CASE STUDY ON THE SUCCESSFUL JOURNEY OF INDIGO AIRLINES

Varun Kesavan, M.Phil. Research Scholar, Bharathiar University,

Coimbatore.

E - Mail Id: varunkesavan@yahoo.com

OVERVIEW OF INDIAN AVIATION SECTOR

India is the 9th largest aviation market in the world with a size of around US$
16 billion and is poised to be the 3rd biggest by 2020. India aviation industry
promises huge growth potential due to large and growing middle class
population, rapid economic growth, higher disposable incomes, rising

aspirations of the middle class and overall low penetration levels.

Civil aviation industry in India is experiencing a new era of expansion 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. Civil aviation
sector has been growing steadily registering a growth of 13.8% during the last
10 years. The air transport in India has attracted FDI of over US$ 569 million

from April 2000 to February 2015.

The Indian airports have a combined capacity to cater to 220.04 million

passengers and 4.63 million tonnes cargo per annum and handled 168.92
million passengers and 2.28 million tonnes cargo in 2013-14. As per estimates,
passenger traffic at Indian Airports is expected to increase to 450 million by
2020 from 159.3 million in 2012-2013. Looking at future air transportation

requirements and desire to become a global player in developing

1
commercializing aerospace technologies, India is rapidly building capabilities
to emerge as a preferred destination for manufacturing of aerospace

components.

Over the next decades, India undoubtedly has the potential to become a
significant part of the global aerospace supply chain as India offers cost
advantages of between 15 to 25 per cent in manufacturing, together with its
large procurement appetite. Robust technical and engineering capabilities
backed by top-notch scientific and technical institutes are other positive

offerings on the table.

MARKET OPPORTUNITIES

+ An investment of over US$ 12 billion required during the Twelfth Five Year Plan

« Airlines are expected to operate about 1000 aircraft's by 2020, up from the
present 450

* Investment to the tune of US $4 billion required for General Aviation aircraft's

by 2017

« Air Navigation Services entails investment worth US$ 7 billion in Twelfth Five
Year Plan

* FDI up to 49% allowed in domestic airlines by the foreign carriers

« Foreign equity up to 100% allowed in airport development

+ Domestic and international passenger traffic expected to grow at annual average

rate of
12% and 8% in next five years

« Annual average rate of growth of domestic and international cargo estimated to be

12%
and 10% during next five years

« MRO industry to triple in size from INR 2250 crore in 2010 to INR 7000 crore by
2020

* Around 3,50,000 new employees are essential to facilitate growth in the next
decade
OVERVIEW OF INDIGO AIRLINES

IndiGo is a low-cost airline headquartered at Gurgaon, Haryana, India. RR is the

largest airline in India in terms of passengers carried, with a 42.6% market share
as
of October 2016. The airline operates to 41 destinations and is the second largest
low-cost carrier in Asia. It has its primary hub at Indira Gandhi International
Airport,
Delhi.

The airline was founded as a private company, by Rahul Bhatia of InterGlobe

Enterprises; and Rakesh Gangwal, a United States-based expatriate Indian; in 2006.
It took delivery of its first aircraft in July 2006 and commenced operations a
month
later. The airline became the largest Indian carrier in terms of passenger market

share in 2012. The company went public in November 2015.

Facts and Figures

» 8 consecutive years of profitable operations

» Market share of 42.1% as of November, 2016

» Fleet of 126 aircraft including 14 new generation A320neos

» "Great Place to Work for in India” 8 years in a row

History

IndiGo was founded in 2006 as a private company by Rahul Bhatia of InterGlobe

Enterprises and Rakesh Gangwal, a United States-based NRI InterGlobe had a
51.12% stake in IndiGo and 47.88% was 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 aircraft on 28 July 2006, nearly one year after placing the order.
It
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 and nine more
aircraft
were acquired in 2007.(8] In December 2010, IndiGo replaced state-run carrier Air
India as the third largest airline in India, behind Kingfisher Airlines and Jet
Airways

with a passenger market share of 17.3%.

In 2011, IndiGo placed an order for 180 Airbus A320 aircraft in a deal worth US$15
billion. In January 2011, after completing five years of operations, the airline
got
permission to launch international flights. The airline launched international
services
in September 2011.[12] In December 2011, the DGCA expressed reservations that

the rapid expansion could impact passenger safety.

In February 2012, IndiGo took delivery of its 50th aircraft, less than six years
after it
began operations in 2006. For the quarter ending March 2012, IndiGo was the most
profitable airline in India and became the second largest airline in India in terms
of
passenger market share.[15] On 17 August 2012, IndiGo became the largest airline
in India in terms of market share surpassing Jet Airways, six years after
commencing

operations.

In January 2013, IndiGo was the second fastest growing low-cost carrier in Asia
behind Indonesian airline Lion Air[17] In February 2013, following the
announcement of civil aviation ministry that it would be allow IndiGo to take
delivery
of only five aircraft that year, the airline planned to introduce low-cost regional
flights
by setting up a subsidiary. Later, IndiGo announced that it plans to seek
permission
from the ministry to acquire four more aircraft, therefore taking delivery of nine
aircraft in 2013. As of March 2014, IndiGo is the second largest low-cost carrier
in

Asia in terms of seats flown.

In August 2015, IndiGo placed an order of 250 Airbus A320neo aircraft worth $27
billion, making it the largest single order ever in Airbus history. IndiGo
announced a
Rs. 3,200 crore (US$480 million) initial public offering on 19 October 2015 which
opened on 27 October 2015. As of October 2016, it is the largest airline in India
in

terms of passengers camied with a 42.6% market share.

Corporate affairs and identity

IndiGo is headquartered in Gurgaon, India.

Logo and livery

Twenty dots arranged in the shape of an aircraft serves as the logo of the
airine.1?®l The airline uses a two tone blue livery on a white background with the
belly
of the aircraft painted in Indigo with the logo in white.!2!l The flight attendants
wear a
single-piece navy-blue tunic with a cap and a thin indigo belt designed by fashion
designer Rajesh Pratap Singh and make-up artist Ambika Pillai.?5! The airline has

the tagline on-time focusing on punctuality.

Operations

IndiGo became one of the fastest growing low cost carriers in the world and was the
largest profitable airline in India. The success of IndiGo has been atiributed to
its
unique business model which reduces costs. The airline operates a single type of
aircraft (Airbus A320) in similar seating configuration which simplifies crew
training
and maintenance. The airline strikes bulk deals with Airbus reducing unit costs.
The
airine targets a quick turn-around time of 20 minutes to get the aircraft ready for
the
next flight, ensuring planes fly about 12 hours every day. Employees share multiple

roles with a check-in staff doubling as a baggage handler.

Destinations
IndiGo destinations

As of March 2016, IndiGo operates 818 daily flights to 41 destinations, 36 in India

and 5 abroad. ts main base is located at Delhi,[30] with additional bases at
Bangalore [31] Bhubaneswar,(32] Chennai [33] Hyderabad, [34] Kolkata [33]
Mumbai[33) and Nagpur.[35) In January 2011, IndiGo received a license to operate
international flights after completing five years of operations.[36] IndiGo's first
international service was launched between New Delhi and Dubai on 1 September
2011.[12] International services were later expanded to serve Bangkok, Singapore,
Muscat and Kathmandu.[12] The airline is considering launch of flights to Kunming,

China.[37]

Fleet developments

IndiGo placed an order for 100 Airbus A320-200 aircraft worth US$6 billion in June
2005 during the Paris Air Show with plans to commence operations in mid-2006. The
airine received its first A320 in July 2006 and planned to induct 100 aircraft by
2015-2016. IndiGo signed a memorandum of understanding for an additional 180
Airbus A320 aircraft including 150 with the New Engine Option (NEO) worth US$15
billion on 11 January 2011. In 2012, the airline took delivery of its 50th aircraft
and
the 100th aircraft was delivered on 4 November 2014, completing its initial order
ahead of schedule. The Airbus A320neo family aircraft ordered in 2011 were to be
delivered starting 2015. However, due to a delay in the production and delivery of
these aircraft, IndiGo dry-leased a total of 22 used aircraft to cope with the

demand. On 15 October 2014, IndiGo expressed its intention to order a further 250
A320neo aircraft worth US$25.7 billion at list prices. On 15 August 2015, IndiGo
confirmed the order for 250 A320neo aircraft for $26.5 billion. The order also
provides IndiGo the flexibility to convert some A320neos to A321neos that can seat
more passengers and fly on longer routes, The order of 250 jets was Airbus’ single

largest order by number of aircraft. Indigo received the first A320neo in March
2016

Services

Being a low-cost carrier, IndiGo offers only economy class seating accommodating
180 passengers per aircraft. To keep fares low, IndiGo does not provide
complimentary meals in any of its flights, though it does have a buy-on board in-
flight
meal programme. No in-flight entertainment is available and Hello 6E is the in-
flight
magazine published by IndiGo. IndiGo offers premium services, where the
passengers can avail additional benefits like a pre-assigned seat, multiple
cancellations and priority check-in at a higher fare. Indigo also has a In-Flight
Shop

in which you can buy models and other daily use items.

Awards and achievements

IndiGo has won the following awards:

« Best low-cost carrier by the Airline Passengers Association of India (2007)

« Best low-cost carrier at the Galileo Express Travel Awards (2008)

« Best low cost airline by CNBC Awaaz (2009, 2013)

+ Best low-cost carrier in C Asial India by SKYTRAX (2012, 2013, 2014, 2015, 2016)

« Best LCC Aviation award for excellence by Centre for Asia Pacific Aviation (2015)
Strategies Adopted By Indigo Airlines

IndiGo has become the new market leader with its slow and steady approach within
just
eleven years of launch. IndiGo focused on what they thought would matter to its
flyers -It
communicated to the flyer his basic need of getting from point A to point B on
time.

Here are the major reasons why the airline has managed lo scale to the top, despite
being

the youngest airline in India.

Indigo's stuck to its low-cost, single class model

While Kingfisher and once market-leading Jet Airways bought rivals, flew multiple
plane models and struggled to mix full-service and low-fare options, IndiGo 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.

Selling and leasing back planes helps its balance sheet

Secondly, it maintains a young fleet by selling and leasing back its planes. IndiGo
uses six-year sale and leaseback agreements, so the airline is constantly replacing
its aircraft. This prevents the need for overall checks and major repairs, which
means
IndiGo understands how to work the margins. 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.
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.

ality and detail key to good service

IndiGo's executives, including staff at the check-in counters, air crew and sales
and
marketing staff are hired only after Bhatia meets each of them individually.
Besides,
the airline also employs far fewer people, with one of the industry's leanest work
forces. The airline also broke industry standards with simple things like tumaround
time. This 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.

Concentrated customer focus

IndiGo's success model largely relies on consistent low fares, regular on-time
performance and minimal flight cancellations. However, the airline's biggest edge
over others is its focus on customer focus. IndiGo only emphasises on-time
performance. Indigo has continuously built around this image through its tongue-in-

cheek advertisements on television and print media.

10
Usi mart Technolo

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.