The Indian aviation sector may be in turbulence mode, but that hasn’t shaken the spirits of G.R. Gopinath, the father of low-cost air travel in India. Gopinath, who sold India’s first low-cost airline Air Deccan to Vijay Mallya, the owner of Kingfisher Airlines, is gearing up for action once again. “I have been preparing for a national launch for the past year, and I hope to be ready next year,” an upbeat Gopinath told India Knowledge@Wharton.
The provocation for Gopinath to take to the skies again is simple: Kingfisher is in a financial mess. The airline is running a sharply reduced service, and if it does not manage to raise funds, it could shut down anytime. Gopinath, who sold Air Deccan to Mallya in 2006, sees this as an opportunity for his re-entry into the sector. He points out that when Kingfisher bought out Air Deccan, the two brands together had 36% market share. “I believe that the market is still largely untapped. This is an unfinished story, and I see a huge opportunity still there.”
In the meantime, he has reentered the skies with a different avataar. Gopinath recently launched Deccan Shuttle, a regional airline in the state of Gujarat in Western India. Gopinath points out that apart from the big cities and towns that are connected by the Airbuses and the ATRs, India has around 500 small airstrips which are not well connected. “Gujarat, for instance, has nine airports. While all of them are linked to Mumbai (India’s financial capital in the neighboring state of Maharastra), they are not linked to state capital Ahmedabad, or to each other. My idea is to open up a new market. I am passionate about providing easy access and connectivity.”
Gopinath has launched Deccan Shuttle under the banner of Deccan Charters, an aviation services firm that he set up in 1995. This was his first venture in the aviation sector. It currently has 20 aircraft (helicopters, turboprops and business jets) and operates out of 16 locations. Under Deccan Shuttle, Gopinath will begin by deploying around six 10-to-18-seater aircraft in Gujarat. Over the next three years, he plans to have 25 such small aircraft across five states. Gopinath’s plan is primarily to offer intra-state connectivity. But in routes where there is significant demand due to cultural or trade reasons, he will also look at inter-state connectivity.
Other recent entrants in this space include Air Mantra, a unit of the Religare Group. Air Mantra launched in July, connecting Amritsar and Chandigarh in North India. Spirit Air, which operates in Eastern states like Jharkhand, Bihar and Orissa, is planning to start operations in the Southern states soon. Air Pegasus, from Décor Aviation, an airport ground handling agency, is expected to start operations later this year.
Analysts are watching the space keenly. “There is a lot of potential in the regional airlines business provided the states offer the required infrastructure and policies, and the companies have the appropriate business model by way of routes, pricing strategy, etc.,” says Vishwas Udgrikar, senior director and partner, infrastructure and transport at consulting firm Deloitte. He warns, however, that “given the current environment in the country’s overall aviation sector, players need to be cautious and enter the regional airlines sector with the right preparation.”
Jasdeep Walia, an analyst at Kotak Institutional Equities, suggests that running a regional airline could be tough. “For distances of around 250-300 kilometers, the demand will be limited, especially if the roads are good and people can cover it by car. And for distances of 500 kilometers to 600 kilometers, there is always the risk that as the demand picks up, bigger airlines will [step in].”
Gopinath’s comeback is also evoking interest. Udgirkar points out that any new entrant at the national level, despite prior experience, will find it very challenging. “There are inherent challenges in this sector and formidable competition, too.” Walia adds: “This space is very competitive, and the government policies are not at all conducive. And Gopinath could not sustain his earlier venture. ”
Gopinath’s Air Deccan changed the face of aviation in India, but as a business per se it got grounded. His foray into logistics with Deccan 360 also ran into trouble. Whether or not he can take off this time round remains to be seen.