Moneycontrol PRO
Open App
Upcoming Event : Traders Conclave 2022 | India's Largest Retail Stock Investors & Traders Residential Conclave

IndiGo sees tailwinds from festive travel, airfare cap removal 

The removal of airfare caps and the upcoming festive season are expected to boost demand. Enhanced meal options, as well as better seats and cargo business, will also augment growth, says the airline. 

August 26, 2022 / 02:52 PM IST
Representative image

Representative image

After a solid summer season, IndiGo, India's top carrier, sees a further rise in passenger traffic on account of the upcoming festive season and the removal of a cap on airfares.

“We are observing a surge in the number of passengers travelling to domestic and international destinations. With the upcoming festive season, we are expecting stronger domestic demand and remain optimistic,” Sanjay Kumar, Chief Strategy and Revenue Officer, IndiGo, said.

The airline is now expanding meal offerings, launching new airport products, looking to reinstate its international network and adding codeshares to augment its dominant market share.

It believes that enhanced choices of in-flight meals and better on-board seating will lift traffic.

IndiGo ferried 183.17 million passengers during Q1FY23, a two-fold growth over 59.54 million in the corresponding quarter of the previous fiscal, when travel was curtailed due to the pandemic.

Close

Also Read | How IndiGo clocked its highest revenue and flights ever

“Summer season was a welcome change for many people, who have been wanting to travel after two years of Covid-related lockdowns and restrictions,” Kumar said.

In the festive season of 2021 (October-December), IndiGo had ferried 166.54 million passengers.

Airfare cap removal

Kumar said the withdrawal of airfare caps is expected to allow the industry to offer lower ticket prices and attract more passengers.

Effective August 31, the Centre withdrew limits imposed on airfares, a practice that started after the Covid outbreak. The airfare caps were based on flight duration and were applicable for a 15-day period.

“The removal of fare caps will enable airlines to price fares based on the demand-supply of routes, thereby allowing us to offer the best price to customers,” he said.

Weaning impact of pandemic

The ebbing of the pandemic has led to the return of demand, especially for international destinations, Kumar said.

“We have witnessed a consistent increase in the number of travellers over the last summer season and a huge demand for international destinations in the last few months,” he said.

“We are looking at reinstating our international network and adding codeshares for connectivity across multiple continents.”

At present, the airline has codeshares with Turkish Airways, Qatar Airways, American Airlines, KLM-AirFrance, Qantas and Jetstar.

Watch: IndiGo pilot’s announcement in Punjabi-English – delivered with dash of humour

It connects 74 domestic and 26 international destinations.

“We are keen on expanding our network and adding destinations in the range of 6-7 hours from Delhi, Mumbai, Chennai, and Kolkata. We expect the international operations to support better margins to help us get through these high-cost pressures.”

Recently, the airline announced flights to Bahrain and Ras Al Khaima apart from adding many new domestic destinations such as Darbhanga, Durgapur, Bareilly, Kanpur, Agra, Gwalior, Kadapa, Pantnagar and Deoghar in 2021-22.

Augmenting growth

Even as the airline remains optimistic about growth, it has initiated several measures to maintain the dominant market share in an increasingly competitive environment.

These include the expansion of meal offerings and the launching of new airport products.

Last month, IndiGo selected Recaro Aircraft Seating’s BL3710 to outfit its brand-new A320neo and A321neo aircraft.

“We will be the first to feature the best-selling economy class seat in the Indian subcontinent. The BL3710 economy class seat will be installed on 75 Airbus aircraft starting from January 2023,” Kumar said.

Cargo services

IndiGo, which stepped up its cargo operations during the pandemic when passenger traffic was lean, has initiated a freighter programme and is in the process of sourcing four A321CEO aircraft for conversion.

“Cargo is a great business, and we are expecting two deliveries in October and two by next year. Meanwhile, our cargo yields and tonnage are growing on a month-over-month basis.”

After the Covid hit, the airline began a cargo-only charter service. Initially, it used the belly space of passenger aircraft, expanding into ‘cargo-on-seat’ operations, and later adding a ‘cargo-on-floor’ A321.

IndiGo is also betting on flights to nearby countries for its cargo service.

“We see lots of opportunities around us, including the countries like Bangladesh and Vietnam. These locations proved to be one of the best locations for us in terms of traffic. Besides that, we believe China is a wonderful opportunity and another good market for our upcoming freighters.”

Currently, the airline has 276 aircraft including 145 new generation A320 NEOs, 31 A320 CEOs, 35 ATRs and 65 A321 NEOs.

It operates over 1,600 flights a day, up from 1,500 flights in February 2020.

Healthy forecast

The airline, which posted its highest ever revenues in Q1, sees it rising further.

It reported a rise of 328 per cent in its revenue from operations during the quarter ended June 30, 2022, to Rs 12,855.3 crore from Rs 3,007 crore in the year-ago period.

The carrier narrowed net losses to Rs 1,064.3 crore from a net loss of Rs 3,174.2 crore a year ago.

“We are optimistic about the trend in revenues and forecast strong demand for IndiGo, going forward.“

“We continue to tide over the current set of challenges with one of the best cost structures in the industry, a laser-sharp focus on our costs and a fleet modernisation programme,” Kumar said.
Rohit Vaid
Tags: #IndiGo
first published: Aug 26, 2022 02:52 pm
Sections
ISO 27001 - BSI Assurance Mark