IndiGo has decided to postpone its expansionist plans to launch flights to London after assessing the commercial viability of the operation, chief commercial officer William Boulter told CNBC-TV18.
IndiGo, India’s largest airline by passengers carried and fleet operated, received slots to operate to London and Gatwick in the UK but decided against using them after reviewing the mid-points necessary for the narrow-body A320 aircraft family operations. Boulter's comments happen to be the first occasion that the airline has admitted that its much-hyped ambitions of launching low-cost long-haul flights to Europe are on hold.
Boulter said it is fair to say that London is the largest market but at the moment we have a fleet which necessitates midpoints. “We have looked at a number of mid-points to London and we have also looked at the operational feasibility of the route," Boulter told CNBC-TV18 at the launch of flight between Ho Chi Minh City and Kolkata. "At the moment it is not something on the immediate next list. It is still something that we think about but we haven’t confirmed it."
Nonetheless, the airline will remain focused on international expansion during 2020 and is looking to add more points in China and Asia, according to Boulter.
In March, IndiGo launched flights to Istanbul from Delhi. But its overseas operations have been
anything but smooth.
While the domestic air passenger traffic has been growing at a slow single-digit pace, IndiGo has no plans to rationalise capacity as it continues to believe that there is fundamental demand in the Indian market. "We are adding one aircraft every week but we don’t have a problem in finding tasks for those aircraft," Boulter said, in an interview to CNBC-TV18. Here are the edited excerpts:
You have launched a number of international destinations from Kolkata, including Guangzhou, Hong Kong, Yangon and Ho Chi Minh City. Is Kolkata being developed as an international hub?We define Kolkata as a gateway city. We fly to 33 places in India from Kolkata so we are contributing a lot of connectivity to the flights that are coming from South-East Asia. Out of those 33 cities, I think eight of those we fly exclusively including Gaya and all these destinations in South-East Asia have some Buddhist demand for pilgrimage but we are not at all 100 percent dependent on that. We are looking at a mix of travel, obviously, business travel especially Guangzhou, for instance, is a strong business market but we think that there are also business links developing very quickly between India and Vietnam and especially Ho Chi Minh City. What percentage of your outbound traffic be handled by Kolkata in the mid to long term?I don’t want to give a figure for that. Our total international network today contributes to a quarter of the company’s total network. So, South-East Asia is a major part of that. Probably 40 percent of the total international operations are to South-East Asia now and not just to countries I mentioned but also to Malaysia, Singapore, Indonesia, Thailand, Hong Kong.
So, we are focused on growing South-East Asia, and Kolkata, as a gateway city, has a number of advantages. Principally the number of cities that we connect through Kolkata. We were already the largest carrier in Kolkata domestically with over 100 flights a day and we just think that this international expansion will help grow that. Obviously, this will be the best gateway to the Buddhist traffic that I mentioned earlier. But generally, as a gateway city, this provides the opportunities to link to other metros especially Mumbai, Bengaluru, Delhi. There are fast convenient connections to Kolkata.
You launched a connection to Hong Kong from Kolkata in August but have now decided to suspend it due to the ongoing situation there. Is Bengaluru-Hong Kong not affected?We have been operating that (Bengaluru-Hong Kong) for almost a year now. We started it in December last year. Bengaluru-Hong Kong has not been as affected by the problems in Hong Kong as was Kolkata-Hong Kong service which was a newer service and had been running for only a couple of months. So that is the pattern with new routes it takes some time to bed down so we took a decision that commercial results on Hong Kong-Kolkata were such that we wanted to suspend the service.
We are still keen to operate to Hong Kong but not from Calcutta again but may be from other cities. Bengaluru-Hong Kong is doing well. Happy with that.
IndiGo said that 2019 would be about aggressive international expansion. How is 2020 looking for you?International remains a focus for us. About 50 percent growth in 2019 has been international so out of the approximately 30 percent growth, about half has been to international destinations both in the Middle East where we opened Saudi Arabia ... where we will be opening other points in due course and of course in Asia. This year we also started Istanbul in March and that takes a significant part of capacity with two flights a day from Delhi and then, China has been of particular focus for us. We were delighted to operate from Chengdu and now we start from Guangzhou.
We have the air service agreement to operate one more service to China and we are looking to materialise that early in the new year. Together with other points, most of which are commercially confidential at the moment. We don’t intend to announce before we have finally decided. We have a number of routes on the list but definitely China.
There were plans to start flights to London this year. What happened?We did have slots to operate to London Gatwick but we chose not to use them. It is fair to say that London is the largest market but at the moment, we have a fleet that necessitates midpoint and we have looked at a number of midpoints to London and we have also looked at the operational feasibility of the route. But at the moment it is not something on the immediate next list. It is still something that we think about but we haven’t confirmed it. India's domestic air passenger traffic is no longer growing at double-digit. Are you looking at some sort of capacity rationalisation?Certainly not on our part. It is true that the market has been weaker than perhaps we expected but we have always anticipated that it could not keep growing at the rate which it was growing which was 15-20% and then, of course, a competitor left the market and that left it short of capacity for a number of months and that capacity is being rebuilt. That was taken up by not just us but also other low-cost carriers.
It is true that figures of the last couple of months have not been as good as we would like them to be but we still believe that there is fundamental demand in the Indian market and especially as we go outside the metros, we are confident that we can continue to serve the smaller cities and grow presence in smaller cities. We are adding one aircraft every week but we don’t have a problem in finding tasks for those aircraft.
Being on time has been projected as one of the pillars of IndiGo’s operations. However, you have not been on time for the past 13 months.DGCA looks at a narrow range of on-time performance (OTP) data and for good reason because measuring OTP across 100 airports of India will be quite hard. But they naturally look at the metros which are most important but that does not necessarily give you the full picture of how IndiGo is operating.
On-time performance remains an absolutely central part of our customer proposition. OTP along with courteous and hassle-free service and affordable fares as a low-cost airline these are the three pillars on which the airline is built and we don’t take the eye off the ball in terms of OTP and we are determined to get back to number one even if it means we are competing with some operations which are simpler than ours, we are operating 245 aircraft with multiple frequencies every day between 60 cities and it is a complex operation than some others but I can assure you and everyone that our eye is not off the ball in OTP. It is a fundamental part of the brand and you will see very soon we are making great strides to get back to number one.
On the customer part, IndiGo recently discontinued its fragile tag policy. Why?One of the problems with it — not just with IndiGo but with everyone — is that fragile tags are not actually treated as fragile by the people who handle the baggage which is often an outsourced organisation. So we took the decision to give the consistency. We want to handle all the baggage in a way, which treats the baggage with respect. We are putting a lot of focus on reducing mishandled baggage rates because we know it is a critical thing for customers. We are sparing no effort to improve our performance on that side, we are pretty good by world standards but as I said it is something we are focussing on. What will be the ratio of A320s and A321s in capacity induction for 2020?We have an order for 125 A321s and we have taken six so far. We continue to take delivery each month and these are coming over the next 3-4 years.