Mktg - Deccan brand transitioned into Kingfisher Red inevitable ?

Nitish Mukherjee, managing director, Leo Burnett, recalls an occasion where he had to temporarily halt a credentials presentation at a prospective multinational client’s office. The head of marketing at the MNC couldn’t control her emotions after watching Air Deccan’s ‘The old man and the sky’ commercial, which was part of the showreel that Mukherjee, then head of Orchard Advertising, was showing.

When late last month the Deccan brand transitioned into Kingfisher Red — the company vehemently refutes any suggestion of ‘transition’ — and finally disappeared from Indian skies, there was no telling on how many tears were shed on its passing. But the sense of disappointment — even outrage — among practitioners and experts of branding is palpable. “Air Deccan is a very special brand.

There are few brands that create seismic shifts in the market place. Deccan changed the aviation landscape in the country,” says Mukherjee, who, at Orchard, literally midwifed the brand. Mukherjee’s opinion can be ascribed to his proximity to Air Deccan; not brand consultant Harish Bijoor’s. Yet, Bijoor makes common cause, given the equity the brand has built over the last decade. “Doing away with the Air Deccan brand is a rather short-sighted approach. A long-term option would have been to keep skeletal operations going on,” he says. Adds Addison Schonland, president, Innovation Analysis Group: “Losing Deccan demonstrates that Kingfisher wanted the license to fly overseas, not the business as such.”

Branding experts may have a reason to be sore. In four years, low cost carriers (LCCs), with Deccan being the flag bearer, have taken a 45% share in the Indian domestic aviation space. Compare that to the US, where low cost carriers, despite having better infrastructural support, have captured just 25% of the market in the best of circumstances.

“The shift in shares is dramatic, and had Deccan continued to operate, the shift could have possibly been more dynamic,” insists Kapil Kaul, CEO, Indian Subcontinent & Middle East, Centre for Asia Pacific Aviation. With so much support for keeping brand Deccan going, it’s but natural to question the collective wisdom at Kingfisher.

But, as many marketing wizards will acknowledge, market share is not the sole criterion to keep a brand in circulation; at the end of the day, what counts is profitability, sustainability and bottomlines. As Kaul points out, it was getting increasingly difficult for the low cost carriers to sustain themselves, given the Indian context.

Aviation fuel costs are 70%-80% higher in India than other parts of the world due to higher levies, and fuel makes up 50% of an airline’s running costs. Then, there are taxes on most cost heads — from a withholding tax on leasing aircrafts to fringe benefit taxes on aircrew accommodation. Add the high airport usage charges plus the lack of infrastructure, and you have a nightmarish business proposition. In metros where air traffic is congested, aircrafts hover above airports for 30 minutes to an hour, rendering on-time performance a near impossibility.

Legacy or full-service carriers may be able to absorb the shock of these inefficiencies better, but for LCCs it becomes unsustainable beyond a point. “The cost structure is not compensated by the fare inputs,” admits Kaul. The rise in oil prices was the final nail.

Even in 2002, with fuel costs being $20 a barrel, most airlines in India did not make money, Kaul recalls. With fuel costs at $140 a barrel, it doesn’t take a genius to figure out who’s bleeding. Then, low-cost carriers were in a precarious position as the market forces, rather than the service offering, determined ticket prices. After all, LCC customers often line up outside the windows of the cheapest service provider. In this context, it’s hard to see the Deccan story ending any other way.

In fact, this was a move that many saw coming once Kingfisher acquired Air Deccan in 2007. Globally, LCCs have never had the joy of growing old bones under full-service carriers. In the US, for example, Delta Airways closed Song, while United is closing Ted. “I don’t think there is any example anywhere of an LCC living happily within a full-service airline. An LCC is so inherently different from any other kind of airline that culturally they cannot co-exist. An LCC does things so differently and will be throttled under any other regime,” concedes Schonland.

The issue lies in basic differences in DNA. An LCC requires if not smallness, then definitely small thinking — that is, lower labour costs, better IT exploitation and inherently a less complex business model. Also, an LCC is expected to move faster and react to market changes at jet-speed, whereas a regular airline is slower and generally more expensive to run — which, of course, is offset by the much higher fares it charges. “Kingfisher is a full-service carrier with stated global ambitions. It cannot be that by being ‘low cost’,” says Kaul.

It’s not as if Kingfisher Airlines decided to do away with the Air Deccan brand in one fell swoop. Vikram Malhotra, head – marketing, Kingfisher Airlines, points out that the company did exhaustive studies using three different agencies. The key findings were that Deccan was seen as a powerful brand, but came with heavy baggage: its ability to perform on time being the heaviest concern.

Then, Kingfisher’s strategic vision was that the Indian market had not evolved to support low cost carriers. “Our market is unlike the western world. We are not evolved to an extent that supports low cost carriers where people will see beyond price,” says Malhotra. Kingfisher also wanted to alienate the bargain hunters and focus on the loyalists. After all, those who come for fares would rather go away for fares. “We are looking at the lifetime value of customers and at upgrading them across our range of offerings,” says Malhotra.

To draw up a course of action, Kingfisher took a close look at the brands strategies of several companies like global luxury goods giant LVMH, Nokia, Nike, and its own UB Group portfolio of liquor brands. What impressed the company the most was that brands like Nike sold everything from a basic canvas shoe to a high end sports shoe, “where the brand is responsible to bring in the customers who then choose what is relevant to their needs”, says Malhotra.

So the company has chosen to bring consumers of all classes under the Kingfisher brand, so that they buy into the Kingfisher brand experience. Hence, Deccan has given way to Kingfisher Red, a value-for-money — but not ‘low cost’ — carrier to add to Kingfisher’s existing offerings, Kingfisher Class and Kingfisher First.

Kaul adds that beyond the major metros there is no requirement for a two-class configuration as passenger loads do not justify the presence of a business class. Hence, Kingfisher does not require its entire fleet of 85 aircrafts, including the erstwhile Deccan’s fleet, to have a two-class configuration. That’s exactly the space where Kingfisher Red comes into play.

With its budget offerings, Red can not just connect non-metros, but also act as a feeder route to major metros for the international flight operations. Malhotra seconds that. “From a network integrity perspective, Red ensures seamless travel as it is one consistent Kingfisher experience all the way.” Kaul feels that Red will sooner or later spread its wings to even South Asian countries and certain parts of West Asia.

Hard business sense might have dictated Kingfisher’s decision to bring the curtains down on the Deccan brand, but for those who see Deccan as a sector pioneer, the move rankles. “In my view they are making a good move on the one hand, but India could have been an interesting place to maintain the LCC brand precisely because of the early stage of air travel,” says Schonland. In the same breath he concedes that, perhaps, “the experimental nature of this idea was too much risk.”

While Air Deccan has metamorphosed into Kingfisher Red, by no means has the Deccan brand been entirely grounded. Captain GR Gopinath has stressed in no uncertain terms that the Deccan brand lives through Deccan Express & Logistics and Deccan Budget Hotels — both owned 100% by him — while Deccan Charters is being hived off from Deccan Aviation and would get a separate air operators permit. Chances are the final chapter inthe tale of the old man and the sky is yet to be written....