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    Microeconomics - Group - 5 Section - F

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    Shivam Tripathi
    Indigo Airlines has monopolized the Indian skies by gaining a 40% market share as of 2018 through competitive pricing, innovative aircraft management, strategic flight expansion, and building customer loyalty. It offered the lowest airfares in India, maintained an all Airbus A320 fleet to reduce costs, added new flight routes every 6 weeks, and prioritized on-time performance to attract customers. Through economies of scale with over 160 aircraft and daily flights across India and internationally, Indigo achieved significant cost reductions to dominate the aviation industry.

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    Microeconomics - Group - 5 Section - F

    Uploaded by

    Shivam Tripathi
    22 views17 pages
    Indigo Airlines has monopolized the Indian skies by gaining a 40% market share as of 2018 through competitive pricing, innovative aircraft management, strategic flight expansion, and building customer loyalty. It offered the lowest airfares in India, maintained an all Airbus A320 fleet to reduce costs, added new flight routes every 6 weeks, and prioritized on-time performance to attract customers. Through economies of scale with over 160 aircraft and daily flights across India and internationally, Indigo achieved significant cost reductions to dominate the aviation industry.

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    Indigo Airlines has monopolized the Indian skies by gaining a 40% market share as of 2018 through competitive pricing, innovative aircraft management, strategic flight expansion, and building customer loyalty. It offered the lowest airfares in India, maintained an all Airbus A320 fleet to reduce costs, added new flight routes every 6 weeks, and prioritized on-time performance to attract customers. Through economies of scale with over 160 aircraft and daily flights across India and internationally, Indigo achieved significant cost reductions to dominate the aviation industry.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    22 views17 pages

    Microeconomics - Group - 5 Section - F

    Uploaded by

    Shivam Tripathi
    Indigo Airlines has monopolized the Indian skies by gaining a 40% market share as of 2018 through competitive pricing, innovative aircraft management, strategic flight expansion, and building customer loyalty. It offered the lowest airfares in India, maintained an all Airbus A320 fleet to reduce costs, added new flight routes every 6 weeks, and prioritized on-time performance to attract customers. Through economies of scale with over 160 aircraft and daily flights across India and internationally, Indigo achieved significant cost reductions to dominate the aviation industry.

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    of 17

    INDIGO

    AIRLINES:
    MONOPOLIZING
    INDIAN SKIES 
    GUIDED BY – Dr. Binilkumar Amarayil Sreeraman
    SUBMITTED BY : Group 5
    SRIJAN GAUTAM 2202225
    SRINABH 2202226
    SUBHAM PATRA 2202227
    SUMANTA BANERJEE 2202228
    SUMIT KUMAR 2202229
    SURAJ KUMAR 2202230
    SWAGAT SHOVAN 2202231
    Group 5 TALELE ADVAIT NITIN 2202232
    TANISH GANESH MESHRAM 2202233
    TANMAY BORA 2202234
    SUMANT JHA 2203016
    SUSHIL CHANDRA MARDI 2203017
    MANU PILLAI 2203018
    • The Indian Civil Aviation Industry was opened in
    1991, post which private players were allowed to
    enter the market.

    Indian • Government owned Indian Airlines and Air India


    enjoyed a monopoly in the market until 2002.
    Aviation • Due to liberalization many players attempted to
    enter in market.
    Sector • In 2018, the Indian aviation market was the seventh-
    Overview  largest in the world in terms of passengers carried.
    • In India, the domestic aviation sector had been the
    fastest growing in the world.
    • Some of the major players include names like Indigo,
    Jet Airways, Kingfisher Airlines, Air India, Vistara
    • Characteristics:
    • Large number of consumer (passengers and
    cargo)
    • Small number of airlines with significant market
    Indian share

    Aviation • Cost barriers to market entry


    • Differentiated services
    Sector • Competitive firms affective each others business
    Overview  decisions

    • These characteristics indicate an oligopolistic market


    structure
    • Due to government regulations, airlines had to
    fly financially unattractive routes which led to
    losses.
    • Lack of onward connectivity and an erratic
    occupancy rate posed major challenges to
    Challenges achieving operational efficiency for most
    players.
    faced in the • The maintenance, Repair, and Overhaul (MRO)
    industry industry is not well developed in India; to
    provide for cost-effective maintenance of
    Aircrafts
    • Declining Yields: Commercial liberalization has
    led to intense competition and reduction in real
    yields for Airline companies
    MAJOR PLAYERS IN INDIAN AVIATION MARKET

    Growth of Indigo & Its competitors


    IndiGo Jet SpiceJet Air India
    Airways
    Kingfisher GoAir Others
    Airlines
    45
    40
    35
    30
    25
    %

    20
    15
    10
    5
    0
    2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
    Years
    CIVIL AVIATION MARKET, AIR CONNECTIVITY, AND
    PER CAPITA INCOME OF SELECTED COUNTRIES 

    Size of Aviation Geographical Number of Per Capita


    Market Area (in Cities with a Income in
    Country (Passengers Square Population of US$PPP Population
    (Thousands)
    Carried) Kilometres) 500,000+ 2017–18
    United States 762,560,000 9,526,468 34 $62,152 328,434
    China 390,878,784 9,572,900 197 $18,066 1,396,982
    United Kingdom 125,068,988 242,495 13 $45,565 66,466
    Japan 110,544,000 377,930 28 $44,426 126,491
    Germany 107,587,503 357,114 12 $52,801 82,838
    Brazil 100,403,628 8,515,767 40 $16,199 209,205
    India 82,751,555 3,287,263 93 $7,783 1,334,221
    Russia 72,189,961 17,098,246 37 $28,957 143,965
    France 63,434,263 640,679 3 $45,473 65,098
    GROWTH IN DOMESTIC PASSENGER TRAFFIC IN INDIA, 2006–2018
    INDIGO: THE COMPANY 

    • IndiGo, headquartered in Gurgaon, India is the largest airline in terms


    of passengers flown with market share of 40% as of 2018.
    • It was set up in early 2006 by Rahul Bhatia of InterGlobe
    • 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
    • The airline currently operates a fleet of 109 planes and offers 679
    flights a day.
    INDIGO - UNIQUE SELLING PROPOSITION

    • IndiGo offered the lowest airfares and professional customer service,


    enabling India’s middle class to afford air flight.
    • Efficiently reducing flight delays, ensuring more than 95% on-time
    performance in arrival and departures, meeting its tagline "On-time is a
    wonderful thing".
    • Dealt with cancellations, with having lowest flight cancellation rate (just
    0.38%)
    • Product homogeneity and focused on one type of airplane
    INDIGO - PROFITIBALITY STRATEGIES

    Competitive Pricing Innovative Aircraft


    Strategy Management Strategy

    Flight Expansion Building Loyal


    Strategy Customer Base
    COMPETITIVE PRICING STRATEGY

    • Dynamic Pricing (DP) allowed prices for the same service to change according to customer,
    time, aggregate demand, and other situation-specific parameters.
    • Customer loyalty was minimal due to product homogeneity in aviation sector, so price
    discrimination through DP was to shift loyalty of customers in order to attain a higher
    occupancy rate.
    • IndiGo leveraged the benefits of DP to take advantage of highly price-conscious customers in
    the Indian aviation market, where demand was still inelastic given the low penetration rates.
    • The efficacy of IndiGo’s DP contributed to its rising market share and average operating
    revenue per passenger kilometer (an increase of 68% in its operating revenue per 1,000
    passenger kilometers since 2007–08). 
    INNOVATIVE AIRCRAFT MANAGEMENT STRATEGY

    • IndiGo operated on a leaseback model, receiving a new fleet every three


    to four years until 2032 (average fleet age – 4 years).
    • Maintaining a single configuration aircraft helped IndiGo reduce its
    training and maintenance costs.
    FLIGHT EXPANSION STRATEGY

    • IndiGo followed unique expansion strategy, adding new flight every 6


    weeks with testing routes for operational and financial viability,
    establishing a foothold and then expanding to other routes.
    • Followed bulk order purchasing which were delivered in phased manner
    to take advantage of lower prices of flights.
    BUILDING LOYAL CUSTOMER BASE

    • IndiGo built a loyal customer base by providing:


    1. On-time arrival and departures
    2. Good connectivity
    3. Consistent services
    4. In-flight meals
    • IndiGo used the Aircraft Communications Addressing and Reporting System to monitor the
    arrival and departure times of IndiGo aircraft to ensure transparency
    • IndiGo became the preferred choice of airline because of its reputation of on-
    time performance and the great psychological boost it gave to their self-
    esteem with its offer of classless yet efficient services.
    Source of IndiGo’s economies of scale

    IndiGo had developed a fleet of 161 aircrafts. In


    2015, it operated 818 daily flights across 40
    Indian cities and five international
    Using economies of scale the average costs per destinations. Since its entry, IndiGo had used a
    unit of output decrease with the increase in the single-class configuration14 aircraft—the 180-
    scale or magnitude of the output being seat Airbus A320-200. Thereby running
    produced by a firm. multiple price efficient flights on highly dense
    routes with the same kind of aircraft to reduce
    net spent on maintenance and overhead
    charges and increase working efficiency
    Thank you

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