Guest Post: Air India Is At A Crossroads

Editor’s note: kids, your Aunt Benet is taking the day off.  We’re going to do a post that’s a bit different.  Our guest blogger, Steven Frischling, of the Flying With Fish blog, offers a look inside Air India, which was recently rejected for membership in the Star Alliance (the best alliance in the world, in my opinion). Despite its obvious assets, the flag carrier continues to flounder in a highly competitive global market.  Fish explains how this happened and how the carrier might be able to turn things around.  Enjoy!!

Air India is an enigma wrapped up in a conundrum with all the potential in the world … yet it keeps tripping over its own feet.

As Air India is licking its wounds of rejection by Star Alliance after a three-and-a-half year courtship, the airline has installed the former Ministry of Aviation Joint Secretary Rohit Nandan as its new Chairman & Managing Director, a step in the right direction … if Air India can go in the right direction.

It is easy to point out Air India’s flaws, there are many, and many seem nearly insurmountable, but on paper Air India has unlimited potential to be a strong and successful airline. A brief look back in Air India’s history reveals that the airline was once a world-class airline, viewed by passengers and the industry as a top-tier airline to be emulated.

Air India Lounge at JFK Airport Photo by Eugene Dimarsky via Flickr

Air India’s reputation as a highly respected airline can be traced to the roots of another airline, Singapore Airlines. Early in Singapore Airlines’ history, the now Five-Star airline turned to Air India for consultation on establishing a superior customer experience. Based on initially on Air India’s model, Singapore Airlines is now renowned for its stellar customer experience and Air India has become renowned for its inferior customer experience.

Somewhere between October 15th 1932 when Air India first took to the skies and now the airline lost its way. The airline’s problems are frequently blamed on the Government of India, however the government has been in control since August 25th 1953. It is hard to overlook it now, but it was a Government owned Air India that became the envy of all airlines around the world on June 11th 1962 when it became the first airline in the world to opera an all jet aircraft fleet.

So … forget mismanagement and labour issues, ignore the estimated daily operating losses of US$4,794,520, put aside last years US$1.75-billion fiscal losses, pretend Air India didn’t just become the first airline in history to be rejected from an alliance it was invited to join and don’t factor in the fact that the airline is bloated and woefully compartmentalized …  just for a moment focus on the future and what Air India has to offer its passengers, its employees and of course its nation.

Airline hubs follow the same motto of retail shops, Location, Location, Location and Air India’s hubs in Mumbai and Delhi are geographically situated in ideal locations to be strong global hubs for international connections, as well as handle the substantial traffic to, from and within India.  Air India competes day in and day with Gulf rivals in the UAE and Qatar, this competition isn’t only for global traffic, but passengers traveling to and from India, many of whom are from India.

If Air India can wage a campaign, back up by its staff’s actions to win back its domestic passenger base and cap its leak to directly competing airlines, the financial implications for the carrier are significant. Good customer service should be a priority, but good customer service pushed as a brand initiative to win back the lost masses, offer short- term and long-term benefits.

Air India jets at JFK Airport Photo by Benet J. Wilson

Any airline with its sights set on a global market requires a sizable fleet. While many of Air India’s direct competitors are first building their fleets, Air India already has a sizable fleet in place and existing order to significantly increase the fleet’s size.  Air India’s fleet of 99 current aircraft range from the Airbus A319s to the Boeing 777s (200LR and 300ER variants) with every potential capacity gap covered in the middle, as well as three more Boeing 777-337s joining the fleet and an additional 27 Boeing 787-837s.

The Boeing 787s are scheduled to begin joining the fleet before the end of 2011.  An advantage in Air India’s favour is the age of its fleet, averaging 9.5 years old, their fleet has a lot of life left in it before aircraft must be replaced, reducing future fleet expenses and lowering potential MRO expenses for older aircraft.

From a domestic tactical stand point Air India is better suited that its Indian rivals for moving passengers where they need to go through its 15-year-old regional airline, Air India Regional inherited from Indian Airlines during the merger if the two airlines. Air India Regional may be small, with just 11 aircraft, a mix of ATR-42s and CRJ-700s, with an additional 14 A320s joining the fleet in the near future, but unlike its domestic competitors, Air India already has its foot in the door with regional service and the ability to expand this service with a relatively low investment into the subsidiary.

Along with Air India Regional, Air India has attempted to fend off low-cost carrier competitors through Air India Express, a wholly owned subsidiary. Air India Express’ fleet of 21 Boeing 737-800s makes the airline competitive, especially if it can differentiate Air India Express from the rest of Air India, while leveraging its network and operations to feed its mainline international traffic.   Air India Express has had some difficulty separating itself from Air India, but the low-cost carrier has begun to challenge a rival low-cost carrier in the UAE, Air Arabia, by establishing an Air India Express base in Dubai.  Many Indian travelers choose UAE based airlines over Air India, so this move is a small step in the right direction for Air India as a whole company to seek to regain some of the passengers they are bleeding to competitors.

 

Air India Route Map

Lastly … what is an airline without a route network?

Air India’s route network is a significant positive factor in the airline’s potential to survive, grow and regain its place amount top-tier carriers. Air India’s current route network includes more than a dozen Gulf Region destinations and 24 international destinations on five continents, in addition to its extensive domestic route network. In addition to the airline’s current destination, Air India has extensive unused fifth freedom rights between Europe and North America and elsewhere in the world. Granted, in some instances Air India made a wise decision to reduce or eliminate its fifth freedom flights, such as its New York (JFK) – London (LHR) flights, which was usually a full flight, the options to revive certain routes may prove to be lucrative to the airline.

Along with Air India’s unused fifth freedom routes, the airline posses many dormant route authority options. As Air India adds additional long haul aircraft to its fleet the flexibility to revive previously popular routes, such as from the west coast of the United States, advance Air India ahead of its domestic competitors, as well as a number of its regional competitors in terms of providing non-stop or one-stop service to destinations other are not serving directly.

Now, outside of the passenger side of things, Air India has many options, many of these options are through joint ventures. One example of Air India’s joint venture financial potential commences operations in 2013, when Air India is scheduled to open its new 50 acre MRO facility in Nagpur as a joint venture with Boeing.  With MRO outsourcing being a highly competitive and profitable business unit for other airlines, this joint venture can be very successful provided the airline’s management and the Government stays out of its business.

All Air India has to do now is the hard stuff … restructure everything about how the airline operates, build harmony among its staff, develop a single corporate brand personality and completely restructure the airline. The up side to all the hard stuff is that once Air India finds its path to success, it already has everything it needs to leave its competition in the dust.

While many see an airline on the path to ruin … I see an airline that needs to find a way to tap its unlimited potential.

Happy Flying!

-Steven Frischling

Flying With Fish

@flyingwithfish

Tags: 737, 777, 787, A319, Air India, Airbus, aircraft, airlines, ATR, ATR-42, blog, Boeing, Bombardier, CRJ-700, Delhi, Flying With Fish, JFK Airport, London Heathrow, Mumbai, Steven Frischling