‘We take 50 planes a year, but I still think we need more’
Indigo, India’s largest airline, is going through a transition phase. With a significant lead in the domestic market, where will the airline’s next phase of growth come from? How is it planning to take advantage of the vacuum left by Jet Airways on long-haul routes? CEO
RONOJOY DUTTA, in a conversation with Arindam Majumder, takes these questions and more. Edited excerpts:
You have held onto a market share of 45 per cent consistently. But is this it? Where is the room for further profitable growth?
Not at all. I can tell you that when we have network planning meetings, there’s always this view that we don’t have enough aircraft. We have lots of ideas about how to grow, where to grow. We are so hungry for growth. That’s reflected in our order size of 300 aircraft. We need the planes, we want the planes and we want them fast. We are just beginning to see the golden age of Indian aviation. Remember there’s a huge migration going on in this country. I came to know that we fly Agartala-kolkata seven times a day. I was surprised — that’s like San Francisco
Boston. Three per cent of the flyers have Bangladesh passports. So they take our flight and migrate across the border. This migratory pattern is a huge part of our growth.
But the inability to price higher can take airlines down like in the case of telecom companies. Isn’t it?
Yields are not high, costs are high. Yes, Indian aviation is not a cakewalk. But I still believe it provides us with more opportunity than threats.
There’s a view that Indigo drags down price. Do you agree?
If there’s a notion that high market share will lead to high price, it is wrong. Load factor requirement drives pricing. If we raise price above the booking curve, you will see someone say, I used to fly twice a year, now I’m going once. So, automatically the load factor falls. The bible of our pricing is booking curve — not market share or the airline’s cost structure.
The challenge of running a big airline without much room to dictate price has started pinching. Isn’t it?
If you are talking about the recent results, costs did spike but I can assure you that this is temporary. The rise in employee cost is again for our future preparedness. We were neck and neck with demand and supply. But that was a chokehold on our decision making. We wanted to get rid of it. Instead of training 25 captains a month, we are training 50. So this training bubble was a big part of cost increase and it goes away by June. The second one was due to the extension of lease period of older aircraft which will be over by 2022. So the drag on numbers is temporary.
But going forward will you have enough matured routes to operate profitably?
What is surprising is how soon the routes have matured. We are surprised how good cities like Gorakhpur, Raipur, Jodhpur would have so much traffic demand. Same goes for the international routes too. That’s why my enthusiasm for growth is in fact higher. We used to take 40 aircraft a year, now we are taking 50, and I still say we need more.
Is the economic slowdown scaring you?
The growth is there. We will maintain a certain rate of growth and the economy will be going up and down through that. But that hardly impacts our plan. We can take these
little hits easily. We are generating so much free cash. The slowdown is really not an issue for us.
You are sitting on a huge pile of cash. So that should have driven your ambition higher. But, what’s next?
Grow, grow and grow. We want to grow at about 25 per cent. Half of the growth will go domestic and another half international.
As for international, Jet left a lot of white space. With a large domestic feed, you were ideally suited to take advantage of this. Why don’t we see that aggression from Indigo?
We have looked at the potential of long haul routes. Say Mumbai-london. We can go all economy but that’s a bad idea. So, we need a business class but where do we get the business class traffic? The business class traffic on these routes are mostly from outside India.