If you wondered why IndiGo placed a firm order for 300 Airbus jets this week, start by looking at India’s aggressive five-year airport growth plan.
IndiGo’s order of 300 A320neo family aircraft is huge. Not only is it huge outright, but it complements an already-huge order of narrowbody Airbus planes IndiGo has already placed. So add 300 A320neos, A321neos, and A321XLRs (we don’t know the breakdown yet) to an earlier order of 280 A320neos and 150 A321neos.
The result is that IndiGo will easily become the largest A320neo family operator in the world.
But how can an airline that just reported its steepest quarterly loss in company history take on such a huge order?
The answer, in part, is India’s plan to open 100 new airports over the next five years. Facing aging and often dilapidated airports, a growing middle class with an appetite for air travel, and a general desire to grow India’s economy through infrastructure investment, India hopes to offer increased connectivity from underserved areas of the country.
Private-public partnerships have already unleashed massive public works projects, with 38 new airports currently under construction. Furthermore, the government is offering subsidies on many routes to attract air service and considering greatly reducing comparatively high fuel taxes. All three initiatives will not only encourage more air travel, but are precisely intended to do so.
And there, folks, you have a pretty clear reason why IndiGo felt comfortable in placing such a large order on top of another large orders.
IndiGo has many reasons to expand. One is the opportunity it sees to leapfrog ailing Air India. Another is the gap left by Kingfisher and more recently Jet Airways. But to really understand why IndiGo is growing so fast you must also look to India itself and its rapidly-transforming broader aviation landscape.
Finally, though, it is instructive to look at another airline who placed an order for 400 Airbus A320s and had grand expansion plans of its own. That airline eventually declared bankruptcy and never received most of its order. That airline was US Airways. And in 2005, ex-US Airways Chief Executive Officer Rakesh Gangwal founded IndiGo.
Let’s hope history does not repeat itself…the grave of airlines who expanded too quickly is deep and wide…
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