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Originally Posted by audioholic Can someone please give an insight about what's the idea behind IndiGo placing an order for 250 A320neo? Are they serious about it? It would be great if someone shared the technical as well as economic background?
Technically, how much of the Domestic traffic can they aim at capturing? Even foreign destinations are limited due to the aircraft type. With only A320s in the fleet, what do they aim at achieving?
Though I am a noob in aviation, I guess they should have expanded their fleet with wide body AC which can at least give higher pax per trip especially on routes with high demand. How logical will it be to use the same aircraft irrespective of route demand, location etc? Though maintaining uniform fleets will prove to be beneficial on the maintenance front, this seems to be heights. |
The aircraft manufacturers generally give discounts depending on how many aircraft are ordered at a single point in time. Considering the number of aircraft, Indigo must have gotten a substantial discount on the list price of the aircraft (some sources say, almost as much as 40%). Hence, it makes sense to order large amounts of aircraft at a go (other examples of this are other LCCs such as Ryanair, Southwest and so on). Incidentally, this takes the total number of 320s, that Indigo has on order to 430 (An order of 180 was placed in the last couple of years). They are also taking a few aircraft on lease from Tigerair (in the next few months) (the first used aircraft in Indigo's fleet).
Regarding their business plan, even though Indigo has placed the order (even previously - their inaugural 100 plane order with Airbus and the above mentioned orders), they do not own any of the planes that have been delivered so far. As soon, as the plane is ready for delivery, they sell the planes to a leasing company and lease the aircraft from them. This way generate a lot of instant cash (also, the aircraft may be sold at a profit, based on the discounts offered by Airbus), which many analysts believe to be the secret behind Indigo's consistent profits (despite the red ink for all the other operators). Indigo does not have to file public financial statements, as they are not yet a publicly listed company.
This also helps as Indigo do not believe in keeping the aircraft for long. Of the initial 100 plane order, 98/99 (do not recall the exact number) have been delivered to Indigo, so far. Out of these, they have only 83 in operations at present, with the other 16 having been returned to the leaser (before the heavy maintenance is required, hereby reducing the heavy associated costs). These 16 aircraft have already been placed with other airlines.
In light of the above, all these 430 aircraft will not be in service at any point in time. Most of the older aircraft will be returned, as newer aircraft are delivered. The newer batch of orders are the new 320NEOs and so, demand for these will be high in the used market.
Also, the order is for the 320NEO family and it can be assumed that at least a major portion of the orders will be for the elder sibling, the 321NEO which can accommodate upto 240 people in a single class layout. This can be used for high demand routes domestically. These newer planes also have an increased range, hence enabling Indigo to cover more of Asia (Middle East, South East, China and so on).
The order also fits in with Indigo sticking to a single fleet type (a commonality with other LCCs - Ryanair with their 737-800s, SouthWest with their 737-700s (and a few older types of 737s) and so on). Other LCCs in India which have tried multiple fleet types (Deccan with 320s and ATRs and SpiceJet with 737s and Q400s) have not fared too well. That said, there are rumours that Indigo was considering Embraer aircraft (Embraer 170s and Embraer 190s - currently flown by Air Costa in India).
According to the reports for September, Indigo has cornered 32% (approximately) of the Indian market, with the Jet family being its closest competitor (with approximately 20%).
I am not in the aviation industry and the above are merely my observations.