Slow and steady wins the race, a phrase that reflects the success story of Indigo in just 6 words.
Indigo was set up in 2006 by Rahul Bhatia, group managing director of Interglobe enterprise limited (a leading air transport management and travel technology company) and Rakesh S Gangwal, a US based NRI. InterGlobe holds 51.12% stake in Indigo and 48% is held by Gangwal’s Virginia based company, Caelum Investments. It made headlines in June 2005 when it ordered 100 airbus aircrafts to implement its operations by mid-2006. It had 17.3% shares in market and was behind kingfisher and jet airways. It then started rising at a rapid rate and then there was no looking back. This Indian budget airline, according to the reports has come up as largest airline in India with a market share of 37.8% in April 2015. Indigo was able to hit it big replacing kingfisher, jet airways and many others. Question is that how did this happen? One of the youngest airlines of India now the largest airline of India? Some differentiation strategies helped them do so.
BUSINESS MODEL OF INDIGO-
- Single class model.
- Usage of single kind of plane, Airbus A320-200.
- Focus on providing basic services to passengers.
- Usage of six year sale and leaseback agreements.
When all other leading airlines were struggling to come up with a combination of low cost, quality and embellished services, Indigo restricted itself to the policy of providing single class service with no additional amenities. Difference can be seen if we once go through the business model of kingfisher airlines. Shifting focus of Kingfisher Airlines lead it to losses in aviation industry. Firstly it launched itself as an economy class airlines with food and entertainment systems. After some time it shifted its focus to luxury. It did not give any of its model time to stabilise and make profits out of that.
Secondly, Indigo uses six year sale and leaseback agreements under which it replaces it’s aircrafts after every 6 years. By doing this it maintains a young fleet which is easy to manage, this not only reduces the need for overall checks but also reduces their training and repairing costs. And therefore Indigo was able to make these much profits.
Also, unlike other big brand airlines, it focussed on providing basic services to passengers and no additional entertainment. Meals on indigo flights are not given for free. Indigo provides point to point service and has proved to be the best for time sensitive travellers. According to the reports, indigo till now has had the least percentage of flight cancellations, approximately 2.2%.
Another important aspect is human resources and that aspect also has been mastered by Indigo Airlines. It has laid a special emphasis on not only providing quality but professional service as well. Rahul Bhatia, person behind the success of Indigo hires his staff after meeting all the candidates individually and then deciding upon the best of them. Staff members are provided with proper training for efficient processes.
Indigo aircrafts have high seating density and load factor. This business model helped Indigo master the art of low cost, high quality. And yes, they definitely have been able to provide on-time performance, affordable fares and hassle free service to the passengers. January 2015 recorded Indigo’s market share at 36.4% which rose to 37% by March 2015. Its passenger load factor stands at 88%. And its fleet also has been expanding rapidly.
Success story of Indigo clearly and loudly says that yes constant improvement, new innovations are necessary but at a manageable pace and with proper planning. Another important lesson that can be learnt is not just to work to but to work to improve and prosper as Rahul Bhatia did.
Tanya is a student at SSCBS, DU. The views expressed are based upon the analysis and research that the writer did on the topic from various books, reports and web articles. The writer regularly writes for Corporate Monks as a research associate. The writer takes personal responsibility for the ownership of the content shared and incase some sources have not been given credit, you can directly mail the writer email@example.com