Friday, December 1, 2023

Tata’s game plan for its aviation biz post-Air India acquisition


Tata group has won the bid for Air India, which is being dubbed as a homecoming for India’s prestigious national air carrier. But, winning the bid was the easiest part for Tata, as the real hurdles are beginning now. How Tata plans to revive the iconic and ailing brand?

Tata Sons has won the bid for Air India. But arguably that was the easiest part. There was just one more bid. In 2018 in fact, Govt found no takers at all! The actual battle for Tata starts now.

Emotions of acquiring something which was their own and/or of acquiring a ‘national’ symbol apart, Business & Brand Strategy is now an extremely tough & complex journey ahead. Tata group already has stakes in two other Airlines. It holds 51% in the venture behind the Vistara Airlines brand and a high 83% in AirAsia India. In fact, Tata increased its stake in Air Asia India, just the last FY.

The last two years of the Covid-19 pandemic apart, both airlines have been running in losses. So, what is Tata going to do with Air India? Or, what is Tata going to do with its Aviation business? How is Tata going to re-structure the aviation business and how is it going to position the three Airlines Brands that it now has?

Vistara is positioned as a Premium Airline. Fliers of such classes may know that Tata is behind the brand. However, Tata name is not part of the marketing/branding. Even on the website, it says, ‘TATA SIA JV’ in almost illegible font size! Air Asia on the other hand, is a ‘bargain’ airline and doesn’t have even that illegible mention of Tata name, even though Tata holds high controlling stakes! Vistara’s other parent is as Prestigious if not more, as Tata, viz., Singapore Airlines (SIA).

In the aviation industry, in particular, SIA is one of the foremost names in Operational Efficiency and in Customer-Service. Air Asia on the other hand, is as disliked a brand as SIA is liked! At the same time, Air India, apart from being loved for a national airline, comes with a lot of added benefits like parking bays, hangars and so on. Given the name, Air India would need to accommodate and/or represent every Indian. At the same time, Air India has never been a cheap/economy airline, as such.

So, with what could be termed as ‘problem of plenty’, what’s Tata going to do three very different Airlines brands in its portfolio?!

Kingfisher, as the ultra-luxury airline, has folded up. Jet Airways has been away from the scene for long and one doesn’t know as to what kind of avatar is it going to come back in, having been taken over by some obscure entity. Globally too, there aren’t many Airlines that are positioned explicitly as Luxury/Premium Airlines. Tata should and is most likely to, retain Vistara. With SIA having such strong Brand Equity, Brand Vistara, as well as the overall Vistara Experience, should be positioned even more explicitly as the Premium Airline.

From a Marketing perspective, brands Tata and SIA should be much more upfront and should build the brand Vistara through the power of legacy, equity and image of Tata and of SIA. Ticket pricing should be really premium and the routes have to be carefully selected. Not everyone can afford a Charter and the elite class would not really prefer a train. The experience of how luxury car market and other elite products, including even day to day consumption items like foods, Vistara could occupy the high perch.

Air India

Since an Airline is all about actual experience from booking to check-in to the airport to in-flight, only at relatively lower passenger volume and at much higher ticket pricing can such experience be delivered? Passenger volume, therefore, isn’t going to be as high as desirable in business terms.

Brand Vistara could be nonetheless, be positioned as a Lifestyle brand and revenues could be shored up with premium pricing, brand extension into lifestyle categories like Fragrances, Clothes, Bags and other travel-related products, Sports Cycles and so on. Group Company Titan Industries could help with sourcing and other logistics. With the brand Vistara touching the relevant customers in so many different ways, Vistara Airlines as the Airline of choice will get the boost in reverse brand rub-off.

Air India should be retained as a middle to upper-middle Airline brand.

Air India should be retained as a middle to upper-middle Airline brand. India surely has massive middle! The youth, in the IT sector and other sectors, look for something rational & pragmatic, in terms of pricing and also in terms of reliability. Air India could address that need. Whereas, neither Vistara nor AirAsia can. The latter in any case is perceived as too downmarket for practical but fashionable youth to be seen with/in! Of course, in terms of product, service, efficiency…in Experience terms, there’s a lot to be done with Air India.

Tata should have its name up there. No, the name shouldn’t be changed. But as Tata associates itself with various other Tata Businesses, like ‘Tanishq – a Tata product’, it could be ‘Air India by Tata’. Air India from a business perspective, should be the mainstay for Tata’s Aviation business, in the short and the mid-terms.

Vistara with premium pricing and also investments for making it tangibly premium might not break even for long. But in the mid to long-term, Vistara may return far higher realisation per ticket and provide for potential opportunities of brand extension and business diversification, than Air India or any other Airline, in India at least. By three to five years, Vistara should also be able to diversify into the other Lifestyle businesses/products and may add some revenues back for Tata.

Air India

AirAsia of course, can’t be moved up from the bottom! There’s a whole set of markets, the long-distance migrant class, which has to move long distances, where Train journeys are either too arduous or not there at all. Like North East & North to South of India. Like India to Gulf, Malaysia, Thailand, Nepal, Bangladesh, Indonesia, et. al. It could be even be positioned as the Airline that can fulfil the aspiration of families being able to fly at least once in life and/or being able to go abroad for a family vacation at least once in life.

Rural India continues to be the positive news for India, even during the pandemic, in economic terms and with the exposure to media, everyone harbours various aspirations, including flying and vacationing abroad. It would, in fact, help bump the brand imagery/positioning up for AirAsia. At the same time, Air India cannot really be a cheap brand and hence, AirAsia could be the flanker brand. Moreover, Air Asia cannibalizing into the Air India business is a possibility and would be such a disaster.

Overall, given that margin on tickets would be thinner than wafer-thin and the margin of error virtually non-existent, this would be the toughest for Tata. Almost a swamp, impossible to extricate oneself out! Tata would do well to keep its name discreet with Air Asia. But must ensure that, if not good, there shouldn’t be bad experiences.

Air India itself is just the name for now.

Air Asia doesn’t have much to lose. But with negative news, that too about the high & mighty, spreading like the wildest of wildfires, one bad experience could leave brand Tata with a lot of muck on its face. It’s pertinent to note that, now there would be two other brands in the same/aviation business and their reputation and image would get directly and substantially impacted with anything going awry at/with Air Asia.

It could be argued that Tata might as well exit out of Air Asia, now with Air India in its portfolio. The business is just too tough, not much to gain in terms of monies or reputation or imagery even if the business does well and the effect of going wrong could badly impact, brand Vistara, brand Air India, brand Tata and also the related businesses. On the other hand, there is so much to gain from both Vistara and from Air India, as a business and a brand. Moreover, there are several other businesses within the group, like Tata Motors, Tata Power and Tata Steel which are in red and/or burdened with debt.

There’s over-dependence on just a few businesses, in fact arguably, just one, viz., TCS. Air India itself is just the name for now. Its accumulated losses of well over Rs. 70,000 crores, its accumulated lethargy & inefficiencies and everything would be rather nerve-wracking for Tata. Tata must, therefore, let go of Air Asia and focus on Vistara and Air India. Should it? Come on, let your arrows fly!

Also Read: India needs to transform from large importer to major defence manufacturing country and a net exporter

(Sanjeev Shukla is a corporate strategy and marketing leader with three decades of experience with Hyundai, Hero MotoCorp, Ford and the advertising world.)

(Disclaimer: The views expressed in the article above are those of the author’s and do not necessarily represent or reflect the views of Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.)


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