22-May-07,BANGALORE (XFN-ASIA) - Discount carrier Air Deccan is counting on first-time fliers and small-town entrepreneurs to turn it into the country´s biggest airline.
"We will become the country´s largest people carrier in less than two years by offering the best low-cost product," managing director G.R. Gopinath told Agence France-Presse in an interview here.
The 55-year-old former army captain has built Bangalore-based Deccan into India´s number two airline in less than four years, with a market share of about 22.7 pct.
Now he wants to overtake Jet Airways, which last month increased its share of the expanding aviation market to more than 32 pct from about 25 pct by acquiring Air Sahara.
Jet, which is focusing on international routes, is trying to chip away at Deccan´s leadership of the budget travel market by positioning Sahara -- renamed Jetlite -- as a low-fare airline.
Meanwhile the upmarket Kingfisher Airlines, owned by liquor baron Vijay Mallya, wants to buy a stake in Air Deccan. But Gopinath says the airline has no merger plans.
Instead, Air Deccan plans to achieve its ambition of overtaking the competition by adding more planes to its fleet of 43, building more hangars and logistics support hubs and taking its low-cost model to untapped markets by linking small towns.
Instead, Air Deccan plans to achieve its ambition of overtaking the competition by adding more planes to its fleet of 43, building more hangars and logistics support hubs and taking its low-cost model to untapped markets by linking small towns.
The airline, which has flown almost 11 mln passengers since it took off, now operates 19 Airbus A320 planes and 24 turboprops, flies to 65 airports and makes 350 journeys a day.
But it is still trying to shake off a reputation for lateness and rude ground staff overwhelmed by the sheer volume of passengers attracted by low prices.
Air travel in the nation of 1.1 bln people has boomed since Air Deccan took to the skies with a single aircraft. The number of airlines has risen to 10 from three in just four years, and average plane fares have fallen by two thirds. The Centre for Asia Pacific Aviation forecasts the domestic market will more than double to 60 mln passengers by 2010, as incomes rise and low fares make air travel more affordable.
But the decline in air fares has squeezed profitability, with airlines posting a collective loss estimated at 500 mln usd in for the year ended in March. Air Deccan had a loss of 2.13 bln rupees in the quarter ended March.
"Gopi has shown he is capable of building a big airline in a very short time," said Kapil Kaul, head of the India office of the Centre for Asia Pacific Aviation. "To become the biggest is within the realm of possibility."
"But all airlines have very aggressive strategic intent," he said. "And it´s important to strive for a balance between growth and expansion. Market share isn´t everything. For Air Deccan and all other airlines, the immediate challenge is to look within, restructure and wipe the bloodstains off the balance sheets in the next 18 months to 24 months."
Gopinath said he was confident Air Deccan would return to two successive quarters of profitability soon.
To fund expansion, he plans to raise between 75 mln usd and 100 mln usd by selling up to 26 pct of the airline to an institutional investor."We want to tap the potential that exists deep in the interiors of India by taking air connectivity there," said Gopinath. "Those are the economic powerhouses of the future. We don´t want to be a Delhi-Mumbai airline."
India´s airlines have expanded aggressively in recent years, with about 480 aircraft on order for delivery through 2012. About 135 aircraft have been added in the past two years. Enormous scope exists, with 18 mln Indians every day still travelling long distances by train and 12 mln taking buses, said Gopinath.
Air Deccan makes money by offering its aircraft fuselage to advertisers. Excess baggage and the sale of sandwiches, chips, tea and soft drinks earns it a bit more.
Non-passenger revenue makes up about 7.5 pct of Air Deccan´s total revenue, a share it wants to raise to 30 pct in three years.
The company is also India´s largest e-commerce website, grossing as much as 1.5 mln usd daily from online ticket sales.
