GoAir – Keeping Up Profitability In Aviation


GoAirIn an effort to up the demand during what has been a traditionally lean quarter in domestic aviation, Wadia Group-promoted GoAir has announced a flash sale on bookings made during a five-day period starting today.  GoAir has put up a sensational sale of about 1.7 million air tickets at very competitive fares – a number of tickets are available as low as INR 1,469. The airline announced that the sale is valid only on tickets booked for travel between January 1 and March 31, 2015.

The low-cost airline is also clear that the special offer is not intended to trigger a price war but is specifically targeted at promoting demand during what could be a low quarter. The first quarter of the calendar year sees very few domestic travel numbers after the Christmas and New Year euphoria. “The January-March quarter is traditionally a lean quarter… The purpose of introducing these fares is to make air travel affordable during the period… It is not an offer on lowest price or the cheapest price but to make it affordable and more attractive during the lean period”, announced GoAir’s Chief Executive Officer Giorgio De Roni. CEO De Roni also reiterated the carrier’s commitment to offer world class services at affordable rates and to grow and develop the fleet.

Slow and steady

GoAir was founded in November 2005 by Jehangir Wadia and is wholly owned by the Wadia Group. With its headquarters in Worli, Mumbai (Maharashtra), the airline holds the lowest market share in the domestic airline industry (8.8 percent as of January 2014). While it is clear that a number of other budget airlines, about as old as GoAir, have far outsized the carrier in terms of size, scope, and market share, GoAir has by design taken its time to consolidate its presence. The company has remained focused on keeping up its profitability rather than on expanding its operations. The company posted a net profit of about INR 50 crore in Q1 of the current fiscal. It reported a profit of INR 5.44 crore for FY14 but has set a profit target of INR 10 crore for FY 15. Being an unlisted company, GoAir is not required to disclose its financial results each quarter.

The Wadia Group

The Wadia Group is one of the oldest conglomerates in India with operations dating back over 250 years. The group was founded in 1736 by Sir Lovji Nusserwanjee Wadia. The company owns a number of well-established companies in the consumer goods, engineering, real estate, aviation, healthcare, chemicals and autocomponents, apart from owning a number of plantations. The best known companies owned by the group include Britannia and Bombay Dyeing. Apart from these, other well-known companies that belong to the Wadia group are Bombay Burmah, National Peroxide, Bombay Realty, Wadia Techno-Engineering Services and GoAir. The group has only kept up its growth trajectory under the leadership of current chairman Nusli Wadia.

The GoAir fleet

As of December 2014, GoAir’s fleet of aircrafts consists of 19 Airbus A320-200 crafts. Only one of these is owned by the company. The average age of the fleet is about 3 years. Since the fleet owned by the Wadia Group airline is a fairly small one, the guidelines of the Government of India’s Ministry of Civil Aviation do not allow it to operate international flights. In 2012, the carrier had put in an application to bypass these guidelines and to be allowed to operate international flights despite the fleet size. No approval has yet been received by GoAir. The company has also placed a USD 5.2 billion order for 72 Airbus A320neo aircrafts and the induction of these are likely to start in June 2015.

Destinations served

GoAir currently operates 140 flights daily and about 975 flights weekly to 22 destinations.

As of now, GoAir services the following airports –

City Airport
Port Blair Veer Savarkar Airport
Guwahati Lokpriya Gopinath Bordoloi International Airport
Patna Lok Nayak Jayaprakash Airport
Chandigarh Chandigarh Airport
Delhi Indira Gandhi International Airport
Goa Goa International Airport
Ahmedabad Sardar Vallabhbhai Patel International Airport
Jammu Jammu Airport
Srinagar Srinagar Airport
Leh Leh Kushok Bakula Rimpochee Airport
Ranchi Birsa Munda Airport
Bengaluru Kempegowda International Airport
Kochi Cochin International Airport
Mumbai Chhatrapati Shivaji International Airport
Nagpur Dr. Babasaheb Ambedkar International Airport
Pune Pune International Airport
Bhubaneswar Biju Patnaik International Airport
Jaipur Sanganer International Airport
Chennai Chennai International Airport
Lucknow Amausi Airport
Siliguri Bagdogra Airport
Kolkata Netaji Subhash Chandra Bose International Airport

 The Indian aviation space

The domestic aviation industry of India is undergoing what could be called its most tumultuous phase. After Kingfisher Airlines having been grounded and gone bust, SpiceJet has next been giving its investors sleepless nights. SpiceJet’s total liabilities including its debts to the AAI (Airports Authority of India) are currently estimated at INR 1,600 crore. The airline has only till end of this month to find new investors and source about INR 2,000 crore funding. Failing this it is likely that SpiceJet may be grounded. Given the instance of Kingfisher Airlines, most banks are apprehensive to finance SpiceJet.

In May this year the Directorate-General of Civil Aviation (DGCA) issued AirAsia the Air Operator’s Permit. Air Asia is yet to launch large-scale airline operations across the country. AirAsia India is a joint venture between AirAsia (Malaysia’s low-cost airline company), the Tata Group and Telestra Tradespace. Even as we watch closely for developments in the Indian aviation space, industry experts believe that there is huge untapped potential in the sector. According to a report by the India Brand Equity Foundation, the Indian civil aviation industry is likely to become the third largest aviation market by the year 2020 and the largest by 2030.