Dubai: With almost 20 per cent market share in the Indian market, the five-year-old budget carrier, IndiGo stunned the world with its whopping $26 billion order for 280 aircraft. The carrier is flying 42 at present on 26 Indian routes.
The carrier, privately owned by InterGlobe Aviation, was profitable from the third year of its operations, and is now spreading wings to international skies. IndiGo will become the first Indian budget carrier to serve the Dubai route when it starts flights between Delhi and Dubai on September 1 this year.
This will be followed by services to Bangkok and Singapore (also in September). The young carrier is being spearheaded by an equally young 36-year-old President, Aditya Ghosh. He shares with Gulf News in an exclusive interview, the future flight path for IndiGo.
Aditya Ghosh: Where does Gulf figure in your long-term plans?
Gulf News: Gulf is the natural extension to what we are doing in India for the simple reason. There is a consistent market for expatriate Indians living in the Gulf,. While there is an expatriate Indian population in other parts of the world, the ones living in the Middle East, travel to India back and forth several times a year.
Second, the market is more inclined towards low fare because of income levels etc. So we should be able to extend the same fares out to this market that we have been able to offer consistently over the last five years in India.
The Gulf is extremely important to our operations. It's not just coincidence that we want to start off with Dubai as our very first port of call. And we want to connect more dots, i.e., add more flights to this route.
What is the one thing that is going to be different about IndiGo compared to other carriers serving this route?
One, we are the only Indian "low fare" carrier flying this route. The route authorities on the Indian side are highly under-utilised, therefore, we can offer more services on the same routes than the competition can. Secondly, it's the low fare and the third, very important thing is we fly out of 26 destinations within India. So there is no reason why over a short period of time we should not be able to have non-stop flights from Dubai into several of these cities without having to funnel everything through one gateway.
What per cent of IndiGo's total business do you see coming from international operations over the next 2-3 years? What is the market share you are seeking in international skies?
I don't chase market share. There isn't a target that I have for market share. But what I definitely look at is how much capacity I am going to have.
So looking at the next eight months, which is towards the end of our financial year [ending March 31, 2012], we would be able to dedicate approximately 18 per cent of our total capacity to just international operations.
By March, we will be approximately a 55-aircraft carrier. So out of that we would be dedicating around nine or ten planes to our international operations. We can't exactly talk about the projected revenue out of this market because a lot of it depends on how the competition reacts to us. The aim is that overall business should remain profitable.
When do you see the carrier starting to make profit in international operations?
This is just a launch phase and we are a long-term player so I am not extremely worried about that. However, my target is that our overall operations should make money and stay profitable and that the international operations should not drag it down.
Flydubai has been trying to get the coveted Delhi, Mumbai routes for sometime now. And now, IndiGo has got them. Your comments?
Route authorisations are reciprocal. There are a certain number of seats allocated to Dubai side and certain on the Indian side. The Indian side is highly under-utilised — there are thousands of seats lying unutilised.
So, therefore, it is far simpler for us to get the rights from India. Almost 51 per cent of our available capacity is still unutilised.
And because the carriers from the Middle East have a far bigger share, and therefore, they are right up to the edge, or probably don't have any seats available at all on their side.
What kind of competition do you see from carriers like Flydubai once it gets the rights into key Indian markets such as Delhi and Mumbai?
We work in a very competitive environment in India. And my simple view of that is competition is good, it keeps us on our toes, and most importantly, it's good for the customer. So whether it is a carrier out of Dubai or out of India, competition is great. Having said that, I firmly believe that as we come in — as it has happened in every other market that we have gone in before, you will see the market expand. So we are not going to start eating market share from another airline. We are not interested in that. We are interested in the larger pie increasing.
Would you look at other UAE markets such as Abu Dhabi and Sharjah? If so, by when?
Yes. But we want to first start off with Dubai and Muscat [launch expected in October 2011], add more flights here and provide enough services to customers in these markets before we start looking at other markets in this region. We would look at other markets towards the latter part of next year, not before that.
How many Middle East destinations would IndiGo be looking to launch in the next few years?
We should look at no less than five or six destinations in the Middle East. After Dubai and Muscat, we would look at Abu Dhabi, Sharjah, and possibly Kuwait, Qatar, Bahrain. We would also be looking at some markets in Saudi Arabia. We are currently focusing on how the next 12 months, and then these destinations will follow over the next three to four years. That's also when we would be close to a 100-aircraft airline. So we will have the capacity to be able to expand into this region.
What are your plans for connecting Dubai with other Indian cities? What about additional frequencies?
We are looking to start services between Dubai and Thiruvananthapuram, Kochi and Kolkata mostly by the winter time this year. We are absolutely looking at increasing frequencies on the Dubai route. We will start with a daily service. We want to then take it up to double-dailies and probably triple-dailies in the next 12 months.
IndiGo seems to be operating like a full-service carrier — barring selling food onboard and some other services — in terms of technology and some other aspects. How do you make money?
It is a purely revenue per passenger driven model. We lay a very strict focus on costs. We started making money in some of the most difficult years ever. So the key is to keep your costs low at all times. That's what is going to ensure you have sustainable low fares.
Are you financed for your future aircraft deliveries?
We are done actually. We are not looking at an IPO (initial public offering) or at issuing bonds to raise money. We raise finance by just internal accruals and profitability.
What do IndiGo's forward bookings look like for Dubai?
Our bookings for the first three weeks are showing more than 50 per cent of our flights are already booked. That's a good indication to start with. So we are selling quite well actually. The launch [return] fare of Dh822 [all inclusive], is doing the trick and it will be valid all the way up to March 2012.
What about post-March? What per cent lower would IndiGo fares be compared to other carriers operating on the same route?
It really depends on what the competition charges. Having said that, I have seen over the last five years that competitors will come back and drop their fares for a few days or a few months, and then it [the fare] would suddenly again skyrocket.
We just keep it simple and say we are the low fare airline. We are not in the business of charging exorbitant fares, and that has served us well.
What are the projected load factors on Dubai route?
We would estimate it to be in the mid-80s in first year of our operations. Our load factors are consistently the highest.
What's the biggest challenge you see for IndiGo in the Gulf?
It is whether we can be consistent and stay true to the three things we stand for, i.e., stick to being on-time, remain hassle-free and continue to offer low fares.
Director-General of Civil Aviation (DGCA) in India recently asked carriers to immediately stop charging extra money for preferred seating. How worrisome is that for a budget carrier such as IndiGo?
We had a meeting with the DGCA about this and there seemed to have been some misunderstanding. Their concern was really if it's a charge that the customer can see clearly and if it's of a mandatory nature.
I certainly hope it's not something that the DGCA would make obligatory for airlines [to eliminate such a charge]. That puts us in a spot. As a low cost carrier, these are things we make money on.
Timeline: young leadership
Having started his professional journey at the age of 21 years, Aditya Ghosh, now the President of India's biggest budget carrier, IndiGo, started out with corporate law firm J. Sagar Associates (JSA), and served clients including InterGlobe, Smithkline Beecham, Pepsico and the World Bank. He then joined InterGlobe Enterprises as its General Counsel in 2004.
In 2007, Ghosh, a post-graduate in Law from Delhi University, was inducted into the Board of Directors of IndiGo, and subsequently in 2008, was appointed as the carrier's president. In his role, he was responsible for carrier's overall growth.
In January 2011, IndiGo emerged as India's second largest carrier (DGCA data) under Ghosh's leadership.
