Simply Fly

by Capt G R Gopinath

  Karnataka chief minister S.M. Krishna had agreed to be the chief guest. Rajiv Pratap Rudy, Venkaiah Naidu, and defence minister George Fernandes agreed to participate. Fernandes said he would get on board my inaugural flight. The advance publicity, and the fact that nodal agencies, including the DGCA, BCAS, AAI and the MCA had been very supportive, generated expectancy, and the very idea that India would launch an airline for the common man created quite a buzz.

  We had also to attend to cabin crew and related matters. Vijaya Lucose was on the job. We did not need to hire designers because Vijaya had an excellent eye for sartorial propriety and aesthetics. I told her: ‘Vijaya, you have such impeccable sense of dress. Why don’t you design the outfits yourself?’ There was therefore no splurging on expensive designer labels or expensive fashion designers. We believed our air-hostesses should not look flashy, flying as we were to semi-urban or rural areas with many of our customers likely to be first-time fliers. We did not wish to embarrass them or make them feel out of place.

  We were lowering the social barrier to flying and felt that a passenger stepping into our aircraft for the first time should not be made to feel overawed. We must create the image of an airline dedicated to common people. We were breaking the cost barrier for airlines and, in a very important sense, I used to say, we were also breaking the caste barrier.

  Vijaya recruited the cabin crew. I had shared my ideas of the profile of air-hostesses for the airline with her. I said there would be simple village folk, auto-rickshaw drivers, blue collar workers, people from the lower economic strata flying with us. I did not want our cabin crew to look down on the customer. I said, ‘We do not want girls with city backgrounds and accents to look down upon first-time fliers from our rural areas.’ I wanted well-groomed girls but not necessarily English-speaking ones. I mentioned the graceful air-hostesses of Thai Airways or Air China who did not speak fluent English. I told Vijaya to look for the qualities of a nurse in the cabin crew: they would have to help a passenger aboard/help them fasten a seat belt, overall they needed to make the guest feel comfortable.

  I wanted an inclusive work force. I asked Vijaya Lucose to recruit people from small towns. I said, ‘Don’t take a Jet Airways air hostess as she will demand a high salary. Go to the smaller towns like Gwalior or Hubli. Girls there are looking for jobs. They will accept the job at lower salaries.’ Incidentally, one year after I launched the airline, a minister put pressure on me to inaugurate a cabin crew training school in Rae Bareilly, a dusty rural town in Uttar Pradesh.

  The uniforms we designed were modelled by children of the team: my daughter and Vijaya’s daughter included who showed us how the different costumes would look. We debated the designs and finally settled on a blue-and-yellow dress that fell short of the ankle by ten inches.

  Our entire effort was aimed at making the airline inclusive. The phrase ‘inclusive business model’ has become a cliché and people do not tire of talking about inclusive growth. For a business model to be inclusive in the case of an airline it must address a price point that generates a wider consumer base; it must have a larger footprint including the remote interiors. It must capture the imagination of the people, grab people’s attention, and must differ in its image from that evoked by existing airlines. It must also be politically acceptable as a new idea. Lastly, and most importantly, it must make a difference to the country and people at large: I had no business to be here if I was not going to make a difference.

  An entrepreneur must not only create a new product but fundamentally alter the very behaviour of consumers; create societal change. The entrepreneur must have a business model that is markedly different from the existing ones. However, the uniqueness of the business model must not be at the cost of viability.

  Legacy players complained about losses because they were forced to fly to interior, non-lucrative sectors while I wanted to fly to these very areas. The angels feared, but I would willingly go there. The government wanted to bring more tier II and tier III cities on to the air map. I came along: it was what the doctor ordered.

  Competition won’t let you go ahead. In normal circumstances, but here competition would be complacent. I was flying to the ‘other India’ it did not care about. The thought of flying to small towns filled me with excitement. We would be welcomed there with open arms. That was the only way of challenging the existing players. Besides, there was no other way for a new airline to enter the airline industry but by creating a new market.

  The small-city focus of the airline did not blind us to the fact that we must become a national presence. Mumbai–Delhi type of route was not ruled out. The small city connectivity would be in addition to the mainstream segment connectivity. This gave me the brand definition for my airline. We called ourselves a national airline going to the regions.We created very strong regional presence and linkages to the hinterland.

  The competition would not be able to react as quickly on regional routes. Also, as there was only one licence applicable to feeder and trunk routes, once the airline had parking space, airport space, and a licence to operate, I could spring a surprise on competition by adding trunk routes to feeder routes.

  To ensure viability, I would peg down costs everywhere in the company. I would be profitable. I would be safe and profitable, not one without the other. The safest place for an aircraft is in the hangar, but if it doesn’t fly the airline doesn’t exist. If an airline is unsafe people will not fly and the airline goes bankrupt. An airline has to be both safe and profitable.

  Implicit in profitability was another element: speed. Speed to market, speed in technology deployment, speed in recruitment, resource acquisition, and raising finance; and speed in securing various government clearances. To be safe, swift, and profitable was the mantra. Low fares would stimulate the market. Existing passengers would fly four times rather than once. Train travellers would be tempted to fly instead of taking the railway. The airline for its part would enter uncharted territory, into the very bowels of India. This was our inner logic.

  11

  Lead, kindly light…

  Keep thou my feet: I do not ask to see

  The distant scene; one step enough for me

  —Church hymn

  Taking-off

  N

  ew technology causes a change in consumer behaviour. Marshall McLuhan aptly summed it up: The medium is the message. The invention of writing radically transformed human society. Printing took ideas beyond regional borders. Radio, TV, and now the Internet are all strides that humanity has taken in the creation of today’s global village.

  A new technology-based product or service offering alters the way things are done. For the offering to become useful, rules and regulations often need to change. It is the responsibility of the entrepreneur to work with the bureaucracy to bring about the changes. Some entrepreneurs badmouth the government in private but shy away from bringing the problems to the government’s attention from fear of retribution. The entrepreneur has to have the courage to convey his criticism to the government but without causing offence. He has to be the active agent of change and work closely with officialdom.

  We introduced the e-ticket system. The question was how to ensure that passengers with e-tickets were permitted to enter airports. I worked with the government and the law-making agencies to ensure favourable policies for e-ticket holders, carefully explained to the government that we were doing away with travel agents in favour of direct booking, adding that now even a travel agent would be issuing an e-ticket.

  The government on its part facilitated airport entry to e-ticket holders. Deccan made it mandatory for such passengers to carry some personal identification. This was important too to prevent credit card fraud. As a consequence of the amended rule, a passenger could ring our call centre late in the night and book a ticket on an early morning flight. He was given a PNR number which s/he could exchange for a print-out from the Deccan ticket counter at the airport and check in.

  Technology was a gre
at enabler. Mobile phone service providers, first Airtel and later Reliance, made it possible for people to make a local call to to our call centre. We did not have a toll-free number. If a passenger called in from Delhi and spoke for an hour to buy a ticket and another bought a ticket taking one minute, then the excess cost of the former will have to be shared by the latter. That would not only have been unfair to the other passenger but negate the very philosophy of the LCC that you pay for what you use. We, therefore, decided that it would be a local call for the customer. Technology made this possible. Reliance later gave us a single number for the entire country. As we spread out to new states, we asked Reliance to increase the bandwidth. Reliance received its revenue from customers who made calls and we negotiated a fixed price regardless of the number or duration of the calls from across the country. This gave us a fix on our telecom costs.

  We had multiple points of access for passengers. The call centre, Reliance cyber cafes, kiosks at petrol stations, bakeries and groceries, individual agents, and at airport terminals. Anyone with a computer at home and Internet access could of course book directly via the Web and obtain the cheapest possible ticket. Once the ticketing system had been integrated, the ticket counter outside airports and check-in counters within them had to be linked to our IT system. We outsourced this to HCL-Infosys. They maintained the computers and the VPNs and LANs across airports. Call centre activities were outsourced to Airtel and Reliance. This enabled us to ramp up operations across India at lightning speed.

  We were hampered by shortage of hangar space. Most hangars were in a state of abandonment and disrepair, and the few usable ones were with Jet or Sahara or Indian Airlines. The AAI could not give us space for storage of essential equipment and spare-parts.

  We entered into a time-share arrangement with the Indian Airlines: hangar space for a fee of Rs 50,000 a day. IA was paying the AAI a measly rent for the use of the hangar while we had to pay through our nose and were constantly threatened by the rider clause that hangar space could be ours subject to availability. Hangar space is so fundamental to running an airline, yet we had to depend on the competition for it.

  In response to this crisis, I tied up with Taneja Aerospace, a private aircraft builder based at Hosur airport, 40 km from Bengaluru, for use of their hangar for heavy maintenance. This meant that we had to set up inventory, repair, and inspection infrastructure at a distance from our operational base, which for my aircraft entailed unproductive, empty-seat flights to and from HAL airport. At the HAL airport, and several others, aircrafts were, and still are, repaired and maintained on the tarmac, in sun and rain. This entailed additional costs. This was a huge handicap to begin with.

  Even as I put together the airline, step by step, I had to contend with the scepticism of the LCC. Among them was industry veteran Naresh Goyal. Naresh ridiculed the idea and said low-cost airlines in India are a myth. He said LCC fare offerings would be impossible if other expenses like aircraft acquisition costs, pilot salaries, and infrastructure costs are the same as those for the traditional airlines. I countered with the example of successfully running an Udupi hotel in a country where the basic infrastructure cost is the same as that of the Taj or Oberoi groups. The cost of rice is fixed all over India and is standard for all hotels, I retorted, but did that in any way stop the Udupi hotel chain from functioning and catering to the low-budget needs of the common man ?

  It is true that low-cost airlines contend with the same aircraft costs, the same lease rentals, and the same pilot salaries. However, an LCC differentiates itself from a legacy full carrier on several other counts. It saves huge costs by flying longer hours, accommodating more seats, distributing tickets on the Internet, and dispensing with frills. To clinch the argument, as I write this, Jet and Kingfisher, reeling under heavy losses, are busy converting almost 75 per cent of their fleet to the LCC model.

  There is an interesting story about O’Leary of Ryan Air. During an inspection of his aircraft, O’Leary observed damaged aircraft seats. Most CEOs wouldn’t have spared a second thought, but O’Leary sent for his engineering chief who identified the cause of the damage: large-bodied passengers trying to adjust their seats. O’Leary decided that Ryan Air did not require adjustable seats.

  O’Leary once told me during a private conversation that he awoke every morning with a sword in hand. Which department do I target today for cost-cutting? This was his daily question. I took a Ryan Air flight from Toulouse in France to London, paying 59 euros for the passage: 29 euros was the ticket price including taxes; 15 euros per piece of baggage checked in; 15 euros for the one kilogram excess baggage. The logic was strange but simple. Use a service, pay for it. Passengers paid for every additional resource utilized. O’Leary was aware that smaller towns would welcome a flight landing and taking off from the local airport, benefiting from the spin-offs of air traffic.

  He was, therefore, actually able to get the municipal council of many small airports, to pay his airline five to ten euros per passenger! The small cities realized intuitively air connectivity boosted tourism, trade and generated employment and decided to pay his airline five Euros per passenger who landed at their airport!

  It is a paradox but true, the airline which offers the lowest fare is the most profitable of all. Ryan Air is in profit whereas legacy airlines such as British Airways, United Airlines, and Delta Airlines charge exorbitant fares and yet are losing money. A greater number of seats of course entails greater discomfort, and snobs are uncomfortable with the prospect of the the common man flying. Ryan Air garnered an array of uncharitable remarks. Some called it cattle class. If you are not a snob, you would recognize the beneficiaries, and the patrons, of LCCs as assorted, nameless, faceless, classless, working middle-class individuals who are in fact the real backbone of the economy.

  I had to identify other ways of reducing the cost of operations. I visualized the aircraft as a shopping mall without footfalls but where merchandise went around. Meals from The Taj or the Oberoi were prohibitively expensive so we worked out a no-frills plan: no complimentary meals on board. Passengers would have to purchase what they wished to eat and drink including water. We were unable to identify a caterer who would help us customize food sales so I got an idea. I asked Bhargavi, who was running a bakery, whether she could take up the contract of selling food with longer shelf-life on the flights. She would pay us a fixed royalty on the sales every month on a turnkey basis. Our air hostesses would be the salesgirls and the passengers her captive customers. We told the cabin crew that they would receive a 15 per cent incentive on food sales. It was a happy arrangement: Bhargavi made a profit; we made a profit; and the cabin crew got a bonus. A cost stream had become a revenue stream.

  We also saved on clean-up costs. We got the air-hostesses to do this and paid them a separate allowance. We appealed to passengers to avoid littering. We eliminated contract aircraft cleaners, saved on contractor fees, and saved on the time required for security screening and thereby also saved on aircraft turnaround time.

  When the passenger numbers rose to several millions we decided to utilize Café Coffee Day to handle the on-board catering. They gave us a fixed percentage on their sales and this was linked to passenger numbers to keep the audit simple. Our revenue from Café Coffee Day was three to four crore rupees at eight million passengers. Every bit helped to either cut costs or add to the till.

  We calculated that if we were to spend Rs 100 each on food for our eight million passengers, we would have to spend Rs 80 crore a year. With that money we could buy six Airbus aircraft on lease rentals! Air-hostess salaries were at a low base-line but with allowances: cleaning allowance, vehicle allowance, and an on-board sales allowance from Café Coffee Day, their salaries were higher than those offered by Jet Airways’ cabin crew.

  Pilot perquisites, especially pickup and drop and meals, also lent themselves to cost-cutting and rationalization. A helicopter pilot began his day in the morning and carried packed food from home. He flew to interior and far-
flung areas where food could not be bought. In addition to this self-service, the pilot went to the Air Traffic Control to pay fees and cleaned up the helicopter. We thought that if a helicopter pilot could do that much, so should fixed-wing aircraft pilots.

  The pilots were initially reluctant to accept the austerity measures but I reminded them that by keeping costs low, planes would always be full and no jobs would be lost; that the airline’s sustainability depended on keeping costs low and that it was a socially laudable objective for the airline to fly common people, a feat nobody had hitherto attempted. They concurred with me and more than willingly accepted allowances in lieu of pick-up and meals.

  I explained to them how an allowance of Rs 200 per day worked out to Rs 6000 per month and Rs 15 lakh which accrued interest in fifteen years, which could be saved for a child’s education. I suggested they bring a sandwich or paratha from home, seeing no sense in paying money to The Taj or Oberoi. By doing away with the pick-up and drop schemes for pilots, we saved on vehicle purchase, fuel and maintenance costs; we also saved on driver and coordinator staff salaries and benefits, and above all, on office costs.

  In 2003, HAL authorities opposed the launch of the new Bengaluru International Airport because they stood to lose revenue, yet at the same time they were not behaving like a commercial enterprise in refusing me parking and hangar space. As a service provider, HAL charged a fee and was behaving more like the PWD and electricity board.

  I needed parking and hangar space for practical reasons and to fulfil conditions for taking delivery of aircraft. I was supposed to show DGCA that I had trained engineers and provided evidence that I had the capability to maintain aircraft. I had an arrangement with Indian Airlines for using their hangar space in Mumbai for day-to-day maintenance. For major maintenance I had tied up with Taneja Aerospace, but for day-to-day maintenance in Bengaluru I needed space as well as a simple open-air concrete space to park the aircraft overnight for morning flights to various destinations. The HAL was refused to give this.