The airlines industry’s biggest enemy is back again. During the past 12 months, Brent crude price has jumped 54.22% to $76.86 a barrel, while jet fuel prices have risen more than 28%. During the same period, the rupee weakened 3.85% against the dollar.

This has prompted most airlines to raise flight ticket prices, cut non-fuel costs and boost non-aeronautical revenue to offset the impact of rising fuel costs and a weakening rupee. IndiGo (Interglobe Aviation Ltd) was the first to hike flight fares by levying a fuel surcharge of as much as ₹400 on domestic routes from 30 May to offset higher costs.

SpiceJet is also planning to diversify its activities beyond “pure aviation” to protect itself from the high risks associated with the aviation sector, and will soon announce forays into a dedicated freight business in cargo and courier logistics. This could be a first for an Indian airline.The airline also plans to develop digital aviation and travel products. They are both likely to be in collaboration with international partners.

“We believe that we must hedge ourselves from the risk of being in a pure aviation business and find businesses which are connected to aviation but which could be a little more insulated from the high cost of fuel,” said SpiceJet co-founder and CEO Ajay Singh in a statement, adding, “so we are looking at some new areas.”

Jet Airways is seeing worse. The reports of full-service carrier’s grounding in the next 60 days owing to severe resource crunch have stirred the aviation sector. The airline has refuted the reports but the speculations are flying thick and fast. Some reports also suggested that Jet has asked employees to take salary cut of between 5 and 25 per cent to slash operating expenses.

The problem with these airlines is no different from the rest of the industry. American Airlines CEO Doug Parker offered a warning to the flying public – fuel costs are skyrocketing and that extra cost will be passed onto the consumer with more expensive ticket prices. Fuel constitutes 35-50% of an airline’s total costs. Airlines in India also make payments in dollars for salaries of expatriates, for maintenance and overhaul, purchase of new aircraft and for buying jet fuel. However, with India being a price-sensitive market in the commercial aviation segment, airlines often struggle to pass on costs to customers.

According to the fifth annual Global Travel Forecast, published by GBTA and CWT with the support of the Carlson Family Foundation, Asia Pacific expects to see a 3.2% rise in 2019 pricing. Chinese demand remains high and by 2020 the country is expected to become the world’s biggest air travel market. In 2019 the country’s flights are seen going up 3.9%.

But China will not be alone. The vast majority of countries in the region will see price rises, especially in markets like New Zealand (7.5%) and India (7.3%). The latter is expected to be the world’s third largest aviation market by 2025, with airports operating beyond capacity. The only exception in this booming region is Japan. Prices there will likely drop 3.9% due to the country’s added capacity in preparation for the Olympic Games in 2020.

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India’s biggest and most profitable airline carrier and the world’s fourth-largest low cost airline has seen a rough couple of months.

It all started with the airline’s surprise declaration of its interest in ailing national carrier Air India (AI) last year, even before the full details of AI disinvestment had emerged. One of the promoters, Rakesh Gangwal, had to hold a hasty conference call with analysts to clarify that “IndiGo’s interest in AI would be conditional and that it would in no way jeopardise the airline’s financial plans”, an indication that perhaps the first announcement wasn’t thought-through. Subsequently, the airline said that it was not interested in Air India.

This was followed by some back-to-back videos emerging of staff misbehaviour, then a report by a Parliamentary panel that pulled up the airline for its service standards, especially regarding the many reports of passenger manhandling and rude behaviour. Remember the viral video that showed the airline’s staff allegedly manhandling a passenger?

Next came the Pratt & Whitney engine troubles, that led to grounding of multiple aircraft, consequent cancellation of flights, leaving passengers and investors irate. The airline also lost out a long-fought battle with the judiciary, after the Supreme Court dismissed plea by IndiGo against an order by Delhi High Court that directed it to shift to T2 terminal of Indira Gandhi International Airport. Amidst all this, the announcement of Aditya Ghosh, President and Director, resigning from his position came along. More recently, IndiGo passengers at the Delhi airport staged a protest near the active runway, due to a five-hour delay, followed by alleged “mismanagement” on behalf of the airline.

Image source: Airlines Inform

A myriad changes are happening at the company to restore its former glory. The primary one is believed to be the resignation of Aditya Ghosh. The stock markets also seem to have supported the decision, as on the first day of trading after news of his imminent departure surfaced, the IndiGo scrip gained in morning trade and finished 0.50 percent lower. United Airlines’ Gregory Taylor is set to succeed as president and CEO. Willy Boulter has already been inducted as Chief Strategy Officer, while Wolfgang Prock-Shauer, who steered Jet Airways and GoAir earlier, was appointed COO. Additionally, many crucial functions have also been assigned to senior expat hires.

While the hasty announcement to bid for Air India may not have been well planned, it does underpin the fact that IndiGo is now looking to expand massively. According to multiple reports, IndiGo plans to order as many as 50 Airbus SE A330 wide-body jets as it seeks to expand beyond short-haul flights. The carrier aims to take the upgraded A330neo version of the plane, and the deal could be worth $13 billion at list prices for the smaller of two variants.
The airline is basically developing plans for long-haul flights after building up a fleet of more than 150 Airbus A320 narrow-body planes used within the region.

Even last year, IndiGo set up an ambitious plan for growth, saying that it will position itself as a price warrior in the regional connectivity business, which it will launch soon, apart from its foray into the long-haul, low-cost international business. According to sources, IndiGo could offer fares up to 50 per cent lower on regional connectivity routes.

The persistent efforts by the airline to change its fundamentals can also be seen in its recent announcement of quarterly results. While the carrier posted a 73 per cent decline in profit at Rs 117.96 crore in the three months ended March 2018 owing to rising fuel expenses, it also posted its highest ever Profit After Tax of Rs 2,242 crore for the year ended March 2018, an increase of 35.1 per cent compared to last year’s Rs 1,656.98 crore.

As far as reports of rude behaviour are concerned, IndiGo may not have handled things in the best possible way so far, but there is still hope that with the change of management, that aspect would be taken care of, too.

As IndiGo navigates across turbulent news and mishaps, what the focus needs to shift to right now is how the change of management and aggressive expansion will help the country’s largest airline fly through these challenges. Perhaps the lineup of monumental changes and plans will manage to steer it towards growth. Till then, we can only wait and hope the carrier doesn’t get burnt by more bad press.

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After months of conversations around privatisation of Air India, the troubled flag carrier is about to be put on sale by the government. Until recently, it was being reported that Tata Group, the founding group of the airline, will be the key player looking at the deal but now IndiGo has joined the race. Operated by Interglobe Aviation, IndiGo is India’s biggest airline by market share.

The low cost carrier became the first airline to formally express interest in Air India. Holding a market share of over 41 percent, IndiGo is aggressive on expansion and is primarily interested in the international operations of Air India and its low cost airline Air India Express. Air India has 17 percent share in overseas passenger traffic which is the key attraction for IndiGo which has ambition to expand the list of international destinations it serves. IndiGo currently serves seven international destinations, all in Asia while Air India connects to 41 destinations in 28 countries across four continents.

With Air India also comes the market position and some of the privileges it has been enjoying, including primetime departure slots, real estate at airports, codeshare agreements and parking slots at major airports. However, with it will follow the mix of Airbus and Boeing fleet, something IndiGo has tried to avoid seriously until recently. In order to reduce operational overhead, IndiGo operates only the Airbus A320 family of aircraft and only recently converted part of its order from Airbus A320Neo planes to Airbus A321Neos. In addition to that, the carrier placed order for 50 ATR-72s for regional connectivity. These are indicators that the single aircraft strategy has been ditched to adapt to the market conditions.

The developments around the future of Air India have received mixed response and questions are being raised if this will be the right strategy for IndiGo. IndiGo stock saw sharp decline in Thursday and Friday’s trading. The loss of confidence is because of the massive debt Air India carries. It is under a debt of over INR 52,000 crore with about INR 28,000 crore in working capital debt and about INR 4,000 crore in interest and hasn’t turned profit in 10 years. Although the government has indicated that it would be willing to shave off some of it to make the deal attractive for a potential buyer, there is fear that the operational inefficiencies could be too deep to address which could create an overhang on the stock. Anand Mahindra, Chairman and MD, Mahindra Group recently commented on the mammoth task it would be to turn things around for Air India.

IndiGo President Aditya Ghosh, in a letter to employees, expressed that the leadership won’t embark on the journey if it isn’t profitable. He clarified that if there is a deal, there will be significant restructuring of operations and they won’t take up debt and liabilities that can’t be supported by new restructured operations. Civil Aviation Secretary R N Choubey had said IndiGo has written a letter with an unsolicited expression of interest in the divestment procedure.

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Only a few months after SpiceJet introduced the special discounted fares for passengers travelling without check-in luggage, DGCA has finally allowed domestic carriers to roll out ‘zero bag’ fares. They will now be allowed to charge penalty against the baggage for tickets booked under zero bag fares.

All the domestic operators allow up to 15 kgs of check-in luggage (except Air India which allows 23 kgs).

“Airlines are allowed to offer no check-in baggage/hand baggage only fare scheme subject to the condition that the penalty to be imposed on a passenger, who avails such schemes but turns up with baggage for check-in at airline counter, cannot exceed the amount of incentive offered compared to lowest fare,” Directorate General of Civil Aviation (DGCA) said in its updated Air Transport Circular for unbundling of services.

Domestic carriers IndiGo, SpiceJet and AirAsia India had approached DGCA earlier with the “zero bag fare” but the plea was rejected after civil aviation ministry asked it to not allow the same. With this new development, SpiceJet commented that the move is in line with the changing trends in the industry. The SpiceJet scheme offered a discount of INR 200 to every passenger booking flight with no check-in luggage and just one handbag. However if they decide to carry check-in baggage, the fee was INR 500 for up to 10 kgs and INR 750 for up to 15 kgs.

With this new regulation in place, we will see domestic airlines come up with more offers for travellers travelling without check-in luggage. Business travellers take short haul flights for work and they often travel with just their handbag. These travellers will benefit from the ‘Zero bag’ fares. Such regulations will also motivate travellers to travel light thus speeding up the processes at airport and also saving airlines some fuel costs. Expect the domestic carriers to come up with attractive zero bag discounts after this announcement.

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Victor Hugo once said, “Nothing is more powerful than an idea whose time has come.” IndiGo, the fastest growing and the largest airline in India, gives you a chance to win 100 free flight bookings with its new travel app idea campaign “6EAppsters”. To participate, all you need to do is register and send in the best idea for a travel app to ‘6E Appsters’ via Indigo’s campaign website. You could think about any idea – From trip planing, to mapping app or even activity planning travel app.

How does it work?

1) The applicant needs to register his idea/design/prototype of an exemplary travel app.

2) Valid registrations will receive a confirmatory email with a link that will redirect the applicant to the page where he will be required to submit his idea in absolute detail.

3) Observing the quality and practicality of the idea, the judges of the hunt will shortlist 20 entries for the presentations of their app ideas.

4) The judges, after careful scrutiny, will select the final 5 winners based on the presentations done.

That’s it! The rules of the hunt are simple too. The top 5 entries with the highest scores will be chosen as ‘Winners’. The list will be declared on their website. The winners will be required to present their entries later. The registration, of the hunt, will close on 15^th September, 2015. So hurry up, put on your thinking caps and who knows you might get lucky.

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