Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
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.
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.
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.
Political
Economic
Social
Technology
Environ
49% FDI in
12.5%
Advent of e-
ment
Increasin
Domestic
reduction
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
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
number suggesting
their active
FACEBOOK
TWITTER
YOUTUBE
involvement in
purchase decision.
Go Air
Indigo
Facebook
Twitter
Spice Jet
Jet Airways
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
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
10
Following changes have been prominently observed that have played a major
role in this captivating flounce by Indigo;
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