IndiGo

Introduction
IndiGo is an Indian airline company having its headquarters at Gurgaon, India. The company
was founded in the year 2006. It is headed by Rahul Bhatia (Managing director) and Aditya
Ghosh (President).It is a low cost carrier and the largest airline in India with a market share of
31.7% as of May 2014. IndiGo is one of the fastest growing low cost carriers in the world. With
its fleet of 79 new Airbus A320 aircraft, the airline offers 516 daily flights connecting to 36
destinations.
IndiGo
Parent company Interglobe enterprise
Category Indian domestic sector and few international destinations
Sector Aviation
Tagline Go IndiGo
USP Lowest price cost, On Time performance

STP
Segment Cost conscious customers
Target Group Middle class
Positioning Lost cost ,no frills

Competitors a) Go air,
b) Spicejet
c) JetKonnect
Core Strategy
Indigo formulated a Cost Leadership strategy. Indigo provides low cost but high quality services.


Success of the strategy
Indias aviation sector is the fastest growing market at a CAGR of 13.1%. The favorable
demographics and low aircraft penetration in India, made Indigo see an opportunity for itself.
Indigo commenced its aviation journey on August 4, 2006 and since then the airline has being
flying high. Currently, Indigo has the highest market share and is the market leader in the
aviation industry which explains that the Cost leadership strategy is a huge success. We can say
this because of the following facts-
1. In the financial year 2013, which had been the worst year for all the competitors of
Indigo, it reported a profit of Rs.787 crore as compared to the combined loss of 671
crore made by its rivals like jet airways and spicejet. This was IndiGo's fifth straight year
of profit, while the industry lost Rs 46,000 crore (Rs 460 billion) in the five-year period.
2. IndiGo carried 27 per cent more passengers in the domestic skies last year, while the
industry carried 5 per cent less, and added only one new destination in the whole year but
flew more flights from existing cities.

3. IndiGo was able to increase the passenger load factor by six percentage points, and
increase its domestic market share of the domestic skies from 22 per cent in 2012 March
to 28 per cent in 2013.
Cost Leadership strategy
which they have
positioned as Low cost,
No frills
Its aim was to provide high
quality transportation services
that are safe, secure,
comfortable, convenient,
reliable, affordable and efficient
at the lowest possible cost to the
customer

4. IndiGo's employee-aircraft ratio has improved from around 120 two years ago to 100-102
now. In striking contrast, Jet Airways has a ratio of 130, while Air India's ratio is 262.

5. Due to the agreements with the vendors, for providing full spares and replacements, the
technical dispatch reliability achieved by Indigo is 99.4 percent which is one of the
highest in the world.

6. Indigo also has the lowest cancellations rate as compared to the competitors.
Reasons behind the success (Linkage of strategic
formulation and strategic implementation)
The strategy of Cost leadership that was formulated by Indigo was very successfully
implemented. The company implemented the strategy by the help of following activities-
1. Single class airline without any frills: Since Indigo offers only economy class and not the
business class for its customers, hence the cabin space is not wasted and more number of
passengers can board on a single plane. It also reduces the maintenance cost. Also Indigo does
not provide any free meals on board, and hence it saves cost.
2. Power of Concentration: It means to apply maximum resources where the maximum revenue
can be generated. IndiGos strategy is to provide more capacity on specific routes, rather than
spread itself thinly over several. As each destination requires new investments (rentals, staff,
ground-handling, equipment et cetera), this helps contain costs.
3. Keeping planes airborne as much as possible: Because 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, which decreases the cost and increases the revenue.
4. Keeps operational cost low: Since the fleet of Indigo consists only of one type of aircraft
which is Airbus-320, it requires one set of pilots, spares and engines. This makes the running
process simple and also cuts the cost. In contrary, Spicejet has two sets of aircrafts requiring
separate staff.
5. Lease back deal with Aircraft manufacturer: IndiGo has a 6 year sale and lease back
agreements for most of its planes. In this, leaser takes the planes back after this and the airline
can induct a brand new one in its place. Therefore, it never has to take the D check, which is
done after 8 years when the aircraft is not in good condition, and the airlines have to bear the cost
of repairs. Hence Indigo saves its cost.
6. Managing fuel burden: Fuel can add up to 50 per cent of the operational cost and any
savings here will make a large difference to operations. Indigos pilots switch off an engine when
the plane is on the runway, thus reducing fuel cost. Indigo was the first airline to have bought
Airbus A-320 with Sharklets, which provide higher efficiency and less fuel consumption.
7. Faster turnaround time: IndiGo closely monitors turnaround time and fixes tough targets.
Currently, it 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 which increases the revenue of Indigo.
Feasible Alternatives
Increase Domestic Operations- Since there are number of initiatives taken by the government
to encourage aviation industry like taking up developmental plans for various airports of the
country hence it would be a wise option for IndiGo to increase its domestic operations. It should
increase the number of destinations and increase the connectivity.
Extension- Currently, IndiGo is concentrating mainly on domestic passenger flights. However,
the freight/cargo market and charted plane service are the areas that can prove to be good
potential market for IndiGo. As per the reports from an economic survey this year, it was stated
that domestic cargo showed a growth of 14.55%. Besides, chartered flight services are an
untapped market for IndiGo. Thus, IndiGo has a huge opportunity to expand in both these areas.
Citations
www.thehindubusinessline.com
http://www.business-standard.com/article/companies/what-keeps-indigo-s-profit-flying-high-
113100901248_1.html
http://mseathena.wordpress.com/2014/06/20/indigo-way-to-go/
http://simpliflying.com/2009/what-makes-indigo-airlines-on-of-the-best-budget-carriers-in-
india/
Submitted by-
AISHWARYA SINGH
13A1HP062