The IndiGo story is one of unusual success. As essentially all of its competitors flounder with frozen accounts, grounded airplanes and massive losses, IndiGo’s focus on execution of its sharply defined business model has helped it to remain consistently profitable and growing. Analysts say IndiGo’s approach not only kept it in the black, but also enabled it to build a loyal customer base in a short period. Its aircraft sale and lease-back strategy also aided in improving its balance sheet.
The airline, established in 2006, has recorded the highest load factors among domestic carriers in the past several years.
According to the latest official figures released by India’s Directorate General of Civil Aviation, for the month of September, IndiGo was by far the leading airline in India’s domestic market, with a 32.1% share. Another low-cost carrier, Spice Jet, stood second at 19.6%. Perennially beleaguered national carrier Air India controlled only 16.9% of the market.
“The IndiGo deal is a strong indicator of the long-term potential of the Indian civil aviation market, despite severe short-term challenges,” says Amber Dubey, partner and India head of aerospace and defense at KPMG. The country is seen by many industry observers as the most promising Asian aviation growth market along with China, but IndiGo so far seems to be the only carrier that can take advantage of it. Others are struggling with legacy structures, overcapacity, unclear business models, infrastructure constraints or a combination of those.
IndiGo’s record order has also kindled speculation that its parent company, InterGlobe Enterprises, may have revived plans to go public. InterGlobe reportedly is in discussions with merchant bankers on the pricing and timing of the issue, though management has not made any announcement in this regard. InterGlobe Enterprises, run by Rahul Bhatia, holds a 51% stake in IndiGo, while Caelum Investment, owned by Indian-born U.S. citizen Rakesh Gangwal, holds 48%.
The size of the IPO is expected to be $400 million, the same amount the company aimed to raise through an IPO in the first-half of 2010. The CAPA Center for Aviation consultancy says that “despite the challenges experienced in the airline sector, there are bright spots such as IndiGo’s success in establishing itself as a sustainably profitable airline.” CAPA also notes, “Timing is approaching to leverage this achievement, and an IPO is likely in the financial year 2014-15, possibly in the third quarter.”
The proceeds of the IPO will help fund IndiGo’s rapid expansion plans as it gears up to take on another low-cost carrier, AirAsia, which made its debut in India last June.
“‘Low cost’ does not mean ‘low quality,’” says Aditya Ghosh, president of IndiGo. “The endeavor is to ensure that we can provide sustainable low fares over a long period of time on the existing routes.” Given that India is one of the world’s most underpenetrated airline markets, IndiGo’s potential for growth is huge, Ghosh says. “We have plans to add more flights and enhance connectivity on new routes,” he adds.
Once the memorandum of understanding signed by IndiGo for 250 A320neo-family aircraft is firmed up, it will be the largest single order for Airbus. In March 2013, Indonesia’s Lion Group signed a deal for 234 A320s.
IndiGo’s order comes on top of its large existing commitments for 100 A320s (98 of which have been delivered), 160 A320neos and 20 -A321neos. IndiGo will start taking delivery of the 250 additional aircraft starting in 2018. The airline reportedly has also signed a deal recently to lease 12 A320s from Singapore’s Tiger Airways so it can accelerate its network expansion.
The 180 A320neo family aircraft from IndiGo’s existing order will start being delivered in 2015. “We hope to have all 430 aircraft, including the 180 ordered in 2011 and the current order, delivered by 2025-26,” Ghosh says. IndiGo is the only Indian carrier to have ordered the A320neo.
“Some of these new aircraft will go to replacement. It’s difficult to say how many at the moment,” Ghosh says. The new aircraft will help keep the average age of IndiGo’s fleet to around six years. The airline does not plan to lease out any of its fleet and will stick to flying narrowbody aircraft in the domestic market and selected international routes, he adds.
IndiGo launched international operations in 2011. IndiGo flies to 31 cities in India and five overseas, including Bangkok and Dubai.
- AviationWeek
IndiGo’s record order has also kindled speculation that its parent company, InterGlobe Enterprises, may have revived plans to go public. InterGlobe reportedly is in discussions with merchant bankers on the pricing and timing of the issue, though management has not made any announcement in this regard. InterGlobe Enterprises, run by Rahul Bhatia, holds a 51% stake in IndiGo, while Caelum Investment, owned by Indian-born U.S. citizen Rakesh Gangwal, holds 48%.
The size of the IPO is expected to be $400 million, the same amount the company aimed to raise through an IPO in the first-half of 2010. The CAPA Center for Aviation consultancy says that “despite the challenges experienced in the airline sector, there are bright spots such as IndiGo’s success in establishing itself as a sustainably profitable airline.” CAPA also notes, “Timing is approaching to leverage this achievement, and an IPO is likely in the financial year 2014-15, possibly in the third quarter.”
The proceeds of the IPO will help fund IndiGo’s rapid expansion plans as it gears up to take on another low-cost carrier, AirAsia, which made its debut in India last June.
“‘Low cost’ does not mean ‘low quality,’” says Aditya Ghosh, president of IndiGo. “The endeavor is to ensure that we can provide sustainable low fares over a long period of time on the existing routes.” Given that India is one of the world’s most underpenetrated airline markets, IndiGo’s potential for growth is huge, Ghosh says. “We have plans to add more flights and enhance connectivity on new routes,” he adds.
Once the memorandum of understanding signed by IndiGo for 250 A320neo-family aircraft is firmed up, it will be the largest single order for Airbus. In March 2013, Indonesia’s Lion Group signed a deal for 234 A320s.
IndiGo’s order comes on top of its large existing commitments for 100 A320s (98 of which have been delivered), 160 A320neos and 20 -A321neos. IndiGo will start taking delivery of the 250 additional aircraft starting in 2018. The airline reportedly has also signed a deal recently to lease 12 A320s from Singapore’s Tiger Airways so it can accelerate its network expansion.
The 180 A320neo family aircraft from IndiGo’s existing order will start being delivered in 2015. “We hope to have all 430 aircraft, including the 180 ordered in 2011 and the current order, delivered by 2025-26,” Ghosh says. IndiGo is the only Indian carrier to have ordered the A320neo.
“Some of these new aircraft will go to replacement. It’s difficult to say how many at the moment,” Ghosh says. The new aircraft will help keep the average age of IndiGo’s fleet to around six years. The airline does not plan to lease out any of its fleet and will stick to flying narrowbody aircraft in the domestic market and selected international routes, he adds.
IndiGo launched international operations in 2011. IndiGo flies to 31 cities in India and five overseas, including Bangkok and Dubai.
- AviationWeek
