IndiGo receives its first A320 neo aircraft; 22 percent increase in fleet projected in 2016-17

In December last year, Airbus had informed its global customers that that there would be delay in the delivery of its new A320neo planes. This had created some ripples within the aviation world. The new A320 neo planes are believed to be the most path-breaking offering from Airbus because of the fuel efficiency it is promising. With India’s market leader Indigo having placed the largest bulk order for the A320 neo, concerns were expressed ​with the airline’s share price getting a beating on the stock market. However, the airline has ​now​ announced that delivery glitches ​stood resolved with Airbus and Indigo will face no challenge in the capacity augmentation it has planned for the fiscal 2016-17.


In fact on 10th of March, the airline received its first A320 neo putting all speculations to rest. Indigo is the largest customer of A320 neo in the world having placed orders for a staggering 430 units on a cumulative basis – order for 250 A320 neo in 2015 after 180 units were contracted in 2011. Going by the original delivery schedule, Indigo was supposed to receive 26 planes by the end of March, 2017. But now, Airbus will be supplying it 24 A 320 neo aircrafts over the next 13 month period. Responding to the development, President of Indigo, Aditya Ghosh underlined that with the delivery issue resolved, Indigo will embark on the next phase of growth. “The new A320 neo powered by Pratt and Whitney’s fuel efficient geared turbo fan engines will enable us to structurally reduce our costs as fuel continues to be the single largest element of our cost structure. This also marks the beginning of the next phase of our growth and will enable us to make air transportation far more accessible for the people of India.”

The company recently also issued its near to medium run operational outlook which, among other things, clearly earmarks that for capacity augmentation, it is not solely relying on Airbus’ delivery but also keeping lease options open. Considering the strong passenger volume surge ( Indigo has seen a staggering passenger growth of 35 percent in the 12 month period ending on January 31st,2016), the company has also provisioned for seven more A 320 aircrafts which will be taken on the lease. “For fiscal 2017, total fleet strength is expected to increase by about 22.4% on a year-over-year basis allowing IndiGo to absorb the additional manpower in its operations that were hired in expectation of taking delivery of 9 A320neo aircraft between December 2015 and March 2016,” the company release maintained.

On the financial performance front, Indigo has projected a strong fourth quarter of fiscal year 2016 wherein EBITDAR margins are expected to be strong at around 35% to 37% and at last year’s levels. However, for the fourth quarter, year-over-year revenue is expected to increase by 6% to 8% and net profit will also be impacted due to the exchange rate movement in the Indian Rupee versus the US Dollar. Meanwhile, the airline has also recently added one more destination to its operational profile (35th domestic and 40th overall) connecting Dehradun with Delhi. The airline has also announced launching nine new flights across its domestic network. The airline has connected Chennai to Bengaluru and Kolkata to Jaipur with its third flight beginning this month while also commencing additional daily non-stop flights between Kolkata and Delhi, Hyderabad and Chennai, Delhi and Bengaluru, Delhi and Chennai, Bengaluru and Thiruvananthapuram & Pune and Thiruvananthapuram. In addition, IndiGo will also connect Jaipur to Hyderabad with the launch of its second daily non-stop flight, with effect from March 15, 2016.

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