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Starting an airline during COVID-19 may sound like a bad idea. But for Flybig, it's a perfect flightplan

Flybig, founded by aviation entrepreneur Sanjay Mandavia, plans to start operations in October

August 26, 2020 / 01:33 PM IST
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COVID-19 has been like a death knell for airlines. Scores of them, around the world, have filed for bankruptcy.

But what if COVID-19 is also a good time to start an airline? Sanjay Mandavia thinks so. The pilot-turned aviation entrepreneur is going ahead with his plans to launch airline Flybig.

While the original plan was for the regional airline to start operations in April, it got delayed because of the COVID-19 disruption and the ensuing lockdown. The new launch date is in October this year.

"The process to get Air Operator's Certificate, or AoC is in the final document stage. The DGCA, the aviation regulator, and the Civil Aviation Ministry have been helpful. We hope to start operations in October," Flybig CEO Srinivas Rao told Moneycontrol.

The airline's first aircraft, an ATR, is at present parked in Australia and will fly to India in September. One more aircraft is in the works. "We plan to start operations with two aircraft, and eventually expand it to a fleet of about 20 aircraft. We will be headquartered out of Indore," said Rao, a former pilot who was also part of the senior management at Kingfisher Airlines. He later worked in Eithad, where he was last Instructor Trainer.

For Mandavia, Flybig is a critical part in his aviation ambitions. The other part is that of Jet Airways, which is going through insolvency proceedings. Mandavia's two firms - Flight Simulation Technique Centre (FSTC) and Big Charter - have joined hands with Dubai-based investment banking and wealth management provider Imperial Capital Investments, to bid for Jet Airways.

At present, Jet Airways bankers are evaluating bids presented by the consortium, and the other party in the race, a team consisting of Kalrock Capital Partners, a UK-based financial services firm,  and entrepreneur Murari Lal Jalan.

Also Read : This former pilot now wants to make Jet Airways fly again

Mandavia's plan is to serve the metro routes with Jet Airways, which will be fed by the regional flights operated by Flybig.

While it may sound like a plan that could take off, what gives Flybig promoter and management the confidence to pull it off, especially when all the airlines in the domestic market are in the red?

Lowest costs, thanks to COVID-19 

Flybig's business plan is centred around the government's UDAN scheme, which encourages establishing air connectivity in tier- 2 and 3 stories and town.

The scheme, which was launched in 2017, includes a government support to operators in the form of Viability Gap Funding, to make these routes attractive enough for airlines. Nearly all domestic airlines had launched UDAN flights.

Flybig is not the first one to centre its business around the scheme. But most of them failed to fly for long. By the end of 2018, three out of the four regional airlines were close to shutting down. 

Rao acknowledges the past experience of the airlines, but is betting on the combination of Flybig's business proposition and the changes in industry dynamics, post COVID-19, to work in favour of the new airline.

"The cost base is very much down now," says Rao. Lease rentals have come down by up to 15 percent, thanks to an over-supply of aircraft in the domestic and global industry. Sources in the industry added that Flybig is also in talks with HAL to buy four Dornier aircraft that can be quickly turned into cargo carrier or an air ambulance, as per needs.

Talent is also easily available. While IndiGo, the largest domestic carrier, has laid off 10 percent of its workforce, all airlines have sent considerable part of there manpower on leave without pay. Not surprisingly, average salary has also nosedived as pays have been cut across the industry.

Flybig, which about 70 employees, plans to increase its workforce to about 100 by the time it launches its operations. "We have already created about 5 stations," said Rao. "We are able to get the best of the talent, including senior pilots who are coming back home. In fact, the average work experience across board is 22 years," he added.

Another factor that will help the newbie airline is the low fuel costs. Despite the recent hikes, ATF rates are lower from their year-ago levels.

Focused on tier-2 and 3

Consumer tastes too, says Rao, have changed. "Regional tourism will take off, as consumers are reluctant to go on short haul international holidays because of the COVID-19 scare. Instead, interest in domestic tourist destinations has increased," says the CEO.

That sits well with Flybig's proposition to connect smaller cities and towns. With its main base in Indore, the airlines plans to first connect to other tier-2 cities, and then the tier-3 cities in the second phase.

From Indore, the airline will connect to cities like Jabalpur, Bhopal and Raipur. Later it will expand to other destinations like Ahmedabad and Nagpur. In the second phase, destinations such as Rourkela, Lanjigarh, Ujjain and Chhindwara are on the drawing board.

The North-East pie is another big focus. "We will deploy seven to nine aircraft in the region," says Rao. An industry official had earlier told Moneycontrol that Flybig "is in line to operate flights in some of the regional routes, including those connecting the North-East."

At present, the airline is using 'internal funds' to launch operations, and will look at raising money later, says Rao.

Even as nearly all decks seem to be clear for a launch within two months, Rao underlines that the company has to be careful of changing industry dynamics."We cannot rest. We should be ready for any changes during COVID-19 and post it," he says. That has been the key piece of puzzle missing for many airlines in the past.

Prince Mathews Thomas
Prince Mathews Thomas heads the corporate bureau of Moneycontrol. He has been covering the business world for 16 years, having worked in The Hindu Business Line, Forbes India, Dow Jones Newswires, The Economic Times, Business Standard and The Week. A Chevening scholar, Prince has also authored The Consolidators, a book on second generation entrepreneurs.
first published: Aug 26, 2020 01:33 pm