The CEO of IndiGo, India’s largest airline, is seemingly unconcerned with the country’s changing competitive landscape calling the shifts simply “noise.”
Ronojoy Dutta was referring to the Tata Group’s acquisition of Air India that closed on January 27, and the imminent launch of startup Akasa by former Jet Airways CEO Vinay Dube in May. Dutta, who spoke during IndiGo’s December quarter results call on Friday, artfully pivoted away from commenting on how either competitive move could affect his airline, and emphasized what IndiGo was doing as it emerged from the coronavirus crisis.
“If you run a great quality airline, our brand name is getting stronger, if you keep your costs under control, I see all the rest of it as noise in the system,” he said.
And IndiGo can, to a degree, look down on the shifting competitive landscape from on high. The airline controlled a 54 percent share of the Indian domestic market — more than four times its closest competitor Air India — in 2021, according to Indian government data. And, to top off a volatile year of ups and downs that tracked Covid-19 cases, IndiGo posted a profit of 1.3 billion rupees ($17.4 million) in the December quarter, its first quarterly profit since the pandemic began in March 2020.
This is not to say Dutta sees an easy road ahead of IndiGo. The airline has pared back March quarter capacity by 10-15 percent from where it was in the December quarter — 23 billion available seat kilometers (ASKs), or 89 percent of 2019 levels — in response to the surge in Omicron variant cases. He expects the recovery to pick up again by March after a brief hit by the variant because of, to use the cliche that many airline executives have embraced during the pandemic, “pent-up demand.” Bookings began a slow recovery after January 15, Dutta added.
“We are clearly in a volatile environment … with traffic recovering and declining lockstep with Covid cases,” he said.
IndiGo is not sitting idly by waiting for the pandemic to end. The airline is moving forward with its fleet renewal program that will see it remove its last Airbus A320ceo aircraft and replace it with an A320neo-family model by the end of 2022. This will allow it to reduce maintenance and fuel expenses — India is known for its high jet fuel prices — and increase utilization that will also achieve cost savings. IndiGo had 283 aircraft at the end of December, including 56 A320ceos, and 192 A320neos and A321neos.
IndiGo had outstanding orders for 204 A320neos and 334 A321neos at the end of December, according to Airbus’ orders and deliveries data.
In addition, the airline is actively working to expand its international footprint. The airline signed a reciprocal codeshare with Air France-KLM during the December quarter that Dutta said will “improve connectivity and gain access to new markets.” The deal follows a similar tie up with American Airlines that was unveiled in September.
These codeshare deals come as IndiGo’s international operations are “performing better than [they] did before the Covid,” said Dutta. That outperformance will likely ebb once international capacity restrictions ease and more flights are added back, but he still sees growth outside of India as the “biggest opportunity” for the airline. IndiGo is currently flying a limited international schedule to the Middle East, including Kuwait, Qatar, and the United Arab Emirates, as well as to Singapore and neighboring Bangladesh, Nepal, and Sri Lanka, according to Cirium schedules
More international flying is planned within the range of IndiGo’s A320neo-family fleet as markets reopen, said Dutta.
Domestically, IndiGo has seen significant success expanding in smaller Indian markets. Dutta called this growth a “tailwind” to its domestic operation, and added that the demand in these cities has “surprised” him. This performance will factor into IndiGo’s ongoing evaluation of whether or not to expand its fleet of 35 ATR turboprops in 2022.
Beneath the headline profit, revenues at IndiGo came in at 94.8 billion rupees, or nearly 92 percent of 2019 levels, in the December quarter. Expenses recovered to 93.5 billion rupees, or 96 percent of two years ago. Unit costs excluding fuel fell 11 percent to 2.6 rupees compared to the same quarter in 2020, but were up 8 percent versus 2019. System passenger traffic was down 19 percent year-over-two-years.