Abstract

The case describes the journey of Indigo, the airline founded by Rahul Bhatia in 2006 and how it was introduced as a Low Cost Carrier in the market, faced government barriers, and still managed to emerge as one of the fastest growing airlines in India with a market share of 37% as of February 2015. While other airlines like Kingfisher, SpiceJet, and Go Air, were battling to stay on in the market due to the public policies on dispersal guidelines, operating costs, fuel prices, 5/20 norms, and the open skies policy, Indigo used its business model strategically to create a platform for profitability and survival. Being a customer-centric airline, it combined the use of technology, sale and lease back agreements, bulk purchase of fleets, quality training of its staff, and high operational efficiency to create a competitive synergy better than that of other players. Though Bhatia was disappointed with the volatile public policies, he came up with a new innovation each time a policy was introduced for any of the controllable components of his business. The impact of the FDI policy of 2011 was clear when other airlines began forming alliances with foreign airlines by creating equity infusion of up to 49%. This resuscitated Indigo’s competitors, putting the sustainability of Indigo’s own business model at risk. Vistara airlines, AirAsia India, and Air Pegasus were the new competitors. Bhatia was faced with having to decide between two alternatives — form an alliance with a foreign airline and benefit from the policy, or maintain Indigo’s current footing without taking recourse to re-strategizing. With the same business model, going global had little viability. Increasing its reach domestically with so many competitors working on the same lines, was even less viable. This created a dilemma for Bhatia on how to define his next set of strategies and raised the question “Can Indigo fly higher?” In 2015, Qatar Airways offered to invest in Indigo but Bhatia did not take any decision on that. In the same year, in June, Indigo had plans to launch an IPO to increase its capital base, but since new challenges had cropped up, Indigo found it would have to soon decide on how to sustain its profitability to keep its market share growing.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Outline how entrepreneurial ventures are affected by the government’s policy and how frequently these policies change the business environment in different ways.
• Learn the unique differentiation and study the functionality of a real time business model of a Low Cost Carrier that was used optimally by Indigo to earn good revenues vis-à-vis other airlines in India.
• Discuss the success factors of Indigo in light of its intersection with the public policies and thereby analyze to what extent an entrepreneur can manage through management practices and strategies to ensure that the policies don’t hamper the venture gro
• Analyze Indigo’s journey (challenges, threats, and opportunities) in the market and identify how strategy making is used to reduce the vagaries of policies being active for most of the decision-making in entrepreneurship.

Keywords

Indigo Airlines, Foreign Direct Investment, Route Dispersal Guidelines, Low Cost carrier, Aircraft Communication Addressing and Reporting System, 5/20 Policy, Directorate General of Civil Aviation, Open Skies policy, Singapore Airlines