By Mark D Martin MRAeS
General George S Patton once said, “Success is how high you bounce when you hit bottom”, and this at best sums up Go Air’s Journey so far.
In the 15 year span of GoAir’s presence, the airline has borne witness to Kingfisher, Jet, Air Costa and Paramount Airways start and cease; and at the same time scrutinize nearly four attempts of SpiceJet’s near collapse and resurrection – and why Go Air lives on is of that it’s strategy has been centered on fleet sizing that’s not aggressive, a revenue model that proxies with Group Companies, a long term ROI window, losses and expenses that can still be managed by promotors and a fundamentally flat, ‘fish-bowl’ organization.
GoAir’s product offering also has played a role with improving the airline’s survivability; it’s practically ‘see-through’, No-Nonsense, Plain Vanilla “What-You-See-Is-What-You-Get”/WYSIWYG Service Invention has paid off with creating a USP benefiting its corporate bulk booking customers and, diametrically opposing Holiday Maker segment.
In hindsight, GoAir’s network reminds one of how Indian Airlines operated back in the day. Offer flight times and connections that are driven by what the traveler wants, and not by competition – as back when Indian Airlines was around, there no competition. I do believe the Wadia family too has had a role to play with the product and network offering, and in particular insightful inputs from Ms. Maureen Wadia, which stems from her experiences of working with airlines. Back in the 60’s and the 70’s, Maureen was Flight Stewardess with air India so clearly there resides understanding of the basics with what Indian travelers need.
And that explains the unique timings of their flights. Go Air flies when others do not. For instance, the 10:45 PM departure for Delhi from Mumbai allows one to finish work, have dinner, a few drinks and fly home in ‘high-spirits’(very thoughtfully Parsi!), whilst the 11AM morning departure from Mumbai to Delhi allows on to wake up not too early, breakfast at leisure to catch a pleasantly timed ride back to to join office at half day making for a very comfortable overall, travel experience. And that goes too for how terrific the Sunday 12noon Mumbai Delhi Flight is.
After running two airlines in my career, restructured one and having lived through the 2008 Financial crisis, for an airline the size of GoAir subsisting through the COVID 19 imbroglio is both a ‘walk in the Park’ and a ‘tight rope act’. And I’ll tell you why. In 2008, accrued debt as part of the lending wave that began from 2004 up until 2007 had gotten so bad that airlines were stuck with overcapacity and arid cash reserves whilst flying empty seats at a time when the price of oil spiked to nearly $160. The only logical steps left then was to aggressively downsize, amortize lending or close.
The Situation Now
2021 and COVID presents a diametrically opposing situation. Cash accrued as part of profits made from previous years and working capital budgeted from FY2019-2020 apportioned for FY2020-2021 matches up to Zero income/earnings with P&L being frozen on account of the widespread flight restriction and ban on operating airline revenue services. Unlike 2008, 2020’s predicament presents the shocking reality of fixed and variable operating expenses staring Airline CEO’s and promotors with the only option left being an aggressive cost cut. Not the smartest thing to do.
GoAir pulling through the COVID19 crunch centers on its ability to Optimize its operations and Network, Fixed and variable fleet lease expenses and focus on trimming the expense ‘flab’ that has crept into its operating structure over the years. A good starting point to this should commence with a Comprehensive Carbon Footprint and Fuel Burn Optimization Plan, Maintenance operations Cost Review, Micro and Macro Crew Operations and Safety Exceedance Cost Impact, Dissecting its entire Airport and Ground Operations costs and right align its Network Operations cost to effectively Augment its Revenue and earnings.
Kaushik Khona at GoAir is possibly the most agile and aggressive step the Wadia’s could have done in the direction of Cost Optimization more so since Kaushik unlike anyone else before knows the Management and functioning DNA of the Wadia group extremely well. Kaushik’s approach with GoAir centers on his powerful understanding of Airline Financials, P&L and Revenue and Returns and this has worked exceptionally well for GoAir in the past. Kaushik during his previous tenure at Go Air ran a very tight ship with firm process and operation controls and this has paid off.
GoAir’s challenge has been finding the right leader that can understand airline balance sheets and ensure revenues are optimized to ensure operations continuity, which sadly didn’t happen before except for showmanship being attached to the brand as big-spenders that eventually proved to be “all bang-no-buck” for the Wadia’s.
As promotors, the Wadia’s are awfully sentimental, emotional and over possessive with all its ventures, and their somewhat harsh and irrational aggression with internal matters in particular at Go Air stems from this approach, that they believe pays back with their experiences from their textile, Fashion Apparel, Retail and FMCG Businesses. In all this, the Wadia’s could not have found a better manager than Kaushik as he understands both the Wadia’s temperament, sentiments, and emotions extremely well.
The GoAir of 2021 with Khona unlike before with flashy, swish, glitterati CEO’s that didn’t do much of a value add except splash and splurge promotor money on marketing with little or no fundamental knowledge of airline financials or technical acquaintance of running a successful one – gets replaced with a “hard-wired” operational and financial control that’s directly linked to efficiency. GoAir prior to COVID 19 had its focus set on International Operations, therefore any plans for network expansion should have become infructuous, with what being left to do now would be to align and structure costs and P&L, which Kaushik is a “Jedi Master” at doing.
Although I’m not too optimistic with the success of Go Air’s IPO given the current COVID induced cash flow impact with investors in general, Go Air in the backdrop of India’s worst recent past has outlived and outperformed nearly all of its competition barring possibly IndiGo; including live to tell the tale when most were in and out of bankruptcy during the 2008 financial crisis, 2012 economic downturn, 2017 demonetization and now with both the COVID waves. GoAir/GoFirst’s strategy with modest, stable, and sustained expansion collocated with rightsizing fleet to market has worked well for the airline. Sustainability is the litmus test that defines the triumph of an airline operating model. Go Air’s slow, steady growth is built on a market demand, a less ostentatious focus with routes and an obsessive fixation for flight times was impossible to compete with, and has worked with the business and leisure traveler.
The focus for the leadership and promotors of GoAir now shifts with taking the fullest from the COVID19 recovery phase which we expect should occur by 2021 Q4 when inoculations are systematically performed across most parts of the world. Immediate COVID induced corrective actions for GoAir should be with setting the house in order by means of controlling lesser assets, set in place a more robust Risk Forecast & Mitigation Matrix, terminate all elements that have the potential of weighing down profits and earnings and, if required execute a minor fleet capacity correction to soften the blow from a mounting expenditure impact.
GoAir outliving some of the largest airlines in India whilst keep itself alive does say something about its promotors commitment given that the airline’s debt and expenses is still within the grasp of an ability to fund the airline and raise capital by means of internal accrual. I expect GoAir to be around for atleast fifteen more years after the IPO and a more aggressive network in five years; so clearly this airline should be on the watch list for many.
Success, indeed is how high you bounce back when you hit bottom!
About the author:
Mark D Martin MRAes leads Martin Consulting, a dedicated aviation consulting and safety firm based in Asia and the Middle East that works with Airlines, Airports, Governments, Corporate Aviation, Helicopter Companies and Banks. Mark has been worked with nearly five airlines in his career out of which he led two as CEO and COO.
Mark D Martin MRAeS is a member of the prestigious Royal Aeronautical Society® of United Kingdom (RAeS) and is trained by the United Kingdom Civil Aviation Authority International®(UKCAAi) in Advanced Safety & SMS, EASA® Part 145 and EASA® Part M/CAMO with a focus on SARI and SEARIF regions. Mark is also rated as an Aerospace Standard AS9100RevD Lead Auditor covering MRO, Military Operations, Business Jets, Corporate Aviation, HeliOps, Component Manufacturing & Overhaul and Airline Operations. Mark can be contacted at: flysafe@martinconsulting.aero
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