Determining the right strategy
Mar 12, 2012 | 9:56 pm
#1
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Determining the right strategy
An argument I often hear on this board, by some more than others, is that AI had the right strategy/horse/car/etc but just had the wrong management/jockey/driver/etc. I'm not sure this is right. Here's my reasoning:
AI seems to be an airline in which the management is inactive. They have not done anything new or remotely risky (perhaps because their managers don't have a real incentive to make AI profitable). The only thing they did introduce was IX, and I bet this was because of some kind of political pressure from Keralites. Of course an airline (or any company for that matter) that does not take any risks will be just as it is. This is what AI did.
Other airlines took their chances and failed. The other airlines took their chances because they had too: after 9/11 and the rise in oil prices in 2006-08, they had to do something innovative or they would go out of business. AI did not have to take these chances since they were backed by the government.
Supporters of AI look at the result of the game and conclude that the losers were dumb. However, that's not the right way to judge intelligence (or competence or rationality or whatever you want to call it). That is not right because outcomes can be influenced by [both good and bad] luck, which is what I think happened here (as in no one predicted the great recession). To truly judge intelligence, you should look at the strategies they employed at the start of the game, given the information available at that time.
Once you apply the framework I described, it's not clear to me that AI has the right strategy and IT/9W don't. Thoughts, comments, feedback appreciated.
AI seems to be an airline in which the management is inactive. They have not done anything new or remotely risky (perhaps because their managers don't have a real incentive to make AI profitable). The only thing they did introduce was IX, and I bet this was because of some kind of political pressure from Keralites. Of course an airline (or any company for that matter) that does not take any risks will be just as it is. This is what AI did.
Other airlines took their chances and failed. The other airlines took their chances because they had too: after 9/11 and the rise in oil prices in 2006-08, they had to do something innovative or they would go out of business. AI did not have to take these chances since they were backed by the government.
Supporters of AI look at the result of the game and conclude that the losers were dumb. However, that's not the right way to judge intelligence (or competence or rationality or whatever you want to call it). That is not right because outcomes can be influenced by [both good and bad] luck, which is what I think happened here (as in no one predicted the great recession). To truly judge intelligence, you should look at the strategies they employed at the start of the game, given the information available at that time.
Once you apply the framework I described, it's not clear to me that AI has the right strategy and IT/9W don't. Thoughts, comments, feedback appreciated.
Mar 12, 2012 | 10:10 pm
#2
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An argument I often hear on this board, by some more than others, is that AI had the right strategy/horse/car/etc but just had the wrong management/jockey/driver/etc. I'm not sure this is right. Here's my reasoning:
AI seems to be an airline in which the management is inactive. They have not done anything new or remotely risky (perhaps because their managers don't have a real incentive to make AI profitable). The only thing they did introduce was IX, and I bet this was because of some kind of political pressure from Keralites. Of course an airline (or any company for that matter) that does not take any risks will be just as it is. This is what AI did.
AI seems to be an airline in which the management is inactive. They have not done anything new or remotely risky (perhaps because their managers don't have a real incentive to make AI profitable). The only thing they did introduce was IX, and I bet this was because of some kind of political pressure from Keralites. Of course an airline (or any company for that matter) that does not take any risks will be just as it is. This is what AI did.
Other airlines took their chances and failed. The other airlines took their chances because they had too: after 9/11 and the rise in oil prices in 2006-08, they had to do something innovative or they would go out of business. AI did not have to take these chances since they were backed by the government.
On the other hand, I would call what 9W did with S2 innovative. Keeping a completely separate airline under the same corporate umbrella, which can keep its own costs down but still enhance connectivity is an excellent idea. However, they made a bit of a hash of that idea as well - S2's costs are too high compared to 6E's or SG's... But the idea was a good one.
Supporters of AI look at the result of the game and conclude that the losers were dumb. However, that's not the right way to judge intelligence (or competence or rationality or whatever you want to call it). That is not right because outcomes can be influenced by [both good and bad] luck, which is what I think happened here (as in no one predicted the great recession). To truly judge intelligence, you should look at the strategies they employed at the start of the game, given the information available at that time.
I never said that AI was "more intelligent" than 9W/IT. The idea behind AI is more intelligent than the idea behind IT. And on that token, I wouldn't disagree with the statement "JRD Tata was more intelligent than Vijay Mallya"
Looking back today, it's clear that AI's strategy was better than IT/9W. 9W's management has clearly been better, but the strategy they have employed is worse. However, I do think that while it's clear now, it wasn't clear back then.
Mar 12, 2012 | 10:23 pm
#3
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Mar 12, 2012 | 10:39 pm
#4
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When I say management, I mean the implementation of the strategy...
Mar 13, 2012 | 12:08 am
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Random thoughts on AI strategy or lack thereof
1.
Air India, started by JRD Tata in 1932, and acquired by the Government of India in 1953 has mainly operated on the premise of connecting pockets of Indian diaspora with India. In itself, that was a sound strategy in its early days, but has certainly left AI behind with the advent of super-hubs of DXB, AUH, SIN, BKK, HKG all around the 5 hour mark form most cities in India.
For someone flying from MAA/CCU/BLR/COK to say Europe or Far East, it is more convenient to change flights in DXB/SIN/BKK/HKG than spend 2-3 hours flying to DEL/BOM, run the gauntlet of transiting through airports that aren't the most transit friendly, and then carry on to their onward destination.
Limited connectivity at destinations certainly doesn't help either, when the carriers connecting through the aforementioned hubs have an option of delivering you much closer to your intended destination in your destination country, with a same one-stop journey.
Would you rather fly MAA-DEL-JFK-ORD or fly MAA-HKG-ORD ?
2.
Transiting in India can be a royal pain in the proverbial. There, I said it. Sure the new DEL airport gets good reviews, but transiting from International to Domestic (or vice versa) is not a welcome experience at the best of the times. Not many people want to deal with the chaotic experience of transferring between the domestic and international terminals (which are separate at BOM and DEL), and would much rather connect outside the country and fly direct to their destination.
If you had to spend 4 hours in transit, would you rather spend them at BOM, or spend them at SIN/HKG/DXB where transit is infinitely more pleasurable, and fly directly to your destination?
9W actually got this right to a great degree by using BRU as a scissor hub in Europe to connect its feeder flights from BOM/MAA/DEL to flights bound for JFK/EWR/YYZ
3.
For a while now, AI has been toying with the idea of a direct flight to Melbourne, Australia (MEL). For the life of me I can not fathom what it stands to gain by having a once daily flight flying such a long, thin and seasonal route. The flight will be of next to no use to anyone who's flying from outside of MEL and who's destination is any place outside the DEL catchment area. But, AI wants to do it.
Again, a better way would be to emulate 9W and fly to one of the Asian hubs from multiple Indian airports and feed the passengers onto another that flies to Australia. 9W codeshares with QF between SIN and India and SIN and Australia, and QF's recent pullout form India altogether seems to indicate that the codeshare strategy is working fine for the market it wishes to serve.
These three are the big "strategy" points that come to mind, and would be great to dissect and fix. Then ofcourse there's the usual suspects of reliability, service recovery, irrops, and what have you.
1.
Air India, started by JRD Tata in 1932, and acquired by the Government of India in 1953 has mainly operated on the premise of connecting pockets of Indian diaspora with India. In itself, that was a sound strategy in its early days, but has certainly left AI behind with the advent of super-hubs of DXB, AUH, SIN, BKK, HKG all around the 5 hour mark form most cities in India.
For someone flying from MAA/CCU/BLR/COK to say Europe or Far East, it is more convenient to change flights in DXB/SIN/BKK/HKG than spend 2-3 hours flying to DEL/BOM, run the gauntlet of transiting through airports that aren't the most transit friendly, and then carry on to their onward destination.
Limited connectivity at destinations certainly doesn't help either, when the carriers connecting through the aforementioned hubs have an option of delivering you much closer to your intended destination in your destination country, with a same one-stop journey.
Would you rather fly MAA-DEL-JFK-ORD or fly MAA-HKG-ORD ?
2.
Transiting in India can be a royal pain in the proverbial. There, I said it. Sure the new DEL airport gets good reviews, but transiting from International to Domestic (or vice versa) is not a welcome experience at the best of the times. Not many people want to deal with the chaotic experience of transferring between the domestic and international terminals (which are separate at BOM and DEL), and would much rather connect outside the country and fly direct to their destination.
If you had to spend 4 hours in transit, would you rather spend them at BOM, or spend them at SIN/HKG/DXB where transit is infinitely more pleasurable, and fly directly to your destination?
9W actually got this right to a great degree by using BRU as a scissor hub in Europe to connect its feeder flights from BOM/MAA/DEL to flights bound for JFK/EWR/YYZ
3.
For a while now, AI has been toying with the idea of a direct flight to Melbourne, Australia (MEL). For the life of me I can not fathom what it stands to gain by having a once daily flight flying such a long, thin and seasonal route. The flight will be of next to no use to anyone who's flying from outside of MEL and who's destination is any place outside the DEL catchment area. But, AI wants to do it.
Again, a better way would be to emulate 9W and fly to one of the Asian hubs from multiple Indian airports and feed the passengers onto another that flies to Australia. 9W codeshares with QF between SIN and India and SIN and Australia, and QF's recent pullout form India altogether seems to indicate that the codeshare strategy is working fine for the market it wishes to serve.
These three are the big "strategy" points that come to mind, and would be great to dissect and fix. Then ofcourse there's the usual suspects of reliability, service recovery, irrops, and what have you.
Mar 13, 2012 | 12:35 am
#6
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Random thoughts on AI strategy or lack thereof
1.
Air India, started by JRD Tata in 1932, and acquired by the Government of India in 1953 has mainly operated on the premise of connecting pockets of Indian diaspora with India. In itself, that was a sound strategy in its early days, but has certainly left AI behind with the advent of super-hubs of DXB, AUH, SIN, BKK, HKG all around the 5 hour mark form most cities in India.
For someone flying from MAA/CCU/BLR/COK to say Europe or Far East, it is more convenient to change flights in DXB/SIN/BKK/HKG than spend 2-3 hours flying to DEL/BOM, run the gauntlet of transiting through airports that aren't the most transit friendly, and then carry on to their onward destination.
Limited connectivity at destinations certainly doesn't help either, when the carriers connecting through the aforementioned hubs have an option of delivering you much closer to your intended destination in your destination country, with a same one-stop journey.
Would you rather fly MAA-DEL-JFK-ORD or fly MAA-HKG-ORD ?
1.
Air India, started by JRD Tata in 1932, and acquired by the Government of India in 1953 has mainly operated on the premise of connecting pockets of Indian diaspora with India. In itself, that was a sound strategy in its early days, but has certainly left AI behind with the advent of super-hubs of DXB, AUH, SIN, BKK, HKG all around the 5 hour mark form most cities in India.
For someone flying from MAA/CCU/BLR/COK to say Europe or Far East, it is more convenient to change flights in DXB/SIN/BKK/HKG than spend 2-3 hours flying to DEL/BOM, run the gauntlet of transiting through airports that aren't the most transit friendly, and then carry on to their onward destination.
Limited connectivity at destinations certainly doesn't help either, when the carriers connecting through the aforementioned hubs have an option of delivering you much closer to your intended destination in your destination country, with a same one-stop journey.
Would you rather fly MAA-DEL-JFK-ORD or fly MAA-HKG-ORD ?
But yes, the way they are building their international network makes little sense - on that front, 9W have done a much better job. When I made the original comments about strategy, I was focusing on the domestic market...
Sure the new DEL airport gets good reviews, but transiting from International to Domestic (or vice versa) is not a welcome experience at the best of the times. Not many people want to deal with the chaotic experience of transferring between the domestic and international terminals (which are separate at BOM and DEL)
For a while now, AI has been toying with the idea of a direct flight to Melbourne, Australia (MEL). For the life of me I can not fathom what it stands to gain by having a once daily flight flying such a long, thin and seasonal route. The flight will be of next to no use to anyone who's flying from outside of MEL and who's destination is any place outside the DEL catchment area. But, AI wants to do it.
Again, a better way would be to emulate 9W and fly to one of the Asian hubs from multiple Indian airports and feed the passengers onto another that flies to Australia. 9W codeshares with QF between SIN and India and SIN and Australia, and QF's recent pullout form India altogether seems to indicate that the codeshare strategy is working fine for the market it wishes to serve.
Again, a better way would be to emulate 9W and fly to one of the Asian hubs from multiple Indian airports and feed the passengers onto another that flies to Australia. 9W codeshares with QF between SIN and India and SIN and Australia, and QF's recent pullout form India altogether seems to indicate that the codeshare strategy is working fine for the market it wishes to serve.
I agree. If AI wants to turn around, there is no doubt that these will need to be fixed.
Mar 13, 2012 | 12:41 am
#7
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On the other hand, I would call what 9W did with S2 innovative. Keeping a completely separate airline under the same corporate umbrella, which can keep its own costs down but still enhance connectivity is an excellent idea. However, they made a bit of a hash of that idea as well - S2's costs are too high compared to 6E's or SG's... But the idea was a good one.
http://www.thehindubusinessline.com/...cle1029226.ece
However, now with too many Jet brands floating around, they are combining Jet Konnect into Jetlite and will hold 2 licenses for 2 set of ops under one group holding company.
Last edited by A2A; Mar 13, 2012 at 12:44 am Reason: bad html
Mar 13, 2012 | 12:48 am
#8
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Or, even with the MAA-ORD routing, more people would prefer to take a slightly longer flight to HKG and transit there (which is a much more friendly experience), than transit via DEL.
Mar 13, 2012 | 12:49 am
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On the other hand, I would call what 9W did with S2 innovative. Keeping a completely separate airline under the same corporate umbrella, which can keep its own costs down but still enhance connectivity is an excellent idea. However, they made a bit of a hash of that idea as well - S2's costs are too high compared to 6E's or SG's... But the idea was a good one.
http://www.thehindubusinessline.com/...cle1029226.ece
However, now with too many Jet brands floating around, they are combining Jet Konnect into Jetlite and will hold 2 licenses for 2 set of ops under one group holding company.
If 9W manages to have 2 distinct brands - 9W (FSC) and S2 (LCC), I think they would be in a good place... However, they also need to make sure that S2's cost base is in line with its LCC competition... Assuming they manage to do that, I think that this strategy could be successful... ^ Of course, it's all about implementation.
Mar 13, 2012 | 12:51 am
#10
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I didn't realize AI flies DEL-ORD but the point remains. Who'd fly MAA-DEL-ORD/JFK-SFO/LAX when they can fly MAA-HKG-SFO/LAX with a one stop flight.
Or, even with the MAA-ORD routing, more people would prefer to take a slightly longer flight to HKG and transit there (which is a much more friendly experience), than transit via DEL.
Or, even with the MAA-ORD routing, more people would prefer to take a slightly longer flight to HKG and transit there (which is a much more friendly experience), than transit via DEL.
Mar 13, 2012 | 12:58 am
#11
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Transit via DEL isn't as poor of an experience now compared to years past... I don't think that HKG would be significantly more friendly of a transit experience than DEL, especially since DEL's connections are perfectly timed while HKG usually requires quite a bit of sitting around... And T3 is fantastic - I didn't think that AAI was capable of such a thing..
One is a true "fantastic" carrier with proven levels of service recovery. The other is a relic of the socialist era who's reliability can not be extrapolated from a HYD-DEL flight.
Mar 13, 2012 | 1:05 am
#12
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AI 126 leaves DEL in a bank which also has all the other USA/Canada flights. I haven't seen a delay or cancellation posted on any of them either when I've flown through DEL...
While I know that AI can be a nightmare when IRROPS hit, the amount of IRROPS that AI faces is overestimated by most in my experience. It had a respectable 80% on-time record last month...
Mar 13, 2012 | 1:10 am
#13
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Lets add pricing to the mix.
For random dates next month, on DEL-ORD, the following airlines are cheaper than AI
Air Canada
KLM
Swiss
Air France
British Airways
Lufthansa
Turkish Airlines
Cathay Pacific
For the same dates, between DEL-JFK, the following airlines are cheaper than AI
KLM
Air France
Etihad
Qatar
Virgin Atlantic
Swiss
Austrian
British Airways
Lufthansa
Turkish
Cathay Pacific
Jet Airways
Not many would pay more to fly AI over any of these airlines.
For random dates next month, on DEL-ORD, the following airlines are cheaper than AI
Air Canada
KLM
Swiss
Air France
British Airways
Lufthansa
Turkish Airlines
Cathay Pacific
For the same dates, between DEL-JFK, the following airlines are cheaper than AI
KLM
Air France
Etihad
Qatar
Virgin Atlantic
Swiss
Austrian
British Airways
Lufthansa
Turkish
Cathay Pacific
Jet Airways
Not many would pay more to fly AI over any of these airlines.
Mar 13, 2012 | 1:17 am
#14
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I agree that it is a relic of a socialist era. I disagree that the reliability cannot be extrapolated from a HYD-DEL flight - I've flown AI 126 (ORD-DEL-HYD) on the DEL-HYD sector about once a month for the last few months. In 6 times, it has been delayed or cancelled 0 times. If the reliability in ORD was poor, it would be pretty obvious in DEL...
BTW, AI127 is delayed an average 101 minutes between 1 Jan and 29 Feb this year - http://www.flightstats.com/go/Flight...19F2.web1:8009
Here are the comparable stats for BOM-EWR in the same period.
http://www.flightstats.com/go/Flight...19F2.web1:8009
Mar 13, 2012 | 1:37 am
#15
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That's good. Even IT realized the problem that IT Red was causing, and they tried (far too late) to fold it into IT (FSC).
If 9W manages to have 2 distinct brands - 9W (FSC) and S2 (LCC), I think they would be in a good place... However, they also need to make sure that S2's cost base is in line with its LCC competition... Assuming they manage to do that, I think that this strategy could be successful... ^ Of course, it's all about implementation.
If 9W manages to have 2 distinct brands - 9W (FSC) and S2 (LCC), I think they would be in a good place... However, they also need to make sure that S2's cost base is in line with its LCC competition... Assuming they manage to do that, I think that this strategy could be successful... ^ Of course, it's all about implementation.