Deeper, wider and lucrative: Decoding IndiGo's mega global flight plan

India's largest airline wants to be measured against global carriers, but it might want to keep an eye on Air India

At a conference organised by the All India Management Association in New Delhi last month, Pieter Elbers, CEO of IndiGo, said his airline should be measured against global carriers, not its domestic peers.
 

IndiGo is India’s largest airline, lording over 60 per cent of the domestic market. Its nearest rival is not even half its size even if you combine the market shares of the four airlines in the Tata fold: Air India, Air India Express, Vistara, and AirAsia.
 

But it is unlikely that Elbers was showing off his market muscle at the conference. He was making the point that Indian air carriers need to let their ambitions soar so that Indian airports could become global hubs. The aviation script, he said, should move away from the competition “between Mumbai to Guwahati” to why the majority of the flights between India and Europe were not run by Indian carriers.
 

This is precisely why Elbers, who was CEO of Dutch airline KLM for more than eight years, was handpicked by IndiGo’s promoter, Rahul Bhatia: To expand IndiGo’s thinking, horizon, and ambition. He is putting together a global plan centred on the total available seat kilometres, or ASKM, which is the number of seats multiplied by the distance travelled in kilometres. The intent is to increase IndiGo’s ASKM for international flights from 24-25 per cent to 30 per cent in two years.
 

Giving wing to this ambition will be the induction of 49 latest Airbus A321XLR narrow-bodied aircraft, which can fly medium- and long-haul distances of seven to 7.5 hours. This fleet will be inducted in phases, starting 2024, though some say this might get delayed till 2025.

 

Deeper, wider, lucrative
 

The new planes will help IndiGo go deep­er into Europe, beyond the direct flight it has between India and Ankara, to add Rome, Athens, Geneva, and Amsterdam. In Asia, Seoul and cities in China are on the radar. There are another 980 planes on order that will come across this decade.
 

IndiGo insiders and aviation mavens go to the extent of saying that discussions are on about the airline’s core business model. So far, in its 12 years of operations, it has leveraged its low-cost carrier (LCC) approach to acquire the massive market leadership, flying only economy and only narrow-bodied aircraft.
 

An Indigo spokesperson did not res­pond to queries. However, people who do not want to be named because they are not authorised to speak on the matter say discussions are on about whether IndiGo should switch to a hybrid model for international operations, adding business class seats, and maybe a few flatbeds, on the single-aisle Airbus A321XLR. Talks are on to buy or lease wide-bodied aircraft so it can fly longer distances to London, United States, and Australia — all of them lucrative routes.
 

A back-of-the-envelope revenue calculation says one flight from India to the US is as good as five to Dubai.
 

“In short-haul flights, the price is the predominant factor. But when you fly longer distances, it is always a balance of the price and comfort,” says Rohit Tomar, managing partner, Caladrius Aero Consulting.
 

IndiGo’s immediate plan is to increase its international routes. From 26 cities now, it will soon be flying to 32, adding 174 new weekly international flights. These include direct flights to Nairobi, its first entry into the growing African market, and straddling the upcoming leisure market of Tbilisi in Georgia, Baku in Azerbaijan, Tashkent in Uzbekistan, and Almaty in Kazakhstan. Then there is Jakarta in Indonesia.
 

Of these, only Nairobi is covered by an Indian carrier (Air India). All the others are international carriers’ fiefs.

 

Air India challenge

The Tata airlines have begun to flex their muscle and won’t let IndiGo have a free international run. Air India has already increased its planes on international routes since coming back to the Tata fold in January last year. It says 76 per cent of its ASKM is international — that is three times IndiGo’s. Even Vistara’s international ASKM, at 40 per cent, is higher than IndiGo’s.
 

Air India flies bigger aircraft, such as the Dreamliner, which has 256 seats, even to Dubai. On the same route, Indi­Go’s A321 Neo has 222 seats. Air India also has several direct and indirect flights to the US, Canada, Australia, and countries in Europe that use wide-bodied aircraft, which IndiGo does not have as of now.
 

“They (IndiGo) are four to five years late in the game. Now they have tough competition from the Tatas. Of course IndiGo, too, has the cash, but it has to get out of the low-cost mode,” says Jitendra Bhargava, formerly a director with Air India.
 

Air India wants to increase its international market share to 30 per cent. Having ordered 470 planes, it is getting 34 A350-1000 (400 seats) planes, six A350-900 (1,000 seats), six Airbus 350-900 (370 seats), 20 Boeing Dreamliners (290 seats), and 10 Boeing 777 (more than 400 seats) — all wide-bodied aircraft — starting this year with the bulk of the A 350s coming in 2025.

That is around the same time that IndiGo gets the Airbus A321XLR.
 

In the face of this renewed compe­t­i­t­ion from Air India, the first credible cha­llenge to IndiGo in years, changing Indi­Go’s business model will be like repairing a plane in mid-flight. “No LCC has made a mark with wide-bodied planes so far. So, will IndiGo take the plunge?” won­d­ers Ameya Joshi, an aviation consultant.
 

Air France, for instance, closed down its budget long-haul subsidiary, Joon, within 18 months of launch. Lufthansa’s LCC carrier, Euroway, moved out of long-haul. WOW Airlines went bankrupt. And the once successful AirAsia X faces record losses. Experts say the longer the distance an LCC flies, the lower its cost advantage.
 

However, many experts say IndiGo has to induct wide-bodied aircraft to become a true global player, and do it smartly, with an eye on the many routes waiting to be tapped. For instance, in the US it can fly direct Los Angeles (Air India flies to San Francisco). There is scope to fly direct to Perth (Air India flies to Sydney and Melbourne). IndiGo can fly direct to New Zealand, where Air India does not fly directly.
 

So, as IndiGo measures itself against global carriers, it might want to look at someone closer home.