💼 IndiGo's game-changing business class plans

IndiGo has dominated India's domestic skies by following the playbook of successful low-cost carriers (LCCs) like Southwest Airlines and RyanAir. Quick turnarounds, minimal services, and aggressive pricing have helped it capture 60% of the domestic market.

But now, IndiGo is eyeing a bigger prize—and spreading its wings to long-haul flights where foreign airlines dominate.

👍 Destination: long-haul 

According to Crisil Ratings, Indian airlines' share in the international traffic was fairly stagnant before the pandemic. While international passenger traffic grew from 55 million in FY16 to 67 million in FY20, the share of Indian airlines grew from 33% to just 34%.

However, after the pandemic, the share of Indian airlines increased to 43% in FY24! This shift was driven by Indians' growing interest in international leisure travel as a result of rising disposable incomes, easier visa requirements, an increase in the number of airports, and improved air travel connectivity.

Indian airlines are betting on this opportunity by expanding into international skies, with 49 new international routes added in FY24, including long-haul flights. Direct flights have been added from additional Indian cities to popular long-haul destinations in the United States, Europe, and Australia.

Moreover, there’s more growth to come. India’s international passenger traffic is expected to rise at a CAGR of 10-11% to 100-110 million passengers in the next four years, from a mere 5% CAGR pre-pandemic.

☁ Airlines eyeing international skies

At present, Air India, the only Indian carrier with a business class – leads with a 29% market share in the international passenger traffic handled by Indian carriers. As per its website, it flies to 79 international destinations, including 59 non-stop routes.

However, domestic market leader IndiGo is now looking to compete with Air India in these two segments. IndiGo will add 7 new international destinations by the end of FY25, increasing its total global coverage to over 30 international destinations. It will induct Airbus A321XLR aircraft next year to fly to Europe, Japan and other medium-haul markets. The airline has also placed an order for 30 wide-body Airbus A350-900 aircraft, which will have business class seats and start delivery from 2027 onwards. This will help IndiGo expand its international network to include long-haul destinations.

💪 India’s natural advantages over the West

IndiGo’s new management has been vocal about their international ambitions. In 2022, the airline got a new management that predominantly came from full-service airlines like KLM, Jet Airways, and Emirates.

IndiGo’s CEO Pieter Elbers is looking to benefit from certain natural advantages Indian airlines have over foreign airlines.

• First, 65% of the world's population lives within a five to six-hour range from India.
• Second, India’s geographic location positions it as an international travel hub for air connections between the EMEA and Asia Pacific regions.
• Third, IndiGo has superior domestic connectivity (Tier 2 and Tier 3 cities) over its overseas counterparts, which serve only select Indian cities.

Moreover, going long-haul could be better for IndiGo.

According to Suprio Banerjee, vice president of ICRA Limited, long-haul flights generate higher airline yields. This is mainly due to two factors: less competition, and lower refueling costs.

How? Think of it like this - there are lots of airlines flying between big Indian cities, so they have to keep prices low to attract customers. But for long international flights, there are fewer choices. So, airlines can charge more for these tickets. Additionally, Aviation Turbine Fuel (ATF) is relatively expensive in India due to high taxes. But when planes fly to other countries with low fuel costs, they can fill up their tanks there for the return trip!