GoAir Says Engine Deal Worth USD$1 Bln

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Published: February 16, 2012

Low-cost Indian airline GoAir’s engine supply deal with Pratt & Whitney is valued at about USD$ 1 billion, managing director Jeh Wadia said.

The privately held airline, which has a market share of about 6 percent in India, ordered 72 A320 aircraft from Airbus last year for about USD$ 7.2 billion.

Pratt & Whitney will supply about 150 engines when the planes are delivered between 2015 and 2020, Wadia said in an interview on Wednesday. The deal will be funded through a combination of equity and debt, he said.

“The reason why we chose these engines is because they will give us fuel efficiency of more than 15 percent in total, and that would relate to 11 percent improvement in direct operating cost,” Wadia said.

Indigo, the only major Indian airline that is making a profit, also ordered 150 Pratt engines for planes it ordered from Airbus last year.

Wadia declined to reveal GoAir’s debt load but said the company would be “extremely profitable” on an operating basis if fuel costs had not risen. He did not elaborate.

India’s airlines, burdened by USD$ 20 billion of debt and fighting high fuel costs and low fares, are desperately seeking changes in government policies to help their businesses.

In a move that could help local airlines access fresh funding, India’s Aviation Ministry said recently that it would recommend that the government allow foreign airlines to buy stakes of up to 49 percent in Indian carriers.

Foreign airlines are currently barred from buying into Indian airlines, though foreign investors can hold a cumulative 49 percent stake.

“We are not in any hurry, but we will look at the opportunity when it arises,” said Wadia, referring to the possibility of investment by a foreign carrier.

A government panel earlier this month recommended that India’s cash-starved airlines be allowed to import jet fuel directly, a break that could help them cut fuel costs by up to 20 percent by avoiding some state taxes.

GoAir is in talks with several companies to provide infrastructure that would allow it to import jet fuel once the government formally gives the go-ahead, Wadia said.

“There are bottle-necks in infrastructure and logistics, but we are trying to find solutions and hope to find solutions,” he said.

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