6E IndiGo: the silent aggressor in the skies

6E IndiGo: the silent aggressor in the skies

6E – the call sign is now a folklore in the Indian aviation sector. From acquiring its first aircraft in July 2006, a month before it flew for the first time, no-frills carrier IndiGo has now grown in to an airline with 175 aircraft – at least an aircraft a month, a feat no Indian airline can boast of.

The airline has been consistently clocking 40% market share for months now. In June, its market share was 41.3%. In between, a flamboyant airline crash landed and another almost went off skies while some just stopped flying even as more and more Indians were flying. With the temperament of a Test cricketer, the airline slowly captured the market, but showed classic aggression when the opportunity was placed before it. The airline slowly captured the market, taking one step at a time, but not slowly.

Like any successful enterprise, IndiGo was born when its low-profile promoters Rahul Bhatia and US-based Rakesh Gangwal, both engineers, got together to launch the airline in 2005. The Bhatia family’s travel business had run into rough weather when the younger Bhatia was abroad. He returned to India and had entered into airport transport management. Bhatia and his father were keen to enter the airline business for long, and roped in Gangwal, a former US Airways CEO who was not very keen initially. Bhatia was very sure about the aviation potential in India and Gangwal’s experience in the aviation sector came in handy. History was in the making, and the Indian aviation sector was on the threshold of a change.

What worked for IndiGo?

IndiGo did not respond to questions from DH, but an analyst, who requested anonymity, said prudence and an eye on every single penny, and eye for every detail worked for the airline. But they were not penny wise and pound foolish. It had a robust road map and set targets. The first order was for 100 planes, which were subsequently augmented by another 180 and 250 aircraft over the years running into billions of rupees. The idea was to have one new aircraft every month to fuel its expansion plans and it worked.

IndiGo was everywhere in the country – now it flies more than 1,000 services a day to 55 destinations, including nine international ones. The aggressive expansion left the competitors high and dry, while IndiGo’s footprint increased as this opened up new untapped markets. Analysts believe that this also helped the airline control the ticket pricing in the Indian aviation sector.

On the financial side, IndiGo was very keen on cutting the flab on expenses. It did not spend huge money on advertisement in the initial years. It went with the traditional word of mouth strategy, while ensuring that its customers reached destinations on time. Indian airlines were known for delays, irritating fliers who were missing their schedules. Critics and competitors claim IndiGo did not play straight on this count as their flying time was shown on a higher side compared to others. Others said that IndiGo’s turnaround time for its next service is lower and it helped them operate more flights on a single day. Another strategy was to use the fuel-efficient aircraft – now the A320neo – which cut the jet fuel cost around 15%. However, the rising fuel prices from time to time does affect IndiGo like any other airline.

Another thing that helped IndiGo consolidate its position was the demise of Kingfisher Airlines and SpiceJet ceding some space, following its worst financial crisis in 2014. IndiGo grabbed the opportunity and filled the space. What went right for IndiGo was that it did not do what Kingfisher Airlines and SpiceJet were doing. It was acute business sense and not ego that helped the airline grow. When it found the business was not in favour, it just left it there like in the case of Air India disinvestment when government said it was not selling international operations alone.

All these steps helped the airline stay ahead of its competitors, healthy in terms of market share and profits. It never went into loss and after being in the scene for nine years, it entered into the stock market in November 2015 with an Initial Public Offering (IPO). It recorded profits for years, but the latest April-June quarter results was a dampener for it. Shares of InterGlobe Aviation, which runs IndiGo, plunged around 11% on July 31, after it reported a steep 96.6% fall in net profit for the same period last fiscal.

HDFC Securities Institutional Research says it is a “cause of concern when the company is cash-rich” and feels that margins will “remain under pressure until competitive intensity eases or crude oil prices reduce”.

For IndiGo, the low-profile promoters were the backbone as they remained in the background, while the then IndiGo President Aditya Ghosh was able to execute the collective decisions of the management. He remained at the top for almost 10 years, before he left the airline earlier this year, a rare feat in the Indian aviation sector where one airline saw around 10 CEOs in a dozen years of its existence. Ghosh steered the airline amid turbulence in the sector, but hung his boots amicably as soon as the airline entered into another stage of growth.

The management started bringing in expat professionals to steer the airline to another level and Ghosh decided to move on, saying it was time “to step off the treadmill” and embark on his “next adventure”. Under Ghosh, the airline placed record aircraft orders, as well as an IPO. He is also credited with doubling the airline’s domestic share from 20.3% in 2012-13, to 39.6% in 2017-18. An IndiGo insider earlier said that Ghosh’s departure was amicable as both sides felt that there is a need for a change at the top. At present, Bhatia is the interim CEO and industry veteran Gregory Taylor is expected to take his place after getting regulatory clearances.

For the airline, which continues at the top, the challenges are not over. It now plans low-cost, long-haul international services, and have hired professionals with experience to steer the plans. It is also looking to expand its regional connectivity through the ‘UDAN’ scheme and has acquired smaller ATR aircraft, besides the existing Airbus fleet. The road ahead for IndiGo is not smooth as competition still remains, but history shows its way.

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