IndiGo, India’s most successful airline, has come — well, flown — a long way. From a single aircraft in 2006 to nearly 250 planes this year, the company has drastically expanded and scaled operations. Today the airline flies to 77 destinations and operates more than 1,400 flights every day.
IndiGo's success is especially distinct given the Indian context. Aviation itself is a completely different ballgame and cannot be compared to any other industry. Unlike new-age technology start-ups that have the blessings of benevolent backers and easier regulations, Indian aviation is steeped in red tape. The history of aviation in India is littered with dead carriers — Jet Airways became the latest casualty earlier this year— but IndiGo has managed to thrive.
IndiGo sits on more than Rs 18,000 crore of cash today. Its liabilities or short-term debt are well under control and continues to expand operations at a herculean speed.
Well-established in the domestic market
IndiGo is among India’s first low-cost carriers and the model has perfectly complemented its operations. Being a developing market, the consumers are extremely price sensitive and competition is cut-throat. IndiGo always ensured it has maximum efficiency, in turn, reducing operational costs.
The airline’s revenue per available seat (RASK) has been better than the competition for quite some time now and its domestic operations are running at maximum efficiency. With 54 destinations in India and a 48 percent market share, the airline is close to completely commanding the market.
The airline has a hub-and-spoke network from all major cities of India – Delhi, Mumbai, Bengaluru, Kolkata, and Hyderabad. Further, it has also taken up point-to-point routes on many sectors including the recently announced Guwahati-Silchar route. In the south, it has deeply penetrated new destinations with its ATR72 operations, which ultimately offer connections via nearby major airports.
This ensures the airline can offer maximum connectivity to the end-user. With multiple bases around the country, one can seamlessly transit with IndiGo to any corner of the country. Keep in mind, these new routes are aimed at profitability and the airline is quick to shut down an unviable sector, unlike Air India.
Its fleet of A320-200 and A320neo offer flexibility like no other, while other carriers like Vistara and Spicejet have a mixed fleet, consisting of multiple seating configurations. A uniform fleet has been at the core of IndiGo’s DNA and it took a huge step further by ordering another 300 brand new A320 family aircraft. Even though the airline also operates ATR72, they’re limited to the South Indian region right now and have their own little hub-and-spoke network from cities like Hyderabad, connecting smaller towns with nearby cities.
Next challenge: Take over the international segments.
So what's next for IndiGo?
IndiGo has been operating international flights for half a decade and it has already connected all major destinations in the Middle-East. Even tier 2 airports have been leveraged to offer direct international connectivity and everything was fine for the airline until it tried to expand further.
Operating a narrow-body aircraft on short routes is fine since passenger experience isn’t hugely affected. Adding to this, IndiGo is a low-cost carrier and hence can offer better fares when compared to full-service carriers to woo passengers. However, is the airline able to offer a manageable in-flight experience on farther destinations like Kuala Lumpur, Singapore, Istanbul and more?
Though, experts say the negative pax-ex can still be tolerated if the airline is able to offer cheaper fares. Being a developing country, the majority of Indians have never been abroad and for first-time flyers, in-flight pax-ex rarely matters. This target audience can help IndiGo soar higher and further, but is the airline ready to follow the same “blitzkrieg” strategy for international operations?
The international routes are already dominated by international carriers and involves more complication. Recently, the airline flew to Istanbul without carrying checked-in luggage or cargo because the flight faces extreme head-winds, forcing it to carry lesser weight and more fuel.
Hong Kong operations have been highly instable due to the ongoing unrest and unpredictable airport shutdowns. The airline has finally decided to take a step back from this destination. Lastly, London has been every Indian airline’s dream destination because of its massive demand and codeshare possibilities.
There were reports that IndiGo wanted to start flights to London with a fuelling pit-stop. Thankfully, sense prevailed and the airline has completely scrapped the plan at the moment. However, this still doesn’t mark the end of their dream because the airline has also ordered the recently announced A321XLR that on-paper opens up the Delhi – London route, non-stop. Obviously, deliveries are still far away and things could change in the interim period.
These incidents prove that starting international operations isn’t going to be a cakewalk. Instead of making its move in London, the airline is looking to branch out into South East Asia. In October, it launched two new connections to Vietnam. Starting from Kolkata, IndiGo now flies to Hanoi and Ho Chi Minh City.
It’s worth mentioning that now-defunct airline Jet Airways also had a well-established international network. And, it was the main source of revenue for the airline. The domestic operations were usually in the red, but international had more demand and lesser supply. IndiGo needs to ensure it’s able to evolve that demand into a low-cost model.
The prime question that investors and analysts need to ask is, will these new destinations continue IndiGo’s legacy of being profitable?
Shivam Vahia is a developer by hobby and an avid aviation geek.