IndiGo, on Monday, placed a firm order for 250 A320 New Engine Options (NEO) planes with aircraft manufacturer Airbus. The company’s president, Aditya Ghosh, told Rhik Kundu the carrier will expand domestic network aggressively with the delivery of the aircraft, the first of which is expected to be inducted by 2018. Excerpts:
Q. When do you take the delivery of the aircraft?
A. We begin taking delivery of the aircraft from 2018. I can’t tell you how many deliveries we will take yearly but we hope to complete the deliveries by 2026.
Q. What are the plans regarding the deployment of these flight?
A. These aircraft will be deployed across our domestic routes. The domestic aviation market is hugely under penetrated. Also, while Indian aviation industry is one with a lot of potential, I feel there’s a lot of demand and little supply. We will use our new aircraft to increase domestic frequencies.
Q. The average domestic load factor, however, in the last fiscal, stood over 80%, meaning 1 of 5 seats were still flying empty. Does it makes sense to expand capacity at such quick a rate?
A. At present, railways carry 8.4 billion passengers a year, only about 1% of this number is ferried by the airlines. This spells out a huge opportunity for airlines in India. There are ways to increase load factor — by bringing down fares — however, these doesn’t always transfer to profitability. Our aim will be to remain profitable. You have found success by SLB (sale and lease back) of your aircraft. Will you be continuing with this form of financing with your new aircraft.
Every Indian carrier today sells and lease back its fleet. However, not everyone is profitable. At IndiGo, we don’t sale and lease back all our aircraft but only a part of our fleet. The financing for the upcoming delivery will be a mix of sale and lease back and other financing processes. We have till date successfully financed more than 100 aircraft.
What is the update on the IPO? Sebi had recently sought clarification from you.
The IPO is on track and should pan out in the next couple of months. The Sebi clarification is a regular thing which all companies face while floating an IPO. The regulators got back to us with comments and questions. It’s a standard process. We have already replied to them.
Q. As you look to expand domestic operations, you will also have more competition as a few new airlines that have applied for licences with the regulators, are expected to take off in the coming years. Are you confident of maintaining profitability?
A. We always had competition. Our aim will be to remain profitable. Also, our main competition is ourselves. It’s is our continuous endeavour to improve our services from the previous day.