The Essentials For Indian Aviation

In the second series Bhisham Mansukhani communicates Air Sahara president, Rono J Dutta’s dossier on international aviation with an Indian perspective

A country needs to have a strong share market in a major city, which is very essential. That said, there is something inherently peculiar and singular to the airline industry. Placed in the context of any other industry, the allowance to increase capacity and access is assumed to translate into more revenue. But it doesn't work out that way - it is the ‘s’ curve phenomenon that is at play here. When an airline adds 10 per cent capacity, it can expect an increase of just two per cent revenue. But once an airline captures, say a 50 to 50 per cent traffic out of a given city, an addition of 10 per cent capacity may turn out 16 per cent further revenue. The way forward therefore is to find those key cities and focus on them for the long haul. Most airlines will agree that the biggest point of failure is the point of human contact because of a lag in consistency of each and every employee and that can pertain to training, human resource issues, what have you. The way around it is to well, empower the customer with a do-it-yourself perquisite. E-ticketing is indicative of this new thrust on innovation. Once the passengers are on board, turn on the in-flight entertainment and that is the best an airline can do. Technology is the most apparently reliable work-around to deal with human inconsistencies and is assuming predominance. The customer is definitely happier with this. It does however make us severely dependent.

Yielding Business

Yield management is intrinsically about gauging and perhaps pre-empting consumer demand reaction to various price points but with the dynamic development of the metros, this key business process is quickly compounding. Let's take an archetypal example - the San Francisco-Chicago-Boston routing. There are no problems with the yield management equation on the Chicago-Boston flight but making sure that there are enough seats for passengers coming in from the San Francisco-Chicago flight isn't that simple because these could be additional capacity coming from HongKong. Similarly, airlines often say they had three good months and then they had a sudden crunch of inventory for the same routes because some agents on the international route indulged in undercutting, putting out unsustainable prices and piled on excess capacity into one of the connecting cities. It is admittedly a complex problem that is taking up IBM's computing might.

Loyalty & Plastic

Loyalty programmes relevant to airlines have evolved to the extent that they influence passenger decisions - a staggering global figure of 15 per cent. This trend of consumer psyche and the stand-alone accent of loyalty programmes in aviation becoming stand alone profit centres can be precisely traced to affiliations with credit card companies. Another staggering fact is that of all the businesses within the banking spectrum, credit card generates the most amount of business Alliances leverages a number of decisions relating to network, city share and loyalty programmes. Put them all together and it is easy to cite the significance of alliances. From a passenger perspective, an alliance as large as Star has access to all major cities and has a number of the world's most rewarding frequent flier programmes in its ambit. There are more such alliances across regions. The point is that every international airlines that wants to last has to find itself in one of the big airline alliances to witness copious volumes. Now notice that India is not part of a single such alliance. India is the last, dark pole in this respect but in light of the ongoing turnaround in Indian aviation, we can soon hope for an Indian partner to join the fray.