A level playing field in the skies

Only the other day, it seemed Group Captain GR Gopinath was making brave noises about Air Deccan not really being up for sale. Now, liquor king Vijay Mallya’s UB Holdings, the parent company of his Kingfisher Airlines, is set to buy 26 per cent in Deccan Aviation, the country’s pioneering no-frills low-budget airline.
It is a sign of the times that the two are coming together in what is clearly a strategic alliance. Strategic fits happen when a strong brand with shaky finances meets deep pockets with staying power. We are yet to see what the future holds for latecomers in the no-frills business, such as IndiGo and GoAir.
The sky is getting crowded, airport terminals are crammed with passengers and pilots are in short supply. It is clear that cut-throat competition has been good for customers, but the honeymoon may not last if that bleeds rival airlines beyond acceptable points. Much of the aviation boom in recent years has been a result of happy coincidences. The rise of sophisticated Internet software that helps boost efficiency and cuts ticketing costs, a recession in the global aviation industry and the growth of a huge aspirational market involving relatively well-heeled Indians have collectively driven the market. But in the world of business, where customers and companies must eventually co-exist, a balance has to be found. Financiers including foreign investors, private equity players and bankers are ready to fund airlines buying jets by the dozens, but they do ask questions on the viability and the future sustainability of those clamouring for a piece of the action. In such a context, mature players, or at least the early ones that have bled some money to build market share or brands, fall in line with reality when they realise that they cannot burn up their businesses in the race to win customers.
What next? India’s aviation industry has to mature, and perhaps airlines would do better if they position themselves to connect smaller towns and give a wider range of options for flyers. Service will need to be critical to retain customers.
02/06/07 Hindustan Times

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Categories: Air Deccan Jun 2007, General Aviation Jun 2007, Kingfisher Jun 2007