The King of Good Times

I have had the pleasure of "flying the good times" with Mr.Mallya's "high-service, high cost" Kingfisher airlines two times over the last year. The ambiance was excellent, the service exemplary, the entertainment system world-class and the air hostesses were....err.....(lets just say, my thoughts about them are not fit for the public domain...) It truly was an airline tailor-made for the upper-middle class, which is continuously going upwards. Though I have not had the fortune of tagging along Capt.Gopinath's "Udupi hotel in the sky", I have a good experience of other low-cost airlines such as Spice-Jet and Go-Air.They get you around with the minimum of fuss, but with the same amount of comfort levels. And oh yes,the air hostesses were pretty good there too.
So, with the news of the Vijay Mallya-controlled United Breweries Group buying 26 per cent of the Air Deccan for Rs 550 crore, comes the expected consolidation in the airline sector.The Jet-Sahara, Kingfisher-Air Deccan, and the Air India-Indian combines now garner a combined market share of almost 85%,almost turning the Indian airline Industry into an oligopoly, as is the case with the same in the rest of the world.
The immediate impact of this merger could be:

1)The remaining smaller Low-cost carriers such as Paramount, SpiceJet, IndiGo, and Go Air will be pressurized either to go in for alliances amongst themselves ,merge with one of the larger entities or simply shut shop, as they simply dont have the financial muscle to compete with the big players.The goalposts are constantly shifting and these low-cost airlines are being boxed into a corner. With only 12-15 % of the market share between all of them, expect some news on the merger/acquisition front here soon.

2)A majority stake in Air Deccan will lead to air-route rationalization for Kingfisher,which means that planes can now be diverted to new routes from existing ones along which both airlines currently operate.An example of this is the Hubli-Bangalore route on which both operate. Route expansion will improve efficiency, profits and of course prove a blessing for the passengers. Other carriers too, will now face competition from only one entity after route-rationalization and hence improve their market share. as well

3)The two airlines will benefit enormously from sharing infrastructure, ground handling services and security, given the tight operating margins of the airlines involved. Both the airlines have Airbus Jets and ATR-Turboprop planes , thereby reducing maintenance costs.An increase in the number of parking slots at intensely congested airports of major cities will empower them to tinker around with the flight timings, making them more flexible.

4)As the airline industry in India slowly transforms to an oligopoly from a monopolistic competition, a collusion will take place amongst the various players involved , leading to a rise in prices. This is undoubtedly good news to an industry which posted combined losses of around 500 million dollars last year. The passengers will bear this additional burden in the short run. But in the long run , the resulting price stability due to the larger economics of scale will no doubt prove beneficial for them.

5)Emergence of large players will bring stability to the industry.This will help to move focus from survival to consolidation and due importance will be given to neglected area such as manpower training.The shortage of talented pilots,cabin crew and ground staff has often led to poaching wars between the various airlines. Now,the airlines can focus more on staff training and HR development.

6) With the per-capita income projected to grow at an unprecedented 8.4% (according to stats released by the Central Statistical Organization (CSO) for 06-07) , there will be a further influx of air-bound passengers for an industry that posted an annual average growth of 20% in passenger numbers over the past 5 years.So,consolidation among the top players will help in the long-time survivability of these airlines.

This marriage between the two entities , seemingly poles apart from each other, is one of necessity , dictated by market conditions , rather than personal choice.But whatever the reason, I'm sure everyone is looking forward to flying the good times along with the Udupi hotel in the sky.