Indigo Airlines

Group B

By

1. How is a low cost carrier different from a Full Service Airline?

Low Cost Carriers
A Low cost carrier has the cost drivers like load factor, Fuel
Consumption, HR, No of Flights per day. The load factor has to be
high for a low cost carrier, because when operating at low costs
they would need maximum passengers on board.
The fuel consumption has to be as minimum as possible. There
wont be any unnecessary crew on board as extra weight adds to
extra fuel. The Cutleries are also not present on board as they add
extra weight. Food even if served will be charged extra.
The Human Resources are also a very important factor, as they will
have to maintain their resources at minimum level and extract
maximum efficiency from the crew, like they dont have separate
cleaners for the plane etc.
Another most important driver is the cost. They will have to
maintain the cost as low as possible and provide a good service as
that happens to be their value proposition
The turnaround time should be rapid as more time the fleets stay on
ground, the lesser will be the profits. So it is an important factor for
the LCCs to make as many trips per day.

Full Service Carriers

The Full Service carriers act on yield factor. They look at their
revenues first and that determines the number of flights to be run,
locations connected and the fleet size etc.
They generally make use of primary airports instead of secondary.
Though Fuel consumption has to be minimized, it is not one of the
major cost drivers.
They generally have long flights and thus turnaround time is not
very less.
They also would need more crew on the flights and cutlery to serve
to customers.

 The fleets also depends on the location they travel to , the traffic
and also the distance

2. Indigo is the late entrant to the Indian civil aviation industry,

which historically has suffered great losses initially. However,
Indigo itself became the most profitable airline in the industry
very quickly. Explain
There are various factors which helped Indigo become the most profitable
airline in the industry even though it was a late entrant in the industry and
most of its competitors were not doing so well. Some of the main aspects
are listed below
Increased Operational Efficiency
Single class configuration (reduce training & maintenance cost)
Leasing aircraft
High Load factor
Hub and spoke model
Faster turn-around time
Low frills
Focus on fuel efficient technologies
Maintenance contract with Airbus
Lean Management process (lowest employee per aircraft ratio of 96)
Acquired trained pilot from rival airlines thereby saving enormous
amount on
Training new pilots
Professional Customer Service
Honesty in dealing with delays & cancellation
Consistent on-time performance of 90% +
Least flight cancellations

3. Analyze the capabilities of Indigo. Are they a key source of

sustainable competitive advantage?

Inimitabl
e

Organized
to capture
value

Value

Rarity

Aircraft

Social
Capital

Human
Resources

Competitive
Parity
Sustainable
Competitive
Advantage
Sustainable
Competitive
Advantage

Operation
al
Efficiency

Low
Airfare

Temporary
Competitive
Advantage
Competitive
Parity

Using the VRIO framework we can understand that capabilities like Social
Capital and Human resource are key sources of sustainable competitive
advantage for Indigo Airlines.
4. Analyse the strategic position of Indigo. Has there been any
change in the competitive strategies it has followed since 2006?
Indigo started off as a low cost carrier in 2006 and was operating in
domestic routes. Now they have slowly moved on to Hybrid carriers. The
Increase in fares shown below suggest the same
New Delhi - Hyderabad

New Delhi - Kolkata

New Delhi - Bangalore

Now they have also started venturing into International Markets which is
major strategy change for them. Can they operate as a low cost carrier in the
international market is one of the biggest challenges?

5. Identify the weakness of indigo that potential entrants can utilize

to their benefit.
Indigo had a few security issues, like landing the plane on the wrong
wheel. This was caught by the DGCA. This can be used by the competitors to
their advantage.
The Pricing strategy of indigo has changed from low cost carrier in 2006 to
hybrid carrier in 2011. This can be used against them to push them out of
the Low Cost Carrier market.
They are highly dependent on 1 hub. This might kill their promise of on
time service. This reduces their value add and rare feature. A new entrant
with multiple hubs will be able to imitate the model of Indigo and it becomes
substitutable.