Case study on Indigo airlines
Vishnu g v
Shirish s u
Raghu h g
INDIAN AVIATION INDUSTRY
The Indian aviation industry is one of the fastest growing aviation
industries in the world.
India ranks fourth after US, China and Japan in terms of domestic
The domestic aviation sector is expected to grow at a rate of 9-10 per
cent to reach a level of 150-180 million passengers by 2020.
Aviation Industry in India holds around 69% of the total share of the
airlines traffic in the region of South Asia
By 2020, Indian airports are estimated to handle:
100 million passengers
Including 60 million domestic passengers
Cargo in the range of 3.4 million tonnes per annum
Parent company-Inter Globe Enterprises
Segment-Cost Conscious Passenger
Target group-Lower Middle class/Middle class
Positioning-Low cost No frills
TO PROVIDE QUALITY AND RELIABLE AIR TRAVEL FACILITIES
TO THE YOUNG, PRICE CONSCIOUS, FIRST TIME TRAVELLERS
vision and values
•TO BE INDIA’S LARGEST AND FASTEST GROWING AIRLINE THROUGH 3
AFFORDABLE FARES, ON TIME PERFORMANCE AND HASSLE FREE TRAVEL
• Indigo was set up in early 2006 by Rakesh S Gangwal,a USA-based NRI and
Rahul Bhatia of InterGlobe Enterprises.
• Indigo is a private, low-cost carrier based in Gurgaon,Haryana,India
• The indigo airline started operation in August 2006 and currently is the largest
airline in India by market share.
• The airline is also one of the fastest growing airlines in the world
• India’s best on time performance and least flight cancellations.
• Indigo placed a firm order of 100Airbus A320-200 aircraft during june 2005 in
plans to commence operation in mid-2006
Total domestic passengers carried by the scheduled domestic airlines between
January and May 2013 were 25.998 million
On august 2012,IndiGo become the largest airline in India in
terms of market share(27%)
In August 2013,the centre for Asia Pacific Aviation ranked
Indigo amongst the 10th biggest low cost carriers in the world.
IndiGo offers a premium service called IndiGo Plus, where the
passengers, at a higher fare, can avail additional benefits like
a pre-assigned seat and a complimentary meal on board.
IndiGo focuses on adding a new plane every six weeks and
sometimes even faster.
It is a low cost carrier and the largest airline in India with a
market share of 36.1% as of December 2014
Indigo's stuck to its low-cost,
single class model unlike rivals Jet Airways.
Selling and leasing back planes
helps its balance sheet
Quality and detail key to good service
It’s all about customer focus
Using technology smartly
Why is the market leader?
A d i t y a G h o s h , P r e s i d e n t
R a h u l B h a t i a , M D
Interglobe holds 51.12% stake in IndiGo and 48% is held by Gangwal’s
Verginia-based company Caelum investments.
Net profit was 7.87 billion rupees(US Dollar 128 million)in the 2012-13
Revenue-Rupees 111.17 billion(US Dollar 1.7 billion)in 2014
Net income-Rupees 3.17 billion(US Dollar 50 million)in 2014
Sales of IndiGo, run by InterGlobe Aviation Ltd, grew 17.5% to Rs.11,117
crore for the fiscal year 2014 against Rs.9,458 crore in the previous year.
On 15 oct. 2014 , indigo agreed to purchase 250 A320neo aircraft worth
US$25.7 BILLION .
One type of airplane –brand-new Airbus A320
One type of fare-low
One type of customer services-professional
One way to deal with delays and cancellations-honesty
Go local-connect with the middle class
Focus on core competencies and market them
Aim to compete with Railways in the long run
Synergies in offering value added services-Holiday
Low cost and high quality of service
Price to be differentiated with respect to days before the travel.
High seating density and load factor
Being a low-cost carrier, none of Indigo's flights have Business
class or First class sections. It offers only Economy class seating.
To keep fares low, Indigo does not provide complimentary
meals in any of its flights, though it does have a buy-on board in
flight meal programme.
Targeting segments locally based on seasons and festivals
• Increase number of destinations / frequencies served resulting in
• Top/ of the mind brand in indian aviation industry for AFFORDABLE
• MARKET LEADER in terms of share in the travel industry
• Introduce and sustain business travel segment for cost conscious
and young professionals
IndiGo operates to 37 destinations in India and abroad
with 564 daily flights.
In January 2011 IndiGo received a license to operate
international flights after completing five years of
IndiGo's first international service was launched between
New Delhi and Dubai on 1 September 2011.
• Generate additional revenue
• Target a PROFIT MARGIN growth of 2.5% - 3% p.a
HOW INDIGO HAS ATTAINED THE HIGHEST
POWER OF CONCENTRATION
It operates on routes which have high traffic. Indigo has
a fleet of 91 aircraft, it offers 564 daily flights connecting
to 37 destinations including 5 international destinations.
Thus, IndiGo’s strategy is to provide more capacity on
select routes, rather than spread itself thinly over several.
As each destination requires new investments (rentals,
staff, ground-handling, equipment et cetera), this helps
Keeping planes airborne as much as possible
Indigo understands that a plane generates revenue as
long as it is in the air.
Indigo gets an aircraft ready for its next flight in 31
minutes compared to 35 minutes a few years ago.
This has helped the airline achieve its target of keeping
the plane airborne for 12 hours a day, despite the fact
that it has been getting new aircraft on a regular basis.
VENDOR MANAGEMENT AND MANAGING FUEL COSTS.
Special training is given to the pilots such that they can
reduce the fuel costs accordingly.
Threat of New Entrants
Low Product differentiation in basic services
Low Switch cost for Customers but high for airlines
Open sky policy for foreign entrants
Very high set-up costs
Increasing fuel prices
Shortfall + High cost of skilled resources- Pilots
Bargaining Power of Suppliers
Duopoly in aircraft market
Switch cost to other suppliers is high
Shortage of Commercial Pilots in India
Limited Suppliers of ATF in India
Very little product differentiation in Services
Mature Industry- Only scope for growth by gaining other
people’s market share
High bargaining power of suppliers
No sense of brand royalty amongst customers and can
easily switch to other airlines
Bargaining Power of Buyers
High number of buyers fragmented- lowers their power
With high number of buyers, growth opportunities are also high
Availability of Substitutes
Indirect Substitutes are railways- but not powerful as airlines, score
highly in travel time
However direct substitutes are other Low Cost Carriers –since
switch cost is low, threat of substitutes is high
2.High Service Quality
5.Fuel Efficient Aircrafts
6.High brand awareness
7.Flights are available to customers when
2.Short lived innovations
3.Untapped domestic cargo segment
4.No established alliances
5.Lack of product depth and breadth
1.Increasing middle class population
2.Increase in domestic tourism
4.An aviation consulting firm estimates the
cargo services of 3.4million tonnes per annum.
5. Largest market share among LCCs in Indian
1.High ATF prices
4.Technological advancement in communication
5.The shortage of trained pilots, co-pilots and ground staff is
severely limiting the growth prospects of all the airline
Comfortable and quick service
Most suitable for caring light goods of high value
At Indigo, purpose is to improve the quality of life of the communities
3 key areas of focus of Indigo Reach:
Children & Education:
primary focus is educating the young , providing employment
opportunities to the youth
indigo is involved in activities at the local level to reduce carbon foot
Indigo is committed towards holistic development of the women in
weaker sections of our society and help them become self-sufficient
through education and employment related activities.
major CSR activities spearheaded by Indigo
Partnership with initiatives of Good Karma : “Save the Child”
Active involvement in the activities of various NGOs across India:
NGOs including Angels, HCHW(Hyderabad Council of Human Welfare) etc.
Sustainable development of villages around a forest reserve:
Mobile: Online ticket booking,
special assistance for minors,
arranging wheelchairs, new
mobile application for checking
flight status, pre-booked seats and
meals on flight
Preemptive: Indigo placed the
largest order in commercial
history during 2011 with Airbus
for 180 aircrafts, keeping in
mind future competition
Position: Tagline-‘On-time, Low
Fares, Courteous, Hassle-Free,
Low Cost Airlines’
Market Leader Strategy
Indigo's success can be attributed to certain things which has done
differently as compared to others
1. Single type of airplane to reduce training and service cost
2. On time performance
3. High Passenger load factor – light weight , No. of seats increased.
4. One of the lowest Cancellation rate in industry
5. No frills such as free food/drinks, lounges
6.Emphasis on direct sale of ticket through Internet to avoid fee and
commissions paid to travel agents.
7.Employees working in multiple roles.
Key Success Factors
Awards and achievements
IndiGo has won the following awards:
Best LCC by the Airline Passengers Association of
Best LCC at the Galileo Express Travel Awards
CNBC Awaaz's Travel Award for best low cost
Skytrax Awards – Best low cost carrier (2010, 11, 12.)
Low cost airlines have huge potential in the Indian market
there are many players entering the market targeting at price
Open sky policy and deregulation have further open space
for many players to enter the market.
Indigo has successfully implemented the low cost strategy
with its value added services but still it has huge potential to
capture more market if it can establish itself internationally ,
expand its service to the cargo .
It also has initiated various services to the society such as
“indigo reach” is the CSR programme focus mainly on
education, environment, and women.