“Competition between the two key airlines will be intense, across routes, regions and products, in a manner previously not seen in India. Importantly, both carriers have the balance sheets to support the anticipated growth and competitive intensity,” CAPA India said in a recent report.
According to CAPA India, India has a stable airline system led by two principal players after a long time, and “possibly for the first time since (the sector’s) deregulation”. Both IndiGo and the Air India group have aggressive network and fleet expansion plans, which they are expected to support by investments in management capital, digitisation, corporate image, employee training, and product upgrades, among others.
Between them, IndiGo and group airlines–Air India, Vistara, and Air India Express/AIX Connect–now control a staggering 88.3 per cent of India’s domestic civil aviation market–the third-largest globally and growing rapidlyIndore Stock. With an eye on future growth, both airline groups have lined up massive fleet expansion and modernisation plans. Earlier this year, IndiGo ordered 500 Airbus jets–the biggest-ever aircraft order in the history of commercial aviationSimla Investment. The Air India group was a close second with an order of 470 narrow-body and wide-body aircraft from Airbus and Boeing.
“We expect Air India Express to concentrate on non-metro markets to compete with IndiGo, while full service Air India/Vistara will compete with IndiGo on metros,” CAPA India said, highlighting that both airline groups are expected to take strategic positions to compete with each other.
The Tata group is currently in the process of consolidating its four airlines–Air India, Vistara, Air India Express, and AIX Connect (formerly Air Asia India)–into a full-service carrier and a low-cost carrierLucknow Wealth Management. The full-service carrier, which will be formed with the merger of Air India and Vistara, will be called Air India, while the other two group airlines will merge to form the no-frills carrier, which will retain the Air India Express brand.
As for IndiGo, CAPA India sees the likely introduction of business class on domestic routes and the speculated wide-body aircraft order as the likely strategic moves in competition with Air India. These would ensure that the latter does not have exclusivity in the premium travel segment as well as the long-haul international market. At present, IndiGo does not have a business class offering, except on the two wide-body planes it has taken on lease from Turkish Airlines to operate flights to Istanbul. Apart from these two aircraft, IndiGo’s fleet is made up entirely of narrow-body jets of the Airbus A320 family and turboprop planes of ATR.
“IndiGo’s speculated widebody order, if it materialises, may be to ensure…that IndiGo participates in the large international long haul market, and that Air India does not have exclusivity in the long haul market. This could be a trigger for the induction of widebodies by Air India Express for long haul operations in the near term,” CAPA India said.
On SpiceJet, which has been struggling financially, the consultancy firm said that the carrier’s likely revival as a result of it securing new funding will result in the emergence of a “very aggressive” airline that will try and make up for three-four years of lost growth. It added that the revival of SpiceJet has the potential to disrupt the market.
SpiceJet, which had a domestic market share of 6.2 per cent in November, recently announced that it will be raising fresh capital of Rs 2,250 crore through issuance of equity shares to financial institutions, foreign institutional investors (FIIs), high net worth individuals (HNIs), and private investors for “fortifying the airline’s financial strength and accelerating its growth trajectory”Nagpur Stock. The airline has also expressed interest in acquiring the bankrupt no-frills airline Go First.Bangalore Wealth Management
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