SONHERA SHEIKH

6606
ASSIGNMENT#1

Case: AIR DECCAN: REVOLUTIONISING THE SKIES

Civil Aviation in India, since its inception, has been a mode of transport mainly for
the elite, and it implies that it is within the means of affordability of less than 1% of
the population only. The launch of Air Deccan in the year 2003 changed this
paradigm forever. The singular driving force behind this audacious venture was
Captain Gopinath. Over the years, there have been many low-cost airlines in service in the advanced countries.
Many of them have succeeded despite the general downtown in the aviation industry post 9/11. Equally
tenacious entrepreneurs, who saw the potential for a low-cost and 'no frills' airline, have launched many of these
ventures. In what is peculiar to India, Captain Gopinath saw the market not in terms of those who were flying,
who would want a low-cost airline, but instead as the more than one billion Indians, who had no possibility of
flying ever in their lives in the legacy airlines, simply because there was no way they could ever afford the price.
That Air Deccan could even think of launching a regular airline, given their very modest means, and more
importantly, strong political support of the existing players, is a feat by itself. Its continued growth, month after
month, is a saga of fortitude and belief.

This case study describes the story of the launch of Air Deccan and the challenges faced by it. In addition to the
usual approaches to cost containment adopted by low-cost airlines worldwide, Air Deccan had implement
several measures that were unique in the Indian context. This had result in steady increase in the market share of
the airline, much to the worry of the established players, viz., Jet Airways, Air Sahara and Indian Airlines.
Consequently, it had result in fierce competition and price wars in the Indian skies, with the net result that the
passenger benefited significantly. There were a number of challenges that Air Deccan had to contend with. It had
set for itself a mission to enable every Indian to fly. Passenger fares for long haul flights such as Bangalore to
Delhi, covering over 2000 km, could be purchased for as low as Rs. 500 , if purchased early. It perceived the
market as practically unlimited, and saw itself as the largest airline in India in the forth coming years.

With daily sales in excess of Rs. 15 million and growing steadily, Air Deccan had transform the aviation
landscape in the country. Air travel, if planned well in advance, is often cheaper than travel by second-class train.
While there are many low cost airlines the world over, especially in the USA, Europe, Far East and Australia, the
challenges of replicating this in India was not trivial. Three powerful established players (Indian Airlines, Jet
Airways and Sahara) were not amused with this upstart airline and with their deep connections in the political
and bureaucratic system of the country, wanted to scuttle the start-up airline. Capt. Gopinath. Despite heavy
odds, including lack of finances, he and his team came up with creative solutions at every step, to overcome the
hurdles. His entrepreneurial style warrants close study to draw out useful lessons for any aspiring entrepreneur.

Captain Gopinath crafted the company from scratch. He went on a 'boot strapping' mode, which was the
hallmark of a successful entrepreneur. The constancy of purpose, focus and humbleness were evident. His ability
to sense opportunities from chance encounters (such as a visit to the USA or the Southeast Asian countries) were
out of the ordinary experience. These and many other qualities were a 'must have' list of qualities of a successful
entrepreneur.Setting up and successfully operating a low cost airline was a challenge in the best of
circumstances, even in the advanced countries. In India the challenge was considerably more with a lot of subtle
factors that make the challenge of setting up and successfully running a low cost airline in India even more of a
challenge, than it is to do in the advanced countries.

The challenges that the company had to face in the initial stages of the company were; many of the established
players (Indian Airlines, Jet Airways and Sahara) trivialized the company and not expected it to reach the level it
has reached now. Suddenly, the company had appeared as a big dot on the radar screen of these well-established
players. The existing paradigm was that running an airline requires large funding, something that Captain
Gopinath lacked. Hence, the existing players would have concluded that this venture was bound to fail.
However, there was a lot of entrepreneurial creativity manifested by Captain Gopi that helped him make his
dream a reality, besides, many other 'me too' low cost airlines were already on the anvil.
(SpiceJet, GoAir, IndiGo and JetLite were all launched between 2005 and 2007)

The airline operated a single cabin class, economy, allowing it to pack more seats into its aircraft. Following
its no-frills approach, it charged for all food and beverages served on board. Payment was also required for
cancellations, and no refunds or accommodations were provided to passengers who had missed their flights.Air
Deccan operated a point-to-point route network from seven base airports. It maintained low turnaround times and
often outsourced work to local airport employees, especially at airports that saw few Air Deccan flights and did
not require dedicated employees throughout the day. Air Deccan also gained advertising revenue by allowing
advertisements both inside and outside its aircraft. For reservations, the airline utilized multiple channels.
Passengers could book tickets through travel agents, on the Internet or through call centers. Each of these
channels was connected to a fully web-enabled reservation system, making Air Deccan the first in India to use
such a system. Air Deccan also avoided the cost of printing tickets; passengers or travel agents were required to
do so off the Internet.
The company was growing from strength to strength. Captain Gopi and Air Deccan were regularly featured in
the various media in India as having ushered in the democratization of air travel in India. The company was
bullish about the future. Several companies were seeking to emulate the Air Deccan model. The three established
airlines were under constant price pressure from these low cost operators. The overall scenario was fairly
dynamic as experts expect considerable churn to take place in the coming years.

In early May 2007, rumors began to circulate that Kingfisher Airlines, was interested in buying Air Deccan.
Gopinath dispelled the rumors, claiming “we are from different planets; King Fisher is from Venus, and Air
Deccan is from Mars". Gopinath believed it was impossible to merge the airlines' separate business models;
Kingfisher was a full-service carrier. Nevertheless, negotiations began at the end of the month, and Kingfisher
parent United Breweries Group purchased a controlling 26% stake in Deccan Aviation on 31 May. Gopinath
changed his mind upon understanding that the two airlines would continue to function independently. In
addition, he needed to raise funds; Air Deccan had lost US$ 33 million during the quarter ending 31 March
2007. Air Deccan was rebranded Simplifly Deccan in October 2007 and adopted Kingfisher's livery and flight
attendant uniform.

However, it is fair to say that while the progress was spectacular, challenges abound. Issues relating to the
continued growth and success of Air Deccan required a clear strategy.

CASE QUESTIONS

1. What are the lessons you can pick up from the launch of the entrepreneurial venture by Captain
Gopinath?
Answer:
The case is replete with illustrations of how Captain Gopinath crafted the company from scratch. He went on a 'boot
strapping' mode, which is the hallmark of a successful entrepreneur.The constancy of purpose, focus and humility are
evident. His ability to sense opportunities from chance encounters (such as a visit to the USA or the Southeast Asian
countries) are out of the ordinary experience. These and many other qualities are a 'must have' list of qualities of a
successful entrepreneur. Anyone aspiring to succeed in an entrepreneurial venture will do well to emulate these
qualities, among others. The class may be encouraged to extract all the various qualities of Captain Gopi that have made
him successful.One of the recurring themse of Gopi’s ventures is the focus on the idea and not the funding. Thus, even
his airline venture started out with a very small investment (INR 5 crores) and thereafter got venture funding and even
raised funds from the public through sale of equity shares. Air Deccan’s large order for 60 air craft from Airbus and
thereafter leveraging the purchase for profit are ideas that later Indian low-cost airlines have copied successfully. It was
not all hunky-dory and the airline faced numerous challenges in its life and those too are described. Air Deccan merged
with another airline Kingfisher Airlines and thereafter underwent a brand revamp being called Kingfisher Red (the low
cost variant). Thereafter, Kingfisher Airlines closed taking down with it Air Deccan too. Gopi’s description of his
journey as a businessman from his hand at farming to the latest one of a air cargo venture, is amazing.  He has the style
 of a great raconteur who keeps the story interesting and riveting throughout. His daring in taking on new ventures as
also during negotiations even when operating from a position of weakness are inspiring lessons to entrepreneurs. .

2. While low cost airlines are not new to the world, Air Deccan was clearly the torchbearer of this concept
in India. What additional challenges did Captain Gopi have to contend with vis-a-vis a low cost
operator?
Answer:
A precursor to this dialogue that could be beneficial is to attract out demanding situations of putting up and running a
low fee airline everywhere with inside the world, which includes in superior countries.Setting up and efficiently
running a low fee airline is a assignment with inside the exceptional of circumstances, even with inside the superior
countries. In India the assignment is significantly extra. The case is embedded with quite a few diffused elements that
make the assignment of putting in and successfully going for walks a low fee airline in India even extra of a
assignment, than it's miles to do in the advanced countries. Participants may also choose up those aspects, and actually
debate on whether or not it is easier or extra tough to drag off one of these undertaking in India vis-a-vis the superior
countries.

3. Going forward, what were the challenges that the company had to grapple with?
Answer:

The demanding situations that the employer has to stand at the moment are best beginning. In the preliminary levels of the
employer, among the hooked up gamers (Indian Airlines, Jet Airways and Sahara) would have trivialized the employer and
now no longer predicted it to attain the extent it has reached now. Suddenly,the employer has seemed as a massive dot at the
radar display of those well-hooked up gamers. The existing paradigm is that going for walks an airline calls for big funding,
some thing that Captain Gopinath lacked. Hence, the prevailing gamers could have concluded that this mission changed into
bound to fail. However, there has been a whole lot of entrepreneurial creativity manifested through Captain Gopi that helped
him make his dream a reality, and nowadays Air Deccan is a pressure to reckon with. Besides,many other 'me too' low fee
airways are already at the anvil.