INSUBCONTINENT EXCLUSIVE:
implementation of a carefully crafted strategy of gaining market share (gained 3 per cent in the past two quarters) with a slight
consideration to gaining pricing power in the industry.
This is summed up in two key financial variables
One: the revenue per available seat km (RASK), and two: high capacity addition.
In the December quarter, considered the peak travel season,
Indigo's RASK fell by 3 per cent to Rs 3.7, compared with the same quarter last year
This fall is largely due to the airline's conscious decision to install high capacity in the industry.
This strategy did not provide much
room to its competitors to raise fares as they were forced to match the attractive fares offered by IndiGo
Even in the March 2019 quarter, IndiGo would install 34 per cent additional capacity in the industry
In the airline's post result conference call, its management said that it in 2019, its capacity would grow by 25 per cent, while the
optimum utilisation of its market share, which is likely to grow to 45 per cent in the next three years from 43 per cent, reckon analysts
present, this strategy has impacted the airline's December quarter performance as its revenue of Rs 7,916 crore came in a tad below
Due to high fuel prices (up 31 per cent in the December quarter on a y-o-y comparison) and currency depreciation (depreciated close to 10
under review, compared with the same quarter last year.
In the coming quarters, the airline said in its post result conference call that it
plans to increase its presence in international markets as the management suggested that large part of its incremental capacity would be
directed to international routes
Analysts pointed out that the airline's strategy of providing relatively attractive fares may not bear the desired results as it would
face stiff competition on international routes from wellentrenched foreign airlines.
On the domestic operations, Indi-Go is placed to gain
considerably from benign fuel prices (fallen 13 per cent in January till date, against last January), which would add to its earnings in a
meaningful way.
Being a dominant player with a strong balance sheet, its gain would be higher than its peers
with its past three-year average of 12.3.
