Look Who's Gaining Altitude In India

Jet Airways is the airline industry's surprising highflier

On Sept. 1, India's Tata group withdrew a proposal to start a domestic airline. Ratan N. Tata, head of India's largest conglomerate, pulled the plug after the government deferred approval for the 20th time since 1995. Tata executives had gathered in New Delhi in hopes that regulators would give the green light, a signal that the country was allowing more competition. Instead, they could only troop back dispiritedly to headquarters in Bombay.

But one man, who had camped out in New Delhi for the past two months, returned to Bombay triumphant: Naresh Goyal, founder and chairman of Jet Airways, India's premier private domestic carrier. Critics say Goyal's intense lobbying undid Tata's bid, and that the government is playing favorites. "It's obvious the government has two sets of rules for two different people," says Subhash Gupte, a former chairman of Air-India. Jet Airways managers dispute that. Whatever the case, Goyal's story shows how a shrewd entrepreneur can defy even the country's mightiest conglomerate.

Since India started to dismantle the monopoly of state-owned Indian Airlines, the domestic carrier, in 1992, seven private airlines have sprung up. Five of them have gone out of business, but Jet Airways has been an exception, thanks to Goyal. Starting out as an office boy, Goyal, 49, spent more than 20 years building up a successful travel agency in Bombay, making excellent contacts with foreign carriers along the way.

DEEP POCKETS. When he saw his chance to start an airline in 1993, Goyal talked Kuwait Airways Corp. and Gulf Air into investing $4 million each, while putting up $12 million of his own. That made Jet Airways far and away the best-capitalized startup. Goyal leased relatively new Boeings and hired airline executives from around the world to help him.

The result has been a romp. Neither frumpy Indian Airlines nor poorly financed private rivals can compete with Jet's onboard service, impressive 30-minute turnaround time between flights, and average passenger loads of over 70%. Saroj Datta, a former Air-India and Kuwait Airways executive who is Goyal's chief lieutenant, also gives credit to his boss's obsession with quality. When he's on a Jet Airways flight, Goyal grills the crew and scours the aircraft for upholstery stains and carpet rips. The effort is paying off: In the latest fiscal year, revenues rose 32%, to $300 million. Profits were $11 million.

Yet Jet Airways may not have succeeded if Tata had gotten airborne. Tata has plenty of capital, and it recruited a powerful ally, Singapore Airlines Ltd., to help operate the new carrier in exchange for equity. So as soon as Tata petitioned the government, Goyal went into action. He rapidly expanded from six planes to its current 22 to reach critical mass before Tata got going.

XENOPHOBIA. That was smart, but critics allege that in his zeal to outwit Tata Goyal took advantage of his close ties with legislators and regulators. Datta retorts that any business tries to minimize competition. But as for rumors that Goyal exerted undue influence on Parliament, he says: "This is malicious information circulated to tarnish our reputation."

Could be. Indian politics is a nasty game. But the government has thrown many obstacles in Tata's path, and legislators have charged that Tata was a front for Singapore Airlines' bid to rule India's skies. This xenophobia prompted regulators last year to ban foreign carriers from investing in domestic airlines. Tata dropped Singapore as a partner, and Goyal bought out his Arab shareholders. But legislators still claimed Tata was working with Singapore, prompting Tata to give up. "We were not willing to wait endlessly," says Tata's Eric Vas, manager of the project.

Now nothing should stop Goyal, except possibly his own ambition. He recently borrowed $400 million to increase his fleet to 32 jets. Bankers and airline analysts say such fast expansion often proves the downfall of young airlines. Either an economic downturn cuts travel dramatically or harried crews cannot keep the planes arriving safely on time. Goyal, however, has defied the odds before. For now, he is India's only airline mogul.

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