Bloomberg Businessweek - USA (2020-11-16)

◼ BUSINESS Bloomberg Businessweek November 16, 2020

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sometimesbeaslowas2¢,withcarriersselling
ticketsbelowcosttowoofirst-timeflyersawayfrom
trainsandbuses.Towithstandthefare-cuttingfray,
IndiGohastriedtointroduceserviceonroutes
whereit canhavea monopoly,whileaddingmulti-
plefrequenciestoestablishedroutes—attractingfly-
erswillingtopayfora choiceofflighttimes.IndiGo
haswona followingbyprovidingon-timeservice
whilechargingforfrillssuchasmeals,luggage,and
extralegroom.It alsopioneeredthesale-leaseback
modelinIndia,allowingit tocontinuallyoffera
modernfuel-efficient fleet.

IndiGo’s success boils down to “a clear and
ambitious blueprint and business plan,” says Sanjiv
Kapoor, an aviation veteran who’s held manage-
ment positions at IndiGo rivals SpiceJet Ltd. and
Vistara, the Singapore Airlines affiliate. He cred-
its the company’s management for maintaining a
“laser-like focus” on operations while steadily bag-
ging fantastic aircraft deals.
That success has attracted suitors, as well.
Akbar Al Baker, CEO of Qatar Airways, has repeat-
edly expressed interest in buying as much as 49%
of IndiGo, the maximum share Indian regulators
allow a foreign airline to control. He’s held talks
with IndiGo since 2015, but the upstart has resisted
a matchup. Qatar also tried to buy a stake when
IndiGo went public later that year but didn’t have
enough time to obtain approvals. Qatar Airways
now plans to start a local carrier in India on its own.

The timing of a full market revival remains

uncertain. Indian air traffic is set to fall to as low as

50 million passengers this fiscal year (the period

from April 1 to the following March 31 for India’s air-

lines), down from more than 200 million last year,

estimates researcher CAPA Centre for Aviation in

Sydney. Discretionary domestic travel has “evapo-

rated and [is] unlikely to return until the pandemic

is under greater control or deployment of a vaccine

is widespread,” CAPA says.

But though IndiGo isn’t immune to the current

challenges—it’s had to cut costs, fire staff, and tem-

porarilyreduceschedules—itremainsrelatively

flush, with $2.4 billion in cash, and hasn’t asked

for major adjustments to its aircraft deliveries.

That should strengthen its relationships with

plane makers and leasing companies.

“In a time like this, all suppliers and stakehold-

ers will be placing bets on who they expect will

survive and emerge stronger than the competi-

tion after the pandemic is over,” Kapoor says. “I

expect they will be willing to do very attractive win-

win long-term deals to secure the business of the

winners rather than increase risk and exposure to

those unlikely to survive or who have been con-

stantly late or delinquent in payments even before

thepandemic.”�AnuragKotoky

▲ An IndiGo jet lands

in Mumbai

THE BOTTOM LINE Indian air travel could fall as much as 75%

this fiscal year, thanks to the pandemic. But IndiGo is negotiating

billions of dollars in engine orders, anticipating long-term growth.