H4G9 – Great Lakes Institute of Management

IndiGo Airlines: Market Plan

Executive SummaryIndia’s best performing Low Cost Airline in

terms of profitEstablished in 2005 as a subsidary of

Interglobe InterprisesA fleet of 30 aircrafts making 170 flights

daily, across 22 destinations in IndiaPlans to acquire 125 new aircrafts by 2025Plans to serve 100 cities in India, South East

Asia, Middle East and China by 2025

The IndiGo Dream…

Why IndiGo ?Emergence of the Great Indian middle class

willing to spend money for swifter travelFor the Individual on the Go,who values time

and on- timlinessBudget travel is not cheap travel, Quality of

ServiceMission Statement :To be the best Airline in India by providing the following values to the customer:

- Affordable Fairs- Ontime performance- Hasslefree Service

Situation Analysis

Open Sky Policy Deregulations in different spheres Low entry barriers to attract new

companies FDI limits

49 % for airlines 100% for airports Extensive airports development

planned

Macro Environment Analysis: Political

Rising income of middle class GDP growth of more than 8% and

expected rate in two digits Average salary increase highest, 14% in

the world Tourism industry growth: 6 % in 2009

Macro Environment Analysis: Economic

Macro Environment Analysis: Technological Modernization of Airports Better handling of Aircrafts, passengers

& cargo Developing Greenfield airports with

Corporate collaboration

Rising middle class: 1993 - 1999 : 39.5 to 56.7

million households 2005: 300 million

households 2010: 400 million

households (Estimated)Leisure travel increased by 15 % in 2009Number of foreign tourists in 2009-2010:

5.1 millionStatus symbol to travel in plane. Glamour.

Macro Environment Analysis: Social & Cultural

Changed travelling pattern of consumersHighest percentage people in age group

20-25Educational environment being improvedShift towards nuclear family concept

increases travel frequencyMiddle class income above Rs.90,000 pa

(Source: NCAER)High energy cost. The cost of ATF in India

for domestic airlines is almost double than that in the international market

Macro Environment Analysis: Demographic

SWOT Analysis

Strengths• High Brand

Awarness• Cost

Leadership• High

Efficiency• Innovation• Tie Ups• Hassle Free

Weaknesses• Less

Differentiation

• Too many players

• Short lived innovations

• Untapped domestic cargo segment

Opportunities• Freight

market• Increased

Domestic Air traffic

• International Markets

• Chartered services

• Regional connectivity

• Airport upgradation

Threats• High ATF

prices• Competitors• Economic

Slowdown• Poaching• Government

policies• Scarcity of

pilots• Cost inflation

Segmentation, Target & Positioning

People for Buisness

travel

Cargo Services

Charter Airways

Leisure travel/Hol

iday

People for Buisness

travel

Leisure travel/Holiday

New Market Expansion•Kolkata, Bodhgaya, Patna, VaranasiBuddhist Circuit

•Chennai, Madurai, CoimbatoreTamil Nadu •Vijaywada, VishakhapattnamAndhra Pradesh

•Bhopal, Raipur, Indore Madhya Pradesh

•Belgaum, MangaloreKarnataka•Chandigarh, AmritsarPunjab•Port BlairAndaman

Geographic- Region, Rural and Semi-urban areas

Demographic- Income, Occupation, Education

Psychographic- Socioeconomic Classification, Lifestyle

Behavioral- Occasions, Benefits, Usage Rate

Basis for Segmentation

Socio-economic revolution is underway. Increase in income of Middle class and increase

in volume of affluent sections of society.

Additional Characteristics of Target Market

Strategic Focus and Plan

One type of airplane - brand-new Airbus A320s

One type of fare - lowOne type of customer service -

professionalOne type of route - serving destinations

within IndiaOne way to deal with delays and

cancellations – honestly

Core Competencies

Sustainable Competitive Advantage

Resources

Aircrafts

Human Resources

Brand Equity

Social Capital

Employee relationship

Fuel

Value

High

High

High

High

High

Costly to Imitate

No

No

Yes

Yes

No

No

Easy to substitut

e No

No

No

No

No

No

Be visible – go all out to project yourself as the Future Market Leader

Go Local – Connect with the Middle classFocus on your Core Competencies and

market themAim to compete with Railways in the long

run

Market Strategy

Market Research The Five Indian Flyers: Market Share (Mar 2008)

14.7%

11.9%

23%26%

17.8% IndiGo

spiceJetKingfisherJET AIRWAYSAIR INDIA

The Five Indian Flyers: Business

The Five Indian Flyers: Financials

The Indian Flyers: Customer Satisfaction

Consumer Preference

Competitive ForcesHighly Volatile Oil Prices

Multiple Market Players

Limited Price Ceiling

Threat from Potential Entrants

Highly Competitive

Prices

Market Penetration and Price DifferentiationPricing Strategy

Low Cost And High Quality of ServicePrice to be diffrentiated with respect to

days before the travel.High seating density and load factor.No frills such as ‘free’ food/drinks or

loungesTargeting segments locally based on

seasons and festivals

Components of PricingBase FareUser development Fee (based on airports)Air Fuel Surcharge (Variable on ATF Prices)Passenger Service FeeLoad Factor ( Average Seat Per Mile)Ticket booking prior to travel based on

number of days.

Price DeterminationKolkata to Bodhgaya/ Chennai to Coimbatore (425 KM):

1) Passenger Service Fee Rs 2252) Fuel Surcharge Cost

ATF Prices Rs 47843.50 / KLAverage seat capacity 180Load factor 70% (125-135 occupancy) Average mileage 2.9625 L/ km ATF cost per passenger Rs 480 Crew members 2 pilots + 4 airhostess (Rs 6.5

lakhs/100 hours) = Rs 52/ person

Capital cost Rs 2.25 Crores/ month as cost of the Plane (Maintenance + Insurance)

Assuming 1 flight per day Rs 1466 So overall the Fuel surcharge

Cost per seat Rs 480+ Rs1466+ Rs52 = Rs 2008 3) Base Fare : Minimum Base fare of Re 101 which would change based on the days booked prior to Travel

Price Differentiation of Base fare based on day of booking prior to Travel

More than 15 days prior to travel• With other

fixed, Base fare would vary 101-501

Within 14 days of Travel• The Base fare

could upto reach upto 1500s

With in 7 days of travel• The base fare

could reach upto 4500

Promotional StrategyCommunication Objectives-Indigo will be promoting the below three things majorly as part of its advertising programme-On-time performance , Affordable fares and Hassle free passenger experience.

Advertisement StrategyHoardings at airports with focus on Best on

time performanceAdvertisement through social networking

medium-Facebook,Twitter,YouTube etcCollaboration with Multiplexes in major

cities to promote the airline and its special offers

Advertisement hoardings in multi-storeyed buildings and offices

Advertisements in magazines targetting Urban population

Advertisement Strategy contd..Sponsering fashion shows, talent hunts, New

Year parties etcCollaboration with consumer banks, credit

card companies, hotels, ticketing websites to promote special offers, discounts and cash back

Giving IndiGo promotion a local flavour by promoting in regional languages in respective sectors

Sending special offer details to frequent fliers by sms, email etc

Targeting foreigners in Tourist circuits

Advertisement through Social Media

The IndiGo AdvantageMultiple Short haul point to point flightsUsing only one type of aircraft to minimize

Maintenance overheadsLean Operating Strategy to maximize

efficiency Minimum turn around time, keeping Aircraft

in air for most of the timeEmployee welfare and resultant loyaltyMaking Low budget flying a pleasant

experience

References

IndiGo Airline - www.goindigo.com Interglobe – www.interglobe.com India Ministry of Civil Aviation -

http://civilaviation.nic.in India Directorate of Civil Aviation - http://dgca.nic.in Airport Authority of India - www.airportsindia.org.in Wikipedia – www.wikipedia.org Bureau of Civil Aviation Security (India) –

http://bcasindia.gov.in http://www.ibef.org/industry/aviation.aspx Outlook Magazine Indian Railways www.indianrail.gov.in

Thank You

- Priyank- Purnendu- Rachna- Rahul Raj- Rahul Jain