Tag: International Flights

How IndiGo is backpedalling from its avowed LCC model

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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This is the second installment of a two-part article highlighting IndiGo’s shift away from a pure low-cost model.

You can read the first part: IndiGo has abandoned its pure low-cost carrier model

From inception through the beginning of 2019, IndiGo has been on a steady uptick. There were a few bumps on an otherwise stable ascent and on the metrics that matter the airline continued to deliver.

At the beginning of 2019, the airline was sitting on a cash balance of $2.2 billion, the lowest CASK in the industry at  US cents 5.16 and a market share of 46.9 percent in an environment where competitors had withered. Yet, few could foresee the clear air turbulence ahead, which emerged in mid 2019. This would change several things at the airline.

The promoter discord

In May 2019, news emerged of a bitter discord between the two airline founders. The points of contention were reportedly the structure of the board and the ability to nominate the president, managing director and chairman of the board and the approval process involving related party transactions (RPT).

The timing of the rift was also important as the airline had several matters that required strategic guidance. One vital decision was the engine selection for the third batch of aircraft and also a new fleet order, which would be essential for the foray into international routes and whether to do it via narrow-body aircraft or wide-bodies.

While the promoter dispute played out publicly, the key point that emerged as far as strategic direction was concerned was that Rakesh Gangwal, until then the lead architect of the fleet plan and financing plan, was not fully participating in the discussions. An otherwise extremely hands-on figure in the monitoring of performance, he was not even taking the review meetings.

Also read: Read full text of IndiGo promoter Rahul Bhatia’s letter to board against Rakesh Gangwal

Interestingly, it later came to light that a very senior former Airbus executive was roped in to advise IndiGo and while the airline undoubtedly got a competitive deal for both the engines and the new aircraft order, these were a departure from the core tenet of the LCC model of a uniform fleet and engine type.

The mega engine order and a new supplier

June 2019 saw the Paris Air Show where IndiGo announced an order worth $20 billion for aircraft engines. It was the largest engine order to date. The order was placed with CFM International for 280 Airbus A320neo and A321neo aircraft. CFM is a 50:50 joint venture between General Electric from the US and Safran from France. The order was a significant coup given that 87 percent of the IndiGo Airbus 320/21 fleet was powered by IAE and Pratt and Whitney with the IAE powered aircraft on their way out via fleet replacement cycles.

Also read: Why Indigo dropped Pratt and Whitney and went with CFM for its mega engine order

The engine order also meant that IndiGo was introducing complexity to its fleet. While the CEO in an interview indicated that beyond 70 aircraft, the induction of a second fleet type and a second engine type have no material impact, many industry insiders disagree. Interestingly, in their second quarter results, Indigo also saw higher maintenance costs per seat kilometre and a portion of this is presumably likely linked to the inability to rollover engine credits due to a switch of suppliers.

The new aircraft order: An indication of diverse stage lengths

IndiGo also announced another major order for planes this year. Interestingly, this was done three months after the Paris Airshow, which caught several aviation analysts by surprise.

The order was a firm order of 300 Airbus 320NEO/321NEO aircraft. It included the extra-long-range (XLR) version, which reveals the stage lengths the airline will be targeting.

Partly, this order was necessary to continue financing the income stream that IndiGo has capitalised on. Based on current lease cycles and financing structures, the initial orders were set to have been fully absorbed by 2026 or 2028 depending on how the deliveries were brought in. As such, an additional order was needed.

But what is equally interesting is the nature and type of aircraft. The 321s give the airline 19 percent additional capacity per flight with economics that are still competitive. This enables the airline to continue to deliver on a competitive CASK, a measure of an airline’s unit cost.

The A321s and A321XLRs (extra-long range) enable more cities to come into the network enabling network expansion. Yet, what it also does is introduce varied stage lengths. And not all stage lengths are as profitable. An impact on the network CASK is all but certain.

As a side note, yet another aircraft order by IndiGo in the near term cannot be ruled out.

International expansion, competition and complexity

The year 2019 also saw rapid international expansion by IndiGo, including the addition of seven new destinations. The nature of the expansion was a further deviation from the LCC principles.

Destinations ranging from Myanmar and Malaysia to Vietnam and China were added to the network. Each had very different demand profiles and varying stage lengths. The recent announcement of flights to London is yet another step in this direction.

For IndiGo, the past, as it pertains to International expansion, may not be a predictor of the future. Because unlike some of the earlier stations where IndiGo captured a leisure and low-cost (labor) travel base, demand for cities such as Yangon, Chengu and Hanoi has to be stimulated. Seasonality also plays a key role.

Finally, the competitive landscape for the new cities IndiGo is targeting is also very different. From competing with the likes of Jazeera Airways in Kuwait (led by a seasoned team that understands the India market extremely well); FlyDubai in Dubai (with access to the broader Emirates network), Vietjet in Vietnam (a powerhouse in the region and likely to start flights to India) and AirAsia in Kuala Lumpur (a powerhouse in the South Asia region).

Its competition is not restricted to low-cost carriers because the full-service counterparts such as Singapore Airlines, British Airways, Emirates and the like can also offer fare levels that are at par or below. This challenge is partly alleviated by code-shares and alliances, which also add complexity to the mix. And indeed IndiGo has gone in this direction by entering into codeshares with Turkish Airlines and Qatar Airways. Yet, the codeshares signed are fairly restricted and geopolitics may not allow either one to deliver in terms of costs and cash flow.

What the future holds

Since its first flight in 2006, IndiGo has gone from strength to strength. In the domestic market, the airline is hovering just below a 50 percent marketshare. And by all indications its position here is only being strengthened via both market weakness and tactical moves. On fleet, it is well positioned with confirmed capacity through the next decade and beyond. And its network is evolving to include more international destinations.

Partly, this is inevitable. Because the airline is limited by the number of additional flights it can mount on domestic destinations before cannibalising its own traffic. And because crossing the hallway mark may also mean added challenges poses by the competition regulator and how that plays out is yet to be seen.

Yet slowly but surely, the airline has moved away from a pure LCC strategy. Complexity has been introduced to the business model and this will only grow with the introduction of long-haul routes like London. As volumes have grown, overall customer experience has declined – a view echoed by several travellers.

On the financials, the cost of delivery (CASK) has risen by 26-30 percent in the past five years depending on what metrics are grouped. Fare levels remain flat and some competitors have linked this to IndiGo’s dominant position and pricing strategy. Cashflows have remained healthy but as the international network matures, the operational cash flow will be interesting to watch.

IndiGo is no longer content with just being the dominant Indian airline but is intent on spreading its wings to the greater South Asia region. Its international expansion plans are as of now the clearest indication of grand ambitions.

Recent filings show that IndiGo has applied for slots at three airports in the London area. The buzz is that these will be serviced via wide-body aircraft. And this introduction of wide-body aircraft to serve long-haul routes will perhaps be the final deviation in Indigo’s departure from a pure low-cost model.

Satyendra Pandey has held a variety of assignments in aviation. He is the former head of strategy at a fast-growing airline. Previously he was with the Centre for Aviation (CAPA) where he led the advisory and research teams. Satyendra has been involved in restructuring, scaling and turnarounds. Has also provided policy inputs and suggestions.

Read his columns here.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Vistara’s international expansion finally takes off: What to expect on board?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Earlier this week, Vistara, the airline co-founded by the Tata Group and Singapore Airlines, announced its first international flight. It is headed to Singapore next month, launching its first two daily international flights from Delhi and Mumbai to the home of its parent, Singapore Airlines.

With the closure of Jet Airways, the country has been wondering who would take its space in the international airspace, which has largely seen its no-frills airlines such as IndiGo and SpiceJet spread their wings over the months into all sorts of regional routes, going to places such as Dubai and Singapore and Bangkok.

Apart from Air India, there has been no other full-service carrier out of India for the moment, and on long-haul flights, there is a clear market for more than one full-service airline to come into the market, given business travellers don’t prefer the no-frills airlines on these routes flying to Singapore, Hong Kong and such. For them, their schedules are important, and also their comfort on the plane, as they most probably head straight into a meeting after landing.

So, the announcement from Vistara, which had qualified for international operations last year (but only got the required permissions this year), was more than welcome.

Where will Vistara go and why?

The first routes that Vistara will fly will all be the usual ones. Vistara was going to launch its international flights with a flight to Colombo, unfortunately, that got postponed due to the terror attacks. The first flight is now to Singapore, and the airline also has slots at Bangkok and Dubai, so expect to see those flights being launched sooner than later. Besides that, Vistara will look to expand its wings to some of the other airports left open by Jet Airways, such as Kathmandu.

These are some of the routes the airline can already achieve with its existing aircraft, the A320 family aircraft and the 6 Boeing 737NG aircraft. Vistara plans to offer codeshares beyond Singapore to Australia/ New Zealand and South-East Asia on Singapore Airlines shortly.

This will be the first wave of expansion for Vistara abroad. From there on, you will need to wait till next year, as the airline stabilises its international operations, perhaps adding a few more regional routes in the coming days. The airline has 50 A320 family aircraft on order, which will start to come in later this year.

Another wave of expansion should come early next year as the airline starts to induct A321neo aircraft. These aircraft should be able to power their flights to further off locations such as Hong Kong in comfort.

Vistara is also due to receive 6 787-9 aircraft, which will be used exclusively for long-haul operations as per the airline. Two of these aircraft are expected to be delivered before March 2020 to the airline, which should power the launch of its international long-haul operations. Where will they go is anyone’s guess at the moment, but it is expected to be heading towards Europe with these aircraft, and perhaps even further East in Asia, such as Japan. While it can operate flights to North America as well, with only 6 equipment, I wouldn’t expect it to use them on those routes anytime soon, not before it adds more planes and get more experience in flying abroad.

What to expect on board?

At the moment, the airline is going to fly with the ex-Jet Airways 737 aircraft to Singapore. You may wonder why are you not getting the signature 3-class Vistara experience? It is the economics, really. The Jet Airways 737 aircraft have the ability to fly more passengers to Singapore, so better revenue economics on that aircraft. Also, they have 12 business class seats in comparison to Vistara’s own aircraft which have 8, so that helps as well.

As the airline receives more aircraft, expect it to swap out the 737s for A320s with the 3-class experience. It has all the plans to do so, given it has also notified similar changes to Club Vistara in line with a 3-class aircraft. Premium Economy should be coming on anytime soon (but not too soon!).

The airline is yet to make an announcement on the complete details of the product and service to expect on board, but I do expect it to be offering an enhanced meal experience on these aircraft, apart from a luxurious lounge experience for those who are eligible. Also, in-flight entertainment for Vistara is a bring-your-own-device based, so it should not be very difficult to plug it into the aircraft as long as they have the intent.

What I do know is that when you will start to fly on a Vistara hard product custom designed for international flights, you will find it to be suiting your needs very well.

Club Vistara changes 

The airline has also moved to change its loyalty programme in line with its move to go international. It is now going to allow you to use your miles and upgrade vouchers to upgrade on international flights as well. You can also use your Club Vistara miles to redeem for international flights, although a Business Class flight to Singapore, coming at 80,000 CV points for one-way seems like a huge ask at the moment. 

I’ll keep you posted on the Vistara experience after I make the flight next month!

Ajay Awtaney is a business travel & aviation journalist based in Mumbai, and the founder of the Indian frequent-traveller website Live From A Lounge (www.livefromalounge.com.) Ajay flies over 200,000 miles every year, and tweets about The Business of Travel at @LiveFromALounge.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

We are on a mission to boost economic growth, mobility across India, says IndiGo CEO Ronojoy Dutta

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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IndiGo is growing at a furious pace and its growth is good for the Indian economy, Ronojoy Dutta, the CEO of IndiGo, has said. The airline is among the major beneficiaries of the grounding of Jet Airways, which last operated a flight in April before folding up under crushing debt.

Commenting on the collapse of Jet Airways, Dutta pointed out that Jet was a good product when they started. “Their Middle East venture was a success story. Their decision for wide-body aircraft was probably a mistake,” he opined.

In an exclusive interview with CNBC-TV18, Dutta said IndiGo would not make the same mistakes. “We will expand our global operations cautiously. We want to be a global player,” he said.

Edited excerpts from the interview.

The Indian aviation industry is really a cautionary example of how not to run airline businesses. You came in December of 2018, you were appointed as a consultant to present a five-year strategy or blue print for Indigo’s growth going forward. You took over as Indigo’s CEO in January of 2019. In the six months into the business, give me a sense of what the five-year road map looks like or flight plan looks like?

When we look at Indigo we think we have four stake holders and we want to give returns to each one of our stakeholders. First and importantly is the nation itself. We think Indigo is serving India and how do we do that – providing air connectivity to small cities is a big part of national growth. There used to be a time when it was growth and railways and river traffic, and now frankly it is all about air connectivity.

So, take a small city such as Raipur where we now fly 18 times a day and it is in sort of a depressed state called Chhattisgarh. Imagine what it does when we fly 18 times a day to Raipur – what it does to the local economy and to the economy of Chhattisgarh, so we are very much a part of nation building. The government is investing in roads and railways and we are saying at least on the airline side you don’t have to worry, we will take care of it.

Indigo is on a mission to boost economic growth and mobility throughout India.

Mobility is also an important aspect. As you know there is lot of migration happening and a country is only strong when there is lot of labour mobility and we are seeing a lot of mobility from eastern part of India to the rest of India and Indigo is part of making all that happen. If you look at affordability, fares have gone down 45 percent in real terms. So this nation building is big part of what we are trying to do and it is not just about providing connectivity, we are looking at social cohesion. So we want Kashmiris to get job in Coimbatore, we want Mangaloreans to travel and fall in love with Manipur, so our vision is trying to make all that happen. So, that is step 1.

Now Step 2; it is good to talk about all this connectivity and nation building but it does not work if we are not returning a fair amount of money to the shareholders. So shareholder returns is a very important part of what we are trying to do. It has been a problem in all other airlines in India but in Indigo we are very focused on providing good shareholder returns.

The third of course is the customer. As far as the customer is concerned, we want to do two things, one is to provide good value and good value comes both in the fare and in the schedule. We want to make sure they are not wasting time, they are productive and you get where you want to in time but the other part of it is experience. So even in the customer experience we are focusing a lot, make sure our prophecies are efficient, that customers are not wasting time, that the environment is comfortable and their experience is worthy of merit.

The fourth is employees. So on employees we want engagement, we want them to be able to grow at Indigo. These are the four things that we are pursuing very aggressively.

So, I will pick up on each one of those in just a bit but let me ask you about the domestic market, market share of over 45 percent you have gained on account of grounding of Jet. How do you see the competitive landscape in India today?

India fortunately is growing at a furious pace. Airline revenues in general grow at twice the rate of GDP and as long as India is growing at 6-7 percent GDP, airline traffic will continue to grow at 12-14 percent. So it is one of the fastest growing markets in the world that provides a lot of headroom.

As far as competitive market share is concerned, we are focused on how fast we can grow because really when Arun Jaitley says that India is impatient for growth, we agree, we are impatient for growth. We think the nation needs to growth really rapidly and it is not just why we are growing in Raipur- its why are we not growing in Allahabad, why are we not growing in Jodhpur. So we are going to grow at a very rapid rate. What that does to our market share I do not know but really you have to ask me what is the market share of oxygen in your lungs, I would say I don’t know but I just know it is good for me right? So, I think Indigo is good for the Indian economy and we are going to continue to push that pedal.

Let me ask you about profitable growth because what we have seen in India, at least as far as the aviation industry is concerned, is not profitable growth with the exception of Interglobe Aviation and now of course SpiceJet. So, what are the levers that you will continue to exercise because the fear is that as capacity gets added on, we will see further depression on yields, what is the situation on that front?

Airlines are a very unforgiving industry and there are many parts to failure and there are only a few parts to success. I think Jet Airways is a good case study in that issue. Jet was doing great I think when they were focusing on narrow bodies. When they first started, corporate India was in love with them because they had a good product, good on-time, they were making money.

Then they took the second step of going into the Middle East and again it was a wonderful success story; very profitable. Then they made a third step and they probably made a mistake. They jumped into wide-bodies too early, too fast, with a fragmented fleet — some 777, some 8330, let us go to New York and go to New York with a hub in Brussels, then let us try a hub in Amsterdam, and then it was okay, now we are going down the wrong path. So, IndiGo needs to avoid those mistakes. Yes, we are going to expand internationally, but we are going to do it carefully, cautiously, and not make the same mistake.

Give me a sense of what the international expansion story looks like because if I look at the numbers today you are reaching out to about 18 international destinations currently, January to March, 14.5 lakh people have travelled internationally on IndiGo. What is the aspiration, do you want to be a global disruptor?

We want to be a global player, I don’t know if we want to be a disruptor. India does not carry its own traffic. If you look at international traffic in and out of India, whether it is Singapore, Thailand, Emirates, or Lufthansa, they are all gobbling up the Indian traffic and what Air India was supposed to do in being the national airline of India and carrying Indian traffic, it has not worked.

We want to step into that, and yes we do want to grow our market share internationally aggressively. You talked about our market share domestically. Internationally our market share is still small. So, we are taking half of our capacity and putting it in the international market. So we are going to grow at 30 percent a year overall, half of that capacity will grow domestic and half of it will grow internationally. So we have a lot of ambitions and aspirations in that regard. We are going to go to China, Vietnam, Myanmar and we are looking at all the markets around us; not wide body, and not long range.

Not in the near future or not for the distant future as well.

No, not in the near future. Wide bodies are inevitable, we are looking at wide bodies.

When will they become inevitable?

They are inevitable now, when will we implement is the issue and it is not going to be very quickly. Look wide bodies are dangerous animals. If you fly Delhi to Bangalore, it costs about $15,000 for each trip. You fly Delhi to London, it is costing $110,000 a trip. So you can lose a lot of money very fast and this is what we see happening with Air India and Jet. So, yes, we will grow international but a lot of things have to fall in place before we do that. I think we need three to four more steps along the way.

What would those be?

We will see them when it happens, we have it in mind but we are working towards them.

What specifically is holding you back today from moving to the wide body route?

As I said the risk. People say London is such a great market, if it is such a great market why both Jet Airways did and Air India both go under, it is a dangerous market because as I said that each flight costs around $100,000.

So are you making money on the international routes today?

But we are going with narrow bodies, so there is a different between filling 300 seats every day, 365 days of the year and filling 170 seats every day – so that is a big jump. So, in the markets we are flying in we are very profitable and we are very happy to fly those and then we have to cautiously inch away into the wide-body long haul market.

So as you move towards more international expansion what is that going to mean, not just in terms of revenue but more importantly in terms of margins because as you pointed out there are risks involved?

We have really bell-curve of margins, some flights are very profitable, some flights are not and that is true domestically and that is going to be true internationally, some flights are highly profitable. So the very profitable flights internationally are more profitable than the domestic flights but also there are some stragglers in the international market. So we don’t say like this is good, that is better – it is a mix of markets and we have to work our way through all of them.

On the international strategy, how much have you been able to benefit on account of Jet’s demise? The routes are up for taking at this point in time, I know that you have had reservations on the manner in which they have handed out, but how much have you been able to benefit both on account of people, pilots essentially, as well as the routes?

The routes, many of them, are quite attractive. As I said, Jet’s biggest strength was domestic Mumbai, and then the Middle East. So, as Dubai, Doha, all these become available, we are very anxious to get into those and we like those. However, we had 15,000 departures a day and Jet domestically gave us 30 more departures in Mumbai. So it is not like a game changer. Similarly, international, we are getting another 25-30 departures a day. So, these are small numbers in the scheme of things, but these are all very attractive routes.

We have got a new government in place. When in the first term they decided to put Air India up for disinvestment, you did express an interest and then did not follow through with an expression of interest. You are more interested in the international operations of Air India and the government decided not to split. If they were to change the terms and come back now, we are given to understand in July with a new disinvestment plan for Air India, would you be interested?

The history of mergers in the airline industry is not very great. Kingfisher bought Air Deccan, Jet bought Sahara and neither of those turned out to be good investments. So, we are not going to rush into this blindly. There are a lot of things that give us pause. There is the huge debt, thousands of crore sitting there.

Buying aircraft at the right price is very important. Did they buy all the fleet at the right price or will we be stuck with high-cost aircraft is an issue. So these are all things to look at. However, at the same time is it attractive to say they fly to Heathrow, they have slots there, you get more slots in Delhi and Mumbai, you get traffic rights to many cities including the Middle East? Yes that is all very attractive. So, I think there are some rewards, but there is a huge amount of risk. So, again, cautious.

So would it be fair to say that the only reason you would consider looking at Air India would be if the government were to split the domestic and the international operations?

Or if there was another buyer hypothetically, who would say I am more interested in the domestic then we could take the international and these are speculative, hypotheticals, there may not be such a buyer but if you say what is your key interest, it is clearly the international at the right price, with the right fleet, with a lot of caveats international would be attractive.

Have you heard from the government on Air India?

No, I have heard that in July they will ask for expression of interest. So that is the last thing I know.

You were talking about the fleet and 100 aircraft in 2006 and 180 in 2011, 250 in 2015 – when is the next big order likely from Indigo – till when do you believe that you have enough capacity on the order-book already?

Our current order runs to 2024 and as you know there is long lead time for these airplanes – so we in fact talking to both Airbus and Boeing right now, not for delivery next year or year after that but for delivery in 2025 and beyond. But equally aircraft manufactures’ order-books are full, so there is a big backlog. So, in order to get ‘25-26 delivery we need to start talking to them now. Very preliminary talks happening at this time.

That is a change in strategy as well because so far you are stuck with Airbus pretty much right through but you said you are open to talking and you are talking with Boeing as well as Airbus. One of the reasons why Indigo is stuck with Airbus is because you did not have complexity of managing different fleet, so is that now a change we are likely to see?

This fleet complexity, I have done several studies on this at various airlines and upto about 20 aircraft its devastating, so if you are trying to buy 18 of one and 12 of another, you are in big trouble but once you get above 70 aircraft it is no longer an issue. So we would like to have fleet commonality but at what price, if someone comes up with a better price – take the Pratt versus CFM it was a similar issue. Is there a benefit to all Pratt engines, of course, but as you know in engines there is a huge maintenance cost involved and if CFM gives you an overall better price then you go with them. So, I think it is the same issue, whichever manufacturer gives the better overall package we will go with them.

Since you brought up CFM, let me ask you that question because you have placed a $20 billion order for the LEAP 1. Is this primarily a price issue because you have got a better bargain with CFM or is this also part of the de-risking strategy because you have had trouble with Pratt and Whitney?

Pratt, actually I have to give them credit, has been very proactive in managing the crisis. There were four or five issues that came up with their engines and each one has been addressed and the new engines are all coming with the fix in place.

So there are currently no Neos that are grounded?

For us, no. I have heard other airlines have. However, again, I was getting to the point that Pratt has been very forthcoming and giving us enough spare engines. So, we changed engines, but we do not have aircraft on the ground. At this point we have no aircraft on the ground because of new engine. The newer engines was an issue, I think it is gradually getting better, and most importantly in our minds all the fixes are identified. So, that was not the reason why we went with CFM.

It is a question of overall package – what is the initial cost of the engine, then we have a power by hour agreement, so what does that look like, so you look at the life span of the engine going up to 2040 and you do the cash flow under each scenario and you see which is the better one.

Just on the Pratt and Whitney engines, the DGCA has been working with you on these engines. Have you been given an all-clear by the DGCA when it comes to the Pratt and Whitney engines?

I do not think there is such thing as an all-clear. All the regulatory bodies, whether Federal Aviation Administration or DGCA, are continuously monitoring this activity and they continue to do that and they always will. Whether it is a perfectly stable engine or not, they will continuously monitor. So there is no one event that says all-clear. We work with the DGCA and as I said, things are getting better all the time on the new engines.

Let me now address an issue that has caused some degree of concern from a shareholders perspective and that has to do with the differences between the promoters. I know that you put out a detailed statement. So let me just quote to you from that statement – if the current differences were not to get resolved, you shall certainly hear about it, however it serves no purpose speculating about it. In that same statement you go on to say that the differences between the promoters are not about control, they are not about operational strategy, and they are not about management changes. So what are these differences about?

I will not go to plural, I will put a singular. They are no differences, it is a difference and it is really an administrative issue. It has no impact on the company, it has no impact on management, and fortunately for me M Damodaran is very experienced and well versed in all these issues and he is handling it on his own and he is doing a great job. We hope to resolve it soon.

However, there are always differences between promoters. We have to find a company and say okay you have got these two or three promoters, are there no differences? That would be unusual I would imagine.

You are saying it is an administrative difference, what would an administrative difference be for an airline?

It is not airline related and that is the important point. It is an agreement issue between the two promoters. It is in language of what they have agreed to and that really has nothing to do with the airline.

The resolution needs to be in place before October when the current shareholder agreement ends? 

Let me go back and answer the question, there is no reason to be so cagey about it. So, the issue really is, what is called related party transaction.

InterGlobe sells certain services to IndiGo the airline. As an example, the headquarters we are in, the landlord is InterGlobe, so we pay a certain rent. The hotels – our crew stays overnight at various places like Sheraton, Holiday Inn or Novotel. Now in Novotel, InterGlobe has shareholding, so these are called related party transactions and it is a matter of how you deal with them the two promoters are talking about. Now, there is a very clear law on this, you have to have an arm’s length and we have it in place. The only issue they (promoters) are talking about it is, do we need to modify this related party transaction process in any meaningful way.

Is it from a compliance perspective or do they want to change the terms? And which one of the promoters wants to terms to be changed?

So, Rahul Bhatia owns InterGlobe and he is the landlord of our property, he has shareholding in Novotel. Rakesh Gangwal is the one who is saying, I want to take this related party transaction process and change it. As it happens we are following compliance to the law, he would like to add another layer over and above that and they are discussing it.

Also, when you add all the related party transactions, last year there were $30 million and this year they will be going down to $20 million or less. We are a company of many billions of dollars and so it is a very small part of what we do.

Has there been any forward movements since the time that you put out the statement?

Yes, absolutely. Going back and forth with proposals. So, at this point, we are looking at different proposals.

And you hope that well before October this will be a matter that will be addressed?

It is not tied to October in anyway.

It is not?

Because it is not part of the shareholder agreement, it is not part of Articles of Association. As I said, it is an administrative issue.

So there is no reason to believe that there could be an eventuality where the two promoters may decide to go separate ways?

Not because of this. They might decide for some other reason that I do not know of, but no one has articulated anything close to that.

Is this a matter that is as significant as could possibly lead to that kind of a disagreement?

I cannot imagine in the wildest of my dreams how an issue with $30 million of purchases between one company and another would lead to two promoters going in different direction.

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IndiGo to start flights on Mumbai-Dammam and Chennai-Kuala Lumpur routes from July

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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IndiGo on Tuesday announced that it will start flights on two new international routes of Mumbai-Dammam and Chennai-Kuala Lumpur from July.

Moreover, the low-cost carrier said that it will add a second frequency on Mumbai-Doha route from July 5 onward.

“Bookings are open with immediate effect, with fares starting at Rs 6999,” it said.

The flights on Mumbai-Dammam route and Chennai-Kuala Lumpur would begin from July 5 and 15, respectively, as per the airline.

With almost 50 percent share in the domestic passenger market, IndiGo is the largest airline in India.

William Boulter, the chief commercial officer of IndiGo said, “We are delighted to expand our international reach through the launch of these new flights. We are committed to strengthen and grow our international network, which is in line with our overall growth strategy.”

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An uphill task: IndiGo’s international foray is not as easy as it looks

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Last week, IndiGo, India’s largest carrier by domestic market share and fleet, announced its results. The airline reported its highest ever international capacity deployment in its history. With a growth of 60 percent in international capacity, the airline now deploys close to 20 percent of its capacity on International routes. Since the time IndiGo expressed its interest in the international operations of Air India, there has been talk of either IndiGo opting for the wide-body aircraft or substantially increasing its international presence. So far, we have seen none.

At its peak, Jet Airways had a revenue share of over 50 percent coming in from international operations. Percentages like statistics often hide more than what they reveal. Jet Airways had much smaller domestic operations as compared to IndiGo and a strong wide-body presence to reach the 50 percent share of revenue. IndiGo on the other hand is relying solely on its fleet of A320/A320neo and A321neo to penetrate the international markets, which will either be medium haul or one-stop long haul.

Headwinds

IndiGo is the only active airline in the country which has a history of not closing a station. Until it started international operations, it also had a record of sorts. The record was shaken when the airline pulled out of its international launch routes from Delhi and Mumbai to Singapore and Bangkok. This was seemingly due to competition and higher costs than what the airline had projected. The airline continued operations to Singapore – launching flight from Chennai and to Bangkok – with a new flight from Kolkata.

Five years later, it did something it had never done before. The airline launched flights to Bangkok from Hyderabad, advertised them and suddenly closed the flights for sale, instead re-instating the second daily frequency between Kolkata and Bangkok – a flight which was withdrawn only 45 days ago.

As it launched a record number of stations, both domestic and international in 2018, it has already seen frequency adjustments or route suspensions within months of operations. While it is common for airline to experiment routes and adjust frequency based on demand, this has not been the case with IndiGo – which has taken its time to launch routes and then only mount frequencies thereon. A major change has been the top management, which has been more aggressive with international expansion.

Numbers game

One argument in favour of international has always been that the fuel is taxed lesser on international than domestic. However, international flights have longer stage lengths and ability to lose more money if unable to attract passengers. Unlike domestic routes, where dropping fare helps convert passengers from other modes of transport – international does not have other modes. Besides the biggest hurdle for last minute travel of international routes is often paperwork (visa, passport, etc).

IndiGo’s CASK (cost per available seat kilometre) has been really low over the years and while that gives it an advantage over its peers, most of its peers are
full-service carriers who may be willing to get into a price war along with the frills and while IndiGo may match the price, it certainly won’t be able to match the frills.

IndiGo has said that its revenue grew over 13 percent on international routes while the domestic was just over 6.2 percent. This is again a case of percentages hiding information, since the base number is not known. The airline started eight new international destinations in 2018 and this could be a case of fares stabilising after initial discounting!

 Tail note

A Bloomberg report has claimed that IndiGo will be a threat to Emirates and the next few years for Emirates will be far worse than its last year as IndiGo starts international flights. While there is no denying that IndiGo will try to be a serious player in the market, to think that it will pose a threat to Emirates in the next few years is farfetched.

IndiGo’s international plans include flights to China and South East Asia – a market which will not overlap with that of Emirates and the airline harbours ambitions of flying to London – currently one-stop, which will make it compete with multiple airlines both non-stop and one-stop.

The airline has the war-chest to take the fight on with the biggies but if it does decide to go ahead and take the fight head on, it has to remember that for Middle Eastern airlines, India is one of the many markets which feed its extensive network but for IndiGo – India will be its sole market, unless the airline can create a successful transit hub in Delhi where it can fly passengers from China, the Philippines, Thailand, Malaysia, Singapore, Indonesia, Vietnam and take  them to West Asia and Central Asia. Again, how the long circuitous route will work is for time to tell. If history is anything to go by, IndiGo still has to re-invent the international game and copy pasting the domestic model hasn’t worked yet.

Ameya Joshi is the founder of aviation analysis blog NetworkThoughts.

Read Ameya Joshi’s columns here 

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Air India to launch a slew of flights; offers Dubai travel at Rs 7,777

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Air India on Wednesday announced that various new flights would begin from next month on domestic as well as international routes in order to meet heavy demand of seats during the summer vacation.

The airline is set to offer 3500 more seats per week each on Mumbai-Dubai-Mumbai route from June 1 and on Delhi-Dubai-Delhi route from June 2 by operating two more flights through B787 Dreamliner aircraft.

The airline will also offer one-way economy class at an all-inclusive promotional fare of Rs 7,777 on these flights for sale and travel up to July 31.

On its domestic front, Air India said it will introduce new flights on Bhopal-Pune-Bhopal route and Varanasi-Chennai-Varanasi route from June 5.

“The number of flights on Delhi-Bhopal-Delhi will be increased from present 14 flights per week to 20 flights per week by introducing third frequency to the historical city of Tals,” the airline said in a statement.

The national carrier would be increasing its flights on Delhi-Raipur-Delhi route from existing seven flights per week to 14 flights per week.

According to Air India, the number of flights per week would be increased on routes such as Delhi-Bengaluru-Delhi, Delhi-Amritsar-Delhi, Chennai-Ahmedabad-Chennai and Chennai-Kolkata-Chennai.

The flights per week would also be increased on Delhi-Vadodara-Delhi route and Mumbai-Vizag-Mumbai route, the statement added.

(Inputs from PTI)

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Vistara adds 14 new flights in summer schedule

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Tata-Singapore Airline (SIA) joint venture airline Vistara on Thursday announced the addition of 14 flights to its summer schedule to meet the rising demand during the summer vacation.

The new flights will operate between April 16 and July 15. The airline added five extra daily flights in the Mumbai – Bengaluru and Mumbai – Hyderabad route, one extra daily flight in the Mumbai – Kolkata route, among others.

In addition, the airline said it will operate an extra flight in the Hyderabad – Pune route between April 7  and April 30.

Recently, the airline added Raipur and Dibrugarh to its network. The operations for Dibrugarh started on April 3.

In March, the airline received approval to launch international flights as the Narendra Modi government ended the airline’s long wait with one of its last significant decisions before the end of its tenure.

“We are closely working with the ministry of civil aviation. Specific details will be shared at an appropriate time,” Vistara Spokesperson had said when CNBC-TV18 had reported the development.

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IndiGo launches Delhi-Istanbul flight; plans for wider global expansion

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s budget carrier IndiGo has launched its flight on the Delhi-Istanbul sector and announced to use its expanding fleet of A320neo and A321neo aircraft to connect more Indian cities to countries such as China, Vietnam, England, Myanmar and Saudi Arabia.

William Boulter, Chief Commercial Officer of IndiGo on Wednesday said, “We are looking very seriously into other points in South East Asia, notably the obvious ones of Vietnam and Myanmar. We also want to operate shortly to Saudi Arabia on the west side”.

“We are seriously interested in getting in China as soon as we can. We are still selecting precise destinations,” he said.

“India operates only five flights from here to China per week, whereas China operates 42 flights to India per week. It’s basically time that we start readdressing that balance. I am convinced that there is a huge amount of traffic in India-China axis. We have not yet tapped that,” Boulter said.

The airline plans to add 125 A321neo aircraft in its fleet over number of years. In 2019, it will receive 20-25 of these aircraft from Airbus, he said.
India’s largest airline IndiGo has around 40 per cent domestic passenger market share.

Boulter said, “Once we get more A321s, we will do more longer routes.” A321neo aircraft has the capacity to carry around 230 passengers while A320 neo carries around 180 passengers.

While Delhi-Istanbul flight is being operated in A321neo aircraft having 222 seats, Boulter clarified that the flights to China would be based on A320neos.

Talking about IndiGo’s plan to connect Delhi to London, he said, “We are still hoping to operating to London this year. We haven’t chosen yet what the mid point is going to be whether Baku or Tsblisi or Istanbul.”

“We had some slots in Gatwick airport last winter but they have lapsed. So, we are again looking at which airport we can operate to in the UK. It’s not yet confirmed. We are very keen to get into the UK market this year.

“We also have a plan to put A321 aircraft domestically because in slot limited airports in Delhi and Mumbai and increasingly, other airports too, A321 gives you that additional capacity,” Boulter said.

The Delhi-Istanbul flight plans to connect 20 forward destinations using the codeshare pact that was signed between India’s largest airline and Turkish Airlines on December 21 last year. Codeshare pact allows passengers to travel on a single ticket on flights operated by the partner carrier.

Boulter said that Delhi-Istanbul is a “strategic route” and the permission for six forward destinations have already been received by the respective countries’ governments.

“We have got six in place but we expect the others to be approved over the next few weeks. And they will be in your system for sales as IndiGo destinations.

“Once the Pakistan issues are gone away, which we hope they will, then this Delhi-Istanbul flight would be our longest flight operated by A321 aircraft,” he said.

Pakistan has closed its airspace since the Indian Air Force carried air-strikes on a terrorist camp in Balakot in the wake of the Pulwama terror attack.

IndiGo’s Delhi-Istanbul flight was supposed to be direct with around 7-hour journey. However, as Pakistan airspace remains closed, it halted at Doha for refuelling, increasing the total journey time to around 11 hours.
Boulter said that whenever Pakistan opens its airspace, Delhi-Istanbul will start operating as a direct flight.

He also clarified that he can’t comment in detail on how the Delhi-Istanbul flight would be different from the domestic flights when it comes to passenger amenities.

“We are not in the position to announce what would be the product changes. But there will be a number of changes – in terms of food, drinks and some comfort related opportunities.

“We are looking for some changes in our product (flights) to cope with the longer sectors. But there won’t be anything like a separate class. We are not going to put a premium class,” he said.

“We still believe that what we stand for is the on-time performance, courteous and hassle free service. Our most important point of low prices would stand us in good stead even as we extend the range,” Boulter added.

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SpiceJet plans aggressive international, regional expansion

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Budget passenger carrier SpiceJet plans to aggressively expand its international networks to fly out of the low fare and high fuel price operating environment.

According to SpiceJet’s CMD Ajay Singh, the airline plans to aggressively deploy its new 737Max aircraft on international medium-haul routes. The airline is prospecting destinations in China and CIS countries.

Speaking exclusively to IANS here, Singh said: “More new destinations will be announced soon. We are looking at destinations in China and the CIS (Commonwealth of Independent States).”

“We are getting the 737Max aircraft which is 14 per cent more fuel efficient. It can fly 20 per cent more than other planes. This will help us in adding a few more international destinations; we will decide on them after a market study is completed,” he said adding that destinations like Singapore and Kuala Lumpur are also under the radar.

Last month, the airline announced the introduction of a daily direct flight on Kozhikode-Jeddah-Kozhikode sector from April. Before that, it had announced a Hyderabad-Jeddah connection effective from March 25, 2019.

Currently, SpiceJet operates to eight international destinations.

Besides overseas destinations, the regional sector is another area, where the airline is expanding aggressively.

Recently, it announced 10 new flights under the regional connectivity — UDAN — scheme. It is going to places like Jharsuguda in Odisha, Gwalior and will operate Bhopal-Udaipur flight.

At present, SpiceJet operates 23 flights under the regional connectivity — UDAN — scheme.

“There has been absolutely terrific growth on the UDAN routes. We have seen that people want to fly to these airports and the demand is only going to get stronger in the years to come,” Singh said.

“By March-end we will be operating close to 40 daily flights under UDAN.”

In the Udan phase-III, the airline has won routes to operate seaplane operations.

The airline in Udan International has been awarded the route to operate Guwahati to Bangkok and Dhaka with the Assam state government providing a viability gap funding of Rs 11 crore annually

On the aircraft delivery schedule, Singh said that the airline has ordered 205 planes and they will be delivered in the next four to five years.

“We have already funded all the planes that will be delivered to us by 2020,” he said.

“The arrival of new planes will help us in reducing our costs as they are 14 per cent more fuel efficient, engineering costs on them will help us save 25-30 per cent expenses. We have also ordered 50 Q400s.”

Currently, the airline connects its network with a fleet of 48 Boeing 737 MAX and NG jets, 27 Bombardier Q-400s and one B737 freighter.

On Q3 results, Singh said: “Despite the huge cost escalation in ATF and exchange rate, SpiceJet has done remarkably well due to superior revenue performance, tight control on other costs.”

“The strong improvement in the macro cost environment and the increasing induction of the fuel-efficient MAX aircraft, the outlook looks stronger than it has over the past year.”

The frill-free passenger carrier had posted a net profit of Rs 55.1 crore for the quarter ended on December 31, 2018. The standalone net profit for the same period last fiscal was Rs 240 crore.

An 8 per cent increase in passenger yields helped it partially offset high cost. Expenses during the quarter increased on the back of a 34 per cent rise in crude oil prices and 11 per cent depreciation of the Indian rupee against the US dollar.

The company’s total income increased to Rs 2,530.8 crore for Q3FY19 against Rs 2,096.1 crore in Q3FY18.

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IndiGo launches four-day sale on fares for domestic, international flights; prices start at Rs 899

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Budget carrier IndiGo on Wednesday launched a four-day sale on fares for its domestic and international flights. The offer, which will be valid for travel from 24th January to 15th April, can be availed till Sunday.

According to the carrier’s official website, it will offer all-inclusive fares starting at Rs 899  Rs 3,399 for a limited number of seats on its domestic and international flights, respectively. The offer can be availed for flight bookings made through all channels during the offer period.

The offer will be valid only on non-stop flights on various sectors across IndiGo’s domestic and international network and cannot be clubbed with any other offer, scheme, or promotion.

While the fares have been significantly cut down in the scheme, it will not include other expenses including airport charges and government taxes.  Further, the offer is not valid on IndiGo’s group bookings.

Besides, the offer is non-transferable, non-exchangeable and non-encashable. Further, any changes in itinerary can be made by paying the applicable change fee and fare difference.

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