Air India- You Need Course Correction

Hon Minister, Sir, your recent directive to the Air India management ‘to develop a hub in South India to target passenger traffic from the region’ (Business Standard, July 8,2013), is a most welcome  decision.

Air India, needs to strengthen and consolidate its position on its home turf. It is this traffic that is its bread and butter, unlike the 5^th and 6^th freedom foreign carriers, who depend on this transit traffic to earn their revenues. Competition is only going to become more and more intense in the days to come and unless Air India takes proactive steps, it might be challenging to retain its market share. Air India’s USP is, it still enjoys a strong brand loyalty amongst the Indian travellers worldwide. It is this loyalty that needs to be harnessed,  and translated into revenues.

In other words a slight course correction can yield substantial dividends. Your directive is an excellent step in this process of course correction. India is not a country, but a continent. Creating a single hub in Delhi, in such a large country has its limitations. Passengers from the southern region are averse to travelling all the way to Delhi to connect Air India’s international flights, particularly when they have a choice of a foreign carrier available right at their doorstep. 

Prior to the creation of a hub in Delhi in 2009, Air India had two very active and robust hubs in Mumbai and Delhi, catering to almost all the international destinations in Europe, UK, USA, the Far East and the Gulf countries. Mumbai and New Delhi acted as major catchment areas for passengers from all across India.  Meanwhile a parallel process of opening new international airports across India was gaining steam day by day. Foreign carriers were quick to move into these new airports, providing direct flights to overseas destinations. This started making a dent on Air India’s passenger uplifts ex Mumbai and ex Delhi.

Air India should have reacted by also operating direct flights from these newly opened gateways. But, instead of expanding into these newly opened gateways, it started shrinking and got confined only to Delhi, even withdrawing from its existing hub in Mumbai. Air India should have examined the possibility of creating a hub in Southern India, consolidating its existing hub of Mumbai, and creating a new hub in New Delhi.  This would have ensured a hub and spoke map of India, where any regional city was only 1 ½ hour away from AI’s international hub. Passengers from the entire southern belt of Kerala, Karnataka, Andhra Pradesh and even Sri Lanka, Lakshadweep would have preferred to connect over Madras or Bangalore hub.  Similarly, a Mumbai hub would have been the main catchment area for passengers originating in Goa, Gujarat, Madhya Pradesh, Maharashtra and to some extent upper Karnataka.  Likewise, the Delhi hub would have continued to be the catchment area for entire Northern India and Eastern India. The marginalisation of Mumbai , which had always been the prime Indian international gateway was a major retrograde step.

We all welcome this step by the government.  While opening a hub in S.India is a must, we must reinstate Mumbai as a hub in the Western Region, particularly with the proposed commissioning of the new International Airport next year in Mumbai. India needs four hubs, but even if three vibrant hubs are created it will go a long way in capturing the lost ground and traffic, incident upon shifting to Delhi.

What is required is a careful and a calibrated approach based on the traffic profile of the countries from where passengers originate. For example, New Delhi is predominantly a tourist market, besides being an ethnic market of visiting friends and relatives, and  students.  Flights from the main tourist originating countries like Japan, Europe, may originate and terminate in New Delhi.  Similarly UK, USA, Canada,-Middle East Australia are predominantly ethnic markets ,and therefore flights from these countries should operate into all the hubs of India.  After consolidating and entrenching itself in the Indian market, Air India should then focus on the overseas market.

Unfortunately Air India has not only lost the battle in its own home turf, but also in the markets overseas .  The existing hub and spoke operations to and from Delhi have failed.  Foreign carriers by making deep inroads in the local / regional markets of India have siphoned away Air India’s legitimate traffic .

Without sounding pompous, marketing is developing and selling a product that the market wants, rather than selling a product that the company wants. Air India, regrettably is in the latter category. This mismatch between what the market wants and what Air India wants has to be corrected, if Air India wants to combat competition successfully