The Hindu Business Line : ‘Airfares staying up on strong dollar’

A chunk of airline costs, which are dollar-denominated, have become 20 per cent more expensive in the last couple of months, as the rupee has weakened. — MR ADITYA GHOSH, PRESIDENT OF INDIGO.

Mr Aditya Ghogh, president of Indiga

Ashwini Phadnis

The newly appointed President of the Delhi-based low-cost airline IndiGo, Mr Aditya Ghosh, has his job cut out for him: navigating the two-year-old airline through some of the most challenging times that the industry is facing.

In an exclusive interview with Business Line, Mr Ghosh, who before taking on the role of President in August this year, was a member of the Board of Directors of IndiGo, talks about the current aviation market.

Excerpts from the interview:

In the recent past, Aviation Turbine Fuel (ATF) prices have come down and the Government has done away with the 5 per cent customs duty on ATF, but the general feeling is that this has not translated into lower fares or surcharge?

Let us start with surcharge. We have done away with congestion surcharge. So that is an immediate benefit to the passengers. We have introduced advance purchase fare structures which mean that if you book in advance you get a cheaper fare than what was available earlier.

How much cheaper?

Almost 50 per cent cheaper than date of travel. So, say, if you booked 21 days in advance in August you would have paid X amount, now if you book 21 days in advance for the same route, you will get an X-Y fare.

The other thing is that we did not raise fares in the last two rounds when ATF prices went up.

We took some of that hit because we understand that if fares remain affordable, there is elasticity of demand. We may debate how much of elasticity is there but there is elasticity.

How does IndiGo decide what is affordable for the passenger?

Affordability is a function of the market and a demand and supply issue.

For us affordability is: are we being able to go to a customer and say that you are flying from point A to point B, you have the choice of a full service carrier but we can give you a fare in a comparable flight on the same day which is about 30 per cent more affordable than some one else.

Just five or six years ago you could make a trip in economy between Delhi and Bangalore return for Rs 19,000.

Now you can do it for Rs 9,000 return. This is less than half of what you had to pay earlier and this is when there has been an escalation in costs and income levels and competition has gone up.

Is all this possible because IndiGo connects to a few cities?

People forget that we are larger than Air Sahara ever was. We have 120 flights a day and connect to 17 destinations. So we are a fairly sizable airline in terms of the passengers we serve.

The general feeling is that airlines are benefiting from the incentives that the Government has given while passengers have to pay more for flying.

While fuel prices came down, dollar-denominated costs became 20 per cent more expensive at the same time. So it is difficult for me to quantify this just yet. The common passenger does not think of it this but a chunk of airline costs, such as lease rentals, expat salaries and maintenance reserves, are dollar-denominated. All these have become 20 per cent more expensive in the last couple of months as the rupee has weakened. So while fuel prices came down, the dollar strengthened, so you could not see that effect on your bottomline. This is one of the reasons that you have not seen fares dropping. It is certainly a zero sum game when you take a longer picture of, say, about 12 months. Remember that fares started going up only six months into the year, so airlines had to take on a lot of the losses on bookings before the fares started going up.

Has the current crisis led to any cutbacks on perks or salaries in IndiGo?

We have not cut back on salaries nor laid off people, retrenched people or sent people on leave without pay or anything of that sort. At a fundamental level we do resource planning very carefully. So we do not have to take any drastic steps because our fleet has grown month on month. We are at a stage where we are actually hiring people in various departments across the country. Our operations are expanding.

Some airlines are talking about deferring and sending back aircraft.

We have absolutely no plans to defer any deliveries.

So you will be an airline with 100 aircraft on its book?

We might be an airline with more number of aircraft if there is more demand. On a more serious note it will never be exactly 100 aircraft because naturally some aircraft as they run through their lease terms will go back. We are taking the 23rd delivery this month. At the moment we have about 19 aircraft on book

Has there been any change in operations since the modernisation of metro airports?

Both Hyderabad and Bangalore airports are good airports. But there are a few things we would love to see, such as CAT II and CAT III or at least CAT II landing and take-off facilities at these two airports. We had flight delays in Bangalore a couple of days ago because there was fog and the airport only has a CAT I runway.

We would also like to see some of the security hold area congestion that happens at some of these airports become a thing of the past. You check-in, get the boarding pass and then there is a long line to get through the x-ray machines to board the aircraft.

We face delays not because we have delayed check-in or our flights are delayed but because we cannot get passengers through the x-ray machines fast enough, which is outside our control. In the case of Delhi, the taxiing time on the new runway has increased.

But on the positive side, you have a new system called R Nav which helps flights take a more direct routing. There are a whole bunch of things that have happened.

Have the changes helped you decrease circling time over the metro airports?

When you see across the network, not really. We do expect it to come down.

Has the third runway in Delhi made any difference to your operations?

A longer taxi time is any day better than holding in the air. It is so much more expensive holding in the air.

For an Airbus A-320 variety of aircraft it takes about 14 gallons of fuel a minute when you are holding in the air, versus 4 gallons of fuel when you are taxiing. Has the liquidity crisis led to promoters pumping in more funds?

No, we have not faced any liquidity crunch. We have not had to go out and seek additional funds from our shareholders.

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