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IndiGo’s leaner cost structure has helped India’s largest airline to emerge from Covid “stronger” and its superior cost efficiency model will keep it ahead of rivals at a time when India’s civil aviation sector is undergoing consolidation, said a top company official.
Four years ago, India announced a nationwide lockdown aimed at controlling the raging pandemic. With 262 aircraft, IndiGo was in the unenviable position of being one of the largest airlines in the world to be completely grounded.
IndiGo chief financial officer Gaurav Negi told ET that in the first meetings after the lockdown, there was optimism that the impact will be short but as the lockdown extended they knew that it was a nosedive. “We just didn’t know how deep that dive was,” he said. Four years later, IndiGo is sitting on free cash of ₹19,199 crore – 171% more than what it had in March 2021.
“From Day 1, the promoters had set the course where the intention is to lower operating cost keeping the same quality. It is that quality which gives an inherent strength to IndiGo which is hard to beat,” Negi said.
The company’s focus is now on doubling fleet size by 2030 while keeping a strict control on cost. IndiGo will use its cash reserves to invest in IT systems, diversify operations and digitise the company. “While we will double our fleet size by 2030, the focus is not to double the organisation,” Negi said.
The airline has invested in a new passenger reservation system which helps it to provide more personalised fare class to passengers depending on their buying behaviour, helping it to earn extra revenue from services like extra baggage. It has also developed a chat bot which will help it to reduce dependency on call centres. IndiGo is also investing in developing inhouse engineering capacity. The airline now does most line maintenance checks inhouse at its hangars in Delhi and Bengaluru. “Initiatives like this help to increase productivity while ensuring that the unit cost doesn’t go up,” Negi said.
IndiGo is likely to use its free cash to take aircraft on finance lease instead of operating lease. In a finance lease, the ownership of the aircraft transfers to the airline as against operating lease where it is returned to the aircraft lessors after a certain period.
Negi said he is enthused by the government’s move to simplify regulation at GIFT city in Gujarat. “We are in sync with the infra and policy of the land. With government taking initiatives to reduce business cost, IndiGo is always the biggest beneficiary of it due to our size,” he said.
The Indian stock market, which is known for shying away from the aviation sector, has been bullish about the company.
Recently, when IndiGo promoter Rakesh Gangwal sold 5.8% stake, a midcap market guru lapped up a sizeable portion of it. The stock market was puzzled because he is known to shy away from sectors which lose money.
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