Thursday, August 6, 2009

Began with a bang…hold on…ended in a whine…

Last week saw country’s private airlines dropping a bombshell – demanding a bailout package, failing which they would ground all their flights and start a strike from August 18. However, within 48 hours of this hoax call (I prefer to call this call for strike “hoax”J), the terror had already fizzled and the domestic flyers of the country were happy. This ultimately turned out to be a big PR blunder for these airlines and the Federation of Indian Airlines (FIA) which called the strike.

Such was the nightmarish feeling of such a call for strike, that the common man in the country felt betrayed. Imagine what could have happened to the already booked tickets on these airlines and how would they travel, once these flights are grounded. To worsen it, they wouldn’t have got train tickets (only “tatkal” was the option) and all their schedules would have gone for a toss.

However, I still believe that some of the demands of these private airlines were legitimate. Like the predatory taxation on aviation fuel, high airport costs and other charges. Even then, I think, these airlines were better off calling for an industry wide dialogue (which they eventually have agreed to) with the Government and come to a common understanding and belief on the issues that matter.

I don’t even agree on the National airlines getting the so called bailout packages. These packages are the tax payer’s money, which no one should spend on about sick organizations. These are companies standing on people’s money – taken, but does that justify using more people money to bring them out of the rut? I think the biggest problem with these airlines is the old time management and policies oiled in the pre-independence era. The processes that these companies follow are based on the now defunct management thoughts and operations. In my view nothing plagues more than the bureaucracy and their old age policy and processes. And any financial package can not make them realise these pitfalls. They would again fall into the ditch that they see themselves in now. They require restructuring at every step – from management to policies to processes to operations. Bringing on board experienced professionals from around the world, who have run airlines profitably for years, could be an ideal start. I guess, the Government in planning to do so is the step in the right direction. But still the bailout package can be a failure in the long run.

This financial package should only be used to bring some sanity in the processes, operations and policies. This money should be consumed to bring in international consultants to utilize their experience and knowledge to help these airlines in the long run. They need a complete overhaul in every aspect of the game. The money should be used to call experienced professionals on the management and delivery teams.

Now let’s understand what actually made this strike call a big failure and one of the biggest marketing blooper by the fledgling private airlines industry in the country. The biggest reason was the firm ground on which the Government stood against the militant call by these private airlines. The Government was very clear and articulate in its stand, with the aviation minister disapproving of their decision to suspend flight operations, saying anything causing inconvenience to passengers was ‘not acceptable’.

Second reason was the lack of preparation by the industry body, FIA. The body unilaterally called for the strike with the threat to call off all operations. All this was done without having a consensus among the members – this was evident by the way first Indigo Airlines and then Spicejet announced they were not a member of this strike and they would continue their operations as usual. The FIA didn’t even have a Plan B, a fall back option in case their first plan failed. With no public support in their favour, these private airlines eventually had to come back on track. They realised that their plan had backfired badly and now they just had to try and salvage some lost pride. This they tried by saying that they did not want to threaten the Government and the public but just wanted to apprise them of the problems faced by them.

As said before, some of the demands set out by the federation were not illegal at all, however, the way it went about looking for answers for their problems, botched up for them. I fully agree that taxes on ATF and other charges are really discriminatory and raise the operational costs of the airlines.

The seemingly lack of agreement and consensus in the airline federation was another cause of failure. The smarter, smaller and leaner (SSL J) airlines seem to be doing a much better job than their big brothers. They are able to manage well and run with high load factors. Their costs are less and revenues are higher, hence their balance sheets and PL statements look better. Due to this, Indigo and Spicejet opted out of the strike even before it actually became a strike and Jet and Kingfisher belligerently called for it. This widened the dichotomy and led to the eventual calling off of the strike.

Even the experts from the industry called such tactics a big “no no”. Capt. Gopinath (of Air Deccan fame) said these airlines are themselves to be blamed for the mess they are in today. They haven’t aggressively marketed and pitched to get more flyers on board. This business in a country like ours will look bad unless we get those 98% of travellers who still prefer travelling via train or road on to flights. These airlines haven’t done anything to attract them to fly. They have to cut costs, overheads like freebies to manage operations cost effectively. Unless they do so, they will continue to see no light at the end of the tunnel. He went on to the level of calling this strike a ‘gimmick’.

I would say, managing the costs and trying to bring in more revenues would help these airlines. They have to be innovative and see how best the other airlines in the world have managed in these turbulent times.
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