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Go Airlines has signed a USD 7.2 billion deal with Pratt & Whitney to supply 150 engines to power 72 of it's A320neo aircrafts, and managing director Jeh Wadi says that deliveries will start in 2016.
Go Airlines selected Pratt & Whitney’s pure power PW1100g – JM engines for its order.
“We chose Pratt & Whitney as our partner to power our future aircrafts because these engines ensure that we get a reduced fuel burn, improved operating cost and obviously these engines are very environmentally friendly,” said Wadia.
Another factor that will also help airlines reduce cost of fuel is the option to directly reduce aviation turbine fuel. “Directly importing ATF will help save 10-15% of our costs,” he said, adding that they are in talks with players and should be able to import ATF by year-end.
Below is an edited transcript of his interview with Swati Khandelwal Jain. Also watch the accompanying video.
Q: It’s a big order. We know that engine order for 72 Airbus A320NEO. Just take us through the order size. How big is this order in terms of value and also how are you secured for the funds for the same?
A: The aircraft order we placed about nine months ago and the value of the order is approximately USD 7.2 billion and we just concluded today and signed with Pratt & Whitney who would be powering our aircraft. We have bought about 150 odd engines from Pratt & Whitney in this order and these engines obviously ensure that we get a reduced fuel burn, improved operating cost and obviously these engines are very environmentally friendly. So that is one of the reasons why we choose Pratt & Whitney as our partner to power our future aircrafts. The funding is going to be both a combination of equity and debt moving forward.
Q: These deliveries come in only starting 2016, am I right?
A: Well the Airbus Neo, which essentially means new engine option, first flies in end of 2015. So in essence we are launch customer and these aircrafts will only be delivered to customers starting end of 2015 or early 2016. So yes, we will be getting these aircrafts in 2016 as a launch customer.
Q: How are you coping up with the pressure in the airline sector and what is the kind of market share that you have at this point in time?
A: Well we have approximately 6% market share at the moment and we believed always from the beginning that we believe in profitable growth and that ultimately was the original strategy. It continues to be our strategy.
We find that things are going to take time to improve - infrastructure, policies, taxes – and as a result we decided to grow slowly and that ultimately is paying back today because you see some of the issues that the current aviation industry is facing and it’s actually a good thing to be small. We foresee that these issues over the next three to four years and as a result we are growing in a very systematic manner. We never found the aviation industry to be a sprint. We always found it to be a marathon and as a result we are running marathons and not sprints. So from that perspective we are totally self-funded. We own 100% of the company from a personal perspective and we are absolutely adequately funded.
Operationally we are quite happy with the results, but for the increased fuel price of approximately 32% we are actually very profitable. Moving forward as I said we will grow our market share and grow in a very systematic, very profitable way rather than in a profitless way.
Q: Is it safe to say that you are currently a profitable company?
A: We are profitable; in the first quarter of this fiscal we were profitable, second quarter we were marginally at a loss and the third quarter we have actually broken even.
Q: As a company, are you in support of FDI in aviation and do you really think that Indian carriers could attract strategic investors?
A: There is no question about attracting strategic investors. Ultimately it’s not a change in policy because the policy already exists for allowing FDI. It’s a simple amendment which would include strategic or include foreign airlines as part of the 49% FDI.
So this is not a new FDI, we are not asking for change in policy, the policy already exists, it’s a simple amendment to allow foreign airlines to participate within the exiting approved 49% FDI.
Q: Are you in talks with some foreign airline companies if FDI were to go through to attract some funds?
A: We don’t have anyone in discussion as of date. We are not in any hurry to basically bring in a foreign in terms of partner or foreign airline as a partner. We hope that the amendment will take place very soon and when that happens we will strategically assess the value of it and go forward accordingly. But as of date, no we are not in any hurry neither are we talking to any particular airline as we speak.
Q: There is also ATF that has been allowed to be imported now. What’s your view on this and do you think it is really feasible at this point in time?
A: Yes, ultimately there is shortage of infrastructure at the airports and subject to that bottleneck being cleared up we will import fuel, we will find a logistics service provider to help us take it essentially from the storage into the airport, from the airport into the aircraft and that obviously will result in about 10-15% reduction in cost. In addition we will also try and use perhaps some of the existing players to support us in managing the logistics because ultimately this is a huge cost savings if we managed to do it.
Q: Are you talking to companies like Reliance or even oil marketing companies for this?
A: We are talking to some of the oil companies, we have intermediaries who are talking on their own behalf and I hope one way or the other we should get the ability to bring in our own fuel because ultimately that would go straight to the bottom line.
Today we are being penalized with a high fuel cost per barrel and on top of that we are paying about 27% sales tax. So as the cost of fuel goes up internationally, so does the tax component and therefore we will find a way, ultimately its just been approved – the import for fuel and we hopefully should get some respite sometime this year or early next year on this.
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