BackIndiGo adds new A320neos to fleet in market share push
IndiGo will be updating some of the initially inducted A320neo planes locally; new planes will start flying over the coming weeks and months
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New Delhi: IndiGo, the budget airline run by InterGlobe Aviation Ltd, has started inducting updated Airbus A320neo planes into its fleet and, according to one analyst, could potentially raise its market share to as much as 50% by next year.
IndiGo, which in 2011 became the first airline to order 430 of these fuel-efficient planes, has faced delivery delays as Pratt and Whitney Co. Inc., the maker of its engines, coped with engine startup issues and software glitches.
“The deliveries since the summer have been with new engines standards," Airbus spokesman Justin Dubon said in an email, “IndiGo received their 8th A320neo (last week). So far we have 20 A320neo delivered to 7 customers in three continents."
The airline will be updating some of the initially inducted A320neo planes locally while new planes start flying in over the coming weeks and months.
The planes are key to IndiGo founder Rakesh Gangwal’s strategy of building a cost advantage over rivals.
Neos come with a 15% higher lease cost but offer 14.3% fuel savings over Airbus A320s, which IndiGo and most other airlines fly in India.
With fuel making up about 40% of an airline’s costs, the reduction in fuel burn gives IndiGo greater savings as more Neos join its fleet. Over a period of time, IndiGo’s old planes will be replaced by new A320neos and slightly bigger A321Neos.
In the current fiscal year, IndiGo plans to add 24 of these planes—making up 18% of its fleet.
Over and above IndiGo has leased 22 planes from Tiger Airways and some other operators which have either joined the fleet or will be inducted by October, according to a person with knowledge of the matter who declined to be identified.
“We took delivery of our first Neo in March... Expected to be 10 by the end of this month. As on now, we have 22 used airplanes, of which 12 are from Tiger," IndiGo’s president Aditya Ghosh said in an email on 15 September.
With a current fleet of 115, the airline has already cornered 40% of the market and its share could hit 50% by next year, said an analyst who did not want to be identified.
GoAir, for example, with 21 planes in its fleet, has an 8% domestic market share. Between now and March 2017, IndiGo alone is inducting as many as 26 more planes.
IndiGo already has a market share equal to the combined share of Jet Airways (India) Ltd (19.2%), Air India (14.6%), AirAsia India (2.2%) and Vistara (2.4%), according to figures for August released by the Directorate General of Civil Aviation.
“That’s (additional capacity) a big challenge. Not only will it give IndiGo immense control over pricing but it also has the potential to change the business plan of other airlines," the analyst quoted above said.
IndiGo reported a record net profit of Rs1,990 crore for the year ended 31 March, up 53% over Rs1,305 crore in the preceding year.
Former Jet Airways chief executive officer Steve Forte said a lack of sufficient flight slots, aircraft parking space and congestion at airports could impede growth.
“IndiGo seems to have followed the right path to achieve their present status," he wrote in an email. “However, I would caution them to be very careful on their future expansion plans for the same reasons listed above. Indiscriminate and unprepared growth will plunge Indian aviation into a dark period from which it will be painfully hard to recover. The government has to play a much more proactive role in providing an adequate infrastructure for present and future industry development."
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