Consumer Insight : The end of air travel as I see it !

This October 2008, in a move that surprised India Inc , Jet Airways and Kingfisher Airlines announced an alliance for sharing their resources and network. According to a report in Deccan Herald, the company announced that this alliance will share their resources in seven critical operational areas including routes and even employees but both these airlines will maintain their legal and brand entity.

Jet and Kingfisher controls approximately 60 % market share . While pundits and media glorified the swift move by the mavericks who head these companies, I see the formation of a cartel.

As a consumer I see it as the end of my air travels.

Both the companies cited the sluggish environment as the core reason for this deal. The rising fuel cost, the looming recession is definitely going to take a toll in the industry. It makes terrific sense for two major players to come together and share resources and cut costs. I also think this as a unique event when two competitors come together to face the looming threats.

But cartels are bad. Its very bad for a consumer.

I live in the state of Kerala where every sector is ruled by cartels. Where else do you find the Bus Owners forming a cartel in the name of union, auto drivers/owners forming cartels, Taxi owners forming cartels , Film stars have cartels, Film producers have cartels, Contractors have cartels, hotels have cartels, traders have cartels, jewelers have one and even the scavengers have formed cartels.

And Keralites suffer the highhandedness of these cartels. They hold the un-organized citizens at ransom to meet their demands. So we see buses off the road, traders shutting shop and even movie production getting stopped .

India currently lacks sufficient laws to identify and regulate such cartels. Sadly there is no political will to prepare one.

Coming back to the Jet- Kingfisher alliance.

What is going to be the result of such an alliance ? I foresee a significant drop in the competitiveness of the industry as a whole.

I am not a fan of Air Deccan but I credit the boom of Indian Airline industry to that brand. And the death of Air Deccan is going to be detrimental to the growth of this industry.( my personal opinion ).

I am not an expert in this domain but as a consumer I will try to defend my point. Please feel free to comment your thoughts.

I am not a frequent traveler ( not even a regular one ). My first flight where I paid from my pocket was with Air Deccan. Why I chose to fly was that it was affordable ( not cheaper).

There are three main customers for Airlines -

The rich travelers : These customers have the income to afford the travel. They either pay from their pocket or their business foot the bill. So whether there is a slowdown or not these guys will fly.
The Executives : These customers fly frequently but the bill is paid by the company. I feel this segment of consumers form a large chunk of air-travelers. When the economy slows down these class will travel less depending on the austerity measures of their organisations.

The ordinary ones : Well, I belong to this class. I would love to fly if its affordable. This category of customers may not travel regularly.

Air Deccan targeted the ordinary ones and that too successfully. But there was an interesting bonus to that strategy. Lot of corporates began to enable their executives to travel by air . The ceiling of air travel for executives have come down since the airline rates became affordable.

There was a time where an executive who earlier had only the eligibility to travel by First Class train was given the sanction to fly since the rate differential was negligible.

This saw a spurt in airline passengers. Both regular and first- time fliers. Those who have never flied before started looking for better rates.

And look at the way the infrastructure reacted to this new boom. New airports began to come up, jobs in the sector boomed and lot of new business catering to this sector began to evolve.

I agree that much of this boom can the attributable to the economic prosperity that we say in the recent past but the low cost airlines contributed significantly .

Now what is the scenario ?

With virtually no low-cost airlines , the entire industry is in turmoil. Companies have cut the eligibility for air travel why because it is now not affordable. So less number of regular fliers. Airports which came up anticipating large number of consumers see very few and they began to hike the airport charges which again is going to put off many fliers.

And the formation of Jet- Kingfisher is only going to make things tougher. This alliance is going to be a major entry barrier for any new player. And using the commanding postion, these two can silence the current competitors.

Rates will be high, service will be bad and ordinary people will travel by train...

Related Brand
Air Deccan

Brand Update : Air Deccan RIP (2003-2008)

On August 30 ,2008, Kingfisher officially announced the rebranding of Simplifly Deccan to Kingfisher Red. It marked the end of a wonderful brand which rewrote the aviation industry in India.

Air Deccan was India's South West Airlines. It made air travel affordable and many Indians had a chance to experience traveling in a plane. Now it is a part of history.

As a marketer , I am upset at the demise of a wonderful brand. As a consumer I worry that I will not be able to have an affordable air travel. Without Air Deccan , air travel will not be the same again. Its back to the earlier days where flying will be restricted to rich and those who travel at their employer's expenses.

When Kingfisher took over this brand followed by rebranding it as Simplifly Deccan, I thought that Air Deccan will emerge as one of the best low cost carrier in India. I did not believe media reports that Kingfisher was only looking at the overseas flying license.

Now I feel these reports were correct. Kingfisher had the following agenda :
Kill the competition
Gain market share
Get the overseas flying licence.
Many new airplanes and routes.

By taking over Deccan, Kingfisher got a larger marketshare to fight Jet Airways. More over Air Deccan was creating huge problems for full service airlines. By taking over and killing this brand,Kingfisher has made life easier for all airlines.

For Captain Gopinath, its life as usual. As an entrepreneur , he has built a business, scaled it and then sold it at a best price.

The problem for Air Deccan was that it went public too early. When the companies become public, its operations are guided by the quarterly reports and stock markets. Stock markets never understand the logic of long term sustainable business models. If the quarterly results are bad, there is media / investor frenzy calling for blood.

For Low cost carriers, one cannot survive by looking at quarterly results. The business may bleed for long before attaining break-even. Especially in Indian aviation industry where there is still confusion in terms of policies.

For a consumer, the death of this brand is a huge loss. Its visible also. All airlines have jacked up prices, cut many routes and scaled down their operations. This has prompted many consumers to depend on Railways again. If Air Deccan was alive, it could have rode this season with lower prices. That's what a low cost airlines will do when every airlines increase their prices.
Kingfisher Red will not play the game of Air Deccan. It will be a flanker brand that will fight Jetlite. But never will you be able to fly at reasonable rates.

Related brand
Air Deccan

Brand Update : Airdeccan

It seems this is a season of rebranding. Along side the mega rebranding of Hutch to Vodafone, another high profile rebranding is taking place .... at Airdeccan. After the high profile and highly surprising " acquisition " of Airdeccan by Kingfisher, the brand is going through a makeover.

When the media announced that Kingfisher has taken control over Airdeccan, one thing that will have popped up in the mind of a marketer is about the brand "Airdeccan ".
How will Mallya treat Airdeccan ? was the million dollar question. Personally I thought that Vijay Mallya will keep the two brands in two different platforms. How dare one can even think of integrating a low-price brand with a lifestyle brand ? My reading was that Mallya will definitely try to cut unprofitable routes , may tweak a little with the level of service at Airdeccan but keep the brand at arms length from Kingfisher.
But what Mallya did with Airdeccan made me realize again that I am still a student of Marketing.
Airdeccan has changed completely. From the brand name, the logo, positioning and all the brand elements. Airdeccan is now " Simplifly Deccan " . The earlier logo of Hands has paved way for the Kingfisher logo. The color of Yellow and Blue has changed to Red. The old tagline has been integrated to the new Brand name and the new positioning statement is " The Choice is Simple ".
According to agencyfaqs.com, the rebranding exercise is costing around Rs 15 crore ( media spend).
The rebranding and the heavy secondary association with Kingfisher was surprising to me because I thought that it is highly risky for a premium brand to be associated with a price warrior brand. So any association of Kingfisher and Deccan may hurt the Kingfisher brand most. But having seen this repositioning exercise, I now have a changed point of view.
The new Simplifly Deccan is promising many things to the customer :
Excellence in timely performance
Wider Network
and more importantly " Little Delights all the way ". The new repositioning identifies all the weakness of Airdeccan. There were constant harping about poor customer service, delays and no free food. In blogs and forums , harried customers aired not so good words about Airdeccan while conveniently forgetting the fact that " You get what you paid for ".
Kingfisher has now bought in a breath of fresh air into Deccan. The Kingfisher airlines brand has established itself as a clear leader in delighting the customers by managing the Moments of Truth. Now that promise is being given to Airdeccan customers. And interestingly Mallya need not do much but just bring in the culture to Deccan. Deccan already have good planes, crew and infrastructure. Bring in Kingfisher culture will be the key change that we are going to see in Airdeccan... sorry... Simplifly Deccan.
The new positioning is also significant. The positioning of " The choice is simple " takes strength from the famous old tagline :Simplifly. It builds on the old platform and aims to be the " preferred airline " for the discerning customers.
So the questions remain. Will Kingfisher brand suffer by associating with a low price brand ? May be no because price was not what Kingfisher is all about. Whether it is Kingfisher airlines or the beer, the brand never was an expensive one. The focus was on experience and lifestyle. There can be huge expectations about the new Deccan and people ( including Kingfisher loyalists ) will try out the new Deccan but will see a clear demarcation on the service levels between the two. The Kingfisher experience will be limited to Kingfisher airlines but you will get a teaser of that in Deccan ( that may be the idea). Having said that , this rebranding exercise is definitely a risky affair for Kingfisher brand.

Related Brand
Airdeccan

Air Deccan : Simplifly

Brand : Air Deccan
Agency : Orchard India ( unit of Leo Burnett)
Baseline : Simplifly

Launched in 2003, this low cost airline of India has changed the Indian Aviation industry for the better. Dominated by government owned airlines and one private player in Jet, Indian aviation never had been in the mind of the Indian middle class.

Then came the visionary Capt.Gopinath with a ( crazy ) idea of a low cost airline for the masses. The large airlines shuddered at the prospect of a low cost airline in the country. How can any one forgo the monopoly. But It happened.

It was disheartening to see the reports that Air Deccan's maiden flight caught fire and was grounded. I bet the bigwigs in the airline industry were very happy at that tragic incident ( no serious mishap happened but it was a terrifying incident for the company) . I wrote off the airline at that time but Capt. Gopinath did not or infact he could not. He had a dream and he could not just write off that dream ( Am I being Dramatic ?) .

Air Deccan is modeled in the lines of low cost airlines like South West airlines (a Harvard case study ) which was the only profit making airline during the slump that followed 911. There was a huge market for a low cost airline in India. The overall economy was shining and middle class was spending money and executives were traveling frequently.

Targeted at the frequently traveling middle class, Air Deccan is now a force to reckon with. After 2 years, Airdeccan has discovered a viable pricing model and has revolutioned the industry by offering tickets at Re 1 and Rs 500.
Having tasted success in domestic market, Air Deccan is going international through its subsidiary in Srilanka .Deccan knows that Indian officials will not favour the Airdeccan going global so it choose to go via SriLanka.

AirDeccan always tried to explore new markets and now is targeting the First class train travelers.

Although there are many noises about the service as such , we must understand that the prices are really low and it takes lot of effort to keep it that way.
Hats off to Air Deccan.....