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BW Businessworld

Sometimes Less Is More

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Gloom, gloom, gloom. I do not know if Greece is to blame or not, but everything is looking gloomy. The aviation sector in India is going through one of its gloomiest phases. Air India pilots and employees have never been this gloomy, gloom surrounds once glamorous Kingfisher Airlines which is dying a slow and painful death and most of the private airlines — big and small — don't seem to be able to shake off the general mood of gloom and doom.

It is no wonder then that many aviation analysts and observers are sceptical about IndiGo Airlines' claim that it will escape unscathed and will, in fact, make a small profit. Whenever I mention this to anyone in the industry they are incredulous. Most cite the airline's postponement of its IPO as proof that it, too, is losing money.

The airline's promoter Rahul Bhatia, who certainly does not care what anyone thinks, is clear that he will time his IPO to suit his convenience — not anyone else's. From Day 1, he has maintained that he will go to the market for funds when he needs funds and when he can get best value for his investment, which, to me, sounds logical.

So when I last met IndiGo's president Aditya Ghosh, I told him precisely this. That people refused to (or maybe they did not want to) believe that an airline was making money in this environment and if he had some secret recipe, everyone wanted him to share it on the Internet.

I am sure he is not about to do that, so let me tell you some of what he told me. IndiGo — just like Southwest Airlines in the US — manages to make money by keeping things simple. Aircraft from one company (many think SpiceJet has shot itself in the foot by adding a mix to its stable), no lounges, no food, no frills, no stuff and nonsense. Simple. That is his key word. Maintenance costs are lower as it has only one make of planes to fuss over, training costs are lower for the same reason and so are equipment and inventory costs. Less engineers are needed. If a plane needs to be pulled out at the last minute for any reason, the same crew and pilots can be used since there is only one type of aircraft the airline works with. Catering costs are lower and partly made up for by sales. Charges at airports in any case are lower since they don't provide lounges or aerobridges. And while he may not say this, I think IndiGo is blessed with less ego (one of the main reasons for the downfall of airlines such as Kingfisher). Ghosh also revealed an interesting fact: 40 per cent of IndiGo's workforce comprises women. Twenty per cent of pilots are women too. 

There are a host of reasons he did not touch upon, which industry sources believe have helped. They say the airline negotiated and got great discounts on the mammoth orders it placed with Airbus (in fact, an article in The Economist argues that airlines that use only planes from one manufacturer are given bulk discounts). Some even claim every aircraft is $3-4 million cheaper than the price at which rivals get them. Also, IndiGo buys and leases aircraft like other airlines but returns them the moment they are five years old. Just like with human bodies, the younger you are, the less you need to spend on maintenance.

There are a few other learnings that I would like to convey — whatever they may be worth — to Indian carriers to help them win loyal customers (although so unique is the Indian context that more fliers may not translate into more profits).

When they offer free or cheap trips, they should make it easy to book them, not impossible as often happens. Discounts and freebies, as and when offered, should be accessible to all and be transparent. You will derive very little benefit from "pretending" to be offering a great deal. Offer less often, if you wish, but when you do, let it be for real.Customers in the US say that they love flying Southwest because it does not charge you for a change you may make in your flight. You may need to pay the difference but they say that the airline's business plan is "not to rip you off" and that is appreciated. 

Again, Southwest's customers say that it has managed to make it "fun" to fly with the airline. I do not know how many Indian CEOs will relate to this, but it has worked for some airlines globally. You may offer very less, but if prices are not dramatically different, people fly with you because it is more fun to fly with you.

Coming back to IndiGo, maybe it is just its 40 per cent women workforce that does the trick. Just as a woman behind every successful man, isn't it possible that behind every successful airline there are women too? Simple.