In India, like any other means of mass transportation, flights and trains are notorious for running late. In 2006, budget carrier IndiGo was launched with just six aircraft in its fleet and the primary objective of maintaining punctuality for its flights. Not only has the airline managed a stellar on-time-performance record, it is currently the fastest growing airline in the country with the largest market-share of more than 38%.
And now, it is poised to grow even bigger.
On Saturday, IndiGo placed a firm order of 250 Airbus A320neo aircrafts to expand its fleet. The order is the largest-ever received by the France-based aircraft manufacturer. At list prices, the order would cost around $26.55 billion but IndiGo could end up paying a lot less given the mammoth size of the order which will provide it with bargaining power.
"With today's announcement, IndiGo has ordered 530 A320 family aircraft with Airbus," the airline said in a statement adding that this order is the largest in terms of value for the manufacturer.
This is not the first time that IndiGo has placed a humongous order for airplanes. The airline attempts to keep its costs low by buying aircrafts in bulk which reduces pricing, lease rentals, as well as the maintenance costs it needs to incur.
In 2011, IndiGo placed an order for 180 A320neos from Airbus itself which was then the biggest order in the history of aviation in terms of value.
Currently, IndiGo operates with almost the same number of aircrafts as any other major carrier in the country such as Jet Airways or Air India which have less than 110 planes each in service at the moment.
That, however, is soon going to change.
The airline is expecting to start receiving aircraft from its 2011 order in the coming months which will go on till 2023. Starting 2023, Airbus will also deliver the 250 planes that the company has just ordered.
In total, this would mean an addition of 430 aircraft to its fleet which is at least double the size of all the orders placed by scheduled airlines in the country put together which are yet to be delivered.
The new fleet will take another decade to be completely delivered and other airlines are likely to ink pacts and procure more planes in the meanwhile to replace the existing ones or to simply fatten their existing inventory.
Not much legroom
But piling losses across the sector are unlikely to afford them much legroom to spend heavily on newer planes. Jet Airways recently deferred its $2.6 billion order for 10 Boeing Dreamliners claiming that it needs to focus on cutting costs and increasing aircraft utilisation.
“We are right now looking at more or less a flat fleet,” Abhijit Dasgupta, vice-president (planning and alliances) was quoted as saying by Business Standard. “We do have some lease expiries coming up, which we are looking to either extend or replace, but broadly, we are not looking at any substantial growth in our fleet. (We have nothing) in the order book for the next two to three years.”
IndiGo, however, appears set on its mission to build a 1,000 jet fleet before any other airline could have a chance to catch up.
Experts meanwhile point out that a large-sized fleet could lead to overcapacity since both orders would be fulfilled simultaneously during 2018-2013. However, many of these deliveries might just end up replacing existing planes.
IndiGo works on a sale and leaseback model through which it buys planes cheaply in bulk. The airline then sells them at a premium to lessors/vendors who allow it to lease them back on monthly rental thus keeping it costs low and its fleet new.
However, not everyone is convinced about the timing and intent of the deal since the company is eyeing an Initial Public Offer with valuation of $4billion when it lists itself on the stock market later this year.
"It is too much of a coincidence that the 250 plane order has been revived months before IndiGo's IPO,” Mark Martin, who heads Dubai-based consultancy firm Martin Consulting told the Economic Times. “To me, this is window dressing the company for investors.” Martin added that the airline should have considered opting for bigger planes to compete internationally with the likes of Air Asia but it’s strategy, he felt, was completely India-centric.
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And now, it is poised to grow even bigger.
On Saturday, IndiGo placed a firm order of 250 Airbus A320neo aircrafts to expand its fleet. The order is the largest-ever received by the France-based aircraft manufacturer. At list prices, the order would cost around $26.55 billion but IndiGo could end up paying a lot less given the mammoth size of the order which will provide it with bargaining power.
"With today's announcement, IndiGo has ordered 530 A320 family aircraft with Airbus," the airline said in a statement adding that this order is the largest in terms of value for the manufacturer.
This is not the first time that IndiGo has placed a humongous order for airplanes. The airline attempts to keep its costs low by buying aircrafts in bulk which reduces pricing, lease rentals, as well as the maintenance costs it needs to incur.
In 2011, IndiGo placed an order for 180 A320neos from Airbus itself which was then the biggest order in the history of aviation in terms of value.
Currently, IndiGo operates with almost the same number of aircrafts as any other major carrier in the country such as Jet Airways or Air India which have less than 110 planes each in service at the moment.
That, however, is soon going to change.
The airline is expecting to start receiving aircraft from its 2011 order in the coming months which will go on till 2023. Starting 2023, Airbus will also deliver the 250 planes that the company has just ordered.
In total, this would mean an addition of 430 aircraft to its fleet which is at least double the size of all the orders placed by scheduled airlines in the country put together which are yet to be delivered.
The new fleet will take another decade to be completely delivered and other airlines are likely to ink pacts and procure more planes in the meanwhile to replace the existing ones or to simply fatten their existing inventory.
Not much legroom
But piling losses across the sector are unlikely to afford them much legroom to spend heavily on newer planes. Jet Airways recently deferred its $2.6 billion order for 10 Boeing Dreamliners claiming that it needs to focus on cutting costs and increasing aircraft utilisation.
“We are right now looking at more or less a flat fleet,” Abhijit Dasgupta, vice-president (planning and alliances) was quoted as saying by Business Standard. “We do have some lease expiries coming up, which we are looking to either extend or replace, but broadly, we are not looking at any substantial growth in our fleet. (We have nothing) in the order book for the next two to three years.”
IndiGo, however, appears set on its mission to build a 1,000 jet fleet before any other airline could have a chance to catch up.
Experts meanwhile point out that a large-sized fleet could lead to overcapacity since both orders would be fulfilled simultaneously during 2018-2013. However, many of these deliveries might just end up replacing existing planes.
IndiGo works on a sale and leaseback model through which it buys planes cheaply in bulk. The airline then sells them at a premium to lessors/vendors who allow it to lease them back on monthly rental thus keeping it costs low and its fleet new.
However, not everyone is convinced about the timing and intent of the deal since the company is eyeing an Initial Public Offer with valuation of $4billion when it lists itself on the stock market later this year.
"It is too much of a coincidence that the 250 plane order has been revived months before IndiGo's IPO,” Mark Martin, who heads Dubai-based consultancy firm Martin Consulting told the Economic Times. “To me, this is window dressing the company for investors.” Martin added that the airline should have considered opting for bigger planes to compete internationally with the likes of Air Asia but it’s strategy, he felt, was completely India-centric.
