Number 2 to number 1: A long-haul flight awaits IndiGo

Low-cost airline IndiGo’s flight from number three airline — in terms of number of passengers carried — to number two on the monthly basis has been a short haul.

It covered that journey in just one month as its share in the domestic market jumped from 17.3% in November to 18.6% in December. This catapulted the budget airline to the second spot with Vijay Mallya-owned carrier Kingfisher Airlines.

And unlike Kingfisher and the current market leader Jet Airways - with 25.4% that includes 7.7% share of its low cost subsidiary JetLite - Rahul Bhatia, co founder of IndiGo, has acquired market share by growing organically.

Kingfisher expanded its market by taking over Captain GR Gopinath’s Air Deccan and Jet by acquiring Air Sahara.

However, industry experts say IndiGo’s run to the top position may not be as swift.  It would not reach there before the end of the next fiscal.

Kapil Kaul, chief executive officer (CEO) - India and Middle East - Centre for Asia Pacific Aviation (CAPA), said on a standalone basis IndiGo is already ahead of Jet but its share stills lag behind combine share of Jet and JetLite.

And he does not expect the New Delhi-based no-frill airline to be number one in the current fiscal on a full-year basis despite its aggressive capacity plans of adding 14 planes in the 2011.

“On a full-year basis, it will move to number two in fiscal 20011-12 from number four in the current fiscal. The way they are adding capacity, they will become number one only in FY13,” said Kaul.
On a full-year basis, IndiGo was at number four in 2010 with a share of 16.3% behind Jet, Kingfisher and Air India with 26%, 20.6% and  17.6%, respectively.

Kaul expects IndiGo to bridge the gap of 10.3 percentage points between itself and Jet in financial year 2013.

Also, the budget airline’s domestic growth may slow down on its entry into the international market sometime around August this year.

“The airline will see a lot of its capacity being used for overseas flights,” said an aviation analyst, who did not want to be named.
The airline has got the government approval to fly to Singapore, Bangkok, Dubai and Muscat.

CAPA is predicting domestic capacity to grow at 12-14% and demand by 15-20% in the 2011.

Among the domestic carriers, IndiGo will be adding the highest number of planes followed by SpiceJet. Jet has said it will induct 29 aircraft over the five years. This means it would be adding 5-6 planes every year.

Going by Kingfisher’s current plans and its highly leveraged balance sheet, its fleet is not likely to expand dramatically in the next few years.

Even though Air India has reportedly revealed that it will be add 30-40 planes, many are sceptical about it.

This leaves a lot of room for IndiGo to expand and consolidate its market in the next one year to fly to the top and become the market leader.