Continuing from part 1 of the interview with the the soft spoken CEO of GoAir, Giorgio De Roni, who has quietly turned around the Wadia family promoted airline from a rock bottom position, dismal market share, and reputation for frequent cancellations, to a top performing contender in the Indian airline industry, with some of the best performance parameters in the industry.
In the concluding part of this broad ranging two-on-one interview with Devesh Agarwal and Vinay Bhaskara, De Roni, shares his management mantras, techniques and methods utilised in the turn around of GoAir.
Q: How are things developing at GoAir and in the Indian airline industry as a whole over the past year?
Well the industry is going through a challenging period due to many issues in the market.
Certainly and foremost the cost of fuel and taxation on fuel. We have recorded an increase of 7%, which is a huge increase given that fuel represents more than 50% of our total costs.
Then we have a market that I’m fully confident and sure that in the medium to long term is growing. But unfortunately in the latest few months, we have recorded a drop in respect to last year, and that is a big concern in the short period.
We have some infrastructure bottlenecks and again this is penalizing airlines in India.
That said, I remain confident in the growth of the Indian aviation sector. We might require some revision of the regulatory environment which is a little bit old fashioned. If I’m not wrong the base of the legal framework is dated 1934, so even before the Chicago Convention.
I feel that some commitment from the government to revise and improve efficiency in the system is necessary. I feel confident that all stakeholders will be able to deliver us such an environment.
In my view, a country with 1.2 billion people should have a much stronger aviation sector. Definitely there is an opportunity to create a hub in India, and there is probably also a space for more than one hub. But we need some efficiency in all of the systems.
Q: Till a little more than a year ago, GoAir did not enjoy the best reputation in the industry in terms of dispatch reliability. In the last 1.5 years, that has turned around literally 100%. GoAir ranks, right at the top in terms of least cancellations and best on-time performance. Can you share with us what were the issues confronting GoAir and some of the steps you took to solve them when you joined the airline?
Well I think that quality to customer is one of the pillars of any airline, and we are committed to deliver value for money. Definitely I am aware that in the past, GoAir was suffering in terms of on-time performance. We are now averaging around 90%. And notwithstanding the high on-time performance, we also have high aircraft utilization, because in July we achieved 13 block hours per aircraft per day, which is remarkable for a narrow-body airline.
I think that the only thing that I am trying to reach within the organization is trying to deliver consistent strategy, and a consistent approach throughout the management team and down to the front line. We are investing hugely in terms of training and hugely in processes and procedure. We were IOSA approved [IATA Operational Safety Audit] at the end of 2010. Since it is a 2 year approval, we are now going through the renewal of that certificate. All these aspects are contributing to keep our quality and standard of performance high.
IOSA? We didn’t know that you had undergone IOSA. We only knew that Air India had undergone IOSA.
Well, one of our characteristics is not to overpromise, but first to deliver the result and then communicate. Sometimes my shareholder [Wadia family] blames me, saying that we [GoAir management] should be more proactive in communication.
Well my view is that we have to communicate only what we are able to deliver. And definitely IOSA is a good achievement.
But in the end, does a passenger choose GoAir for being IOSA certified? No I don’t think so.
I think that it is more important to deliver on-time performance, and good service, both on-board and on the ground. And that is why we are investing significantly in training.
Q: You mentioned that GoAir is achieving 13 hours aircraft block utilisation time, That is almost 20% or 30% more than IndiGo or SpiceJet. You appear to have probably the best aircraft utilization in the country?
Well last year we received an award by Airbus for being the best operator of the A320 in whole of Asia Pacific, Middle East and Africa in our fleet size. [Editor’s note: A320 behemoths AirAsia and IndiGo are in the same geography]
And this is remarkable because of course the higher utilization continues to keep fixed costs more efficient , but also it is remarkable because it is accompanied by a very good on-time performance.
Q: How long are you looking at keeping the same level of aircraft utilization?
I hope that as soon as we get approval, we can start operating on international flights and increase the aircraft utilization by adding some flights at night. Of course on a daily basis we need to carry out maintenance checks on all the aircraft. And these keep the aircraft grounded for 3.5~4 hours every day, so the limit for the utilization is 20 hours.
We have a turnaround time of between 25 and 30 minutes depending on the size of the airport and efficiency of the airport in providing turnaround services. And that’s the limit I cannot go beyond.
Because our first departure is at 05:15 and our last arrival is at 01:00 the following day. Of course not all of the aircraft have such an intensive utilization, but we manage to have a pretty good utilization.
Q: So does this high utilization change the timeline on heavy maintenance checks for the A320s?
We do have C-checks. Another policy of the company is to keep the fleet as young as possible, because this brings efficiency in maintenance and efficiency in fuel consumption, and a good product to our customer. It means that C-checks. Yes we have undergone 8 C-checks for the fleet. These keep the aircraft grounded for around 3 days. We outsource the C-check maintenance. We also have engines updated but considering that we have spare engines, the high utilization is not as much of a concern.
Q: Many Indian carriers are moving to the concept of “power by the hour” with engine manufacturers. Is GoAir using this business method?
[Editor’s note: In this business method, airlines agree to pay engine manufacturers a unit price per hour of usage of the engine. The manufacture is then responsible for the performance and maintenance of the engine.]
We do not do so currently, but we are exploring this method. If it saves us money and helps us improve our despatch reliability we will consider it most strongly.
Q: Can you share some of your operational numbers? What are your average number of flights per aircraft per day?
We operate roughly 100 nonstop flights, but the network is constructed to offer as many “via” [connecting] opportunities as possible, particularly via Delhi and via Mumbai. And we carried roughly 3.5 million passengers last year and we have a target of 5.5 [million]. Why? Not only due to the increase of aircraft, we grew capacity by 22% as well.
Q: So you will be targeting growth up to 5.5 million passengers this year?
Yes 5.5 million. Due to increasing capacity by 22% and a higher seat factor. We also slightly increased the productivity by 15 minutes – which is peanuts. But at the end of the day, we can deliver some positive results.
Q: How many rotations do you achieve on average per aircraft per day?
We achieve 7.6 legs per aircraft per day.
[Editor’s Note: Mr. De Roni clarified that he meant 7.6 one way flight segments per aircraft per day.]
Q: Can we ask you for CASK or RASK numbers? (Cost per Available Seat Kilometre, Revenue per Available Seat Kilometre)
Q: You mentioned the enhanced connectivity that you are looking at through Delhi and Mumbai. Looking forward, how much do you want to grow connections? Will it play an increasing role in the business model or will the primary focus still be point to point connections (P2P)?
Well the main focus will continue to be on point to point, but definitely connectivity might increase without diluting the overall revenue. Furthermore, we also must consider that due to some infrastructure bottlenecks, it wouldn’t be easy to add additional slots in Mumbai or at peak times in Delhi. So we also have a strategy to increase our presence in other areas of the country. We are already relatively strong in the Northwest; in Jammu and Kashmir we are the market share leader in Srinagar. We have recently deployed second aircraft nonstop at Bangalore Airport and the January A320 delivery will be most probably deployed in the South of the country, bypassing both Delhi and Mumbai.
Q: What do you see happening in Mumbai with regards to an integrated terminal? Will it be something similar to Delhi where you have an LCC terminal and a separate integrated terminal.
First of all, I am not Indian and I am not particularly able to forecast Indian decisions. And even if I am able to forecast, since it is sometimes a frustrating experience, I prefer to keep to what is the final the result.
Because media coverage is unpredictable – one week they say that FDI will be approved by Friday, the next Saturday, it is next month, and the next month, it is in a few months time.
So I have the habit of let’s see what happens and planning consequently.
Q: The reason we ask is that if in Bombay they structure the integrated terminal similar to Delhi, will the cost structure be similar to Delhi?
Yes. And it will create inefficiencies in the cost structure if we have to share activity between two terminals. So I do hope that this kind of consideration will be analyzed before any sort of decision is made.
[Editor’s note. Please see part 1 of this interview where Mr. De Roni explains how high fees are impacting Delhi airport with reduced traffic]
You recently asked the DGCA to grant you a waiver from the 5-year and 20-aircraft rules for international flying. How confident are you in receiving a waiver, and would this signal a shift in strategy towards more international flying?
No, the core business will remain domestic. I personally see a strong potential for more growth domestically, considering that only 60 million passengers travelled by air last year out of 1.2 billion people.
If there are opportunities to fly internationally, I feel relatively confident to be authorized to fly internationally.
We already have, as you know, the 5 years of experience required, but we are flying less than 20 aircraft. I do not see why foreign airlines are allowed to fly international flights to India with just 1, 2, or 3 aircraft and Indian carriers are not allowed.
In my view, allowing GoAir to fly international, will increase opportunities for employment, flows of currency and tourism, and will serve the economy of the country better, and at the end of the day, it will create a dynamic competitive environment to the benefit of the final customer.
[Editor’s Note: Just to give some examples of this disparity. Avia Traffic Company, an airline with 5 aircraft that is banned in the EU, is allowed to operate in to India. Bhutan’s Druk Air with just 3 aircraft, and several sketchy Afghan airlines with very small fleets, operate non-stop international services into Delhi? Yet GoAir with its now sparkling reliability and safety record is not allowed to do so?]
Q: Looking at your network, Mumbai and Delhi seem to be roughly equal in size. Will you increase in Delhi?
We are slightly more present in Delhi, historically due to a lack of slots in Mumbai. But definitely also due to the fact that the cost in Delhi has increased greatly. Thus the expansion plan will mostly be outside Delhi.
Q: One thing we’ve noticed is that the bulk of the expense at Delhi Airport seems to have occurred on Terminal 3. Yet GoAir, SpiceJet, and IndiGo passengers, who do not use T3, are made to pay fees for T3. Your comments?
Unfortunately, this is the common approach to airport development. And with this kind of approach we have weaknesses in the efficiency of the system. We have to survive anyhow.
Thank you sir for the revealing details. It was a pleasure.