GoAir to buy 72 Airbus-320s for Rs 32,400 crore

Wadia group-owned GoAir on Thursday announced placing an order for 72 Airbus A-320 aircraft valued at about Rs 32,400 crore (Rs 324 billion) on list price, the second largest such order in six months.

With this order for 72 A-320 NEO (New Engine Option) planes worth $7.2 billion, GoAir has a total order book of 92 aircraft worth Rs 43,200 crore ($9.6 billion).

In January, the country's biggest no-frill carrier IndiGo had ordered a record 180 aircraft worth Rs 67,800 crore ($15 billion) to meet its expansion plans till 2025.

GoAir, which currently operates 10 planes with an average age of two years, had earlier placed an order for 20 A-320s.

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"As part of our Vision 2020, we have placed an order for additional 72 A-320 NEO aircraft with Airbus.

"These aircraft will give us a further competitive advantage of up to 15 per cent on efficiency, primarily gained from a much improved fuel burn," Jeh Wadia, GoAir managing director said in a statement about the strategic initiative.

The company would take delivery of its additional aircraft from its previous order over the next 24 months.

Wadia terming the placement of order of an additional 72 aircraft as game-changer for GoAir and the Indian aviation sector.

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 "GoAir has no plans currently to fly international routes. I feel there is too much competition, especially from low-fare carriers and I anticipate a bloodbath there. I wish good luck to some of our competitors who are set to fly international routes," Wadia said.

Asked about plans to rope in a private equity player or a strategic investor, he said there were no such plans at present.

"We have no plan to sell a part of our stake. We also have no plans for an initial public offering. On a profit after tax basis, we are profitable and we have a positive EBITDA growth."

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On GoAir's performance, Wadia said it has achieved an an operating margin of 15.7 per cent as well as an EBITDA growth of 13.7 per cent.

Its load factor stands at 82.5 per cent, while the industry average is 78 per cent.

The airline's on-time performance is 90 per cent, while the industry average is 88 per cent. Its cancellations stood at 0.3 per cent, against the industry average of 2.1 per cent, he said.

GoAir currently operates 10 aircraft with an average age of two years which makes it the youngest fleet in India, he claimed, adding that the company will take delivery of 10 more passengers planes over the next 24 months.

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Elaborating on the airline's order for the 72 A320 NEO aircraft, Wadia said "we are very committed to reducing greenhouse gases emission . . . in line with this commitment, this order with Airbus will ensure that we continuously reduce greenhouse gases emission."

In terms of sectoral growth, GoAir sees a tremendous potential in India, which has barely six airlines with 350 aircraft catering to a billion-plus people, compared to China's 1,100 aircraft currently.

Even with all the present orders placed by Indian carriers, the country would have only 700 aircraft by 2020, Wadia pointed out.

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"Just one domestic airline in America, SouthWest, already has close to 700 aircraft. In terms of seats sold, one airline in Europe, Ryan Air, sold approximately 65 million seats last year, while the whole Indian aviation industry sold just 54 million seats."

"With India's gross domestic product growing at a brisk eight to nine per cent per annum, we see a great future ahead for the aviation sector, including GoAir. Our strategy is to fly those who currently don't fly," he said.

The airline currently operates 133 daily flights across 18 destinations such as Ahmedabad, Bagdogra, Bengaluru, Chandigarh, Cochin, Delhi, Goa, Guwahati, Jaipur, Jammu, Leh, Lucknow, Mumbai, Nagpur, Nanded, Patna, Pune and Srinagar.

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GoAir's new chief executive officer De Roni indicated that additional frequencies would be introduced on existing routes, without starting new hubs.

New hubs would lead to decreased profitability, he said.

"It will be my endeavour to expand the operations profitably and continue to increase its route network. Our aircraft utilisation is the best-in-category, giving us an operation edge over others."

The chief executive officer also indicated that he would create revenue from ancillary and non-passenger operations. "We intend to tap small-and-medium enterprises as well as corporate travellers for revenue," he said.