GoAir, the low-cost carrier promoted by the Wadia Group, said on Thursday it has placed an order for 72 aircraft worth $7.2 billion (R32,328 crore) with Airbus, that would be delivered over the next five years. The company will fund the aircraft acquisition through a mix of equity and debt. Each A-320 NEO (new engine option) aircraft that GoAir plans to acquire has a list price of around $100 million.
The carrier, which already operates 10 aircraft, will have another 10 delivered to it over the next two years, and with the latest order, will have a combined fleet of 92 aircraft by 2020, said Jeh Wadia, managing director, adding that air fares could grow 10-15% in the high season this year. The company has also appointed Giorgio De Roni, who had earlier stints with Italy?s Air One and Ireland?s Aircraft Fleet Purchase Ltd, as its new CEO.
In the past five years the Indian domestic air travel market has tripled compared to a doubling of the Chinese and the Brazilian domestic markets, and compared to a shrinkage of domestic air travel in both the US and Japan, according to a recent report by the International Air Transport Association (Iata).
Among the emerging markets, India stands out with a growth of 25.6% in April, compared with April 2010. Private Indian carriers are going in for huge aircraft acquisition to tap this opportunity. Jet Airways has been reportedly planning to buy 10 Airbus A330s worth $2.5 billion for its international plans. Last year, SpiceJet said it plans to spend as much as $900 million to purchase 30 Nextgen turboprop aircraft from Canada’s Bombardier Inc.
?As a carrier that was launched in 2005, GoAir may get the eligibility to fly international soon, and this move for such a huge purchase of aircraft would be aimed at global operations,? said Sushi Shyamal, a partner with Ernst & Young. ?International operations for airlines, including those of Air India, Kingfisher and Jet Airways, are profitable, compared to domestic operations, where the margins are very thin.?
In India, it is mandatory for private airlines to complete five years in the domestic market before obtaining a licence to fly international.
Wadia, who ruled out any stake sale plans for the airline, citing self-sufficiency in resources, also said it has no immediate plans for an initial public offering and would rather wait for the stock markets to stabilise.
?As part of our Vision 2020, we have placed an order for additional 72 A320 NEO aircraft with Airbus. These aircraft will give us a further competitive advantage of up to 15% on efficiency, primarily gained from a much improved fuel burn,? Wadia said. This would translate into an operational cost reduction of 11% per seats, he added.
?In terms of aircraft, we see tremendous potential in India, which has barely six airlines with 350 aircraft, compared with China’s 1,100. Incidentally, with all the present orders placed by Indian carriers, we would reach only 1,100 aircraft by 2020,? he said. Compared to this, one domestic airline in America, SouthWest, already has close to 700 aircraft.