Splainer

Thursday, October 21 2021


Dive In

 

Her Majesty believes you are as old as you feel, as such The Queen does not believe she meets the relevant criteria to be able to accept, and hopes you will find a more worthy recipient.

That’s part of a letter sent by 95-year old Queen Elizabeth’s private secretary declining the honour of being named ‘Oldie of the Year’. You go girl!

 

Don’t miss this: Our next Ask Me Anything session is with accomplished patissier, chef and entrepreneur Pooja Dhingra—who also hosts a brilliant podcast ‘No Sugar Coat’. You can ask her about all the things close to her heart: food, restaurants, entrepreneurship and more. Time/Date: 6 pm on Saturday, October 23, via Zoom. Sign up here for one of the limited slots.

 

And don’t forget: To take the splainer reader survey. Taking that 10 minutes to fill it out is a huge help to us! Please fill it out here


Stuff to check out: The latest episode of the splainer podcast ‘Press Decode’ offers a closer look at the Global Hunger Index and the bizarre TikTok trend of teenagers developing symptoms of Tourette syndrome. Be sure to head over to the IVM website, Spotify or Apple Podcasts to listen to it.

 
Big Story

The future of Indian airline travel

The TLDR: The Tatas have bought Air India, Jet Airways has announced an unexpected comeback—and there is a brand new airline named Akasa getting ready for takeoff. We take a look at what you can expect when you plane-hop next year.

 

Where we are now

This flurry of big ticket activity is a bit astonishing given the state of the Indian aviation industry—which is expected to report a net loss of Rs 250 to Rs 260 billion (Rs 25,000 crore to Rs 26,000 crore) in FY22. Thanks to the pandemic, there has been a 66% decline in passenger traffic, and airlines are neck-deep in debt. For all the optimism shown by Jet, Air India, and Akasa, the industry forecast for 2022 remains gloomy:

 

“Lurching from crisis to crisis has become a familiar story since 2004 because the industry has chosen to pursue profitless growth, resulting in chronic losses for many years… Two major airlines have failed in the last 10 years, leaving a trail of $7 billion of liabilities. Yet nothing has changed. The twin waves and sudden impact of Covid-19 have resulted in a high level of solvency risk for most airlines, which could impact the entire industry, including airports.”

 

The main players: The biggest fish is Indigo with 57.6% of the market, followed by Air India (13.3%), SpiceJet (8.9%) and Vistara (8.2%). The smallest fish: AirAsia with only 4.4%. 

 

Point to note: Indian airlines share the same basic problem. The industry requires huge upfront investments and is vulnerable to spikes in fuel prices. But it has to turn a profit in a country where the consumer is highly price conscious—and the only way to compete is to slash fares. As one financial expert puts it:

 

“Airline companies depend on how the government makes rules. The problem with airlines is not lack of supply or lack of airports. The problem has always been government regulation and competition. The competition is so much that it’s great for consumers but not good for companies.”

 

Welcome aboard Akasa

Origin story: When Jet Airways collapsed, its CEO Vinay Dube left for GoAir—which didn’t work out either. He then came up with the idea of a new airline, and found a big-name investor Rakesh Jhunjhunwala—a stock market genius known variously as either India’s Warren Buffet or Big Bull. He is putting in $35 million for a 40% stake. Industry watchers are a little surprised that Jhujhunwala is gambling on an industry known to be a terrible bet, but he insists: “I’m very, very bullish on India’s aviation sector in terms of demand.” 

 

A super duper cheap flight: Akasa will be an Ultra Low Cost Carrier (ULCC), which means it will keep its costs to a minimum—and charge you for everything, including cabin baggage—and offer very cheap fares. Think even more low-budget than GoAir or SpiceJet. The model is similar to European airlines such as RyanAir.

 

Big challenge #1: A ULCC may seem ideal for an Indian market where most passengers are looking for the cheapest flight. But it isn’t clear how Akasa will reduce its operational costs. Aviation turbine fuel (ATF) prices have risen by over 30% since the beginning of 2021, and account for nearly 40% of the cost of running an airline in India. And unlike Europe and the US, India doesn’t have low-budget, no-frills airports to support the ULCC business model. 

 

Big challenge #2: The competition. Given its focus on low fares, you might expect Akasa to focus on Tier 2 and 3 cities. But there is every indication that it intends to take on the big boys in the big metros. The airline’s headquarters will likely be in Mumbai and  it will operate out of Bangalore. And its biggest rival will be Go First (formerly GoAir) which has big plans to corner the ULCC market—under the leadership of a new CEO Ben Baldanza. Unlike Akasa CEO Dube who only has a premium airline like Jet on his resume, Baldanza built his reputation by transforming Spirit Airlines into North America’s first ULCC.

 

One Tata brand to rule them all…

There’s been plenty of ink spilled over whether the Tatas can turn a white elephant like Air India into a success. The challenges are fairly straightforward:

 

  • Its fleet of planes are either old or in a state of disrepair: “If you don't have newer airplanes or airplanes that are reliable, no matter what you do, you are going to have a problem.”
  • A makeover will be expensive. It will cost at least $1 billion to rehaul Air India's 141 planes and up to $300 million to retrain staff and improve operations and service.
  • Despite the sweet deal cut with the government, the Tatas will still inherit 25% of Air India’s Rs 615.6 billion (61,562 crore) debt.
  • Also this: The airline currently loses Rs 200 million (20 crore) a day.

 

The really big play: From a customer point of view, what’s most interesting is the plan to consolidate all Tata-owned airlines under one brand. The group currently owns 100% of Air India and Air India Express, 51% of Vistara and 81% of AirAsia India. Taken together, the three airlines account for 26% of the domestic market—making them a formidable rival to IndiGo. 

 

Now add in Air India’s advantage in international operations. The carrier has 7000 slots at key international airports—and code share agreements with a number of foreign airlines. And it flies non-stop to Europe and the US. Sprinkle in the Tatas’ experience in offering a premium customer experience (See: Taj hotels), and you have the makings of a very different kind of business model. 

 

The big question mark: Jet Airways

 

 
Headlines that matter

Covid crimes of Jair Bolsanaro

A congressional panel is getting ready to recommend charging the Brazilian president of “crimes against humanity”—for seriously mishandling the pandemic and causing the deaths of 300,000 Brazilians (which is 50% of the total death toll). FYI: They were originally planning to charge him with mass genocide of the country’s indigenous populations—which have been decimated by the disease. If the report is approved by the committee, the Brazilian attorney general will have 30 days to decide whether to pursue the charges. (New York Times)


A new anti-machismo hotline

The Colombian government has unveiled a new anti-machismo hotline that aims to fight violence against women. Men can call the ‘Calm Line’ to talk through their feelings of jealousy, fear and rage: “By pushing men to focus on how that often unexamined attitude [of machismo] is hurting their lives and the lives of those around them, the program seeks to inspire a profound cultural change.’ (New York Times)

 

Facebook by any other name…

Mark Zuckerberg has reportedly hit on a novel solution for his many PR and legal woes: a new name! According to The Verge, he will unveil it next week at an annual company conference. The reason:

 

“[It] is meant to signal the tech giant’s ambition to be known for more than social media and all the ills that entail. The rebrand would likely position the blue Facebook app as one of many products under a parent company overseeing groups like Instagram, WhatsApp, Oculus, and more.”


This is similar to Google creating the parent company Alphabet to signal that it isn’t just a search engine company. But in Zuck’s case, a rebranding may also help ease the baggage attached to the name ‘Facebook’—which has become synonymous with fake news, toxic content etc. FYI: The news has sparked great amusement and trolling. Twitter CEO Jack Dorsey’s suggestion: Central Intelligence Corporation. (The Verge)

 

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In today’s edition

Sanity Break

  • The Vienna Tourist Board is using OnlyFans to share paintings that are taken down on Facebook and Instagram for being “potentially pornographic”

 

I recommend

  • Satire writer and stand up comedian Meghana Indurti recommends her favourite funny people
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