How IndiGo gained, while Kingfisher lost
IndiGo, a low-fare carrier launched in 2006, has climbed to second place in market share at the expense of Air India and Kingfisher Airlines and is the only one of country’s six main carriers making a profit.india Updated: Mar 06, 2012 23:09 IST
It’s not all doom and gloom for the country’s embattled airline sector.
IndiGo, a low-fare carrier launched in 2006, has climbed to second place in market share at the expense of Air India and Kingfisher Airlines and is the only one of country’s six main carriers making a profit.While Kingfisher and market-leading Jet Airways have bought rivals, fly multiple plane models and have struggled to mix full-service and low-fare options, IndiGo offers one class of no-frills service on a single type of plane.
IndiGo also sells and leases back its planes, sparing its balance sheet and allowing itself to maintain a young fleet.
Kingfisher, headed by liquor tycoon Vijay Mallya, has never made a profit and has grounded more than half of its planes. Tax authorities last month froze its bank accounts.
“Indigo has done everything right which Kingfisher has done wrong,” said Rajan Mehra, executive director, Asia Pacific Academy for Aviation and Hospitality. Industry watchers say there is no great secret to IndiGo’s success, which they attribute to rigid adherence to a disciplined business plan, a task that grows more complex as the 50-plane airline adds a new plane every month.
Still, IndiGo is not immune to the industry’s myriad headaches — fierce competition, a weak rupee, high taxes, rising airport fees and the high cost of oil. IndiGo’s rise mirrors that of Jet Airways in the 1990s, before it became a sprawling international carrier that has lost money in the last four quarters.
“Jet also came from nowhere, took on Indian Airlines (now part of Air India) and succeeded to become a big market share holder,” said Mahantesh Sabarad, an aviation analyst with Fortune Equity Brokers.
IndiGo has 21% of the domestic market, behind the combined low-cost and premium operations of Jet Airways, but up from its 17% share at the end of 2010.
The Centre for Asia Pacific Aviation (CAPA) expects IndiGo to take the top spot from Jet in a few months in an aviation market that grew 17% in 2011 and is expected to expand by about 12% annually over the next few years.
“Our only big objective is to prove that low-cost is not low-quality,” Indigo’s president, Aditya Ghosh, told management graduates in New Delhi recently.