TrailBlazer

Flying high on innovation

Replicating a concept is uncomplicated, but to mould it into the pattern of a country as difficult as India is a challenge. Navigating through several hurdles, Air Deccan has kept the competition guessing with its innovative strategies. Express TravelWorld takes a look

Captain G R Gopinath MD, Air Deccan

Blazing a trail is taxing. In a country like India, it becomes even more pertinent considering the copious barriers one has to encounter. It is evident from what Captain G R Gopinath, managing director of Air Deccan - India's answer to America's South west - speaks about aviation in India.

The going has been tough for Air Deccan. Tumultuous times are still looming large and competition from all corners is threatening the existence of the company. But Air Deccan is working overtime. Its phenomenal growth since 2003 led to the creation of more than half a dozen low-cost air carriers in India. Air Deccan now faces stiff competition from Kingfisher Airlines and SpiceJet. The growth of these and other low-cost air carriers has also forced mainstream airliners like Indian Airlines, Jet Airways and Air Sahara to lower their fares.

But Gopinath is unperturbed. He says, "We are not competing with a full service airline or even the other low cost airlines. We are just competing with the railways. I am not worried about competition from other airlines because you can have low fares but not low costs at the same time." The low-cost carrier today connects 32 cities within the country and now operates about 210 services daily and growing.

Keeping tabs

The main stratagem of Air Deccan, or for that matter any low-cost carrier, is to cut costs and innovate revenue streams. While there are no frills like free food and beverage or a proper printed ticket, Air Deccan has brought innovation to its revenue structure by endowing advertisement space on the seats, cabin interiors, and even on the body of the aircraft.

It claims to give advertisers a chance to impress their brand presence on a captive audience, of which 82 per cent are business travellers. Advertisers, in addition to advertising on the in-flight television screens, can choose from an array of the latest advertisement media on the inside and outside of the aircraft. According to Gopinath, the airline is making about Rs 20 lakh on each Airbus aircraft a month through advertisement revenue.

Going further into the logistics of maintaining costs, he says, "My cost per kilometre per seat is only 4.3 cents while my competitors fly at eight to 16 cents. My revenue yield is 5.1 cents. And now, by expanding the network and adding more flights, I will reduce costs even further. Our Airbus aircraft have 180 seats, which is 22 per cent more than what our competitors have and we fly our aircraft for over 12 hours compared to the competition's eight to nine hours. Besides, our sales and distribution costs constitute only eight per cent of the total cost compared to the full-service airlines that spend as much as 28 per cent." This is essentially because Air Deccan managed to shift bookings away from travel agents to the Internet, ensuring money upfront. It also does not use international reservation systems, which charge money for each transaction, thereby saving on agency commission.

There are also savings in avoiding the printing of tickets and keeping staff on a tight leash. Besides, he only flies point to point with no onwards or connecting flights, saving on both fuel and time. Air Deccan even surprised the industry when it announced tickets at Rs 500 and later at a shocking Re 1. The industry has ever since been strongly reacting to Air Deccan as it felt that most of its marketing strategies are attention seeking gimmicks without having any actual realisation. But Gopinath has stuck to his stand and is working towards his dream of making every Indian fly.

Hitting the market

Air Deccan has strong plans to hit the capital market early next year sometime between January and March and plans to raise US $250 million through a public issue. It had raised US $50 million in equity of which US $40 million has already been utilised.

It has already identified the banks for the purpose and has signed up JP Morgan, Enam Securities, ABN Amro Rothschild, ICICI Securities and SBI Capital as merchant bankers for its proposed Rs 1,350-crore IPO.

The airline has witnessed a buoyant growth in its revenue over the last one year from a mere Rs 400 crore last fiscal to Rs 1,000 crore this fiscal. Its air passenger traffic has also grown from under one million to over 3.5 million in the same period.

New forays

Amongst its newer plans, Air Deccan has plans to acquire 78 new generation aircraft. Gopinath reveals that while Air Deccan will buy 64 aircraft, the rest would be taken on lease.

The airline is also planning to start operating low-cost flights from Colombo to a number of nearby international destinations including Kochi, Singapore and Sharjah through Deccan Lanka, a subsidiary of the company. The license of Deccan Lanka has been approved by the island state's aviation authorities. The new airline hopes to take to the skies within the next six months, initially with three Airbus A-320 aircraft.

Air Deccan has also announced the opening of its call centre. The centre, Gopinath claims, will be able to handle approximately 25,000 calls per day, which is double of what had been handled previously.