GoAir's Wadia: Acquiring for growth

After last year's $13 billion splurge at the Paris air show and another couple of billion gone into further orders at the Dubai and Singapore exhibitions, the Indian aviation sector was expected to take it easy at the biggest air-show this year at Farnborough in the UK. But last fortnight, when Airbus sent out a press release, congratulating the Wadia group-promoted GoAir for buying 10 more A320 aircraft at an estimated list price of $600 million (Rs 2,820 crore), it became clear that the buying binge had in fact only just begun. Kingfisher Airlines' top honcho Vijay Mallya too was on a signing spree ensuring that Airbus put an A320 in Kingfisher colours on display at the show. For good measure, the UB group Chairman also ordered $400 million (Rs 1,880 crore) worth of engines from Pratt & Whitney and booked three full-flight simulators for $24 million (Rs 112.8 crore). Mallya reportedly is also keen to buy the all-business transatlantic carrier MAXjet. And then there was Flyington Freighters' audacious $1 billion (Rs 4,700 crore) order for four Boeing 777 Freighters.

At a time when the listed airlines companies are being hammered on the markets can the Indian market sustain so many aircraft orders? "Yes," says an extremely bullish Nikhil Garg, Aviation Analyst, Edelweiss Securities. "The Indian market can grow to four times its current size in four-five years, and towards the low-cost side there is significant room for growth." By these estimates, the Indian domestic fleet (aircraft used specifically for domestic operations) will grow from around 200 today, to about 800 by 2011-12. The orders placed in the last 24 months (excluding Air-India's $8 billion or Rs 37,600 crore order) would result in 300 aircraft flying the Indian skies. "I think there are going to be far more orders from both start-up and established domestic carriers going forward," Garg adds.

Airbus may have little reason to complain, but competitor Boeing has a slightly different view. Speaking from Farnborough, Dinesh Keskar, Senior Vice-President, Boeing Commercial Aircraft, spoke out against the massive growth in the Indian domestic market. "Don't think I'm not bullish, I still believe the Indian market can grow at 20 per cent annually. But more than adequate aircraft have been ordered keeping that sort of growth in mind. There are significant pressures on Indian carriers, not the least of which are the rising oil costs, increased people costs and rising lease rentals. Market penetration can only happen when you have cheap tickets, but with prices rising how cheap can you keep the tickets," wonders Keskar. Now whether that's a voice of reason or that of a tetchy competitor is for you to decide.

-Kushan Mitra

In Search Of Accolades
JWT has consciously decided to win more awards.

JWT's Harris: A brand in the making

It wasn't just a chance victory. A lot of planning went into JWT India winning two Gold Lions at the recently-concluded Cannes Lions International Advertising Festival. And for the record, the agency has also won more than two dozen other popular awards at the New York Festival, ABBY, AAAI and Clio, to name a few. "We took a conscious decision to try and win more awards when the agency was restructured last year," says Rohit Ohri, Senior Vice President, JWT Delhi. The agency's Chief Executive Officer, Colvyn Harris, explains: "We realised that while we were focussed on clients' work, we hadn't paid much attention to our own brand management and communication." So, the agency rebranded (its name was changed to JWT from J. Walter Thompson in late 2004) and restructured itself and put in place processes to track growth; along with these measures, it decided to boost its own brand perception by proactively undertaking creative work that would win accolades from peers and awards at festivals (some of such work has limited release and is largely focussed at winning awards).

Indeed, Ogilvy & Mather (O&M), JWT's sister agency (both are part of Sir Martin Sorrell's WPP Group), has had a better record of winning awards. This has led to a perception that the creative output of O&M, and some other agencies like McCann Erickson, was better than JWT's. Harris strongly refutes this. "Our line-up of clients is like a blue-chip portfolio of a shrewd investor. We handle the biggest brands in most product categories, like Lux, Sunsilk, Pepsi, FritoLay, HPCL, Nestle and Hero Honda. Most of these clients have been with us for 15 to 75 years," he says, adding: "First, no other agency can claim such long relationships with its clients; and secondly, no client will stay with an agency for so long if it isn't happy with its work." JWT claims that repeated analyses done by clients and the agency itself have shown that JWT's work has boosted clients' business. "It's just a perception that our creatives are weaker than those of others. To address this issue, we decided to create some positive buzz around ourselves," says Ohri, asking: "And what better way to do this than winning awards?"

JWT's rivals in the industry argue that this dual creative strategy may not work in the longer term. Many in the industry, in fact, have been quite vocal in opposing this trend and have dubbed it an "ad scam". "Isn't it a little contradictory to presume that a good creative work that can boost clients' business can't win awards and that to win awards, one has to do different work?" asks Piyush Pandey, Executive Chairman and National Creative Director, O&M. "Our work on Cadbury's, Asian Paints, Perfetti and Pidilite that won us awards was done for the common consumers and not for (an) award jury," he adds.

Clients, however, don't mind. For them, anything that creates a positive buzz around their brand is welcome. Says Suman Chatterjee, Country Head, Levis India: "If the brand is featured in the campaign in a way that boosts its attributes and appeal, then it is a win-win strategy for both the agency and the client." He says that the much-talked about Levis Slim Jeans print campaign that won many awards this year did exactly that.

Harris, meanwhile, insists that he won't be relying only on award-winning creatives to grow. "We have set ourselves ambitious growth targets. We are also making our creative team more accountable for its work," he says adding that JWT has grown over 10 per cent over the past three-four years and hopes to continue this momentum. "We are the third biggest JWT division globally, after North America and the UK," he adds. According to estimates, JWT's global revenues stood at around $1.3 billion (Rs 5,720 crore) in 2005 and India contributed around $45 million (Rs 198 crore) to it. "We are the market leaders and our new orientation is to ensure that we remain that way," asserts Harris.

-Archna Shukla

Flyington Who?
An airfreight wannabe places a billion dollar order for aircraft.

Last year at the Paris air-show, the question everybody was asking was: "Who are IndiGo?" Today, with their first plane painted and ready for delivery at Tolouse, nobody is asking that question anymore. Primarily because the new question-mark in the Indian aviation community surrounds the mysterious 'Flyington Freighters,' that placed a $1 billion (Rs 4,700 crore) order for four Boeing 777lr Freighters.

The promoters of the freight carrier are the same as promoters of the Deccan Chronicle group. When Business Today tried to contact T. Venkatram Reddy, Chairman, Deccan Chronicle Holdings, it was informed that he was still at the air show. According to sources, the Boeing aircraft will arrive starting 2009, but the company hopes to begin operations this year with three leased Airbus A300 aircraft.

Says Nikhil Garg, aviation analyst, Edelweiss Capital: "Globally freight is a fast-growing market, and many Indian corporates have spoken about entering this segment. But it seems Flyington is the first to put money on the table." "There are no Indian carriers in the market, and Flyington will do well," adds Dinesh Keskar, Senior Vice-President, Boeing Commercial Aircraft.

-Kushan Mitra

Big Wheels
If Tata has Daewoo, Ashok Leyland may soon have Avia.

Ashok Leyland's Seshasayee: Riding on a serious makeover plan

How's this for a quirk of fate: Daewoo Commercial Vehicle Co acquires Czech truck maker Avia at the turn of the century. The Korean company goes bankrupt in 2003. India's #1 CV maker Tata Motors takes it over, to form Tata-Daewoo. Meantime an asset restructuring company buys out Avia. Last fortnight India's #2 CV company Ashok Leyland signs up to buy Avia's Prague-based truck business.

Leyland officials point out that the sale is subject to conditions as well as corporate and statutory approvals. The valuation and acquisition price hadn't yet been finalised at the time of writing. If the deal does go through (and there's little to suggest it won't), Leyland gets a footprint in Central and Eastern Europe as well as good cabin technology and a platform for light CVs. Avia is also known to be fuel efficient, giving 18 miles per gallon of diesel as against the global average of 15 miles. And as R. Seshasayee, Managing Director, Ashok Leyland, points out: "Ashok Leyland will also look to launch some of its new-gen vehicles from Avia.''

Ashok Leyland currently uses the cabin design of the Cargo (from the Iveco stable and which has been phased out along with the relationship) in its E Comet range between 7.5 tonne and 14.5 tonne. The Avia's D Series, a parallel range, is between 6 tonne and 12 tonne (although the price starts from Rs 18 lakh in Indian currency as against just Rs 6 lakh for the E Comet). Goodbye Iveco, hello Avia?

-Nitya Varadarajan