Converting a “not cool” to a “wow” expression from customers requires a lot of belief, determination, maturity, business sense, resources, training, preparation, and continuous improvement, along with constant management follow-through. This transformation, in a nutshell, is what the new management team, led by the Tata group, has done to Air India.
I just completed a business class flight from Chicago to Delhi via Vienna. At the time of booking my flight, I was apprehensive about traveling with Air India after reading about it in the media, including reports of clogged toilets, returned flights, irate customers, old aircraft, stubborn operational losses, and the indifferent demeanor of flight attendants. Further, with the recent closure of Pakistan’s airspace and numerous schedule changes before the flight, I became more nervous at the time of boarding. All I wanted was to reach Delhi safely. With the lowest expectations, I couldn’t have expected anything worse.
On the contrary, my flight experience was way better than what I have historically received at top-end all-inclusive resorts. First, the Air India mobile app provided up-to-date flight status notifications, allowing me to continue running my business from home and reach the airport just in time for the updated takeoff time. At the counter check-in, the staff gave me access to the classy airport lounge, where I could continue working and enjoy healthy, great-tasting appetizers and beverages. With priority boarding, I landed straight in a spacious, fully operational seat with a complete flat bed arrangement. The entire cabin crew was young, energetic, professional, fit, attentive, and overly enthusiastic to shed the old Air India image. I found their attitude refreshing.
The food menu was top class and, in a way, better than my recent visit to Caribbean resort restaurants. The long list of top-quality beverages to complement puts a feather in its cap. Too bad that I don’t drink these days. My selected, gourmet, mouthwatering fish entrée, paired with a hot beverage, at 30,000 ft above ground in international airspace, provided a surreal experience. After I finished my business tasks and was ready for my shut-eye, the attendant offered to prepare my bed with a sleeping mattress, blanket, and lighting arrangements. There was no difference between the sleeping experience at home and on this flight. After I deboarded the flight, I experienced no fatigue or stress, which is typically a result of long flights. As a side note, I would like to recognize Sheetal Aggarwal, the cabin crew member who attended to the business class customers on this flight. She and others are leading the Air India charge to restore the original Maharaja image, which was started by the same owner, the Tata Group, after a multi-decade gap.
Now, why am I raving about Air India? How does this experience pertain to the topic title, and what do I do for a living? Selecting distressed assets at a reasonable price for potential turnaround requires a strong heart, business acumen, a suitable skill set, and a management personality. Once a company has a success story with one acquisition, a repeatable model starts to develop, and they can begin looking for other acquisitions. The Tata group executed a similar turnaround earlier with the acquisition of Land Rover and Jaguar from Ford. (We won’t go into the Auto (Land Rover and Jaguar) acquisition turnaround (that will be for another day) and stay with the Air India story for now.) We acquire assets of our own at a much smaller scale, but the process involved is the same:
- Search for assets that are underperforming, with bad/disinterested management, with a lot of potential, and ones that can be turned around with our experience.
- Use past credibility to line up lenders and investors for the purchase.
- Get control of operations (maintain the status quo).
- Find the “lipstick” (to use the English phrase “lipstick on a pig”) that will immediately bring out the new look, showcase a new management point of view, and intent to turnaround.
- Prepare a list of changes and prioritize with the low-hanging fruit first
- Use the budget from the acquisition analysis and create additional funds to cover the changes. We generally use money from operations to avoid bringing in more seed investments. Tax breaks resulting from the loss of the current transaction can offset gains from other stabilized acquisitions.
- Improve operations, continuously bring in more revenue, and lower expenses
- Refinance/exit the business with a much higher valuation and then repeat from #1 above
Now, let’s see how the Tatas are working on steps 4, 5, 6, and 7.
#4 Lipstick – The purple scheme neatly complements the original red and brown colors of the previous Maharaja brand. The aircraft linen, seats, and walkways gradually bring out the newness to the old aircraft. The imperfections – scratches, wear and tear, dents, etc., can be “hidden” from the guests’ eyes by subconsciously urging them to look elsewhere. People who complain will complain, and it isn’t easy to please everyone. They will complain when using the other supposedly best airlines in the world. To entice customers further, the ticket prices can be adjusted to provide the most value for the money. Remember, with a lower cost base, Air India has more room for price adjustments.
#5 Prioritized Change List (constantly evaluating bang for the buck) –
- Bring in a younger, passionate, modern workforce eager for work, and more aligned with the “change mindset”.
- Bring in the best quality food and liquor for service, since that is much cheaper than buying and deploying new aircraft.
- Compensate the new workforce better to improve customer service.
- As long as the aircraft’s internal mechanics are good, continue making minor adjustments and repairs to the aesthetics. For example, if a high-quality duct tape can hide an imperfection, then so be it. Focus on the critical human essentials – water, sewer, air, food, beverages, timely departures and arrivals, and baggage service.
- Add better-quality entertainment content (i.e., movies and shows, as opposed to electronics if the latter is difficult). Human senses (eyes and ears) start with the superficial, but then the content takes over and doesn’t care whether the screen quality was good, if the content was memorable.
- Add freebies such as a small Tumi toiletry bag, sleepwear to further augment the memorable experience
#6 Budget for small and big-ticket purchases. Buying new aircraft is expensive, so start with token purchases with small down payments and later deliveries. Create room for small ticket investments with immediate returns and a positive effect on ground operations.
#7 Improve operations – Make money from the older aircraft as much as possible, while orders for the newer ones are in place. Attract new and lost customers, and use political pressure to secure favorable landing spots worldwide. Add economies of scale and sustainable measures to continuously reduce costs.
In our efforts to educate and cultivate entrepreneurship in the workplace, we hope you found this helpful article. There are multiple opportunities available, such as business for sale websites and multi-family property investments, where you can repeat the above steps and make a lot of money. That is, if you want to make money and not work for others.
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