New widebody order signals IndiGo’s long haul intentions
When an airline already has nearly 1,000 aircraft on order, the addition of another 30 may not sound all that noteworthy. But Indian carrier IndiGo's latest deal is very significant, because it highlights the LCC's ambitions to expand its range into new markets.
IndiGo announced a firm order for 30 Airbus A350-900s on 25-Apr-2024 - a move that had been widely expected for several months.
These will be the first new widebodies operated by the airline. IndiGo currently bases its business model on Airbus narrowbody aircraft, with a few leased Boeing 777s.
Deliveries of the A350s are expected to begin in 2027, and the airline has also secured purchase rights for a further 70 of these aircraft.
IndiGo has long talked of its plans to channel more of its growth into international since the COVID-19 pandemic. This is a sensible strategy, not only because of the massive potential of the Indian travel market, but also because the domestic market is already fiercely competitive.
- IndiGo has reached a deal to order 30 Airbus A350s, with purchase rights for another 70.
- Massive narrowbody backlog is almost expected to almost double IndiGo's feet by 2030.
- The airline plans for international operations to take up more than 30% of its capacity.
- A321XLRs will start long haul expansion in 2025, and the A350s will take it further.
- Four leased 777s are giving the airline early experience in widebody operations.
The airline's planned foray into long haul is built on very strong domestic operation
IndiGo operates about 330 Airbus narrowbody aircraft. In 2023 it placed a major order for 500 more narrowbodies, including A320neos, A321neos and the longer-range A321XLRs. This almost doubled its existing order backlog.
While some of the narrowbody orders will be for replacement, the airline plans to increase its fleet size to approximately 600 aircraft by 2030, CEO Pieter Elbers said during a 30-Apr-2024 briefing.
The airline clearly believes in the massive potential of the Indian market, and the addition of the A350s underlines the fact that it sees the greatest scope for growth in the international arena.
IndiGo is the dominant domestic airline in India, accounting for more than 60% of weekly seats in that sector.
Looking to markets further afield has been a "natural evolution" for the airline, Mr Elbers said. International flights now account for 27% of IndiGo's overall capacity as measured in ASKs.
The airline's stated medium term goal is to raise this to 30%. However, Mr Elbers signalled that the latest orders will allow the airline to lift the international percentage even higher.
IndiGo's international vs domestic capacity for the week of 06-May-2024, as measured in ASKs
IndiGo is progressively extending its international reach
The airline's international expansion began in 2011, when it launched flights to relatively close destinations in the Middle East, such as Dubai.
It subsequently grew its international footprint with routes to Southeast Asia, and in 2023 it added flights to Central Asia.
The A321XLRs are due for delivery in 2025, and they will extend the airline's range to potentially include Southern European destinations, Mr Elbers said. Then the A350s will enable a greater increase in range when they arrive.
The size difference between the A321XLRs and A350s will give it flexibility to match aircraft to various long haul routes, depending on demand. And their range will not just bring new destinations into play, but also allow some of the airline's existing international destinations to be served from more points in India.
The A350 orders will help shift balance towards Indian airlines in international market
India's international market has historically been dominated by overseas-based airlines - and this is particularly true on routes longer than six hours, Mr Elbers said.
Data from CAPA - Centre for Aviation and OAG shows that foreign airlines account for 56.1% of India's international seat capacity.
India's local versus foreign airline capacity in the international market, as measured in seats for the week of 06-May-2024
There are currently only approximately 70 widebody aircraft operated by Indian airlines, which is linked to the fact that local airlines "are significantly underrepresented in [India's] nonstop long haul markets", Mr Elbers said. The IndiGo A350s will be "part of the government's vision to make India a global aviation hub," he added.
The A350 deal is structured to allow IndiGo's widebody fleet to expand dramatically beyond initial orders
IndiGo has already tested the waters with widebody aircraft.
The airline introduced two damp-leased Boeing 777-300ERs last year, mainly to offset a temporary capacity shortage caused by the grounding of many Airbus narrowbodies due to Pratt & Whitney engine issues.
The Boeing 777s, which are used on IndiGo's Istanbul route, have given the airline valuable experience and insight into how widebodies could fit into its operation, Mr Elbers said.
Mr Elbers admits that widebody operations are still a very new concept for IndiGo. This helps explain why the Airbus deal is split into 30 firm orders and 70 purchase rights.
The initial 30-aircraft firm order will give IndiGo a subfleet large enough to start a widebody long haul operation. The purchase rights give it the opportunity to scale up later if the widebody business is successful.
The airline is remaining coy about its plans for how it might configure the A350s. Such a decision will reveal what sort of product changes it will make for long haul services.
IndiGo is not the only Indian airline looking to expand its international footprint.
Air India placed orders for 470 aircraft last year, including 40 Airbus A350s, 20 Boeing 787s and 10 Boeing 777Xs. It also signed deals for additional leased 777-300ERs. Most of the widebodies will be used for international operations.
IndiGo is taking a calculated risk, but few would bet against it succeeding
India's rapid population growth and economic growth create opportunity for airlines, but it is certainly no guarantee of profitability: the history of the Indian airline industry is littered with airlines that have collapsed - some fairly recently.
However, IndiGo has proven to be one of the country's major success stories.
Adding 30 widebodies to operate long haul services is certainly a risk - particularly for an LCC.
But IndiGo's track record inspires confidence that it can gain further advantage from its move into a new competitive battlefield. And it is already such a strong force in the Indian airline industry that its latest step should worry its competitors.