As VT-IRR landed in India, it marked the delivery of the 50th ATR 72-600 aircraft to IndiGo and also the last of the order placed in 2017. The airline which inducted one A320neo family aircraft a week on an average last year, took seven years to induct 50 ATR 72-600 aircraft in its fleet and does not have any more on order while its narrow body order book shows close to 1000 pending aircraft slated for delivery from now until 2036, stretching well over a decade. For the last one and half years, there have been news articles indicating many different things which include IndiGo being ready to place another order for ATR aircraft and IndiGo exploring other options (may be A220 or Embraers). Neither has the order for ATRs materialised nor has the airline placed an order for any other type of jet. With money definitely not the reason to hold the airline back, what could be the reasoning? Unlike other articles on this website, this is a little speculative in nature.
- Same technology
The ATR 72-600 is the latest technology aircraft available in the turboprop space. With Embraer not going ahead immediately with its turboprop development and Q400 not in production anymore, ATR is the only option. IndiGo had placed multiple orders for the A320neo family which included A320neo/A321neo and A321XLR which were all newer technologies as compared to the A320ceo which the airline operated before the “neo” era. In case of ATR, there is no change in terms of technology so a replacement to better performance and cost is not on the cards
- Lack of Routes
The airline has spread a lot with the ATRs which include new stations and few which have a handful of flights as compared to its old philosophy which I often describe as “Find a station and flood it with flights”. In the larger scheme of things such stations may be a drop in the ocean for IndiGo, but standalone they may not be at their best – financially. Replacing one ATR by another of the same technology may not be a viable idea and that means there have to be enough routes in the country to operate the 78 seat plane which then demands the fleet to go up from 50 to 75 to 100 and beyond. Prima facie, that does not seem to be the case. The cancellation rate for ATR routes has been high as compared to the narrowbody fleet, a fair indicator of two things. Routes aren’t working, but at the same time – multiple routes have been tried.
- Change in UDAN?
With the addition of ATR in the fleet, IndiGo could play a significant role in the RCS-UDAN scheme. The airline later also started adding flights in RCS-UDAN with the narrowbody fleet. The recent budget has put focus back on UDAN as UDAN 2.0 but there remains speculation on how the scheme will evolve and if it will be more beneficial for smaller capacity aircraft. Does that put restrictions on more ATRs?
- Alternatives?
Multiple news reports have called out that the airline could be looking at Embraers (or even Airbus A220). The A220s as well as the E2s are powered by Pratt & Whitney Geared Turbo Fan (GTF) engines, the same type which has troubled IndiGo. With a different rating, the performance on the E2s and A220s has been marginally better than those on the A320s, yet they are not absolutely immune to trouble. That leaves only E175 (not an E2) as the alternative but is from an older generation. None of the alternative options are a 1:1 replacement for ATRs and will be an incremental fleet type with some like the A220-300 and E195-E2 being closer to the A320neo in terms of capacity. This will likely put the CASK vs Trip Cost argument to test and with a large A320neo fleet, likely lead to failure for any other type.
- Availability
In 2023, IndiGo placed an order for the A320 family for deliveries from 2031 and beyond. The order book and production capacity metrics showed that the A220 also had a long wait. However, Airbus has not clocked many orders of the A220s since then while the A320 family continues to be on a roll. Direct orders from airlines for Embraer E2 have been steady and lessors have placed significant orders. Both of these indicate an availability earlier than one could have imagined in the past.
ATR on the other hand had said that it wants to increase its production to 80 planes a year and without substantial orders, the availability remains high. This means that IndIGo can negotiate late in the cycle and yet expect deliveries to be very early, similar to how things were with the first ATR order when 2017 saw the announcement of order and the first delivery.
Tail Note
The airline or Airbus or Embraer have never made any comment on the deal or the lack of it, as has been the case in the past as well. We may not know what the airline is thinking and neither would we know how the OEMs are pitching themselves. It is undeniable that India is a growing market, also undeniable that growth is coming from smaller cities but definitely questionable if the smaller markets are as profitable as the larger ones. With competition from Air India and focus on international expansion, including widebody, will IndiGo maintain a minimal presence on these regionals or be keen to expand? It will be interesting to see how IndiGo looks at this market.
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