By Nishant Saravanan, Member of SIGMA — The Business Club, NIT Trichy
Recently South India’s famed actor, Suriya, announced that his latest movie ‘Soorarai Pottru’ will skip theaters and be released straight to Amazon Prime Video on October 30. I felt that this would be the perfect time to write about one of India’s most notable entrepreneurs and the subject of the movie, Captain GR Gopinath, and his greatest achievement, Air-Deccan.
“The uncommon man who made the common man fly”- Dr. APJ Abdul Kalam
Who is G.R.Gopinath?
G.R.Gopinath is the Indian entrepreneur who revolutionized the airline industry. He came from humble beginnings; his father was a schoolteacher who ironically did not send him to school, and he went on to serve in the army for eight years.
Gopinath had a passion for business, but he wasn’t always successful. He started in the silk and hotel industry before hitting it big in the airline industry when, in 1992, he partnered with his friend, captain K.J.Samuel, to create a chartered helicopter service called Deccan Aviation.
The Success of Air Deccan
Air Deccan was an immediate success, and within four years of its launch, it controlled 22% of the market, connecting over 69 cities in India with its fleet of 43 aircraft. It followed a point-to-point model for major cities eliminating transit time and providing better options for its customers. The company’s primary aim was to give the cheapest fares for the price-conscious middle-class traveler.
“One-rupee wonder” -Economic times
The budget airline was most famous for its one-rupee ticket. The publicity stunt helped convince the middle class that flight tickets were attainable and brought in a large customer base by marketing their products as “tickets starting from Rs. 1”, even though very few seats would cost that much.
The Decline of Air Deccan
A major cost for Air Deccan was fuel prices, contributing to up to 50% of each flight ticket. As fuel prices continued to rise, the budget airline faced considerable losses and sold a significant stake to Kingfisher Airline’s chairman Vijay Mallya. This resulted in the merger of both companies with Vijay Mallya becoming the chairman and G.R.Gopinath as its vice-chairman.
An interesting fact about this merger was that both companies were facing significant loss during this time. According to an M&A report, Deccan Aviation reported a loss of Rs. 419 crores for the financial year of June 2007, while Kingfisher Airlines had lost Rs. 577 crores by March 31, 2007. It rumored that Vijay Mallya’s team did not even conduct a cursory background check before the merger.
The resurrection of G.R.Gopinath’s aviation career
“The unstoppable Indian” — NDTV
G.R.Gopinath did not give up on the aviation business. When asked whether he was facing a financial crisis, he denied all allegations pointing that his other chartered business was still doing well. After the merger with Kingfisher Airlines, Gopinath pulled his money from the merger into his next venture, Deccan 360.
He started Deccan 360 in 2009 as a cargo delivery service. Mr. Gopinath was unique in whatever he did. So, what was unique about Deccan 360? When all the big cargo companies aimed to provide services to the metropolitan cities, Deccan 360 aimed at delivering to smaller cities where it was harder to reach. It reached over 75 cities in the country and used the aerial route to reduce shipping time. Mr. Gopinath knew that warehousing, logistics, and transportation comprised around 28% of India’s total manufacturing cost; he planned to bring it down to 12%.
In addition, as cargo planes operate during the night, Deccan 360 hoped to increase its aircraft’s utilization by chartering the Airbus A310s on international routes during the day.
Downfall of Deccan 360
Mr. Gopinath put up 25 million dollars to restart his business and expected to get around 30 million dollars investment from big firms. At that time, firms like Singapore Cargo, IBM Ventures, and Intel Capital showed great interest in Gopinath’s business plans.
He tried to bring the same business model he used in ‘Air Deccan’ into the cargo business, but the biggest problem was of market size. India’s domestic express cargo business was worth 500 million dollars but consisted of only seven cargo aircraft. In comparison, China had a market of 5 billion dollars with over a 100 dedicated cargo aircrafts.
In 2011, like Air Deccan, Deccan 360 was shut down due to a cash crunch. Later in the year, he bought all the shares of Deccan charters from Mallya but was forced to close the business by 2013.
Conclusion
G. R. Gopinath was an innovative thinker and a shrewd businessman but he failed due to mixture of bad luck and a lack of business acumen. While it is possible to turn around a failing airline, such as Etihad Airways by Sheikh Mansour, it is an extremely difficult proposition that few have mastered. The current coronavirus pandemic has also caused significant setback to the Indian aviation industry, but that is a story for another time.
