STMT

Group AO-2
Hitesh Takhtani 14S716
Meghana Chore 14S721
Raunak Rao 14S732
Jagannath Akella 14905
Avinash T 14S752

[INDIGO AIRLINES]

Contents
Executive Summary............................................................................................... 3
How is a Low-cost carrier (LCC) any different from a full service airline (FSA)?.....3
Indigo became the most profitable airline in the industry very quickly. Explain....4
Analyze the capabilities of Indigo. Are they any key source of sustainable
competitive advantage?........................................................................................ 7
Identify the weakness of Indigo that potential entrants (like Spice jet, Go Air, etc.)
and /or existing carrier (Air India, Jet) can utilize to their benefits.........................9
Analyse the current strategic position of Indigo. Have there been any changes in
the competitive strategies it has followed since 2006?.......................................10

Executive Summary
With the onset of liberalization policy of 1991, India witnessed a fast growth in
aviation industry. In 2006, the private carriers captured a whopping 75% share of
domestic aviation traffic. Growing purchasing power of middle class, low airfares
offered by low cost carriers and the growth of the tourism industry in India etc.
have led to enormous exploitation in domestic air market. After the success of Air
Deccan, the liberalization policy attracted many other LCC such as Spice Jet, Go
Air, Indigo etc.
A turf of imbalance occurred when LCCs began to expand even when fuel costs
were on the rise. Thus the LCCs found it difficult stay alive in this turbulence. For
survival they were compelled to increase prices and extra benefits such as
snacks on the board. However, amidst this chaos Indigo continued to fly high. In
desperate attempts to stay consistent and maintain low fare, Indigio crafted
some baffling strategies like homogenous aircraft and outsourcing of secondary
services. It is thus no wonder that Indigo enjoys a lion market share and has won
awards of best domestic LLC for India several times.

How is a Low-cost carrier (LCC) any different from a full

service airline (FSA)?
A low-cost carrier or a low cost airliner is generally the one which offer lower
fares and few comforts as compared to a Full service airline. These low cost
carriers, in-order to make-up for the low fares, they charge extra amount like
food, priority boarding, seat allocation and baggage. They operate on a single
type of aircraft and generally do not have an in-flight entertain systems,
currently that are changing due to the intense competition in the domestic as
well as international market. Some of the well-known LCC airline are mentioned
below.
Airline
Name
Air Tran
Easy Jet
German
Wings
Go Air
Jeju Air
Indigo
West Jet
Thai
AirAsia
Solaseed
Air

Count
ry
Region
UK
Germa
ny
India
Korea
India
Canad
a
Thailan
d
Japan

The LCCs are now days bringing out innovative ways in changing their business
operations. For example: Air Asia in-order to cut down on the operation cost is
has built its own low cost terminal specially designed for LCCs.
On the Contrary Full service Airlines (FSAs) charge higher ticket prices, they
offer wide variety of inflight entertainment and also different classes of services.
They also have aircrafts ranging from single to multi configuration airplanes.
Unlike the LCC which operate mostly on domestic short and medium run, FSAs
operate on Domestic as well as international routes.

Market Share Of FSC & LCC

120%
100%
80%
60%
40%
20%
0%

FSC

LCC

As per the above table, no one from the established industry could have believed
that LCCs business model could work. With globalization taking place and
increase in the number of passengers and net disposable income, the LCC is a
very successful in todays scenario.

Indigo became the most profitable airline in the industry

very quickly. Explain

Political

Economic

Social

Technology

Environ

49% FDI in

12.5%

Per capita income

Advent of e-

ment
Increasin

Domestic

reduction

rising in India led

commerce

g air

Airlines

in jet fuel

to a better

has eased

traffic

Privatisation

prices.

standard of living

the hassle of

leading

of major

Airfares

which in turn

ticket

to air and

airports

hence

increases the use

booking

noise

Open Skies

reduced.

of airlines

further

pollution

policy on

expanding

international

the industry

routes.

consumer

Approval for

Loss of

Demand for

base
Development

Technolo

budget

5000 jobs

connectivity

of Greenfield

gy like

airports to

due to

between major

airports

RNP has

increase

closure of

cities rising

regional

Kingfisher

reduce

connectivity

airlines

the

helped

greenhou
se gar
emission
Direct

Job

Change in the

IT

Alternati

import of

generation

demography of

infrastructur

ve fuels

ATF

is low

consumer

e has

are soon

segment- Female

increased the

to

and young

operational

replace a

travellers on

efficiency

significan

increase

even at

t amount

airports

by 2020.

Government

Increase in skilled

plans to

force aspiring to

invest $30

be part of ground

billion in the

staff.

next 10
years.

The PESTE analysis is used to depict the macro level changes in the aviation
industry which also contributed to Indigos success.
Internal Analysis
Operational Efficiency, Innovative strategy, increasing confidence of customers
and stakeholders all played key role in the airlines strategy.
1. Required Navigation Performance RNP was implemented for a safer and
cost efficient landing mechanism which benefited the airport authorities
along with the airlines.
2. This created good will along with cost efficiency between the airport
authorities, the government and the airlines.
3. RNP shortened the flight path, saved 106 gallons of the expensive fuel
which is the major cost driver for the industry as well as reduced the
greenhouse gas emission.
4. Shorter path also helped in shortening of turnaround time which further led
to 12 hours of daily operations as against the industry average of 10 hours.
5. The airlines did not carry much cutlery which reduced the weight per flight,
which in turn reduced the fuel consumption per flight.
6. The Hub and Spoke Model implemented only by Indigo and Spice Jet where
in flights between any two locations were linked by a central location called
the Hub.
7. This helped reduce the total fleet size and yet achieve a greater market
share.
8. Indigo preferred Airbus against Boeing which was 15% fuel efficient.
400,000 gallons per annum saved.
9. Single class configuration also reduced the maintenance cost in terms of
personal needed on flights, their skills, training.
10.Contractual maintenance facilitated on time and on call maintenance.
11.90% on-time performance ensured greater customer satisfaction
12.Marketing cost low. Relied more on word of mouth.
13.Loyalty schemes for regular flyers, reduction in queue with single baggage
further added to customer satisfaction.
14.Indigo believed in leadership training at all levels. It spent less on training
as it hired the ex-staff and pilots from other competing airline like
Kingfisher. This resulted in close to 0% attrition in 2009.
15.Internal promotions were at large.
Technology, Social Media and Airlines.
The power of social media platforms like Facebook and Twitter is not unknown to
even a common man today. With the dynamic airline industry, the social media is
still an untapped medium of catering to customer engagement programs. Also
tourism is greatly advertised by these platforms. Data mining from these
interactions can be of great use as a future marketing prospect for the industry.

Below are few mentioned statistics of Indian aviation related activities on social
media
Conversation regarding

Most popular platforms

airlines forms close to

Male dominate this

56% of the total sum

number suggesting

from online Indians.

their active

FACEBOOK
TWITTER
YOUTUBE

involvement in
purchase decision.

Indigo has launched a SNAP, SHARE, WIN contest on Facebook to increase

the customer engagement from fans.

Go Air

Indigo
Facebook
Twitter

Spice Jet

Jet Airways

200000 400000 600000 800000 1000000 1200000

Analyze the capabilities of Indigo. Are they any key

source of sustainable competitive advantage?
The following are the key factors which helped Indigo airlines in becoming a
market leader:

Low cost structure

Load factor
Turnaround time
RNP landing technology
7

Hub and spoke model

On time performance
High service quality.
Customer Service Quality
The critical factors can be identified on the basis of VRIO model

FEATURE/PARAMETE INDIGO AIRLINES

R
FEATURES
VALU RAR INIMITAB
Turnaround time E
20
E Minutes
LE
Air
time
Minimum
12
Low cost airline
High
Low
Low
hours/day
Load
Factor
Load
factor
High 160-190(at
High Low80%)
Hub
and
spoke
model
Yes
Turnaround time
High
High Low
Kitchen
Cutlery
Less
cutlery
Brand Value
High
High
High
On
time High
performance
Human resource High

OTHER AIRLINES

High

Low

ORGANIZ ADVANTAGE
30 Minutes
ED More than
TYPE
Around
10
hours/day
Low
Comparative
Parity
Low150
Competitive
Spice jet
LowNo except
Competitive
High
cutlery
High
Sustainable
Low
Competitive

High

High

High

Sustainable

Key elements which constitute up of internal environment are resources,

capabilities and core competencies. Resources are tangible and intangible in
nature.
Tangible Resources:
Aircrafts: Indigo airlines currently operates 120 daily flights with a fleet of 19
brand new Airbus A320 aircrafts and covers around 17 destinations
Human Resources: Pilots, crew members and ground staff are the human
resources. Human resource policies such as on-time salaries, robust appraisal
system, promotions and emphasis on training and development. All these
policies resulted to close to zero percent attrition.

Indigo's CEO believed that it was leadership training at all levels that helped
indigo manage HR appropriately and keep satisfaction level high. Indigo also
hired highly trained pilots from other airlines in order to save more money and
ensure low cost structure.
Fuel: ATF in India was very expensive a major cost driver as it constitutes 35% of
production costs, and it was vital for low cost operators like Indigo to focus on
fuel efficiency.

Intangible resources:
8

Brand Equity/reputation: Because of the

a) On time arrivals and lowest fare compared to other airlines which was a key
differentiating factor for Indigo Airlines
b) Implementation of new and innovative ideas to increase the quality of
customer service and satisfaction is also a key attribute for attaining competitive
advantage
c) Freedom to customers to carry own eatables and snacks on board.
Social Capital:
1) Indigo maintains good relationships with other organizations which will
contribute to the value addition of customers.
2) Indigo has formed collaboration with many hotel chains and engaged many
web portals for ease and comfort of customers.
Low fares: Indigo used only single class configuration aircraft, low airfare,
professional customer service and honesty in dealing with delays and
cancellation. It helped Indigo to generate high market share and it became the
market leader.
Aircraft Management: Indigo never owned the aircraft. Indigo had a contract
with Airbus which included a maintenance clause; it helped Indigo to cut on
additional costs thus improving ground handling time and operational efficiency.
This serves many purposes like lesser mean fleet age, safety concern, and Fuel
efficient aircrafts.
Low cost Strategy: Indigo always focuses on low cost strategy, Indigo
collaborated with Quovadis, the airport authority of India and DGCA to
implement a safer and more fuel efficient landing system in India. Indigo was the
first airline in India to implement RNP (Required Navigation performance).
Innovation: Indigo focussed on time arrival, departure, consistent services
during boarding and off boarding, good connectivity there by gaining publicity by
word of mouth, as a result of which marketing budget was low compared to other
airlines.

Identify the weakness of Indigo that potential entrants

(like Spice jet, Go Air, etc.) and /or existing carrier (Air
India, Jet) can utilize to their benefits.
The airline industry is a highly competitive industry, and this results in difficulty
to get high returns in this sector. The aviation industry is a mature industry. The
growth is very slow and the only way to achieve gains is to steal away the
customers. Indigo is relying heavily on AIRBUS as supplier which has been
advantageous for them but with the emergent inclination in order rate, the
traders may find better point to bargain for their new clients. There is very little
distinction between competitors merchandise and amenities. If there is high
switching of customers, the brand equity reduces.
Our Government follows an open sky policy .This helps new entrants to enter the
aviation industry also launching low cost airlines. Another weakness Indigo might
face is the fact that Indigo has just 5 international destinations and new entrants
might capitalize on this very fact. Indigo has been criticized in certain guidelines
and security & safety arrangements according to the DGCA & BCAS.
The number of employees per aircraft is very low in Indigo compared to its
counterparts. Proper trained pilots of competitors can be disadvantage to Indigo.
Labor in airline industry is very costly and on the other hand very easy to lose.

Analyse the current strategic position of Indigo. Have

there been any changes in the competitive strategies it
has followed since 2006?
Started as an LCC in year 2006, Inidigo Airlines has come a long way in sweeping
a huge market share of more than a quarter.
Current Strategies seemed so effectively designed that even market leaders
were startled with its magic of operating to maximum effectiveness. Some
salient ones are listed as below:

Be visible- go all out and project yourself as market leaders

Focusing on core competencies
Synergies in offering value added services

10

Same type of aircrafts in operation- it need not train pilots separately,

easy to maintain
Shortest turn-around time of 20 minutes which ensured the aircrafts in
service for almost 12 hours a day
One type of fare- low
Operating cost- bare minimum due to efficient use of fuel and support staff
per aircraft

Following changes have been prominently observed that have played a major
role in this captivating flounce by Indigo;

Diversification in International Arena: With easing of policies by

Government of India, Indigo got the maximum limit to import ATF which
significantly reduced fuel costs. In 2011, Indigo made an incursion into
international routes by flying into cities like Kathmandu, Singapore, Muscat
and Dubai.
Shift from Low Cost Carrier to Hybrid cost carrier: From low cost airlines,
setting the bar high on performances measures in all dimensions, Indigo
positioned itself from Low Cost to Hybrid airlines
Disruptive expansion plan: After realizing good profits, Indigo is all set to
expand 180 new aircrafts ordered, 450 additional pilots to be hired, good
quality of training to pilots from CTC (a New Zealand based firm)

11

Competitive Advantage:
Resources

Value

Costly
estimate

to Easy
to
substitute

Aircrafts

High

No

No

Brand Equity

High

yes

No

Employee
relationship

High

No

No

Fuel

High

No

No

Human
Resource

High

No

No

The End

12