Friday, November 25, 2011

GoAir slips into red, eyes smaller cities for growth

Wadia group-promoted budget carrier GoAir, which has slipped into the red in the second quarter due to high fuel costs and a falling rupee, is looking at a number of options to return to profitablity in the third quarter. The airline plans to go ahead with a new strategy, under which it will not sell tickets below cost price, induct 3 new Airbus A320s and start new operations in tier 2 and tier 3 cities.

“We had some weak result in the second quarter but we feel confident that we might get a good result in the third quarter,” Georgio De Roni, CEO, GoAir, told Hindustan Times on Monday. “Fuel price has gone up by more than 40% but fares have not.”

“We must deliver profitability so we need to revive some approach,” he added.

The company is also mulling whether to increase fares. De Roni indicated that the airline could increase fares by about 20% in the third quarter, as it was “impossible to sell tickets below the cost of production.”

The company that had placed an order of 20 A320s would be taking delivery of 3 of those in 2012. “We had placed an order for 20 A 320s in 2007 of which we will get delivery of three of the planes in 2012, three in 2014 and four in 2015,” he said.

The airline also plans to deploy new planes in newer destinations, especially in tier 2 and tier 3 cities.

Thursday, July 7, 2011

GoAir May Buy Regional Aircraft to Connect Smaller India Cities

Go Airlines (India) Ltd., the discount carrier that ordered 72 Airbus SAS A320neo jets last month, is considering adding modest planes to tap rising travel demand in the South Asian nation.

“The Indian industry has essential ability for regional aircraft,” Giorgio De Roni, who took more than as chief executive officer last month, stated inside a July Five job interview in Mumbai. GoAir has had “very preliminary” talks with planemakers Avions de Transport Regional, Bombardier Inc (BBD/B) and Embraer SA (EMBR3), he said.

GoAir might join rival SpiceJet Ltd. (SJET) in ordering modest planes that seat less than 100 folks as economic growth spreads beyond India’s major cities. The Mumbai-based carrier plans to double its fleet of larger A320s to 20 in the next two many years previous to it starts receiving aircraft from its latest order.

“There is a strong case for airlines to produce a regional network,” stated P.C.K. Ravindran, chairman of Kochi, India-based Institute of Employed Aviation Management, and an adviser on aviation projects. “Gradually, if not immediately, air site visitors will grow in states as industrialization catches up.”

Deliveries of GoAir’s 72 A320neos will begin in 2016, De Roni said. The airline currently flies to modest Indian cities for example Bagdogra, Guwahati, Jaipur and Nagpur using its A320s. The carrier had sales of $300 million in the last financial year and posted a profit, he stated with no elaboration.

SpiceJet, India’s only listed discount carrier, will add 15 Bombardier Q400 turboprops by July next year. The carrier is expanding services to modest cities and towns because it aims to more than double passenger numbers in three years. It ordered the planes last year and took choices for another 15.

IndiGo, the nation’s biggest low-fare airline, last month placed an order for 180 Airbus planes at the Paris Air Show.

Wednesday, June 22, 2011

GoAir takes the big leap, finally

The smallest of India’s low-fare carriers is in a hurry to make up for lost time Giorgio De Roni, GoAir’s new chief executive officer, is no stranger to aggressive growth. In his previous job with Air One, an Italian private airline, he increased its market share from 6 per cent to 30 per cent. And the fleet count went up from 10 to 64. In the process, Air One became a profitable airline.

De Roni will have ample opportunity to put that skill to good use in GoAir, which has shown a reversal of fortune from two years ago. His appointment coincided with the airline’s announcement last week that it would buy 72 Airbus A320neo planes for $7.2 billion – something that prompted the CEO to say that his “target is to outperform competition”.

That may be a tall order as GoAir remains the smallest of India’s low-fare carriers (market share 6.4 per cent) with others such as Indigo and SpiceJet taking a giant leap in market share as well as fleet expansion. But the aircraft acquisition deal shows that the Wadia group airline is finally taking steps to get into the big league. The six-year-old airline currently has 10 A320 planes, but together with an order of 20 A320s placed in 2006, its total order with Airbus is now 92 aircraft.

Managing Director Jeh Wadia is quick to dispel any sense of disbelief. “Let me tell you, these planes are confirmed orders, not options,” he said, speaking at a press conference last week to announce the deal. The 72 planes will be delivered from 2015 onwards. The company is tightlipped on how it would fund the expansion, except saying that the airline is generating money and that the group is capable of funding the 72-plane deal through a mix of equity and debt.

But what would be the new CEO’s strategy going forward? De Roni says GoAir plans to tap the corporate sector, specially small and medium enterprises, to increase its passenger volumes. “I am evaluating trends and will have a concrete proposal shortly,” he says, adding the airline has so far been more oriented towards leisure travelers.

There are also plans to expand the footprint fast, to make up for lost time. So Chennai and Bangalore are the next on the radar. The airline is also working out a new network expansion strategy to tap tier II and tier III cities, which is a big change from its earlier strategy of flying only between big metros.

Last month, the airline introduced a 4.40 a.m flight between Mumbai and Delhi. “The early morning Delhi flight gets a full load. Those travelling by road or air to hill destinations in North prefer this flight,” says Rahul Deans, general manager (marketing). The airline has also added a morning flight to Srinagar in view of good passenger load and high fares.

There is no denying that after a turbulent phase during 2008 and 2009, GoAir did turn around under the stewardship of Kaushik Khona, who was brought in from Bombay Dyeing, as the CEO. It flew 3.3 million passengers last year and expects a 20 per cent growth this year. Go Air has 79 daily flights and its load factor is consistently around 80 per cent. The airline’s revenue grew 61 per cent in FY 2011 and profit after tax was up by 7 per cent. While absolute numbers are not available, company executives say operating margin was up 15.7 per cent and operating profit by 13.7 per cent. Kapil Kaul of Centre for Asia Pacific Aviation estimates the airline made a profit of Rs 40-50 crore last fiscal.

Wadia attributes the success to the airline’s focus on small issues: clean aircraft, cleanest bathroms, smiling crew members. Other factors such as better turnaround of flights also helped.

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