Budget carrier GoAir may fly more frequently to Andhra Pradesh and Chhattisgarh as it seeks to enhance profitability by increasing services in States that offer cheaper fuel options.

Recently, AP and Chhattisgarh reduced the quantum of sales tax on Aviation Turbine Fuel to one per cent and four per cent respectively thereby helping carriers cut fuel costs.

Fuel accounts for a lion’s share (40-50 per cent) of overall costs for GoAir and its peers. “When we expand services, we have to study the cost structure in order to remain profitable. We are considering increasing services to Raipur and Vizag and discussions are on with airport officials there. Once our 20th aircraft comes in, we will look at the competitive dynamics and take a call,” Giorgio De Roni, Chief Executive Officer of the Wadia Group company, told BusinessLine .

Sales tax coupled with excise duty of 8.24 per cent (including cess) makes ATF price in India one of the most expensive globally. GoAir and Indigo are the only two profit making carriers in the country. For the year ended March 31, 2014, GoAir had recorded a net profit of ₹5.5 crore on operating income of ₹2,435 crore. “We were profitable in Q1 and we are on track to make profits this year as well,” said Roni, GoAir’s longest serving CEO. GoAir is an unlisted company and hence is not required to disclose financial results every quarter.

Roni does not see more scope for adding services between metro cities. “I would say we have overcapacity on metro-to-metro routes. Today, metro to non-metro accounts for 70 per cent of our capacity and that will be the model for the future,” he added. In fact, cost considerations have had a bearing on GoAir’s plans to fly international. According to Government regulations, a domestic airline will have to complete five years of operations and have 20 planes to qualify for flying abroad.

The company, which has a fleet of 19 Airbus A320 aircraft, says that it would start international operations next fiscal. It has delayed the induction of the 20th aircraft, scheduled for June this year, as it wants to maintain current aircraft utilisation levels and pave the way for the A320 NEOs (New Engine option) that is on order, said Roni. GoAir is to get 72 NEOs, touted to be 20 per cent more fuel efficient than its predecessor, starting April 2016. “Currently, each of our aircraft is in service for 13 hours, the highest in the industry. We need to maintain this efficiency level till the NEOs come in.

At the same time, we may need an aircraft for capacity expansion. Hence, the plan is to take an A320 (on lease) with the current engine early next year and keep it in service till the first NEO joins our fleet,” said Roni.

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