NDTV Profit

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Power Of One Team

Sreenivasan Jain : Hello and welcome to Power of One. At a time when virtually every private and public airline is struggling, indigo is the only airline which is making profits and just continues to be a fantastic success story. To explain how and why they have pulled this off, I am joined by Aditya Gosh who is the president of IndiGo. Thank you very much indeed Aditya for joining us. How do you do it?


Aditya Ghosh: (Laughs)


Sreenivasan Jain: You can lean across and whisper if you want so that no one else can hear.


Aditya Ghosh:  Only a billion people will hear it(Laughs)


Sreenivasan Jain:  Just to put it in perspective, I was first talking about figures. So you guys are right now the number two airline in India?


Aditya Ghosh: Yes, on a standalone basis we are the largest carrier by market share.


Sreenivasan Jain: Basically what you are telling me is that if you combine Jet and Jet Light then they are number one. But if you take it separately then you are actually number one.


Aditya Ghosh:  That’s right.


Sreenivasan Jain: And you have about 21% of the market, and you posted profits of 650 crores last year. Which is remarkable because last year everyone was bleeding, everyone posted losses. And you have ordered 180 A 320’s for 16 billion dollars.


Aditya Ghosh: Ya, that is to follow up on our original 100 aircraft order so it’s about 280 on total.


Sreenivasan Jain: (Laughs) So everyone else is trying to lease out their aircrafts, get rid of them, and you are actually ordering aircrafts. That’s amazing.


Aditya Ghosh: But you know Vasu, if you kind of look at it this way. I always remind people that you are a country of a billion people and about 400 commercial planes in this country. One of the most under penetrated aircrafts market in the world. The thing that is different between our aircraft market versus others is that yes we have ordered 280 planes. But we spread that over a period of almost 20 years. We started getting out first plane in 2006 and we get out last in 2025. Now 280 planes in the country of a billion people over a period of 19years is a drop in the ocean.


Sreenivasan Jain:  So that’s just another example of how you guys financially manage by just spreading it out.


Aditya Ghosh: Ya.


Sreenivasan Jain: But seriously tell me what are all the, I know that it’s been talked about so much and people have talked to you guys and to Rahul. So let’s take it one by one, first of all you biggest USP continues to be on time. How does that work?


Aditya Ghosh: Well there is no real secret to the profitability. As basic as it sounds our cost structure is lower than our revenues at the end of the day.


Sreenivasan Jain:  You got a very very tight cost structure. And how do you manage to do that? The thing is that you guys have always said that low cost doesn’t mean low quality.


Aditya Ghosh: Absolutely.


Sreenivasan Jain: Because when you fly indigo you definitely feel you are flying some kind of a bucket flight. It’s a pretty good experience.


Aditya Ghosh: Well you know, first from where we started off, I think the 2 big secrets or elements of our success is I am blessed with shareholders who really understand the business. Both Rahul Bhatia who runs inter globe enterprises and Rakesh Gangwal who used to be the CEO of US airways


Sreenivasan Jain: These are the two gentlemen who started the airline.


Aditya Ghosh: Yes, and when three of us got together. I am given the responsibility of running the business and these are two shareholders who really know the business. So what happens is that I don’t have to go back and explain every move and they don’t ask me to do irrational things.


Sreenivasan Jain: And what about in operational terms?


Aditya Ghosh: I think we have a phenomenal team that focusses on every detail. I say this and I mean this with all my heart. I have one of the best jobs in the world and I really get to work with a brilliant set of people. So we have a phenomenal team. But there are these little little things.  


Sreenivasan Jain:  So give me one or two examples of that?


Aditya Ghosh: So you know sometimes people ask me is that why don’t you start a frequent flyer. And I say that I really like your customer and I want people to come and fly us over and over again. But in all that complexity that you have and then you go and promise someone that free ticket and then you say that you can’t travel on Holi and you can’t travel Diwali, you can’t travel on Christmas and you can’t travel on new year’s.


Sreenivasan Jain: So you decided to do away with it?


Aditya Ghosh:  Do away with it, give the guy a lower fare consistently so that he keeps coming back and flying us. We are obsessed with keeping the whole operation very simple, flying the planes on time and consistently come back and offer low fares. Having said that you were absolutely right when we started up there was this big perception, low cost, delays, canceled flights, dirty planes, bad service, unreliable.      


 


 


Sreenivasan Jain: Your planes are always fresh and clean. It doesn’t seem like rocket science. 


Aditya Ghosh:  It isn’t rocket science, I wish I could get paid like a rocket scientist. 


Sreenivasan Jain: But I am sure that you do somewhere in the ballpark (both laugh). So how does that work? Is it just great maintenance?


Aditya Ghosh: We have phenomenal maintenance, our technical dispatch reliability, very few people know about this because this is just a statistic. But our technical dispatch reliability is 99.91%  


Sreenivasan Jain: What does that mean technical dispatch reliability?


Aditya Ghosh:  So what that means is from the time we started to now, 5 and a half years , how many times was your plane not available due to any technical issue. That could be fixing a light bulb it could be changing an engine and it is 0.09%. There is no other airline no other airbus operator in the world who has a better technical dispatch reliability in the world.  Why I use that as an example is that who would have thought 5 years ago that a low cost airline out of India would have been able to be here. And here we are comparing ourselves to the emirates of the world and the Air France of the world.


Sreenivasan Jain: And the other statistic you gave me which is very interesting that you have about 50 aircrafts, and you are doing about 300 flights a day and with that you are doing about 21% of the market. Jet has 100 aircrafts which is double and they only have about 28%. So again as an example of how you’ve utilized your resources to the optimum.


Aditya Ghosh:  I must warn that market share is not everything, I mean if we drop fares by a 100 rupees we’ll have all of India flying us. But it’s also a perfect way on ensuring that I don’t have a job tomorrow, because the airline would go bankrupt. So while market share is not something we chase.


Sreenivasan Jain: But you do manage to manage you fleet very very effectively.


Aditya Ghosh:  Absolutely, and that basically means that more and more people come back and fly us. And that’s a responsibility and we have the highest load factors in the country and that helps for sure.


Sreenivasan Jain: So basically what the indigo story tells you is that right now when you see whats happening to airlines everyone’s in deep trouble and most of the time they would say that this is because of a difficult market, oil prices are high, airport fees are very high . Those things are I am sure true but within that you can still run a successful airline profitably.  


Aditya Ghosh:  Absolutely, and this is going to be our fourth year of profitability in a row and we fly the same airports, same routes, we charge lower fares. We were the last airline to start, we have the same fuel bills, we at least pay for it. And we have the same airport charges


Sreenivasan Jain: So what are these guys doing wrong? What’s not working for them? Are their cost margins too high?


Aditya Ghosh:  You know when I was in Bombay and I was talking to you and your folks at NDTV.


Sreenivasan Jain: At the Profit Awards?


Aditya Ghosh:  At the Profit awards yes, and what I said was and I firmly believe it that we need to look internally as well as an airline and in any business. We need to look inside and see that is our cost structure really what it is. And secondly the most important thing is that are we giving the customer what that customer really needs and is the customer willing to pay for it. Does the customer really want to pay for a red or a blue carpet? Or is the customer really paying you for reliability?


Sreenivasan Jain:  So all the frills, the classic example like Kingfisher put in videos and food and the freebies and all of that. What you are saying is that the customer may not necessarily want that? Or atleast they are willing to pay a lower price for some basic stuff. Like quality, reliability, on time and stuff like that. 


Aditya Ghosh:  When you think of a typical experience that you book a ticket you get to the boarding gate and you see if the flight on time, is the plane clean, if you eat some food weather u feel sick at the end of it? You go to the other end and is your bag there? And did you have a comfortable experience and that’s what you are paying for and that’s why you are deciding which airline to fly on.


Sreenivasan Jain: Could you see this coming for the others?


Aditya Ghosh:  I could probably see that is our cost structure or if we lost focus then we would not be profitable airline


Sreenivasan Jain: And you could actually see that happening with these guys. They are running cost structure which seems unrealistic


Aditya Ghosh:  That’s right in the sense that , I think that as far as IndiGo is concerned  if our cost structure was similar to anyone else in the sense that you know, we found ways to spend money on all of the other stuff we would not be profitable and what that would basically would mean is that we would’nt have money to buy spare parts , we would not have money to hire talent, we would not have money to give salaries and we would not have enough money to pay salaries and things like that.


Sreenivasan Jain: Which is exactly what’s happened to Kingfisher. They have not been able to do any of these things and it’s pretty bad


Aditya Ghosh:  You know its probably not fair for me to comment on somebody else but having said that I definitely know that I would not have been able to buy spare parts or get salaries. I don’t want to sound immodest but having said that we hold it dear to our heart but we have been around for 5 years and we have never had a salary freeze, we have never had a pay cut, we have never had to layoff even one employee.


Sreenivasan Jain: You have never laid off even one employee?


Aditya Ghosh:  No not even one person.


Sreenivasan Jain:  And you are paying salaries month after month?


Aditya Ghosh:  By the 30th of the month for the month. So if 30th is a holiday we pay by the 29th.


Sreenivasan Jain: That’s a given, but today Kingfisher employees haven’t got their salaries for 3-4 months. Even with Jet there is a problem that’s why their pilots are unhappy. Within the airline industry having to get your salary every month is becoming a big deal. Almost like a luxury. But tell me something, let me ask you and again this not to be interpreted in the wrong way. But when you look at what is happening with Kingfisher, how serious is the crisis. Because when we look at it from the outside and not entirely from the outside it seems pretty serious. 


Aditya Ghosh:  You know I don’t envy .


Sreenivasan Jain: Dr. Mallya


Aditya Ghosh:  Ya, I don’t envy the people who are running it. They have a very difficult situation on their hands.


Sreenivasan Jain: Is it possible to come back from where they are? Because many people are now feeling that may not be an option anymore?


Aditya Ghosh:   You know that’s going to sound self-serving if I was to answer that question. But I do feel it is a very difficult situation 


Sreenivasan Jain: And then you get into that spiral


Aditya Ghosh:  Yes Exactly.


Sreenivasan Jain:


Aditya Ghosh: 


Sreenivasan Jain:  Lots of people have left kingfisher across all different levels of the organisation they are obviously going to be out there looking for job options, are some of them coming to you like pilots for example,


 


Aditya Ghosh:  Ya absolutely but that there are people coming from various airlines, there are people coming from overseas coming back and you know want to work back in indigo.


 


Sreenivasan Jain: But obviously there would be quite a few from.


 


Aditya Ghosh:  Yes but the hard reality of this is vasu beyond a point of time even we cannot absorb n it is a very difficult situation and what number


 


Sreenivasan Jain:  Do you have number that how many pilots from kingfisher have joined you from the past three months?


 


Aditya Ghosh: Ahh no i don’t because we have been hiring pilots for a long period of time and we have had pilots from various airlines including new youngsters who come and join us , so i don’t have number in my mind , but definitely the reality of it is that in airline business and specially folks who work in a airline business other than few people who work in finance and HR and anything, you get so focused on that industry and you skills are so meant for that industry, it is a difficult situation when you do not have enough job opportunity


 


Sreenivasan Jain: Ya right you have to be very much with in the industry and that’s a fairly limited space , what did you make of that whole debate about the bailout, do you think that banks particularly national banks should be bailing out private airlines


 


Aditya Ghosh: I have a very firm view on this and my firm view on this is that whatever government policy there might be whether you are trying to support a business or whether you are trying to help them out or whatever it might be, there should be level playing field and as long as we have a level playing field, whether it is a private operator or whether it is a governments entity, we can then compete with each other and that’s the best


 


Sreenivasan Jain:  So don't favor anybody                                                                                 


 


Aditya Ghosh: Yes so don’t favor me don’t favor anybody else because ultimately that only can lead to one thing, you have a skewed market which is not purely competitive and that only means i mean at the end of the day fairs will rise and you know quality of service will come down, the reason why we are able to do


 


Sreenivasan Jain: So basically no favorites, just keep it level


 


Aditya Ghosh: Ya just keep it level


 


Sreenivasan Jain:  Is there an element of favoritism in what’s happening in terms of that trying to go to extra mile to bail somebody out


 


Aditya Ghosh: Ya i think. i think. You know again it’s a very difficult spot that everybody isn't.  ahh , Definitely some carriers are aloud not to pay certain bills or not put charges or they are given more time than others to pay their dues or their backlogs.  Ahh, then it does hurt us, it does hurt us because as it we have a steep mountain to climb then you just inverted the mountain for us so...  and the reason why we stay on our toes is if there is true competition and that’s what drives fairs down and that’s what has more people coming and flying us


 


 


 


 


 


 


Sreenivasan Jain: One thing that and this is a slightly technical question and about you profits, is that when i was reading up is that some people are saying why we are profitable because you lease and you sell back your aircraft and firstly how does that work, i mean just to explain to the viewer, so you buy a plane and you sell back


 


Aditya Ghosh: So this is that famous thing called sale and lease back, when i was growing up in law school and as a kid these used to be called operating leasers so everybody in the world does operating leases, so do we, not all our aircraft are on operating leases, by the way 75% of all the fleet in this country across airlines are sale and lease backs


 


Sreenivasan Jain:  So there is sale and lease back in ordinary terms. You buy a plane


 


Aditya Ghosh: So it’s like this, let me think differently, you buy a car and you sell that car to me and i said you know what vasu you use that car for the next 10 years and just pay me a lease rental and at the end of the 10 years I’ll take the car, i have made my money on it your lease rentals naturally are much higher than the money you have paid but you used that car for one year and now it’s mine, there is no other rocket science to it and if sale and lease backs were the holy grail to profitability


 


Sreenivasan Jain: Then everybody would be doing it


 


Aditya Ghosh: Not only that everybody does do it, 75% of the fleet of across all airlines are on sale and lease back , and whoever would have more aircraft would be more profitable, if you made X on one aircraft then in our case 50 aircraft would be 50x and then anybody would have 100 made 100x


 


Sreenivasan Jain:  So it’s not like that’s the soul driver of you profit


 


Aditya Ghosh:  That’s right it’s just a financing model


 


Sreenivasan Jain:   The other thing is that in terms of the overall market now that you have a major player like kingfisher who has cut back in a huge way in their flights, does that benefit you, i mean i am not asking this in a cynical way, but that happens


 


Aditya Ghosh: Ahh. I think well the answer to that is no, the reason that is not that there is been a dramatic shut down you know.


 


Sreenivasan Jain:  It seems fairly dramatic, they were operating upwards 200 flights a day now i am told that it’s down to 50-60, so..


 


Aditya Ghosh:  But this is also we are getting in to low season, other people are bringing in capacity, we are bringing in capacity, Jet is bringing in capacity


 


Sreenivasan Jain:  I mean generally there must be a spillover right


 


Aditya Ghosh:  I think there is different impact that happens on the industry that if you let the market forces paly then if the fitter survive then that basically means that it’s better for the consumer, to that extent for sure I think then it’s a, if we let competition actually the way its suppose to work out without creating a s i said creating different playing fields for different people and then that’s good for the consumer


 


Sreenivasan Jain:  And on pricing you guys have always said that you guys are very clear that you always try to keep it low and is your benchmark is like that you want to be the lowest or right there amongst the lowest


 


Aditya Ghosh:  Ya we definitely want to be lowest, that’s not always possible because some time our plane might be filling up little bit more that somebody else's plane at the same time so i have an 8 o'clock departure or somebody else’s have a 8 o'clock departure or 8:05 departure my plane is 75% full and the other guys is 35 % full, so it might seem like we are selling at the higher fare then the other person, but apples to apples we definitely aim to be the lowest fair,


 


Sreenivasan Jain:  And how do you actually fix fares, do you have some software, which is what most airlines do,


 


Aditya Ghosh:  Yes absolutely, i mean most sophisticated airlines around the world and so do we, we divide up the plane in to various fare buckets, or whether mu mother ask me the question or you know i get asked by the family all the time, how do i get a cheap fare on indigo and the very simple thing is that book early and that’s how you'll get the cheapest fare because as the plane gets filled up and as you get closer to the date of travel, the fare keeps going up


 


Sreenivasan Jain: And that happens with all airlines


 


Aditya Ghosh:  Having said that there are various other revenue models that, you i have heard this thing called the tapering fare mechanism which means that basically that if you have empty seats towards the last day you know drop the fare, fill up the seats, but now what is happening is that every customer is going to wait for that last day (laughs)


 


Sreenivasan Jain:  (laughs) then try and like book then.


 


Aditya Ghosh:  Yes yes.


 


Sreenivasan Jain:  The other thing about the indigo is where we talk about the little bit about the engine is that you lift the hood of the car and you are looking at what it takes, is what you experience at the front end, so we are talking about the front end, on time thing and the freshness, but there's also like this cool element, like you guys are cool. How are you cool?


 


 


Aditya Ghosh:  Ya.. (laughs) it must be something to do with age (laughs)


 


Sreenivasan Jain:  So you are just a young team, so i brought some of the things you get when you go on a flight, this is like a i don't know if our camera is picking this up this is like a sandwich box, this is called airwich.


                                       


Aditya Ghosh:  Correct.


 


Sreenivasan Jain:  And it’s got a little. you read it out


 


Aditya Ghosh:  A riddle on it. (hindi) mooh aur jeeb ko dheela chodein, chod dijiye, aur bina ruke 22 baar kahen (laughs) kachcha papad kachcha papad (laughs)aur ek minute mein hajam kahaniyan. anaarkali shehenshah akbar ke darbaar mein raks kiya karti thi (hindi) and then it goes on, i mean. (laughs)


 


Sreenivasan Jain:  I want you read out the Tung twister. (laughs)


Aditya Ghosh:  I mean you'd brought the English one. As an ethnic bangoli you are really pushing me the limits...


 


Sreenivasan Jain:  And then there is that and little snack thing which says that the stick man, like ya


 


Aditya Ghosh:  That’s basically the, you know you are eating away the potato sticks and it has the little thing. stick man stick man marching side by side, stick man stick man god know where to hide, eat his left arm and right one too, when he comes to senses he won't know what to do, he'll run and run but there is no place to flee, gobble up its left leg and lick your lips with glee.


 


Sreenivasan Jain:  So you've got somebody who is designing all this


 


Aditya Ghosh:  Ya we have a great time to work with, couple of guys Mohit and Sunil, who run this agency called wild and Kennedy, and then


 


Sreenivasan Jain:  They have done the new ad as well. The new Broadway.


 


Aditya Ghosh:  The Broadway show and ya you know if you notice our advertisements do not have pictures of flight attendants, they do not have pictures of that planes,


 


Sreenivasan Jain:  Ya the ads are very cool. Very cool.


 


Aditya Ghosh:  Ya the reason for that is, it’s not so much of business strategy it’s not so much wanted to be cool , you got limited space very little money , so just get the point across as soon as possible,


 


Sreenivasan Jain:  And then the airhostesses, what’s the deal with that, were they the wigs.


 


Aditya Ghosh:  Ya they were the wigs, so we have a great time, they have this immense passion that people come in and work at indigo


 


Sreenivasan Jain:  So they just wanted to create a look.


 


Aditya Ghosh:  They wanted to create a look and i remember the first day, these people that this uniform trial, and these for girls walk in and they are smiling and i am looking at their hair and i am a guy, i only have one another brother and we never had any sisters or anything at home and i am looking at them at telling you got to be kidding me, i mean i cannot tell 700 girls to cut the hair in a particular way , so they are like but sir do you like it, i mean i like it but it just cannot happen, i mean i can't tell people to cut their hair and there are like no no it’s wig it’s a wig (laughs) and you it’s easier for them to dress that way.


 


Sreenivasan Jain:  So what was that look, what was the brief, what was the idea?


 


Aditya Ghosh:  The idea was we wanted a uniform that was simpler that was easier to maintain that the girls would be more comfortable in, and that’s, there is a thinking behind it, and none of it turns out to be cool, but we don't set out that we got to be just cool and then the marketing guys would run the company (laughs).


Sreenivasan Jain:  (laughs)In the end, is it going to be bad news that kingfisher an airline the size of that goes down for everybody.


 


Aditya Ghosh:  Ahhh. like as i said for me, I’ll answer that question slightly differently because you know purpose that you don't want to comment on another airline but i will answer that question in the sense that if we can have things we can have policy’s or if we can have an environment that is a level playing field and anything all the policy's to two things , encourage growth and reward efficiency, so if you are more efficient and there are policies that encourage you and you know India is fast growing aviation market, way passenger traffic is growing year on year, our revenues are growing 40% at indigo , our revenues are going 40% year on year, if we have policy's and if we have an environment that rewards that efficiency that encourages that growth that creates a level playing field its good, anything that is not is just going to unnecessarily you know complicating the market, i keep saying that it will only do one thing it will drive fares up and if it’s going to drives fares up you know the whole growth story is going to come crashing down .


 


Sreenivasan Jain: Right. Right. So, ok that’s answering the question as best as you could. But thanks very much indeed for joining us and all the very best you guys are flying international right so.


 


Aditya Ghosh:  Yes.


 


Sreenivasan Jain:  So that’s what the ad says so.  So all the very best for that and thanks very much for talking to us.


 


Aditya Ghosh:  Thanks thanks !


 


 

7 years ago

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