Civil Aviation in India, since its inception, has been a mode of transport mainly for the elite, and it implies that it is within the means of affordability of less than 1% of the population only. The launch of Air Deccan in the year 2003 changed this paradigm forever. The singular driving force behind this audacious venture was Captain Gopinath. Over the years, there have been many low-cost airlines in service in the advanced countries. Many of them have succeeded despite the general downtown in the aviation industry post 9/11. Equally tenacious entrepreneurs, who saw the potential for a low-cost and ‘no frills’ airline, have launched many of these ventures. In what is peculiar to India, Captain Gopinath saw the market not in terms of those who were flying, who would want a low-cost airline, but instead as the more than one billion Indians, who had no possibility of flying ever in their lives in the legacy airlines, simply because there was no way they could ever afford the price. That Air Deccan could even think of launching a regular airline, given their very modest means, and more importantly, strong political support of the existing players, is a feat by itself. Its continued growth, month after month, is a saga of fortitude and belief.
This case study describes the story of the launch of Air Deccan and the challenges faced by it. In addition to the usual approaches to cost containment adopted by low-cost airlines worldwide, Air Deccan had implement several measures that were unique in the Indian context. This had result in steady increase in the market share of the airline, much to the worry of the established players, viz., Jet Airways, Air Sahara and Indian Airlines. Consequently, it had result in fierce competition and price wars in the Indian skies, with the net result that the passenger benefited significantly. There were a number of challenges that Air Deccan had to contend with. It had set for itself a mission to enable every Indian to fly. Passenger fares for long haul flights such as Bangalore to Delhi, covering over 2000 km, could be purchased for as low as Rs. 500 , if purchased early. It perceived the market as practically unlimited, and saw itself as the largest airline in India in the forth coming years.
With daily sales in excess of Rs. 15 million and growing steadily, Air Deccan had transform the aviation landscape in the country. Air travel, if planned well in advance, is often cheaper than travel by second-class train. While there are many low cost airlines the world over, especially in the USA, Europe, Far East and Australia, the challenges of replicating this in India was not trivial. Three powerful established players (Indian Airlines, Jet Airways and Sahara) were not amused with this upstart airline and with their deep connections in the political and bureaucratic system of the country, wanted to scuttle the start-up airline. Capt. Gopinath. Despite heavy odds, including lack of finances, he and his team came up with creative solutions at every step, to overcome the hurdles. His entrepreneurial style warrants close study to draw out useful lessons for any aspiring entrepreneur.
Captain Gopinath crafted the company from scratch. He went on a ‘boot strapping’ mode, which was the hallmark of a successful entrepreneur. The constancy of purpose, focus and humbleness were evident. His ability to sense opportunities from chance encounters (such as a visit to the USA or the Southeast Asian countries) were out of the ordinary experience. These and many other qualities were a ‘must have’ list of qualities of a successful entrepreneur.Setting up and successfully operating a low cost airline was a challenge in the best of circumstances, even in the advanced countries. In India the challenge was considerably more with a lot of subtle factors that make the challenge of setting up and successfully running a low cost airline in India even more of a challenge, than it is to do in the advanced countries.
The challenges that the company had to face in the initial stages of the company were; many of the established players (Indian Airlines, Jet Airways and Sahara) trivialized the company and not expected it to reach the level it has reached now. Suddenly, the company had appeared as a big dot on the radar screen of these well-established players. The existing paradigm was that running an airline requires large funding, something that Captain Gopinath lacked. Hence, the existing players would have concluded that this venture was bound to fail. However, there was a lot of entrepreneurial creativity manifested by Captain Gopi that helped him make his dream a reality, besides, many other ‘me too’ low cost airlines were already on the anvil. (SpiceJet, GoAir, IndiGo and JetLite were all launched between 2005 and 2007)
The airline operated a single cabin class, economy, allowing it to pack more seats into its aircraft. Following its no-frills approach, it charged for all food and beverages served on board. Payment was also required for cancellations, and no refunds or accommodations were provided to passengers who had missed their flights.Air Deccan operated a point-to-point route network from seven base airports. It maintained low turnaround times and often outsourced work to local airport employees, especially at airports that saw few Air Deccan flights and did not require dedicated employees throughout the day. Air Deccan also gained advertising revenue by allowing advertisements both inside and outside its aircraft. For reservations, the airline utilized multiple channels. Passengers could book tickets through travel agents, on the Internet or through call centers. Each of these channels was connected to a fully web-enabled reservation system, making Air Deccan the first in India to use such a system. Air Deccan also avoided the cost of printing tickets; passengers or travel agents were required to do so off the Internet.
The company was growing from strength to strength. Captain Gopi and Air Deccan were regularly featured in the various media in India as having ushered in the democratization of air travel in India. The company was bullish about the future. Several companies were seeking to emulate the Air Deccan model. The three established airlines were under constant price pressure from these low cost operators. The overall scenario was fairly dynamic as experts expect considerable churn to take place in the coming years.
In early May 2007, rumors began to circulate that Kingfisher Airlines, was interested in buying Air Deccan. Gopinath dispelled the rumors, claiming â€œwe are from different planets; King Fisher is from Venus, and Air Deccan is from Mars”. Gopinath believed it was impossible to merge the airlines’ separate business models; Kingfisher was a full-service carrier. Nevertheless, negotiations began at the end of the month, and Kingfisher parent United Breweries Group purchased a controlling 26% stake in Deccan Aviation on 31 May. Gopinath changed his mind upon understanding that the two airlines would continue to function independently. In addition, he needed to raise funds; Air Deccan had lost US$ 33 million during the quarter ending 31 March 2007. Air Deccan was rebranded Simplifly Deccan in October 2007 and adopted Kingfisher’s livery and flight attendant uniform.
However, it is fair to say that while the progress was spectacular, challenges abound. Issues relating to the continued growth and success of Air Deccan required a clear strategy.
- What are the lessons you can pick up from the launch of the entrepreneurial venture by Captain Gopinath?
- While low cost airlines are not new to the world, Air Deccan was clearly the torchbearer of this concept in India. What additional challenges did Captain Gopi have to contend with vis-Ã -vis a low cost operator?
- Going forward, what were the challenges that the company had to grapple with?