Pricing Strategy-Indigo

Airlines

Prepared by Bhooshan
Kanani

*Prepared for educational

purpose only

Agenda
Introduction to Aviation industry
in India
About Indigo airlines
Competition Analysis
Cost Leadership The Pricing
Strategy
Success Factors
SWOT Analysis
Way forward to Indigo Airlines

Aviation Industry in
India

1932 JRD Tata launched TATA Airline

1948 Air India International came
in- being between Indian Govt.
and Air India(TATA Airline)
1986 Private Sectors players
permitted as Air
taxi operators like Jet, Air Sahara
etc.
1994 Private Carrier permitted to
operate scheduled services
2003:Entry of low cost carriers

Indigo Airlines
Indigo is an Indian airline company
headquartered at Gurgaon. It is a low cost
carrier and the largest airline in India One type
of fare - low
Set up in early 2006 by Rakesh Gangwal and
Rahul Bhatia, of
INDIGO
InterGlobe Enterprises InterGlobe Enterprises
Parent Company
Category

Indian Domestic Sector

Sector

Airlines

Tagline/Slogan

Go Indigo

USP

On time performance, Lowest price

One way Indigo Way

One type of airplane - brand-new Airbus
A320s
One type of fare - low
One type of customer service - professional
One way to deal with delays and
cancellations - honestly
STP

Segment

Cost Conscious Passenger

Target Group

Lower Middle Class/Middle Class

Positioning

Low Cost No Frills

Existing players in Low Cost

Carriers
Competition
Jet Airways
Spice jet
Competito
Go Air
rs
Air India

Comparison with
competitors

Steps up price war

& won

Challenge to Indigo

REF: http://www.financialexpress.com (posted on

Feb 26, 2014)

Pricing
Cutting costs
Strategy
One service one fleet (63 Airbus A320s)

Higher fuel efficiency

Alliance with Airbus for maintenance
Asset light leasing model
IndiGo has 96 employees per aircraft; lean-andmean vis--vis
to Air India's 250 a plane
Only Indian airline to adopt RNP approach: Fuel
and cost
savings; Faster turnaround at airports
Gradual expansion
Lower flight to market ratio

Pricing
Strategy

Cutting costs
Single Model of Aircraft
Operate on Secondary
Airport
Hub & Spoke Model
Fewer Employees per air
craft
E-Ticketing
Single Class Configuration
No In-flight Entertainment
Systems
Ancillary Revenues

Cost Leadership Its Go

War on Costs
Indigo
way
On an average, an IndiGo aircraft flies for
around 12 hours a day, compared to 8 to 10
hours logged by most competitors.
Aircraft operates with a minimum set of optional
equipment,
reducing costs of acquisition &
maintenance, thereby keeping the weight of the
aircraft lower and thus saving fuel.
Indigo has broken up the job into small parcels
like loading, unloading and cleaning with time
targets and each of these is monitored. The
team is trained to focus on its job. They have
even turned around an aircraft in 14 minutes.
Amongst the first to Select1 V2500 engines

Cost Leadership Its Go

Being no-frills as an added advantage for the
Indigo
way
airline, it takes lesser turn-around time then full
service carriers which cater food on-board.
To reduce its cost of holding inventory of
components, IndiGo has done a tie-up with Air
France under which the French airline will stock
components required by Indigo. In this way, the
Inventory will not be in Indigos Books.
The airline has trained its crews to de-plane the
passengers in 6 minutes and unload the
baggage in 10 minutes. It regularly achieves Turn
around times of around 22-25 minutes(Industry
Average being much more than 30 minutes).
Using the lightest passenger seats in India - only

Success Factors
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
cost
2.Onservice
time performance
3.High Passenger load factor
Flight
occupancy percentage
4.One of the lowest Cancellation
rate in
industry
5.Lean Workforce

Single
model
of
aircraft
ETicketing

Operate
on
secondar
y airport

Point to
Point
Model
Fewer
employe
es per
aircraft
No Inflight
services

Single
class
configurati
on

S.W.O.T
Analysis

Strength:
1. Low fares
2. High Service Quality
3. Operational Efficiency
4. Customer Service
5. Short haul flights
6. Fuel Efficient Aircrafts
7. On time departures
8. Investment in technology
9. Good advertising and
marketing strategies
10.Lowest attrition in the
industry

Weaknesses:
1. Less differentiation
2. Short lived innovations
3. Untapped domestic
cargo segment
4. No established
alliances
5. Lack of product
depth and breadth
6. Less routes than
competitors
7. Yet to establish in

S.W.O.T
Opportunity:
Analysis
1. Huge untapped
2.
3.
4.
5.
6.
7.
8.

International
sectors should be
explored
Growing demand for
low cost airlines
Increase the
frequency of
existing routes
Increase of long haul
aircrafts as per
demand
Indian market still
undertapped
Going regional - smaller
cities
Extension of the
current strategy
Increase in middle

Threa
ts:
1. High rising aviation
fuel
prices
2. Slow down in
the economy
3. Growing
competition
like
other
LCC carriers,
video
conferencing
etc
4. Austerity
measures by
corporate
sectors
5.

Subdued demand
from tourist
sector

Way forward for Indigo

airlines
Explore untapped Cargo market
Focus on international LCC
Increase product portfolio from LCC to full
carrier service
Focus on innovation
Focus on expansion capacity
Cut down of advance booking prices
Link to tourism industry