Thursday, July 15, 2010

Aviation-Flight Plan to the Dream Destination

Shweta Srivastava, Debanjana Sinha | IIM S

The first quarter of 2010 brought some good news to the Indian airlines industry. According to Directorate General of Civil Aviation (DGCA), domestic air travel in India has reported growth of 20% in the first quarter of 2010. After the double-digit fall in traffic in the first quarter of 2009, this means that passenger numbers are up around 7% in Q1, 2010. India’s domestic traffic slump began in June 2008 and it eroded the bottom line of almost all the carriers and led to industry consolidation. Battling rising Airline Turbine Fuel costs, excessive low cost carrier challenge, errant employee unions and political interference, the dream destination for this sector looks quite far.

The 9th largest market in the world, the aviation industry in India is one of those sectors that saw a constant pace of growth among the other industries in the world over the past many years. One of the most dynamic industries, it has witnessed an exponential growth over the last two decades. Ever since the government’s open sky policy was implemented, the industry trudged on a growth path registering y-o-y growth rate as high as 18% resulting in the entrance of many overseas players. For some time, it seemed that the fairy tale will never end.
Then the recession came and the aviation sector that witnessed a double digit growth in recent years began resorting to rationalisation. Private Indian airlines, which in the past had experienced massive growth, started demanding a “bailout” in the form of reduction in taxes and airport charges etc from the government and even threatened to ground their planes if their demands were not met. A case that needs special mention in this context is that of Air India. The Maharaja piled up accumulated losses of over Rs 7,000 crore and debt exceeding Rs 16,000 crore. As a result, it was forced to cut salaries and cancel order for new jets. The situation got so grave that it headed for a major government sponsored restructuring, after being denied bailout. Joining it, among others, were Kingfisher Airlines, IndiGo and SpiceJet, with accumulated losses of Rs 2,444 crore in 2007-08 and expected to stay in the red in 2008-09 with losses of over Rs 10,000 crore. The following two figuresshows the current condition of the Airlines Industry.

Challenges are many and problems need to be overcome. The current status speaks high of the sad plight the industry is in, but we would like to list some reasons as to why I think the industry will revive and be among the top 5 aviation markets in 5 years.
Standing by the customers
Recession, undoubtedly, took its toll over the aviation industry but one must stop awhile and look at what happened in the western airlines. US Airways started charging for blankets, and they already charge for water leading to a seeming decline in airline provisions and the imposition of new fees on almost every service of value to travellers. 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.
Surprisingly, this is not the trend in Indian carriers. Private airlines have ramped up their customer service even in the Economy Class with special focus on personalized service. Jet Airways recently won the Best First Class award, and Kingfisher does everything it can to uphold its 5-Star Airline status. Indigo started the use of automated screening systems to validate passenger names on the boarding passes, a technology used for the first time by an LCC in India. The airlines also came up with special deals on all their routes.
Is it that someone forgot to tell these airlines that they were in a recession? Probably not! But their focus on keeping the customer happy will definitely pay off in the long run. It is a known fact that it costs 5 times as much to bring in a new customer, than to keep an existing one. And this mantra was religiously followed by the Indian carriers by utilizing the “back to basics” of customer service. The loyal customers will never ditch them. And when good times return, these same happy customers will contribute their best to generate enough brand awareness through word-of-mouth to bring in new passengers.

Being resilient pays off
Unlike airlines in the Middle East, most airlines in India do not have any special privileges like reduced oil prices or backing from a government with deep pockets. This forced them to act on their own to cut costs to remain afloat in these difficult times. And they successfully did it. Instead of bothering the customer with frivolous charges like in US airlines, Indian carriers cut costs where it mattered.

Kingfisher Airlines swiftly postponed plans for more overseas route launches like Singapore, Hong Kong etc – since they tend to be resource heavy at the beginning. Jet Airways did away with glamorous but bleeding routes like that to San Francisco. Moreover, they both either delayed the delivery of new aircraft, or leased them to airlines like Turkish and GulfAir. Most airlines in India switched to focused marketing efforts, rather than blanket campaigns to get more bang for the buck. And Kingfisher and Jet Airways came up with a code-share alliance to save costs keeping aside their competitive aspirations. It is this resilience and fast action that will pay off well in the end.

Indian economy among the fastest growing even during recession
The word “recession” has disappeared from the vocabulary now. The International Monetary Fund (IMF) has raised its India growth forecast for 2010 to 9.4 per cent from 8.8 per cent. Despite the fact that India's civil aviation industry was the second largest loser after the US due to the recession worldwide, 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.
The Indian Aviation sector has the potential of absorbing up to USD 120 billion of investment by the year 2020. It’s high time that the regulatory and policy framework is aligned with the needs of the civil aviation industry to encourage serious investment in the sector and create a safe, secure, efficient and environment friendly system conducive to healthy growth.

Kingfisher Airlines- CRM the way forward…
Kingfisher Airlines (KFA) is positioned as “Full Frills - True Value Carrier”. In order to achieve this, KFA had to differentiate itself from the then market leader, Jet Airways. It dedicated itself to Customer Relationship Management to initiate its customer base and retain its profitable customers. Some of the initiatives by Kingfisher Airlines are:

Roving Agents
KFA combined its IT expertise and customer service to create the concept of “Roving Agents”. The Roving Agent is a Kingfisher staffer carrying a handheld that is connected to the main reservation and check-in system wirelessly using Wi-Fi, and a portable thermal printer, attached to the staffer's belt, that links with the PDA using Bluetooth. Guests flying with Kingfisher carrying only hand luggage can be intercepted near the entrance. Using a ticket's PNR number, a Roving Agent can help guests choose a seat on their plane, print a boarding pass from the printer on the Rover's belt and send passengers straight to security check. On a typical day, at a busy airport like Mumbai or New Delhi, this initiative can help save a passenger seven or eight minutes. It might not sound like much, but for a business traveler pressed for time and catching a flight at the last moment, eight minutes can come very handy.

Partner Program
Although frequent flier’s program is done by all major airlines in the world, KFA’s partner program tied with best brands in across industries to provide functional quality to its loyalty program, the King Club. It teamed with the stalwarts in various sectors to help its loyalty program members earn and redeem points. All its partnering and co-branding efforts are targeted towards acquiring and retaining its most valuable customers, i.e., the globe-trotting business traveler. Some of the examples are:
  • Passengers can earn miles by travelling in the major international airlines around the world. This includes Emirates, Air France, KLM Royal Dutch Airlines, Qatar Airways, Delta Air Lines and Continental Airlines.
  • It tied up with the major banks, both national and international, such that the each brand’s star and premium credit cards can earn mileage to King Club customers, through each transaction.
  • Their hospitality partners include The Hilton Family, Oberoi Hotels, Leela Hotels, Ananda, Trident Hotels, Ista Hotels, The Park Hotels, The Paul Hotels and ITC-Welcomgroup.
  • They even tied up with publishing partners like Harvard Business Review and Fortune to expand its global customer base.
  • Such diverse portfolio of partnering is unheard in India and it has provided KFA the competitive advantage over other carriers with true focus that “The right Customer is the king”

Add-On Selling strategies:
Kingfisher Airlines have successfully integrated its Customer Relationship Management to cross selling very well.
This includes transaction in Air Boutique ONLINE – KFA’s premium online reward shop. It is the first of its kind in the Indian airline industry. This is a 24 hour service that is exclusive to King Club members and customers can redeem reward points merchandise.
The reward points or the King Miles for KFA are transferable to family and friends at a nominal value unlike many carriers in India. This flexibility allows KFA to acquire newer customers and strengthen its customer base considerably. It has also integrated its Kingfisher Holidays with its loyalty program. This completes the full circle of impact of UB group in hospitality industry.
All the above examples show the superiority of Kingfisher Airlines in delivering the right mix of technical and functional quality in its service. Its ability to manage customer service at the actual touch points and provide newer avenues of experiencing its superior pre and post journey is unmatched in the India airlines industry. Only time will tell if its customer focused strategy will help it pass through the difficult times of negative bottom line and an immensely regulated airlines industry.

Way Ahead
India is yet to witness a success story like Southwest Airlines where the integration of marketing, CRM and technology and route optimization led to record revenues irrespective of condition of the industry. With the domestic traffic boosting up, it is high time that carriers utilize the best practices in customer service from around the world and turn the tables for the Indian aviation industry.

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