The Indian aviation industry has been going through some tough times over the last few years. Many companies have had to stop operations while others are struggling to stay afloat. The latest entrant to the troubled club in Indian aviation is Jet Airways, with the fleet grounded and operations suspended. In this bleak atmosphere for aviation companies, the one company that is actually doing well and has only had one-quarter of posting losses in the last 4 years is IndiGo. With the finances being in a good state and the brand showing promise unlike any other in this brutally competitive industry, InterGlobe Aviation, the parent company of IndiGo, is moving ahead with confidence in its expansion plans, both in terms of the fleet and the headcount in the company.
With its ever growing fleet strength currently at 262, IndiGo is on a hiring spree, hiring pilots from grounded airlines like Jet and GoAir, along with bringing expatriate pilots on board. Adding to that, CEO Ronojoy Dutta confirmed on 7th May that the company was in discussions with Airbus SE, a European aircraft maker, for a sizeable plane order. Meant to fly on the long distance routes, the new aircraft line is expected to offer higher seating capacities and better fuel efficiency. This news comes on the back of the airline bringing 25 A321neo aircraft into its fleet just last month, while also booking around 430 jets from Airbus’s A320neo line and upgrading 125 planes from the existing fleet to A321neo. These additions are undoubtedly being made keeping in mind the new international routes being added to Asian countries like Saudi Arabia, China, Cambodia, Myanmar and Vietnam along with different parts of Europe. So, what makes IndiGo tick while every other major player in the aviation industry is struggling?
According to aviation expert Ashish Nainan, IndiGo’s cost structure could be a big contributor to their success. An analyst at CARE Ratings, Ashish says, “Indigo’s cost structure is quite low and that seems to be working for them. Let’s say they sell a ticket for around ₹2500, in which case, they make sure that their cost is under ₹2000. The company always keeps a good margin. When asked what could IndiGo be doing to curtail to their costs, Ashish said, “They always place aircraft orders in bulk, which ensures that they have higher bargaining power with the manufacturers”. This theory finds support in the fact that the smallest aircraft order IndiGo has ever placed was way back in 2005, when they bought 100 A320 jets. When talking about the discussions with Airbus SE, the IndiGo CEO Mr. Dutta confirmed that when the time comes, the new order will be a bulk one too. Another contributing factor to IndiGo keeping its costs low is the uniformity of the fleet, as per Ashish Nainan, who says, “Indigo has a single-aircraft fleet (the A320 family), which caps maintenance and overall operational costs”.
However, the picture has not always been rosy for the airline. While a rapid expansion of fleet has been good for the company, it has given way to new problems, the chief among them being an acute shortage of pilots. In February 2019, the airline’s operations took a bad hit when they had to cancel up to 30 flights on a daily basis owing to a shortage of pilots. The recent surge in hiring is targeted towards addressing this problem, and the company remains optimistic about the results.
Several technical issues reported in recent times are just adding to Indigo’s problems. There have been many reports of technical glitches with the Pratt & Whitney engines, which power the Airbus fleet. These incidents have led to the Directorate General of Civil Aviation (DGCA) looking into the matter with a special audit being set up. These problems even led to the airline having to ground half of its fleet, and IndiGo must be desperate to get the issues fixed at the earliest.
Even with the many issues popping up here and there in recent times, IndiGo is going strong with a huge market share of 46.9% in March 2019, up 7.4% from the 39.5% market share in March 2018. That the next best airline in terms of market share is SpiceJet at 13.6% really puts the success of IndiGo in perspective. The management would be hoping to iron out the glitches soon with the new pilots and aircraft, and grow their market share even further in the coming year.