Monday, December 02, 2019

IndiGo has abandoned its pure low-cost carrier model

In recent years, IndiGo has launched a series of significant steps, making a marked departure from a pure low-cost strategy, long its mainstay and which helped it become India’s largest airline. As the airline spreads its wings, the extent of its ambitions is becoming clear.

IndiGo is no longer content being the dominant domestic airline in India. It is steadily positioning itself to become a major player in the international segment as well. The change has not been sudden. Far from it.

The shift — by way of an evolving strategy — has been deliberate. And looking back, one can clearly see a pattern emerge.

IndiGo started as a pure low-cost carrier (LCC). Elements of the LCC model were made popular by Southwest Airlines in the US and then copied the world over.

A raft of LCCs sprung up all over the globe. The disciplined airlines that were devoted to the core principles of the LCC business model thrived. The salient principles of the LCC model are a focus on short-haul sectors, no-frills, point-to-point flights, and low fares delivered via a single fleet and engine type.

Complexity for this model was (and is) akin to a cancer and kept at bay. Genuine LCC airlines utilize their assets to the hilt, with fast turnarounds, minimal ground times and stubborn about stifling costs. Rather than building a network spread across several points, they focus on maximising frequencies, allowing for amortization of fixed costs over a greater spread. They also consistently offer low fares, which are a key determinant of demand, especially in price-sensitive markets such as India.
02/12/19 Satyendra Pandey/CNBC TV18

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