STMT Case Analysis - Indigo Airlines

Submitted by:- AK2
Arshdeep
Dhyan
Nivedita
Pulkit
Sowmya

Background
• Founded in August 2006 as a Joint Venture between
Inter-globe and Rakesh Gangwal
• Low cost carrier(LCC)
• Largest(33.6%) and fastest growing airline in India
• Fleet of 88 Airbus aircrafts
• Single class configuration aircraft

• Value Proposition:- Affordable fares, on-time performance and hassle-free travel experience
• One type of airplane - brand-new Airbus A320s
• One type of fare – low
• One type of customer service – professional
• One way to deal with delays and cancellations - honestly

LCC v/s FSA
• Generally has lower fares and fewer comforts.
• Lower operating cost structure
• Single type aircrafts and old model aircrafts
• Mostly operate in small and less congested secondary airports- not in India
• Do not provide any in-flight entertainment
• Passengers do not get refund or transfer to later flight if he/she misses the flight
• Tend to operate short-haul flights
• Employees work multiple roles

Question 2:
Indigo is the late entrant to the Indian civil aviation industry, which historically has suffered great losses initially. However, Indigo itself became the most profitable airline in the industry very quickly. Explain.

Strategies
• Never owned the aircraft. First purchased and then sold them to an intermediary who leased them the aircraft on a contractual basis.
• Single configuration aircraft reduced training and maintenance costs.
• Fuel efficient Airbus- 3% fuel savings over Boeing. Fuel cost 40% of the cost of running an airline.
• Contract having guaranteed maintenance clause with Airbus means lower ground handling time.
• Growth and Expansion:- Started with one aircraft and then added one more every six weeks. Tested one market, established foothold, then expanded to other markets.
• Required Navigation Performance(RNP)- safer and more fuel-efficient landing system; saved approx. 106 gallons of fuel per landing.
• Cost savings by not carrying much cutlery and heating equipment

Strategies
• Hub and Spoke model- serve more markets with lesser fleet
• Focused on parameters which were of prime importance to customers- on-time arrival and departure, good connectivity, quality services
• Low marketing budget
• Enhancing customer service- separate check-in counter for customers with only hand baggage • One central training program with 3 segments: functional skills training centre, customer service and soft skills; leadership training at all levels
• Hired pilots from other airlines to save costs.
• Appropriate human resource policies, resulting in close to 0 per cent attrition
• Lesser employees per aircraft.

Question 3:
Analyse the capabilities of Indigo. Are they a key source of sustainable competitive advantage?

Competencies
• Low fares
• Highest load factor of 160-190 passengers
• Performance record of more than 90 percent
• RNP landing technology
• New fleets every three or four years due to leasing
• Hub and spoke model
• High service quality

Question 4:
Identify the weaknesses of Indigo that potential entrants (like Spicejet, GoAir, etc.) and/or existing carrier (Air India, Jet Airways) can utilize to their benefits.

Weaknesses
• No In-flight Entertainment : Recorded TV