www.economictimes.

com | Mumbai | 32 pages | `10

February 24-March 02, 2013

TATAS NEXT-GEN
LOW-COST CAR
A prototype of a composite
car is part of Tata Motors
growth ambitions
p.04
PRE-BUDGET SPECIAL

A DECADE OF FISCAL
IRRESPONSIBILITY
Even as Malaysias AirAsia gets
set to enter India, its the
funds-flushed troika from the
Gulf Emirates, Etihad and
Qatar that are well placed
to catch the tailwinds on
the Indian flight path
p.06-11

p.13

06

cover story
FEBRUARY 24-MARCH 02, 2013

Sheikh, Rattle
And Fly

Even as Malaysias largest budget carrier AirAsia gets set to enter India
with the Tata group as a partner, its the funds-flushed troika from the
Gulf Emirates, Etihad and Qatar that are well placed to catch the
tailwinds on the Indian flight path
:: Binoy Prabhakar

ven for an industry that has always been inherently vibrant, last week was unusually eventful
for aviation. It began with the news that a sale of
stake by Jet Airways, Indias second-largest carrier by passengers carried, to Abu Dhabis fastgrowing airline, Etihad Airways, will be delayed.
If the news was disconcerting, Jet didnt show it.
The airline cut fares by nearly a half on Tuesday,
mimicking a move by budget carrier SpiceJet in
January, when Indian air travellers had become
accustomed to the idea that the era of cheap airfare was history. A day later, the Tatas said they
were taking another shot at aviation partnering
Malaysian budget carrier AirAsia. Turns out run-

away airfares will be history.

Understandably, in the euphoria over lower airfare, the news concerning Jet receded into the
background. Yet for Indian aviation, a Jet-Etihad
deal trumps the other developments in significance. Falling airfares are a flash in the pan. SpiceJets offer was a buffer against a lean travel season
and Jets price cut was nothing but a counter. As for
the Tatas and AirAsia, these are early days to ascertain the success of their venture (see A New Kid..).
A Jet-Etihad deal has the potential to be a gamechanger, according to consultancy Capa. Despite
the early hiccup, most aviation analysts say a deal is
at hand because of the substantial benefits for both

A New
Kid on the
Air Block
AirAsias plan to enter the
domestic aviation market
partnering the Tatas is
surprising on many counts.
The airline's wariness
about the Indian market is
well-known because of its
struggles on overseas
routes from India since the
launch in December 2008.
According to consultancy
Capa, the brand has
struggled partly because of
its inability to access local
distribution networks.
Travel agents still account
for most bookings in India
but they have not
supported AirAsia as they
do not use the fee-for-service model," it noted in a
recent report. Another
impediment was its
exclusive partnership with
reservation website
Expedia. India happens to
be the only Asian market
where the group has
reduced capacity in the
past year. It dropped out of
three of the nine routes due
to losses. The two busiest
Mumbai and Delhi were
dropped from the network
in 2012 as part of a
rationalisation exercise. Already, AirAsia CEO Tony
Fernandes has indicated
that he is skittish about
flying between Delhi and
Mumbai due to the high airport charges. Today, the
carrier accounts for just
10% of seat capacity in the
India-Southeast Asia
market compared with 14%
a year ago, says Capa.
That said, the
consultancy also noted that
securing the right local
partner could resolve
many of the challenges
AirAsia has faced in India.
The airline seems to have
done exactly that by roping
in the Tatas.
The Indian aviation
industry as a whole may
be in a shambles because it
is a competitive and
largely unprofitable
market thanks to high fuel
taxes and airport charges,
but long-term growth
opportunities are vast.
Mohan Ranganathan, an
air safety consultant, says
the venture is likely to
succeed. Focussing on
tier-2 and tier-3 routes in
the south will feed
AirAsias larger network,
he says. Then there is the
credibility of the Tatas.

07

cover story
FEBRUARY 24-MARCH 02, 2013

THE GULFS BIG THREE

Emirates
Airline

Etihad
Airways
National carrier of UAE
Ownership Wholly owned by the
Abu Dhabi government

Dubais flagship airline

Ownership Wholly owned by the
Dubai government

Fast Fact

Fast Fact

2012-13*

President

President and CEO

Chief Executive Officer

Tim Clark

James Hogan

Akbar Al Baker

2011-12*

Change (%)

Key Financials

2012

2011

Change (%)

Revenue ($ billion)

9.7

8.3

16.8

Revenue ($ billion)

4.8

4.1

17

Net profit ($ million)

464

225

106

Net profit ($ million)

42

14

200

Global Operations

Hub

Key Financials*

Increase in profit on
Ebitda level in 2011-12

"Small" Net Loss, according to Al Baker

*Qatar Airways, which is not listed on a stock market, rarely
discloses its earnings or market share

* First six months of financial years 2011-12 and 2012-13

Launch

National carrier of Qatar

Ownership Government of Qatar (50%)
and private shareholders (50%)
Fast Fact

Global Operations

October 25, 1985

Launch
Hub

Dubai International
Airport

Global Operations

November 2003

Launch

Abu Dhabi
Intl Airport

Hub

January 20, 1994

Doha International
Airport

129

Destinations in
75 countries

86

Destinations in 55
countries

124

Destinations in
70 countries

197

Fleet in service

70

Fleet

119

Fleet

202

Fleet ordered

90

Fleet ordered

250

Fleet ordered

42,800
11,263

10,656
1,500

Employees
Indians

Indian Operations
Launch October

(Mix of Airbus and

Boeing aircraft)

including 10 Airbus A380s

Employees
Indians

22,100
5,000

Indian Operations

25, 1985

(Mix of Airbus and

Boeing aircraft)

Employees
Indians

Indian Operations

Launch 2004

Launch 1997

185 Flights a week

10 Destinations Ahmedabad, Bengaluru, Chennai,

63 Flights a week
9 Destinations Ahmedabad, Bengaluru,

95
12

Delhi, Hyderabad, Kochi, Kolkata, Kozhikode,

Mumbai and Thiruvananthapuram

Kozhikode, Chennai, Kochi, Delhi, Hyderabad,

Mumbai, Thiruvananthapuram

12.3%

1.5%

Etihads market share of Indias

international passenger traffic in 2010-11

3.3% Qatars market share of Indias

international passenger traffic in 2010-11

4.71 million

0.7 million Passengers who travelled

Etihads Indian flights in 2012

0.85 million Passengers who travelled

Qatar's Indian flights in 2011-12

Emirates market share of Indias

international passenger traffic in 2010-11
Passengers who travelled
Emirates Indian flights in 2011-12

Flights a week

Destinations Ahmedabad, Amritsar, Bengaluru,

Chennai, Kochi, Delhi, Goa, Hyderabad, Kolkata,
Kozhikode, Mumbai, and Thiruvananthapuram

Takeaway Right now, Emirates has a clear lead over the other two carriers
carriers (see Why Jet & Etihad). Jet is
starved for capital and Etihad, which has
pushed alliances that give it strategic access in specific geographies, stands to
grow in one of its most important markets.

India Shining
To fully understand Etihads gains, we
need to look at the airline from the lens of
the other two big carriers based in the Persian Gulf Emirates Airline and Qatar Air-

ways. At a time when global rivals are

pinching pennies, all the three carriers are
hankering for new routes, shopping for
planes and building or expanding their
home airports. It is not hard to see why:
they are wrapped in a cocoon of oil wealth.
If a deal with Jet materialises, it will be
Etihads fifth acquisition in a shade over a
year. Being the youngest, Etihad is playing
catch-up with its larger Gulf rivals by snapping up stakes in overseas airlines. Qatar

for now is keen to tap opportunities closer

home. Emirates has been content growing
its network individually.
Indeed, all three have pressed ahead
with different growth plans. Yet there is a
common thread running through their
strategies and fortunes India. Essa Sulaiman Ahmad, vice-president, India and
Nepal, Emirates, says India is the largest
operation in the airlines network. Etihad
flies to six cities in India, the most in any

country. Akbar Al Baker, the chief executive of Qatar Airways, says India is a key
part of the airlines growth strategy, which
is evident from its services to the most
number of destinations compared with
any other country in our network or by any
other international airline.
Indians also form the lions share of their
workforce (see The Gulfs Big Three). It is
another matter that its because they are
inexpensive, deployed largely for the least

Source: Airlines, Aviation industry consultants

Key Financials

Qatar
Airways

08

cover story
FEBRUARY 24-MARCH 02, 2013

How They Stack Up

THE BUZZING INDIA-UAE AVIATION MARKET*
IndiGo

Jet Airways

8.18%

7.15%

56

49
Emirates

27.15%

Air India Express

7.01%

185

48

Air India

16.5%

Etihad

11.24%

113

63

FlyDubai

1.46%
10

Air Arabia
SpiceJet

4.08%
28

Takeaway
Emirates
has
grabbed
the biggest
market
share
thanks to a
larger
number
of flights

17.23%
118

Flights per week

Source: Martin Consulting LLC
*RAS AL KHAIMAH & FUJAIRAH ARE NOT INCLUDED

glamourous tasks in aviation such as handling baggage or catering.

Given this backdrop, a direct confrontation with each other is inevitable.
To date, Emirates is by far the most successful of the three. Its progress in India
mirrors its global push, building routes to
a country that was simply ignored or forgotten by rivals.
Indians who form the biggest expatriate population in the region have long
been one of Emirates principal growth
engines. More than 1.7 million Indians live
in the UAE (of this, nearly half live in
Dubai) while 0.5 million Indians live in
Qatar, according to the Ministry of Overseas Indian Affairs.
Geography too was critical to its success. Roughly two-thirds of the global
population live within an eight-hour
flight while the rest live within four
hours from Dubai.
It shouldnt then be a surprise that seven airlines, including five from India, fly to

Flight attendants of an
Emirates flight

Dubai alone from as many as 17 Indian

cities. In an earlier interaction, Lorne Riley, head of corporate communications of
Dubai Airports, said India was the topmost market, accounting for 6.84 million
air travellers in 2011.

A Three-Way Race
As an early mover, the biggest beneficiary
of this growth has been Emirates. Still,
that does not explain how the carrier has
come to fly 185 times a week from Dubai
to 10 cities in India, considerably higher
than any other international carrier. Emirates edge over rivals stems from the air
traffic rights that Dubai secured from India as part of the open skies policy pursued by the government since 20042005. These arrangements, known as Air
Service Agreements or bilaterals (see
What are Air Service Agreements) in

aviation parlance, are one of the darkest

legacies of former aviation minister Praful Patel. Patel has on many occasions denied any wrongdoing.
But the audacious manner in which flying rights were handed to foreign carriers
was severely criticised by Indias national
auditor. In a 2011 report, the CAG chronicles events relating to the India-Dubai sector to illustrate the liberal grant of rights.
Between 2005 and 2010, Dubais bilateral
entitlements grew from 10,400 seats to
54,000 through a series of MoUs. The
CAG notes that Emirates was able to derive substantially greater traffic under the
Dubai bilateral (due to 6th freedom traffic
passengers flying between two countries while stopping in ones own country
and access to 10 points of call in India)
while Indian carriers were essentially carrying only 3rd or 4th freedom traffic (between India-Dubai).
The 6th freedom traffic is not, in a
strict sense, illegal. Saj Ahmad, chief analyst of StrategicAero Research.com, a
consultancy based in London, says as air
travel continues to grow, the increase in

bilaterals and other open skies agreements are par for the course. In turn,
6th freedom traffic rights have also expanded as a result; so in a way you could
argue that this is indeed the new norm
for the industry and is also part of the
reason why co-operation, not competition on treaties is the way forward.
Nevertheless, the CAG report draws attention to the one-sided nature of benefits
to Emirates despite state-run Air Indias
repeated protests at the lack of reciprocity. It highlighted the Dubai authorities
refusal to agree to requested reciprocal
arrangements for Air India, citing acute
infrastructural constraints at the Dubai
airport. Indian officials overlooked the
Dubai airports status as one of the biggest
in the world. Terminal 3, which is reserved for Emirates, is not only the
worlds largest air terminal, it is also the
worlds largest building.

The Bilateral Factor

The India head of a foreign airline speaking
anonymously pointed out that the UAE is
the only country that has managed to obtain bilaterals from India for four of its emirates Dubai, Sharjah, Abu Dhabi and Ras
Al Khaimah. It is the same as Kerala and
Karnataka asking for traffic rights.
A former official of the aviation ministry
says the arrangement with the UAE is peculiar and very suspicious. Air India is essentially servicing probably five airports
and in return we have opened up nearly
20 airports to airlines from that region,
he says, asking not to be named.
It is not for nothing that Emirates is
known as Indias national carrier. But
the airline is hardly the sole beneficiary
of the generosity of Indian authorities.
Entitlements to Qatar, for example, have
grown from 5,372 seats in 2005 to
24,292 currently.
The bilaterals remain a prickly topic for
the aviation ministry. Information on the
subject on the website of the aviation regulator DGCA dates back to 2005. A senior
DGCA official says the agency has strict
orders from the aviation ministry against
updating the rights to foreign carriers.
This official too did not want to be
named, fearing repercussions.
Indian private airlines, meanwhile,
have complained repeatedly against the
lack of opportunities in a lucrative sector.
In an earlier interview, SpiceJet CEO Neil
Mills said he wanted to diversify into more
international routes to take pressure off
the domestic market, but was yet to hear
from the aviation ministry. Today, both
SpiceJets and budget competitor IndiGos
operations on the Dubai route (see How
They Stack Up) are modest.
That is partly due to the fact that they
are late starters; IndiGo launched servic-

The Gulf carriers, compared with

rivals, have better geography and
an awful lot more cash
Richard Aboulafia, AVIATION CONSULTANT

09

cover story
FEBRUARY 24-MARCH 02, 2013

What are Air

Service
Agreements
or Bilaterals?

What are Freedoms

of the Air?

Air Service Agreements (ASAs)

specify traffic rights for global
air services

ASAs are also referred to as

bilateral agreements or simply
bilateral
These are concluded on the
basis of reciprocity and
fair/equal opportunity, and
provide the legal framework
for scheduled air services
between two countries

International commercial aviation

traffic rights that grant a countrys
airlines the privilege to enter and land
in another countrys airspace

st

freedoms have
been officially
recognised by international treaties
The right to fly
over a foreign
country without
landing

nd

The right to refuel or

carry out maintenance in
a foreign country on
route to another country

Traffic rights and capacity

entitlements are exchanged
between the countries on the
basis of market requirements

How are Bilaterals related to Freedoms of the Air?

Bilaterals specify entitlements of airlines of both

countries in terms of frequency
of operations, number of seats,
destinations etc

Freedom

es to Dubai in September 2011 and SpiceJet in June 2012 to comply with a rule that
says Indian carriers must fly on domestic
routes for five years before they expand
overseas. Yet, the total number of seats
apportioned to Indian carriers is still only
42,978 compared with the 54,200 allotted to Emirates and FlyDubai, Dubais
budget airline, according to data collated
from the Dubai airport.

THE 3RD, 4TH AND 5TH FREEDOMS ARE NEGOTIATED BETWEEN

COUNTRIES THROUGH BILATERALS

3
4
5

Example

rd

The right to fly from one's

own country to another country

New Delhi-London for

Air India

th

The right to fly from another

country to one's own country

London-New Delhi
for Air India

th

The right granted by one

country to another to put down
and take on in the territory of
the first country traffic coming
from or destined to a third country

New Delhi-LondonNew York for Air India

... Several other freedoms exist and the most popular is

Not Enough
However, Emirates is still hungry for more
seats from India. Last year, the carrier approached the National Council of Applied
Economic Research (NCAER) to push its

Description

th

The right to fly from a foreign

country to another foreign
country while stopping in
in one's own country

Emirates flies passengers

from India through Dubai
(its home state) to the UK
or the US
Source: CAG

for Studies in Social Sciences

in Kolkata, says the adverse effects of market concentration,
a euphemism for Emirates
domination over the Dubai
route, did not fall under the
scope of study. Adverse impacts in this regard are obvious
for any sector, not just aviation.
So far, Emirates has benefited
from generous approvals from Indian authorities. But the advantage may
soon come to naught. One of the critical
impacts of the Jet-Etihad deal is likely to
be a relaxation of the India-UAE bilateral,
according to Capa. Emirates Ahmad says
any further growth in the Indian market
will be determined by government approvals. The rub is that with more players
on the scene and greater media scrutiny,
the bilateral is unlikely to be as one-sided
as before.
Capa notes that Qatar apart, Turkish
Airlines and Singapore Airlines too are
waiting in the wings to expand bilaterals
as they have exhausted their current entitlements. Indeed, Qatars Al Baker says
the airline plans to seek more landing
rights in India, incorporate new destinations to its list and increase frequency on
existing routes. The advent of AirAsia
means there is another attractive alternative for Indian expatriates.
Bilaterals are important to the Gulf carriers because there is little to choose from
the three in terms of fares or facilities. All
three are known to woo travellers who
represent the crowded and cosmopolitan
facets of aviation. So, economy-class passengers are pampered with lavish meals
and entertainment options while business
and first-class flyers are welcomed with
stunning interiors and showers onboard.
Manish Chheda, managing director of
consultancy firm Auctus Advisors, says in
a sense, they are all fighting for the same
passenger. If I am flying to Madrid, I could
choose either of these airlines.

Whole New Ball Game

A first-class
lounge of
Qatar
Airways

case with the Indian government. By contrasting the increase of seat allocation
from the present 54,200 a week to
60,000, 70,000 and 80,000, a study by
NCAER notes that if the seats allocated to
Emirates are increased, then the corresponding benefits to the economy and
tourism sector will also increase.

The study establishes Emirates advantage due to the extensive use of the 6th
freedom right, revealing that 55% of its
passengers flew to destinations beyond
Dubai from India compared with the 45%
traffic between India and Dubai. But it is
also careful to highlight that only 18% of
the 6th freedom traffic flies between

points served by Indian carriers.

According to Tushar Nandi, the principal author of the study, the NCAER team
worked on a brief laid down by Emirates.
They [Emirates] wanted to highlight
that allocating more seats can be only
good for India.
Nandi, who has since joined the Centre

Etihads deal with Jet must be viewed in the

context of these realities. Mark Martin of
Martin Consulting, a consultancy based in
Dubai, says the rivalry between the Gulf carriers is becoming more and more aggressive. Etihads potential purchase of a Jet
stake is, in a manner of speaking, sidestepping codesharing [reciprocal agreements
between airlines that offer passengers more
destinations and easier connections] or bilaterals. According to Capa, a key rationale
of the proposed investment for Etihad is to
provide greater feed from the Indian market
to support its intercontinental services to
Europe and the Americas.
The India head of the foreign airline
who sought anonymity says Qatar can
catch up with Emirates on bilaterals, but
Etihad cant. Hence, the deal with Jet.
Craig Jenks, president of Airline/Aircraft Projects Inc, a consultancy based in
New York, says the Emirates versus Etihad
battle is global in scope. Etihad, he says, is
substantially behind in size, global marketing clout and its home airport. However Etihad is Abu Dhabi while Emirates is
Dubai. This is the big difference. The former can still buy whatever it wants I
mean anything not just airlines. Dubai
got burnt by its property boom its air-

10

cover story
FEBRUARY 24-MARCH 02, 2013

Why Jet & Etihad

Need the Other
The Bilateral
Divide

Extensive codesharing arrangement

Network and scheduling
coordination

EMIRATES
Last MoU April

WIN-WIN

23, 2008

54,200

Integration of frequent-flyer
programmes
Sharing of resources

Entitled seats a week in each

direction to Indian destinations

1,701

Joint purchasing and

negotiations with suppliers

BENEFITS FOR JET

Seats reserved from this quota

for FlyDubai

Brings in much-needed capital

Clearer strategy

ETIHAD
Last MoU* February

International expansion

4, 2008

BENEFITS FOR ETIHAD

13,330
Entitled seats a week in each direction
to Indian destinations
*The Indian external affairs ministry issued
notes verbales (diplomatic notes) on
February 10, 2009 and May 11, 2010

QATAR AIRWAYS
Last MoU February

AirAsia CEO Tony Fernandes is

entering a competitive and largely
unprofitable market

6, 2009

24,292

Greater feed from India to support

intercontinental services
Develop Canada & other markets
where there are no bilaterals
Source: Capa

And why Emirates

doesnt need a Jet
FEW BENEFITS

Entitled seats a week in each direction

to Indian destinations

Bilaterals have ensured a sizeable

lead over rivals
Traditionally focused on growing
network in-house

The flexibility or margin a

bilateral provides beyond the
specified seat entitlements
because sticking to the exact seat
entitlements may not always be
operationally feasible

Indian carriers provide little value

in terms of expansion

For example

Entitled seats for

airlines of Dubai

Entitled seats
after applying
the 2% flexibility

Takeaway The bilaterals

are clearly skewed in
favour of Emirates

line does very well, but the boss cant go out and buy anything and everything.
Jenks says the Etihad airline acquisition policy is a way
to ramp up its global market share. For example, an Air
Berlin or [soon] Jet Airways frequent short-haul passenger
within EU or India will be more likely to connect in Abu
Dhabi airport when it flies long-haul.
Indeed, long-haul flights are key to the ambitions of all
the three Gulf carriers. Passengers, particularly business
travellers who are the source of most airline profits, will
pay more to not change planes, says Richard Aboulafia,
an aviation consultant at the Teal Group, an American
consulting company.
That explains their big strides in markets like the US.
Emirates launched direct services to Washington DC last
September and Etihad is due to follow this summer. Etihads strategy in India centres on creation of substantial
traffic to destinations in Europe and North America and of
course, the Gulf. Both are offering passengers from India
a one-stop connection to the US capital, says StrategicAero Research.coms Ahmad.
Not to be outdone, Qatar will start flights to Chicago

from April 10. The airline has also announced the launch
of six new international gateways in recent months, including Gassim in Saudi Arabia and Najaf in Iraq.

A New Order
A few Indian competitors are fighting back. IndiGo, Indias biggest airline by passengers carried and the only
one known to make consistent profits, is expanding operations to the Gulf, according to its president Aditya Ghosh.
The carrier currently flies 16 times (to and fro) a day between India and Dubai and will connect Thiruvananthapuram with the city-state from March 1. Ghosh says keeping in mind the high travel demand, IndiGo will look to
launch operations between Kozhikode and Dubai as a
part of its summer schedule this year.
Yet, other financially-strapped Indian carriers should
be worried. Aboulafia says most other airlines and lessors
care solely about profit, pricing their products and running their businesses accordingly. But these players (from
the Gulf ), he says, are trying to preserve oil and gas wealth
by converting it into something tangible airlines, aircraft
leasing, and aviation services. They dont need to make
money, at least not in the short term.
That makes them the best bets to inherit the future of
air travel. Already, they have pulled global airline alliances, which offer passengers more destinations, easier
connections and transfer of frequent-flier miles, to their
hubs. Al Baker was quoted as saying: When you cannot
defeat someone, youve got to join them.
That sounds like bravado, but it also reflects the realities of a new era of aviation. The Capa report says the international aviation industry is adjusting to the impact of
the unfettered global ambitions of these carriers.
According to Capa, the historical weakness of international services by Indian carriers means that nearly 40%
of Indian international traffic travels to its final destination via an intermediate offshore airport. The Gulf hubs
capture more than half of such flows. Most of the airlines
seeking additional rights are 6th freedom carriers, which
will further squeeze the foreign routes of Indian carriers.
Not to forget AirAsia, whose operations will open a new
line of confrontation on domestic and foreign routes.
The India head of the foreign airline quoted earlier says
when the bilaterals are due for review, nothing is going to
change. Obviously, he is referring to the poor prospects
of Indian carriers thanks to the staggering ambitions of
the three Gulf carriers.

11

cover story
FEBRUARY 24-MARCH 02, 2013

Jet, Set...IndiGo!
Indias most preferred full-service airline brand is in desperate need of an
overhaul if it has to counter the threat from the value-for-money brigade

:: Manisha Singhal

arlier in the week when Jet Airways flagged off

a fresh round of price wars by announcing
that it would offer 2 million tickets at discounts of up to 50%, frequent flyers may have
rubbed their hands in glee. However, Jets second stab at prices in less than five months in
October, the Naresh Goyal-promoted airline
had slashed fares on the Mumbai-London
route to take on Richard Bransons Virgin Atlantic may not be doing Indias premier aviation brand too many favours.
In recent years Jets visibility is more due
to the fare schemes it has offered, says business strategy specialist Harish Bijoor. These
commoditised schemes make some people
happy and some very unhappy. And that is
where one has to be very careful while offering schemes, as schemes eat into brands.
The recourse to discounts, point out experts, is a surefire sign that even as rivals like
IndiGo have upped their game, the Jet brand
has descended into confusion. The offering of
multiple services under the mother brand hasnt help matters. Although the no-frills JetLite
has since been merged into JetKonnect the
slightly oxymoronic high-end low-cost carrier,
the dissonance that three brands from one airline created hasnt entirely disappeared.

Mid-air Confusion
Jet acquired Sahara [in 2007] and then
rechristened it JetLite. Later it added more
confusion by adding eight business class seats
to its JetKonnect service. But the business
class seats on the JetKonnect flights offer me a
different experience than the flights on Jet full
service. This has a huge negative impact on
the Jet brand, points out Bijoor.
Initially, Jet Airways had a much clearer
brand proposition. Among the several lowcost airlines that were available at the time, it
stood out as a brand that delivered highquality, customer-focused service, though at
a premium, points out Rishtee Batra, assistant professor of marketing at the Indian
School of Business.

Manish Dureja, vice-president, marketing,

products and merchandising at Jet Airways,
points out that the creation of low-fare brand
JetKonnect was a successful strategy to improve
yields. The launch of brand JetKonnect is the
culmination of a well-coordinated effort. We
believe that the JetKonnect rebranding initiative has proven to be extremely popular with
guests and helped us augment our revenues.
He adds that customer feedback on the rebranding, done on March 2012, indicates that
there is no confusion at all among passengers.
Jet Airways will continue as a full-service carrier, while JetKonnect will emerge as the low-fare
brand catering to price-sensitive market by offering competitive fares in the economy cabin.

Hitting an Air Pocket

Prior to the arrival of Kingfisher, Jet was the
only premium carrier that offered nationwide
connectivity. Batra adds that people were
comfortable paying a premium for travelling
on Jet Airways because of its adherence to
quality (flight timeliness, staff training, attention to aesthetics). Slowly, not only did the
landscape become more competitive but Jet
Airways also started slipping along these metrics. Competitors began beating Jet Airways at
their own game and were able to do it at a lower cost, explains the professor.
Ironically, this is a period in which Jet
should be consolidating its position, what
with its only rival in the full-service space,
Kingfisher Airlines, grounded. This advantage
wont last for long, what with the no-frills
brigade closing in. What is more, the Indonesia-based airline AirAsias imminent entry into
India via a three-way joint venture will give
Goyal some more to think about. After all,
AirAsia boasts of operational efficiencies and
combines them with the trick of selling the
cheapest air fares and still being able to hold
on to its margins.
The bigger worry for the moment, though,
is IndiGo, which has successfully positioned itself as a deliverer of high quality at lower fares.

IndiGos
delivery is
good & there
is clarity in
terms of what
the airline
is offering
Santosh Desai,
MD & CEO,
FUTUREBRANDS

Jet is working
on several
initiatives:
on time
performance,
constant
product and
service
innovation
Manish Dureja,
VICE-PRESIDENT,
JET AIRWAYS

Harish Bijoor Consults Inc recently did an audit by identifying 47 touch points at which an
airline interacts with consumers, like airport
kiosks, staff, hostesses and the like. Of these,
the audit suggested that IndiGo had perfected
46 touch points, right from the badges worn
by the hostesses, to the way food is packed, to
the uniqueness of those boxes. The bottom
line: IndiGo respects detail, which helps give it
a singular, conscious identity.

Brand Push
In an airline industry, brand consultants argue, two aspects are critical: one is operations
and the other is branding. An airline seat is a
commodity and a differentiation in that commodity is what gives you a kick. Experts say Jet
did a brilliant job for long time on branding
and a good job on operations but today its focus is more on operations and less on branding but IndiGo has done both.
IndiGos delivery on the whole is good and
there is clarity in terms of what the airline is offering. They sell themselves as full value at low
cost, says Santosh Desai, MD & CEO at Futurebrands, a consultancy. He adds that IndiGos brand equity in terms of perception is superior to that of Jet in the current scenario.
IndiGo may have done enough to put Jets
tag of being the most-preferred airline under a
cloud. Latest numbers for the peak Decemberended quarter show that Jets passenger numbers have declined by 13% on domestic routes.
Jets Dureja counters that today we are Indias largest private-airline group and continue
to retain our undisputed market leadership
the airline is also constantly working very hard
on several initiatives such as on time performance, constant product and service innovation, which would manifest itself in the form of
superior service quality, greater reliability and
enhanced connectivity for all our guests.
A deal with Etihad, which is still some way
from being inked, and the resultant financial
infusion may be just what Jet needs to refresh
a brand that still has a lot in store.