Managerial Economics

Welcome On board

Indigo Airlines
By
Swarnim Solanki
(PGP16030)
Parijat Shrivastava
(PGP16029)
Naveen Bharadwaj

Introduction
Indigo Airlines (InterGlobe Aviation Ltd.) is a low cost
airline based in Gurgaon
Indigo was founded by Rahul Bhatia and Rakesh Gangwal
in 2006
The company went public in November 2015
Indigo is the fastest growing airline in India and is also the
most profitable airline
USP for Indigo is its unmatchable commitment to on time
arrival

CONSUMER
PROFILE
Basically targets the segments :
Business travel
Cargo services
People travelling for leisure or holiday plans
Low cost airline supporting the dreams of the
middle class to fly
Cost conscious passengers

COMPETITORS

Factors affecting Demand

Stuck to low cost
single class model
Selling and leasing
planes

Its all about

consumer focus
Using technology
smartly
Quality and detail
key to good service

Factors Affecting
Supply
Price of goods
Price of related goods
Price of inputs
Government policies and
regulation

Aircraft

In Service

Orders

Passengers

Notes

Airbus A320-20
0

106

180

Airbus A320ne
o

423

180

First delivered
on 11 March
2016[39]
Some orders
convertible to
A321neo[
citation needed]

Total

113

423

Airlines

Prices

Indigo

Rs 2539/- to Rs 3767/-

Air India

Rs 2960/- to Rs 4005/-

Jet airways

Rs 2963/- to Rs 3949/-

Vistara

Rs 3521/- to Rs 5306/-

Demand and Supply

It is a case
where both
demand
and supply
increases
without
change in
price

Economies of scale
What we have observed
from demand and supply
that we are increasing the
quantity thus we can say
that indigo is moving
towards the point where
they will have minimum
average cost

Market Share

Company with market share(out of

1)
Indigo = .3669
Jet group = .2248
Air India = .1648
Spicejet = .1163
GoAir = .0855
Others = .0421

W i2
.1346
.0505
.0271
.0135
.0073
.0018

2016

2015

2014

2013

2012

39.8%

36.69%

31.6%

29.8%

27%

HHI=2348
Concentration Ratio=.8728
Apart from that we can say
that the market is
oligopolistic having a few
large players with some
small players as well.

Substitution
The price at which indigo flight is being offered Substitute for Indigo airlines
can be considered as Railways if compared on the basis of the price.
But railways has certain shortages and constraints and hence cannot be
considered to be as the strong and direct substitute as it fails in few important
factors such as:
1. Time, as railways cannot beat airlines on time saving and convenience.
2. Next is the prestige or the status perception of the customers.
.Hence considering this fact other low cost carriers such as Go Air, Spicejet
can be considered as direct substitutes for Indigo as all these airlines almost
operates at very similar low cost offering and also the switching cost being
very low the threat of direct substitutes very high it is just because of
companies earned brand image and few better offerings Indigo is above its
substitutes and competitors .

Product Differentiation
Being from the sector that it is serving, in low cost
carrier there isnt much differentiation in the basic
amenities and services that are provided to the
customers.
Differentiation can
business approach

be

achieved

by

some

unique

Additional Value added services can make the

difference here, so as in case of Indigo we have VAS
such as:
1. Special Fares and good
students, army personnel.

discounts

for

2. Personalized and hassle free ground services.

3. Check-in Kiosks

families,

Pricing Strategy
Its whole fleet consist of Single type of aircraft Airbus
A320.[1]
Only Economy class offering.
Less then 5 years of average fleet age.[2]
Fuel saving and efficiency techniques such as fuel
hedging.[3]
Proper Route Planning, its fleet of around 114 flights
operates only at 40 destinations which is very less
compared to competitors.[4]
Maintenance contracts with Lankan Airlines for
maintenance.[5]
1) http://www.dgca.nic.in/operator/sch-ind.htm (22-06-2016)
2) https://www.goindigo.in/about-us.html
3) http://www.airbus.com/presscentre/pressreleases/press-release-detail/detail/indigo-becomes-the-first-indian-airline-with-sharklet-equipped-a320/(28 Jan 2013)
4 )http://www.marketing91.com/marketing-mix-indigo-airlines/ (July 7 2016 )
5) http://www.telegraphindia.com/1140425/jsp/business/story_18276757.jsp#.V96vEZh9600 (April 2014)
6) http://www.business-standard.com/article/companies/what-keeps-indigo-s-profit-flying-high-113100901248_1.html (October 2013)

Advertising
Spending on Advertising is very less with
almost last TVC coming out on 2011.
Mainly focused on word of the mouth marketing
by providing Fantastic customer experience.
Mainly Hoarding advertisement with main
highlights on low cost and on time
performance.
Magazines and social media advertisment,.
Collaborating with banks, online tickets
provider to give away special offers.

Role of government in aviation

sector
Govt recently launched the new Civil Aviation Policy
Objective is to connect the unconnected.
Customers have to pay Rs 2500 for an hour flight.
Scrapped the rule of 5/20.

Impact of GST on Aviation Industry

Air Turbine Fuel (ATF) amounts to 40% share in
operational cost.
Before GST-:

Central Government- Excise Tax

State Government- VAT(upto 30%)

Service tax-: 6%( Economy class) and 9% ( Non

Economy)
Multiple taxes on
Price

ith

ta
w
MRO activities
are
t
ve
en
r
s
re
cu
p
ly
p
i th
p
w
Su t
e
rv
gs
u
C
y re
l
p u
p
t
Su ruc
st

Quantity

likely to be scrapped.

Thank You

On Time DELIVERY