IndiGo was established in 2006 by Rahul Bhatia and Rakesh Gangwal. It began operations in 2006 with one aircraft and has since grown rapidly, becoming the largest airline in India by 2012 through its low-cost business model. IndiGo focuses on on-time performance and affordable fares without additional amenities. It faces competition from other low-cost carriers and issues with aviation infrastructure, but has been successful due to consistent profits when other airlines struggled.
IndiGo was established in 2006 by Rahul Bhatia and Rakesh Gangwal. It began operations in 2006 with one aircraft and has since grown rapidly, becoming the largest airline in India by 2012 through its low-cost business model. IndiGo focuses on on-time performance and affordable fares without additional amenities. It faces competition from other low-cost carriers and issues with aviation infrastructure, but has been successful due to consistent profits when other airlines struggled.
IndiGo was established in 2006 by Rahul Bhatia and Rakesh Gangwal. It began operations in 2006 with one aircraft and has since grown rapidly, becoming the largest airline in India by 2012 through its low-cost business model. IndiGo focuses on on-time performance and affordable fares without additional amenities. It faces competition from other low-cost carriers and issues with aviation infrastructure, but has been successful due to consistent profits when other airlines struggled.
IndiGo was established in 2006 by Rahul Bhatia and Rakesh Gangwal. It began operations in 2006 with one aircraft and has since grown rapidly, becoming the largest airline in India by 2012 through its low-cost business model. IndiGo focuses on on-time performance and affordable fares without additional amenities. It faces competition from other low-cost carriers and issues with aviation infrastructure, but has been successful due to consistent profits when other airlines struggled.
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1/ 7
CASE ANALYSIS REPORT
The IndiGo Story: “On Time, Hassle Free”
IndiGo was set up in early 2006 by Rahul Bhatia of InterGlobe Enterprises and Rakesh S Gangwal, a United States-based NRI. InterGlobe holds 51.12% stake in IndiGo and 48% is held by Gangwal's Virginia-based company Caelum Investments. IndiGo placed a firm order for 100 Airbus A320-200 aircraft in June 2005 with plans to commence operations in mid-2006. IndiGo 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 the end of 2006, the airline had six aircraft. Nine more aircraft were acquired in 2007 taking the total to 15. By December 2010, IndiGo replaced the state run flag carrier Air India as the top third airline in India. It already had 17.3% of the market share, behind Kingfisher Airlines and Jet Airways. By early 2012, IndiGo had taken the delivery of its 50th aircraft in less than six years. IndiGo is known to have placed the largest order in commercial aviation history during 2011 at that time, when Airbus won the US$15 billion deal for 180 aircraft. This deal pushed up the percentage of Airbus aircraft in India to 73%. 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 was going through a bad patch. IndiGo focuses on adding a new plane every six weeks and sometimes even faster. However, this rapid expansion led to a scathing report by the DGCA in December 2011, which highlighted problems resulting from this expansion in the airline that could impact safety. 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. In January 2013, the Centre for Asia Pacific Aviation announced that, following Indonesian Airline Lion Air, 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 the Airbus A320-200 aircraft equipped with sharklets. Aditya Ghosh, IndiGo's president said that this move would help them reduce fuel burn. In February 2013, following the civil aviation ministry announcing that they would be allowing IndiGo to take the delivery of only five aircraft that year, reports suggested that the airline was in plans to introduce low-cost regional flights by setting up a subsidiary. However, Aditya Ghosh, IndiGo's president said that all such reports were untrue and IndiGo was actually in plans to seek permission from the ministry to acquire four more aircraft, therefore taking the delivery of nine aircraft in 2013. In August 2013, the Centre for Asia Pacific Aviation ranked IndiGo amongst the 10 biggest low-cost carriers in the world.
PRODUCTS AND SERVICES OFFERED BY INDIGO
In Flight Services
To keep fares always affordable, IndiGo has designed -
A clean, comfortable and reliable airline without costly frills that put upward pressure on fares An assortment of vegetarian/non-vegetarian sandwiches, flavored cashew nuts, cookies, soft drinks and juices for sale onboard. Drinking water is provided free of charge on all its flights to all customers. Food can also be carried on board, and the allowed food items include: cold snacks, non-alcoholic drinks, snack bars and biscuits. For the convenience of customers, messy, oily or smelly food items are not allowed onboard.
Product Core Transportation Supplementary Check in Food on board Connecting flight Complementary gifts In-flight entertainment Frequent flier programs Augmented Online booking Variety of meal options Pick up and drop service Mobile ticketing
STP Segment- Cost Conscious Passengers Target Group - Lower Middle Class / Middle Class Positioning - Low Cost No Frills ORGANISATIONAL CHART
Finance Planning &
Analy... Vineet Mittal
CFO Treasurer Riyaz Peermohammed Krishan Bhargava
Airport Operations Sales Alphonso Dass Sanjay Kumar
Sunita Srivastava KEY FACTS Current Market share of 41% On-time performance of 83.4% IndiGo stands for three things: on-time performance, affordable fares and hassle-free travel experience First domestic low-cost airline to have CAT III compliant pilots Several industries first initiatives like web check-in, mobile bookings, queue busters, step less boarding ramps and air-conditioned tarmac coaches
P.E.S.T ANALYSIS
Political Open Sky Policy/Deregulation Low Entry Barriers FDI Limits International Travel Restrict Technological Modernized Airports Greenfield Airports Video Conferencing/VOIP Economic Growing Middle Class Income Consistent GDP Growth Hike in Average Income Growth in Tourism Rising ATF Price Socio-Cultural Growing Middle Class Domestic Leisure Travel Foreign Tourist Status Symbol Security Issues & Terrorism PROBLEMS FACED
Stiff competition from established LCC players -AirAsia, Air Arabia and home-grown Air India Express - on the same routes.
Large network carriers have built their fortunes on carrying onward traffic from their hubs to dozens of cities around the world. IndiGo does not have this luxury and hence will never get the passengers who want to fly onward to say Europe, Africa or Australia.
Infrastructure remains a continuing challenge and potentially is the critical restraint upon the growth of India’s civil aviation
Various DGCA actions impose frustrating operational and regulatory barriers
Financial distress is also considered as one of the problems of indigo airlines.
FEASIBLE ALTERNATIVES
1. Increase domestic operation
There are a number of initiatives taken up by government to encourage aviation industry,
e.g., promotion of regional air connectivity, Open Sky policy and policy of Greenfield airports. In addition to this, government has also made plans for the development of airport infrastructure. 35 airports have been selected for this purpose, of these 24 airports would be taken up for city side development through PPP including maintenance and operation of the terminal buildings, cargo operations and real estate development. All these factors indicate towards a favorable environment for growth in the domestic aviation sector. Hence it would be a wise option for IndiGo to increase its domestic operations. IndiGo must increase the number of destinations and can start long haul aircrafts.
2. Extension
Currently, IndiGo is concentrating only in domestic passenger flights. However, the
freight/cargo market and charted plane service are the areas that can prove to be good potential market for IndiGo. As per the reports from an economic survey this year, it was stated that domestic cargo showed a growth of 9.3%. Besides, chartered flight services are an untapped market for IndiGo. Thus, IndiGo has a huge opportunity to expand in both these arenas. FINAL RECOMMENDATION
As inferred from the above two solution analysis, we recommend that IndiGo must increase its domestic operations by starting flights connecting to new destinations and long haul flights. As the opportunities are vast for this purpose, the other low cost carriers may also venture in this area. So using the cost leadership strategy, IndiGo can gain competitive advantage over its competitors as the first mover. Once the above strategy is successful and results in promising revenue growth, IndiGo can use extension to freight and chartered services as the next objective for further expansion.
