InterGlobe IPO has been a big success, having managed to garner Rs 3,010 crore and in the process proved legendary investor Warren Buffett wrong, at least about business views on investing in airlines.
To be fair to Warren Buffett, airlines across the world haven’t exactly covered themselves in glory. In India’s case, airlines here have lost a combined $10 billion in the past six years as fierce competition forced them to sell tickets below cost and provincial taxes on jet fuel drove up their expenses.
Founded by former US Airways chief executive officer Rakesh Gangwal and former travel agent Rahul Bhatia, InterGlobes’ IndiGo is, at the moment, giving the lie to legendary investor Warren Buffett, who famously swore off airline stocks after his $358 million “mistake” with US Airways Group before Gangwal’s time.
“I guess our founders disregarded that advice 10 years ago, and have gone from millionaires to billionaires today,” IndiGo president Aditya Ghosh said Tuesday about Buffett’s view on airlines. “The opportunities that India provides are vast. If you can create the right product, there will be demand.”
IndiGo is the only Indian airline to turn a profit in each of the past seven years, taking advantage of a burgeoning middle-class in the world’s second most populous nation. The carrier is taking advantage of low fuel prices to pursue an ambitious growth agenda. In August IndiGo firmed up an order to buy as many as 250 A320neo single-aisle jets for $26.6 billion. This came comes after IndiGo’s $15 billion order in January 2011 for 180 Airbus planes.