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IndiGo’s grounded planes may be costing it thousands of dollars daily

Reuters/Vivek Prakash
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India’s largest airline is scrambling to maintain operational normalcy, at a significant cost to investors and flyers.

On March 12, IndiGo had to ground eight of its Airbus A320neos—the firm has over 150 planes of various makes—following orders from the Indian aviation regulator, the directorate general of civil aviation (DGCA). Last month, the DGCA had grounded three of its aircraft. The 11 grounded planes, which could accommodate over 15,000 passengers daily, are costing the company heavily.

Back-of-the-envelope calculations indicate that the airline may be losing up to Rs7.2 lakh (over $11,000) in revenue per aircraft per day, Mark Martin, CEO of aviation consultancy firm Martin Consulting, told Quartz.

“If they’re grounded for even 20 days, that’s a revenue loss of nearly Rs140 crore (over $21 million). But, under the circumstances, cancellations and revenue loss are better than a catastrophic event like a crash,” Martin said.

The grounding, along with those of three GoAir aircraft, was ordered due to instances of in-flight shutdowns in the Airbus A320neos powered by certain Pratt & Whitney engines.

As a result, flight cancellations have spiked. IndiGo, which operates 1,000 flights a day, nixed nearly 50 on March 13, and over 40 the next day.

Meanwhile, overall air fares have jumped sharply post-cancellations, according to The Economic Times newspaper. Today (March 16), return journeys on India’s busiest route, Delhi-Mumbai-Delhi, could cost over Rs51,000.

IndiGo’s image has taken a hit in this imbroglio, and the firm is now struggling to manage dissatisfied customers.

Hi, this sounds concerning. We’d like to inform you that if an IndiGo flight is cancelled, a customer shall have to right to choose a refund; or a credit for future travel on IndiGo; or re-booking onto an alternative IndiGo flight (1/n)

— IndiGo (@IndiGo6E) March 14, 2018

But, the company has few options as long as the DGCA order is in place.

“Should IndiGo get into an accident on account of this engine problem, it stands to deal with a worse impact to its brand and integrity, and irreparable damage to its market share,” Martin said. “If the engine issue is not resolved soon, it will have to look at other options, probably wet-leasing planes from other airlines.”

GoAir, which currently has 230 daily flights and 1,600 weekly ones, has also been hit, but not as badly. The airline has cancelled 18 flights between March 15 and March 24.

For the rest of the month, IndiGo has announced the cancellation of 62 daily flights. ”Cancellations will probably go down in the days to come, as we are adding three more aircraft by March 22,” an IndiGo spokesperson said.

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