Three reasons airlines in India will come out strongest from the recession

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Jet Airways recently hinted that the worst is over for them and they expect to break even again in the middle of this year. And this is mostly because of the drop in fuel prices (obviously!) as well as the prudence shown by the management in cutting unprofitable routes, including that the San Francisco. And I don’t see this as an isolated case.

After my recent interactions with key airline executives in India, including the CEO at SpiceJet, it is my belief that airlines in India will not only be one of the first few to emerge from the recession, but also come out the strongest.Here are three key reasons for this conviction.

1. Airlines that stand by their customers in bad times win hearts – brand matters

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Just look at what’s happening in the western airlines in this recession. US Airways recently started charging for blankets, and they already charge for water (which can even be a health hazard!). Ryanair is famous for being the most hated airline in Europe, since it hardly takes care of its customers. Interestingly, bad times have not resulted in a disregard for customer service in Indian aviation.

Recently when I flew from Bangalore to Jaipur on Indigo Airlines, I was greeted by my name before being served soem beverages. Now, that’s a first. I’ve never been greeted by my name in an Economy Class on any airline before, let alone on a low-cost carrier!Jet Airways recently won the Best First Class award, and Kingfisher does everything it can to uphold its 5-Star Airline status.

Did someone forget to tell these airlines that “we’re in a recession”? Probably not. But their focus on keeping the customer happy will pay off in the long run. Those who’re still flying will never ditch them. And when good times return, these same happy customers will generate enough brand awareness through word-of-mouth to bring in new passengers.

2. Being nimble and resilient pays off

Unlike other airlines that’re expected to do well in the recession, especially Middle Eastern ones, most airlines in India do not have any special privileges like reduced oil prices or backing from a government with deep pockets. This has forced them to act on their own to cut costs to remain aflot in these difficult times. And they’ve done so smartly too. Instead of bothering the customer with frivolous charges like in US airlines, Indian carrier have cut costs where it matters.

Kingfisher Airlines has swiftly postponed plans for more overseas route launches (Singapore, Hong Kong) – since they tend to be resource heavy at the beginning. Jet Airways too has not shyed away from cutting glamorous but bleeding routes like that to San Francisco. Moreover, they’ve both either delayed the delivery of new aircraft, or leased them to airlines like Turkish and GulfAir. Most airlines in India have switched to focused marketing efforts, rather than blanket campaigns to get more bang for the buck. And Kingfisher and Jet Airways have set aside their competitive aspirations to forge a code-share alliance to save costs – as Lisa Markovic explained in a recent interview with SimpliFlying. It is this resilience and fast action that will pay off well in the end.

3. It’s the economy, stupid!

In the last 50 days, I’ve spent a considerable amount of time in New York, Singapore and Delhi/Bangalore. And the word “recesssion” has disappeared from the local vocabulary in that order too. India’s GDP will grow 7.1% this year, according to data released today. In what way is this a recession? At best it’s a slowdown from previous years’ growth of close to 10%, but c’mon guys…this is not a recession. And if anyone has any doubts, just head over to Marthelli in Bangalore or Gurgaon, just outside of Delhi, to dispell all the myths. And this economic growth translates to the aviation industry too.

Talking about the Indian operations, Kenji Sugino, Director – Sales, Administration and Marketing, ANA recently said “Despite the global slowdown, India is one of the growing markets for ANA. We are positive about this year and are expecting good load factors and sales margins. We are going to play strategically in the Indian market this year.”

More than anyone else, it’s the Indian carriers that will reap the best rewards of a still-active Indian economy, if they play their cards right. And till now, they haven’t let most people down when it comes to crises handling.

What do you think? Are Indian carriers indeed doing it well, or is this a mirage? How soon do you think airlines in India will recover, and which international airlines would give them competition? Let’s discuss…

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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 16 comments
  • shaquille squires
    Reply

    Very interesting the article .
    But I have read in airliners.net that a grow of the GDP of less than 6% it’s is a recession for India.

    Hope the world get out of this recession soon.

  • Martijn Moret
    Reply

    Good article, Shashank! I think you are spot on: most successfull airlines are those you will (be able to) invest, in customers relations, better business processes, a better product in short. And those that can manage cost down with demand.

    I hope that the figures for India come true, that would be amazing. However, global downturn may affect India’s income as well, and the airlines are also dependent on foreign pax.

    The article expresses a great motto: “keep your customers close, especially in hard times.”

    • Shashank Nigam
      Reply

      @Martin: Glad you enjoyed the article. Indeed, I’m a strong believer that if airlines concentrate on the customer, while not losing sight of sustainability, they’ll do well in the long term. And that’s a nice Motto you added for the article!

  • Kees Burger
    Reply

    India has a large domestic market. internationaly I think you should underestimate the power of the established bigger carriers organized in alliances (say IATA top 15) . Even in bad times they have the cloud / cash to take big steps in weak markets. I’m not sure if Indian, Jet, Kingfisher have the resources / flexibility.

  • Shashank Nigam
    Reply

    @ Kees: Indeed, the domestic market should revive soon in India. But it’s the international routes that turn in the most profit. But as you mentioned, foreign carriers to India like Lufthansa and Emirates are in a very strong position currently. (see my article at SimpliFlying.com ).

    But with the Indian airlines joining alliances, it should ease off the pressure. Air India is headed to Star Alliance. Jet Airways is rumored to be in talks with OneWorld, and Kingfisher with Skyteam.

  • Gilles Rivet
    Reply

    Maybe there will be some fatalities. Air India still have government support, but what about the “small ones” (IndiGO, Deccan, and even Kingfisher)?

  • Shashank Nigam
    Reply

    You’re right Giles. There might be some fatalities. But as you mentioned, air India has govt support. Kingfisher and Deccan have Mallya’s deep pockets (much like Branson), Jet Airways is the market leader, and Indigo and spicejet have been runaway sucess stories on the LCC scene.

    That leaves GoAir and a couple of other smaller airlines which I think might fail.

  • Clint White
    Reply

    I think India has far less exposure to the banking crisis that is effecting the world. There are many reasons to think that India has some distinct advantages as the world economy recovers (eventually). These include: A young and still rapidly growing workforce that is also highly educated. As stable democratic government and an ability to adapt to changing times better that most countries, even China.

    India has had tremendous growth, but nothing like some of the other asian countries, just looking at history you realize it is India’s time to shine.

  • Detlef Meyer
    Reply

    I can’t agree with this arguments at all.
    The fares are growing in India too. The grow in such manner that there are antitrust questions. The losses for all indian airlines are higher then expected. The goverment had to rule that all prices have shown including all taxes and fees to save customers right of information. Airlines shows their own fees in such a way that customers believed it were govermental taxes. All that don#t speak about a very proper relationship airline – customer. The cost cuts were nesecary to stay alive. They were right and just in time, but they show the problems. The time for growth is over. And that only in the last months. To end of 2009 we will see a cut in services, failing airlines and declining passenger numbers. May be nesecary to sell shares of airlines to the big players in the world airline industry. For India this will be at first hand the big arabian airlines with the big pockets (Etihad and Co).
    Recession – lets see the numbers at the end 2009. I think a 6% growth is very optimistic. Anyhow, also with a small growth India has a lot of trouble.

  • Jonathan Yam
    Reply

    In general, all the low budget airline in Asia will come out better than mega carrier. I can see the growth of commercial air line in India and Southeast asia, but I don’t believe will make airline in India come out strong after the recession. As for air India, if they can merge a couple regional low budget airline, then they’ll come out well in book value.

  • Pradeep Narasimha
    Reply

    All the Airlines along with Ministry of Tourism in India has taken the age old adage’ “Athiti Devo Bhava” pretty seriuosly. In fact all the airline carriers in India except for dropping Air fares based on revision/reduction of Air Fuel Charges. All other comforts within th aircraft remained the same.

    In fact business houses large, medium and small have circulated a diktat that no more of Business Class travel, no more of overnight stay and importantly some companies have gone to the extent of insisting that their Vice Chairman and other Directors should fly only by low cost/budget airlines.

    Amazingly in a country where there is no recession except fo an economic slow down; it’s the belief of the business houses that the situation can worsen hence the perspective is cut cost, delay payments and importantly reduce man power by increasing the load on performers. In my opinion this will lead to performing managers non performance because of the load; leading to the growth of the company being dwarfed.

    Yes I agree with Shashank that the airlines customer interaction has not changed and in fact has improved leading to brand equity and empathy for airlines to return lot more stronger in the near future.

  • Rohit Hangal
    Reply

    Airlines in India are in a dilemma and can’t figure out their next move..they were shouting themselves hoarse about a year back about the high cost of fuel they have to pay..which made them cancel future flights, postpone aircraft deliveries, hike fares (‘fuel surcharge’ being more than the actual fares), cut commissions to travel agents (even though 80 – 90% of tickets sold of all full service airlines were through Travel agents), forced oil companies (mostly owned by the Indian government) to take in deferred payments are now trying to create a new marketing buzz in form of cartelization of airfares and rationalizing of schedules amid falling fuel prices and traffic. If you go through the figures provided by the ‘Ministry of Civil Aviation’ in India, there is a drop of nearly 26% in air traffic across sectors in India, the aviation industry in India needs more than savvy marketing to foresee the future.

    The new Airports in India such as Bangalore and Hyderabad are adding to the cost of travel. Being located at a minimum distance of 40 kilometres from the City Centre (with not much low cost airport commute options) and the ‘User Development Fee’ enforced by Airports (as a cost of passengers using the services of the Airports) has made air travel less popular than before.

    India is not immune to the global slowdown and it is showing and aviation industry continues to bleed. When Richard Branson of Virgin said the “fastest way to be a millionaire is to start with a Billion pounds and get into the Airline business”, he sure was not joking. Airlines in India are still not hedging fuel prices (they are anticipating a further fall of about 20%). Jet Airways and Kingfisher are world-class products, which should be a serious contender in the Airline business atleast in the Asia -Pacific region, but Airlines in India are in much ‘trial and error’ mode of managing their airline business. Though just very young compared to some International airlines who have a heritage of more than fifty years, there is an opportunity to learn from some of their mistakes and make some of our own ‘original’ ‘Made in India’ blunders!

    These are sure exiting times for Air travel industry in India, with the Indian government seriously contemplating increase of FDI into the Indian aviation industry, it is a question of ‘who blinks first!’

  • Aamer Quraishi
    Reply

    Indian carriers have already started recovering and will come out very strong from this recession. Indian carriers have worked on high costs and have identified ways in reducing costs. Hence productivity has been much higher for them thus increasing efficiency. Once one gets used to deliver quality and work with quality in mind, that entity will always come out as a winner. To the benefit of the industry, fuel costs have nose dived along with taxes in various states controlled on aviation fuel and airport infrastructure increased thus expanding the scope of airline operations in India.This will only power the industry & energize sustained growth over a period of 2 years. Competition is to the spirit of its meaning in India when it comes to the commercial airline business. All Indian carriers expect to achieve the level of customer augmentation and delight which is necessary for any vibrant and consumer oriented economy. Customer is truly KING here.

    I personally don’t feel a particular international carrier is a threat to the Indian carriers, but SQ has its own consumer oriented style which is hard to skip for any frequent traveller to go un noticed. LH / BA too is dominant but not due consumer delight in particular but due to its fantastic network in Europe. EK’s expansion in India is commendable emerging as the largest international airline operating out of India along with a growing base of its frequent travellers. QR looks at following EK’s foot steps in passenger delight, infact its a much better product inflight but not positioned adequately in the market place.

  • Deb
    Reply

    Very interesting article indeed. It has provided me insights about what the Airlines are actually thinking in order to survive and sustain in this recessionary period as I am doing a project on Compatibility of Low Cost Carriers in India for my Dissertation. Indeed Branding plays an important role in the service sector and Customer Relationship Management has been a major focus area by the Airlines. Definitely customer concentrated actions would turn out to be profitable for the Airlines in the long run.

  • Louis Vuitton handbags
    Reply

    Talking about the Indian operations, Kenji Sugino, Director – Sales, Administration and Marketing, ANA recently said “Despite the global slowdown

  • designer replicas
    Reply

    That leaves GoAir and a couple of other smaller airlines which I think might fail.

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