Budget airline Indigo is already the undisputed leader in India's aviation industry; its market share hit a record 61.4 per cent in the domestic market in May. But, Monday's mega order for 500 aircraft clearly indicates it has a far bigger appetite in a market, which remains under-penetrated, yet few have managed to survive in the long run.
Exactly 18 years ago, Indigo, little known then, made a statement of intent by placing an order for 100 aircraft from plane maker Airbus at the Paris Air Show. On Monday, Indigo was back at the Paris Air Show, with a bigger show of strength, with the $50 billion order for the 500 planes, which will be a mix of A320neo, A321neo and A321XLR aircraft.
The airline already operates over 300 aircraft and has pending orders totalling 480, which are to be delivered between now and the end of 2030. The latest order means it has almost 1,000 aircraft yet to be delivered well into the next decade.
With rival Go First suspending operations since last month, Indigo is cashing in on the domestic demand. Its order trumps the recent 470-airplane order by Tata-owned Air India, which has also outlined big expansion plans.
Why is Indigo ordering so many planes?
"An order book now of almost 1,000 aircraft well into the next decade, enables IndiGo to fulfil its mission to continue to boost economic growth, social cohesion and mobility in India," Pieter Elbers, CEO of Indigo said.
While Indigo continues to expand its domestic operations, adding new routes and increasing capacity on existing ones, its also been focusing on growing its international business in recent times. With its code-share arrangement with Turkish Airlines, Indigo now provides connections to multiple European destinations. Recently, Indigo has also announced new flights to African and Central Asian countries. It will also provide connections to North America through its partnership with Turkish.
The A321XLR aircraft it has ordered will help it penetrate further into Europe and East Asian markets, say analysts.
"The order implies that Indigo will continue with its single-aisle strategy despite a deeper international foray. This highlights the continuation of the low-cost business model even in the international segment, which should result in consistent cost expectations. A321XLR will offer an extended range deeper into Europe and East Asia," said Ansuman Deb, research analyst at ICICI Securities.
By sticking with plane maker Airbus for the new order, Indigo has ensured that there will be a commonality in its fleet. This has its advantages in terms of service and spares, and manpower utilisation among other things. Also, the newer aircraft are more fuel efficient, which will also provide a cost advantage to the airline.
"IndiGo can maintain operational cost reduction, fuel efficiency, and sustainability goals with the fuel-efficient A320neo family aircraft, enabling the fast-growing airline to sustain growth for years to come," noted Jinesh Joshi, an analyst at broking firm Prabhudas Lilladher.
According to Indigo, it has realised a CO2 reduction of 21 per cent between the financial years 2016 and 2023. The new fuel-efficient planes will further aid the airline to build up on its sustainability ambitions, it said.
The new order further defines Indigo's long-term future into the next decade and would provide a steady supply of aircraft between 2030 and 2035, said analysts at Motilal Oswal Financial Services.
"The A320neo family aircraft would help Indigo lower its operating costs and deliver fuel efficiency with high standards of reliability," the analysts agreed.
India is among the fastest-growing aviation market globally. By 2030, it is estimated that there will be 450 million domestic flyers, a 300 per cent jump from the 145 million currently.
But, it also remains a tough market to survive. The Wadia Group owned Go First last month suspended operations citing troubles with its Pratt and Whitney engines. Jet Airways, which was acquired by the Jalan Kalrock consortium after its resolution plan for the bankrupt airline was approved back in 2021, is also yet to restart operations.
Meanwhile, existing carriers - Indigo, Air India (including Vistara) and Akasa continue to expand. The late billionaire investor Rakesh Jhunjhunwala-backed Akasa, which began flying in August 2022, is also reportedly in talks with plane maker Boeing to expand its fleet of 737 Max jets. SpiceJet also recently announced plans to expand its fleet by inducting 10 new Boeing narrow-body aircraft starting September 2023.
