The Indian airline industry has been living on the edge for sometime now. With skyrocketing fuel prices , the operating margins of all major airlines are being shot. Moreover, with the Indian skies opening up to a lot of players , it has become a different ball game to maintain profitability for airlines.
The plight was intensified with the advent of Low Cost Airlines which led to a increase in the number of people flying but also led to a crazy price war. This has the Indian airline sector struggling to maintain their profitability since the pricing has to be at par to lure the customers.
The past one year or so has seen a lot of drastic measure adopted by airline players. Jet Airways has already reduced its capacity by 20 per cent this year and Vijay Mallya-led Kingfisher Airlines too has reduced its fleet to 71 aircraft this year from 84 earlier and opted for the no-frills format in a major way. The Air India story is already talked about to call for further discussion.
But, then when every other airline is struggling to maintain its margins and operate at full capacity, Paramount is going the expansion way and bucking the trend. Paramount Airlines is actually planning to increase its fleet 4 fold with a focus on targeting tourist destinations. The airline with headquarter in Chennai is eying to become a major player in connecting the South sector with the north eastern sector , a route which does not enjoy good air connectivity right now.
“Many southern cities don’t have direct connection with states located in northeastern parts of India,” according to M.Thiagarajan (Paramount MD)
What’s more ? In these tough time when all other airlines are opting for a no frills arrangement to maintain their operating margins, Paramount is actually going out of the way to introduce some killer value additions to make its customer’s flying experience even sweeter.
Paramount has plans in place to become the first carrier to provide on-board mobile phone facility in the country. Now, that is one service CEO’s will love to have while flying, wont they. The company also expects to launch in-flight services complete with internet connectivity by the end of 2010.
How much of Paramount’s ambitions are completed would only be visible with time, but I like their different approach to steer the company in troubled times.
Sure the airline sector is going through a lean patch , but lower pricing and sub-standard service is not the only answer to its problems, is it ?
Why shouldn’t airlines look at upping the ante with quality service to outperform each other and take it a notch higher by providing some serious value additions to attract the business class
It seems clear that slowdown and shrinking margins calls for optimizing the Bottom Line but does that mean that the focus is taken away from increasing the Top Line growth at the same time.
In the end, a streamlined bottom line will not boost profits alone. The top line growth is going to drive revenues and that will only come with including new features and increasing the quality of the service.
What are your thoughts on this ?
Paramount might be a small player , but then instead of being bothered with the slowdown they are concentrating on expanding their horizon.Will they be able to beat the trend and enjoy higher revenues going forward
Low Cost Airlines have definitely increased the number of people flying but also led to a crazy price war. Really had to believe when these airlies will be profitable.
Ankit, if I can use my negligible marketing knowledge – a company needs to define what is the market segment, price range etc that one is targeting. Paramount is targeting the non-regular route (South to North-East) which might have some customers and so give it pricing power until there are no competitors.
I think Paramount is trying to do what Southwest airlines did for the US – no frills airlines for non-regular routes, at cheap prices with the following reasongs:
1. That way the bigger airlines do not compete due to less traffic.
2. If other airlines come into fray they would have to go low price to win customers and this place is already taken by Paramount
3. Airlines is a low-interest (marketing lingo) industry meaning, people do not care which airline they travel as long as they achieve their ends (reach destination at cheapest cost).
4. Giving internet access etc., are short term incentives to the customer. Before long all carriers will probably ape this and the advantage will be short lived.
Only time will tell if Paramount will be successful.
Awesome thoughts Madhav, and from the content u sure know marketing more than me :-)
I second your thoughts completely.What paramount is doing here can be vaguely thought of as a blue ocean strategy.Instead of fighting for the same thing, they are trying to make the competiton irrelavant.They are going where no one else is vying to go and hence they can be the leaders of an unexploited market place.Their profits can also go up since they are the only ones to do it.
as for internet and stuff like that, yes they are short term incentives to attract a lot of eye balls.But, as they say do what do u do with a bang.So, with these services Paramount is becoming a differentatior