But the three airlines with a mix of full-service and low-cost operations—Kingfisher, Jet and Air India—had the oldest fleet mix. Kingfisher and Kingfisher Red had 4.6 years and 5.9 (making for an above 5 average for the company as a whole), Jet had 5.8, and Air India had a gerontocratic 9.8 years.
Age is beginning to tell on the big boys.
The fourth cost relates to aircraft maintenance. Globally, airlines have to maintain and service airlines to strict safety standards. This is why airlines with a diverse mix of aircraft tend to have higher costs, because they need separate staff to maintain Boeings or Airbuses or whatever.
The low-cost carriers (LCCs) have cannily focused on having only one basic aircraft (or sometimes two, with the second one connecting the smaller towns). SpiceJet uses Boeing 737s (NextGen). And Indigo Airbus 320s. But the big boys use several types. Kingfisher uses many different Airbuses (from A319-321 to 330) and ATRs. Jet uses Airbuses, Boeings and ATRs. Air India uses Airbuses, Boeings and even a Lockheed L-101 Tristar (anyone’s heard of them?)
In this business, diversity is weakness.
The fifth cost is the cost of idling. Getting bums on seats is one half of the challenge, but there’s no point getting them seated till you can fly them. In short, you have to fly more bums more often and for longer – and this means airlines which keep their aircraft flying for longer hours get better revenues. The figure to watch here is the aircraft utilisation rate – the time the aircraft spends in the air in a 24-hour cycle.
Indigo tries to keep the idle time between two journeys to 30 minutes and manages an aircraft utilisation rate of 11.5 hours a day. Air India’s? Don’t ask. It’s 9.1 hours.
Apart from costs, the full-service carriers compounded their problems by making fundamental strategic errors in their desire to scale up and raise market share.
Domestic market shares in 2001 stood at 26 percent for Jet (including JetLite), 19 percent for Kingfisher, 18 percent for Indigo, 16 percent for Air India, 14 percent for SpiceJet and 7 percent for Go Air, according to data from the Directorate General of Civil Aviation.
Two areas are worth mentioning. Mergers and branding.
All the full-service boys messed up their mergers. Coincidentally, all three—Jet, Kingfisher and Air India—went in for acquisitions and mergers in 2007-08. While Jet bought Sahara, Kingfisher bought Air Deccan and Air India merged with Indian Airlines. The traditional logic of mergers is cost savings and synergy, where two and two equals five.
But, surprise, two plus two ended up as three for all of them. While some cost rationalisations did come through from route swapping and capacity and code sharing, all three made branding and HR errors.
Air India never fully consummated the marriage with Indian Airlines as its human resources issues did not get sorted out (pay structures, etc). Jet and Kingfisher committed cardinal branding errors by renaming their low-cast carriers in their own image.
While Jet renamed Sahara as Jet Lite, consumers wondered what the difference was. Kingfisher converted Air Deccan into Kingfisher Red – and duly landed deeper in the red.
The issue is simple: when two brands—one full-service with all the frills of flying, and another, with low fares—are given the same or similar names, how is the consumer to know the difference? It is easy to assume that Kingfisher Red’s service is no different from Kingfisher’s, when the fares of the former are far lower. If Rolex were to buy Titan and name the latter Rolex Lite, will Rolex’s sales go up or Titan’s?
It is more than likely that many air passengers downtraded to the LCCs due to this brand confusion.
The full-service carriers have clearly to rethink their business models and branding. Or else, they can kiss goodbye to profits forever.
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