FINOCO

Primary business of Go Airlines LTD | Go First

 

Go Airlines (operating with brand name Go Air then now Go First ultra-low-cost carrier ("ULCC") and is one of the fastest growing airlines in India, increasing domestic market share from 8.8% in fiscal 2018 to 10.8% in fiscal 2020. (Source: CAPA Report). The primary business of the industry in which  Go Airlines operates, is the aviation business. 

Summary of Industry

SWOT analysis of Go Airlines LTD | Go First

Strength

• Operational Efficiency and optimum resources utilisation :-Go Airlines have a strong focus on operational efficiency and reliability to deliver a superior customer experience relative to other ULCCs and LCCs. It had high aircraft utilization during fiscal 2020, with an average utilization of 12.9 hours per day with a high load factor of 88.9%.
• Cancellations of Flight:-  Go Airlines achieved last rate of cancellations due its operational efficiency at 0.3 per  10000 passengers vs 1 per 10000 is industry standard.
• Simple, fuel-efficient and next generation fleet:- Company is employing a single aircraft type across their entire fleet and also planning to increase it. GO First has average fleet age of 3.7 years as of February 2021, which is one of the youngest fleet ages in India and globally. Fleets built on single airframe help company decrease the cost of maintenance and also do not require to hold large and different types of inventories for its spare parts. Usage of a single type of aircraft standardizes the requirements for the pilots and maintenance teams. This enables easy availability of resources and eliminates training requirements for the crew and engineers.
• Established position in slot-constrained airports, with best in class efficiency :-   Go First 's market share in India has increased from 5.4% in fiscal 2010 to 10.8% in fiscal 2020. Go FIRST  had established market share of 14% in Mumbai, 12% in New Delhi, 14% in Pune, 25% in Ahmedabad and 14% in Goa, which are among the top 10 airports in India. GO AIRLINES  had the leading market share in the New Delhi – Patna, Mumbai – Goa and New Delhi – Srinagar routes, and the second highest market share in the Ahmedabad – Mumbai, New Delhi – Lucknow, New Delhi – Pune, Bengaluru – Pune and Ahmedabad – New Delhi routes.
• Route Selection and operations:-  Go First have a robust route selection process. While evaluating new routes their primary aim is to improve market share by increasing the utilization of our slots at airports and also considering  profitability of the route.  Additionally, Go Airlines Ltd operate a point-to-point route network with no code-sharing with other airlines for passenger traffic. As a result of this measured approach to route selection and route utilization, their Slot Efficiency1 during fiscal 2018 to fiscal 2020 was 1.23, which was the second highest in India.  To reduce the costs of parking the aircraft overnight, they have focused,  international operations on flights which return on the same day.
• Selling experiences for the young Indian leisure and focusing MSME traveller :-  The main customer acquisition strategy is targeted towards the growing number of leisure customers and MSME business travellers in India. Go Airlines  first Indian airline to launch flights between Delhi – Phuket, Mumbai – Phuket, Delhi – Male and Mumbai – Male, Mumbai to Leh, Port Blair, Srinagar and Male along with Bengaluru – Phuket and Kannur – Muscat. Their slot shares in India for fiscal 2020 at key leisure markets such as Leh (47%), Srinagar (23%) and Port Blair (21%) allowing to target domestic leisure travellers to these destinations.  Similarly, in fiscal 2020 they had a 65% slot share among Indian airlines flying to Phuket and connect Male to multiple Indian cities, allowing to target the international leisure traveller to these destinations.    For MSME business travellers point to point connectivity and same-day travel features of route helps to  attract and retain customers. Focusing on metro-metro, non metro- metro routes and non-metros to non-metros In fiscal 2020, company's market share across these routes was 8.3% in metro to metro, 11.7% in metro to non-metro and 10.2% in non-metro to non-metro.  Total passenger volume for fiscal 2018, 2019 and 2020 and the nine months ended December 31, 2020 was 10.8 million, 12.7 million, 16.2 million and 2.4 million.

Demonstrated track record of growth across key performance indicators:- Passenger revenue has grown at a CAGR of 24.8 % from fiscal 2018 to fiscal 2020 and Operating Revenue has grown at a CAGR of 25.2% in the same period.

TERMS used in above table:-

1. Ancillary Revenue is equal to (i) revenue from passenger services, e.g. seat selection, excess baggage, priority check-in, convenience fees, assistance for unaccompanied minors, travel protection, pre-booking international SIM cards, Smart Assist (meet and greet services for departure and/or arrival), GoHoliday (flight and hotel package deals), Smart Café (prebooked meals), e-ticket printing, upgrades and others, (ii) cancellation and modification charges and (iii) cargo revenue.
2. Operating Revenue is equal to the sum of Passenger Revenue and Ancillary Revenue.
3. Total RASK is equal to Total Revenue per ASK. Operating RASK is equal to Operating Revenue per ASK.
4. RPK Yield is equal to Operating Revenue per RPK.
5. Cash CASK excludes non-cash expenditures of finance and forex costs due to the Ind AS 116 transitions.

Highly experienced Board and management team compliant with corporate governance and backed by the Wadia group.

Promoters of Go Airlines are individuals and entities associated with the Wadia group, which is a part of one of the oldest conglomerates in India with presence in several diversified industries, including FMCG, real estate, textiles, chemicals and food processing. Four companies in the Wadia group, are listed on Indian Stock Exchanges, including Britannia (a 102-year old company in FMCG that is in the Nifty 50 index), Bombay Burmah (a 150-year old company in tea and other businesses), Bombay Dyeing (a 140-year old company in textiles and real estate) and NPL (a manufacturer of hydrogen peroxide).

Ben Baldanza as Vice Chairman, who was the CEO of Spirit Airlines in the U.S.

Weakness

• Defaulted several payments :- Go Airlines have been and continue to be in payment default under several of their aircraft lease agreements. Such defaults may lead their lessors to initiate legal or enforcement proceedings against the company, enforce bank guarantees, appropriate security deposits or repossess the aircraft, which will adversely affect the business, financial condition and results of operations. 
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Opportunities

• Economic growth will drive higher income levels and consumption:- Over the long term, air traffic is strongly correlated to GDP, although fuel prices, supply side issues and other external shocks can cause short term disruption. Over the 10 years to FY2020, there was a very strong positive correlation between GDP growth and domestic revenue passenger kilometres (RPKs) in India. This mirrors the relationship that has been observed globally over several decades. Over the last 20 years, domestic traffic in India has grown on average at around 1.8 times the GDP growth.  The share of the population categorised as low-income is expected to shrink from 43.3% in 2018 to 14.8% by 2030. High income households are projected to grow at a CAGR of 11.3% between 2018 and 2030, the fastest rate of all income categories, followed by high-mid income households at 8.8%. As a result, the number of high and upper mid-income households as a proportion of the total will more than double from 23.5% in 2018 to 51.0% in 2030, making them the largest income category. This structural shift will increase disposable incomes and provide a significant stimulus to discretionary consumption on categories such as travel. Consumer spending is as a result expected to quadruple from USD1.5 trillion in 2018 to USD6.0 trillion by 2030.
• Upside potential in overseas travel amongst Indian nationals:- In the 10 years to 2019, international departures by Indian nationals increased at a CAGR of 9.3% to reach 26.6 million. Meanwhile, foreign tourist arrivals rose at a CAGR of 7.8% to 10.9 million. 
• Supply Side Issues:- Supply-side issues, such as airline capacity, can impact traffic in individual years. For example, the exit of Kingfisher Airlines resulted in negative growth in FY2013, while Jet Airways’ closure led to subdued growth in FY2020. 
• In FY2010, routes between the six metros (Delhi, Mumbai, Bengaluru, Hyderabad, Chennai and Kolkata) accounted for 41.6% of total domestic traffic. This declined to 25.7% by FY2020 as air services spread to more and more cities. In the ten years to FY2020, traffic on metro–non-metro routes increased at a CAGR of 15.2%, almost twice the 7.7% CAGR on metro–metro routes, reflecting the under-penetration and potential of non-metro routes. And in the last five years, there has been particularly strong growth (CAGR of 31.2%) on non-metro to non-metro routes, albeit off a small base.

  Route type	FY 2010-2015 CAGR (%)	FY 2015-2020 CAGR (%)	First Go share (%)
  Metro - Metro	7.8	7.7	10.8
  Metro - Non Metro	14.5	16.5	11.7
  Non Metro - Non Metro	10.5	31.5	10.2

• In short :-Rising per capita incomes, increasing urbanisation and industrialisation; Burgeoning middle class with higher disposable incomes and greater propensity to travel because of changing social attitudes towards consumption and influence from the internet and media;  Relatively young society that will result in a large cohort of economically active people over the next two decades and beyond; and  Modal substitution of travel from rail to air.

Threats

Go Airlines LTD | Go First’s Financial Informations:-

Profit and loss

Balance sheet

Cash Flow Statement

Utilisation of Capital raised through IPO

Go Airlines LTD | Go First through this IPO wants to raise RS 3600 crores..

 

Key Points to to be considered before subscribing for Go Airlines LTD | Go First IPO.