As IndiGo prepares to tap the primary market for raising upto Rs 2,500 crore, the focus of attention is on the business model details it has shared in its IPO prospectus.
India’s aviation leader with a 37 percent market share - and the only one to report a consistent profit over the last five years - has essentially one basic USP: lower operating costs. A demonic zeal in keeping costs low has made it India’s only viable airline.
Peter Drucker, the late management guru, once said inside the company there are only costs. The profits lie outside, with the customer. The prime task of any business is thus to create a customer. IndiGo has succeeded because it has done both: managed its costs well, and created a new kind of airline customer - a profitable one.
The key costs any airline has to manage are those of maintenance, fuel and debt – and IndiGo did that better than its main rivals. According to this Mint report, IndiGo’s maintenance costs were as low as 11 paise per available seat km (ASKM) against Jet’s 74 paise. ASKM is a metric used to figure out what it costs an airline to fly every seat for every one km of distance.
07/07/15 R Jagannathan/First Post
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India’s aviation leader with a 37 percent market share - and the only one to report a consistent profit over the last five years - has essentially one basic USP: lower operating costs. A demonic zeal in keeping costs low has made it India’s only viable airline.
Peter Drucker, the late management guru, once said inside the company there are only costs. The profits lie outside, with the customer. The prime task of any business is thus to create a customer. IndiGo has succeeded because it has done both: managed its costs well, and created a new kind of airline customer - a profitable one.
The key costs any airline has to manage are those of maintenance, fuel and debt – and IndiGo did that better than its main rivals. According to this Mint report, IndiGo’s maintenance costs were as low as 11 paise per available seat km (ASKM) against Jet’s 74 paise. ASKM is a metric used to figure out what it costs an airline to fly every seat for every one km of distance.
07/07/15 R Jagannathan/First Post
