The pioneer of low-cost flights in India is making a comeback to connect its small towns

Gopi the phoenix.
Gopi the phoenix.
Image: AP Photo/Manish Swarup
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A decade after he quietly walked away from India’s highly-competitive passenger airline industry, Gorur Ramaswamy Iyengar Gopinath, is taking to the skies again.

Popularly known as Captain Gopinath thanks to his stint with the Indian Army, the 65-year-old’s Air Deccan introduced Indians to cheap airfares in the early 2000s. But by 2007, Gopinath chose to merge the airline with the now defunct Kingfisher Airlines, switching his focus to logistics and charter services instead.

Now, he is set to launch a new service that will primarily connect India’s long-neglected small towns. His company is among the five firms tapped by the Narendra Modi government to revive unused and under-used airports in India’s hinterlands under the UDAN—Ude Desh ka Har Nagrik (Let every citizen fly)—scheme.

According to government documents, Gopinath’s new airline will also be called Air Deccan. It is expected to use 18-19 seater planes to connect remote cities like Burnpur, Cooch Behar, Rourkela, and Shillong.

For a man who sparked the second revolution in the country’s passenger airline industry—the first being its inception by JRD Tata in the 1930s—these hinterlands may hold the potential for the third.

Low-cost pioneer

Gopinath, the son of a schoolteacher from the nondescript village of Gorur in the southern state of Karnataka, began his entrepreneurial journey in the 1980s after retiring early from the Indian Army as a captain.

He started out with sericulture—the production of silk and rearing of silk worms—before opening a hotel. However, it was his entry into the aviation industry in 1995, with the establishment of helicopter charter service Deccan Aviation, that paid off.

In 2003, as India’s economy entered an era of rapid growth, Gopinath launched Air Deccan, an airline that offered extremely cheap fares, with some tickets even priced as low as Re1. The goal was to target the millions of Indians spending days on trains, then the only affordable mode of long-distance travel, to get from city to city.

“People remember us for the Re1 fare, but there were many other innovations. We were the first to introduce e-ticketing in India and, thus, put the ticket inventory directly in the customer’s hands,” Gopinath told the Business Standard newspaper. He did not immediately respond to Quartz’s request for comments.

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. Its strong performance also inspired others, most notably IndiGo and SpiceJet, to take the “low-cost” route to Indian skies. Domestic air travel boomed, with the number of passengers flying within India jumping threefold to 90.44 million in 2006, from 29.2 million in 2003.

“Many consider Captain Gopinath as the father of the LCC (low-cost carrier) revolution in India,” Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG, said. “He was clearly ahead of his time.”

However, with rising oil prices—fuel constitutes 50% of an airline’s costs—Air Deccan’s super-cheap tickets couldn’t be sustained and the company eventually suffered deep losses. In 2007, Kingfisher Airlines, owned by flamboyant businessman Vijay Mallya, saw an opportunity in merging with Air Deccan, and soon bought a controlling stake.

That merger, which Gopinath described as giving away his daughter in marriage, didn’t go as well as planned, though. Kingfisher went on to disband the Air Deccan brand after a few months, jettisoning the low-cost model. Eventually, Mallya’s firm itself piled up huge debt, forcing it to shut shop in 2012.

Gopinath, in the meantime, had turned to air cargo and logistics, setting up Deccan 360. But it was asked to shut shop in 2013 by the Karnataka high court because of unpaid dues owed to some customers. Gopinath also continued to operate Deccan Charters, launched in 1997, which provided chartered helicopter and aircraft services.

“I never completely left aviation,” Gopinath said last week. “Deccan Charters has been providing charter services for tourism, medical service, and corporate travel. I just want to make it bigger.”

Back to the future

Gopinath’s new airline is being launched at a time when the Modi government has big plans to make India one of the world’s top-three markets by 2022 in terms of domestic and international passenger traffic. It’s currently the ninth-largest.

The UDAN scheme is a key part of this project. Under the scheme, Air Deccan, Air India’s subsidiary Alliance Air, SpiceJet, Turbo Megha, and Air Odisha will connect metros such as Delhi, Mumbai, Bengaluru, and Hyderabad to 70 small cities, including Kanpur, Bathinda, Pathankot, and Gwalior. Currently, no airlines fly to 31 of the cities selected under the UDAN scheme.

The government will provide a financial stimulus to the airlines besides granting them a monopoly on these routes for three years. Moreover, the price of 50% of the seats on one-hour flights will be fixed at Rs2,500.

“If handled well, UDAN can prove to be a game changer,” KPMG’s Dubey said. ”India’s real population is in the interiors. Once they take to flying, India can easily grow its 99 million domestic market to over three times in six to eight years…provided that ATF prices remain stable and the airport infrastructure is ramped up quickly.”

KPMG’s estimates suggest that the scheme could prove highly lucrative for 46 and 78-seater aircraft, though it could be challenging for smaller ones, like the 9- and 19-seaters. However, Dubey said, if these new regional operators synchronise their schedules to enter into code-share agreements with larger carriers, they can maximise occupancy.

“UDAN is a need of the hour. It will give a huge fillip to investments, tourism, and job creation in the interiors of India,” Dubey said.

And that echoes a belief Gopinath has held for a while.

“I have always said connectivity is key to growth and the hinterland of India deep in its bowels needs to be air-linked to metros for equitable growth,” he told the Mint newspaper.

Good timing

Gopinath’s new airline is joining the fray just at the right time. India’s $16-billion aviation market has been struggling through much of the past decade, but has recently experienced a recovery. Between 2011 and 2015, barring IndiGo and GoAir, none of India’s seven airlines made profits. In fact, Kingfisher and Paramount even went bust and SpiceJet was on the brink.

However, plummeting crude oil prices in recent times have helped carriers return to profitability. In the 2016 financial year, all three of India’s publicly-listed airlines—Jet Airways, IndiGo, and SpiceJet—recorded substantial profits, and private airline GoAir, too, raked in Rs166 crore.

And there’s plenty of room to grow. Last month, India overtook Japan to become the world’s third-largest aviation market in domestic traffic. Aircraft-maker Airbus expects domestic air travel in India to grow 9.5% annually between 2011 and 2031.

According to Airbus and Boeing, the world’s two largest aircraft makers, India is also likely to order over 1,700 planes over the next 20 years. By 2020, its airports are expecting as many as 369 million passengers, both domestic and international—more than the current population of the US—compared to today’s 190 million.

No wonder Captain Gopinath is re-entering the arena. And, undoubtedly, his return will be welcomed by a lot of travellers who remember exactly what he, along with Air Deccan, symbolises.

“Most passengers carry fond memories of Air Deccan,” Dubey said. ”It was the airline that helped many Indians take the first flight of their lives, especially in the interiors of India.”