IndiGo Looks Beyond Airbus To Tap Into Government’s UDAN Scheme
Indigo placed an order for 50 smaller ATR 72-600 aircraft to boost regional connectivity.
India's biggest airline IndiGo will break its own practice of maintaining a single aircraft fleet as it looks to tap into the government’s regional connectivity scheme – UDAN. The budget air carrier currently has the largest fleet of Airbus 320-series aircraft in the country – 131 as of the end of March this year – and has never operated any other plane since it commenced operations exactly 11 years ago.
IndiGo has entered into an agreement with French manufacturer Avions de Transport Regional to buy up to 50 smaller ATR 72-600 aircraft, said the company in a media statement issued with its quarterly earnings.
The government launched the UDAN scheme last month in an attempt to connect underserved and unserved airports, by subsidising 50 percent of the seats available on the flights under this scheme. IndiGo did not participate in the first round, opposing the government's decision to levy a cess on tickets to fund the scheme. The company now seems eager to participate.
In support of our honourable Prime Minister Narendra Modi’s UDAN vision, we are embarking on a journey to build a nation-wide regional network and connect cities that have not benefitted from the growth in Indian aviation.Aditya Ghosh, President And Director, InterGlobe Aviation
Aviation Secretary Rajiv Nayan Choubey shares the optimism. The government expects more airlines including IndiGo to participate in the subsequent rounds of the UDAN scheme, he said in an interview to BloombergQuint on Tuesday.
InterGlobe Aviation Ltd., the parent company of IndiGo Airlines saw its profit decline nearly 25 percent in the fourth quarter compared to a year ago, but managed to beat analyst estimates. Profitability was hurt "primarily due to higher fuel prices" which rose 40 percent during the financial year 2016-17. Operating margins contracted over 9 percentage points, as the cost incurred on every available seat per kilometre went up 5 percent.
Separate Verticals
The company will form a different division catering to smaller regional cities, Ghosh added in IndiGo’s post-earnings conference call.
The company plans to start operating its first smaller flights by the end of 2017. The ATR 72-600, that IndiGo intends to buy, has a seating capacity of 68-72 passengers and a range of 1,665 kilometres. The bigger A320-series aircraft has an average capacity of 180 passengers.
Joining Peers
Other Indian air carriers like SpiceJet Ltd., Jet Airways Ltd. and Air India Ltd. already operate turboprop aircraft. Ghosh said while the Bombardier Inc.’s Q400 used by its peer SpiceJet is also a good aircraft, they finalised on the ATR 72-600 as the “right product”. The ATR turboprop has a "lower fuel burn" compared to other turboprop aircraft, said the company while refraining to divulge details on IndiGo's regional connectivity plans.
Bread And Butter
The low cost carrier will continue to take delivery of the Airbus 320-series aircraft, with its fleet expected to grow to 170 aircraft by the end of this financial year. This is expected to expand its total capacity by 25 percent. Of these, 47 will be A320neos, with 28 new aircraft scheduled for delivery within this financial year.
The A320neos, with Pratt & Whitney engines, have been impacted with several glitches leading to an inspection being ordered by India's aviation regulator. The impacted aircraft will be retrofitted with updated engines by the manufacturer, said the IndiGo management.