Ready to take off

AVIATION: The promoters of this new airline, servicing regional segments, think there's a market out there - where other airlines have gone kaput.

Though the last two years saw a number of new airlines come up, the last six months have been somewhat jinxed for airline startups and expansions.

Jagson Airlines, which was planning to expand its unscheduled operations to scheduled hub-and-spoke operations across the country, has reportedly run into rough weather as it is still awaiting the Directorate General of Civil Aviation's approval.

Another startup, Indus Air, promoted by Mohan Meakins (which planned to put in the initial Rs 100 crore for the airline), too, pulled out after a few months of its launch. After these recent debacles, no one was really expecting new players to enter the aviation sector for some time.

But undeterred by these pitfalls, another player, MDLR Airlines, seems all set to enter the fray. Promoted by the MDLR Group, an established name in the real estate sector, MDLR Airlines has started bookings for its flights between Chandigarh and Delhi.

The airline is planning a full service regional offering and is investing Rs 200 crore on the startup. (A regional startup needs at least Rs 125-150 crore to secure operations for two years.)

According to Gopal K Goyal, chairman, MDLR Airlines, the group is looking at building a fleet of 10-12 BAE 70 aircraft in the next one year and plans to break even within 16 months of starting operations.

"We have planned our resources. If, for some reason, things do not work out according to the plan, then we have the financial backing to carry on till it does," he explains.

Kapil Kaul, CEO (Indian subcontinent & Middle-East), Centre for Asia Pacific Aviation (CAPA), says that a startup needs to take care of three aspects "" a well structured and realistic business case, funding to back the business case for at least 2-3 years, and sound management capabilities.

"The focus has to be on all the three parameters. You miss one and you will not make the grade," he warns. As for MDLR Airlines, he says: "They have sound finances. What they need is good management and maybe a reassessment of their choice of aircraft."

MDLR Airlines, on the other hand, is highly optimistic. Says Goyal, "Our decision to enter the aviation industry has been a deliberate one and we have selected our market segment very carefully."

In terms of strategy, MDLR is looking at the regional market, which is where the real gap is today, as smaller cities need point-to-point connectivity.

Apart from Chandigarh, places like Surat, Bhavnagar, Ranchi, and some parts of Orissa are on the airline's radar. "We might also enter the north-east depending on how it goes," says Koustav M Dhar, president, commercial and special projects, MDLR Airlines.

The airline plans to get in the luxury segment with better seats and improved leg space in a two-class configuration. "We will not sell below cost. Also, as an airline is purely about perception, we are looking at operating a full service carrier. Branding survives in the long-run," feels Dhar.

According to Goyal, their revenue model would be to tap into the non-metro to metro traffic, which has grown 48 per cent over the last two years.

"The disposable wealth in the regions is three times that in the metros. Here, the yield is a mix of convenience, frequency and pricing," says Goyal.

So while the airline might charge a bit more for their point-to-point connections, it will offer better frequencies which, in the overall scheme of things, saves time for the passengers and, in some cases, costs too.

Kaul also feels that there is huge potential in the tier 2 and 3 cities. The only point to take note of is that "the demand will take time to show up so the airline needs to be prepared to wait it out", he says.

But then, with factors like high ATF cost and regular delays at metro airports, the going is sure to be tough for the startup, at least initially. What remains to be seen is if the promoters will be able to pull this one off.

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GROUNDED TOO!

For someone who's been in the real estate business for the past three to four years, MDLR has come a long way. Apart from constructing residential and commercial complexes, MDLR is also into building five-star hotels. It is developing three hotels in the NCR and one each in Jaipur and Shimla.

While the Shimla property is almost complete, the three properties in the NCR "" one on NH8, one near the Maruti Chowk in Gurgaon and one in Manesar "" are in various stages of construction.

The hotel close to Maruti Chowk in Gurgaon is to be a 100-room all-suite property going up to 16 floors and will have a revolving restaurant on top. The group is investing Rs 1,000 crore in the five properties and each of these is slated to be managed by different brands.

The group is in various stages of negotiations with international brands such as Hyatt, Marriott and Four Seasons for management contracts, says Goyal.

In terms of features, what will set each of these hotels apart from the others is the presence of a helipad. And one of these hotels, says Goyal, will even have a heliport (akin to an airport).

The construction of these helipads/heliport would mark a take-off of MDLR's plan to enter the helicopter services business as well. MDLR will start with a fleet of five to seven helicopters for hub-and-spoke operations in the interiors of India for which they are speaking to several international helicopter brands.

"We will connect completely inaccessible destinations in the north, and maybe also in the north-east, as well as off-shore destinations. Election duties will surely be a big part of our helicopter business. The helicopter and charters business is a $150-200 million a year business in India.