IndiGo, like Apple, is usually the late/last mover in any space. However, it usually has its own take on the situation and tries to refine it before making its move. Much ink has been spilt over this past week around the launch of IndiGo’s new big seat, and I also wanted to add some colour to the situation.

Why right now is the right time?

There are many ways to look at this situation, but this is as good a time as ever for IndiGo to throw its hat in the ring for an evolution from its previous avatar, where it was a no-frills carrier. The airline has already moved away from being a one-trick pony a long time ago, the trick being an assorted fleet of A320/A320neo, A321neos, ATRs, a couple of B777s, and a few Boeing 737 MAX aircraft on damp lease as well. Now, it will add a sub fleet of A321neos with a wide seat, and later, some A321XLRs and even A350 aircraft in the future.

Pundits have concluded that this is a Business Class product, but as IndiGo and its CEO Pieter Elbers have chosen their words wisely, it is not. It is a better, more premium product, available on just 10% of the fleet, or even less, operating on certain key routes, but not being offered across the fleet, at least to start with. IndiGo does not call it Business Class. I don’t even expect a hard divider when the plane enters service. IndiGo will see it as a useless piece of weight that will cause fuel burn. Instead, let those in the XL seat wonder if they will fly the Stretch Class the next time.

Here we go with the promised reasons for why IndiGo is doing this right now. As usual, I’d love to hear more about your thoughts in the comments section.

• Training wheels for the premium products on long hauls: As IndiGo grows, it realises that the home market is almost saturated. Hence, the focus has grown on international markets and most initiatives you hear of from IndiGo tie into the “New Frontiers” part of the initiative. The airline is rapidly seeking to grow internationally as well from India. However, it has mostly captured the neighbouring markets, and now it needs to go far and wide. This is where the XLRs and the A350 aircraft come into the picture. However, the further you go, the 29″ seat pitch stops working. For instance, even on the heavily packed 777, the seat pitch is 31″. The willingness to buy a bigger seat would increase the longer the flight is.

IndiGo is trying to develop and perfect an optimum service level for these flights, and the domestic Stretch class is the starting point. While much thought would have already gone into it, they will build on it, see the feedback coming in, and improvise if needed. For instance, will the meal box work? I suspect it is being served in a cardboard box so people can take it home without consuming it on the plane. We will see.

IndiGo does not want to get into the “Business Class” Game, perhaps, and does not want to compete with Emirates and Air India in serving champagne and nuts. This is a bigger seat for them, and they add some bundled services to make the product sweeter. But the step change is the seat itself, not the service. So, there are no towels, no menus, one consistent meal box, and so on.

• The right time with the right data: As much as customers don’t see it, running an airline is a game of situational awareness and responding to everything on a micro and macro level. With Jet Airways being tossed aside (and Kingfisher before it) and Air India and Vistara merging, there will eventually be just one player with a business-class product in the market. Let’s not count StarAir because of the lack of scale here. IndiGo is making a highly targetted effort, on the back of studying, the revenue potential of business class on these routes it wants to enter and hoping to capture some market share.

Coming to the time, as I mentioned earlier, after, it is a sort of a duopoly and before it is the start of their long-haul operations (discounting the 777s on rent).

• A Pricing Play: To start with, this is a pricing play as well. IndiGo has the pricing power to cut deep on pricing and keep it attractive as it wants people to come in and try the product. This is the same playbook they will  When this product is with the travel agents and the OTAs, perhaps with the right incentives, they will also give a push to this product, making it sit next to the Air India/Vistara flights when you look for a flight on MMT or another portal. Here you go, for instance, IndiGo sitting at the top of the Business Class search, with their non-Business Business Class (you know what I mean).

Before we go to the next point, they’ve done this before: kept prices low. For instance, the Delhi—Istanbul flight is on the same date, when sold on IndiGo and Turkish Airlines (both are just 5 minutes apart).

• Corporate Travel Budgets: IndiGo was the airline that moved people and businesses around the country for long, given its expansive network. With Jet Airways going under, even the honchos, movie stars, politicians and VIPs gave up their spot on Premiere to move to Row 1 (XL Seats) on IndiGo. And these people will move to the bigger seat in a jiffy. And between the BOM-DEL, DEL-BLR, BOM-CCU, DEL-CCU, HYD-DEL, MAA-DEL and the six other routes this product will go on initially, there are enough “moneyed” people travelling to pay for it. Your inability to redeem your Vistara Business Class voucher should be an example of how full the business class is nowadays.
• Moving into the international markets: While IndiGo won’t say it now, the airline is renowned for keeping its aircraft in the air more than the other guys. And eventually, they won’t have their aircraft just do Mumbai—Delhi six times a day, will they? You’ll eventually find it when you take a trip to Dubai here and Male there, where these seats will be very useful for leisure or business travel. These routes do not need an XLR from Delhi but respond very well to premium capacity.

Bottomline

IndiGo is all set to launch its premium product, IndiGoStretch, in the coming months. It is not going to be a full-stack business-class product but rather a bigger, better seat with a clutch of services and perks that come along with it. But it will sit right there on top with the same products that it does not intend to compete with but wants to be clubbed with.

What are your thoughts on IndiGoStretch?

(PS: I’m not putting this behind a paywall and selling it as an investment update, but I know some of my stuff made it to an investment update from an analyst firm earlier this week with no credit. If any analyst is picking up this data, which I know they do from time to time, do have us front it, license it from us and feel free to add an honorarium using the links below.

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