The dangers of the face value

For almost twenty four years (discount the first five years) of my life, I have been used to conducting transactions with only the Rupee as a currency. And over these years, I have seen how things have become expensive (or the value of the Rupee has diminished). Moreover, I have been able to develop benchmarks for how much to spend on what item. And also rough benchmarks for monthly expenses and savings required.

Cut to September 2011. I am in Canada and suddenly, I have to spend in Canadian Dollars. Now, the game has completely changed. Suddenly, I have to adjust to the new currency and what can one unit of this currency buy and is buying of that amount, actually worth that value? But, the problem is that I haven't yet developed any benchmarks. One Canadian cent still has a lot of value, compared to one Indian paisa. But, then for many days, it is only the face value of the currency that registers in my mind. And with the mental framework wired to deciding the worth based on the Rupee, many a times doesn't register the gravity of the expenses incurred. E.g., a CAD 1.24 worth of coffee is far expensive than if I would have my own coffee maker. But this gravity doesn't register quickly, as for me the value 1.24 registers as a small number, because I am used to transacting in the Rupee. But, it is significant value for many Canadians. And hence, some of them might skip the coffee for a day and have it only on certain number of days.

This is the danger that the face value of the currency poses. For me to realise the gravity of the transaction, I have resorted to converting the amounts into Indian rupees. This helps me in also keeping a tab on the expenses involved. Moreover, it has led to looking for cheaper alternatives. But, the flip side is that I might not end buying something really needed or beneficial, just because its price in Rupees feels too much!

From where else can money come for AI?

Whenever I travelled Air India on international flights, I thought that they were doing a good job with the facilities provided on board. When compared with other airlines, they didn't seem too extravagant. Of course, they did offer a wider choice of meals, except that the special requests had to be informed earlier. And the portions served too are comparable to what is served on other airlines. So, what else could be done to improve the revenue of the airlines?

I saw this on the Lufthansa, Air Canada and Dragon Air flights. The cabin crew literally hawk duty-free stuff. After you have been served a nice(?) meal and drink, the cabin crew come out with a trolley of duty-free goods. And they literally keep on calling 'Interested in buying duty-free?' Of course, coming from a beautiful air-hostess, it sounds seductive, and many a times I feel sorry about not being in a position to buy something from her. But then it is same to the 'chaaayee aaa' call of a tea-vendor on railway platforms. Except that the chai wala is viewed as a nuisance, while the air-hostess isn't. However, this is additional revenue for the airlines. On every flight, I have seen passengers buy a thing or two from the airlines' duty free catalogue. And mind you, these aren't stuff that are cheap. Things like a Calvin-Klein perfume or a Jack Daniel cannot be readily bought by anybody. Moreover, I have seen Air Canada entice passengers by showing them some 'good reasons' to purchase duty-free items on the personal entertainment system in their aircraft.

And the entertainment system brings another source of revenue. Why not show advertisements on the personal entertainment screens? Air Canada does that. Before you start a show or movie, a 15 sec advertisement is played. This can range from sports equipment to credit cards. So, basically Air Canada is selling advertising space. Mind you, these can be easily customised. E.g., the kids' section like cartoons, et al. can have advertisements targeted towards kids, the movie or TV show section can have different advertisements. And yes, advertisements in business and first class can still be different from those in economy class. It is similar to public transport authorities selling space on the exterior of the buses for advertisements. All this brings in additional revenue for the airline.

I never see such things happening on Air India flights. The crew just serve the meals and go to their resting stations after they have cleared the tables. Air India does have a catalogue, which mentions the duty free items available, but then you have to contact the crew for that and they will have it delivered to your address. How many passengers will be willing to do that, compared to when the duty free trolley is wheeled past your seat? Moreover, its entertainment screens do not advertise anything. These revenues may seem too trifle, but then, there isn't much effort involved in generating them. A Boeing 777 carries more than 300 passengers. Imagine, being able to advertise for such a captive crowd. People plug into their entertainment system by default, and even at 70% load, it is a big crowd to be targeted. Moreover, the flights last for more than six hours and if it is a hopping flight, you get a total of many more passengers to be advertised to. And margins from selling duty-free stuff should be pretty high. The Air-India management needs to have some strategy on this. It might involve a lot of work with the RBI, with regards to the payments made, but in the long run, it is worth these efforts.

Of course, none of this substitutes to running the airline in an efficient manner. These earnings are like icing on the cake, which just makes the cake more attractive and bring in better margins. But, for that, the cake itself should be perfectly baked. Hope someone in Air India is listening to this!