GoAir bets big on ultra-low-cost carrier model to consolidate market position

There have been talks that GoAir has been on course to raise funds to fuel its expansion

As the airline sector grapples with the second Covid-19 wave, Wadias-promoted GoAir has set its sights on a major expansion drive in terms of network and aircraft fleet and is betting big on its ultra-low-cost carrier model to consolidate its position as one of the few Indian airlines making profits in a highly-competitive and cost-intensive market.

"While the sector is facing temporary headwinds, we at GoAir believe that the airline is uniquely placed with its inherent ultra-low-cost structure that has always stood us in good stead," its CEO Kaushik Khona told PTI in an exclusive interview.

In March, founder Jeh Wadia from the promoter family stepped down from the company's management. The airline also announced the elevation of Ben Baldanza, a global airline professional, as vice-chairman. Badlanza has been accredited with reviving and taking public Spirit Airlines in the US.

There have also been talks that GoAir has been on course to raise funds to fuel its expansion.

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Khona said he remains confident that the ULCC (ultra-low-cost carrier) model will set GoAir on a unique growth route.

"At GoAir, we are confidently moving ahead, thanks to our ULCC model," he said.

Khona said the ULCC model involves single aircraft and engine type, with common buyer-furnished equipment that provides the lightest and most cost-efficient high-density seating of 186 for its Airbus A320 neo aircraft.

"All this helps to keep our operations simple and overall cost structure low, along with a common skill set for pilots and the engineering team, among other training requirements," Khona said.

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Khona also sounded confident about a highly-underpenetrated Indian aviation market, which he said, once the Covid-19 pandemic ends, is expected to witness a huge surge in demand.

"We cater to a large proportion of first-time flyers and non-business travellers. We already see strong growth shoots from small cities – opting for shorter travel time vs railways.

"At the same time, we expect the trend of intermittent vacationing or short-term leisure holidays growing post the pandemic," he said.

The second factor driving optimism at GoAir has been its good track record of profitability above everything, he said.

Owing to its point-to-point network operations to navigate slot constraints, GoAir claims a high aircraft utilisation rate of 12.9 hours per day and a pre-Covid-19 profitability record.

"We were profitable since inception till 2019 and also closed 2020 as a cash positive player. Efficient operations are our USP and we don't compromise on that," Khona said.

This passion for efficiency has also led the company to lag amid its peers, as some analysts said.

However, Khona said it is a trade-off the company has lived happily with.

"GoAir started with the aim of being a profitable player and not just chasing the market share. In retrospect, we believe that the measured expansion plan has worked in the interest of GoAir," he added.

The airline has an order book of 98 aircraft and commands a market share of around 10 per cent -- the fourth largest in the Indian skies.

However, Khona said this also gives the airline an edge over the market leader.

"In a segment, with the leading player accounting for half the market share, we are strongly positioned to emerge as a very strong second player, focusing on a little more price-sensitive customer base," he said.

GoAir is betting big on its business expansion plans to further use its profitability and agility to cruise ahead in an ever-changing yet promising Indian aviation space.

"Today, our operational costs are as low, or even a tad lower than the largest airline in the country -- despite the difference in fleet size. So, as we grow our operations, we will become even more efficient as we strengthen the balance sheet of the company," Khona said.

On the much-talked-about frequent exits in the ranks of the company's top management, Khona said, "We believe that GoAir has a very stable and dedicated senior and middle management. In fact, the average age of the middle management and senior management within GoAir is quite healthy at around 8-10 years, including some of the employees who have been with us since the airline started operations."

"Due to a few exits at senior levels, we believe a wrong perception has been projected about the airline with regard to senior-level exits, but that perception is not right for sure," said Khona, who himself is in his second stint at the airline.

After leaving the Wadia group-owned airline in 2011, Khona rejoined GoAir in August last year.

GoAir began its domestic operations in November 2005.