India-based Airlines - Air India to get INR 6750,00,00,000

http://www.bloomberg.com/news/2012-03-13/air-india-aid-dwarfing-hospital-budget-adds-to-kingfisher-pain.html

Bloomberg reports that AI is going to get a massive cash infusion soon.

One thing I found interesting is "The unprofitable airline, the nation’s third-largest, has also helped prolong a price war that has contributed to losses at listed Kingfisher Airlines Ltd. (KAIR) and Jet Airways (India) Ltd."

The only explanation for this pricing strategy is that AI is trying to drive everyone else out of the market. But this strategy works only if AI (aka GoI) has deep enough pockets. Given that the Indian public doesn't want to fly AI despite their low prices (for a variety of reasons including perception), I don't see how they will ever succeed with this underpricing strategy. I think they will keep bleeding rupees for a long time.

Oh come on now. AI has a wonderful strategy and is the best airline in the greatest country on the planet while Kingfisher is an ego driven enterprise with an awful business plan.

:rolleyes:

The entire AI saga is a strange reminder of the days of License Raj. How dare anyone seek to make money in a business where GoI has its fingers in the pie.

Oh come on now. AI has a wonderful strategy and is the best airline in the greatest country on the planet while Kingfisher is an ego driven enterprise with an awful business plan. :rolleyes:
lol... I just refuse to believe that a rich, successful businessman like Mallya is an irrational idiot. At the risk of sounding like an economist, I'd describe him as an intelligent, rational person maximizing his utility function. Now his utility might be a function of flaunting his wealth and running a flamboyant business. But that's a conscientious choice he is making after having carefully evaluated all the pros and cons of the choice.

The entire AI saga is a strange reminder of the days of License Raj. How dare anyone seek to make money in a business where GoI has its fingers in the pie.
The problem is that the GoI is both a player in a competitive market and the regulator of the market. There is a fundamental conflict of interest that will not be resolved unless GoI relinquishes ownership and control of AI.

Nowadays, it's even more complicated since GoI is also a lender of last resort to all players in this market. I wonder how all this will play out? :confused: :confused:

http://www.bloomberg.com/news/2012-03-13/air-india-aid-dwarfing-hospital-budget-adds-to-kingfisher-pain.html

Given that the Indian public doesn't want to fly AI despite their low prices (for a variety of reasons including perception), I don't see how they will ever succeed with this underpricing strategy. I think they will keep bleeding rupees for a long time.

That is not true. AI is doing well load-wise.

Oh come on now. AI has a wonderful strategy and is the best airline in the greatest country on the planet while Kingfisher is an ego driven enterprise with an awful business plan.

:rolleyes: Please don't put words in my mouth... That statement is only somewhat accurate - AI has a wonderful domestic strategy which has been implemented woefully. Calling it the best airline on the planet depends on the metrics you are judging by - and financially, they clearly are nowhere close.

Kingfisher is indeed an ego driven vanity project with an awful business plan :)

lol... I just refuse to believe that a rich, successful businessman like Mallya is an irrational idiot. At the risk of sounding like an economist, I'd describe him as an intelligent, rational person maximizing his utility function. Now his utility might be a function of flaunting his wealth and running a flamboyant business. But that's a conscientious choice he is making after having carefully evaluated all the pros and cons of the choice.Mallya isn't successful. His father was successful. He just has managed to not kill UB yet. I would not call that success.

I wouldn't call him irrational - the decisions he makes are reasonably rational. My point is that Kingfisher is a vanity project for him - his focus wasn't on profitability, it was on furthering the Kingfisher brand. And I'd actually say that he was fairly successful at that. I bet he didn't predict the damage to the brand of having the airline practically grounded... But that's another story.

The problem is that the GoI is both a player in a competitive market and the regulator of the market. There is a fundamental conflict of interest that will not be resolved unless GoI relinquishes ownership and control of AI.

Nowadays, it's even more complicated since GoI is also a lender of last resort to all players in this market. I wonder how all this will play out? :confused: :confused:

Quite right. GoI has a bunch of fundamental conflicts of interest in a lot of markets. And while it clearly isn't an ideal situation, I don't forsee any changes to policy any time soon..

[QUOTE=Brahmin;18196417]That is not true. AI is doing well load-wise./QUOTE]
I'm not sure about passenger loads so I'll take your word for it. In that case, what's preventing AI from raising prices? Is it that they are trying to undercut the competition or are they just not good at determining prices? If the former, how long can this go on? They've been at it for years with no real results (all airlines besides IT are still up and running).

Please don't put words in my mouth... That statement is only somewhat accurate - AI has a wonderful domestic strategy which has been implemented woefully. Calling it the best airline on the planet depends on the metrics you are judging by - and financially, they clearly are nowhere close.

Please show me where I've put words in your mouth.


Kingfisher is indeed an ego driven vanity project with an awful business plan :)

Lets take a look at which Airline in India is guilty of

- Disproportionate Cost/Revenue ratio
- Monumentally stupid fleet purchase decisions
- Routings driven by things other than commercial sense
- Hankering to join an alliance without a clear direction of what they'd bring to the alliance and what the alliance will deliver to them

And then we have the AI Groupies who think a business plan which can boast of the aforementioned achievements is somehow "basically sound"; while KingFisher, guilty of the same afflictions is plagued by "bad business model".

That is not true. AI is doing well load-wise.
I'm not sure about passenger loads so I'll take your word for it. In that case, what's preventing AI from raising prices? Is it that they are trying to undercut the competition or are they just not good at determining prices? If the former, how long can this go on? They've been at it for years with no real results (all airlines besides IT are still up and running).
Their passenger loads are fine. Their yields are poor... There is intense price competition (due to a lot of excess capacity) on a lot of routes, and no airline is able to raise prices. IT going under will take out capacity from the market, which will really help everyone else. Hopefully no other airline will decide to dump capacity after they go under - then the situation will continue to be unsustainable.

Their passenger loads are fine. Their yields are poor... There is intense price competition (due to a lot of excess capacity) on a lot of routes, and no airline is able to raise prices. IT going under will take out capacity from the market, which will really help everyone else. Hopefully no other airline will decide to dump capacity after they go under - then the situation will continue to be unsustainable.

Conversely, if AI had been allowed to go under when its financials demanded that it go under, IT would not be in the predicament it is in today.

And that, my friends, is whats wrong with the Indian aviation industry.

GoI on one hand thinks it is reasonable to ask the private players not to raise fares during peak season to make the most of the supply/demand paradigm, and on the other hand, pours money in the bottomless pit that is AI that allows it to compete on price (which, lets face it, would've been the only way anyone would've picked AI over other Indian carriers till say a year ago!), at a price point which makes its business model (if there is one) untenable, so they go and beg again at the doors of GoI.

And all this while an economist who dragged the kicking and screaming Indian markets away from the spectre of socialism and license raj.

Conversely, if AI had been allowed to go under when its financials demanded that it go under, IT would not be in the predicament it is in today. I don't know about that. IT has done a great job destroying any chance for success that they ever had without any help from others.. Did AI/GoI/Praful/etc. make it easier for them? No. But if they had run the airline the same way they did, it would be in poor shape right now, whether AI is there or not

And that, my friends, is whats wrong with the Indian aviation industry.

GoI on one hand thinks it is reasonable to ask the private players not to raise fares during peak season to make the most of the supply/demand paradigm, and on the other hand, pours money in the bottomless pit that is AI that allows it to compete on price (which, lets face it, would've been the only way anyone would've picked AI over other Indian carriers till say a year ago!), at a price point which makes its business model (if there is one) untenable, so they go and beg again at the doors of GoI.

And all this while an economist who dragged the kicking and screaming Indian markets away from the spectre of socialism and license raj.

Agreed. GoI's position isn't one that will promote a healthy aviation sector. Sadly, their position isn't about to change either.

lol... I just refuse to believe that a rich, successful businessman like Mallya is an irrational idiot. At the risk of sounding like an economist, I'd describe him as an intelligent, rational person maximizing his utility function. Now his utility might be a function of flaunting his wealth and running a flamboyant business. But that's a conscientious choice he is making after having carefully evaluated all the pros and cons of the choice.
Let's put that into a little bit of perspective.

He inherited the booze business from daddy. Yes, he did grow said business, largely through acquisition.

Everything else that he started on his own? Flop after flop after flop. Not surprising since each of them are basically attention-seeking vanity projects, borne out of his me-too affliction.

Cricket team, racing team, airline... All very frou-frou and very lovely to have indeed. All seemingly designed to squander daddy's money.

I'm not sure I'd call that a successful anything, from any angle.



In any event, vulgarity aside, what Kingfisher do with their planes and their funds is their problem, between their board and their shareholders.

Air India, on the other hand, needs to have been put down yesterday. It serves zero purpose at vast taxpayer expense, that one of the poorest countries in the world simply cannot afford.

Die AI die.

I don't know about that. IT has done a great job destroying any chance for success that they ever had without any help from others.. Did AI/GoI/Praful/etc. make it easier for them? No. But if they had run the airline the same way they did, it would be in poor shape right now, whether AI is there or not

Oh remove your blinkers.

If AI had been continued to run the way it was being run, minus the "equity infusion" via taxpayer funds, it'd have been dead and buried long time ago.

And, thus, the argument that IT dropping out would allow AI to be profitable as the number of seats would reduce, is the same that'd have applied if AI had shut shop, this taking from the market far more seats than would be lost by IT closing down. That would've certainly allowed 9W and IT to become more robust players in the aviation sector, and for all we know, they might even have made better and more strategic use of the various routes available to India under the billaterals, than AI.

If AI had been continued to run the way it was being run, minus the "equity infusion" via taxpayer funds, it'd have been dead and buried long time ago. Agreed

And, thus, the argument that IT dropping out would allow AI to be profitable as the number of seats would reduce, is the same that'd have applied if AI had shut shop, this taking from the market far more seats than would be lost by IT closing down. That would've certainly allowed 9W and IT to become more robust players in the aviation sector, and for all we know, they might even have made better and more strategic use of the various routes available to India under the billaterals, than AI.
Yeah, I agree. AI going under would have strengthened IT. Just as 9W going under would have. Or 6E. Or SG. Or even G8.

However, that doesn't mean that their problems are AI's fault. Their mismanagement would have hurt the airline badly regardless of whether AI was there or not.

is it just me or has every thread in the 'airlines of india' forum turned into the same discussion with the same points being made by the same people across the board????

is it just me or has every thread in the 'airlines of india' forum turned into the same discussion with the same points being made by the same people across the board????
Well you can join right in - then it won't be the same people across the board anymore :p:p

But yes, I agree completely. I don't think this discussion is going to go anywhere, so maybe we should just drop it SQ421? We can just agree to disagree...

I agree with the notion that the amount of blame directed towards Air India and Prafull and government is far too great.

Do they have a role in Jet and Kingfisher's current predicament? They most certainly do.

But a larger proportion of that blame lies, and should lie, with Jet and Kingfisher (mis)management. They've done themselves no favours over the last few years.

One no longer knows if it's coming or going and the other has always been a joke of monumental proportions.

Air India and Indian Airlines were great concepts at one point in time. Just like Jet were a superior airline at one point in time. Neither are are true today.

Agreed

Yeah, I agree. AI going under would have strengthened IT. Just as 9W going under would have. Or 6E. Or SG. Or even G8.

Well, of those airlines you named, only AI was perilously close to going under (someone will correct me if I'm wrong but I recall reading something to the effect of "going under within a month" if GoI doesn't infuse money); and was given a taxpayer funded lifeline.

However, that doesn't mean that their problems are AI's fault. Their mismanagement would have hurt the airline badly regardless of whether AI was there or not.

You never know. With one less airline (and a lot less seats) to compete with, IT's twin pronged strategy of appealing to the budget end of the market with IT-Red, as well as the premier segment, with its full service offering may well have paid off.

I agree with the notion that the amount of blame directed towards Air India and Prafull and government is far too great.

Do they have a role in Jet and Kingfisher's current predicament? They most certainly do.

But a larger proportion of that blame lies, and should lie, with Jet and Kingfisher (mis)management. They've done themselves no favours over the last few years.

One no longer knows if it's coming or going and the other has always been a joke of monumental proportions.

Air India and Indian Airlines were great concepts at one point in time. Just like Jet were a superior airline at one point in time. Neither are are true today.Well said ^

Well, of those airlines you named, only AI was perilously close to going under (someone will correct me if I'm wrong but I recall reading something to the effect of "going under within a month" if GoI doesn't infuse money); and was given a taxpayer funded lifeline.
True


You never know. With one less airline (and a lot less seats) to compete with, IT's twin pronged strategy of appealing to the budget end of the market with IT-Red, as well as the premier segment, with its full service offering may well have paid off.
This twin pronged strategy cannot work. IT's costs are too high for an LCC. Having both an LCC and an FSC is just too expensive to be able to compete effectively.

That's why all the other carriers who want to do both LCC/FSC are doing it separately. Scoot, Tiger, Nok, JetStar, and now 9Wk being spun into S2.

But yes, I agree completely. I don't think this discussion is going to go anywhere, so maybe we should just drop it SQ421? We can just agree to disagree...


True. Its not like I'm ever going to fly AI even with a gun to my head, *A or not. I was looking forward to flying IT between BOM and HKG as a part of a DONE4 ticket later in the year, but I guess it'll have to be CX now.

That said, I did feel the compelling need to jump in the debate because you were glossing over AI's mismanagement while whacking IT with the same stick for the same reasons.

Till AI can substantially lift its game, EK will continue to be the de-facto national carrier of India. However, sticking to the existing non-strategy is NOT going to do it for them, nor is joining an Alliance, as though it were the sanjeevni to all that ails AI.

I guess its time to sit back, watch the chaos, and take a peek at the media frothing at the mouth when VJM heads to Melbourne later in the week, in his private jet, for a little fun n frolic a the Melbourne GP.

This twin pronged strategy cannot work. IT's costs are too high for an LCC. Having both an LCC and an FSC is just too expensive to be able to compete effectively.

That's why all the other carriers who want to do both LCC/FSC are doing it separately. Scoot, Thai Smile, and now 9Wk being spun into S2.

The other carriers are doing it separately more to avoid cannibalising of their main brand (or to not associate their main brand with a low cost operation). IT could just as well have done it with keeping the re-branded Air Deccan as a separate operational entity. Jetlite being spun back into S2 again has more to do with brand cannibalisation and confusion, than anything else.

Of course there were some obvious synergies to be exploited, viz, fleet commonality, which makes maintenance/spares/inventory a much easier enterprise.

Picture a scenario where AI had died, leaving the market to 9W and IT as the two major players.

IT could, in theory, use its mainline brand to connect the bigger metro's (BOM, DEL, MAA, HYD, CCU) while using the IT-Red brand to fly the secondary routes (Mumbai to Pune/Ahmedabad/Jamnagar/Goa/Nagpur) or (Delhi to Lucknow, Chandigarh, Jaipur, Patna) or (Chennai to Hyderabad, Bangalore, Cochi) or (Calcutta to north east capitals).

Internationally, the flights would've been full service (obviously) with the IT and IT Red flights to BOM and DEL connecting to international departures.

Costs would be low as the domestic fleets of IT and IT-Red would have fleet commonality, and thus could cut down on staff duplication and associated training costs.

True. Its not like I'm ever going to fly AI even with a gun to my head, *A or not. I was looking forward to flying IT between BOM and HKG as a part of a DONE4 ticket later in the year, but I guess it'll have to be CX now.

I'm with you on that one. I'd rather swim than take AI. Unless they start a non-stop BOM-NTE flight.

Domestically though, I gladly fly them; the erstwhile IC has always been perfectly adequate for the short hops within the country. I just (willingly) did a flight - it was just 30 minutes to Goa, but the whole experience from beginning to end was so underwhelming and uneventful, it was perfect.

And no, I'm not going to textbook extrapolate that into claiming AI are the most fantastic airline the world will ever see.

As for Cathay, now that is a class act. Few airlines can match them if you ask me.

Oh come on now. AI has a wonderful strategy and is the best airline in the greatest country on the planet

And a "fantastic" airline :D

Well you can join right in - then it won't be the same people across the board anymore :p:p

i think there are way way way way better things to do with my time....