MACHINES have always fascinated man. In particular, there’s something about flying an aeroplane. The diablerie, the adrenalin rush of sitting in the cockpit and steering an aircraft is heady, simply unmatched. Which explains why many business tycoons globally have flirted with the aviation business. Many of them have had a crash landing. In India, think Vijay Mallya and Naresh Goyal. But never mind that these two gentlemen went broke – Mallya squandering away billions in an effort to save Kingfisher – chasing their aviation dreams. Many more are still queuing up to take to the skies. Tatas have made a bid for Air India and canny billionaire investor Rakesh Jhunjhunwala is planning an airline as well – Akasa.
Tatas already own Vistara, have a track record, even if it’s mixed, in aviation but Jhunjhunwala of all the people? An ace investor with plenty of smarts, why has Jhunjuhunwala chosen to fly an airline, an industry deep in crisis – the pandemic only adding to its woes. Well, Jhunjhunwala has obviously given it plenty of thought. Akasa will be an ultra low-cost carrier (ULCC), giving it the best shot at survival. Remember, only low-cost airlines (LCCCs) have stayed afloat in India, led by the likes of Indigo and SpiceJet.
LESSONS FROM RAIL TRAVEL
Now, as a proxy, see how train travel in India has changed dramatically in the last couple of decades. Remember, even in the nineties, travel in air-conditioned rail coaches was considered a luxury by the middle class. But the prosperity created by Narasimha Rao and Dr Manmohan Singh’s economic reforms made AC rail travel affordable for India’s burgeoning middle class.
Now, think again. There is more to it than meets the eye. The real game-changer perhaps was the introduction of AC 3-tier coaches, a cross between ultra-affordable sleeper class and relatively expensive AC travel. The middle-class just loved it and AC 3-tier has become the choice of travel for India’s aspirational middle class. Call it affordable luxury for the masses. AC-2 rail travel is less popular and AC-1 is considered unaffordable – call it niche travel – by the middle class. In fact, Indian Railways is now replacing loss-making AC-2 coaches with AC-3 coaches which have become big cash spinners for it.
Think about it. The same story is being played out in the aviation space. The middle class has lapped up low-cost airlines (perhaps the equivalent of AC-3 tier) but have been more circumspect about full-service carriers (the equivalent of AC-2), and more often than not would avoid flying than fly business class (the equivalent of AC-1).
So, if the above paradigm was to hold true for the aviation business in India, this is what the future looks like. A massive airport-expansion drive across India, in smaller towns and cities, is likely to lead to an explosion in LCC and ULCC travel by Indians. There would be a niche market for full-service carriers as well but it’s the AC-3 tier model that may click for airlines in India. And, yes, expect a shakeout in the aviation industry with the players with deep pockets likely to survive and the rest perhaps flying into the sunset (perhaps a bit like in the telecom industry).
THE BOTTOM LINE
So, Tatas – if they win Air India – may find low-cost Air India Express a cash spinner, flying middle-class Indians across the country, with Air India flying in a more niche space. And Jhunjhunwala must build a truly ULCC – there is a difference is shades between LCCs which India has in plenty and an ULCC – to make his venture work.
Indeed, both the Tatas and Jhunjhunwala may do well to model their airlines on India’s experience with AC rail travel. If they give Indians the AC-III tier experience in air travel, which many may see it as a very affordable luxury of sorts, their dreams may take wings and soar.
(Rishi Joshi is Executive Editor with India Ahead News. The views expressed in this opinion piece are those of the author.)