You Cannot Miss This Flight: Essays on Emerging India

By Capt. G R Gopinath

Captain G.R. Gopinath is an unusual industry leader. Whether it was setting up Air Deccan to get train travellers in the air or jumping into the fray of Indian politics, Gopinath does not merely put his money where his mouth is - he takes his mouth to the scene of action.Unsurprisingly then, he has been an active and provocative columnist down the years. Nothing is off the table for him, not business rivals, nor political bosses. He meditates on yoga and farming, on caste and religion, he tears down the flaws in Indian aviation policy and he snipes at politicians who play Indians for their votes. He is honest about corruption, he is angry at the system and he is a believer in the power of entrepreneurship.Gopinath's is a brave and important voice in Indian business and media. You Cannot Miss This Flight is a selection of his writings in the past decade and a bit. As thought-provoking as they are delightful, these essays capture the breadth of Captain Gopinath's interests and the depth of his commitment.

• Language: English
• Publisher: Harper India
• Release date: Jun 15, 2017
• ISBN: 9789352644803

Capt. G R Gopinath

Captain G.R. Gopinath is the founder of Air Deccan, a retired army man, an award-winning farmer, an activist and the author of SimplyFly: A Deccan Odyssey.

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Introduction

This collection of essays from my published writings cover a wide range of topics – economy, politics, farming, agriculture, defence, social issues and my personal life experiences. They are views of a lay person and there’s no pretence to scholarship. I’ve no scholastic achievements. I grew up in a village, and my life has been tossed about like a tiny boat on the high seas during all its storms and gales.

I spent eight years in the Army, fought in the 1971 Bangladesh War, farmed a remote and barren piece of shrub land, after prematurely retiring from the Army, and then embarked on various odd enterprises from running a motorcycle dealership to an Udupi hotel in small rural towns of Karnataka. Later, I launched with my Army pilot buddies India’s first dedicated helicopter company, followed by the low-cost airline Air Deccan.

Along the way, I contested elections twice – once from a mainstream political party which is now ruling the country, for the state elections from a rural constituency; and as an Independent for the Parliament from Bangalore – and lost both times. In a sense, it’s been a life on the edge of chaos. Blessed with a fount of inextinguishable optimism and a wild courage, which got me into trouble and also out of it, I plunged headlong into the sea of life, in a country that has remained an enigma. It sapped my energies and yet nourished me. 

I wrote these essays in the last few years, deeply conscious, as Emerson said, ‘that we are all victims and, at the same time, a source of injustice’, with a perspective gained from all my follies and journeys, as the country went through tumultuous changes.

AVIATION

Low-cost Will Never Be in the Red

When I look back at the days just before I founded Air Deccan, a few images come to my mind. Images of India’s transformation from a nation with a billion mouths to feed to one of a billion consumers; from a nation with two government-run television channels to one whose countryside was dotted with shiny dish antennae. I had a bird’s-eye view of this wave of change from the cockpit of the charter helicopter service I used to run in those days.

It was in this atmosphere of feverish change that the idea of Air Deccan came to me. Chandrababu Naidu asked me to start a daily flight from Hyderabad to Vijayawada and Rajahmundry, instead of the on-demand helicopter service I ran. Several politicians in Karnataka who availed my charter service began to ask why I wasn’t starting a regular service to tier-III cities like Hubli and Belgaum.

However, the first time that the idea of starting a low-cost airline came to me with clarity was thousands of miles away from home.

I was strolling around in the lounge of the Phoenix airport in the US when I saw a plaque that announced that the airport handled 1,000 flights and 1,00,000 passengers a day. An airport that was in the middle of a desert handled more flights than all the airports in India put together. Later, on the Southwest (an American low-cost carrier), I was seated next to a beefy man who was chewing on a burger. He turned out to be a carpenter.

13 million vs 16 million

It was a moment of epiphany, one that led to the birth of Air Deccan and low-cost aviation in India. Consider this: At that time, India’s carriers Jet Airways, Sahara and Indian were running at 55 per cent capacity, carrying around 13 million passengers a year. Yet, over 16 million people travelled by trains every day. It stood to reason that most of these people could not afford to fly. And that was Air Deccan’s dream: to provide a service that would allow millions of middle-class folks to fly. It would also connect the hitherto unconnected, smaller cities where the winds of change had been blowing at a pace like never before.

We launched Air Deccan with one old, used ATR aircraft on lease; no one believed in my dream or was ready to fund the airline. But once we were up and running and caught the public imagination, we raised capital and managed to deploy forty-five aircraft in forty-five months and overtook Indian in market share. A new India was flying. In four years, we were connecting sixty-nine cities daily, when some of our larger competitors were operating flights to forty-odd cities. Of these sixty-nine cities, close to thirty were first-time destinations.

But as we grew, so did the competition. Oil prices went through the roof. We had 4,000 employees. At an AGM, a shareholder told me that he had put his savings into buying stocks of our airline and expressed hope that it would be worth it. It was an obligation that really haunted me.

Mallya’s money

When the deal with Kingfisher happened, the understanding was that Kingfisher and Deccan would be run as separate brands. People might progress from one service to the other but, in my mind, there was space and demand for both. You need both an Udupi hotel and an Oberoi hotel. Also, I believed that there could be tremendous back-end synergy.

As things evolved, Vijay Mallya believed that he could make more money by making things more ‘sexy’, by improving the touch and feel of the service offered and adding frills. For example, despite my reservations, free water, food and newspapers were offered on board Deccan flights. The global distribution system (GDS) reservation used by full-service carriers was introduced, which went against the very grain of the low-cost, no-frills philosophy Deccan had pioneered. That was followed by a rebranding exercise as part of which the Deccan brand was brought under the Kingfisher brand and was renamed Kingfisher Red, blurring the distinction between the full-service and low-cost brands.

This led to the cannibalization of the mother brand, as the economy passengers of the Kingfisher full-service flights started asking why they should be paying more when they could fly cheaper on a Kingfisher Red service which didn’t differ much. As KF Red became slightly costlier, passengers migrated to other low-cost carriers like Spice and Indigo, adding to Kingfisher’s woes.

Internationally, airlines like British Airways and KLM which had set up low-cost subsidiaries with similar branding had to shut down these services eventually.

The other mistake, in retrospect, was Kingfisher’s decision to do away with Deccan flights that were scheduled around the same time slots as the Kingfisher’s full-service flights, which led to customers moving to other low-cost carriers in the same time slot.

Numbers game

Given Kingfisher’s decision to exit the low-cost business, I think it is a good idea to stick with one brand. However, I believe it would have been a smarter decision to go low-cost on all the domestic routes and provide full service on international routes.

Why?

Globally, it is the low-cost airlines that have been making profits consistently. Southwest Airlines of the US, with a fleet of 600 Boeings, has been making profits for thirty-eight years consecutively, every single quarter. Ryanair and EasyJet in Europe, Goal in South America and AirAsia in Asia have been making profits for more than a decade. More importantly, despite India’s billion-plus population, only 50 million has access to air travel. In comparison, 680 million passengers travelled on US flights last year, despite the country’s population of just 311 million. In Ireland, which has a population of 5 million, 25 million people travelled by air last year. In India’s context, this means 97 per cent of the population still travelling by train is a potential customer base for low-cost airlines. Simple arithmetic.

But the question we need to answer is: How do we get more people to fly? The answer, I believe, is to make flying affordable and accessible to more parts of the country.

People often ask me if I am up to starting another low-cost carrier. I am not really ready for it at the moment. A year down the line, who knows? Today, Air Deccan may not be around any more, but the low-cost aviation dream lives on in India.

The Economic Times, October 2011

What I Learnt in the Downturn

The year: 2007. Air Deccan was the largest airline in the country in terms of network (connecting 67 cities every day as against 43 by Indian Airlines and 44 by Jet Airways) and the second-largest in terms of market share with 22 per cent as against Jet’s 22.6 per cent. We had not yet broken even, but the economy and the stock markets were booming and Air Deccan had deployed forty-five aircraft in forty-five months. One day, I was called out of my yoga. One of the engines of an Air Deccan flight from Delhi to Kolkata with 180 passengers had failed mid-flight – possibly because it hit a bird – and was now flying on the other engine. It isn’t uncommon in aviation, but I was nervous till the flight landed safely.

The onward flight was cancelled, and the waiting passengers erupted in anger. Fortunately, we had a new Rolls-Royce/Pratt & Whitney/IAE engine parked in an air-conditioned hangar in Delhi.

‘Fly it to Kolkata,’ I ordered.

But the problem: There was no freighter aircraft in India large enough to carry the engine. It had to be sent to Singapore via an international freighter and from there to Kolkata. The cost: Over one crore. And the time: Six days. That beats even Tughlaq!

But it gave me an idea. I phoned Thierry Lindenau, my old friend in the Belgian headhunting firm Spencer Stuart. I told him that I had decided to set up an end-to-end multimodal air-and-ground logistics company and asked him to find me a CEO from FedEx, UPS or DHL.

The Deccan–Kingfisher marriage was not on the cards then, but I reckoned that with Air Deccan now a 2,000-crore company, I could incubate one more company and build Deccan Express Logistics.

From the list that Thierry sent me, I chose Jude Fonseka – who was the head of sales at FedEx, Australia – primarily because he had previously spent four years in India setting up FedEx. He recruited about eight people – mostly from FedEx – to head various functions of the new company and went about creating a business model and plan. I instructed Jude to build the best express logistics company in the country.

Then I got completely wrapped up in Air Deccan. We were growing at a frenetic pace but were still losing money. The stock market was going through the roof, and I thought I must raise more capital through a strategic investor. And so I allowed Vijay Mallya to invest in the airline and acquire a 46 per cent stake for 1,000 crores.

Just before the merger Air Deccan’s market cap had reached a dizzying $1.1 billion. All the original investors had an option to exit and many made unimaginable gains. I was immersed in the merger, with hundreds of bankers and investors seeking me out to manage my private wealth and lend me money; private equity (PE) funds were chasing me too.

Two of my earlier investors actually gave me a few million dollars but I returned it, partly out of arrogance and partly out of optimism and stupidity. Then, the world’s financial markets collapsed, and almost all the fifty-odd PE funds that had been talking to us got cold feet. Some of the funds themselves collapsed. The cloud on which I was sailing evaporated and I saw that I had no parachute.

For the logistics venture, we had made advance payments for aircraft and had hired over 150 people from the top rungs of FedEx, DHL and UPS. We had even built an express logistics IT system. But no one came forward to actually put up the money. The world had changed while our heads were buried in the sand chasing funds.

However, I had started Air Deccan and, before that, Deccan Helicopters without any money, during recessions. Now I had money, resources and a name; I just had to wait for an angel to come and invest. But soon I realized with horror that if I did not act fast we would sink. I called Mohan Kumar, CFO in Air Deccan, who was also on its board, to take stock of the situation. It became clear that if we did not launch commercial operations within the next six months, the dream would dissipate, people would start leaving and, with them, the investments we had made.

We had been in the womb too long. We had to deliver. And regardless of the resources I had, we were still a start-up.

We had to take drastic decisions, and fast. I told Mohan to sell all my stocks and offered my house on mortgage to show my commitment to the bank. We decided to stop looking for outside equity or raise debt and instead innovate with the resources available. Mohan suggested that we go for the franchisee model, which had immense energy and entrepreneurial spirit waiting to be tapped. The recession had made idle a huge amount of infrastructure across the country and the franchisee model saves and chases a rupee better than any number of employees. Other team members chipped in – notably my partner Capt. Sam who offered to sell a large portion of his Kingfisher stock – enabling us to scale up much faster than what we had planned, at half the investment and with better cash flows.

Wartime needs a different kind of courage, and so I asked Mohan to come on board full-time and lead the team. It required a total restructuring. But instead of trimming the workforce, we opted for a 25 per cent pay cut to conserve cash. Times were tough and we had to be tougher. Aircraft, real estate, human resources were all available now at much lower costs, and I promised to commit all I have – my stocks, my house – to make this a success. This galvanized the team, and almost everyone wrote back saying they were ready to make any sacrifice.

Things started falling into place. The economy was looking up and banks, led by the State Bank of India, lent us money. We were overwhelmed with 2,800 applications for franchising, warehousing, trucking, surface hubs and pick-up and delivery for the first and last mile. We acquired space in seventeen airports. The government went out of the way to help us get infrastructure and clearances. What would otherwise have taken twenty years took less than six months with our own funds. We launched Deccan 360 on 4 November 2009 from Nagpur.*

And PE funds are knocking on our doors again.

Business Today, January 2010

*Deccan 360 raised equity from Reliance Industries soon after but, unfortunately after a couple of years, flew into turbulence due to various factors and went into liquidation .

Aviation is the Sick Man of India

Twenty-odd years ago we had two television channels, Doordarshan One and Doordarshan Two. There was a popular R.K. Laxman cartoon in those days: On one channel you had Indira Gandhi and on the other you had Sanjay Gandhi. We had only two car companies, Hindustan Motors and Fiat, which made the Ambassador and Premier Padmini; two motorcycle companies, Enfield India and Ideal Jawa; two telephone companies, Bharat Sanchar Nigam Ltd and Mahangar Telephone Nigam Limited; and one airline, Indian Airlines.

Things have changed thanks to the visionary reforms by P.V. Narasimha Rao, which was ably assisted by Manmohan Singh and has been carried forward during the Atal Bihari Vajpayee government and the first tenure of the United Progressive Alliance (UPA). We now have an excess of 500 television channels, 5 airlines, more than 20 automobile companies and 15 two-wheeler manufacturers and many number of cell phone companies that are the envy of the world for innovation and cost management.

The reforms that ended the ‘licence raj’ and the monopoly of Indian Airlines and Air India has opened up civil aviation and enabled common people to fly. Along with other sectors, this has transformed India into a vibrant and emerging powerhouse among emerging markets.

Sadly, while all sectors have grown by leaps and bounds even during the comatose period of the second UPA regime, Indian aviation has been sick and stagnant. The growth rate in passenger traffic has actually slowed down because of cartelization, the return of the licence raj, crony capitalism, mindless policies and a visionless aviation minister.

Less than 3 per cent of Indians can afford to fly, placing India in terms of per capita consumption of air tickets with some sub-Saharan African countries. Smaller countries have fared much better in this regard. Ireland, with a population of 5 million and not the biggest of economies, has sales of 25 million tickets, while India, one of the biggest economies and with one-and-a-quarter billion people, has sold less than 60 million domestic tickets.

One does not have to be an analyst to discern that the existing airlines are caretlizing, controlling prices by controlling supply. Jet Airways, IndiGo and SpiceJet are lobbying to stop the entry of foreign brands like AirAsia and Tata-Singapore Airlines. Their flimsy arguments are (1) that AirAsia and other foreign brands can only invest in existing airlines and (2) that they will lose money. By that same twisted logic, we would have had only Ambassador cars today, with a foreign joint venture. Jet started with foreign airline equity, and SpiceJet and IndiGo with foreign direct investment.

How quickly they forget that they would never have taken birth if the aviation