Bangalore: Air Deccan, India’s oldest and largest low-cost carrier owned by Deccan Aviation Ltd, will swap five leased turboprop planes with newer planes later this year to increase operational efficiencies with its new, single-largest shareholder, United Breweries Ltd’s Kingfisher Airlines. “We are looking at returning the oldest ATRs and replacing them with a new fleet,” said Ramki Sundaram, acting chief executive. “There are five of them and are leased.” The planes being replaced represent nearly a quarter of the airline’s 21-strong ATR fleet. Air Deccan also has 24 Airbus jets in its fleet. In the last six weeks since the United Breweries group, which owns Kingfisher Airlines Ltd, picked up a quarter-ownership in Deccan Aviation for Rs550 crore, with an option for another 20% through a public offer to shareholders, Sundaram, until 1 June the chief financial officer of Air Deccan, has been in the spotlight with a mandate to move the loss-making airline to profitability sooner than later. The ATR move is likely to be a precursor to a wider route rationalization exercise that Air Deccan could kick off, together with Kingfisher, to increase the number of seats filled, especially on routes involving small towns. “If we are (flying to) some remote location, where Kingfisher also operates, merge both and move from an ATR to an Airbus,” said Sundaram. “Or, we look at moving the timings in such a manner so that we can get more people to travel.” In an interview with Mint, Sundaram said that another top item on his agenda is to drive home the message that the airline runs services on time—Air Deccan’s on-time performance has been as high as 98.5% in recent months—and remove the popular perception of its flights being perennially delayed. Replacing Air Deccan’s cloth seat upholstery with leather is another priority to improve cleanliness, he added. Edited excerpts:
G.R. Gopinath (Air Deccan’s chairman) has said that the airline will break even this year. Are you on track?
Later this financial year. What I have said always is that we are looking to break even in a few quarters. It is a very dynamic environment, we are doing lots of things, it is difficult to predict exactly.
Is there a new-found urgency in trying to nudge those fares upward or get to profitability faster?
Ever since I came here (around four months), the urgency was always there to ensure that. But, whenever any investor comes in, when they invest large amounts of money, they want to see returns on that. And, it would be fair to say that one of my prime responsibilities is to ensure that (when) any new investor comes in, he is satisfied with his investments and that is how I get more investments or get the existing investors to put in more money.
Have there been any clear deliverables in terms of time that have been set on you?
How has the last quarter been?
We have operationally done lots of stuff that will start to bear results in the coming few weeks and few months. If I can actually say that, the most important aspect is that our reservation system is starting to settle now. It was a nightmarish experience moving from one to the other. We had to do that for business reasons and that is starting to settle down.
We are more scientific in what we are doing and that we are building the foundation to getting to profitability in the shortest possible time.
The other thing in the last six weeks is the focus on synergies with Kingfisher. I think there are a lot of opportunities there in terms of low hanging fruits and we are focusing on how to make that work in the shortest possible time. We wanted to understand the competitor’s (Kingfisher’s) perspective of a slightly different (full service) market and use that perspective to our benefit. There is a bit of overlap but primarily we are at the two ends of the spectrum.
What are the top items on your agenda?
I think there is big difference at this point of time between perception and reality. Ever since I joined this company, I have been taking Air Deccan flights, three or four times every week. Between the metros, the Airbus operations are spot on (time).
We have a few delays, but everyone has those. My view of Air Deccan four to five months back as a client and what I see now on actual operations is very different.
A lot of hard work has gone into operations... to ensure timely performance. On-time performance is quite good. So we want to tell, “Hey guys, come travel with us and the perception you have is not really true.”
The other bits, which we are looking to do in operations, is to streamline what we are doing and see whether we can be more cost effective and that is an ongoing exercise to see how we can bring down costs and be more cost-effective.
We thought you have already done a very good job of this and there is no room left to shave off costs?
There is always room to shave off costs. There is something wrong when you say that we are absolutely efficient. Leaving aside the things we can do on a stand-alone basis, there is a lot that we can do together with Kingfisher.
We have a common fleet, we have engineering requirements, we have base requirements and we have common vendors. So all these places we can do significant reductions in costs. We are looking at few things, like insurance... our insurance is up for renewal, so there will be big cost savings there.
On the ATRs, yes, we have some broad issues and we are working around that. We need to ensure that one odd ATR going to a remote location (that) gets delayed due to the weather does not make headlines impacting (the perception) across the company. That is the risk of the business when we look to go to more locations than other people, and this is something we are looking at.
So, would synergies with Kingfisher also have route rationalization?
All options are open. Within that, route rationalization would be one thing we look into. It could be driven by two things, one is on certain routes that are not making money, whether you need to continue that route, or pull out of that route and see whether there is money in the future.
If we are on some remote location, where Kingfisher also operates, merge both and move from an ATR to an Airbus or we look at moving the timings in such a manner so that we can get more people to travel. Some common sense things and also how we can manage our clientele better.