A few weeks ago, as it has done every so often, Air Deccan, India’s biggest low-cost carrier, raised the fares on a few of its secondary routes to test customer response.
Just as they had done in the past, passengers baulked, and the flights flew increasingly empty.
But this time around, Deccan’s reaction was new: It stuck with the higher prices, some as much as 8-10% more or almost Rs400 for each ticket.
“That’s just not how we did business before,” said a senior executive at the Deccan Aviation Ltd owned airline. “It’s not in our DNA to fly planes half empty.”
Before as in “before Vijay Mallya became an investor”. Mallya, whose United Breweries Holdings Group owns Kingfisher Airlines Ltd, paid Rs550 crore to buy a 26% stake in Deccan Aviation on 1 June.
Until now, Air Deccan’s pursuit of passengers has been so fervent that load factors (how full the planes are) were discussed non-stop at top level company meetings, and breaking even of operations was relegated to a future date: first 2007, then 2008.
Since the Kingfisher deal, questions of what will happen to Air Deccan’s core philosophy of low costs, low fares, no frills and intense, almost manic, growth have swirled around both G.R. Gopinath, the charismatic entrepreneur and the carrier’s chairman who introduced India to budget airlines, and Mallya, the equally charismatic liquor baron who seems intent on overtaking competition the old-fashioned way—by buying it.
The ‘Deccan way’ of running operations was the subject of a staff meeting two weeks ago in the airline’s Bangalore offices, according to two people who attended it, but didn’t want to be named.
“We do our business a certain way, and (Kingfisher) does their business a certain way,” Gopinath told the gathering, which included four members of a Kingfisher task force that now works closely with Deccan staffers. “But as long as we can keep the DNA of our business intact, we are open to change.”
Since the deal went through, changes have come quite quickly at Deccan and it is unclear how much Gopinath can do to preserve the DNA of the airline. Chief finance officer Ramki Sundaram, whose last stint was as an investment banker in London for Investec, is now the officiating CEO of the airline, and most likely the next CEO. But since the Kingfisher deal, he doesn’t report to Gopinath. Instead, he reports to a newly reshuffled board, of which Gopinath is the executive chairman and Mallya a deputy chairman.
In a telephone interview, Gopinath said that the shift was his idea and one of the four conditions he placed on Mallya before closing the deal.
“One of the fundamental principles for me is that the company has to be run on a professional basis,” he said. “And Mallya agreed with that.”