Airline Leader Interview with IndiGo CEO Pieter Elbers

Transcript

Richard Quest:Pieter Elbers is with me. How— he's already had an effect. He's made me come up here without my jacket. I feel quite naked in front. Pieter, how much of a culture shock was it going from the ordered, structured life at KLM in the Netherlands to India?

Pieter Elbers:Well, it's— I would say it's a different structure. If you do 2,000 flights a day, there has to be structure, right? So, so it's a, it's a different structure. I think one of the biggest differences is the enormous growth and the growth potential. So the growth we're having and the growth we're enjoying in the market, that, that I guess is one of the largest differences.

Richard Quest:Right, but your competitor CEO, Kamal Wilson, says when he turned up at Air India— and we'll come to the sort of that in a second— but it was quite extraordinary that, you know, people were using Gmail emails for their own email. The legacy tech and infrastructure, technology infrastructure, was so outdated it was prehistoric. What did you find?

Pieter Elbers:I found a company which is only 17 years young, which has done pretty much something extraordinary to grow from one single flight a day up to today, 2,000 a day in a timeframe of just 17 years. And that could only be executed by a relentless focus on execution, on customer service, and, and doing the right things in a very, very efficient way. So I found a company which is thriving and with actually even a lot more potential going forward. And you saw it in the video. We welcomed last year 86 million customers in a single year prior to COVID. The record at that point in time was 74%, so we're actually already 15-ish percent above pre-COVID levels.

Richard Quest:So I don't mean to be disrespectful with this question. What do you bring to the company? I mean, CEO—

Pieter Elbers:That's a very disrespectful question.

Richard Quest:Yeah, but, you know, a legacy carrier, one of the oldest in the world.

Pieter Elbers:The oldest in the world, still operating under its original name.

Richard Quest:Yes, you've reminded of numerous occasions. But what, what do you bring?

Pieter Elbers:You know, I think IndiGo has been a company which has done extraordinarily well in the domestic space. And still today, roughly 22-23% of all our available seat kilometres, and in flights even less, is domestic. And we're just at the start of a further internationalisation. So today we operate 84 destinations in the country itself. and only 32 outside. So that ratio will change, and we're going to put a lot of new stuff in place, which actually we started a little over a year ago. We have more codeshare agreements in place now. We further expand international. We have actually quite a few connecting customers today. So we're moving from a, I would say, primarily domestic-focused company into more a— well, I would dare to say more a carrier with a much broader scope. In terms of range and even partnerships and connectivity.

Richard Quest:Right, but, but, but your aircraft, you're, with the exception of the 777s, you're a single, uh, single aircraft fleet.

Pieter Elbers:Yeah.

Richard Quest:Um, and therefore there's a certain geographical limit, albeit huge, to where you can go, assuming you can get the planes.

Pieter Elbers:Well, Richard, if you, if you, if you just take India, 3,200 kilometers from north to south, 3,000 kilometers from east to west, look at the big metropolises, and then take the, the range of today's A320 and A321, which today indeed is the backbone of our operation, you would cover 65% of the world population. And that leaves aside the XLR, which would further expand it. So if 65% of the world population is within reach of of today's aircraft for us, I think we still have a lot of opportunity to further grow and further develop that.

Richard Quest:How many aircraft do you have on the ground at the moment?

Pieter Elbers:Well, today we have a number in the 40-ish aircraft on the ground.

Richard Quest:And this is because of?

Pieter Elbers:This is because of the topic which was addressed in the previous session, a lot of these supply chain challenges we're having.

Richard Quest:The engines?

Pieter Elbers:The engines, yes.

Richard Quest:Are you pissed off?

Pieter Elbers:Yeah, but it doesn't make too much sense to be on stage here, on stage being pissed off. Of course, you know, if, if, if, if home—

Richard Quest:40 planes is a huge— it's a fleet for some of the people.

Pieter Elbers:It is. But I think what we have done at IndiGo, we have done actually a lot of mitigating measures. We've extended some of the leases, we've taken some temporary leases, and with that we have been able to, to live up to our capacity guidance. We had a capacity guidance in the north mid-teens in this financial year. We're going to make that number. We're actually very confident. Last financial quarter, we had a 28% growth compared to last year. So we're actually just, just continuing on that track of growth. And thanks to the timely mitigating measures we've been taking, we are able to actually achieve our target this year of 100 million customers in this financial year.

Richard Quest:But what we talked earlier in the day before you were here about the ability of a carrier to put pressure on the OEMs, you know, to basically sue them. for not delivering or for bad engines or for whatever it might be. And one of the things I heard at the break was, no, you can't do that because they threaten you back. But you buy so many planes, you are in a very strong position to say you perform or else.

Pieter Elbers:Yeah, I mean, like every airline, we have our in-depth discussions and debates with the OEMs, and I would like to leave it there.

Richard Quest:We wouldn't.

Pieter Elbers:No, I know that's— but I would.

Richard Quest:All right, assuming we leave it there, how much of your ability to grow is now constrained by OEM issues?

Pieter Elbers:No, I think again at IndiGo we are probably in a different position than some of the others. Of course, I wish we would not have this entire supply chain issue. Having said that, we do have a steady flow of aircraft coming in, and you saw it on the little video. We have an outstanding order of close to 1,000 aircraft, which is an incredible number. And that means actually for the next pretty much decade to come, each and every week we got a new plane coming in.

Richard Quest:And what the hell do you— how do you manage that?

Pieter Elbers:Well, that, that's— you asked earlier, what did you find? I found an incredible professional and smooth-running organization where these number of planes are getting in, we allocate them to the network, we fly them, And there's such a demand in India. Look what's happening with the country today. India is moving actually swiftly forward to become the 3rd largest economy in the world before the end of the decade. And yet the number of planes in the country itself is relatively limited. There's like 3,000 planes in operation in China. There's 700-something planes in operation in India. And just 2 countries, similar population, landmass is a bit different, admittedly, but still. So the, the The market, I would say, is still largely underserved. And with that, we need those planes.

Richard Quest:Right. So what do you do? I mean, you can open new routes, you can expand the international network, you can increase the frequencies of your— you were telling me some horrifying numbers.

Pieter Elbers:Well, we're in fact doing all of that. So we have recently opened up some 12 new routes.

Richard Quest:How many times do you go from Delhi to Mumbai?

Pieter Elbers:19 today. We used to have 18, we're at 19 a day.

Richard Quest:19 a day?

Pieter Elbers:Yes. And that's mostly, I should say, A321s, some A320s, but mostly A321s. And, and the good news is there's going to be a new airport opening in Delhi, a second airport. There's a second airport opening in Mumbai. But, but again, here, think about that. Pick the 10, 15 largest cities in the world in terms, in terms of size of the population. They all have 2, 3, 4, 5, whatever the number of airports. Delhi used to have one. Mumbai used to have one. I think it's India's time, really. A lot of infrastructure developments are now coming to fruition and will bring it. For us, more destinations, more frequencies, new routes, and that's basically the focus of the expansion.

Richard Quest:Right, but the traditional view, and now certainly in Latin and Central America, is the The carrier's traditional competitor had been the bus or the train. It's same in India to an extent for travel. It was the coach, the bus, or the train. Now, who is your main competitor?

Pieter Elbers:Well, the train is still there, and India is investing a lot in trains, and that's good because that would take away even some of the pressures on slots and capacity. So I'm a big proponent of more investments on that. But again, there, the drive for mobility, and with the economy moving to be the 3rd largest economy in the world, and all these megacities— and India, contrary to some other countries, is not very centralized. You have not only the 6 metros, but also a lot of other places which are really very significant in size. And we just expand from there, both domestic and international. And if you take a city like Bhubaneswar, I'm sure it's not very high on the list of cities you've visited, But did you know where that was on the map before you became the CEO? No, but now I know, and that's why I'd like to impress you.

Richard Quest:Exactly.

Pieter Elbers:And, and we just opened new flights from Bhubaneswar to Singapore and Bhubaneswar to Dubai. And, and with that, we just keep expanding that network. And that— and there are so many of these cities in India which having potential to connect directly into the region. And as I said earlier, 65% of the population is living in that range. So, so there's a lot of potential not only for new destinations but also new routes.

Richard Quest:Right. I can see how that grows and I can see you just keep adding bits. You know, essentially you grow to the extremities of the airline, of the aircraft.

Pieter Elbers:Correct.

Richard Quest:Range.

Pieter Elbers:I mean, another example, we opened up in August new flights from Mumbai into Nairobi. First time for IndiGo to touch African soil. That's greatly connecting our network out of Mumbai into Nairobi. Flights now from Nairobi into— sorry, from Mumbai into Jakarta, out of Delhi, Baku, Tbilisi, Almaty, Tashkent. And that just solidifies India as a—

Richard Quest:But what do you do? But you're point-to-pointing.

Pieter Elbers:We're connecting also. So point-to-point is the very core of what we do. But on these flights, we find actually a lot of connecting cities and from a lot of cities in India. And if you need to go from from Bhopal to, to, to Nairobi, you can perfectly connect through to Mumbai with us.

Richard Quest:Herb Keller, I interviewed him several times over his life, and from Southwest, for those who are under 40, he always said to me, the biggest danger is you start fiddling with the model. Michael has drunk from that Well, deeply. Are you at risk of fiddling with the model?

Pieter Elbers:I don't think so. The model is very much focused on our 3 customer promises: affordable fares, hassle-free and courteous service, and on-time performance. And that's the very core. And whatever fits in that core of the model in terms of serving that, We're doing that. And I think in addition, I think one should look at what's the overall landscape and where is the market moving to. And the fact that we do have customers connecting on us without sacrificing our industry-leading utilization, without sacrificing some of the other stuff, it's perfectly suitable for us. We may review that or may further fine-tune that going forward, but today it really helps us to build that customer basis.

Richard Quest:So where do the 777s come into this?

Pieter Elbers:Well, the 777s came in as a sort of one of the mitigating measures to deal with the supply chain challenges. So we have a partnership with Turkish Airlines. We took 2 777s on a, on a damp lease basis from both Delhi and Mumbai into Istanbul. And that's again for us a good way also to develop some of that new connectivity. It's connecting beyond into Europe, into the US, even 5 destinations in the US in codeshare. And it's giving us the opportunity actually to prepare because because in less than 2 years we get the XLR coming in. The XLR will bring us from Delhi into Europe. It will bring us into Northeast Asia. So, and a lot of people—

Richard Quest:How long will those flights be?

Pieter Elbers:7 to 8 hours. And a lot of people in India, actually, the brand awareness of IndiGo is great. Outside India, outside this region, actually, there's some work to be done.

Richard Quest:So when do you start Tinkering? Well, I think we better have a few more comfortable seats at the front.

Pieter Elbers:You know, our view is—

Richard Quest:Yield, Richard, greater yield on those seats at the front. JetBlue's done it, FlyDubai's done it.

Pieter Elbers:Yeah, no, I, I see all those examples. Again, we, we keep all options open going forward, and we just focus today—

Richard Quest:You're gonna do it, aren't you?

Pieter Elbers:No, we are focused on the relentless execution of our model. Yeah, and that's what we do. And each and every week we've got a new plane coming in, we put it on the network, we put new routes, new destinations, and we're going to build those numbers.

Richard Quest:Yeah, but you know, um, when FlyDubai buys 787s and Jetstar's got 787s, and you can— your virginity as a low-cost carrier is not broken by having wide— more widebodies. Is it? You can still buy more.

Pieter Elbers:You know, actually, when we did— when we signed the order for 500 aircraft in Paris, I got that very same question. And let me give that very same answer. If you have almost 1,000 planes on order, and I don't think there's any airline in the world really who's having that number of planes on order, I think we have our hands full in making sure, to your earlier question, How do the planes come in? Where do you allocate them? How do you grow? And with that, that has all our focus and attention today.

Richard Quest:Right. Any questions from, from, from our guests here for Pieter? I was very aware that I was remiss in not asking earlier, but I want to just give a chance. Yes. Is that somebody there? Sorry? Oh, someone on the screen. Which screen? Oh, oh, here we go. Oh, I'm so sorry. Here we go. Yes. Campbell Wilson suggested yesterday that Indian Airlines Should be, I think, should be protected from more international capacity. Agree or disagree?

Pieter Elbers:You know, I have a habit, and you may decide whether it's a good habit or not a good habit, not to comment on any viewpoints or remarks from my competitors in the Indian market. What I can say, though, is that the share of Indian Indian airlines in the Indian market is significantly lower than some of that of the foreign carriers. And we're actually building up an Indian infrastructure in order to compete and making sure that, that the Indian carriers can also play that global role, which was not there for, for a long time. So I would like to refrain from commenting on what Campbell Wilson said or what he didn't say or in what context did he say it. I think it's up to the government to decide at what point in time further steps are going to be taken. We are developing actually quite significantly our international network. We have 32 destinations today and we keep actually adding not only destinations but even more so a lot of new routes.

Richard Quest:But do you, to the extent that I hear what you say about not commenting on others, but if we just take it at a corporate level, You are competing against a group, Tata Group, that owns 3 airlines or has interests in 3 airlines. I mean, it's a bit like as quick as you can bash one, the others are coming at you, and your ownership structure allows you that focus, but you are facing a formidable, well-funded competitor.

Pieter Elbers:Yeah, but what's happening in India today actually is— it was not the case for a long time. Look at the history of many Indian Indian Airlines and what happened in the market.

Richard Quest:Bad.

Pieter Elbers:So today, probably for the first time in history, we see a consolidation taking place, and with that, I would say a more stable market situation taking place, which wasn't there for a long time. So overall, the market and consolidation, as took place in the US, as took place in Europe, it's a natural thing to happen. And yes, we'll be competing with the Air India Group, which is, which is again, it's a It's a thing we're, we're ready for.

Richard Quest:Um, you're not going to answer this, but I'll ask it anyway.

Pieter Elbers:Uh, then, then why, why do you?

Richard Quest:Because I want to.

Pieter Elbers:Okay, good.

Richard Quest:I mean, the competitor that IndiGo had, the Air India competitor, somewhat shambolic, disheveled, and, and all over the place, is not going to be the competitor that you're going to face in 3 or 4 or 5 years' time as Campbell sort of gets to grips with it and turns it into a much leaner fighting machine against you. And we see that already in a sense of there's a, there's a small uptick in their market, domestic market share. Does that— what do you need to do to recognize that or to, to counter that?

Pieter Elbers:You know, today, um, the fact that this consolidation is play— is taking place, the fact that India is becoming a more mature market where eventually Shareholders are looking for return on capital. Pricing should be a reflection of the actual cost of doing business. That dynamic will take place in India as well, like it's taking place in other parts of the world. And that in itself for the industry is a good thing. And we will be making sure that our cost leadership, which IndiGo had all these years, our cost leadership will remain there. And that's why we continue to focus on remaining a very lean and very efficient and agile organization.

Richard Quest:The size and scale is quite extraordinary. You were giving me the numbers earlier comparing about daily flights of KLM plus Air France equaling less than your current daily schedule.

Pieter Elbers:You know, it's, it's, it is a, it's a narrow-body operator only, so we have— sorry, except for these 2, 2 damn pieces of widebodies. We have a little over 300 aircraft, 330-ish. 44 of them are ATR and the rest is all Airbus. That brings us to 2,000 daily flights. And I mean, just as a number, that was not too long ago, less than 2 years ago, it was 1,500. So we're just expanding at a very impressive speed, and that would help us. And with that, and that's where we are today, we're the 7th largest airline in the world in terms of daily departures.

Richard Quest:It's extraordinary. Well, again, I mean, is it extraordinary?

Pieter Elbers:Is it extraordinary for the country with the largest population in the world? Is it extraordinary for the country which is soon to be the 3rd largest economy in the world? Or is it finally time for India to catch up and having these numbers?

Richard Quest:I was just about to say it exhibits my own stereotype and prejudice that you have these airlines in India, which I have been and visited and done stories on, but one forgets about them. And but, but, you know, I travel around now And there's your planes chugging up to terminals, you know, 1 or 2 flights a day all over the region now. And this next question, can you expand on your plans for routes to Central Asia, Tashkent, Samarkand, Almaty, and Bishkek?

Pieter Elbers:No, I see it as a continuously expanded circle around India. IndiGo started 17 years ago as a purely domestic airline. In 2011, the first international flights were done. They were actually to the classical destinations here in the Gulf itself. Gradually, we have expanded. So Singapore was added, Malaysia was added, Thailand was added, and we have now actually very recently taken the next step with Baku, Tbilisi, Almaty, Tashkent. So we move up to actually to the northern part into Central Asia. First step into Africa, first step into Indonesia. With the XLRs coming in, that range could go up even further up north into China, such as Korea, and parts of Europe will be reachable with that. with that XLR, depending on what the precise range is going to be. So we're actually expanding that circle, and with the expansion of the circle, we're not only able to add more destinations, but we're also able to add multiple destinations outside— sorry, from multiple destinations in India itself to outside. We used to fly only from 2 Indian cities to Singapore. That's ridiculous. Today we have 7 Indian cities into Singapore. There's no reason why Some other carriers could fly to 12 different cities in India and we do one. So, so we're actually rebalancing that setting. And today, as I said, 7 different cities in India we fly into Singapore.

Richard Quest:Would you like to send one of your little planes into Amsterdam one day? Would there be a certain sort of joy? Schadenfreude? No, no, no.

Pieter Elbers:Would you like to fly to No, I would miss the opportunity by flying back on KLM if I ever traveled between Amsterdam and Delhi. So I would miss that opportunity. But, but with that, you know, we, we will expand our network into, into that region as well. And whether Amsterdam is going to be part of that, I don't know. It's just a business trade-off at what point in time. And if there are still slots available in Amsterdam, I guess that's another—

Richard Quest:Yeah, what do you make of that?

Pieter Elbers:That's another, that's another story.

Richard Quest:But I mean, what do you make of the The Amsterdam fiasco.

Pieter Elbers:I think you summarized it in one word. I'm following it from a distance, so I don't think I'm in a position to say anything on that, but it's a wonderful piece of infrastructure. It's a great airline. It's a great contributor to the national economy and structure like that, and I can only wish for all my former colleagues at KLM that The government is taking very good care and very considerate in all the decisions being taken on that part for Schiphol, for KLM, and for Air France-KLM.

Richard Quest:Yeah, we might ask which government, but that's another subject.

Pieter Elbers:Well, when it goes to Schiphol, it's the Dutch government.

Richard Quest:Well, not quite. I was thinking about the wider issues of the government. The overall direction. I mean, however long your tenure is at IndiGo, what would you— what do you see as your goal? I know that sounds sort of one of those grand visions, but, but you, you, you've inherited a machine because that's what it— I mean, it's a, it's an exceptionally efficient machine that is churning out flights every day. Growing exponentially. So what do you, what do you want to do?

Pieter Elbers:You know, in 2030, by the end of this decade, we will be double in size to what we are today. So take all the numbers we have. So by 2030, and could be '31, could be middle of '30, but by the end of the decade, we'll be double in size. And again, at that point in time, India is the 3rd largest economy in the world. We should have an airline matching the size and the potential and the scope of that country. And whatever is underneath in terms of what's our customer service, what's our network, what's our direct connectivity, what are the airports which we serve, and all the investments being done today in that 2nd airport in Delhi, 2nd airport in Mumbai, that's all part, I would say, of that, of that scheme where we stand in 2030.

Richard Quest:But how will you have to— how will you have to adapt the airline to accommodate the fact that it is not a little airline 17 years ago? It is now 300 to 500 to 700 planes running stage lengths of 6 to 8 hours, and that will require a different mindset.

Pieter Elbers:Absolutely. So we have a strategy rolled out which basically has 3 very important elements of it. One is preserving what's the very core of the company itself: on-time performance, affordable fares, and courteous and hassle-free service. That is to be there every day. And if you just look at the OAG statistics, you see the punctuality of the airline is great. It's really a unique asset. So that's one. We need to keep that at 1,500 daily flights, at 2,000 daily flights, and at 3,000 daily flights. flights. One. Two is whatever we're going to do in the field of digital artificial intelligence. We've actually, as recent as last week, we have introduced a lot of new artificial intelligence. And again, there India is a great place to be. The whole world comes to India to—

Richard Quest:So what have you got AI doing?

Pieter Elbers:So we have now the AI in a lot of predictive models. We have the AI for a lot of sort of customer interfacing aspects in terms of helping to, to build that better bridge. You know, everything what we do needs to be scalable. I think that's one of the earlier questions you had. Whatever we do needs to be scalable, and we cannot just make it scalable by adding more people, more people, more people. And again, there I think India is a great place to be because if digitization, artificial intelligence, a lot of these things are actually all being homegrown and we develop that in-house. So that's the second pillar. The third pillar is whatever we do around internationalization and about building our model, building some of the partnerships we're having. So these 3 pillars—

Richard Quest:Alliances.

Pieter Elbers:Should help us— partnerships. These 3 pillars are helping us to make sure that that vision and that ambition to double in size and scale by 2030 is going to be met.

Richard Quest:Finally, when you left KLM, and again, it's the ignorance and prejudice, in a sense of the industry that we don't give enough importance to vast carriers, China, or maybe we do more China than we do in India. What did they— what did people say to you when you left and about— and they said you're going to IndiGo?

Pieter Elbers:I think IndiGo outside India or outside the region—

Richard Quest:What did they say?

Pieter Elbers:Tell me what precisely it is.

Richard Quest:What it is, where it is, why, why, why?

Pieter Elbers:Where it is is clear, but what it is, and I think it's, it is just not, not known outside India too much. We're getting there, and it was also not needed. You know, if, if 96% of your customers are domestic, then there's no need. Today that ratio is changing a lot, and, and that's helping us. And again, you know, look at the foreign, foreign investments in India is growing. Look at Indian companies going abroad is growing. The Indian diaspora is probably the largest diaspora in the world. So all these aspects are helping us to build up, to build up that. So, back to what was the question? Where are you going to? And I think by now people figure out that it's, it's actually a massive airline with even a greater potential going forward.

Richard Quest:One of the things that people love at KLM, particularly at the front, The Delft Blue houses. The little blue house.

Pieter Elbers:Yeah, no, I can't bring them for you anymore, so I'm done with that.

Richard Quest:No, but are you going to design an IndiGo equivalent of the little blue houses that people can collect?

Pieter Elbers:This is your way of asking if we're going to introduce a premium class?

Richard Quest:I've had a second bite at the cherry. Ladies and gentlemen, Pieter Elbers. You could do it in economy.

Copyright policy: All transcripts on this site are the copyright of CAPA - Centre for Aviation. Our reproduction policy is as follows: you may quote up to 400 words of any transcript on the condition that you attribute the transcript to CAPA - Centre for Aviation and link to the original video page. All other use is prohibited. While we aim for 100% accuracy in the transcript, there may be some minor transcribing errors.