Why is IndiGo adding widebody planes now? | Company Business News

In what looks like IndiGo showing remarkable faith in Air India’s turnaround and growth, the airline is diving head first into the widebody game much earlier than it received its own A350s, which it ordered last year. The most obvious question is why now. As its CEO said, it has left that station long ago when asked about IndiGo being a low-cost carrier, the airline has been open to adding planes which are not in its livery for a while. The circumstances leading to the airline having to make a choice between branding and standardisation or capacity addition and market leadership seems to be settled in favour of the latter.

At the crux is the capacity deployment by rival Air India. IndiGo has 1.5 times more international frequencies than Air India and 1.3 times more seats on offer on international segments, while it pales in terms of capacity by ASKs with Air India being 1.6 times IndiGo. The capacity by ASK (Available Seat Kilometers) is often the metrics considered gold standard in aviation and is derived by multiplying the length of the route and seats on offer. A long flight with a widebody aircraft naturally triumphs multiple flights on narrow body planes. However, these statistics take a different turn if both Air India and Air India Express are combined together and the Tata group as a whole is compared with IndiGo. The capacity by ASK for IndiGo is less than half of the combined Tata group while its seats per week are 21% lower and departures are 17% fewer.

Widebody aircraft are also facing delivery issues due to supply chain constraints across and getting a wet lease aircraft is not easy. With a deferred delivery schedule of the wet-leased aircraft, IndiGo will have planes in its fleet for a while which helps it start new services until the A350s arrive. Interestingly, the Norse Atlantic planes, prima facie, have better amenities and experience than the high density B777s which it deploys to Istanbul.

Over the last couple of years, IndiGo started many codeshare arrangements. Some of these ensured additional traffic on its domestic network with feed from international partner carriers. However, with Turkish Airlines the codeshare involves selling tickets to destinations beyond Turkey. IndiGo, thus knows how many passengers book tickets to which destinations, apart from having competition and industry data.

Which destinations will IndiGo fly these planes to?

The airline has so far remained tight-lipped about the plan itself and thus the destinations part will not be announced this early. However, the destinations are likely to be a mix of high traffic routes where it can corner some rights, take on Air India and virgin routes where it can have a first mover advantage.

Unlike Air India, which has years of legacy, a proven sales system and global expanse; IndiGo’s early routes may have to be those which have heavy sales from India and not abroad along with places which have high Indian origin population knowing IndiGo. Brand establishment cost and selling cost at time outweighs the early mover advantage. It has always been an aspiration for every airline to fly to London. In the past, IndiGo had requested slots at London Heathrow, but were not granted and likewise had requested slots for flights to Manchester in 2019, which were granted but the airline never started operations.

Challenges

Air India and Air India Express operate out of the same terminal at Delhi’s Terminal 3, the largest airport in the country and a hub for Air India. Likewise, they also operate from the same terminal at Mumbai and Bengaluru. For IndiGo, the international operations are from T3 at Delhi and T2 at Mumbai and Bengaluru, while the domestic operations remain scattered.

A lot of routes which IndiGo operates sees feed from its domestic network. This transfer of passengers is a challenge and the airline will have to be competitive in terms of cost to an extent that passengers opt for IndiGo over rival Air India, or the airline flies at such places which are monopoly.

Tail Note

These are early days. IndiGo might be taking a step towards premiumisation from where it is today. Likewise, Air India is also climbing the premium ladder by introducing Premium Economy across planes and in some larger planes planning for a four class configuration. IndiGo’s entry into this space will mean more competition for Air India, which earlier had to compete largely with foreign carriers. As the two large carriers try making life difficult for each other, will it be any simpler for the passengers? Will this entry mean lower fares?