Easy to Blame, Hard to Change – Air Asia’s India dilemma?

On 1st of June I wrote about the numerous U turns – Air Asia India has taken in the last one year. (Air Asia India – The “U” turn airline), a lot of media houses have subsequently come out with articles related to growth of Air Asia India and news that TATA’s may increase stake in the venture. This also led to rumors of management changes and change in strategy.

Between then and now the airline has again gone public blaming the policy framework in the country for its slow growth. I find these really unfortunate and only points to lack of home work on the airline’s side before entering the country for business.

While today there is debate and discussion happening on removal of 5/20 rule allowing newer airlines to fly international and changing the Route Dispersal Guidelines, when the airline decided to enter the country in 2013, it should have been well aware what the rules were and how the existing airlines are working around them. The rules may not be perfect or supporting open market, but they are the rules of the land and the airline should have been fully aware about it rather than blaming the policy and framework two years down the line.

LCC dilemma – point to point or hub and spoke

World over, Low Cost Carriers (LCCs) tend to have point to point flights on offer compared to Hub and Spoke model like what full service carriers do – getting passengers from all across to their hubs, transferring them onto another plane and sending them to their destination.

Some good examples of Hub and Spoke airlines can be Emirates or Lufthansa, who connect people from East to West and vice versa at their hubs of Dubai and Frankfurt/Munich respectively.

However, many low cost carriers world over started with either a hub and spoke model or looking for connecting traffic at not just hubs but any airport. This includes Ultra Low Cost Carriers like Spirit in USA, which offers one stop flights with same aircraft and also connects passengers onto other aircraft at some airports.

The third way, which is a mix of these, is through flights or via flights. In this the same aircraft, most of the times operating with the same flight number goes from point A to point B and to point C and tickets are sold from A to B, B to C as well as A to C. This model is something which has been picked up very well by the Indian Carriers – not just Low Cost but also Full Service. This is generally done if the two destinations do not have sufficient traffic for direct flights. Domestically tickets can be sold between point B and C, while on international segments they are subject to bilateral agreements between the three parties.

An example of such flight is Emirates flight from Dubai to Buenos Aires via Rio De Janeiro.

 Indian scenario

While the Full Service Carriers (FSCs) use GDS (Global Distribution Systems) which let them configure connecting times at airports between flights and building automatic connections for passengers, the LCCs most of the time build connections manually. This helps them decide which flights and sectors should be offered for connections and can modify based on seasonality as well as traffic projections.

In India, the LCCs not only provide Hub and Spoke connections at metro airports, they also have via flights from Point A to B to C and they also have triangular flights – with the most popular sector for this has always been Delhi – Guwahati – Bagdogra – Delhi or/and vice versa.

Air Asia India on the other hand has stayed away from this and stuck to its model of point to point service only. Neither providing connections with change in aircraft nor providing connections without change in aircraft (Delhi – Imphal via Guwahati).

What this essentially means is that the smallest sector which it flies, between Imphal to Guwahati, is to be filled up with traffic originating at Guwahati and terminating at Imphal and vice versa, unlike what every other player does on this sector, thus limiting the market from/to Imphal by its own rules!

Guwahati – Imphal – Guwahati

For year ending March’15, Guwahati saw an increase of just 1.6% passengers on the domestic side over the same period in the previous year while Imphal registered negative growth of 2.6%.

While it is difficult to get the exact Origin – Destination (O-D) numbers between Guwahati and Imphal, the numbers prima facie look miniscule.

In such circumstances can it help Air Asia India to tweak its model to suit local conditions and offer a Delhi – Imphal connection via Guwahati or stick to its global stand of not offering a via connection and selling Delhi – Guwahati and Guwahati – Imphal separately but not selling Delhi – Imphal at all which sees considerable traffic ?

Yes, this may look like a change in strategy. Yes, this may need some modifications to internal procedures. Yes, this may involve some system upgrades but all this may well be worth if it can attract traffic. For what the airline said of offering experience to passengers in Delhi and taking on market leader IndiGo, Delhi – Imphal remains a route which passengers can try only on IndiGo or Air India and not Air Asia India!

Currently IndiGo flies double daily from Delhi to Imphal via Guwahati, Air India flies daily from Delhi to Imphal via Guwahati, Jet Airways flies 4 times a week on Guwahati Imphal sector which is part of its flight which originates in Bengaluru and reaches Imphal via Kolkata and Guwahati.

Is it so difficult to change and adjust to the local market or it is indeed easy to keep blaming the local market rather than looking at ways to change, adapt, adjust and take on the competition? I keep wondering . . .

Tail Note

While I was always skeptical about Air Asia India, personally I expected that they would take the whole industry to new and higher levels. In the last year or so, it is Spicejet which has been the most innovative airline coming up with disruptive strategies time and again. May it be the hand baggage only fare or some frills which they introduced first. IndiGo continues to keep their head down, talk less and consolidate – something which they have done consistently for last many years. The airline is also waiting for IPO, followed by rapid expansion when the A320 NEOs start arriving.

That leaves us with Air Asia India, which has been speaking a lot, but executing little. I continue to wonder if “Any publicity is good publicity” is the mantra here or bad planning and preparations for entry into the country has led to this state. I am not sure how much preparation the airline did before starting operations but the only way to end this article would be to say – “The more you sweat in peace, the less you bleed in war” and wish Air Asia India good luck for the operations.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s