The jury has been out on the potential for a sustainable long-haul low-cost airline operation for many years and whilst many have tried few have cracked the challenge, as combinations of competitive pressure, seasonal market demand, critical mass, currency fluctuations and uncontrollable costs tested even the most passionate LCC (low-cost carrier) entrepreneurs.
But is that all about to change, and, ironically, is it a former legacy airline CEO that is going to drive that change? Indeed, there are indications that IndiGo is accelerating plans with some sharp short-term lease opportunities.
So, why could they make it work when others haven’t?
Starting From a Point Of Strength
In nearly every attempt at a long-haul low-cost airline the airline has started from a zero base of scheduled services or at best a minimal network of international services. This is not the case for IndiGo who in 2024 operated nearly three-quarters of a million scheduled flights, offering 135 million seats for sale spread across twenty-four countries and six hundred and thirty-three routes; hardly a start-up operation by any measurement.
Operating 304 aircraft with another 103 inactive, IndiGo received more aircraft from Airbus in 2024 than any other airline. They also have another 28 scheduled for delivery through 2025, including some A321-XLRs which will create a whole new set of network opportunities. While the current 2025/6 deliveries exclude the planned A350s (which are slated for 2027 and beyond), IndiGo are keen to get into the long-haul low-cost business before then and have found a potential route to market.
One Man’s Problem, Another Man’s Opportunity
Norse Atlantic Airways, the re-incarnated Norwegian long-haul operation, are seeking to offload around half of their B787 fleet, if possible, in a wet lease – proving how difficult it is to operate long-haul low-cost. For IndiGo, such an opportunity is too good to miss – an operator with a suitable aircraft type in an existing LCC configuration desperate to move a problem on is too good a negotiating opportunity. It seems that IndiGo is looking for six aircraft which would probably be the minimum requirement to achieve any scale and operational efficiency from the fleet. But why the sudden urge to accelerate an already well documented plan? A rush of blood, a gap to be filled or a land grab in a booming market? Probably a bit of all, to be honest – so what is happening?
Taking Advantage of the Moment
Even the largest and best managed businesses can sometimes spot opportunities, and first mover advantage or fast of foot can create a strong market position. For a number of reasons IndiGo can see that moment – so what are the drivers?
- Competitive consolidation. Merging two airlines into one is tough, but three into one is both tough and a distraction for the Air India Group as they stitch together the main brand, Vistara and Air India Express, while continuing to segment the different brands and invest in a massive programme of cabin upgrades.
- Capacity at some of the most likely markets is becoming a constraint, especially in Europe where Summer 2025 looks very busy. Taking the UK market as a likely starting point, Gatwick is probably the preferred destination and effectively full until 20:00 although some juggling could create schedules that sit on top of the current Air India services from the airport to points such as Ahmedabad and Cochin. Could IndiGo go to Stansted, perhaps, but Gatwick would probably be their preferred option.
- With both Navi Mumbai and Delhi Noida opening in 2025 and the main Mumbai Airport heavily constrained, both Air India and IndiGo are looking to realign their networks across both the new airports while scheduling for greater international connectivity at the two largest metropolitan airports. Part of that process for IndiGo is creating the space to start building international to international connectivity and locking in the long-haul parts of that network are a cornerstone of the plan.
For any airline seeing an opportunity to move quickly and then actually being able to do something about it doesn’t happen very often, but for these reasons alone bringing forward an existing plan makes sense, and that’s even before you look at the market potential.
India’s Booming Market
While India has for many years been an emergent market it has also seen a fair degree of boom-and-bust periods as local airlines have struggled to survive in a market where seemingly uniforms and working conditions were more important than fuel. Today that has all changed and anyone who has travelled recently in India will be impressed with the levels of digital technology and biometrics in place across every major airport.
India is no longer an emergent market – it is the market of international focus and the centre for aviation growth in the next decade, regardless of what one or two Middle East markets may think, and as a local airline IndiGo want their share of the growth rather than let some overseas carriers take their revenues. Traffic leakage through the major hubs in the Middle East has always been a characteristic of the Indian market and as the booking data below shows there are large volumes of traffic that could in a real low-cost airline model be swayed to a non-stop versus a one-stop service.
London is not surprisingly the largest single city market with 330,000 pax per annum on Mumbai and 418,000 on Delhi and up to one-third of those currently travel indirectly. With some aggressive pricing market stimulation is very possible and aligning that emergent with a growing middle-class society with disposable income creates a perfect cocktail for a low-cost airline to grab, especially when that airline is an established and credible brand in the local market.
Looking towards Asia there are also interesting markets for IndiGo including Singapore, Bangkok and Kuala Lumpur, although in these cases the volumes of indirect traffic are quite low so a new entrant will have to be aggressive on their initial pricing, and IndiGo know how to do that for sure!
Speed To Market
It is of course still speculation if IndiGo will lease those unloved Norse aircraft, but it appears too good an opportunity to miss. However, the chances of getting something in place for a launch in early Summer 2025 are slim. Perhaps it will be a launch in the second half of the year – although that is only 5 months away, and certainly for IndiGo securing any historic summer slots as part of the initiative will be important for the longer term. Certainly, from a market perspective demand from both Mumbai and Delhi to major markets is consistent throughout the year so launching in June or October IndiGo will be tapping into sizeable market opportunity.
In summary, IndiGo long-haul low-cost is happening and while the original timelines pointed to a launch around 2027, a chance for a 2025 start-up has emerged – and it may just be that the stars are aligned for this year.
