Go Air IPO to open on December 8; proceeds to help reduce debt

The company steps up cost control as loss widens to Rs 923 cr in H1FY22

Go Airlines (India), which operates the Go First brand, is looking to raise Rs 3,600 crore from its initial public offering (IPO) and planning to launch the share sale by December 8.

The anchor issue will be launched a day earlier on December 7.

The IPO proceeds will be used to retire debt, and pay oil companies and lessors.

The company is strengthening its cost-saving measures and evaluating higher-capacity Airbus A321neo aircraft after posting a Rs 923-crore net loss in the first half of FY22. The Wadia-group controlled airline’s loss for the period has more than tripled from Rs 299 crore in the first half of FY21 due to amortisation of aircraft leases and higher fuel costs.

Revenue in the first half of FY22 doubled to Rs 1,202 crore on a year-on-year basis due to increased capacity. 

Sources said, the airline said it achieved an EBIDTAR (earnings before interest, depreciation, tax, amortisation, and rentals) margin of 13.9 per cent in the second quarter FY22, supported by 53 per cent revenue growth in the period.

With rapid vaccination and relaxations in pandemic measures, the airline is ramping up its operations. “In the last three months we have increased daily flights from 130 to 310 now. We plan to increase them further to 340-350 in December,” an airline source said. 

“We are growing profitably and are cash-positive since September,” he said.

The source added the company had initiated wide-ranging cost-saving measures as it positioned itself as an ultra low-cost airline.

Besides introducing a variable pay structure for its pilots and cabin crew, the airline took up renegotiating contracts with vendors and suppliers. It has also adopted pay by use models for certain contracts like engineering services and crew accommodation to save cash.

The source added the airline expected to make further savings in sales and distribution expenses.

Go First operates all economy 180-seat Airbus A320Neo aircraft. Currently it is utilising 45 of the 57 planes in its fleet. The airline is in discussion with Airbus for A321 aircraft, which offer 30-40 more seats than the A320 aircraft.

“We are evaluating it. We have an option to acquire A321neo aircraft and will take a call after the IPO,” the source said.

The Wadia group airline will be listing at a time when the aviation industry is witnessing a recovery with passenger load rising on a monthly basis. In October, domestic traffic grew 67 per cent year-on-year to around 8.7 million in October.

Apart from Go Airlines, IndiGo and SpiceJet are listed companies with a market capitalisation of Rs 86,587 crore and Rs 4,651 crore, respectively.

According to ICRA, the domestic aviation industry is expected to witness strong year-on-year growth of 45-50 per cent in domestic air passenger traffic and 80-85 per cent in international air passenger traffic during FY22. This will be driven by a faster pace of vaccination and gradual relaxations in restrictions by the regulatory authorities.

Airlines witnessed 50 per cent recovery in corporate travel versus pre-Covid levels (pre-covid mix were 24 per cent. The revenues from cargo have also increased on a quarter on Quarter basis.