Right fleet & smart pricing will help IndiGo achieve its international ambition

An aggressive international push by IndiGo will also help in correcting the traditional tilt in India’s international traffic towards foreign airlines.

India’s biggest airline by passengers, IndiGo, has now trained its sights on an aggressive international expansion plan. And rightly so. The airline is already over-leveraged in the domestic market, operating from virtually every domestic airport with its fleet of ATRs (small aircraft) and the A320 family aircraft. This limits the potential for further expansion within the country. Besides, an aggressive international push by IndiGo will also help in correcting the traditional tilt in India’s international traffic towards foreign airlines.

In the domestic market, IndiGo accounts for 59 percent market share as of July this year, and its firm grip has often sparked concerns of a duopoly, together with the Air India group with 25.5 percent domestic market share. Given the obvious difficulties in further domestic expansion, the sensible way forward for the airline is to grab a bigger share of the expanding international pie. In the latest annual report, CEO Pieter Albers has said that one of the three pillars of the airline’s growth strategy is ‘create’, which seeks to combine the airline’s strong Indian foundation and international aspirations.

IndiGo’s aggression appears to be already working in correcting the tilt towards foreign carriers. Data from the aviation regulator Directorate General of Civil Aviation (DGCA) shows that till the April-June quarter of 2019-20, the pre-Covid era, foreign carriers accounted for two-thirds of the international traffic to and from India. But once Covid19 restrictions were lifted, Indian airlines began muscling their way in, led by the Air India Group (Air India, Air India Express and Vistara) and IndiGo. In the April-June quarter of the current fiscal year, Indian carriers accounted for nearly 44 percent of international traffic, a gain of about nine percentage points.

IndiGo carried nearly 14.97 lakh international passengers in the April-June period of FY20, accounting for 9.8 percent of total international traffic to and from India. But the number of overseas passengers jumped by about 80 percent to nearly 26.77 lakh in the April-June quarter of FY24, with IndiGo cornering 17.18 percent of the market.

Getting The Fleet Right

Of course, even as IndiGo has been gaining a firm foothold in the overseas traffic pie, the long flight out of India may not all be a smooth affair for the airline. International expansion will add several complexities ranging from multi-currency payment processing to global marketing and distribution challenges. Also, a significant factor that will determine the scope and nature of IndiGo’s international expansion is fleet type.

The airline has recently placed an order for 500 aircraft of the A320 family and together with earlier orders, it is slated to receive 1,000 aircraft by the middle of next decade. While the numbers are jaw-dropping, they still do not address the long-haul, wide-body market. The airline has said, though, that the A321 XLRs, which form part of the order, may allow it to offer more connections to Europe. There is no clarity though on the number of these aircraft on order or their delivery schedule.

Meanwhile, IndiGo already has a couple of wide bodies on lease, which fly to Istanbul and then offer onward connections to North America, etc. But unless the wide-body count rises, a question mark hangs over its long-haul operations. Then, breaking into new markets would also mean having to deal with unpredictable actions by competitors such as price wars.

As of now, international expansion is being done with the goal of deploying nearly 30 percent of the airline’s capacity on overseas routes by the end of this fiscal, up from the “low” 20 percent now. As of March, this year, IndiGo was flying to 26 international destinations; most of these are within five to six hours from India. And, earlier this month, it announced new international destinations including Nairobi, Jakarta, Tbilisi, Baku, Almaty and Tashkent. It has also said it is reinstating flights to Hong Kong.

Challenging Competition

But what do the soaring ambitions of IndiGo mean for competition on international routes? IndiGo is already snapping at the heels of the Air India group, which has traditionally been the flag carrier for India in overseas markets. The group now flies overseas through Air India, Air India Express and Vistara. In the June quarter of 2019-20, the group (through AI and AI Express, Vistara was not flying international routes) carried 30.61 lakh international passengers, accounting for nearly 57 percent of the traffic carried by all Indian airlines. By the June quarter of 2023-24, even though the total number of international passengers carried by the group had jumped to 36.53 lakh, but its share of the traffic among Indian carriers had shrunk to 53.4 percent. In the same period, the share of IndiGo among Indian carriers had jumped from 27.7 percent to over 39 percent. The Air India group had better pay heed to IndiGo’s ambitions!

All in all, while IndiGo’s aggressive overseas push is a logical move given the already saturated domestic routes, execution will be the key to success. The right equipment and smart pricing will determine whether IndiGo replicates the iron grip of domestic passengers in the overseas business too.

Sindhu Bhattacharya is a journalist based in Delhi who writes on a range of topics in business and economy. Views are personal, and do not represent the stand of this publication.