GoAir Airlines, a Wadia Group company, has steadily expanded its operations to smaller cities from high-traffic sectors like Delhi and Mumbai. The country?s smallest scheduled carrier, with a market share of 6.2% in June, placed an order with Airbus Industrie to buy 72 new airplanes valued at Rs 32,400 crore at list price. The airline CEO, Giorgio De Roni, shared the company?s growth plans and challenges faced by the airline sector with FE’s Nirbhay Kumar:
With most carriers expanding their fleet and network, what are GoAir’s growth plans?
We will increase our fleet with three brand new aircraft in 2012. This will translate into an increased capacity of slightly more than 20% and we will strengthen our presence in some strategic markets.
Additional aircraft will join our fleet in 2013 and 2014. Therefore, within less than 20 months, our fleet will double. Starting from 2016, 72 additional aircraft will join our fleet and will allow us an even wider coverage of the domestic market.
Having already completed the mandatory five years of operation to be eligible to fly overseas, is the airline working on plans for international operation?
For the time-being, we would like to concentrate on the Indian domestic market as we feel it will continue to offer huge opportunities for a solid growth in the near future.
Till now, all listed carriers have posted losses in the last two quarters and are expected to close the year in red. Where does GoAir stand?
The domestic market continues to grow strongly. So far, in this financial year, demand has grown more than 18% and GoAir is
part of this growth. However, all Indian carriers are facing turbulent times due to high cost of fuel and the weakness of the rupee.
We, however, feel confident to be able to deliver reasonably good results in the medium term. We are investing in value-added services to our customers.
We are the only budget carrier in India to offer a loyalty programme, to offer business class with hot meals. Also, through an efficient cost structure, we keep our fares appealing to our customers.
Is the operating environment in India one of the most challenging with taxes on fuel very high?
Yes, it is. The cost of fuel and the weakness of the rupee against the US dollar are two concerns. We must, therefore, continue to control our cost structure efficiently. Of course, our fare structure will be adapted to external pressure on costs.
However, we feel that pricing is just one component of the overall offer we are committed to delivering to our guests on board.
We are witnessing that customers continue to remain loyal to our services although we have been recently obliged to marginally increase our fares because we offer outstanding on-time performance, overall good and warm service and great value for money.
What fiscal measures do you expect from the government in the coming Union Budget, given the poor financial health of the industry?
A strong domestic aviation industry represents an advantage for any country. It contributes to increase in employment, supports the overall growth of the economy, contributes to developing tourism, and helps logistics for the entire industrial compartment.
Any government should, therefore, be committed to making aviation more efficient. If the fiscal burdens are not as heavy as they are currently in India, carriers might deliver a more appealing pricing proposal, therefore, increasing demand further, providing benefits to a larger and larger market through a virtual process.
Earlier, there were talks of GoAir roping in strategic investors in the company. Is the airline still in talks with them? Also, what is the airline’s stand on the government’s proposed move to allow foreign airlines to invest in Indian carriers?
In a globalised sector as aviation is today, it should be reasonable to have a step-by-step approach to allow foreign airlines to invest in India.
It will definitely benefit the aviation sector. However, we should carefully implement rules to ensure that the financial investment from foreign airlines does not translate in making the Indian market a purely catchment market for foreign interests.
India’s airline business is growing at among the highest levels worldwide. With a population of 1.2 billion people, a growing middle class, an expanding industrial output, India needs strong Indian airlines to further help the overall growth of the country.
It might, therefore, be suitable to have an overall review of what legal and fiscal framework might be more efficient to help Indian airlines achieve these challenging results.