INDIGO

AIRLINES:
MONOPOLIZING
INDIAN SKIES 

GUIDED BY – PROF. UTPAL CHATTOPADHYAY

SUBMITTED BY : TEAM 2
 • A Devaprasanth 2201001(IE)
• Abhay Kumar 2201002(IE)
• Abhinav Prasad 2201004(IE)
• Abhishek Bharti 2201005(IE)
• Abhishek Kumar 2201006(IE)
• Abhishek Prajapati 2201007(IE)
• Tayde Ajay Manikrao 2201012(IE)

Team 2 • Akash Jain 2201015(IE)

• Anand Ratana Maurya 2201020(IE)
• Ankit Pandey 2201027(IE)
• Apurba Dey 2201033(IE)
• Abeer Kumar Jha 2202003(IM)
• Aditya Vikram 2202015(IM)
• Alan Leslie Joshua 2202024(IM)
 • Before 1991, Indian government had owned Indian
Airlines, and Air India had enjoyed a monopoly in the
Indian Aviation Indian market, which was highly regulated.
• Due to liberalization many players attempted to enter
Sector in market.

Overview  • In 2018, the Indian aviation market was the seventh-

largest in the world in terms of passengers carried.
• In India, the domestic aviation sector had been the
fastest growing in the world.
• The aviation market’s low penetration in India was
still very less—fewer than 62 air passengers per
1,000 people. 
 • Since the mid-1980s, the Indian aviation sector grew
by more than 10 times, with rising Per Capita income
Indian Aviation being the main reason.
• The introduction of Low Cost Carriers (LCCs) and
Sector other full service carriers contributed significantly to
the air traffic in India.
Overview • Challenges:
1. Due to government regulations, airlines had to
fly financially unattractive routes which led to
losses.
2. Lack of onward connectivity and an erratic
occupancy rate posed major challenges to
achieving operational efficiency for most players.
CIVIL AVIATION MARKET, AIR
CONNECTIVITY, AND PER CAPITA INCOME OF
SELECTED COUNTRIES 

Size of Aviation Geographical Area Number of Cities Per Capita Income

Country Market
(Passengers (in
Square Kilometres)
with a
Population of in
US$PPP 2017–18 Population
Carried) 500,000+ (Thousands)
United States 762,560,000 9,526,468 34 $62,152 328,434
China 390,878,784 9,572,900 197 $18,066 1,396,982
United Kingdom 125,068,988 242,495 13 $45,565 66,466
Japan 110,544,000 377,930 28 $44,426 126,491
Germany 107,587,503 357,114 12 $52,801 82,838
Brazil 100,403,628 8,515,767 40 $16,199 209,205
India 82,751,555 3,287,263 93 $7,783 1,334,221
Russia 72,189,961 17,098,246 37 $28,957 143,965
France 63,434,263 640,679 3 $45,473 65,098
GROWTH IN DOMESTIC PASSENGER TRAFFIC IN INDIA, 2006–2018
INDIGO: THE COMPANY 

• IndiGo, headquartered in Gurgaon, India is the largest airline in terms of

passengers flown with market share of 40% as of 2018.
• It was set up in early 2006 by Rahul Bhatia of InterGlobe
• InterGlobe holds 51.12% stake in IndiGo and 48% is held by Gangwal's
company Caelum Investments.
• IndiGo began its operations on 4th August 2006 with a service from
• The airline currently operates a fleet of 109 planes and offers 679 flights
a day.
 MAJOR PLAYERS IN INDIAN AVIATION MARKET

Growth of Indigo & Its competitors

IndiGo Jet SpiceJet Air India
Airways
Kingfisher GoAir Others
Airlines
45
40
35
30
25
%

20
15
10
5
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Years
INDIGO - UNIQUE
SELLING PROPOSITION
• IndiGo offered the lowest airfares and
professional customer service, enabling
India’s middle class to afford air flight.
• Efficiently reducing flight delays, ensuring
more than 95% on-time performance in
arrival and departures, meeting its tagline
"On-time is a wonderful thing".
• Dealt with cancellations, with having lowest
flight cancellation rate (just 0.38%)
• Product homogeneity and focused on one
type of airplane
INDIGO - PROFITIBALITY
STRATEGIES

Competitive Pricing Innovative Aircraft

Strategy Management Strategy

Building Loyal Customer

Flight Expansion Strategy
Base
COMPETITIVE PRICING STRATEGY

• Dynamic Pricing (DP) allowed prices for the same service to change according to
customer, time, aggregate demand, and other situation-specific parameters.
• Customer loyalty was minimal due to product homogeneity in aviation sector, so price
discrimination through DP was to shift loyalty of customers in order to attain a higher
occupancy rate.
• IndiGo leveraged the benefits of DP to take advantage of highly price-conscious customers
in the Indian aviation market, where demand was still inelastic given the low penetration
rates.
• The efficacy of IndiGo’s DP contributed to its rising market share and average operating
revenue per passenger kilometer (an increase of 68% in its operating revenue per 1,000
passenger kilometers since 2007–08). 
INNOVATIVE AIRCRAFT MANAGEMENT
STRATEGY

• IndiGo operated on a leaseback model, receiving a new fleet every three to

four years until 2032 (average fleet age – 4 years).
• Maintaining a single configuration aircraft helped IndiGo reduce its training
and maintenance costs.
FLIGHT EXPANSION STRATEGY

• IndiGo followed unique expansion strategy, adding new flight every 6

weeks with testing routes for operational and financial viability,
establishing a foothold and then expanding to other routes.
• Followed bulk order purchasing which were delivered in phased manner to
take advantage of lower prices of flights.
BUILDING LOYAL CUSTOMER BASE

• IndiGo built a loyal customer base by providing:

1. On-time arrival and departures
2. Good connectivity
3. Consistent services
4. In-flight meals
• IndiGo used the Aircraft Communications Addressing and Reporting System to monitor
the arrival and departure times of IndiGo aircraft to ensure transparency
• IndiGo became the preferred choice of airline because of its reputation of on-
time performance and the great psychological boost it gave to their self-
esteem with its offer of classless yet efficient services.
Oligopoly Market
•Oligopoly markets are markets dominated by a
small number of suppliers. They can be found in
all countries and across a broad range of sectors.
Some oligopoly markets are competitive, while
others are significantly less so, or can at least
appear that way
Characteristics of oligopoly
•High barriers to new entry
•Price-setting ability
•The interdependence of firms
•Maximized revenues
• Product differentiation
• Non-price competition.
Prices remained sticky for economy-class passengers in the
Indian aviation market

Two Demand Zone of the IndiGo customer

1. Inelastic Zone
2. Elastic Zone
Shifting of Marginal Cost from inelastic zone to elastic zone.
• Reasons for a shift in MC curve -
Increase in profit margin by keeping other KPIs constant.
 Shifting to elastic zone (More price
sensitive zone)
Effects of
Increase in price
shifting of
Marginal Decrease in market share
cost
More tendency of customers to
shift to other airlines
 The source of IndiGo’s
economies of scale
•Using economies of scale the average costs per unit of
output decrease with the increase in the scale or
magnitude of the output being produced by a firm.

•IndiGo had developed a fleet of 161 aircrafts. In 2015, it

operated 818 daily flights across 40 Indian cities and five
international destinations. Since its entry, IndiGo had
used a single-class configuration14 aircraft—the 180-
seat Airbus A320-200. Thereby running multiple price
efficient flights on highly dense routes with the same
kind of aircraft to reduce net spent on maintenance and
overhead charges and increase working efficiency
Game Theory

Company B

100(High) 90(Low)
100(High) 3 Lakhs, 3 Lakhs, 50,000 , 4 lakhs
Company A
90(Low) 4 Lakhs, 50,000 1 lakh, 1 lakh

Resulting in:
• Price Rigidity
• Temptation to collude
• Incentive to cheat on collusive
agreement
Thank you