IndiGo: Desperate for Capacity

IndiGo had been an aggressive player from the start. The airline was nine years old, had gone public when fuel prices were low and profits were high, and flew 98 Airbus A320 aircraft with current engine option (CEO) engines. Its 99th aircraft was due soon, and then the new engine option (NEO) deliveries would begin. IndiGo's orders, and its share of the first 35 NEOs to be built, were far bigger than any other airline's.

A fleet of leased aircraft

Of the 98 aircraft, 84 came from the 100 aircraft order placed in 2005. Sixteen were returned to the lessor, and those were the only ones on a six year lease. Then IndiGo did something new. It began to dry lease older, used aircraft for short periods to add capacity quickly. It had leased 14, most from Tigerair, and its 15th was expected soon, which would be the 99th active aircraft. These leased aircraft were registered VT-IDA to VT-IDO.

IndiGo felt the Indian market had the demand. More than half of its fleet had joined since 2012, the year Kingfisher Airlines collapsed. IndiGo filled the gap Kingfisher left, got ready for a gap from SpiceJet, and built capacity to meet AirAsia India and Vistara.

The NEO order

After the 100 aircraft CEO order, IndiGo had 430 A320neo aircraft on order and not yet delivered: 180 ordered in 2011 and 250 in 2015. It chose the Pratt and Whitney PW1100G engine, and the NEO saves up to 15 percent more fuel than an A320 CEO without sharklets. As of 31 October 2015 there were 2,868 disclosed A320neo orders from airlines and lessors. IndiGo's 430 made up 15 percent of them. AirAsia was next with 304.

Qatar Airways was the launch customer, but the first production NEO was meant for IndiGo. Of the first 35 NEOs, 10 were IndiGo's, followed by 6 for Qatar. IndiGo was due to get the 1st, 2nd, 4th, 6th, 9th, 10th, 12th, 15th, 18th and 19th. So why lease an 11 year old A320 as the 99th aircraft? Certification had been expected in November, but delays meant Airbus would say only that Qatar would receive its NEO by the end of the year. IndiGo plans well, and the old aircraft may mean it knew of delays it could not accept.

More seats, longer range

IndiGo also planned to add seats. Its Space Flex idea moves the two rear toilets into the galley and frees room for one more row, taking an A320 from 180 to 186 seats. Any A320 can be retrofitted. The airline also meant to take A321neos, though they were not yet in Airbus's order book. Co-founder Rakesh Gangwal told Livemint that the A321 would have 234 seats, cut costs sharply and fly longer routes from India. In January 2015 Airbus announced the A320neo LR, a 97 tonne A321 with three extra fuel tanks and a range of 4,000 nautical miles, 300 more than the A320neo. Deliveries were expected in the second half of 2018, so IndiGo would use the A320neo until then.

Fleet targets

Aditya Ghosh told AIN that the operating fleet would reach 111, 134 and 154 aircraft by the end of March 2016, 2017 and 2018. That meant:

• 13 NEOs by March 2016, or 4 to 5 a month if deliveries began in January 2016.
• 23 NEOs between March 2016 and March 2017, or 2 a month.
• 20 NEOs between March 2017 and March 2018, or 1 to 2 a month.

That totals 56 NEOs, or 36 percent of the fleet by the end of 2018. Ghosh had said two thirds of the fleet would be NEOs within two and a half years, and an all NEO fleet in five to six years. All current aircraft would stay until at least March 2018. If CEOs were replaced from 2018 to 2021, that would mean 2 to 3 replacements a month. IndiGo had averaged one new aircraft a month, though it took 3 in March 2012. With replacements and about 2 additions a month, it could handle 4 to 5 aircraft a month, taking the fleet to around 220 in FY2021-22. A fleet of 200 would double the present one in 5 to 6 years, a reasonable 12 percent annual growth.

The weak point was the NEO program. If certification slipped again, IndiGo might have to add more old CEO aircraft to reach 111 by March 2016, though that seemed unlikely. One IndiGo NEO, the sixth built (MSN 6720), assembled in Toulouse, had flown since 25 September 2015 for certification. The second NEO (MSN 6744), assembled in Hamburg and fully painted in IndiGo colours but without engines, might be delivered first.

Thanks to Ameya for the tip on the 99th aircraft.