For IndiGo, the real battle starts now

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How should one look at these numbers?

IndiGo wants to double its fleet by the end of this decade, which means it is likely to have 600 aircraft by 2030. The airline could now look at longer leases for its planes, moving away from the earlier six-year cycle, which anyway had to be changed due to the delay in delivery of the A320neo and subsequent issues with Pratt & Whitney powered engines.

India’s home market and fleet doubles every nine to ten years. This means that to garner 50 percent market share in 2033, IndiGo would need to double the planes it has now. The airline currently has 300 planes in its fleet. With rival Air India’s induction plan known, it is easier for IndiGo to plan the fleet expansion to maintain its lead in the market.

As of now, 90 percent of all departures for IndiGo are domestic, and 90 percent of its passengers are also domestic. In terms of available seat kilometres (ASK), the international capacity is 23.6 percent. IndiGo has publicly stated that it wants to increase international deployment by 30 percent (by ASK), which helps utilisation, reduces flight count even at higher flying hours, and helps balance maintenance costs, which are linked to both hours and cycles (one take-off and landing is one cycle).

Will the going get tough?

In May, IndiGo and the Tata group airlines had a combined market share of 87.7%. In the past, IndiGo has immensely benefited from the fall of its rivals, such as Kingfisher Airlines and Jet Airways, or the shrinking of SpiceJet in 2014. The market share of 5-15% these airlines held was largely captured by IndiGo.

With the country now largely flying with one of the two large groups, the chances of failure are lower, especially now that the Tata group owns Air India, and has a clear merger plan for its subsidiaries and Vistara, along with a publicly stated target. This means that even if other airlines go down, beyond this, the market share up for grabs will be miniscule.

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The flight path

IndiGo will be locked in a steady battle with the Air India group and will have to differentiate itself beyond its already-proven on-time, hassle-free experience model, since Air India is likely to stress on operations and look at ways to improve the flying experience.

Growth will have to be steady and will be dependent on the capacity that comes in, like new airports at Greater Noida and Navi Mumbai, among other places. With 78 domestic destinations, IndiGo has covered all the important cities and towns in India. Any incremental addition will not contribute large numbers and growth will thus have to be international.

International, unlike domestic, is not a game of capacity addition, since it is governed by Bilateral Air Services Agreements, and has higher seasonality, which does not allow for the addition of seats in the peak season. The international market will also see IndiGo compete with some well-funded network carriers, whose product is superior. Will the airline focus on improving its product or afford the cost differential where it can attract enough passengers to itself?
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