GoAir Plans Fleet Expansion To Catch Up With Peers

GoAir to increase fleet ahead of winter launch of international operations.

A Go Airlines (India) Ltd Airbus A320 aircraft comes in for a landing at Indira Gandhi International Airport in New Delhi. (Pankaj Nangia/Bloomberg)
A Go Airlines (India) Ltd Airbus A320 aircraft comes in for a landing at Indira Gandhi International Airport in New Delhi. (Pankaj Nangia/Bloomberg)

Go Airlines (India) Ltd., which owns carrier GoAir, will take delivery of 14 Airbus A320neo aircraft this financial year, taking its total fleet size to 37, Managing Director and Chief Executive Officer Wolfgang Prock-Schauer told BloombergQuint in an interview.

Right now we have 23 aircraft, and we will have 37 at the end of the financial year, which is in March 2018. And the aircraft will be coming now. We had delays in our deliveries.
Wolfgang Prock-Schauer, MD & CEO, GoAir

The A320neo aircraft are part of the first leg of an order for 144 planes that the low-cost carrier has placed with Airbus. Of the first 72, the Wadia Group-promoted airline has so far taken possession of four. The rest of its fleet is comprised of the older generation A320 aircraft.

It is likely that GoAir will complete taking delivery of the 72 A320neo aircraft by 2020, said Prock-Schauer.

GoAir has a much smaller fleet than its peers. Market leader IndiGo, with a market share of over 40 percent, has a fleet of 135 planes. Among the others, full service airlines Jet Airways and Air India have 103 and 107, respectively, while low-cost carrier SpiceJet has 54.

The addition to GoAir’s fleet has been necessitated by its desire to raise its market share in the domestic market, which currently stands at around 9 percent, and ahead of the imminent launch of its international operations. GoAir intends to begin flying to international destinations in its winter schedule, but is yet to decide on the number of routes, said Prock-Schauer.

In the medium term, the airline intends to deploy as much as 30 percent of its capacity on international routes, he added.

Striving For Operational Efficiency

GoAir, according to Prock-Schauer has maintained its market share in the domestic market despite competitive pricing pressure, and a delay in the delivery schedule of its aircraft. The reason, he said, was on account of the high load factor, a measure of the utilisation of the available seats on an airlines aircraft.

GoAir has been able to raise its load factor to 90 percent, and hopes to maintain this number even after the increase in the size of its fleet. Operational efficiency, and a high load factor is paramount to the successful running of an airline in India on account of high input costs.

“The underlying demand for aviation is evident in India, and a 15 percent growth per year (in passenger traffic) is achievable,” said Prock-Schauer. “However, one problem I see, is that all our input costs, mainly airport related charges, infrastructure charges, taxes, levies, all that is going up. And that can put a dent in the growth development, because it’s very price sensitive.”

The GoAir head said the airline has been profitable for two financial years, and that profitability in the last financial year saw an improvement. BloombergQuint could not independently verify these claims.

Does GoAir Need Capital?

GoAir has already completed the pre-delivery payments to Airbus for the delivery of the Airbus A320neo aircraft, said Prock-Schauer. After taking delivery, the airline follows the popular sale-and-lease-back model.

“You have to do a pre-delivery payment, and once you take delivery then you have to do a sale and leaseback, and that is all tied up for the foreseeable future,” he said.

The airline business is an expensive proposition, and Prock-Schauer admits that “some capital will need to be raised”.

“We are not in a hurry. We’re waiting for the right timing,” he said.

When asked if an initial public offering is on the cards, he said: “All the options are open. There are many possibilities to raise capital.”