InterGlobe Aviation Limited: history, ownership, mission, how it works & makes money

A Brief History of InterGlobe Aviation Limited

InterGlobe Aviation Limited, founded in 2006, is the parent company of Indigo, India's largest airline by market share. The company was established by Rahul Bhatia and Rakesh Gangwal. It primarily operates in the low-cost carrier segment, becoming a prominent player in the Indian aviation industry. As of 2023, Indigo's market share stands at approximately 56%.

Initially, Indigo launched operations in August 2006 with a modest fleet of just 3 Airbus A320 aircraft and focused on providing affordable air travel. By the end of 2007, the airline had expanded its fleet to 14 aircraft, connecting key cities across India. This aggressive growth trajectory continued, and by 2015, the fleet had reached 100 aircraft, firmly establishing Indigo as a leader in domestic air travel.

InterGlobe's business model emphasizes operational efficiency, punctuality, and customer service, which have become the cornerstone of Indigo's reputation. The airline is known for its on-time performance, boasting an impressive 86.6% punctuality rate in 2022.

Financial Performance

InterGlobe Aviation Limited went public in November 2015, listing on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) with an initial public offering (IPO) of ₹ 1,032 per share. As of October 2023, the stock price is approximately ₹ 2,350, reflecting a significant appreciation since its IPO.

For the fiscal year 2022-2023, InterGlobe reported consolidated revenue of ₹ 35,178 crore, a substantial increase compared to the ₹ 24,000 crore reported in the previous fiscal year. The company achieved a net profit of ₹ 4,255 crore in FY23, recovering from the losses incurred during the COVID-19 pandemic.

In September 2023, InterGlobe Aviation announced that it had placed an order for 500 Airbus A320 family aircraft, one of the largest single aircraft orders in the history of the aviation industry, valued at approximately $50 billion at list price. This order underscores the airline's commitment to expanding its operations and continuing to cater to the growing demand for air travel in India.

As of October 2023, the total fleet size of Indigo stands at 300 aircraft, with a mix of A320ceo, A320neo, and A321neo models. The airline operates over 1,600 daily flights to more than 100 destinations, both domestically and internationally.

Market Position

Indigo's competitive edge is further augmented by its well-structured cost management strategies and ancillary revenue streams. The company has successfully diversified its revenue by offering additional services, such as excess baggage and additional seat selection, which are contributing to nearly 20% of its total revenue.

As of 2023, the industry’s overall growth outlook remains positive, with the International Air Transport Association (IATA) projecting a recovery in passenger demand to pre-pandemic levels by 2024. InterGlobe's strategic positioning and robust operational framework make it a strong contender to capture the rebound in air travel demand.

A Who Owns InterGlobe Aviation Limited

InterGlobe Aviation Limited, primarily recognized for its operation of IndiGo airlines, has a diverse ownership structure. As of the latest filings, the ownership distribution is as follows:

The key promoters of InterGlobe Aviation include:

• Rahul Bhatia - Co-founder and Managing Director
• Rakesh Gangwal - Co-founder and former CEO
• InterGlobe Enterprises - A significant shareholder entity

As of the fiscal year ending March 2023, InterGlobe Aviation reported a total of 525,585,052 shares outstanding. The shareholding of the promoters has remained stable, reflecting their confidence in the company's growth trajectory. Foreign investment in the airline sector has also seen an uptick, with FIIs increasing their holdings by 2.5% over the past year.

In terms of market performance, InterGlobe Aviation's stock price as of October 2023 stands at approximately ₹1,800, exhibiting a growth of 10% year-to-date. The company's market capitalization is around ₹950 billion.

The financial health of InterGlobe Aviation is noteworthy, with the company reporting a revenue of ₹ 145.4 billion for the fiscal year 2022-2023, representing a year-on-year growth of 30%. Net profit for the same period was reported at ₹ 31.7 billion, translating into a profit margin of 21.8%.

InterGlobe's strategic focus on cost management and operational efficiency has contributed to its robust performance in a challenging airline market. The company currently holds a fleet size of 300+ aircraft, predominantly comprising Airbus A320 family planes.

InterGlobe Aviation Limited Mission Statement

InterGlobe Aviation Limited, the parent company of IndiGo, aims to provide reliable, low-cost air travel in India. The airline's mission emphasizes safety, customer satisfaction, and operational excellence. With a focus on becoming a leader in the Indian aviation industry, IndiGo operates with a value-oriented approach that prioritizes punctuality and customer service.

As of the second quarter of FY 2023-24, InterGlobe Aviation reported a consolidated revenue of ₹15,820 crore, marking a significant increase compared to the previous year's revenue of ₹10,844 crore for the same quarter. The company maintained its commitment to cost efficiency and operational reliability, which is reflected in its mission to serve customers with a focus on affordability and excellent service.

In terms of operational scope, as of September 30, 2023, IndiGo had a fleet of 302 aircraft, operating over 1,600 flights daily, serving approximately 80 domestic and international destinations. This expansion of their fleet and network enhances their mission to connect various parts of the country while promoting affordable air travel.

The company has also demonstrated a strong financial performance with a net profit of ₹1,400 crore for Q2 FY 2023-24, compared to a net loss of ₹1,058 crore in Q2 of FY 2022-23. This turnaround underscores the effectiveness of their mission-centric strategy.

InterGlobe Aviation's commitment to sustainability is also intertwined with its mission statement. The airline has been actively investing in fuel-efficient aircraft and exploring sustainable aviation fuel (SAF) options, aligning with global efforts to reduce carbon emissions. The focus on operational efficiency is evident from their reported 87% on-time performance in September 2023, which adheres to their promise of punctuality.

In summary, InterGlobe Aviation Limited's mission aligns with their operational objectives and financial performance, clearly reflecting their dedication to providing affordable and reliable air travel. The company's ability to maintain profitability amidst industry challenges exemplifies the effectiveness of their strategic focus.

How InterGlobe Aviation Limited Works

InterGlobe Aviation Limited, the parent company of IndiGo Airlines, operates primarily within the airline industry as a low-cost carrier. Since its inception in 2006, the company has strategically positioned itself as one of the largest Indian airlines in terms of market share and passenger traffic.

The operational model of InterGlobe Aviation focuses on achieving efficiency through a simple service structure, high aircraft utilization, and robust cost management. As of October 2023, IndiGo holds a market share of approximately 55% in the Indian domestic aviation sector.

The company's fleet, predominantly consisting of Airbus A320 and A321 aircraft, includes around 280 operational aircraft with a plan for expansion. The average fleet age stands at about 5.5 years, contributing to efficiency and lower maintenance costs.

InterGlobe Aviation's revenue stream is primarily generated from passenger fares, accounting for approximately 90% of total income. Ancillary services, including baggage fees and in-flight sales, comprise the remaining 10%.

The company has successfully implemented a direct sales strategy through its website and mobile app, reducing reliance on travel agents and enabling better cost management. In 2023, the digital platform accounted for over 60% of ticket sales, enhancing operational efficiencies.

Fuel costs represent a significant portion of the operational expenses, constituting around 30% to 35% of total costs. In recent months, jet fuel prices have fluctuated, with a reported average price of around INR 100,000 per kiloliter, impacting the cost structure of airlines including InterGlobe.

Labor costs also play a crucial role, accounting for roughly 15% to 20% of overall expenses. The company employs more than 27,000 personnel, focusing on maintaining a lean operation while ensuring high service standards.

In terms of growth strategy, InterGlobe Aviation has committed to increasing its fleet size to over 500 aircraft by 2030. The expansion is geared towards enhancing both domestic and international route offerings, with a focus on operational hubs such as Delhi and Mumbai.

Moreover, the company has seen a surge in demand post-pandemic, with a year-on-year growth rate of 20% in passenger traffic reported for the first half of 2023. The strategic focus on expanding international flights has also been highlighted, targeting key markets including Southeast Asia and the Middle East.

InterGlobe's corporate governance practices adhere to stringent compliance and transparency standards, which have garnered positive investor sentiment. The company's stock performance on the National Stock Exchange (NSE) has remained robust with a current share price approximately at INR 2,300, reflecting a market capitalization of around INR 1.05 trillion.

As of the latest financial disclosures, InterGlobe Aviation's debt-to-equity ratio is maintained at a comfortable level of 0.7, demonstrating prudent financial management while facilitating growth initiatives.

How InterGlobe Aviation Limited Makes Money

InterGlobe Aviation Limited, operating under the IndiGo brand, is a prominent player in the Indian aviation industry. The company generates revenue through several key streams, primarily focused on passenger transportation, cargo services, and ancillary services.

Passenger Revenue

The bulk of InterGlobe's earnings comes from its passenger segment, which accounted for approximately 87.2% of the total revenue in the fiscal year 2023. In FY 2022-23, the company reported a total revenue from operations of approximately ₹40,000 crore (~USD 4.8 billion). The average fare per passenger has shown an upward trend, attributed to increased demand and fuel costs, reaching an average of around ₹3,200 per flight.

Cargo Services

Cargo services contribute significantly to the company’s revenue mix, typically accounting for about 3.5% of total revenue. In FY 2023, InterGlobe's cargo revenue was approximately ₹1,400 crore (~USD 168 million), reflecting robust growth due to heightened e-commerce and logistic demands post-pandemic.

Ancillary Revenue

Ancillary services encompass a variety of offerings, including baggage fees, in-flight services, and seat selection charges. This segment has seen a growth rate of about 25% year-over-year, reaching approximately ₹6,500 crore (~USD 780 million) in FY 2023. Ancillary revenue as a percentage of total revenue stood at around 16.3%.

Operational Efficiency and Cost Management

InterGlobe operates a fleet of 300 aircraft with an average age of 5.2 years, which enhances fuel efficiency and reduces maintenance costs. The airline's operating profit margin for FY 2023 was recorded at 9.4%, reflecting effective cost management strategies despite rising fuel prices.

Table: Revenue Breakdown of InterGlobe Aviation Limited (FY 2022-23)

Future Growth Strategies

Looking ahead, InterGlobe Aviation aims to expand its fleet and services, targeting an increase in domestic and international routes. The company has placed orders for an additional 300 aircraft from Airbus, set for delivery between 2024 and 2035, which will bolster its capability to tap into growing markets.

Market Position and Competitive Landscape

As of 2023, IndiGo holds approximately 58% market share in the domestic airline sector, making it the largest carrier in India. This market dominance is critical for sustaining its revenue growth against competitors like SpiceJet and Air India.

By continuously optimizing operational efficiency and expanding its service offerings, InterGlobe Aviation is positioned to maintain robust financial performance in the competitive aviation landscape.