Cautious but confident, IndiGo betting big on international sector

Despite warnings from aviation experts, IndiGo is taking small but confident steps into foreign sectors

Half of the total growth that domestic aviation market leader IndiGo expects this financial year will be in international sectors, said the airline’s chief commercial officer William Boulter. IndiGo has chalked out a cautious but well thought out approach for its international foray, he added.
 
“As of today, we are operating a little above twice the capacity internationally that we were at this time last year. We still see much opportunity and are proceeding accordingly,” said Boulter.
 
Though there have been repeated rumours that IndiGo was going for wide-bodied aircraft in a big way, Boulter clarified that there were no plans to induct aircraft other than the current A320/321 (and ATRs) in the airline’s fleet.

 

“We have always said wide-bodied aircraft are an “aspiration” and not a firm commitment at this stage.” Hence, fears that IndiGo would hastily jump in whole hog into international sectors appear to be unfounded.
 
IndiGo is adding routes using its present fleet — A320s and A321s including the neos — which typically allow four to five-and-a-half hours’ flying with a full aircraft load. The delivery of its new A321neos may be delayed somewhat but the airline will lease aircraft from the market as and when required.
 
The airline says that despite a sharp rise in the number of aircraft in its fleet, there is no intention at present to “separate” the operations of the A320/321 aircraft from the ATRs the way many international carriers tend to do at some stage.

 
Again, contrary to market rumours, the airline is not setting up any hubs per se. The strategy is to have “gateway cities” as and where it makes sense. For instance, Kolkata is being developed as a gateway for flights from Yangon, Hanoi, Ho Chi Minh City and Guangzhou to connect to multiple cities within India, including those on the “Buddhist circuit”.
 
“We are offering connectivity from over 30 cities in India through Kolkata to various Asian points and are confident that we will stimulate the markets sufficiently to achieve profits in due course,” Boulter said.
 
Experts, investors and analysts in the aviation sector have been concerned over IndiGo’s choice of routes and expansion plans into new markets. The closure of Jet Airways has left a wide gap in domestic and international capacity. While the domestic capacity vacated by Jet has been largely filled by the Indian carriers, the latter remains a tempting void for many players.

 
The timing has also been a worry for analysts and industry observers. IndiGo has been going through its own share of troubles since 2016 — be it engine problems, a series of PR disasters, a creeping arrogance, a faster than anticipated growth, a new aircraft type (ATR) to deal with, unhappy pilots, sulking Indian staff, entry and exits of top level management and more recently, a bitter spat between the founders.
 
Many analysts have been of the view that the viability of some of the routes chosen by the airline is questionable in view of the fact that the airline’s present network does not offer any further connectivity. Experts say that as things stand, barring Dubai, Bangkok and Singapore, very few cities in the region offer enough point-to-point traffic from even the main Indian metros. They also point out that several international carriers have tried other direct connections but have often burnt their fingers in the process.

 
At present, IndiGo is offering daily connections between Kolkata and both Hanoi and Ho Chi Minh City, with two separate flights.
 
According to the airline, there is a lot of business, tourist and MICE demand between India and Vietnam, a route which has so far been underserved and directed over cities like Bangkok, Kuala Lumpur or Singapore.
 
What is giving the airline more confidence is that both Istanbul and Chengdu routes are performing “ahead of expectations”. In the first few weeks of operations, flights departing from Chengdu have had 90 per cent loads — far higher than anticipated. The airline expects some of its international routes to break even in the short term.

 
“We don’t factor in losses in advance as market behaviour often surprises on the upside,” said a confident Boulter. Most international routes, he pointed out, take six to 12 months to mature. IndiGo withdrew its direct connection to Hong Kong recently, but that was more on account of the political unrest in the region.
 
According to Shakti Lumba, a former IndiGo employee and a stalwart in the sector, “IndiGo has the maximum to gain from international operations owing to their extensive domestic network, which can feed traffic into the metros to carry forward.” However, he said that the airline must avoid a “hit and miss strategy — introducing new routes and withdrawing due to poor loads — at all costs.”

 
Boulter dismissed warnings of observers, saying that “industry analysts are a mixed bunch” with a variety of competencies and experience and that what may seem “a bit hasty” to one can look like classic, flexible, nimble low-cost carrier behaviour to another. The airline is happy that it has been able to start five new destinations in three countries in the past five weeks.
 
The good news is that the viability of new routes — especially on international sectors — becomes evident rather quickly and allows for rapid course correction. As for IndiGo, as long as the giant treads gently, it should not find itself falling into a deep crevice.

 
The plan ahead
 

• IndiGo is adding routes using its present fleet — A320s and A321s including the neos — which typically allow four to five-and-a-half hours’ flying with a full aircraft load
• Indigo says despite a sharp rise in the number of aircraft in its fleet, there is no intention at present to “separate” the operations of the A320/321 aircraft from the ATRs
• IndiGo is developing Kolkata as a gateway for flights from Yangon, Hanoi, Ho Chi Minh City and Guangzhou to connect to multiple cities within India
• According to the airline, there is a lot of business, tourist and MICE demand between India and Vietnam