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Home » News » Business » IndiGo only airline to opt for aggressive expansion. Is it anticipating a gold rush?
IndiGo only airline to opt for aggressive expansion. Is it anticipating a gold rush?

IndiGo only airline to opt for aggressive expansion. Is it anticipating a gold rush?

New Delhi:IndiGo is the only domestic airline expected to expand capacity significantly this fiscal as others remain cautious. India’s largest airline by passengers is expected to place an aircraft order for the future, of anywhere between 200-250 aircraft, at next month’s Farnborough Air Show. So not only is it optimistic about the near term prospects of Indian aviation, it is obviously placing a long term bet on the Indian market.

According to aviation consultancy CAPA, IndiGo is the only airline among incumbent Indian carriers which will add any significant capacity this fiscal. In all, CAPA expects domestic capacity to expand by just 8‐10% but even this would be higher than the traffic projection for FY15. And most of this growth is expected to be generated by AirAsia.

India, Tata‐SIA, and possibly Air Costa, all of which combined could deploy up to 18-20 aircraft by the end of the fiscal. Air Costa is the new kid on the block, AirAsia has just begun operations with one aircraft and Tata-SIA will begin perhaps with this year’s winter schedule. This means apart from one aircraft that incumbent airline GoAir is expected to add this fiscal, IndiGo’s six aircraft arriving in the market by March 2015 are the only serious capacity addition by an existing airline.

CAPA does not mention any aircraft addition by SpiceJet, Air India or Jet Airways. It says Jet will freeze domestic expansion and instead deploy the seven Boeing 737s scheduled for arrival this fiscal on international routes; SpiceJet will shrink its domestic operations and Air India is unlikely to get the government’s permission to bring in all 40 leased aircraft (Airbus 320 and ATRs) it wants for the domestic market.

On international expansion, CAPA says Air India will take delivery of two to three Dreamliners this fiscal as SpiceJet and IndiGo both pursue only “moderate” international expansion. And Jet will take delivery of seven Boeing 737 aircraft which are largely going to be used on international routes to enhance the airline’s coordination with Etihad Airways.

So this begs the question: why is IndiGo expanding domestic capacity when almost all other incumbents look to consolidate with what they have? CAPA has also said that IndiGo may go in for a public offer of up to $400 million this fiscal. Obviously, IndiGo is betting on some of the incoming aircraft to be replacements for those whose lease may be expiring but it may deploy some others on routes where potential exists, thereby expanding capacity. The airline may also be banking on having enough capacity and flight frequency on busy routes to keep aggressive competitors like AirAsia India at bay.

It already has a large fleet of 79 aircraft, almost a third share of the domestic market and in 2012-13, IndiGo announced a six-fold increase in profit to Rs 787 crore. IndiGo is widely expected to post a profit for FY14 too. It is obvious that consistent low fares and the airline’s on-time performance have helped it gain a firm lead in the market where almost all other airlines are piling up losses. Will its aggressive capacity expansion and the reported move to raise funds again show that promoters of the airline have anticipated a gold rush in the Indian aviation market where other airline promoters have been timid?

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