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'East West hired relatives of hot-shots and when the first crisis came, they were stuck with a management which could do nothing'

Business circles say, however, that this balding, rather successful-looking gentleman from Madras suffers from a lack of commercial understanding: the kind of routes he chose to operate being a testimony to that. He was doing reasonably well in the south, based as he was in Madras, but he overspread himself when he opened routes in the north and west.

The Damania takeover was supposed to bring him the north and west bonanza. But says Rasheed Jung, aviation consultant, ''He (Khemka) was badly advised in the takeover, He thought he would inherit a debt of Rs 400 million but ended up with liabilities of over Rs 700 million.''

By then Khemka's attempted takeover of ModiLuft had also come to nought. In any case, many believed that the takeover threat was just an extremely unsavoury way of creating negative publicity for a rival and that Khemka never had either the intention or the money for the takeover.

Because, behind Khemka's bluster and the plush company brochures, reality is rather different. At the time of the ModiLuft takeover, Khemka had told every reporter in town that he ran a Rs 25 billion empire. But when questioned closely about where he would get the money for the 47 per cent ModiLuft shares required for the takeover, he said he could always pledges his wife's jewels. Of course, he said, they were substantial.

Truth is, Khemka's empire centres around his wind power generation unit. And its total generating capacity: a mere 75 MW. For one year now, he has been promising to invest Rs 30 billion in the NEPC group: Rs 20 billion for the wind power unit, Rs 5 billion for the solar generation unit and Rs 5 billion for the airline. And this, when he has tonned down his size and now reportedly claims a net worth of Rs 4.91 billion: Rs 660 million of equity and Rs 4.25 billion of reserves.

Having spread his wings far beyond his capacity to pay, Khemka has consistently defaulted on payments to everyone he has done business with. In June last year, the DGCA sent him a notice of deregistration of two of his Boeings. Reason: he owed the American firm, PLM Equipment and Transport, close to $ 1.4 million in lease rentals. He made his ad agency R K Swamy run around in circles for a mere Rs 30 million; he defaulted on payment of Rs 5.6 million to a television software company; till September last year he owed over Rs 7 million in inland air travel tax and last December he refused to pay Rs 60 million to the Taj group of hotels which caters to his airline till it threatened to go to court against him.

And this month, while Khemka was telling newsmen how he was going to add another 16 aircraft to his fleet, cheques given to suppliers of his flagship company, NEPC-Micon, were bouncing.

The East West Airlines story has been somewhat, but not fundamentally, different. Though the Thapar group's Indian International was the first licensee after the Open Skies policy was announced, East West was the first scheduled airline to take off the ground.

Those were euphoric days. The airline was born with the spirit of every pioneer in history: a robust energy and infectious hope. Their air-hostesses wore skirts and saucy caps instead of the staid saris of Indian Airlines. Their ground staff were courteous and accommodating, instead of the dour faces at the IA part of the terminal. They were out to challenge the government behemoth and they believed they would come out on top. And with them, the domestic air-travelling public believed too.

They started, as per government stipulations, with three aircraft, all Boeing 737-200s. And for a while, things went well and in time, East West went on to acquire four more planes.

The first shock came when a rival airline spread rumours that East West was funded by Bombay underworld don Dawood Ibrahim. The airline still had the energy to fight back with front-page advertisements denying the charge and eventually, government enquiries on the issue proved nothing against them. But the airline did have to pay a price when it began cutting back on some of its schedules.

And these cracks were the first tremors of a wide-open split that would eventually ruin the airline. For, in a hurry to be the first off the ground, East West's Wahids had made one big mistake.

Says Jung, ''Their staffing was targetted towards a quick take-off. They had hired a lot of hot-shots on the board, relatives of a lot of hot-shots as their staff and when the first crisis came, they were stuck with a management which could do nothing. And a management about which the Wahids could do nothing."

The airline industry requires a professional staff. You could, for a while run an airline with a few good men placed in a few key places. But in a crisis, you need as many good men as you can get.

The Wahids had few good men. Says an East West employee, 'The kind of staff they hired couldn't be fired easily. Theoretically, they could duplicate people -- get professionals to cover for those whose sole qualification was their ties to some bureaucrat or politician. But that takes money."

And this time, East West did not have that money to spare.

Courtesy: Sunday magazine