Corporate Aug 21, 2012
In Indian aviation someone's pain is always another's gain.
As Vijay Mallya watches his beloved Kingfisher Airlines collapse to dust, low-cost IndiGo has become the new market leader with its slow and steady approach within just six years of launch.
As Mallya grounded more than half of Kingfisher planes to create a capacity vacuum,Indigo managed to not only increase its passenger traffic but also its fleet size.
Moreover, while full time carriers focus on the experience of flying, IndiGo focused on what they thought would matter to its flyers -It communicated to the flyer his basic need of getting from point A to point B on time.
Here are 4 reasons why the airline has managed to scale to the top, despite being the youngest airline in India.
Indigo's stuck to its low-cost, single class model unlike rivals Jet and Kingfisher
While Kingfisher and once market-leading Jet Airways bought rivals, flew multiple plane models and struggled to mix full-service and low-fare options, IndiGo stuck with its policy of offering one class of no-frills service on a single type of plane. Indigo has chosen to stick to the world's best-selling single-aisle aircraft, the Airbus A320.
Selling and leasing back planes helps its balance sheet.
Secondly, it maintains a young fleet by selling and leasing back its planes. IndiGo uses six-year sale and leaseback agreements, so the airline is constantly replacing its aircraft. This prevents the need for overall checks and major repairs, which means IndiGo understands how to work the margins.
Operationally it would be impossible to make a profit at the very low fares they were offering through the first four years of operations, where ticket prices on Indigo were roughly 40 percent of cost of operation.
Even before starting operations in 2006, Indigo had placed a firm order for 100 Airbus A320 aircraft in June 2005, which gave it a pricing advantage. 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.
Also it focused on inorganic expansion by adding a plane every six weeks. A report in the Economic Times says Indigo's fleet size has grown to 58 aircraft from 42 in the last one year, implying that the Rahul Bhatia-promoted carrier added 16 aircraft in the last 12 months.
"Eight aircraft have been added to IndiGo's fleet since January and two more will come by year-end. This is one connection as to how it could lap up the spillover traffic from Kingfisher better than Jet Airways, whose capacity on the domestic routes has largely remained static," the report said.
Quality and detail key to good service
The third reason is Bhatia's obsession with detail and quality. IndiGo's executives, including staff at the check-in counters, air crew and sales and marketing staff are hired only after Bhatia meets each of them individually. Besides, the airline also employs far fewer people, with one of the industry's leanest work forces.
The airline also broke industry standards with simple things like turnaround time. This is the time taken for a plane to be ready for the next flight between landing and take off. IndiGo boasts of a turnaround time of less than 30 minutes.
Obviously less time on the ground means more time in the air which also reduces fuel burning. A report in the Business Standard had said earlier that IndiGo's aircraft spend more than 11 hours a day in the sky, compared to the industry average of eight or 10 hours.
It's all about customer focus
IndiGo's success model largely relies on consistent low fares, regular on-time performance and minimal flight cancellations. However, the airline's biggest edge over others is its focus on customer focus. "Would you like to be on time or would you like to be three hours late and have the nicest champagne and caviar on board," Bhatia had asked earlier this year in an interview with ET. Fliers want on time journey at reasonable prices and this has helped IndiGo inch past stalwarts to reach this milestone.
Other airlines advertise low fares, marketing or other promotional offers on their websites, IndiGo only emphasises on-time performance. Indigo has continuously built around this image through its tongue-in-cheek advertisements on television and print media.
Using technology smartly
Unlike manual systems used by other airlines, IndiGo planes are equipped with a digital link system for for transmission of short, simple messages between aircraft and ground stations via radio or satellite called Aircraft Communications Addressing and Reporting System (ACARS). Before every IndiGo flight departs an automatic message is triggered from the aircraft to its operations control centre - and immediately the same departure time gets recorded in the software. Similarly, the moment the flight lands an automatic message is triggered from aircraft to control centre. Hence, the on-time performance is diligently monitored for every flight in real time.
"Reaching your destination in less time to make best utilisation of vacations is what an average passenger look for, and IndiGo won its common man by this very basic model," an aviation analyst told Firstpost.
Even the airline's president Aditya Ghosh has frequently repeated that IndiGo keeps the whole business of flying simple for our customers. Ghosh had earlier explained that "simplified pricing" means one fare, inclusive of all taxes and other charges, an easy-to-navigate website etc. "One of every two of our customers is an infrequent flier and many are first-time fliers. It is important for us to simplify flying for them. So we want to keep flying simple. We have features such as queue busters at most airports, where if you are carrying only cabin luggage, you need not stand in a check-in queue and these queue busters would print boarding cards from hand-held machines quickly."
Indigo has realised that in a services industry, where competition is so cut throat, it needs to deliver on its promise, which clearly seems to be going in its favour, at least domestically.
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