Category : Management

Airlines in trouble

When Vijay Mallya took over Air Deccan, he had not seen the writing on the wall. We tend to do what we are. However, this may not work well in managing businesses efficiently. Yet, many are not able to resist such temptation. The operation and management of Kingfisher Airlines have borne the imprints of Vijay Mallya’s style — flashy and frills. Its in-flight services are on par with some of the top international airlines. Most passengers give it a high rating; but that does not guarantee sustainable economics and survival.

Airline industry has shown exponential growth in recent years. This is likely to continue. Many airlines have exploited the opportunities. Kingfisher went wrong with its understanding of market dynamics and consumer behaviour. The percentage of people willing to pay for the luxury provided by such airlines, is small, maybe not 8 percent to 10 percent of passengers. Airline business growth is being fuelled by lower medium class and emerging upper medium class. They like luxuries and frills, but at no extra cost. That is where Indigo Airlines has done a good job.

High aviation fuel cost and taxes have had adverse effect on Kingfisher. But it is a reality for its peers too. Toe more factors have added to the woes of Kingfisher. Most consumers have not yet matured enough to recognise the true value of quality and services. There is obvious reluctance to pay for them. The only option for low-cost airlines is to provide the basic level of quality and services but no frills. Kingfisher, known to have a good degree of sensitiveness for customers, must continue the policy, it does not cost money but increases loyalty.

Another damaging factor is the reckless price war unleashed on Air India. They do not mind pushing peer industry in red, even if that worsens their own position. The consumer has the last laugh in such a price war. But only in the short run. In the longer run, when non-viable organisations start falling apart, flights are cancelled, safety gets compromised and so on. One does not know who has the last laugh. There is a strong need for representatives of airliners and the government to sit together and bring an element of sobriety in the policies governing pricing, minimum service and safety standards. Competition must always be there. But it must be healthy. This is true for other sectors like telecom too, where public interest is involved. Failing this, we can hurt both, consumers and industrial growth.

Originally printed in www.SakaalTimes.com (December 08, 2011)

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