A startup Indian airline backed by the former CEO of U.S. Airways startled the industry with a mammoth, $6B order for 100 planes at the Paris Air Show last week:
The order for 100 Airbus aircraft… is the biggest single order from India and the biggest, as well, for a single Airbus model (A320)… [Rahul] Bhatia may have been emboldened to take the plunge, backed by former US Airways head Rakesh Gangwal, who he has known for 20 years…… the biggest advantage his IndiGo, designed to be a budget carrier, has, is size. With 100 aircraft, it will be able to touch all airports in the country with multiple connections… IndiGo will be able to connect the lucrative metro routes with flights every half-an-hour… “We will connect every possible destination in India.” [Business Standard]
Gangwal apparently took the phrase ‘aviator frames’ literally 🙂 I love the airline name but am skeptical of the cash-rich naïf story. A high-profile team, unproven in a new market, drums up massive startup funding and makes confident proclamations about dominating the sector. Webvan, anyone?
Even before IndiGo’s buy, India had ordered almost half the world’s output of airliners in the last few months:
In the last nine months, India alone has booked 250 aircraft, nearly half of the orders for the entire industry worldwide. [Deccan Herald]
Besides the budget carriers, a new category of premium airlines is arising. In typical desi style, they don’t want an efficient shortcut, they want the whole experience: a high cost structure, bankruptcy and then a belated turn to the budget carrier model 😉
Paramount, from the Coimbatore-based textile company of the same name, will be a different kind of airline. While all the new airlines starting in the country are no-frills, low cost carriers… Its 70-seater aircraft from Brazil’s [Embraer], will be a business class airline — contrary to the all-economy class budget carriers. Paramount, which plans to take to the skies in August next, believes that there is enough premium traffic to be targeted in the country. [Deccan Herald]
I still question the wisdom of painting on airplanes a name which evokes ‘mountain.’ Those are two things which never should meet.
Update: Kingfisher Airlines also announced a $3B order for the Airbus double-decker:
Kingfisher, another Indian startup that has been flying for five weeks and owns two single-aisle airplanes, on Wednesday announced a $3 billion list-price order that included five superjumbo A380 jets. [Seattle Times]
Boeing poked holes in its rival’s story, though there are sizeable upgrades underway for India’s airports, and these planes aren’t due for delivery for a few years:
All Indian airlines together now have a combined fleet of 165 airliners, [Boeing’s Indian sales chief Dinesh Keskar] said… the Indian airport infrastructure is strained to accommodate them and there is a big shortage of pilots, he said. “It’s unrealistic for any one entity to fly in India with 100 airplanes,” he said. “Where are you going to park them?”… Another barrier, Keskar said, is that all aircraft purchases in India have to be approved by the government. Keskar said the government would likely withhold approval that would strain the nation’s aviation infrastructure…Airbus seemed to play down the stunning IndiGo order, which was announced only in a news release. None of the management team from India was in Paris to answer questions. [Seattle Times]
Update 2: Mariner comments at Airliners.net:
I am as sceptical about Kingfisher’s 5 x A380 as anyone. At the same time, I do not under-estimate the power of ambition in successful people. If they want to do it – and can raise the money – why not?… if we barred people from starting cheeky airlines, Sir Richard Branson would still be running a gay disco in London.
With all those private airlines starting up, the modernization of Airports can’t be far behind.. if the government doesn’t do it, the airlines will… capitalism at work!
I am optimistic about the success of these airlines since right now the price of a domestic airline ticket in India is about the same as that for a railway ticket (AC II-tier). Note that it’s possible to get a railway ticket on the major routes only if you book weeks in advance – there’s always a queue, so there should be a big group of switchers who want to travel without all the hassles of a train journey. Also, airline tickets will get cheaper with all that competition (as railway tickets get dearer with every new budget).
I am a bit sceptical about the ‘orders’ placed by the Indian airliners. Besides lack of infrastructure and funds for these many new birds, some of the orders even seem ridiculous.
Many of these orders placed are still “non-binding”. Essentially its a handshake deal that says “We intend to purchase from you Mr. Airbus and not Boeing for our requirements.”
Airbus expects many of these orders to be confirmed but only the future can tell when dealing with startups.
Technically speaking, the A380 can make port calls at very few airports world wide. The blog link mentioned that infrastructure would need to be upgraded for that aircraft, which is correct. This includes terminal facilities (Double decker jetways for the top and bottom decks), reinforced runways and bridges/tunnels, taxi way clearance with other aircraft around, etc.
If the airline boom goes as projected by the high flyers, the economic impact would be significant.
Gangwal can still get work? After the mess he (and other upper management) left US Airways in, I’m surprised he can get work as a ticket agent. Rono Dutta, formerly of United Airlines, now with Sahara, is another high-flyer who moved to India after mismanaging an American airline (again, with plenty of help from teh rest of United’s management).
In today’s news.. Indian airports to get ~$20 bn investment..
Where is Mallya planning on flying the A380s? …thats what a one too many Kingfishers does!!!
Well, since Indian airports are being upgraded anyway, they’ll toss in a few tweaks to handle the A380s…now considering that there’s no way in hell that A380s would be flying domestically, you obviously only need to upgrade one or two airports to handle the A380 – i.e. most like Delhi, Mumbai (or Amritsar!#@#!$). Because the A380 will probably be a Delhi/Mumbai-New York/London (or maybe even Delhi-Los Angeles non-stop? Is that possible with the extended range?). So I don’t think there’s any impracticality in buying a few 380s. Buy 5 and fly the high-demand routes, (and cut prices to fill up the 380) and you’ve probably got your competitors beat – not that I’m a successful businessman or anything… I just hope that I get to see upgraded airports in my lifetime 🙂 They’ve made some minor changes to IGI recently(New Delhi) – it’s gone from looking like A-Place-For-Planes-To-Land to a third-rate mall. So hopefully a full makeover isn’t far away…
TTG: The upgrades are definitely needed, especially with the air market opening up over India. However as this CNN article says, the upgrades are very pricey.
Other articles here and here quote similar numbers for expansion costs.
Will India gear up fast enough? Knowing how slow the governing machine works, thats a lot of money to come up at 2-3 airports in a short time. Note: Air India I believe has not purchased the A380, they recently annouced intentions to buy Boeing Aircraft.
I concur with some of the commentators above. Gangwal and Datta have plenty of experience in running airlines–into the ground. Chapter 11 gives executives carte blanche to mismanage companies without any accountability. After all, its all OPM, or other people’s money. Indian airline operators, executives and potential employees should speak to those who lost their pensions and, in many cases, their jobs as well at US Airways and UAL, before entrusting them with any responsibilities other than picking out furniture for the executive suite.
KXB and desichick: I donno if u both have something personal against Gangwal, but to me his resume sounds outstanding. I donno what you both do, but it seems a little presumptuous that you can be so dismissive.
Plus its a little silly to blame all the airlines problems on one CEO who was there for 3 years. No CEO can work miracles overnite.
I am copy pasting his bio from worldspan website:
Rakesh Gangwal Chairman, President and Chief Executive Officer
Rakesh Gangwal was named chairman, president and chief executive officer of Worldspan in June 2003 and appointed to the CompanyÂ’s board of directors.
Gangwal has held various positions with several major corporations in the areas of travel distribution and management, corporate strategy, operations, technology management, engineering and finance.
From 1998 to 2001, Gangwal served as chief executive officer of US Airways Group. Gangwal joined US Airways in February 1996 as president and chief operating officer, at which time he was also appointed to the board of directors of both US Airways, Inc. and US Airways Group.
From 1994 to 1996, Gangwal served as executive vice president – Planning and Development for Air France. From 1984 until his appointment at Air France, Gangwal worked at United Airlines serving in a variety of capacities including senior vice president of Planning, vice president of Financial Planning and Analysis, vice president of Revenue Management and vice president of Flight Administration.
GangwalÂ’s association with the travel industry commenced in 1980 when he worked with United Airlines as a management consultant for Booz Allen Hamilton. Earlier in his career, Gangwal was with the financial planning and analysis group of Ford Motor Company. Additionally, he was a production and planning engineer with Philips India, Ltd., a subsidiary of N.V. Philips.
In 1999, BusinessWeek recognized Gangwal as one of 1998’s 25 top global executives. He currently serves on the OfficeMax Incorporated board of directors and was a board member of the Boise Cascade Corporation prior to its spin-off of OfficeMax Incorporated. In addition, Gangwal is a past board member of the Air Transport Association (ATA) and the Airline Tariff Publishing Company (ATPCO). Gangwal was also a member of the board of trustees for both Providence – St. Mel School in Chicago and Alexian Brothers Medical Center in Elk Grove, Illinois.
He holds a Master of Business Administration from the Wharton Business School of the University of Pennsylvania and a Bachelor of Technology in Mechanical Engineering from the Indian Institute of Technology in Kanpur, India. Gangwal was born in Kolkata, India. He and his wife have one daughter.
Rakesh Gangwal, Rono Dutta two prominent indians in the aviation business but with abysmal record in running major carriers in the US. Walked away with millions in exec compensation and now are preaching the same mantra that they sold to US investors and boards to gullible Indian entrepreneurs who see dollars dancing in their eyes due the deregulated indian skies. Last blowout in India saw plenty of people go bust, and this time around Gangwal and Dutta will ensure that the losses are of McDonald’s UPSIZE variety. Sahar Pariwar may be able to take the punch from Dutta not sure about indiGO chap who might find that Rakesh has not only stuck with a huge loss but picked his pocket clean as well!!!