economy. Just basic economy class.
On the international routes, Air India should be running as Vistara. Anyways, the reputation of Air India internationally is at a low, so to build a new premium brand will be a sensible strategy. The current version of Vistara with some slight tweaks can help the beleaguered brand which currently is operating with an incorrect offering for the domestic market, but has an opportunistic offering for an international market.
The real question for Air India to answer is about what will make it competitive. On domestic sector, I think there is enough scope for a me-too brand like Indigo. Currently there is not much serious competition to Indigo. SpiceJet struggles on parameters like on time and it’s route width. GoFirst is too small. A me-too strong competitor with competitive pricing can be a good beginning for Air India domestically. As a customer, I frankly find any low-priced airlines since the price of Indigo, Spice Jet, GoAir, Air Asia and Air India are almost at the same level. Except for some discounts offered, I suspect on a few seats, by all of them from time to time, I don’t find any high cost or low-cost carriers in India. It’s all the same cost.
What needs to be done, is also a fleet rationalisation. The single aisle narrow body aircrafts should be all transferred to the domestic Air India and Vistara should have the wide-bodied, long haul aircrafts. What will help Air India is that most of its single aisle narrow body aircrafts are Airbus and the wide-bodied long haul are Boeing. The only anomaly are the Air India Express 737 Boeings. Vistara too has mainly the Airbus single aisle narrow body aircrafts and that could be transferred to Air India and it’s wide body long haul Boeings can be retained. It would need to lease/buy new wide-bodied Boeing in the immediate future to take advantage of its international slots.
Air Asia, as a group, is in disarray and it may not be difficult for Tatas to buy out the Indian operation. The experience of the team running Air Asia India will come in handy. The big challenge for Tatas would be how to handle SIA. Vistara will be in direct competition with SIA and would SIA want to remain invested in Vistara will be the big question.
The privatisation of Air India is just a small first step in what promises to be interesting times in the Indian, nee, global aviation circles.