A

STUDY OF
THE COMEPTITIVE STRATEGY ADOPTED
BY
INDIGO AIRLINES

Group 7 Section A
Ankit Goyal(M007-15)
Nikhil Dalal(M018-15)
Prabhat Kerketta(M039-15)
Shilpa Tandon(M049-15)
Shrinidhi Kudi(M028-15)
V V B Satyanarayana (M058-15)

A Study Of The Competitive Strategy Adopted By Indigo Airlines

Executive Summary
Objectives
The objective of this report is to study the detailed study of the competitive strategy adopted by
IndiGo airlines and also to identify what has helped IndiGo outperform its competitors right from
its inception.
Methods
To understand the important factors responsible for the formulation of corporate strategy, we
have utilized Strategic Management tools like Porters Five Forces model, Value Chain analysis,
SWOT matrix, PEST and the VIRO framework.
Limitations
Due to confidentiality clause and corporate policies of the company, primary data could not be
sourced. However, we have used the data available on the open source channels to come up with
an analysis of the competitive strategy of IndiGo.
.

A Study Of The Competitive Strategy Adopted By Indigo Airlines

Contents
Executive Summary.........................................................................................................................2
Introduction..................................................................................................................................5
History.............................................................................................................................................5
Early Beginnings.........................................................................................................................5
Going international......................................................................................................................5
Rapid expansion...........................................................................................................................5
About Indigo....................................................................................................................................6
Industry Analysis.............................................................................................................................7
About the Industry.......................................................................................................................7
Make In India...............................................................................................................................8
Growth drivers.........................................................................................................................8
FDI Policy................................................................................................................................8
Investment Opportunities.........................................................................................................9
PEST Analysis.............................................................................................................................9
Political Factors.......................................................................................................................9
Economic Factors....................................................................................................................9
Social factors...........................................................................................................................9
Technological factors...............................................................................................................9
PORTER FIVE FORCES MODEL...........................................................................................11
Threat of new Entrants...........................................................................................................11
Bargaining power of suppliers...............................................................................................11
Bargaining power of buyers...................................................................................................11
Threat of substitutes...............................................................................................................11
Current Day Operations of Indigo Airlines...................................................................................12
Vision.........................................................................................................................................12
Resources...................................................................................................................................12
Operational Performance...........................................................................................................13
Value chain of Indigo.....................................................................................................................15
Internal Environment Analysis and sources of competitive advantage.........................................15
Aircrafts.....................................................................................................................................15

A Study Of The Competitive Strategy Adopted By Indigo Airlines

Fuel............................................................................................................................................16
Low fare flights......................................................................................................................18
Cost efficiency.......................................................................................................................18
On-time flights.......................................................................................................................19
Low turnaround time.............................................................................................................19
Using technology smartly......................................................................................................19
VRIO Framework......................................................................................................................21
Value......................................................................................................................................21
Rarity.....................................................................................................................................22
Imitability..............................................................................................................................22
Organization...........................................................................................................................22
The Competitive Advantage......................................................................................................22
SWOT Analysis for Indigo........................................................................................................23
Strengths................................................................................................................................23
Weaknesses............................................................................................................................23
Future strategy for Indigo airlines.................................................................................................24
References......................................................................................................................................25

A Study Of The Competitive Strategy Adopted By Indigo Airlines

A Study of the Competitive Strategy Adopted By Indigo Airlines

Introduction
IndiGo Airlines is a focused Low Cost Carrier in the Indian domestic air transport segment. It
operates from the national capital Delhi and its tag line says low fares, on-time flights and a
hassle-free experience to our passengers. It commenced operations in August 2006 with a single
aircraft, and has grown their fleet to 103 aircraft.
History
Early Beginnings
IndiGo, headquartered in Gurgaon, India is the largest airline in terms of passengers
flown with market share of 36.5% as of September 2015. It was set up in early 2006 by Rahul
Bhatia of InterGlobe Enterprises and Rakesh Gangwal, a United States-based NRI. InterGlobe
holds 51.12% stake in IndiGo and 48% is held by Gangwal's company Caelum Investments.
IndiGo began its operations on 4th August 2006 with a service from New Delhi to Imphal via
Guwahati.
Former US Airways Executive vice-President and Marketing and Planning Bruce Ashby
joined IndiGo as its Chief Executive Officer. The airline already acquired parking lots for its
brand new aircraft at both Mumbai and Delhi airports. 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
a 17.3% of the market share, behind Kingfisher Airlines and Jet Airways.
Going international
In January 2011 IndiGo received its license to operate international flights upon
completing five years of operations. Its first international service was launched between New
Delhi and Dubai. Over the next few weeks it expanded to serve Bangkok, Singapore, Muscat and
Kathmandu from New Delhi and Mumbai. With the lift of barriers (to protect the sinking Air
India) on International routes in February, 2012, IndiGo received clearance to fly
to Dammam and Doha.
Rapid expansion
By early 2012, IndiGo had taken the delivery of its 50 th aircraft in less than 6 years.
IndiGo is known to have placed the largest order in commercial aviation history during 2011. As
of 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 the low cost model, buying only one type of aircraft and
keeping operational costs as low as possible along with heavy emphasis on punctuality are said
to be some of the reasons for its success even when the airline industry in India is currently going
through a bad patch. IndiGo focuses on adding a new plane every six weeks and sometimes even
faster.
SriLankan Engineering, a subsidiary of the Sri Lankan flag carrier SriLankan
Airlines recently won the contract of performing heavy maintenance checks on 26 of the 50

A Study Of The Competitive Strategy Adopted By Indigo Airlines

Airbus A320-200 operated by IndiGo. SriLankan has been receiving contracts for the past 4
years to perform maintenance checks on IndiGo aircraft. IndiGo is believed to outsource its
aircraft to SriLankan because of the unbearable tax imposed on the local MRO providers making
them unfavorable when compared to the MRO providers in Sri Lanka.
About Indigo
India is one of the fastest growing aviation industries in the world. Because of the
introduction of liberalization policy in the Indian aviation sector, the industry has witnessed
difference with the entry of the privately owned full service airlines and low cost carriers. In
2006, the private carriers accounted for around 75% share of the domestic aviation market.
Besides, there was significant increase in the number of domestic air travel passengers. Some of
the factors that have resulted in higher demand for air transport in Indian clued the growing
purchasing power of middle class, low airfares offered by low cost carriers and the growth of the
tourism industry in India. In addition to the liberalization policy, the deregulation policy has also
played a major role to encourage private players in the aviation industry. Below graph shows the
gradual growth in the domestic air traffic: The growth in the aviation industry looked promising
and hence attracted many low cost carriers like Spice Jet, Go Air and IndiGo after the success of
Air Deccan in 2003
On one hand, the booming opportunities encouraged players to expand capacity but on
the other hand, rising fuel costs and taxation rates increased the operational costs. Thus the lowcost players found it difficult to maintain their commitment. In their urge to survive, they were
compelled to increase prices, add free refreshments and beverages on-board, etc. Some players
sought refuge in mergers, whereas some survived by modifying their business model. However,
amidst this aviation turmoil, IndiGo continued to fly high. In its endeavor to consistently
maintain low costs, IndiGo resorted to measures like outsourcing and having homogeneous fleet.
These efforts helped IndiGo to offer its passengers low air fares.
The IndiGo team uses all of these resources to design processes and rules that are safe
and simple, that make sense, and that cut waste and hassles, which in turn ensures a uniquely
smooth, seamless, precise, gimmick-free customer experience at fares that are
always affordable. It was awarded the title of Best Domestic Low Cost Carrier in India for 2008. The
airline currently operates 681 flights a day with a fleet of 102 planes and flies to 40 destinations
including 5 international. It has a market share of 36.5% as of September 2015.
Below are the key factors of the business model of IndiGo airlines:

A single passenger class.

Single type of airplane to reduce training and service cost.
No frills such as free food/drinks, lounges.
Emphasis on direct sale of ticket through Internet to avoid fee and commissions paid to

travel agents.
Employees working in multiple roles.
Unbundling of ancillary charges to make the headline fare lower.

A Study Of The Competitive Strategy Adopted By Indigo Airlines

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 in the
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.

About the Company

Parent Company

InterGlobe Enterprises

Category

Indian domestic sector

Sector

Airlines

Tagline/ Slogan

Go IndiGo

USP

On Time Performance, Lowest Price

Segment

Cost Conscious Passengers

Target Group

Lower Middle Class / Middle Class

Positioning

Low Cost No Frills

Go Air

Competitors

Spicejet
JetKonnect (low cost brand of Jet Airways)
Air Asia

Industry Analysis

A Study Of The Competitive Strategy Adopted By Indigo Airlines

About the Industry

India currently ranks 9th in the aviation market in the world with a size of around US$ 16 bn.
Looking at the future, India aviation industry promises a huge growth potential because of
growing middle class population, rapid economic growth, higher disposable incomes, rising
aspirations of the middle class and overall low penetration levels. The Civil Aviation industry in
is gaining growth which is driven by factors such as low cost carriers, modern airports, foreign
direct investments in domestic airlines, cutting edge information technology interventions and
growing emphasis on regional connectivity. Total passengers carried in September 2015
increased 13.24 per cent year-on-year to 8.73 mn from 7.71 mn in September 2014. International
and domestic passenger traffic grew 6.6 per cent and 15.5 per cent in September 2015.

Some major initiatives undertaken by the government are:

The Airports Authority of India (AAI) plans to revive and operationalise around 50
airports in India over the next 10 years to improve regional and remote air connectivity.
The Government of India, in its draft civil aviation policy released for inputs from
stakeholders, has proposed raising Foreign Direct Investment (FDI) limit in domestic
airlines from the current 49 per cent to over 50 per cent, along with other reforms such as
tax incentives for airlines, incentives for travellers to fly to small towns at affordable
rates.

Make In India
Growth drivers

Five international airports (Delhi, Mumbai, Cochin, Hyderabad, and Bengaluru) have
been completed successfully under Public Private Partnership (PPP) mode.
The Greenfield airport of Navi Mumbai, Mopa of Goa and some brownfield airports of
Airports Authority of India (AAI) and 50 airports have to be developed at low costs.
Focus on the development of the infrastructure; increasing liberalisation Open Sky
Policy; AAI driving modernisation of airports, Air and Navigation Systems.
Growth in aviation accentuating demand for MRO (maintenance, repair and overhaul)
facilities giving rise to employment opportunities.
By 2030 India plans to increase operational airports to 250.

FDI Policy
Foreign Direct Investment (FDI) of 100 % is permitted for Greenfield airport projects
under the automatic route.
Up to 100% FDI is permitted in helicopter services and seaplanes under the automatic
route.
Up to 74% FDI permitted for existing airport projects under the automatic route.

A Study Of The Competitive Strategy Adopted By Indigo Airlines

Investment Opportunities
The number of things to be added in the next 5 years: 300 business jets, 300 small
aircraft and 250 helicopters.
The development of new airports the AAI aims to bring around 250 airports under
operation across the country by 2020.
AAI has plans to spend $1.3 bn from 2013-2017 in order to develop the airports and for
its modernization.
PEST Analysis
Political Factors
100 % FDI investments for Greenfield projects
100 % tax exemption for the airports projects for a period of 10 years
Slow initiatives taken by the government in the development
Indigo Airlines has benefited the most till date.
Economic Factors
The growing middle class population and their incomes
GDP growth in the Indian economy slowed down which has forced the airlines to cut
down on their costs so as to avoid wastage of capacity
Constantly fluctuating oil prices demand a greater operational efficiency from the
airlines.
Depreciating value of rupee adds costs to lease rentals, salaries, and sales commissions
when compared to the US economy.
Working capital requirement is high but Indigo is having a good financial condition
compared to the competitions
Social factors
The constantly changing incomes for population makes it difficult to recognize the needs
of each group which changes according to their salaries.
The quality and type of food had to be chosen carefully as different people have different
tastes and require special ingredients in their kind of food. It becomes difficult to cater to
their needs every time.
With the incomes of the people rising in Tier2 and Tier 3 cities air connectivity is in
demand for these cities with a good level frequency to as many parts of the word as
possible.
A huge amount of rise in the females travelling by airlines and hence their safety adds to
cost
Now, travelling by planes has become a status symbol for many people.
Technological factors
Growth of ecommerce and e-ticketing system in India with increase in the internet usage

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Modernization and privatization of the airports in the country

The government has taken initiatives to develop new technologies for air traffic
management.
The technological development has made it possible for the passengers to board the flight
without wasting time through reduced check-in times

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PORTER FIVE FORCES MODEL

Threat of new Entrants
New entrants has to go through a lot of government regulations and which is not possible
for everyone to surpass
The cost of entering is very high because of huge technological and other operational
investments required at initial stage
Difficult to manage timely arrivals and departures for so many passengers.
Safety issues involved with getting the right pilots and securing passenger safety.
The entry barriers is very with companies requiring minimum of 30 crores to just enter
the industry.
Bargaining power of suppliers
Any airlines in general face a duopoly of two major suppliers of aircrafts i.e. Airbus and
Boeing. It is very difficult to maintain low costs especially with airlines like Indigo.
Lack of good quality pilots makes them very powerful to choose their company
Only four suppliers of aviation fuel to airlines in India. Thus oil companies have a huge
bargaining power.
A few number of quality suppliers keeps them in commanding position with respect to
the airlines they choose to supply the parts with.
Bargaining power of buyers
Buyers in airlines industry are large in number and highly fragmented thus lowering their
power
The switching costs for the buyers is very less and hence they have a lot of power of
whom to choose to fly with.
Backward integration with the buyers is very difficult
However if any airlines offers a good price and benefits the buyers power reduces.
Threat of substitutes
Airlines have become a status symbol and people cant substitute airlines by trains.
Trans cannot act as a substitute for the planes as long distance journey from different
states is not possible.
Thus threat of substitutes is very minimal except in cases where people want to travel
within a state between cities having short distances

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Current Day Operations of Indigo Airlines

Vision
IndiGo is built for people with things to do, places to be, people to see - who don't want to waste
time, money or energy in the process. We continuously focus on keeping costs low and a high
frequency of flights while striving to fulfill our simple brand message of providing low fares,
on-time flights and a hassle-free experience to our passengers.
Resources
Indigo, as of 01st March 2016, has a fleet size of 102 aircrafts with average age of aircraft being
3.26 years. It operates only one type of aircraft: Airbus A320-200s with a standard seating
capacity of 180 passengers. It serves 35 cities within India and 5 cities internationally (Bangkok,
Dubai, Kathmandu, Muscat and Singapore) with 719 daily flights.
Market share

Indigo occupied 38% of the market share in the domestic aviation sector in 2014-15.
There has been a marginal 100 bps increase in market share in H1 2015-16 to 39%. This increase
in market share has been resulted due to capacity addition and route expansion over a period of
time.

International market share has considerably declined to 5% in 2014-15 from 7% in 201314. It remained stable in H1 2015-16 with respect to 2014-15.
Share in the domestic market and international market (based on RPKM- Revenue Passenger
Km)

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Note: Indigo started its international operations from September 2011. International market
share represents share of international traffic carried by Indian airliners, originating from and
terminating in India. It has been calculated based on international pax- km performed by Indigo
divided by international pax- km performed by all Indian airliners. Source: Indigo RHP
Segmental market share by passenger traffic for top 10 routes in each segment

Note: Top 10 routes by traffic for the above three categories are calculated on the basis of twoway, non-stop, origin-destination traffic for FY2015; Air India includes Alliance Air and Air
India Express, Jet Airways includes JetLite, Others include Air Costa, AirAsia India and Vistara.
Source: Indigo RHP
Operational Performance
Indigos domestic passenger traffic (which form a major portion of overall passenger traffic)
grew by 31% y-o-y to 23.7 mn in 2014-15. The PLF (Passenger Load factor) increased by 310
bps to 79.4% as RPKM (Revenue Passenger Km) growth outpaced capacity (ASKM-Available
Seat Km) growth - 27% increase in RPKMs and 22% growth in ASKMs. However, international
passenger traffic declined by 3% to1.45 mn in FY 2014-15. International PLF marginally
increased by 140 bps to 82.4% in 2014-15.
In H1 2015-16, domestic passenger traffic grew 40% y-o-y. PLF increased sharply by 680 bps to
83% as RPKM grew by 35% while ASKM rose by 24% during the same period. International
passenger traffic grew by 15% in H1 FY16 from H1 FY15. In the same period, PLFs however
declined by 200 bps to 83%.

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Operational snapshot

Source: Directorate General Civil Aviation, CRISIL Research

Services: 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
program. No in-flight entertainment is available, but the airline provides an in-flight
catalogue Hello 6E which gives information about various duty-free products which can be
bought on board.
IndiGo offers premium services, where the passengers, at a higher fare, can avail additional
benefits like a pre-assigned seat and meals on board. It also offers a service called IndiGo
Corporate Programme for corporate travelers. IndiGo offers a boarding ramp for people in a
wheelchair for boarding the plane.

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Value chain of Indigo

Figure: Value chain of Indigo

Internal Environment Analysis and sources of competitive advantage
The key constituents of Internal Environment are Resources, Capabilities and Core
Competencies. The resources may be either tangible or intangible. Competitive advantage of a
company describes the attributes that allow it to outperform its competitors. We will try to
analyze how Indigo is trying to leverage its resources efficiently to gain competitive advantage.
The following are the Tangible resources of Indigo
Aircrafts:
Indigo, as of 01st March 2016, has a fleet size of 102 aircrafts with average age of aircraft being
3.26 Years. It operates only one type of aircraft: Airbus A320-200s with a standard seating
capacity of 180 Passengers. It serves 35 cities within India and 5 cities internationally (Bangkok,
Dubai, Kathmandu, Muscat and Singapore) with 719 daily flights.
Indigos entire fleet consists of A320-214 aircraft fitted with V2500-A5 type engines. Flexibility
in scheduling, training costs virtually nil (due to the same type of aircraft used in the fleet of
IndiGo. This makes the drivers exceptionally efficient at piloting their aircraft.
Average aircraft age has fallen to 3.26 due to inclusion of new aircrafts). A younger fleet means
less maintenance costs. Once the aircraft begin to show signs of wear and tear, they are promptly
taken off service which usually occurs at the end of 5 years and the process to send them back
home begins, keeping maintenance costs significantly low. Indigo plans to maintain a lower fleet

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age as all its aircraft by leasing 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.)
Human Resources
1. The human resources for indigo consist of the pilots, cabin crew members and ground staff.
2. No airline can recruit a trainee pilot and directly assign him to fly an airplane carrying around
500 passengers. The labor-force has to be trained and then assigned with tasks to perform after
proper evaluation.
The pay structure of the employees at IndiGo is as follows:
Experienced commanders
Experienced first officers
New Pilots
Cabin crew
Engineering

3-4 lacs pm
2-2.5 lacs pm
1 lac pm
35-50k pm
75-80k pm

Besides the pilots are rewarded for on time arrivals and fuel savings.
Fuel
Aircraft Turbine Fuel is the complementary product for airplane and it constitutes approximately
45% of the production costs.
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 which claims 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. IndiGo has integrated fuel saving practices in its daily
processes. Their Standard Operating Procedure demands flights to fly with minimum required
fuel. In addition, holding fuel and contingency fuel are kept on bare minimums to avoid the
extra load and costs.

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Intangible resources
Brand Equity/Reputation
IndiGo is the most reputed low cost carrier due to the following reasons:
1. On time arrivals is the key differentiating factor for IndiGo which sets it apart from its
competitors.
2. IndiGo keeps implementing new and innovative ideas to increase the quality of customer
service. One good example is the roving check-in counters Indigo uses to help passengers with
only cabin baggage to check-in with an IndiGo official with a handheld device, rather than lining
up at the check-in counter. This improves customer experience.
3. It gives the customers the freedom to carry their own eatables and snacks on board.
4. Compared to the direct competitors, that is, the other low cost carriers like SpiceJet,
Jetlite, etc. IndiGo offers the lowest airfare.
Social Capital:
1. IndiGo has amicable relationship with the other organizations that contribute to the value
addition for the service provided to the customers.
2. 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.
3. Collaboration with hotels: Mumbai-based hotel chain operator Sarovar Hotels and IndiGo
Airlines announced a marketing tie-up for frequent travelers. The highlights are:
a. The arrangement will allow guests staying at select Sarovar Hotels across 26 destinations 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 room tariff, 10 per cent
discount on holiday stay packages and 10 per cent discount on restaurant dining at select Sarovar
properties 8.
Hence IndiGo has a remarkable Social Capital.
Brand Awareness:
IndiGo is a well-known Low Cost Carrier in India. The following points contribute to the brand
awareness of IndiGo:
1. Advertising using print media like newspapers, billboards, etc.
2. It may not pay for an advertisement in a newspaper, but has been covered in news for its low
cost strategy implementation.

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3. As IndiGo provides better value added services to the customers, Word of Mouth, promotion
also works in its favor.
Employee Relationship:
Good Employee Relationship is a key factor to sustain competitive advantage. IndiGo provides
several incentives to its employees. IndiGo has been seeing a healthy growth in passenger
numbers and it is optimistic about its long term growth. Also, it is planning to expand its
employee strength and at the same time there is no indication of downsizing the current staff. At
a time when several domestic airlines are looking to prune their staff strength, the Delhi-based
low cost airline, IndiGo, has been 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.
Sources of Competitive advantage
Low fare flights
Indigo won for the 3rd consecutive time 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 and Single model of aircraft

IndiGo has stuck with its policy of offering one class of no-frills service on a single type
of plane. Indigo has chosen to stick to the world's best-selling single-aisle aircraft, the
Airbus A320
Operating on secondary airports
E-ticketing: to avoid fee and commission paid to travel agents
Fewer employees per aircraft and more seats per aircraft
IndiGo airline employs far fewer people than any other airlines with one of the industry's
leanest work forces.
Hub and spoke model for flights
Reduction on fuel burning due to A-320 aircrafts

Operationally it would be impossible to make a profit at the very low fares they were offering
through the first four years of operations, where ticket prices on Indigo were roughly 40 percent
of cost of operation.

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Even before starting operations in 2006, Indigo had placed a firm order for 100 Airbus A320
aircraft in June 2005, which gave it a pricing advantage. The airline then acquired parking lots in
Delhi and Mumbai, and by the time the first Indigo flight was announced, it had already
scheduled the first 20 aircraft.
Also it focused on inorganic expansion by adding a plane every six weeks.
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. The
moment the flight lands an automatic message is triggered from aircraft to control center. Hence,
the on-time performance is diligently monitored for every flight in real time.
Low turnaround time
Turnaround time is the time taken for a plane to be ready for the next flight between landing and
takeoff. IndiGo boasts of a turnaround time of less than 30 minutes. Less time on the ground
means more time in the air which also reduces fuel burning. IndiGo's aircraft spend more than 11
hours a day in the sky, compared to the industry average of eight or 10 hours.

Using technology smartly

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
center. Hence, the on-time performance is diligently monitored for every flight in real time.
IndiGo has features such as queue busters at most airports, where if you are carrying only cabin
luggage, you need not stand in a check-in queue and these queue busters would print boarding
cards from hand-held machines quickly.

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Routes:
Indigo operates over a lesser number of destinations than its competitors but with a higher
frequency not comparing Jet's fleet size as it operates more than double flights per day compared
to Indigo.

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 up 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.

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VRIO Framework
VRIO is the acronym from the first letters of the dimensions - value, rareness, imitability, and
organization. So, the first question that has to be answered is whether a resource is valuable. It is
considered valuable if it can increase market share, achieve cost advantages, or both. Otherwise,
it is not a source of competitive advantage. Once a resource is deemed valuable, the next
question is whether it is rare or that it is not available to all competitors. If it is valuable but not
rare, meaning competitors possess the same resources, the organization has no inherent
advantage in this resource. The resource must also be difficult or costly for competitors to imitate
or acquire. This dimension is called imitability, which can result in a sustained competitive
advantage only if the organization can take advantage of it. Organization is where the resource is
supported by any provisions in the company and that it can be used properly. Otherwise, the
resource or capability is of little use. Thus, a resource that is valuable, rare, costly to imitate, and
the company is organized to capture its value can be a source of sustainable competitive
advantage for an organization.
Resources &
Competencies

Value

Rarity

Imitability

Organization

Low Fares

Yes

Yes

No

Yes

Single type of
Aircraft

Yes

Yes

Yes

Yes

Turnaround
Time

Yes

No

Yes

Yes

Brand Name

Yes

Yes

Yes

Yes

Value
IndiGo is offering the lowest fares to its customers. The way they do it is through having a single
type of Aircraft which reduce the overall maintenance cost of the Aircraft, since there is only one
kind of Aircraft. It also does Fuel Hedging which reduces the overall cost of fuel.

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Rarity
IndiGo has the highest market share in the Airline industry and it owes everything to the low fare
tickets it offers to the customers. The low average fleet age, single type of aircraft and the policy
of on time every time is a rarity in the Indian Airline Industry.

Imitability
Even though IndiGo has create much value in the market and amongst its customers, but many of
its strategies like less turnaround time and using single type of Aircraft are imitable and hence, in
long run are not sustainable.

Organization
In the last few years, IndiGo has become the brand name in the Indian Airline Industry. It has
hardly been ten years since its inception and it has created a brand value through unique value
proposition.

The Competitive Advantage

IndiGo has implemented low cost strategy to gain competitive advantage in the Indian Aviation
Industry. It has been able to achieve its break even within two years of its launch. Despite being a
new entrant, it managed to become a cost leader in its sector. IndiGo team uses all of these
resources to design processes and rules that are safe and simple, that make sense, and that cut
waste and hassles, which in turn ensures a uniquely smooth, seamless, precise, gimmick-free
customer experience at fares that are always affordable.

However, apart from following a cost leadership strategy, Indigo has also taken steps to
differentiate itself in the highly competitive aviation industry. Indigo has successfully turned
regular business travelers into loyal customers because it never acted like a budget airline. From
the beginning, its purchase of all new aircraft helped it avoid maintenance problems, and
superior planning helped it to match or exceed the on-time performance record of its full-service
competitors. Also even rapid turnaround of its planes is the key differentiating factor and is one
of the major reasons behind the company making money
In a country where other carriers shared passenger-stair vehicles and the top airline still had to
have disabled passengers carried up the staircase to plane height by ground crew, for instance,
Indigo brought in larger, handicapped accessible passenger ramps from day one.
Similarly, the company equipped check-in staff with hand-held scanners that allowed passengers
without baggage to avoid the dreaded scrum at the counter. And at least in the beginning, flight
attendants manning the beverage carts addressed even lowly economy class passengers by name
with the aid of the seating chart.

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These factors point towards a slight blend of differentiation competitive advantage being sought
by the airline within the broad competitive advantage of being a cost leader.

SWOT Analysis for Indigo

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 market
Strengths
1. IndiGo has high brand awareness and brand
equity.
2. Cost leadership: Successful implementation
of low cost strategy.
3. Highly efficient management that ensures
high rate of on-time arrivals.
4. Continuous innovation to improve on nonprice factors.
5. Tie-up with hotels.
6. Ease of ticket booking for customers.
Opportunities
1. Untapped Freight market
2. Increase in domestic air
traffic
3. Uncharted International market
4. Chartered flight services
5. Promotion of regional air
connectivity
6. Development of airport
infrastructure

Weaknesses
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.
4. Not present in International market

Threats
1. Rising ATF prices
2. Increasing competition
3. Economic slowdown
4. Poaching
5. Government interference
6. Scarcity of trained pilot

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Future strategy for Indigo airlines

IndiGo Airlines has been changing the game for all other domestic airlines operating in India
with the new orders of 250 Airbus 320 Neos in 2015. This mega order not just only shows its
firm confidence in its Indian growth story but also in its ability to keep itself ahead of the other
carriers. They are least bothered about its low cost completion or being the legacy carriers.
Indigo is simply following the steps of the big players of aviation industries like Etihad Airways
and its Gulf cousins - airlines which are taking the completion within the industry to the doorstep
of powerful American and European carriers by extensive fleet aggressive wowing of global
traveler. It can be seen that rapid fleet expansion is the main key to this aggression and
bombarding the Indian market with the capacity is a game IndiGo has adopted a long ago.
It already accounts 40 percent of domestic market in terms of passenger and a market leader by a
well and comfortable margin with its fleets of 97 operational aircrafts. But the most interesting
fact is that it achieved the feat with just one-fourth of its total aircraft and has cornered out more
than a third of all domestic passengers.
Let us now consider the vital points that actually helped IndiGo in being the market leader and
will help it maintaining its position:

IndiGo has an average fleet age of four years and it is making sure that it continues at
least till 2032. It was a preplanned strategy that was made about 10 years back. It had placed a
bulk order of 530 aircrafts which it will be receiving in 2026. This includes 100 Airbus A-320 in
2005, 180 A-320 Neos in 2011 and 250 A-320 Neos in 2015. It can be noticed that the bulk
orders helped negotiating at lower rates. A strategy for cost cutting.

Currently at peak, IndiGo has 330 planes, but once all the planes are delivered it will be
having a fleet of 530 planes and this is due to the buy, sell and lease back strategy. The older
planes will be sold to lessors at market price and the planes are again leased back for the next 6
years, which means for the first six years IndiGo receives a plane every month.

Every month a plane goes out of the IndiGos fleet a new planes joins, reducing the
average fleet age which also reduces the average cost of maintenance. The Neos help IndiGo in
saving 10-15% of overall fuel cost and as we know that that he fuel costs more than 50% of the
carriers cost.

Due to the six years lease back plan, one-third of IndiGos fleet would be Neos within the
next two-and-half years. This will have a strong positive impact of about 7% on the companys
bottom line. As the IndoGo officials say, other airlines can copy their food, advertising and other
things but they cannot replicate the fleet IndiGo has.

Along with its current order of planes, IndiGo is planning to increase its presence in the
number of cities it flies to, increasing the number by two or three every year. It has planned to be
established in 56 cities compared to 33 now. It neither does have any plans on regional flying nor
buying smaller planes. And nobody currently has been able to implement a two model strategy.
We can see that such strategy which mainly focuses on the future planning and growth is really
helping IndiGo get an extra edge over its competitors.

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References
http://www.india-aviation.in/pages/view/38/an_overview.html

http://www.ibef.org/industry/indian-aviation.aspx

http://www.makeinindia.com/sector/aviation

https://www.quora.com/Airlines-in-India/How-is-Indigo-different-from-other-airlines-and-howhas-it-been-able-to-churn-profits