India's biggest carrier IndiGo, which announced on Wednesday (Oct 15) a deal to buy 250 Airbus aircraft, has consistently racked up profits as rivals have drowned in red ink from cut-throat fare wars.
No-frills IndiGo has posted six straight years of profits - even with India's high fuel taxes, ramshackle airport infrastructure and vicious fare fights - thanks to its zealous cost controls, analysts say.
Billionaire airline co-founder Rahul Bhatia is legendarily tight-fisted, telling Forbes magazine in 2010 his credo is "thinking before spending a single dollar" and asking himself, "Do I need to spend it? Can I get away without it?"
The New Delhi-based carrier, co-founded by Bhatia, who is group managing director, and former US Airways chief executive Rakesh Gangwal in 2006, is unlisted. But analysts say IndiGo, which depends a lot on word-of-mouth recommendations rather than advertising, could stage a debut share offer in mid-2015.
IndiGo's stylish flight attendants and spotless plane interiors give the budget airline a premium feel while its strong on-time performance has wooed business and other customers, giving it a one-third market share.
The purchase of the 250 single-aisle A320neo aircraft - Airbus;s single largest order by number of jets - marks Indigo's bet that air travel is only just taking off in the country of 1.25-billion people, analysts say.
The draft order "reaffirms IndiGo's commitment to the long-term development of affordable air transportation" in India, said airline president Aditya Ghosh. The planes' total list price is €20 billion (US$25.6 billion) but Airbus' discounts will likely cut the cost.
"The deal is a strong indicator of the long-term potential of the Indian civil aviation market," Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG, told AFP.
For decades, Indians depended on the nation's bone-jolting railway but cheap air fares have encouraged tens of millions of increasingly affluent Indians to fly.
Still, air travel is low per person compared with Americans who make over two flights a year. Indians, by contrast, take just 0.4 airplane trips annually, according to government figures.
The plane order is also part of Indigo's drive to keep its fleet young - it retires its aircraft after six years - to minimise maintenance and fuel costs.
Analysts say IndiGo has taken a leaf from budget US carrier Southwest Airlines in containing costs by keeping operations simple.
It flies to fewer destinations than rivals but offers more flights on those busy routes to maximise plane-capacity and uses just one make - Airbus. Just three years ago, IndiGo ordered 100 A320ceo and 180 A-320neos.
IndiGo, which operates over 500 daily flights with a current 83-plane fleet, has also pared costs by keeping planes aloft longer, fast landing-and-takeoff turnarounds and maintaining a lean staff-aircraft ratio.
Still IndiGo has not been immune to India's sharp economic slowdown, reporting profit last year nosedived by 60 percent to 3.17 billion rupees (US$51.6 million).
But IndiGo outperformed other big carriers. Budget SpiceJet, for instance, posted a record 10.03-billion-rupee (US$162.6 million) loss last year while full-service Jet Airways lost 36.67-billion rupees (US$594.5 million).
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