 | « Back to article | Print this article |
Kaushik Khona's second innings at GoAir will be more challenging than the first. Globally, the aviation industry is in deep distress because of the pandemic, reports Aneesh Phadnis.
When Kaushik Khona took over as the chief executive officer of GoAir in the summer of 2009, the airline had barely six aircraft and limited operations. A few months earlier, GoAir had introduced a business class product (the first for an Indian, no-frills airline) and attractive fares to lure flyers. But customer confidence remained low owing to the high rate of flight cancellations.
Khona, who had been a vice president in the Wadia group before this appointment, steadied the ship, improved the aircraft utilisation and expanded the airline's network with a focus on mini metros and tier II cities. When he left the airline in 2011, it was in much better shape, having clocked 61 and 7 per cent growth in revenue and net profit, respectively, in FY'11.
Khona's abilities will be put to test again as he begins a second innings at the Wadia group airline. The airline press release describes him as a turnaround specialist and a qualified resolution professional.
In the past 12 years, Khona turned around the operations of Dunlop Tyres and restructured a renewable energy and shipping venture before taking up a consulting role in Talati & Talati LLP, the airline said.
Khona's second innings at GoAir will be more challenging than the first. Globally, the aviation industry is in deep distress because of the pandemic.
Domestic air traffic is down 82 per cent on a year-on-year basis and the industry-wide load factor is 50-55 per cent. GoAir's load factor fell to 50.5 per cent in July from 57.9 per cent in June.
Most other airlines operated cargo-only flights during April-May to support revenue but GoAir failed to capitalise on the opportunity. The airline relied on a third party for cargo handling and was developing its own in-house capabilities when the pandemic struck.
Against an industry-wide capacity deployment of around 30 per cent of pre-Covid period, GoAir is operating only at 10-12 per cent capacity. The airline operates around 40 flights daily including charters.
Khona's challenge would be to shore up the airline's finances. Cash and bank balance had halved to Rs 72.5 crore sequentially in the June-end quarter and its credit rating downgraded in July, given the weak liquidity outlook.
He will also have to negotiate with Airbus regarding scheduled aircraft deliveries given the changed business outlook. Last October, the airline had indicated it would induct one aircraft a month. It has a fleet of 55 aircraft at present.
Motivating the workforce will also be essential since the airline has put around 70 per cent of its staff on leave without pay since March. Several senior executives, too, have quit in recent weeks. "Other airlines have cut salaries and jobs but have managed public perception better," said an industry expert.
"GoAir has taken a spreadsheet-driven hard-line approach to save cash. With no bailout or support coming from the government, the promoters probably believe that is the only way to save the airline," the industry expert pointed out.
This also explains why the airline is operating fewer flights than others.
Insiders say it is not prudent to add flights if the airline is unable to make money from them. The June-September period is also traditionally a weak quarter for domestic aviation and executives are hoping for a demand recovery from next month.
Some believe that cash conservation alone will not help and the airline will have to focus on operational efficiencies.
During his earlier tenure, GoAir's average fleet utilisation had increased to over 14 hours a day, among the highest in the industry, and this helped it achieve economies of scale.
"Kaushik taking over GoAir is possibly the most agile and aggressive step the Wadias could have taken; more so since Kaushik, unlike anyone else before in the CEO role, knows the management and functioning DNA of the Wadia group extremely well," said Mark D Martin, founder & CEO of Martin Consulting LLC, an aviation consulting and safety firm.
His approach with GoAir centres on his powerful understanding of airline financials, P&L and revenue and returns, and this has worked extremely well for GoAir in the past, he added.
Others believe a mere change in guard will not help GoAir ride the storm.
"Kaushik's first tenure as GoAir's CEO was good and we wish him good luck for the second tenure. His induction this time is under severe and challenging circumstances - most of which are beyond his control, especially recapitalisation," said Kapil Kaul, South Asia CEO of aviation consultancy CAPA, in a statement.
