Cap. C. R. Gopinath: A Story of High-Performance Entrepreneurship

From the Fields to the Skies

“My story and Air Deccan’s story … is the story of the new India, the India of possibilities”

Gopi was just like any other child, happy go lucky and very ordinary, but he always had an eye for the unusual and a fascination for the simple. Gopi did not remain for long in the village Gorur in Karnataka where he was born, spent most of his childhood and started schooling. When Gopi left Hassan district for attending Military School, little did he know what life had in store for him. Gopi answered the nation’s calling and entered the prestigious portals of National Defence Academy and graduated from the Indian Military Academy as a commissioned officer in the Indian Army. Who could predict that eight years of successful service in the Indian Army was to help him later in the future to train another army of people to conquer the skies!
Capt. C.R. Gopinath was happy and contented serving his country and guarding the borders for fellow citizens. But, he always knew that he had more to offer to the nation. Capt. Gopinath wanted to do something different yet simple. One can say that Capt. Gopinath’s tryst with destiny happened sometime 1995, when the Govt. of India announced and began implementing the reforms process in a large scale by encouraging entrepreneurship. That was precisely the spark that he needed! From being an Army Officer Capt. Gopinath made a decision to practice Silk Farming on 40 acres of land that he borrowed from his uncle. This indirectly inspired the entrepreneur in him to identify the tremendous potential Helicopter Charter had in India. This is an incredibly diverse and unbelievably real journey from a village school to the Indian Army to Silk Farming to Helicopter and finally to a leading airlines!

The Making of Air Deccan: Behind the Screens

Let’s go back for a while to the Army captain who quit the Army and got into biofarming. Once he was into biofarming, Gopinath thought that he would basically do farming on a piece of land that his family had been given in compensation because their land was taken away by a dam project by the government. And during that period this dynamic man used to come to the nearby city occasionally to visit his daughter. During one such visit, he met another Army colleague who used to fly a helicopter in the Army and was a very successful helicopter pilot. He had just come out of the Army and this friend tells Captain Gopinath that he has found a job. So, he said, “What kind of job?” He said, “I found a job as a Regional Manager in a courier company.” First, he felt happy that his buddy had found a job. And then it struck him suddenly, “What is a carrier helicopter pilot doing in a courier company? Why can’t he be a helicopter pilot? That’s what he is trained to do.” Capt. Gopinath didn’t say much then but the thought lingered for a long time. Subsequent to that, however, he went back to his farming. And then he led a delegation of farmers to China. On the way to China, he read about a Vietnamese lady who had set up a helicopter company in Vietnam, because she wanted to do something for Vietnam, after having fled during the war. She had set up a helicopter company in Vietnam because she felt that was what an infrastructure-poor country like Vietnam required. That did ring a bell in Gopinath’s mind. So, two and two came together in his mind. He thought about his army buddy and said, if Vietnam needs a helicopter company to overcome its infrastructure problems, what about India? And the rest, as they say, is history!

Unfolding the Story

Like any other successful venture Air Deccan also has an interesting but brief past to share. Starting with just one helicopter, today Deccan Aviation boasts of 10 (Ten) Helicopters and two charter jets operating from eight major locations criss-crossing the entire length of the country. This company is India’s most reputed private Air Charter Company with a presence now in Srilanka also. Air Deccan began scheduled operations in August 2003, with a single ATR turboprop aircraft, flying a single route between Bangalore and Hubli. Soon after, Air Deccan announced plans to fly on long haul routes such as Delhi – Mumbai, Delhi – Bangalore and Chennai – Delhi. In Captain G. R. Gopinath’s words, “We have major expansion plans and are going to increase our operations four times by April 2004. The airline is also going to break the image of a regional low frills airline and enter the trunk route market”. The amazing confidence that Capt. Gopinath displayed was a boost up to all his employees and colleagues, who were not yet sure whether they were there to stay in the skies or not! But, Capt. Gopinath was sure – and that created a whole lot of difference.

How on Earth!

Air Deccan was daring and adventurous right from the beginning. How on earth could anyone imagine an air fare which was at times much lesser than the railway fare! Capt. Gopinath was all game to make the impossible fares possible.
Flying was generally associated with the life style of ‘the rich and the famous’ and Air Deccan simply pulled down those notions and took the common man up in the air. Yes, Simply fly! Air Deccan is India’s first airline to follow a no frills, low cost scheduled passenger airline business model. Counterintuitive to a general LCC strategy, which has only one aircraft type, Air Deccan follows a two aircraft type fleet strategy with the aim of effectively serving both the highly traveled routes between major Indian urban centers and the routes to and from regional locations. Air Deccan uses the ATR turboprop aircraft, in both a 48 seat size and a 72 seat size, for its regional routes which have lower passenger volumes per sector and involve short flights. On its trunk routes, Air Deccan uses the 180 seat Airbus A320 jet aircraft.
Air Deccan created history on August 25, 2004 by flying passengers to Delhi from Bangalore for a fare of only Rs. 700, virtually half the price of a railway ticket in many destinations. That was a revolution in the flying history of India! The company offered 75% of the seats at rates ranging between Rs. 500 and Rs. 5,000 and the remaining 25% at around Rs. 7,500, which was still 25% less than the normal fare of Rs. 10,500 on any other airline. Skeptics cited the reason as hidden costs, but regardless, this provided a means for air travel to be accessible to the average middle income bracket customer, something which was previously unheard of. An estimated 40% of Air Deccan’s passengers are first time flyers.

Vision

“Making air travel affordable to the Indian middle class and helping every Indian fly” – The vision which is as simple as it could be echoes the dreams of ordinary citizens like you and I.

Challenges

Air Deccan’s journey was never a smooth one. When one ventures into new territories and treads through paths not taken, challenges are pretty much expected. However the challenges only helped Air Deccan to evolve better and emerge successful.

• A new venture does not possess all the resources and capabilities that are needed. Bridging the gap of what is required and what it possesses with little or no loss of time is the challenge. This further facilitate on congregating competent people and technology, and facilitating learning within the resource constraints of the enterprise. Along with congregation, it is required to cultivate its distinctive competence to defend itself against competitive forces and sustain itself.


• There are challenges in the supply side. Supply comes from the money market. The money market source is decided by the comparative evaluation of the enterprise against other enterprises that also tap the money market. The cash from operations is dependent on both revenue and expense management.


• A start up normally begins with an innovation in service or product or process. The innovation creates a competence gap in the environment and constrains the environment from absorbing the innovation appropriately.


• Low cost does not signify low quality so, what is essential is to see whether you are getting a particular service at a cost that is conservative to the service.


• A large number of new entrants like Kingfisher Airlines and Spice Jet launched their airlines in 2005. Go Airlines was next in line among others. Price wars among the above companies always a determining factor for the market share of Air Deccan.


• Skilled labor has not kept pace with the industry growth. So getting the desired skilled personnel or improvised the existing personnel is required.


• The increasing players in the aviation sector with the required suitable and adequate infrastructure.

Strategies

“Do not follow where the path may lead. Go instead where there is no path and leave a trail”, said Ralph Waldo Emerson. Air Deccan could not afford to follow suit along with the other Air Lines. To exist, to survive and to sustain Air Deccan came up with some innovative but simple strategies which when synthesised in the right proportion spelled success.

Low Cost Structure and Operations : -

Air Deccan’s business model is inspired by the low cost business models adopted by successful no frills, low cost airlines in other parts of the world. Air Deccan’s target customer base includes those who travel by train or other ground transportation as well as those who already travel by air. It aims to turn non fliers into fliers, and occasional fliers into more frequent fliers. Overall, Air Deccan’s flight fares are as much as 50% lower than those of other leading airlines in the country. To sustain these low fares, Air Deccan uses innovative techniques to keep overall costs of the company low.

• For example, in flight food and drinks are served for a price. An estimated 5% of the revenue comes from these in flight services.



• The company has also removed the business class section and reduced overall leg space on their aircrafts. This helped increase the seating capacity by another 22%.



• Distribution costs are kept low by selling tickets through web sites and call centers.



• Additionally, Air Deccan increased its aircraft utilization by investing in technology to reduce airport turn around time between flights significantly. On average, an Air Deccan aircraft flies for about 12 hours a day compared to 8 – 9 hours by its competitors.

A significant portion of the company’s expenses such as fuel, aircraft and engine maintenance services, and interest and principal obligations under the terms of foreign debt and aircraft lease payments are denominated in or linked to U.S. dollars. In Fiscal 2005, 35.96% of Air Deccan’s expenses were incurred in currencies other than Indian rupees.

Financial Model : -

Due to the strong growth in the domestic market driven by affordability, a booming economy and an increase in capacity, it is forecasted that the aviation sector in India will flourish in the years ahead. Analysts projections are that airline passenger growth will slow down to 12% per annum by 2012 and 10% per annum by 2013. Air Deccan gained market share from 6.5% in FY 2005 ending on March 31st to 11% in October 2005. Even though it is unlikely that Air Deccan will continue to gain market share at the same rate, management expects that the firm will further strengthen its position and gain market share of about 19% in the domestic market by 2013.
Fuel expenses are the most significant part of operating expenses. Fuel costs for Air Deccan were 38.7% of sales in 2005 due to the increase in international crude oil prices. Thus, Air Deccan’s fuel cost is expected to be around 35% of sales in 2006 and come down (in line with most oil analysts’ forecast) to 30% by 2013 with government initiative to bring airline fuel costs in line with what they are for international carriers.
Air Deccan incurred more costs on operating expenses and on repairs and maintenance partly due to the age of its fleet and partly due to the start up costs of establishing maintenance facilities. Together, these costs accounted for 39.8% of revenue in the six months ended September 2005. However, as Air Deccan acquires new fleet, these costs are likely to be aligned with its comparables at around 24%.
Administrative and general expenses for Air Deccan have been lower than its competitors and are likely to remain at low to moderate levels due to its low cost operational model. In addition, the employee remuneration costs for Air Deccan are higher (at 12% of sales) than the 7 to 8% for its peers. These costs are significantly higher internationally and are likely to go up in India as the Indian economy opens up more. However, due to its emphasis on cost reductions, Air Deccan is likely to keep these costs at around 8.5% of sales in the long run.

Focus on tier II & tier III cities : -

Capt. Gopinath was fast in realizing that they should move beyond metros like Delhi and Mumbai. As a result they started focusing on small towns with huge potential like Hubli and Nasik. Capt. Gopinath wanted to cater to the people who have not been attended to yet. And he also believed that there is market as people from small towns are also willing as well as capable of air travel.

Capacity Utilization : -

They introduced differential air fares within the same airlines but utilizing the vacant seats. They did it by utilizing the seats vacant and selling the tickets for them at cheaper rates, leading to full capacity utilization. This strategy was successful primarily due to two reasons, the first being they were able to sell additional no. of tickets for the given fixed cost they incur on running a flight, the second being their expenditure on the variable cost was minimized as they offered no frills services to those customers. So, from business strategy point of view this was a typical example win-win example both from customers and entrepreneur’s point of view.

Reservation & Ticketing : -

Deccan is the first airline in India to have an independent and internet-based Computer Reservation System. Deccan tickets can be booked at the following points of sale: -

• Bangalore, Chennai, Kolkata & Mumbai City Office Counters
• Deccan Website (http://www.airdeccan.net/)
• All India 24 / 7 call centre at 39008888
• Airport Counters
• Travel Agents across India
• Reliance Web Worlds in 228 cities in India
• Club HP Outlets in 7 states in India
• India Post - Karnataka Post Offices
• Home Delivery by calling our 24/7 All India Call centre

To Lead is to Inspire

One cannot but agree with Capt. Gopinath when he says, “My Story is the story of new India”. Capt. Gopinath is a first generation entrepreneur, hails from very ordinary middle class background and he is completely self-made. As far as entrepreneurship is concerned, the most important thing to live it more than anything else. The zeal and conviction to be uncompromising and the confidence to listen to your inner voice keenly can take one to places. To pursue that vision to the exclusion of everything else. Captain Gopinath Later starting a Helicopter company with an ex-army colleague when India had only 20 Helicopters in civil sector and finally to his successful venture Air Deccan. He stressed on the need to dream big and act fast. Air Deccan collects more than USD 1 to 2 million every day. Captain G. R. Gopinath, MD, Air Deccan, was awarded the Amity Leadership Award for Breakthrough Success at the concluding day of the second Global Leadership Summit. The award is in recognition of success in the corporate sector.
He did not compromise on his values and dreams even when things were going wrong. When, on the verge of bankruptcy, he decided to offer a strategic stake in his airline to Kingfisher airlines, Gopinath wanted to ensure three things: one, the survival of the company and protection of jobs of all his staff; two, the low-cost nature of the business in letter and spirit (the brand and Air Deccan’s identity); and three, close, if not day-to-day, running of what he had created with passion and tenderness. He was proud of his airline’s reach, its brand, its identification with the masses and even its colours; and he had every right to be proud. Thus, Captain Gopinath is an entrepreneur who leads by inspiring who is committed to his belief and above all commitment to his people.

The Blend of Vision, Perseverance and Excellence

“For millions of Indians, flying is no longer a dream” intones the voice-over, as an Air Deccan aircraft is shown, followed by the airline’s logo and tagline: Simplifly. That’s the short narration of a very long advertisement. At 150 seconds -- a breathtaking two-and-a-half minutes -- the Air Deccan campaign that was released in 2005. So this is the kind of impact that Capt. Gopinath has made on the Indian Citizens, who gave wings to the Indian middle class and who broke the myth that air travel is reserved only for the rich class has made a fabulous impact in the hearts of every Indian citizen and he is relentlessly working towards his goal of making every Indian fly. Capt. Gopinath looked out for opportunities in unusual places, not in the usual run-on-the-mill destinations.
Some say entrepreneurs see the future in pictures and visuals, when everyone else fails to even notice the picture. On one of those early days after launching the helicopter service, once Capt. Gopinath’s helicopter was flying over huts and he was rather amused to find cable-television antennae on top of these huts! He suddenly thought, “Oh my God, here is opportunity. It’s not a country of a billion people waiting to be fed. But here is a country where a billion people could fly”. And, amazing, he did make them ‘Simplify’!

What we can learn from this story

Ø Real leaders are those that are not deterred by the challenges ahead but instead see them as unexplored opportunities as Capt. Gopinath did.
Ø Conviction in your dreams backed by persistent effort to achieve it will help you to achieve your dreams.
Ø Ignore the bottom of the pyramid or lower middle class at your own peril. Now, they are no more liabilities but a sizeable chunk of market with high potential that need to be tapped.
Ø The success of an organization should be measured on how much it addresses the problems on holistic basis.

“We must become the change we want to see” – Mahatma Gandhi