Can IndiGo make a successful Air India take-off?
Run by InterGlobe Aviation, IndiGo operates more than 900 flights daily to destinations in India and overseas, with a market share of over 40%.business Updated: Jul 10, 2017 08:30 IST
With a market share of over 40% and counting, the country’s largest airline IndiGo is charting an ambitious trajectory where Air India might provide the perfect ground for its expansion.
The profitable no-frills carrier, which came into existence in August 2006, also has the largest number of aircraft on order, with more than 450 to be delivered over the coming years.
Run by InterGlobe Aviation, the airline operates more than 900 flights daily to destinations in India and overseas.
In a significant move that reflects its growing appetite, Gurgaon-based IndiGo has announced plans to purchase 50 ATR turbo-prop planes worth $1.3 billion as part of efforts to tap the high growth potential regional aviation market.
IndiGo, while eyeing the “tremendous growth opportunities” in the smaller cities (tier 2 and 3), seeks to be a part of the government’s regional air connectivity scheme UDAN by inducting the ATR planes.
Despite intense competition and the entry of new players in the fast growing Indian aviation market, IndiGo has managed to stay the course, while steering clear of common industry practices such as offering frequent flyer programmes.
In May, the airline had a domestic aviation market share of 41.2%, way ahead of low-cost as well as full service carriers, according to the latest data with aviation regulator DGCA.
IndiGo is in the limelight now after showing an interest in buying out Air India’s flight operations.
It has written to the civil aviation ministry saying that it would be interested in buying out the international operations of Air India and its low-cost arm, Air India Express.
If that was not possible, it said it would like to buyout the entire Air India flight operations, including domestic flights.
While IndiGo has the wherewithal to board the debt-laden Air India juggernaut, the airline has its share of woes, too. Engine problems faced by some of its A320 neo-aircraft and the issue of slots at the Dubai airport are among some of the problems it faces.
As it charts out an aggressive path of expansion, there have also been brickbats from certain quarters about its On Time Performance (OTP) claims.
With a fleet of around 135 planes -- all from the Airbus 320 family -- and more additions expected in the current fiscal, the airline has plans to connect more destinations.
Currently, it flies to around 46 destinations.
Reflecting the kind of disruption the no-frills airline has inflicted in the domestic market, aviation think tank CAPA’s latest report said IndiGo’s unprecedented growth creates a strategic compulsion for others to expand.
“IndiGo has the largest in-service fleet in India at 135 aircraft and the largest order book of any airline in the world at 458 aircraft. Its fleet could expand by up to 46 aircraft during this financial year -- a net addition of almost one aircraft a week,” CAPA said on Wednesday.
While remaining profitable for many quarters in a row, the airline saw a slump in its net profit to Rs 440.31 crore in the three months ending March 2017 as a jump in fuel prices took a toll on its bottom line.
InterGlobe Aviation, which made a successful debut in the capital market in late 2015, raised a little over Rs 3,000 crore from the initial public offer that was oversubscribed. The shares got listed on the stock exchanges in November 2015.
“Offer fares that are always low, flights that are on time, and a travel experience that is courteous and hassle- free,” is how IndiGo defines its business philosophy.
Now, the airline might well also be hoping for a hassle- free journey on board Air India.