InterGlobe’s IPO (Rs 3,008.5 crore) was a tremendous success being oversubscribed 6.63 times and as a result Indigo, the country’s largest airline by market share, is set to remain in the lead in the Indian aviation market. But there is more to the strategy of success and Aditya Ghosh, president reveals top 5 points that will ensure Indigo remains a high-flyer now and well into the coming decade:
1. IndiGo has made sure that its average fleet age remains four years till 2032. It was a well thought-out fleet strategy that was made 10 years back, and not something done a couple of months ago. The last plane of the three bulk orders of 530 aircraft that IndiGo placed will come in 2026 — 100 Airbus A-320 in 2005, 180 A-320 Neos in 2011 and 250 A-320 Neos in 2015. IndiGo’s bulk buying helped negotiate better rates. We buy planes at a lower price than what a seller would buy for. We gain right at the beginning — this is netted against our rentals and brings our cost down.
2. Once all airplanes are delivered, IndiGo will not have a fleet of 530 planes — this is due to the ‘buy, sell and lease back’ strategy. At peak we will have 330 planes. Once the order is placed the planes are sold to lessors at market price. The planes are then leased back for the next six years — which means for the first six years IndiGo receives a plane every month.
3. Every month a plane goes out of IndiGo’s fleet and a new aircraft joins, thus reducing the average fleet age, and with an average fleet age that is low the cost of maintenance is also lower. In 2011, IndiGo was the first customer for Airbus to order the new range of fuel efficient A-320 Neo planes. Neos help in saving 10-15% of the overall fuel cost. Fuel makes up for 50% of a carrier’s cost.
4. Because of the six year lease back plan, with the next two-and-half years one-third of IndiGo’s fleet will be Neos, and in the next six years it will have an all Neo fleet. There is a straightaway positive impact of 7% on the company’s bottomline because of of the Neos. People can copy our food, our advertising, our buses, and other things but they cannot replicate the fleet we have.
5. With orders in place, IndiGo is planning to increase its presence in the number of cities it flies to — adding two to three cities to its portfolio every year. In the next eight and half years it plans to have presence in 56 airports compared to 33, now. Regional flying is not on the radar, and neither are smaller planes. We do not have any plans to induct smaller planes into our fleet. Nobody in this world has been able to implement a two-model strategy.