Indigo Soars

Written by The Financial Express | Updated: Oct 22 2014, 07:16am hrs
Indigo Airlines $26 billion order for 250 Airbus

aircraft created a buzz in international aviation circles at a time when most airlines are struggling. It brings into focus the low-cost carriers sustained profitability in such a volatile sector. It is the largest airline by passengers carried in India and the R787 crore profit in FY13 is its sixth profitable year in a row. So, how does the airline remain the lone Indian carrier to prosper in a troubled industry (GoAir made money last year but it is much smaller). One reason, clearly, is its on board service efficiency and on-time record. Its aircraft utilization is the highest for any Indian airline, a factor that boosts revenues. Indigo takes calculated risks. During the slowdown, it increased capacity and introduced new flights to get more passengers.

It also does clever route planning that helps it gain market share and contain costs. It has backed a strategy to provide more capacity on select routes, rather than spread itself thinly over several. The other key strategy is to ensure that the aircraft dont stay grounded for too long because they make money only when they are in air. It has signed power by hour agreements with vendors under which it pays for every hour the aircraft flies; in return, the vendors provide full spares and replacements whenever they are required. As a result, its technical dispatch reliability of 99.4% is among the best in the world. The airline also closely monitors turnaround time and fixes tough targets. Finally, its fleet consists of one kind of aircraft: the Airbus A-320. As a result, it is required to deal with one set of pilots, spares and engines which keeps costs on a tight leash, and keeps the airline flying high.