Aviation doing no wrong collectively; there's no general problem: IndiGo CEO Elbers

To say that Pieter Elbers, the 53-year-old, former president and CEO of KLM Royal Dutch Airlines, Netherlands flag carrier landed in New Delhi in a pretty sweet spot as CEO of India's largest private airline IndiGo in September 2022 would not be far from the truth.

His arrival coincided with a sharp rebound in air travel in India and a much-awaited turnaround in the airline's financial report card after many quarters and years of losses. The airline reported a net profit of ₹1,400-odd crore in the October-December 2023 quarter followed by a just above ₹900 crore in the following quarter (January-March 2023), ensuring that the airline ends the financial year with a small loss. Three years post pandemic, IndiGo is finally able to see light at the end of a long, dark tunnel.

Elbers, who started his career at 22 following a degree in logistics management and a mandatory stint with the army, spent 30 years including stints based in Italy, Greece and Tokyo with his country's carrier. In his first detailed interview with Fortune India, Elbers speaks to Anjuli Bhargava on how he sees the aviation industry, IndiGo's strengths and weaknesses and its journey ahead.

Excerpts from an in-depth conversation:

Q: What are some of the factors that are critical to success in this business as you have seen with the breadth of your experience?

A: Aviation is a super competitive business which is both capital and labor intensive. Aviation is a logistics challenge each and every day. A 24/7 type of operation. A synchronisation of many factors. All these elements have to come together and one has to be on the toes each and every day. That can be a challenge looking at the capital intensity of the business, the customer experience and the logistics optimisation.

Q: In India, we have seen a spate of closures since the sector was privatised……do you think we are doing something wrong at a macro level ?

A: That I would argue is too generic. IndiGo has been successful in building the company from nothing 16 years ago to what it is today. The question we can ask is what made IndiGo a success where it has a standing today even on a global scale. So one cannot say what we are doing wrong collectively. Clearly as a country, there's no general problem. Nonetheless, India is a very competitive market too and requires the organisation to perform on all aspects I mentioned above every single day. It doesn't always happen.

Q: So would you attribute the failure of airlines in India to bad internal management or faulty business models or a combination of both since the operating environment is largely the same for all carriers?

A: Actually, in reality, the circumstances are never the same across companies. Even if the external operating environment is common, there are many differences based on strategic choices, network and route composition, the sheer size and scale differs. Each carrier operates in a different setting even in the same broader environment.

Q: How did you find things at IndiGo when you arrived in September 2022? Tell me some of the things you were excited by and those you felt needed change?

A: Coming from a company with a 103-year-old history, operating to 250-odd international destinations with wide bodies and a single hub (Schiphol), I moved to a very different environment. The market here characteristically is very different and goes up and down much faster than other parts of the world. Moreover, the dynamics of the market here are very "last moment": we find that we are able to load and dispatch flights here at a perilously late hour; yet people are traveling!

What struck me is the commitment of IndiGo's workforce that comes together to ensure that 1800 flights take off and land safely on a daily basis from different bases on a vast network, some domestic and others international.

I was fortunate to arrive at a point of recovery which started effectively in summer 2022. What we were able to do is to do some positive "jugaad" to capture some of the traffic rebound by introducing additional capacity on damp lease. As you know, almost 37-38 of our aircraft have been on ground due to engine related supply side constraints.

Last but not least, coming from a European perspective, I find it heartening to see how aligned the goals of India’s aviation sector are with the goals of development of the country as a whole - the push on GDP front, the hosting of the G20 summit - acting as it would as a tool to catapult India to its next logical position in the world. There is an absolute alignment between where the country is going and where IndiGo is going. New infrastructure is being built, we will have new airports in Mumbai and Delhi…in general, aviation is expected to play a major role. This is definitely exciting for me as a European, the role the airline is expected to play in the country’s growth journey. The challenges are the speed of growth and the consequent infrastructure challenges that we need to deal with.

Q: What were some of the things that struck you immediately as requiring improvement or change at the carrier?

A: For a country that is so digitally savvy, I realised quite soon that IndiGo needs to prioritise this aspect of its operations. The whole world comes to India for a lot of its tech needs, so we should be not just with but ahead of the pack in this.

A second aspect is IndiGo's customer loyalty programme. We do have one but it’s at very early stages and not enough are aware of it. This may have been fine earlier when it was establishing itself but now at the stage the airline finds itself where it will soon touch 100 million customers, this needs a push.

Our on-time performance too had slipped a bit in the aftermath of the pandemic and with increasing complexity of operations. We have been working on that as well and it has picked up since November 2022. Along with improving on time, we’re working to improve our aircraft utilisation from the present roughly 13 hours per day to 14 hours as we get into a more stable operating environment but this also partly depends on network alignment.

Q: What about the relationship with commanders and crew, which has in the past been fraught off-and-on, especially in the aftermath of the pandemic? I know a few senior pilots - IndiGo loyalists - with 12-15 years who have moved recently to airlines in the Middle East……

A: Some factors are within our control and some outside of it. A lot of Middle East carriers have started to hire after COVID - they had all reduced numbers during the pandemic - and this is creating career opportunities outside our control.

Let me say that the pandemic was an unusual time but things are and will be very changed going forward. In October, we restored all salaries that had been reduced in the aftermath of the pandemic. Moreover, when people are not certain about the direction or the future of the company, at times disillusionment can set in but our last two quarters' results should drive home the larger message that IndiGo is a solid, stable base with growing opportunities for those who want a steady career.

Q: Coming to your results, a good performance is always a combination of factors. Which factors have led and which have contributed? 

A: Besides a cooling of fuel prices and no further depreciation of the rupee, the two strongest factors have been the recovery in air traffic which is a reflection of India's sharp economic recovery post-Covid-19. India recovered later but faster compared to some other countries in the world.

The other is the efficient execution of a couple of strategies introduced last year that are now beginning to show results. The addition of new routes in both the domestic and international network are now beginning to pay off.  We added routes like Ras-Al-Khima, Mopa-Goa, Nashik, Itanagar and Dharamshala that are doing well. New routes have been added like Jaipur-Bhopal, Indore-Surat and Pune-Varanasi, among others.

We have introduced a three point disembarkation system which is lowering turnaround time by saving a couple of minutes per flight. One may say what's the big deal but with 1800 flights a day—2 or 3 minutes per flight adds up to a big number. 

In addition, by acting on time, we were able to mitigate some of the supply side challenges we faced by both extending some leases and by bringing in a few aircraft on damp lease (the cockpit crew is the airline's and the cabin crew and aircraft are outsourced) as mentioned earlier. At the start of the FY, we had given a capacity guidance of 17% to 18% but we have marginally exceeded that. This guidance was given before we knew about the supply chain problems; yet we managed to exceed it. I'm quite happy about that.

We have also diversified our business by adding two full freighters at the end of last year and we hope to develop this. We have a third freighter coming in this year and the two 777s we have leased are also giving more cargo opportunities. Covid-19 brought this business into focus and we are expanding it.

We also hope to look more closely at our non fuel cask once we enter a more stable operating environment. We have earned our first profits after ten quarters of losses so we might wait a bit. Overall, the improved results have helped with confidence in the company, employee morale and our future ambitions.

Q: What happens to your international operations going forward with Air India and the new aviation scenario that is emerging in the country?

A: Today, we operate 300 aircraft and we operate to only 26 international destinations. For a country the size of India and for a carrier the size of IndiGo, 26 is a very modest number. Look at the geographical position of India where we can operate a very different network out of Delhi, Mumbai, Chennai or Kolkata.

Let me give you just one example: we used to have flights out of five Indian cities, now it's up to seven including Bhuvaneshwar. We will soon be adding Bhubaneswar to Dubai. We can increase our international footprint similarly across many destinations. We also have plans to add new routes like Nairobi, Jakarta and Central Asia, which can be done with our existing aircraft.

We expect around 24-25 A321XLR aircraft to come in as per our existing order with Airbus. This will stretch further the destinations we can reach. Presently, we are flying up to Istanbul but with the XLR we can fly further into Europe and Asia.

Q: A few years down the line, what percentage of your revenue would be from international and what would it be from domestic?

A: We're not disclosing the revenues but what I can say is around 20% to 22% of the available seat kilometers (askm) deployed is international. We hope to bring that up to 30% with the new destinations we will be adding after we bring in more XLRs.

Q: So, no wide bodies on the cards as of now ? Is IndiGo wary of introducing a second aircraft since the experience of airlines who have mixed models has not always been a happy one ?

A: There are many generic industry experiences but for us we have to develop something that matches the needs of the Indian consumer and yet remains very close to what IndiGo stands for. We are not ruling out anything but today we see and are focussed on the opportunities identified with our existing fleet and the new aircraft on order.

This ties in with something I mentioned earlier. We now feel IndiGo is at a stage where it can offer a full fledged classic loyalty programme. We have in the past offered some cash discounts through credit card tie ups but with the stage we are at now - many very regular fliers, and high frequencies between metros - the time is right. Similarly, when we feel we need to make decisions on where we go from here with our international foray, we will.

Q: Aircraft is one thing but it also means a change in the basic DNA of IndiGo from a low fare service provider as long haul requires a different level of service…

A: We are currently running a very tight ship and we are very focused on this. IndiGo has to some extent changed air travel in India itself and given the size of the country and its potential, the fact that India will be the third-largest economy in the not-too-distant future, the fact that the Indian diaspora is traveling back and forth, the fact that India has a young ambitious population makes me believe that we should be in a position to draft our own course. Whenever the time is right, we will take these decisions. 

We will cross 100 million customers this year which is a big moment for IndiGo but I think it’s also a big moment for India. There are probably just a handful of carriers in the world with more than 100 million customers. We are not on a mission to just fly planes but also to help develop this country as a purpose. The growth of the country matches our ambition to double in size by the end of the decade (from 300 to 600 aircraft).

Q: What are some of the mechanisms that IndiGo has in place to cushion itself from external shocks like the pandemic ? What helped you cope with a highly trying situation?

Navigating through a crisis like covid has been one of the toughest challenges for IndiGo, much like any other business anywhere in the world. A couple of factors that helped us steer through this situation were our solid cash position. We continued to invest in training (ensuring our staff was kept abreast via online trainings on how to serve customers during this period), empathetic training (how to deal with for first time flyers for instance) and technology (the entire check-in process went online in a couple of weeks from online boarding passes to baggage tags so that people could print everything themselves and navigate through the airport process in a touchless way). This wasn't easy with such a large and spread out operation.

Agility was key in coping with Covid-19. Adapting the network to meet the demands of the nation via repatriation flights or transporting life-saving drugs or blood plasma across the nation, the softer aspects where employees had to adapt overnight to many restrictions and requirements like wearing the PPE suits, masks, adhering to all safety and hygiene parameters. The airline forayed into different verticals like cargo or charters and had to keep as much of the fleet in running conditions to get back to the skies as soon as restrictions were lifted.