PROJECT REPORT ON

INDIGO AIRLINES: MODEL, MARKET AND

FINANCIAL BUSINESS ANALYSIS

PAPER CODE – 206

A PROJECT SUBMITTED TO THE UNIVERSITY OF RAJASTHAN
FOR PARTIAL COMPLETION OF DIPLOMA IN
ENTREPRENEURSHIP AND SKILL DEVELOPMENT

Submitted by -
Kush Chaturvedi

Under the Supervision of -

Dr. Mayank Agarwal
 University of Rajasthan, Jaipur
Department of Commerce
2022-23

ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the
depth is so enormous. I would like to acknowledge the following as being idealistic
channels and fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Rajasthan, Jaipur for giving me
the chance to do this project.

I would like to express my deep and sincere gratitude to my research supervisor,

Dr. Mayank Agarwal, for giving me this opportunity to complete this research
and providing invaluable guidance throughout this research. His dynamism, vision,
sincerity and motivation have deeply inspired me. He taught me to carry out the
research and to present the research work as clearly as possible. It was a great
privilege and honor to work and study under his guidance. I am tremendously
grateful to what he had to offer me.

Lastly, I would like to thank every person who directly or indirectly helped me in
the completion of the project especially my parents and peers who supported me
throughout my project.

Kush Chaturvedi.
 Table of Contents

1. EXECUTIVE SUMMARY........................................................................................3
2. PESTLE ANALYSIS.................................................................................................4
3. Porter’s Five forces Analysis................................................................................7
4. RESOURCES.......................................................................................................10
5. CAPABILITIES.....................................................................................................13
6. COMPETITIVE STRATEGIES FOR INDIGO AIRLINES............................................14
7. TETRA THREAT FRAMEWORK FOR SUSTAINABILITY.........................................15
8. Value Chain of Indigo........................................................................................17
9. Market Share and Competitors share...............................................................18
10. APPENDIX.......................................................................................................20
 1. 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.
 2. PESTLE ANALYSIS

A PESTLE analysis is an analysis of the external macro-environment that affects all firms in
an industry. P.E.S.T.L.E is an acronym for the Political, Economic, Social, Technological,
Legal and Environmental factors of the external macro-environment. Such external factors
usually are beyond the firm's control and sometimes present themselves as threats. For
this reason, some say that "pest" is an appropriate term for these factors.

Political /legal Factors

 The government has opened up the Indian skies by allowing up to 49% FDI in
Domestic Airlines which is expected to give an impetus to the sector which is reeling
under huge cost side pressures
 Government allowing direct import of ATF is another move in the right direction to
decrease the operating costs
 Micro-managing by the government is seen as a great negative for the industry as
the airlines are not being given enough freedom to run their operations
 Slow growth of airport infrastructure because of government impasse
 Lack of government initiatives stalling the growth of the sector.
 Overall the government is slowly waking up to the issues plaguing the sector and is
taking few steps to improve the health of the sector, Indigo which is the market
leader in the LCC segment stands to be benefitted the most

Economic factor

 Business cycles have a wide reaching impact on the airline industry. During
recession, airline is considered a luxury & therefore spending on air travel is cut
which leads to reduce prices. During prosperity phase people indulge themselves in
travel & prices increase
 The economy is slowing down which is a huge negative for the industry as the
capacity is getting underutilized and the companies are being forced to reduce the
ticket prices to reduce the capacity wastage
 Consistently high oil prices along with high taxes contribute significantly to the
operational costs
 Depreciating value of rupee is adding to costs as substantial portion of other
operating costs like lease rentals, maintenance, expat salaries and a portion of sales
commissions are USD-linked or USD-denominated
 The industry operates under high cost of capital which again adds to the operational
costs but the positive side for indigo airlines is that it is in a far better position
 financially than the competition which helps it to raise capital comparatively at a
lower cost

Social factors
 The changing travel habits of people have very wide implications for the airline
industry. In a country like India, there are people from varied income groups. The
airlines have to recognize these individuals and should serve them accordingly
 The destination, kind of food etc all has to be chosen carefully in accordance with
the tastes of their major clientele especially, since India is a land of extremes there
are people from various religions and castes and every individual travelling by the
airline would expect customization to the greatest possible extent. For e.g. A Jain
would be satisfied with the service only if he is served jain food and it should be
kept in mind that the customers next to him are also jain or at least vegetarian.
 With the income levels rising in the Tier-2 and Tier-3 cities, there is demand being
generated for air connectivity in these cities also.

Technological factors
 The industry is in the process of adopting a new standard for distributing airfare
information which the IATA has termed as NDS which stands for New Distribution
Capability which will help the airlines to tailor the services to each customer and
will add value to both the airline as well as the customer
 Growth of Electronic ticketing satellite based navigation systems
 Leveraging technology has made check in times to reduce which has contributed in
efficiency improvements for the airlines
 The Airports Authority of India is developing modern communication, navigation,
surveillance, and air traffic management systems for India's aviation sector that will
help the country meet the expected growth and demand for air passenger and cargo
service over the next decade.

Environmental
 With air traffic growing, environmental concerns are also gaining an increasing
importance. Although the aerospace industry has already made significant efforts to
reduce its environmental footprint, further technological and operational
improvements are necessary to outweigh the impact of traffic growth.
 The two main environmental issues associated with aviation are noise and
emissions. Within emissions, the distinction is made between local air quality and
climate change.
 Noise: The principle sources of aircraft noise are the aircraft’s engines and,
particularly during approach, airframe noise when the aircraft’s flaps/slats are fully
extended and the landing gear are deployed. Air traffic movements have
 significantly increased, and will continue to grow. As a result aircraft noise
continues to have a very significant environmental impact around airports and be a
source of disturbance to the public. Many airports have implemented noise related
charging schemes, night time restrictions or even night curfews. The number of
airports affected in this way will likely increase further during the next decade.
 Local air quality: Air pollutants such as Nitrogen Oxides (NO2 and NO) and
particulate matter (PM); have been identified as key contributors from air transport
to the problems of local air quality. Exposure to particulate matter can lead to
impacts ranging from minor effects on the respiratory system to premature
mortality. It is therefore likely that air quality will be a significant feature in the
debate concerning additional runway capacity.
 Alternative Fuels: Alternative fuels should become a major driver in reaching the
objective of carbon-neutral growth for aviation. Drop-in bio fuels have been
successfully tested and are already in use on certain commercial routes. The
industry is aiming at replacing 6% of current fossil fuel with bio fuel by 2020.
Beyond the complex issue of life cycle assessment, the major challenge will be to
ensure that bio fuels are supplied in a reliable and cost-effective manner to air
operators
 Land acquisition has become one of the serious issues plaguing the industry
because it is stalling the building of new infrastructure which is the need of the hour
 Future objectives: The ultimate aim for the industry must be sustainable
development, where the environment is not sacrificed for growth and future
generations will be able to continue to benefit from air travel. The aviation industry
has already started to tackle this formidable task, but continued and imaginative
effort is required to ensure the industry maximises the use of its "environmental
capacity"
 3. Porter’s Five forces Analysis
1. Threat of New Entrants

 Threat of New Entrants Aviation industry is highly cost intensive. Besides it has to
go through a number of regulatory compliance before it gets an excusatory order.
The factors which make entry of new entrants in the Indian Aviation sector a
difficult task are the following
 The capital requirement- An airline is required to have capitalization of minimum
thirty crores without which it is not allowed to takeoff.
 Expected retaliation-The market is concentrated in the hands of a few players thus
any new player would to face stiff competition and retaliation from the existing
players such as Jet Airways and Indian.
 Inadequate airport infrastructure often makes it difficult for the new entrants to get
right flying slot time.
 Shortage of pilots and high fuel costs also pose a threat as the existing demands
itself are not being fulfilled.
 Exit barriers-The high capital requirement makes it difficult for the companies to
exit the market but being a growing industry the existing players are willing to
acquire and make exit for an operator less difficult.

2. 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 comprise 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.
  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.

2. 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.

3. 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.

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 travellers, 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
'commoditising 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 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

5. 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:

1. Customers use airline transport as it is convenient and saves travelling time. So trains
cannot work as a substitute to save time.
2. 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.
 4. RESOURCES
Tangible Resources:

 Physical Resources
Aircrafts:
Indigo is the first Indian airline with Sharklet equipped A320. Indigo welcomed its
first Sharklet equipped Airbus A320 on January 28, 2013.Sharklets are newly
designed wing-tip devices that improve the aircraft’s aerodynamics and significantly
cut the airline’s fuel burn and emissions by four per cent on longer sectors.
(Source: http://www.airbus.com/presscentre)
The airline currently operates 399 daily flights with a fleet of 65 Airbus
A320 with an average fleet age of 2.3 years and flies to 33 destinations
(Source: www.goindigo.in)

Fuel:
Fleet maximum fuel capacity is 23,860 Litres. Fuel is a resource for Indigo as due to
the use of A320 it attains around 4% of fuel burn reduction.
Further ATF (Aviation Turbine Fuel) is a complementary product for airplane and it
constitutes almost 35% of production cost.

 Financial Resources
As confirmed by India's Minister of Civil Aviation, Ajit Singh on 22-Mar-2012, all
scheduled Indian airlines except Indigo are incurring losses, based on returns filed
by airlines with the Directorate General of Civil Aviation (DGCA).
As the only profitable airline in India, Indigo was able to put an order of 180 new
aircrafts A-320 as of in 2011, in a total cost of USD 15 billion. Financial resources
also enable Indigo to phase out aircrafts older than 6 years, in order to keep the
average fleet age low.

 Human Resources
In a time of crisis when competitors are laying off staff or leaving the market
(Kingfisher), Indigo is on lookout for more pilots, cabin attendants, customer service
and airport service agents in order to keep growing and in congruence with its new
aircrafts.
Indigo has one of the highest percentages of pilots who are trained to fly under
dense fog.
 Great employee relationship- Indigo’s president, Mr. Aditya Ghosh, makes sure he is
available to 4000+ employees of Indigo; was named the travel industry’s best
employer in 2010.

The attrition rate in Indigo is negligible or zero percent.

 Technology Resources
Indigo uses e-ticketing facility which makes travel by Indigo hassle free. E-tickets
add to its cost efficiency as it saves fee and commission paid to agents.
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.

INTANGIBLE RESOURCES:

- Brand Equity/Reputation:
Indigo is the most reputed low cost carrier due to the following reasons:
 On time arrivals is the key differentiating factor for Indigo Airlines.
 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.
 Compared to the direct competitors, that is, the other low cost carriers like SpiceJet,
Jetlite, etc. Indigo offers the lowest airfare.
 Reputation of high value added services-which also contributes to “word of mouth”
promotion of brand.

- Social Capital:
 Indigo has amicable relationship with the other organizations that contribute to the
value addition for the service provided to the customers.
 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.
 Collaboration with hotels: Mumbai-based hotel chain operator Sarovar Hotels and
Indigo Airlines announced a marketing tie-up for frequent travellers. 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.
Hence Indigo has a remarkable social capital.
(Source: http://www.business-standard.com/article)

- Brand Awareness:
Indigo is a well known Low Cost Carrier in India. The following points contribute to
the brand awareness of Indigo:
 Advertising using print media like newspapers, billboards, etc.
 Advertising has been done my TV commercials as well. Indeed indigo was the first
low cost airline to release a TVC. Unlike regular airline ads, it opted for an animated
ad-to cut the cost and break the clutter. Further the series of commercials continued
like- the “on time” commercial, the anthem commercial, etc.
 It may not pay for an advertisement in a newspaper, but has been covered in news
for its low cost strategy implementation.
 As Indigo provides better value added services to the customers, word of mouth
promotion also works in its favour.

- 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:
“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.”
 The above facts show that Indigo has taken a positive approach while dealing with
its loyal employees at the time of economic slowdown.

5. CAPABILITIES

Capabilities are what we do with our assets. It includes our operational efficiency,
distinctive competence and core competence.

Financial Capability:
Indigo’s financial capability is evident by the fact that it got the permission from Indian
government to fly aboard by September 2011. “The government cannot freely offer licenses
to any airlines which wish to fly abroad. We have to look into other aspects like the
financial viability of the airline as well so that it can sustain international operations even
when the demand is low,” said an official of aviation ministry. Indeed, Indigo is the fourth
Indian low-cost carrier to operate overseas services.
(Source: http://www.thaindian.com/newsportal)
Further, Indigo has managed to be the only profitable airline in India currently.

Low fare flights:

Indigo has successfully managed to be a low fare flight maintaining its reliability and good
service. It focuses on customer needs by offering low fares.
Indigo scored a hatrick 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 i.e. no in flight services
 Operating on secondary airports
 E-ticketing: to avoid fee and commission paid to travel agents
 Single model of aircraft
 Fewer employees per aircraft and more seats per aircraft
 Hub and spoke model for flights
 Reduction on fuel burning due to A-320 aircrafts
 Selling and leasing back planes helps its balance sheet
“Indigo goes in for cost saving to the extent that every time an Indigo aircraft takes off in
daylight, the pilot switches off the navigation lights located on its wings and tail tips.
The reason is the saving on cost of changing bulbs. It’s such a minor detail and saving so
small that most airlines wouldn’t bother, but it’s taken seriously at Indigo.”

On-time flights:
Passengers all across India rave about Indigo’s on-time performance, the highest amongst
all airlines at 92.4%. They are always on time and often before time, which is remarkable.
Passengers call punctuality the ‘hallmark’ of the airline.
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.

Low turnaround time:

The turn-around time for an Indigo flight is less than 30 minutes, a hard feat to match.
Though there are no complimentary meals on this no-frills airline, the service and
performance matches the best.

6. COMPETITIVE STRATEGIES FOR INDIGO AIRLINES

Air craft management

 Indigo purchased the aircrafts, then sold them to intermediary and then hire the
fleet on lease from then on contractual basis.
 Use single configuration aircraft.
 For maintenance, it allied with airbus
 Indigo preferred airbus over Boeing as the fuel efficiency of the former is greater
than the latter.

Growth and Expansion strategy

 It adopted a strategy with one aircraft and adding one after six week. In other way is
that they first tested one market and after establishing foothold in that market, they
expanded to other markets.
 Shorter trajectory for landing.
 Does not require ground based navigation
 Helps in reduction of green house gas emission.
 Turnaround time is less
 Low frills
 Hub and spoke models for flights
  IndiGo preferred to wait and have a solid business plan in place. Its plan was to stick
to operating a single configuration aircraft, providing point-to-point connectivity.
 IndiGo, however, continued its gradual expansion and waited for five years to
launch its international operations, although, arguably, the airline had to wait those
five years because of airline industry regulations.
 Still, it wasn't tempted to find loopholes to expand aggressively in what was a
rapidly growing market. This slow and steady approach has made IndiGo the
second-largest airline in terms of passenger carriage in a matter of over five years
(it commenced operations in August 2006) with a fleet of 50 aircraft.

7. TETRA THREAT FRAMEWORK FOR SUSTAINABILITY

Added Value

You add value to the industry if the value generated by you is not equal to the value
generated without you. Core competency adds value.

If value generated by you = value generated without you, then you are not required.

Threats to added value are:

1) Threat of imitation:

Imitation is the case when there is a diffusion of successful business model by competitors.
Company creates added value by competitive advantage through low-cost leadership.
A company chooses a particular peak depending upon its strength and weakness on this 3-
D business landscape. When a competitor tries to come to your peak and when peak gets
crowded, it comes down thereby bringing down your performance. This is the reason why
imitation is considered a direct threat.

Some of the imitation threats to Indigo are:

 Imitation of its aircrafts

 Imitation of its human resource
 Imitation of brand awareness

2) Threat of Substitution

 Railways and roadways (response: time saving travel)

 Technological advancement (diminishing the need to travel)
 High end airlines (the ones providing services)
 Either of the LCC

Appropriated Value

3) Threat of Hold-up

Value gets added vertically across the 5-forces model i.e. through the participants including
suppliers, buyers, competitors, etc.

Value is captured by each of these along the vertical chain. A company can’t capture all the
value because of the presence of the competitors. Competitors hold up companies or
participants from capturing whole value.

Threats of hold-up for Indigo are:

 High power of the aircraft suppliers i.e. Airbus and Boeing

 High power of supplier of pilots due to the shortage of commercial aircraft pilots
  Holding up of value by the limited number of suppliers of ATF: IOC, Hindustan
Petroleum Corporation, Bharat Petroleum and ONGC
 Government interference: government has a control over fuel prices, foreign
investments (i.e. FDI policies), tourism laws, taxes, etc.

4) Threat of Slack

Slack is the gap b/w the appropriated value and the value actually captured. Slack
generates not because somebody takes any value from some organization, but because the
firm looses it itself. Slack can’t be avoided but it can be maintained. This is the gap which
the firm creates to generate value.

Threats of slack for Indigo are:

 Increasing fuel prices

 Increasing labour costs
 High capital investment
 Rising airport costs

8. Value Chain of 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

Opportunity

 Increasing middle class has offered more opportunities to the low cost carriers.
 Superior technology has helped cut costs and thus prevail as a low cost carrier.

Threats

 Increase in fuel prices

 Government intervention
 Increase in tax rates
 Economic downturn

9. Market Share and Competitors share

Indigo has been able to increase their market share in the market quite steadily from 4
percent in 2006 to almost 22 percent in 2012.They have increased their fleet considerably
and have operated flights to strategic locations in India. Their ability to reduce the
turnaround time and use fuel efficient airbuses have helped their cause by large. Their
target segment has been increasing rapidly with services industry growing at a fair pace
but low switching costs and loyalty have not affected their growth. Amidst fierce
competition from Spicejet, Go air, jet lite, jet konnect and Indigo has been successful in not
only maintaining its market share but enhancing it multiple times. Even during recession
when other companies had tough times Indigo increased their market share by a whopping
50 percent i.e. from 10 percent to 15 percent and recorded profits for that year

The below given diagram explains about how competitors have been faring in response to
Indigo airlines in March 2012.The graph is in favor of Indigo and portrays the industry to
be highly favorable for Indigo. There are very few fierce competitors and Indigo is the
market leader in the low cost segment of the aviation industry. Jet Airways alone is ahead
in terms of market share but is not a direct competitor to Indigo as it does not fall under the
low cost airline. Jet lite has a market share of less than 8 percent. Its close competitors in
terms of market share are Jet lite, Spice Jet and Go air. Except for Spice jet the others have
market share of less than 10 percent each and together form not more than 14.3 percent of
the market. The challenge ahead to Indigo is how they confront the growing fuel prices,
maintain lowest fares, increase customer loyalty, maintain their market leadership. The
story for Indigo has been so far so good.
 10. APPENDIX
MARKET SHARE OF INDIGO

Despite only entering the market less than six years ago in Aug-2006, Indigo has rapidly
soared up the ranks to become the second largest domestic carrier, overtaking Air
India and Kingfisher Airlines on the way. In doing so, Indigo has overtaken more well-
established carriers that have expanded not only organically but through acquisitions and
with a mixed-product that offers both full service and low cost products. And the growth
for Indigo is expected to continue, with the airline likely to remain the fastest growing
airline in India in 2012, as it continues to add capacity on both domestic and international
routes, with the latter expected to generate a growing proportion of total revenue.

Indigo held a 21% domestic market share at the end of 2011, behind Jet Airways/JetLite.
For the second consecutive year, the carrier reported domestic passenger growth of almost
40% to 11.8 million, with total passenger numbers exceeding the 12 million-passenger
mark following the launch of international operations in Sep-2011.

According to DGCA monthly traffic data, Indigo handled over 1 million passengers for the
first time in May-2011 (with 1.1 million passengers), a feat replicated in Jun-2011, Oct-
2011, Nov-2011, Dec-2011, Jan-2012 and Feb-2012, with over 1.1 million passenger in
each of these months.

Fig: Indigo passenger numbers: Aug-2006 to Feb-2012

Domestic load factors in 2011 were also strong, averaging 83.3%, based on DGCA data,
with load factors exceeding 90% in Dec-2011. In 2010, load factors exceeded 90% on four
occasions – in May-2010 (92.3%), Jun-2012 (90.7%), Nov-2010 (91%) and Dec-2012
(93.3%). So far in 2012, the carrier has reported load factors of 85.9% in Jan-2012 and
82.8% in Feb-2012.

Fig: Indigo load factor: Apr-2004 to Feb-2012

In the month of Feb-2012, the LCC held a 21.3% market share compared to a combined
29.8% at Jet Airways/JetLite. Indigo will likely take the top spot from Jet Airways, with
growth of around 12% p.a. expected over the next few years.
Growth Path of Indigo Airlines