Strategic Management Project IndiGo Since its Inception approximately ten years ago, IndiGo has created a brand name for itself through different strategy practices which are rarely seen in the Indian Airline Industry. It is currently the market leader in this sector and there are no close competitors to it. Prepared by: Aakriti Gupta (002) Ankita Sood (009) Deepti Verma (016) Lay Thaker (030) Pramey Zode (038)
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Strategic
Management
Project
IndiGo
Since its Inception approximately ten years ago, IndiGo has created a
brand name for itself through different strategy practices which are rarely
seen in the Indian Airline Industry. It is currently the market leader in this
sector and there are no close competitors to it.
Prepared by:
Aakriti Gupta (002)
Ankita Sood (009)
Deepti Verma (016)
Lay Thaker (030)
Pramey Zode (038)
TABLE OF CONTENTS
Sr. no
1 About the company
2 About the Industry
3 External Analysis (PESTEL & Porters’ five forces)
4 Internal Analysis (SWOT & VRIO)
5 Strategies at Various levels (Corporate/Business/Functional)
6 Strategic Models
7 Recommendations
8 Conclusion
1. ABOUT THE COMPANY:
IndiGo, headquartered in Gurgaon, India is the largest airline in terms of passengers flown
with market share of 36.5% as of September 2015. It was set up in early 2006 by Rahul
Bhatia of InterGlobe Enterprises and Rakesh Gangwal, a United States-based NRI.
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 New Delhi
to Imphal via Guwahati. The airline currently operates a fleet of 97 planes and offers 648
flights a day.
1.1 Timeline:
2011-12: IndiGo replaced the state run flag carrier Air India as the top third airline in India. It
already had 17.3% of the market share. By early 2012, IndiGo had taken the delivery of its
50th aircraft in less than six years. In 2011, IndiGo placed an order for 180 aircraft Airbus
320 aircraft in a deal worth US$15 billion which pushed up the percentage of Airbus aircraft
in India to 73%
As of 2012, IndiGo was expanding rapidly and was the only profitable airline in India. It
replaced Kingfisher as the second largest airline in India in terms of market share. IndiGo
strongly adheres to a low-cost model, buying only one type of aircraft and keeping
operational costs as low as possible along with an emphasis on punctuality. IndiGo added a
new plane every six weeks and sometimes even faster. In December 2011,
the DGCA highlighted problems resulting from the expansion could impact safety. On 17
August 2012, IndiGo became the largest airline in India in terms of market share (27%)
surpassing Jett Airway, six years after operations commenced.
2013-14: IndiGo was the second fastest growing low-cost carrier in Asia behind Indonesian
airline Lion Air. However, IndiGo announced that it actually plans to seek permission from
the ministry to acquire four more aircraft, therefore taking the delivery of nine aircraft in
2013. In August 2013, the Center for Asia Pacific Aviation ranked IndiGo among the 10
biggest low-cost carriers in the world.
2015-16: IndiGo placed an order of 250 Airbus A320 Neo aircraft worth $27 billion, making
it the largest single order ever in Airbus history. Indigo announced a Rs.3,200 crore initial
public offering on 19 October 2015 which opened on October 27, 2015. IndiGo, which had a
33.8% share of domestic passenger traffic in the year ended 31 March, reported a net margin
of 9.4%, according to the submission to DGCA.
1.2 The Mission statement
“IndiGo is a very quality conscious airline and passenger safety is paramount to our
company’s mission and values,"
1.3 Market Share
2. ABOUT THE INDUSTRY:
Tony Tyler, Director-General and CEO of International Air Transport Association (IATA)
has stated that the global world is focussing on Indian aviation, starting from manufacturers,
businessmen, airlines, global businesses, tourism boards to individual travellers and shippers.
According to him, if there is a common goal among all stakeholders in the aviation sector of
India, a bright future can be expected.
2.1 Market size
It has been reported that the air traffic in India has increased over the last five years both in
terms of aircraft movement and passenger traffic. The compound annual growth rate (CAGR)
of total aircraft movements was 3.3% and of passengers 5.6% during FY11 to FY14. In the
next five years too, in terms of the aircraft movements, passengers and freights, the aviation
sector is expected to grow, according to the Airports Authority of India (AAI). The job
market in this sector is also expected to improve in 2015 with a number of new airlines
coming up. Globally, it stands ninth in the civil aviation market. It ranks fourth in domestic
passenger volume. It has been reported that by 2020 the civil aviation market in the country
will become the world’s third largest and is expected to be the largest by 2030. This sounds
really good.
2.2 Factors contributing to the growth of the aviation sector
From an over-regulated and under-managed sector, the aviation industry in India has now
changed to a more open, liberal and investment-friendly sector, especially after 2004. The
civil aviation sector in India has moved into a new era of expansion. Some major factors
contributing to this are:
Higher household incomes
Strong economic growth
Entry of low cost carriers (LCC)
Increased FDI inflows in domestic airlines
Increased tourist inflow
Surging cargo movement
Cutting edge information technology (IT) interventions
Focus on regional connectivity
Modern airports
Sustained business growth and
Supporting Government policies
2.3 Some major threats to the Airline Industry:
A global economic slowdown negatively impacts leisure, optional and business travel.
The continuous rise in the price of fuel is a major threat.
A terrorist attack anywhere in the world can negatively impact air travel.
Government intervention can lead to new costly rules.
Operation of many airlines
Problems facing the aviation sector
High operational costs
High cost of aviation turbine fuel
High service tax and other charges
Shortage of maintenance facilities
High foreign exchange rate
Competition from foreign airlines
Congestion at airports
Lack of qualified pilots and technical manpower
2.4 The Road Ahead
The launching of the new airlines can be an aviation boom in the country as it will lead to an
increase in the number of flights, lower prices, more demand for ground staff and trained
crew, including a rise in finance and leasing activities. However, the real challenge of the
Indian aviation industry is to manage the unprecedented growth of air traffic with safety. The
increase in air traffic has raised the demand for aircrafts. But at the same time, it has also
posed a problem of modernising the airport and air navigation infrastructure so that safe,
efficient and orderly operations are ensured. There is an urgent need to study the causes of
the issues and address them so as not to obstruct the growth path of the aviation sector.
And we should remember that even today, access to aviation is still a distant dream for the
poor and the lower middle class sections of its vast population. So there is a large untapped
potential for growth in the industry as well. It is necessary for the stakeholders to engage and
collaborate with the policy-makers to implement efficient and rational decisions that will
shape the future of the aviation industry. With the right policies and a continued focus on
cost, quality and passenger interests, India would definitely be able to realise its vision of
becoming the third largest aviation market by 2020.
3. EXTERNAL ANALYSIS:
3.1 Porter’s Five Forces strategy for Airline Industry
3.1.1. Threat of New Entrants
Product differentiation: In low cost carriers, there is not much differentiation in the basic
service that is being provided to the customers. Differentiation can only be achieved by Value