There were reasons for delay or cancellations: lack of communication or cohesion, of leadership and planning. We had been in some difficulty because of the rapid growth. In three years, Deccan had grown from one aircraft to thirty-six; in three and a half years, Deccan had grown at a blistering pace from two aircraft to forty-five aircrafts and from 2000 passengers to 25,000 passengers a day and ramped up from flying daily two airports to sixty-seven airports and 380 flight everyday across the country. This process of growth was continuing. One of the major problems was lack of right people in the right places to manage things. Besides, the IT system which was good initially began to show weakness and was unable to handle the surge in numbers.
I hired Spencer Stuart, a reputed global headhunting company, to source the best people in the industry for us. They put Belgium-based Thierry Lindenau, who specialized in senior-level placements in aviation, on the job. I told Thierry to find someone solid to head our operations either from Ryan Air or Easyjet or Southwest. Thierry got Warwick Brady from Ryan Air for me, who joined us as the chief operations officer. Brady and I sourced the head of heavy engineering from British Airways, the head of line maintenance from Ryan Air, and head of flight training from KLM.
Ryan Air had overcome the many problems we were now facing. It had reached a point of no return until strict measures were introduced to turn it around. Brady introduced a policy stating that if a flight was cancelled, it stood cancelled and passengers would receive a refund according to the contract. Period. I felt terribly guilty about this because we still had an ethical responsibility to the stranded passenger. Brady said the problem would be fixed in five to six months. And that was the only way to focus on fixing the problem rather than attending to stranded passengers and taking care of them like full service airlines.
With growth came both good and bad publicity. We were regularly on TV for the right reasons: for opening a new route or for having achieved a new landmark; and also for the wrong ones: for neglecting passengers and for giving them a raw deal. Passengers were seen on TV losing their cool and venting their ire, manhandling our ground staff; seen attacking our points of sale. We were the unwitting suppliers to the media of juicy bits of news.
It was at this juncture that we took a decision to invest in upgrading our engineering, flight operations, and logistics abilities. Deccan’s unprecedented success had had positive spin-offs for the aircraft-manufacturing companies. ATR’s manufacturing inventories revived. However, the resurgence of Indian aviation also came as a challenge to both ATR and Airbus. Both were forced to stretch their production capabilities. Both had major supply chain issues because their suppliers had not been geared up to dovetail supplies to match the order books. ATR slipped up on spares’ supply and we suffered. ATR made things worse for us by sometimes supplying spare parts and components that did not match specifications. This led to a blame-game between our engineers and theirs. It was akin to a tennis rally. I frequently intervened to find workable solutions.
The other source of problems for us was the emergence of new airlines like Spicejet, Kingfisher, Go Air, Paramount, and Indigo. The new airlines needed planes and ordered tens of aircrafts to be built. This put pressure on aircraft manufacture and delivery schedules. The daily flight density at airports rose. There was pressure on airport space and ground-handling facilities. The new airlines were offering competitive fares resulting in a flood of seats in the market and affecting our yield and profitability. We raised prices somewhat to help the bottom line, but that alienated customers.
Meeting Vijay Mallya
A few months before he launched Kingfisher Airlines, Vijay Mallya wanted to meet me. Kiran Rao of Airbus facilitated our meeting. Kiran hinted that Vijay Mallya was probably seeking to invest in my airline. I went to meet him.
I then lived in a modest apartment block located on the same road as Vijay Mallya’s imposing mansion. I used to walk to office or drive a small car, travelled economy class, stayed in my guest-houses and very rarely in five-star hotels. I had read about the man from the time I was in my late twenties and was aware of his glamorous lifestyle.
Everything about Vijay Mallya is grand and larger-than-life. The driveway to his bungalow is lined on either side by eye-catching grottos, fountains, cascades, and majestic figures in stone. There is a regular boulevard with ornamental palms, creepers, and well-manicured flower beds. As I walked towards his palatial old-world mansion, I was attracted to the figure of a rider on a prancing horse.
I wondered what it was that this man wanted to say to me. Was it perhaps a desire to meet a fellow entrepreneur? Mallya had launched UB Air in the early 1990s. That was when East West, Damania, Modi Luft, and Gujarat Air had emerged and folded up as rapidly as they had arrived. A UB Air aircraft had met with an accident but there were no casualties. The airline however closed down soon thereafter, sharing the fate of six other airlines of its vintage. Might this be a prelude to a second attempt at starting an airline?
It had been rumoured that Vijay Mallya was planning a brand new airline. The name of Kingfisher Airlines had been suggested. It derived itself from the ‘King of Good Times’, a catch-phrase that has attached itself to Vijay Mallya. Kiran Rao was certain that Mallya would relaunch his airline, and assuming he did, I urged Airbus and Kiran Rao to incorporate a six-month gap between deliveries to us and to Kingfisher. Kiran would not listen, and with the unimpeachable logic of the salesman said if they didn’t sell to Mallya, Boeing surely would. I had warned aircraft-makers that it would be counter productive for them to sell to everyone before the market matured, arguing that it would only trigger a new aviation shake-out and no-one would survive except the monopolies. I sensed a hint of prophecy about my own words. A CEO has to show sales, and stock-markets pressurize CEOs to deliver for the short-term. Airbus wanted to deliver for the short-term as did Deccan.
The Mallya bungalow is surrounded by well-maintained lawns and an adjoining patio. Giving access to the house is a wide portico. There is an enormous garage at some distance from the portico where the Mallya family has a museum of antique cars. About thirty or forty of them, their metal exteriors gleaming, were parked cheek by jowl. At the front porch was a Bentley. Down the cobble-and-grass pathway to the side stood a gleaming new Mercedes and a brand new sports car.
Inside the house, on one side, is a temple that is as impressive as the rest of the ambience. Vijay Mallya sat on a swing on a raised deck in the veranda. Mallya is a good model for a modern maharaja. The raised platform looked on to a large and impressive swimming pool. Seated a little distance away from Vijay Mallya was Ravi Nedungadi, his group CFO, cigar in mouth, a flute of smoke rising from it. Ravi sat there calmly like the Buddha, a figure of utmost composure. The cigar was his logo. Some homes are marked by a strong smell of burning incense, some by the sound of wind chimes, some invoke a visual motif (a mandala or chakra or some geometric shape to haunt you while you are there), some home interiors resonate to a painting as the centrepiece. In the opulent interiors of the Mallya residence, the cigar was the central motif, both visual and olfactory.
When I drew closer, I saw that the swing on which Vijay Mallya was seated was made of solid silver, his feet rested on a silver stool. Silver was the counterpoint: the foil. Solid antique gray silver!
Vijay Mallya noticed my wide-eyed amazement. I was like a village boy in a big city for the first time; like a village boy who is completely in the thrall of the sights and the sounds. I gave it away; felt no embarrassment at being in awe; had no inhibition in manifesting it. What really bamboozled me were two tall columns of silver placed symmetrically a few feet away from the ensemble of the silver furniture. They had limbs that forked upwards like the fronds of some artificially selected palms; simply stood there. I asked Ravi Nedungadi what these were. He said calmly, as though any rapid movements would offend the choreography of the occasion, ‘Gopi, they are candlesticks.’ I imagined large candles in the holders, lighted and burning forever. I had never seen anythi
ng like them, not even in the celebrated Salar Jung Museum in Hyderabad.
Vijay Mallya welcomed me and straightaway offered me a drink. I settled for a beer, which was promptly served. Vijay Mallya is an affable and very hospitable person. He uses his carefully engineered pug image as a front. He came straight to the point with no preliminaries. He said, ‘Gopi, you are from Bengaluru. I am from Bengaluru. Why do we need two airlines?’ I promptly replied, ‘Vijay, we are very different as individuals. We have different philosophies, outlooks on life, and styles of functioning. How would it help to erase our individual borderlines and identities?’ He suggested working together as one airline so as to avoid eating into each other’s market share. He said he would like to invest in my airline. No word-mincer, Vijay spoke as if he wanted to buy me out. He would call the new airline Kingfisher Airlines.
I said, ‘Yes, it’s not a bad idea, but I need to think about it. If we can’t make a single airline through your investment in Deccan, I am sure we could collaborate. We could share our engineering and other resources.’
We chatted aimlessly and shot the breeze. I kind of liked him. He was friendly and jovial; had a twinkle in his eyes. I hung about for two hours. When I came out, Kiran Rao asked me, ‘What do you make of it?’ I said, ‘I don’t think it’s going to work. We are two very different people.’ I left it at that. My whole dream was to build this airline and not to make money for myself. I could have sold the business and retired on a fat compensation, and had that happened the entire history of Indian aviation might then have been different, as would the course of my life.
Once the mist of Vijay Mallya’s charisma and opulence lifted, I returned to my own real world and was seized with the faith reposed in me as chief executive of the company. I recalled my mandate: that the challenge of creating something is worth striving for, living for, and dying for. It had been my dream to achieve that, and I had sold the dream to a team of people. It did not take me long to say ‘No’ to the overture. Kingfisher Airlines was born in its avatar because I said no. Otherwise, within six months Deccan would have been reborn as Kingfisher Airlines.
At around the same time there were developments that had an impact on the future of Deccan. Deccan was losing money, flights were being cancelled, flights were being delayed. By the time we got one problem fixed, another raised its head. Popular sentiment was no longer in our favour. Part of the problem was of our making, part that circumstances were ranged against us.
The new airlines needed skilled people to run their operations. They poached and there was attrition. We faced an acute HR shortage. We lost pilots and engineers to competition. One morning I received the news that our Ahmedabad–Bengaluru flight had to be cancelled because the pilot and engineer had left and joined Kingfisher Airlines. On another day, fifteen copilots resigned en-masse and joined Indian Airlines.
The regulations did not allow airlines to employ foreign nationals as copilots, and the latter joined the exodus. We were in for a serious crisis. I had to get something done. I persuaded the government to change the rules to enable foreigners to operate as co-pilots in India. The problem with captains was far worse. Other airlines, particularly Kingfisher, offered inordinately high salaries to our captains in a bid to attract them. I had recruited them from non-aviation sector companies and assignments, paying them 20 per cent less than Jet Airways. Our employees however, including pilots, earned more through allowances. We had worked out a load factor index as a performance parameter. All employees, regardless of rank and function, got a load factor allowance every month. If they pushed up the load factor, they would get a higher allowance.
Pilots were given a sector allowance in addition to the load factor allowance. The more they flew, the more they earned. Their basic pay plus various allowances put together worked out to an emolument higher than that offered by Jet Airways.
Other HR functions also suffered. While the core team and those who had joined the company early stayed, the newcomers began to leave. I had not had the opportunity to interact with the new recruits. Kingfisher Airlines and the other airlines were brazen about their poaching exercise: they openly set up recruitment bazaars at airports. Our airport handling was outsourced; airport cadres were working for us through an agent. The Kingfisher bazaars attracted the agents’ staff and many quit service with the agents without as much as a day’s notice. We faced a similar crisis with engineers. Vijay Mallya had clearly mandated to his recruiters: ‘Get the best from Deccan,’ and they did.
IT and Fund-raising
We hired quality trainers like Hero Mindmine to train our front line customer service executives, but the best of them left after training, to join the competition because of higher salaries and the attraction of working for a principle rather than an agent. The attrition was unabated. There was a hole in the bucket which we were unable to fix. Let me give a few instances of how the bucket leaked. There was an airport manager with us who received a salary of Rs 35,000 a month. He left overnight to join SpiceJet who had offered him Rs 1,50,000. After we had inducted the Airbus, we recruited another chief pilot on a salary of Rs 2 lakh. Kingfisher offered him Rs 3,50,000, a car and a house so he moved over. It was like the nightmare—the director of Gujarat Airways had described to me earlier.
One day the crisis deepened: twelve engineers resigned and went over to Kingfisher Airlines. I was furious with Vijay Mallya and publicized his unethical practises in the media. Mallya used the media to get back at me. We went to and fro. When the steam cooled the two of us met. I said, ‘What you are doing will prove to be counter-productive and bite you back in the long run. Once you increase pilots’ salaries you can’t bring them down, and their numbers are limited. Why don’t you import them? But don’t touch my pilots and engineers.’ He seemed to see the truth of my logic and we signed a no-poaching agreement.
That agreement did not deter Mallya’s HR which continued to poach in my backyard. Mallya is an extraordinarily busy person and I was willing to believe that he might not have known. I called him and gave vent to my ire. He got back. We exchanged a volley of incendiary words. The no-poaching agreement proved a non-starter.
The spurt in airline numbers had caused a huge rush at the airports. The infrastructure was woefully inadequate to cope with the vast numbers. This was particularly bad in Delhi, Mumbai, Kolkata, Chennai, Bengaluru, and Hyderabad. It was so bad in Delhi, Mumbai, and Bengaluru that it became routine for aircraft to circle over the airport for an hour before being permitted to land. One minute of flying drains Rs 1300 of fuel on an ATR and Rs 2200 on an Airbus. It made for huge losses and hurt us most severely further delaying our flight operations. While other airlines had aircraft to spare in the event of flight delays, we had none. Even after we managed to fix many of our engineering problems, the reputation had stuck.
As a low-cost airline, we were flying to smaller airports, which was a source of a new problem. Some of these were under the defence ministry and closed at a particular hour, by 4 or 5 p.m. If we were delayed elsewhere we could not land at these airports and this added to our un-intended truancy. Jammu and Gwalior, for instance, were IAF airports while Vizag was a naval airport. If an aircraft headed for Gwalior was delayed at Delhi and could not land there because of the time bar, it had to return to Delhi. Many small airports did not have night-landing facilities. At others, government airport staff worked only till 6 p.m. The AAI had not recruited additional staff even after so many new airlines had commenced operations.
The problems piled up one on top of another. After we fixed most operational glitches, we were short on break-even by Rs 300 to Rs 500 on an average per passenger. We had very little debt, our turnover having crossed Rs 2000 crores. We only needed to stay the course some time longer. However, while we waited for airport infrastructure to improve, a terrible misfortune befell us: our IT system collapsed.
It was a huge disaster. We had outsourced the reservation system operations to Interglobe Technologies (IGT), a company promoted and head
ed by Mr Rahul Bhatia. I had reposed deep and implicit trust in the company not because of Bhatia, whom I met much later, but because of the young, enthusiastic, and hard-working bunch of software engineers who provided me with a good alternative to Navitaire. I had begun hearing rumours that Bhatia was going about the business of setting up his own airline. I called Bhatia and said that if what I had heard was true then there was conflict of interest. I pointed out that he would become my competitor and he would have access to all my data. He denied the rumour, but when I asked him to commit his denial in writing, he dithered.
With all its problems, Deccan had become big and was a force to reckon with. Had Bhatia spent more time on Deccan’s IT system and made it more robust and versatile, the system would have catapulted him to the global stage and put him in the league of Navitaire and Saber.
Bhatia’s IGT had signed a contract with us to provide us all the features that Navitaire was offering, at contract cost; plus add-on features as and when necessary, for which a separate fee was to be negotiated and paid by us. IGT was required to create a full-feature, robust system within a ninety-day period from our signing the contract. However, even a year and a half later the revenue-management system with dynamic pricing and the basic essentials had not been developed. IGT had given us the Internet-based reservation system, the second of the two-component software, in its simplest configuration: it was to be made robust to be able to handle large passenger hits which required much attention and a fresh injection of investment. Bhatia had done neither. Apparently, IGT had failed to invest in upgrading the system to handle the increasing customer volumes. I was told by my marketing executives and investors that Bhatia was setting up his own airline. I did not believe them but gradually the lack of investment by IGT to support Air Deccan was evident as the system was not able to handle ever-increasing passenger volumes and traffic to our website.
Simply Fly Page 48
