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Capt GR Gopinath: "Future is low cost connectivity"news
Rajiv Singh
15 May 2007
From its pioneering days as the country's first low cost service provider, Air Deccan has come a long way, knocking well established carriers off their perch, and carving out the second largest market share in the domestic market in the process. In an exclusive interview to the aerospace section of domain-b, founder and managing director, Capt. GR Gopinath, covers a gamut of topics regarding the airline and the country's booming aviation sector.
Capt GR Gopinath
Capt GR Gopinath
Managing Director Air Deccan
Very many congratulations on your being conferred the French Government's prestigious 'Legion d' Honneur' award. The citation would appear to recognize, and validate, all that you may have stood for when you launched Air Deccan?

I am grateful to the French Government for according this prestigious honour to me. This award is for my colleagues and friends who have stood with the company in testing times. I dreamt of launching low-cost air travel when I realised that reforms had come to stay in India and it was irreversible. I was sure that my country was destined for great times.

You would have launched Air Deccan with certain hopes and expectations at a personal level, and also, with some perceptions regarding the country's civil aviation sector. How far have these hopes and expectations been fulfilled or belied?

Almost four years ago a solitary aircraft took off from Bangalore airport bringing much needed air connectivity to Hubli, a small town in Karnataka. That aircraft carried with it a few passengers, the cynicism of many skeptics -- and also a PROMISE. A promise, to bring air travel within the reach of the common man by providing low fares and enhanced connectivity. Also, as that aircraft took off into a clear sky, it carried with it the hopes and dreams of a billion Indians.

Today, almost four years later, Air Deccan has grown into a fleet of 43 aircraft, and has carried close to 11 million passengers already. Through its journey, it has been instrumental in changing the aviation skyscape, and also, the economic landscape of India forever.

The number of aircraft flying in Indian skies is projected to grow, from the current 300, to 500 by 2010 and to 1,000 by 2020. Do you think this will occur? If so, what would be the drivers for such a phenomenal growth in numbers?

Our experience has shown that we have underestimated the Indian market in terms of demand. New air carriers are constantly generating new demand and stimulating more travel. It is estimated that by 2023 there will be a market for 570 more aircraft in India and this may have to be further revised upwards. Passenger traffic is expected to go up by at least 250% by the year 2010. People are traveling more by air and are migrating from other modes of transport.

Historically, the aviation industry has followed a thumb rule - airline traffic grows at twice the nominal rate of GDP. Last year, India proved this adage right with market growth skyrocketing at 25 per cent.

A healthy 20-25 per cent growth rate has been forecast for the next three years, according to the Centre for Asia Pacific Aviation.

The structural and policy challenges faced by the aviation sector in this country are often spoken about. What is your take on this? In particular, is the policy emphasis correctly placed, or is it lacking or misdirected in any manner?

Air Deccan- logoConsidering the fact that expansion of air transport in India is among the fastest in the world, there is much to be done to match global standards - especially in terms of airport infrastructure, upgraded equipment and facilities, spacious terminals, adequate runways etc.

The lack of a secondary airport network in India is also a major issue.

We are glad that the Government is taking initiatives and measures to solve these problems, which contribute to high costs for all airlines. Privatization of airports is an extremely positive step taken by the Government and will go a long way towards streamlining processes and issues regarding airports.

The Government's recent decision to reduce navigation and airport charges for regional airlines will be extremely beneficial, not only for the airlines but also for regional travelers.

Cargo operations are attracting increasing attention from airline operators. What is your perspective as far as growth in this sector is concerned?

The demand for low cost domestic cargo services is poised to emerge as a big focal point for Indian aviation industry. According to Airbus Industries' market outlook for the next twenty years, dedicated freight service in India will go up from eight per day to one hundred and sixty five per day by year 2026.

Highlighting the spurt in demand for air cargo service is the union minister for civil aviation's own estimate that India needs at least 500 dedicated cargo airplanes in the coming ten years.

Modern agriculture, trade and industry underscore the necessity of air cargo/ freight services. We are actively strategizing to begin low cost cargo operations with the conviction that transporting apples from Kashmir to Chennai at the lowest possible cost will give a much-needed boost to our primary economy.

The process for floating a new subsidiary dedicated to air cargo services has begun with the approval of the Company Board.

How do you propose to meet the 'skills' challenge? What are the initiatives that you have launched in this regard or propose to?

With the advent of so many airlines in the country the industry is facing a crunch in terms of skilled manpower. However, with the boom in the country's aviation sector, a lot many professional institutes have come up for training of aviation specialists i.e. cabin crew, pilots, technicians etc.

We also hire skilled manpower from other countries.

Airlines in the country inhabit a financially vulnerable environment. How long do you think they can continue to live with such vulnerabilities?

With the influx of multiple airlines, rapid capacity addition is occurring in the industry. There now exists a differential between demand and supply, which has crimped load factors on certain sectors bringing down the overall load factor for airlines, resulting in losses.

The industry is witnessing increased competition and airlines are dropping their fares, which is impacting the financial health of the industry. Airlines will have to be prudent about pricing and refrain from dropping fares on the last day.

What care have you taken to insulate your organization from such vulnerabilities?

The key is to maintain and control costs. Our cost per seat km is amongst the lowest in the country. It is important to ensure prudent route planning, which leads to enhanced fleet utilization and better yields.

With an aggressive fleet expansion plan, we would be opening new routes and strengthening our existing network even further. Routes that were launched last year are expected to give higher yields in the coming quarters as they are nearing maturity. New routes account for as much as 58% of all routes.

The coming year will be a challenging year for us, and sustainability will be questioned.

There is a school of thought that questions the viability of a low cost carrier operation in this country. Jet Airways and Paramount owners, particularly, have vented their feelings on this issue. How would you respond to their point of view?

Capt GR GopinathThe low cost carrier (LCC) revolution, led by Air Deccan, successfully tackled the issue of the prohibitive cost of airfares, as they then prevailed, bringing them at par with train fares. This has resulted in the creation of a new generation of air travelers in India with the up-gradation of millions of passengers.

The results are self-evident. The domestic aviation market in India has been growing annually at over 40% and is now amongst the fastest growing in the world. In 2006, for instance, domestic passenger traffic grew by 48%. The number of passengers stood at a record 29 million, as of November 2006, according to government figures.

The impetus for growth comes from the surge in demand for low cost air travel. The Centre for Asia Pacific Association (CAPA) predicts that domestic aviation in India will continue to grow at above 20% in the next decade. The LCC market share in India will reach 70% in 2010, making it the world's leading market in terms of market penetration.

Overall, LCCs already control 40% of the domestic market, with Air Deccan as the market leader holding the second largest market share.

Large jets, as designed and built by Airbus and Boeing, dominate the market. Do you think 'big will remain beautiful' forever, or is there likely to be a drop in demand for large size jets in the future, particularly with the advent of regional or business jets in the market?

In the years to come, as millions of Indians aspire to air travel, we will need larger aircraft with higher fuel efficiency and lower emissions. While smaller aircraft and turbo props are good for regional airports and connectivity between smaller towns, larger aircraft are necessary for metro connectivity.

What are your perceptions about the role of turbo-props and smaller size regional jets in the aviation market? How has Air Deccan strategised its fleet split between turbos and large size jets?

Globally most low cost airlines follow single aircraft model, which helps in reducing costs, with respect to maintenance etc. However, we have customized the model to two aircraft types, keeping in mind India's geographical terrain and airport runways. There are several airports in India where only turbo props can land, and not jets.

Turbo pops, we feel, are extremely important for regional connectivity.

Much is spoken about the tier-2 market in India. Is the growth story here real?

Low cost air travel has acquired both depth and width of demand, percolating to non-metro towns and Tier-II cities as well. We have pried open the interiors of the country, creating an exhaustive network of vast and varied destinations.

Low cost connectivity will extend from transporting people to cargo, and from short-sector to long-haul flights. Going forward, the future of air transport in India is low cost connectivity.

also see : Low cost connectivity is the key: Capt G R Gopinath )

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Capt GR Gopinath: "Future is low cost connectivity"