Days after low-cost carrier AirAsia announced it would launch its India operations by the end of the year, IndiGo Airlines President Aditya Ghosh, 38, tells Sudipto Dey in an interaction why his airline is not one that should be worried.
He also shares his views on why adding new aircraft capacity, competition, and unbundling of fares will only help keep passenger fares low in India.
In 2006, being one of the promising new airlines, you were seen as a challenger. Seven years on, you are a leader (with 29.5 per cent share of the market in May 2013).And, a new aggressive challenger is standing at the gate. Should we expect IndiGo to adopt a defensive strategy from here?
We will continue to play like we have played before. We did not change our plans with giant airlines in our own backyard.
Even now, we are not going to change our plans.
We will continue to do two things: Chase growth, which is there; and compete against what we were yesterday.
I hope we are like Roger Federer -- boringly consistent.
So, you are not losing sleep over AirAsia entering the market?
I am embarrassed to say this but I really am not.
Sorry for not giving you a dramatic response; I sleep fairly well.
That’s because we are building a strong business, because we have a great team and because we are building a long-term sustainable business.
If you focus on someone else, you lose focus on what you are trying to do.
We are focused on bringing 18 planes over the next 18 months and keep growing from there.
We are flying a fleet of 66 aircraft now and should have 84 by the end of 2014 -- that is, addition of an aircraft every month for the next 18 month.
Our average fleet age is 2.2 years.
So, we are the youngest fleet in the sky. Passengers always get to fly a brand-new plane.
From the airline’s point of view, we burn less fuel.
The issue of AirAsia poaching IndiGo pilots caught a lot of attention. Was keeping your flock together part of a defensive play -- a bit of a mind game?
I never strategised that. That’s the disadvantage of not going to a business school.
We have not got even one resignation yet.
But such challenges will always remain.
In fact, pilots do not need a new challenger in India -- they can fly IndiGo today; Emirates tomorrow, if they wish; or Philippines Airlines the next day; or even Singapore Airlines.
The focus for us is that people working with IndiGo should be happy working with IndiGo.
I interview each person who joins IndiGo (the headcount at present is around 7,000). One question I ask everyone is, what’s your personal dream?
Each day you spend working with IndiGo should bring you a step closer to that dream.
We aim to be better today than we were yesterday.
How do you see AirAsia’s entry changing the Indian market?
The new player has a sharp bunch of people.
They run a good airline.
They will run a sharp business and not do anything silly.
They run a successful business everywhere else in the world, keeping the costs low. Those that have kept prices high need to worry.
Many of your peers have taken potshots at your claims of being a 'profitable' airline, even as the industry was bleeding. How has 2012-13 been in terms of financial performance?
We will disclose the numbers for last financial year in another 60-odd days.
We have come out of a strong year -- both in terms of growth and profitability.
The dollar will impact us more this year but the objective is to remain profitable this year, too.
We broke even for the first time in March 2009.
We have been profitable in each year since then.
So, was there margin pressure in FY13... did profitability go down?
Not really. (Passenger) Capacity went down; demand was more than supply.
So, profitability margins did not come down.
The players with stable and lower costs should bring in more supply.
So, what I’m saying has a two-fold import.
First, a motherhood statement, the business has to be run in a way that costs are less than revenue.
This makes business sustainable.
And, second, from the passengers’ point of view, sustainable business has to bring in more supply, so that fares come down.
That is exactly what we are trying to do at IndiGo -- build a strong sustainable profitable business and bring in more planes so that we can offer lower fares.
We are entering a phase where we will see unbundling of fares. How does that change the economics of the business?
That is bound to happen, if airlines have to meet costs.
So far, Indian passengers were used to paying for buffet lunch.
Now, buffet lunches are becoming à la carte menus.
If the entire global industry is moving in a direction, India cannot be unique in that respect. Every mature market has gone that way.
Do you expect a major ramp-up in ancillary revenues?
We hope so.
Indian airlines’ ancillary revenues are not even a third of what airlines like Ryanair, EasyJet and Spirit Airlines make from ancillary services.
How do you allay passengers’ concerns that they might have to shell out more?
There is nervousness among passengers due to the transition and the flux.
Airlines, too, will take a few months to get it right.
But passengers would get used to it easily. Indian customers are used to paying differential parking fees, paying more for food and balcony seats inside movie halls, etc.
Airlines are no different. People are willing to pay for extra convenience if they see value.
Even today, IndiGo offers something called ‘Fast Forward’ for corporate customers. There’s an extra dedicated line at check-in, where you can zip through after paying a fee for about Rs 200.
Customers wanted convenience of paying for excess baggage in advance, so we brought a pre-pay facility.
However, we will never charge for a glass of water, or for using the toilet.
We should not lose sight of the fact that ancillary revenues will only help bring airfares down.
It has happened everywhere in the world; it will happen in India, too.