Case in Point: No-frills IndiGo airlines stays focused on its low-cost, on-time mission


Aditya Ghosh, president of IndiGo, poses for a portrait in this 2013 photo. The airline's operations were profitable for a fifth straight year, Ghosh said. The market share of Ghosh’s no-frills Indian carrier soars as the company stays focused on its low-cost, on-time mission. (Graham Crouch/Bloomberg)
May 30

The big idea: News flash — airlines are service operations. With elites comfortably flying the friendly skies under Premieres, AAdvantage, Gold Member and SkyPriority programs, what do service operations look like for an airline carrier that offers no frequent-flier perks? What choices must an organization make to compete effectively?

The scenario: The passenger-airline industry in India was messy: The government bailed out its national carrier; a once-thriving independent airline looked close to folding; fuel prices hit a longtime high; debt levels were climbing among carriers. Yet, a relatively new company, IndiGo, grabbed market share from more-established fliers in 2013.

The airline offered “one type of fare — low.” It allowed assigned seating at airport check-in counters and through Web check-in without cost, but it had no loyalty program. There was no onboard entertainment. IndiGo focused on providing a clean aircraft, good onboard service and “being on time.”

Each IndiGo flight provided complimentary water and charged for food and other beverages. The airline appealed to business travelers with services such as connections to public transportation, cab-booking assistance and car rentals at reduced prices. To aid its success in being on time, as well as to save money, IndiGo used technology made up of digital data links to communicate between its planes, ground stations and satellites.

Still the weak rupee was sending a chill wind through the aviation sector, and growth plans would require new destinations. That meant hiring more employees, opening more ticketing stations and increasing costs. What would IndiGo need to do to deliver on its promises?

The resolution: IndiGo made choices supporting its premise that service would not be sacrificed because airfares were low — being on time was key and meant a huge investment in technology to ensure that reservation, operation control and dispatch systems ran smoothly.

The areas of service in which IndiGo is less strong, mostly as a result of cost savings, include charging fees for service perks and the lack of other services, such as onboard entertainment, hot food, connections and loyalty programs.

The lesson: IndiGo’s service model traded some extras that other airlines offered for services IndiGo wanted to excel at providing. Its technology network provides a strategic advantage. Yet that same nexus can make it difficult for an organization to respond to change or shifting realities underlying economic activity. IndiGo could be praised for putting its systems and its people together in such a way to support its low-cost and on-time mission. Its challenge will be to maintain that relentless focus as it looks to enter new markets.

— Gerry Yemen and Elliott Weiss

Weiss is a business professor and Yemen a senior researcher at the University of Virginia’s Darden School of Business.

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