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Last Updated : Aug 17, 2020 03:54 PM IST | Source: Moneycontrol.com

Did COVID-19 and the deteriorating equation with the Wadias lead to Vinay Dube's exit from GoAir?

Dube's entry into the airline was cordial. His exit, acerbic. Things changed dramatically in just six months

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There was no notice period, or a gardening leave or any notion, of a transition. And, the statement, announcing the change at the top, was terse.

"Vinay Dube has ceased to be in the employment of GoAir with immediate effect and hence ceases to be the CEO of the company."


25 words. There was no mention of any contribution Dube made in his stint - albeit a short one of six months -as is the norm in any statement announcing a leadership change. Instead, the rest of the 335-worded announcement was dedicated to Dube's successor Kaushik Khona,who was taking over as the CEO of the Wadia family-owned airline with 'immediate effect.'

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Obvious questions followed. Was Dube fired? Or did the industry veteran put in his papers? A senior executive from the industry, who had earlier worked in GoAir, pointed out to the 'pattern' of previous exits of senior executives at the airline, owing to differences with the promoters.

While a company executive said Dube "has decided to explore new opportunities," scores of executives Moneycontrol spoke to pointed out several factors that would have led to the CEO cutting short his tenure.

Moneycontrol reached out to Dube, who is yet to respond. A mail with detailed questions has been sent to GoAir, awaiting a response.

Through conversations with several executives, including those at the airline or had worked there, it is clear that COVID-19 and the circumstances following the disruption, had a big role in the CEO change at GoAir. While it may have impacted every airline in India and overseas, it was especially debilitating for GoAir, which was on an aggressive expansion mode.

To know about why the airline, which was otherwise conservative, but suddenly seemed to be in a hurry, read this: GoAir IPO in sight? Why Indian aviation's tortoise has decided to run

And, things changed dramatically for Dube.

The margin man

Like the time when he took over as the CEO of GoAir, Dube joined Jet Airways in August 2018, in similar circumstances. The Naresh Goyal airline went without a CEO for over 18 months.

When Dube's name was finally announced to take the top seat, the news was welcomed by the industry. Like this Moneycontrol story points out, the 30-year industry veteran had grown the business of Delta Air Lines as its Senior Vice President, Asia Pacific.:

"Under him, the airline’s Asia Pacific business had expanded over 60 percent by entering new markets and stitching up alliances. In his earlier roles, Dube was instrumental in Delta’s successful acquisition of Northwest Airlines. He also gained considerable experience in sales and marketing while at Sabre Inc, a leading provider of technology services to the aviation industry.

"For the aviation veteran, who calls Mumbai home, the shift back to India seemed like a perfect way to cap a distinguished career."

Though Jet Airways was already facing financial stress, one of Dube's main priority was to handle the induction of 225 Boeing 737 Max aircraft. Alas, both Boeing's aircraft, and the airline were grounded.

Dube quit Jet Airways in May 2019, just a month before the airline was admitted to the insolvency courts. The senior executive moved on, taking on an advisor role with GoAir, which had been without a CEO since February that year, when Cornelis Vriewijk departed. Instead, Jeh Wadia, son of Chairman Nusli Wadia, had donned the part of an acting chief executive.

The younger Wadia, who had been closely involved with the family's aviation business, seemed to have thought through what he needed from his next CEO.

"The family had aggressive plans for GoAir. While they had been conservative till now, the plan now was to expand the aviation business," says a former senior executive, who like many others, had a short stint at the airline.

In July 2019, the airline had added its 51st aircraft to the fleet. Its fleet has expanded by more than half in one year. Now it planned to add "at least one aircraft a month." In 2016, GoAir had signed its second deal with the aircraft manufacturer for the supply of 72 A320 Neos, taking the total order to 144.

This meant that the airline, which had been profitable in all but one of the past eight years till then, also needed money. "There were many options on the table - IPO, a QIP or bringing in a PE. And though the airline had been profitable, the margins had to improve further if the Wadias were to get the valuation they sought. "That is where, Dube came in," says one of the senior executives quoted above.

Apart from Dube, GoAir had also roped in Miranda Mills as the new Chief Operating Officer. The airline also got a new Chief Financial Officer, a Vice President to overlook international operations, and heads for network planning, revenue management and flight operations. "The decks were spruced up before the fund raise," is how one industry executive put the whole exercise.

When the company announced Dube's appointment in February this year, it said he would be responsible for the management of the airline and also for meeting the goals and long-term growth objectives of the company. One of those goals was to make the airline more profitable, even as it expanded its wings. "He was a specialist in improving margins," says another industry old-timer of Dube.

Jeh Wadia said this in a statement at that time:

“I welcome Vinay to the GoAir family. His proficiency in leading enterprises with more than 20,000 employees and consistently delivering margin expansion, revenue growth and operational excellence while developing platforms of world class customer service and employee engagement is something that GoAir will benefit from."

A gentleman. Nice guy. These are two of the most common words used to describe the industry veteran. "He had worked most of his career in the US or with American companies. He has a US mindset. Not the jugaadu CEO kind," says the industry old-timer.

But even as Dube formally took over at GoAir in February, a virus had other ideas. And suddenly, the Wadias needed a CEO with a knack to solve problems using limited resources. Did Dube fit the bill?

Representative image Representative image

The disruption

In little over a month later, the Indian government announced a national lockdown by the end of March to limit the damage by coronavirus. Both domestic and international flights were suspended.

Domestic flights would resume only on May 25, but meanwhile at GoAir, the Wadias changed gears instantly. "The Wadias are extremely sharp, especially when it comes to numbers. Their focus on cash flow is nearly unmatched," a former GoAir executive had told Moneycontrol in a previous interaction.

As it became clear that COVID-19 was spreading and flights wouldn't resume any time soon, GoAir started cutting costs. In March itself, it laid off expat pilots. Soon after in April, salaries were cut by up to half, and many employees were asked to go on leave without pay. By the end of the exercise, over 70 percent of GoAir employees would be on leave without pay.

"The company started negotiating with everyone - lessors, vendors, banks for moratorium on interest payment, airports, Airports Authority of India... the focus was to save money," says a former senior executive.

And this is where differences cropped up between Dube and the Wadias. The promoters were not satisfied with the results these negotiations brought, especially those with lessors, says a senior executive. A Hindu BusinessLine report pointed out that while the airline wanted to retire 12 of its A320 CEO aircraft earlier than the agreed schedule, not all lessors had agreed.

The airline was running out of cash. India Ratings downgraded GoAir, and pointed out that the airline had posted a loss of Rs 1,346 crore in FY20, against a profit of Rs 123 crore a year earlier. More worryingly, its unencumbered cash and bank balances had halved, from Rs 140 crore in March, to Rs 72 crore as on June 30.

Desperate to further cut costs, the airline looked for ways to further reduce its wage bill. Pilots' salaries were slashed and most of their pay now depended on flying hours. Each department saw its employee strength considerably reduced.

"Nearly all the Vice Presidents heading the departments were sent on leave without pay. Instead, general managers have been asked to take over responsibilities. The pay difference, between a VP and a general manager, is significant," said an executive.

Though flights resumed - GoAir restarted operations a week later than its peers - it was not business as usual.

"Before COVID-19, considerable hiring had been done. But now, there was no need for so many people in marketing or sales. It is understandable that the company wanted to let go of most of them," says the executive quoted above.

The person added that most of the departments now have one-fourth of their previous strength. A few have even less.

The airline was not alone in pruning its workforce. But, unlike IndiGo which offered a financial package to the 10 percent of the workforce it laid off, GoAir saved on the expense by sending its people on leave without pay.

But, even that was not enough. In early August, Airports Authority of India put GoAir on cash and carry mode. The airline owed it over Rs 60 crore.

Differences between Dube and the promoters, say industry executives in the know, increased.

"There were arguments between the two," said an industry executive.

It didn't help, say former executives, that Wadias' focus also raised questions on micro-management and tussles with senior management. In 2018 and 2019, at least a dozen senior officials left the airline. One of them told Moneycontrol about the "high and sometimes unrealistic expectations" put on the senior executive.

Enter the turnaround specialist

By now it must have become clear to Dube, where this was headed. Wadias too, say sources, had dialled Kaushik Khona, someone who had worked extensively in the group.

Khona was the CEO of GoAir for two years, from April 2009. He was also Vice President, corporate finance and strategist for the Wadia Group. This is what Khona says about his stint in Linkedin:

"After significant contribution to turn around Real estate and Textile divisions of Bombay Dyeing and after successfully handling other assignments for Britannia and Bombay Burmah, was bestowed the responsibility to turn around hugely loss making Domestic Aviation venture- Go Air- as the CEO at Go Air, spearheaded various initiatives to bring it to being the most profitable airline in India which gave huge confidence to the Promoters to then sign up 72 NEO A320 aircraft at the Paris Air Show in 2011."

Before returning to GoAir for the latest assignment, Khona was a partner at M/s. Talati & Talati LLP, in areas of business turnaround and restructuring.

The next step was swift. Within a day, Dube was out, and Khona was in. There was no time for pleasantries.

What next?

GoAir needs cash. Industry observers say the airline may scale down its operations and will operate less than 20 aircraft. The company has sent half of its 600 pilots on leave without pay.

While the scaled down operations will mean less cash is burnt, the carrier class needs a lifeline. All eyes are on the Wadias. "The question is if they do a leap of faith and put in their own money in GoAir. Or, will they dilute stake at a time when valuations will be low," says a senior industry executive.
First Published on Aug 17, 2020 01:34 pm