Partners for Biman
Come fly with me. Photo: K64360_lg
THE equation in combining for synergy is that 2+2= 5, not 4. Yet, there are also downsides in synergistic efforts. And this is true of the airline industry more than any other. Additionally, the trend among airlines in South Asia, and to a great extent in South East Asia, is not to go in for full-scale strategic partnership. But that has nothing to do with geographic regions.
To determine the right approach let's look at things in reverse order. Biman should first try out partnerships of convenience and test its strengths and weaknesses, its ability to muster the necessary resources and tailor its products and services per its limitations in specific markets.
But even before contemplating such "marriages of convenience," Biman may try to focus on developing the markets -- that were either long lost or have seen a dramatic reduction in market share -- as a precursor to considering collaborative growth with other airlines.
Entering into strategic alliances before attaining a firm foothold will be the equivalent of undervaluing its potential and bargaining leverage. By contrast, achievement of robust growth and a return to profitability leading to strategic alliances (instead of the other way around) will enable negotiations for arrangements best suited for its interests. In the process, the expertise of its personnel -- that had fast eroded after a dramatic withdrawal from long haul markets -- can also be expected to re-develop quickly.
Comprehensive and all inclusive strategic alliances in the airline industry, as opposed to market or area specific arrangements, have their own inherent blockage factors. Any or every one of these alliances is fraught with complexities. Some of them relate directly to airlines of developing countries and are always reviewed seriously, considering the sensitive nature of the issues.
Here are some of them:
-Sovereignty of air space and national carrier concept: Alliances in the airline industry raise eyebrows and draw more attention than say, a local bank being taken over by a Middle East bank or a pharmaceutical company bought out by a foreign one. The national carrier or flag carrier concept factors in very strongly. If not national pride, the element of national identity pervades the carriers of both large and small countries. And this is not confined to relatively small carriers or less developed nations.
-Risk of smaller carriers being overwhelmed by larger carriers: Unless full potential or near full potential is achieved, the smaller partner can lose out from the deal. The large(r) partner can prevail, and that can be a bane for it (larger partner), too. Every carrier, large or small, has its own niche and area of expertise. While resource constraints may have led it to enter into a partnership, the purpose of such arrangements may be defeated for want of (and not quite an adequacy of) expertise of the prevailing partner.
-Larger carriers compromised by smaller carriers: Larger carriers can feel shortchanged, too. The larger partner may feel they are being taken advantage of by assuming the role of "giving" partner without the expected benefit from the quid pro quo. Larger or prevailing carriers are known to constantly evaluate the tradeoff and the opportunity cost of collaborative efforts and in the process lose sight of the benefits of synergy. What might have been conceived as a strictly business arrangement can trickle down to a "paternalistic" or "patronising" approach.
-Incompatibility of networks, size of markets and market profile: The ideal alliance or partnership is purported to be mutually inclusive and yet complementary to each other's services. The services of one should neither be far removed from nor overlapping the other's. It takes a great deal of accommodation and adjustment to ensure that the other party's niche or money-spinning market is not encroached upon.
Once either party agrees to forego or forsake its market, there should not be any qualms or remorse. Additionally, great care needs to be taken to see there is no clash in the profile of its clientele that either partner serves or market base that it has a firm foothold on. Service approaches for labour traffic customer of an airline and the IT professional customer of its partner airline will not mesh well. Yet, there are methods to adopt efficient practices to address just that by a single organisation. Biman was one organisation that did just that successfully in the early to mid-eighties. It stands to good reason, therefore, that both partners identify what they want to achieve from the alliance.
-Conflicts of corporate cultures: The methods of operation of each partner airline may also be markedly different. Selling practices, marketing techniques, and even making or responding to overtures from other aspiring airlines. There must be a reconciliation and total acceptance of the fact that business practices will undergo a dramatic shift before entering into the more difficult terrain of determining who will call the shots, i.e., who will command whom?
The aforementioned are some of the realities that airlines aspiring for strategic partnerships have faced. Not being in the right league is yet another. But that's not the reason why across- the-board full-scale strategic partnerships are no longer in vogue.
The concept outlived its utility before it could take off. An airline that has cut down routes and sent home many skilled personnel in the process of retrenchment, has the more immediate and arduous task of regaining its identity as an airline. Optimum utilisation of leased and new aircraft, while simultaneously lifting service standards, is the herculean task that should precede strategic partnerships.
The sky is the limit when it comes to conceiving options for collaborative growth. It does not have to be a full-dress strategic partnership. There is a myriad of options. But before that, sprucing up and looking good for the occasion is the priority.
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