IndiGo's Jaw-Dropping Airbus A320neo Order

That’s an insane order.

You only mention the neo. Worth noting they have 129 regular A320s in their fleet, too, and aside from a couple Dash-8s for smaller routes to remote towns operate an A32*-only fleet

What about Southwest Airlines. They have 750 737s, acquired over many years but still that’s a lot of 737s plus another 250 on order.

So Indian passengers are destined to travel the world in single-aisle configuration. Only.

They are loosing money. Who is paying for all of this?

1. IndiGo, unless they introduce business class and/or not to pack 244 pax, can only fly 4000nm with A321XLR. (but that's still sufficient for Chennai to Perth nonstop), still, customer experience on flying longhaul with narrowbody wouldn't be great.
2. That's a lot of order. I wonder if their finances may go into some trouble in few years, when they order that much planes and aggressively expand their network.

Mike: IndiGo operates the ATR 72, of which it has nearly 30, in addition to the A320ceos, A320neos and A321neos. SpiceJet operates the Q400.

IndiGo is already the largest A320neo operator, and given that there are three more operators of the aircraft (GoAir, Air India and Vistara, of which GoAir also has hundreds of orders), India (or precisely Delhi) has quickly become the A320neo capital of the world.

Time for you to come back to India to review them maybe?@Lucky

Is this order even realistic/sustainable?

They have to expand 3 times their current size and they also need to be profitable

Most commenters need to understand that IndiGo are not as small as they think. They have a market cap larger than the likes of Singapore and Lufthansa.

Their last quarter results were an anomaly, but they have one of the largest cash holdings compared to their peers and are debt free.

Regarding massive ordering, they operate on a sell and lease-back model, pioneered by Ryanair. Their very first order while starting the airline from scratch was for 100 A320s. So basically their formula is - Ask Airbus for the largest discount in their history and buy 300 planes. Sell them off to individual Aircraft Leasing firms at a profit. Its a win-win as the leasing firms usually don't get such a huge discount. Then lease back the aircraft from them.

One more point to note is that IndiGo rarely keep the airframes around long enough to perform D-checks on them. They shift out nearly all aircraft before a D-check comes along. This maintains a young average fleet and saves on the maintenance costs and downtime. However, this cycle also requires a constant turnover of planes, which is where the order starts making sense.

I would say 60-70% of this order will simply replace existing planes, with the rest being used for expansion.

India is a huge emerging market and there's a ton of potential there for the right airline(s) if they are managed properly. Yes, this is a very ambitious order - but as long as IndiGo has a solid gameplan, it could work. They are serving a gigantic market that is growing every day.

Their biggest competitor on the international market is Air India, which is woefully mismanaged and which may go the way of Jet Airways. That doesn't mean that all Indian airlines are doomed, just the ones that are managed by inefficient, corrupt managers. If IndiGo (and Vistara, etc.) can keep themselves on the straight and narrow - then there could easily be a future for each to operate with such huge fleets.

This will not end well.

Who is paying for all of this? These start ups today have bilions to play with and some say economy is bad. There is to much money on this planet.

This seems like they are future proofing their position so that they are ready for the anticipated explosive increase in passenger numbers in India within the next few years. It's a smart albeit risky move in the high stakes game of the Indian air travel market

Re: "I can’t think of another airline that has ever ordered 730 of one aircraft type."

Brad's right, Southwest has been a single-type airline for more than three decades now. Granted, their current fleet of 750 B737s came in much more gradually, but still. And they have some 270 more on order, some of which will perhaps replace their oldest NGs.

And then you have Ryanair, which is much smaller with 458 planes, but those are not only the same aircraft family, but the same model!

@Moke, this is not a startup, IndiGo has been in the business for over a decade and a half. They control 42% of the Indian aviation market, third largest in the world.

IndiGo has more cash reserves than any European Airline, that includes IAG and Lufthasna group. They bough these planes at perhaps $17-19bn price and will sell it to leasing firms for $33bn. Now that's a hell lot of addition to their existing cash pile which they will simply utilise to dump the capacity on the routes where SpiceJet enjoys monopoly and then simply kick them out. SpiceJet would move on to another route which is not in existence yet or is underserved. The same cycle will repeat until they get kicked out again. That's the business model for IndiGo and SpiceJet both, like a tom and jerry race between two.

@Ankit VaGhela, they are losing money every year, every Indian airline does. Yet they have tens of bilions for new planes?

I am worried about that Indigo may go the Jet Airways way. I hope their expectation from Indian aviation market is not wrong. But ordering too many aircraft and that also the same type of aircraft is foolishness. What if something happens like Boeing 737 Max with Neo series. ? Southwest had made this type of mistake earlier and they are paying for it. Indigo is going the same way. Hoping all will be good !

@Moke Indigo is a profitable airline. Money regularly keeps coming in. No they don't lose money.

I think it spends on several factors-

Indigo is known to maintain a young fleet so it could well be possible that they have staggered their deliveries over several years to account for retirements. While they may not have all 730 aircrafts in their fleet at once they will have a sizeable number.

With this order it is evident that Indigo’s business model is betting heavily on stimulating new demand- domestically targeting first time flyers who previously chose other modes of transport such as air. Internationally they are probably looking to operate a global network from multiple cities in India many of them Tier 2 and Tier 3 cities by offering nonstop connectivity and low prices.

Given the demographics of India it looks great on paper but I can’t help feeling that they are over-extending themselves. For one they have another LCC Spicejet in their market that is just as aggressive.

More importantly India does not have a pro-aviation environment. Regulatory interference is high, taxes are stifling and airport charges at major cities are crazy. Plus there is the issue of getting landing slots considering there are multiple carriers including Vistara, Air India, Spicejet and GOAir all with ambitious growth plans.

I can’t help thinking that Indigo has over extended itself and them taking delivery of the entire order is far from certain.

Congratulations to IndiGo and to Indian aviation.

The growth in this sector is going to be amazing (I've seen forecasts of 10x over the next 20 years) and that's going to mean a lot of aircraft for the 1.3 billion population.

Actually I've done some sums and for india to reach the same air travel use as the EU, they will need to expand 40x (not including any future growth).

I wonder are they looking to become a budget-priced long-haul connecting-airline, firmly focused on economy-passengers rather-than freight or Premium-flyers, and hubbing in India rather than the Gulf ? But also feeding longer-haul to/from India itself as-well ? The XLRs suggest to my mind that this might be so.

In which case I guess we'll have to get used to flying in 3-3 narrow-bodied planes, rather than the familiar 3-4-3 wide-bodied ones, maybe it's not such a big jump as we've always believed, if the price is right ?

Although I'd hope for IFE & basic-meals on longer-haul, but maybe they'll follow the Norwegian LCC-model faithfully, it will be interesting to see !

Then again perhaps they plan to copy Air-Asia & Lion-Air, and create local-subsidiaries eventually, overseas ?

great. i flew them recently for the first time and was super impressed.

Jeez, West Coast of Australia is going to get infested by these planes with cashed up middle cLass Indians moving in and doing business, university etc.
Which I think is great.
i Won't be doing PER-BOM-LHR on one of these planes though. Good luck to them

I think that the A32X series aircrafts are good enough for domestic destinations and short international destinations which take 2 to 4 hours flight time. Beyond 4 hours definitely the passengers won't feel comfortable. It will be a huge letdown for Indigo's International flights. People may afford little more for some other International Airline connectivity instead of Indigo flights.
I wonder how people are travelling to Istanbul from Delhi and Mumbai on Indigo A320 Aircrafts whose seats are not comfortable for long duration.

I wish Indigo makes plans to have at least some Airbus A350s and Boeing 787 Dreamliners in their fleet for long-haul flights in near future.

IndiGo's business strategy revolves around 'Hedging, sale-purchase, and leaseback.'
It clearly understands that operating an aircraft doesn't make a profit. There is no way, howsoever efficient, in which one can achieve a profit here. One major breakdown or one engine change can wipe out all such minuscule profit.
So, it is prudent to indulge in sale-purchase.
Let Airbus be loaded with IndiGo orders only. Let other airlines stay on the waiting list till eternity.
When any airline shows a pressing need, make yourself available for sell/lease at a hefty premium.
India does not want to invest in Aircraft manufacturing. It lets Airbus/Boeing do it.
Indian airlines flood them with orders. A situation has reached wherein without such Indian orders and the associated advance money it gets, Airbus starts staring at bankruptcy!