No plans to launch airlines abroad: Aditya Ghosh

Interview with President, IndiGo

This article has been modified. Please see the clarification at the end.

Days after turning nine, IndiGo, India’s largest airline by market share, has announced an order to buy 250 narrow-bodied A320 neo aircraft for $25.7 billion. In an interview with Aneesh Phadnis, IndiGo President Aditya Ghosh talks about the mega aircraft deal, the company’s coming initial public offering (IPO) and other plans. Edited excerpts:

Earlier, IndiGo had signed a memorandum of understanding (MoU) with Airbus for 250 A320neo planes. Why did you allow the MoU to lapse? Is Monday’s order according to the same terms?

It is according to the same terms. The MoU lapsed because we were unable to sign the purchase agreement within the stipulated period but we were always in discussions with Airbus.

There is a perception that you signed this order to boost investor sentiment ahead of the IPO. The draft red herring prospectus had revealed the MoU had lapsed and investors could have seen this as a negative.

We have finalised the order, which will be received through the next decade. The 100 planes we ordered in 2005 have been delivered and the deliveries of 180 planes ordered in 2011 will begin later this year. Monday’s order will chart our growth in the next decade. Very few well-run businesses would make such large commitments on the basis of what would happen over the next two-three months. It would be incorrect to say we announced the order to boost investor sentiment.

 

When will the deliveries of the 250 Airbus A320neos begin?

The deliveries will take place between 2018 and 2026 and will overlap with the 2011 order deliveries.

IndiGo has about 400 planes on order. That means you would induct 40 planes every year through the next 10 years.

Many of the planes on order will be replacements (for planes whose leases expire). So, the net addition will be less. It is difficult to say exactly how many planes we will induct each year; that would depend upon the prevailing market conditions. I can say our growth has been faster than our original plans. In the past year, we added 17 planes.

Does IndiGo plan to launch airlines in other countries?

All the planes are for the airline operating in India; there are no plans to start an airline in other countries. We see a massive opportunity in India. It is a hugely under-penetrated market.

IndiGo’s international operations are limited to five destinations. Are you planning to fly to more?

I am not saying we will not expand internationally but primarily, we are a domestic airline. I cannot make forward-looking comments and share specific routes because of the IPO process.

Critics say IndiGo makes profits because of higher other income.

If it is so simple, why don’t other airlines make money?

That is also because other airlines’ operations are more complex.

We want to keep our business simple and consistent.

How will the airline fund the 250-plane order? Has IndiGo selected the engine option?

We have successfully financed our 100-plane order and we will decide on financing the 250 planes in due course. We are yet to finalise the engine option.

CLARIFICATION
In an earlier version of this article, it was wrongly mentioned that IndiGo had added 15 planes in the past year. The correct position is that the company added 17 planes according to its draft red herring prospectus. The error is regretted.