Deccan brand transitioned into Kingfisher Red inevitable?- Brand Equity -Features-The E...

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Deccan brand transitioned into Kingfisher Red inevitable?

17 Sep, 2008, 0450 hrs IST,Prasad Sangameshwaran , ET
Bureau
Nitish Mukherjee,
managing director, Leo Burnett, recalls an occasion where he had
to temporarily halt a credentials presentation at a prospective
multinational client’s office. The head of marketing at the MNC
couldn’t control her emotions after watching Air Deccan’s ‘The old
man and the sky’ commercial, which was part of the showreel that
Mukherjee, then head of Orchard Advertising, was showing.

When late last month the Deccan brand transitioned into

Kingfisher Red — the company vehemently refutes any
suggestion of ‘transition’ — and finally disappeared from Indian
skies, there was no telling on how many tears were shed on its
passing. But the sense of disappointment — even outrage —
among practitioners and experts of branding is palpable. “Air
Deccan is a very special brand.

There are few brands that create seismic shifts in the market
place. Deccan changed the aviation landscape in the country,”
says Mukherjee, who, at Orchard, literally midwifed the brand.
Mukherjee’s opinion can be ascribed to his proximity to Air
Deccan; not brand consultant Harish Bijoor’s. Yet, Bijoor makes
common cause, given the equity the brand has built over the last
decade. “Doing away with the Air Deccan brand is a rather short-
sighted approach. A long-term option would have been to keep
skeletal operations going on,” he says. Adds Addison Schonland,
president, Innovation Analysis Group: “Losing Deccan
demonstrates that Kingfisher wanted the license to fly overseas,
not the business as such.”

Branding experts may have a reason to be sore. In four years, low

cost carriers (LCCs), with Deccan being the flag bearer, have
taken a 45% share in the Indian domestic aviation space.
Compare that to the US, where low cost carriers, despite having
better infrastructural support, have captured just 25% of the
market in the best of circumstances.

“The shift in shares is dramatic, and had Deccan continued to

operate, the shift could have possibly been more dynamic,” insists
Kapil Kaul, CEO, Indian Subcontinent & Middle East, Centre for
Asia Pacific Aviation. With so much support for keeping brand
Deccan going, it’s but natural to question the collective wisdom at
Kingfisher.

But, as many marketing wizards will acknowledge, market share

is not the sole criterion to keep a brand in circulation; at the end of
the day, what counts is profitability, sustainability and bottomlines.
As Kaul points out, it was getting increasingly difficult for the low
cost carriers to sustain themselves, given the Indian context.

Aviation fuel costs are 70%-80% higher in India than other parts
of the world due to higher levies, and fuel makes up 50% of an
airline’s running costs. Then, there are taxes on most cost heads
— from a withholding tax on leasing aircrafts to fringe benefit
taxes on aircrew accommodation. Add the high airport usage
charges plus the lack of infrastructure, and you have a
nightmarish business proposition. In metros where air traffic is
congested, aircrafts hover above airports for 30 minutes to an
hour, rendering on-time performance a near impossibility.

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Legacy or full-service carriers may be able to absorb the shock of

these inefficiencies better, but for LCCs it becomes unsustainable
beyond a point. “The cost structure is not compensated by the
fare inputs,” admits Kaul. The rise in oil prices was the final nail.

Even in 2002, with fuel costs being $20 a barrel, most airlines in
India did not make money, Kaul recalls. With fuel costs at $140 a
barrel, it doesn’t take a genius to figure out who’s bleeding. Then,
low-cost carriers were in a precarious position as the market
forces, rather than the service offering, determined ticket prices.
After all, LCC customers often line up outside the windows of the
cheapest service provider. In this context, it’s hard to see the
Deccan story ending any other way.

In fact, this was a move that many saw coming once Kingfisher
acquired Air Deccan in 2007. Globally, LCCs have never had the
joy of growing old bones under full-service carriers. In the US, for
example, Delta Airways closed Song, while United is closing Ted.
“I don’t think there is any example anywhere of an LCC living
happily within a full-service airline. An LCC is so inherently
different from any other kind of airline that culturally they cannot
co-exist. An LCC does things so differently and will be throttled
under any other regime,” concedes Schonland.

The issue lies in basic differences in DNA. An LCC requires if not

smallness, then definitely small thinking — that is, lower labour
costs, better IT exploitation and inherently a less complex
business model. Also, an LCC is expected to move faster and
react to market changes at jet-speed, whereas a regular airline is
slower and generally more expensive to run — which, of course,
is offset by the much higher fares it charges. “Kingfisher is a full-
service carrier with stated global ambitions. It cannot be that by
being ‘low cost’,” says Kaul.

It’s not as if Kingfisher Airlines decided to do away with the Air

Deccan brand in one fell swoop. Vikram Malhotra, head –
marketing, Kingfisher Airlines, points out that the company did
exhaustive studies using three different agencies. The key
findings were that Deccan was seen as a powerful brand, but
came with heavy baggage: its ability to perform on time being the
heaviest concern.

Then, Kingfisher’s strategic vision was that the Indian market had
not evolved to support low cost carriers. “Our market is unlike the
western world. We are not evolved to an extent that supports low
cost carriers where people will see beyond price,” says Malhotra.
Kingfisher also wanted to alienate the bargain hunters and focus
on the loyalists. After all, those who come for fares would rather
go away for fares. “We are looking at the lifetime value of
customers and at upgrading them across our range of offerings,”
says Malhotra.

To draw up a course of action, Kingfisher took a close look at the

brands strategies of several companies like global luxury goods
giant LVMH, Nokia, Nike, and its own UB Group portfolio of liquor
brands. What impressed the company the most was that brands
like Nike sold everything from a basic canvas shoe to a high end
sports shoe, “where the brand is responsible to bring in the
customers who then choose what is relevant to their needs”, says
Malhotra.

So the company has chosen to bring consumers of all classes

under the Kingfisher brand, so that they buy into the Kingfisher
brand experience. Hence, Deccan has given way to Kingfisher
Red, a value-for-money — but not ‘low cost’ — carrier to add to

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Kingfisher’s existing offerings, Kingfisher Class and Kingfisher

First.

Kaul adds that beyond the major metros there is no requirement

for a two-class configuration as passenger loads do not justify the
presence of a business class. Hence, Kingfisher does not require
its entire fleet of 85 aircrafts, including the erstwhile Deccan’s
fleet, to have a two-class configuration. That’s exactly the space
where Kingfisher Red comes into play.

With its budget offerings, Red can not just connect non-metros,
but also act as a feeder route to major metros for the international
flight operations. Malhotra seconds that. “From a network integrity
perspective, Red ensures seamless travel as it is one consistent
Kingfisher experience all the way.” Kaul feels that Red will sooner
or later spread its wings to even South Asian countries and
certain parts of West Asia.

Hard business sense might have dictated Kingfisher’s decision to

bring the curtains down on the Deccan brand, but for those who
see Deccan as a sector pioneer, the move rankles. “In my view
they are making a good move on the one hand, but India could
have been an interesting place to maintain the LCC brand
precisely because of the early stage of air travel,” says
Schonland. In the same breath he concedes that, perhaps, “the
experimental nature of this idea was too much risk.”

While Air Deccan has metamorphosed into Kingfisher Red, by no

means has the Deccan brand been entirely grounded. Captain
GR Gopinath has stressed in no uncertain terms that the Deccan
brand lives through Deccan Express & Logistics and Deccan
Budget Hotels — both owned 100% by him — while Deccan
Charters is being hived off from Deccan Aviation and would get a
separate air operators permit. Chances are the final chapter inthe
tale of the old man and the sky is yet to be written....

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