Customers love us for the price

Captain Gopinath is managing director, Air Deccan, a unit of Deccan Aviation Private Limited, India’s largest private heli-charter company. A graduate of the National Defence Academy, he has served in the army. Gopinath also has to his credit the Rolex award for ecological site farming and is also the recipient of the Wipro PRSI Award.

In a conversation with Chandrima Pal of agencyfaqs!, he talks straight about costs, criticism and competition, among other things. Excerpts.

Edited Excerpts

We do not see ourselves as a 'challenger brand'. We are perceived as such due to our aggressive pricing, which has forced a lot of the existing players to lower their fares or to come up with differential pricing themselves. When we started off, the aim was to develop a new market segment of those travellers who could not afford to fly or were forced to use other transportation since their cities were not connected by air. That goal was coherent with what other low cost carriers aim for. We have been successful to a very large extent.

Since we were starting off, we took all this as 'bad publicity is publicity anyway'. We believe it actually helped us in the longer run as people came to know us better. In any case, we had full flights the very next day.

We are looking forward to competition. That will help us become even more efficient and induct more air travellers. Today our cost is our competition. We are confident that we will continue to be able to provide the lowest fares on the routes we fly.

A high percentage of our passengers are repeat customers on almost all routes. Also awareness about how low-cost airlines operate has grown since we started. Many of our passengers are train or bus travellers and air travel is a first-time experience for them.

Customers fly Air Deccan because of the price, not because of the service. Even our most expensive tickets are less than 50 per cent of what the other airlines offer. The more you increase complexities, the more costs you tend to incur. The other models leave no option for you. But we offer you the option of paying for the services and food and beverage.

Let me tell you something, nothing is for free on any other airline. All the frills have been paid for when you buy the ticket. We don’t have business class, or airport lounges or fancy meals, but we offer you rock-bottom prices and convenience, while buying your ticket through the Internet.

The truth is, when executives travel for work and the company pays for the ticket, they fly Jet Airways. But when it comes to flying with their families on vacation, they choose us. The reason is simple. On a return flight to Goa from Mumbai for four people, you can end up saving Rs 20,000 on Air Deccan!

In fact, we get a lot of block booking from Samsung, LG and Wipro. We are also the first choice for families visiting relatives, and who book tickets well in advance. Even for a top-end executive, pressed for time and willing to pay any price for a ticket, we are there. Our most expensive tickets are cheaper than the apex fares of other airlines.

Look, we flew 1.5 million passengers last year. If we made provisions for free water, it would have been consumed by the flight crew, the airport staff and others as well. In the process, we would have ended up spending Rs 3 crore on water alone. It is not feasible for us. We need to educate the customers instead of asking them what is on their wish list. If you need something, you may as well pay for it. In this way, we have been able to save 20 per cent on distribution costs and turned our cost centres into revenue centres.

Our airline follows a low-cost business model, in which we do things fundamentally different that keeps our costs of operation low. Areas where we are different from our peer group include: We fly longer number of hours by having quicker turnaround time; with an all-economy configuration, we are able to accommodate about 25 per cent more seats than a full service airline; tickets are distributed through the net with only e-tickets; there's no free catering on board.

Let me put it this way, as we are a growing company, we are constantly evaluating possibilities for growth, which of course requires funds. There are a lot of proposals coming in from various organisations for investing in Air Deccan. But presently, we have already signed and partnered with Capital International and ICICI venture funds divesting 26 per cent of our equity.

Budget airlines have not been failures. On the contrary, these have forced the industry to become more efficient, induct more up-to-date technology and use resources more efficiently. The airlines which register profits worldwide are the budget airlines. That's precisely why every full service airline is coming up with a budget airline. We would like to believe that our success has encouraged many other players to follow suit in India. The focus has to be on keeping our operating costs low to be able to offer the lowest airfares. You just can’t go wrong with this strategy.

The major problems we faced were operational like getting our parking slots, ticketing counters etc. Let me give you an example. When a real estate developer starts building the foundation of a building, the marketing team starts selling the space. As far as I am concerned, airport is a real estate meant for handling passengers. The attitude should be that if an airline wants ticketing counters, the airport authority should create that space for the airline, which is not happening.

As passengers are a source of revenue for the airport authority, I believe that the airport authorities should have pursued me to get more of the business. But it's the other way 'round! Unless that culture changes, these problems will continue to exist. So, we spend a considerable of time and energy in getting these sorted out.

The stipulations attached to the policy are not satisfactory since only a couple of players have been allowed to participate under the open sky policy. This can lead to cartelisation and could keep out certain consumers, who want to fly abroad but cannot afford to. Air Deccan is presently not keen to fly internationally as we are focused on India because of the estimated domestic demand.

Air Deccan is about 1,000-employee strong now. We have outsourced a lot of

functions like airport ground handling. That and other functions are automated to reduce the number of employees. Due to effective automation, we have major cost savings in administration, accounting, payroll and other head office functions.

Planning on these sectors has already commenced. You should see Air Deccan

flying these routes in the first quarter of this year.

Rs. 500 seats are extremely popular- the seats are available for sale on first-come-first-serve basis. We release these seats periodically for future dates along with advertisements in major dailies. Normally seats are sold out in the very first hour of opening the reservation . For short-haul sectors like Dehradun and Jaipur however, you would still be available to find the seats at Rs 500 + tax.

It comes to around Rs 700, but the Rs 200 goes to the airport authorities.

We already have 12 aircrafts in our fleet. We have grown from four flights a day to more than 80 daily flights in just about a year, which is phenomenal by aviation standards. Air Deccan has already signed a contract to induct 30 ATRs and 30 Airbus aircrafts in the next three to five years. That should give you some indication of our growth plans.