More on this book
Community
Kindle Notes & Highlights
She told employees that if an airline couldn’t keep up with on-time performance, it meant it treated its customers with little respect. To improve its image, particularly among corporate travellers, she introduced attractive plans which forced the competition—including Ryanair—to up their game.
Fernandes, a self-made entrepreneur, comes from a modest background. His father, a physician, was originally from Goa and his mother Ena Dorothy Fernandes was a lady of Portuguese-Eurasian descendance. Fernandes climbed the ladder of success by dint of sheer hard work, by investing in good education (he graduated from the London School of Economics) and by acquiring a passion for uplifting himself.
The airline was transferred to Fernandes at a token money of 1 ringgit (about 26 US cents), but with all debts and liabilities totalling up to $11 million.
Fortuitous timing. • A well thought-out and well-executed business model. • Excellent relationship with the home government.
Today, LCCs account for nearly 70 per cent of domestic market share and their impact has been much deeper.
And if a passenger opts to have a meal on board of an LCC, he or she may actually end up paying more than an FSC.
The world over, low-cost flying operations typically presume the existence of secondary airports within a city.
But in India, there is no city that has a secondary airport for commercial operations.
In 1990, the total annual air passengers stood at around 11 million which grew to over 17 million by 2000.54 From
2000 to 2005, the growth remained gradual, but after 2005, there was a dramatic rise in the number of air travellers. From approximately 29 million annual traffic in 2000, the number shot up more than twice to 64.3 million in 2010 and to 120 million by 2015.
The pre-IndiGo years (1993–2005) turned out to be a phase of high growth and high mortality.
The airline was started by Thakiyudeen Wahid, a Trivandrum-based businessman. Starting operations with three leased Boeing 737-200s, the airline gained from the extended Indian Airlines pilots strike in 1992.57 The then Minister of Civil Aviation Madhavrao Scindia58 granted it quick permission to bring in more aircrafts to counter the ongoing strike and to ensure future remedial backup. Two years later, in 1994, it was also granted scheduled operators’ status permit.
the airline appeared to be in the safe zone, its founder Wahid was shot dead on 13 November 1995 outside his airlines office in Bandra, Mumbai.
Apparently, Mumbai underworld boss Chhota Rajan had ordered Wahid’s killing to avenge the murder of his close business associate Omprakash Kukreja by henchmen of his rival Dawood Ibrahim few months ago.
big loser of this development was PLM Equipment, an American
aircraft leasing firm, to whom the airline owed $3.3 million towards lease of three Boeings. The firm wasn’t able to recover its money despite court orders.
The airline served four-course meals with liberal doses of liquor.
The final nail in the coffin came from the twin-pronged impact of government regulation which forced private airlines to fly certain non-metro routes.
On a daily basis, 6100 passengers were being added each day.
Oil price trend, 1965–2015 Source: World Bank
Two Men with One Dream
In 2005, two little-known men—Rahul Bhatia and Rakesh Gangwal—decided to join hands and form a company called InterGlobe Aviation Private Limited with an aim to launch a true low-cost airline in India.
The airline was to be called IndiGo—In...
This highlight has been truncated due to consecutive passage length restrictions.
Bhatia would have been quite content with a teaching job in Canada or the USA, post his engineering degree from the University of Waterloo, Ontario.63 In fact, he had seriously contemplated taking up teaching after his first venture—making telecom switches—had failed.
This was the also the time when his father Kapil Bhatia was not in the best of health. Senior Bhatia offered to liquidate his share in an airline ticketing partnership business by the name of Bharat Express, which he had founded and nurtured for over 25 years, and give the funds to Rahul to start afresh.
Rahul didn’t have the heart to ask his father to exit a business that was so dear to him. Another catch was that the business, nurtured and supervised by his father, had ten partners and entering a business co-owned by so many people made little sense to Rahul and offered even lesser solace.
Some adverse events ultimately turn out to be providential. The shock developments made the father-son duo start afresh, but this time the venture was to be their sole baby. They started their own travel business—InterGlobe Enterprises (IGE). It did help that Senior Bhatia carried much goodwill among travel business associates and most of his earlier agents decided to join hands with his new firm.
Managing and nurturing the airline travel business gave Rahul Bhatia a deep insight into the aviation business, something that would come handy later, and contributed to making a big success of his aviation foray. As one industry watcher observes, ‘Rahul’s strong relationship with travel agents became a key strength for IndiGo Airlines when it began its operations.’
The partnership with Accor remains strong despite some hiccups midway. InterGlobe later got into partnerships with Novotel and Pullman too.
Rahul bought back the name ‘IndiGo’ from Kansagra for ₹25,000. IndiGo was to be Rahul Bhatia’s baby and destiny.
SpiceJet began flying on 23 May 2005, fifteen months before IndiGo’s first flight. Kansagra exited from the venture in mid-200866 after the aviation sector started bleeding heavily, while Bhatia remained glued to his baby and eventually turned it into the undisputed king of Indian sky!
Gangwals’ crowning moment was being made CEO of US Airways in May 1998, one of the largest and oldest US airlines at the time.
A Marwari by lineage, Rakesh Gangwal was born in Kolkata.
By this time, Gangwal had already resigned (in November 2001) from US Airways, and had moved to the field of private equity and venture capital followed by forays into technology support for airlines.
On 16 June 2005–the fourth day of the 46th Paris Air Show—Airbus made a stunning announcement. It informed the press that an upcoming airline in India by the name of IndiGo had made a firm order for 100 Airbus A320 family aircrafts.73 The deal was worth nearly $6 billion at list price.
Moreover, as per the terms of its arrangement with Airbus, any technical glitches or issues with engines were to be taken care by Airbus or the engine supplier. Also, by entering into a ‘sale and lease back’ arrangement, planes could be sold back
as they grew older. This model reduced IndiGo’s maintenance cost outgo while its accounts book would also become cleaner when compared to competitors as outstanding capital obligations would go down.
It may be recalled that Gangwal had dealt with Airbus extensively during his tenure at US Airways, and US Airways, despite being an American airline, had become the largest customer of Airbus. The press release on the occasion of IndiGo placing its first mega order with Airbus stated Airbus president and CEO Noël Forgeard as saying:77
IndiGo arrived on the horizon nearly fourteen years after the first private sector airline post-liberalization—East-West Airlines—had taken wings. By the time it was airborne, the Indian aviation sector had undergone significant metamorphosis.
One of the main reasons for Kingfisher going down was the fact that it was in a tearing hurry to start international operations, believing it to be its panacea for its financial woes while also being driven by the prestige of it.
The price paid by Vijay Mallya to acquire Deccan was well above its real market value and further stretched Kingfisher financially.
Dr Manmohan Singh took charge as the 13th prime minister of India. He went on to serve as the prime minister for the next ten years providing policy stability.
However, under the compulsions and compromises of coalition politics, the aviation sector was given to one of the NDA’s key ally—the Nationalist Congress Party (NCP). NCP boss Sharad Pawar chose his blue-eyed boy, industrialist-politician Praful Patel—the Bidi King of Vidarbha—to be the new minister for civil aviation.
Patel’s tenure79 would be remembered as the best of times and the worst of times for Indian aviation!80
GoAir, the low-cost airline from Wadia group, had also entered the fray by November 2005. The airline was headed by Jehangir (Jeh) Wadia, the younger son of Nusli Wadia. From its inception, it had been a quiet kind of player, content with slow and steady growth.
So, by the time IndiGo arrived, there were seven major airlines ready to give it competition. The list included one government airline—Indian Airlines, three full-service private airlines—Jet Airways, Air Sahara and Kingfisher, and three LCCs—Air Deccan, GoAir and SpiceJet. IndiGo appeared to be the weakest among them all. So what was IndiGo’s proposition that gave it the confidence to sail against the known headwinds?
Surprisingly, IndiGo has never had a vision or mission statement—it still does not. So what was it that the two partners wanted to offer to Indian flyers?
Commenting on IndiGo’s core proposition, its first CEO Bruce Ashby said, ‘IndiGo is built for people with things to do, places to be and people to see, who don’t want to waste time, money or energy in the process. The team at IndiGo has designed an airline with affordable fares that has cut red tape and hassles, opening up a country full of opportunities.’
(i) On-time performance (ii) Low-cost connectivity (iii) High-service standard
IndiGo announcers often went overboard on this count but then it helped them build a good reputation in the long run.
