'Secondary airports should be opened up'
Ranju Sarkar caught up with Stelios, who was in Mumbai to attend an aviation meet and announce the entry of easyHotels.Updated: May 02, 2006 11:19 IST
Stelios Haji-Ioannou is a serial entrepreneur—his visiting card bears no other designation, except that of a serial entrepreneur. Stelios, who prefers to be called by his first name, has floated 16 ventures, including a shipping company at the age of 25, which he sold last year for $1.5 billion. But the 38-year-old man is best known as the founder of easyJet, the no-frills airline from the UK, which together with Ryanair, has changed the way Europe travels today, benefiting millions of consumers. Ranju Sarkar caught up with Stelios, who was in Mumbai to attend an aviation meet and announce the entry of easyHotels in India.
How did the LCCs create a market for themselves in Europe?
The market is there if you can reduce prices. There is plenty of evidence now that shows when prices come down, people are willing to fly more often. All you have to do is figure out a way of reducing prices. The way a low-cost airline reduces prices is by putting more seats in the aircraft, take out all the free food and drinks that nobody wants to pay even if they don’t consume it, you try and go direct to consumers with Internet, and more importantly, that’s not happened in India yet, is that you try and negotiate better airport deals.
How have legacy carriers responded to the entry of LCCs in Europe?
The high-cost, long-haul airline really don’t have a chance to compete in the short-haul market, and in many sectors, they don’t care to com pete. Unless it goes out of their main hub, they’re really not interested. So, they will continue to make their money on the long-haul flights, premium class, and they will keep only enough short-haul flights to feed into the long-haul flights.
To what extent the secondary airports are cheaper?
The secondary airports can be significantly cheaper than the main airports if you can negotiate a good deal. For example, the cheapest airport could cost nothing and the costliest airport could cost 20 euros per passenger. I think there’s a message for India. If India has to see a boom in aviation, they should really open up the secondary airports, municipal and military airports; make them available for commercial use that will create a lot more capacity, and competition.
Well, that could be a bit politically sensitive.
You don’t have to open all your military airports. Assess which of them you need for national security and on which of them you can allow commercial aviation to run. Many countries have built military airports, which they no longer need. Sometimes an old military runway can make a good civilian airport.
What’s your take on the Indian market? Airlines seem to be bleeding.
Well, its early days. Even easyJet didn’t make money in the first couple of years. There’s a lot of euphoria; there are different business models that are being funded by capital, which is not expecting any return immediately. That would not last forever. I can predict some casualties–some people will go bankrupt; others will succeed. We have to wait for 3-5 years for the LCCs to break even.
You plan to have easyHotels in India. What’s the idea?
What we are doing here is we are trying to capitalise on the same boom. We are not competing with the aviation sector. If many of these people are going to fly for little, many of them would stay in budget hotels. So, we announced that we will do 8 easyHotels in India over the next three years. These will be located in Delhi, Mumbai, Kolkata and Chennai to start with. The concept is compelling—it’s a clean, safe, consistently-deco rated room with a bathroom in a city centre. It will be a small room hence it will be cheaper, consistent. Isthimar, the private equity firm from Dubai, who picked up a stake in SpiceJet, will invest in these hotels. They have exclusive rights for most of Gulf; there’s a master franchisee agreement. For India, they have a non-exclusive licence, which means that we can go ahead and have other hotels.
What will be the tariff like?
We haven’t done the economics; we don’t know what the real estate is going to cost us.
Are you looking at other businesses in India?
We have to see how easyHotel does, before we can think of other businesses. But I am bullish on India.
But you were in talks to see if easyJet can fly in India?
A year ago, I came here for another conference, and spoke to some people, and what I found is that as people in India have enough money; they want to have their brands. We don’t invest in other people’s brands. So, no deal could be done. We wanted our brand, and they wanted to have control over their brands. Usually, that’s where it breaks down.
Tomorrow, regulations permitting, will you be keen to come on your own or pick up a stake in an LCC?
It’s a question if I feel it’s too late. There’s a lot of competition in the Indian skies; maybe we should wait and see.