India’s InterGlobe Aviation , owner of IndiGo airline, has shown unsolicited interest in buying a stake in state-owned carrier Air India.
With a market share of over 40 per cent and counting the country’s largest airline IndiGo is charting an ambitious trajectory where Air India might provide the perfect ground for its expansion.
The profitable no-frills carrier, which came into existence in August 2006, also has the largest number of aircraft on order, with more than 450 to be delivered in coming years. Run by InterGlobe Aviation, the airline operates more than 900 flights daily to destinations in India and overseas.
In a significant move that reflects its growing appetite, Gurgaon-based IndiGo has announced plans to purchase 50 ATR turbo-prop planes worth USD 1.3 billion as part of efforts to tap the high growth potential regional aviation market.
Flying high, IndiGo eyes Air India for a new take-off https://t.co/Po9T5s4AVr— ET News Updates (@ETNewsUpdates) June 29, 2017
IndiGo, eyeing the “tremendous growth opportunities” in the smaller cities (tier 2 and 3), seeks to be part of the government’s regional air connectivity scheme UDAN by inducting the ATR planes.
Despite intense competition and the entry of new players in the fast-growing Indian aviation market, IndiGo has managed to stay the course while steering clear of common industry practices such as offering frequent flyer programmes.
In May, the airline had a domestic aviation market share of 41.2 per cent, way ahead of low-cost as well as full-service carriers, according to the latest data with aviation regulator DGCA.
It has written to the civil aviation ministry saying it would be interested in buying out the international operations of Air India and its low-cost arm, Air India Express.
If that was not possible, it said it would like to buy out the entire Air India flight operations, including domestic flights.
While IndiGo has the wherewithal to board the debt-laden Air India juggernaut, the airline has its share of woes, too.
Engine problems faced by some of its A320 neo-aircraft and the issue of slots at the Dubai airport are among some of the problems it faces. As it charts out an aggressive path of expansion, there have also been brickbats from certain quarters about its on- time performance (OTP) claims.
With a fleet of nearly 135 planes — all from the Airbus 320 family — and more additions expected in the current fiscal, the airline has plans to connect more destinations. Currently, it flies to around 46 destinations.
Reflecting the kind of disruption the no-frills airline has inflicted in the domestic market, aviation think-tank CAPA’s latest report said IndiGo’s unprecedented growth creates a strategic compulsion for others to expand.
“IndiGo has the largest in-service fleet in India at 135 aircraft and the largest orderbook of any airline in the world at 458 aircraft. Its fleet could expand by up to 46 aircraft during this financial year — a net addition of almost one aircraft a week,” CAPA said on Wednesday.
While remaining profitable for many quarters in a row, the airline saw a slump in its net profit to Rs 440.31 crore in the three months to March 2017 as a jump in fuel prices took a toll on its bottom line.
Now, the airline might well also be hoping for a hassle- free journey on board Air India.