Indigo Airlines_Final Report

7/27/2019 Indigo Airlines_Final Report

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Submitted by: Under Guidance of: Dr. Rushi Anandan

2013

SIMSR

[STRATEGY PROJECT ON]

INDIGO- AIRLINES

Prachi Vajani Deepesh Chhabra

Prathamesh Kulkarni Pranil Deone

Mihir Hombalkar Anand Lihinar (SRBS)


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Table of Contents

1. EXECUTIVE SUMMARY ..................................................................................... 3

2. PESTLE ANALYSIS ............................................................................................. 4

3. Porters Five forces Analysis ............................................................................ 7

4. RESOURCES .................................................................................................... 10

5. CAPABILITIES .................................................................................................. 13

6. COMPETITIVE STRATEGIES FOR INDIGO AIRLINES .......................................... 14

7. TETRA THREAT FRAMEWORK FOR SUSTAINABILITY ....................................... 15

8. Value Chain of Indigo ..................................................................................... 17

9. Market Share and Competitors share ............................................................ 18

10. APPENDIX ................................................................................................... 20


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1. EXECUTIVE SUMMARY

In this report, we will analyze what strategies IndiGo followed to enter the aviation

industry. Also, we will discuss how IndiGo implemented the low cost strategy to gain

competitive advantage and provide recommendations to sustain its competitive position inthe long-term. To know about the industry attractiveness of aviation and the factors that

helped IndiGo enter this market, we will use the Porters 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, competitors 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.


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2. 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 factorsusually 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 /legal Factors

The government has opened up the Indian skies by allowing up to 49% FDI inDomestic 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 todecrease the operating costs

Micro-managing by the government is seen as a great negative for the industry asthe airlines are not being given enough freedom to run their operations

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

Economic factor

Business cycles have a wide reaching impact on the airline industry. Duringrecession, 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 thecapacity 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 theoperational costs

Depreciating value of rupee is adding to costs as substantial portion of otheroperating 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 operationalcosts but the positive side for indigo airlines is that it is in a far better position


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financially than the competition which helps it to raise capital comparatively at a

lower cost

Social factors

The changing travel habits of people have very wide implications for the airlineindustry. 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 withthe 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 beinggenerated for air connectivity in these cities also.

Technological factors

The industry is in the process of adopting a new standard for distributing airfareinformation 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

The Airports Authority of India is developing modern communication, navigation,surveillance, and air traffic management systems for India's aviation sector that will

help the country meet the expected growth and demand for air passenger and cargo

service over the next decade.

Environmental

With air traffic growing, environmental concerns are also gaining an increasingimportance. 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.

Noise: The principle sources of aircraft noise are the aircrafts engines and,particularly during approach, airframe noise when the aircrafts flaps/slats are fully

extended and the landing gear are deployed. Air traffic movements have


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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.

Local air quality: Air pollutants such as Nitrogen Oxides (NO2 and NO) andparticulate 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 capacity.

Alternative Fuels: Alternative fuels should become a major driver in reaching theobjective 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

Land acquisition has become one of the serious issues plaguing the industrybecause it is stalling the building of new infrastructure which is the need of the hour

Future objectives: The ultimate aim for the industry must be sustainabledevelopment, where the environment is not sacrificed for growth and future

generations will be able to continue to benefit from air travel. The aviation industry

has already started to tackle this formidable task, but continued and imaginative

effort is required to ensure the industry maximises the use of its "environmental

capacity"


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3. Porters Five forces Analysis

1. Threat of New Entrants

Threat of New Entrants Aviation industry is highly cost intensive. Besides it has togo 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

The capital requirement- An airline is required to have capitalization of minimumthirty crores without which it is not allowed to takeoff.

Expected retaliation-The market is concentrated in the hands of a few players thusany 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 getright flying slot time.

Shortage of pilots and high fuel costs also pose a threat as the existing demandsitself are not being fulfilled.

Exit barriers-The high capital requirement makes it difficult for the companies toexit the market but being a growing industry the existing players are willing to

acquire and make exit for an operator less difficult.

2. Bargaining Power of Suppliers

Any airlines in general face a duopoly of two major suppliers of aircrafts i.e. Airbusand 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

IndiGo fleet comprise of Airbus-A320 and the switching cost is high due to thelimited number of suppliers.

Due to shortage of commercial aircraft pilots in India the supply of pilots isconcentrated, hence increasing their power.

There are only four suppliers for ATF (Aviation Turbine Fuel); IOC, HindustanPetroleum 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 thatthe ATF prices constitute 35-40% of the costs in India compared to 20-25% globally.


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The brand value of suppliers is high due to their less number and results in higherbargaining power for them.

The airlines also face a threat of forward integration since the suppliers are in closecontact and are familiar with the knowhow of the aviation industry.

The suppliers are few and thus in better position to bargain as they always findscustomers for their aircrafts.

2. Bargaining Power of Buyers

Buyers in airlines industry are large in number and highly fragmented thus loweringtheir 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 notdifficult to move from one airline to another or to switch to a substitute.

Furthermore the players in the particular strategic group do have minimalisticdifferentiating points.

Backward integration from the buyers end is very difficult and next to impossible.

3. Competitive Rivalry

The aviation industry is a highly competitive industry because of which it is difficult to

earn high returns in this sector. Below are the major reasons for the high competition in

the low-cost carrier airlines:

Very little scope for differentiation between competitors products and services Aviation is a mature industry with very little growth. The only way to grow is by

stealing away customers from competitors

Suppliers of aircrafts are the same, i.e., Boeing and Airbus. Hence suppliersbargaining power is high.

Switching cost of customers is high for low cost carriers, i.e., there is no brandloyalty.

Closest competitor 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 Jets mission is to

becomeIndias 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


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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. TheAirlines theme line is Experience the Differenceand 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-seatconfiguration, 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 cutthroat competition, each player will

have to come up with different strategies to improve the non price factors

5. 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:

1. Customers use airline transport as it is convenient and saves travelling time. So trainscannot work as a substitute to save time.

2. Secondly, many customers use airlines as a status symbol. So again, trains cannotsubstitute 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 costbetween low cost carriers is low.


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4. RESOURCES

Tangible Resources:

Physical ResourcesAircrafts:Indigo is the first Indian airline with Sharklet equipped A320. Indigo welcomed its

first Sharklet equipped Airbus A320 on January 28, 2013.Sharklets are newly

designed wing-tip devices that improve the aircrafts aerodynamics and significantly

cut the airlines fuel burn and emissions by four per cent on longer sectors.

(Source: http://www.airbus.com/presscentre)

The airline currently operates 399 daily flights with a fleet of 65 Airbus

A320 with an average fleet age of 2.3 years and flies to 33 destinations

(Source: www.goindigo.in)

Fuel:

Fleet maximum fuel capacity is 23,860 Litres. Fuel is a resource for Indigo as due to

the use of A320 it attains around 4% of fuel burn reduction.

Further ATF (Aviation Turbine Fuel) is a complementary product for airplane and it

constitutes almost 35% of production cost.

Financial ResourcesAs confirmed by India's Minister of Civil Aviation, Ajit Singh on 22-Mar-2012, all

scheduled Indian airlines except Indigo are incurring losses, based on returns filed

by airlines with the Directorate General of Civil Aviation (DGCA).

As the only profitable airline in India, Indigo was able to put an order of 180 new

aircrafts A-320 as of in 2011, in a total cost of USD 15 billion. Financial resources

also enable Indigo to phase out aircrafts older than 6 years, in order to keep the

average fleet age low.

Human ResourcesIn a time of crisis when competitors are laying off staff or leaving the market

(Kingfisher), Indigo is on lookout for more pilots, cabin attendants, customer service

and airport service agents in order to keep growing and in congruence with its newaircrafts.

Indigo has one of the highest percentages of pilots who are trained to fly under

dense fog.

Great employee relationship- Indigos president, Mr. Aditya Ghosh, makes sure he is

available to 4000+ employees of Indigo; was named the travel industrys best

employer in 2010.
http://centreforaviation.com/profiles/countries/indiahttp://centreforaviation.com/profiles/countries/india


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The attrition rate in Indigo is negligible or zero percent.

Technology ResourcesIndigo uses e-ticketing facility which makes travel by Indigo hassle free. E-tickets

add to its cost efficiency as it saves fee and commission paid to agents.

Unlike manual systems used by other airlines, Indigo planes are equipped with a

digital link system for transmission of short, simple messages between aircraft and

ground stations via radio or satellite called Aircraft Communications Addressing

and Reporting System (ACARS). Before every Indigo flight departs an automatic

message is triggered from the aircraft to its operations control centre and

immediately the same departure time gets recorded in the software. Similarly, the

moment the flight lands an automatic message is triggered from aircraft to control

centre. Hence, the on-time performance is diligently monitored for every flight in

real time.

INTANGIBLE RESOURCES:

- Brand Equity/Reputation:Indigo is the most reputed low cost carrier due to the following reasons:

On time arrivals is the key differentiating factor for Indigo Airlines. Indigo keeps implementing new and innovative ideas to increase the quality of

customer service. Recent example is: Indigo has roving check-in counters where

passengers with only cabin baggage can check-in with an Indigo official with a

handheld device, rather than lining up at the check-in counter.

Compared to the direct competitors, that is, the other low cost carriers like SpiceJet,Jetlite, etc. Indigo offers the lowest airfare.

Reputation of high value added services-which also contributes to word of mouthpromotion of brand.

- Social Capital: Indigo has amicable relationship with the other organizations that contribute to the

value addition for the service provided to the customers.
http://www.business-standard.com/india/news/indigo-flaunts-on-time-performance-muscle/468700/http://www.business-standard.com/india/news/indigo-flaunts-on-time-performance-muscle/468700/http://www.business-standard.com/india/news/indigo-flaunts-on-time-performance-muscle/468700/http://www.business-standard.com/india/news/indigo-flaunts-on-time-performance-muscle/468700/


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Indigo has engaged many travel web-portals and regional travel agents withincentives like booking commissions, etc. There have been no instances of distress

between Indigo and its other collaborators, that is, suppliers.

Collaboration with hotels: Mumbai-based hotel chain operator Sarovar Hotels andIndigo Airlines announced a marketing tie-up for frequent travellers. The highlights

are:

a) The arrangement will allow guests staying at select Sarovar Hotels across 26destinations in India to avail a 10 per cent discount on their next travel

booking with Indigo.

b) While Indigo flyers can avail up to 25 per cent discount on published roomtariff, 10 per cent discount on holiday stay packages and 10 per cent discount

on restaurant dining at select Sarovar properties.

Hence Indigo has a remarkable social capital.

(Source: http://www.business-standard.com/article)

- Brand Awareness:Indigo is a well known Low Cost Carrier in India. The following points contribute to

the brand awareness of Indigo:

Advertising using print media like newspapers, billboards, etc. Advertising has been done my TV commercials as well. Indeed indigo was the first

low cost airline to release a TVC. Unlike regular airline ads, it opted for an animated

ad-to cut the cost and break the clutter. Further the series of commercials continued

like- the on time commercial, the anthem commercial, etc.

It may not pay for an advertisement in a newspaper, but has been covered in newsfor its low cost strategy implementation. As Indigo provides better value added services to the customers, word of mouth

promotion also works in its favour.

- Employee Relationship: Good Employee Relationship is a key factor to sustain competitive advantage. Indigo

provides several incentives to its employees.

As per the news article published in The Hindu Business Line:At a time when several domestic airlines are looking to prune their staff strength,

the Delhi-based low cost airline, Indigo, is on the lookout for more pilots, cabin

attendants, customer service and airport service agents.

The above facts show that Indigo has taken a positive approach while dealing with

its loyal employees at the time of economic slowdown.


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5. CAPABILITIES

Capabilities are what we do with our assets. It includes our operational efficiency,

distinctive competence and core competence.

Financial Capability:

Indigos financial capability is evident by the fact that it got the permission from Indian

government to fly aboard by September 2011. The government cannot freely offer licenses

to any airlines which wish to fly abroad. We have to look into other aspects like the

financial viability of the airline as well so that it can sustain international operations even

when the demand is low, said an official of aviation ministry. Indeed, Indigo is the fourth

Indian low-cost carrier to operate overseas services.

(Source: http://www.thaindian.com/newsportal)

Further, Indigo has managed to be the only profitable airline in India currently.

Low fare flights:

Indigo has successfully managed to be a low fare flight maintaining its reliability and good

service. It focuses on customer needs by offering low fares.

Indigo scored a hatrick at SKYTRAX World Airline Awards 2012 for being the best low cost

airline of India & Central Asia

Cost efficiency:

Indigo has been offering low fare flights and is still able to have good cash flows. This is due

to the cost efficiency capability. They have managed to reduce the costs.This can be attributed to various strategies adopted:

No frills i.e. no in flight services Operating on secondary airports E-ticketing: to avoid fee and commission paid to travel agents Single model of aircraft Fewer employees per aircraft and more seats per aircraft Hub and spoke model for flights Reduction on fuel burning due to A-320 aircrafts Selling and leasing back planes helps its balance sheet

Indigo goes in for cost saving to the extent that every time an Indigo aircraft takes off in

daylight, the pilot switches off the navigation lights located on its wings and tail tips.

The reason is the saving on cost of changing bulbs. Its such a minor detail and saving so

small that most airlines wouldnt bother, but its taken seriously at Indigo.


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On-time flights:

Passengers all across India rave about Indigos on-time performance, the highest amongst

all airlines at 92.4%. They are always on time and often before time, which is remarkable.

Passengers call punctuality the hallmark of the airline.

The moment the flight lands an automatic message is triggered from aircraft to control

centre. Hence, the on-time performance is diligently monitored for every flight in real time.

Low turnaround time:

The turn-around time for an Indigo flight is less than 30 minutes, a hard feat to match.

Though there are no complimentary meals on this no-frills airline, the service and

performance matches the best.

6. COMPETITIVE STRATEGIES FOR INDIGO AIRLINES

Air craft management

Indigo purchased the aircrafts, then sold them to intermediary and then hire thefleet on lease from then on contractual basis.

Use single configuration aircraft. For maintenance, it allied with airbus Indigo preferred airbus over Boeing as the fuel efficiency of the former is greater

than the latter.

Growth and Expansion strategy

It adopted a strategy with one aircraft and adding one after six week. In other way isthat they first tested one market and after establishing foothold in that market, they

expanded to other markets.

Shorter trajectory for landing. Does not require ground based navigation Helps in reduction of green house gas emission. Turnaround time is less Low frills Hub and spoke models for flights IndiGo preferred to wait and have a solid business plan in place. Its plan was to stick

to operating a single configuration aircraft, providing point-to-point connectivity.

IndiGo, however, continued its gradual expansion and waited for five years tolaunch its international operations, although, arguably, the airline had to wait those

five years because of airline industry regulations.
http://www.business-standard.com/india/news/indigo-flaunts-on-time-performance-muscle/468700/http://www.business-standard.com/india/news/indigo-flaunts-on-time-performance-muscle/468700/


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Still, it wasn't tempted to find loopholes to expand aggressively in what was arapidly growing market. This slow and steady approach has made IndiGo the

second-largest airline in terms of passenger carriage in a matter of over five years

(it commenced operations in August 2006) with a fleet of 50 aircraft.

7. TETRA THREAT FRAMEWORK FOR SUSTAINABILITY

Added Value

You add value to the industry if the value generated by you is not equal to the value

generated without you. Core competency adds value.

If value generated by you = value generated without you, then you are not required.

Threats to added value are:

1) Threat of imitation:

Imitation is the case when there is a diffusion of successful business model by competitors.

Company creates added value by competitive advantage through low-cost leadership.

A company chooses a particular peak depending upon its strength and weakness on this 3-

D business landscape. When a competitor tries to come to your peak and when peak gets

crowded, it comes down thereby bringing down your performance. This is the reason why

imitation is considered a direct threat.

Some of the imitation threats to Indigo are:


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Imitation of its aircrafts Imitation of its human resource Imitation of brand awareness

2) Threat of Substitution

Railways and roadways (response: time saving travel) Technological advancement (diminishing the need to travel) High end airlines (the ones providing services) Either of the LCC

Appropriated Value

3) Threat of Hold-up

Value gets added vertically across the 5-forces model i.e. through the participants includingsuppliers, buyers, competitors, etc.

Value is captured by each of these along the vertical chain. A company cant capture all the

value because of the presence of the competitors. Competitors hold up companies or

participants from capturing whole value.

Threats of hold-up for Indigo are:

High power of the aircraft suppliers i.e. Airbus and Boeing High power of supplier of pilots due to the shortage of commercial aircraft pilots Holding up of value by the limited number of suppliers of ATF: IOC, Hindustan

Petroleum Corporation, Bharat Petroleum and ONGC

Government interference: government has a control over fuel prices, foreigninvestments (i.e. FDI policies), tourism laws, taxes, etc.


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4) Threat of Slack

Slack is the gap b/w the appropriated value and the value actually captured. Slack

generates not because somebody takes any value from some organization, but because the

firm looses it itself. Slack cant be avoided but it can be maintained. This is the gap which

the firm creates to generate value.

Threats of slack for Indigo are:

Increasing fuel prices Increasing labour costs High capital investment Rising airport costs

8. Value Chain of Indigo


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Strengths

Indigo has high brand awareness and brand equity. Cost leadership: Successful implementation of low cost strategy. Highly efficient management that ensures high rate of on- time arrivals. Continuous innovation to improve on non price factors. Tie-up with hotels. Ease of ticket booking for customers.

Weaknesses

Scope of product differentiation is less. 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.

Indigo is not exploring the untapped domestic air cargo marketOpportunity

Increasing middle class has offered more opportunities to the low cost carriers. Superior technology has helped cut costs and thus prevail as a low cost carrier.

Threats

Increase in fuel prices Government intervention Increase in tax rates Economic downturn

9. Market Share and Competitors share

Indigo has been able to increase their market share in the market quite steadily from 4

percent in 2006 to almost 22 percent in 2012.They have increased their fleet considerably

and have operated flights to strategic locations in India. Their ability to reduce theturnaround time and use fuel efficient airbuses have helped their cause by large. Their

target segment has been increasing rapidly with services industry growing at a fair pace

but low switching costs and loyalty have not affected their growth. Amidst fierce

competition from Spicejet, Go air, jet lite, jet konnect and Indigo has been successful in not

only maintaining its market share but enhancing it multiple times. Even during recession


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when other companies had tough times Indigo increased their market share by a whopping

50 percent i.e. from 10 percent to 15 percent and recorded profits for that year

The below given diagram explains about how competitors have been faring in response to

Indigo airlines in March 2012.The graph is in favor of Indigo and portrays the industry to

be highly favorable for Indigo. There are very few fierce competitors and Indigo is themarket leader in the low cost segment of the aviation industry. Jet Airways alone is ahead

in terms of market share but is not a direct competitor to Indigo as it does not fall under the

low cost airline. Jet lite has a market share of less than 8 percent. Its close competitors in

terms of market share are Jet lite, Spice Jet and Go air. Except for Spice jet the others have

market share of less than 10 percent each and together form not more than 14.3 percent of

the market. The challenge ahead to Indigo is how they confront the growing fuel prices,

maintain lowest fares, increase customer loyalty, maintain their market leadership. The

story for Indigo has been so far so good.


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10. APPENDIX

MARKET SHARE OF INDIGO

Despite only entering the market less than six years ago in Aug-2006, Indigo has rapidly

soared up the ranks to become the second largest domestic carrier, overtaking Air

India and Kingfisher Airlines on the way. In doing so, Indigo has overtaken more well-

established carriers that have expanded not only organically but through acquisitions and

with a mixed-product that offers both full service and low cost products. And the growth

for Indigo is expected to continue, with the airline likely to remain the fastest growing

airline in India in 2012, as it continues to add capacity on both domestic and international

routes, with the latter expected to generate a growing proportion of total revenue.

Indigo held a 21% domestic market share at the end of 2011, behind Jet Airways/JetLite.

For the second consecutive year, the carrier reported domestic passenger growth of almost40% to 11.8 million, with total passenger numbers exceeding the 12 million-passenger

mark following the launch of international operations in Sep-2011.

According to DGCA monthly traffic data, Indigo handled over 1 million passengers for the

first time in May-2011 (with 1.1 million passengers), a feat replicated in Jun-2011, Oct-

2011, Nov-2011, Dec-2011, Jan-2012 and Feb-2012, with over 1.1 million passenger in

each of these months.

Fig: Indigo passenger numbers: Aug-2006 to Feb-2012
http://centreforaviation.com/profiles/airlines/air-india-aihttp://centreforaviation.com/profiles/airlines/air-india-aihttp://centreforaviation.com/profiles/airlines/kingfisher-airlines-ithttp://centreforaviation.com/profiles/airlines/jet-airways-9whttp://centreforaviation.com/profiles/airlines/jetlite-s2http://centreforaviation.com/profiles/airlines/jetlite-s2http://centreforaviation.com/profiles/airlines/jet-airways-9whttp://centreforaviation.com/profiles/airlines/kingfisher-airlines-ithttp://centreforaviation.com/profiles/airlines/air-india-aihttp://centreforaviation.com/profiles/airlines/air-india-ai


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Domestic load factors in 2011 were also strong, averaging 83.3%, based on DGCA data,

with load factors exceeding 90% in Dec-2011. In 2010, load factors exceeded 90% on four

occasions in May-2010 (92.3%), Jun-2012 (90.7%), Nov-2010 (91%) and Dec-2012

(93.3%). So far in 2012, the carrier has reported load factors of 85.9% in Jan-2012 and

82.8% in Feb-2012.

Fig:Indigo load factor: Apr-2004 to Feb-2012

In the month of Feb-2012, the LCC held a 21.3% market share compared to a combined

29.8% at Jet Airways/JetLite. Indigo will likely take the top spot from Jet Airways, with

growth of around 12% p.a. expected over the next few years.
http://centreforaviation.com/profiles/airlines/indigo-6ehttp://centreforaviation.com/profiles/airlines/indigo-6ehttp://centreforaviation.com/profiles/airlines/jetlite-s2http://centreforaviation.com/profiles/airlines/jetlite-s2http://centreforaviation.com/profiles/airlines/indigo-6e


22/22

Growth Path of Indigo Airlines

Documents

Indigo Airlines_Final Report