Ministry puts a spanner in IndiGo’s expansion
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Ministry puts a spanner in IndiGo’s expansion
New Delhi: India’s civil aviation ministry has allowed IndiGo to import only five of the 16 aircraft it had sought to in 2013, in a move that some analysts see as a setback for the airline and which could benefit rival Jet Airways Ltd.
IndiGo is currently the largest airline in India and has 61 planes in its all Airbus A320 fleet.
The Gurgaon-based airline, promoted by InterGlobe Aviation Pvt. Ltd, has only got approval to import five planes this year, said two aviation ministry officials, who didn’t want to be identified.
“We have asked them to give us a detailed plan as to where do they want to use these 11 planes,” said one of the officials.
IndiGo added 19 aircraft to its fleet in 2012 and returned six after the leases expired. According to consulting firm Centre for Asia Pacific Aviation, IndiGo was the third largest in the world in 2012 in terms of aircraft capacity addition among low-fare airlines.
A spokesperson for the airline declined to comment on the ministry’s move and said that the airline hopes to end 2013 with a fleet of 71 planes. IndiGo still has 209 aircraft on order with Airbus spread out till 2025, which means it can bring in an average 17 aircraft every year—pending the ministry’s approval.
A former airline executive said the ministry’s move is understandable and that it will benefit Jet.
“I can understand the ministry’s reticence to permit large operators to bring large aircraft with 180 seats or more because it would like to control capacity; excess capacity will put pressure on fares and financial viability of operators as they will all end up selling below cost,” said Shakti Lumba, former vice-president with IndiGo and Air India.
Typically, aircraft of this size are used on the popular metro routes.
“The airline that throws too much capacity will be able to control the market and the only airline that has been adding been adding capacity is IndiGo. So it is not in Jet Airways favour that IndiGo adds more international or domestic capacity,” added Lumba.
The country requires capacity in 20-50 seater aircraft type to fly on subsidiary routes to supplement infrastructure development and for accelerated mobility of the economy, he further added.
The official cited above said the ministry was working on guidelines that could make it mandatory for airlines to fly less-profitable regional routes. IndiGo, which doesn’t have smaller aircraft, may have to conform to these guidelines when submitting plans for the remaining 11 aircraft, this person added.
Consulting firm Deloitte is working on these guidelines and is expected to submit a report later this month.
Mohan Ranganthan, member of the government-appointed Civil Aviation Safety Advisory Council, said the ministry’s move would, apart from handicapping IndiGo, also send out the wrong signal to investors. The government recently amended its rules and allowed foreign airlines to invest in Indian carriers, but moves such as these indicate that policy changes with every minister, Ranganathan said.
The ministry’s move to control capacity in an effort to ensure airlines remain profitable is anti-customer, said the representative of a passenger grouping.
“Only if we have more aircraft will we have low fares; the government should encourage that,” said Sudhakar Reddy, president, Air Passengers Association of India and member of the aviation ministry’s committee on airfares, adding he expects 2013 to be another year of high airfares.
In 2012, airfares increased by at least 20% as the number of flights declined owing to the reduction and eventual stopping of services by Kingfisher Airlines Ltd.
Ministry puts a spanner in IndiGo’s expansion - Livemint
IndiGo is currently the largest airline in India and has 61 planes in its all Airbus A320 fleet.
The Gurgaon-based airline, promoted by InterGlobe Aviation Pvt. Ltd, has only got approval to import five planes this year, said two aviation ministry officials, who didn’t want to be identified.
“We have asked them to give us a detailed plan as to where do they want to use these 11 planes,” said one of the officials.
IndiGo added 19 aircraft to its fleet in 2012 and returned six after the leases expired. According to consulting firm Centre for Asia Pacific Aviation, IndiGo was the third largest in the world in 2012 in terms of aircraft capacity addition among low-fare airlines.
A spokesperson for the airline declined to comment on the ministry’s move and said that the airline hopes to end 2013 with a fleet of 71 planes. IndiGo still has 209 aircraft on order with Airbus spread out till 2025, which means it can bring in an average 17 aircraft every year—pending the ministry’s approval.
A former airline executive said the ministry’s move is understandable and that it will benefit Jet.
“I can understand the ministry’s reticence to permit large operators to bring large aircraft with 180 seats or more because it would like to control capacity; excess capacity will put pressure on fares and financial viability of operators as they will all end up selling below cost,” said Shakti Lumba, former vice-president with IndiGo and Air India.
Typically, aircraft of this size are used on the popular metro routes.
“The airline that throws too much capacity will be able to control the market and the only airline that has been adding been adding capacity is IndiGo. So it is not in Jet Airways favour that IndiGo adds more international or domestic capacity,” added Lumba.
The country requires capacity in 20-50 seater aircraft type to fly on subsidiary routes to supplement infrastructure development and for accelerated mobility of the economy, he further added.
The official cited above said the ministry was working on guidelines that could make it mandatory for airlines to fly less-profitable regional routes. IndiGo, which doesn’t have smaller aircraft, may have to conform to these guidelines when submitting plans for the remaining 11 aircraft, this person added.
Consulting firm Deloitte is working on these guidelines and is expected to submit a report later this month.
Mohan Ranganthan, member of the government-appointed Civil Aviation Safety Advisory Council, said the ministry’s move would, apart from handicapping IndiGo, also send out the wrong signal to investors. The government recently amended its rules and allowed foreign airlines to invest in Indian carriers, but moves such as these indicate that policy changes with every minister, Ranganathan said.
The ministry’s move to control capacity in an effort to ensure airlines remain profitable is anti-customer, said the representative of a passenger grouping.
“Only if we have more aircraft will we have low fares; the government should encourage that,” said Sudhakar Reddy, president, Air Passengers Association of India and member of the aviation ministry’s committee on airfares, adding he expects 2013 to be another year of high airfares.
In 2012, airfares increased by at least 20% as the number of flights declined owing to the reduction and eventual stopping of services by Kingfisher Airlines Ltd.
Ministry puts a spanner in IndiGo’s expansion - Livemint
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It has been reported that GoAir also has been denied from importing a certain number of aircraft .
They wanted to bring in 7 aircraft but was only allowed 2
Bad news for all the unemployed Pilots.....
Lets hope the both airlines manage to convince the Civil Aviation Ministry to bring in more aircraft .........
They wanted to bring in 7 aircraft but was only allowed 2
Bad news for all the unemployed Pilots.....
Lets hope the both airlines manage to convince the Civil Aviation Ministry to bring in more aircraft .........
Last edited by cyrilroy21; 19th Jan 2013 at 03:47.
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This is a move in the right direction. Most of the capacity is only deployed in the already over saturated peak metro routes. Capacity discipline is the need of the hour and it is this capacity discipline which has seen most of the US majors (except AA) breaking even or turning in a profit the last couple of years. Both Indigo and Go Air only have A320s and nothing smaller than 180 seats. Thanks to this overcapacity seat factors will now become an issue issue and as a result some airlines have already started offering unsustainable fares .
Good move from the regulator - that is my opinion!!!
Good move from the regulator - that is my opinion!!!
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so much for the free market state of India! and they wonder why no FDI is happening !!!
Seriously how can a bunch of government goons most likely with no economic, free market experience stop private companies from importing aircraft....so stupid for everyone involved.
Seriously how can a bunch of government goons most likely with no economic, free market experience stop private companies from importing aircraft....so stupid for everyone involved.
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so much for the free market state of India! and they wonder why no FDI is happening !!!
Seriously how can a bunch of government goons most likely with no economic, free market experience stop private companies from importing aircraft....so stupid for everyone involved.
Seriously how can a bunch of government goons most likely with no economic, free market experience stop private companies from importing aircraft....so stupid for everyone involved.
That is not the case.... I would say the government is wiser from the earlier experience.....
9W is actually cutting down unproftable frequencies and services. I think Indigo is given a strong prod to do like wise!!!!
