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Ministry puts a spanner in IndiGo’s expansion

Civil aviation ministry allows IndiGo to import only five of the 16 aircraft it had sought to in 2013
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First Published: Wed, Jan 16 2013. 12 08 PM IST
Some analysts see the civil aviation ministry’s decision as a setback for IndiGo, which could benefit rival Jet Airways. Photo: Ramesh Pathania/Mint
Some analysts see the civil aviation ministry’s decision as a setback for IndiGo, which could benefit rival Jet Airways. Photo: Ramesh Pathania/Mint
Updated: Wed, Jan 16 2013. 11 01 PM IST
New Delhi: India’s civil aviation ministry has allowed IndiGo to import only five of the 16 aircraft it had sought to in 2013, in a move that some analysts see as a setback for the airline and which could benefit rival Jet Airways Ltd.
IndiGo is currently the largest airline in India and has 61 planes in its all Airbus A320 fleet.
The Gurgaon-based airline, promoted by InterGlobe Aviation Pvt. Ltd, has only got approval to import five planes this year, said two aviation ministry officials, who didn’t want to be identified.
“We have asked them to give us a detailed plan as to where do they want to use these 11 planes,” said one of the officials.
IndiGo added 19 aircraft to its fleet in 2012 and returned six after the leases expired. According to consulting firm Centre for Asia Pacific Aviation, IndiGo was the third largest in the world in 2012 in terms of aircraft capacity addition among low-fare airlines.
A spokesperson for the airline declined to comment on the ministry’s move and said that the airline hopes to end 2013 with a fleet of 71 planes. IndiGo still has 209 aircraft on order with Airbus spread out till 2025, which means it can bring in an average 17 aircraft every year—pending the ministry’s approval.
A former airline executive said the ministry’s move is understandable and that it will benefit Jet.
“I can understand the ministry’s reticence to permit large operators to bring large aircraft with 180 seats or more because it would like to control capacity; excess capacity will put pressure on fares and financial viability of operators as they will all end up selling below cost,” said Shakti Lumba, former vice-president with IndiGo and Air India.
Typically, aircraft of this size are used on the popular metro routes.
“The airline that throws too much capacity will be able to control the market and the only airline that has been adding been adding capacity is IndiGo. So it is not in Jet Airways favour that IndiGo adds more international or domestic capacity,” added Lumba.
The country requires capacity in 20-50 seater aircraft type to fly on subsidiary routes to supplement infrastructure development and for accelerated mobility of the economy, he further added.
The official cited above said the ministry was working on guidelines that could make it mandatory for airlines to fly less-profitable regional routes. IndiGo, which doesn’t have smaller aircraft, may have to conform to these guidelines when submitting plans for the remaining 11 aircraft, this person added.
Consulting firm Deloitte is working on these guidelines and is expected to submit a report later this month.
Mohan Ranganthan, member of the government-appointed Civil Aviation Safety Advisory Council, said the ministry’s move would, apart from handicapping IndiGo, also send out the wrong signal to investors. The government recently amended its rules and allowed foreign airlines to invest in Indian carriers, but moves such as these indicate that policy changes with every minister, Ranganathan said.
The ministry’s move to control capacity in an effort to ensure airlines remain profitable is anti-customer, said the representative of a passenger grouping.
“Only if we have more aircraft will we have low fares; the government should encourage that,” said Sudhakar Reddy, president, Air Passengers Association of India and member of the aviation ministry’s committee on airfares, adding he expects 2013 to be another year of high airfares.
In 2012, airfares increased by at least 20% as the number of flights declined owing to the reduction and eventual stopping of services by Kingfisher Airlines Ltd.
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First Published: Wed, Jan 16 2013. 12 08 PM IST
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