I flew to from Delhi to Singapore yesterday on Singapore Airlines. Service was at its best, as always, but the Boeing 777 plane wasn’t very full. In fact, the load factor was startingly low – probably below 50%! There was one person in First Class, less than five in Business Class and Economy was empty enough that almost everyone had the middle row seats to sleep across. And it seems to be the case across Singapore Airlines’ flights from India. Why would they be suddenly cutting 214 regional flights?
What’s wrong? Recession… nah, but surely something else is at play here too.
End of the peak season?
Airline officials argued in a recent news report that the drop was due to the end of the peak winter season. “The fall happens every season from January to August,” said an official. But I’d disagree that the slump can be so severe. It’s the end of the peak season, not the beginning of the low season! So, how can passenger numbers drop from 300+ per flight to just over 100?
The unspoken truth: travel agents’ boycott
The drop in traffic in India is due to a boycott from the travel agents, who have refused to sell Singapore Airlines tickets due to the latter’s refusal to give commission. “We sell around 90% of the airline’s tickets in India. When we stopped selling Singapore Airlines tickets from December 29, the passenger load fell drastically,” claimed Anil Punjabi, Travel Agents’ Federation of India Chairman in a Times of India article.
After months of agitation and deliberations, the Indian carriers like Jet Airways and Kingfisher have decided to five 3% commission to travel agents, but some foreign carriers like Singapore Airlines, British Airways and Delta Airlines have not budged, resulting in the boycott. But why is it such a bad situation, given that a similar policy is followed by international airlines across the western world?
Cultural sensitivity is key to brand sustainability
Many dilemmas in India are created by imitating the Western business models. Zero percent commission was one of them. In India, travel agents play a vital role in the travel plans of people, unlike in the West, where the penetration, usage and payment gateways through the Internet are well known. Moreover, there are many small travel agents whose earnings solely depend on selling air tickets. The whole issue of zero percent smells of ignorance and cultural insensitivity on the part of airlines.
Hence, even though airlines like Singapore Airlines has a superb brand image in developing markets like India and China, it will do them no good if they cannot keep their channel partners happy. I feel that cultural awarness in developing markets and adopting them reaps good rewards in the long term, even though it may mean greater costs in the short term.
Two pieces of evidence to support my claim:
- Virgin Atlantic’s latest advertisement in a local Indian magazine “TravTalk” reads: “It’s 5%. We’re 100% sure”. They’re referring to keeping the commissions to 5% for travel agents. Who do you think travel agents will recommend for flights to London from Delhi/Mumbai? Virgin Atlantic or British Airways (0%)?
- I had featured an interview with Gary Leopold, CEO of ISM Boston, who had designed a very culturally relevant campaign for Emirates’ US markets. They recently won Best in Show, the highest accolade in the industry, at the HSMAI Adrian Awards in New York for their work with Emirates airlines.
So, how important do you think cultural sensitivity is to an international airline’s branding and operational strategy? After my interaction with Indian aviation executives, I certainly feel it’s one of the most important things for long-term success. Do you have other examples of airlines who’ve done it successfully?
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