'India can support two or three large no-frills airlines'
Meet Bruce Ashby, CEO of IndiGo, the no-frills airline that began operations on August 4, in conversation with the author.india Updated: Aug 11, 2006 21:57 IST
What's your view of the market? How many more airlines can we have?
Today, we have three no-frills airlines. Together, they fly 19 aircraft. Southwest Airlines has 453 aircraft, US Airways (356), easyJet (112), Ryanair (107), Jet Blue (102), even Go in Brazil has 47. The number of people that can fly at the right price is huge, especially in a country like India where the alternate modes of transport are not as attractive. It's a great set-up for no-frills airlines to expand.
But some say the market is saturated and heading for overcapacity?
Given the size of the country, there can be hundreds of no-frills airlines. In the US, there are several large no-frills airlines, several smaller airlines, flying thousands of airplanes. I don't know what the right number for India is.
Many airports are still serviced by one or two airlines. No-frills airlines are not serving many airports. Can you fit in so many planes in the available infrastructure? Airports need to be more modernised; the process has already been kicked-off. When people come to the airport and they see a sea of crowd, they get confused. Airports getting crowded and skies getting crowded are two different things.
Mumbai and Delhi airports are reaching capacity. But it is possible for them to han dle more flights. The Charlotte airport in North Carolina handles 80 takeoffs and landings in 90 minutes (53 movements in an per hour; against that, Mumbai can handle only 32-35 flights in an hour). Airports like Atlanta and Chicago handle hundreds of movements. It can be done here too but it takes time. China is able to do it in a year; India may take 2-3 years.
You plan your schedule around the peak hours. Suppose, you want to schedule a flight from Delhi to Hyderabad at 6 am but you know that slot maybe too full. The alternative is to fly at 5 am or 8 am. Now, 5 am could be too early for passengers while 8 am maybe a bit a late for the aircraft to get off the ground. So, I may decide to park the aircraft at Hyderabad. You may ask aren't there too many competitors? Well, India can support 2-3 large no-frills airlines and a few smaller no-frills airlines that are niche players. Over time, demand will absorb capacity. Who will survive? One who is more on time and offers better service.
What's your equity capital? And when will you break even?
The airline has an equity capital of $50 million (Rs 200 crore). We have leased out the first six aircraft. The aircraft financiers like our business plan and team. (Yes, we have made the pre-delivery payments for 100 planes but can't disclose the amount). The equity is enough to run the business.
We would break-even in 18-24 months from starting operations. It takes time to amortise your expenses; you get economies of scale as you get larger. If you operate two flights to Hyderabad, you have to maintain a whole staff of people. As you have more flights, you don't have to add more people, the cost per seat comes down.
What's your route strategy? Are you ignoring the regional markets?
We will be covering 33 cities that have a million people, and where the airports are capable of handling an Airbus A-320. You see people fly more within North or within South than from North to South; we would be doing just that. What make no-frills airlines successful is doing one thing and not multiple things. It's not that regional and international is a bad business; it's just that it will not be our business.
How do you plan to play the game differently?
We would be focusing on offering an affordable price, on-time performance, minus the hassles of red tape by ensuring that our procedures are simple. We want to offer a simple product, be honest and not play games with consumers.