Indigo: What it got right that other's didn’t?

Published by MBA Skool Team, Published on June 26, 2011

Richard Branson, the aviation entrepreneur once joked that "The easiest way to become a millionaire is to start off as a billionaire and then enter the aviation business". The statement sums up the difficulty in surviving the aviation industry. However there are a few examples which have delivered even in these conditions. Some of the names which come to our mind are the Southwest Airlines, Emirates, and Singapore Airlines. But we would like to concentrate on Indian Market which has caught the imagination of quite a few players. In India one airline which, despite being a low cost carrier, comes to the mind is Indigo.




Indigo Airlines

So we try to answer using Indigo as an example on what it got right in this market that others didn't. Let's try to figure out what is the fascination to enter the aviation Market. It could be purely commercial to something which is glamorous. Most of them end up losing money and back home we see most of the airlines are bleeding and their balance sheets are in deep red. In this scenario Indigo has delivered excellent results and stands out in the aviation Market.

Indigo's success can be attributed to certain things which has done differently as compared to others

1. Sale - leaseback Program: This was the first in the Indian aviation industry. As the name suggests it refers to buying an aeroplane from the manufacturer and selling it to a leasing company. This ensures that the company's balance sheet remains relatively debt free. This has helped the company to have relatively young fleet at any point if time as they have the option of not renewing the lease of older planes. This ensures safety and builds the confidence of the passengers in the airline.


2. On time performance: It has one of the best on-time performance which it strives to maintain even in the face of poor infrastructure. This actually helps to build a positive image in the minds of the passenger.


3. High Passenger load factor: The focus is purely on offering the cheapest and affordable fares. This has ensured the airline to have high passenger load factor. One could argue that Air Deccan was offering cheaper fares. Yes they were but it was irrational pricing which could not be sustained. They are very transparent in their pricing and this was what is helping them to fill up their planes and people flocking to Indigo than to others.


4. Low Cancellation: According to the DGCA data, Indigo has 0% cancellation of flights. This is the best in the industry where every player complains of poor airport management and infrastructure. They have showed to the entire industry how to run an efficient airline and could be a role model to others.


5. Lean Workforce: It has one of the leanest workforce amongst the airline companies. They operate a fleet of 40 planes with just 4000 people which translates into a ratio of 1:100 which is better than the worldwide industry average of 1:125. Obviously this helps in saving costs and ultimately drives up their profits. Also their top management is less heavy and hence the decisions could be taken faster and better.


All these has ensured that Indigo is the leading airline operator in the country. Now they have entered the international Market trying to repeat the same success. But the competition is much fiercer with entrenched competition with deep pockets. They need to innovate and create space in the consumer mind so that they can succeed. They have an excellent product and don't see why they should not replicate the same globally. However only time will tell whether it can be a truly IndiGlobal airline.


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