IndiGo Ahead of Other Airlines in Domestic Capacity Addition: Report

Low Cost Carrier Accounts for More than 70% of Domestic Capacity Addition Amidst Tough Financial Times

By January 22nd, 2019 AT 2:40 PM

Even while being troubled by rising operational and fuel costs and in between financially troubling times in the Indian aviation industry, IndiGo, the low-cost carrier has been the biggest contributor to domestic capacity addition last week. An Australia-based aviation consultancy CAPA released the data collected by a data intelligence company, OAG aviation, which detailed that approximately 99% of airline seat capacity added last week was due to the low-cost carriers and out of this big chunk, IndiGo accounted for close to 70% of capacity addition. On the other hand, the report highlighted that full-service carriers in the Indian aviation industry made up for 1% in capacity addition. The data showed that local carriers flew a total of 445,000 seats last week, as highlighted by a DNA report. The thing to note was that with the recent numbers Indian carriers have crossed 40% share of international seat capacity reaching up to about 93,000 seats for the first time in last week. Among these airlines, IndiGo was the leader.

IndiGo Airbus A320 Neo Aircraft

IndiGo Now Boasts of 200 Strength in Its Fleet

As highlighted by the DNA report, CAPA said, “Increase in international capacity share is driven by Indian carrier expansion, led by IndiGo, which accounted for 57% of the total additional weekly seats, and 75% of additional seats by Indian carriers.”

It was in last week, that IndiGo became the first airline in India to cross the figure of 200 aircraft in its fleet. Interim CEO and co-founder Rahul Bhatia had earlier highlighted that IndiGo would add 30% to capacity addition this year. However, looking at the financials of the airlines, things are not so good. In the September quarter, the low-cost carrier had reported a loss of Rs 652 crore which is in contrast to the Rs 551.6 crore profit which the airline had made a year ago in the same quarter. As per the airline’s management, the “unmaintainable” low fares and the brutal competition along with rising fuel prices and volatility in foreign exchange were the main reasons for the loss. Also, this was the first time that IndiGo made a loss after being listed in November 2015.

Poor Financials Common for the Entire Industry: Analysts

However, analysts are of the say that these financials indicators are not company specific but instead denote what the industry is going through in large. Industry experts have also highlighted that the cutthroat competition has pushed the low-cost carriers to obtain 66% market share in India, and this figure is only expected to rise to 70% in the coming four to five years. The report also added that this market share of the LCCs (low-cost carriers) was only 25% in the industry a decade ago.

Another interesting thing to note is that the industry has placed orders for more than 1,000 aircraft, out of the total, 85% of the orders have been placed by the LCCs. With the total order being above 1,000, a large 60-65% of the planes have been scheduled for delivery in the next decade, while the others are to be delivered in the next five years.

The report citing the analysts said that since the government has refrained from providing additional flying rights to the foreign airlines, the domestic carriers have benefitted a lot. It is due to this reason, carriers like Air India, Jet Airways, IndiGo and SpiceJet have been able to claim a bigger share of the pie.

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Whenever Arpit boards a plane he is filled with awe and bewilderment and soaring above the skies is something marvellous for him. An aviation and tech geek through and through Arpit writes at AviationScoop not only because he's experienced and good at his craft but also because flying is something which makes his heart flutter with joy.

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