Success Story of Indigo Airline

Success Story of Indigo Airline

History of Indigo Airline

Indigo is an Indian airline which is headquartered in Gurgaon, India. It is India’s largest passenger airline with a market share of more than 55 percent. The airline was founded in 2006 by Rahul Bhatia of Inter Globe Enterprises and Rakesh Gangwal. Indigo placed an order for 100 Airbus A320-200 aircraft in June 2005 as it planned to begin operations in mid-2006. Indigo has a total destination count of 95 with 71 domestic destinations and 24 International. Indigo’s main base is located at Delhi, with additional bases at Bengaluru, Chennai, Kolkata, Hyderabad, Jaipur, Ahmedabad, and Mumbai. Indigo currently has more than 250 aircrafts and it operates more than 1500 flights daily.

Business Model

Indigo airline uses Hub and Spoke Model to operate in India. Hub and Spoke model is a distribution method in which a central hub exists. Airline operates from a centralized hub and uses regional airports as a spoke. In this model, regional airports transport passengers to one of the centralized hub airports. From there, connecting flights can take them to another regional airport. This is more efficient than the point to point model in which there are many direct flights from regional airport to regional airport. Hub and spoke model leads to more efficient use of aircrafts and thus helps in decreasing operating cost as a lesser number of aircraft are needed to operate in Hub and Spoke model than in point to point model.

Besides, Indigo works on a Low Cost Carrier Model and tries to minimize the operational cost and expenses so as to offer tickets to customers at cheaper prices. Indigo usually buys similar types of aircrafts so that same crew can be deployed for any aircraft without additional training and thus it leads to decrease in expenditure on giving extra training to crews. To decrease costs, Indigo buys aircrafts in bulk and gets huge discounts on prices of aircrafts. After buying aircrafts in bulk, Indigo sells them to some other entity by taking some profit and then takes the same aircrafts from them on lease for some particular amount of time. Thus Indigo operates on a Sale and Leaseback Financial Model. Sale and Leaseback Financial Model helps Indigo to cut costs as repairs and maintenance are supposed to be done by entities which have given aircrafts on lease.

Core Competency of Indigo Airline

·   Low Cost Carrier: Indigo operates on Low Cost Carrier Model. It used to provide only economy class tickets, which helped it to streamline its operations and reduced its expenses on maintaining expensive lounges.

·   Quickest Turnaround Time: Indigo has quickest turnaround time as compared to its competitors. Turnaround time is the time taken by plane to be ready for the next flight after landing. The turnaround time of Indigo is more or less 25 minutes. Less turnaround time means more time in the air than on ground. According to a report, Indigo aircraft spend about 11 hours a day in the sky, while the industrial average is about eight to ten hours.

·   Low Fares: Indigo does not provide in-flight entertainment and offers a buy onboard in-flight meal programme and thus charges less amount on tickets.

·   Fuel Efficiency: Indigo fleet includes Airbus, which is more fuel efficient as it consumes less fuel and thus decreases operating costs as well. Also, Indigo uses software to optimize flight planning and fuel saving technologies to increases fuel efficiency.

·   Simplified Pricing: Simplified Pricing means one fare, inclusive of all taxes and other charges. As many customers are first time fliers, simplified pricing helps in smoothing the process for them.

·   On-time and hassle free experience: Indigo flights are on time and flight cancellation rate is very low. Its major focus is to be always on time. Thus their flights always take off and land on time. Even business travelers prefer Indigo over other airlines because of its reliability about timings.

Conclusion

All the strategies adopted by Indigo airline have helped it in gaining traction. Indigo has done Cash Flow Management in a very efficient manner. Also, Indigo operates mostly in full capacity which helps in increasing its margins. Another strategy opted by Indigo is to reduce operating costs. As fuel comprises a major part of operating cost of an airline, Indigo uses fuel efficient technology to reduce its expenditures on fuel. Apart from this, Indigo took full leverage of the Sale and Leaseback Model which is integral to its success.

Strategies opted to acquire talent have also led to decrease the cost of training the crew. Other than this, management Of Indigo was stable which has increased its credibility as a company. All these strategies worked in favor of Indigo and made it the largest passenger airline with market share of more than 55 percent. By delivering what is promised, Indigo is expected to grow by leaps and bounds in the future.