Rapidly expanding carrier IndiGo is reportedly in talks with Airbus to purchase more of its jets, including the A321neo LR.
Bloomberg, commenting that IndiGo is adding aircraft to its fleet “every week,” interviewed the airline’s CEO Ronojoy Dutta. The CEO revealed that after the carriers existing orders are delivered over the next two years, it may add more of the A321neo LR and the even newer A321 XLR.
According to Quartz India, IndiGo will add 25 A321neos to its fleet this year. This is in addition to booking a total of 430 jets from the A320neo family and upgrading 125 of its existing fleet order to A321neos.
Dutta says:
“When we order, we’ll order in bulk for sure, I can’t give you a tentative number, but it will be large. We need longer range.”
A new multi-billion-dollar deal?
Bloomberg predicts a multi-billion-dollar deal, based on the value of past orders. The smallest order placed by IndiGo was in 2005 for 100 A320 jets, and was worth $6 billion at the time. However, the latest order hasn’t yet been finalized, and CEO Dutta also hasn’t ruled out spending with Boeing.
The Indian airline, according to Flight Global, took delivery of its first A321neo on December 28, 2018. The first of the Airbus aircraft for India. The A321neo’s arrival opened up new routes to Europe for IndiGo.
Growth and ambition
IndiGo was founded in 2005 by ex-US Airways CEO Rakesh Gangwal and travel industry co-founder Rahul Bhatia. The carrier has grown its low-cost, long-haul model aggressively. It has outpaced domestic rivals in India and now has almost half of the local market at 46.9% according to Quartz India and India’s Directorate General of Civil Aviation (DGCA) data. IndiGo’s parent company InterGlobe Aviation Ltd is worth over $8.6 billion, reports Bloomberg.
Dutta, who became CEO in January 2019, is ambitious adding:
“We would like to be one of the biggest, largest, profitable airlines in the world.”
Bulk orders to keep costs down
He was previously president of United Airlines where he worked for almost 20 years. The CEO provided some clues to IndiGo’s large order strategy revealing:
“One of the things that’s key to our success is keeping the fleet cost down, and fleet cost is only down when you order in bulk.”
Quartz India quotes Ashish Nainan, an aviation analyst at CARE Ratings, commenting on IndiGo’s low-cost approach:
“What’s working for IndiGo is that its cost structure is really low. So if they sell a ticket for Rs2,500 ($36.13), they make sure the cost comes under Rs2,000 ($28.72). They always keep a good margin.”
Nainan also says IndiGo is able to keep costs low by ordering planes “in bulk” giving the carrier “more bargaining power.” And, he believes that IndiGo’s current A320 family only fleet enables the airline to keep its maintenance and operational costs lower.
Though successful, IndiGo has also faced challenges. Quartz India says pilot shortages in February led to the cancellations of 30 flights a day. And, the airline had to ground around six of its planes due to glitches in Pratt & Whitney engines. Other carriers have also faced issues with the engines which resulted in a three-month delivery halt for new A320neos. Bloomberg says IndiGo is in talks with both CFM International and Pratt & Whitney in regard to new engine orders.
On April 26, the first Pratt & Whitney powered A319neo took flight in Toulouse, France.