GoAir facing turbulence on the ground

The rapid expansion of seat capacity in the domestic aviation market is taking its toll on the players. Jeh Wadia's GoAir is undergoing a churn with some senior management people quitting, and its fleet size reducing from seven to five in the next two months. Further, there would be no network expansion over the next six to eight months, with at least two destinations going off air. The top management of the company terms the downsizing of operations, as “fleet optimisation” which would help reduce cash-burn in the lean travel months. “This will help us become cash-flow positive and profitable over the next two months,” Mr Jeh Wadia, managing director, GoAir, said. The short-term operating lease of two aircraft in the fleet — whose contracts end by March — will not be renewed and their replacements would only come in October when the first of the 20 - A320 aircraft joins the fleet.

February and March are lean travel months for the industry. According to Mr Wadia, the carrier wants to put in place a “flexible fleet management plan” by the year end where around seven aircraft would be part of a fixed long-term lease, while three to six aircraft would be available for use only in peak travel season. The airline plans to have 10 aircraft in its fleet by the end of the current calendar year. Also GoAir does not have plans to carry any of its new aircraft on its books. “We have decided to adopt the sale-lease model. All our aircraft would be on lease,” Mr Wadia said. Talks for entering into sale-lease-buy back agreements are on with potential investors. While conceding that there is some top management level churn in the company, Mr Wadia said most of them are “non-performance related”.

Industry sources said among others, GoAir’s chief commercial officer Raj Halve is said to be have put in his papers. However Mr Wadia insisted that Mr Halve was on sick leave and his association and future role in the company would be decided over the next few weeks. All these come at a time when the Wadia group promoted airline is looking at diluting up to 26% stake in the company to raise funds. This is expected over the next couple of months. Over the last three months, private carriers such as Air Deccan, Kingfisher and IndiGo have added over 35,000 fresh seat capacity. This has put pressure on passenger yield per seat for all airlines. The Indian aviation industry is expected to end the financial year 2006-07 in the red with losses to the tune of Rs 2,000 crore.

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