India's biggest airline by market share IndiGo is highly optimistic about its growth, with works on to expand international routes to a 100 destinations from the current 70.
CNBC-TV18's Shereen Bhan caught up with the airline's CEO Pieter Elbers soon after its first quarter results were out. The chief of the aviation company, which reported the highest ever-quarterly net profit of Rs 3,090.7 crore, explained about how it has taken measures to mitigate the challenges faced by its competitors.
IndiGo is also celebrating 17 years of operations today, July 4. The airline's inaugural flight was from Delhi to Guwahati on August 4, 2006, and since then it introduced the concept of ramps for boarding and deboarding, launched its first international flight to Dubai in 2011, became the first Indian carrier to operate 1,000 flights a day in 2017, ventured into the Udan scheme in 2018, set a new record of maximum number of 3 lakh customers a day in May 2023, and recorded its largest order book of 500 A320 aircraft in June 2023, bringing the order book close to 1,000 aircraft.
The airline's CEO said IndiGo is looking into tapping the strong growth in India, especially in its aviation market, by connecting to a wider network of destinations.
Here are edited excerpts from the conversation:
Q: Let us start by talking about the standout quarter that you have been able to deliver and the question, though, is this sustainable? Are you going to be able to replicate the kind of margins which have come in at a record high of almost 31.2 percent, record revenue, as well as record profit, in terms of demand, and in terms of the external environment, will you be able to redo this performance?
A: Indeed, this results for this quarter has been actually a wonderful and very strong result and a lot of things were coming together in this quarter. And if you take a little bit of a step back at COVID, we have pretty much 10 quarters of consecutive losses and by the middle of last year, as from the third quarter, we are back into profitable territories. So now for three quarters in a row, we are back into black numbers, black figures, and this quarter obviously has been the highest one from the three.
And what we see really is a combination of two factors. Firstly, we see a very strong demand in the markets, the Indian economy is growing, Indian travel is growing, and visitors are growing. So a very strong market demand. India does not only have one of the fastest recoveries post-COVID in the world, but also a very solid demand going forward.
The second factor, really, what is helping us is that we have launched a whole range of initiatives last year, and we see that all these initiatives start to pay-off. So this combination of a strong market on the one hand side, and a lot of initiatives including a very strong operational performance, are really helping us in creating such good results. We are not making any prediction, what is going to be the precise result next quarter, as there is always some seasonal fluctuations in the results. But the foundations what we are doing as a company are really very strong.
Q: Speaking about what is happening in the market, I thought you would address that in terms of factors that are possibly helping you as well. We have seen significant amount of capacity being squeezed out of the market. Go First, there is no clarity on when it is likely to re-launch. There is no Jet Airways at this point in time. SpiceJet is facing its own set of troubles, as are you on the supply side. But how much of the capacity constraints are actually aiding you at this point in time and what could that potentially mean in terms of market share addition?
A: We prefer to look at IndiGo at what we can do and how we are able to help the market with the capacity, what is needed. Since we had the first challenges in the middle of last year with some of the supply chain challenges, forcing us to take some mitigating measures, we have been very consistent actually, in meeting our capacity guidance. We have given the guidance for last year, we have met the guidance even slightly higher. We have given the guidance for this year, and the call which we had earlier today, the north mid-teens are just repeated. So what we have actually in place at IndiGo is a whole range of mitigating measures, some extension of leases and we are of course, in the situation whereby we do have a steady flow of aircraft coming in.
To your question on Go First, yes, the suspension of Go First flights in early May created, of course, some certain market disruptions and dynamics. However, I should say, after a couple of days, you see that things are stabilising. And for us for the 400-plus domestic routes we are flying, there was like 15 to 20 percent of these routes were also operated by Go First. So the actual overlap on our network was limited, I should say.
The majority of the growth what we are seeing is really the growth of the markets and if you just compare today's market numbers to that of the situation before COVID, we are actually significantly higher. For us, year over year, we almost had a 30 percent growth in terms of passenger numbers. So that's really new market and we keep seeing and that's one of the — I would say — strongholds of IndiGo we keep seeing a lot of first time fliers in our aircraft and the very strong government policies in promoting air travel and making sure that smaller communities have access to air travel, that's really supporting the growth of aviation in India itself.
Q: You have talked about Go First and I would like to address the rumors and reports appearing in the regional press that suggests that IndiGo might be interested in Go First. Is there any truth to that at all?
A: IndiGo is focusing — again I am not reacting to any rumors — but IndiGo is focusing on developing our own company, we have a steady flow, I mean, even before we placed the most recent mammoth order of 500 aircraft, we already had 470ish aircraft yet to be delivered. So we are in a strong position to build our company and build our brands and that is really our focus going forward.
Q: Let us talk about some of the challenges that you need to contend with as well and I know that you have addressed this on the investor calls. I am just trying to get a little more clarity from you on the Pratt & Whitney recall aspect. In the first phase, Pratt & Whitney has announced that starting September, they will recall about 200 aircraft globally. Now, you have said that that will impact IndiGo in single digit numbers. You already have 40 aircraft grounded currently. So starting September to perhaps the end of the year, which is part of the winter schedule that you have to factor in, what will be the operational fleet size? What will be the grounded fleet?
A: We said we have in the highest 30s of AOGs (aircraft on ground) and today, I think we communicated that we are having around 40ish aircraft, which of course are driven by the supply chain. In addition, and that number is actually pretty stable over the past time.
Most recent announcements of the first batch of 200, I mentioned a single digit number actually for IndiGo. So that is for the weeks, and the months ahead will not have a very significant impact. Those are the numbers we can deal within our capacity guidance. And again, today, even for the full year, we have repeated our capacity guidance of the north mid-teens. So we don't know yet precisely what's going to be the next phase of the Pratt inspections to take place. We don’t know precisely what is the impact of that. We will work closely with Pratt whenever we have more information, whenever we get more information, we would like to be totally transparent. That is why we shared in our investor call whatever info we have we share there.
I think it's important to be transparent. And of course, we are working like we did last year on the range of mitigating measures such as extension of leases and the two wide-body leases we are having from Delhi to Istanbul and Mumbai to Istanbul are clearly also helping. So a range of measures, a range of initiatives and a stable capacity guidance — in other words, we continue to execute what we plan to execute, and we will deal with this together with Pratt how to find more mitigating measures for that.
Q: Let's talk about the other challenge, it is actually been a better environment as far as crude is concerned and you have seen the benefits of that play out for you in the quarter gone by. But we have now started to see crude prices inching up and that's resulted in aviation turbine fuel (ATF) moving higher as well. How much of a risk factor is that at this point in time, what are you penciling in?
A: There is obviously some global fluctuations in the prices of fuel and IndiGo, of course, is just affected by these global fluctuations and one quarter the effects are positive and another quarter, they could be negative. So I would not be in a position to predict or to speculate. And I think I have said that before, not sure to you, but if I were to be able to have a precise prediction for oil prices, I probably would not run an airline but have a different job. So we just follow actually here.
I think in the long run, actually, we see that there's always a correlation between fuel prices and actual prices of tickets. You mentioned ATF, I think what's an important element in India today is that more and more states and more and more stations actually, as part of the government policies are lowering the taxation on the ATF and aligning that. That helps a lot in order to make sure that India becomes more and more a global aviation hub.
And we are not only looking to passengers within India itself but even passengers traveling to and from and via India and more and more, we are building that connectivity and that connectivity system and that in itself will also help us to mitigate some of the fluctuations in prices which take place anyway.
A: I think we should probably make a bit of a differentiation between what's the trend in the direction and what are our actual situations. And the trend and direction of India is that India will grow as an economy, India will take an even more prominent place on the global stage as we basically see that growing by the day. With that the Indian aviation market will continue to grow and actually, whatever prediction you follow — and at the IATA conference a little less than two months ago in Istanbul, it was all about India, looking at the airshow in Paris, where IndiGo announced its order and Air India dated slightly before that, it was all about the growth of the Indian market.
So the general direction and the general focus on India becoming such a vibrant aviation market, that is there. Then, of course, there is the situation around Go First, which we follow closely, where it's important that it is matching some of the international standards and practices. So I think it's a bit premature to now connect the two and say, because of this, that will happen. Again, what is important is what is the long term perspective and how some of the actual situations, which I think it is still under development, it is probably not totally worked out or still some work in progress and some discussions going on to my understanding, without being aware of all the details, which are of course taking place behind closed doors. I think the overall direction is clear and India will continue to be developing as a global aviation powerhouse.
Q: You talked about India's place in the global aviation market. And we have seen its position consolidating, you spoke about those two big orders, yours and the one that's coming from Air India, as well. So I want to focus now, specifically as far as your own international plans are concerned, because when we last spoke, you did say that you wanted to aggressively now amp up your international expansion plans, given where capacity is and your aspirations, what should we now expect in the next few months, perhaps over the next year?
A: I think one of the things at IndiGo is, we say what we're doing and we're doing what we're saying. So when we said we're going to make international expansion, we're actually doing it and think about this, we announce more international expansion in three days from now. We will start our flight from Mumbai into Nairobi. First time ever IndiGo is connecting India into Africa — the first time an IndiGo aircraft is touching down on African soil, which is great.
Two days later, we start with direct flights from Mumbai into Jakarta. Again two days later, we start flying from Delhi into Baku and Tbilisi. Later we are adding Almaty and Tashkent. So we keep on adding that international network. And it's not only plans, it's actually coming into life. And with that, you see that our relative share of available seat kilometers is moving from the low 20s to a 30 percent of our network.
And as we continue to build not only new destinations, also lot of new routes are being added. And some of the examples I gave earlier today is next week, Friday, we start direct flights from Ahmedabad into Abu Dhabi. So these are both existing destinations, but we keep adding new routes and we're actually heading now towards a set of 100 different international routes, which a few months ago was only 70. So from 70 to 100 international routes, I think that speaks to what we're doing in terms of international development.
Q: What is the aspiration? You said that IndiGo delivers on the talk, it walks the talk, what's the aspiration? What's the internal target on what amount of revenue you expect from your international operation by 2025?
A: Yeah, I think we're not giving any guidance longer than 12 to 24 months, because around international development, there are significantly more uncertainties than there are for domestic, we need to get the air traffic rights, we need to get the slots, we need to get all the permission. So in terms of precise percentages, I would prefer to sort of stick to one or two year outlooks and we've now moved from 20 to 30 percent, or we will ending up in the range of 30 percent. And that will continue to grow.
The next phase really is the XLR coming in by the end of 2024, early 2025, which will further extend our range of flying. And then if you take again, we could start flying to places like Delhi-Athens and Delhi-Rome and to Seoul, but not only new destinations, also places like Delhi to Nairobi would then be possible, which today is connected Mumbai-Nairobi. So we can we can further expand our network and really build on that international network profile, then the precise percentage is going to be an outcome of that network development and not an objective in itself.
Q: That's as far as your international plans are concerned. I want to go back to the comment that you made about the strength of the domestic market and how you are seeing first time fliers coming on board and you're seeing a growth within the market itself. Now, what more can we expect from IndiGo, especially when we talk about the UDAN routes. Are the UDAN routes now, minus the viability gap funding, are profitable routes? How do you see IndiGo as the market leader expanding the domestic market?
A: It's an important point, of course. We like to speak about our international expansion and the growing share. The very backbone and the very foundation of IndiGo obviously, is still our domestic markets. And when we were speaking about the share of available seat kilometers, clearly, that's high internationally.
When we speak about the individual customers, clearly the domestic is still the backbone and the fact that we are now — and I should pronounce it correct — we start flying into in Shivamogga from Bangalore, that's just our 79th domestic destination. So we keep expanding that domestic network.
Earlier this year, we connected Delhi to Dharamshala. Now we're not in fact only connecting Delhi to Dharamshala, but suddenly it connects over Delhi to a lot of different places. So our strategy domestic really will continue to add destinations, and more so adding a number of routes.
And another very interesting statistic actually, is that today we operate a little over 500 routes, prior to COVID that was 350 routes. So we've added a total of a little short of 200 new routes since COVID, which I think speaks to what is our plans domestic. Adding new destinations, but even more so, adding a whole range of new routes and making sure that all these customers who want to fly actually have the access to air travel.
Q: Speaking of new opportunities, I also want to understand from you on the freight aspiration as well, which is of course, something that we saw all airlines are focusing on through the COVID period. Now, where do things currently stand on that front? And how big is that aspiration for you?
A: Today, let's take a step back. IndiGo has performed very well on cargo during COVID like a lot of other airlines. But with narrow body aircraft, it's a different setting. We do have in place today two Airbus 321 freighters dedicated to that. And in fact, we have quite a bit of cargo capacity on our leased 777 aircraft to Istanbul. That gives us the opportunity to get more experience also with that international cargo side.
Later this year, we're expected to get a short freighter coming in. And with that we start to build up our network and basically like similar to what we've done on the passenger side. It will take a bit enough time before we have that whole network up and running, have established all our customer bases. But I'm very proud of what our cargo team really is doing and start to build from these two freighters — not only the two freighters only, we do have 1850ish flight per day. So we see with the growth of eCommerce in India, with the growth of some of the pharma industries, with a lot of growth going there, that going forward, we still have a lot of aspirations and ambitions in that field. Having said that, it's taking us of course, a bit of time to start to prepare and building on it.
Q: Speaking of building on new opportunities, a venture capital fund that IndiGo has decided to announce. You're starting off small, Rs 7 crore, but what is this about? What is the bet that you intend to make?
A: Here we are becoming a global aviation player, which in itself in two days from now we're celebrating our 17th anniversary. And I'm sure you've seen it going around. But I don't think there's many, if any airline in the world, which has grown in 17 years from basically one flight to 1850 a day and to this year, hopefully 100 million customers. But with that 100 million customers and that size of the operation, we're in fact, expanding also and making sure that we work and collaborate with young, innovative new startups and companies.
And for that a fund like this could help us to work together to collaborate and to see for opportunities to continue to be ahead of the pack and prepare actually IndiGo for the next phase, which is not only domestic competition, but bringing IndiGo more to a global player and for that, I think India probably is one of the best places in the world to be with so much entrepreneurial spirits, IT spirits. People who started their own companies will help us to establish a more solid cooperation with some of these new startups. It's a new era for us. Absolutely. But I guess it speaks to the entrepreneurship not only of India, but also very much of IndiGo.
Q: You preempted my question. So is the focus largely going to be on collaborating with startups in the tech space? Is this part of the plan to sort of plug gaps, if any, within the digitisation journey that you intend to take? What will be the specific focus areas?
A: We actually have not predetermined a specific focus area. The most important criteria is that it's linked to the operation and the core business of Indigo itself. But with that, one could think about the operation at airports, one could think about our customer interface, one could think about the way we approach our customers. And again, here, obviously digital will offer us a whole range of new initiatives and the new opportunities and possibilities. And the whole world is coming to India for its digital enhancements. And actually, we're living here. This is our home. So we're in the right spot to build on that.
Q: Let me end by asking you, outside of the engineer issues, which you have spoken of, what would you count out or call out as possible risks today? And in terms of demand, as well as capacity what kind of pricing power does somebody like you enjoy today?
A: The demand is strong, and we expect it to continue to grow with the growth of the Indian economy and I think today, someone forwarded me a sort of risk of economic reduction of forecasts and where again, some countries were ranked high and India was ranked at the position of having a lower risk. So I think the whole outlook for Indian economy is pretty robust if you look to international analysts and reviews. Within the robust economic outlook, we can also feel that the demand outlook is strong and robust. Yes, there are seasonal patterns and yes, there will be fluctuations and there's always fluctuations. But I think the foundations in itself are solid. You addressed the engine issue. That's obviously something we keep a very close eye on. And we will make sure as we have done in the past that we can live up to our capacity guidance. And that is, I would say, our focus at this point in time. So I wouldn't add anything to the point you've mentioned just underlining that that's a point where we put a lot of efforts and a lot of focus in.
CNBC-TV18's Shereen Bhan caught up with the airline's CEO Pieter Elbers soon after its first quarter results were out. The chief of the aviation company, which reported the highest ever-quarterly net profit of Rs 3,090.7 crore, explained about how it has taken measures to mitigate the challenges faced by its competitors.
IndiGo is also celebrating 17 years of operations today, July 4. The airline's inaugural flight was from Delhi to Guwahati on August 4, 2006, and since then it introduced the concept of ramps for boarding and deboarding, launched its first international flight to Dubai in 2011, became the first Indian carrier to operate 1,000 flights a day in 2017, ventured into the Udan scheme in 2018, set a new record of maximum number of 3 lakh customers a day in May 2023, and recorded its largest order book of 500 A320 aircraft in June 2023, bringing the order book close to 1,000 aircraft.
The airline's CEO said IndiGo is looking into tapping the strong growth in India, especially in its aviation market, by connecting to a wider network of destinations.
Here are edited excerpts from the conversation:
Q: Let us start by talking about the standout quarter that you have been able to deliver and the question, though, is this sustainable? Are you going to be able to replicate the kind of margins which have come in at a record high of almost 31.2 percent, record revenue, as well as record profit, in terms of demand, and in terms of the external environment, will you be able to redo this performance?
A: Indeed, this results for this quarter has been actually a wonderful and very strong result and a lot of things were coming together in this quarter. And if you take a little bit of a step back at COVID, we have pretty much 10 quarters of consecutive losses and by the middle of last year, as from the third quarter, we are back into profitable territories. So now for three quarters in a row, we are back into black numbers, black figures, and this quarter obviously has been the highest one from the three.
And what we see really is a combination of two factors. Firstly, we see a very strong demand in the markets, the Indian economy is growing, Indian travel is growing, and visitors are growing. So a very strong market demand. India does not only have one of the fastest recoveries post-COVID in the world, but also a very solid demand going forward.
The second factor, really, what is helping us is that we have launched a whole range of initiatives last year, and we see that all these initiatives start to pay-off. So this combination of a strong market on the one hand side, and a lot of initiatives including a very strong operational performance, are really helping us in creating such good results. We are not making any prediction, what is going to be the precise result next quarter, as there is always some seasonal fluctuations in the results. But the foundations what we are doing as a company are really very strong.
Q: Speaking about what is happening in the market, I thought you would address that in terms of factors that are possibly helping you as well. We have seen significant amount of capacity being squeezed out of the market. Go First, there is no clarity on when it is likely to re-launch. There is no Jet Airways at this point in time. SpiceJet is facing its own set of troubles, as are you on the supply side. But how much of the capacity constraints are actually aiding you at this point in time and what could that potentially mean in terms of market share addition?
A: We prefer to look at IndiGo at what we can do and how we are able to help the market with the capacity, what is needed. Since we had the first challenges in the middle of last year with some of the supply chain challenges, forcing us to take some mitigating measures, we have been very consistent actually, in meeting our capacity guidance. We have given the guidance for last year, we have met the guidance even slightly higher. We have given the guidance for this year, and the call which we had earlier today, the north mid-teens are just repeated. So what we have actually in place at IndiGo is a whole range of mitigating measures, some extension of leases and we are of course, in the situation whereby we do have a steady flow of aircraft coming in.
To your question on Go First, yes, the suspension of Go First flights in early May created, of course, some certain market disruptions and dynamics. However, I should say, after a couple of days, you see that things are stabilising. And for us for the 400-plus domestic routes we are flying, there was like 15 to 20 percent of these routes were also operated by Go First. So the actual overlap on our network was limited, I should say.
The majority of the growth what we are seeing is really the growth of the markets and if you just compare today's market numbers to that of the situation before COVID, we are actually significantly higher. For us, year over year, we almost had a 30 percent growth in terms of passenger numbers. So that's really new market and we keep seeing and that's one of the — I would say — strongholds of IndiGo we keep seeing a lot of first time fliers in our aircraft and the very strong government policies in promoting air travel and making sure that smaller communities have access to air travel, that's really supporting the growth of aviation in India itself.
Q: You have talked about Go First and I would like to address the rumors and reports appearing in the regional press that suggests that IndiGo might be interested in Go First. Is there any truth to that at all?
A: IndiGo is focusing — again I am not reacting to any rumors — but IndiGo is focusing on developing our own company, we have a steady flow, I mean, even before we placed the most recent mammoth order of 500 aircraft, we already had 470ish aircraft yet to be delivered. So we are in a strong position to build our company and build our brands and that is really our focus going forward.
Q: Let us talk about some of the challenges that you need to contend with as well and I know that you have addressed this on the investor calls. I am just trying to get a little more clarity from you on the Pratt & Whitney recall aspect. In the first phase, Pratt & Whitney has announced that starting September, they will recall about 200 aircraft globally. Now, you have said that that will impact IndiGo in single digit numbers. You already have 40 aircraft grounded currently. So starting September to perhaps the end of the year, which is part of the winter schedule that you have to factor in, what will be the operational fleet size? What will be the grounded fleet?
A: We said we have in the highest 30s of AOGs (aircraft on ground) and today, I think we communicated that we are having around 40ish aircraft, which of course are driven by the supply chain. In addition, and that number is actually pretty stable over the past time.
Most recent announcements of the first batch of 200, I mentioned a single digit number actually for IndiGo. So that is for the weeks, and the months ahead will not have a very significant impact. Those are the numbers we can deal within our capacity guidance. And again, today, even for the full year, we have repeated our capacity guidance of the north mid-teens. So we don't know yet precisely what's going to be the next phase of the Pratt inspections to take place. We don’t know precisely what is the impact of that. We will work closely with Pratt whenever we have more information, whenever we get more information, we would like to be totally transparent. That is why we shared in our investor call whatever info we have we share there.
I think it's important to be transparent. And of course, we are working like we did last year on the range of mitigating measures such as extension of leases and the two wide-body leases we are having from Delhi to Istanbul and Mumbai to Istanbul are clearly also helping. So a range of measures, a range of initiatives and a stable capacity guidance — in other words, we continue to execute what we plan to execute, and we will deal with this together with Pratt how to find more mitigating measures for that.
Q: Let's talk about the other challenge, it is actually been a better environment as far as crude is concerned and you have seen the benefits of that play out for you in the quarter gone by. But we have now started to see crude prices inching up and that's resulted in aviation turbine fuel (ATF) moving higher as well. How much of a risk factor is that at this point in time, what are you penciling in?
A: There is obviously some global fluctuations in the prices of fuel and IndiGo, of course, is just affected by these global fluctuations and one quarter the effects are positive and another quarter, they could be negative. So I would not be in a position to predict or to speculate. And I think I have said that before, not sure to you, but if I were to be able to have a precise prediction for oil prices, I probably would not run an airline but have a different job. So we just follow actually here.
I think in the long run, actually, we see that there's always a correlation between fuel prices and actual prices of tickets. You mentioned ATF, I think what's an important element in India today is that more and more states and more and more stations actually, as part of the government policies are lowering the taxation on the ATF and aligning that. That helps a lot in order to make sure that India becomes more and more a global aviation hub.
And we are not only looking to passengers within India itself but even passengers traveling to and from and via India and more and more, we are building that connectivity and that connectivity system and that in itself will also help us to mitigate some of the fluctuations in prices which take place anyway.
Q: You have talked about the aspiration of making India a global aviation hub and I want to ask you this in the context of what we are seeing play out in the NCLT, etc. and there have been different representations being made on the rights of the lessors. One of the concerns is that there is a crisis of confidence within the lessor community. How are you reading that? How is that likely to impact agreements going forward? Are we already starting to see that being penciled in as far as security deposits are concerned, change in agreement at this point in time? How do you see this playing out for India in the medium-term, given the current environment?
A: I think we should probably make a bit of a differentiation between what's the trend in the direction and what are our actual situations. And the trend and direction of India is that India will grow as an economy, India will take an even more prominent place on the global stage as we basically see that growing by the day. With that the Indian aviation market will continue to grow and actually, whatever prediction you follow — and at the IATA conference a little less than two months ago in Istanbul, it was all about India, looking at the airshow in Paris, where IndiGo announced its order and Air India dated slightly before that, it was all about the growth of the Indian market.
So the general direction and the general focus on India becoming such a vibrant aviation market, that is there. Then, of course, there is the situation around Go First, which we follow closely, where it's important that it is matching some of the international standards and practices. So I think it's a bit premature to now connect the two and say, because of this, that will happen. Again, what is important is what is the long term perspective and how some of the actual situations, which I think it is still under development, it is probably not totally worked out or still some work in progress and some discussions going on to my understanding, without being aware of all the details, which are of course taking place behind closed doors. I think the overall direction is clear and India will continue to be developing as a global aviation powerhouse.
Q: You talked about India's place in the global aviation market. And we have seen its position consolidating, you spoke about those two big orders, yours and the one that's coming from Air India, as well. So I want to focus now, specifically as far as your own international plans are concerned, because when we last spoke, you did say that you wanted to aggressively now amp up your international expansion plans, given where capacity is and your aspirations, what should we now expect in the next few months, perhaps over the next year?
A: I think one of the things at IndiGo is, we say what we're doing and we're doing what we're saying. So when we said we're going to make international expansion, we're actually doing it and think about this, we announce more international expansion in three days from now. We will start our flight from Mumbai into Nairobi. First time ever IndiGo is connecting India into Africa — the first time an IndiGo aircraft is touching down on African soil, which is great.
Two days later, we start with direct flights from Mumbai into Jakarta. Again two days later, we start flying from Delhi into Baku and Tbilisi. Later we are adding Almaty and Tashkent. So we keep on adding that international network. And it's not only plans, it's actually coming into life. And with that, you see that our relative share of available seat kilometers is moving from the low 20s to a 30 percent of our network.
And as we continue to build not only new destinations, also lot of new routes are being added. And some of the examples I gave earlier today is next week, Friday, we start direct flights from Ahmedabad into Abu Dhabi. So these are both existing destinations, but we keep adding new routes and we're actually heading now towards a set of 100 different international routes, which a few months ago was only 70. So from 70 to 100 international routes, I think that speaks to what we're doing in terms of international development.
Q: What is the aspiration? You said that IndiGo delivers on the talk, it walks the talk, what's the aspiration? What's the internal target on what amount of revenue you expect from your international operation by 2025?
A: Yeah, I think we're not giving any guidance longer than 12 to 24 months, because around international development, there are significantly more uncertainties than there are for domestic, we need to get the air traffic rights, we need to get the slots, we need to get all the permission. So in terms of precise percentages, I would prefer to sort of stick to one or two year outlooks and we've now moved from 20 to 30 percent, or we will ending up in the range of 30 percent. And that will continue to grow.
The next phase really is the XLR coming in by the end of 2024, early 2025, which will further extend our range of flying. And then if you take again, we could start flying to places like Delhi-Athens and Delhi-Rome and to Seoul, but not only new destinations, also places like Delhi to Nairobi would then be possible, which today is connected Mumbai-Nairobi. So we can we can further expand our network and really build on that international network profile, then the precise percentage is going to be an outcome of that network development and not an objective in itself.
Q: That's as far as your international plans are concerned. I want to go back to the comment that you made about the strength of the domestic market and how you are seeing first time fliers coming on board and you're seeing a growth within the market itself. Now, what more can we expect from IndiGo, especially when we talk about the UDAN routes. Are the UDAN routes now, minus the viability gap funding, are profitable routes? How do you see IndiGo as the market leader expanding the domestic market?
A: It's an important point, of course. We like to speak about our international expansion and the growing share. The very backbone and the very foundation of IndiGo obviously, is still our domestic markets. And when we were speaking about the share of available seat kilometers, clearly, that's high internationally.
When we speak about the individual customers, clearly the domestic is still the backbone and the fact that we are now — and I should pronounce it correct — we start flying into in Shivamogga from Bangalore, that's just our 79th domestic destination. So we keep expanding that domestic network.
Earlier this year, we connected Delhi to Dharamshala. Now we're not in fact only connecting Delhi to Dharamshala, but suddenly it connects over Delhi to a lot of different places. So our strategy domestic really will continue to add destinations, and more so adding a number of routes.
And another very interesting statistic actually, is that today we operate a little over 500 routes, prior to COVID that was 350 routes. So we've added a total of a little short of 200 new routes since COVID, which I think speaks to what is our plans domestic. Adding new destinations, but even more so, adding a whole range of new routes and making sure that all these customers who want to fly actually have the access to air travel.
Q: Speaking of new opportunities, I also want to understand from you on the freight aspiration as well, which is of course, something that we saw all airlines are focusing on through the COVID period. Now, where do things currently stand on that front? And how big is that aspiration for you?
A: Today, let's take a step back. IndiGo has performed very well on cargo during COVID like a lot of other airlines. But with narrow body aircraft, it's a different setting. We do have in place today two Airbus 321 freighters dedicated to that. And in fact, we have quite a bit of cargo capacity on our leased 777 aircraft to Istanbul. That gives us the opportunity to get more experience also with that international cargo side.
Later this year, we're expected to get a short freighter coming in. And with that we start to build up our network and basically like similar to what we've done on the passenger side. It will take a bit enough time before we have that whole network up and running, have established all our customer bases. But I'm very proud of what our cargo team really is doing and start to build from these two freighters — not only the two freighters only, we do have 1850ish flight per day. So we see with the growth of eCommerce in India, with the growth of some of the pharma industries, with a lot of growth going there, that going forward, we still have a lot of aspirations and ambitions in that field. Having said that, it's taking us of course, a bit of time to start to prepare and building on it.
Q: Speaking of building on new opportunities, a venture capital fund that IndiGo has decided to announce. You're starting off small, Rs 7 crore, but what is this about? What is the bet that you intend to make?
A: Here we are becoming a global aviation player, which in itself in two days from now we're celebrating our 17th anniversary. And I'm sure you've seen it going around. But I don't think there's many, if any airline in the world, which has grown in 17 years from basically one flight to 1850 a day and to this year, hopefully 100 million customers. But with that 100 million customers and that size of the operation, we're in fact, expanding also and making sure that we work and collaborate with young, innovative new startups and companies.
And for that a fund like this could help us to work together to collaborate and to see for opportunities to continue to be ahead of the pack and prepare actually IndiGo for the next phase, which is not only domestic competition, but bringing IndiGo more to a global player and for that, I think India probably is one of the best places in the world to be with so much entrepreneurial spirits, IT spirits. People who started their own companies will help us to establish a more solid cooperation with some of these new startups. It's a new era for us. Absolutely. But I guess it speaks to the entrepreneurship not only of India, but also very much of IndiGo.
Q: You preempted my question. So is the focus largely going to be on collaborating with startups in the tech space? Is this part of the plan to sort of plug gaps, if any, within the digitisation journey that you intend to take? What will be the specific focus areas?
A: We actually have not predetermined a specific focus area. The most important criteria is that it's linked to the operation and the core business of Indigo itself. But with that, one could think about the operation at airports, one could think about our customer interface, one could think about the way we approach our customers. And again, here, obviously digital will offer us a whole range of new initiatives and the new opportunities and possibilities. And the whole world is coming to India for its digital enhancements. And actually, we're living here. This is our home. So we're in the right spot to build on that.
Q: Let me end by asking you, outside of the engineer issues, which you have spoken of, what would you count out or call out as possible risks today? And in terms of demand, as well as capacity what kind of pricing power does somebody like you enjoy today?
A: The demand is strong, and we expect it to continue to grow with the growth of the Indian economy and I think today, someone forwarded me a sort of risk of economic reduction of forecasts and where again, some countries were ranked high and India was ranked at the position of having a lower risk. So I think the whole outlook for Indian economy is pretty robust if you look to international analysts and reviews. Within the robust economic outlook, we can also feel that the demand outlook is strong and robust. Yes, there are seasonal patterns and yes, there will be fluctuations and there's always fluctuations. But I think the foundations in itself are solid. You addressed the engine issue. That's obviously something we keep a very close eye on. And we will make sure as we have done in the past that we can live up to our capacity guidance. And that is, I would say, our focus at this point in time. So I wouldn't add anything to the point you've mentioned just underlining that that's a point where we put a lot of efforts and a lot of focus in.
First Published: Aug 3, 2023 6:42 AM IST
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