Business Today

Simply superb

Captain Gopinath's autobiography is a treasure trove of real life lessons in starting a business.

     Print Edition: January 24, 2010

How do you order aircraft worth Rs 12,000 crore with less than a crore in your bank account? How do you get your first supplier deliver you the product without paying an advance? Captain Gopinath's autobiography is a treasure trove of real life lessons in starting a business. Some exclusive excerpts:

Negotiating with Airbus: I said: "I am willing to buy 60 no-frills Airbus-320 aircraft from you at the rate $28.5 million apiece. If you say $29 million, then we will have to go through the due bidding and evaluation process between Airbus and Boeing. The decision is yours." John and Kiran looked lost at the suddenness of this quote. They left their whiskey glasses on the table and went indoors to consult the management of Airbus Industrie in France. They returned after an hour and said: "Give us 29."

I said that would not be possible... I asked them to think about all these factors and gave them till the next day to decide. "If you agree, we can be in Bengaluru by 10 a.m. and sign the purchase contract by 1 p.m. I will call a press conference at 4 p.m.," I said... I was already seated at the breakfast table when John came in, and as he took his seat, proffered his hand and said: "Captain, Congratulations! Let us shake hands. You have the deal at 28.5!" … It was unbelievable that with less than a crore of rupees in your bank account, we had ordered aircraft worth Rs 12,000 crore. This changed Deccan and Indian aviation forever. (Page 323)

Being Courted by Anil Ambani and Vijay Mallya: Vijay Mallya called me a little after 10 that night. He spoke endearingly and in a spirit of camaraderie. He said: "I know you've shaken hands with Reliance. It does not matter what they have offered you. I am willing to better every term in the deal. You quote the price. I will not negotiate. Let us do the deal." Mallya was calling from Monte Carlo where his $100-million personal yacht, the Indian Empress, was berthed, and hosting his famed annual party on the eve of the Formula One race. He said: "I am calling from Monte Carlo. I am at the dinner table with a host of VVIPs.

The Prince of Monaco is here, the stars of Formula One are here. I am calling you in the midst of all this because it is very important to me. Please make a note of all the major terms of the deal. I will call later." … The phone rang at about 4 a.m. I said: "Vijay, I want you to know this is serious. I've already shaken hands with Anil Ambani, but they need 5–6 days more..." Mallya spoke to me in Kannada. He was disarming in his tone... He sounded urgent but winsome. He said it was his philosophy to address all the segments of the market: Low, middle, and high.

He had done this with whiskey and with beer. He said he was aware of my commitment to a low-cost airline and he respected that. Together, we would be good for the industry. However, with Reliance's entry into the fray, the bloodbath would continue. Our coming together would altogether transform the scene. Mallya asked me if I had the list ready. I read out my list, which included conditions that would deter Mallya. I said: "If you are serious about investing in Deccan, you will have to make a deposit of Rs 200 crore immediately." (Page 342)

Mastering Negotiation: My homework had suggested that helicopter lease rentals across the world were 1 per cent of the cost of the machine. I began at 0.6 per cent. I told Doug: "It is in your interest that I succeed. It is not one helicopter. It is the first." I told him about the debt trap created by local moneylenders in India in which I had myself been once or twice enmeshed. I related stories of how moneylenders kill the businesses they fund. Doug was amused. I made it quite clear that I wanted the project to be sustainable, and I would leave that part to him to attend to in such a way that I would not need the assistance of a lawyer or accountant or both. (Page 153)

Ready for Launch, but no Helicopter: ...I knew that Doug would throw a fit if, at this last moment, I asked him for a bank guarantee.... He would never understand the logic of the RBI.... We had two days to go... I eventually overcame the embarrassment and called Doug. I explained to him that we had been caught off guard.... I explained that it was a slip-up on our part and apologised, and added that it was the RBI that needed a bank guarantee and not us. "Doug," I pleaded, "I have the money. You have to trust me. We've announced the inaugural event, printed the cards, and invited people. I will not betray your trust. You will be proud of this association. The money will be in your account within 24 hours of the helicopter landing in India." (Page 169)

Handling Travel Agents: ... IATA-registered travel agents attempted to exert oblique pressure and blackmail the airline, threatening to boycott my airline if I sold tickets through the Internet.... I said that online booking was an idea whose time had arrived. If I did not adopt it, someone else would. I made it clear that I was not against travel agents, but maintained that my airline would revolutionise flying in India and that the number of travellers would increase many times over than they currently were.

I said 100 million people would be flying in a few years when the LCC model stabilised. They, therefore, stood to gain more by controlling, for instance, 20 per cent of a larger pie when a billion people flew than by monopolising the entire domain when 13 million flew. The travel agents were not convinced. (Page 274)

Interglobe's Googly: We had outsourced the reservation system operations to Interglobe Technologies (IGT), a company promoted and headed by 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. ... My team warned me many times. They said: "Captain, the writing on the wall is clear. Please see it. Don't close your eyes." They identified three areas of conflict of interest between Deccan and IGT. By then Bhatia had already launched his Indigo in partnership with Rakesh Gangwal from the US. (Page 334)

Taking on the Jet-IA Cartel: What IA and Jet lost because of the Check Fare scheme, they made up by marginally increasing the fares charged to passengers travelling in other sectors where we were not operating. They initially made gains because the number of flights we operated was small, so they could gain leverage quite easily. I saw that if we ramped up our operations rapidly and deployed more flights across the country, the leverage would be gone and it would prove self-defeating for the cartel to use predatory pricing.

This is exactly what happened. After Deccan got more routes and flights going, they abandoned the Check Fare scheme. Meanwhile, passengers on our flights were checking among themselves the fares they had paid and realised the advantage of early-bird tickets. The result was higher occupancy on our flights and lower occupancy on Jet and IA flights. Re 1 tickets fired the imagination of the people and very rapidly became a buzzword. Critics of this dynamic pricing system arrived and described me as being out to wreck the industry.... People from all walks of life thronged the city booking offices to buy the Re 1 tickets.... Among them were rickshaw-drivers, too. (Page 316)

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