COOPERATIVE & COMPETITIVE STRATEGIES

MIDTERM PROJECT
Presented to Prof. Rohit Kumar
By Group - 8

Syed Bawqer Damashqi M205-21

Ishita Kamat M244-21

Rohit Kumar M282-21

Yalla Revanth Pratap Naidu M316-21

Bhagyashree M342-21

Noopur Lakra M380-21

Vivek Chhari M421-21

 Ratio Analysis

Indigo has competitive advantages because of the following:

● The RoA of Indigo is way higher compared to Air India meaning its making optimum
utilisation of its assets to generate revenues.
● The loss margin is lesser for Indigo by 25% compared to Air India
● The Debt to Asset ratio is only 0.08 for Indigo, meaning it can easily pay off its debts by
selling the assets. Whereas Air India doesn't have this option since its debts are more than
the assets.

All these point to a good business with a high potential to turn profitable in the coming financial
year unlike its competitor reeling under huge debts and losses.
 A - Company’s USP B - Industry standards

● IndiGo has been ranked as the 4th most punctual airline
globally in 2018, 6th most punctual airline globally in 2019
and 3rd most punctual airline globally in 2021 by OAG
Punctuality League.
● Also it’s average fleet age is less than 3 years. IndiGo
maintains a lower fleet age as all its aircraft are leased for a
period of 5-6 years.
● IndiGo, as a matter of fact, has a huge fleet compared to
SpiceJet and hence, has a huge fixed cost. So, rather than
keeping its aircraft parked, it flew more aircraft compared to
SpiceJet and hence gained the market share.
● Passengers shall be offered free of charge the following:
Meals & Refreshments in relation to waiting time, Hotel
Accommodation when necessary.
● Passengers who have not been informed or who have
missed their connecting flight, the airline shall provide an
alternate flight as acceptable or provide compensation in
addition to the full refund of air ticket
● No Airline shall refuse the persons with disability or
reduced mobility to carry their assistive aids/devices.

C - Cost of Doing Business

● Power and fuel cost - Indigo Airlines power and fuel costs were
7,760.14 cr. in 2017-18, which increased to 12,453.79 cr. for 2019- Customer
Company
20 and then decreased.
● Employee cost - The amount for the employee cost was 3,137.79
cr. in 2019-20, which increased to 4,395.36 cr. in 2020-20 and
decreased in the following year.
● The selling and administrative cost - In the beginning, Indigo airline
spent comparatively less on its sales and administrative. Competitor
 D - Competitor's USP
● Air India’s wide network remains its selling point. It has service
to around 100 domestic destinations and cater to over 60
international destinations, as compared to Indigo’s service in 71
domestic destinations and 24 international destinations,
according to IANS report.
● After Jet’s collapse, Air India is the only Indian airline doing
medium- and long-haul nonstop flights between India and
distant continents.
● Its new brand identity focuses on the heritage, architecture, and
diverse culture of India, hence the company has an emotional
connect as well.
F - R&D (Still not realised) potential of INDIGO Airlines
● Partnering 12 global airlines in the coming 2 - 3 years through
alliances & codeshare agreements - this can offer higher
convenience for the travellers in the form of Elite benefits.
● IndiGo became the first airline to successfully trial ISRO’s
‘GAGAN’ - a Satellite-Based Augmentation System (SBAS) in
April 2022. This system can modernise the airspace, reduce
flight delays, save fuel, and improve flight safety.
● Decision to acquire 4 freight aircrafts by mid 2023, to capture
the boom in air cargo driven by the Covid-19 pandemic.
E - White space (unaddressed needs of the
customer)
● Unsatisfactory service by the domestic airlines - 79%
of the 15,000 airline passengers surveyed by Local
Circles said they believe carriers in India are
compromising on passenger comfort and cutting
corners.
● More affordable pricing to cater to an even wider
target audience.
● Offering better complimentary services like some
other global peers. For instance, a complimentary
one-night stay at a hotel.
G - R&D (Still not realised) potential of AIR INDIA
● To enhance operational effectiveness and customer
experience, Air India is implementing the full Amadeus Alta
PSS (Passenger Service System) suite, which includes
revenue management, revenue accounting, retailing and
merchandising, website, mobile, and frequent flyer
programme management.
● Under the direction of an expatriate CEO, the Tata Group is
developing a 100-day plan for Air India to raise the airline's
operational and service standards. The main conflict will be
waged to get more market share on international routes.
Three Strategy Group Maps
 Key Insights
● Indigo, capturing a
significant market share
helps the company
generate profits while the
other companies have a
fragmented market share.
● Passenger load factor is
high for Indigo, thus helping
determine various aspects
like pricing, capacity and
demand.
● Larger the Fleet size, it
provides IndiGo with more
passengers leading to
higher revenue, profits and
market share.
 Key Resources

● Implements innovative ideas viz. “check-in”, customers with only cabin luggage can check-in with the IndiGo employee carrying
hand-held device rather than standing in queue for the boarding pass.

● IndiGo has been able to offer the lowest fare in comparison to its competitors like SpiceJet, GO First etc.

● Since its inception, IndiGo has been successful in maintaining a positive brand image in terms of a low-cost carrier and “every
time on time” arrival.

● IndiGo maintains a lower fleet age as all its aircraft are leased for a period of 5-6 years. A younger fleet means less
maintenance costs.

● IndiGo's route planning assists it in gaining market share while also controlling costs. It operates 290 aircraft but serves only 74
domestic and 25 international destinations to concentrate capacity on a few routes rather than spread it across many because
each destination necessitates new investments & it helps to keep costs in check.

● The airline has no debt as it has avoided the lure of rapidly expanding into new cities and undertaking acquisitions. The
company has single mindedly focused on delivering higher operational effectiveness in its existing routes before expanding to
others.

● It has ordered A-320 Neos which are 15 per cent more fuel-efficient and can make a substantial difference to fuel costs. It is
also pushing ancillary revenues (on-flight sales and meals) to increase cash flows, though this might happen over the long
haul.
 Key Resources

● It is a full member of the Star Alliance Network and provides for The Flying Returns Programme of Air India making it a
rewarding experience for its passengers.

● Due to increase in fraudulent bookings made online, resulting in dispute in payments, a fraud prevention tool was
integrated with E-Billing Solutions (EBS) in June 2010.

● Integrated with the Octopus website for making hotel reservations online and for other ancillary services like weather and
city information, passport/visa information, currency convertor and health requirements. Also, Integrated with “Car
Trawler” for car reservations online.

● With Ground Handling setup at over 50 airports in India, Air India Airport Services is a One Stop for the comprehensive
range of GH services including Security, Flight Operations & Technical Handling. It is the first & only Ground Handler in
India to handle the Airbus A380 on its maiden visit to India, and to handle the futuristic 787 Dreamliners at major airports
in India.

● It recently announced a new medical insurance scheme, the sum insured provided would be Rs 7.5 lakh per annum per
family for its employees by which they will have the necessary support at their time of need anywhere in the country.

● Moreover, Air India has opened up a direct communication channel for its 7,000-odd employees, so that employees can
reach out to the management to sort out their issues.
 Aviation Industry Key Success Factor
● The civil aviation industry in India has emerged as one of the fastest growing industries in the country during the last three
years.
● Low-cost airlines like IndiGo, SpiceJet, GoAir, and AirAsia India occupy over 70% of the domestic market and continue
growing.
● This explosion of airlines and low fares has propelled India into the third-largest aviation market, requiring thousands of new
aircraft in the coming decades.

Evolution of Indian Aviation Industry

● Indian aviation kicked off in 1932 with the introduction of the first airline, Tata Air Services. The airline, founded by J.R.D Tata,
started as an airmail carrier within India.
● The airline progressed from a small freight airline to a commercial passenger airline and was flying domestic flights to a
number of destinations.
● Two government airlines were simplified for efficiency. Indian Airlines operated domestic flights in India, and Air India focused
on international routes.
● By 1994, India repealed all laws regulating the formation of airlines. This deregulation allowed for the formation of new airlines
such as Jet Airways
● This laid the groundwork for the current Indian aviation industry.
 FUTURE PREDICTIONS

● Given that India has the world's fastest-growing aviation industry, both aircraft makers and airlines will be eager to strengthen
their presence there.

● Additionally, it is startling that India, the third-largest aviation market in the world, only has one significant international airline.
When compared to the other top nations, China has four significant airlines, while the US only has three.

● Therefore, I think the Indian Aviation Industry has a good potential of expanding in this area over the future years.

● In the upcoming years, India's aviation business is expected to experience exponential growth. A new long-haul airline from
India will increase competition and add much-needed capacity on strategic routes.
 ● Indigo strategy - Low fares, on-time & hassle free experience

PORTER’S DIAMOND MODEL

● Industry structure - Consolidated by Indigo with few other players
● A resurgent TATA Air India, newly launched Akasa Air and the return
of Jet Airways make the rivalry even stronger and more competitive.

● COVID restrictions
● Fluctuation of Air fuel
prices ● COVID induced pent-up demand (In FY22,
● Global political scenario airports in India pegged the domestic passenger
traffic to be 166.8 million, a 58.5% YoY increase)
● Young population and rising working group
shifting more to air travel

● Human Resources - Vast and diverse talent

pool available ● 100% FDI
● Airbus termed India as ‘World’s fastest ● UDAAN scheme -
growing Aviation market’ Plans to increase the
● Capital Resources - Stagnant wages, job domestic airports to
losses, dipping customer sentiment and 200 by 2026
banks averse to lending to aviation ● Open-Sky policy
customers
● Huge investments in the MRO (Maintenance, Repair & Overhaul)
industry with plans to make India a Global MRO Hub.
● Airport infrastructure construction & maintenance industry is also
available abundantly in India

Upon analysing all the 6 factors of the Porter’s Diamond Model, we observe that despite the aviation industry being hugely capital intensive with delayed ROI’s, India is an
appropriate home base for both Indigo & Air India as majority of factors are in its favour and it is still only the beginning of the resurge of the Indian aviation industry with new
entrants, flexible regulations, easing of Covid restrictions, availability of workforce, supporting industries, and most importantly, the customer demand for air travel consistently
increasing.
Business Model Canvas - Indigo
Business Model Canvas - Air India
 Recommendation

● Both the Airlines compete on different USP

● Indigo is focusing on cheap fares with more fleets of aircraft
● Air India focuses comfort and have positioned itself slightly above low cost companies
● Indigo should continue to compete with Air India because of the large customer base they
have.