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Mint
11 hours ago
- Business
- Mint
United Airlines CEO says low-cost model is dead and he may be right
United Airlines and JetBlue announced an agreement on May 29 to link loyalty programs. The broader understanding helps United return to New York one more time, while it mainly focuses on customer loyalty programs, cross-earning and sharing benefits. Speaking to WSJ, Scott Kirby, the CEO of United Airlines, called the low-cost model 'dead', adding that its aim was to 'screw the customer'. Interestingly, JetBlue had started as a low-cost carrier (LCC), though it quickly added amenities like live inflight TV and subsequently a business class cabin. Scott Kirby's remarks may resonate closer home in India, with IndiGo's CEO Pieter Elbers saying 'We have left the station of a typical LCC, if there is such a thing' last year. IndiGo is the largest carrier in India by both fleet and market share. As Indian LCCs scaled the heights of market share, passengers often complained of either no fare difference or very limited fare differential between LCCs and Full-Service Carriers (FSC) in India. IndiGo, like many of its peers in India, started as a pure-play low-cost carrier. When Kingfisher Airlines and Jet Airways were struggling in the aftermath of the 2008 financial crisis, it went to town explaining the benefits of a single fleet type, its positive impact on costs and operations. The first change for IndiGo was adding a row of seats in the A320neo to make it 186 seats instead of the standard 180 it had with the A320ceo. In 2017, IndiGo added a new fleet type to its fleet with the induction of the ATR 72-600 turboprop aircraft. The LCC station was left in the true sense back then. Today, the IndiGo fleet comprises a multitude of aircraft configurations within its over 400 aircraft, apart from the damp-leased ones the airline operates. If various aircraft types was not enough, IndiGo added a Business class equivalent cabin, calling it IndiGoStretch, which started operations in November last year. The airline also launched a frequent-flyer programme. Go FIRST was possibly the last true LCC that operated in Indian skies, having a single fleet type. Akasa Air has taken that place eventually, though it has different configurations for planes and will continue to have a mix of MAX 8 and MAX 8-200 in its fleet. Akasa Air has not been able to grow as per its initial announcements after indicating planes in quick succession in its first year of operations. Air India Express, which had a fleet of 26 B737s at the time of privatisation, is now more times its size but with a mix of A320ceo, A320neo, A321neo, B737NG and 737 MAX 8. SpiceJet, on the other hand, joined the multi-fleet bandwagon much earlier than IndiGo. However, its focus has been on sustenance amid multiple financial headwinds rather than growth. India today has only one FSC in the form of Air India. As it shifts to a three-class configuration, akin to Vistara which merged with Air India, the economy class is competing with the LCCs with features like 'pay for seat selection', shorting up ancillary revenues and the difference being only in the meals being served complimentary on the FSC. While the LCCs moved up the pedestal, the FSCs climbed down in a double whammy for the customers. This often points up to the question of how FSCs are different in India and the answer to that lies only in the cabins upfront with Premium Economy now offering the service levels and options which were common to Economy class two decades ago and Business class focusing on more and more frills, especially with modern seats. In essence, is Economy then a downgrade in an FSC? All indicators point to a resounding yes and this helps the traditional FSC compete with LCCs, with the bulk of the passengers comprising economy class. Pre-pandemic, when there existed three FSCs in India — Jet Airways, TATA-SIA-owned Vistara and government-owned Air India — the LCCs led by IndiGo were pushing the envelope up with every month and the LCC concentration in the Indian domestic market was over 80 per cent at its peak. On the other side of the pandemic, there is no Vistara or Jet Airways and IndiGo with a 60 per cent-plus market share is a different airline than what it was while SpiceJet has shrunk. The Indian market effectively is undergoing a transition like never before and while the first part of Scott Kirby's statement may be right, the second part definitely does not fit well in Indian context. In fact, the Indian LCCs helped the average Indian consumer fly and more than doubled the market with each passing decade. The rate of growth for Kingfisher Airlines, Jet Airways, Vistara or Air India was much slower than what the trioka of SpiceJet, IndiGo and Go Air achieved in its early years. If anything, the impact was felt on FSCs and not consumers.
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Business Standard
23-05-2025
- Business
- Business Standard
IndiGo to restore 80 grounded planes by 2026; airfares may ease slightly
IndiGo is expected to return most of its grounded planes to service by early 2026, boosting its active fleet by nearly 80 aircraft in the financial year 2025–26 (FY26), according to a report by The Economic Times. This increase is about twice the airline's typical annual addition of 40 planes. Grounded aircraft to rejoin operations Currently, around 40 of IndiGo's planes are grounded. With improved engine supply from Pratt & Whitney (PW) and longer engine life between repairs, approximately 30 of these will return to active service. The remaining 10 will be released back to lessors as their lease terms expire. Will fares come down as capacity rises? IndiGo's current operating fleet stands at 434 aircraft. The planned expansion could help moderate airfares, which have remained elevated due to capacity constraints. However, aviation analysts caution that since some of the additional capacity will be used to launch new international routes, any drop in domestic fares may be limited. Engine issues contribute to recent financial pressure IndiGo's financials have been strained due to engine-related groundings. The number of aircraft powered by PW's geared turbofan engines and currently grounded has exceeded 40. Combined with high aviation turbine fuel prices, these issues led InterGlobe Aviation Ltd — IndiGo's parent — to post a ₹987 crore consolidated loss in Q2 FY25, compared to a ₹189 crore profit in the same quarter the previous year. Strong Q4 performance boosts annual outlook Despite the Q2 setback, IndiGo posted its highest-ever consolidated net profit in Q4, with a 61.9 per cent year-on-year rise to ₹3,068 crore. Strong travel demand during the Mahakumbh in Prayagraj, an extended wedding season, fewer grounded planes, and better cost management contributed to the gains. For FY25 overall, IndiGo's profit stood at ₹7,258 crore — an 11.2 per cent decline from FY24. Rare defect detected in A320neo engines Pratt & Whitney previously flagged a rare powder metal defect in engines used on A320neo aircraft, which could cause component cracking. In September, it announced that 600–700 engines would require detailed quality inspections between 2023 and 2026. To mitigate the disruption, IndiGo extended leases on older A320ceo aircraft and secured both narrow-body and wide-body aircraft on wet lease agreements.
Mint
28-04-2025
- Business
- Mint
Growth the single agenda, Air India Express defies the standard LCC model
In the second half of April, two A321s started operating for Air India Express, the low-cost arm of Air India. This could have been a routine deployment for any airline, except for Air India Express, the 108th aircraft in the fleet is a new type. With the induction of these two aircraft, the airline now has B737-800NG aircraft, the only type it had when it was privatised, the B737 MAX8 (part of the order placed by Air India group in 2023), A320ceo and A320neo, most of which it inherited from erstwhile AirAsia India, which merged with Air India Express. Some planes came from parent Air India, and now, the A321s also come from parent Air India. Low-cost carriers traditionally focus on having a single fleet type. This helps the airline keep costs low by having a single training requirement, the ability to swap planes and crew, and ensuring better On-Time Performance and operational efficiency. Additionally, it helps on the engineering and maintenance side by having to maintain spares for just one type of plane. Air India Express has always been under the shadow of its parent company, Air India. It was a government entity largely restricted to routes from the southern part of India to the Gulf. Cut to now, the airline has a sizable domestic presence, part of which it inherited from erstwhile AirAsia India, which merged into Air India Express, and some transferred from Air India. The airline's fleet now includes A321neo, A320neo, A320ceo, 737 MAX8 and 737NG, totalling a little over 100 planes. While it has been a traditional operator of 737NG and built capability for the 737 MAX8, it inherited the capability to maintain the A320 family from erstwhile AirAsia India and Air India. In the end, it boils down to accounting. As an unlisted entity, it may never be known how the airline handles internal transfers, finances and inventory management. The airline has been expanding rapidly. By May, it will be 1.5 times the size it was last May. The growth is more on the domestic routes, which will be nearly thrice in terms of capacity compared to last May. However, this growth comes with many ups and downs. The airline is growing rapidly on some holiday-centric routes like Delhi-Srinagar, Bengaluru-Goa and Tier II routes like Delhi-Ranchi, Bengaluru-Bhubaneswar, amongst others. However, it has also pulled out of routes like Chennai-Kolkata, Hyderabad-Amritsar, Delhi-Gwalior or Jaipur-Pune. A churn in routes is common when an airline grows as rapidly as Air India Express is. However, the airline can hope that this churn is handled well and does not create a negative impact on passengers. The airline has also been receiving flak for its On-Time Performance, with parent Air India often showing better punctuality. In its quest to add capacity, it has a livery conundrum. The legacy fleet features the old livery, with each side of the tail depicting a different scene from India. The MAX 8 have the new Air India Express livery depicting the art and culture imprints from different states of the country, it has a whole bunch of A320s which it inherited from erstwhile AirAsia India which are in Red livery without titles and it has old Air India livery planes with decals mentioning its operations for Air India Express. In a market constrained by capacity, it is only logical that the airline waits for a major check to take the aircraft out of service and plan the livery change, rather than taking it out twice. There are also many planes up for redelivery, and they may not be repainted at all. However, such multiple liveries never bode well for a customer-facing business, which is rather particular about its brand image. India has had two bankruptcies in the recent past, Jet Airways and Go FIRST, with a pandemic in between them. Growth has moderated from what it was ten years ago. For double-digit growth to return, the country needs capacity, but capacity induction can happen when there are slots at airports, which are hard to come by at most large airports in the country. Amidst this, the Air India group is pushing Air India Express, seemingly with a lower cost structure, to be the flag bearer of competition against IndiGo and fill the void left by carriers which collapsed. In the past, IndiGo used its superior financial numbers to push competition by dropping fares on competition-specific routes. However, Air India Express is coming in with a force which was not seen before, thus making it difficult to counter with the same strategies. As long as the battle helps the consumers, it will be a good battle in the industry where the two players are backed by large groups. First Published: 28 Apr 2025, 12:40 PM IST
Reuters
28-03-2025
- Business
- Reuters
Air India's budget airline head expects capacity growth to outpace demand
NEW DELHI, March 28 (Reuters) - The head of Air India Express said on Friday that the increased capacity Indian carriers expect to add in coming years will outpace demand, which may potentially bring down ticket prices, as the airline industry comes under criticism for rising fares. India's domestic air travel sector is among the fastest growing in the world, but just two carriers - IndiGo and Air India, parent of Air India Express - control about 90% of the market. Criticism around rising fares has been growing. Earlier this year, India's aviation regulator, the Directorate General of Civil Aviation (DGCA), was forced to step in and ask airlines to cut fares after prices soared during the Hindu Maha Kumbh festival. "The capacity that we expect coming into the market, not just over the next year, but over the next several years, in all probability, will stay ahead of the demand," Managing Director Aloke Singh told reporters, when asked about air fare concerns. His comments come days after an Indian parliament committee recommended giving the DGCA the power to regulate air fares, currently based on demand and supply considerations. Indian airlines are expected to add 96 aircraft to their fleet this calendar year, according to data from consultancy Cirium Ascend, slightly less than in the previous two years. Express will add about 15 aircraft to its fleet in the next fiscal year, which begins on April 1, with some procured from Air India, Singh said. It is also working on a "long term" fleet plan, he said, without elaborating. Capacity should rise by about 45% next year, enabling the airline to carry an average of 2.5 million passengers per month, up from 2 million passengers the previous year, Singh said. Express added about 37 planes last year, consisting of Boeing's (BA.N), opens new tab 737 MAX jets and Airbus ( opens new tab A320neo and A320ceo aircraft. The company plans to complete the addition of economy class seats to its aircraft by the beginning of fiscal year 2027, Singh said. The carrier is also looking to deepen arrangements with international low-cost airlines Scoot, Jazeera Airways and Air Arabia, among others, allowing passengers more options.
