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HOW INDIGO ESCAPED THE BLUES

INTRODUCTION While trying to provide an insight into the practices in India’s airlines industry, there has been a question, “Why Indigo escaped the blues?” This question clearly meant reasons why IndiGo airlines managed to come top its big competitors in customer service performance and finally overtakes them in the market share. Many people have tried to revise the question and pointed out different reasons why really this baby airline is out-competing these giants in the market. The likes of Air India, Jet airways,  and Spice jet. According to the Centre for Asia Pacific Aviation, in all the past years since IndiGo came into existence, Aviation industry as a whole has been facing huge losses. The reason is not Indigo but losses incurred by other carriers. Let us not look too far back. The best instances are: in the fiscal year 2011, Indigo IndiGo had a growth of almost 40 per cent in revenues and made profits of more than Rs.650 crore, that year, with the exception of Spice Jet, all other Indian airlines faced losses. And in 2012, 30 flights were grounded by Kingfisher Airlines and cancelled more than 50 per cent of its scheduled departures. The aviation industry faced a loss of at least Rs.7, 700 crore in the same year. As all these losses happen with these giants, India remains though unexplored and potential market for the industry to grow 8 times more in 2020. That is huge business for which all the points are now being scored by only one player that is IndiGo. While all other airlines flounder with frozen accounts, massive losses and grounded planes. According to the directorate General of Civil Aviation, in May 2011, both January and February, IndiGo handled over 1.1 million passengers for the first time and has replicated these digits several times. It is quite clear to everyone one on this globe, that, ” if anything is done well, people will notice” once noticed, they will examine an inspect critically. And chances are, they will wait for you to take a dark passage. Not only India, but the whole world is watching the unbelievingly, as this 8 year baby in the business wins the race while in its early stages of walking. While reviewing Mr. Prashad Maskara’s answer to the question, and all other necessary publication, as well as consultations done to some customers of the carrier, it does not require much time to conclude that the following are the main reasons as to why only IndiGo is climbing all the stare cases. Amazingly indigo was founded early 2006 as a low cost carrier by Mr.Rakesh Gangwal and Mr.Rahul Bhatia of  InterGlobe  Enterprises, with InterGlobe as the parent company holding 51.2 per cent of the stake while 48 per cent held by Rakesh Gangwal’s  Caelum Investments, a Virginia, company located in US. And now belongs to Rakesh Gangwal and Rahul Bhatia each holding 50 per cent shares. With IndiGo, “low cost does not mean low quality” is this correct to be followed? The answer is “Yes” because it is a lesson that this low- cost carrier has learnt so well and used it efficiently to attain the highest goals. Staying focused According Kapil Kaul, regional head, Centre for Asia-Pacific Aviation (CAPA), What IndiGo has played just right is getting sharp focus “on-time performance, clean and neat aircraft, and good service”. Even before starting operations in mid-2006, Indigo placed a firm order for 100 Airbus A320 aircraft in June 2005, an order that gave it a huge pricing advantage. It followed this up by adopting, for the first time in India, the sale and lease-back arrangement, under which it sells planes back to a leasing company, keeping its balance sheet light and its fleet younger. The airline then acquired parking lots in Delhi and Mumbai and, by the time the first Indigo flight was announced, it had already scheduled the first 20 aircraft. IndiGo started life as a low-cost carrier and has stayed there firmly, sticking to its business model even in the worst economic crises, a move that has paid off brilliantly. In order to prevent these crises, some of the best cost control method the airline use area: Paid-for on-board meals, a single flying class with no-frills service, high aircraft utilisation, and optimal use of space (150 seats to the 190 that a full-fare airline carries). Aircraft utilisation is maximised by cutting turnaround time, which also reduces fuel burning. With oil prices rising sharply, every bit helps. By not serving hot meals on board, IndiGo carries no heavy equipment and cutlery, thus lightening the aircraft and allowing for less fuel burn. Besides, the airline also employs fewer people, with one of the industry’s leanest work forces. Basics concentration With a clean business plan, the airline then concentrated on the basics on-time performance, clean aircraft, and good onboard service. IndiGo stands for three things: being on time, being courteous and hassle-free, and offering low fares”. In India, where airlines compete with the much cheaper options of rail and road travel, it is usually the time advantage that attracts passengers to planes, and a four-hour delay for a 55 minute flight can be disastrous.

IndiGo has carved out a reputation for flawless “On Time Performance”, earning itself some serious brownie points and an average on-time record of an amazing 90 per cent. How does it do it? By using a technology called ACARS (Aircraft Communications Addressing and Reporting System). This means constant radio and satellite communication between aircraft and ground stations. Every plane in the fleet is fitted with ACARS. Before every departure, an automatic message is triggered from aircraft to the control centre and the departure time recorded immediately. Similarly, the moment the flight lands an automatic message is triggered from aircraft to control centre. These timings are recorded “real time” and without human intervention. While ACARS can run without human intervention, IndiGo is what it is today because of the team that operates it. That’s not just the leadership team in but all 5,400 of the team, spread across the country. IndiGo is taking this emphasis on personnel training very seriously, something that is reflected by its business success. The iFly learning and development team at Indigo’s leadership academy is where the crew trains, and there are numerous methods available to equip employees to better do their jobs. There is standard classroom or instructor-led training, and then there is on-the-job training. For IndiGo, On-Time and Hassle-Free are more internal brands than external brands. It’s not just about On-Time flights but about on-time meetings, on-time salaries, on-time hiring, promotions, increments, and bonuses. Similarly, when IndiGo says hassle-free, it refers to making the company a hassle-free place to work in. IndiGo was named one of the Top 50 companies to work for in India and the best in the transportation industry. Flyaway profits Indigo is in an enviable position, slowly but surely outclassing the biggies in the business, filling the gaps created by cancelled flights and rising fares. Given that India is one of the most underpenetrated airline markets in the world, IndiGo’s potential for growth is high. Already, its flights are the most utilised, with an average load factor of over 80 per cent, sure sign of its profitability. While a part of its profits is explained by the sale and leaseback policy, there are other factors at work too.

To begin with, using just one type of aircraft has its benefits, and Indigo has chosen to stick to the world’s best-selling single-aisle aircraft, the Airbus A320. IndiGo signed with Airbus (in 2011) a deal for 180 eco-efficient Airbus. A320 aircraft, of which 150 were neo variety and 30 were standard A320s, is the largest single-company order for large jets in commercial aviation history. This deal also makes IndiGo a launch customer for the A320neo. The A320neo, available from 2016, incorporates a more efficient engine and large wing-tip devices called Sharklets that deliver significant fuel savings of up to 15 per cent, which represents savings of over 400,000 US Gal of fuel and up to 3,600 tonnes of CO 2 annually per aircraft. In addition, the A320neo provides a double-digit reduction in NOx emissions and reduced engine noise. Reducing costs and further improving environmental performance were key to IndiGo’s decision to go for the A320neo. IndiGO believes its fleet will set a benchmark and lead the way to a more sustainable mode of flying. The launch of international operations in 2011 opened up a new chapter for IndiGo. Analysts expressed doubts about whether an airline that’s by and large a domestic flyer will be able to survive the global market. Now the carrier is steadily making inroads in its own inimitable fashion. The endeavour is to ensure that it can provide sustainable low fares over a long period of time on the existing routes. IndiGo flies to a total of 37 destinations including 32 domestic destination within India and 5 international destinations within the extended neighbourhood in Asia (as of January 2015). It was not a secret that IndiGo faced its share of setbacks, with the DGCA’s January 2012 report of a violation of mandatory safety norms. While the path to getting everything right is possible, IndiGo seems to be coping quite well, managing to stay in the air in an industry that looked quite dismally grounded at that moment. The low-cost carrier might not offer any frequent flyer programmes, but it has a huge share of loyal customers who cheer its performance. And if it can weather the gathering storm of fuel prices, high taxes, airport fees and the weakening rupee, it should be able to leave competition way behind its vapour trail.

Touch of Indigo IndiGo ramped up its style quotient with a new look for its crew. The airline partnered with fashion designers and stylists for the navy-blue outfits with a touch of indigo. Design inputs were taken from in-flight crew and senior management to create a single piece tunic to address the identified ‘on the job’ requirements. Hairstyle and make-up was also standardised to get a global look Operations: Because of the airlines experienced ownership of IndiGo, the following areas are taken as best hedge against competition

1. Single type of aircraft: A comparison was done on aircraft being used by different airlines operating in India. Indigo's whole fleet consists of A-320-232 aircraft while Air India, Jet Airways and Spice Jet use 10, 9 and 3 different makes of aircraft respectively. This result in greater flexibility by making use of the same crew from pilots to flight attendants to the ground force thereby cutting hiring, training and up gradation costs.

2. Single Class By operating only one Economy class means that Indigo does not have to spend time, money and crew on privilege passengers. They also don't need to maintain expensive lounges at airports further reducing costs.

3. Low average fleet age: Indigo has an average fleet age of less than 3 years. A younger fleet means less maintenance costs. Indigo plans to maintain a lower fleet age as all its aircraft are leased for a period of 5-6 years. This way they avoid the D-Check which is done after 8 years of operation of an airplane

4. Fuel: Domestic fuel taxes can be as high as 30 per cent along with an 8.2 per cent excise duty. As a result, fuel for Indian airlines accounts for about 45 per cent of total operating costs, compared to the global average of 30 per cent.

Indigo's aircraft try to save fuel by using software to optimize flight planning for minimum fuel burning routes and altitudes and also by making use of latest fuel saving technology.

Indigo was one of the first airlines to place order for the Airbus A320neo family which claims to deliver 15% less fuel consumption and 8% lower operating costs. IndiGo was also among the first airlines to have the aircraft taxi to the terminal with one engine, shutting down the second engine to save fuel.

5. Route Planning: Indigo operates over a lesser number of destinations than its competitors but with a higher frequency - with a fleet of 78 planes for 36 destinations. while Spice Jet flies to 46 destinations with 58 planes.

The network maps show that all Indigo's destinations are connected to at least two cities while most are connected to 3 or more destinations, whereas this is not the case with Jet Airways. This means Indigo can keep its aircraft in the air for a longer period of time and save up on airport charges. Because of this Indigo has a high aircraft utilization rate of more than 11.5 hours per day per plane. This also means that customers don't have to look for connecting flights with other competing operators.

II. Marketing: 1.	Little advertising spend. 2.	High reliance on word of mouth marketing in its early days by establishing a reputation of being a no frills airline which is always clean and on time. 3.	Strategic marketing - Indigo advertised heavily when it started international operations The result of these operational and marketing aspects is visible in IndiGo which has a market share of 30% and the highest passenger load factor of close to 90%. compared to 77% of JetLite and 81% of SpiceJet. This means better revenue for IndiGo compared to its competitors.

III. Financial Aspects: 1.	Debt:

IndiGo has gone on record to say that the company has practically no debt. This is not the case for other airlines - Air India, Jet Airways and Spice Jet all have huge debts which were taken to finance expansions. A massive debt of more than 123.03 billion rupees was one reason for Jet's 24% stake sale to Etihad. Even Kingfisher Airline's major financial woes stemmed from their debt of more than 75 billion Rupees. IV. Vision:

The large aircraft orders, phasing out of aircraft older than 6 years and Indigo's highly connected flight network to which a new destination is not added unless it can be connected to at least 2 other destinations point to a highly planned long term growth trajectory.

Fleet planning has to be done decades in advance, so the above points also mean that IndiGo probably has cash rich investors. V. Influence:

IndiGo is privately held by two very low key people. - Rahul Bhatia, who owns 50% of the airline, is in charge of operations. He has almost two decades of experience in the travel business - Rakesh Gangwal who owns the remaining 50% has a long history in the US airline industry. He brings global networking and expertise to IndiGo.

IndiGo does not make its financials public, only estimates the factors that may have contributed to IndiGo's success. But, IndiGo's real test started when DGCA gave clearance to Air Asia, which is known to operate with a similar model, and had already planned to offer 35% lower fares.

References:

How Rahul Bhatia Found His Escape Velocity India’s airlines lost USD1.65 billion in FY2013. CAPA India Aviation Outlook 2013/14: Part 4 SPICEJET LTD Stock - Yahoo! India Finance JET AIRWAYS Stock - Yahoo! India Finance India aviation grounded by high taxes: IATA chief Indigo's profits are not surprising, competitor's survival is How IndiGo escaped the blues The secret of Indigo’s consistent profits What keeps IndiGo's profit flying high? Indigo FY13 profit rises to Rs 993 crore

NTEGYEREIZE CHARLES (talk) 08:17, 5 March 2016 (UTC)