CXO Talks: IndiGo CSRO Sanjay Kumar says product definition for the XLR is ongoing; Zero-bag fares are coming

LiveFromALounge recently caught up with the Chief Strategy and Revenue Officer of Gurugram-based IndiGo, Sanjay Kumar.

Sanjay Kumar has had a long and distinguished career in Indian aviation for over 25 years and has extensive experience in the areas of business planning, network development, revenue management, sales and distribution. Prior to rejoining IndiGo in 2020, Sanjay worked with AirAsia India as the Chief Operating Officer for a year. At IndiGo, he was the Chief Commercial Officer for over 11 years between 2007 and 2018, and he headed the commercial function.

Sanjay started his career at Air Sahara where he spent over a decade and also spent significant time at SpiceJet (and its earlier form, Royal Airways), where he was the Vice President of Planning and Marketing before moving to IndiGo, which was at, at the time of his starting his first stint, a small player in the Indian aviation scenario with just six aircraft.

We talked about IndiGo’s growth post-pandemic, the upcoming growth opportunity in India and abroad, and the IndiGo loyalty programme, apart from their international ambitions.


Sanjay Kumar, IndiGo’s Chief Strategy and Revenue Officer

Give us an understanding of how IndiGo is operating these days in terms of network and operations

We are back to almost pre-COVID levels, in terms of the capacity deployed, in terms of the ASK (available seat kilometres) deployed and in terms of the number of flights. We are operating close to about 1500 flights a day, which is slightly more than what we were operating pre-COVID and hopefully in December, between our domestic operation and international operations put together, we will be crossing 1550 flights a day.

Load factors are looking good, the (forward) bookings are looking good. And what is more important is, we also see the recovery of the corporate business. Corporates are beginning to travel after Deepawali. Corporate travel after Deepawali has come up by about 85% of their pre-Deepawali travel.

Things are looking better as compared to what it was a couple of months back. And every week, we see better performance compared to the previous one. And we hope that this will continue, provided there is no third wave of Covid. We will continue to build up our business going forward, both domestically, as well as international.

So one of the things that changed was new network points (new airports) that were previously not connected, such as Bareilly and Kanpur. Was that because of the pandemic? How did that work out?

Even prior to COVID, we were looking at the launch of new markets. Just to give you some examples, Darbhanga, Agra and Bareilly were very much a part of the plan even prior to Covid.

As the market started to open up in a post-Covid scenario, we saw a lot of revised travel patterns from various markets, basically from tier-two or tier-three cities. What we saw was that there was more demand coming in from smaller cities compared with larger cities because corporates were still not ready to fly.

And as a result, we saw subdued demand on the metro-to-metro markets. But we saw a great demand in metro/non-metro and non-metro/metro markets, which kind of pushed forward this plan to launch into these new markets. In any case, we were planning to launch these markets, but, post-Covid. It became quite important that we get into these markets sooner than later.

And that is how we launched Darbhanga, Bareilly, Jabalpur, Gwalior, Kanpur. And we see great demand from these markets. Our belief is that, you know, if you connect Bareilly to Bombay and Bangalore, there are huge catchment areas, for instance, the hilly areas around Bareilly, Ranikhet, Nainital, etc. Not only is there tourist traffic but also business travellers. We are seeing demand for Dehradun, Gwalior and Kanpur.

We recently launched Kanpur and we are operating three flights a day from there. Kanpur is now directly connected to Bombay, Bangalore and Hyderabad on the IndiGo network. So we are seeing a greater demand coming from these tier-two and tier-three cities into the metros and that is helping us keep our growth plan on track.

Earlier these people used to take the train to come to Delhi and fly out. So does this not impact that traffic then?

With the corporates taking to fly again, we are seeing a greater demand on the metro to metro segments. Today, we are operating 16 flights a day between Mumbai and Delhi. Prior to COVID, we were operating almost the same number of flights. All these flights are operating with about 80-85% load factors.

What is important to note is that demand is coming from all over. Metro-metro people have started to travel; people who are wanting to take holidays, have started to travel and so have those who wanted to meet their families, friends, and relatives. So we are seeing a demand coming back from all sorts of customers, and that is really helping.

So we are not overly concerned if we have created direct connectivity between Kanpur to Bombay because we were already operating three flights from Bombay to Lucknow, which is about one and a half-hour drive. Given an opportunity for them, people would want to save that time and fly directly into Kanpur rather than fly to Lucknow and drive.

You have a huge aircraft order outstanding already. You want to replace your 50 CEO aircraft with new aircraft in the fleet. So after that how do you continue to grow inside the country? You already have a lion’s share of the market. So where do you go in order to create new markets going forward?

Covid has given us the opportunity to re-fleet ourselves. We have less than 50 (ceo) aircraft right now and that’ll go out of our system by the middle of next year. So in the third quarter of the next year, we will be an all neo fleet airline, which means that we have much more fuel-efficient aircraft.

And almost 30% of our neo fleet will be Airbus 321neos, which will have 45 seats more per departure. And that will help us in terms of deploying into the markets which are either slot constrained or capacity constrained because of any reason. So we will be able to grow, despite the fact that we will have limited opportunities as far as slots are concerned. We can deploy these 232 seat aircraft on some of the markets such as Delhi-Bombay-Delhi and can offer almost 25-30% more seats on the same slots.

So that will be another way to grow the business. We will have much more fuel-efficient aircraft. Operationally it’ll help us in a big way in terms of the cost of operations and also commercially in terms of capacity growth. And with the 320ceos which are getting replaced with the 320neos, we will be able to add 3% more capacity in every plane.

You also have an ATR operation, which was largely left to the south of India but you’ve recently started to open that to the north of India as well. What has been the reaction of the market? And how do you plan to grow your regional operations?

SSo we had been focused primarily on the South Indian market prior to Covid. Now, we have brought the ATR Operations to parts of Northern India and central India such as in Indore, Ahmedabad and Lucknow and I think that’s been doing pretty well. Some of the ATR capacity is deployed in the RCS routes. Some are deployed in normal commercial routes. We are quite happy with the growth of the ATR network across the length and the breadth of the country.

We have an ATR base now in Eastern India, in Calcutta. And that also helps us cover destinations in the Northeast in a bigger way. So we will continue to grow our business and we will have more ATRs in Northern India as well as central India.

We are looking at opportunities to deploy capacity from the non-metro markets. For instance, can we get two or three ATRs based in Lucknow or Ahmedabad? We think there is a huge opportunity for connecting them within the regions with ATR operations and then connecting to lots of cities (from the base airport).

Coming from domestic to international operations. How many points have you gotten back online?

We are still about close to 50% of our operations, as far as our international operations are considered.

As you are aware that we are governed by certain bubble arrangements between two countries and we have limited operations in those markets. So we are covering the entire Middle East right now though we are still waiting for Saudi Arabia to open up.

We have recently announced our operations in Singapore (effective 29th November) with double daily flights. And then on 15th of December, we are putting our third service from Trichy to Singapore.

Then we are operating into parts of South Asia, into Bangladesh, Sri Lanka and the Maldives.

What we are not operating at this point in time is parts of Southeast Asia, which are still under constraints due to the regulations and other markets like China. But we have tied up flights twice a week into Phuket with leading travel operators, such as MakeMyTrip, where we are doing charter flights. They will create the packages and they will be operating the charter with IndiGo and marketing them. So that is a new experiment we are getting into. Depending on the success, we will explore other connecting points into Thailand and other parts of Southeast Asia, as long as the government permits that.

So we are still waiting to grow back into the Southeast Asia market, but we have grown quite a bit despite the constraints in the Middle East markets with the bubble agreements.

If it was left to you, would you prefer bubble agreements or would you prefer for them to go away?

We are of the opinion that it should be left to airline operators to decide what they want to operate and where they want to operate. They should have that sort of flexibility. It should be a commercial decision of the airline operators to kind of look into, rather than getting constrained by any regulations.

You are also one of the first operators to sign up for the Airbus A321XLR. When is that expected to come online?

The XLR starts to come in the third quarter of 2024, and that is the current timeline.

When you have the XLR, it will give you a longer reach. Where do you plan to take the aircraft?

I think XLR will give an extended reach of seven to seven and a half hours of flying from the current six hours. So it will give us an extended reach of about one and a half hours, and that will help us to go to central Europe, it’ll allow us to go to Egypt, Moscow and Beijing, and parts of Southeast Asia, like Bali and Manila. So we’d be able to cover these markets from any point in India, such as from Delhi and Mumbai. Once we get there, we will be able to kind of expand our operations into these new territories purely on the basis of the extended reach.

Your passenger experience is more designed for domestic flights, like maybe for three-hour-long flights where people don’t really feel the need for eating something. Are you going to make a commensurate change in your XLR experience or will it continue to look like your current experience? where, for instance, people flying to Egypt or to central Europe will have to buy a sandwich on the plane.

We are looking at a product improvement in that regard. Seven-hour flights will definitely require some product innovation and product improvement, whether on the seating or the offering.

We are kind of still evaluating that. There will be some improvement around there. We are looking at better seats. We are looking at better service on those aircraft. I think that will unfold over the next few months.

Then is it safe to say that with those moves you are perhaps getting into the territory of full-service carriers. Because if you have to make all those offerings, then there’s not much difference left

That is a tricky one, in the sense that, we just want to be the lowest cost operator in any market we operate in. Obviously, we’ll have to evaluate every item based on the cost/benefit, but definitely, we will like to have some improvement in the product offering that should be in line with our cost structure. With that limitation, we’ll have to find a balance between what we can offer.

I will not say that we will get anywhere close to a full-service airline. We will continue to be a low cost, low fare airline. And that is the basic fundamental business which will help us to decide what is the product offering.

The 321 is a really versatile aircraft and you’ve seen La Compagnie and, closer home, Vistara see do different things with the aircraft. So with the XLR for you, still going to be a single cabin operation, or is it going to be more than one cabin we can expect?

While Rono has described a few things, the rest of the things whether it is going to be a single class, or not, we are still in an evaluation stage at this point. So it will not be fair on my part to comment on this at this time.

About three years back you were discussing London plans at some point in time. Is that still on the table? How does that work?

We keep looking at various opportunities from time to time and keep assessing. We have done it a couple of times already (file for London slots). We have done it as late as last year. There is no plan right now to look at a direct service into London at this point in time. But we will keep on assessing our business opportunities.

You have gotten into this new business opportunity around codeshares. The first one happened with Qatar, and now with American. Is that something you see happening a lot in the future?

Our network allows us to have a lot more opportunities explored in the area of codeshare and interline partnerships. I think we continue to work on that within our cost structure. As long as we align with some like-minded companies and airlines, to work with us based on our philosophy, we will be happy to keep exploring and expanding these partnerships.

You guys also started to tread into loyalty a while back. What has been the experience with the loyalty offering and how is it growing?

Unfortunately, when the IndiGo co-brand card was launched last year, immediately after the launch, we had a complete lockdown. And unfortunately, the airline business came to a complete halt post that for almost two months. Since then, it has been on and off.

So haven’t really been able to kind of focus on this activity greatly. But despite that, we have been able to grow this card base to about 0.2 million at this point in time. And I think since the month of August/ September, we are seeing faster growth in this area.

It is going to be a significant focus area for us going forward in the sense that we will want to have a co-brand card and other than creating a loyalty or reward for the customer, it is also a revenue opportunity for us. That’s how we look at this part of the business. And we’ll continue to work on this going forward.

There was the second card supposed to come up with Kotak?

We are ready to launch that.

Any more in the pipeline?

Right now these are the ones. But the focus will remain there and depending on the success we keep adding.

Then there will be another opportunity. At some point in time, the government said that unbundling will happen. What are you planning to do? What would be your offering going forward? 

I think the government has been very considerate to revise the guidelines. We have this fare-band regulation right now. But once the fare band regulation goes away, I think we as an airline industry are free to offer what we want to offer to the customers.

So zero bag fares are one thing the industry is looking forward to.

When we talk about ULCCs, that is the only thing that you’re missing in India, compared to other parts of the world. Indian airline operators offer fares with a 15kg built-in baggage allowance.But once the regulation is away I think airlines will be free to offer products and services, with bags, without bags and so on. And that will be a new kind of game-changer in the country.

We’ll have to wait to see how the industry follows it, and more importantly, how our customers get used to it. So I think this is a new way that will kind of unfold over the next few months post the fare band regime being taken off by the government.

Fares are already inching up. Fuel is going up I guess and hence. So do you see, any opportunities to cut down fares going forward, after the fare bands go away that is?

Fares are already at a very low level at this point in time. The costs have gone up, primarily fuel cost and the cost of foreign currency. These are the two adverse factors affecting us.

I think fares will remain range-bound. I don’t think it can go downward, but yes, with the advent of zero-bag fares, there could be a scenario where we could see some low fares without baggage. So that could unfold over the next couple of months once the government has taken out the regulation completely.

The Tata group is growing very big in aviation, in the sense that Air India, Vistara and AirAsia India. Obviously, we expect consolidation but we don’t know. But what do you think, now that you have a player almost your size, of Tatas in aviation and how does it affect Indigo’s thinking.

So I would like to avoid commenting on that. But our CEO has said multiple times that it is good that Air India has been acquired by the Tata group. It will become a much more financially-disciplined airline and a customer-friendly airline, and that’s the only thing I can say.

A couple of more competitors are coming into the market. SpiceJet now has the Max. Akasa is coming as well. So any new moves that indigo will play out?

I think we continue to focus on our core business philosophy. Irrespective of the competition, growing or degrowing or new competition coming in. Uh, we will continue to focus on our business in terms of both, seeking growth opportunities across the domestic market, as well as the international market and continue to do work on the lowest cost structure.

As long as we are able to continue to execute our plans, I think we’d be not overly concerned about the competition.

Give us a picture of IndiGo, let’s say, three years from now, where do you see it would have gone as compared to where is it right now? What to expect on a plane when I step onboard three years from now.

IndiGo will continue to deliver high customer value in terms of operations: on time, reliable, safe operations.IndiGo will also be responsible to its employees and shareholders, and continue to create a massive air transportation network across the globe.

That is what Indigo is focused on for the past 15 years. And this is what we will continue to focus on.

Any plans to take on any new territories outside the country. Maybe open a second airline in some other country, which might also benefit from the IndiGo philosophy.

SWe are quite committed to look at the opportunity within the market here in India, as well as surroundings where we can go back and forth flying. Right now, we have not explored those areas. Right now our entire focus is to build up this massive opportunity that is in India. India is a huge opportunity for the next 10-12-15 years in terms of traffic growth.

Every forecast in the aviation industry says that India is likely to continue to grow 10-12% year on year. And that creates a massive opportunity for India’s domestic market. So our focus will continue to be on the Indian domestic market. And of course with that, growing internationally, as we have done in the past couple of years.

So we just want to remain focused on that activity at this point in time.


Liked our articles and our efforts? Please pay an amount you are comfortable with; an amount you believe is the fair price for the content you have consumed. Please enter an amount in the box below and click on the button to pay; you can use Netbanking, Debit/Credit Cards, UPI, QR codes, or any Wallet to pay. Every contribution helps cover the cost of the content generated for your benefit.

(Important: to receive confirmation and details of your transaction, please enter a valid email address in the pop-up form that will appear after you click the ‘Pay Now’ button. For international transactions, use Paypal to process the transaction.)

We are not putting our articles behind any paywall where you are asked to pay before you read an article. We are asking you to pay after you have read the article if you are satisfied with the quality and our efforts.

About Ajay

Ajay Awtaney is the Founder and Editor of Live From A Lounge (LFAL), a pioneering digital platform renowned for publishing news and views about aviation, hotels, passenger experience, loyalty programs, travel trends and frequent travel tips for the Global Indian. He is considered the Indian authority on business travel, luxury travel, frequent flyer miles, loyalty credit cards and travel for Indians around the globe. Ajay is a frequent contributor and commentator on the media as well, including ET Now, BBC, CNBC TV18, NDTV, Conde Nast Traveller and many other outlets.

More articles by Ajay »

Pingbacks

Comments

Leave a Reply

Your email address will not be published.