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Vol. 2 ::
No. 09 August, 2000 (Shrawan-Bhadra) |
Corporate
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Corporate |
When Mountain Air announced in April this year that it was to take to the air soon with two aircraft, the news was received with much skepticism. "One more airline company in the already crowded airport", was the comment a frequent flyer made. He was hinting that despite 30 airline companies registered in the country, the flyers were not getting any benefit from the competition supposed to come about from such a large number of suppliers of the service. Moreover, the timing of the company’s start up of business was also seen as an unsuitable one, because from April till August end is the period regarded as off-season in Nepal’s tourism industry. While other established airlines could have their seats booked well in advance, the newcomer had to start all afresh.
| However, within
about three months of its presence in the Nepali sky, the company seems to have proved a
number of points. First, you can do a good business even after launching the product at
the end of the peak season. Second, even a latecomer and small player can influence the
way the competitors do the business. Take for example, the fare reduction that the passengers are enjoying now in various sectors. Initiated first by Mountain Air as its introductory offer, discounted fares are now available from almost all the private sector airlines. Though it is regarded as an off-season discount, the regular flyers had never seen such off-season discount offered to customers in previous years. And, the discount scheme brought out by Mountain Air has paid off for the company, according to its Executive Chairman Pragyan S Rana, who informs that the average occupancy in the flights conducted by the company is and has been hitting the occupancy rates of other established companies. Presently, the company’s fleet comprises two Beech 1900 C aircraft made in USA. And the services being conducted are mountain flights and trunk route flights – i.e. flights to Biratnagar, Pokhara, Bhairahawa and Nepalganj. The company does not seem to be attracted to serve other destinations as that will add more to the operating cost than to the revenue. |
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| The wear and tear that the craft will have to suffer will be higher while landing and taking off from an airport without a metalled runway. Giving reason for his company not serving the STOL (short take-off and landing) destinations and concentrating only on hub destinations that belong to the trunk route, Rana says, "Our planes are not suitable to fly to STOL destinations. They are much sophisticated and need longer runways due to their high speed and big size". | |
In spite of so many airlines being in competition, each one is doing its own kind of operation, he says and gives example that Twin Otters and Dorniers specialize in serving STOL, and others in hub or international sector.
He points out that helicopters are performing well in providing their specialized services to remote areas - some in charter, some in cargo and some in rescue service.
The observers who initially regarded Mountain Air as a mediocre increment in the number of airlines in the country, have perhaps changed their views today. The three months during which Mountain Air has been in operation has established that the new management in the company was serious about introducing a difference in the business.
Perhaps the explanation of the success can be found in the fact that the team that manages Mountain Air is a blend of young technical experts and experienced personnel, and a businessman who has tried his hands at several other businesses learning the ropes of conducting a business in Nepal.
Originally, Mountain Air was licensed to a group of five persons who did not operate it for their own reasons. They had not obtained even the Air Operating Certificate (AOC). And the story of Pragyan Rana getting involved in Mountain Air is like those of many other Nepali entrepreneurs who keep on hopping from one business to another in search of a stable one.
Rana debuted in business about 15 years back as distributor of satellite TV receivers. In fact, he was one of the first to introduce in Nepal these dish antennas that still don the roof-tops of many Nepali houses, though they are now gradually being replaced by other types of receivers. But to the dismay of young Rana, other people too started entering the same business causing profit margins to go down. It was that which prompted Rana to start importing reconditioned cars. Again brokers made their entry into the new field, and again Rana had to suffer his profit margins going down. Therefore, he switched over to hotel business in partnership but due to, what Rana calls, unavoidable circumstances, the hotel building had to be converted to a higher secondary school – the Xavier Academy which was set up with the initiative of Rana himself, but is presently being managed by a team of professionals. It was only after the setting up of the school that Rana obtained the opportunity of entering airlines business, which he grabbed with both hands.
However, it was not a smooth flight for Rana and his team right from the beginning of their acquiring the airline company. First, they had to spend about a year to receive AOC for the MI-17 helicopter that the company was licensed to operate. After the AOC had been obtained, there was the problem in finding the craft, since it was not possible to lease MI-17 from the manufacturers and therefore had to be acquired on lease through brokers. For this reason, the company changed its license for fixed wing operation and acquired Beech 1900 C aircraft from USA on option-to-purchase basis. "We can fully own these two aircraft in about 15 years", informs Rana. The company at present has about 200 employees and plans to go for international flights as well provided the government permits.
The Beech aircraft are okayed by Indian authorities to fly in their sky. But as the Nepali authorities say that they have already tied their hands by promising not to issue any license to other airlines to operate international flights, Mountain air, like a few other airlines, is waiting for the government to invite fresh application for licence to operate international flights.
One innovative idea the company introduced was the painting over the craft’s body. While all other airlines have painted their planes white, Mountain Air has its planes painted blue with Mt. Everest. This has given a glamorous look to the planes, says Rana.
Though it was Mountain Air itself which started offering discount on fares, Rana also complains that price war is the major problem facing the business as of now. Hence he suggests to make such arrangements that the companies would specialize in different sectors and thus the price war would be less severe. "Additionally, such specialization also brings better safety standards in operation of flights", he views. And air safety has been a growing concern in the country’s airline business in view of frequent air crashes. As Rana says, the travel agencies have started asking for copy of insurance policy bought by the airline and also about the policy of the airline in promoting copilots to the position of pilots. Rana also points out that the recent price hike in aircraft fuel by Nepal Oil Corporation has created another problem to airlines as it is bound to cause increase in the operating costs.
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