India’s ‘unknown’ biggest airline pushes for global expansion

Last September, Pieter Elbers became chief executive of India’s largest airline, IndiGo, and quickly discovered what it is like to be overlooked.

A budget carrier specialising in domestic routes, IndiGo flew more than twice as many passengers last year as AirAsia, Singapore Airlines, Japan Airlines and All Nippon Airways. But few people outside its home country had heard about it.

“In my observation, IndiGo is such a great and well-respected brand in India,” Elbers told Nikkei Asia. “But outside India, [the perception of the airline] is neither positive nor negative. It’s just unknown.”

Elbers is hoping to change that. The 52-year-old — who joined IndiGo after serving nearly eight years as chief executive of Dutch carrier KLM — is making international expansion a priority, setting the stage for more intense competition with regional rivals, including India’s second-biggest carrier, Tata Group’s Air India.

IndiGo flies Airbus aircraft to 26 international destinations and reaches 30 European cities under a code-share agreement with Turkish Airlines that enables either carrier to sell seats on its partner’s planes.

Elbers said IndiGo would soon start flying to Nairobi and Jakarta, and was in talks to sign a code-share agreement to expand to the US. It is awaiting delivery of A321XLR aircraft from Airbus, which can fly longer distances and will help IndiGo grow further in Europe, south-east Asia and north-east Asia.

“Our position in international [travel] is still, I would say, modest, but internationalisation is going to be a very important part of our road map going forward,” Elbers said.

At the same time, he pledged that IndiGo would “develop the domestic network, which remains the core of the company”, with a goal of “serving every city which has an airport of some size”.

The airline, which flies to 78 cities in India, carried 69mn passengers within the country in 2022. Its domestic market share topped 55 per cent in February, according to India’s civil aviation regulator, twice that of Air India, its closest domestic competitor. IndiGo flew 7.42mn international passengers last year, while Air India carried 10.67mn.

“At present, IndiGo is very much a regional carrier, similar to [Ireland-headquartered] Ryanair or [Hungary-based] Wizz Air,” said Mark Martin, chief executive of aviation consultancy Martin Consulting. “On the contrary, a carrier like Air India was designed to fly international.”

Set up in 2006, IndiGo has thrived in a difficult home market. At least 15 Indian carriers, including high-profile brands such as Jet Airways and Kingfisher Airlines, have ceased operations in the past three decades, brought down by price wars, low occupancy and the high cost of fuel.

IndiGo’s selling point has been reliability. Research firm Jefferies said in a report in March that 84 per cent of IndiGo flights departed on time, compared with 72 per cent for Southwest Airlines and 75.5 per cent for Ryanair.

“IndiGo remained focused on its low-cost roots despite distractions like Kingfisher Airlines and Jet Airways, which made some headway with full-service models,” said aviation blogger Devesh Agarwal. “What helped them seize the market was relentless focus on operational excellence, optimal use of resources and launching multiple flights on a single route. You look for an IndiGo flight any time of the day, and most likely you will find one.”

IndiGo’s international ambition comes as competition heats up in India’s aviation sector. The south Asian nation has already surpassed China as the world’s most populous country and is poised to become the third-largest global economy by the end of the decade. The Centre for Asia Pacific Aviation, an aviation consultancy, estimates that India’s domestic airline traffic will grow by about 20 per cent in the fiscal year ending March 2024 to 160mn passengers, while international traffic could surge 27 per cent to 75mn. By comparison, about 199mn people flew on American Airlines in 2022 and 168mn used Ryanair.

India’s government has responded by earmarking $11.8bn for airport construction and modernisation. It hopes to increase the number of airports from 140 to 220 by 2025. The government has also rejected a request from the United Arab Emirates to boost the maximum number of seats Gulf carriers can offer Indian passengers per week from 66,000 to 116,000, because it wants more Indian airlines to fly direct international flights.

IndiGo faces stiff competition from Air India, which placed a huge order for 470 jets from Boeing and Airbus in February, including 70 wide-body variants, underscoring its ambition to operate nonstop long-haul flights. India’s Akasa Air, which started operating in August and will begin international routes this year, said it would place an order for new planes going into “three-digits”, on top of an existing order for 72 aircraft from Boeing.

IndiGo has started taking delivery of 500 jets that will expand its fleet to 800 aircraft by 2030. Reuters has reported that the airline is in talks with Airbus and Boeing for an order of an additional 500 aircraft, including wide-body planes.

Elbers declined to comment on the report. But he said the airline would stick to its low-cost model as it seeks more international business, banking on its “three customer promises of on-time performance, hassle-free and courteous service, and affordable fares”.

“Rather than being overly concerned with what others are doing or not doing, we follow our own path,” he said. “The competition will take its own decisions on how to position and where to position, and what to integrate or not to integrate. But for us, these three customer promises will continue to be the key. There will be competition but IndiGo is in a good spot to deal with it.”

Analysts caution that it will be a tall order for IndiGo to replicate its success at home on the international front. Indian international travel is skewed towards the Middle East and south-east Asia, where local airlines handle the bulk of traffic. Expanding internationally would put IndiGo in competition with full-service carriers ranging from Air India to Emirates, Qatar Airways and Singapore Airlines.

Martin of Martin Consulting said the incumbents could wage a price war to limit IndiGo’s growth.

“The minute you start flying in foreign countries, local airlines will drop the fare because they see you as competition,” said Martin. “IndiGo has to slug it out in the same manner they did in India for years to win the international market.”

A version of this article was first published by Nikkei Asia on April 13. ©2023 Nikkei Inc. All rights reserved.

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