In Gopi we trust

ORUR RAMASWAMY Iyengar Gopinath (popularly known as Captain Gopinath) could have retired on the money he made after selling Air Deccan (“quite handsome by Indian standards”, he says, though the exact amount’s never been disclosed) and lived happily ever after. He didn’t, and is now slipping into yet another professional avatar. Or avatars, perhaps.

As a gun position officer with the 33 Corps, he battled Pakistanis in the 1971 war in places such as Dinajpur and Chittagong, now in Bangladesh. On leaving the army he started rearing eco-friendly silkworms when few knew about organic farming, winning the 1996 Rolex Award for Enterprise. He then started Deccan Aviation, a helicopter charter firm, and, in 2003, the company that brought him fame, Air Deccan

In 2007, Vijay Mallya’s Kingfisher Airlines bought Air Deccan but Gopinath stayed on as a minority stakeholder. He finally left the airline in 2008 and turned author; his autobiography Simply Fly was a bestseller. He has now gone back to what he loves—creating businesses from scratch.

Even while partnering the titans—Ratan Tata and Mukesh Ambani—he doesn’t rule out launching “another” airline after his non-compete agreement with Kingfisher Airlines ends. Gopinath doesn’t want to talk about that except to say that he is now focussing on his current ventures, but admits he’s disappointed that Air Deccan’s bare-bones model with disruptive pricing is today missing from the Indian market. “If airlines such as SpiceJet or IndiGo are collecting Rs 8 crore a day at 70% occupancy, you have to figure out how to fill the remaining seats and increase the revenue to, say, Rs 8.5 crore by offering tickets with very cheap fares,” says Gopinath.

“That will not only add Rs 180 crore a year to the bottom line, it will create consumer aspiration and an explosion at the bottom of the pyramid, ensuring an ever expanding consumer base.”

In India’s burgeoning air passenger market, there may well be space for another airline. Mark Martin, commercial director of Dubai-based Aviation Services Management, believes that India has the capacity for at least 180 more aircraft over the next few years. “Gopinath has to decide on the business model that makes the most sense,” Martin says.

So what is it about this 59-year-old in thick spectacles that pushes him to continually experiment with new ventures and win the trust of heavyweights?
The obvious answer is his track record. When he started Air Deccan, flying was still the rich man’s preserve. Gopinath spotted an opportunity, questioned the existing economics of airlines, refashioned the business model, and gave middle-class Indians wings. By the time he was ready to sell his Rs 2,100 crore airline to Mallya, nearly 15 million people had flown Air Deccan. More important, a new business category, ‘low-cost airlines’, had been created in India, with at least five others copying Gopinath.

John Kuruvilla, founder of the deal-a-day website Taggle.com, has known Gopinath since 1997, and worked with him as the marketing head of Air Deccan. Kuruvilla says: “He is always passionate, energetic, and fired up. He is willing to take risks because he knows he has nothing to lose and everything to gain for himself and the country.” And that is something Gopinath has done with Deccan.

But his allure is not just about his track record. It’s also about his belief that business is a mix of capitalism and corporate social responsibility. It’s a compelling story, one that both Tata and Ambani believe in. Gopinath says Ambani told him after signing a logistics business deal last April that he was investing only because of him. “I am investing in your dreams,” were the words he used, says Gopinath.

STROKING WHAT REMAINS OF HIS receded hairline, Gopinath points to a wiry man in his early twenties, selling paan at a traffic signal on Airport Road in Bangalore, and asks: “Do you know why he is here? In this city?” Not waiting for an answer, he continues animatedly: “It is hell here in the big city, but there is a door to heaven. In the villages of India, it is hell forever. I want to help change that.” Almost as an omen, the light turns green.

Later, he eases himself out of his black Toyota Camry and starts walking briskly towards the simple and comfortable office of Deccan 360, in a pristine white building on Bangalore’s Infantry Road, while acknowledging the smiles of those around him. Settling down, he adds: “The biggest corporate social responsibility is to create jobs for the other India. Out of selfish interest, you have to do it, because otherwise your society will not be stable.”

Gopinath is walking the talk. Both the logistics business (with Ambani) and the charter partnership (with Tata) are founded on the premise that they will improve connectivity to the “other India” (a term frequently used to describe the hinterland) and eventually bring in jobs and prosperity.

Logistics is an important part of Reliance’s retail push across 1,000 stores (including Reliance Fresh and Digital) in 85 locations. Ambani, who believes in scale, wanted to start his logistics service in 2009, and was in talks with Airbus to buy aircraft to move goods, not people. Gopinath, who had just launched his own logistics company, Deccan 360, had picked up gossip about these talks. Instinctive businessman that he is, Gopinath wrote to Ambani and asked if he would be interested in joining hands.

He needed a backer with deep pockets, because logistics is about size. (Much of what Gopinath made from selling Air Deccan—he owned 22% of it—was invested in stocks, which had diminished in value thanks to the slowdown.) Giants such as FedEx and UPS, with 684 and 527 aircraft respectively, are bigger than most airlines in the world. But India, despite being the world’s fourth-largest economy by purchasing power parity, and one of the fastest growing, had just Blue Dart Express, a part of DHL, as an express logistics company, with only six planes.

Ambani knew Gopinath understood the importance of scale and, more importantly, knew his way around aviation. After all, Gopinath had launched Deccan 360 with eight aircraft, more than the capacity India had dedicated to express air cargo. Ambani’s comment announcing their partnership in April 2010: “We believe that our collaboration with Deccan 360 will see a transformation in the logistics domain in India.” (He wasn’t available for this article.)

Kapil Kaul, chief executive of aviation consultancy Centre for Asia Pacific Aviation (CAPA) says that in the next decade the express logistics business is likely to grow in double digits. Such a leap in the transport industry will improve supply-chain efficiency, both in terms of the raw materials and finished goods, helping stimulate new markets, and, most importantly for Gopinath, ultimately creating jobs.

Gopinath is aware that partnering the big boys comes at a price. He doesn’t reveal how exactly Deccan 360 is structured (“Reliance owns between 26% and 49%, while I own the majority,” is all he says) but is willing to answer how such a partnership could eventually end with him losing control. Over a late lunch of rice, egg curry, dal, and salad at Deccan Aviation’s office in Jakkur, Bangalore, on a Wednesday in February, he explains that the larger cause is more important. “My idea is to create change in my lifetime. You can’t do it unless you have scale. If Mukesh Ambani wants to put in more money and grow the business, I will get diluted. I am fine with that. It is better to have 10% of a billion-dollar company than 100% of a million-dollar company.”

The challenges of the Tata deal are different. “This deal might not be even a drop in the ocean for the Tatas. But this is sacred for us because they have trusted us,” says Gopinath.

Airlines have always been close to Ratan Tata’s heart. His uncle, J.R.D. Tata, started Air India in 1932, which was nationalised in 1953. In the 1990s, the Tatas tried to start another airline in partnership with Singapore Airlines, but that stalled over regulatory issues. With Gopinath, he is trying his luck again. As Tata Sons director R.K. Krishna Kumar told Gopinath when their partnership was formalised this February, this is a “personal dream of Ratan Tata’s”.

IT BEGAN A BIT LIKE THIS. In February 2008, Indian Hotels (a Tata company) partnered with the Singapore-based Briley Group which has interests in aviation, hospitality, business process outsourcing, and technology, to form BJets. Its objective: fly charters. BJets had also ordered a fleet of 40 new jets worth over $600 million (Rs 2,668 crore)—20 Cessna Citation CJ2+ and 20 Hawker 850XP and 900XP. But the global economy imploded in September 2008. Then came the terrorist attack on the Taj Mahal hotel on November 26, 2008, and the folks at Indian Hotels began battling a more immediate crisis. The upshot: BJets was hangared.

Last September, the Tatas reached out to Gopinath. When he met Krishna Kumar (also vice chairman of Indian Hotels) at Bombay House, the Tata group’s headquarters, the conglomerate was figuring out what to do—wind up BJets, merge it with Taj Air (the luxury business charters arm of Indian Hotels) or relaunch operations. Krishna Kumar asked Gopinath for ideas on how to turn it around.

Gopinath’s big idea—what’s good for India is good for business—matched the Tatas’ thinking. After all, the Nano and Air Deccan were created for the common man and repositioned India as a large market at the bottom of the pyramid. By December, Gopinath had cracked the structure: a complete suite of services under the brand Powerfly. “We’d manage, operate, maintain, and market all aircraft of Taj and BJets. For the first time, under one umbrella you will be able to get an entry-level jet, a luxury jet, a turboprop, and Deccan Aviation’s helicopters,” says Gopinath.

Though CAPA believes that charter aviation is about to boom, the numbers don’t back it up, yet. So, as with Air Deccan, Gopinath may once again be in a position to shape the business. What he has going for him are 400 airstrips across the country (many of them unused), the high cost of chartering a plane—anywhere from Rs 60,000 to Rs 5 lakh per hour—(and, therefore, an opportunity to recast chartering economics) and executives warming up to the idea of such services. Like logistics, this too has the potential of creating jobs, especially in the hinterland.

Interestingly, though they will be sharing revenues (more like management fees for Gopinath), the Tatas have trusted him to run the business completely. That was his condition for coming aboard. “I said it has to be under my total control. They can trust me that everything will be transparent and they can check the books any time,” he says.

AT DECCAN AVIATION’S OFFICE, Gopinath is in a meeting with the team. Some 15 people are in a conference room which overlooks a helipad, as he pores over the results for January. The numbers don’t make him happy. Not capturing enough of the growth in an emerging market like India, he thunders, is nothing less than a sin. “Whatever else we might not have in this country, the one thing we have is a huge market. Everything which is an obstacle is an opportunity. If you say power cuts exist, there is an opportunity in power generation.”

His secretary of seven years, Cecilia John, says Gopinath always makes obstacles seem surmountable. “He keeps reminding his team never to take no for an answer, however impossible the challenge may seem.”

M.G. Mohan Kumar, one of his trusted lieutenants and a director of Deccan 360, says: “He charges up people and make them understand his passion and belief in the business. At the end of a chat with him, you feel that it is your duty to realise the dream.”

There’s something about Gopinath that makes people want to trust him. Some of it has to do with his middle-class-boy-who-made-it-big image. His deliberate use of cartoonist R.K. Laxman’s common man in Air Deccan advertising may also have had an impact. He tells Fortune India that he’d rather be seen as underdog than top dog.

Business, according to him, is about intuition and trust, which is why he never takes lawyers or chartered accountants to meetings. “Once I know the broad numbers, it’s like buying a cow in the market. When I know it is a good cow, I say Rs 5,000. He says Rs 10,000. At some point we shake hands. The lawyers only come in for the paper work after the deal is done.”

He stresses face-to-face interaction, has an aversion to computers—he doesn’t use a laptop or a desktop—and prefers to talk rather than exchange “impersonal” e-mails. Therefore, he is constantly talking on the phone even when travelling in his car, according to his driver, Moorthy. An iPod, with over 32 GB of Carnatic music by M.S. Subbulakshmi and M. Balamuralikrishna, is pretty much the only gadget he uses.

In spite of his success, he remains easily accessible. As John says, he meets all those who have read his book and were inspired to travel from the villages of Karnataka to see him. (He got into a conversation with the waiter serving him lunch, and enquired about his family.)

His critics say the salt-of-the-earth, by-the-gut style may not be the best way to run a business. “The impulsiveness that makes him unique also turned out to be his biggest weakness,” says an aviation industry expert who did not want to be named, referring to the fact that Gopinath ultimately had to sell Air Deccan. He admits this, and says day-to-day management isn’t his strongest suit. He puts it down to his “middle-class, non-MBA mindset” and his high level of impatience to try out new ideas.

“But I am learning,” he says, with a smile. That may explain why he’s hired two CEOs for Deccan 360—H. L. Rikhye, formerly CEO of Sri Lankan Airlines’ aviation division, and Thomas Mathew, who has 18 years of experience with UPS in express logistics.

Stepping outside the Deccan Aviation conference room into the open, Gopinath points to the space his offices occupy—a cluster of blue buildings surrounded by manicured lawns that stands in contrast to the rickety old hangars housing small air operators in the dusty Jakkur Aerodrome in Bangalore. “This is where it all began; it was a barren piece of land back then, and I started out in a tent.”

That journey continues, whether it is logistics, charters, or another brand new airline. His throwaway piece of wisdom: “You must penetrate deeper to take advantage of being in this country.