We hope to find a foreign partner by end of this fiscal: GoAir

Updated: Jun 27 2013, 05:37am hrs
The Wadia group-promoted GoAir is on the lookout for a foreign partner and may announce a tie-up before the end of the fiscal, says CEO Giorgio De Roni. In a conversation with Rhik Kundu, De Roni says that while the airline is scouting for a strategic partner, it will not jump at the first available option. Excerpts:

Reports suggest you are in talks with three global airlines for a possible stake sale. What stage are the negotiations at

Since the government opened up FDI in aviation last year, we have been analysing opportunities to strengthen our position through a strategic partnership. There are many opportunities available as India is a strategic market for all global players. However, our challenge is to find a suitable foreign partner to strengthen our position in the market. The management is working to deliver a proposal to shareholders soon, who, in turn, will have to make a choice based on the available opportunities.

Have you already submitted your recommendations on a foreign partner to the shareholders

We have been working both with our shareholders and a foreign airline. We are going forth with a marriage, which we hope will last a lifetime. The main challenge is to find a suitable partner. We hope to find one by the end of this financial year or may be before that.

It's a strategic decision, and we don't want to find the first available partner or the easiest solution in the market as we want to build our future through the partnership.

How has the depreciation in the rupee impacted your operations, especially with the price of ATF going up

The volatility of the rupee is a significant concern because many cost components, such as those related to fleet, maintenance and fuel, are recorded in dollars. This translates to more than 50% of our costs. The fiscal burden of fuel is approximately around 40% here, which makes it the most expensive in the world.

The depreciation of the rupee is a serious concern as we have seen a continuous fall over the last few weeks and this increases costs for the airline. We will be obliged to pass on the additional cost to passengers.

What are the new domestic routes you are looking to add

GoAir recorded an increase of 16% in passenger traffic even though traffic across the industry shrunk last year. In the first two months of 2013-14, we have seen about 27% increase in passengers. We are strengthening our presence in markets such as Jammu and Kashmir as we recently started daily flights from Mumbai to Srinagar. We have also increased our capacity on the Mumbai-Goa route and further increased our presence in the existing 21 cities where we operate. We are to receive four new aircraft by the end of this year, one of which will be delivered to us in a fortnight. For 2013-14, we plan to increase our capacity by 22% year-on-year. Our strategy is mainly to grow from metros to non-metros, and avoid additional capacities in direct metro to metro routes.

Has there been any progress on your plans to fly internationally

We are in talks with the authorities. It's a huge challenge and we are providing the authorities with all the information required. The regulations, in my view, don't make sense. India allows foreign airlines with less than five years of operational period and with less than 20 aircraft in their fold to operate from the country. Domestic airlines, meanwhile, are discriminated against as they are required to abide by the five-year and the 20-aircraft rule. We are trying to get a waiver. The authorities have agreed with us in principle, but they are yet to give us the formal approval.

We are looking at Gulf countries. Specific routes will be chosen once we get the authorisation. It's too early to say whether our international operations will be restricted to budget flying.

What does the fare scenario look like with Kingfisher Airlines still grounded What are your profitability projections

Fares increased even before September 2012, when Kingfisher Airlines was grounded, mainly because there were some attempts to be logical. Prior to this, some airlines sold tickets below their cost of production to increase their market share, which eventually led to disaster for many airlines. We didn't follow this as we tried to maintain a logical approach. We have a relatively high load factor, at slightly over 80%.

We were profitable last year and in the quarter ended March 2013. The first quarter of this financial year exceeded our expectations in terms of performance, but we are aware

that the second quarter will be a challenge.