In 2006, flying in India was a dream. It was normal to catch the latest Shah Rukh Khan movie while you were served warm Chicken Tikka Masala for dinner, on a 1 hour 45 minute flight from Mumbai to Delhi. Before you landed, your frequent flying account would get credited with a generous number of miles. This wasn’t even business class!
In the same year, InterGlobe Enterprises Ltd., a small hospitality conglomerate launched a new airline – Indigo Airlines – offering no business class seats, no loyalty program, no inflight entertainment, and no (free) meals. Indigo, however, did promise more economical fares and on time arrival of flights. “Who would care for that?”, thought everyone including the leading incumbents in the market – Jet Airways, Kingfisher Airlines, and Air India – all full service carriers who had a combined share of nearly 80% of the market. A previous attempt at a low cost aviation, by Deccan Airways, was failing miserably.
A new customer promise
At the time, flights were frequently delayed and a 15-20 minute late take off (and landing) was the norm. Passengers were forgiving of these delays as a lack of punctuality is often seen to be deep rooted in Indian culture. Given the sheer number of procedures required to prepare a flight for takeoff and the general leniency of the customers – no airline made being on schedule a priority – until Indigo. From its early days, it committed to an “on-time” customer promise. (IndiGo TV Commercial) Flyers didn’t immediately catch on to this new proposition, but Indigo persisted. Indigo made its “on-time” value proposition central to its marketing message – for instance, through a play of words, it renamed IST (acronym for Indian Standard Time, similar to EST) to stand for “Indigo Standard Time” in its communication.
Although, through various cost efficiencies and lean operating choices, Indigo was able to offer fares lower than other airlines, it chose to keep ticket prices as a secondary value proposition. Instead, cost advantage was used to drive profitability.
Leisure travelers – many of who were priced out of the market – were first to move towards Indigo, while business travelers still flocked towards full service carriers. However, as more and more people experienced the beauty of “on-time” flights, Indigo’s market share grew. Today, Indigo’s market share (see figure below) is more than twice of its nearest competitor – Jet Airways – and is one of the few profitable airlines in India.
Smart choices to keep that promise
Given that the airline business is highly capital intensive, every airline tries to increase utilization by scheduling back to back flights with only a 20 to 30 minute time in between to prepare for the next flight. Within this short period of time, several tasks need to take place including cleaning, maintenance checks, de-boarding and boarding of passengers, unloaded and loading of luggage, loading of meals. Any delays resulted in a delayed take off and a delayed arrival at destination.
Indigo made several operating model choices to not only keep its operating costs low but also to ensure that planes were ready to take off at the scheduled time. However, none was more important than using only one type of aircraft, the Airbus A320. Having only one type of aircraft helped improve utilization of pilots, crew, maintenance and ground staff, as airline staff is typically specialized to handle 1-2 aircraft types. More importantly, because staff members were working on only one aircraft type, they could work faster: MRO (Maintenance, Repair and Overhaul) staff did their maintenance checks faster, ground staff loaded baggage faster, and cleaners cleaned the toilets quicker. Small efficiencies added up when they had only 20-30 minutes to prepare an aircraft.
Secondly, Indigo signed ‘Sale and Lease Back’ deals with aircraft manufacturers i.e. after six years of operation, the manufacturers were contracted to take back the planes and Indigo could have brand new ones. Keeping the average fleet age low not only reduced the maintenance costs but also fewer maintenance operations were required, reducing MRO related hold ups.
Furthermore, Indigo made smart choices about their customer facing policies and processes to drive timely turnarounds. For instance, meals-for-sale were restricted to sandwiches or packaged snacks and beverages that could be loaded much faster than warm full-meals, which were the norm in Indian aviation in the late 2000s. They even got their customers to help! A few minutes before landing, an announcement would be made on the PA system requesting passengers to tidy up their seats. Passengers would then hand over the trash to a cabin-crew member who would walk the aisles collecting trash. While these practices had emerged in the west, they were extremely new to the Indian aviation sector and often broke cultural norms.
Lastly, as the saying goes, “You cannot improve what you cannot measure” – Indigo invested in technology for measuring on-time performance in an automated and tamper proof manner. Unlike other airlines that used manual systems, Indigo aircrafts were equipped with Aircraft Communications Addressing and Reporting System (ACARS). The system enables automated communication between the aircraft and ground station – whenever a flight takes off or lands, the time is recorded in the software. Hence, on time performance can be reported and tracked in real time.
Indigo carefully aligned its operations strategies to its twin promises: promise to its customers to have on-time flights, and a promise to itself to keep a lean cost structure. And as they say, “the rest is history”!
- “The Indian Airline Industry in 2008”, Rishikesha T. Krishnan, Professor of Corporate Strategy & Policy, Indian Institute of Management Bangalore
- Directorate General of Civil Aviation (DGCA) Data
- InterGlobe Aviation Limited Interim Report (Jun 30, 2015)