Reference Auto

GoAir, of the Wadia Group, is eyeing to fly high in India’s civil aviation space, both in domestic as well as foreign skies, with the airline placing orders for 72 Airbus A320 neos aircraft in a deal worth $7 billion.

“The new aircraft will join our fleet in about five to seven years,” said GoAir managing director Jeh Wadia. From 2015 onwards, the airline hopes to induct up to 15 aircraft every year. Quite an ambitious target though!

Another low-cost carrier, IndiGo, ordered 180 A320 neos for $15 billion last year, leading to the biggest order in the history of Indian aviation.

GoAir seems to be bullish at a time when the aviation industry is striving to control rising costs of fuel as well as higher input costs. This could dent bottom lines in the forthcoming quarter.

GoAir is planning a brand uplift and appointed Giorgio Di Roni as new CEO to spearhead its ‘Vision 2020’ plans. Like other budget carriers — SpiceJet and IndiGo — the Wadia airline is eyeing an aggressive growth.

While the aviation industry has grown at about 36%, GoAir, which flies to 18 destinations with 133 flights a day and 931 every week, has grown 257% over the last three years.

GoAir, which has a clinched market share of 6.4%, operates 10 Airbus A320s only. It wants to grow manifold with this order.

International Air Transport Association or IATA, which is the industry body for civil aviation, had whittled down its forecast for the industry’s earnings to $4 billion for 2011 in June owing to swirling fuel prices and other costs.

Wadia said, “We are looking at a combination of debt and equity but we have not decided on any option as yet. Some aircraft from the order will be funded while others need to be funded.”

As rising costs could hit future earnings, this possibility could create problems when the airline goes to the market to raise funds.

But experts are gong-ho, saying funding is unlikely to be a major hindrance as airlines do not make entire payments in one go. According to them, 2 per cent of the amount has to be paid at the time of placing the order.

GoAir’s earlier bid to raise funds from private equity players turned out to be a dud.

Though GoAir ordered 20 Airbus A320s in 2006, it only took delivery of 10 aircraft as the global meltdown of 2008 took a huge toll on the aviation industry.

Wadia said the airline will fly into the buoyant Tier II and Tier III cities. To counter GoAir, rival SpiceJet will launch Bombardier Q400s (small aircraft) for flyers from small cities.

An upbeat Wadia said, “I take a mid-term and long-term opinion on the industry. I think this (oil pricing) is short term volatility.”

In the days to come, the slugfest in the aviation industry is set to intensify with more players coming in and fuel and input costs will burgeon. So, can a $7-billion purchase of 72 Airbus 320 aircraft help GoAir become one of the dominant players in India’s aviation market?