How hubris turned IndiGo's once-disciplined success model into chaos

By Mihir S Sharma

 

When IndiGo entered India's already crowded skies two decades ago, it was a revelation. It was supposedly a low-cost airline, but it was more comfortable and welcoming than most of our full-service carriers. Its well-maintained cabins had a calming, if excessively cutesy, aesthetic. It felt like a world-beating product when Indians too frequently have to put up with second-best.

 

Most importantly, its flights invariably left and arrived on time in a country where punctuality is often considered a luxury.

 

That’s why what’s unfolded in recent days feels like a shock, a betrayal even: Over 3,000 flights were canceled last week, and thousands more delayed. On Friday, amid a clash with regulators over new pilot flying hours, almost half of the airline’s scheduled flights didn’t take off. Already crowded airports were stuffed to the gills with angry, abandoned passengers and their luggage. 

 

How did a company famous for its discipline and world-class service get here? It’s a familiar story in India: One of a regulatory establishment that overreaches without overseeing, of shrinking capacity amid excessive ambition, and of companies that grow arrogant enough with success to take on their employees, customers, and regulators all at once.

 

IndiGo, which is operated by InterGlobe Aviation Ltd, started out as a scrappy underdog in a sector where everyone else was backed by government, billionaires, or storied corporate groups. And that’s why it thrived: It wasn’t a vanity project in a business that attracted them. Just an ordinary, professionally run company that tried to keep things simple.

 

It bought one aircraft type: Airbus 320s. That simplified maintenance and training, and ensured a quick turnaround time on the ground. Those planes were leased, not owned, so the company stayed asset-light. Its schedules were carefully designed, but stacked with flights; aircraft stayed in the air for about half the day, a far higher proportion than the global norm.

 

Lots of flights, planes in the air and not on the ground, and a dedication to being on time — a disciplined approach that kept passengers loyal, costs low, and earnings stable. It also meant it grew incredibly fast. In two decades, IndiGo has largely taken over the world’s fastest-growing aviation market, with an almost two-thirds share. And it’s still ambitious, planning to break into the lucrative European market; it reportedly has an astounding 1,400 aircraft on order, after adding another 500 more A320s in 2023, the largest single buy ever recorded. 

 

Nobody expected this tightness and discipline to become its biggest problem. But it should have been predictable: With minimal turnaround times, sometimes just half an hour between domestic flights, cancellations and delays can cascade through the schedule until it collapses in on itself. There’s no slack in the system for shocks.

 

And shocks are what India specialises in. New regulations have been introduced that reduce the amount of time pilots can fly in a week. They must be given 48 hours of consecutive rest, up from 36.

 

Something like this might indeed be needed to deal with a growing problem of pilot fatigue, which has become a global issue. But Indian regulators specialise in three things: rules that are harsher — on paper — than those elsewhere in the world; weakness in the face of corporate power; and a complete inability to check if companies are able and willing to comply before they introduce systemic changes.

 

That’s exactly what happened here. The Directorate General of Civil Aviation’s proposed regulations are more conservative and less flexible than those in Europe and the US. In particular, they introduce stricter, quantitative restrictions on night flights and landings — two per week per pilot for the latter — compared to elsewhere. In a country where night flights are vastly more common than in jurisdictions where airports tend to shut down early, such requirements are naturally going to cause problems. 

 

IndiGo has known for months, even years, that these rules will drive an Airbus-sized hole through its clever business model, but has chosen not to prepare for them, or even to push for a sensible compromise. Its management is clearly unwilling to hire hundreds of new pilots at a time when it’s already taken big bets on new planes and new routes.

 

The company knew it was dominant enough that the government couldn’t force it to obey unless politicians were willing to endure weeks of disruption, and over the holiday period at that. Worse, they seem to have won: The regulator has just caved, extending the compliance period for the changes to February.

 

IndiGo was aware its reputation for timeliness and efficiency would lead flyers to blame the regulator rather than the airline. It used that reputation to get its own way, rather than working with the authorities in advance. This felt like the equivalent of a corporate strike.

 

The government is now talking of trying to end IndiGo’s dominance, built on efficiency and a better product. If the airline’s never the same again, that would be a shame. Why can’t Indians have nice things? Because our companies and their regulators take them away when they exist.  (Disclaimer: This is a Bloomberg Opinion piece, and these are the personal opinions of the writer. They do not reflect the views of www.business-standard.com or the Business Standard newspaper)