IndiGo is back with a bang

The domestic market summary for November released by the Directorate General of Civil Aviation shows that the share of passengers carried by IndiGo shrank by a percentage point to 55.7 percent from the previous month.

Yet, the airline has reason to celebrate because it is back on top of the on-time performance (OTP) chart with an over four percentage point lead over Air India. And there’s more: IndiGo carried over 6.5 million passengers – the highest number in the market leader’s history.

The data is also a testament to how the airline and the Indian aviation market have grown. Back in 2014, December was the peak travel month, when all airlines carried over 6.4 million passengers – which is less than what IndiGo alone flew in November this year and more so, after two years of the pandemic. IndiGo itself flew 6.1 million passengers in October-December of 2014.

The airline started operations in August 2006. That was the year in which scheduled domestic airlines averaged 1,153 departures a day, something that IndiGo has done daily for the past few months and had first achieved before the pandemic struck.

The carrier has been going from strength to strength in 2022 as it recorded its best revenue and passenger numbers in May, which it exceeded last month and will most likely cross again in December with a mix of new aircraft inductions and grounded planes functioning again as engine availability improves.

What changed for OTP?

IndiGo had not been at the top of the OTP charts for six months, but after Air India – traditionally a poor performer – led in terms of punctuality, the focus shifted to IndiGo.

With operations at all three terminals in New Delhi and both terminals in Mumbai, swapping planes and connecting passengers are some of the challenges that an airline has to handle operationally. It can’t blame these factors because it is fully aware of them.

When the winter schedule started on October 30, IndiGo made some remarkable changes to its schedule to factor in additional ground time at the metro airports (OTP is not measured at all airports). Flight-tracking websites show that the airline has gone back to basics by ensuring the first wave of flights or base flights depart early, which helps to build a buffer through the day.

The only time this year that IndiGo had a higher OTP than now was in February when 95.4 percent of its flights were on time at the four metros. The airline was on top of the punctuality charts back then.

It occupied the top spot last in March. The summer schedule started in the last week of March and the data suggests the airline had a tough time maintaining a high OTP for the entire summer schedule.

Market share or profitability?

Laurels such as the highest passenger numbers do little for shareholders or the board, where per-unit costs and profit are more important, along with revenue. IndiGo’s capacity addition and load factors indicate the airline is pushing up yields overload factors, thus helping to maintain a healthy average fare and charging a slight premium for the options the airline has across over 100 global destinations.

As international travel opens up, the revenue side will start to reflect the positive impact of the multiple codeshare arrangements that the airline has gotten into.

Oil prices have cooled, but they are still higher than they were before Covid-19. With staff salaries back to normal and not all aircraft available for operations, it's a tight ship for IndiGo and other carriers. The airline has lost over Rs 11,000 crore in the past three years, a far cry from its earlier avatar of being profitable.

There’s no word on compensation for engine issues. In the past, the airline refused to spell out the exact amount or nature of compensation for aircraft delivery delays and engine issues, and it probably will take the same stance now.

We will have to wait a month more to know how these high passenger numbers have translated into revenue and possible profit or breakeven.