Indigo Airline Casestudy

Topics: Arvind Mills, Low-cost carrier, Airline Pages: 23 (6824 words) Published: April 21, 2012
Come September, budget carrier IndiGo will press ahead with its boldest move since... inception. India's fastest-growing airline will launch its first international flight from Delhi to Dubai on September 1, followed by flights to Bangkok and Singapore from Delhi and Mumbai.

In many ways, it will be a pivotal moment for the five-yearold carrier. IndiGo has built its success on a signature cocktail of clipped costs, a squeaky-clean reputation for punctuality and hassle-free services, rapid expansion into new routes and of course, its bread-and-butter affordable fares.

Now, as it prepares to start international flights, some profound shifts are taking place in not only the airline's core operations but also the Indian aviation industry.

IndiGo has never been squeamish about expansion, but the fervour with which it has burst into the international skies is certain to unnerve even bigger rivals.

With typical bravura, the carrier announced a promotional offer of `9,999 for the foreign routes though the flight schedules are still subject to regulatory approval. In January, again with an eye on expansion, IndiGo said it will buy 180 planes from Airbus for an estimated $15.6 billion - the order was finalised on Friday at the Paris Air Show - in the largest jet order in commercial aviation history.

Now, IndiGo is mounting efforts to replicate its tried and trusted domestic model in the international routes, according to three people familiar with the airline's operations. Even so, analysts are questioning whether the airline can sustain its singular operating style in a fiercely competitive new market.

Or for that matter, whether its formidable reputation in the domestic market will be a springboard for success in the international market as well.

New Game, New Rules

"Flying international is a completely different ball game," says Mark D Martin, an aviation industry veteran, who previously headed low-cost carrier SpiceJet's strategy. "IndiGo is known for its consistency and an efficient business model that give it an edge in the hotchpotch domestic aviation market, but the global market is an uncontrolled environment where it will be dealing with different procedures, regulations and cultures," says Martin, who has advised the Directorate General of Civil Aviation and spearheaded the operations of foreign airlines in Rwanda, Saudi Arabia and the UAE.

IndiGo happens to be a late entrant in a market where full-service and budget carriers have established a strong footprint. In Dubai, it has to match wits against the UAE's flagship airline, Emirates, which offers 184 flights a week to India, and FlyDubai. In others, it will face competition from Singapore Airlines and low-cost rivals such as Air Asia, Tiger Airways and Air Arabia. Domestic competitors too are spoiling for a fight.

Hot on the heels of IndiGo's bigbox fleet announcement came an order from bigger rival Jet Airways for 10 A330s planes worth $2.5 billion. Low-cost carrier SpiceJet , owned by Sun Group's Marans, has ordered 30 Airbus planes valued at $2.7 billion and 15 more planes from Bombardier for $500 million. Wadia Group-promoted GoAir has ordered 72 planes for $7.2 billion.

SpiceJet, which flies to Kathmandu and Colombo, is also due to start flights to "South Asian and West Asian countries by August or September", the airline has said. GoAir will start international operations from 2013, says the airline's sales general manager, Praveen Nair.

Aviation watchers and company insiders also expect a slugfest of fares in the market with nearly every airline due to lower ticket prices. Competition is going to rise and it is not going to be easy for anyone," says a senior Air India official asking not to be named. The national carrier sharply reduced airfares than even budget carriers on select domestic routes after a crippling pilot strike recently.

Safe Bet

For its part, IndiGo will clone its domestic model, which has...
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