According to data company OAG, the airline is now the seventh-largest airline in the world and the largest outside of the United States and China. It’s a rare bright spot in a struggling global airline industry that’s offering a lifeline to squeezed lessors and plane manufacturers by paying bills on time and in full.
IndiGo acquired 44 aircraft from Airbus SE last year – the most of any customer, surpassing Delta Air Lines Inc and China Southern Airlines Co Ltd – as it replaced older aircraft with more fuel-efficient newer models. From 2023, she also wants to further expand her fleet.
With a 52% domestic market share in 2020, up from 47% in 2019, and with profitability on the horizon after a loss last fiscal year, IndiGo is expanding its reach into smaller Indian cities like Ranchi, Patna and Gorakhpur to mitigate a drop in business travel to offset larger routes like New Delhi-Mumbai, CEO Ronojoy Dutta told Reuters.
It also bets that faster growth and higher margins will come from non-stop flights to international destinations like Moscow, Cairo and Manila, which it can reach with its narrowbody aircraft, eliminating the need to complicate its fleet with widebody aircraft.
“While things stabilize, I’m very optimistic that I believe we’ll be fully back to normal by the end of 2021,” Dutta said, referring to the calendar year rather than the fiscal year ended March 31.
“And I think 2022 is going to be a great year for us in terms of growth and profitability,” he added.
The COVID-19 pandemic brought global air travel to a halt and plunged airlines into the red. India imposed one of the toughest lockdowns and even now airlines can only fly 80% of their total capacity on domestic routes.
IndiGo already had Rs.
Once IndiGo is able to operate at full capacity, it aims to increase its utilization rate to a breakeven level of about 12 hours per day, compared to the current 10 hours, Dutta said, adding that it would also be able to fill more seats and reduce unit costs.
Shares in parent company Interglobe Aviation Ltd have doubled from March 2020 pandemic lows and are trading within 10% of their October 2019 record high.
INTERNATIONAL GROWTH
Before the pandemic, IndiGo was using around 25% of its capacity on international routes, where flights are now often restricted to certain countries or charter flights. This means that it currently only operates about 20% of international flights.
International business typically offers about 10% higher margins than the price-sensitive domestic market, Dutta said, adding that IndiGo would expand with its narrowbody fleet for now, meaning places like London, where it has slots, are out.
IndiGo’s strong financial position relative to domestic and regional rivals like SpiceJet Ltd, Malaysia’s AirAsia Group Bhd and Indonesia’s Lion Air should help it dominate flights within a seven-hour radius, some analysts say.
“IndiGo has cleverly identified its bases in India and is now preparing to spread its tentacles across the entire subcontinent,” said Shukor Yusof, head of Malaysia-based aeronautics consultancy Endau Analytics.
Despite the recent turmoil, Dutta expects the share of capacity deployed to international markets to increase by a few percentage points each year.
IndiGo has 580 aircraft on order from Airbus, pending delivery, and is receiving them at a rate of about 50 a year. Still, Dutta feels that with the growth it has in mind, it may not have enough planes to fly anywhere it wants to go.
“Sometime between 2024 and 2025 we’ll probably stop and say if we can frontload some of the shipments and then order more for later years,” he said.
