Naresh Goyal, the founder chairman of Jet Airways (India) Ltd, just one of the two privately run carriers to survive a downturn in the industry in the early 1990s, is unperturbed by competition or the exit of key executives from his airline’s ranks or an immediate need of cash.
Even as billionaire Vijay Mallya’s Kingfisher Airlines Ltd is readying to fly international routes following the acquisition of low fare carrier Simplifly Deccan, Goyal says he remains focused on his airline’s business plans. Last year Jet Airways had acquired Sahara Airlines Ltd (formerly Air Sahara, now JetLite) and, after restructuring the loss-making unit's operations, Goyal is in the process of making it profitable.
“I am not here (to become) bankrupt,” he says. “The new initiatives of Jet Airways are not planned overnight. All are made well in advance. I am not worried about Kingfisher Airlines or the policy on flying international routes. Because government policies are made not to favour Jet or Kingfisher, but to protect the country’s long-term interest.”
The Jet Airways chairman was at Mumbai International Airport at 4am to inaugurate his airline's first flight to West Asia: Mumbai to Bahrain. The departure of the flight was 5.55am on 5 January, in line with Goyal's fondness for the number 5.
In an interview with Mint conducted at dawn, Goyal talks of his fund-raising plans, entering the hotels business, competition and international ambitions. Edited excerpts:
Jet Airways has rolled out huge expansion plans, but no fund-raising plans are in sight. Where is the money coming from?
You need tie-up funds to buy (even) a bicycle. Our fund-raising programme is well on track and we have a strong cash flow mechanism. We had decided to raise $400 million (Rs1,572 crore) via a rights issue for fund expansions.
Apart from that, guidelines of the Securities and Exchange Board of India insist that the promoters cannot hold more than 75% of the stake in the company after 31 March. Therefore, I will have to dilute 5% stake to make it 75%. Now, we are speaking to bankers to find a suitable option. We are examining various options such as Qualified Institutional Placement, follow-on offer to public, private equity placements and rights issue. The fund-raising will meet all aspects and would be completed by 31 March.
Ambitious plans: Jet Airways (India) Ltd founder chairman Naresh Goyal. (Photo: Ramesh Pathania/Mint)
After acquiring Deccan, Kingfisher Airlines is all set to give you competition on the international routes, too…
Vijay Mallya is my good friend. I do not know whether he considers me as a good friend or not. It could be a one-way traffic. For me, Kingfisher Airlines would be the last thing to worry (about).
I am not lobbying for stopping domestic airlines entering international routes, as the media projects (it). Media is sensationalizing it. Honestly, I am not at all bothered by Kingfisher.
I am more concerned about the big boys in the industry like Singapore Airlines, British Airways and Lufthansa.
There were rumours about your CEO quitting. Earlier also, you lost several senior executives to Kingfisher.
Let me clarify my CEO Wolfgang Prock-Schauer is not quitting. Even if he is quitting, there are 10 other CEOs waiting to join Jet Airways. Exit of any manager is not going to affect us. Jet Airways is a big training school with a lot of talent, so it is natural that domestic and international airlines look at us to tap those talents. Even if I am hit by a bus, there is somebody to replace Goyal. There is a clear succession plan in place for my airline.
But human resources continue to be a problem…
The real challenge is getting the right talent. We have appointed some best managers in the airline industry to head our various operations. I prefer Indian managers because they are good at making decisions. Of course, I will be looking at foreign personnel, too.
You had plans to enter the hospitality industry also?
We are building a 500-room hotel in Brussels in association with Brussels Airport. This will help us to lower the cost of accommodation for pilots. We are also examining similar proposals with partners in India. But, it is too early to comment on it.
How are you coping up with infrastructure constraints in the country?
Infrastructure is a huge challenge, though the government is doing its best to find solutions. But, the world will not wait for us to get our infrastructure ready.
Therefore, we are in the process of creating hubs to connect other parts of the world. Apart from our hub in Brussels, Jet Airways is seriously looking at having another hub in South-East Asia. I am looking at Kuala Lumpur, Bangkok and China to facilitate more onward connections from there.
When will your Gulf routes break even?
Jet Airways is expected to break even the Gulf operations in the first year itself. There will be no fare wars. Besides augmenting the capacity in the Gulf route, we will be tailoring the flight schedules to target passengers flying beyond the Gulf.
Over 60% passengers to the Gulf are flying to the US or Europe. (Also) we will be offering better connections to Bangladesh, Sri Lanka, Nepal, Malé, Singapore and other closer destinations for Gulf passengers.
But you have not got approvals for Dubai and Abu Dhabi…
Regarding Dubai and Abu Dhabi, we have applied to the regulatory authorities for permission to fly. We understand that bilateral entitlements need to be enhanced between the two governments, before we could launch our services. Now Air India is utilizing all bilateral rights to Dubai.
But, let me clear the air. There is no competition with Air India. In fact, together we can make foreign airlines run for their money.
What’s the vision for international operations?
Service is going to be the main strength for Jet Airways. The service level in the airline industry is declining. Asian airlines continue to offer superior service, while Europe is losing ground. There is no concept of service in the US. Singapore Airlines and Cathay Pacific are best examples for quality services. Our aim is to position Jet Airways as one of the five best airlines in the world in terms of service standards.
We managed to get 68% seat occupancy in the India-US operations (starting) last August. It will take one more year to break even this route.
In the India-UK sector, we have a market share of 23%. We will be adding more destinations including Hong Kong, Shanghai, Zurich, San Francisco, etc., in the coming years.
Any plans to merge JetLite with Jet?
There is no such proposal under consideration. Instead, we will rationalize the routes of both airlines for a better network.
Services such as engineering and airport operations would be common, thereby, we can lower the cost incurred for senior management.
JetLite will become profitable in this fiscal and we have already halved the losses of JetLite in the last eight months.
No news about cargo airline, MRO...
We would be launching a cargo airline this year. We are talking to several international players for a tie-up. We are looking at using the strength of hub and trucking facilities of an international operator for cargo airline business.
Maintenance, repair and overhaul (MRO) facility is very much on the cards. It needs (to be able to service) at least 200 aeroplanes to make it profitable. We are looking for suitable sites in Bangalore, Hyderabad and Nagpur.
Consolidation is catching up in India. Is it good or bad...
Consolidation is a reality and nobody can stop that from happening. Sense will prevail in fares. We cannot have any more irrational pricing. We are here to make money.
Mere obsession cannot work here. Now, people should be serious about this business as a slowdown is set to hit the US market.
Certainly, this will be having an impact on India. The International Air Travel Association has already warned about the tight market conditions as there is already 30% or more aircraft capacity against demand.