If you wondered why IndiGo placed a firm order for 300 Airbus jets this week, start by looking at India’s aggressive five-year airport growth plan.
IndiGo’s order of 300 A320neo family aircraft is huge. Not only is it huge outright, but it complements an already-huge order of narrowbody Airbus planes IndiGo has already placed. So add 300 A320neos, A321neos, and A321XLRs (we don’t know the breakdown yet) to an earlier order of 280 A320neos and 150 A321neos.
The result is that IndiGo will easily become the largest A320neo family operator in the world.
But how can an airline that just reported its steepest quarterly loss in company history take on such a huge order?
The answer, in part, is India’s plan to open 100 new airports over the next five years. Facing aging and often dilapidated airports, a growing middle class with an appetite for air travel, and a general desire to grow India’s economy through infrastructure investment, India hopes to offer increased connectivity from underserved areas of the country.
Private-public partnerships have already unleashed massive public works projects, with 38 new airports currently under construction. Furthermore, the government is offering subsidies on many routes to attract air service and considering greatly reducing comparatively high fuel taxes. All three initiatives will not only encourage more air travel, but are precisely intended to do so.
And there, folks, you have a pretty clear reason why IndiGo felt comfortable in placing such a large order on top of another large orders.
CONCLUSION
IndiGo has many reasons to expand. One is the opportunity it sees to leapfrog ailing Air India. Another is the gap left by Kingfisher and more recently Jet Airways. But to really understand why IndiGo is growing so fast you must also look to India itself and its rapidly-transforming broader aviation landscape.
Finally, though, it is instructive to look at another airline who placed an order for 400 Airbus A320s and had grand expansion plans of its own. That airline eventually declared bankruptcy and never received most of its order. That airline was US Airways. And in 2005, ex-US Airways Chief Executive Officer Rakesh Gangwal founded IndiGo.
Let’s hope history does not repeat itself…the grave of airlines who expanded too quickly is deep and wide…
> Read More: IndiGo A320 Goa To Chennai Via Hyderabad Review
I’m betting against this working. One you have a CEO who tried this and failed at it. Two look at the graves of airlines in India that have tried to take advantage of this explosive growth and failed. Clearly if there was huge demand just waiting to be tapped other airlines would still be in business. Third I very much wonder about finding qualified pilots for all those planes. Fourth that’s is an astronomical number of planes. 580 airplanes would vault them to number 5 in the world based on fleet size. I find it hard to believe that there is that much untapped demand that hasn’t been noticed until now. Finally there is Air India who is a perpetual money loser and train wreck. The government will never allow them to collapse so anyone competing is going to be up against a subsidized operation that never actually needs to make money.
To add on to what 121Pilot said, this seems like a bad idea, unless the goal is to burn a large pile of money in a dumpster fire. The big thing to keep in mind is that on many of these routes between mid- and small-sized metros, air travel competes against the (subsidized) long-distance trains. The trains actually aren’t bad these days, largely run on-time, and put you in the city center of your destination instead of on the outskirts of town at an airport (and as bad as traffic in India is, even an airport that’s only 5-10 miles away from the city center can mean an hour+ drive to get there). Honestly that’s a problem even between large metros that no airline has been able to solve. To go between Hyderabad and Chennai, as one example, convincing someone to spend $100 on airfare when the train costs $50, even in A/C class, is culturally quite difficult. So naturally, airlines have to cut the fare, and can’t make money. Maybe the upcoming VAT cut on jet fuel helps, but I’m still skeptical that the economics of domestic aviation in India are going to make a ton of sense anytime soon.
Infrastructure spending in India is a great idea, but honestly, I’d rather they spend the money improving the national highway system and public transit within the cities before moving on to airport boondoggles.
Are all of those people who ride on the top of the trains going to be flying now?
Won’t they be returning their old 320? Also they have no long haul aircraft and good luck flying DEL LHR on 321XLR.
Further, vistara is receiving 787 destined for vietjet. UK will eat 6Es lunch before they know it
I’m guessing that they plan to remove all their a320ceos and replace them with neos.
But also I imagine as with their previous large order they’d have massive discounts on the list price and they could lease/sell these aircraft or possibly just the delivery slots as the A320 is more or less at capacity on production.