Gopinath, who is travelling in Europe right now, fiercely rejected the notion that there have been any substantive changes to the airline’s business model, other than an image makeover.
“Where is the change? Apart from changes in colour and logo, there is no change in the business model,” he said in a phone interview on Thursday. "Even the branding has been done after appointing independent consultants by us and Kingfisher to give a larger image to the airline.”
In many ways, the changes that Sundaram has brought in are a rejection of the core ways in which Gopinath had steered Deccan for five years of explosive, if financially unsustainable, growth.
Gopinath, for instance, in a nod to the successful practices of European low-cost carrier RyanAir Plc., had an almost single-minded focus on increasing the airline’s load factors, which measure how full planes fly. In board meeting after board meeting, as the firm’s losses piled up, he promised investors and colleagues that as soon as Deccan’s planes were able to fly more than 90% full on a regular basis, profits would startto flow.
He was, of course, right, if overly optimistic. The way Deccan managed its sales for each flight, many of the early seats were given away for eye-popping low amounts like Rs500 or Rs100. It was only towards the last few seats of each flight that the airline would be able to recoup its cost. In effect, the last 10% to 15% of each flight’s passengers would subsidize the first 85%. But those last few seats often went unsold with competitors aggressively pricing their tickets lower, guaranteeing that on average, every ticket Deccan ever sold was sold at a loss.
“It felt like we were digging faster and faster into a hole, and kept hoping we would strike oil at the end of it, but we never found it,” said a person who worked with Deccan until earlier this year, but has since left to work elsewhere. “That 90% load factor—it meant everything.”
Today, the relentless focus on load factors has been abandoned as unfeasible, and has been replaced with an emphasis on increasing the revenues for each ticket sold, called yields in airline-speak.
Deccan is giving away fewer tickets, and the bottom prices on many sectors have moved up by a few hundred rupees, said the CEO of a competing airline who tracks Deccan’s fares daily.
Since then, Deccan’s load factors have plummeted, falling to 65% this August before recovering to 70% in September, a disastrously low number for an airline that needs high volumes to break even.
“Rather than attributingany particular management style to particular people, I canonly say that that was something that made sense then, and what we are doing iswhat makes sense now,” said Sundaram, who was recruited from London’s InvestecBank Ltd about eight months ago, around the same timeas Gopinath’s Februaryinterview.
He declined to answer a direct question about his working relationship with Gopinath, and what Gopinath’s continuing role in the company is. “I think we should skip this question if you don’t mind,” said Sundaram.