Air India long haul restructuring

Air India has been cited by the Economic Times of India newspaper that it has submitted a business plan to the Indian Govt on new cost saving measures that can be implemented by the carrier from the on set of the IATA Winter 2010-11 season. The 2 major interesting points concern making Delhi its second international hub after Mumbai due to over congestion at the latter airport and the second concerns focusing more on nonstop long haul flights which would see the termination of the Frankfurt scissors hub in Europe for North America bound flights.

Mentioned below is my analysis and suggestions with regards to this new business strategy of the Indian state carrier.

Analysis:

Interesting turn of events proposed by AI which makes you wonder what sort of possibilities lie in the short term future for this carrier. The important thing that one must focus on is to make full use of all your available assets at the lowest possible cost and in the most commercially viable manner. Keeping this in mind, I would like to suggest to AI on how to go about this proposed new strategy of theirs which I fully agree with especially concerning the termination of FRA as a hub.

Currently in AI's fleet for long haul routes consists of 8 B 77Ls (B 772LRs) and 12 B 77Ws (B 773ERs) and the best manner to effectively make use of these aircraft is as follows:

1. First and foremost from their entire B 77L fleet, the first class cabin needs to be removed. There is absolutely no demand what so ever for it on their ULH flights and it would be wise for them to replace 8 first class seats with 32 economy class seats. This will help increase the B 77L seating capacity to 262 which will help reduce the seat per mile operational cost as well. Its best to generate revenue by having seats occupied rather than having "heavy empty seats" left unoccupied thus causing loss of revenue.

2. The 8 B 77Ls should be used in the following manner:

Two aircraft for daily BOM-EWR-BOM nonstop
Two aircraft for daily BOM-ORD-BOM nonstop
One aircraft for 4 weekly ATQ-LHR terminator + 3 weekly DEL-LHR terminator
Two aircraft for 4-5 weekly DEL-SFO nonstop
One aircraft for 4 weekly DEL-NRT + upgrade DEL-HKG to a B 77L from A 310 three times per week.

Anyone noticed how I purposely left out BOM-JFK? Thats because there is absolutely no need whatsoever to fly BOM-JFK nonstop + BOM-EWR nonstop. Its a total waste of 2 precious B 77Ls which can be used in a more efficient manner on other routes which have better revenue generating potential. AI need to have a maximum of 2 daily flights to the NYC market place from India which is BOM-EWR nonstop on a B 77L and DEL-JFK nonstop with a B 77W.

The reason why I have designated one B 77L for ATQ-LHR + DEL-LHR terminator flights is because AI need to protect those precious LHR slots hence it would be best if a smaller B 77L is used for these flights rather than waste capacity by deploying a larger B 77W which seats 104 more pax than their B 77Ls.

3. The 12 B 77Ws should be used in the following manner:

Two aircraft for daily ATQ-DEL-YYZ with DEL-YYZ-DEL sector being flown nonstop.
Two aircraft for daily DEL-JFK-IAD
Two aircraft for daily DEL-SYD-MEL-DEL
One aircraft for daily BOM-LHR terminator
One aircraft for daily DEL-LHR terminator
One aircraft for daily BOM-JED terminator
One aircraft for daily DEL-JED terminator
One aircraft for daily BOM-RUH terminator
One aircraft for daily same plane service DXB-BOM-SIN-BOM-DXB (on AI 716/442 + AI 443/717)

Now one can notice that DEL-YYZ and DEL-SYD/MEL flights should be flown nonstop. For DEL to become an effective hub, the DEL-YYZ-DEL flights should be similar to DEL-JFK-DEL which means that for YYZ, the flight schedule would have to be changed to as follows:

AI 187 Dep ATQ 2225 Arr DEL 2315
AI 187 Dep DEL 0100 Arr YYZ 0730

AI 188 Dep YYZ 1500 Arr DEL 1545
AI 188 Dep DEL 1730 Arr ATQ 1820

The best thing about this above mentioned flight schedule is that the YYZ flights cannot be delayed due to overnight FOG related issues at DEL which shall come as a huge relief to the passengers and ground/office staff alike. An arrival time of 1545 into DEL from YYZ is ideal from a passenger convenience perspective and also it connects very well with the domestic AI/IC hub wave bank that is in place at DEL for flights bound to BOM and Southern India departing between 1800-2000 hours DEL time! If flown the DEL-YYZ-DEL sector nonstop, the impact for AI will be positive big time from a revenue generating, customer appreciation and most importantly market share gain stand point. A nonstop DEL-YYZ-DEL flight would greatly hurt the market share enjoyed by 9W/EY/AF/LH/BA/EK on this high demand sector which should be one of the primary focus areas for AI to seriously contemplate over as one must think of it as a long term investment they are making into this route.

I have also suggested that BOM-JED + DEL-JED flights should be flown using a B 77W so that the leased A 332s can be withdrawn and returned back to their owner thus another form of cost savings for AI to enjoy! It is also due to the fact that there is plenty of demand on the JED and RUH bound flights from DEL and BOM in particular that it wouldn't require any great sales/marketing effort to fill up the plane on a consistent basis in all cabin classes. Also note that the excess cargo belly capacity of the B 77W would serve as a huge asset to AI to effectively exploit on this route by offering a greater baggage allowance facility to its passengers versus its competitors along with other forms of cargo sales to generate additional revenue.

Another suggestion (mentioned above) with the B 77W was to use it as a daily same plane service on the DXB-BOM-SIN-BOM-DXB sector. With CX now suspending its own BOM-DXB daily nonstop flight, there is capacity available to grab back for AI and its best to do it now before 9W upgrade BOM-DXB from a B 738 to an A 332. AI needs to use their premium B 77Ws on this high density high yielding route because there is a lot of demand in F and J class on this sector and no one will fly their A 321s in premium classes if that remains. In order to attract the high end passenger on this route as well as on the equally important BOM-SIN route, the B 77W must be used. With regards to BOM-SIN, it needs to use the B 77W here because to effectively compete neck to neck against SQ, 9W and IT who all use modern wide bodied B 77Ws and A 332s on this sector. AI currently deploys a small A 319 on the BOM-SIN route which is quite simply ludicrous compared against what the competition is offering. Lastly, by replacing the A 321 and A 319 used on the DXB-BOM and SIN-BOM route respectively with a B 77W, extra revenue will too be generated through the attainment of cargo in the aircraft belly. The B 77W on such routes can easily carry up to 15 tons of value able cargo where as the A 321/A 319 cannot uplift anything hence the extra revenue generator in the form of cargo would also come in handy for Air India on both these routes. The flight schedule would remain the same and is as follows:

AI 716 Dep DXB 1715 Arr BOM 2130 /// AI 442 Dep BOM 0010 Arr SIN 0750
AI 443 Dep SIN 0925 Arr BOM 1215 /// AI 717 Dep BOM 1415 Arr DXB 1545

One last suggestion I have for AI to seriously pursue with its B 77Ws is to launch daily nonstop flights to Australia from the upcoming DEL hub. The flight schedule I propose is as follows which would connect wonderfully 3 times per week with DEL-LON-DEL:

AI 112 Dep LHR 2130 Arr DEL 1115+1
AI XXX Dep DEL 1445 Arr SYD 0815+1
AI XXX Dep SYD 1000 Arr MEL 1130

AI XXX Dep MEL 1400 Arr SYD 1530
AI XXX Dep SYD 1715 Arr DEL 0315+1
AI 187 Dep DEL 0635 Arr LHR 1130

The above flight schedule for DEL-Australia-DEL allows for excellent connections domestically too via DEL to interior Indian points as the flight departs DEL in the mid afternoon and arrives back early morning thus beautifully positioned to connect with the late morning arrival domestic hub wave bank in DEL for Australia and on the return the 315am arrival time means passengers bound to other Indian cities can connect with the early morning 6-8am domestic departure hub bank of AI/IC. FYI, in 2008 more than 120,000 passengers flew alone from DEL to both SYD and MEL combined so the figure if you add in BOM + AMD + MAA + BLR and HYD into it should be well over 250,000. To attract passengers from AKL and CHC on to its DEL-SYD-DEL nonstop flight, AI should look to code share with Air New Zealand on the trans tasman sector in order to gain useful feeder traffic.

If someone would forward this email to mine to Air India Senior Management officials, I would sincerely appreciate it.

Any feedback to my above mentioned suggestions is greatly welcome :)

Hope you enjoyed reading,
Rgds
Behramjee