GoAir looking at IPO window, again
SECOND COMING Rally in aviation stocks fuels move
NEW DELHI: Wadia Group-owned Go Airlines (India) Ltd is readying itself to go public as investors have turned bullish on airline stocks, its top executive said.
“The IPO window is not off at all, we are just looking at the right timing,” Wolfgang ProckSchauer, chief executive of the low-fare airline said in an interview. “Warren Buffett has gone on to aviation which again sends a positive signal. Investors are coming in.”
Buffett’s Berkshire Hathaway Inc recently invested $9.3 billion in four US airlines, with investments topping $2.1 billion in American Airlines, triggering a rally in the stocks of airlines in India, including IndiGo, SpiceJet and Jet Airways.
In 2015, Go Air was keen to look at an IPO after its fuel-efficient Airbus A320neo planes joined fleet (unclear). These planes have now started joining the airline’s fleet even as it has doubled the number of planes on order from 72 to 144 this year.
Indian airlines have been reporting profits for the last two fiscal years as lower fuel prices, which account for nearly half of their expenses, reduced costs.
GoAir clocked a profit of around ₹166 crore in 2015-16, according to aviation consulting firm CAPA. In 2014-15, it reported a profit of ₹218 crore on operating revenue of ₹3,066 crore, according to aviation regulator DGCA.
“With our performance, we will be an attractive investment whatever time we chose,” ProckSchauer said, without giving details.
He said the timing of the IPO will be decided by the owners (Nusli Wadia and son Jeh Wadia) who also control textile major Bombay Dyeing and biscuit maker Britannia Industries.
Prock-Schauer ruled out leaving the airline after his contract expires this year. “There is nothing of that sort. Lot of work ahead. My job is to run a good airline and produce a profit.”
Airlines in India have hired experienced foreign CEOs to boost investor confidence, especially in areas of operations, aircraft leases and the overall books.
GoAir, which was founded in 2006 and has a 24 aircraft fleet and 8% domestic market share, will embark on its biggest expansion in the coming fiscal year, adding one aircraft a month to increase its size to 37 planes by March 2018.
IndiGo, which started at the same time, has 130 planes and a 40% market share. It plans to add a fleet of the size of GoAir by next fiscal from its 400 plane-order.
GoAir will show investors its fuel-efficient planes, which are currently saving 14% in fuel costs, said a person who tracks the airline closely, requesting anonymity. “When some of these planes replace its existing fleet, the airline will see reduced costs. The airline will also show how it will generate cash from sale and lease back of the planes. Airlines get about $3-5 million upside when they order in bulk and sell the aircraft closer to date of delivery to an aircraft lessor.”
The Indian air passenger traffic is growing at the fastest pace in the world. Domestic air passenger traffic has doubled in the past six years to nearly 100 million.
The last airline IPO was that of IndiGo owner InterGlobe Aviation Pvt Ltd which raised ₹3,000 crore at ₹765 a share in 2015.