Back‘IndiGo watchful of Air India; it’s arrogant to ignore rivals’
IndiGo until now had the unique distinction of being the Indian carrier that sets the trend in the market with record plane orders
PremiumNEW DELHI : IndiGo until now had the unique distinction of being the Indian carrier that sets the trend in the market with record plane orders. However, that changed on Tuesday with Air India announcing a historic confirmed order for 470 planes, joining IndiGo in becoming the second Indian airline with nearly 500 planes on order.
In an interview, IndiGo chief executive Pieter Elbers said the Air India order underscores the potential of the Indian market with two homegrown airlines placing such large orders.
He also said that he is watchful of the competition from Air India but added that the Indian market is poised for massive growth which can absorb the hundreds of new planes that are set to land. Edited excerpts:
Your competitor Air India has placed a historic order. When is IndiGo planning the next order?
I welcome them to the club of airlines having 500 aircraft on order. Our competitor has placed an order now; it will take some time before the aircraft delivery starts.
But, if you take even the combined order of IndiGo and Air India, the Indian aviation market will still continue to grow and be able to accommodate the influx of aircraft.
If we look at IndiGo’s order trend, you placed an aircraft order after every four years since the second order. Your last order was in 2019. Should we expect another order in 2023?
The 2019 order proved to be very timely, adequate and I am very glad that we do have a steady flow of aircraft coming in through the next few years.
We have a backlog of around 480 planes. We will complete their induction just before 2030.
Currently, all our focus and attention are on making sure that we execute the current order book. There is also this fact that covid happened during the period between 2019 (and now). Moreover, we place aircraft order when we feel it is appropriate time for it. We were not driven by the competition in the past, (and are) not going to be driven by competition now.
How does IndiGo, the market leader, see the expansion plans of Air India?
Air India does their own trade-off. Our forecast is in high mid-teens for FY24 for IndiGo. That’s our perspective on the basis of 300 aircraft.
We are very agile. Some lease extensions give us flexibility to fine-tune our capacity to the market. We are not closing our eyes to competition. It would be arrogant not to be watchful.
The third quarter has been the best ever for airlines. What is the outlook on demand for the current quarter?
In India, we see return of travellers after covid...we see some pent-up demand coming back and we expect economic development to support some very good growth numbers.
We will close this fiscal year with a range of 80 million customers. We should move to the direction of 100 million customers next year.
Is high yield holding up in the current quarter, too?
The yields in Q3 were good. At the overall scale, some markets in India such as Delhi are very developed but we also fly to a lot of destinations in India where we are not there at this stage. We will have a mixture of different markets going forward.
Cost leadership has enabled IndiGo to grow, so affordable fares is clearly linked to that part, and maintaining the cost leadership is an important part of our strategy. We will see some seasonality in Q4.
You have not given any outlook on adding freight capacity? Was cargo primarily a function of covid?
Cargo had enormous growth during covid. IndiGo developed cargo skills during covid. We are developing different type of cargo skills now.
Our freighters serve mostly international routes. And in time to come, we will see the stabilization of the market; clearly, the opening of the China market will help.
Yes, the covid boom is over when it comes to cargo but it will be replaced by new cargo streams because of investment, production facilities and Made in India programmes.
With Air India and IndiGo becoming two strong players in the market, do you see a consolidation in the market among smaller players?
The market is already consolidating. Whatever is happening in the Air India umbrella group is consolidation in itself. It is natural evolution. It speaks to the maturing stage or exiting the nascent stage of Indian aviation.
There are some 4,000 commercial aircraft in operation in China and there are 700 in India.
Look at the economic outlook and size of the country—700 is lower than the fleet of some of the world’s largest airlines...so against that background, we should have every confidence in the trajectory we started on.
There will be IndiGo, Air India group and there will be some other contenders and that’s even in the most mature market of the world such as the US--there are established airlines and there are always some new airlines coming up.
India is at a stage of massive growth, consolidation and at this stage of consolidation, there will always be space for new contenders.
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