STP STRATEGY ANALYSIS

The Indian Civil Aviation Industry, before the entrance of IndiGo, served
only the higher income group who could afford to pay hefty prices for
travelling. Since the very beginning, IndiGo catered to the needs of cost-
conscious customers. IndiGo considered the following segments:
SEGMENTATION  High income group, whose main focus is quality services
irrespective of charges involved
 Middle income group, who can afford to pay considerable amount
for the essential services availed
 Lower income group, who do not want any extra services.
IndiGo targeted the middle and lower income groups as their customers.
There were already many players who were catering to the needs of higher
income groups. In order to serve this target segment, IndiGo had to work
hard to reduce its fares.
In order to reduce its operational costs, IndiGo took the following steps:
• IndiGo had a single passenger class and also similar kind of airplanes
TARGETING to reduce training and service costs.
• IndiGo emphasised on direct sale of tickets online in order to reduce
commission paid to travel agents.
• IndiGo focussed on on-time performance and quality of service to
add value to the customer experience.
Since the customer base was huge under this target audience, IndiGo could
acquire a good amount of market share.
IndiGo has positioned itself as a low cost and no-frills airlines. By offering
only the most important and basic needs, IndiGo has been able to maintain
the low fares for the last twelve years. IndiGo is known for its on-time
performance and providing quality services to its customers.
IndiGo resorted to measures like homogeneous fleet and outsourcing to enter
POSITIONING
the low-cost carrier market in the Indian Aviation Industry.
In the year 2008, IndiGo won the title for ‘Best Domestic Low Cost Carrier’
airlines. IndiGo continues to fly high with a fleet of 186 aircraft including 47
new generation A320 NEOs, 127 A320 CEOs and 12 ATRs and 10
consecutive years of profitable operations. [3]
 PESTLE ANALYSIS
POLITICAL
1. UDAN is a regional airport
development and "Regional
Connectivity Scheme" (RCS) of
Government of India which is aimed at
making air travel affordable and
widespread.
2. The open sky agreement allows the
government to enter into air services
agreement with different nations. In
2018, it has signed the Open Sky
agreement with Japan and Australia
which allows the carriers to mount
flights to selected cities in each other’s
country.[5]
3. Last year, the government announced
an investment of Rs.17,000 crore to
upgrade airport infrastructure. Better
airports attract a large customer base.
4. India has decided to allow overseas
entities to own 100% in domestic
airlines as it seeks greater FDI inflows
into the country. The 100% FDI could
make Indian airlines interesting to
foreign capital markets that could
support initial public offerings
SOCIAL
1. The number of employees at Indigo
has risen from 3,400 in 2011 to
around 15000 in 2017 (increasing
employment opportunities)
2. Staff misbehaviour with the
customers affect the brand of the
airlines and tarnish its image.
3. Terrorism is a constant threat to the
aviation industry and such incidents
have a huge impact on the public
consciousness.
4. India is one of the youngest
population in the world and its
consuming class with increasing
disposable income is a source of great
market value.
ECONOMIC
1. Sharp increase in the crude oil prices
has resulted in rise of the Aviation
Tribune Fuel prices.[6]
2. Travel and tourism industry is
expected to grow by 7.9% per annum
by 2026.
3. With the growth in the economy and
stability of the country, India has
become one of the preferred locations
for trade and commerce activities
hence increasing scope to target
travellers.
4. Hike in average income of Indians has
increased the spending capacity of
customers and they are willing to travel
by air to save time.
TECHNOLOGICAL
1. IndiGo planes are equipped with a
digital link system for transmission of
short, simple messages
between aircraft and ground stations
via radio or satellite referred to
as Aircraft Communications
Addressing and Reporting System
(ACARS).
2. Indigo moved its ticket booking
process to online platform thus
negating the role of travel agents
which acted as middlemen earlier
enabling the end user customers to
avail services at a cheaper price.
3. IndiGo airline is looking at an
overhaul of strategy, shifting gears
from having a single aircraft variety
to wide-body aircraft for long-haul
operations.
 LEGAL
1. Different legal frameworks in different
countries play a crucial role in an
airlines’ growth plans across the global
market. With India signing Open Sky
agreement with more number of
nations, there is immense potential for
growth.
2. The number of lawsuits against
airlines from workers as well as the
customers has gone up which has
impacted the aviation industry’s
relationship with the flyer.
3. The Directorate General of Civil
Aviation recently ordered the grounding
of 11 Airbus A320 neo aircraft for
recurring mechanical problems, forcing
budget carrier Indigo to cancel 47
flights on various routes.
IndiGo Airbus A320 Neo
ENVIRONMENTAL
1. Pollutant emissions from craft at
ground level are increasing with craft
movements.
2. Noise pollution causes interference
with communication, sleep disturbance,
annoyance responses, learning
acquisition, performance effects and
cardiovascular and psycho-
physiological effects.
3. Usage of non-renewable resources by
airplanes is one thing that cannot be
stopped but their excessive usage can
lead to their depletion.
 Five Forces Analysis

Threat of new entrants

The threat of new entrants for IndiGo is low due to the following reasons:
 Low product differentiation: New entrants cannot make major difference in their product in
the aviation industry. Differentiation can only be achieved through services.
 High capital requirements and variable costs: Entering the airlines business involves heavy
investment. Even after setting up the business, variable costs like fuel prices etc. are very
high.
 Lack of Resources: Shortage of Airline pilots due to lack of training facilities, decade-old
aircrafts and poor-quality training offered at higher price doesn’t make it easy for new
entrants.
 Stringent Indian Civil Aviation Policies: Incompliance with regard to safety and security
arrangements stipulated by the Director General of Civil Aviation (DGCA) and the Bureau of
Civil Aviation Security (BCAS) may lead to heavy penalties.

Bargaining power of Suppliers

The bargaining power of suppliers is high because:
• Supplier Industry Dominated by few firms: There are two major suppliers in Airline
Industry Airbus and Boeing. There are other suppliers like Bombardier, Embraer, ATR but
they are unable to provide high volume of single configuration fuel efficient aircrafts, that low
cost commercial aircraft carriers like Indigo airlines requires. Hence, suppliers are in better
position to bargain.
• Limited number of ATF suppliers: There are only four suppliers IOC, Hindustan Petroleum
Corporation, Bharat Petroleum and ONGC for ATF which makes the supplier price-makers.
• No substitutes and high dependability on suppliers: As there are very less number of
suppliers, the substitutes for supplier product are not available which gives an upper edge to
the suppliers.
Bargaining power of Buyers
The bargaining power of buyer is low because of following reasons:
• Large number of buyers: Number of buyers in airlines industry are large and highly
fragmented thus lowering their power .With the growing Indian economy and increasing low
cost carriers, the bargaining power of buyers has reduced.
• Undifferentiated product: There is very little scope for differentiation in terms of product
and services in the aviation industry.
• Switching costs: Due to the availability of close alternatives, switching cost for buyers is
minimal.
• Backward integration: Backward integration from the buyer’s end is very difficult.

Threat of Substitutes
The threat of substitutes is high due to the following reasons:
• Availability of other low-cost airlines: A number of other low-cost carriers like SpiceJet and
Go Air are available.
• Low switching cost: The switching cost between low cost carriers is low which makes it easy
for buyers to switch from one airline to another.
• Alternative modes of travel: Availability of other mode of travel like train at affordable
prices and comparable travelling time are extensively used by commuters.

Competitive Rivalry
There exists a cut-throat competition among all the airlines.
• Limited scope of products and services differentiation: There is very little differentiation
between competitors’ product and services.
• Customer poaching: To compensate for the slow growth of airline industry the competitors
prefer to steal other airline customers through attractive offers and competitive pricing.
• Highly competitive pricing: As there is limited differentiation between competitors’ product
and services, the pricing is done aggressively.
• No customer or brand loyalty: Due to low switching cost, customers generally prefer to
look out for a better offer and value-added services in place of sticking to a particular airline.
 SWOT ANALYSIS
Strengths
1. The airlines has been efficient and maintained its low-fare with focus on detail and quality
services.[7]
2. IndiGo is the only low-cost carrier to make consistent profits.
3. IndiGo has a highly efficient management that ensures high rate of on-time arrivals and being
synonymous to ‘on-time’ image has helped IndiGo to acquire more customers. [8]
4. With the successful implementation of low cost strategy, IndiGo has proved itself as a cost
leader.
5. Use of advanced technology for transmission of short, simple messages between aircraft and
ground stations via radio or satellite called Aircraft Communications Addressing and
Reporting System (ACARS)
6. IndiGoReach has undertaken a lot of initiatives for the empowerment of women and weaker
sections of the society making it a socially responsible company.
7. Continuous innovation to improve on non-price factors through creative marketing and
advertising strategies
Weaknesses
1. IndiGo largely depends on consistent volume for its profits. In order to ensure consistent
profits, IndiGo cannot let itself affect by fluctuations in demand
2. Compared to its competitors, IndiGo still has many routes undiscovered.
3. Scope of product differentiation is less.
4. IndiGo has had 3 in-air engine failures and 69 replacements in last 2 years. [9]
5. The international market for IndiGo is still untapped.

Opportunities
1. Indigo is expecting an addition of 448 more aircrafts by the year 2026 which can help it to
operate on routes which are not covered by its competitors. [10]
2. The increase in the number of Indians willing to travel abroad is a great opportunity for
IndiGo to expand.
3. Another profitable segment for IndiGo airlines can be the charter plane services.
4. The cargo services are growing at an increasing rate and Indigo can tap the international cargo
market.
5. IndiGo airlines can to take good advantage of air freight market which can contribute to a
large portion of their revenue.

Threats
1. Increase in Aviation Turbine Fuel price up to 30% has led to an increase in the operating
costs.[6]
2. Shortage of pilots, co-pilots and ground staff has limited the growth aspects for most of the
airline companies.
3. Tough competition from brands such as Jet Airways, Indian Airlines, Air India, etc.
4. Trustworthiness on the company may be affected due to rumours and excessive interference
of media
5. Changes in government laws, fuel prices, tourism laws etc. adversely affect the day to day
working
6. Barriers to exit the airline industry are high due to the high capital investment and
government restrictions