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As the government of India attempts to privatise Air India, media reports suggest the second time around is seeing renewed interest. Reports also indicate the government is keen the Air India brand is retained post any sale. One can see why. The airline is still India’s national carrier and the brand has a high recall value and familiarity quotient.
Despite this the Maharaja continues to bleed with a massive loss of Rs 8,640 crore for the fiscal year ending March 31, 2019 (FY19), a declining domestic market share and an over-leveraged and fragile balance sheet. Why this contradiction?
The Air India brand
To understand Air India’s brand woes one has to revisit the narrative on Air India. Every conversation on Air India current situation begins with references to its glorious past. A past that traces back to 1932 and boasts of gorgeous cabin crews, extremely high service levels, luxurious cabins, capable and committed stakeholders, and a golden age of flying. This image of a glorious past is consistently repeated, to the point where combined with the current experience with Air India there is a narrative distortion.
It is not that all experiences on Air India are negative. Rather they are inconsistent. Some passengers testify that their Air India flight was one of their best flying experiences; others testify it was their worst. One just does not know what to expect.
The brand strength of Air India also faces significant distortion. A brand’s strength is not only measured by a high recall value but also by what price premium it commands, what loyalty it generates, and how successful is it in lowering costs. Air India shines on the first measure but falters on all the rest. The purchase behaviour of customers show that Air India does not deliver on a premium experience, neither on price, on service or on value. Add to this a weak loyalty program, weak positioning and mindless network planning i.e. operating flights on routes with excessive competition or poor demand. Pricing too sends mixed messages. The Air India brand is consistently inconsistent.
The new management team will have their work cut out
Assuming a bid does come in with adequate financing to take over the airline, the challenge of fixing brand Air India will stare the new management squarely in the face. Fixing brand Air India will require fixing the above elements, without the luxury of time. Borrowing the popular phrase from the former COO of Continental Airlines, tt will need to be done “Right Away and All at once”.
To start with Air India has to clearly set expectations of what segment it will compete in. The strategy of being all things to all people is simply not viable. The new management needs to convey these expectations, with no ambiguity, via the route network, schedules, stakeholders, processes and performance. This needs to be done via multiple touch points internally and externally, repeatedly, to the point where it starts to recast the narrative.
This will involve financial, strategic, and operational considerations. The new Air India will have to invest, align, and deliver on whatever it promises, seamlessly, flawlessly, repeatedly. In addition to massive amounts of cash, this will demand extreme levels of collaboration and consistency across the organisation. As an example, Air India is in the full-service segment, yet thanks to its poor finances, the hard or on-board product has not been repaired and maintained properly. Just to repair all the cabins we estimate will cost over Rs 700 crore. To bring the airline in the same league as the global players like Emirates, Qatar, Singapore, British, Lufthansa, Delta and United et al, will involve a cabin upgrade costing over Rs 7,000 crore ($1 billion) in investments.
These upgrades are critical in the hyper-competitive aviation world of today. Additionally the entire network, schedules and loyalty program will have to be revamped and aligned.
Alternatively, the airline could choose to reposition itself as a value carrier buying itself some more time in the bargain. However cost reduction is a difficult science, and this strategy may be a tougher goal to attain, given the bureaucratic, inefficient and bloated legacy of the airline.
Next, marketing efforts will have to align. To begin with something as simple as the colour scheme may require some tweaking. The current colours of orange and white carry a very different connotation than what the airline delivers on. Using the Ogilvy colour association, orange signifies energy, rejuvenation and affordability while white is symbolic of purity, cleanliness and simplicity. These associations have to find resonance with the brand. Air India is also woefully poor in the digital marketing space, an area that is growing in importance by the minute.
The current irrational pricing policy needs a total overhaul. It is unclear what Air India is attempting to deliver, or even communicate. As an example, on several sectors it is pricing higher than the competition while on others it is much lower. The variation at times can range upto 70%. The end result is a very confused customer, a confused brand proposition and an inconsistent experience.
The list goes on…
Consistency will be key to fixing brand Air India
Ultimately the Air India must deliver a brand that will increase the customers’ willingness to pay, on a high mind-share and on a lower cost. This can only be achieved via establishing a clear proposition, communicating core values and consistently delivering on this clear and well-articulated value proposition.
Fixing the brand may also help stemming losses by clearly focusing on a travel segment rather than attempting to be all things to all people. If the Rs 8,556 crore annual loss in FY19 was not bad enough, the Chairman and Managing Director (CMD) of Air India indicated earlier that the airline requires Rs 2,400 crores to fund on-going operations. Additionally as many as 16 aircraft are grounded for some reason or the other, and the roots trace back to a lack of funds. As such investing in the brand is often dismissed as a secondary consideration.
Yet for Air India to be successful fixing the brand will be a key element. And with over a hundred planes flying across the skies connecting ninety seven destinations, the brand must deliver. Failing that the customer simply has too many options.
