Over the past decade, starting international flights has become more about pride than profits for Indian carriers. It means added sophistication, Royal Doulton china, fine wines and cabin crew that speak foreign languages. Entering this airspace on September 1 will be IndiGo, India’s second largest airline by marketshare. In doing so, the country’s largest low-cost carrier (LCC) will be flying in the face of stiff competition from established LCC players — AirAsia, Air Arabia and home-grown Air India Express — on the same routes.
What it is banking on is its successful desi formula: Clean, fresh airline product, great on-time performance and cheap tickets. Promoter Rahul Bhatia is certain that his formula, which has seen IndiGo grow steadily in the past five years — it was even profitable in the bad years of 2008-2010 — will prove effective for international operations as well.
The fortunes of IndiGo’s predecessors, however, have not always soared when they crossed the seas: Some achieved outstanding results; others floundered. The Indian government has been stringent about permitting domestic airlines to fly abroad: Jet Airways had to wait for nearly 12 years, while Kingfisher promoter Vijay Mallya, a man in a hurry, acquired Air Deccan (which had been around for longer) to piggyback on. Kingfisher’s decision proved disastrous, as its international debut coincided with the global economic slowdown and the airline has lost Rs. 2,700 crore in the past two years.
Old Formula, New Tests
Speaking to Forbes India, IndiGo CEO Aditya Ghosh says a lot of effort goes into keeping it simple. Efforts had begun in 2010, as IndiGo had hoped the government would allow it to fly overseas before it completed five years. Though the approval didn’t come, insiders say the network planning, marketing, training and product definition began in earnest.
With flights to Dubai, Singapore and Bangkok, IndiGo is expecting a large percentage of its customers to be first-time fliers and expat Indian labour. Crew training is, therefore, crucial. “The idea is to anticipate all their needs, so that the passengers feel comfortable while flying with us,” says Ghosh. The crew are encouraged to speak in Indian languages and those who raise an eyebrow at first-time fliers are not welcome.
The planning is also reflected in the flight timings. IndiGo flights to Singapore and Bangkok coincide with the notoriously strict check-in times of hotels in these two cities. Departures from Dubai are in late evenings, to let people spend the day there.
IndiGo plans to continue with its no-frills philosophy on international flights too. There will be no hot meals or in-flight entertainment. Passengers will have to pay for food and alcohol. “In many ways, the new flights are extensions of things we are already doing well. Mumbai-Kolkata or Ahmedabad-Kolkata are routes with flights over three hours, which is longer than Mumbai-Dubai,” says Ghosh.
Flying overseas could have major ramifications for the airline. It has grown at a slow but steady clip, adding about eight planes every year to its fleet. Of its 39 aircrafts, eight will start flying on international routes. This will increase as the network grows.
Bhatia is also leading an aggressive rollout for his hotel business, through his other venture InterGlobe Hotels. He plans to put up 200 Ibis hotels by 2015, as a part of his joint venture with French hotel major Accor. Yet, in terms of volume, revenue from the airline will remain the larger part of his business.
IndiGo is an unlisted company and its revenues and profits are not made public, but analysts estimate the company’s profit at about Rs. 600 crore on revenues of Rs. 3,500 crore in 2010-11.