Cover story: King Of The Skies [Pg.2]

Contn.
King Of The Skies

The Coming Competition

"There is no doubt that Goyal has played his cards well"
VINOO KASHYAP/
Joint MD/Indian Airlines

That's more than just a nifty sound byte. In fact, Goyal sees it as a mantra with which to voodoo the coming competition, which will be unlike anything Jet has seen so far. Indian Airlines is awaiting a buyer, and should the new owners (the government will continue to own 40 per cent, though) prove to be somebody like Tata-Singapore Airlines, Jet's USP of superior service and on-time flights will be hard to defend. Then, there is Royal Airways (formerly ModiLuft) threatening-for the nth time-to take wing, besides Crown Air and North Star Aviation. Acknowledges Datta: ''Any one new coming in would certainly hurt us. Our growth may not fall in absolute terms, but the rate of growth could be affected.''

Part of Jet's spectacular success was ensured by Indian Airlines itself. The fact that it was government-owned, long operated in a captive market, was not allowed to expand its fleet, and had to get the ministry's approval for every thing, made it a poor competitor. Therefore, while IA served 70 stations with a fleet of 57, Jet plied its 33 aircraft among, until recently, 30 key stations. Even today Jet operates more flights than IA out of a lucrative station like Bangalore. Admits Kashyap: ''It's a fact that until recently we were reactive.''

Jet	Jet vs IA	IA
33	Number of aircraft (June 2001)	57
5.9 million	Passengers carried last year (2000-2001)	8.0 million
71.7%	Average seat factor	67.0%
10 hours per day/aircraft	Aircraft utilisation	7.5 hours per day/aircraft
163	Number of employees/Aircraft	397
215	Number of flights/Day	208
2.8 years	Average age of fleet	13 year
17,200	Passengers/Day	22,000
Rs 2,547 crore	Turnover	Rs 3,796 crore
Rs 12.50 crore	Profits/Loss	Rs 177 crore (Loss)
42%	Marketshare	51%
Turnover, Profits & Marketshare for the year ended March 31, 2001 Source: Respective airlines

Over the recent years, however, the national carrier has been pulling itself up by the bootstraps. For instance, its 737s were flying 1,600 hours a year in 1995. Today, they do 2,900 hours. Similarly, its a-320s are doing 3,100 hours a year, compared to 2,300 hours earlier. By the end of this year, IA plans to have four more a-320s in service to consolidate its presence in the trunk routes, and also bring in six ATRs (50 seaters) to do short hauls and thin routes.

In a price sensitive market, the biggest threat to Jet could come from IA's decision to go in for flexi-pricing of fares. Eight months ago when Jet increased its fares, IA had to hold on to its own because it had just crashed one of its 737s at the Patna airport. By maintaining fares, IA had hoped to lure passengers away from Jet. But the 9W (Jet's flight code) did not register any fall in numbers, although its rate of growth slowed.

With flexi-pricing, IA, which flies one out of every two passengers, may be able to make further inroads. For example, an afternoon Delhi-Mumbai flight may be cheaper than the morning flight on the same route. Kashyap says that the difference in fare could be as much as 15 per cent. The idea, of course, is to even out passenger load and grab customers from Jet, which-not taking any chances-has also decided to drop its prices by 10 to 15 per cent on all the key sectors.

Gaining Altitude

Not surprisingly, Jet's immediate goal is to consolidate its marketshare by further improving its service levels, and adding more routes to its network. By the end of this fiscal, Jet plans to have three more ATRs and one 737 in its fleet. That should increase the number of stations it serves to 45 or so. Explains Forte: ''We feel that a satisfied customer is the best defence against the threat of new entrants.''

Around this time last year, Goyal had threatened to cancel the lease on four ATR turbo-prop aircraft because the 62-seaters, brought in to fly feeder routes, proved to be unviable. But obviously growing traffic and the need to strengthen presence in smaller stations have prompted Jet to try and rework the ATR equation. By the end of next fiscal, it hopes to rack up $638 million in revenue. Says Anita Goyal, V-P Marketing and Sales, and Goyal's wife: ''Today, responsibilities are much more defined, and we are working with expat managers to put into place systems that should result in a qualitative jump in performance.''

The 9W Man

So, just what kind of a man is Naresh Goyal? By all accounts, affable, shrewd, a good listener, a Hindi movie buff, and a family man. Almost a decade ago, when Jet was working on its logo, the kind of people who came forward to brainstorm gratis included actress Shabana Azmi, her husband and lyricist Javed Akhtar, and even producer Shekhar Kapoor. The point: ''Goyal's ability to make friends is simply incredible,'' says an associate of 20 years. His self-confessed gurus are Ali Gandhour, who founded Royal Jordanian Airlines, and J.Y.M. Pillai, former chairman of Singapore Airlines. ''They both are great leaders and even today I continue to be inspired by them,'' says the man, who'll fly business class in his airline only if a seat is going vacant. Otherwise, you'd spot him somewhere in the backrows.

To his employees, the NRI Goyal, who lives in Mumbai and London, is an accessible boss. In fact, every time he flies, Goyal makes it a point to chat up the crew and the ground staff. But for all his pre-occupation, the father of two (Namrata, 12, and Nivaan, 9) is a hands-off manager, allowing his hand-picked team of professionals to run the show. ''If (Goyal) needs to meet somebody, he will simply walk down from his fourth-floor office (in Andheri, Mumbai) to their work station," says Jet's Pramilla Kanga. And here's a secret that the peripatetic entrepreneur would not have his people know: he actually hates having to fly so much.

An external consultant, Dr. Pieter Britz, has been appointed to access managerial expertise and help optimise performance. Simultaneously, serious investments are being made on the training front. An aviation academy, housing the state-of-the-art Boeing 737 700/800 flight simulator and a flight training device for 737-400s, has just been set up at a cost of $10 million.

The dough to plough into infrastructure and fleet is to come from a private placement. Says Goyal: ''We are talking to six interested parties, and hope to finalise a deal in the next three months.'' Jet has already tied up a Rs 1,600-crore loan for the purchase of 10 Boeing 737s to be delivered over the next two years. The innovative deal minimises Jet's foreign exchange exposure, since the repayments are to be made in Indian rupees. Says Shailendra Apte, V-P, Centrum Finance: ''Jet was able to borrow at just 70 basis points above the sovereign rate, and get a floating rate of interest.''

"A satisfied customer is the best defence against the threat of new entrants"
STEVE FORTE
CEO

All this will help when Jet begins flying neighbouring countries. It has already applied for permission to fly countries such as Malaysia, Singapore, and the UAE. And although the proposed new aviation policy is likely to recommend that sound private airlines be allowed to ply such sectors, IA and AI may be given the first right of refusal. But that clause could go in the wake of their privatisation. Still, it will take Jet at least a year from the date of approval to get a set up in place. Not only will it need bigger aircraft, it will have to train its pilots and engineers to handle the new fleet.

There is little doubt that it's a totally new kind of competition that Jet will face in the international arena. Apart from AI and IA, which deploys 22 per cent of its capacity on international routes to get 30 per cent of the revenue, there are international biggies such as United Airlines, Singapore Airlines, Lufthansa, British Airways, and Cathay Pacific to reckon with. Besides, in an industry prone to downcycles, Jet's relatively shallow pockets and overwhelming dependence on passenger business could prove fatal.

That said, not many doubt Goyal's ability to stand his ground in the global dogfight. Besides, the man himself-who is known to say a small prayer at take off and landing-will want to make moves with the precision of a ballet dancer. For, unlike 1992, what Goyal has at stake is not a few millions of dollars, but an airline.

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