Strategic Analysis of Indian Aviation Industry and IndiGo Airlines

1. A V I A T I O N
I N D U S T R Y
B u s i n e s s P o l i c y A n d S t r a t e g y

2. The quickest way to become a millionaire in
the airline business is to start out as a
billionaire.
-Richard Branson

3. 1. GLOBAL SCENARIO
• The global airline industry consists of over 2000 airlines operating more than 23,000
aircraft, providing service to over 3700 airports.
• In 2017, the world’s airlines flew almost 28 million scheduled flight departures and
carried over 2 billion passengers.
• The global airlines market experienced good growth during the past five years and is
expected to reach an estimated $832.8 billion in 2020 with a CAGR of 3.7% over the next
seven years (2013-2020).
• Increasing demand from emerging economies, continuous demand for new low-cost
carriers, deregulation, and rising middle class are factors driving growth in markets such
as Asia and the Middle East.

4. 2. INDIAN SCENARIO
• 117.1 million passengers flew in CY17, up from 99.89 m in CY16
• Domestic passenger traffic expanded at a CAGR of 11.46 per cent over FY06–17
• During FY17, domestic passenger traffic increased by 22 per cent in comparison with
growth rate of 21.24 per cent in FY16.
• 9th Largest Civil Aviation Industry in World
• 548 aircrafts in total and another 920 will come by 2025
• Modernization and expansion of airport, a key thrust area for govt
• FDI push in the civil aviation sector: FDI up to 49% and investment by Non-resident
Indians ("NRI") up to 100% is allowed under the automatic route
• India is estimated to see an investment of US $25 billion in the next decade in the
airports sector, and traffic growth of 13 per cent, according to Morgan Stanley.

5. P
• Lenient tax policy with GST at 5%*, in order to promote faster and convenient
transport medium among masses.
• 5/20 Rule for International Airlines.
• 5% Bio-ethanol must in ATF due to environmental concerns, will go up to 20%.
• Support to regional air-connectivity under UDAN scheme.
E
• Increase in economy growth and economic activities have in turn led to rapid increase
in growth of business air-travel.
• Prevalent higher interest rates in the market have kept domestic airlines at a
disadvantage from international airlines, which have access to cheaper finance abroad.
• Rising disposable income has fuelled the growth in domestic tourism air-travel.
PESTEL Analysis

6. • Perception of air-travel as a luxurious mode of transport among middle-class masses
• Increase in frequency of travel with family, friends, etc.
• Shorter period holidays(weekend, long weekends, etc.) has made air-travel the
preferred mode of transport.
• More customers are coming online, hence companies need to advertise, influence and
attract customers online
• Online facilities and services, like e-Ticketing, web check-in, becoming the norm due
to all pervasiveness of information technology
• Fuel-efficient engines and aircraft bodies have helped airlines to reduce their fuel
expense, the major expense of any airline
S
T

7. • 5% Bio-ethanol must in ATF due to environmental concerns, will go up to 20% by
2030
• At a local level, even noise seems to be the main concern
• FDI up to 49% and investment by Non-resident Indians ("NRI") up to 100% is allowed under
the automatic route
• Government of India, plans to enter into an 'Open Sky Agreement' on a reciprocal basis, with
SAARC countries and countries with territory located entirely beyond a 5000 km radius
E
L

8. THREAT OF
NEW ENTRANTS
Low: Capital intensive nature of the
industry poses as the barrier to new
entry. Moreover, regulatory barriers also
exist
BARGAINING POWER OF
SUPPLIERS
High: Given only two major supplier of
aircrafts(Boeing and Airbus), they hold
high bargaining power. Fuel is another
key supply item which is regulated by
handful of suppliers
High: Competition among major players
is very high in LCC section because major
target segment is middle income group
which has low brand loyalty and is very
sensitive to price.
COMPETITIVE
RIVALRY
BARGAINING POWER OF
BUYERS
Low: Since the consumer group is very
large and segregated, no single buyer
controls the price
THREAT OF
SUBSTITUTES
Low: No other means of transport is as
fast and convenient as airlines, and hence
saves time. Moreover, there is superiority
attached to the usage of air transport
PORTER’s 5 FORCES

9. • IndiGo operated by InterGlobe Operations Ltd., is a low-cost airline headquartered at Gurgaon,
Haryana, India.
• It is the largest airline in India by passengers carried and fleet size, with a 39.9% market share as
of February 2018.
• The airline operates to 50 destinations both domestic and international
• It is the only low-cost carrier in India which has kept its bottom line is black consistently, from
last 9 years. It earned a profit of ₹16.6 billion in FY2017.
• IndiGo has recently appointed Wolfgang Prock-Schauer as its Chief Operating Officer(COO) as it
starts planning its long-haul international operations

10. OPPORTUNITIES AND THREATS
Opportunities:
• In-flight Wi-Fi Services
• Fast growing air-freight market
• Growth trend in domestic air traffic
• Venture into international market
• Chartered flight services
• Govt’s push to regional connectivity, especially UDAN Programme
• Development of Airport Infrastructure
Threats:
• Rising Aviation Turbine Fuel prices
• Strong competition in LCC segment leading to price war among competitors
• Scarcity of trained personnel

11. VALUE CHAIN ANALYSIS

12. STRENGTHS
• IndiGo has high brand awareness and brand equity.
• Operational efficiencies helps to implement low cost
strategy
• Effective management ensures high rate of on-time
arrivals
• Tie-ups across value chain to provide Value-added
services to consumers
WEAKNESSES
• Lack of differentiating factors from competitors
• Absence in fast growing air-freight market
• Negligible presence in international markets
OPPORTUNITIES
• Fast growing air-freight market
• Growth trend in domestic air traffic
• Venture into international market
• Chartered flight services
• Govt’s push to regional connectivity
• Development of Airport Infrastructure
SO Strategies:
• Expand the domestic destinations covered and
strengthen the market leader position
• Build upon operational, managerial and financial
efficiencies to keep the cost low and grab the
growing domestic market
WO Strategies:
• Optimise the utilisation ratio by tapping air-freight
market
• Increase the presence in South East Asian, Middle
East and venture into European Markets
THREATS
• Rising Aviation Turbine Fuel prices
• Increasing Competition
• Scarcity of trained personnel
ST Strategies:
• Build pilot training centres with govt assistance
under PMKVY programme and its CSR activities
• Enter into long term agreements for fuel and/or
procure fuel from international markets where it is
cheaper
WT Strategies:
• Customer centric innovation of value added services
to differentiate from the competitors
TOWS ANALYSIS

13. MARKET
PENETRATION
STRATEGY
MARKET
DEVELOPMENT
STRATEGY
PRODUCT
DEVELOPMENT
STRATEGY
DIVERSIFICATION
STRATEGY
MARKETS
Existing New
NewExisting
PRODUCTS
Given the tremendous growth in domestic market, especially low-
cost segment, the company is best suited to capitalize on this
opportunity
The high margin, low volume Chartered/private airline industry
presents a good opportunity owing to rise in HNIs in India and
IndiGo’s presence across all major cities of India
Company’s low-cost no frills offering will attract a huge segment in
the international flying community
Capitalising on Govt’s push to regional Airport infrastructure
development and/or maintenance
ANSOFF MATRIX
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strategies for your organization.