MIAMI – People who have lots of money often like to make conspicuous displays of their wealth. And folks who have airplanes typically like to do the same. So, what happens when someone has both money AND airplanes?

The biggest splash coming out of the first few days of the 2021 Dubai Air Show was Indigo Partners’ order for 255 Airbus A321s. As it has been reported, the aircraft will be distributed to Indigo’s airlines:

  • Wizz Air (Hungary, W6) – 75x A321neo, 27x A321XLR
  • Frontier (USA, F9) – 91x Airbus A321neo
  • Volaris (Mexico, Y4) – 39x Airbus A321neo
  • JetSMART (Chile, JA) – 21x Airbus A321neo, 2x Airbus A321XLR

Indigo has long been a solid customer of Airbus’ narrow-body aircraft, and with this announcement, it has purchased 1,145 Airbus A320 family aircraft.

Bill Franke, the managing partner of Indigo Partners said, “This order reaffirms our portfolio airlines’ commitment to consistent growth through the next decade… With these aircraft, Wizz, Frontier, Volaris and JetSMART will continue to offer low fares, stimulate the markets they serve and improve their industry-leading sustainability profile.”

2017 Was Bigger


This wasn’t the first time that Indigo had made headlines at the Dubai show. In 2017, the group signed a memorandum of understanding to purchase 450 Airbus planes worth US$49.5bn at list prices. This still holds the record as the largest aircraft order placed.

Following the 2021 announcement, Airbus CCO and head of international, Christian Scherer, confirmed at a press conference that the manufacturer has essentially sold out of A321 slots.

Wow. Image having enough money and leverage to buy out all of Airbus’ A321 slots.

Just who are these guys at Indigo Partners?

Interestingly, the group has no website. But Wikipedia and various news reports on the purchases shed quite a bit of light on the group.

Wizz Air is one of the airlines within Indigo Partners’ portfolio of investments. Photo: Daniel Gorun/Airways

Bill Franke


It all starts with one man: the above-mentioned William A. “Bill” Franke. He is the managing partner of Indigo Partners and is also chairman of Wizz Air and Frontier Airlines.

Franke graduated from Stanford University in California with a BA in History in 1959 and an LLB in Law in 1961. (The LLB degree is the law title historically conferred in England and the US before the JD Juris Doctor degree became more prominent.) So he’s trained as a lawyer.

Within 16 years of graduation, he was CEO of Southwest Forest Industries which is a Fortune 500 company. Franke credits this position as giving him an unrelenting focus on cutting costs. Paper is paper whether you buy it from Dunder Mifflin or Southwest Forest. The one way to differentiate yourself in the marketplace is to beat the competition on price.

“I had to figure out how to produce paper products at a lower cost,” Franke said in an interview. “That was in my DNA.”

After restructuring Southwest Forest, he moved on to chair the executive committee of Valley National Bank which at the time was the largest bank in Arizona. He oversaw the management restructuring of the business while building his credentials as a restructurer of businesses.

William “Bill” Franke. Managing partner, Indigo Partners. Photo: Casa Rosada (Argentina Presidency of the Nation), CC BY 2.5 AR https://creativecommons.org/licenses/by/2.5/ar/deed.en, via Wikimedia Commons.

An Important Phone Call

In 1993, Bill took on the chairmanship of Circle K convenience stores. And it was then that he received a pivotal call from the governor of Arizona, J. Fife Symington, asking for help in saving the state’s airline, America West.

The airline was already in bankruptcy and was facing unrelenting competition from Southwest Airlines (WN). Creditors were lined up to liquidate its assets.

Franke said he’d stay for six months. He stayed nine years.

The airline doubled down to slash costs and increase revenue. The tactics worked, and the airline was revenue positive after only half a year. America West morphed into a low-cost carrier, and by the time Franke left in 2001, it had the highest EBITDAR margin in the industry. (EBITDAR stands for Earnings Before Interest, Taxes, Depreciation, and Amortization-excluding Rental costs.)

We must always remember that as much as we like looking at pretty pictures of planes, fancy interiors, new engines and liveries, airlines are first and foremost a business. And nothing else matters if the numbers don’t add up. Franke, obviously, learned how to make the numbers add up.

Bill Franke was CEO of America West Airlines but left before the airline acquired US Airways in 2005. After the acquisition, the US Airways branding was used until it merged with American Airlines in 2013. Photo: By Andy Kennaugh – http://www.airliners.net/photo/America-West-Express/Beech-1900D/1341703/L/, GFDL 1.2, https://commons.wikimedia.org/w/index.php?curid=17464101

Indigo Partners


The success at America West gave Franke the model on which to base his future work. And it was this success that enabled him to launch in 2002 Indigo Partners that invests in low-cost carriers.

Early funding came from Singapore’s sovereign wealth fund (i.e., the government) which is still an investor today.

By making large purchases and monopolizing the production of aircraft, Indigo Partners has a great deal of leverage not only with the airframe manufacturer but also with all partners who supply parts and avionics for the craft. And with that leverage comes the ability to beat down the price of both the aircraft and the tickets sold to those who wish to ride on those aircraft.

We also consider that as the world comes out of the pandemic and the related slump in aircraft orders, manufacturers and airlines are eager to get the orders coming in.

When asked if Indigo had received special terms and prices for the 255-plane order, Franke said, “Obviously we have an optimistic view of the market as we recover from the pandemic and we wanted to be early in the process [of expanding fleets]. That’s our strategy across the portfolio.”

Airbus representatives added, “There are not many airline groups like Indigo Partners, and we really like the relationship we have with them. There is give and take when you deal this way.”

Render: Boeing

Incremental Revenue


One of the ways that the group makes incremental revenue is by selling its aircraft to lessors. What happens is that Indigo buys Airbuses from the manufacturer at a deeply discounted price.

Then, it sells the aircraft at market rates – at a profit – to a leasing company. Indigo’s airlines then lease the backplane from the lessor. There is no interruption or disruption of aircraft operations. And the transaction can free up cash for Indigo.

“The lessors can’t match our pricing (when purchasing an aircraft),” Franke said in an interview with Flightglobal.com. “They’ll pay us more than we paid for the aircraft, which creates incremental cash flow.”

Ryanair (FR) and IndiGo (6E) (not related to Indigo Partners) do the same thing.

In addition to cheap aircraft, and relentless cost-cutting, Indigo’s airlines also generate revenue by getting passengers to pay extra fees for baggage, seat assignments, onboard food and shopping. That’s what makes it work.

Photo: Indigo Partners

Huge Returns


And it does work. According to flightglobal.com, since Indigo invested in 2013, Frontier has produced an average net margin of 13.5%. Wizz has had an average net income margin of 12.2%.

That’s not to say there haven’t been mistakes. Indigo invested in the notoriously complaint-riddled Spirit Airlines but bailed out of that in 2013. And the Financial Times says that an investment in Russia didn’t work out.

Overall, it is difficult to see exactly how well Indigo does as it releases very little financial information. In an interview with the Financial Times, Franke said that Indigo would be “for sure in the top 10 percent” of the industry for returns over the past 20 years.

He also refuses to disclose his investors, although they are understood to include a European bank and high-net-worth individuals.
So exactly who the “Partners” are will remain a mystery.

Bill Franke is now 84 years old, and with the huge play in Dubai, he obviously has no thoughts of slowing down. As he recently told the Financial Times, “It is an interesting, difficult business, but that is part of what keeps me intellectually engaged.”


Featured image: Airbus