Recently, it was announced that Indigo will enter a codeshare agreement with Middle Eastern carrier Qatar Airways. This agreement will place Qatar’s code on flights between Doha and Mumbai, Delhi and Hyderabad. Then, several days ago, Skift reported that the carrier reiterated its interest to buy a stake in the Indian budget airline. So why does Qatar Airways want a piece of India’s largest airline? Let’s find out.
Back in August, Qatar CEO Al Baker told Reuters the following:
“We are very interested in IndiGo … We are talking to IndiGo of doing codeshare, joint flights but not yet an equity stake in the airline.”
The world’s fastest-growing aviation market
According to the Times of India, quoting data from IATA, India was the fastest-growing domestic air travel market in 2018. The country saw an 18.6% growth in passenger traffic compared to 2017. China was next on the list with 11.7% growth.
By Qatar Airways having a stake in an Indian carrier, it will allow it to compete with its Middle Eastern rivals, Emirates and Etihad. Furthermore, the budget airline market is heating up in the Middle East as airlines like flyDubai, Air Arabia, and Jazeera Airways connect the Gulf region with numerous Indian cities. Moreover, Emirates is partnered with flyDubai while Etihad recently teamed up with Air Arabia. It seems fitting that Qatar Airways would partner up with a budget airline as well.
Investment in India will enable Qatar Airways to expand in a market where air-travel penetration remains relatively low but is growing fast. In fact, with the collapse of Jet Airways, IndiGo has been able to pick up market share left from the airline’s bankruptcy. The airline has around 40% of the domestic market and continues to be a key player, setting its sights on an aggressive expansion into international markets.
India’s growing prosperity
“The total wealth in India increased five-fold between 2000 and 2018, reaching $6 trillion in 2018.” – Credit Suisse via Quartz
As India increasingly moves away from agriculture and more towards IT and other forms of industrialization, wealth has risen drastically in the last decade. In fact, according to the Economic Times of India, individual wealth in the South Asian country grew by 9.62% in just the last fiscal year. With this growing wealth comes a growing class of people who can afford air travel.
With a stake in IndiGo, Qatar Airways is sure to catch a piece of India’s rising prosperity and growing aviation market. This will allow it to keep up with its Middle East rivals and diversify its interests into the low-cost airline sector.
Do you see any pitfalls or potential problems with this investment? Or is it a low-risk move that will pay off? Let us know what you think by leaving a comment!
We reached out to IndiGo to get a reaction regarding Qatar Airways’ interest. However, we did not receive a response at the time of publishing this article.