My opinion of Indigo’s planned order for more A321Neos
India's Indigo Airlines has recently come out with an official statement that it is looking to place an incremental order for more Airbus A321NEOs in particular the LR and XLR versions. It has already ordered 150 A321NEOs and still has another 200+ A320NEOs to be delivered. Link: https://www.bloomberg.com/news/articles/2019-05-07/airline-built-on-airbus-jets-prepares-for-another-large-order
My personal opinion of this is as follows:
To begin with, now with 9W most likely done and dusted, the remaining 200 odd A320Neos should be further exchanged to be 100 A320Neos and 85 A321Neos. The main reason why they need more A321s is because with many of India's tier 1 city airports getting slot restricted, 6E needs to maximize its seats per slot ratio especially at BOM, DEL and MAA. The only way that they can do this faster is by operating more flights with the A321s which seat 42 more passengers than their A320s i.e. +23%. 6E should be able to exchange 100 A320Ns for 85 A321Ns. In addition, the new Mumbai airport should be operational by 2024-25 and hence more planes would be needed to service that requirement as this new facility will be targeting both Mumbai + Pune catchment areas. The incremental order for the A321s should initially be for 65 units as that would round up the total A321s ordered by 6E to 300 if the above exchange proposal idea of mine is also taken into account.
Secondly, as far as the breakdown of the new order of A321Neos is concerned, I agree that they need to get the A321NEO LR with 2ACTs installed (ACTs means additional centre fuel tank) which would allow them to fly up to 7.5-8 hours nonstop with a full payload as that shall enable China, Indonesia, HKG, MRU and East Africa to be flown to without much issue.
However, what I do not agree with, is their keenness to buy the A321NEO XLR. An all Y class A321Neo XLR having an average passenger + baggage weight of 100kg cannot operate DEL-LGW nonstop with a full payload of 222 passengers (especially in winter) and would also struggle to do so too on many other Western EU routes. This flying to EU obsession, 6E needs to get rid off for the time being and instead focus on getting EU traffic with TK via IST. The network expansion should be limited to a 7-7.5 hour flying radius of India.
Instead of EU there are niche market segments in Central Asia, China, MRU, ASEAN, East Africa that need to be looked at which are shorter in flying time and lack nonstop service to India along with further expansion to KSA + GCC. For example, Bali-BOM / DEL / MAA have become the fastest growing Far East Asia market segments out of India since 2015. In 2015, BOM-DPS was 47,000 pax round trip and in 2018 it was 141,000. On the other hand, in 2015, DEL-DPS was 48,000 pax round trip and in 2018 it was 105,000 pax. Lastly, MAA-DPS grew from 14,000 pax round trip in 2015 to 53,000 pax in 2018 ! Demand to Jakarta too is soaring rapidly from India albeit the yields are not that great but currently no one operates nonstop from Indonesia to India.
If and I mean if 6E are so desperate for Western Europe, they should bide their time till 2025 and operate it using the new Boeing NMA / 797 aircraft which should be able to seat 320-330 pax in an all Y class configuration with 30 inch seat pitch.
To conclude, I would like to state few things:
i. The Indian market was supplied with way too much capacity on offer. The same thing was prevalent in 2012 when Kingfisher collapsed as well. Airlines should not think each and every seat that has been pulled out of the market by 9W needs to be grabbed right away because that is purely a myth. Yes getting incremental slots at BOM + DEL airports are precious and required as a long term investment but those are only two cities in the whole of India. One must be financially disciplined in the cash intensive business that the Indian airline industry is in which is also plagued with very high fuel and other government taxes related costs of operating.
ii. Narrow body aircraft are not meant to perform long haul flights because of the capacity they have on board to offer is very low in comparison to wide bodies hence this means the average cost of a seat to break even at a "net profit" level on a 8 hour narrow body flight is far higher than a wide body. In addition, airlines that make net profits flying between EU and India do so because of the healthy premium first and business class passenger loads they receive consistently + incremental cargo revenue in the belly. These are the core reasons why BA, LX, SQ, CX and LH have historically done very well not only in India but throughout their network. Indigo unfortunately does not cater to this market segment as it is not their business model. Their business model for long haul is similar to Primera, Monarch and WOW Air and we all know what happened to those 3 airlines unfortunately. Long haul low cost does not work and even Norwegian is realizing that the hard way despite operating fuel efficient Boeing 787s.
ii. I do not believe the Indian travelling public would relish the thought of flying 7-8 hours nonstop on a cramped plane with 30 inch pitch with no TV screens on each seat + no free food / drinks. They would tolerate it for 6 hours but pushing beyond that range is really testing one's patience and perseverance.
posted by Behramjee Ghadially @ May 12, 2019
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