IndiGo has turned out to be a consistently aggressive player. The 9 year old airline, which went public when fuel prices were at their lowest and profits at their highest, already flies 98 Airbus A320 current engine option (CEO), and is soon expected to add its 99th airplane. Then, the Airbus A320 new engine option (NEO) starts getting delivered. The magnitude of the airline’s orders, and the airline’s share of the first 35 aircraft to be delivered dwarfs every other airline.

Out of the 98 airplanes that the airline flies, 84 are part of the 100 airplane order that the airline placed in the year 2005. 16 aircraft were returned to the lessor, and those were the only airplanes that had a 6 year lease term. Then, IndiGo did something it had never done before – it started short term dry leasing older, previously operated airplanes, in a desperate attempt to increase capacity. The airline has leased 14 aircraft, most from Tigerair, and is soon expected to induct it’s 15th such airplane, making it the 99th active aircraft in the fleet. All the short term dry leased airplanes that were not part of the airline’s order are registered VT-IDx, with ‘x’ taking values from A to O.

IndiGo resorted to such leases because it felt the Indian market had the demand. More than 50% of the airline’s fleet today has been inducted  since 2012 – the year Kingfisher airlines went down. IndiGo filled in the void left by Kingfisher, was prepared for a void to be left by SpiceJet, and prepared to boost capacity to take on AirAsia India and Vistara. Today, the airline has a momentum that seems unstoppable. After exhausting its A320CEO order (100 airplanes, placed in 2005), the airline is left with 430 Airbus A320NEO airplanes that have been ordered and not yet delivered (an order for 180 airplanes in 2011 and 250 in 2015). The Airbus A320NEO is expected to soon be certified. IndiGo has opted for the Pratt and Whitney PW1100G geared turbofan engine option, and the NEO airplanes offer fuel savings of upto 15% more than A320CEOs without winglets/sharklets.

As of October 31st, there are 2,868 disclosed orders for Airbus A320NEO airplanes from airline operators and leasing companies. Out of those 2,868 orders, IndiGo’s totals 430 aircraft – a staggering 15% of that number. This is followed next by the AirAsia, which has 304 NEOs on order.

Although Qatar Airways is the launch customer of the A320NEO, the first production NEO is destined for IndiGo. Out of the first 35 NEOs to be produced, 10 are IndiGo’s, followed next by 6 of Qatar Airways.

Both these point to one thing – that IndiGo is desperate for capacity.

But with the 1st, 2nd, 4th, 6th, 9th, 10th, 12th, 15th, 18th and 19th A320NEOs destined for IndiGo, why would the airline want to lease a 11 year old A320 as its 99th aircraft?

The A320NEO was expected to be certified this November, but there apparently few delays that has forced Airbus to state that Qatar, the launch customer, will receive its A320NEO by end of this year, without publicly stating a date. IndiGo is a good planner, and perhaps the induction of the 99th aircraft as an old airplane points to the airline having some knowledge about delays in the NEO program which may be unacceptable for a carrier that is ever looking to add capacity.

IndiGo will be adding capacity not just with airplanes, but with seats. While the airline has stated its intent to induct Airbus A321NEOs, orders for such airplanes do not yet officially reflect in Airbus’s order book. Another way the airline is adding seats to airplanes is through the Space Flex concept, where the two aft lavatories will be moved into the galley, freeing up enough space to accommodate an additional row of passengers, taking the total to 186 seats per A320 as opposed to the present 180 seats per A320. All A320s can be retrofitted to the new configuration.

Interestingly, IndiGo co-founder Rakesh Gangwal mentioned that that the larger A321NEO will have a longer range, when compared to the A320NEO. He told Livemint, ” We will soon have the (Airbus) A321, with 234 seats. That brings down costs dramatically and allows us to do different things. Also, the range of the A321 is bigger, so with the same product, we can fly on longer routes from India”. It was only in January this year that Airbus formally announced the A320NEOLR, a 97 tonne Airbus A321 with three auxiliary fuel tanks that offers a range of 4000 nautical miles (NM), which is 300 NM more what is advertised for the A320NEO. Airbus claims that the 97 tonne A321NEO has “the longest range of any single aisle airliner available today and tomorrow, making it ideally suited to transatlantic routes and will allow airlines to tap into new long haul markets which were not previously accessible with current single aisle aircraft.”

However, deliveries for the long range A321NEO are expected in second half of 2018, which means IndiGo will have to do with the A320NEO till then.

Aditya Ghosh told AIN that the airline will increase its operating fleet to 111, 134 and 154 aircraft, by the end of March 2016, 2017 and 2018, respectively.

This means that IndiGo will need to induct:

1. 13 A320NEOs by end March 2016, or 4 – 5 airplanes a month assuming deliveries for IndiGo start in January 2016.
2. 23 A320NEOs between March 2016-March 2017, or 2 airplanes a month in FY2016-17.
3. 20 A320NEOs between March 2017-March 2018, or 1-2 airplanes a month in FY2017-18.

This will total to 56 A320NEOs, which will represent 36% of the airline’s fleet by end 2018, in line with what Aditya Ghosh told AIN in October: “We will, within two and a half years, have two-thirds of our fleet with Neos and in five to six years, have an all-Neo fleet”.

With such a plan, all the airplanes presently in IndiGo’s fleet will stay atleast till end March 2018, after which aircraft may be replaced by A320NEOs.

Assuming that IndiGo starts replacing the A320CEOs in its fleet with A320NEOs in its fleet from FY2018-19 to FY 2020-21 (to have an all NEO fleet in 5-6 years), that will involve replacements at an average rate of 2-3 airplanes a month. IndiGo has historically inducted on average 1 airplane a month, but in March 2012 it inducted 3 airplanes in a month. IndiGo will be able to handle 2-3 replacements a month, and perhaps 2 additions each month, taking the induction to a total to 4-5 airplanes a month, perhaps at maximum. At such a rate, the fleet at maximum may rise to around 220 airplanes in FY2021-22. A ball-park figure of 200, if achieved, will translate to IndiGo doubling its fleet in the next 5-6 years, amounting to a net CAGR of 12% – a very reasonable growth rate.

The initial hiccup, however, may still be with the A320NEO program. If IndiGo is to achieve its target of 111 airplanes by end March 2016, and if the NEO certification further pushes back timelines, the airline may have to induct more, previously-operated and old CEO aircraft, though that seems somewhat unlikely.

One of IndiGo’s A320NEOs, a Toulouse assembled frame, which is also the 6th NEO to be built (MSN6720), has been flying since 25th September 2015 to help with the certification program. The second A320NEO (MSN6744), which unlike the other initial NEOs for IndiGo has been assembled at Hamburg, and fully painted in the airline’s colors, but missing engines. It may be that the latter MSN (the Hamburg build) will be delivered first to IndiGo.

Thanks to Ameya for heads-up on the 99th aircraft.