Reference Auto

IndiGo’s move to order 180 Airbus A-320 aircraft for a whopping $15.6 billion could give it a competitive advantage and make the low-cost airline a trendsetter in prices.

With a huge volume of operations, the airline company can make a plane journey even more affordable while remaining profitable, though this could be the long-term scenario. Deliveries of the aircraft will begin from 2016 and continue till 2025. But IndiGo is yet to chalk out its funding plans for the acquisition.

The order is for 30 classic A-320s — Airbus’s best-selling plane, which carries 150 people on short and medium distances along with 150 upgraded versions of the same aircraft. However, the engine selection will be done later.

This move could also prompt the airline to offer budget fares to international destinations, which it is slated to begin from August when the airline will launch flights to West Asia, South and South East Asia.

The airline had also ordered 100 A-320s in 2005 the deliveries of which could begin in four years. So, from 2015 onwards, we could actually see IndiGo offering budget fares to even international destinations.

Airbus has delivered 4,500 A-320 aircraft to 310 airlines, with 1,300 more in its order books. This makes the A-320 the world’s best-selling single-aisle aircraft family.

Jet Airways also followed suit, unveiling its plans to buy 49 aircraft within the next five years beginning next fiscal. This will lead to an unprecedented growth in the airline industry, airfares will remain fiercely competitive and the flyer will reap the benefits.

The country’s airlines managed to make a windfall after Diwali till the New Year as a burgeoning demand for air tickets, especially during the year end, saw air fares skyrocket to levels never seen before. The Central government had to step in but could do little to prune fares as demand during this period kept on soaring.

Post acquisition of the 180 A-320 aircraft, IndiGo could make a killing during the peak season and even draw customers during lean periods with unbelievably low fares, considering the ambit of operations.

Moreover, the choice of aircraft was done astutely. IndiGo has become the first Airbus customer to buy the fuel efficient A-320s (which could save fuel by over 15 per cent as compared to the older version of the A-320) and this move could help the low-cost carrier shore up profit margin big time.