IndiGo Continues To Soar, Embarks On IPO

Saturday, 24th October 2015 at 01:44am

Next week, the airline will embark on an Initial Public Offering (IPO), hoping to raise more than US$460 million worth of funds.

Experts from Centre for Aviation (CAPA) predict that Indigo's IPO will turn out to be a success, citing the airline's credibility and sustainable operations for seven straight years. In terms of passenger volume, it ranks first among India's air carriers.

Passenger traffic is increasing by 18 per cent annually. The high level of optimism which generally blankets the aviation sector today may help lure investors to participate in the IPO. This, coupled with the airline's effective strategy on keeping operating costs and tax expenses low add appeal to the public offering.

Competing airlines failed where the top low-cost carrier succeeded. For a couple of years now, the airline remains undaunted despite challenges. The secret to its sustainability lies in part to the exercise of prudence in every decision.

A London-based asset management firm gave positive comments on the airline's services, citing its commitment to bring passengers to their choice destinations consistently on time. It is a vital commitment that some airlines tend to neglect, according to the review.

This IPO would be India's biggest so far since 2012.

IndiGo was founded by Rakesh Gangwal and Rahul Bhatia back in 2006. In 1985, the two had run into each other at United Airline's (UA) Chicago headquarters where Bhatia used to work as an IT professional. Gangwal, on the other hand, is an engineer who has worked with a string of airlines before becoming UA President and CEO. Eventually, he retired from his post in 2002.

After their chance meeting, the two managed to maintain close ties and were able to set up IndiGo more than a decade later. Currently, each holds a 50 per cent stake in Interglobe Aviation, the firm which owns and operates the airline.

Key competitors include Jet Airways and SpiceJet, but what sets the airline apart from the rest is its penchant for punctuality as well as management's effectiveness in handling airline costs.

Experts also noted that one of the airline's winning strategies is procuring only from a lone aircraft manufacturer (Airbus) and ensuring that it orders only one aircraft type. In addition, it enters into aircraft sale-and-leaseback transactions and sees to it that expenses for aircraft maintenance are kept at a minimum.

The airline operates a total of 97 aircrafts but have placed orders for more than 400 aircrafts from its supplier.

According to IndiGo, proceeds of the IPO will be used for expansion and settlement of lease obligations.

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