Continuous modernisation: The mantra of Chennai Airport

When I first sat down to write on this topic it was the peak of recession all over the world.(I hope the worst has gone past) It wasn't the right time to appreciate the efforts of modernisation that was going on throughout the country's various airports when new Greenfield airports of Hyderabad and Bangalore were experiencing negative growth in air traffic in their first year of inception. But the operation of Chennai airport through the years was a successful and unique model by itself that I yielded to the temptation and here the interesting story unfolds before you.

First of all the greatest advantage that the airport has had right from the beginning was the availability of large tracts of land around it for expansion(At least till the turn of the century). First came the Meenambakam terminal that still continues to be part of the Cargo terminal at the airport. Then came the Kamaraj terminal and Anna Int'l terminal next to one another. This model was best suited for linear expansion for both domestic and international terminals. As int'l traffic increased Anna terminal was expanded further down to add three more aerobridges. The domestic apron was expanded to accommodate more narrow bodies without the requirement for expansion of the terminal itself. Both terminals were built for good capacity.

The highlight was better utilisation of available space. Chennai airport always experienced a steady growth or drop in traffic and never a drastic fluctuation. Innovative ideas which were never experimented at Mumbai or Delhi were used here. Traditional space plans were done away with and models that suited the needs of the situation were implemented. Also Chennai airport was the first to implement cross runway operations along with mumbai. Walkalators which were conceived for the new terminal at Delhi have been commissioned at Chennai airport at concourse level.

The concept of integrated terminal seems to have caught the fancy of everybody. All major airports that have been modernised or under modernisation are following this for better utilisation of space at air side as well as terminal side. Chennai airport on the other hand is going for separate expansion of domestic and international terminals. But it hasn't failed to understand the benefits of the other model. So the concourse level of both terminals of the airport have been connected with travelators for easy transit. This means domestic aircrafts can park at international terminal when it is empty but the passengers can reach the domestic terminal easily and vice-versa. This combines the advantages of both the terminal models.

Finally, Chennai airport has always undergone modular expansion and continues to do so linearly. This eliminates the need for sudden or drastic change in airport operations. It would be better if the air side was also expanded similarly like rapid exit taxiways etc.

The short sighted Indian players

When the Indian aviation boom started, many players jumped at the opportunity to grab a share of their pie. The market was studied extensively by various analysts and different business models came out. Each of them was successful in its own way during the early periods. Then as the industry began to consolidate, it underwent a lot of change and attained the first level of maturity.

A mixture of American kind of operations(in terms of routes and fleet) and the customer favoured low cost model turned out to be a model that was tailored for India. So everything was fine on the domestic arena.

At the same time the open skies policy opened up India for new foreign airlines. Code share agreements with domestic carriers helped both of them mutually. It was business time for airliners. Then came the blow. Who would have expected things to have such a rippling effect? The U.S sub prime crisis turned into the worst economic downturn the world's economies faced after the Great Depression of the last century. Pink slips and bankruptcy became household words. Airlines couldn't find passengers. To add to this, the oil prices rose to a new high which meant that it was much more costlier to fly a craft than it was earlier. And a couple of our own domestic players were overjoyed by the new found freedom-Authorisation to start international operations from DGCA after 5 years of golden domestic period. Here is where they failed miserably.

The international market was just recovering from the 9/11 epidemic and was growing. So others have already had an experience with such an aviation crisis. But to the new players it was a whole new world to play in. They went the grand way of opening into traditional international routes that kept the airlines' ledgers ringing. But the fact that these players failed to realise was that these routes were also running in full capacity. Any more addition would only lead to over capacity. The early success enjoyed by Jet Airways was followed by the economic downturn. The true picture came into view. Airlines worldwide were undergoing trimming and route rationalisation. Kingfisher opened with a service that was least favoured at the time. Mallya would have been wiser, had he delayed his international plans and concentrated on the ailing domestic sector. But things weren't as they were to be. Now all the three Indian international carriers are looking down the barrel.

So the first mistake that Kingfisher did was not to look back into its domestic operations. The liquor baron in his hurry to start international operations bought Air Deccan. Had it been mainly to consolidate Kingfisher's position, he wouldn't have changed the business model of it much. His idea of penetrating into deep inner markets of India was great but the method followed was not the best. If the Air Deccan or other LCC model was prevalent then Kingfisher would have garnered a huge market share. Jet Airways realised this and started the Jet Airways Konnect and expanded Jet lite to increase its domestic presence and to build its brand value while maintaining the regular Jet Airways service.

The second mistake was done by both the private carriers. This is regarding their international operations. Both started on traditional busy routes i.e from Bombay and New Delhi, to start on a strong note. But they were actually eating into a pie that was already shared by Air India and was shrinking. During the period of recession these airlines faced severe load factor problems and now the loss has been to all the three Indian carriers. They lacked innovation at the time when it was needed the most.

Kingfisher and Jet Airways with their domestic hubs at Bengaluru and Hyderabad had excellent opportunity to grow their international operations from these two places that they lost. Look at the opportunities. A diversified domestic network that can compliment the international arm. Two private greenfield airports that provided excellent infrastructure and could have made for ideal hubs. They didn't capitalise on these two core points. These are international airlines that are going to serve passengers whose either starting point or destination was India. So instead of catering to Indian needs you can't provide people with given limited options. With traditional hubs like Dubai, Kualalumpur, Singapore etc which have world class facilities a mere 3 hrs distant, Mumbai with its shanty airport would not make for an ideal international hub. One cannot become a truly international carrier like Cathay Pacific or Singapore Airlines overnight. An international transfer from Mumbai was already available from Air India for people . If alternate and nice locations were given, people would have had a wide range of options and everybody wouldn't be fighting for the same route. Jet Airways made a positive move in this direction by making Brussels as its international hub and connecting that to all major cities of India. But it couldn't expand much due to the recession.

In U.S also different carriers provide direct international connections from their hubs. Delta used to fly non-stop from Atlanta to Mumbai . Continental is flying from Chicago O-Hare to Mumbai. These do not fly from the traditional international gateway of New York-JFK. One needs to follow such a model to be successful. The sad thing about the whole issue is both the private carriers had a market in hand which they left out and went at Air India's. That was loss for all the three. Hope the carriers make the necessary changes before getting ready for a new and promising chapter which I hope is just round the corner.

Air India: The journey ahead

Through all these years the Maharaja was a symbol of royalty and luxury. Air India in the past had done well to use this as its mascot and has had some wonderful times up there in the sky. But almost a decade after the Open skies agreement and many other ups and downs in the global aviation industry, Air India now finds itself at the brink of bankruptcy. What could be the reasons? Let's see.

During the early days Air India had a monopoly over Indian Aviation. Though the govt was giving little support financially this indirect support led to the building of Brand Air India throughout the country as well as outside. So the market for Air India was high. Then as the domestic skies opened up, it saw the entry of private players into the arena. Initially Air India continued to dominate the Indian Aviation scene due to its wide network and experience. But soon as more and more domestic carriers especially LCCs came to the front it started losing. While Air India continued its age old model with its ageing flights the new carriers sporting a modern look and new aeroplanes attracted everybody. Right from customers to pilots and air hostesses and other staffs. The momentum was gone. The enthusiastic Air India's staff were no more, as either they moved to other airlines or were downtrodden at the benefits their counterparts were enjoying in other airlines. This brought down the operational efficiency as well as the services of the National carrier.

Also Air India failed to evolve with the changing market and economy. Before 1991 Mumbai and Delhi were the places were international traffic originated or ended. But then southern states opened up to brace the IT and manufacturing revolution that is still continuing. The private and foreign carriers grabbed the opportunity and built their brand value. Air India lost the race in the south. When Thai Airways, Singapore Airlines , Malaysian Airlines Cathay Pacific, Lufthansa, Air France and British Airways started direct services to Chennai from their hubs back home the south could not have asked for more. Air India continued expanding from its traditional hubs at Mumbai and to a lesser extent New Delhi. For an international airline, to expand services at its primary hub makes sense only if it caters to a large number of international transit passengers. But Air India serves basically for its nation and never had a thought of becoming an airline as British Airways or Singapore Airlines is. So it must have concentrated on other cities of India also.

This led to a cash crunch and it couldn't modernise its fleet as it was trying to realise its mistakes slowly. The only positive thing about Air India is it started the highly profitable Air India Express that has established its brand well in the region. Though it might be facing tough competition from emerging rivals I am sure it will continue to grow.

On the whole the govt and the management of Air India must realise that the carrier is not a charity service for the country as it could not live if it continues to do so. Air India is not like other PSUs. In other industries some kind of a law protecting the PSU could be made to increase the business of PSU. But the aviation sector is different. The people must be satisfied with the service to choose the airline. So a different kind of push is needed to revive the airline. These are:

1. Excess staff is a major problem with AI. One cannot easily give them a pink slip. The only way is to expand the Air India Express network to untapped markets from tier 2 cities like Trichy, Madurai, Jaipur etc. Let AI expand with its established brand initially. Then we can think of the main carrier.

2. Route rationalisation must be done to cash in on profitable routes and remove non profit making routes.

3. Throw away the old A300s and 310s or convert them to freighters and Cash in on an untapped high potential sector when it is in its nascent stage. Build Air India Cargo and expand it and modernise the passenger fleet.

4. Build the brand value of Air India in the domestic arena first. A good image in the domestic sector would automatically lead to a better position in the international market. Jet and Kingfisher have banked on their excellent domestic service when they started their international operations. If your own country people don't prefer you who else are you going to carry.

5. Last, after the above said points are accomplished there is a need to build a strong and dynamic management group that reacts to different market scenarios and thinks out of the box to grow.

So the current bailout is definitely needed from the govt but the management must ensure that these are utilised properly.

Going International: The Paramount way

With Paramount Airways at last announcing the purchase of ten A321s, we can see Chennai emerging as a hub for business class travellers in South Asia. This takes away people from the busy and congested hubs of Bombay, New Delhi and Colombo. 'Hassle free transfers through Chennai'. That might be the tag line for Paramount. Think of Paramount advertising "Fly to the Far East and Europe seamlessly through our hub at Chennai". Paramount has carefully examined and chosen its possible destinations. Untapped markets of Central Europe and Far East are being considered. That is a gutsy move. While most of the Indian carriers started their international services on traditional routes which has led to over capacity, Paramount wants to cater to the niche market. People from central Europe may transfer through Chennai for Far East destinations like Seoul, Shanghai, etc.

If things continue on a sound note one may expect a Paramount flight on the Kangaroo route via Chennai. Chennai being right on the middle of the Sydney-London route could provide a hassle free alternative from the traditional hubs at Dubai and Singapore. In future Paramount can think of its own terminal in Chennai on the lines of T3 at Dubai or T5 at LHR. Paramount's mantra of growing slow but steady is perfect for an all business class airline.

Being an all business airline has its own advantages and disadvantages. Since you will be catering to a small but regular traffic your customer base is steady but low. At times of turbulence this is useful. One can look at markets which do not have much of economy travellers.
Paramount has withstood the economic crisis in the domestic arena, while other carriers were struggling to survive. The U.S market has been shrewdly avoided for the time being considering the fact that it has still a long way to go before it recovers from the crisis. So it is those markets which are on the verge of recovering that Paramount is looking at. Lets wait and see how Paramount's Thiagarajan makes his international debut.

The implications of Deccan 360

I am personally surprised at the reception of Deccan 360 by the industry. Considering its potential and implications one might have expected a lot of hulla ballo similar to the Nano project. But may be its implications haven't yet been realised by many. So why am I so excited about this venture?

Because within a couple of years an industry which is 90% unorganised becomes a highly organised one. Capt. Gopinath threatens to remove half the trucks that ply on today's national highways. From then on one doesn't need to pack his house a week before and wait for a week after if he is shifting his home from Agartala to Mumbai. Trucker's strike would have little impact on commodities movement.

Airports like Salem, Tuticorin which have been closed due to unviability can expect huge revenues from Cargo handling as they are strategically located near large industrial clusters. Since Deccan plans to have international entry points at Delhi, Nagpur, Mumbai, Hyderabad and Chennai, customs clearance could be finished at these airports and be sent to other places as domestic cargo. So little infrastructure needed at these small airports. Overall revenue of all domestic airports would increase thus making their modernisation profitable. The low-cost model will make average exporter shift to air transport from land and rail transport.

The current model followed is a 3rd party logistics manager manages warehouses at various points across the country and mostly outsources the transportation part from transport companies. This leads to production delay in the manufacturing industry. But within half a decade one can do away with such a system. As soon as a batch of components is manufactured, it can be air transported to the customer company in a day or two.

Now after all this, the ground situation is, MIHAN is only partly ready. Chennai the second busiest cargo port in India is facing capacity constraints. Chennai being a manufacturing hub for many auto components and electronics in industry is the customer end of many cargo routes. Airports like Salem and Tuticorin are ready to receive the ATRs of Deccan 360 but not their cargo. A cargo terminal at each of these airport is essential and also needs to be adequately staffed.

Deccan has cleverly chosen its initial sectors. Let it prove its mettle in the high density sectors and then expand. Maybe there will be a day when the number of Deccan's parcel coaches outnumber the yester year's postal department's van. That is something like privatisation of postal dept!!!!

Deccan 360 The Indian avtar of Fed-Ex

Capt. G.R. Gopinath may first seem to be a man who takes heavy gambles in a volatile industry. But his past records speak volume about what he has in him. When Deccan first flew out of Bangalore only 1% of India's population was flying. Later when he sold it to Mallya it was 5%. Now his new brain child 'Deccan 360' dares to change supply chain and logistics scene in the country.

Within an year he plans to have a fleet of 9 planes and over 400 trucks criss crossing the country and abroad. A corporate logistics solution provider, end to end supply chain management and a swift and low cost courier and parcel service, all combined into one. This is what he has envisioned. Think of a parcel being sent from Jalandhar to Tuticorin within a day. This is what Gopinath is planning to achieve. With a hub at the geographically and therefore the govt favoured Nagpur MIHAN, that will serve as the hub for domestic network and a feeder point for international cargo, one can expect a reformed and competitive service from the logistics sector in the near future.

Jet Airways Konnect - following a once successful model

On May 7th 2009, the Indian aviation industry, which has witnessed everything from boom to crashes in the past, saw the emergence of another successful business model that is still followed in the U.S and Europe. The feeder and hub model. Under this model low density routes from major cities are served by a subsidiary which acts as a feeder for the mother airline. The mother airline operates on the high density routes. These subsidiaries act as a feeder service for the high density routes. For eg, if a passenger wants to travel from Coimbatore to Kolkata, he will take a Jet Konnect to Chennai from where a Kolkata bound Jet Airways flight would leave in twenty or thirty min. At the same time similar flights from other tier 2 cities like Trichy and Madurai will also arrive to connect with the Kolkata flight. Since only ATRs or other regional jets would be operated on these routes, the load factor would be high as well as the load factor on the mother Chennai - Kolkata flight would be high.

Similar model is already being followed by Paramount keeping Chennai as a hub, with the only difference being it operates all business class flights in all its routes. Though the time of introduction of such a service by Jet Airways is debatable, considering the position of Jet lite and the current economic scenario, this age old model has been highly successful in boom times. Seems like Naresh Goyal wants to consolidate his position further in the domestic sector, considering the current international scenario.