Friday, May 12, 2017

How UDAN scheme has changed IndiGo’s flight plan

IndiGo, it seemed, was convinced that a single-breed aircraft fleet works best for a low-cost airline. But, now, in a complete change of tack, the carrier has announced that it will acquire ATR 42-600 aircraft to fly on regional routes.

The airline has signed a term-sheet with ATR for these aircraft.

IndiGo’s change in plans can be viewed in various ways. First, it can be seen as a logical step to grow in Tier 2 and 3 cities, for which, the airline’s existing fleet of Airbus A-320 will not work. With many believing that the next phase of growth in the domestic aviation market will come from tier 2 and 3 cities, and the fact that the number of passengers flown under the Government’s UDAN scheme will count towards domestic market share, it probably makes sense for IndiGo to venture into this market. Many also believe that the announcement follows a nudge from the Government that the market leader needs to be part of its new aviation initiative. Anyway, there is history of other airlines opting for smaller aircraft. SpiceJet ordered Q400 in 2010 almost five years after Ajay Singh restarted the airline. Jet Airways picked ATR aircraft years after starting and stabilising its operations in the domestic market.

Guarding dominance
Many believe that as the market leader, with a share of over 40 per cent, IndiGo may be looking at ATRs as a natural way to ensure that its competitors — SpiceJet and Air India, which have already secured routes under UDAN — do not become a threat to its dominance.

Incidentally, this is not the first time IndiGo has announced its intention of entering the regional market. During the UPA government’s second term, IndiGo officials had told media, off the record, that it was signing up for smaller aircraft to look at regional routes. The then Civil Aviation Minister, Ajit Singh, had been keen on regional connectivity. But with the Manmohan Singh government losing the elections that plan died a natural death. This time, the regional connectivity scheme is already up in the air.

Focus division
And, IndiGo is serious about that. Addressing a conference call after announcing the ATR move, Aditya Ghosh, IndiGo President, said a ‘focus division’ will handle the turbo-prop operating functions that will not overlap with its narrow-body working. These operating functions will comprise flight operations, inflight services, despatch and operations control, route planning and revenue management. But human resource, finance and legal functions will be managed by the IndiGo infrastructure already in place.

“The advantage of this overall structure is that it will avoid adding complexities to IndiGo’s mainline operations. At the same time, most if not all administrative functions will be handled by the existing IndiGo department,” Ghosh said.
11/05/17 Ashwini Phadnis/The Hindu Business Line

0 Comments: