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Air Deccan aims for top spot in crowded skies

Air Deccan aims for top spot in crowded skies
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First Published: Mon, May 21 2007. 12 32 PM IST
Updated: Mon, May 21 2007. 12 32 PM IST
Anil Penna, AFP
Bangalore: Air Deccan, the discount carrier that opened air travel to millions of Indians, is counting on first-time fliers and small-town entrepreneurs to turn it into the country’s biggest airline.
“We will become the country’s largest people carrier in less than two years by offering the best low-cost product,” Managing Director G.R. Gopinath told AFP in an interview in Bangalore. “That’s inevitable.”
The 55-year-old former army captain, who says his ambition is to “make every Indian fly,” has built Bangalore-based Deccan into India’s number two airline in less than four years, with a market share of about 22.7%.
Now he wants to overtake Jet Airways, which last month increased its share of the expanding aviation market to more than 32% from about 25% by acquiring Air Sahara.
Jet, which is focusing on international routes, is trying to chip away at Deccan’s leadership of the budget travel market by positioning Sahara — renamed Jetlite — as a low-fare airline.
Meanwhile the upmarket Kingfisher Airlines, owned by liquor baron Vijay Mallya, wants to buy a stake in Air Deccan.
But Gopinath, the son of a village schoolmaster who swears by “dreaming big, thinking big and acting fast,” says the airline has no merger plans.
Instead, Air Deccan plans to achieve its ambition of overtaking the competition by adding more planes to its fleet of 43, building more hangars and logistics support hubs and taking its low-cost model to untapped markets by linking small towns.
The airline, which has flown almost 11 million passengers since it took off, now operates 19 Airbus A320 planes and 24 turboprops, flies to 65 airports and makes 350 journeys a day.
But it is still trying to shake off a reputation for lateness and rude ground staff overwhelmed by the sheer volume of passengers attracted by low prices.
Air travel in the nation of 1.1 billion people has boomed since Air Deccan took to the skies with a single aircraft.
The number of airlines has risen to 10 from three in just four years, and average plane fares have fallen by two thirds.
The Centre for Asia-Pacific Civil Aviation forecasts the domestic market will more than double to 60 million passengers by 2010, as incomes rise and low fares make air travel more affordable.
But the decline in air fares has squeezed profitability, with airlines posting a collective loss estimated at $500 million (Rs2,033 crore) in the year ended March.
Air Deccan had a loss of Rs2.13 billion in the quarter ended March.
“Gopi has shown he is capable of building a big airline in a very short time,” said Kapil Kaul, head of the India office of the Centre for Asia-Pacific Civil Aviation. “To become the biggest is within the realm of possibility.”
“But all airlines have very aggressive strategic intent,” he said. “And it’s important to strive for a balance between growth and expansion. Market share isn’t everything.
“For Air Deccan and all other airlines, the immediate challenge is to look within, restructure and wipe the bloodstains off the balance sheets in the next 18 months to 24 months.”
Gopinath said he was confident Air Deccan would return to two successive quarters of profitability soon.
To fund expansion, he plans to raise between $75 million and $100 million by selling up to 26% of the airline to an institutional investor.
Air Deccan put on the aviation map destinations such as Little Tibet in the high-altitude desert of Ladakh, cut off from the outside world for seven months a year because of heavy snow.
It appealed to small-town passengers prepared to pay a fraction more than on the state-run rail network to drastically reduce their journey time.
“We want to tap the potential that exists deep in the interiors of India by taking air connectivity there,” said Gopinath. “Those are the economic powerhouses of the future. We don’t want to be a Delhi-Mumbai airline.”
“There are a billion hungry consumers there. They are aspirational, full of hope,” he said. “These people want to travel, must travel.”
India’s airlines have expanded aggressively in recent years, with about 480 aircraft on order for delivery through 2012. About 135 aircraft have been added in the past two years.
Enormous scope exists, with 18 million Indians every day still travelling long distances by train and 12 million taking buses, said Gopinath,
“It’s a new market,” he said. “There is a tectonic shift in consumer behaviour. And we are on the forefront of it.”
Air Deccan makes money by offering its aircraft fuselage to advertisers. Excess baggage and the sale of sandwiches, chips, tea and soft drinks earns it a bit more.
Non-passenger revenue makes up about 7.5% of Air Deccan’s total revenue, a share it wants to raise to 30% in three years.
The company is also India’s largest e-commerce website, grossing as much as one-and-a-half million dollars daily from online ticket sales.
Gopinath, an artillery officer who saw action in the 1971 India-Pakistan war, was named aviation CEO of the year last week for “bringing every Indian closer to that dream of flying.”
For a man who left the army in 1979 with less than 100 dollars in his pocket, got himself a dog and grew bananas and coconuts on a patch of land he named Gopi’s farm, awards don’t matter.
“You do it for the sheer challenge,” he said.
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First Published: Mon, May 21 2007. 12 32 PM IST
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