Companies
IndiGo: Navigating turbulence as market leader
Summary
- IndiGo, a global aviation giant, dominates Indian skies with a growing market share. However, the carrier is facing profitability concerns and needs to optimize its operational efficiency.
On 17 November, India’s domestic air traffic surpassed half a million passengers in a single day for the first time, marking a milestone for the country's aviation industry. As air travel soars, , one player has continued to increase its market dominance even as rivals explore consolidation strategies. In October, the last full month with available data, India’s top airline, IndiGo, expanded its already outsized market share for the fourth straight month, to nearly match its all-time high of 63.4% set last year.
The Indian aviation sector, which has witnessed the collapse of carriers like Kingfisher, Jet Airways, and GoFirst, has found a rare pillar of stability in IndiGo. Its low-cost business model has enabled it to navigate industry turbulence with remarkable consistency and growth.
From a modest fleet of six aircraft in 2006, IndiGo has steadily risen to dominate India’s skies, holding the top position for over a decade. It surpassed 50% of the domestic market in 2020 and crossed 60% last year, cementing its leadership, shows data from the regulator.
Even the merger of Vistara and Air India in November is unlikely to challenge IndiGo’s supremacy, as the combined entity would control no more than 29% of the domestic passenger market, based on October figures.
Among the top airlines in the world's five largest aviation markets, according to data analytics firm OAG, —the US, China, India, Brazil, and Indonesia—only Indonesia’s Lion Air Group rivals IndiGo's dominance, holding a 64.6% market share in 2023. In contrast, market leaders in the US and China command just 12-17% of their respective markets.
International reign
With a fleet of over 400 aircraft, IndiGo ranks among the world's top 10 airlines by fleet size. The carrier not only dominates domestic air travel but also holds a substantial share of international traffic to and from India.
While foreign airlines collectively handle 55% of international air traffic involving India, no single carrier dominates the segment. Even Emirates, the leader among foreign airlines, accounted for just 7.9% of international traffic in the first half of 2024, while other foreign carriers individually held market shares below 4%.
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Homegrown airlines' share of international air travel ranged from 2% to 20% in the first half of 2024. IndiGo led the domestic pack with a 17.6% share of international traffic during this period. However, when Air India and its subsidiary Air India Express are considered together, their combined share of 20.6% makes the group the largest overall carrier for international air traffic during January–June 2024.
Full flight potential
While IndiGo reigns supreme in domestic air travel and has made significant strides in international markets, a deeper analysis of key performance metrics reveals a more nuanced picture of the airline's operational efficiency.
Passenger load factor (PLF) is a crucial metric of efficiency that measures how much of an airline’s seating gets utilized. Between January and October, IndiGo's average PLF stood at 85.5%, which was higher than Air India's 83.8%, but both lagged other carriers. The erstwhile Vistara led with 91.2%, followed by SpiceJet at 89% and Akasa Air at 88.4%. These figures suggest that despite IndiGo's market dominance, the airline has room for improvement in maximizing seat occupancy and operational efficiency.
A higher PLF can generally translate to higher profit margins for airlines as fixed costs are spread across more passengers.
Financial turbulence
IndiGo faced a significant setback in the September quarter of 2024-25, ending seven consecutive quarters of consolidated profitability. The airline reported a net loss of ₹986.7 crore, a sharp decline from the ₹189 crore profit recorded in the same period last year and the ₹2,728 crore profit in the preceding quarter. The losses were primarily driven by elevated fuel costs and aircraft groundings.
“While the cost structure problem will get resolved soon with the reduction in AoG (aircraft on ground), early signs of pricing pressure are visible as passenger revenue per available seat kilometre is likely to witness a correction in Q3," said a recent Prabhudas Lilladher Capital report. Despite capacity utilization challenges, the analysts said that the airline's position as a market leader will help prevent any major drop in their earnings from competitive pricing pressure.
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While IndiGo's market dominance is undeniable, the airline faces headwinds in the form of rising costs and profitability. As IndiGo navigates these turbulent skies, it would look at refining its strategies to ensure sustained growth and profitability.
