Joint venture for Air India and Railways: A profitable deal

Posted on by Namita kapoor
 
  

Air India and Indian railways are two of the most constructive organizations of Indian economy. Though both the organizations are in their best phases nowadays. Air India, is suffering from commercial losses due to ineffective strategy, over staffing and flight delays cumulatively relate to rising losses whereas, Indian railways, which is currently recovering, but still making some meagre profits just to cover up its expenses.  However, with the new strategy both these organizations will be able to recover from its current state.

The tricky part is that Indian railways is not able to meet the demands of passengers in terms of capacity where Air India is not getting enough passengers in terms of its capacity and service level, but it’s still increasing burdens of financial debt. According to the new joint venture between the two organizations  if any train passenger who is not getting confirmed railway ticket will now be able to fly with Air India at the same fare of Ac first class. Similarly if a second AC class is not getting confirmed tickets, then he can get Air India first class ticket at the price of second class AC ticket plus fifteen hundred rupees.

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Both organizations have taken into account all the pros and cons of the collaboration, and hence considered this to be profitable deal of all the parties involved Air India, Indian railways and customers. Both organizations are considering two strategies based on practical scenarios, but this is also very challenging.

  1. Cost strategy: This strategy is followed by those airlines which charge low fare for their services. They charge low fare prices per flight from customers and pass on the reduction to consumers to gain more market share. However, this strategy is quite difficult to adapt for Air India due to administration cost and staffing expenses. They can’t lower the flight prices. Secondly, fuel price fluctuations and high competition with private carriers are contributing to disturbing factors. Moreover, this joint venture demands flexibility from both organizations which is quite impossible when you are dealing in high numbers with regard to both passengers and costing.
  1. Benefit strategy: This strategy is customer friendly as they are at the receiving end. There are two alternatives.
  • To provide high value services to customer at the same price to acquire greater market share
  • To adjust the prices so as to acquire constant market share and providing value services to customers.

However, in this solution both organizations are facing troubles from private carriers because this is what exactly they are doing. They offer deals and deals to woe customers and so passengers have many options available.

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Solution

Here is the solution that both organizations have come up with mutual understanding.

Railways are failing to satisfy customer travelling needs, most of the reservation requests are kept on waiting slot or cancelled. It is also very difficult in “Tatkal” option.

Hence those passengers who are unable to get confirmed ticket will be automatically redirected to Air India site to book tickets on the same fare according to their convenience.

. Incentive can be given to AC I, II and III tier passenger by crediting points and they have to give these credits or points if they opt for traveling flights alternatively. Tier I passengers will be given more credit points as compared to II and III tier passengers.

However, the facility is available for Rajdhani and luxury trains passengers, but it is definitely going to benefit both the organizations and will save passengers from any kind of inconvenience. This joint venture between Air India and Indian Railways will be a great revolution and will help the organization to cope up the competition from private carriers and cater passenger’s needs in an improved manner.

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