Case study on Indigo airlines

Environmental impact

Presented byVishnu g vShirish s uMeghana manojRaghu h g

INDIAN AVIATION INDUSTRY

The Indian aviation industry is one of the fastest growing aviation

industries in the world.

India ranks fourth after US, China and Japan in terms of domestic

passengers volume.

The domestic aviation sector is expected to grow at a rate of 9-10 per

cent to reach a level of 150-180 million passengers by 2020.

Aviation Industry in India holds around 69% of the total share of the

airlines traffic in the region of South Asia

By 2020, Indian airports are estimated to handle:

100 million passengers

Including 60 million domestic passengers

Cargo in the range of 3.4 million tonnes per annum

Parent company-Inter Globe Enterprises

Sector-Airlines

Tagline/Slogan-Go India

Segment-Cost Conscious Passenger

Target group-Lower Middle class/Middle class

Positioning-Low cost No frills

Company information

Mission TO PROVIDE QUALITY AND RELIABLE AIR TRAVEL FACILITIES

TO THE YOUNG, PRICE CONSCIOUS, FIRST TIME TRAVELLERS

vision and values

•TO BE INDIA’S LARGEST AND FASTEST GROWING AIRLINE THROUGH 3

THINGS :

AFFORDABLE FARES, ON TIME PERFORMANCE AND HASSLE FREE TRAVEL

EXPERIENCE

INTRODUCTION

• Indigo was set up in early 2006 by Rakesh S Gangwal,a USA-based NRI and

Rahul Bhatia of InterGlobe Enterprises.

• Indigo is a private, low-cost carrier based in Gurgaon,Haryana,India

• The indigo airline started operation in August 2006 and currently is the largest

airline in India by market share.

• The airline is also one of the fastest growing airlines in the world

• India’s best on time performance and least flight cancellations.

• Indigo placed a firm order of 100Airbus A320-200 aircraft during june 2005 in

plans to commence operation in mid-2006

Total domestic passengers carried by the scheduled domestic airlines between

January and May 2013 were 25.998 million

On august 2012,IndiGo become the largest airline in India in

terms of market share(27%)

In August 2013,the centre for Asia Pacific Aviation ranked

Indigo amongst the 10th biggest low cost carriers in the world.

IndiGo offers a premium service called IndiGo Plus, where the

passengers, at a higher fare, can avail additional benefits like

a pre-assigned seat and a complimentary meal on board.

IndiGo focuses on adding a new plane every six weeks and

sometimes even faster.

It is a low cost carrier and the largest airline in India with a

market share of 36.1% as of December 2014

Indigo's stuck to its low-cost,

single class model unlike rivals Jet Airways.

Selling and leasing back planes

helps its balance sheet

Quality and detail key to good service

It’s all about customer focus

Using technology smartly

Why is the market leader?

A d i t y a G h o s h , P r e s i d e n t

R a h u l B h a t i a , M D

Financial highlights

Interglobe holds 51.12% stake in IndiGo and 48% is held by Gangwal’s

Verginia-based company Caelum investments.

Net profit was 7.87 billion rupees(US Dollar 128 million)in the 2012-13

Revenue-Rupees 111.17 billion(US Dollar 1.7 billion)in 2014

Net income-Rupees 3.17 billion(US Dollar 50 million)in 2014

Sales of IndiGo, run by InterGlobe Aviation Ltd, grew 17.5% to Rs.11,117

crore for the fiscal year 2014 against Rs.9,458 crore in the previous year.

On 15 oct. 2014 , indigo agreed to purchase 250 A320neo aircraft worth

US$25.7 BILLION .

Strategy

One type of airplane –brand-new Airbus A320

One type of fare-low

One type of customer services-professional

One way to deal with delays and cancellations-honesty

Go local-connect with the middle class

Focus on core competencies and market them

Aim to compete with Railways in the long run

Synergies in offering value added services-Holiday

packages/visa services

Pricing strategies

Low cost and high quality of service

Price to be differentiated with respect to days before the travel.

High seating density and load factor

Being a low-cost carrier, none of Indigo's flights have Business

class or First class sections. It offers only Economy class seating.

To keep fares low, Indigo does not provide complimentary

meals in any of its flights, though it does have a buy-on board in

flight meal programme.

Targeting segments locally based on seasons and festivals

STRATEGIC OBJECTIVES

• Increase number of destinations / frequencies served resulting in

market leadership

• Top/ of the mind brand in indian aviation industry for AFFORDABLE

QUALITY SERVICES

• MARKET LEADER in terms of share in the travel industry

• Introduce and sustain business travel segment for cost conscious

and young professionals

Destinations

IndiGo operates to 37 destinations in India and abroad

with 564 daily flights.

In January 2011 IndiGo received a license to operate

international flights after completing five years of

operations.

IndiGo's first international service was launched between

New Delhi and Dubai on 1 September 2011.

FINANCIAL OBJECTIVES

• Generate additional revenue

• Target a PROFIT MARGIN growth of 2.5% - 3% p.a

MARKET SHARE

Competitors of Airlines

HOW INDIGO HAS ATTAINED THE HIGHEST PROFITABILITY ???

POWER OF CONCENTRATION

It operates on routes which have high traffic. Indigo has

a fleet of 91 aircraft, it offers 564 daily flights connecting

to 37 destinations including 5 international destinations.

Thus, IndiGo’s strategy is to provide more capacity on

select 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.

Keeping planes airborne as much as possible

Indigo understands that 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, despite the fact

that it has been getting new aircraft on a regular basis.

OTHER FACTORS

VENDOR MANAGEMENT AND MANAGING FUEL COSTS.

Special training is given to the pilots such that they can

reduce the fuel costs accordingly.

Threat of New Entrants

Low Product differentiation in basic services

Low Switch cost for Customers but high for airlines

Open sky policy for foreign entrants

Very high set-up costs

Increasing fuel prices

Shortfall + High cost of skilled resources- Pilots

Bargaining Power of Suppliers

Duopoly in aircraft market

Switch cost to other suppliers is high

Shortage of Commercial Pilots in India

Limited Suppliers of ATF in India

Competitive Rivalry

Very little product differentiation in Services

Mature Industry- Only scope for growth by gaining other

people’s market share

High bargaining power of suppliers

No sense of brand royalty amongst customers and can

easily switch to other airlines

Bargaining Power of Buyers

High number of buyers fragmented- lowers their power

With high number of buyers, growth opportunities are also high

Availability of Substitutes

Indirect Substitutes are railways- but not powerful as airlines, score

highly in travel time

However direct substitutes are other Low Cost Carriers –since

switch cost is low, threat of substitutes is high

1.Low fares

2.High Service Quality

3.Operational Efficiency

4.Customer Service

5.Fuel Efficient Aircrafts

6.High brand awareness

7.Flights are available to customers when

required

Strength

1.Less differentiation

2.Short lived innovations

3.Untapped domestic cargo segment

4.No established alliances

5.Lack of product depth and breadth

Weaknesses

1. Increasing middle class population

2. Increase in domestic tourism

3.Chartered Services

4.An aviation consulting firm estimates the

cargo services of 3.4million tonnes per annum.

5. Largest market share among LCCs in Indian

Market

Opportunity

1.High ATF prices

2.Economic slowdown

3.Government policies

4. Technological advancement in communication

5.The shortage of trained pilots, co-pilots and ground staff is

severely limiting the growth prospects of all the airline

companies.

Threats

Environmental impact

Comfortable and quick service

High speed

Easy access

Emergency services

Quick clearance

Most suitable for caring light goods of high value

National defense

At Indigo, purpose is to improve the quality of life of the communities

and serve.

3 key areas of focus of Indigo Reach:

Children & Education:

primary focus is educating the young , providing employment

opportunities to the youth

Environment:

indigo is involved in activities at the local level to reduce carbon foot

print

Women:

Indigo is committed towards holistic development of the women in

weaker sections of our society and help them become self-sufficient

through education and employment related activities.

major CSR activities spearheaded by Indigo

Partnership with initiatives of Good Karma : “Save the Child”

Active involvement in the activities of various NGOs across India:

NGOs including Angels, HCHW(Hyderabad Council of Human Welfare) etc.

Sustainable development of villages around a forest reserve:

Mobile: Online ticket booking, special assistance for minors, arranging wheelchairs, new

mobile application for checking flight status, pre-booked seats and

meals on flight

Preemptive: Indigo placed the largest order in commercial

history during 2011 with Airbus for 180 aircrafts, keeping in

mind future competition

Position: Tagline-‘On-time, Low Fares, Courteous, Hassle-Free,

Low Cost Airlines’

Market Leader Strategy

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 – light weight , No. of seats increased.

4. One of the lowest Cancellation rate in industry

5. No frills such as free food/drinks, lounges

6.Emphasis on direct sale of ticket through Internet to avoid fee andcommissions paid to travel agents.7.Employees working in multiple roles.

Key Success Factors

Awards and achievements

IndiGo has won the following awards:

Best LCC by the Airline Passengers Association of

India (2007).

Best LCC at the Galileo Express Travel Awards

(2008).

CNBC Awaaz's Travel Award for best low cost

airline(2009).

Skytrax Awards – Best low cost carrier (2010, 11, 12.)

conclusion

Low cost airlines have huge potential in the Indian market

there are many players entering the market targeting at price

sensitive segment.

Open sky policy and deregulation have further open space

for many players to enter 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 service to the cargo .

It also has initiated various services to the society such as

“indigo reach” is the CSR programme focus mainly on

education, environment, and women.