We will not go overboard in adding routes: Wolfgang Prock-Schauer

Wolfgang Prock-Schauer, managing director and CEO of GoAir, believes that a low-cost carrier (LCC) flying over short- and medium-haul distance in a fast-growing economy like India makes for a good business model. Former CEO of Jet Airways, Prock-Schauer spoke at length with Shahkar Abidi about various issues including the delay in starting the airline's international operations, raising external funding, present aviation environment opportunities and challenges.

You have been associated with the Indian aviation sector for 15 years now. What are the remarkable changes that have taken place?

I have been seeing Indian aviation since 2003. When I came here for the first time, there were just around 100 aircraft and if you remember how airports were then, one can recognise what it has changed. About 15 years later we have become the third-largest aviation market in the world. There are 500-odd aircraft and the whole of the aviation sector in the country has taken a huge quantum leap.To support it, India is one of the fastest-growing economies in the world and you can actually feel the pulse. I keep travelling back and forth to Europe. I feel the pulse in India and also feel the pulse in Europe. I can tell you that the whole economic development and the eagerness to work here as compared to in Europe is in huge contrast, and that is why I am so optimistic. If you operate in an environment where you have a strong economic growth and a strong need to travel among its people, then we are already in a strong position. As we have seen in Europe earlier, an LCC flying over short and medium haul distance in a strong economy makes for a good business model, and you are bound to be successful.

Coming to GoAir, what are your priorities?

We have been a relatively smaller player over the years. We reinforced our plan to grow when we doubled the order of aircraft to 144, which is a quantum leap. With this order, we will be able to reach our goal and mission of becoming top three airlines in Indian aviation. To be among top three in such a big market is a very remarkable achievement. It has a lot of challenges but then it can be achieved. It is one thing to get an aircraft order in place because a good deal on aircraft is one of the major prerequisites to be successful. It is also a strategic asset to us. Also, I can say that our order is a very firm one. Everything is in place. It is not just a memorandum of understanding (MoU) or anything like it. Now if you have ordered the aircraft, you also need to see that you have a right network in place. Network is the heart of an airline. In order to be successful, you should be able to have a meaningful presence on the routes you operate. I firmly believe that we first have to firm our domestic presence. We will be selectively adding more routes without going overboard, and only after that get into the international markets. I do not see that we will predominantly be international. We majorly will be domestic, and then we will have a mix of international. On the people side, what we see in a country like India which is on a move. It generates a lot of people capable of doing these jobs here. I remember, there was a huge pilot shortage in 2003 and then the Indians discovered possibilities to be a pilot. A lot of people went out and returned after being trained CPL (pilot licence holder). So we see a lot of young people coming out trained and we can choose the best among them. For example, every month we are hiring about 40-50 flight attendants. We have been profitable since past couple of years or so and we want to improve upon that. We have been growing with the market, and in terms of market share, we are close to 9%. Despite the fact that we had not been adding too many aircraft in the past financial years, we could keep our market share because of the much higher load factor. With more aircraft coming in now, I foresee an increase in our market share. Revenue has been satisfactory. In terms of measurement in the airline industry, which is revenue available per seat kilometre, we are already leading.

It is one thing to have 90% load factor when the aircraft fleet size is just 23, but a different ball game when the size changes to 144 aircraft or so. This puts pressure on filling seats and margins. Kindly comment on it.

When you have more aircraft then you will be in a position to create a much better product. So in the coming season and winter schedule, we will add more aircraft, and also there will be more frequencies on certain routes. So I do not see the load factor for the airline going down.

In India, you have something like 40 aircraft joining every year for all the airlines. We also have our share of it about one aircraft every month. So you have a right product combined with a right network then you will not see the load factors going down.

There is a lot of noise over rising capacity in India but the lack of corresponding infrastructure growth to back it. How do you see it?

The underlying demand for aviation growth is already there. So 15% growth rate for me is absolutely achievable. In the past, there was a growth rate of 20% but you can not extrapolate it to 20%. However, one problem I see is the increase in input costs – airports related, infrastructure charges, taxes and levies – and that can put a dent in the growth and development because the market is very very price sensitive. If the input cost is too high, then growth can come down very very fast. On infrastructure, I can say that you cannot see additional 500 aircraft being put here now, but definitely, with more airports opening it will not get concentrated. I think it is doable. In comparison to China, they had done something like this earlier because they started much before. They have developed the infrastructure and so can we.

Are you not getting any offer from the foreign airlines? Any plans to raise funds anytime soon from the primary markets?

(Laughs) I think, we are looked at as an attractive option for banks, financial institutions and others. As far as raising the money is concerned, we do need some capital but we are not in a hurry and will do it at the appropriate time. There are so many options and possibilities to raise money but timing is key.

In the telecom sector, operators are calling for a cap on pricing. Do you see it happening in the aviation sector as even though, for example, a Rs 500 fare will be good for a customer, but it will certainly not be good for the airline industry?

Going into the pricing of an airline will be very difficult. It will be difficult to monitor or implement it. What I believe in is that there should be a level-playing field for all airlines. I do not believe in upper or lower ceiling, and the market and competition should decide that.