Term paper on

STRATEGIC MANAGEMENT

Topic
STRATEGIES FOLLOWED BY LOW-
COST AIRLINE-INDIGO

Presented by:
SHALINI.E.S(09248)
RAMYA.K(09238)
RANJITH KUMAR.P(09137)
PRAThEEKA (09159)
SANTOSH RAJ(09141)
Hanusha.g(09262)

1|Page
Contents
Executive Summary...................................................................................................................................3
Objectives..................................................................................................................................................4
Scope.........................................................................................................................................................4
Limitations.................................................................................................................................................4
Introduction..............................................................................................................................................5
External Analysis.......................................................................................................................................6
PESTEL FRAMEWORK................................................................................................................................7
Porter’s Five Forces strategy for Airline Industry......................................................................................9
Internal Environment Analysis:...............................................................................................................16
Market Share of IndiGo.......................................................................................................................16
Sustainable Competitive Advantage........................................................................................................17
Sustaining differentiation- Based advantage.......................................................................................17
Tangible resources..........................................................................................................................17
Intangible resources........................................................................................................................18
Value Chain Analysis................................................................................................................................21
SWOT Analysis:........................................................................................................................................22
Feasible Alternatives...............................................................................................................................23
Conclusion...............................................................................................................................................24
Final Recommendation...........................................................................................................................24
BIBLIOGRAPHY.........................................................................................................................................25

2|Page
Executive Summary

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 Porter’s 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. Further, the analysis of government policies, competitor’s
strategies and other variables like fuel prices, increasing domestic traffic, economic downturn
etc will lead us to the external influences that affect the aviation industry of India. Hence, using
the external environment study, we can come to know about the opportunities and threats for
IndiGo airlines. Thus, the consequences and influence of the all factors of SWOT taken
together will aid in the formulation of alternative strategic actions that IndiGo may consider to
sustain its competitive advantage.

3|Page
Objectives

The objective of this report is to study the external environment of the Aviation Industry in
India. Subsequently, internal environment analysis is conducted for IndiGo Airlines. With the
help of this comprehensive study, we have suggested recommendations that can be adopted by
IndiGo to sustain its competitive advantage by utilizing its cost leadership strategy.

Scope
The study is mainly done to understand the how the Aviation industry especially IndiGo
airlines adopts different strategic management tools in order to survive in the competitive
market and to attain maximum share in the current market.

Methods
To understand the important factors responsible for the formulation of corporate strategy, we
have utilized Strategic Management tools like Porter’s Five Forces model, Value Chain
analysis, TOWS matrix etc.

Limitations
Due to confidentiality clause and corporate policies of the company, accurate financial data
could not be obtained for IndiGo Airlines. However, most recent and reliable data sources have
been referenced for the analysis of this case.

Findings
IndiGo airlines entered the low cost carrier market in aviation industry in 2006. It has been able
to achieve its break even within two years of its launch and has reported gross revenue of 60
crores this year. Despite the decline in the aviation industry and global economic slowdown,
IndiGo has accelerated its growth rate. Also, IndiGo being a new entrant has managed to
become a cost leader in its sector.

4|Page
Introduction

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 a vast 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 India include 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 SpiceJet, GoAir and IndiGo after the success of
Air Deccan in 2003. On one hand, the booming opportunities incited players to expand capacity
but on the other hand, rising fuel costs and taxation rates, increased the operational costs. Thus
the low-cost 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 a
homogeneous fleet. These efforts helped IndiGo to offer its passengers low air fares. IndiGo is
the latest entrant as a low cost carrier in the aviation industry of India. It started its operations
on August 4, 2006. InterGlobe Enterprises, a renowned travel corporation, is the owner of
IndiGo. 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 120 daily flights with a fleet of nineteen brand new Airbus A320
aircraft and flies to 17 destinations. IndiGo plans to serve approximately 30 Indian cities by
2010, with a fleet of approximately 40 A320s.

5|Page
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.

External Analysis
Airline Industry Attractiveness
1. Foreign equity allowed: Foreign equity up to 49 per cent and NRI (Non-Resident Indian)
investment up to 100 per cent is permissible in domestic airlines without any government
approval

6|Page
2. Attraction of foreign shores: After five years of domestic operations, many domestic
airlines too will be entitled to fly overseas by using unutilized bilateral entitlements to Indian
carriers.
3. Rising income levels and demographic profile: Demographically, India has the highest
percentage of people in age group of 20-50 among its 50 million strong middle class, with high
earning potential.
4. Untapped potential of India's tourism: Tourist arrivals in India are expected to grow
exponentially, especially due to the open sky policy between India and the SAARC countries
and the increase in bilateral entitlements with European countries, and US.
5. Glamour of the airlines: No industry other than film-making industry is as glamorous as the
airlines. Airline tycoons from the last century, like J. R. D. Tata and Howard Hughes, and Sir
Richard Branson and Dr. Vijay Mallya today, have been idolized.

PESTEL FRAMEWORK
This model proposes that the relevant factors should be divided into the categories of Political,
Economic, Social, Technological and Environmental. These factors are not mutually exclusive
but then the classification helps in understanding each ones influence.

POLITICAL

 Open Sky Policy and Deregulations have impact

 100 per cent FDI under automatic route is permissible for Greenfield airports
 49 per cent FDI is permissible in domestic airlines under the automatic route, but not by
foreign airline companies. 100 per cent equity ownership by Non-Resident Indians
(NRIs) is permitted
 100 per cent tax exemption for airport projects for a period of 10 years...
 Airport Infrastructure Mumbai and Delhi airports have already been privatized and are
being upgraded at an estimated investment of US$ 4 billion over 2006-16
 Over the next five years, AAI has planned a massive investment of US$ 3.07 billion—
43 per cent of which will be for the three metro airports in Kolkata, Chennai and
Trivandrum, and the rest will go into upgrading other non-metro airports and
modernizing the existing aeronautical facilities

7|Page
ECONOMIC:

 The rising income of the Indians will see a rise in the air travelers
 Consistent GDP growth of more than 8%
 Periods of economic stagnation see a significant slowing of the rate of increase in
demand

SOCIAL:

 Change in Lifestyle the changing demographics have profound effect on the marketing
strategies of the airlines
 The Indian population is going through a transition phase. The high percentage of youth
coupled with increasing job avenues certainly hints at the growing income and the
aspirations
 Significant rise in the number of the tourists in the country
 The Female business Traveler Female population has shown a higher numbers the
business scenario
 Status symbol to travel in planes

TECHNOLOGICAL

 Growth of e-commerce and e-ticketing - Internet has enabled to provide real time
information of flight schedules and availability
 Modernization and privatization of airports - The CAT technology employed in
International airports of the country has helped the pilots to take off and move in even
during the low visibility hours
 Developing Greenfield airports with private sector

ENVIRONMENTAL

 Increase in global warming

 Sudden and unexpected behavior of atmosphere and the dependency on atmosphere
 Shortage of infrastructural capacity.

8|Page
LEGAL

 FDI limits
 Bilateral strategies
 Airlines acquisitions and leasing costs

Porter’s Five Forces strategy for Airline Industry

Threat of New Entrants:

• Product differentiation:
In low cost carriers, there is not much differentiation in the basic service that is being provided
to the customers. Differentiation can only be achieved by Value Added Services. IndiGo
provides check-in kiosks, stair-free ramps, and “Q-Busters”. Hence this argument works in
favor of IndiGo.
• Switching cost:
1. The switching cost is not high. Customers can easily choose other low cost carriers.
2. The switching cost of an airline company to other business/industry is high as the exit cost is
high.
In aviation industry the major entry barriers can be:
• Government regulations:
1. The government's open sky policy has encouraged many overseas players to enter the
aviation market.
2. Aviation was primarily a government owned industry. Due to liberalization Indian aviation
industry is now dominated by privately owned full-service airlines and low-cost carriers.
Private airlines account for around 75 per cent share of the domestic aviation market.
3. Private sector is allowed to operate scheduled and non-scheduled services.
4. Operator should be a citizen of India or a company or a body corporate which is registered in
India and whose principal base of business is in India.
5. Chairman and at least two –thirds of its Directors are Indian citizens.
6. Foreign equity participation up to 49 percent and investment by Non- Resident Indians
(N.R.I), Overseas Corporate Bodies (OCBs) up to 100% is allowed. The representation of the

9|Page
foreign investing institution/entity on the Board of Directors of the company shall not exceed
one-third of the total.
7. Foreign airlines are not permitted to pick up equity. Foreign financial institutions and other
entities who seek to hold equity in the domestic air transport sector shall not have foreign
airlines as their shareholders.
8. As regards safety and security arrangements, the operators must ensure compliance with
relevant regulatory requirements stipulated respectively by the Director General of Civil
Aviation (DGCA) and the Bureau of Civil Aviation Security (BCAS).
9. For green field airports, foreign equity up to 100 percent is allowed through automatic
approvals. For upgrading present airports, foreign equity up to 74 percent is allowed through
automatic approvals and 100 percent through special permission (from FIPB).

• Setup costs:
Nowadays, venture capital of $10 million or less is enough to launch an airline.
1. In order to overcome the shortfall of aircrafts during the peak seasons, airlines can utilize an
ACMI lease agreement for the extra aircraft. If the airline has many aircrafts, either owned or
leased, then they can offer their surplus aircrafts in their low season to another airline that is
facing peak season.
2. An airline company will bear the cost of purchasing an aircraft if it wants to start or expand
its fleet, leasing allows the cost to be spread across several years. At the lease term end, the
lease can be renewed or aircraft can be returned, to be replaced with more modern aircraft.

• Fuel prices: Domestic ATF prices have increased by over 160 per cent from the beginning of
2005 till last year and by over 80 per cent from a year-ago levels. In India, oil companies do not
import ATF directly; instead they refine it from imported crude oil. With rising crude oil prices,
imports are becoming expensive day by day and at the same time, the government is unable to
pass on the full impact of this rise to the consumer. As a result, the state owned oil marketing
companies (almost 95 per cent of the market is with state owned firms) are forced to sell diesel,
petrol, kerosene and LPG at way below cost, a cost they are trying to somewhat make up by
raising the price of ATF, which is under their control. As a result prices of ATF in India are
much higher than some of the other Asian countries.

10 | P a g e
• Resource: The aviation industry in India suffers a shortfall of pilots. The reasons are:
1. The aspirants can receive Commercial Pilot License (CPL) only if they undertake a training
abroad.
2. The reason being that in India, there is a lack of dedicated flight Instructors, decade old
aircrafts and poor quality training offered at a price much higher than what is offered by flying
schools in USA, Canada and Australia.
3. Indian institutes provide training with the help of their training partners in the foreign
countries like U.S.A, U.K etc.
Private airlines hire pilots; get expatriates or retired personnel from the Air Force or PSU
airlines in senior management positions. Airlines can contract employees such as cabin crew,
ticketing and check-in staff members.
In airline sector, finding appropriate labor-force is very costly. Moreover, due to the
liberalization of policies by government, foreign and private players often poach workforce of
competitors which leads to talent-drain and thus losses.
Bargaining Power of Suppliers
 Any airlines in general face a duopoly of two major suppliers of aircrafts i.e. Airbus and
Boeing. There are other suppliers like Dauphin,Dronier,Bell,ATR-42 but do not meet
the requirements to serve the low cost commercial aircraft carriers, particularly IndiGo
airlines. Fleet Forecast for the India-Region 2006-2011 shows that there will be approx.
85% growth in the order rate of air carriers. Thus, suppliers are few and thus in better
position to bargain as they always finds customers for their aircrafts.
 IndiGo fleet comprises of Airbus-A320 and the switching cost is high due to the limited
number of suppliers.
 Due to shortage of commercial aircraft pilots in India the supply of pilots is
concentrated, hence increasing their power.
 There are only four suppliers for ATF (Aviation Turbine Fuel); IOC, Hindustan
Petroleum Corporation, Bharat Petroleum and ONGC and since their number is limited,
they possess more power.

11 | P a g e
  The proof of evidence for high power enjoyed by ATF suppliers lies in the fact that the
ATF prices constitute 35-40% of the costs in India compared to 20-25% globally.
 The brand value of suppliers is high due to their less number and results in higher
bargaining power for them.
 The airlines also face a threat of forward integration since the suppliers are in close
contact and are familiar with the knowhow of the aviation industry.
 The suppliers are few and thus in better position to bargain as they always finds
customers for their aircrafts.
Bargaining Power of Buyers
 Buyers in airlines industry are large in number and highly fragmented thus lowering
their power .With the growing Indian economy and increasing low cost carriers, the
buyers have increased and so have the growth opportunities.
 The switching cost is minimal since there are multiple alternatives available. It is not
difficult to move from one airline to another or to switch to a substitute.
 Furthermore the players in the particular strategic group do have minimalistic
differentiating points.
 Backward integration from the buyers end is very difficult and next to impossible.

Competitive Rivalry
The aviation industry is a highly competitive industry because of which it is difficult to earn
high returns in this sector. Below are the major reasons for the high competition in the low-cost
carrier airlines:
 Very little scope for differentiation between competitors’ products and services
 Aviation is a mature industry with very little growth. The only way to grow is by
stealing away customers from competitors.
 Suppliers of aircrafts are the same, i.e., Boeing and Airbus. Hence supplier’s bargaining
power is high.
 Switching cost of customers is high for low cost carriers, i.e., there is no brand loyalty.

12 | P a g e
Closest competitor of IndiGo is SpiceJet followed by GoAir. Below is brief description about
each of them:

SpiceJet is a low-cost airline based in New Delhi, India. Spice Jet’s mission is to become
India’s preferred low cost airline, delivering the lowest air fares with the highest consumer
value, to price sensitive consumers. Its vision is to ensure that flying is no longer confined to
business travelers, but is affordable for everyone and thus the tagline ‘flying for everyone’
Spice Jet airways began its operations in May 2005. SpiceJet has chosen a single aircraft type
fleet which allows for greater efficiency in maintenance, and supports the low-cost structure. It
has a fleet of 6 Boeing 737-800 in single class configuration with 189 seats. SpiceJet's new
generation fleet of aircraft is backed by cutting edge technology and infrastructure to ensure the
highest standards in operating efficiency. Spice Jet currently flies to 11 destinations.

GoAir Airlines, owned by Wadia Group, is a low-cost budget airline based in Mumbai, India. It
has been showcased as “The People's Airline”. GoAir is looking at 'commoditizing air travel' by
offering airline seats at marginally higher train prices to all cities in India. The Airline’s theme
line is “Experience the Difference” and its objective is to offer its passengers a quality
consistent, quality assured and time efficient product through affordable fares. GoAir's business

13 | P a g e
model has been created on the 'punctuality, affordability and convenience' model. Go Air
operates four A320 aircraft with a single class, 180-seat configuration, and plans to expand its
fleet to 33 aircraft in three years.
Thus, we can summarize from above data that all the three players are trying to follow cost
leadership strategy by bringing down the ticket rates to the minimum possible value. However,
it is clear that, to sustain in this cutthroat competition, each player will have to come up with
different strategies to improve the non price factors.

Availability of Substitutes:
The substitute for low cost airline company is the railways. But this substitute is not very
powerful due to the following reasons:
 Customers use airline transport as it is convenient and saves travelling time. So trains
cannot work as a substitute to save time.
 Secondly, many customers use airlines as a status symbol. So again, trains cannot
substitute for prestige.
So if we consider IndiGo airlines, the direct substitutes are the other low cost carriers like
SpiceJet and GoAir. So in this case, threat of substitutes is high as the switching cost between
low cost carriers is low.

Opportunities
 IndiGo airlines have not ventured into the huge air freight market which can contribute a
sizeable portion of the revenue. A study by Centre for Asia Pacific Aviation or CAPA6,
an aviation consulting firm estimates the cargo services of 3.4 million tonnes per
annum. According to a research conducted by PhoCus, Indian domestic traffic will
touch 86.1 million by 2010,up from 32.2 million in 2007.The flight density of IndiGo
airlines is limited in domestic market; hence there is a big scope to increase the flight
frequency.

14 | P a g e
  The huge untapped international sectors should be explored once IndiGo has a
considerable presence in the domestic market.
 IndiGo currently does not have too many long haul aircrafts and as per CAPA study by
2020, Indian Airports are expected to handle more than 100 million passengers. IndiGo
airlines should focus on long haul aircrafts both for domestic and international sectors.
 The chartered flight services still remain an area not exploited by Indian aviation
industry and IndiGo airlines can play a major role in tapping the potential in that
particular market.

Threats
 ATF (Air Turbine Fuel) prices have increased radically since 2005
 Foreign and private players often poach work-force of competitors.
 Extensive Government Interference can affect the accountability of the organization. In
aviation industry, government has control over fuel prices, foreign investments (e.g. FDI
policies), tourism laws, taxes etc. This can greatly affect the day to day business in the
airline industry. Like every other industry, recession has hit aviation industry as well.
People have cut down on tourism and corporate travels have also been slashed down.

15 | P a g e
  The shortage of trained pilots, co-pilots and ground staff is severely limiting the growth
prospects of all the airline companies.
 Barriers to exit in aviation industry are high because of high capital investment, no
government restrictions and loss of brand image.

Internal Environment Analysis:

Market Share of IndiGo
Industry capacity growth, excluding IndiGo, has flattened:

16 | P a g e
• Industry capacity has grown at a CAGR of 22% between 2004 – 2008
• Seat capacity for Industry excluding IndiGo dipped by 5%, while IndiGo grew by 23% for
2009
• 15% passenger growth expected to exceed the 10% expected growth in capacity in 2010

Increasing market share:

Expected market share in FY10/11 is 20%

Sustainable Competitive Advantage

There are some circumstances where sustainability is possible at least for a period of time and
this can be achieved by Sustaining differentiation- Based advantage which is the strategy
applied to IndiGo and it is explained below.

Sustaining differentiation- Based advantage

Resources, Capabilities and Core Competencies are the key elements of the Internal
Environment. The resources are tangible and intangible.

Tangible resources
Aircrafts:
The airline currently operates 120 daily flights with a fleet of nineteen brand new Airbus A320
aircraft and flies to 17 destinations.
Human Resources:

17 | P a g e
1. The human resources are the pilots, 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.
Fuel:
1. Porter’s five forces model does not cover the importance of complementary product.
2. ATF is the complementary product for airplane and it constitutes approximately 35% of the
production costs.

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 Airlines.
2. IndiGo keeps implementing new and innovative ideas to increase the quality of customer
service. Recent example is: IndiGo has roving “check-in counters” where passengers with only
cabin baggage can check-in with an IndiGo official with a handheld device, rather than lining
up at the check-in counter.
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.

18 | P a g e
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.
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.
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. As per the news article published in The Hindu Business
Line
“IndiGo officials claimed that they have been seeing a healthy growth in passenger numbers
and had no plans to defer delivery of any of the 100 Airbus it has ordered.”
Hence, it is clearly evident from the above statement that IndiGo 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.
Quoted below are some comparisons about the different approaches implemented by various
airlines at the time of recession stated in the same article:
“At a time when several domestic airlines are looking to prune their staff strength, the Delhi-
based low cost airline, IndiGo, is on the lookout for more pilots, cabin attendants, customer
service and airport service agents.”
“In the recent past, both Kingfisher Airlines and Jet Airways have asked their staff to leave.
While Jet Airways offered a “voluntary retirement scheme” to more than 300 of its staff, it was

19 | P a g e
also planning to lay off about 1,900 of its staff. In late September, Kingfisher announced that
300 employees had “parted ways” with the company”.
The above facts show that IndiGo has taken a positive approach while dealing with its loyal
employees at the time of economic slowdown.

Value Chain Analysis

The value chain describes the activities within and around an organization which together
create a product or service.

Primary activities in the value chain are concerned with creation of product or service and can
be grouped into five main areas, they are inbound logistics, operations, outbound logistics,
marketing and sales and services.

Each of these group of primary activities is linked to support activities which help to improve
the efficiency of primary activities.They can be divided intp four main areas, they are
procurement, technology development, human resource management , infrastructure.

20 | P a g e
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 bogoking 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.

21 | P a g e
SWOT Analysis:
Strengths(S)
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
onetime
arrivals.
4. Continuous innovation to
improve on non price factors.
5. Tie-up with hotels.
6. Ease of ticket booking for
customers.
Opportunities(O) SO
1. Freight market 1. Increase domestic
2. Increase in domestic air destinations for flights
traffic 2. Upgrade to long haul 2. IndiGo can expand its
3. International market aircrafts
4. Chartered flight services as per demand
5. Promotion of regional air
connectivity
6. Development of airport
infrastructure
Threats(T) ST
1. Rising ATF prices 1. Sign anti poaching
2. Increasing competition agreements with competitors.
3. Economic slowdown 2. Effective incentive
Weaknesses(W)
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
WO
1. IndiGo can plan to go
international.
services
to freight/cargo.
3. Diversify to chartered flight
services.
WT
1. Continuous innovation of
value added services.
22 | P a g e
 4. Poaching
5. Government interference
6. Scarcity of trained pilots
programmes to avoid talent
drain.
3. Hire well trained pilots
from
other countries as well as
retired Air Force personnel.

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 14.55%15. Besides, chartered flight services are an
untapped market for IndiGo. Thus, IndiGo has a huge opportunity to expand in both these
arenas.

23 | P a g e
Conclusion

Low cost airlines have huge potential in Indian market and they are many players entering the
market targeting at the price sensitive segment. Open sky policy and deregulation have further
opened space for many players to enter the market. Despite of the fact that product
differentiation in low cost carriers is very less with many established players in the market,
Indigo has successfully implemented the low cost strategy with its value added services but still
it has huge potential to capture more market if it can establish itself internationally, expand its
services to cargo, Upgrade to long haul aircrafts as per demand and Continuous innovation of
value added services.

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.

24 | P a g e
BIBLIOGRAPHY

Websites
 www.indigoairtickets.com
 India Ministry of Civil Aviation - http://civilaviation.nic.in
 India Directorate of Civil Aviation - http://dgca.nic.in/
 Airport Authority of India - www.airportsindia.org.in/
 Bureau of Civil Aviation Security (India) – http://bcasindia.gov.in/
 Centre for Asia Pacific Aviation – www.centreforaviation.com
 www.cleartrip.com
 www.infrstructure.gov.in
 www.interglobe.com
 www.civilaviation.nic.in
 www.business-standard.com
 www.thehindubusinessline.com

25 | P a g e