IndiGo's flight path, 20 years on: Market leader faces global headwinds

Global headwinds have forced the airline to make steep cuts in capacity

In June 2005, two determined Indian entrepreneurs placed orders for 100 Airbus planes at the Paris Air Show — making the global aviation industry sit up and watch.

 

Rahul Bhatia, whose family ran a travel business, convinced an initially reluctant Kolkata-born Rakesh Gangwal, who ran US Airways for four years as chairman and CEO, to co-promote IndiGo Airlines.

 

The deal was struck after some hard bargaining in meetings in a Mexican fast- food joint rather than a fancy restaurant. They were able to negotiate a hefty discount — better than what Airbus offered its best customers.

 

Bhatia had earlier made an abortive attempt to set up an airline with the Kansagras, a wealthy British-Indian family, who had bought the licence for the Lalit Modi-headed Modiluft airline, now defunct. The Kansagras did not accept Bhatia’s demand for equal equity and, instead, launched SpiceJet with Ajay Singh in May 2005. IndiGo launched with an Airbus A320 flight on August 4, 2006, between Delhi and Imphal via Guwahati.

 

The journey so far

 

Twenty years on, IndiGo with its 430-strong fleet (one-and-a-half times Air India’s) is not only a dominant player in the Indian skies but a global player to reckon with. In July this year, OAG ranked it among the 10 largest airlines in the world in terms of frequency of flights. In June, the research agency said it was the world’s third most punctual airline with an on-time performance of 86.64 per cent.

 

IndiGo lords over the Indian market. In June, it hit a new record, grabbing a 66.3 per cent share of what is the third-largest domestic airlines market in the world — behind only the US and China — according to the Directorate General of Civil Aviation (DGCA). And it widened its market share gap with its chief rival, the Air India group, by over 5 percentage points between January and June 2026. In international skies, with a 20 per cent share of flights from India, it is neck-and-neck with the rival.  

 

A few days ago, IndiGo signed an order for 1,000 engines — the largest in the world — with CFM International, which will partly power 510 new Airbus planes ordered in 2023.

 

But the airline’s dominance has also triggered attacks from rivals and fliers, who allege its quality of service has declined sharply. Competing airlines allege that it has exploited its clout to grab the best slots and timings in airports and used its pricing power to weaken competition. But government regulators and the Competition Commission of India have been soft in taking action. Said a senior executive of an airline: “In telecom, which is also a strategic industry, there is a 50 per cent cap on market share in each circle. But even at over 65 per cent, IndiGo faces no such issue — so there are double-standards.”

 

Yet no one can deny IndiGo’s success in an industry where many of the big boys— from Jet Airways and Vijay Mallya’s Kingfisher to Wadia’s Go First — have fallen like ninepins. 

 

Long-term planning

 

So what did IndiGo do right? Said Sanjay Kumar, who has worked at various airlines, including a long stint in IndiGo as part of its top management team: “The big difference is IndiGo from the beginning had a long term consistent plan of 10-20 years — with the clear belief that India was a high-growth but under-penetrated market. Competitors however were planning their business for just a few quarters ahead.”  

 

Aviation analyst Ameya Joshi added: “IndiGo was nimble when larger competition in the form of Jet Airways and Kingfisher existed and agile when they went down to make the most of the situation”.

 

Clearly IndiGo’s dominant position was not by design. It happened because the airline was nimble enough to grab every opportunity to gain market share — when its competitors confronted with financial trouble closed down or trimmed capacity. IndiGo was able to fill the gap because it had a consistent pipeline of aircraft on delivery month-on-month as part of its Airbus mega-deals.

 

So when Jet Airways was in trouble at the beginning of 2019 and closed flight operations in May, IndiGo’s domestic market share zoomed from 42.5 per cent in January to 49 per cent in May and crossed the halfway mark for the first time at 50.6 per cent within a year.

 

After the pandemic, Go First faced serious engine shortages and closed down its operations in May 2023 while SpiceJet, too, faced financial problems and cut capacity. This offered a double bonanza for IndiGo — and its market share jumped from 57.5 per cent in April, just one month before GoFirst stopped flights, to 63.2 per cent in July. In the same period, SpiceJet lost its market share from 4.2 per cent to 1.9 per cent. The chief beneficiary was IndiGo.  

 

Even in new airports like Navi Mumbai, IndiGo has been able to grab 65-70 per cent of the total departing domestic flights with 400 weekly departures to 42 destinations — even as Air India decided not to use the airport for the time being, citing higher costs of flying from Navi Mumbai.  

 

IndiGo could operationalise such a strategy because it had new planes. It has added 22 planes to its fleet this year, according to planespotters.net, part of 40 that are expected to come by the end of this year. In contrast Air India added just two Boeing Dreamliners 787-9, meant for long haul destinations.

 

For an airline, a substantial part of the operational cost is pegged to the price of fuel over which it has no control. Thus, profitability is always a challenge. But IndiGo has shown profit in six of the 11 years ending FY26, with losses mostly during the pandemic.

 

Air India, on the other hand, has lost money every year through these eleven years — even after the Tatas took over the company, prompting Tata Trusts chairman Noel Tata to question their performance. Even new player Akasa, despite having a small, 40-aircraft fleet, has not got out of the red in the last four years of its operations.

 

Clearly the sale and lease-back of aircraft have helped IndiGo — according to industry experts, the profit an airline makes from selling an aircraft to a leasing company is around $3-5 million, which would shore up profit. 

 

The big focus

 

For IndiGo, the big focus has been on operational efficiency and costs. Its aircraft utilisation-per-plane, based on revenue flying hours, in FY 25 was double that of SpiceJet,  27 per cent more than Air India Express and 5 per cent more than Air India. 

 

But its total employee-per-aircraft ratio in FY25 at 96 is lower than Air India’s at 125 and Akasa’s at 166. The same is reflected specifically in the pilot-to-aircraft ratio, which, at 12.5 is far lower than 17.3 for Air India and 29.8 for Akasa.

 

Of course the airline has faced some tough challenges. A bitter battle between Gangwal and Bhatia in 2019 on the way the airline was run eventually ended with the former leaving the board — he has also sold a large part of his stake. It did not impact business, however.

 

Last December again, IndiGo faced its biggest crisis when it was forced to cancel over 4,500 flights in 10 days, affecting over one million passengers, creating chaos in airports across the country and prompting angry customers to demand refunds. 

 

The airline was unable to schedule its flights as it had failed to hire enough pilots to implement a new roster in which pilots were required to be given more rest hours. This, despite the management knowing fully well of the requirement nearly a year in advance.

 

But in a rearguard action, heads rolled in the airline — Peter Elbers quit as CEO and Bhatia was brought in as the interim managing director ahead of Willie Walsh,  former CEO of British Airways, joining as the new CEO of IndiGo.

 

The challenges

 

It is also facing headwinds in international skies. The Iran-US war and the blockade of Hormuz saw fuel prices hit the roof, forcing airlines to cancel a large number of flights in the war zone ofWest Asia.

 

However, hopes rose after the US and Iran agreed on a fragile peace deal but a resurgence in fighting has seen pilots petition the government to suspend flights to West Asia. In March, according to data from Cirium, which tracks flight operations globally, IndiGo cancelled 10 per cent of its international flights. According to OAG, the airline cut its international capacity in May by 17 per cent — one of the steepest among the top global airlines compared with February.

 

But IndiGo has negotiated many such challenges. It has clearly charted out its flight path till 2030: It wants to run a 550-plane fleet, handling 200 million passengers per annum (124 million in FY26), with 3,000 daily flights (from 2,200 currently) and 40 per cent of its capacity coming from international routes. Going by its past performance, that is an achievable target. By 2030, the Indian skies are unlikely to change much despite the government promising more competition. IndiGo looks set to continue its dominance, with the Air India group a distant second in a duopoly. 

 

Outlining the future, promoter-managing director Rahul Bhatia said, in the IndiGo annual report released on Tuesday, that the airline will witness the most significant phase of international expansion in its history over the next decade.