IndiGo on Thursday has said that it is planning to start low-cost long haul international flights. It is also planning to buy Air India’s overseas operations. A week after expressing interest in buying out the operations of debt-laden Air India, IndiGo’s founders, Rahul Bhatia and Rakesh Gangwal, laid out the airline’s long term plans to take advantage of the “untapped international air transportation opportunities” given by India.
“Irrespective of how Air India story plays and based on our internal works, we are generally of the view that it makes fundamental economic sense for us to enter the long haul international market,” Gangwal said.
The airline’s long haul plans are guided by a range of factors, including the fact that India market is under-served by long haul international flights, he said in a conference call with investors and analysts. “We believe international long haul market is ready for the right type of low cost operations,” he stated.
However, he added that the business has to be profitable. “To be clear, whether we do limited transactions with Air India or launch our own long haul international operations or a combination of both, the business case would need to be EPS (Earnings per Share) accretive for us to go down that path.”
On its interest in Air India, Bhatia said IndiGo is “focused narrowly” on Air India’s international operations and Air India Express. “In our view, that would be a herculean task which would at best a very challenging proposition and at worst an impossible task, unless an organisation is willing to fund large losses for a very long time,” he added.
“Acquiring all of Air India’s operations will bring with it a lot of issues and many more challenges and complexities. We will assess whether it would be feasible for us to go down that path. At the end of the day, the exercise is not to become bigger for the sake of becoming bigger, but it is all about profitable growth and that is the bedrock principle at IndiGo,” Bhatia said.
