1. MAPPING THE MARKETING STRATEGIES OF INDIGO AIRLINES:
A PROFITABLE EMERGING MARKET AIRLINE SERVICE PROVIDER
Submitted towards partial fulfilment of the criteria for the award of PGPM-Ex by GLIM
Submitted By: Group B3
Rebekah Susan Thomas - PXBJAN17024
Neha Garg - PXBJAN17017
Satheesh P. - PXBJAN17031
Research Supervisor: Prof. Jones Mathew
1. Tables and Figures
3. Executive Summary
4. Chapter 1 - Introduction
5. Chapter 2 – Literature Review
6. Chapter 3 - How did IndiGo market and launch itself successfully in an industry that was already struggling?
7. Chapter 4 - How did IndiGo position itself to dominate market share within a decade of operations?
8. Chapter 5 - How did IndiGo market its USPs?
9. Chapter 6 - How did IndiGo give its customers a value-for-money flying experience?
10. Chapter 7 - Recommendations and Conclusion
3. I. TABLES AND FIGURES
Passengers carried by domestic airlines during Jan-Nov 2017 were 1059.34 lakhs as against 903.36 lakhs during the corresponding period of previous year
thereby registering a YoY growth of 17.27% and MoM growth of 16.99%.1
0 200 400 600 800 1000 1200
PASSENGERS CARRIED BY DOMESTIC AIRLINES
Jan - Nov 2017 Jan - Nov 2016
4. The passenger load factors of various scheduled domestic airlines in Nov 20171:
0 10 20 30 40 50 60 70 80 90 100
PASSENGER LOAD FACTOR % OF DOMESTIC AIRLINES
5. On-Time Performance (OTP) of scheduled domestic airlines is computed for four metro airports1:
0 10 20 30 40 50 60 70 80 90
Jet Airways + Jet Lite
OTP OF DOMESTIC AIRLINES
6. • 9 consecutive years of profitable operations.2
• Market share of 39.4% as of November, 2017.2
• Fleet of 153 aircraft including 32 new generation A320neos and 3 ATRs.2
MARKET SHARE OF DOMESTIC AIRLINES
• Recognized as ‘Great Place to Work for in India’ for 8 years in a row (2008- 2015).2
• Named as AON Best Employer for the year 2016 and 2017.2
7. II. ABBREVIATIONS
OTP – On Time Performance
RASK – Revenue per Available Seat Kilometre
CASK – Cost per Available Seat Kilometre
UDAN (Ude Desh ka Aam Naagrik) is a regional airport development and "Regional Connectivity Scheme" of Government of India.
CAPA – Center for Asia Pacific Aviation
LCC – Low Cost Carrier
PLF – Passenger Load Factor
ATF – Aviation Turbine Fuel
IATA – International Air Transport Association
8. III. EXECUTIVE SUMMARY
This project traces the steady ascent of IndiGo Airlines, a private domestic low-cost carrier. It is one of the world’s fastest growing low-cost carrier in the world
having flown over 21 million passengers in its first five years. IndiGo has been very successful with its low-fare, short-haul strategy.
This is a study of the marketing strategies implemented by IndiGo Airlines, and its effect on customer conversion, satisfaction, and retention. Literature review
suggested that effectiveness of marketing strategies can be evaluated by market research, customer surveys and measuring brand awareness. This study will help
marketers of domestic airlines plan their marketing strategies, and effectively implement them.
This project enumerates the reasons for IndiGo’s success in a highly competitive industry. IndiGo's profits seem abnormally high relative to its revenue,
according to industry analysts. With rising fuel costs straining the entire industry, questions are being raised about IndiGo's ability to sustain its position much
above the industry profitability in the face of stiff competition by both stand-alones and low-cost subsidiaries of full-service carriers.
To know about the industry attractiveness of aviation and the factors that helped IndiGo enter this market, we will use the Porter’s Five Forces model. This will
be useful in gaining insight about the entry barriers, power of buyers and suppliers, competition among the existing players and the feasible alternatives in
aviation industry. SWOT analysis of the company will help us understand the current positioning of the company based on the analysis of external and internal
environments. For internal analysis, we will study the criteria for sustainable competitive advantage as well as the Value Chain Analysis. This will help identify
the strengths and weaknesses of the company. Further, the analysis of government policies, competitor’s strategies and other variables like fuel prices,
increasing domestic traffic, economic downturn etc will lead us to the external influences that affect the aviation industry of India. Hence, using the external
environment study, we can come to know about the opportunities and threats for IndiGo airlines. Thus, the consequences and influence of the all factors of
SWOT taken together will aid in the formulation of alternative strategic actions that IndiGo may consider to sustain its competitive advantage.
9. IV. CHAPTER I - INTRODUCTION
The Indian aviation industry is the 3rd largest aviation market in the world. India is also one of the fastest growing aviation markets globally. Total passenger
traffic stood at 22.36 cr. in 2016 and there were 85 international airlines connecting to over 40 countries. In terms of number of seats per capita, India is quite
low – India has 0.08 domestic seats per capita, while Philippines (0.29), China (0.31), Indonesia (0.41) and Thailand (0.48) are much higher. But according to a
projection by CAPA, domestic passenger volumes are poised to touch 125 million by this March.3
IndiGo is a private, low-cost carrier based in Gurgaon, Haryana, India. The airline started operations in August 2006 and is currently the largest airline in India
by market share. The airline is also one of the fastest growing airlines in the world. The company was set up in early 2006 by Rakesh S Gangwal, a USA-based
NRI and Rahul Bhatia of InterGlobe Enterprises. InterGlobe holds 51.12% stake in IndiGo and 48% is held by Gangwal's Virginia-based company Caelum
Investments. IndiGo placed a firm order of 100 Airbus A320-200 aircraft during June 2005 in plans to commence operations in mid- 2006. The company took
delivery of its first Airbus A320-200 aircraft on 28 July 2006, nearly one year after placing the order, and commenced operations on 4 August 2006 with a
service from New Delhi to Imphal via Guwahati.
By February 2012, IndiGo was expanding rapidly and was making solid profits, the only airline in India to do so. It had replaced Kingfisher as the second
largest airline in India in terms of market share. IndiGo's strong adherence to a low-cost model, buying only one type of aircraft and keeping operational costs as
low as possible along with an emphasis on punctuality are said to be some of the reasons for its success even when the airline industry in India is going through
a bad patch. The company focuses on adding a new plane every six weeks, and sometimes even faster. On 17 August 2012, IndiGo became the largest airline in
India in terms of market share (27%), which is more than one-fourth of total market share of all the Indian airlines combined, in the process dethroning the full-
service carrier Jet Airways, which had held that position for many years. The airline had reached the position just six years after operations commenced.
10. In January 2013, CAPA announced that IndiGo was the second fastest growing low-cost carrier in the continent. In the same month, IndiGo became India's first airline to take
the delivery of Airbus A320-200 aircraft equipped with sharklets. Aditya Ghosh, IndiGo's president said that this move would help them reduce fuel burn.
The main objective of this project is to map and study the marketing strategies implemented by IndiGo. It attempts to seek answers to following questions:
• How did IndiGo market and launch itself successfully in an industry that was already struggling?
• How did IndiGo position itself to dominate market share within a decade of operations?
• How did IndiGo market its USPs?
• How did IndiGo give its customers a value-for-money flying experience?
We hope to use a combination of the following approaches and model to measure the effectiveness of the marketing strategies implemented by IndiGo since its inceptions, as
well as to suggest possible recommendations for sustaining and improving their current position of market share leader:
• PESTEL Analysis
• SWOT Analysis
• Brand Recall surveys by customers
• Porter’s Five Forces Model
• Value Chain Analysis
11. V. CHAPTER 2 – LITERARY REVIEW
IndiGo is currently India’s largest airline by passengers and the only one with a consistent track record of profits - Rs. 9 crore daily net profit was reported in the
first quarter of 2017. It has obviously beaten analysts’ estimates about its profitability by posting the highest ever quarterly profit in this journey. For Q1, IndiGo
reported revenue of Rs 5,753 crore, a growth of 26 percent year on year and 19 percent over the previous quarter. Net profit was Rs 811 crore, a growth of 37
percent year-on-year and 84 percent versus the previous quarter. Revenue per available seat kilometre (RASK) increased by 5.5 percent while cost per available
seat kilometre (CASK) increased by 1.3 percent. This airline now commands nearly 40 percent overall market share but on non-metro routes, it control over
half the market. Put simply, this means that 4 in 10 domestic fliers choose IndiGo but on non-metro routes, every second flier chooses this airline.4
According to data compiled by analysts, IndiGo has been increasing its share in the domestic market at the expense of Jet Airways and Air India. In 13
successive quarters starting from Q1 FY15, when IndiGo had just about 32 percent share, it has inched up to 41 percent now. Over the same period, Jet Airways
went from controlling a fifth of the market (21 percent) to 17.58 percent now. And Air India went from 17.42 percent to 12.77 percent. SpiceJet, an LCC
competitor to IndiGo, also came down from almost controlling a fifth of the domestic market in Q2FY15 to 12.96 percent now. Market share is a direct
consequence of capacity and IndiGo has seen the fastest capacity addition among all domestic airlines.
It is interesting to see that as IndiGo grows in both size and ambition, the airline is introducing significant changes to the way it does business. First, it
announced plans to enter the regional market by acquiring a fleet of 50 ATR aircraft in what many saw as a complete reversal of its earlier strategy of keeping a
single type of aircraft fleet (IndiGo flies the Airbus 320 aircraft on domestic and short haul international destinations). The new fleet will start coming in soon
and is expected to help IndiGo start regional operations under the government’s UDAN scheme by the end of the current fiscal.
Second major change in the way IndiGo operates is coming about shortly – after years of following a robust sale and leaseback model for aircraft acquisition,
the airline may now go in for a mixed strategy when it starts actually purchasing aircraft instead of merely leasing them back from lessors.
12. This will, going forward, impact dividends to shareholders as more of the company’s reserves will get used in paying for aircraft purchase. What this means for
the airline’s overall profitability going forward is not clear as of now.
Airbus 320neos are new-generation aircraft with fuel saving technology and IndiGo would like to hence own the aircraft for a longer period. The current
average age of IndiGo's fleet is around six years. Most of their aircraft are on a short-term operating lease. Under the sale and leaseback model, a lessor
purchases the aircraft from the airline and leases it back. This removes the aircraft debt from the airline's balance sheet and allows it to invest equity elsewhere.
IndiGo makes around $4 million dollar per aircraft under such transactions. As of March 2017, it had 131 aircraft, of which 17 were owned or on finance lease;
118 were on an operating lease. A third thing which needs to be kept in mind about changes in IndiGo’s workings is a slowing fleet induction plan – forced
upon the airline by the aircraft manufacturer’s inability to supply the fuel-efficient Neo engines. From about 25 percent annual capacity expansion rate till now,
the airline will expand at just 20 percent between now and 2020, including the smaller aircraft fleet.
The induction of smaller fleet and participation in UDAN could mean creation of a separate company and therefore some diversification of operations where
profit making may be tougher due to a fare cap-cum-subsidy structure of UDAN. Moving to an owned fleet strategy would, as we said before, mean lower
dividend to shareholders. And a slowing fleet induction plan obviously is good news for competition since it gets a much-needed breather. Yield – which
denotes revenue per passenger – for the entire domestic aviation market could improve because of slower fleet induction by the market leader. Global aviation
consultancy CAPA had noted last month that IndiGo has the largest in-service fleet in India and the largest order book of any airline in the world, at 458
aircrafts. Its fleet could expand by up to 46 aircraft during this financial year – a net addition of almost one aircraft a week. Other airlines are responding by
accelerating their own expansion in order to hold on to market share and to prevent IndiGo from securing a dominant position with over 50 percent of the
1. IndiGo has high brand awareness and brand equity.
2. Cost leadership: successful implementation of low cost
3. Highly efficient management that ensures high rate of
4. Continuous innovation to improve on non-price factors.
5. Tie-up with hotels.
6. Ease of ticket booking for customers.
1. Scope of product differentiation is less.
2. Benefits of the innovations implemented by IndiGo to
provide better services to the customers are short-lived, as
these can be easily imitated by the competitors.
3. IndiGo is not present in domestic air cargo market.
1. Freight market
2. Increase in domestic air traffic
3. Increase in international air traffic
4. Chartered flight services
5. Promotion of regional air connectivity
6. Development of airport infrastructure
1. Increase domestic destinations for flights.
2. Upgrade to long haul aircrafts as per demand.
1. IndiGo can expand its services to freight/cargo.
2. Diversify to chartered flight services.
1. Rising ATF prices
2. Increasing competition
3. Economic slowdown
5. Government interference
6. Scarcity of trained pilots
1. Sign anti-poaching Agreements with competitors.
2. Effective incentive programmers to avoid talent drain.
3. Hire well trained pilots from other countries as well as
retired Air Force personnel.
1. Continuous innovation of value added services.
14. PESTLE ANALYSIS
A PESTLE analysis is an analysis of the external macro-environment that affects all firms in an industry. P.E.S.T.L.E is an acronym for the Political, Economic,
Social, Technological, Legal and Environmental factors of the external macro-environment. Such external factors usually are beyond the firm's control and
sometimes present themselves as threats. For this reason, some say that "pest" is an appropriate term for these factors.
Political and Legal
• The government has opened up the Indian skies by allowing up to 49% FDI in Domestic Airlines which is expected to give an impetus to the
sector which is reeling under huge cost side pressures.
• Government allowing direct import of ATF is another move in the right direction to decrease the operating costs.
• Micro-managing by the government is seen as a great negative for the industry as the airlines are not being given enough freedom to run
• Slow growth of airport infrastructure because of government impasse.
• Lack of government initiatives stalling the growth of the sector.
• Overall the government is slowly waking up to the issues plaguing the sector and is taking few steps to improve the health of the sector,
Indigo which is the market leader in the LCC segment stands to be benefitted the most.
• Business cycles have a wide-reaching impact on the airline industry. During recession, airline is considered a luxury & therefore spending on
air travel is cut which leads to reduce prices. During prosperity phase people indulge themselves in travel & prices increase.
• The economy is slowing down which is a huge negative for the industry as the capacity is getting underutilized and the companies are being
forced to reduce the ticket prices to reduce the capacity wastage.
• Consistently high oil prices along with high taxes contribute significantly to the operational costs.
• Depreciating value of rupee is adding to costs as substantial portion of other operating costs like lease rentals, maintenance, expat salaries
and a portion of sales commissions are USD-linked or USD-denominated.
• The industry operates under high cost of capital which again adds to the operational costs but the positive side for indigo airlines is that it is
in a far better position financially than the competition which helps it to raise capital comparatively at a lower cost.
• The changing travel habits of people have very wide implications for the airline industry. In a country like India, there are people from
varied income groups. The airlines have to recognize these individuals and should serve them accordingly.
• The destination, kind of food etc all has to be chosen carefully in accordance with the tastes of their major clientele especially, since India is
a land of extremes there are people from various religions and castes and every individual travelling by the airline would expect
customization to the greatest possible extent. For e.g. A Jain would be satisfied with the service only if he is served jain food and it should be
kept in mind that the customers next to him are also jain or at least vegetarian.
• With the income levels rising in the Tier-2 and Tier-3 cities, there is demand being generated for air connectivity in these cities also.
• The industry is in the process of adopting a new standard for distributing airfare information which the IATA has termed as NDS which
stands for New Distribution Capability which will help the airlines to tailor the services to each customer and will add value to both the
airline as well as the customer.
• Growth of electronic ticketing satellite based navigation systems.
• Leveraging technology has made check in times to reduce which has contributed in efficiency improvements for the airlines.
• With air traffic growing, environmental concerns are also gaining an increasing importance. Although the aerospace industry has already
made significant efforts to reduce its environmental footprint, further technological and operational improvements are necessary to outweigh
the impact of traffic growth.
• The two main environmental issues associated with aviation are noise and emissions. Within emissions, the distinction is made between local
air quality and climate change.
• The principle sources of aircraft noise are the aircraft’s engines and, particularly during approach, airframe noise when the aircraft’s
flaps/slats are fully extended and the landing gear are deployed. Air traffic movements have significantly increased, and will continue to
grow. As a result aircraft noise continues to have a very significant environmental impact around airports and be a source of disturbance to
the public. Many airports have implemented noise related charging schemes, night time restrictions or even night curfews. The number of
airports affected in this way will likely increase further during the next decade.
• Air pollutants such as Nitrogen Oxides (NO2 and NO) and particulate matter (PM); have been identified as key contributors from air
transport to the problems of local air quality. Exposure to particulate matter can lead to impacts ranging from minor effects on the respiratory
system to premature mortality. It is therefore likely that air quality will be a significant feature in the debate concerning additional runway
• Alternative fuels should become a major driver in reaching the objective of carbon-neutral growth for aviation. Drop-in bio fuels have been
successfully tested and are already in use on certain commercial routes. The industry is aiming at replacing 6% of current fossil fuel with bio
fuel by 2020. Beyond the complex issue of life cycle assessment, the major challenge will be to ensure that bio fuels are supplied in a
reliable and cost-effective manner to air operators.
18. PORTER’S FIVE FORCES MODEL
Threat of New Entrants
• The aviation industry is highly cost intensive. Besides it has to go through a number of regulatory compliance before it gets an excusatory order. The factors
which make entry of new entrants in the Indian Aviation sector a difficult task are the following.
• An airline is required to have capitalization of minimum thirty crores in order to take off.
• The market is concentrated in the hands of a few players thus any new player would to face stiff competition and retaliation from the existing players such as
Jet Airways and Indian.
• Inadequate airport infrastructure often makes it difficult for the new entrants to get right flying slot time.
• Shortage of pilots and high fuel costs also pose a threat as the existing demands itself are not being fulfilled.
• The high capital requirement makes it difficult for the companies to exit the market but being a growing industry the existing players are willing to acquire
and make exit for an operator less difficult.
19. Bargaining Power of Suppliers
• Any airlines in general face a duopoly of two major suppliers of aircrafts i.e. Airbus and Boeing. There are other suppliers like Dauphin, Dronier, Bell, ATR-
42 but do not meet the requirements to serve the low cost commercial aircraft carriers, particularly IndiGo airlines. Fleet Forecast for the India-Region 2006-
2011 shows that there will be approx. 85% growth in the order rate of air carriers. Thus, suppliers are few and thus in better position to bargain as they
always finds customers for their aircrafts
• Fleet comprise of Airbus A320 and switching cost is high due to limited number of suppliers.
• Due to shortage of commercial aircraft pilots in India the supply of pilots is concentrated, hence increasing their power.
• There are only four suppliers for ATF (Aviation Turbine Fuel); IOC, Hindustan Petroleum Corporation, Bharat Petroleum and ONGC and since their number
is limited, they possess more power.
• The proof of evidence for high power enjoyed by ATF suppliers lies in the fact that the ATF prices constitute 35-40% of the costs in India compared to 20-
• The brand value of suppliers is high due to their less number and results in higher bargaining power for them.
• The airlines also face a threat of forward integration since the suppliers are in close contact and are familiar with the knowhow of the aviation industry.
• The suppliers are few and thus in better position to bargain as they always finds customers for their aircrafts.
20. Bargaining Power of Buyers
• Buyers in airlines industry are large in number and highly fragmented thus lowering their power .With the growing Indian economy and increasing low cost
carriers, the buyers have increased and so have the growth opportunities.
• The switching cost is minimal since there are multiple alternatives available. It is not difficult to move from one airline to another or to switch to a substitute.
• Furthermore the players in the particular strategic group do have minimalistic differentiating points.
• Backward integration from the buyers end is very difficult and next to impossible.
21. Competitive Rivalry
The closest competitors of IndiGo is SpiceJet followed by GoAir. Below is brief description about each of them:
SpiceJet is a low-cost airline based in New Delhi, India. Spice Jet’s mission is to become India’s preferred low cost airline, delivering the lowest air fares with
the highest consumer value, to price sensitive consumers. Its vision is to ensure that flying is no longer confined to business travellers, but is affordable for
everyone and thus the tagline ‘flying for everyone’ Spice Jet airways began its operations in May 2005. SpiceJet has chosen a single aircraft type fleet which
allows for greater efficiency in maintenance, and supports the low-cost structure. It has a fleet of 6 Boeing 737-800 in single class configuration with 189 seats.
SpiceJet's new generation fleet of aircraft is backed by cutting edge technology and infrastructure to ensure the highest standards in operating efficiency. Spice
Jet currently flies to 11 destinations.
GoAir Airlines, owned by Wadia Group, is a low-cost budget airline based in Mumbai, India. It has been showcased as “The People's Airline”. GoAir is
looking at 'commoditising air travel' by offering airline seats at marginally higher train prices to all cities in India. The Airline’s theme line is “Experience the
Difference” and its objective is to offer its passengers a quality consistent, quality assured and time efficient product through affordable fares. GoAir's business
model has been created on the 'punctuality, affordability and convenience' model. Go Air operates four A320 aircraft with a single class, 180-seat configuration,
and plans to expand its fleet to 33 aircraft in three years.
Thus, we can summarize from above data that all the three players are trying to follow cost leadership strategy by bringing down the ticket rates to the minimum
possible value. However, it is clear that, to sustain in this cut throat competition, each player will have to come up with different strategies to improve the non-
22. Availability of Substitutes
The substitute for low cost airline company is the railways. But this substitute is not very powerful due to the following reasons:
• Customers use airline transport as it is convenient and saves travelling time. So trains cannot work as a substitute to save time.
• Many customers use airlines as a status symbol. So again, trains cannot substitute for prestige.
So if we consider IndiGo airlines, the direct substitutes are the other low cost carriers like SpiceJet and GoAir. So, in this case threat of substitutes is high as the
switching cost between low cost carriers is low.
23. COMPARATIVE ANALYSIS
Passenger Load Factor: PLF is the measure of how many seats an airline manages to fill on its flights. For a high capital cost business like an airline, it is crucial
to fill as many seats on each flight as possible.
Spicejet led the industry in this crucial metric from April onwards, and maintaining above 90% from May onwards. It reached its high of 93.4% in July and
maintained 89.8% for the year. Clearly its strategy of repeated fare sales helped bring in passengers who would have otherwise travelled by rail or road.
IndiGo came in second maintaining an annual average of 83.7%, high of 91.9% and a low of 76.8%. GoAir came in third with an average 82.6% passenger load
factor. The laggard was the Tata-SIA airline, Vistara.
24. Punctuality: After a low fare, punctuality is a key expectation of the Indian air passenger. Market leader IndiGo made a virtue of being “on-time” and customers
responded making it the biggest airline in India. The DGCA compiles on-time data at four privately operated airports — Bengaluru, New Delhi, Hyderabad, and
Mumbai. IndiGo’s long held crown appears to have passed on to newcomer, Vistara, the Tata-Singapore Airlines joint venture. Though we must highlight the
incompleteness of the DGCA data. Both Vistara and IndiGo kept a fairly consistent performance, while the other airlines were all over the graph. AirAsia India
went from a high of 100% on time flights to a miserable 66% in December. Only national carrier Air India performed worse at 62.8%. The graphs below also
highlight the tremendous impact the infamous winter fog at India’s largest airport New Delhi, has on the entire system. The fog punishes the on-time
performance of the Delhi centric IndiGo, Spicejet, Air India and Vistara, during January. Even Mumbai based Jet Airways and GoAir suffer due to the systemic
disruptions the fog causes thanks to the dominance of New Delhi in the industry.
25. Reliability – flight cancellations: The weather is a major reason of flight cancellations which in turn are a major reason for passenger complaints. Spicejet
quoting the DGCA figures says “between January 2015 to December 2015, flight disruptions formed a huge chunk of the passenger complaints at an average of
27.3%. The number of passengers affected by cancellations were 1,16,645, while 7,31,637 passengers faced delays and 13,175 passengers were denied boarding
across airlines”. Spicejet which had an astounding 31.5% of flights cancelled in December 2014, started recovery through 2015 and from September has been
consistent, though it still needs to improve further overall.
Passenger dissatisfaction: Spicejet leads Indian carriers with 2.26 complaints per 10,000 passengers carried. It is surprising since the airline has the best
passenger load factors. It appears this is due to the large scale flight cancellations that took place at the end of 2014 and early 2015. GoAir was the next most
complained against, followed by Air India. IndiGo was the industry leader with the least number of complaints.
26. Price appears to be most important factor for the consumer followed by service provided and flight schedules. Indian Airlines has been rated high on
most parameters while Jet Airways, although rated low on price, is rated highest in most other factors. The two airlines are charging different fares for different
routes for different weights. But indigo is the market leader in terms of low cost fares. While India's low cost carriers (LCCs) have a domestic market share of
63%, passengers flying on full service airlines (Air India and Jet Airways) pay close to LCC fares in economy class. As a result India is virtually a 100% low
fares market. As, in reality, the operating environment makes it very difficult to be genuinely low cost this poses a significant challenge to industry viability. In
1Q14 the average fares for LCCs IndiGo and GoAir were in the range of INR5000-5200, with SpiceJet close to INR5000. Jet Airways’ average fare was
INR5632, but this includes the contribution of the premium cabin, suggesting that its average economy class fare was closer to that of the LCCs. GoAir in fact
had some of the highest fares in the market in 1Q14, while the regulator also identified a number of routes where FSC fares were below LCCs. Overall there is
very little difference between LCC and FSC economy class fares.
28. Hence, the conclusion is that the statistics show a mixed bag of results. Some obvious, some contradictory.
• IndiGo remains the operations excellence leader which explains its commanding lead in the domestic Indian market.
• Air India has a long way to go and with the promised improvement still to come, the government has to question whether the airline can run without
continuous funds injection.
• Spicejet shows that it is on the path to recovery but it will take a few years to overcome the damaging effects of its 2014 financial problems.
• GoAir and Jet are in a holding pattern. Expect GoAir to assert itself in 2017 when deliveries of its ordered 72 Airbus A320neos are in full force. Will we see
Jet continuing diversion of its narrow-body capacity to international services? Rumours in the industry point to Jet continuing its practice of leasing out bulk
of its wide body Boeing 777s and A330-200s to foreign airlines.
• AirAsia India has not lived up to the hype created prior to its launch. The reasons are not clear, but it is time for boss Tony Fernandes to take a critical look at
• The X-factor airline is Vistara. The airline is living up to the operational excellence DNA of its two joint-venture partners, the Tatas and Singapore Airlines,
and has already caught up with its sister Tata promoted airline, AirAsia India.
29. VI. CHAPTER 3 - HOW DID INDIGO MARKET AND LAUNCH ITSELF SUCCESSFULLY IN AN INDUSTRY THAT WAS ALREADY
THE TEAM: Between Rahul Bhatia and Rakesh Gangwal, the promoters of IndiGo, is a combination of street smart travel business experience, and an IIT
engineer with aviation industry experience. They also have Aditya Ghosh as the President, who is a lawyer by education. Their complimentary experience and
network have worked well for the brand.
THE BRANDING: If good branding begins in a name, then IndiGo airlines had quite a launch pad. A word play between ‘India’ and ‘Go’ - a smart shorthand
for a nation where, according to government data, domestic air travel grew 19 percent in 2010, to 52.02 million passengers on the go. IndiGo has become the
kind of brand that has garnered positive customer feedback, and even appreciation on social media, which is unusual for an Indian airline where service-oriented
brands usually get flak for failures, not fans for their flair. Indigo’s branding has helped them conquer the low-cost carrier stigma.
When a brand has such a strong personality, it makes sense to extend it, and so IndiGo did. An airline passenger is perhaps the most captive of all audiences.
IndoGo differentiated all their products to stand out from the stereotypical airline merchandise. Even the tape that separates their check-in counter or boarding
queues reads ‘no red tape’ and it comes in a shade of indigo. Luggage stickers read ‘Fragile’ over a little heart-shaped graphic, that appeal to children as well as
adults. IndiGo’s airsickness bags say "Get well soon" on them. This was later adopted by Jet, whose bags now say "Take care." Cookies are packaged in pretty
pastel pink and blue tins, and small tins of nuts are labelled ‘nut case’. The secondary products are practically a spin-off industry now, and IndiGo definitely
started that trend.
THE MANTRA: IndiGo’s corporate mantra has always been “Offer fares that are always low, flights that are on time, and a courteous, hassle-free travel
experience.” Step-less stairs, handicap-accessible boarding ramps, q-buster scanners for passengers traveling without check-in luggage, were all on the
manifesto from the get-go. IndiGo has a cancellation rate of 0.15%, which is the lowest among domestic airlines in 2015. Although they have recently been
facing a lot of competition from SpiceJet in terms of on-time performance, they are still in the top spots.
30. THE TIMING: The fact that Air Deccan sold out to Kingfisher and Sahara to Jet followed by Kingfisher going down, most of the market share was just sitting
to be captured when Indigo was growing and they did a good job of grabbing the opportunity that came their way. Being in the right market at the right time
with the right product, definitely played out as an advantage for IndiGo.
THE TARGET: IndiGo sees their target consumer as “not a demographic but a psychographic” and the brand as having an abundance of crossover appeal. They
use plenty of young, urban style cues, demonstrating an abiding respect for the fundamentals, while indulging the cool quotient.
THE IMAGE: The brand was always careful to not inundate the consumer with on-board and terminal messaging, but a television commercial which premiered
in March 2010 pulled out all the stops. The smash hit commercial for the airline has the tagline “on-time,” which is a part of their corporate mantra. With
conveyor belts and assembly lines and workers indistinguishable in their uniforms, the ad projects assembly line efficiency. Secondly, the swell bell-hops, slick
executives and smiling airline crew portrayed the sheer charm of the brand’s personality. Toward the end of the TVC, to add a bit of patriotism, the voiceover
quips in an upbeat voice, “We become the world’s most powerful economy … on time.” The company has always maintained that they are creating a global
brand with a ‘made in India’ sticker.
Apparently, the flight crew loved their slick on-screen projections, that IndiGo recruited top stylists to reinterpret look for the crew. In August 2010, female
flight attendants of IndiGo debuted in what went on to become the signature IndiGo uniform - single-piece navy-blue tunic with a thin indigo belt highlighting
the waist. Stylish hair styles and striking makeup completed the look. The company said in its press release - India’s coolest airline now has India’s hottest
looking crew! At this same time, JetLite launched a new uniform, which featured their female flight attendants in collared men’s jacket and pants - a stark
31. VII. CHAPTER 4 - HOW DID INDIGO POSITION ITSELF TO DOMINATE MARKET SHARE WITHIN A DECADE OF OPERATIONS?
In 2006, flying in India was a dream. There were full service carriers that offered in-flight entertainment and food, and sometimes even air miles, for a flight that
lasts all of 2 hours. And this wasn’t even business class! In the same year, InterGlobe Enterprises Ltd., a small hospitality conglomerate launched a new airline –
Indigo Airlines – offering no business class seats, no loyalty program, no inflight entertainment, and no (free) meals. Indigo, however, did promise more
economical fares and on time arrival of flights. All leading incumbents in the market – Jet Airways, Kingfisher Airlines, and Air India – all full-service carriers
who had a combined share of nearly 80% of the market, offered much more, and so did not feel threatened at the time. A previous attempt at a low-cost aviation,
by Deccan Airways, was failing miserably.
At the time, flights were frequently delayed and a 15-20 minute late take off/landing was the norm. Passengers were getting used to these delays, getting
conditioned to accept this lack of punctuality. Given the sheer number of procedures required to prepare a flight for takeoff and the general leniency of the
customers – no airline made being on schedule a priority – until Indigo. From its early days, it committed to an “on-time” customer promise. Flyers didn’t
immediately catch on to this new proposition, but Indigo persisted. Indigo made its “on-time” value proposition central to its marketing message – for instance,
through a play of words, it renamed IST (Indian Standard Time) to stand for “Indigo Standard Time” in its communications. Although, through various cost
efficiencies and lean operating choices, Indigo was able to offer fares lower than other airlines, it chose to keep ticket prices as a secondary value proposition.
Instead, cost advantage was used to drive profitability. Leisure travelers – many of who were priced out of the market – were first to move towards Indigo,
while business travelers still flocked towards full service carriers. However, as more and more people experienced the beauty of “on-time” flights, Indigo’s
market share grew. Today, Indigo’s market share is more than twice of its nearest competitor – Jet Airways – and is one of the few profitable airlines in India.
IndiGo's unique fleet strategy to use single-type aircraft reduces maintenance and training costs. They keep the average fleet age low at 3.2 years, as opposed to
Jet Airways at 5.9 years and Spice Jet at 4.1 years. This improves reliability and lowers fuel costs, thereby giving the company a significant advantage over
peers. This strategy is not something that the competitors can replicate the strategy in the short-medium term. The company's strategy to place bulk purchase
orders significantly reduces its ownership costs as it gets discounts on price, and this benefit may continue over the long term-given their fleet expansion plans.
Indigo's fuel cost leadership over competitors may widen as it gets deliveries of 15% more fuel-efficient A320 neo aircrafts, which are expected to form 33% of
Indigo's fleet by FY18.6 They are focussing on high-density routes, consistently high load factor and improving aircraft utilization, which is helping them
remain the most profitable airline. 31
32. VIII. CHAPTER 5 - HOW DID INDIGO MARKET ITS USPS?
IndiGo’s media campaign has focused more on customer service and less on pricing where it is hard to be competitive, and the airline’s avant-garde branding
has been a major differentiator. IndiGo’s same-day return flights from major Indian cities, extra seat pitch (2 inches more than India’s industry standard) and
new aircraft. IndiGo has worked agency Wieden + Kennedy building a new, cool airline brand from scratch. Besides quirky advertising everything from the
design of the safety instruction card and sickness bag, to the availability of a boarding ramp instead of a staircase, to the packaging of in-flight snacks were
aimed at being more engaging. For example, IndiGo’s triangular paid-for ‘Airwich’ boxed feature interesting stories and fun illustrations to offer passengers
something to read when having their meal.
In another innovative effort to promote its buy-on-board offering, IndiGo and Wieden + Kennedy in late 2012 organized a food tasting in the sky, dubbed
#IndigoFoodFight.7 Held on a single day on IndiGo flights across major routes, over 1,000 passengers were surprised with boxes of free food samples
containing the contenders for the airline’s new buy-on-board menu. Passengers were asked to vote for their favourite, with the winner making it on-board as the
IndiGo’s check-in counters feature banners saying “India’s Coolest Airline” and check-in queues have “Cut The Red Tape” signs. Hoarding at airports with
focus on Best on Time performance. They also heavily advertise through social networking medium like Facebook, Twitter, etc. They collaborate with
multiplexes in major cities to promote the airline and its offers.
IndiGo has engaged many Travel web-portals and regional travel agents with incentives like booking commissions etc. There have been no instances of distress
between IndiGo and its other collaborators, that is, suppliers. Mumbai-based hotel chain operator Sarovar Hotels and IndiGo Airlines announced a marketing
tie-up for frequent travellers. Promoting in regional languages in respective sectors thus giving a local flavor
IndiGo advertised heavily when it started international operations and also when Kingfisher was going bust, with catchphrases like ‘Let the bad times roll… Fly
indigo in good times and in bad times’. This move was criticized but it worked for IndiGo.
34. IX. CHAPTER 6 - HOW DID INDIGO GIVE CUSTOMERS A VALUE-FOR-MONEY FLYING EXPERIENCE?
IndiGo understood that the prime motive of the air traveller in India was to reach fast and on time with affordable pricing. IndiGo made choices supporting its
premise that service would not be sacrificed because airfares were low — being on time was key and meant a huge investment in technology to ensure that
reservation, operation control and dispatch systems ran smoothly.
Indigo has taken the road less travelled. They do not give frequent flyer miles, they charge for food and have no lounge at the airports and they have no
Business Class. Ultimately it can only and obviously be only about customer delight. Indian consumers are extremely conscious about what they will describe as
value for money. It is not about affordability. It is about getting what we pay for. People take pride in being frugal but hate being called cheap.
Single type of aircraft: Indigo's whole fleet consists of A-320-232 aircraft while Air India, Jet Airways and Spice Jet use 10, 9 and 3 different makes of aircraft
respectively. This results in greater flexibility by making use of the same crew from pilots to ground force, thereby cutting hiring, training and upgradation
Single Class: Having only Economy class means that Indigo does not have to spend time, money and crew on privilege passengers. They also don't need to
maintain expensive lounges at airports further reducing costs.
Low average fleet age: Indigo has an average fleet age of less than 3 years. A younger fleet means less maintenance costs. Indigo plans to maintain a lower fleet
age as all its aircraft are leased for a period of 5-6 years. This way they avoid the D-Check which is done after 8 years of operation of an airplane. (A D-check
may take up to 2 months during which the aircraft remains out of service.)
Fuel: Domestic fuel taxes can be as high as 30 per cent along with an 8.2 per cent excise duty. As a result, fuel for Indian airlines accounts for about 45 per cent
of total operating costs, compared to the global average of 30 per cent. Indigo's aircraft try to save fuel by using software to optimize flight planning for
minimum fuel burning routes and altitudes and also by making use of latest fuel saving technology. Indigo was one of the first airlines to place order for the
Airbus A320neo family to deliver 15% less fuel consumption and 8% lower operating costs. IndiGo was also among the first airlines to have the aircraft taxi to
the terminal with one engine, shutting down the second engine to save fuel. The company is also involved in Fuel Hedging after the government allowed it in
2007. Other operators like Spice Jet and Air India have also taken up hedging recently.
35. Route Planning: Indigo operates over a lesser number of destinations than its competitors but with a higher frequency - with a fleet of 78 planes for 36
destinations while Spice Jet flies to 46 destinations with 58 planes. Not comparing Jet's fleet size as it operates more than double flights per day compared to
The network maps show that all Indigo's destinations are connected to at least two cities while most are connected to 3 or more destinations, whereas this is not
the case with Jet Airways. This means Indigo can keep its aircraft in the air for a longer period of time and save on airport charges. Because of this Indigo has a
high aircraft utilization rate of more than 11.5 hours per day per plane. This also means that customers don't have to look for connecting flights with other
competing operators. Spice Jet destinations also seem to be well connected, but they have a larger presence in Tier 2 and Tier 3 cities (especially in the south)
and traffic to and from these cities tends to be seasonal.9
36. Tightly framed maintenance contracts: Indigo has a power by the hour contract with International Aero Engines (IAE), which provides the engines, that put the
onus of performance delivery on the manufacturer. IndiGo has similar agreements with Airbus, as well as with the vendors for other critical components. These
contracts probably come at a premium but it means that Indigo does not have to pull out planes from service for repairs and also does not have to maintain a
large inventory of spares.
Turnaround time: An airline is charged for the duration its aircraft stays at the airport. Indigo has a faster turnaround time (time taken between landing and the
next take-off) of 30 minutes. Point 5 is one of the reasons for this. Having a single make of aircraft again helps in this regard as the time taken by the crew gets
Employee Aircraft ratio: Lower employee aircraft ratio of 102 compared to Jet Airways's 130 and Air India's 262.
Stage Length - Average Stage length (flying time per flight) of 1.5 hours, which means not having to stock and serve hot meals in most flights. This again
contributes to the low turnaround time.
Most Indian airlines take delivery of aircraft by sending their own pilots and engineers (to Toulouse in the case of Airbus). Indigo prefers to get them delivered
to Delhi, this is costlier but it also leads to better utilization of the available pilots and the engineering crew.
Customer Focus: IndiGo's success model largely relies on consistent low fares, regular on-time performance and minimal flight cancellations. However, the
airline's biggest edge over others is its focus on customer focus. Fliers want on time journey at reasonable prices and this has helped IndiGo inch past stalwarts
to reach this milestone. Other airlines advertise low fares, marketing or other promotional offers on their websites, IndiGo only emphasises on-time
performance. Indigo has continuously built around this image through its tongue-in-cheek advertisements on television and print media.
Each IndiGo flight provided complimentary water and charged for food and other beverages. The airline appealed to business travellers with services such as
connections to public transportation, cab-booking assistance and car rentals at reduced prices.
37. Punctuality: Airlines must remember that their fundamental raison d’être is to take off and land on time.To aid its success in being on time, as well as to save
money, IndiGo used technology made up of digital data links to communicate between its planes, ground stations and satellites. IndiGo routinely asks its
passengers to report two hours before departure time, and even if few people actually do that, the message that on-time performance depends on your turning up
on time is subtly emphasised. Over time, it sinks in, as the payoff is arriving on time. Customers invest their pre-departure time so that arrival time is
Humanize the Employee-Customer Relation: The Indigo cabin crew is introduced by name, the city they belong to and the languages they speak. Trivia like that
always makes it more interesting and creates a “connect” between the passengers and the crew. That little gesture suddenly makes them real people. Many of the
other airlines announce the names of the cabin crew and pilot. Without that little personal information about their city and the languages they speak, merely
announcing their names makes it sound impersonal.
In-flight cooperation: IndiGo focused on providing a clean aircraft, good on-board service and “being on time.” All passengers are regularly told that dumping
their food waste in sacks carried by the air hostesses will help the airline maintain time but eventually its helps improving the next flight experience on
cleanliness and prepared for the next flight. This is probably the most important thing the airline has done: creating value for all customers by allowing them to
be part of the airline’s success story in on-time performance.
Competition: In a world of hyper competition, the consumer is no longer willing to remain a passive recipient of offerings from companies. When they want
something, they are happy to help the company with advice and effort to deliver the right product or service. This is exactly what IndiGo has done. IndiGo
introduced fuel efficient aircrafts by introducing Airbus 320 into its fleet which helped it reduce 7.5%-12.5 % operating cost which eventually helped it focus
more on providing cost effective pricing consistently.
38. X. CHAPTER 7 - RECOMMENDATIONS AND CONCLUSION
Low cost airlines have huge potential in Indian market and they are many players entering the market targeting at the price sensitive segment. Open sky policy
and deregulation5 have further opened space for many players to enter the market. Despite of the fact that product differentiation in low cost carriers is very less
with many established players in the market, Indigo has successfully implemented the low cost strategy with its value added services but still it has huge
potential to capture more market if it can establish itself internationally, expand its services to cargo, Upgrade to long haul aircrafts as per demand and
Continuous innovation of value added services.
IndiGo has been making all the right moves on the strategic planning aspect. The company has been able to maintain focus on low cost operations and on time
performance. They have been able to sustain value for customers in the long run without increasing their fares. We would like to make recommendations based
on the following factors, for IndiGo to sustain its competitive advantage by utilizing its cost leadership strategy:
• The company needs to evaluate its diversification strategy.
• With tough competition and high interchangeability with customers, the company needs to constantly innovate and offer greater value at affordable prices.
• Increase domestic operations and long-haul flights.
• Extend to freight and chartered services.
39. XI. BIBLIOGRAPHY
1. Based on domestic traffic reports provided by the DGCA on http://dgca.nic.in/reports/Traffic-ind.htm
2. As per the Company’s website https://www.goindigo.in/about-us.html?linkNav=about-us_footer
5. Motilal Oswal’s report on InterGlobe Aviation, November 2017.
6. As per the Report of the Committee Constituted for examination of the recommendations made in the Study Report on Competitive Framework of Civil
Aviation Sector in India, June, 2012.
7. Motilal Oswal’s report on InterGlobe Aviation, December 2015.
8. Details as on http://www.wk.com/office/delhi/client/indigo_air
11. All advertisement images taken from Google image search.