IndiGo reportedly buying 100 more ATR planes: How will it change things?

Turboprop planes have helped IndiGo rule the regional aviation network for the last five years. And there might be more coming

A lesser-known facet of India's largest air carrier, IndiGo's flight network is how it serves routes where the demand is not enough to fill the regular 180-seat Airbus planes that fly between the big cities as well as to some of the smaller ones. That is where IndiGo’s ATR aircraft have filled the breach during the last five years.

These ATR planes are turboprops, which have a hybrid engine that runs on jet thrust as well as has propellers. These are smaller and work well over a short range. They have proven to be economically viable on routes with lower demand, allowing IndiGo to serve them profitably.

ATR, which is a joint venture between Airbus and Leonardo, currently has about 1,400 aircraft operating around the world.

According to aviation industry insiders, IndiGo's turboprop operations have also benefited significantly from the substantial reduction in SpiceJet's turboprop operations, using Q400 aircraft. SpiceJet, has struggled with cash flow issues. Data from Cirium, the aviation analytics firm, reveals that its turboprop operations have decreased by a striking 77.1 per cent over the past five years, dwindling to just 346 services a week.

IndiGo, after placing the world's largest aircraft order for 500 A320neo family planes in June last year and another order for 30 A350 wide-body planes in April this year, is reportedly in talks with ATR for another 100 planes for its burgeoning regional operations.

Currently, the airline has about 370 planes, out of which 45 are ATR aircraft and the rest are the bigger Airbus planes. The company's top four hubs for ATR flight operations are all in South India: Hyderabad, Bengaluru, Chennai, and Vijayawada.

When asked where the airline would be deploying the new ATR planes, a spokesperson for IndiGo responded: "We constantly evaluate available options to enhance our network and service, while driving business growth. We do not comment on speculations. If and when we have any significant business developments, we will share communication with all stakeholders as per regulations."

Flexibility factor

An IndiGo ATR plane typically accommodates 78 passengers. By comparison, there are usually 180 seats in an A320neo, the kind that comprises most of IndiGo’s fleet and which flies on turbofan engines.

Over the last five years, IndiGo has tripled its ATR fleet to 45 aircraft. Consequently, its ATR flights have surged by 164.3 per cent to 2,405 flights a week. The turbofan operations, on the other hand, grew by 25.2 per cent in this period, albeit on a much larger base, to 10,296 flights every week.

According to IndiGo executives, one of the significant benefits of operating ATR planes is their ability to service routes where the airline is the only one flying or where there is very little competition. On these routes, where demand is sufficient to fill the 78-seater planes, IndiGo enjoys considerable flexibility in setting airfares.

Out of its top eight busiest ATR routes, IndiGo is the only one flying on four: Hyderabad-Rajahmundry, Chennai-Tiruchchirappalli, Bengaluru-Madurai, and Chennai-Tuticorin. No other airline operates on these routes. Even on the remaining four routes, competition is minimal. For instance, IndiGo's busiest ATR route is Hyderabad-Vijayawada, where the airline operates 86 per cent of all flights. Chennai-Madurai, IndiGo's third busiest ATR route, sees approximately 98 flights every week, with 86 per cent operated by IndiGo.

All is fare

However, this market dominance does not allow the airline to set "exorbitant" fares. "The demand has to be kept in mind. Pushing the fare too high could affect the load factor," an IndiGo executive explained.

Load factor for an airline is the ratio of filled seats to total seats.

In fact, the airline, in March this year, had lower fares on its top four ATR routes as compared to March last year. This is evident from the data provided by Cirium.

IndiGo, after placing the world's largest aircraft order for 500 A320neo family planes in June last year and another order for 30 A350 wide-body planes in April this year, is reportedly in talks with ATR for another 100 planes for its burgeoning regi

On its number one ATR route, Hyderabad-Vijayawada, IndiGo earned an average fare of $44 per passenger in March this year, compared to $49 per passenger in the same month last year. On its number two ATR route, Hyderabad-Rajahmundry, the average fare was $42 per passenger in March this year, compared to $43 per passenger in March last year. On its number three ATR route, Chennai-Madurai, the average fare was $49 per passenger in March this year, compared to $58 per passenger in the same month last year. The average fare on the Chennai-Tiruchchirappalli route dropped to $33 per passenger in March this year from $41 per passenger last year. 

These fares do not include taxes and other charges.

"Not all ATR routes had lower fares in March [this year]. However, even when there were lower fares, the margins remained strong," noted an executive.

Heat of competition

This pricing flexibility diminishes on IndiGo's busiest turbofan routes, such as Delhi-Mumbai, Mumbai-Bengaluru, and Delhi-Bengaluru, where it faces stiff competition from rivals such as Air India. When asked about the fare movements on their busiest turboprop versus turbofan routes, the IndiGo spokesperson replied: "In terms of fares, there is a consequence of demand and supply, and like in any business this equation plays a pivotal role in what the fares look like. In addition to this, other key costs for an airline, such as fuel and forex fluctuations, also have a bearing on the fare charges."

Meanwhile, ATR expects India to become its largest market in the next 10 years as the demand for regional air travel continues to rise in the country, according to its head of commercial for the Asia Pacific region, Jean-Pierre Clercin, who had spoken to Business Standard in February. 

IndiGo's strategic use of its ATR turboprop fleet has emerged as a key advantage, allowing it to dominate regional routes and leverage pricing power judiciously. As the airline expands these operations, maintaining its deft approach to route economics and fare management will be crucial. Leveraging this regional turboprop network as a potent feeder system for its larger domestic and international operations could turbocharge IndiGo's growth trajectory.

Or, shall we say, turboprop it?