Indigo's profits are not surprising, competitor's survival is

Mumbai: Competitors and sceptics have been doubtful about Indigo’s year ending figures. This, at a time when the aviation sector has been bleeding losses quarter after quarter.
Critics not entirely convinced about Indigo's numbers say that the company generates profit by entering a sale and lease back deal with aircraft manufacturers, However, Indigo has now disclosed its operating profit figures which stood at Rs 1,758 crore on an operating margin of 18.6%. This number is calculated before taking sale and lease back benefit. Au contraire, Jet Airways reported an operating margin of 7%, while SpiceJet was barely profitable at operating levels.
What needs to be compared, is the long term sustainability of the airline. This is where Indigo differs from the others. The airline’s closest competitor was Spicejet. But a new CEO appointed by the company’s new owners – The Marans of Sun TV Network – managed to pull the airline down into losses. Indigo, on the other hand, in cricket parlance, has stuck to its basics by taking singles. The airline did not enter the price war when every other airline was rooting on Kingfisher’s fall to earn numbers and it continues to stick to its operating format.

Owned by two of the most experienced Indians in the sector, Indigo has a fixation with cost control. The company has stuck to its low-cost carrier model rather than the low-fare carrier model. The company operates only one type of aircraft, which gives them the flexibility of using the same crew, thereby cutting hiring, training and upgradation cost of the crew. As per the aviation laws, separate crew needs to be maintained for different kind of airplanes and they cannot be interchanged.
Indigo also has the highest passenger load factor which means it carries more passengers on its plane. This, leads to higher revenue and also helps distribute cost and increase profitability. Further, its planes make more trips per day than any other airline in the country. This is possible because it has one of the best turnaround time (time taken between landing and the next take-off) of 30 minutes.
Read news in full 30/09/13 Shishir Asthna/Business Standard