Market Mix - Indigo’s Stretch To Business Class

Good morning. IndiGo was probably the only airline in India that emerged from the pandemic with flying colours. The Core had earlier written about how the pandemic had weakened its rivals and the airline implemented many steps to keep soaring. Now, as the aviation industry has gone back to functioning in full swing, IndiGo is venturing into business class offerings from November. What does this mean for the airline that has so far been no frills? Read on to know more. 

Meanwhile, did you know that Australia has the highest per capita of solar energy in the world? Read on to find out how India can learn from them. 

DECODE THE NEWS

IndiGo Stretch Towards Business Class Will Be A Game Changer For The Airline

The bookings opened in August and from November, Indigo is set to have fancy business-class seats at a base price of Rs 18,018. IndiGoStretch targets the business flyer in India’s metro-to-metro routes, aiming to service all 12 routes by the end of 2025. 

IndiGo Airlines already has the lion’s share of India’s aviation sector at 61.6% as of May 2024. Introducing business class is a significant move for IndiGo, which already has a reputation for its on-time services, as it looks to tap into a newer customer segment. 

IndiGo’s availability on routes across the country has consolidated its position in the market, even creating a monopoly in some sectors.

But how will the business-class gamble play out for the airline? 

“I think they will be successful. They have a reputation for on-time performance and everyone wants that. Besides, the metro sectors, where the service will be launched, have a lot of traffic,” Subhash Goyal, chairman of STIC Travel Group at the Indian Chamber of Commerce, Aviation and Tourism Committee and president of the Chamber for Service Industry, told The Core. 

THE TAKE

Worshipping The Sun & Saving From It

Indians worship the sun as a source of life, as many civilisations do. This practice goes back to ancient Egypt. Increasingly, it has become a source of energy as well. Solar power generation in India is now touching 20% of total power generation. Overall fossil fuel power generation is only at 53% because fossil fuels are reducing. 

The first half of 2024 saw almost 15 gigawatts of solar capacity being set up, the highest ever for a six-month period. Interestingly, 87% of India’s solar power is generated into grids. These are mostly state government-run electricity grids. The other 13% comes from rooftop solar, which is where great opportunity lies. 

Solar power generation is getting cheaper and cheaper. The problem is when you combine it with battery storage — needed for nighttime supply when the sun stops shining — the cost increases. “The combined cost is twice as that of fossil fuel-based power,” Dr Ajay Mathur, director general of the International Solar Alliance, a pan-national body, told me on a panel titled ‘Reaching the Unreached’ on Thursday at the International Solar Festival 2024 in Delhi. The title ‘festival’ is apt for solar energy, suggesting something to celebrate rather than a seminar to grimly ponder over the future of energy.

The economics of grid power are still a little tricky but that may not be the case when it comes to homes. Philip Green, the High Commissioner of Australia, said that the country now has the world’s highest per capita of solar energy. Not just that, one-third of households in Australia now have rooftop solar, Green said during the festival.

The Clean Energy Council says rooftop solar photovoltaic systems touched 20 GW of capacity in Australia last year, are the fourth largest source of power and now represent a little over 11% of the country’s power supply. Australia is a small country, but the percentage is a good example. There are calls for more subsidies for batteries to create the flexibility of storage and thus being able to access power at all times.

India launched a rooftop solar programme in January this year, targeting 10 million rooftops, riding on previous schemes launched in 2022, including subsidies for the cost of solar panels. Around 13 million Indians have reportedly registered for this. The big opportunity is self-generation and innovation in utilities. For example, solar heating can save water heating bills, as may be the case in many homes in India. This is perhaps more in the southern part of India where I have seen it. Similarly, solar can drive power requirements for remote applications.

Going back to Australia, a friend originally from Delhi who lives in Sydney says his Tesla car is totally charged with power from his rooftop solar and he also pumps energy back into the grid. So his “electric is truly electric,” he says. It is something of a hobby for him to see if he can take less and less power from the grid and one day be completely independent of the grid.

India needs more applications like this which will decentralise and reduce distribution costs and friction. It is almost a Gandhian way of self-sufficiency if you think about it, except that it is not in a way that he would have perhaps imagined.

CO:RELATION

Writing A Turnaround

In a bull market, it is not easy to identify businesses that still have value. You could look for businesses likely to stage a turnaround in such a situation. An analysis by CRISIL, a credit rating agency, states that the writing instrument businesses are such a story. Strengthening distribution and increased government spending on education induce domestic demand for premium writing products. Domestic demand contributes 75% of the total revenue of organised players, while there is hope that exports to the US and Europe would pick up, too. 

The average price of pens has grown to Rs 5.60 per instrument from Rs 4.90 per writing instrument over the past three years. CRISIL believes profit margins will grow further. The writing instruments business in India is worth nearly Rs 13,000 crore. The Covid-19 pandemic allowed organised players like Cello, Linc, and Flair to capture an 80% market share from 65% earlier. However, the share prices of these companies have underperformed despite solid profit margins and growth.

CORE NUMBER

481 billion

This is how much India’s digital transaction volumes are expected to grow to by in FY 2028-29, according to a PwC report. Transactions grew by 42% year-on-year in the last fiscal to 159 billion. In terms of transaction values, the industry is expected to double in the next four years, from Rs 265 trillion to Rs 593 trillion in FY29. UPI use is leading the shift to digital payments, and is expected to make up 91% of the country’s digital payments by FY29. 

FROM THE PERIPHERY

—💼 Things aren’t looking up for the IT sector! It has faced over 27,000 job cuts in August alone. Major players like Intel, IBM and Cisco are slashing jobs with Intel cutting 15,000, Cisco 6,000 and IBM 1,000. In 2023, layoffs in big tech surged 15%, with more than 1,150 companies cutting 260,000 jobs. By July 2024, the trend continued with 8,000 more layoffs, bringing the total to 124,517 across 384 companies globally. In total, 136,000 tech professionals have been laid off this year from 422 companies.

—🪧 Employees of the Securities and Exchange Board of India (SEBI) protested outside their office seeking the withdrawal of a statement made by the regulatory board on Wednesday and the resignation of Mahabdi Puri Buch, SEBI chief. The statement said that “external elements” are using the staff members to target the credibility of SEBI and its leadership. The officials had written to the ministry last month regarding a toxic work culture, adding to Buch’s many problems including the Hindenburg report, Zee’s Subhash Chandra calling her “corrupt” and her integrity being questioned due to past jobs at ICICI Bank and ICICI Securities. 

—🏢 Family offices in India, managing ultra-high-net-worth families' wealth  like Catamaran Ventures and Premji Invest, among others have surged from 45 in 2018 to nearly 300 in 2024, according to a PwC report. This sevenfold surge is fueled by a focus on structured investment, succession planning and philanthropy. Their assets under management (AUM) are estimated at US $30 billion, a fraction of the global US $6 trillion. With a projected 14% annual growth rate, AUM could increase 1.5 times in the next three years, according to Sundaram Alternates.

—🤝 During Prime Minister Modi’s two-day visit to Singapore, India signed agreements with the city-state to increase collaboration for semiconductors and digital technologies. According to the agreements, the two will cultivate talent in semiconductor design and manufacturing, and pave the way for Singapore tech investments in India. Both economies are seeking a larger role in the global chip market, and to benefit from the prolonged US-China chip war which is reshaping the market.

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