Airline Leader Interview - IndiGo Airlines CEO Pieter Elbers

Transcript

Richard Quest:Do you have a preference which side? I'll have your good side. You can sit there. Gosh, we will all— that was very impressive.

Pieter Elbers:It is, huh?

Richard Quest:It is.

Pieter Elbers:I think this takes away half of your questions. No.

Richard Quest:Oh no, it just increases the number of questions. Okay, cool. Um, before we get into the meat, the meat and veg of, of the airline, let's just deal with topics of the day. Uh, the current difficulties, uh, regional difficulties between India and Pakistan, uh, which obviously have, um, overflight and circumventing flight. How, how are they affecting you? Anything? Just, just give us an overview of the current situation from IndiGo's point of view.

Pieter Elbers:Yeah, well, the, the airspace closed like 2 weeks back. for Indian operators that forced us to cancel 2 flights, or 2 destinations rather, in Central Asia served out of Delhi, and the rest of the flights had some diversion. So it was actually quite minimal in terms of operational impact for us. For Air India, it's much larger given their long-haul portfolio. Of course, the last 48 hours, the impact is significantly larger in terms of operations. So We have cancelled around 170 flights a day today, all to the northern part of India.

Richard Quest:These are the airports that are closed?

Pieter Elbers:And there's around 11, at least, there's more airports closed, but 11 to where we operate, 11 to 12 airports are being closed. And obviously, just to put it in perspective, you know, we operate 2,200 daily flights, 2,300 actually, close to 160 cancellations out of 2,300. It puts a bit in perspective.

Richard Quest:But it also reminds everybody, just, I think, Not the people in this room need to be reminded, but the incredible difficulty of this industry, whether it be regional tensions, volcanoes in Iceland, whatever it is, it eventually hits the industry in some shape or form. It's extraordinary.

Pieter Elbers:Yeah, and it does. But at the same time, if I see how the sort of economic growth in India continues, the international business continues, right? And again, putting it in perspective on the total number of flights, 160 cancellations, which could be partly and which will be partly redeployed to other parts of the country and other regions.

Richard Quest:So why did you take the job?

Pieter Elbers:You know, I mean, because India, I would say, is the last aviation frontier. What's happening today in India happened probably 30 to 40 years ago in the US, 20 years ago in Europe, 10 years ago in China, and that's happening today in India. And, and I mean, listening to the, the introduction and some of the airports and airlines struggling to come back to COVID levels, IndiGo is 50% larger today than it was prior to COVID. Uh, the Indian market has grown 20% as compared to prior to COVID. So I think the, the democratizing of air travel which is happening in India today, we've seen in other parts of the world in earlier stages, and that's happening now. And I think there was an opportunity not to be missed.

Richard Quest:But I cannot think of a move which is so diametrically opposite in terms of the type of carriers, from a legacy carrier that has so many of the legacy issues, not only of, you know, a national carrier, but also the merger, etc., etc., into a dynamically very different— was it a culture shock for you?

Pieter Elbers:I mean, if you come from a small country, I worked in different places and one of them is here in this wonderful country.

Richard Quest:You speak Greek, don't you?

Pieter Elbers:Legal. But, you know, moving from a European country where growth of 2-3% everyone is excited about, to a country where there are 6 or 7% growth, to a country where aviation is embraced, and I hope Willie agrees to use the phrasings of one of the former DGs of IATA, aviation as a force for good. Every rupee we put into aviation turns into 3 rupees for the economy. Every job we create in aviation turns into 6 jobs for the economy. So to be part of that journey is incredibly inspirational.

Richard Quest:How did you have to change your way of, of looking when you walk in the front door coming from KLM, coming with all the legacy issues, but, and then seeing this— I mean, essentially Phenomenal opportunity that you have of a runway in front of you.

Pieter Elbers:I think speed and embracing the speed of India is, is one of the things. And I, I guess India has different speeds and different tracks, and some of the tracks lack speed, but some other tracks are enormously speedy. So the speed of implementation—

Richard Quest:What was the first thing you did? What would you say, once you sort of worked out where the coffee, the photocopier, and the toilets were, what was the first thing you actually did?

Pieter Elbers:Meeting as many as possible Indigo colleagues. I've been traveling around the nation. I've been meeting all the teams we have everywhere. We have like 13 different bases. We operate today to 90 destinations in the country. I mean, if you pick Leh in the north or Trichy in the south, it cannot be more different. So I spend a lot of time in going around. We have a training center where we train 2,000 people a day. I cannot be more excited to go there, sit in the morning, just talk to our new colleagues who just joined the airline coming from all parts of the nation and, and basically are ready to embark on a professional journey, which is fantastic. So I spent a lot of time on that when, when I joined.

Richard Quest:And once you'd done your listening, what did you determine was the necessity for, for, for growth? Because the one thing I, I'll, you know, let's not, let's not spend or waste too much time discussing or the fact that India is the future. It's got a phenomenal market. It is the US Pre-deregulation, in a sense, and it's now moving forward. So let's not worry about that or establish that as a fact. What is it that you then decided was the way forward for you?

Pieter Elbers:You know, the company has been extremely successful by running out a rigorous low-cost model ever since it was founded in 2008. So it's only an 18-year young company and today welcoming 120 million customers. So that That in itself says something about the execution power. But with that, India has changed, and with that, there was a need for us to start adjusting to that new reality of India. The fact that India today has the same number of widebodies in operation as my former company KLM has— think about that— a country of 1.45 billion people, 3rd largest economy in the world, having the same number of widebodies. as a nation of 18 million people with one large airport. Singapore, I think, has 120, 125 widebodies. So, so we felt that there was a need to, to take the airline to the next level and to make sure that by 2030 it is not only a huge domestic aviation player but also taking its share on the international and global stage, really.

Richard Quest:Did you Feel any opposition? Not when I say opposition, not that they you know. Here's this. Oh, here he is. He wants us to go international. He wants us to grow. He wants to recreate a global airline.

Pieter Elbers:No, it's it's not. It's not he. It is, I would say, reflection of the ambition of India. If I see today Indian travelers, they are incredible, ambitious, and aspirational to travel all over the world. We have opened. Since COVID 20 new international destinations, and whether it's Baku, Tbilisi, Almaty, Tashkent, Karachi, Nairobi, Bali, all these places, when we open, we see Indian consumers starting to fly. So we are giving wings literally to the nation and to that aspiration. So it is not Pieter Elbers walking in and say, hey, you know what, we're going to go international, we're going to, we're going to do widebodies, and we have, by the way, another 40 XLRs on orders which will start coming. So we have all that But that's not what it is. What it is, is there's a changing India, there's an aspirational India, and we're actually giving wings to that aspiration.

Richard Quest:One of the things I've always been impressed by is, and I think Turkish is a very good example of this, the understanding at Turkish, regardless of its ownership structure, the chairman and CEO of Turkish, the understanding of its role within the country. And that's when I say a Turkish first, I'm not putting it in an American, you know, that sort of sense. I mean that it does have a very, very defined role in the growth of the country, the economics of the country, and if you will, the tourism of the country. And I think that's what you're suggesting.

Pieter Elbers:No, absolutely. I think aviation as a force for good is widely recognized and surely embraced In India, and that is not translated into financial support or stuff like that, but it is embraced into opening new airports. It is embraced into adjusting policies, adjusting frameworks. And, you know, listening a bit to Willy earlier today, I think some of the European policymakers are a lot about lip service rather than embracing what aviation does for communities. And contrary to other parts of the world where probably there's a shortage of manpower, In India, employment is still a very important thing. So by every new plane, we start to hire new people, and that, that is, is a reflection in what we do for the country, creating connectivity from the northeast to the south where people used to travel 2 days by train and now have a flight of 3 hours. I mean, there's 8 billion people traveling by train a year in India.

Richard Quest:Right.

Pieter Elbers:So if you convert 1% of that 8 billion to aviation, That just is it.

Richard Quest:So you have a huge domestic, if you will, underpinning of it. But the more you— I mean, you've got IndiGo Stretch, and as you look to the widebodies, you are, by definition, you're moving away from the model, the classic one. Now, I'm not saying that's bad, but I am saying that the moment you do that, the Herb Kelleher view, the moment you do that—

Pieter Elbers:So what happened to the Herb Kelleher view today?

Richard Quest:You tell me.

Pieter Elbers:No, tell me, what's, what's the situation at Southwest today? What are they doing?

Richard Quest:Well, they've expanded and not doing a particularly good job at the moment in terms of maintaining the model.

Pieter Elbers:So they're making a couple of changes. They're introducing some premium seats, they're introducing a loyalty program, they're introducing stuff which, you know, this entire discussion about label and leaving the model, it is nice for analysts it is nice for the likes of yourselves, you have this label, you know, handing out pretzels free of charge, does it make you a full-service airline?

Richard Quest:No, but there's a reason why we did— there's a reason though that people didn't move away from the model, because the moment you moved away, you added costs. The moment you added costs, you lost focus.

Pieter Elbers:Yeah, and that's a very, I would say, understandable approach. But for us, the size would enormously help in addressing that. So we've introduced— we fly domestic 90 cities, 450 routes. We have our premium product on 15 of those routes. That's 15 out of the 450, because on all the other routes we don't need it. And I guess that you were asking earlier, for a lot of legacy carriers, they want to have standardized stuff all across the network. There's no need. We fly 20 a day between Delhi and Mumbai, 40 sectors, 30 a day between Delhi and Bangalore. So that, that is exactly where we created the subfleet. The subfleet will have anywhere between 45 and 50 aircraft. That's the size of a reasonable airline, right? So that is for us the subfleet that we're adding. So if you talk about adding cost, it is just on, on, on a scale where the additional benefits will be outweighing those additional costs.

Richard Quest:So you get your, you've got the, the Dam leases at the moment, and then you will get more aircraft and you'll get your A350s. Paint the picture for what you want the route network to look like. And, and I'm not gonna ask you to analogize to an existing airline in terms of, 'cause you know, what, what, where do you want to fly?

Pieter Elbers:Yeah. You know, if you take a step back and, and you see where in 2015, all international travel to and from India was operated for 35% by Indian operators and almost 70% by non-Indian operators. That percentage today, with all the changes we've done, have gone to like 45-65%. So there's still a lot of, of room to grow on that part. But the fact that, that the connectivity of India is basically being facilitated through places outside India, I think offers a great opportunity to start operating direct from the larger Indian cities to different parts of the world. And, you know, today we operate to countries in the region from different areas. So if you want to see how the airline would look like, yeah, and I guess the comparison would come to the larger US operators or the larger Chinese operators, because those are our markets in terms of size comparable So in that, through the Indian markets, that's fascinating because that's exactly where I, you know, because essentially your transfer traffic is going to be transfer to within the country more than traditional 6th freedom. I mean, 65% of the world population, 65% of the world population lives within the range of 5 to 6 hours from India. So if you just take that as a starting point, 65% of the world population, which by the way also is, is the fastest growing part in terms of economic growth. So the opportunity not only to attract point-to-point traffic but also to attract some of the connecting traffic is a great opportunity. And the geographical spread of the country with Delhi in the north and Mumbai in the, in the, in the west part, and then Hyderabad and Bangalore more to the south, gives an enormous opportunity to start connecting flows. Today, if you travel from Africa to Southeast Asia, you probably have to connect, go up and go south. We have— we will have that connection as well. So the airline would look founded by a strong domestic foundation because that's the core of who we are and what we're going to be, but fueled by more international growth, either point-to-point or connecting.

Richard Quest:Right. You have, of course, the other carrier. Air India, which is completely reforming itself under, under Campbell, and to a large extent is going to be going after, um, a similar sort of— I mean, it is a, it is already a legacy carrier with a, with a premium product. How does IndiGo and Air India compete against each other in the future on the— while you are going with such a growth strategy?

Pieter Elbers:You know, if you believe in the growth story of India, and I think you believe that, and that by 2027, when Willie will retire and go to his winery in Italy—

Richard Quest:I think he will, by the way.

Pieter Elbers:I'm not sure, Irish man making wine in Italy, but that's another, another story. So, so now, if by that time India is, is this economy, we should compare the aviation landscape to, to the US and to Europe and to China, and all of them have multiple larger airlines or larger airline groups. So the fact that it's going to be us and Air India and a couple of contenders around that, I think it is, it's in fact the same consolidation as what took place in other parts of the world.

Richard Quest:There's a question that's come here: how do you mitigate the risk that a new ULCC may enter India and challenge you as you did your predecessors with Jet and Air India?

Pieter Elbers:Yeah, it's a very, it's a very fair point, and, and exactly therefore the number one priority we have on a lot of stuff is keep our cost leadership. And I think that very first panel today was speaking about cost leadership.

Richard Quest:And cost leadership, you mean?

Pieter Elbers:Cost leadership, having the lowest cost, right? And with the lowest cost, India is an incredible competitive market. So addressing that challenge of having others stepping in forces us to keep the cost low. And that's exactly why the product you just— we just alluded to, the business product and the loyalty part, is focusing on those market segments which are ready to pay for that. And yet the other 400+ routes will be just the same, low cost, high utilization, quick density, all that stuff, we just keep it. And I think we're in that sense, and I don't want to sound too bullish on that, but in a much better position than others who have to transform in that direction. So we have a basis, we're expanding the basis, the basis today is 400 aircraft, basis by 2030 is going to be in the range of 600 to 700 aircraft, so we're going to double that. That very basis and very foundation of what we're having is, is just keep— we keep that machine running. On top of that machine, we're building the new products when it comes to some of the business, when it comes to international, when it comes to—

Richard Quest:How do you keep the cost leadership whilst doing that? Because that is what the analysts, that's what the— that's what people like me will say The ability to keep that cost, that laser focus on cost leadership.

Pieter Elbers:I mean, we have an approach whereby we have a huge agility and we're not having any of the dogmas. What I said, if we introduce a certain product, we introduce it where we feel it makes sense. That doesn't mean that we have to introduce it everywhere. So a lot of these additional sort of costs are— we just don't carry them. And then I would say it's deeply rooted in the company and full focus. I wouldn't say every day, but pretty much every day is on cost, cost, cost.

Richard Quest:The infrastructure of the airports and the existing infrastructure and the ability to cope with your growth strategy and the growth of the airlines, because of course Air India is doing similar.

Pieter Elbers:Well, I think India, and then I go back to some of the vision from the Indian government, aviation is seen as an integral part of the growth story of the country, and it came, I would say, in various speeches today morning. And if you embrace that, I would say finally steps are being taken to do that. So finally we'll have a second airport in Delhi opening, we'll have a second airport in Mumbai opening. These were decisions taken like a decade back, and they've come to fruition now as we speak, rather. So this year we'll have finally 2 airports in Delhi and 2 airports in Mumbai. You know, Mumbai is is the commercial capital of the nation with 2 runway airports. So that is changing now. So the question is absolutely correct, but I would say if, if you haven't been in India for the past 5 years and you see the likes of new airports in Lucknow, in Bangalore, and they're beautiful airports.

Richard Quest:Do you, as we come to the end, do you get amused when people like me question you? Or there's a question here: what will be the real model? LCC, ULCC, value carrier, quasi- Do you get amused that we're all trying to pigeonhole you into the carrier because that's the way, that's the way we traditionally look at it? Because most of us weren't around here when the big US carriers were building all their— I mean, you know.

Pieter Elbers:I would say India as a country and IndiGo as an airline is big enough and sizable enough to craft our own path and our own future. if the likes of yourself want to give that a label, you give it any label you want. I don't care.

Richard Quest:What would you label?

Pieter Elbers:You know, India by IndiGo is what we label. But, you know, probably if I go to your labels, hybrid would be coming close.

Richard Quest:I think I prefer yours.

Pieter Elbers:But, you know, we have codeshares. We work with around 10 different partners. We recently signed up a codeshare with Japan Airlines, codesharing on our flights in India. It's working fantastically. I mean, it's a quality airline putting their customers on us, connecting to 15 different cities in India. So, so if, if that's against that background, I, I think we, we left the ULCC station long ago when it comes to labeling. What we haven't left, and that's where we keep growing, we haven't left the philosophy of we should maintain our cost leadership, and that's in fact what we're doing A final question.

Richard Quest:When you hear your European counterparts and predecessors, or successors, I should say, bemoaning this, bemoaning that, complaining that, complaining that the environment, the regulation, blah, blah, blah. It must be exciting going to work every day in a country where the growth potential is exponential and they seem to actually want airlines and growth. unlike the rest of the world?

Pieter Elbers:Well, the ambition of India and the ambition of, of the people is, is reflected in what we do, and that's an incredible inspirational environment to work in. So, so yes, I'm incredibly inspired and energized by the opportunity which is out there— opening new stations, opening new routes, hiring new people— and that indeed being recognized by regulators, politicians, government bodies as, hey, that's a force for good. I mean, we hire 250 people with disabilities. You know, I was recently in one of our stations, Gwalior. One of the ground staff has a button, I can't speak, I can't talk, but I can't speak, I can't hear, but I'm happy to help. So we have— and to see what that does for a small airport like that and having people, giving people a purpose in life really to start working, being part of a team. I think that energy and that recognition from policymakers, hey guys, you are doing something good for the nation, is fantastic.

Richard Quest:Are you looking forward to sending your first plane into Schiphol?

Pieter Elbers:Absolutely. Absolutely.

Richard Quest:Will you be on board?

Pieter Elbers:Absolutely. With a big Indian flag, here we are.

Richard Quest:Thank you. Pieter, thank you very much.

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