Presentation to understand the Pricing Strategy of Indigo Airlines.

1. Pricing Strategy-Indigo Airlines
Prepared by Bhooshan Kanani
*Prepared for educational purpose only

2. 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

3. 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

4. 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
Parent Company InterGlobe Enterprises
Category Indian Domestic Sector
Sector Airlines
Tagline/Slogan Go Indigo
USP On time performance, Lowest price

5. 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

6. Existing players in Low Cost Carriers
Competition
Competitors
Jet Airways
Spice jet
Go Air
Air India

7. Comparison with competitors

8. Steps up price war & won

9. Challenge to Indigo
REF: http://www.financialexpress.com (posted on Feb 26, 2014)

10. Pricing Strategy
Cutting costs
• 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-and-mean vis-à-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

11. 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

12. Cost Leadership – Its Go Indigo way
• War on Costs
• 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 manufactured by
Zurich-based IAE, which will help it cut fuel-burn by around 2
per cent.

13. Cost Leadership – Its Go Indigo way
• Being no-frills as an added advantage for the 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 Indigo‘s 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 12.8 Kgs.
Using paint which overall weighs 50 Kgs less.

14. 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 service cost
2. On time performance
3. High Passenger load factor – Flight
occupancy percentage
4. One of the lowest Cancellation rate in
industry
5. Lean Workforce
6. No frills such as free food/drinks, lounges
Single model
of aircraft
Point to Point
Model
Operate on
secondary
airport
Single class
configuration
No In-flight
services
E-Ticketing
Fewer
employees
per aircraft

15. 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 international
market
8. No focus on business class

16. Opportunity:
1. Huge untapped International
sectors should be explored
2. Growing demand for low cost
airlines
3. Increase the frequency of
existing routes
4. Increase of long haul aircrafts
as per demand
5. Indian market still under-tapped
6. Going regional - smaller cities
7. Extension of the current
strategy
8. Increase in middle class
population
9. Increase in domestic tourism
10. Booming air cargo business
Threats:
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
6. Capacity for catering
future demand
S.W.O.T Analysis

17. 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