THE
NEXT FIVE YEARS FOR BUSINESS (14)
AIR TRAVEL
Up In The Air
What can be done to take the present
level of 3% air travellers to 10% in the next five years?
The year was 2002. I had put out an
ad for my helicopters and the copy below the picture of a girl fishing next to
a helicopter on a remote uninhabited island said - "If it's on the map, we
will get you there!" I started getting hundreds of calls asking if I could
fly them to Dharamshala, Vijayawada or Gwalior and how much it would cost. When
I said it would be a lakh of rupees or two, they would gasp in disbelief and
hang up in disappointment. I found that they were common people who were
enticed by the ad. Then one day when Chandrababu Naidu said to me if I could
connect small towns in Andhra, like Vijayawada and Rajahmundry with flights, it
created a buzz in my mind. On a chopper flight between Goa to Bangalore, I
noticed when I flew over villages, shiny mirrorlike objects flashing in the sun
and vanishing. Curious, I asked the pilot to fly a bit low. I discovered they
were large dish antennas for TVs. It was almost part of the landscape of the
cluster of mud huts and small towns as I flew across India. It was my moment of
epiphany! I suddenly saw a new India, of a billion hungry people not to be fed
and subsidized, but a billion hungry consumers, with aspirations for buying
televisions, motorcycles and cell phones. That metaphor and image were symbolic
but possessed me and gave wings to Air Deccan.
It seemed a mad man's obsession and dream. As Walt Disney said - "If you can dream it, you can do it." Vision is the art of seeing the invisible. Everyone was skeptical. Only 13 million Indians flew in 2002, including frequent flyers. That was less than 0.5 % of our population. They said, where's the market? But I saw only the 99% who didn't fly. How can you fail in such a country?
Today, after 10 years and witness to the fastest aviation growth in the world and 60 million flyers and eight new airlines and exit of four, Indian aviation is in its death throes. For the first time, the total number of passengers flown year on year, has shrunk. The government wittingly and unwittingly, through omissions and commissions, has created a minefield that has spooked new investors who are shy of investing in the aviation sector. Coupled with that, most airlines have also built a business model and cost structure, which are unable to stimulate and expand the consumer base.
What do we need to do to make more people fly so that it enlarges the consumer base? What can be done to take the present level of 3% air travellers to, say 10%, in the next five years? What policy framework do we have to put in place to encourage private sector participation but prevent cartelisation? It is shocking but true - 50% of total air traffic of India is contributed by just two airports - Mumbai and Delhi. How do we incentivise and remove barriers so that air travel penetrates into other regions and reach the very bowels of India to ensure equitable growth and knit the country together?
In every sector, the engine of growth is at the bottom of the pyramid and so is it in aviation. Whether it is retail, automobiles or the telecom industry, it is the low-cost product service mix that is rising to the challenge, winning customers while the premium brands are not scalable, especially in an emerging economy. The low-cost airline business model is not just about cutting costs by saving some fuel or a few overhead expenses. Fundamentally, the low-cost model is all about innovations, efficiency, very high asset utilisation and stimulating market demand by targeting an inclusive consumer base. The basic philosophy is not very different from that of a self-service Udupi restaurant in stark contrast to a full-service five star hotel-clean, efficient, quick turnaround with high footfalls and low prices, translating into very high volumes and low margins. What India has is an inexhaustible customer pipeline and that more than makes up for any overwhelming or seemingly insurmountable odds. To put this in context, if we can reach even one-fourth the per capita consumption rate of air tickets in Europe at the end of 30 years, we would need 30,000 flights a day as against the present 2,000. So the sky is the limit!
By CAPTAIN GR GOPINATH who in 2003, founded Air Deccan, India's first low cost airline CDET130104
It seemed a mad man's obsession and dream. As Walt Disney said - "If you can dream it, you can do it." Vision is the art of seeing the invisible. Everyone was skeptical. Only 13 million Indians flew in 2002, including frequent flyers. That was less than 0.5 % of our population. They said, where's the market? But I saw only the 99% who didn't fly. How can you fail in such a country?
Today, after 10 years and witness to the fastest aviation growth in the world and 60 million flyers and eight new airlines and exit of four, Indian aviation is in its death throes. For the first time, the total number of passengers flown year on year, has shrunk. The government wittingly and unwittingly, through omissions and commissions, has created a minefield that has spooked new investors who are shy of investing in the aviation sector. Coupled with that, most airlines have also built a business model and cost structure, which are unable to stimulate and expand the consumer base.
What do we need to do to make more people fly so that it enlarges the consumer base? What can be done to take the present level of 3% air travellers to, say 10%, in the next five years? What policy framework do we have to put in place to encourage private sector participation but prevent cartelisation? It is shocking but true - 50% of total air traffic of India is contributed by just two airports - Mumbai and Delhi. How do we incentivise and remove barriers so that air travel penetrates into other regions and reach the very bowels of India to ensure equitable growth and knit the country together?
In every sector, the engine of growth is at the bottom of the pyramid and so is it in aviation. Whether it is retail, automobiles or the telecom industry, it is the low-cost product service mix that is rising to the challenge, winning customers while the premium brands are not scalable, especially in an emerging economy. The low-cost airline business model is not just about cutting costs by saving some fuel or a few overhead expenses. Fundamentally, the low-cost model is all about innovations, efficiency, very high asset utilisation and stimulating market demand by targeting an inclusive consumer base. The basic philosophy is not very different from that of a self-service Udupi restaurant in stark contrast to a full-service five star hotel-clean, efficient, quick turnaround with high footfalls and low prices, translating into very high volumes and low margins. What India has is an inexhaustible customer pipeline and that more than makes up for any overwhelming or seemingly insurmountable odds. To put this in context, if we can reach even one-fourth the per capita consumption rate of air tickets in Europe at the end of 30 years, we would need 30,000 flights a day as against the present 2,000. So the sky is the limit!
By CAPTAIN GR GOPINATH who in 2003, founded Air Deccan, India's first low cost airline CDET130104
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