 "GoAir's big test begins from 2016")
It has survived competition, price wars and fuel price spike in the last decade but Mumbai-based no-frills carrier, GoAir, faces its biggest test as it embarks on massive expansion.
GoAir's small size (in the last 10 years, the airline has inducted just 23 planes) ensured that it did not burn cash the way some of its peers did and has made a profit for three consecutive years. From January 2016, GoAir will start inducting the new Airbus A320neo aircraft and in all, induct 72 planes till 2020 – at the rate of 15 aircraft each year.
Jeh Wadia, the airline's managing director, recently said, “GoAir will increase destinations from 22 now to 36 by March 2018 and 52 by March 2020. From 41 routes now, it will grow to 71 in 2018 and 116 in 2020.”
The challenge before GoAir and its new chief executive Wolfgang Prock-Schauer would be to hire and retain talent, especially pilots, step up marketing and achieve profitable growth. Ensuring management stability and consistency in planning will also be critical.
This year, however, there is no expansion planned in routes or frequencies, sources said. At present, GoAir operates 19 A320 aircraft and flies over 140 flights daily.
“Prock-Schauer is taking over a profitable and well-run airline but needs to create a new management structure, which has more depth in senior and middle management. A new GoAir has to emerge, which retains profitability whilst expanding aggressively,” said Kapil Kaul of Centre for Asia Pacific Aviation.
Prock-Schauer was the chief executive of Jet Airways for six years till 2009 and is familiar with civil aviation sector in India. He assumed charge as CEO in GoAir earlier this month replacing Giorgio De Roni, the longest serving chief executive in that airline.
GoAir did not respond to an email query on the issue. During De Roni's tenure, the fleet size rose from 10 to 19 aircraft and revenue doubled.
But now the airline is facing a shortage of pilots requiring the management to curtail the summer schedule. About 35 pilots resigned from GoAir in the last few months and the carrier is now hiring expat commanders.
“Pilots, especially commanders' shortage, could impact growth for most of the domestic players,” Kaul added.
Also, consultants and travel agents say GoAir needs to focus more on branding and marketing. “The airline will need to be more visible and step up marketing to sustain growth,” said aviation analyst Ameya Joshi.
The other big challenge for GoAir will be to manage growth. While Jet Airways and Kingfisher went for costly acquisitions and SpiceJet is following the twin fleet strategy, GoAir stuck to basics – cost control, improve fleet utilisation while remaining conservative in pricing strategy.
“Once it starts receiving the new planes, the options before GoAir will be to launch new destinations or add frequency on existing routes like Guwahati, Nagpur and Ranchi. GoAir does well on routes like Srinagar and Leh but there are limited slots at these airports. The airline suspended flights from Hyderabad some years ago and can look to reintroduce the service again. Also from Chennai, the airline only flies to Mumbai, Pune and Port Blair," an aviation consultant said. The airline is also expected to introduce international services with the addition of new planes. In the last two-three years, capacity growth has been moderate as Kingfisher went bust and SpiceJet went into a crisis tailspin. In 2016, almost all airlines, except Air India and Jet Airways, are expected to add domestic capacity and supply could overtake demand,” he added.
"Rapid aircraft induction could lead to high costs in opening new stations and an overall spike in operational expenses. An IPO would help the company become cash rich before the rapid induction," Joshi said.
"The net addition to GoAir fleet would not be as rapid as being imagined because a few new aircraft would also be used to replace the existing aircraft. This way GoAir would be the first in India to have an all Airbus A320neo fleet and will have a headstart over its rivals in terms of operating costs, assuming there is 10-12% fuel saving with the new planes," Joshi added.
GoAir's small size (in the last 10 years, the airline has inducted just 23 planes) ensured that it did not burn cash the way some of its peers did and has made a profit for three consecutive years. From January 2016, GoAir will start inducting the new Airbus A320neo aircraft and in all, induct 72 planes till 2020 – at the rate of 15 aircraft each year.
Jeh Wadia, the airline's managing director, recently said, “GoAir will increase destinations from 22 now to 36 by March 2018 and 52 by March 2020. From 41 routes now, it will grow to 71 in 2018 and 116 in 2020.”
| FLIGHT OF FANCY |
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The challenge before GoAir and its new chief executive Wolfgang Prock-Schauer would be to hire and retain talent, especially pilots, step up marketing and achieve profitable growth. Ensuring management stability and consistency in planning will also be critical.
This year, however, there is no expansion planned in routes or frequencies, sources said. At present, GoAir operates 19 A320 aircraft and flies over 140 flights daily.
“Prock-Schauer is taking over a profitable and well-run airline but needs to create a new management structure, which has more depth in senior and middle management. A new GoAir has to emerge, which retains profitability whilst expanding aggressively,” said Kapil Kaul of Centre for Asia Pacific Aviation.
Prock-Schauer was the chief executive of Jet Airways for six years till 2009 and is familiar with civil aviation sector in India. He assumed charge as CEO in GoAir earlier this month replacing Giorgio De Roni, the longest serving chief executive in that airline.
GoAir did not respond to an email query on the issue. During De Roni's tenure, the fleet size rose from 10 to 19 aircraft and revenue doubled.
But now the airline is facing a shortage of pilots requiring the management to curtail the summer schedule. About 35 pilots resigned from GoAir in the last few months and the carrier is now hiring expat commanders.
“Pilots, especially commanders' shortage, could impact growth for most of the domestic players,” Kaul added.
Also, consultants and travel agents say GoAir needs to focus more on branding and marketing. “The airline will need to be more visible and step up marketing to sustain growth,” said aviation analyst Ameya Joshi.
The other big challenge for GoAir will be to manage growth. While Jet Airways and Kingfisher went for costly acquisitions and SpiceJet is following the twin fleet strategy, GoAir stuck to basics – cost control, improve fleet utilisation while remaining conservative in pricing strategy.
“Once it starts receiving the new planes, the options before GoAir will be to launch new destinations or add frequency on existing routes like Guwahati, Nagpur and Ranchi. GoAir does well on routes like Srinagar and Leh but there are limited slots at these airports. The airline suspended flights from Hyderabad some years ago and can look to reintroduce the service again. Also from Chennai, the airline only flies to Mumbai, Pune and Port Blair," an aviation consultant said. The airline is also expected to introduce international services with the addition of new planes. In the last two-three years, capacity growth has been moderate as Kingfisher went bust and SpiceJet went into a crisis tailspin. In 2016, almost all airlines, except Air India and Jet Airways, are expected to add domestic capacity and supply could overtake demand,” he added.
"Rapid aircraft induction could lead to high costs in opening new stations and an overall spike in operational expenses. An IPO would help the company become cash rich before the rapid induction," Joshi said.
"The net addition to GoAir fleet would not be as rapid as being imagined because a few new aircraft would also be used to replace the existing aircraft. This way GoAir would be the first in India to have an all Airbus A320neo fleet and will have a headstart over its rivals in terms of operating costs, assuming there is 10-12% fuel saving with the new planes," Joshi added.