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The future of aviation in India is in its small towns: Capt G.R. Gopinath

Capt G.R. Gopinath, founder of India's first low cost airline, Air Deccan - which he later sold to Kingfisher Airlines - has known both success and failure in a turbulent career.  Gopinath met Govindraj Ethiraj inside a hangar at Bangalore's Jakur airport for an exclusive interview for the show Bottomline, airing on Headlines Today.

     Last Updated: January 3, 2013  | 20:30 IST

Capt G.R. Gopinath, founder of India's first low cost airline , Air Deccan - which he later sold to Kingfisher Airlines - has known both success and failure in a turbulent career.  Gopinath met Govindraj Ethiraj inside a hangar at Bangalore's Jakur airport for an exclusive interview for the show Bottomline, airing on Headlines Today. Edited excerpts:

Q. Captain Gopinath, your supporters say you are a visionary who dreams big, but is often let down by investors, while your critics say you are a failed entrepreneur who comes up with good ideas you cannot sustain. But most people would agree that you never give up. What do you say to that?
I think perception is important and the truth is always somewhere in between. This company for example whose hangar you are sitting in was incorporated in 1995. It took me three years to get the licence. I started here with a tent and one helicopter as a small company but today it is the largest general aviation company in India to cater to infrastructure, high net worth individuals, and corporate houses. We also maintain 60 third party aircraft. We have been here for a very long time. I am a dreamer, as you said. But as I dream, I design. It has also sometimes led me to failures. There is also a burning optimism in me.

Q. Aviation is a key component of the economy and its growth, but the aviation sector is having all kinds of problems.
I think you know in the aviation sector a lot of problems are self inflicted by entrepreneurs who did not build a model which was sustainable in a country as large as our where less than three per cent of the population travels even today. You don't have to be an aviation genius or analyst to understand that if at all there is a future for any of us it is only by expanding the market. And Air Deccan was a step in that direction. It was not 'Shall I start an airline?' it was more a question of how do I make more people fly because then you have a never ending consumer base and that is not easy because to do because low cost is all about innovation, efficiency -ruthless efficiency. It is also a mindset of considering those who cannot fly as your customers with love and affection so that you are not looking at only the rich. And I think this was a problem both with the entrepreneur and the government. I think a large problem was with the entrepreneur, but I think a much bigger problem came from the government. The infrastructure was medieval, the rules and regulations are of 1937, we don't have visionaries. I also think, from the level of the Prime Minister - successive Prime Ministers, not just the current one - aviation was not considered as core infrastructure. I don't think GDP can grow if aviation is not integral to the growth. So we don't have a long term strategic vision for aviation in this country. I have seen five or six civil aviation ministers, each one of them tried to bring out a policy… but we don't have a policy yet. We have tried to make policies each time for a particular airline or a particular player. For the first 50 years you made rules and regulations for Air India and Indian Airlines, then rules were made for Jet Airways and now we are trying to make them for kingfisher or GMR or GVK. We are not asking what we need to do to make more people fly.

But somewhere the market doesn't seem to be going the way the entrepreneurs in this industry had dreamed or envisaged. Air traffic has gone up and then come down, passenger capacity has gone up and come down, the market has shrunk. So maybe entrepreneurs are betting on something that is nearly impossible to achieve?

As an entrepreneur we are part of the problem and part of the solution. We are very often a part of the problem, because once you get your licence you ensure that others don't get a licence. Then you don't form an association of the industry but you form an association which benefits one lobby rather than saying look we'll keep our personal agenda aside, let us see how we can work with the government to ensure that we have policies that will expand the market. I think that whether it is in airline or some other sectors, policies have been influenced by particular bidders or operators or airlines to benefit that particular airline or that particular airport operator. I am just giving an example, everybody knows that Jet Airways tweaked the policy at one time to ensure that only they can fly abroad and others cannot.  So we had a strange anomaly. While a foreign airline with one year experience could fly into India, an Indian airline without five years experience (could not fly abroad).

Q. That is also a serious charge to make.
Yes it is.

Q. You are quite sure this is what happened.
It is an open and shut case. Why would anybody come and suddenly say you need five years experience to fly abroad? That means you are unsafe to fly the Bangalore Dubai route, but safe to fly the Bangalore Delhi route. In certain cases domestic flights are longer - Trivandrum-Delhi is a longer flight than a Trivandrum-Colombo for example. I'm saying this not to blame any one government, successive governments did that. There is crony capitalism here where you try to tweak policies to benefit one player or a set of players rather than creating policies for mining the bottom of the pyramid because that is where the future for all of us is.

Q. You also started a cargo airline and again it didn't do so well and you finally shut it down. So what's the lesson from there? Each project you've tried has not taken off for some reason or the other…
No, Air Deccan was a success by any standards because we became the largest airline in four years…

Q.…To the extent that you got out of the company.  
I was an entrepreneur. I had raised a lot of public money. At that point of time (when Air Deccan was sold) we weren't breaking even, though we were four years into the airline. I had deployed 45 aircraft in 45 months, but we had shortage of pilots and shortage of a whole lot of things. I didn't have ancillary businesses so I had only one thought in my mind - I said investors have put up a lot of money, there were also 5,000 employees to think of. I said what do I need to do to capitalize the company. I had investors with me who were not strategic investors, who were private-equity players interested in making money in the short term. So they put a lot of pressure on me…and as you rightly said maybe I shouldn't have taken a PE player as a partner but PE players came and their single minded focus was: how do I multiply by five times in less than five years. So they were not willing to fund me further because they saw an opportunity and the stock market was blazing hot and I got offers from 10 different companies and finally Vijay Mallya came along. Maybe it was a mistake in hindsight that I went to bed with Mallya because he changed the model.

Q. And you haven't forgiven him since…
Yeah, I haven't forgiven him because he killed my airline and I think he killed himself. Because the writing was on the wall…the future was in low cost. The market cap of Deccan - which is normally the yardstick - before the merger with Kingfisher had reached $1.2 billion. So every investor made mountains of money, so Air Deccan was not a failure from monetary point of view, and neither was it a failure from the point of view of the model because the dream lives on.

Q.Let me quote another Jet Airways employee about you: "He is the person who killed Indian aviation, bringing to India the concept of low cost flying without the backing of infrastructure. His principle of selling well before cost sent the entire industry into the red and the industry has not recovered since".
I think it's too elementary to respond to. It's like saying the Maruti 800 is not the right car for this county but the only the Benz is the right car or the Ambassador is the right car. Indigo is there, Spice is there, Go Air is there…even today you can buy a ticket on a Bangalore-Delhi flight, a week in advance, for Rs 5,000 as against Rs 12,000 a decade ago when salaries were one-third and oil prices were one-third of what they are today. And Indigo is in profit. Jet, 70 per cent of the aircraft of Jet are in the low cost model. All over the world it is low cost which is (flourishing).

Q. The logistics venture also didn't take off right? Is it because you were largely dependent on aircraft as a mode of transport?
The logistic venture was actually born out of Deccan. When I was running Air Deccan, it became very big. We were going to a large number of cites where there were no other flights. And when my aircraft got grounded there for want of a part it was impossible to send a part. Once my aircraft got grounded in Kolkata, it was a bird hit, and we lost an engine and a and new engine cost $15 million. And you can't put 50 engines in 50 cites so I had one engine in Delhi. I had to shift that engine from Delhi to Calcutta and I couldn't do it. There was no capability in India. It took me seven days. I sent it from Delhi to Singapore and Singapore to Calcutta. So that triggered (the awareness) that logs is a big nightmare. And like all entrepreneurs you don't do too much of market research before you start the business. Whether it it is Bill Gates or N.R. Narayan Murthy you just do it because it is something you visualise. Someone said vision is the art of seeing the invisible…you know you are seeing it, others are not seeing it. So there is no point going to someone else to validate it. That is how I started all my ventures. That is exactly how I started Air Deccan. But of course when I launched the logistics business, I got the best people from around the world. I got 400 people from FedEx, and UPS and DHL. And I realised that the Indian logs supply chain is medieval. So I acquired eight aircraft, chose 101 locations. I had considerable amount of funds with me because I had sold my stock to Vijay Mallya. And with that huge optimism, and maybe a little arrogance. I had not sold all my stock and the Kingfisher stock crashed. It coincided with the crash of Lehman Brothers and Citibank so generally the stock market crashed but the KF stock went rock bottom so whatever money I had, the capability to invest as per my original plan shrank when I was midway in the project. So I had to immediately mobilize funds and that's how I mobilized my partnership with Reliance -Mukesh Ambani and launched. It didn't fare as I expected it to fare. Lots of thing went wrong. Now I'm trying to revive that…I have not shut the company I still have the two cargo aircrafts…I'm just tying to restructure the whole thing.

Q. Let's talk about the new ventures that you are looking at. You have launched a Deccan shuttle operation in Gujarat, you talking about connecting smaller cities to one another rather than just metros to smaller cities. So what is the future looking like?
I firmly believe that the future of India is in small towns. With that in mind I found that there are 508 strips which are unconnected. So it is a part of my dream. I am connecting all these small towns in various states. That's how I did it last time. Obviously now a lot of water has flown under the bridge. I have an aviation company, which is a 15 year old company; we have 60 engineers and about 45 pilots. We maintain 60 third party aircraft in 60 locations. We have a lot of aviation backbone, the backbone to climb Mount Everest again, maybe without oxygen (laughs). My non-competing agreement with Vijay Mallya is ending in January. Vijay Mallya's airline is now at a very skeletal level with six or seven aircraft. Air India is in a mess. Aviation even now is in a time warp…less than three per cent of India is travelling, because even though we have low-cost airlines, you can get a Bombay to Delhi (flight cheap) but a Bangalore to Bhubaneswar flight costs Rs 9000, Bangalore Hubli is a half an hour flight, or Delhi Dehradun is a half an hour flight but they cost more than Delhi to Bangalore. So it is a big anomaly. But how will Delhi-Bangalore expand if people from Dehradun can't come to Delhi, people from Lucknow can't come to Delhi? Many people who come from Dehradun to Delhi are coming there to take a connecting flight, so you need to penetrate into the very bowels of this country. So we have to work with the government to bring some of these costs down. Inherently our model of airports is flawed and you can't blame the airport operators. We had inefficient public sector airports earlier, now we have efficient monopolies and we have a regulator who is regulating a monopoly as against regulation competition. Aviation costs have gone up because of that. But the bottom-line is that if all this changes how do we build a product or an airline in this case and a service which can expand the market like Air Deccan did earlier? Obviously the existing players are nervous; they are going to the government (for help). They are exactly like train passengers who, once they are on board, don't want to let anyone else get on board. So they are all going like…don't let Capt Gopi come.  

Q. What is it that you are going to do that could potentially destabilize the sector…?
My idea is not to destabilize but to create a new market. Take TV channels. Imagine if someone wants to start a new channel and the existing channels go and say to the government: 'Look there are already 400 channels, we are already losing money, don't give one more licence because he is going to destabilize TV channels.' What should the government do? Should it protect the existing channels or should it protect the consumer? I am only going to do what any sane businessman does. I made mistakes last time…my mistake was selling under pressure from my investors. I was new. I was not honed in the skills of negotiating with hawkish investors just out to make a quick buck. But it is a lesson in life I have no regrets.

Q. You have a regional airline licence with you…
I have a regional airline licence but my investors are saying that if I have a regional airline there will be a conflict of interest. We will have one airline in which we will have the regional as well as the one-equity structure where one will feed the other.

Q. So what you are saying is another national airline like Air Deccan, the revival of Air Deccan…
(Laughs) Revival of the dream. As you know every investor made money with me. I don't think they have made money with any other airline. No investor has made any money with any other airline except Air Deccan. So people are ready to invest because I took care of investors' interests. The airline was clean, transparent and it was a national, people's airline.

Q. I can almost see the tag line for the new airline: the people's airline…as opposed to the 'simply fly'.
You can see that the most profitable airlines of the world are low cost airlines. Look at Ryan airlines, with 290 aircrafts, 75 million passengers…with lowest fares in the world and the highest profits.

Q. How big will this be when you launch in January or  February?
We will obviously launch small we will ensure that we are in profit. I am not an NGO…you know some crack-pot said that I am selling my tickets below cost… nobody does that. It is an art and a science to sell tickets and fill the plane… some tickets go below cost, some go above cost… that is to stimulate the market. Even yesterday I came on one of the airlines, it had only 60 per cent occupancy. Seventy seats gong empty. It's a crime to fly planes empty. I don't think my investors will allow me to take the money and burn it because I want to kill Jet Airways. No, that's not the aim. The aim is to build a robust airline for the country which this country needs. And I'm sure all of you are going to root for it. 

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