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    What IndiGo’s mammoth aircraft order (again!) really means

    What IndiGo’s mammoth aircraft order (again!) really means

    What IndiGo’s mammoth aircraft order (again!) really means
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    By Ameya Joshi   IST (Updated)

    Mini

    The latest order comprises A320neo, A321neo and A321XLR aircraft and takes the total number of A320neo family aircraft orders by IndiGo to 730.

    IndiGo, India’s biggest airline by fleet and market share, said it has placed a firm order for 300 A320neo family aircraft. The latest order comprises A320neo, A321neo and A321XLR aircraft and takes the total number of A320neo family aircraft orders by IndiGo to 730.
    The order is significant in many ways. Few believed in the airline soon after inception when it placed its first order of 100 A320 aircraft at the Paris Air show in 2005. A lot has changed since then for aviation in India as well as for IndiGo.
    The early days
    The market is triple of what it was back then and IndiGo alone corners nearly half of that market. All the aircraft from the initial order of 100 planes were delivered by 2014 and the airline started leasing planes from open market to tide over the delay in induction of the A320neo.
    By January 2016, IndiGo was 100 aircraft strong. It achieved this feat in 113 months, or nine-and-half years since the start of operations. From there to where it is now — nearing 250 aircraft — the journey has taken less than four years.
    Diverting attention from the terrible losses?
    There was a lot of social media chatter that the new order is aimed at covering up for the sliding share price. The airline announced a mammoth loss of Rs 1,031 crore in the July–September quarter. The last year has not been very kind for the airline, starting with another such loss in the same quarter last year and the spat between the founder promoters.
    While this news will give a lot of publicity for the airline, a deal as large as 300 aircraft is not negotiated overnight. Hence it is not possible to say that the order is to defuse the bad press the disastrous results. Definitely, the timing of the announcement can be questioned but a firm order as big as this was certainly long in the works.
    Fleet Replacement
    By end of this year, IndiGo would have 250 aircraft in its fleet. The leap from 100 to 250 will take just four years or 48 months.
    IndiGo, which provisioned for higher maintenance costs in its recent results, is expecting a large portion of its A320ceo fleet to be phased out in 2022. It is expected that engine manufacturer Pratt & Whitney (PW) will have all its problems sorted out by 2020 and the airline will get deliveries of its PW powered A320neos to replace the A320ceo fleet.
    The airline signed a deal with CFM this year to power 280 of its A320neo aircraft. The aircraft fitted with CFM engines are slated for delivery from 2020, making the rapid de-fleeting possible for the airline.
    The airline has 128 A320ceo aircraft in its fleet and it will take over two-and-half years to replace those at one aircraft a week – the airline’s current induction average. However, IndiGo is unlikely to focus only on replacements at the cost of growth – which means that the airline will need many more aircraft starting 2021 to replace and grow at the same time.
    The routes
    What it finally boils down to is the routes and infrastructure. Can IndiGo find routes where it can deploy as many planes and can IndiGo find place across the country to park these planes?
    Going by how the country has seen air traffic growth in the last decade, IndiGo could definitely find routes to deploy the planes but the question to ask will be If it can find profitable routes to deploy these planes. The airline maintains a reputation for not closing a station after it has started. However, it has closed many a route lately and a few of those in quick succession, indicating that the airline is not finding gold in all its routes.
    However, the airline is talking of taking planes over a longer spectrum. Markets mature and new links develop between now and then. Hardly anyone would have imagined that there would be non-stop links from Bengaluru to Lucknow or Delhi to Coimbatore or Ahmedabad to Guwahati when the airline places its first order of 100 planes! The airline has developed routes, nurtured markets and the same will continue in all likelihood.
    Not the IndiGo of old
    When Kingfisher Airlines was in the doldrums, IndiGo – then led by Aditya Ghosh — was at the forefront in explaining its profitability model. Hassle-free, on-time and single fleet type leading to lower training costs, easy swaps and a lot more.
    In recent years, it has deviated from most of these tactics. The airline now has a fleet of A320ceo (180 seats), A320neo (180 seats), A320neo (186 seats), A321neo (222 seats), ATR72 (74 seats) and ATR72 (78 seats). The A321neo will also be present in another configuration going forward. This is an indication that how things have changed for IndiGo!.While both Airbus and IndiGo have been tight-lipped about the split of aircraft, typically such large orders come with a lot of flexibility on choosing the specific type. The airline may or may not take up the A321XLR. The A321neos will help the airline increase capacity between metro’s without increasing frequency and comes in handy to tackle competition at peak times.
    What will the new aircraft do for IndiGo?
    IndiGo has publicly admitted two things – its interest in wide-body aircraft and ambition to reach London, which it has postponed. While there are certain core outbound markets from India, there are city-pairs which have seen a constant increase in traffic, not yet meriting a non-stop. A flight to Bali or Manila from Delhi is possible when the A321XLR enters service a few years from now.
    By then the market has further matured and if there is competition from other airlines – the lower trip cost of the narrow-body A321neo could help the airline compete effectively with airlines operating the wide-body aircraft.
    Who’s the competition?
    The full-service carriers in the region are struggling. Thai Airways, Air India, Malaysia Airlines, Garuda Indonesia are all either looking out for a strategic partner or in various stages of a possible stake sale. That leaves IndiGo with competition from the Lion Air group and AirAsia group for the South East Asian market. A long thin market like Vietnam, Cambodia, Indonesia, if well served, will snatch away the pie from the legacy carriers from the region.
    Time will tell if IndiGo can have its cake and eat it too or it is trying to chew more than it can bite!
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