“The airline business is all about ego”

19 Tuesday Mar 2013

Posted by theflyingengineer in General Aviation Interest

Tags

72, Aditya, Air, Airbus, ATR, Boeing, Ghosh, Indonesia, Kirana, Lion, Rusdi, Wings

Says Rusdi Kirana, CEO of Lion Air, which has been, off late, making headline for all the “right” reasons.

Surprisingly, for a man who has absolutely no emotional attachment to the airline industry, all his orders are worthy of an ego boost. Surprising for a man who started off as a typewriter salesman, and has ended up as the CEO of the family owned business of the fastest growing airline in the world fueled by a dubious source of funding. Indonesia is ranked 118 by Transparency International. The ranking runs from least corrupt at No. 1 to most corrupt at No. 176.

In the February of 2012, the Indonesian airline placed an order for 27 ATR 72-600 aircraft, which, when all delivered in 2015, will make Lion Air’s subsidiary, Wings Air, the largest ATR operator.

In the same month of the same year, Lion Air placed the then largest firm order in aviation history, for 230 Boeing aircraft: 29 Boeing 737-900ERs, and 201 737Max, with options for 150 more 737MAXs.

Said Rusdi, in 2006, to Flightglobal, “Everyone knows that the passenger doesn’t really care about aircraft. I hear other airline people say they will go from old aircraft to new aircraft because their passenger likes it. But the passenger is already flying with you so who cares? Unless you are like Singapore Airlines where it is part of your image you should only change your aircraft if the cost is better. Here in Indonesia it is all about the ticket price.”

But Yesterday, (March 18^th, 2013), Lion Air ordered for a total of 234 A320 Family aircraft, comprising 109 A320neo, 65 A321neo and 60 A320ceo: one of the biggest orders from that region.

Surely, the orders are business driven. The carrier is banned from flying into the US and EU skies over safety fears. Now, Airbus and Boeing “safety experts” are running in and out of the airline auditing its safety and helping improve its rating.

Lion air has quite a few thin feathers on its cap. The first Boeing 737-900ER, and the and last ATR 72-500, were delivered to Lion Air. Lion Air is expected to be the launch customer for the 737-9 MAX.

Lion Air, with its subsidiary Wings Air, presently has a fleet of 125 airplanes, which comprise a mix of 737 Classics, 737NGs, 747-400s, MD-82s, MD-83, ATR 72s, and Dash 8-300s. This is impressive, considering the airline started operations in 1999. This combined fleet size is 17 aircraft more than the combined fleet strength of the Indonesian national flag carrier, Garuda Indonesia, and its low cost subsidiary, Citilink Indonesia.

This is surprising growth, and surprising business moves, coming from an apparently public shy, boyish charm businessman who said almost 6 years ago, on why he started an airline: “I did it because I was hungry”. Surprising that in a business with hairline margins, high costs, and stiff competition, that was the first business of choice for a starving man.

Instead, he went on to say, “I didn’t have money. If I had money at that time I would never have done an airline. Only stupid people who have money do airlines. If I had money I would buy plantations or do mining or property or restaurants.”

So we have a shy CEO who was hungry, made about US$10 a month, and decided, of all businesses, to start an airline, and has managed to grow it to the largest by fleet in the country, with money magically appearing from absolutely nowhere.

If Aditya Ghosh considers Southwest beyond Godly status, Lion air is Supernatural.

CLICK HERE to hear Aditya.

“Indian Aviation Sector: Going to be better”

20 Wednesday Feb 2013

Posted by theflyingengineer in General Aviation Interest

≈ 1 Comment

Tags

Aditya, Ghosh, India, Indigo

Indigo Airlines’s President & Executive Director, Aditya Ghosh, interviewed at NASSCOM India Leadership Forum 2013, had to say a lot on what he thought of the airline business. I believe that every pilot should read excerpts of what I believe are important, to understand that there may be a boom, but there may be a slump as well, if an airline is not well run.

What is it that Indigo saw?

“In most businesses, what tends to happen is that as businesses become bigger, and as the industry matures, the tendency is to move away from the basics. And we tend to kind of forget what the customer really needs, versus what are all the things the customer really wants.”

But the customer wants to be treated in a glamorous manner

“Customers want a lot of things, the only problem is that they don’t want to pay for it. This issue really is, how do you figure out what the customer needs, what the customer is willing to pay for, and can you do that over and over again really well?”

“Nothing uniquely different about Indigo except the consistency”

On Investment in Technology

“As a low cost airline and as a business that is so focussed on cost, it doesn’t come naturally to go make big investments, because the tendency is to go save cost, in a lot of little places. But the problem with penny pinching is you’re pound foolish, and for us, from day one, because we had the advantage of knowing we’ll get a 100-150 planes, we invested upfront for anything that was scalable, but had a good impact on productivity.”

India’s Southwest Airlines

“It’s a disservice to Southwest. Southwest is an amazing airline, an absolute legend. They’ve been around for 40 years and been successful.”

What is the matter with Indian Aviation?

“Ego comes in the way of wisdom, and people forget that cost is a big driver, and we lose focus of ourselves. We must look within”

Is the problem with the regulations?

“The problem without (external to the airline) is everywhere. A large part of the problem is within, because, many of the businesses don’t run them as businesses.”

Why are there so few airlines in India?

“It doesn’t matter how many airlines there are. There have to be more airplanes. If you have 50 airlines with 1 aircraft each, it’s still 50 aircraft. But if you have 6-7 good, sustainable airlines with a 100 aircraft each, this could be a really, really different industry. Absolutely, there should be more competition.”

Airline Market Outlook

“I think it (outlook on the aviation sector) is going to be better than the last couple of years, lot of demand, not enough supply, huge opportunity for the (airline) businesses to grow. But I think obviously…I’m quite certain that the big growth and the big success stories will happen on the low cost segment”

Consumer Point of View

“(Prices) should absolutely come down. For that, we will need airlines to do their thing, but we will also need the government to do its thing. The ultimate cost of travel for the traveller must come down. That is the only way this industry will grow.”