What do you get for the airline magnate who has everything? If he knows what’s best for him, the answer isn’t “another airline.”
Rahul Bhatia, the biggest shareholder in India’s biggest carrier, InterGlobe Aviation Ltd., is evaluating data and considering a bid for Virgin Australia Holdings Ltd., a person familiar with the matter told Anurag Kotoky and Angus Whitley of Bloomberg News. He would bid via the vehicle he uses to invest in IndiGo, as India’s biggest budget airline is known, the person said.
It’s not hard to see the attractions. IndiGo’s home market is fiercely competitive, with half a dozen major carriers duking it out even after Jet Airways India Ltd. was forced into bankruptcy last year. Jet was squeezed between the loss-making full-service flights offered by state-owned Air India Ltd. and IndiGo’s own devastatingly cheap fares. Australia, on the other hand, is more or less a duopoly between Virgin Australia — which was itself put into a coronavirus-induced administration last month — and a dominant Qantas Airways Ltd. That should offer the opportunity for the two carriers to cozily carve up the market between themselves.
Opportunities to break into the Australian airline game don’t come along often. The last time was when Ansett Australia Ltd. collapsed just days after the Sept. 11 attacks. A fledgling Virgin Australia, at the time a budget carrier named Virgin Blue, was perfectly placed to capitalize.
Despite the vast disparity in population, Australia isn’t that much smaller than India as a market, thanks to greater wealth and a higher propensity to fly. Traffic last year came to about 71 billion revenue passenger kilometers, roughly the size of the fast-growing Indian aviation market five years ago.
It also has close links to India, raising the prospect that an Australian network could feed passengers via international flights into IndiGo’s domestic web of destinations. Indian-Australians make up close to 2% of the population, and the number of non-resident Indians — the subset of the diaspora who are most likely to take regular flights back to the motherland — is the largest after the U.K., U.S., Singapore, Nepal, and the Persian Gulf countries.
For all that, Bhatia should pass up the chance to have a crack at Virgin Australia. In its ruthless efficiency in controlling its home turf, Qantas behaves a lot like IndiGo, one reason that Australia has for a decade been a graveyard for ambitious foreign airlines. His best opportunities lie closer to home.
Both Qantas and IndiGo exploit a rare and priceless phenomenon known as the S-curve, by which dominant airlines end up with more connections and a greater share of traffic the more planes they add. That makes life extremely difficult for competitors.
12/05/20 David FIckling/Print
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Rahul Bhatia, the biggest shareholder in India’s biggest carrier, InterGlobe Aviation Ltd., is evaluating data and considering a bid for Virgin Australia Holdings Ltd., a person familiar with the matter told Anurag Kotoky and Angus Whitley of Bloomberg News. He would bid via the vehicle he uses to invest in IndiGo, as India’s biggest budget airline is known, the person said.
It’s not hard to see the attractions. IndiGo’s home market is fiercely competitive, with half a dozen major carriers duking it out even after Jet Airways India Ltd. was forced into bankruptcy last year. Jet was squeezed between the loss-making full-service flights offered by state-owned Air India Ltd. and IndiGo’s own devastatingly cheap fares. Australia, on the other hand, is more or less a duopoly between Virgin Australia — which was itself put into a coronavirus-induced administration last month — and a dominant Qantas Airways Ltd. That should offer the opportunity for the two carriers to cozily carve up the market between themselves.
Opportunities to break into the Australian airline game don’t come along often. The last time was when Ansett Australia Ltd. collapsed just days after the Sept. 11 attacks. A fledgling Virgin Australia, at the time a budget carrier named Virgin Blue, was perfectly placed to capitalize.
Despite the vast disparity in population, Australia isn’t that much smaller than India as a market, thanks to greater wealth and a higher propensity to fly. Traffic last year came to about 71 billion revenue passenger kilometers, roughly the size of the fast-growing Indian aviation market five years ago.
It also has close links to India, raising the prospect that an Australian network could feed passengers via international flights into IndiGo’s domestic web of destinations. Indian-Australians make up close to 2% of the population, and the number of non-resident Indians — the subset of the diaspora who are most likely to take regular flights back to the motherland — is the largest after the U.K., U.S., Singapore, Nepal, and the Persian Gulf countries.
For all that, Bhatia should pass up the chance to have a crack at Virgin Australia. In its ruthless efficiency in controlling its home turf, Qantas behaves a lot like IndiGo, one reason that Australia has for a decade been a graveyard for ambitious foreign airlines. His best opportunities lie closer to home.
Both Qantas and IndiGo exploit a rare and priceless phenomenon known as the S-curve, by which dominant airlines end up with more connections and a greater share of traffic the more planes they add. That makes life extremely difficult for competitors.
12/05/20 David FIckling/Print
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