May 11, 2025

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INDIGO'S GLOBAL FLIGHT PATH

INDIGO MADE HISTORY in the week starting April 7 by momentarily surpassing global giants Delta Air Lines and Ryanair to become the world's most valued airline. This capped a series of headline-grabbing moves over the years since it took to the skies. The most significant was in mid-2023 when it announced non-stop flights to four Central Asian cities, not usual travel destinations for Indians and not connected by an Indian carrier till then. Within months, these destinations recorded triple-digit growth in the number of Indian visitorsTo meet the growing demand, IndiGo had to prioritise fleet allocation to Baku, Azerbaijan; Almaty, Kazakhstan; Tbilisi, Georgia; and Tashkent, Uzbekistan. Baku registered 283% traffic growth from India in January-September 2024 compared to the same period in 2023. It was followed by Almaty (172%), Tbilisi (147%) and Tashkent (90%)Bolstered by the response, IndiGo talked about starting direct flights to international cities not served by a domestic carrier and announced in earlier this year that it would connect four new destinations: Krabi, Thailand; Manchester, UK; Seychelles; and Fujairah, UAE. In fact, even global carriers do not fly directly between Delhi and Manchester, IndiGo's second European destination after the Netherlands. With leased widebody aircraft, it is set to announce 10 new international destinations this yearIndeed, after capturing 60%-plus domestic market share, IndiGo has set its sights on dominating the global skies too, including mid- and long-haul markets such as northern Europe, the US, Canada, Australia and Japan. Air India is the only domestic airline that connects these countries. This sets the stage for an epic battle between Air India, which has a monopoly on long-haul routes, and IndiGoFor IndiGo, the opportunity is too big to be missed. Around 26 million passengers flew on long-haul routes from and to India in FY24 and generated $16 billion in revenue. But the share of Indian carriers on long-haul routes (only Air India) was just 21%. "This contributes more than 50% to Air India's revenue," Nipun Aggarwal, Chief Commercial Officer, Air India, said recently. For IndiGo, international is believed to have contributed about 25-30% of revenue in FY25Clearly, international has big margins, and growth. The international passenger traffic for Indian carriers is expected to grow by 15-20% in FY26, more than the 7-10% growth expected in domestic, says an ICRA report. The total international traffic from/to India rose 11.4% to 5.7 million in the first nine months of FY25. The international traffic for Indian carriers also rose 11.4%The Airports Council International says India is likely to be the fastest-growing large aviation market over the next three decades. But there is a paradox; it is among the few big countries where domestic airlines are not leaders on international routes. The market share of foreign airlines on global routes has been 5560% over the last three years. IndiGo has 20% share of

CRUDE BONUS?

AS GLOBAL CRUDE oil prices plunge, the question that's being asked in India and around the world is whether this is a silver lining or a dark cloud? That's because US President Donald Trump's tariff announcements have dampened sentiment and heightened fears of an impending global recessionFor India, falling crude oil prices are typically a reason to cheer when it's business as usual. After all, India is the third-largest importer of crude oil after China and the US and a fall not only lowers its import bill, but also reduces inflation and the fiscal deficit, cuts the subsidy bill, makes exports more competitive and boosts overall economic growth. For consumers, it means that their fuel bills could possibly go down with a cut in retail pricesBut since the Indian economy is closely intertwined with global developments, can falling oil prices also become a liability? In the four months since Trump took over as the US President, business has been very far from usual. Almost daily announcements and reversals by the US on trade and tariff levies on countries across the globe have dampened sentiment, with equity, bond and currency markets on a roller-coaster ride, reflecting the volatility in the global economy. There are concerns that the tariff hikes could lead to lower demand for goods in the US and trigger an economic slowdown if not a full-fledged recession that would also affect economies across the worldGlobal crude oil prices, too, have mirrored this uncertain outlook and have fallen in recent weeks to touch a four-year low after Trump's "reciprocal" tariff announcement on April 2. Some believe that crude oil prices could fall further in the coming weeks because of the trade war. Brent crude dipped below $65 per barrel on April 4 and the West Texas Intermediate (WTI) has inched down to $61 on April 10 before recoveringGoldman Sachs expects Brent and WTI prices to edge down and average around $63 and $59, respectively, for the remainder of 2025, and $58 and $55 in 2026. Its base case assumes that the US will avoid a recession, and the OPEC+ bloc's supply will rise only modestly. However, it has warned that a global slowdown or a full reversal of the 2.2 million barrels per day of voluntary cuts by OPEC+ would likely push Brent towards $40 in 2026 and below that in an extreme scenarioWith the expectation of demand moderation, OPEC, in April, has cut its forecast for global oil demand for this year and the next by about 150,000 barrels a day. This year, it expects global oil demand to grow by 1.3 million barrels per day to 105.05 million barrels per day. Similarly, in 2026, it expects global oil demand to grow another 1.3 million barrels per day to 106.3 million barrels per day.