Air Deccan: The First Low Cost Airline in India


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Case Details:

Case Code : BSTR134
Case Length : 20 Pages
Period : 2003 - 2004
Organization : Air Deccan
Pub Date : 2004
Teaching Note :Not Available
Countries : India
Industry : Aviation

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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EXCERPTS

Entry and Expansion of Air Deccan

Gopinath was in the Indian army till 1980, when he left his job and started trying his hands at various things like multi-culture farming, sericulture and agri-consultancy. In the early 1990s, Gopinath was in Singapore, where he read about a helicopter company, founded by a girl in Vietnam.

The company was set up to carry tourists in the US to Vietnam after the war had destroyed infrastructure in the country.

The story reportedly inspired Gopinath to do something similar in India. In 1995, Gopinath started Deccan Aviation Private Limited (DAPL), a private helicopter charter company, providing helicopter services for company charters, tourism, medical evacuation, offshore logistics and a host of other services.

DAPL soon emerged as a pioneer in helicopter tourism in India. While serving tourists, the company encountered demands for flights to many smaller tourist places. Gopinath claimed that government representatives from the states of Andhra Pradesh and Karnataka met him and asked whether DAPL could provide air links to smaller cities in these states...

The Low Cost Business Model

Air Deccan's business model was inspired by the globally successful low cost model pioneered by the US-based Southwest Airlines in the 1970s. In the fiscal year 2003-04, the LCAs commanded a global market share of 25% and their revenues had grown by 40%.

LCAs were continuously offering lower flying rates by inventing innovative ways to cut operational costs. Analysts claimed that the overall costs for LCAs were 45% to 60% to that incurred by FSAs.

To keep overall costs of the company low, Air Deccan took the following measures:

Food:

Unlike FSAs, Air Deccan did not provide any food on board. However, it sold snacks and water bottles on its flights for a price. Serving and consumption of alcohol were not permitted. The company felt that for short distance domestic flights, most passengers did not want food...

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