Indian low-cost giant IndiGo is continuing its expansion in 2021, adding a series of new domestic bases. Alongside, its fleet of A320neos grew considerably in 2020, making it Airbus’ biggest customer in 2020. But how much more can IndiGo continue to grow?
While India might be the third-largest aviation market globally, only a small part (around 10%) of India’s massive population currently travels by air. Historically this has been both due to cost and convenience, but as air travel continues to expand across the country, many may choose to take shorter flights rather than lengthy road or train journeys.
Airbus estimates that the share of Indians traveling by air will double to roughly 20% by 2038, giving India a huge growth opportunity. Assuming a successful vaccine rollout in 2021-22 is able to reopen travel, we could see India return to over 7% yearly growth. This means India can expect a significant market expansion in the coming decades.
For IndiGo, this expanding market will mean more opportunities to capture traffic and retain its place as the country’s leading carrier. India is a also notoriously price-sensitive market, which allows IndiGo, and its low-cost rivals, to overwhelmingly dominate the domestic market. This isn’t expected to change anytime soon, even with the expanding market, aiding IndiGo’s growth.
IndiGo’s recent announcmennt of seven new bases across regional and Tier-2 airports around the country could signal the airline’s long-term plans. Moneycontrol notes that IndiGo’s choice to open multiple bases insteas of growing its larger bases in hub is a change in strategy for the airline. With economic growth seeing more demand for air travel arise in smaller cities, indiGo could be seeking a new oppotunities.
The seven bases will open between Feburary and May of this year, with IndiGo being the first or only second airline to start services to some cities. While its too early too see if this regional expansion will work, IndiGo seems to doubling down on it.
While international flights may seem like a distant memory right now, IndiGo could have some big growth plans internationally. 2023 will see the rollout of the Airbus A321XLR, the longest-range narrowbody on the market. The plane will allow IndiGo to reach new destinations across Asia and fly to Europe for the first time, opening a whole new market segment for the airline.
While the history of low-cost, long-haul airlines is bleak (especially with Norwegian’s recent shrinking), the A321XLR’s much lower cost of operation could shake up the market dramatically. For IndiGo, this would mean much more range and passenger traffic.
Overall, IndiGo has much to look forward to in the coming decade. Once the pandemic recedes, there is much room for growth as Indian aviation, and the larger economy continue to thrive.
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