IndiGo Low Cost Business Model
Indigo operates on the low cost carrier model. This model has become so popular in aviation that many full-service carriers have also launched their new airlines with dedicated short-haul flights. Well, it was the Southwest Airlines of USA which pioneered this model of civil aviation in early 1970s and is still running successfully for the last 45 years. This American airlines showed the way to the world, caused consternation in full-service carriers, made air travel affordable for people, removed the elitist auora and proved that airline can be run profitably with operational efficiency and low-priced tickets.
Airlines around the world have since adopted this model and most of them have remained successful. IndiGo Airlines is one of these. Though these airlines have done their own variations of this model, the underlying concept and its essential tenets remain the same. So, what is it that makes this model so successful?
- Short-haul flights: Budget airlines do not fly distances which are more than 4 hours (with a few hours here and there) away. Anything within this flight time range is highly feasible. In India, you can cover the length and breadth of this country within this time-frame which makes it highly suitable for these short-haul flights. It is not that airplanes used by these carriers can not fly more than this distance. It is just that by flying short distances, airlines are able to cut down on a number of amenities which passengers would need for flying longer distance. For example, they would be needing more comfortable seating with more legroom and wider seats with greater reclines. They would also need meals and entertainment facilities. Adding meals would inevitably mean more costs in catering, cabin crew, cutlery and maintenance of airplanes as well. This all pushes up the costs of air tickets
- No-frills carriers: By adding entertainment, meals and other services like legacy carriers, which passengers can do without on short haul distances, airlines not only increase the costs, it also adds to the weight of aircraft making it less fuel efficient. Meals are not free, even if these are provided. Budget carriers like IndiGo do not presume that meals would be required for 3-4 hours flights. Even if these are needed, it does allow dry snacks and other food which is non-oily, non-smell and non-messy in nature.
- Fuel Efficiency: Prime focus is fuel efficiency and since fuel costs make almost 35% of operational costs of airlines, achieving more efficiency through all possible means is very important. Whether it is the weight of fitments on the airplane, baggage allowance limits, lesser turnaround times at airports, higher on-time performance records, using modern navigation methods and using modern airplanes with higher efficiency of fuel consumption are some of the ways which they use to reduce costs.
- Aircraft leasing costs: Airlines lease aircrafts from manufacturers which involves leasing costs. By purchasing airplanes in bulk, IndiGo was able to negotiate highly favourable leasing costs which helped it to reduce costs further.
- Single Plane, Single Cabin Class: IndiGo has only one type of airplanes. These are the 180-seater A320 airplanes. By using only 1 type of airplane, there is less maintenance cost to be entailed. More are the different models and makes of the aircraft, more are different engineering staff is required for its maintenance. Similarly, by keeping only economy class of cabin, it is able to price its ticket better, fly with optimal seating arrangements and with maximum number of passengers on board.