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GoAir inks $1 billion engine deal with Pratt & Whitney

MUMBAI: The Wadia Group-promoted budget airlineGoAir announced a billion-dollar engine deal (on list price) with Pratt & Whitney on Wednesday for its 72 A320neo aircraft, firm orders for which were placed with the European airplane maker Airbus in June last. GoAir placed an order worth $7.2 billion for the aircraft deal, and deliveries will start by 2016.

GoAir chose these 144 PurePower PW1100JM engines over its current CFM engines that are fitted on its existing A320 fleet as the new engines would result in substantial fuel cost savings for the budget airline. GoAir will fund the engine acquisition through a mix of debt and equity.

Pratt & Whitney pitches one of the PurePower engines as quieter, more fuel efficient, green engines that use the geared technology, allowing different fan speeds.

“Purely on a direct operating cost, we are expecting about 15% savings on fuel costs by mounting the PurePower engine, and this has been the main reason for signing the deal apart from good maintenance, repair and overhaul package,” said Jeh Wadia, managing director, GoAir.

The budget carrier that has 160 daily flights, said that the environment where fuel costs have gone up by 42% on price alone is a challenging one, but GoAir might still end the year closer to break even. The unlisted entity where promoters hold the entire 100%, said it would have ended the year with a profit had the fuel cost not played truant. Brent crude prices have remained above the $100-mark through the year.

“We ended FY2011 on a profitable note, and we would have been very profitable in FY12 but for the high fuel costs and a depreciating rupee,” Wadia said. The low-cost airline, with a six percent market share, said it is not striving for expansion and is instead trying to consolidate its position and focus on yields. The airline yields have seen a 12% improvement year-on-year despite the market offering tickets below cost price.

“For the third quarter of this financial year we were very clear that we will not chase market share, but focus on yields and that strategy has worked for us,” Wadia added.

He also said that the airline is in consultation with public oil marketing companies and private firms for using infrastructure and distribution network of these companies, since the government has allowed airlines to import air turbine fuel directly for captive use.

Domestic airline companies are facing an acute cash crunch and need equity infusion to survive, but GoAir says it’s in no hurry to raise cash as it has a comfortable cash position.

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Posted by on Feb 16 2012. Filed under Business India News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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