Kushan Mitra
Indian low-cost airline IndiGo burst into the scene with a mega-order for 100 aircraft at the Paris Air Show 2005. It had people asking who and what IndiGo was. Yet, it is a sign of IndiGo’s success that almost no eyebrows were raised when over the past week the airline ordered 250 new aircraft from Airbus.
When IndiGo started operations in 2007, many did not give them a high chance of success. This is despite the fact that the airline was co-promoted by Rakesh Gangwal, a former American airline industry honcho and had brought in some of the best industry talent from across the world. That was a point of time when Vijay Mallya’s Kingfisher was still flying high. The ‘low-cost’ model was not one that people believed would work very well in India, Air Deccan, the low-cost airline pioneer had bled money and was eventually acquired in a fateful decision by Mallya. Fateful because absorbing Air Deccan’s red account books possibly led to Kingfisher’s premature demise.
But this is not a column about the disasters and near-disasters of the Indian aviation industry, this is a column about IndiGo’s unprecedented success. This is an airline that has given wings to millions of Indians, but it is not just about the low-fares. Indeed, IndiGo often has some of the pricier flight options on most sectors if not booked well in advance. However, IndiGo is a prime example of shrewd marketing and canny business operating skills.
One of IndiGo’s best success points was convincing Indian passengers that they were the most punctual airline. While there are several, particularly younger and lower-income passengers who bothered about fares, IndiGo’s management realized fairly early on that while there were new passengers entering the Indian market, most air travelers in India still came from a small sliver of society and still travelled mainly for business. These were not passengers for whom an additional thousand rupees in fares mattered, what mattered was punctuality.
Although IndiGo padded their schedules, making an hour and 45 minute flight between Delhi and Mumbai into a longer flight so that they would always be on time, this strategy worked, particularly as IndiGo’s rivals suffered chronic delays. On high-frequency business routes such as the Delhi-Mumbai sector, IndiGo quickly became the airline of choice as passengers also decided to forego meals onboard. Coupled with Kingfisher’s collapse through 2012 along with IndiGo’s steady stream of new aircraft from their first order, the Gurgaon-based airline was well-positioned to pick up the slack.
IndiGo has also followed another low-cost carrier, the Irish airline Ryanair in how they use their aircraft. According to the website airfleets.net which tracks the fleets of global airlines, IndiGo has received 99 out of a 100 of the planes from their initial order and the hundredth aircraft is on its way. Of the 99 aircraft though, IndiGo currently operates only 83, with 16 planes already being retired by the company and have found homes with other airlines across the world, a couple even making it to Abu Dhabi based Etihad Airlines. In addition, IndiGo actually does not own their planes choosing to undertake the sale and leaseback process which while hiking operating costs slightly saves on capital expenditure for the airline.
By operating new aircraft for just six to seven years, IndiGo keep maintenance costs low, as newer aircraft, much like newer cars do not need the level of care that older planes need. Also due to warped government policy imposing a high rate of taxation on Maintenance and Repair Operations (MRO), they save even more money by doing some of the scheduled maintenance in nearby countries, such a Sri Lanka keeping costs even lower. IndiGo also sweats out investments in every new destination they add, never flying into a new destination with a single flight but choosing to add multiple flights at a single go.
Canny marketing and an extensive choice of flights along with a standard if unspectacular level of service have meant that IndiGo has become the airline of choice for Indians. But IndiGo has not had it all their own way. The low-cost carrier has seen tremendous success on the domestic market but has not enjoyed the same on international routes. For example, IndiGo used to operate three flights a day between Delhi and Bangkok which have now been
discontinued.
However, the 250 aircraft that IndiGo has ordered last week in addition to the 180 aircraft the airline ordered in 2011, means that even while rotating aircraft out of their fleet, IndiGo will likely have a fleet of over 200 operational aircraft by 2019. While the airline will benefit from growing domestic traffic particularly from flying between non-Metro cities, they will need to figure out a way to expand internationally. With Air Asia and Vistara taking to the skies and Jet Airways bolstered by Etihad’s investment as well as the Indian air passenger becoming increasingly fickle, IndiGo may not find the going in the next five years as smooth as the last seven.
