Mumbai: The Wadia Group promoted GoAirlines (India) Pvt. Ltd, that runs low-fare airline GoAir, is planning to reposition itself as a value carrier, as part of its makeover.
Repositioning: Edgardo Badiali of GoAir. He says the carrier is trying to create value for money while being a point-to-point airline. Daniel Hambury / Bloomberg
A value carrier is a business model placed between no-frills and full-service airlines. Until now, GoAir has been a no-frills, low-fare carrier that sells light refreshments on board.
With the proposed change, GoAir will add some services similar to a full-service airline such as Jet Airways (India) Ltd and Kingfisher Airlines Ltd that would include seat selection, multiple insurance facilities, an expanded selection of food on offer, return check-in facilities, and tele check-in. An announcement of this change in the business model is expected in a month’s time.
GoAir chief executive officer Edgardo Badiali declined details, only saying that his airline “is planning to restart (the style of operations) to create value for money while being a point-to-point carrier, and passengers will have to pay to get more.”
Badiali told Mint that his airline will continue to have a low-cost structure but offer more services and products on board, on ground and during reservation.
The carrier is also considering a new package for corporate travellers, aimed at frequent flyers among them. About one-fifth of GoAir’s passengers are repeat travellers, Badiali said.
GoAir is also in talks with leading international carriers on a possible arrangement to carry their passengers domestically. Badiali declined to name these airline firms it may partner with. The Business Standard newspaper last month reported that GoAir was in touch with British Airways Plc.
An aviation expert said GoAir is trying to customize the low-cost business model for Indian passengers and predicted other carriers would follow suit.
“(A) pure low-cost carrier is an international concept. It cannot be replicated in India since there are no secondary airports or special treatment for low-fare carriers,” said Mark D. Martin, senior adviser (advisory services) at audit and consultancy firm KPMG India Pvt. Ltd.
On whether GoAir’s promoters, the Wadia family that controls textiles-to-realty business Bombay Dyeing and Manufacturing Co. Ltd, is looking to infuse equity from a private equity firm in the airline, Badiali said that option was being pursued.
“As a promoter, they (Wadia Group) will be looking at getting additional equity injected into the company. It (Wadia Group) is continuously looking at that possibility,” he said. “However, it is more than happy to stay invested in GoAir.”
The chief executive said GoAir planned to add new destinations and more flights on its existing routes in the busy season ahead. Airlines in India face increased demand for their services October through January, coinciding with vacations around festivals such as Diwali and Christmas. The carrier has re-started its operations to destinations such as Kochi and Jaipur.
GoAir has finalized several agreements with its suppliers and vendors, often at revised, lower rates, Badiali said. The carrier is in the process of streamlining its fleet by ensuring the fleet will have common engine types to increase fuel efficiency and finalizing various agreements with aircraft parts suppliers and maintenance companies.
The Mumbai-based carrier has also signed an agreement with a leading aircraft maintenance and repair services firm that Badiali declined to name, revealing only that the agreement is worth $20 million(Rs94.16 crore) for maintenance of its fleet for the next five-six years.
GoAir has plans to induct six new Airbus A320 planes from February next year, which will be used to replace its current six-aircraft-strong fleet.
“Instead of renewing the lease, we will be replacing with new planes. This will result in us having an average fleet age of just six months,” Badiali said.
The airline is also looking at the feasibility of hedging prices of jet fuel, referred commonly in the industry as aviation turbine fuel, or ATF. “It is tough to take a view on oil prices and decide the entry point for hedging. We are examining the possibilities of hedging a small portion of our ATF uplifting to begin with,” Badiali said.