Mumbai: These aren’t the best of times for India’s aviation sector. It was pounded last year by steep jet fuel costs and high fares that kept passengers out. The global slowdown followed, forcing airlines to delay expansion plans, cut routes and trim staff and salaries. GoAir faced the same hurdles, but not so much the fallout.
When Jehangir N. Wadia, better known as Jeh Wadia, launched the low-fare airline in 2005, at the peak of the aviation boom in the country, he decided the airline needed a gradual take-off, but with a flexible fleet and a business class, unique for low-fare carriers. That approach, he says, has paid off now.
Innovating: Jeh Wadia says it’s time for GoAir to rebrand its look and feel to reflect a more formal undertone. Hindustan Times
The airline is increasing its fleet size, adding routes, revamping its management and hiring staff as planned, though it has had to put on hold its proposed cargo airline and an aircraft engineering and maintenance business. Wadia, managing director of GoAirlines (India) Pvt. Ltd, even expects the company to turn profitable next year. Edited excerpts:
GoAir was the first to introduce a flexible fleet plan in India. Later on, we saw full-service carriers too following it in the backdrop of the economic slowdown. How did it help you? Or did it hurt you since GoAir is a low-fare carrier?
Low-cost carriers in India do not enjoy low-cost privileges in the true sense of the word from an operational perspective. In India, low-cost carriers pay the same amount of money for airport usage as the full-service carriers.
Having said this, airline strategies for full-service or low-cost are based on the airline’s market positioning and consequently an appropriate approach needs to be adopted. A flexible fleet plan came into existence thus and works extremely well for GoAir. It is a process that addresses not only current market requirements but anticipated markets as well. Capacity phasing is critical.
Are you happy with the size of the carrier since you still continue to remain a small carrier? Are you expanding your fleet?
Fleet planning can be compared to buying shoes for children. You don’t want your shoes to become too small too quickly in a situation of rapid growth. Extensive planning and three-and-a-half years post our launch, GoAir is poised to grow. Yes, I am happy with where we are.
With a current fleet size of seven brand new aircraft with one more expected in June and two more before the end of the year, GoAir will have 10 brand new aircraft and the youngest fleet in India. Ten more aircraft are being planned over the next one-two years and details of the induction plan will be shared in a phased-out manner.
In a recessionary environment, GoAir is expanding. What is your positioning plan?
Being an LCC (low-cost carrier), it is imperative to revisit the business process periodically, and, I believe, we have attempted this successfully at GoAir. Today, achieving overall airline efficiency is key. We are in a position to expand, owing to our intuitive approach to route planning and our market strategy.
The introduction of Guwahati and Bagdogra this May was undertaken keeping in mind a mix of various segments like small and medium enterprises, corporate travellers, leisure flyers and pilgrim traffic. Come June, more routes will be added and additional flights will be deployed on existing routes.
Going forward, we foresee steady growth. Management and strategy changes will be evident in the next few months and, we believe, this will reflect in service levels and product offerings in the next couple of months.
The company decided in 2005, when it launched, to grow conservatively rather than aggressively. We decided to only grow aggressively when the external factors such as infrastructure, policies and tax structures improved. We realized in 2005 that the industry would take up to three–five years to turn healthy and as a result decided to increase fleet strength only starting in 2009.
GoAir has been talking about fund infusion for a long time now. When do you think you will get funding and what is the plan of action till then?
We are not talking about fund infusion. We are self-funded. We have stated in the past that on an ongoing basis we receive proposals which get evaluated.
You had originally planned ventures in cargo airline, aircraft engineering and maintenance. Are you still pursuing these?
At present, these plans have been put on hold and will be relooked at in the future.
What about the frequent changes at GoAir’s top brass? Many positions are vacant, while other airlines are recruiting aggressively.
Over the last few months, we have made several changes internally based on our expectations from the roles. We set extremely high service levels internally and in the process of achieving it, some stay with us and some have to go. After the “top brass” changes in February, the company has improved its load factor from 66% in February to 72% in April, which was the second highest load factor in the industry among the national carriers. Our market share has gone from 2.5% in February to 4.4% in April.
Your competitors are talking to pilots to lower salaries and are trimming their workforce. What’s GoAir doing?
We are not considering any lowering of salaries at present. And with reference to trimming, we are hiring at present.
Shifting from the copybook low-cost model, you had introduced a business class for GoAir. How is the model working for you?
GoBusiness is an innovative brainchild we are extremely proud of. Being an LCC, pioneering initiatives are our lifeline. GoBusiness is one such successful initiative. The offer to travel and experience business class at a low-cost price is irresistible.
Could you throw some light on a likely date of turning black, yields, aircraft utilization rate and revenue per passenger?
We would be looking at turning a profit by the next financial year.
Are you looking at rebranding your airline? Or rather relaunching the carrier?
We launched with much vibrancy and colour and, while we stay with the same buoyancy in approach, we believe it is time to rebrand our look and feel to reflect a more formal undertone. We are not unlearning or undoing our brand with an attempt to relaunch. We are merely innovating within our existing brand guidelines. Our ground and air personnel adorn new formal grey attire and our logo will now reflect single deep blue. Our strength lies in our product offerings—like the GoBusiness, GoFlexi and GoSmart offers.
After a slump, oil prices have again been going up. What is your outlook on oil? Are you planning to hedge?
It is under consideration.
Are you looking at an alliance similar to Jet Airways and Kingfisher’s to cut costs?
We are open-minded to evaluating any proposal that adds value to our customers.
What’s your expectation on passenger traffic? Was your 35% growth projection two years ago unrealistic?
No, it was not. Unfortunately, the environment has changed in the last eight months. We have had high fuel prices, world recession, the terror attacks, which have understandably had an impact on growth. This will change soon as we are already seeing a gradual increase in the overall economy, which will have a positive impact on the industry.
What is the future of low-fare carriers in India? Full-service carriers are offering low fares as well and even starting low-fare services such as Jet Konnect.
The future of low-fare carriers is very bright as the statistics show. In 2006, the LCC market share was 28% and in 2008, it was 47%. The recent announcement of full-service carriers, such as Jet announcing Jet Konnect, only stands testament to the fact that India harbours a highly sensitive market to price, and, as a result, low-fare carriers have the potential to carry double the passengers in the near future. Also, the purchase power of India lies in the middle of the pyramid, which is exactly where GoAir is positioned.
The Bombay Dyeing group has interests in different verticals. How does the group view its aviation business?
We see this as an industry similar to the telecom industry. Telecom, when launched in the late 1990s, had very high costs of supply and very few subscribers as a consequence of high tariffs. In fact, about 10 years ago, the subscriber base was not more than three million. Today, it is close to 400 million and the same telecom companies that were bleeding heavily are now very profitable and valuable. Indian aviation had about 14 million seats sold/flown in 2004; last year, 40 million seats were sold/flown. The CAGR (compound annual growth rate) between 2004 and 2008 is 29%, which is impressive for any industry.
We see the market potential to be exponential as less than 2% of the population fly today.