Logistics

25 years on, Jet Airways CEO says customer is still the focus

Ashwini Phadnis/Anand Kalyanaraman New Delhi | Updated on May 04, 2018

Vinay Dube, CEO, Jet Airways   -  BL

The airline will continue to build on its goodwill and offer a differentiated service while unbundling products

As Jet Airways gets ready to celebrate 25 years of flying, Vinay Dube, Chief Executive Officer, traces the journey of the airline and what passengers can expect from it in the future. Edited excerpts.

How much of what was planned then has been achieved?

The underline vision was to create an airline that was something that India had never seen; that which provided world class operations and world-class experience.

You are talking about world-class but at that time you were restricted as you could only fly domestic?

It does not matter.. if you are flying one aircraft let that have operational reliability and safety standards… if you have two let those two have it. If 24, then let the 24 have the highest standards of operational reliability and world class safety.

You obviously had to tinker with what was planned as post 9/11 steel cutlery was banned on aircraft…

This was more tactical tinkering that everyone had to do; it did not change the ethos which started or drove the airline. Till today, if you look at our DNA, service and warmth are very fundamental to who we are. All the feedback that we get from our customers is that our flight attendants and our customer service agents stand apart. I do not mean stand apart in India but stand apart in terms of world service. I have had considerable background in global aviation and I will say that our service, warmth and hospitality is second to none.

But the other reality is that a major portion of the market is carved out by low-cost airlines.

That is not necessarily so because we do not have world-class service. For example, in your mind who do you think has world class service? The best of the best?

The carving out or taking of some share by LCCs does not mean that a particular airline, in my case Jet, does not have world class customer service. It just means that over time you have a price sensitive customer who may not value every aspect of customer service.

Can you explain this?

Take a Mercedes, BMW or high-end European cars and they say we provide high-end customer service, high-end performance and high-end luxury. You are going to say wait a minute, Maruti has a lot of share. Just because Maruti has share it does not mean that Maruti has the kind of high-end performance that some of the European car makers have. But that also does not mean that Maruti does not provide value for money… it does. It is just that different people value different things. You may have LCCs but that does not mean that the Indian consumer does not value the operational reliability, safety and customer experience that Jet has to offer.

How has that perception changed over time?

When you did not have LCCs, Jet was seen and was a pioneer in the game-change because it took what was at that time the existing competition and added a level of operational reliability which was not seen before at similar price points in customer service.

But at that time fares were regulated and so the price points was pretty much decided by the government.

But that does not take away from the fact that because of the efficiencies that Jet had in its operations as a private airline it provided consumers the highest level of customer experience and operational reliability at the prevailing price points and was still able to make money.

Over time what has changed is that: LCCs have come in with a fundamentally restructured cost base wherein they have not been able to replicate that level of customer experience but they have offered something to a consumer who may not want that experience but may want just lower fares.

How are you tweaking your model?

We need and are in the process of restructuring our costs. We are in the process of unbundling our products. There was a time when seat assignment was a right that every customer had. But some customers were paying for that right. If you look at what the LCCs have done around the world they have said: ‘I do not have to give everything to everyone, let me just give those things to those people who want those things and not have one person subsidise somebody else’.

That unbundling of the products is going to continue. At Jet Airways we are fundamentally looking at our cost structure, we are looking at ways we can get more efficient and we are looking at unbundling our products as we have done so far with the fare choices that we offer to give the price-sensitive customer the lowest fares and to give service-oriented customers a higher level of service.

Was acquiring Air Sahara a mistake because that pulled down the airline very badly financially?

Personally, I cannot tell you whether it was a mistake or not because I genuinely do not know.

But if you look at the finances?

You can point to one element but if you were to do a statistical co-relation I am not sure. And, since I was not there at that time I genuinely cannot answer.

What I can do is to give you the flip side… the airline business is one of scale so acquiring another airline is not necessarily just out-and-out ‘oh! that is a stupid move’ and that is the reason I am not giving you what is a politically correct answer that this is not a mistake or that it is a mistake. I will need to understand what the prevailing forces were in 2006-7-8-9, whether we got the economies of scale that we were hoping for from this merger or not.

Another aspect is what happened post-merger. One of the things that I can tell you is that we have changed course. After the Air Sahara acquisition, we decided to run dual brands and that is something we reversed course on to be able to take some of the advantages of scale and provide more simplified expectations to customers.

I came from the US where one of the best things that happened to us was the merger between Delta and NorthWest because of scale. I cannot look back on it and say this was a mistake because building scale is something that was very beneficial to the players in the industry.

Which brings me to the Etihad sale of 24 per cent for about ₹2000 crore. Have you achieved what was planned? What is the update on the three-year turnaround plan?

It has been extremely successful because it provided some financial stability at a time where we needed a cash injection and because the Etihad partners provided aviation knowhow in key areas.

Such as?

Maintenance and engineering in terms of commercial space. They still have two seats on the Jet board; they are aviation experts so we get very good guidance from them.

The Abu Dhabi hub provides another gateway to the world, and for the US, with pre-clearance it adds to Jet’s network value proposition.

But the Abu Dhabi hub came at the cost of Brussels.

No, I do not think so. I think Brussels had nothing to do with the Abu Dhabi hub. We have Amsterdam, Abu Dhabi and London that we are using as gateways and those are the substitutes for Brussels, not Abu Dhabi. It is a completely different paradigm.

Can you explain a completely different paradigm?

If you look at before and after Etihad, the number of flights to Europe did not go down. In fact, we have continued to increase the flights to Europe and that is the reason why I am saying it is a different paradigm as the number of flights to Abu Dhabi have gone up. It was an extra gateway that we got as opposed to reducing that gateway.

Where are you on the three-year turnaround plan?

If you look at our cost performance over the last few years, my predecessors have done a very good job when it comes to reduction in non-fuel unit costs.

We have ordered new planes and are in growth mode. We have restructured our network and we have got many more cost and revenue initiatives identified. We have signed enhanced cooperation agreements with Air France and KLM, so a number of strategies are falling in place.

The unfortunate part is that fuel prices have gone up a dollar-and-a-half per barrel every month that I have been here starting from $54-56 in August to $74. Unfortunately, our price environment in India has not changed substantially so that has put pressure and will continue to put pressure. If God forbid it goes to $100, $200 or $500 then the best laid plans will have to be rethought.

How much of the increase in fuel cost are you absorbing and how much are you passing on?

As of today there is virtually nothing that is being passed on. Now, usually all over the world there is a lag. In India, the lag just seems to be more than in most points in the world.

Can you explain?

For example, if fuel prices have gone up by $20 a barrel in an 11-month period you will notice it in fares. In India, you may notice it in fares a year from now or six months from now or four months from now. What I mean by lag is that you will notice it faster in the fares in the mature aviation economies because they know that it is very difficult to absorb it (the increase) and you are finding that this lag is longer in India.

In the turnaround and the restructuring plan we are executing all the things that the aviation business experts expect us to execute. But fuel is not helping us.

Most people say fuel is likely to hold at this level. Do you agree?

I have no view on fuel. I do not spend a minute thinking about whether it is going to go up or down. I know that we cannot plan for a rosy fuel picture. So as a planner I will plan for it to be on the upside rather than the downside because planning on the downside could be very detrimental. If you plan high and it is lower, then you can be a lot happier and sleep better.

How much did Naresh Goyal’s experience in the General Sales Agent business help the airline?

Some, but not an overwhelming amount. The overwhelming benefit comes from Goyal and not the GSA business. He had approached the GSA business as Goyal, he approached the airline business as Goyal. If you asked him to own a hotel he would approach that as Goyal; if he owned a sports team he would approach it as Goyal.

The man is a force of nature. He has an eye for detail, which is why Jet Airways was able to change the face of Indian aviation on the back of customer experience. He is extremely demanding when it comes customer service.

How are you staying relevant given LCCs have such a huge market share?

Jet has always been relevant from the point view of consumers as a result of its differentiated service model. We are the carrier of choice for business travellers, we are the carrier of choice for international travellers. Thankfully, we have an amazing following from the frequent flyer perspective, so I would say relevance and excellence come in this environment and this is going to be our future – continuing to offer a differentiated service while unbundling our products to make sure that a differentiated product is offered to the consumer who wants it and restructuring our cost base so that we can offer it in a cost effective manner.

Broadly speaking at a low-level, relevance comes from a good network, an international network that connects to a strong domestic network, size and scale for specific cities which give meaning to your frequent flyer programme and to your corporate contracts. A set of partners that can take our customers to places that no one can. And a service ethos; I go back to it.

When you ask how do we stay relevant I keep going back to the other things but fundamentally our biggest relevance is our customer experience. And that is our people, our frontline.

It is our people who take the time with some degree of warmth; this has been so historically been and can be unparalleled in the future.

Jet Airways came up during deregulation and deregulation also allowed low cost carriers. Has that hurt or benefitted you?

I think deregulation is a good thing in general. I cannot say anything negative about deregulation whether it has hurt or helped us. Deregulation for me is progress and beyond that it is how we react to it, how we change with the changing landscape whether it is competition or whether it is geo-political.

I cannot say deregulation has hurt us. I am all for deregulation. Progress of a country happens when there is deregulation. We have to react, we have to address the competitive landscape. Regulating it is not the answer.

Apart from MAX, what can Indian and global passengers expect from Jet Airways in its 25th year and onwards?

The MAX is a new aircraft. It will have some new shiny stuff on board, a gizmo here a gadget there, but for that you will have to wait till we unveil it. But more than anything we want to get back the operational excellence and customer experience that we were known for even if it might mean continuing unbundling of products.

We are making changes in on-time performance. We were close to 86 per cent for April and that is industry leading. So I would say getting back to our basics. We are making changes in on-time performance. We were close to 86 per cent for April and that is industry leading. So I would say getting back to our basics.

So the focus goes back more on the customer?

Yes. It should always be on the customer, but yes I would say continue to focus on customers because at the end of the day they pay our bills.

flydubai has the MAX and it has lie flat beds in business class…

We are not getting that. Our MAX will be relatively standard with 12 premier and 162 economy seats.

The MAX enhances the distances that it covers…

From a range perspective, the MAX will allow us to do parts of the coast of East Africa, it will allow us to do some South East Asia. We do not have Astana, Almaty, Ankara or Istanbul on our wishlist.

You are already in Singapore and Bangkok.

It will allow us to do a little beyond that and give us some payload capabilities that we may not have today for the same range.

Now that Jet is part-owned by a Gulf carrier has that changed the DNA in any part?

I do not think so. I would say that the DNA absolutely 100 per cent not. The DNA is that of a warm service-oriented company where we really strive to fulfil and exceed the expectations of our customers.

Have our operating capabilities changed for the better with our partner and know how? Yes.

How is the tie-up with Air France KLM?

It is going well. We are happy to have AF-KLM as partners and beyond that Virgin.

Is the tie up with Air France-KLM a stepping stone to their possible stake in Jet Airways?

I will answer this in two ways. One of the questions you did not ask was whether we are partnering with Delta, Air France, KLM so will we be joining SkyTeam? I would say that for the next year or two or three our interest is in deepening the relationships that we have with existing partners where the bulk of the value lies rather than joining an umbrella alliance with one more carrier there and one more carrier here.

An alliance’s value lies in deepening your relationships with one, two or more carriers. Equity stake is just one mechanism to deepen these ties but not the only mechanism. When you say is this a stepping stone I cannot answer that. You will have to get them to answer that. But I would say that we have already taken one step towards deepening the ties which is through this enhanced cooperation agreement between AF-KLM and another with a deeper cooperation agreement with Delta and so that step is already taken.

Published on May 04, 2018

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