A Case About Indigo Airlines

Topics: Airline, Indira Gandhi International Airport, Low-cost carrier Pages: 7 (2336 words) Published: February 5, 2011
AIR OF CONFIDENCE How Indigo went from being a small airline to a spunky player which took on aviation biggies to grab third spot in the market Tushar Srivastava

A decade ago, they were just another bunch of travel agents in a sea of similar Commission brokers. But Kabul Bhatia apparently knew how to make sense of the decades that his family-run busi¬ness, InterGlobe Enterprises had put in, doing the stuff and turning it into something bigger.

Barely five years after it started off as a humble budget airline that people hardly noticed, Gurgaon-based IndiGo Airlines has emerged as a big challenger in India's aviation industry, taking on deep-pocketed industry leaders Jet Airways and Kingfisher Airlines.

Its strategy to focus on some routes and maximize the impact of its limited fleet seems to have laid the ground for an ambitious takeoff. Earlier this week, IndiGo moved European stock markets when it announced the biggest commercial aviation deal in history.

Topping up an earlier plan to buy 100 planes with another 180 in the decade from 2015, Indigo unveiled a shopping bag for $15.6 billion (around Rs. 70,000 crore) to buy airbus aircraft that would power its ambitions to become an international airline.

Much remains to be seen in an industry which has seen many ups and downs, but one thing that could give Bhatia, 48 - an electrical engineer from the University of Ontario, Canada - an edge, is the intimate knowledge of deal¬ing with passengers day in and day out, unlike aviation entrepreneurs who came from unrelated backgrounds.

His father Kapil Bhatia was an early entrant in the travel industry. He began his career as a sales manager and in 1964 founded Delhi Express Travels, which gradually developed into a group of travel-related organisations.

IndiGo's growth story has many admirers. Kapil Kaul, South Asia chief executive officer of Centre for Asia Pacific Aviation's rates the IndiGo suc¬cess story higher than that of Jet Airways. "The competition faced by Jet wasn't as high as IndiGo, which faced a more competitive environment when it started operations. To make a prof¬it of Rs. 550 crore last year when others were struggling is huge. They will make massive profits this fiscal," Kaul said.

Headquartered in Gurgaon, InterGlobe has grown from a single enterprise to a formidable travel cor-poration and has a network of 52 offices across 23 cities in India and abroad and has a significant presence in the fields of aviation management, travel-relat¬ed services, travel technology, travel distribution services and hotel devel¬opment and management services.

Airlines have come and gone ever since the skies were opened up nearly two decades ago to private carriers. While East West Airlines and ModiLuft had glamorous starts that gave way to rickety landings, Jet seemed to be only one going steadily forward until Kingfisher arrived.

As it happened, the budget airline that fired the country's imagination, Air Deccan had bitten off more than it could chew and ended up as an appendage of Bangalore rival Kingfisher, while Jet gobbled up Air Sahara.

IndiGo, the country's largest low-cost carrier, in contrast, has behaved more like the tortoise in the proverbial race with the hare. From day one, it has behaved as nothing but a no-frills air¬line, and has focused more on walking than talking its way through the indus¬try. The efforts seemed to make a big mark last month when it edged past the decades-long state monopoly, Air India, to the third spot with a market share of 17.3% in the domestic industry. Jet has a domestic market-share of 26.2 per cent and Kingfisher 19.1 per cent, while Air India stands at 17.1 per cent.

When most airlines were in the red, Indigo announced a Rs. 550 crore profit in 2009-10 on a turnover of Rs. 2,664 crore. With a fleet of 84 Airbus A320 aircraft, it offers 221 daily flights connecting 24 destinations. It has an All-Airbus fleet comprising the...
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