2. 1
CONTENTS
Introduction to the Topic............................................................................ 2
Introduction to Indigo................................................................................. 2
Introduction to AirAsia................................................................................ 2
AirAsia’s dynamic entry into India.............................................................. 2
Key challenges faced by Indigo................................................................... 3
AirAsia vs Indigo: a comparison.................................................................. 3
Possible strategies for Indigo...................................................................... 4
It's all about customer focus................................................................... 5
Using technology smartly ....................................................................... 6
Pricing Anamoly ...................................................................................... 6
Recommendations...................................................................................... 7
3. 2
INTRODUCTION TO THE TOPIC
In this report, I am assuming the role of an advisor to Indigo who is
analyzing impact of AirAsia’s entry into Indian Market.
INTRODUCTION TO INDIGO
Indigo is the biggest Airline in India 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. IndiGo boasts of a turnaround time
of less than 30 minutes. 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 8 or 10 hours.
INTRODUCTION TO AIRASIA
Asia’s leading low-cost airline, AirAsia started its journey as a low-cost
carrier in Malaysia. With a route network that spans through more than 22
countries and 100 destinations.
The company’s competitive advantage is “Cost Reduction” through
innovative solutions like - no frills service, fast turnaround time (25
minutes), cost optimization operations like self-automation, self-check-in,
self-tag your baggage, improved aircraft utilization by using fuel efficient
aircraft – Airbus A320 and Crew efficiency.
AIRASIA’S DYNAMIC ENTRY INTO INDIA
AirAsia the low-cost airline company commenced operations in India with
a Joint Venture with Tata on 12 June, 2014.
The company has a unique LCC model which ensures lowered operational
costs. AirAsia is planning to achieve an aircraft turnaround time of 25
minutes which is very low when compared to the best of airlines in the
world. AirAsia India has announced preliminary operations to 4
destinations in India – Bangalore, Goa, Chennai and Kochi.
4. 3
Inaugural Fares Offered: Bangalore to Goa Rs.990; Bangalore to Chennai
Rs.990 and Bangalore to Kochi Rs.500.
KEY CHALLENGES FACED BY INDIGO
The key challenge for IndiGo is to defend its 50% market share from AirAsia
who is starting a price-war with super-low prices like Rs 500 and Rs 990.
AIRASIA VS INDIGO: A COMPARISON
Here is a quick overview of AirAsia (Worldwide) vs. Indigo (India) in the
table below.
AirAsia India has started its operation in India with 4 aircrafts. Based on
new aircraft delivery by 2017, AirAsia will acquire 36 new aircrafts fleet
that will be one third the size of Indigo’s 120 aircrafts fleet. Meanwhile,
5. 4
IndiGo has also ordered A-320 Neos aircraft in 2015. These planes are
more fuel efficient and claims to save upto 15% in fuel cost.
Hence, Indigo is not at a disadvantage when it comes to plane technology.
AirAsia has plans to fly to 10 to 12 cities whereas Indigo plans to increase
the destinations to 40+ by 2017. Indigo will have an edge over the number
of routes covered against AirAsia.
POSSIBLE STRATEGIES FOR INDIGO
In Airline industry the capacity constraint is the number of seats on their
aircraft. To manage this constraint the Airline can use strategic approach
to shift demand to match capacity by focusing on to reduce the demand
during peak.
1. Communicate with customers – Inform the peak times when the
fares are high and persuade customers to book the tickets at
alternative times. For example, Clear trip calendar shows the fares
for each day so, the customers know when the ticket fare is high
and low. This helps the customer to plan their travel and customer
is happy paying low which increases the customer loyalty towards
the company.
6. 5
2. Offer incentives for non-peak usage - Indigo can communicate to the
customers about day, time or months when the rush is less and persuade
them to book the tickets at that point of time by offering extra discounts,
early bird discounts, etc
3. Educate the customers -To decrease their operation cost Indigo can
educate their customers on how to do check-in online and self-tagging
the luggage. If the customers do the check-in online this will help Indigo
as they can use less number of staff.
IT'S ALL ABOUT CUSTOMER FOCUS
Customer relationship plays a very vital role in any company’s success.
IndiGo's success model largely relies on consistent low fares, regular
minimal flight cancellations and on-time performance. However, the
airline's biggest edge over others is its customer focus.
Other airlines advertise low fares, marketing or other promotional offers
on their websites, IndiGo only emphasizes on-time performance. Indigo
has continuously built around this image through their advertisements on
television and print media. IndiGo has 86% OTP as compared to 70-80% for
AirAsia.
7. 6
USING TECHNOLOGY SMARTLY
To monitor on-time performance for every flight in real time, Indigo is
using Aircraft Communications Addressing and Reporting System (ACARS).
They have an easy-to-navigate website, and 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.
PRICING ANAMOLY
AirAsia advertises low prices but in fact after adding minimum baggage
fees, its price goes higher than the existing competitors. As Indian
customers are very price sensitive, they might be fooled by this pricing
strategy once. But this tactic will surely backfire in getting repeat
customers. So, IndiGo should advertise transparency in airline prices.
8. 7
RECOMMENDATIONS
Based on my analysis, IndiGo should counter the price-war by
strengthening its Brand Positioning of On-Time Performance. Customer
Focus and Transparency in Prices. This can be best achieved by educating
the customers by various channels, such as advertising on TV, newspapers,
magazines and websites.
