Should Air India cut International fares to counter Jet Etihad competition…???

Apropos news item in Business Standard of 26 June, “…..AI to cut international travel fares to counter competition from Jet-Etihad……”. The question is should Air India cut International fares to counter Jet Etihad competition ?

While apprehensions of Air India on the Jet Etihad deal are understandable, but cutting International fares to combat competition, is not the answer. On the India- USA, India-UK, India- Middle East & Gulf routes the nationality profile of passengers on Air India, and presumably also on Jet Airways is predominantly Indian ethnic. This traffic again comprises largely of VFR’s ( visiting friends and relatives ), students, and Indian tourists and holiday travellers. All these traffic segments of Indian passengers are highly price sensitive, and often seek value additions to their travel program.

Prior to embarking upon any price cutting strategy to combat competition, it would be prudent to understand the dynamics of carrier selection by the passengers on these routes. Off course price is an important determinant. Indian passengers often travel as a family. Hence, even a $20/- fare differential in the ticket price, translates to $80/- for a family of 4, and this can swing the choice of carrier.

But, besides price, there are other equally vital variables that need to be focussed upon in a constructive manner to succeed in this fiercely competitive market. It is a calibrated blend of various variables that will eventually determine winner. In other words what is needed is, a well-conceived plan and a strategy to tackle this challenge, rather than resort to predatory fares. There is no end to this game of cutting fares, and it is a foregone conclusion, that the winners in this game are airlines with deep pockets. If not, then the game is ‘self-destructive’ ! Does Air India have a deep pocket ?

Let us look at Air India, in the context of the Jet Etihad deal. Let us take the India-USA route as an example. Firstly, Air India should remember, and confidently so, that it has a large secure base of brand loyalists who will not desert it or shift to other airlines. This component of loyalist will continue to patronise Air India, until and unless, there are substantial price differentials. It is this loyalist camp, that Air India, now needs to identify, assiduously nurture, protect and cultivate, in a  focussed and planned manner, come what may.

Secondly, Air India enjoys an edge over other airlines. Travel on Air India does not entail change of airlines en-route, where the culture, the overall ambience, the comfort level and continuity of experience changes. And change is never welcome, it is always resisted. This change is vastly different from change of airplanes. On Air India, from origin to destination, it is one and one airline only- the same culture, the same care, the same warmth, the same faces, the same assurance enhances the basic comfort and acceptance level several notches, compared to  what a joint venture or a code share carriers will offer. It is this major variable that passengers look at when making choice of a carrier, particularly on a long haul travel. Even at the destination airport overseas, or the origin station overseas it is the same Air India personnel and Air India culture to welcome and greet Indian passengers. There is no substitute to this bonding, nothing like seeing your own people in a foreign land. This is a great USP of Air India, and it needs to be fully harnessed.

Thirdly, Air India operates to three gateways in the US, namely New-York, Newark and Chicago. Traffic destined, or originating from these points in the US will continue to patronise and travel on Air India. Making a dent on this segment by the competitors will be challenging. It is the transit component of the traffic, travelling beyond New-York, Newark and Chicago that is and will be vulnerable to competition, but only if the competitor has a direct flight into that destination. If not, then Air India will continue to be the carrier of choice. It is this component that Air India needs to identify, and tailor a product and service that offers convenience, comfort and value for money. This is where Air India strategists have to put their heads together, think out of the box, and secure this traffic.

Fourthly, Air India, should seriously rethink its strategy of Delhi as the hub of all overseas operations. India is a continent. Passengers from Southern Region are not very receptive to travelling all the way to Delhi, before stepping out of Indian shores. Moreover our competitors have direct flights overseas from various Indian gateways. Besides this it is pertinent to mention, that the Southern states today not only have maximum International airports, but are also most robust in terms of the total travel potential. Having said this, Air India should immediately explore feasibility of creating a hub in Southern India and in Kerala. A corollary to the above will be the option of operating direct flights overseas from these gateways. This is a must, in view of the increasing competition all around. Passengers from Southern India are not interested in Bharat darshan or Delhi darshan. They want to leave Indian shores immediately after boarding the flight. This desire becomes more acute, particularly on the return leg of a long haul journey.  They want to reach ‘ home’, but reaching Delhi, is not akin to reaching home. This waiting in the aircraft on India soil, for another three to three and a half hours to reach home is torturous. This last mile is the longest and unending. Air India will need to understand this, and develop a customer and market friendly product, otherwise it might as well write off the Southern Region traffic.

Another, fiasco of this Delhi hub for the Southern Region passengers is- that of a single class configuration on domestic flights being proposed by Air India. An Executive Class passenger from Chicago to Delhi, will find it unacceptable to travel on the Delhi-Chennai leg in the economy class of a domestic flight, particularly when he has a choice of Executive Class travel end to end on Lufthansa or Emirates or Singapore Airlines or Etihad. While IGI International Airport per-se is an excellent airport, at par with any modern International airport, but in terms of service deliveries for transit and connecting passengers, it leaves a lot to be desired.  Passenger comments have been far from encouraging. This is yet another reason for Air India to look afresh at its Delhi hub policy.

Fifthly, Air India should very closely look at offering value additions to its passengers. Frequent Flyer Program should be tweaked up with multiple purchase options of product and services, free gifting of tickets and mileages to friends and relatives, tie-up with health services and hospitals for complimentary health check-ups for the weak and elderly in the family of the frequent flyer. Air India should offer liberal bonus miles to first time travellers diverted from other airlines on to its services. Co-branding and tie up with major global tour operators, for exchanging accumulated miles for tour and sight-seeing packages to friends and relatives. A fare discount offer sans mileage to be offered to frequent flyers on a calibrated scale of travel anywhere from 10% to 15% or an upgrade facility on seat availability basis. These are value additions that will go a long way in retaining and nurturing Air India loyalists and patrons.

Sixthly, a customer focussed and a customer committed attitude amongst all the staff and officials needs to be deeply and assiduously ingrained. This image change is imperative, and needs to be advertised and aggressively promoted across all media, to change the perception about Air India in the public mind- from a ‘could-not-care-less’ attitude to one of ‘tender-loving-care-and-concern’.

Seventhly, Air India as a brand still enjoys a strong recall value, not only in India but all across the globe. Air India should build on this and enhance its brand image or rather reinforce its impeccable credentials in the public mind as a brand from the pioneers of Civil Aviation in India- the Tatas. A sustained media blitz is an urgent imperative, to clear the accumulated baggage of an adverse image over the years. Image change is not by change of livery or colour or logo, image change has to be in the mind of the public.

Lastly, the think tank in Air India should take a cue from the prestigious Skytrax Airline Awards, to identify award categories, as these are the segments, which are increasingly reckoned by an average passenger in selecting an airline. Air India should focus on each and every such component, develop it and then excel in it, to emerge as the airline of first choice. These are some of the variables which Air India should concentrate upon on a priority basis to combat competition.