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January 28, 1997


And before Lufthansa knew, they had a baby

Faisal Wahid To date, no one really knows where the Wahids emerged from; what kind of business they did before or where they got the money to set up an airline. Though the charge that it was a company basically backed by Dawood Ibrahim was never proved, says an employee, ''It became increasingly clear to us that the money that came in was in some way, havala money." Also, the gangland connections kept dogging the company till finally, in 1995, Thakiyudeen Wahid was killed in his car just a few minutes away from his office.

From then on, it's been all downhill. The other Wahid brothers struggled on for a while till forced by financial constraints or underworld threats -- no one knows which -- they shifted base to Madras.

But whatever it is they wanted to run away from, the Wahids couldn't leave their troubles behind. They owed over three million dollars to PLM Equipment -- the company from which they had leased three Boeings three and a half years ago. After much haggling, the American company first appealed to the DGCA to deregister the aircraft and then in utter frustration, went to court. The Delhi high court ordered East West to pay up or return the planes. They grounded the planes.

Then, with only four planes remaining, in May last year they sought and were given DGCA permission to get off trunk routes. As per government regulations, if you fly trunk routes -- the most paying -- you have to compulsorily fly category II and III routes like the North-East and Jammu that are loss-making.

But they were crumbling fast. By June they had decided to fly from one hub: Bombay. That is, they would fly only from Bombay to non-trunk routes like Calicut, Trivandrum, Cochin, etc. Initially, this decision to fly on high-density non-trunk routes was supposed to be 'only temporary'.

Well, it was. On August 8, 1996, East West stopped all operations.

ModiLuft finds itself in more or less the same straits. In a way, it was a tragedy waiting to happen. After the acrimonious break-up of the Modi group, S K Modi was left with a clutch of companies, the best known of which is Modi Threads and Fibres, S K Modi was far from happy with what he'd got as the main group dismembered and sometime as the year 1992 was coming to an end, he decided to prove a point. He'd set up an airline of his own. It would bring in money, but more importantly, it would give him the high-profile image he wanted.

Having so decided, in February 1993 he landed in Hamburg on his way to the United States to lease a few aircraft from General Electric. In Hamburg, Modi went to visit Lufthansa's technical services plant, escorted by a member of the Lufthansa board. He told them that he was going to lease aircraft from General Electric but would Lufthansa take up a contract to maintain them?

He also told them he had been a fan of the German airline since his childhood and would be happy to form a relationship with them. The board member agreed. At the time, says Lufthansa's Kavin Sethi, ''We had 174 maintenance contracts all over the world and one more maintenance contract wouldn't matter.''

Three weeks later, S K Modi called up his friends in Hamburg and said the deal with GE had fallen through. Could Lufthansa also lease him the aircraft?

That was early 1993 and Lufthansa's bad days -- they had been going through severe financial problems and restructuring since 1990 -- weren't yet over. When Modi called, there were twelve 737-200s lying at the head office tarmac due to lack of finances or lack of business. The airlines's board member told Modi, ''You can take them tomorrow if you want. All they need is a coat of paint."

"But at no point of time," says Sethi, "did Lufthansa specifically choose Modi. He came to us. By our reckoning," says Sethi, ''We had already gone through a similar experience with Croatian Airlines. When the state of Croatia decided to start an airline of its own they wanted three aircraft to begin with which would be leased from and maintained by us. After we taught them the ropes, we would move out. And we did after three years. Now Croatian Airlines is making money. So Modi's proposal didn't set any alarm bells ringing."

Besides, says Sethi, "all business was to be strictly on payment."

Modiluft Modi asked if he could use 'Luft' in his airline's name and since 'Luft' in German is a generic term for 'air'. Lufthansa said it couldn't really object; all the papers were signed by March and ModiLuft made its inaugural flight on May 2, 1993.

The initial agreement between ModiLuft and Lufthansa in February was for technical maintenance. A March agreement was for lease of three aircraft and provision of cockpit crew training. In August Lufthansa agreed to provide flight deck crew against payment. "And before we knew," says Sethi. "We had a baby."

Courtesy: Sunday magazine