Indicating that there is enough firepower left among Indian entrepreneurs to fuel their aviation dreams, the promoters of Kolhapur-based Sanjay Ghodawat Group (SGG) have committed to be a stable and long-term player in the airline business by adopting a calibrated approach.
Having witnessed the collapse of big Indian airlines like Kingfisher Airlines and Jet Airways, SGG, which is into agri products, education, consumer products, textiles, software, mining and real estate business, had earlier this year ventured into the airline business through Star Air. It is now planning to move step by step by limiting the cash burn that is evident in this sector. Star Air commenced operations on January 25, 2019, as a regional airline and has permission to operate flights under the UDAN scheme in 22 routes. The startup airline has operations in six routes and by December 2019, plans to cover all 22 routes with 44 flights a day.
On Friday, it announced the operation of UDAN flights connecting Mumbai to Belagavi (earlier Belgaum) in Karnataka. Currently, it has two Embraer 145 regional jets in its fleet and will get three more by November 2019. Unlike other airlines leasing aircraft, Star Air is purchasing them to keep the cost under control.
“We decided to buy the aircraft. Most airlines worldwide failed because of lease and fuel cost. While the fuel cost is not under our control, the lease is something we can manage. So we opted for the regional jet model, which is very successful in the U.S. It is the same strategy that we are bringing to India,” said Shrenik Ghodawat, managing director, Star Air.
To ensure a sustainable business, the company has adopted a cautious approach. “The first thing we wanted to do is to start small. Which is why we choose the UDAN scheme. We have been planning for past five years, but were waiting for the right opportunity and sectors,” he said. “Through UDAN, the government has given us the right opportunity to connect tier-III and tier-IV cities as well as be sustainable to a large extent. Once the routes mature, we will slowly get out of the subsidy scheme and still be economically viable,” he said.
The company plans to break even in December, by which time it will operate five aircraft. It has already invested close to ₹100 crore and another ₹150 crore has been earmarked for this project. “Going forward, when we will look at bigger aircraft, we will look at deploying more capital,” Mr. Ghodawat said.
On why the group ventured into this sector, he said the biggest drive was to overcome the problem of connectivity. “We ourselves suffered a lot as we live in a small place like Kolhapur. Going to Mumbai or Bengaluru was almost nine hours by road. So having felt the pain of the citizen, we realised it is a business opportunity we can leverage. When the government unveiled the UDAN platform, we thought this is the best businesses to be in right now,” Mr. Ghodawat said.
On their holding power in this business of high risks, he said, “We are here to stay for the long haul. Our focus clearly is to connect the unconnected; we don’t want to fight with the biggies as of now.”
The company has assembled a team of professionals from other airlines having experience of handling 100 to 200 flights a day to stitch together a perfect business model to win at the end of the day.
