How do you turn around a business that incurs a loss of Rs.3 crore a day, into one that makes a profit of Rs.1 crore, every single day? The quest for answers to this single question led me on a hunt to meet up with Ajay Singh, the CEO of SpiceJet and get the answers straight from him.
I was amazed that with absolutely no background in the aviation industry, he decided to buy ModiLuft a company that even Lufthansa airlines failed to run. When the Maran brothers of the SunTV fame bought the company from him, they drove the company to near bankruptcy. Ajay Singh bought back the company and turned it around to be one of the most profitable airlines in India? I asked him how and he replied, “Well, we were all young and foolish, and at that point, you feel like you can do anything,” he laughs, adding, “But I did fundamentally believe that there was a market and there was talent to run a business of this sort.” He delves deeper into his turnaround experience and shares a lot more details in the podcast.
Ajay was also the brain behind Narendra Modi’s election-winning slogan, ‘Ab Ki Baar, Modi Sarkar’.
Do listen to the podcast to peek into the wonderful mind of one of India’s savviest businessman.
(The article below is part of my weekly column that I write for the DTNext Newspaper)
Technology is bringing in changes to the way we travel and stay. Business models are changing in the transportation and hospitality industry. There used to be a time when you had to own a car to live a comfortable life. It gave you freedom of movement and afforded you the flexibility. However, did you know that our cars remain idle for 90% of their life? Think about it. We mostly use it for the commute from home to office and back and at other times, it remains parked at the car park at the office or at the garage at home.
John Zimmer, a student of hotel management at Cornell University, saw an opportunity to put to use the idle hours of the cars. He along with his friend created an app called ‘Lyft’ which helped car owners offer rides to others while having the ability to earn money. Now, that simple idea has spawned a company that is worth over US$ 5 Billion dollars.
The hotels have a curious case that has baffled me for long. Most people who book a hotel room only stay a few hours during the day. Most use it to quickly take a shower, dress up and rush to series of meetings. Even though you only use it for a few hours and you were never physically in the room for most of the day, you still have to pay for the entire day. That’s the way hotels operate around the world.
Vinil Reddy, who was earlier a CEO of a real estate company, saw a mismatch in what the business travelers wanted and what the industry offered. Being an entrepreneur at heart, he sensed a business opportunity. He created an accommodation space, aptly titled ‘FreshUp’, where people can stay at the hotel for a few hours and only pay for the hours they have used. He realized that there are business travelers who are day travelers. They are the ones who travel to another city in the morning, finish their meetings and leave back to their home at night. For such people, the important things are a place to rest a couple of hours, take a nice hot shower, get dressed up, use the WiFi to get some work done and head for the meetings. Vinil’s concept of FreshUp is minimalism with purpose.
We notice the same ‘minimalism with purpose’ concept with Airlines. Recently, I got to sit down with Ajay Singh, the founder & CEO of SpiceJet. When he founded the airline, most of his competitors were full-service carriers (think Jet Airways and Kingfisher Airlines) which offered meals on board. Ajay created a ripple when he began to charge for food. He realized that passengers wanted cheaper airfares and hence detached the cost of food from the ticket cost and made is optional. He focused on the bare essentials of on-time arrival and lower cost. Now, SpiceJet makes a profit of Rs.One Crore every day (yes, Every Day!) while Kingfisher Airlines is defunct.
These three case studies teach us an important lesson. By using business common sense, leveraging the power of technology and thinking outside of the box, you can create new businesses that work.
The 2nd edition of CNN Asia Business Forum took place in Bengaluru recently. The event had two clear focus areas. The first was centered on the burgeoning Aviation industry and the second focused on Digital & Technology.
I was particularly looking forward to the panel because I had an opportunity to study in-depth the three panelists that were part of the panel. 1) Ajay Singh, Chairman and Managing Director of SpiceJet, 2) Phee Teik Yeoh, CEO of Vistara Airlines and 3) Kanika Tekriwal, CEO of JetSetGo.
Earlier in the day, I had recorded interesting conversations with Ajay Singh of SpiceJet and Phee Teik Yeoh of Vistara Airlines as part of the ‘Movers & Shakers’ Podcast that I host on The Hindu Businessline. This helped me get an inside view of their businesses and their career growth. To me, listening to the panel discussion looked like a seamless extension of our conversation.
Here are the key takeaways I gained from the panel discussion.
Richard Quest, the ebullient business anchor at CNN, kickstarted the panel by saying the Airlines industry is a good way to become a millionaire. How so? Well, if you are a billionaire and you start an airline, you’ll soon lose enough money to become a millionaire. And am sure everybody in the audience was thinking of Vijay Mallya.
What I loved was how Ajay Singh countered that. SpieceJet is an example of success. True, SpiceJet was losing Rs.3 crores a day (yes, a day) under SunTV’s Kalanidhi Maran. But after Ajay Singh bought back the company he founded, he was able to turn it around in less than 3 years to a stage where the airline is now making Rs.1 crore profit every day. That is a fantastic turnaround.
Phee Teik Yeoh, the CEO of Vistara, the airlines founded by the collaboration of Tata Group and Singapore Airlines mentioned how external factors destabilize the growth of an airline. He took the example of airline fuel. India has one of the most expensive airline fuels and this year alone, the cost has increased by over 50%. This can eat into the profits of the airline and wipe away the thin margins.
Phee Teik agreed that the market for high-end business travel was not as high as they had expected. Vistara launched a few years ago and they positioned themselves as the choice for corporate executives. They had allocated a significant number of seats for business class and premium economy. Due to poor demand, they now had to cut back on the premium seats and increased the number of economy seats. This proves the fact that India is a price sensitive market.
Ajay Singh added a very valid point. The discerning Indian flyers want the following: 1) Fly from their city or town directly. 2) Pay as little as possible. 3) Fly on Time. If these three factors can be met, then they are happy. Anything else, like gourmet food, leg space, good looking staff is not as important as one would think.
Kanika Tekriwal, who built an amazing business on leasing the private airlines, was bullish on the future. It is interesting how she runs her business. She found that many rich individuals who had private airplanes were finding it very expensive to maintain them and they were losing money. That’s when she approached them offered a solution that will not only take care of the planes but also earn them a profit from their planes. She has her own set of pilots, mechanics, and crew who take care of the planes. The people who hire the private planes can do so without the need to invest high capital for the planes but yet enjoy the luxuries of private travel. With the number of millionaires mushrooming in India, and with not much competition, she sounded very positive on future prospects.
Overall, it was a thoroughly enjoyable session. What I loved was the display of entrepreneurship and street smart approach that the panelists displayed while narrating their story.
I’m right now in Bangalore to attend the CNN Asia Business Forum, which is an invite only event that brings together key business leaders and thought influencers to assess India’s position in a tumultuous global economy.
I’ve lined up podcast interviews with very interesting personalities. The list includes:
Ajay Singh, CEO of SpiceJet Airlines
Phee Teik Yeoh, CEO of Vistara Airlines
Nandan Nilekani, Cofounder of Infosys
Yesterday I had a very interesting interaction with Sunita Rajan, Senior Vice President, Advertising Sales at CNN.
In the conversions, I look forward to digging into their career journey, life lessons and explore new ideas and innovations that capture their imagination.
Very excited for the event.
I was listening to NPR’s awesome podcast titled, ‘How I Built This’, which had a segment on the Instagram founders. After I listened to the half hour interview with Kevin Systrom and Mike Krieger, I asked myself what would be the two important take-aways from the podcast. Here’s what stood out for me.
They quoted Eric Ries, the author of ‘The Lean Startup’ who said its important to have conversations with people who liked your product, why they liked your product and take steps to make it even better. Many times, we pay higher importance to things people don’t like and work at solving those.
Another important takeaway is that they made Instagram open to follow. Back in 2010, it was common for most social networks to be closed and one can only follow someone else if both are connected as friends. Instagram was among the earliest social networks where anyone can follow anyone else. This means you can follow any celebrity, sports star or politician. This was a key point for Instagram’s growth. Now, these features are used in most social networks, including Facebook, Twitter or YouTube.