Business - India;When airlines catch a cold

Devina Joshi

With the airline industry hitting an air pocket that seems to be getting bigger by the day, Jet Airways and Kingfisher got together to steady themselves. But that alliance’s ripple effect has shaken associated businesses. How much has this ‘handshake’ affected travel portals and agents, aviation and airhostess training institutes, airline caterers and other material suppliers, infotech companies, BPOs or even ad agencies?

Feeling the reverberations


Jet and Kingfisher together account for roughly 60 per cent of the market share. Going by what is happening in the aviation sector that could erode fast. Rising fuel and other costs resulted in unrealistic ticket prices, which, in turn, gave way to low demand (overall there has been a drop by 20 per cent month on month in demand for air tickets). The best way out for the two was to think together. When the two finally joined forces (with the promise of co-branding activities later on), it meant different things to different people.

The Kingfisher-Jet alliance, experts say, is just the start of many more M&As in this space. Some say Air India is next on the radar. The general feeling is that the co-opetition (collaborating while competing) model is here to stay. While most may believe it is critical for survival to join hands with arch rivals, others feel the move goes beyond basic survival.

“It is a smart move, as co-opetition is the marketing way forward,” says Swapan Seth, CEO, Equus (Kingfisher’s agency). In all likelihood, there is considerable marrow to be extracted from KFA’s innovative marketing techniques and its customer experience model. Meanwhile, Jet’s sheer breadth of years will be a fountainhead of learning for KFA.

All looks pretty, but some watchers of the industry are sceptical. “Such alliances generally work in the case of brands that complement each other, and not those that are core competitors,” says Ankur Bhatia, executive director, Bird Group, an aviation consultancy.

Anand Halve, partner, chlorophyll Brand & Communications, feels that the only other way in which this alliance will help Jet and KFA (in addition to cost cutting) is attaining a certain bargaining power with the government. “It won’t help them in branding or directly associating with consumers in any way,” he asserts. So much for the airline industry, but what exactly does this team-up do to the allied or dependant industries?

Ripple effect

Just as one spoilt apple can ruin all the others in the basket, the airline crisis is not happening in isolation – it is bringing down several industries with it.


Travel portals (which run on a commission based model, rather than an advertising based one) currently get about 5 per cent commission from airline brands on every transaction. From November 1, airlines are going to take this figure down to zero. Naturally, there will be no income stream for travel portals from airlines then. This will force travel portals to add a service fee on ticket prices. Passengers would then prefer to go directly to the airlines to book tickets than visit the portal.

Larger players such as Yatra.com, Makemytrip.com or Travelguru.com have the staying power. So they won’t be as badly hit. Moreover, some like Yatra and Travelguru get a lot of the business from the hotels and the hospitality sector.

“But for the smaller players who depend on commissions from airlines, this will be a major hit,” says Ashwin Damera, founder and CEO, Travelguru. The Jet-Kingfisher alliance isn’t going down too well with travel portal. According to an industry watcher, for consolidators like travel portals, the more fragmented the players, the more the chances are for negotiations. And with two of the biggest players joining hands, this will be a wait and watch game.

Deep Kalra, CEO, Makemytrip.com, says that the worst hit will be the physical travel agents, who may have to pack up because of a decrease in demand. Experts also feel that enrolments in aviation training institutes will fall drastically due to the instability. “People join these institutes with the assurance of getting jobs. Without that, the reason to join evaporates,” says Halve. And to think that recently, an aviation academy had rolled out an ad that had a parent feeling relieved about his child’s job security on the latter’s enrolment into one such institute. Furthermore, in all likelihood, advertising by the AHAs and Frankfinns of the world will experience a dip.

Less demand for air tickets also means a lesser interface with customers and, therefore, reduced use of backend services. This is likely to affect BPOs and the IT industry as well. Thomas Xavier, chairman and national creative director, Orchard Advertising (the agency behind the Air Deccan ‘common man’ communication), predicts that people may revert to the old ways of travelling by trains, which is an unexpected boom for the railways.

Advertising whammy

With things going the way they are, ad spends could lead the cost-cutting heads airlines are drawing up. “Advertising works best in a competitive environment, and media spends will be the last thing on everyone’s minds,” says Harish Bijoor, chief executive officer, Harish Bijoor Consults. Jet and Kingfisher may, however, make this decision more easily than the others as they are in a relatively more comfortable position than the smaller fish.

But while there will be a cutting of media spends by all players, the ad agencies handling airline brands shouldn’t suffer per se. “Their fees won’t be squeezed, as generally, a client’s market conditions affect its advertising and not its advertising partner,” says Xavier of Orchard. “In fact, these agencies could advise clients on how to handle the media and the public at such a time.”


According to Xavier, the only way airline brands can save their brand imagery from being tarnished is for the CEOs of these companies to make public appearances, be it in media briefings, or through advertisements, assuring the public that this will all be over soon. For instance, when Chrysler Corporation was in a shambles in the 1980s, Lee Iacocca, among other things, ensured he was in the public eye, appearing in adverts as well. “Maybe a personal reassuring message by Dr Mallya on Kingfisher tickets could be a beginning,” Xavier offers.