How business lessons from AirAsia can rescue the battered Air India brand

Air India 747-400
Image by caribb via Flickr

Air India is losing about $1 billion, on revenues of $3 billion. What’s more alarming is that Air India contributes 10% of global airline losses with just 0.35% of global traffic (stat. from Bangalore Aviation). And the Indian national carrier is still struggling with its merger with the domestic Indian Airlines a couple of years back. Couple that with the global economic crises and a bloated payroll, and you know how much trouble the airline is in.

Being an Indian at heart, I couldn’t help but come up with some ideas to save this once well-regarded Maharaja brand. In fact, I know that when Singapore Airlines began operations, they heavily hired the best from Air India! I’m not sure if Air India can return to its former glory anytime soon, but these ideas should certainly help it get back on track. Or at least, I hope so.

Getting the business plan in order

I frankly feel that Air India has only survived as long as it has due to two reasons – offering extremely low fares, and getting government funding. But having fares that hardly cover your costs are not sustainable, especially in the face of tough competition. Emirates now operates almost 200 flights out of India per week, much more than Air India. There’s an urgent need to revitalize the business plan.

The AirAsia + AirAsia X model for Air India

There are a number of business models that can work for Air India and I think the AirAsia model may be a viable. AirAsia operates as a Malaysian budget carrier serving South East Asia. This can be paralled with the domestic service of AirIndia, which can be turned into a budget-only.

Most flights within India tend to be less than three hours and budget airlines are thriving there, much more than full-service carrier. Domestically, Indians tends to be even more price sensitve than internationally, as can be seen from the success of Indigo, SpiceJet and Deccan before them.

Internationally, though Air India now has good, new planes with a world-class product, their bad on-time performance and a reputation for poor service still stalks them. It’s one of the reasons I still refuse to fly with them, no matter how cheap their tickets get. But Air India can leverage on their new product as an asset – by creating a “blue ocean” and not competing on the same turf as their competition. And that’s where AirAsia X comes in.

AirAsia X is not trying to replicate the Ryanair model to long-haul travel, rather trying to apply the Singapore Airlines model to budget carriers. The key? Low cost base, and connectivity. AirAsia X is charging people for services like food (which really tastes good!) and for a business class seat, and yet cutting overhead costs by not providing lounges or priority check-in. I think it’s a model Air India is close to and can replicate quickly.

Their in-flight service is nowhere close to exceptional, whereas the product is good. So, why not just set the expectation with the customer that he will have to pay for additional service, but he will receive a good product (seats etc) at the low price he pays. That would put the airline in a league of its own when targeting those traveling to India. But the big challenge for Air India is to bring down costs drastically.

It’s the execution that matters

The biggest worry that I have is that Air India is run for and by “babus” – India government and administration officials. With all due respect to them, it is indeed their meddling in the airline’s affairs that have resulted in such rut. Otherwise, who in their right minds would operate a route like Dubai-Srinagar regularly, even when the plane is less than half-full? This has to change (and I know that here… talk is cheap)

Having a capable management team to the lead the execution of a renewed business plan is a must. Air India needs people who’ve run international airlines successfully, not Indian Administrative Services folks who often do not have a clue about running an airline (though I have tremendous respect for the current CEO). They need to hire at least a professional COO, who can take over the reigns from the de-facto COO, the Minister for Aviation. Air India needs to reduce dependence on the government, hence its involvement in the airline’s affairs.

At the end of the day, I see no point in running an unsustainable business entity. And to keep pumping in government money is to have good money chase bad money.

Air India probably has its last chance to learn some lessons from the likes of AirAsia, or it might be too late. What do you think? What can this battered airline do, to emerge from the shadows? Let’s discuss in the comments or over on Twitter (@simpliflying)

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Shashank Nigam

Shashank Nigam

Shashank Nigam is the CEO of SimpliFlying and a globally sought-after consultant, speaker and thought-leader on airline branding and customer engagement strategy. He is also the youngest winner of the Global Brand Leadership Award and has addressed senior aviation executives globally, from Chile to Canada and from Sydney to San Francisco. Shashank's perspectives have found their way into major media outlets, including CNN Travel, CNBC, MSNBC, Bloomberg UTV, Mashable and in leading publications like Airline Business, ATW, Aviation Week, and others. Shashank studied Information Systems Management and Business Management at Singapore Management University and Carnegie Mellon University. Hailing from India, he splits his time between Singapore and Vancouver, among other cities.
Shashank Nigam
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Showing 49 comments
  • Oussama Salah

    I agree with you that there is no point in throwing good money after bad money. I think this is decision time not for the Indian Government. Air India needs to be reinvented. A new passion to succeed must replace tyhe apathy. I am not so sure that the government, Air India or the people are ready for what it takes to reinvent the airline. The shedding of jobs is probably the hardest and the greatest obstacle. The curtailment of flights and allowing foreign competitors to pick up the slack is a bitter pill to swallow.

    Personally, I think it will be more of the same until someone is ready to pay the political price associated with an new Air India

  • Yogesh Pagar

    Everything liked to India – gets politicised. And you can not change this nor you can expect to witness a ‘depoliticised India’ in next many years to follow.

    A professional CEO/ COO & CFO can do wonders at any loss making entity. Air India could be rescued from the hands of the crooked bureaucracy & politicians playing major role behind the scene, unless India inc demands it.
    The core problem is, Corporate India has accepted Air-India as a dying organisation, hence unfortunately I do not see rebirth of this airline atleast during my Lifetime.

  • Jeff Tomei

    Shashank, Air India is a disaster based on poor planning and uninspired govt control. With the intro of LCCs in the region, Air India was late to the game. Then again, Kingfisher is sucking wind now also so maybe the market dynamics just arent conducive to profits?

  • Nirav

    Air India sucks… the best way to deregualte it and sell assets. Its the only way to get govt controls off their back. THe govt divested many things in the aviation industry insluding the airports… AI would be a good asset to sell.. the longer they wait.. the more punishing it becomes. India already has airlines if given the freedom can start taking market share from global players… the govt just has to let go.. just another Indian subsidy

  • Aalok Gaitonde

    Please remove the picture of the Air India Boeing 747-400 from this page. Its my picture and I never gave permission to use it here.

  • zixmail pricing

    well friend i think Flying With Fish » How business lessons from AirAsia can rescue the battered Air India brand!

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