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IndiGo plans to increase fleet size to pre-empt competition

IndiGo hopes to plug gaps in its flight network that other low-cost airlines such as AirAsia are likely to exploit
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First Published: Mon, Apr 01 2013. 12 01 AM IST

Updated: Mon, Apr 01 2013. 12 28 AM IST
New Delhi: IndiGo, India’s biggest domestic airline, will add 16 aircraft by December and start inducting an additional 12 from that month to retain its pole position and pre-empt competition from new entrants such as the proposed airline by AirAsia Bhd.
By doing so, IndiGo hopes to plug gaps in its flight network that other low-cost airlines such as AirAsia are likely to exploit. In March, India cleared a proposal by Malaysia-based AirAsia Investment Ltd to establish a joint venture with Tata Sons Ltd to start an airline.
IndiGo, which has a 27.4% share of the market, has been expanding the fastest in India over the past few years, according to consulting firm CAPA.
Rival SpiceJet has 18.4% market share, GoAir has 7.6%, Jet Konnect has 6.2%, Jet Airways (India) Ltd has 20% and Air India Ltd has 20.3%.
Jet Airways is in talks with Etihad Airways PJSC for investments after the government allowed foreign airlines to invest as much as 49% in a local carrier.
The aviation ministry last year gave permission to IndiGo to induct 16 aircraft in calendar year 2013. The firm now wants to introduce an additional 12 Airbus A320s planes starting from December 2013, according to two ministry officials who declined to be named.
IndiGo’s president Aditya Ghosh denied the airline was accelerating its aircraft-induction programme but said it has sought to induct an additional 12 aircraft.
“Our delivery schedule remains as before,” Ghosh said. “This is just part of our original order.”
Ghosh said India needs more planes. “India is a highly under-penetrated aircraft market with one commercial aeroplane for every 3.1 million Indians. This used to be 2.8 million some years ago. So the demand-supply gap has widened,” he said.
“Even developing countries like Indonesia, the Philippines and China have three or four times our aircraft penetration. Bringing aircraft is the only way that the demand-supply anomaly may be addressed over time and millions more may be able to fly one day at lower fares.”
India’s scheduled airlines have 390 planes in their fleets as of December, according to data submitted to Parliament.
IndiGo’s request to add more planes came days before an announcement by the aviation ministry on 21 March scrapping a decade-old committee empowered to allow airlines to import planes. As long as airlines have in-principle approvals when ordering the aircraft, they will no longer need to approach the ministry again but only ask for regulatory clearances, on of the ministry officials said.
IndiGo’s plans to speed up introducing aircraft is probably because of the impending entry AirAsia India, according to Steve Forte, a former chief executive of Jet Airways, but it needs to proceed with caution
“You must have good indications of growth before increasing the fleet. Otherwise you risk losing your shirt,” Forte said.
Forte said his biggest worry if he was heading IndiGo would be to focus on reworking human resource agreements to stop trained manpower from leaving, lured by the entry of a new and flashy airline firm.
AirAsia may not have a joyride in India like in a few other markets, said Vikram Krishnan, a partner at Oliver Wyman Inc., a Washington-based consulting firm.
“AirAsia has a good brand but will have to replicate its ultra-low cost model in India, which is hard to do given high infrastructure costs, high taxes on fuel, overbearing government regulation, and heavily congested airspace and ramp and apron capacity at India’s major airports,” Krishnan said.
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First Published: Mon, Apr 01 2013. 12 01 AM IST