The IndiGo Story: Inside the Upstart that Redefined Indian Aviation

by Shelley Vishwajeet

At the time IndiGo commenced operations, only two airlines from the early phase were still around—Jet Airways and Air Sahara. However, it was Air Deccan, India’s first low-cost airline, founded by Captain Gopinath, that was really making waves. Established in 2003, it had become the third largest domestic airline by the end of 2005, cornering around 19 per cent of market share. It was flying to 55 destinations and had a fleet size of 30 mixed type aircrafts. Air Deccan’s golden period was 2006–2007 when it experienced 42 per cent growth in passenger traffic over the previous year which made it the second largest airline in India. But its finances always remained stretched. The airline was also receiving increasing flak for its poor on-time performance and less than desirable customer service standards. In 2008, it was sold to Kingfisher. Vijay Mallya, the new owner, rebranded it as Kingfisher Red—an upmarket low-cost arm of Kingfisher Airline. ModiLuft, which began its operation in 1993, had been grounded by 1996. By 2004, it was taken over by a consortium of investors led by London-based Indian businessman Bhupendra Kansagra. Ajay Singh, the current promoter and CEO of SpiceJet, was also an important member of the team in its second innings. The new promoters rebranded ModiLuft as SpiceJet, a low-cost airline, which commenced operations in May 2005. Sahara Airlines, aka Air Sahara, which was amongst the early entrants in India had ambitious plans too, just like the group ...

Surprisingly, IndiGo has never had a vision or mission statement—it still does not. So

IndiGo didn’t do anything different, but did the same things differently.

The three pillars on which IndiGo was built and continues to adhere to are: (i) On-time performance (ii) Low-cost connectivity (iii) High-service standard

IndiGo was always particular about on-time performance, making it one of its key USPs.

Moreover, IndiGo was always conscious to communicate that low cost doesn’t mean cheap. So, its cabin crew and support staff were always smart, prim and proper. Further, it was a good decision to get uniforms designed by the brilliant designer duo of Rajesh Pratap Singh (RP, as he is popularly called by his friends) and Sapna Mehra, aided ably by stylist Ambika Pillai.85

IndiGo team and they even designed outfits for Rahul Bhatia. So, the makeover started right from the top! IndiGo’s crisp and stylish uniform went a long way in creating the desired impression—an upmarket feel despite low-cost offering.

Aviation watchers unanimously agree that the consistency with which IndiGo delivered on its three key promises made it the first choice of Indian flyers.

Its debt-equity ratio always remained the lowest in the industry.

IndiGo also understood well that the ‘god (of success) was in detail’; it put in place a robust process to control any non-essential costs and was always financially prudent, unlike Kingfisher.

IndiGo’s choice of its fleet—Airbus A320—was a well thought of exercise to keep its finance and operational costs down. It was not based simply on the initial cost of acquisition, but factored in the entire life-cycle operational, maintenance and finance cost of fleet. It began by deciding to have a single class of aircraft to reduce maintenance costs and other hassles associating with owning multi-class fleet, and to build a better relationship with the aircraft supplier. The first bulk order of 100 aircrafts did give it an unprecedented acquisition cost advantage over the competition as it lowered its initial finance burden and spread the payment over a fairly long period of time, while ensuring a steady supply of planes even when demand for planes picked up. In contrast, the competition’s cost of aircraft acquisition shot up due to absence of forward planning and innovative thinking or simply lack of self-belief. The choice of Airbus A320 fleet offered other benefits too.

The Airbus A320 is regarded as the most fuel-efficient commercial aircraft94 in its class and this is one edge Airbus doesn’t wish to cede to Boeing at any cost.95 So, IndiGo did not opt for Airbus A320 simply because they were getting a good bargain, but largely because it was the cheapest aircraft to fly. According to Airbus, ‘The A320 family is the world’s best-selling and most modern single aisle aircraft family. With proven reliability and extended servicing periods, the A320 family has the lowest operating costs of any single-aisle aircraft.’ A320 can also accommodate more seating configurations than its competition, Boeing 737.

Lower weight translates into higher fuel efficiency. So, to make its aircrafts as light as possible, IndiGo opted for lighter seats in its fleet. A passage from its annual report reads: Fuel consumption is directly proportional to the weight of an aircraft. The Company has sought to reduce the weight of the aircraft by selecting lighter seats and by choosing to not have in-flight entertainment system.96

IndiGo has adopted conservation of fuel consumption policies which are inculcated in all pilots and engineering staff training procedures. i. The Company provides adequate fuel for sectors after evaluating various traffic trends thus avoiding any additional/unnecessary fuel upliftment, installing software for accurate flight planning which provides accurate maps and most efficient flight path, restricting the use of auxiliary power units, employing continuous descent approaches and economy cruise speeds, minimising aircraft weight by removing unnecessary equipment and optimising engine settings for take-off and climb. ii. Additionally, the Company has also adopted fuel policies designed to reduce costs on the ground including the use of the Eco-Power Engine Wash process for our engines, the use of ground equipment in place of aircraft auxiliary power units which consumes more fuel, use of single engine for taxing on ground and other engineering/operations protocols. These policies are all designed to optimise fuel consumption, reduce carbon footprint and thereby finally reducing costs.97

IndiGo has one of the youngest fleets of any LCC globally.

2006–07 till 2012–13 reveals that IndiGo’s average PLF was higher than all its competitors. On average, its PLF was 77.22 per cent while FSCs such as Jet Airways and Kingfisher trailed significantly.

IndiGo employed a technology called Aircraft Communications Addressing and Reporting System (ACARS),102 which not only helps it in ensuring on-time performance but also in faster turnround. The automated real-time flight status is triggered the moment its aircraft takes off on the handheld devices of the arrival centre. So, its staff knows the exact flight status in real time and is ready for the next action. IndiGo has trained its staff well for swift onboarding and deboarding. Typically, its staff can get the flight ready for the next departure within 25 minutes.

IndiGo has the lowest count of employees per aircraft at 110. SpiceJet and Jet Airways have more than 140 employees per aircraft, while GoAir has 120.

IGE was the first airline owner to establish its own training centre, the CAE Simulation Training Private Limited (CSTPL),113 in partnership with CAE Inc.,

Three things stand out in the case of IndiGo which catapulted it ahead of competition: (a) Steadfast adherence to cost optimization goals (b) Consistency of performance (c) Managing to do more with less.

Right from the beginning, IndiGo ensured industry-leading on-time performance which gained it respectability among flyers. And it ensured that despite being a low-cost offering, it was never seen as cheap or sloppy in any of its interfaces with flyers. Its staff was smartly dressed, courteous and enthusiastic, things on which LCC pioneer Air Deccan had severely floundered. All this resulted in making IndiGo a preferred airline and its financial performance better than the competition.

IndiGo gained most from Kingfisher’s fall and became the top domestic airline.

by the end, the entire Kingfisher story had become more a saga of financial scandal than a tale of business failure.

So, just the fact that a market is expanding fast doesn’t guarantee profit—certainly not in airline business.

SpiceJet: Too Many Ownership Changes Destabilized It

IndiGo’s business acumen, forward planning and the steadfast implementation of its well-crafted low-cost strategy had won the day for it even when others were caught deep in a financial whirlpool.

Richard Branson, the founder of Virgin Atlantic and Virgin America, had once famously remarked, ‘If you want to be a millionaire, start with a billion dollars and launch a new airline!’175

Well, such are the ways of the corporate world! But is IndiGo going to miss Ghosh?227 Not really. Everyone has a role and time span in an organization. Ghosh was doing a good job but as IndiGo prepared for its next growth flight, he didn’t really fit into the new scheme of things.

The biggest challenges for IndiGo as with any airline are three; the first being the cost of jet fuel and oil prices, the second being competition, and the third being credibility and reputation. The

An airline has to consistently deal with more than ‘five forces’229 to remain airborne. A slight policy tweak can make one’s future growth plans go absolutely haywire, a seemingly innocuous customer handling incident can blow up into a high decibel public relations and social media crisis sullying a reputation painstakingly built over years, a little surge in the oil price can upset all costing estimates, while a tension in some remote part of the globe can have a ripple effect back home leading to large-scale cancellations. No wonder, the industry treads from one existential crisis to another.

This industry is not for the faint-hearted. It is also not for people who want to make a quick buck or for those who mistake it as an annex to the glamour world.

Noted management thinkers, C.K. Prahalad and Gary Hamel, talked about why an organization needs to identify its core competency and build upon it to emerge a winner.

The general refrain has been that business partnership of individuals is not a very good idea242 as different personalities with different ways of running and implementing a business plan ultimately clash, which sooner than later brings down the venture, preceded by bitterness in personal equations.243 But there have also been a few glorious exceptions to this general refrain. Some of the most iconic brands that we know of today have been created by the coming together of two individuals, who, despite radically different personalities, harmonized their respective strengths to shape up a common dream and turned their dreams into mega business empires. Just think of Bill Gates and Paul Allen244 or Bill Hewlett and Dave Packard.245 Could they have done it on their own? Seems quite unlikely! Rahul Bhatia and Rakesh Gangwal, the men who scripted the most stunning success in Indian aviation, could also not have been more different from each other, somewhat akin to Steve Jobs and Steve Wozniak—the co-founders of Apple. Personality-wise, Jobs and Wozniak were as different as chalk and cheese.246 And if Wozniak knew how to build a computer (he was the main guy who designed and developed Apple I and Apple II), Jobs knew how to market it. Rest is legend. On the surface, Bhatia has been the outgoing kind with a vision, while Gangwal, the reticent kind of guy who likes to go about a task quietly, has been the mission man—the implementer. So, while Bhatia had the vision of starting a tr...

Gangwal, while finally agreeing to be a partner, told Bhatia that once they lost all the money, they would shake hands and remain friends.

Eleven Life and Business Lessons from IndiGo 1. Dare to dream—and dream big. 2. One can succeed and succeed big the ethical way. 3. A partnership can work if it is a partnership of shared vision and shared values—not if it is just a partnership of convenience and connivance. 4. Ultimately, a business has to be run on sound business principles to succeed. 5. PR and gimmickry is no substitute for real performance. 6. A start-up, despite a great idea and market potential, has to do its homework meticulously. 7. Think ahead to remain ahead of the competition! Think like a chess grandmaster—a grandmaster visualizes at least ten forward moves. The current world champion Magnus Carlsen can think up to twenty forward moves. 8. Be the game changer if you can be. 9. Strike like a panther when opportunity strikes. 10. Empowerment of people is key—one can’t be everyone and everything. 11. Providence plays its own role, but don’t centre your business strategy around it. IndiGo