Last week, IndiGo, India’s largest carrier by domestic market share and fleet, announced its results. The airline reported its highest ever international capacity deployment in its history. With a growth of 60 percent in international capacity, the airline now deploys close to 20 percent of its capacity on International routes. Since the time IndiGo expressed its interest in the international operations of Air India, there has been talk of either IndiGo opting for the wide-body aircraft or substantially increasing its international presence. So far, we have seen none.
At its peak, Jet Airways had a revenue share of over 50 percent coming in from international operations. Percentages like statistics often hide more than what they reveal. Jet Airways had much smaller domestic operations as compared to IndiGo and a strong wide-body presence to reach the 50 percent share of revenue. IndiGo on the other hand is relying solely on its fleet of A320/A320neo and A321neo to penetrate the international markets, which will either be medium haul or one-stop long haul.
IndiGo is the only active airline in the country which has a history of not closing a station. Until it started international operations, it also had a record of sorts. The record was shaken when the airline pulled out of its international launch routes from Delhi and Mumbai to Singapore and Bangkok. This was seemingly due to competition and higher costs than what the airline had projected. The airline continued operations to Singapore – launching flight from Chennai and to Bangkok – with a new flight from Kolkata.
Five years later, it did something it had never done before. The airline launched flights to Bangkok from Hyderabad, advertised them and suddenly closed the flights for sale, instead re-instating the second daily frequency between Kolkata and Bangkok – a flight which was withdrawn only 45 days ago.
As it launched a record number of stations, both domestic and international in 2018, it has already seen frequency adjustments or route suspensions within months of operations. While it is common for airline to experiment routes and adjust frequency based on demand, this has not been the case with IndiGo – which has taken its time to launch routes and then only mount frequencies thereon. A major change has been the top management, which has been more aggressive with international expansion.
One argument in favour of international has always been that the fuel is taxed lesser on international than domestic. However, international flights have longer stage lengths and ability to lose more money if unable to attract passengers. Unlike domestic routes, where dropping fare helps convert passengers from other modes of transport – international does not have other modes. Besides the biggest hurdle for last minute travel of international routes is often paperwork (visa, passport, etc).IndiGo’s CASK (cost per available seat kilometre) has been really low over the years and while that gives it an advantage over its peers, most of its peers are
full-service carriers who may be willing to get into a price war along with the frills and while IndiGo may match the price, it certainly won’t be able to match the frills.
IndiGo has said that its revenue grew over 13 percent on international routes while the domestic was just over 6.2 percent. This is again a case of percentages hiding information, since the base number is not known. The airline started eight new international destinations in 2018 and this could be a case of fares stabilising after initial discounting!
Bloomberg report has claimed that IndiGo will be a threat to Emirates and the next few years for Emirates will be far worse than its last year as IndiGo starts international flights. While there is no denying that IndiGo will try to be a serious player in the market, to think that it will pose a threat to Emirates in the next few years is farfetched.
IndiGo’s international plans include flights to China and South East Asia – a market which will not overlap with that of Emirates and the airline harbours ambitions of flying to London – currently one-stop, which will make it compete with multiple airlines both non-stop and one-stop.
The airline has the war-chest to take the fight on with the biggies but if it does decide to go ahead and take the fight head on, it has to remember that for Middle Eastern airlines, India is one of the many markets which feed its extensive network but for IndiGo – India will be its sole market, unless the airline can create a successful transit hub in Delhi where it can fly passengers from China, the Philippines, Thailand, Malaysia, Singapore, Indonesia, Vietnam and take them to West Asia and Central Asia. Again, how the long circuitous route will work is for time to tell. If history is anything to go by, IndiGo still has to re-invent the international game and copy pasting the domestic model hasn’t worked yet.
Ameya Joshi is the founder of aviation analysis blog NetworkThoughts.
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