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Air India, Vistara And Now SpiceJet Fly To London. Why Not IndiGo?

The country's largest airline, IndiGo - which also has the largest fleet - is not ready to fly to London yet.

Oct 6, 2020 / 01:00 PM IST
 
 
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When its first flight to London takes off from Delhi on December 4, SpiceJet will become the third airline, and the first low-cost carrier, from India to operate to the British capital.

"The airline will operate thrice-a-week to London including twice from Delhi and once-a-week from Mumbai," the airline said in a statement on October 5. 

SpiceJet will use Airbus A330-900 Neo aircraft for these flights. Sources added that the airline was in talks with Portuguese charter operator Hifly to take these aircraft on wet lease. The Indian airline though hasn't shared details.

Air India and Vistara, which had launched services to London in August, are the other Indian carriers that operate on the route.

The name that is missing, glaringly, is that of IndiGo, the country's largest airline. Why is the airline, which also has the largest fleet of all, not flying to London? The airline's absence is especially striking as the industry was abuzz last year with talk on it starting long haul flight to destinations in Europe and the US.

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Industry observers, however, credit IndiGo for not jumping onto the queue. "Given the impact COVID-19 has had on international travel, IndiGo wouldn't want to take the risk on long haul. It's strategy is to first dominate regionally, and then expand one step at a time," says Mark Martin, Founder and CEO of Martin Consulting LLC, an aviation consulting firm.

A popular destination

UK is a popular destination for India, to visit friends, relatives, leisure and on business. Sally Balcombe, Chief Executive, Visit Britain, the country's tourism agency, was present in SpiceJet briefing on October 5, and shared some interesting data points.

India is the 16th biggest travel market for the UK, with about 7 lakh Indian visitors every year. They are even bigger spenders, ranking 11th and spent 753 million pounds in the UK in 2019. There was a growth of 19 percent in arrivals from India, obviously helped by the 1.5 million Indian diaspora in the UK.

London, where British Indians make up for 6 percent of the population, is the most popular entry point to the country. The British capital takes up for majority of the 156 departures and 26,000 seats that the two countries have every week, according to their air bilateral.

While the COVID-19 pandemic has disrupted operations, the Delhi-London flights operated under Vande Bharat Mission exercise were among the busiest. And that's why SpiceJet, which reported a first quarter loss of Rs 600 crore, wants to make the most of the opportunity.

So if the route is as profitable and as busy as it is, what makes IndiGo stay away?

Management talk

"Wide-body has always been a sort of touch-and-go issue for us," IndiGo CEO Ronojoy Dutta said during the company's last call with analysts. "The numbers are sort of okay, but we know there is a risk to it, so we keep saying, Okay, let's wait and see, wait and see," he added.

Interestingly, he admitted that current industry circumstances favour a wide-body operation. With many airlines internationally unsure about the demand for long hauls, after COVID-19,  have put a pause on their fleet expansion. Both, Airbus and Boeing, have also slowed down on their production and have put off deliveries. All this means, as Dutta pointed out, price of wide-body aircraft is down.

Second, fuel costs are also lower than a year ago period. Mint recently reported that oil marketing companies slashed prices of air turbine fuel for the second time in September.

Despite these factors, IndiGo continues to be cautious. "So these are all factors to be studied. We are in the same situation we were a year ago, we are still studying it. We don't have an answer," said Dutta.

Reason to be cautious

"Long haul routes are very risky financially and take time to break-even. Yes, London is an exception and is very viable presently as one can negotiate a lot of costs, but the demand may not presently justify it," says a senior executive at a private airline.

An senior executive from an international airline operating in India, agreed. "IndiGo is being sensible. Without the right type of aircraft IndiGo should not do any long haul flights especially in an uncertain market situation like now."

Little wonder that Dutta of recent has hinted that the airline is patiently waiting for the delivery of Airbus A321XLR. The delivery of the singly-aisle aircraft that can fly to western Europe, will happen according to the original timeline of the first quarter of 2024. There are no plans to advance it, said Dutta during IndiGo's recent AGM.

And that is one reason why the airline is not in a hurry and doesn't want to lease aircraft on wet lease, like SpiceJet has done. "Given its relationship with lessors, IndiGo can get the best of deals. But it would be wary of adding aircraft to its fleet that will change the dynamics of maintenance and increase its operating costs," says Martin.

And given that IndiGo has focused on building on scale, adds the international airline executive quoted earlier, it will be wary of starting new services with just one or two aircraft as "these are difficult to sustain."

It may not be another year or so, before the country's largest airline reveals its long haul plans. Till then, it will continue to fly till Istanbul.
Prince Mathews Thomas heads the corporate bureau of Moneycontrol. He has been covering the business world for 16 years, having worked in The Hindu Business Line, Forbes India, Dow Jones Newswires, The Economic Times, Business Standard and The Week. A Chevening scholar, Prince has also authored The Consolidators, a book on second generation entrepreneurs.
first published: Oct 6, 2020 01:00 pm

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