How Indigo is managing to buck the trend
IndiGo, the country’s biggest airline with a market share of 33.5%, has been Indian aviation’s biggest success story. Its rise since it was launched in 2006 has stunned competition, impressed critics and attracted global attention.
IndiGo, which faces the same operational challenges as its rivals — a weak rupee, high taxes, rising airport charges, high cost cost of ATF — reported its sixth straight annual profit in 2013-14.
“We concentrate on what the customer wants — on-time departures, clean aircraft and good and clean flying experience. We plan to stick to these and not try anything different,” Aditya Ghosh, president, IndiGo, had told HT. Indigo had the best on-time performance of 94.3% in November.
The airline offers a one class, no-frills service on a single type of plane (Airbus A320) and also sells and leases back its planes (it sells the planes it buys to global financiers and leases them back on competitive terms). This spares its balance sheet from the burden of heavy capital expenditure and interest costs, which adds to profitability, and lets it maintain a young fleet.
The closely held company, co-founded by former US Airways Group CEO Rakesh Gangwal and travel industry veteran Rahul Bhatia, is known for smart business moves. It has placed three large aircraft orders totalling 530 planes in the last nine years.
“Rahul is a workaholic. He has the ability to identify the best talent in the market and convince people. In the travel agency business there have been two big success stories – (Bhatia’s) InterGlobe and Naresh Goyal of Jet,” said Rajji Rai, Bhatia’s school senior and chairman, Swift Travels.
“IndiGo’s success is largely due to the expertise and leadership of the board... its focus on key deliverables is remarkable,” said CAPA’s Kaul.