Losses And Gains
For a man who’s been endeavouring to stay on top of the situation, Gopinath today has lost effective control over his company, at least its day-to-day operations. Insistence from investors had convinced him of the need for a new CEO but the decision is now out of his hands. Though CFO Sundaram — at Gopinath’s suggestion — has been made the CEO for three months, it’s unlikely he will remain (Sundaram is primarily a finance professional with no prior airline experience). When asked what if Mallya removes him — Gopinath — from his present position, he is philosophical. “If it happens, it happens,” he says. “Do you live in constant fear of dying one day? He trusted me and I have trusted him in turn. Under the circumstances, this was my best option.”

Given the situation — where he’d be risking the long-term financial stability and future of the company — he is quite happy with the outcome. “To preserve the model, you have to be in business,” he says. “But in the short run, you need cash. If costs go down, the business model becomes even more robust.” He says the deal is structured in a way that the Air Deccan entity will remain and that the other offers were less attractive. “In life — be it business, marriage or anything else — things don’t always go the way you want them to,” he says. “I am a first-generation entrepreneur. I have nothing to give but equity. The choice before me was either to hold on or to take a chance. But if I hadn’t pulled it off, then what? There are 3,800 employees, 65 vendors, investors, banks. Too much is at stake.” Others associated with the deal say that Mallya may well be happy to retain Gopinath’s association. After all, he’s identified with the low-cost model in India, and his passion for it has won many people’s imagination.

The closer one looks at this deal, the better it appears for Mallya. In one stroke, he becomes the single-biggest player in the market. Not only has the deal been struck at a good price (analysts believe that in future, the LCC that succeeds will have valuations like Ryanair and Southwest), the money — unlike in the Jet-Sahara deal where Sahara chairman Subrata Roy has walked off with the amount — remains within the company. So, in a sense, Mallya owns 26 per cent of the Rs 550 crore that he’s invested as well. And as Mallya points out, he’s already got richer since the deal was announced as the share price of Air Deccan has moved up. Though attempts to contact Jet officials failed, industry sources said that Jet Airways chairman Naresh Goyal’s first reaction to the news was “Why wasn’t this stopped ?” Quite characteristic of a man who’s adept at blocking whatever doesn’t suit him. In a single stroke, Mallya has overtaken Jet in terms of the number of aircraft and destinations covered. Moreover, he will now be eligible to fly overseas sooner than expected as Air Deccan started operations in 2004, a year before Kingfisher.