Thursday, August 31, 2023

Right fleet & smart pricing will help IndiGo achieve its international ambition

India’s biggest airline by passengers, IndiGo, has now trained its sights on an aggressive international expansion plan. And rightly so. The airline is already over-leveraged in the domestic market, operating from virtually every domestic airport with its fleet of ATRs (small aircraft) and the A320 family aircraft. This limits the potential for further expansion within the country. Besides, an aggressive international push by IndiGo will also help in correcting the traditional tilt in India’s international traffic towards foreign airlines.

In the domestic market, IndiGo accounts for 59 percent market share as of July this year, and its firm grip has often sparked concerns of a duopoly, together with the Air India group with 25.5 percent domestic market share. Given the obvious difficulties in further domestic expansion, the sensible way forward for the airline is to grab a bigger share of the expanding international pie. In the latest annual report, CEO Pieter Albers has said that one of the three pillars of the airline’s growth strategy is ‘create’, which seeks to combine the airline’s strong Indian foundation and international aspirations.

IndiGo’s aggression appears to be already working in correcting the tilt towards foreign carriers. Data from the aviation regulator Directorate General of Civil Aviation (DGCA) shows that till the April-June quarter of 2019-20, the pre-Covid era, foreign carriers accounted for two-thirds of the international traffic to and from India. But once Covid19 restrictions were lifted, Indian airlines began muscling their way in, led by the Air India Group (Air India, Air India Express and Vistara) and IndiGo. In the April-June quarter of the current fiscal year, Indian carriers accounted for nearly 44 percent of international traffic, a gain of about nine percentage points.

IndiGo carried nearly 14.97 lakh international passengers in the April-June period of FY20, accounting for 9.8 percent of total international traffic to and from India. But the number of overseas passengers jumped by about 80 percent to nearly 26.77 lakh in the April-June quarter of FY24, with IndiGo cornering 17.18 percent of the market.

Of course, even as IndiGo has been gaining a firm foothold in the overseas traffic pie, the long flight out of India may not all be a smooth affair for the airline. International expansion will add several complexities ranging from multi-currency payment processing to global marketing and distribution challenges. Also, a significant factor that will determine the scope and nature of IndiGo’s international expansion is fleet type.

31/08/2023 Sindhu Bhattacharya/Moneycontrol

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