(Mohan Bhulani): In the Indian aviation industry, IndiGo has scaled heights that make it not only the country’s largest airline but also a benchmark of success. While Vistara grapples with a ₹581 crore loss, Air India struggles with a ₹7,000 crore deficit, and airlines like Go First have shut down, IndiGo stands tall with a staggering ₹8,170 crore profit. In terms of fleet size, Vistara operates 70 aircraft, Air India 144, and Akasa Air 24, but IndiGo boasts a colossal fleet of 392 planes. These figures underscore IndiGo’s dominance as a champion in Indian aviation. From humble beginnings with a single aircraft, the airline has placed orders for over 300 Airbus planes, making it Airbus’s largest customer. But how did IndiGo thrive in a market often dubbed the “graveyard of airlines”?
The Brutal Indian Aviation Market
The Indian aviation market is among the world’s toughest. Low fares and high capacity benefit passengers but bleed airlines dry. In recent years, several carriers have collapsed—Go First was the second airline in four years to cease operations, while SpiceJet teeters on the brink due to unpaid dues. Big names like Sahara Air, Kingfisher, Deccan Air, and Jet Airways failed to turn profits or survive. Even tycoons like Vijay Mallya and Sahara couldn’t save their airlines. In this context, IndiGo’s success is nothing short of a miracle. Let’s trace its journey from the beginning.
The 2005 Era
In 2005, Indian aviation was dominated by Jet Airways, Deccan Air, and Air India. Kingfisher entered the fray in 2005, followed by IndiGo in 2006. Early years were tough, with all airlines incurring losses. By 2007, Kingfisher reported a ₹408 crore loss, SpiceJet ₹132 crore, Jet Airways ₹423 crore, and IndiGo ₹234 crore. But by 2008, the tides turned. While Kingfisher’s losses quadrupled to ₹1,900 crore, SpiceJet lost ₹340 crore, and Jet Airways ₹400 crore, IndiGo posted a ₹80 crore profit. Kingfisher and Jet Airways never recovered, but IndiGo’s profits soared from ₹400 crore to ₹4,847 crore, eventually reaching ₹7,000 crore. Today, with ₹8,170 crore in profit, it reigns supreme.
The Secret to IndiGo’s Success
IndiGo’s triumph lies in understanding three realities of the Indian market and learning from competitors’ mistakes. As the saying goes, “Good companies learn from their mistakes; great companies learn from others’.” IndiGo did exactly that.
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Ticket Pricing: Indian aviation demands heavy investment, but most Indians prioritize ticket prices over comfort or experience. With 80% of Indians earning less than ₹10 lakh annually and only 2.2 crore people paying income tax in a 140-crore population, affordability is key. Many opt for 2 AM flights if tickets are cheaper. IndiGo recognized that fares must stay between ₹5,000–₹8,000 to attract customers.
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Market Size: While India’s 140-crore population seems like a vast market, the reality is different. The population can be segmented into India 1 (12 crore people, average income ₹1 lakh), India 2 (30 crore, average income ₹5 lakh), and India 3 (100 crore, average income below ₹1 lakh). Air travelers mostly come from India 1, making the actual market 12–15 crore. IndiGo tailored its strategy to this limited segment.
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Profit Margins: Earning profits in Indian aviation is daunting. Fuel costs consume 35–45% of expenses, sometimes hitting 50%. As India imports crude oil, prices are volatile. IndiGo realized that minimizing costs and maximizing efficiency were the only paths to profitability.
IndiGo’s Winning Strategies
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Airbus Advantage: In 2005, IndiGo ordered 100 Airbus aircraft worth $6 billion (₹8,000 crore). This was critical for Airbus, which had lost ground in India. Airbus planes are 8–10% more fuel-efficient than Boeing’s. For instance, a Boeing flight from Mumbai to Delhi consumes 10,000 liters of fuel, while an Airbus uses 9,000 liters. At ₹100 per liter, this saves ₹1 lakh per flight. With 2,000 daily flights, annual savings could reach ₹1,800 crore.
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Sale-and-Leaseback Model: IndiGo adopted a unique strategy. A ₹500 crore aircraft was bought for ₹400 crore (due to bulk discounts) and sold to leasing firms like BOC Aviation for ₹500 crore, yielding an immediate ₹100 crore profit. IndiGo then leased the same plane for 5–8 years. This brought three benefits: instant profits, reduced maintenance costs (as all planes were Airbus), and more planes with less capital.
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Hub-and-Spoke Model: Unlike Kingfisher’s point-to-point model (separate planes for each destination), IndiGo used a hub-and-spoke system. For six destinations (A, B, C, D, E, F), point-to-point requires 15 planes, but a hub (O) needs only 6. This reduced fleet size, increased efficiency, and simplified adding new routes.
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Simplicity and Affordability: IndiGo avoided luxury—no business class, free meals, or headphones, just basic legroom and the cheapest tickets. While Kingfisher and Jet Airways burned cash on extravagance, IndiGo won the market with simplicity.
Turning Crises into Opportunities
The 2008 global recession devastated Indian aviation. Oil prices surged from $76 to $112 per barrel. Kingfisher’s losses hit ₹1,902 crore, SpiceJet’s ₹340 crore, and Jet Airways’ ₹400 crore. IndiGo, however, turned the crisis into an opportunity. From a ₹234 crore loss in 2008, it earned an ₹82 crore profit in 2009, followed by ₹480 crore and ₹700 crore. As Kingfisher sank, IndiGo hired 200–300 of its pilots, eliminating training costs.
IndiGo Today
With 392 aircraft and 2,000 daily flights, IndiGo dwarfs competitors. It’s not just India’s largest airline but one of the world’s fastest-growing.
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Low Fares, Basic Service: Indian customers want premium service at budget prices. IndiGo delivered affordable tickets with basic amenities, securing victory.
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Learning from Others: IndiGo studied the failures of Kingfisher and Jet, refining its model.
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Preparedness Pays: As Louis Pasteur said, “Fortune favors the prepared mind.” IndiGo’s cash reserves and crisis readiness turned downturns into opportunities.
IndiGo’s strategic brilliance, market insight, and efficiency have transformed challenges into triumphs. In the “graveyard” of Indian aviation, it shines as a star.
