Companies

To cut costs, GoAir may retire 12 A320 CEO aircraft

Forum Gandhi Mumbai | Updated on July 29, 2020 Published on July 29, 2020

The Wadia Group-owned GoAir may be retiring 12 of its A320 CEOs earlier than scheduled as part of its cost-cutting measure to deal with subdued air travel. However, the lessors of at least seven of these aircraft are resisting the move, and have demanded a balloon payment on lease rentals for the remaining period.

Sources privy to the information said that GoAir is negotiating to swap the A320 CEO aircraft with A3020 NEOs, which the airline had ordered earlier. But the lessors are not in favour of such a swap and are insisting that GoAir should pay the lease rentals.

According to information available on Planespotter.net, four of the twelve A320 CEOs has been operational for 10 years. A source explained that as per a clause in the lease agreement, post 10 years of an aircraft being in a particular fleet, it can be returned. However, the average age of the other eight aircraft is anywhere between six to eight years.

Currently, the no-frills GoAir operates only 15 to 18 daily out of its total fleet of 55 aircraft. Even here, government regulations allow only up to 45 per cent of the seats to be sold.

Responding to BusinessLine’s query, a company spokesperson said: “It is an established fact that NEO technology provides 15 to 20 per cent better fuel efficiency when compared to the CEO technology, in addition to six extra seats and the commonality of the fleet for ease of maintenance and overall costs.”

A company source said that GoAir has been reducing A320 CEOs from its fleet for a while now, but last year, it has redeployed a few of these aircraft back into its system after acquiring slots operated by Jet Airways .

“GoAir has maintained the principle of ‘sistership’ of the fleet all through, leading to the eventual phase out of our twelve A320 CEOs as soon as possible. Further, post-Covid, passenger demand is expected to be subdued for the coming months and, hence, GoAir intends to accelerate the retirement of the CEO fleet. GoAir is working in close partnership with our lessors towards this goal,” the airline spokesperson added.

Ratings downgrade

This comes even as ratings agency India Ratings downgraded the airline on rising debt and sliding operating performance in FY21.

The report claimed that GoAir’s overall debt was up to ₹1,891 crore in the June quarter, which was 6 per cent higher. It also stated that GoAir’s cash and bank balance have nearly halved to ₹72.5 crore during the said period.

The airline spokesperson, however, said that the “the India Ratings report is incorrect and way off-the-mark. GoAir has more than adequate cash and bank balance to support its operations”.

The report had also stated that the overall debt of GoAir included borrowings from Wadia Group of companiesto support business operations.

A top company source said that the Wadia Group has not taken any decisions on the basis of the past four months or the coming few months. “It has a five-year plan in place. Yes, there is a cash crunch, and the group has had to make a few harsh decisions to stay afloat and achieve its long-term goal. Its ultimate goal is to make GoAir self-sustainable. However, since the market is so tight at the moment, the Wadia Group will infuse more funds,” the source added.

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Published on July 29, 2020
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