Friday, June 01, 2007


Capt.G.R.Gopinath, Founder & CEO of Air Deccan, India’s low cost carrier (LCC) is a smart man.

Just as everyone was about to write it off as a sick airline headed for its grave, yesterday this wiry ex-soldier of Indian army quietly palmed off a 26% controlling stake to Vijay Mallya’s Kingfisher Airlines for Rs.5.50 billion ($137.5 m) – Rs.155 per share (IPO was at Rs.150/- a share). In the process getting a return of almost 6 times his original investment of about Rs.930 m ( $ 23.25 m). As per the deal terms, he will continue as Chairman of the Company. The company had a last quarter loss of Rs.2.21 billion ($55.25 m) and its EPS is a cool negative figure. Coming to think of it, the strategy is fairly simplistic and well executed - go float a capital intensive business, shake down the whole market by suicidal pricing, break the back of existing established players almost forcing them either to buy you out (to stop bleeding price cuts threatening their very existence !) or to go out of business and eventually sell it to one of them and make 6 x returns...ain't that smart...?

Now to a little abstraction. Remember the Captain did it in India, a hotbed of spirituality where your good karma never goes unblessed or unrewarded. True to his words, he made air travel affordable for many a cost-conscious, VFM minded people (not necessarily poor) and he can safely count on all of their blessings. In particular, of those who could make it only because Deccan made it affordable for them, at real low cost – “Simplifly” goes its slogan – without a worry and no frills.

Now with $137 million in his pocket, in all probabilities, this Captain would want to do more of good Karma. Unless he makes it clear, every industry has reason to worry !


Yogesh said...

THanks to him the industry has changed from being shortchanged by indian airlines to customer being the king ... the airline industry has come a long way ... in the bargain if capt has made some /lot of money, I dont think any customer should complain. Well as for the airline cos. they need to understand public cant always be taken for "ride" !

Krish said...

That's been the point of my post too yogesh...!