India’s Evolution from Narrowbody to Widebody Jets

INDIA – A NARROWBODY DOMINANT MARKET

Did IndiGo sound a war bugle when the airline placed an order for 30 A350-900 widebody at an estimated cost price of approximate $9 billion? Probably! Experts believe IndiGo sent a clear message not just to Indian operators but to international competitors too – The message was loud and clear – ‘IndiGo has jumped into the long-haul market, and we will soon overtake it.’

The deal will not just help IndiGo to embark on its next phase of becoming one of the leading global aviation players but will also aid in IndiGo’s firm commitment to the ‘growth of India’. With the new widebody set to roll, are you are under the impression that IndiGo’s regional expansion plan will take a back seat? Well, IndiGo is currently in talks with ATR and Embraer for a firm order of 50 aircraft with options of 50 more. At present IndiGo has 45 ATRs with 78 seats configuration. This new order is a testament that IndiGo is looking at overall expansion – regional routes catering to Tier II, Tier III cities with smaller planes, international routes with its new A350 widebody order all the while continuing to expand its domestic network with its largest order of 500 A320s placed last year.

THE TURKISH WET-LEASE PROPELLED INDIGO TOWARDS THE FIRM ORDER

Although IndiGo is the undisputed ‘narrowbody king’ of India, the airline has some experience with widebody space having recently leased two B777 for Istanbul route from Turkish Airways. Experts feel that this move by IndiGo was long anticipated. After experimenting with the wet lease deal with Turkish Airlines on Istanbul route, rumours were flying think and fast about IndiGo soon to place a large order of widebody aircraft. Finally on April 25, 2024, IndiGo put all rumours to rest and signed an order of 30 A350s with an option of 70 more. The exact configuration of the (A350-900) aircraft will be decided at a later stage while the deliveries of new aircraft will commence from 2027.

Experts believe IndiGo sent a clear message not just to Indian operators but to international competitors that IndiGo has jumped into the long-haul market

“It was indeed long awaited,” says Ajay Kumar of KLA legal. IndiGo, having captured the domestic market, is looking to spread its wings and cover more international routes. Placement of wide-body order, therefore, came as a no surprise at all,” Kumar adds. “Besides, the wet leases are always more expensive as compared to the conventional dry leases and is used by airlines as stop-gap arrangements,” adds Harish Venkateswaran, Vice President - Technical & Head of CAMO, at AirFleet Managers. “Hence this widebody order is certainly not a surprise,” Venkateswaran adds. “After the exit of Jet Airways, there was a gap in India’s long-haul market, reasons Prakash Babu Devara, Director of Product Marketing, Cognitus. “While carriers like Air India and other international airlines, along with their Indian code-share partners, attempted to fill this void, the market remains open for an Indian carrier to step into the shoes vacated by Jet Airways,” Davara adds.

WHERE WILL INDIGO FLY ITS A350?

Earlier this year, IndiGo signed an order with Airbus for 30 A350s with an option of 70 more wide-body aircraft.

“While it is difficult to predict with accuracy, in my opinion, IndiGo will be looking to consolidate the existing routes and cover certain new international destinations, such as Australia and Europe,” reasons Kumar.

Middle East seems to be already taken up to a great extent, particularly by the likes of Emirates and Etihad. Both the Middle Eastern carriers have an established first and business class product. “IndiGo doesn’t have any experience in this area. So, if and when they come with such a product, the comparison and competition will be serious and they need to be on the ball from the word go!” argues Venkateswaran.

However, there is a void created by Go First and Jet Airways downfall. With the ever-increasing business activity between India and Middle East and the EU, Kumar feels IndiGo will have plenty of opportunity to prove its metal.

This deal will also position IndiGo as direct competitor to Air India and foreign airlines like Emirates and Qatar on various lucrative routes. But will IndiGo override Air India in international expansion as they did with domestic market? “There is no doubt that IndiGo is doing exceptionally well and have balanced, but aggressive expansion plans,” says Kumar. “Their market share is already in the range of 60 per cent and adding more international flights is definitely the way forward for them. Air India on the other hand is backed by TATAs who are working overtime to bring back its lost glory. TATAs of course have Vistara under their belt too which is an excellent product. We can, therefore, expect, a healthy competition between IndiGo and Air India in the future,” Kumar adds as an afterthought.

Venkateswaran however feels IndiGo will take the lead in the race. “IndiGo has always been very aggressive right from day one. It would not be incorrect to assume that the wide-body order is to get a head start over Air India in this game,” Venkateswaran predicts.

“There are significant distinctions between the Low-cost carrier (LCC) model and the Full-service carrier (FSC) model,” Devara says. “One key difference lies in the operational approach: LCCs typically operate on a point-to-point model, whereas FSCs employ a Hub & Spoke model. Moreover, the business models themselves diverge in terms of revenue management, profitability strategies, and ancillary product offerings.”

Apart from what experts predict, the move is indeed a welcome news for the passengers as well as the Indian civil aviation market. Going ahead, it will be interesting to watch how the two airlines woe passengers to garner a greater share on international routes.

AIRBUS’ A350S STRATEGIC ENTRY INTO INDIA

As the pandemic receded in late 2021 and Q1 of 2022, discussions revolving widebody aircraft in India began to change. Airbus began its demonstration tour of India to crack the Indian widebody market. Around March 2022, Airbus was already in talks with Tata Group for potential widebody order. Boeing had always dominated the widebody market in India with Air India flying the B777s and B787s. Airbus had come to India armed with the new A350 to create a dent in Boeing’s widebody share. According to Airbus, A350s can seat up to 480 passengers depending on the configuration while offering the lowest cost per seat and can fly non-stop on ultra-long-haul routes of 18,000 kms.

This deal will position IndiGo as a direct competitor to Air India and foreign airlines like Emirates and Qatar on various lucrative routes

Calling A350 as the catalyst for India’s international travel revolution, Airbus was confident that A350 will change India’s long-haul landscape. And did it? The wheels of fortune for India’s widebody sector began to change as Air India in February 2023, placed an order of 470 aircraft, of which 70 were widebody. Air India received its first A350 at the first day of Wings India Air Show in January 2024.

The Indian civil aviation sector has been growing steadily over the past many years. In fact, according Airbus, India may require about 2,800 to 3,000 additional aircraft in next 20 years to cater to the bourgeoning demand.

Agreeing with Airbus prediction, Kumar adds, “Indian carriers are, of course, more confident and ambitious now and would look to expand to claim their share in the international market. This would require widebody aircraft to cover the long distance and to give their passengers a world-class service,” Kumar further asserts.

Venkateswaran too agrees wholeheartedly with Airbus and its predictions. He goes ahead to explain the passenger dynamics of today’s times. “Frequent flyers would agree that at times it is really difficult to get seats on flights operating to South East Asia. e.g. if you want Business class seats to Singapore in the next day or so, you may not get one.” Venkateswaran says. “Similarly, there is a huge demand on the economy class, driven primarily by two groups of passengers one the young Indian population which is headed out to study at universities abroad and the other is the Tourist group. Both groups are getting bigger thanks to the huge growth in the Indian Middle Class.” Venkateswaran explains.

INDIA’S TRANSITION FROM NARROWBODY TO WIDEBODY, HEADED FOR A DUOPOLY?

India has always been a dominant narrowbody market. The widebody market simply never took-off in India over the last 15 years. As a result, foreign operators grabbed a huge chunk of international passenger traffic from India as domestic carriers like IndiGo were busy spreading their wings across India. Prior to the orders from Air India and IndiGo, Indian markets has just 67 widebody aircraft, less than 10 per cent of the total fleet. This was one of the major reasons why foreign airlines gained on their share of profits from international routes to and from India while Indian operators completely lost out.

The present commercial aviation sectoral situation in India is very dynamic. On one hand we are witnessing dominant airlines placing huge aircraft orders while some of the seasoned airlines filing for bankruptcy. “The collapse of two major aircraft carriers in quick succession, with SpiceJet also struggling and Akasa being a relatively new player, it appears that Indian aviation may well be headed for a duopoly,” predicts Kumar.

Indian market is well placed with diverse airline business models which will segment the market well to deliver customised value propositions. “Another area which will play a critical role to make wide body operations successful is efficient alliances and partnerships to deliver wide network and seamless customer experience,” explains Nair. “Strong wide body network will allow us to arrest our erosion to foreign hubs, however it will not be easy as we (Indian carriers) will face strong competition with onestop players on price,” Nair further elaborates. It’s an established fact that barring few brands airline seat is perceived to be a perishable commodity and price can drive decision making.

Apart from price-war, capacity limitation and prime slot entry is another issue for new players coming in the market. “The newer players will have to look beyond the Tier 1 cities and this is where there is a lot of untapped potential,” says Venkateswaran.

Going ahead, Devara believes India will experience a duopoly in its aviation sector for a significant period, “ranging from 5 to 6 years if I’m optimistic and 8 to 10 years if I’m pessimistic,” Devara further predicts a ruthless analysis of India’s aviation market. “The Indian aviation industry is not for the faint-hearted—it demands substantial business acumen, industry connections, and, most importantly, robust financial backing,” says Devara. “Even for Akasa, it may require 5 to 6 years to establish a substantial market share domestically, and it’s unlikely that any new entrants will challenge the dominance of IndiGo or Air India in the foreseeable future.” Devara adds.

All-in-all it will be interesting to see how the airline brands will connect with Indian consumers to command a premium for non-stop offering.

START A NEW ERA FOR INDIAN AVIATION?

India is exceptionally well placed, geographically, to cater to huge traffic potential which is more than 10 million pax annually flying onestop between Asia Pacific, Europe and North America. However, we have been losing this traffic to overseas airport hubs located in Asia and Middle East. Additionally, around 25 million passenger traffic annually from India use overseas airport hubs to connect to various parts of the world. Now with Indian airports evolving as world-class hubs and with dynamic changes in the airline landscape we can witness strong airline-airport partnerships which can arrest this erosion.

“The stakes are higher and airlines which have a robust domestic network stand to have an advantage as they can use their domestic operations to feed the international operations,” argues Venkateswaran. “The newer players in the market would need to stabilise their domestic network and turn profitable before venturing into the international widebody market,” Venkateswaran adds.

Apart from network stability, Girish Nair, partner and aviation sector lead, KPMG also points out to widebody operations and its own set of challenges like heavy operational cost. “Airline needs to achieve brutal cost leadership and extreme clarity in their business model,” argues Nair. “We have not seen success with no frills model in long-haul flights hence it will be interesting to see how business models will evolve to create hybrids where experience is not compromised to achieve impressive cost metrics,” Nair further adds.

Indian carriers are more confident and ambitious now, looking to expand to claim their share in the international market, requiring widebody aircraft to cover long distances and provide world-class service

Kumar of KLA Legal argues that although Akasa has been growing steadily since its inception and has a good order book, they would eventually require widebody fleet for more expansion, but as of now they may prefer to stick to the MAX variant.

Meanwhile, Devara feels it’s possible that Akasa Air might place a A350 order in future. “As I mentioned, the long-haul market is open for new players, and considering that Akasa’s team consists mostly of former Jet Airways employees, they have the expertise to operate as a full-service carrier.”

Currently, Akasa has commenced operations with the Doha route, and in the near future, they may expand to other Middle Eastern and Asian routes using their existing narrowbody fleet. “Given their long-term ambitions, there’s no reason why they wouldn’t venture into long-haul routes with widebody aircraft,” Devara argues.

“We have seen our airlines placing unprecedented aircraft orders which reflects the changes in consumer behaviour when it comes to consuming air travel,” sums up Nair. But going forward strong widebody fleet is critical to realise India’s true potential and maximise our air traffic,” Nair forecasts.

Just like they say in cricket, a match is not lost till the last ball is bowled, we never know how the overall airline operations might turn out in near future. As for IndiGo with the new order the airline has yet again proved its versatility in crafting its own path, only time will tell how profitable this path will be. For now, let’s celebrate, to be a part of this dynamic industry called ‘Aviation’.