How IndiGo Airlines Disrupted the Indian Skies

#DisruptiveInnovation doesn't happen everyday. IndiGo airlines shows how market-facing strategy and operating choices come together to make it happen.

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In 2006, flying in India was a dream. It was normal to catch the latest Shah Rukh Khan movie wDisruptive Innovation_2hile you were served warm Chicken Tikka Masala for dinner, on a 1 hour 45 minute flight from Mumbai to Delhi. Before you landed, your frequent flying account would get credited with a generous number of miles. This wasn’t even business class!

In the same year, InterGlobe Enterprises Ltd., a small hospitality conglomerate launched a new airline – Indigo Airlines – offering no business class seats, no loyalty program, no inflight entertainment, and no (free) meals. Indigo, however, did promise more economical fares and on time arrival of flights. “Who would care for that?”, thought everyone including the leading incumbents in the market – Jet Airways, Kingfisher Airlines, and Air India – all full service carriers who had a combined share of nearly 80% of the market. A previous attempt at a low cost aviation, by Deccan Airways, was failing miserably.

A new customer promise

At the time, flights were frequently delayed and a 15-20 minute late take off (and landing) was the norm. Passengers were forgiving of these delays as a lack of punctuality is often seen to be deep rooted in Indian culture. Given the sheer number of procedures required to prepare a flight for takeoff and the general leniency of the customers – no airline made being on schedule a priority – until Indigo. From its early days, it committed to an “on-time” customer promise. (IndiGo TV Commercial) Flyers didn’t immediately catch on to this new proposition, but Indigo persisted. Indigo made its “on-time” value proposition central to its marketing message – for instance, through a play of words, it renamed IST (acronym for Indian Standard Time, similar to EST) to stand for “Indigo Standard Time” in its communication.

Although, through various cost efficiencies and lean operating choices, Indigo was able to offer fares lower than other airlines, it chose to keep ticket prices as a secondary value proposition. Instead, cost advantage was used to drive profitability.

Leisure travelers – many of who were priced out of the market – were first to move towards Indigo, while business travelers still flocked towards full service carriers. However, as more and more people experienced the beauty of “on-time” flights, Indigo’s market share grew. Today, Indigo’s market share (see figure below) is more than twice of its nearest competitor – Jet Airways – and is one of the few profitable airlines in India.

Market Shares


Smart choices to keep that promise

Given that the airline business is highly capital intensive, every airline tries to increase utilization by scheduling back to back flights with only a 20 to 30 minute time in between to prepare for the next flight. Within this short period of time, several tasks need to take place including cleaning, maintenance checks, de-boarding and boarding of passengers, unloaded and loading of luggage, loading of meals. Any delays resulted in a delayed take off and a delayed arrival at destination.

Indigo made several operating model choices to not only keep its operating costs low but also to ensure that planes were ready to take off at the scheduled time. However, none was more important than using only one type of aircraft, the Airbus A320. Having only one type of aircraft helped improve utilization of pilots, crew, maintenance and ground staff, as airline staff is typically specialized to handle 1-2 aircraft types. More importantly, because staff members were working on only one aircraft type, they could work faster: MRO (Maintenance, Repair and Overhaul) staff did their maintenance checks faster, ground staff loaded baggage faster, and cleaners cleaned the toilets quicker. Small efficiencies added up when they had only 20-30 minutes to prepare an aircraft.

Secondly, Indigo signed ‘Sale and Lease Back’ deals with aircraft manufacturers i.e. after six years of operation, the manufacturers were contracted to take back the planes and Indigo could have brand new ones. Keeping the average fleet age low not only reduced the maintenance costs but also fewer maintenance operations were required, reducing MRO related hold ups.

Furthermore, Indigo made smart choices about their customer facing policies and processes to drive timely turnarounds. For instance, meals-for-sale were restricted to sandwiches or packaged snacks and beverages that could be loaded much faster than warm full-meals, which were the norm in Indian aviation in the late 2000s. They even got their customers to help! A few minutes before landing, an announcement would be made on the PA system requesting passengers to tidy up their seats. Passengers would then hand over the trash to a cabin-crew member who would walk the aisles collecting trash.  While these practices had emerged in the west, they were extremely new to the Indian aviation sector and often broke cultural norms.

Lastly, as the saying goes, “You cannot improve what you cannot measure” – Indigo invested in technology for measuring on-time performance in an automated and tamper proof manner. Unlike other airlines that used manual systems, Indigo aircrafts were equipped with Aircraft Communications Addressing and Reporting System (ACARS). The system enables automated communication between the aircraft and ground station – whenever a flight takes off or lands, the time is recorded in the software. Hence, on time performance can be reported and tracked in real time.

Indigo carefully aligned its operations strategies to its twin promises: promise to its customers to have on-time flights, and a promise to itself to keep a lean cost structure. And as they say, “the rest is history”!


  1. “The Indian Airline Industry in 2008”, Rishikesha T. Krishnan, Professor of Corporate Strategy & Policy, Indian Institute of Management Bangalore
  10. Directorate General of Civil Aviation (DGCA) Data
  11. InterGlobe Aviation Limited Interim Report (Jun 30, 2015)


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Student comments on How IndiGo Airlines Disrupted the Indian Skies

  1. This was an excellent post which laid out the benefits of their operating model very clearly.

    Going from 5% market share to ~40% share is no joke, and there is no doubt that some of these operational decisions have led to market dominance. Specifically, the low cost structure–assisted by the homogeneity of the fleet, sale-lease back agreement, and high utilization of aircraft–have allowed IndiGo to survive and thrive amidst competitor airlines such as Kingfisher going out of business. It is impressive how such simple operational choices, such as having ready-to-eat packaged foods and enlisting customers to help clean up, can add up to deliver the cost savings needed to run a profitable airline.

    Additionally, it is impressive that the company capitalized on a growing middle class in India by shaping its own customer promise of timely and affordable flights, bucking the dominant trend in the airline industry. While that choice seems obvious now, the fact that none of the incumbent airlines were thinking this far ahead shows the level of strategic thinking that IndiGo employed.

  2. Well done! This post cleanly lays out how IndiGo’s operating model choices–one plane type, lease-back agreements, no meals–were all designed with profit margins and on-time arrivals in mind. This company’s growth in market share over the past 8 years is incredibly impressive, especially given the fact that it is one of the few domestic airlines to consistently turn a profit. I think this company’s story is a great example of what can happen when someone dares to challenge the status quo–and at the right time.

    Just a few small points to add on the operating model. Choosing to go with one style of plane probably played a role in IndiGo’s ability to secure attractive lease-back agreements. Since they ordered planes in bulk instead of in small orders, they probably had some power over Airbus to negotiate such an arrangement. I’m guessing that this arrangement plays a huge part in the company’s profitability. The only concern that I have about this model is that it is probably limited to only serving major airline routes due to the plane size. That said, they’ve done an excellent job at playing to their strengths along those routes, winning market share, and focusing on profit margins. I’d be interested to see if this model could extend to another market with a growing airline industry.

  3. Fantastic post. You really laid out the key operating decisions made to support the low-cost everyday carrier business model.

    Indigo seems like a great business. I am impressed that they were able to gain market share so quickly. How did they change the cultural norms that existed in aviation, around full meals, service, entertainment, etc.? I am particularly curious about their promotions strategy since mass advertising / sponsorship like the other airlines would not make sense since you’re targeting a lower price customer. Perhaps pricing is transparent (through online search) and Indigo’s lower price is enough to win customers.

    I also think of airlines as a fairly high fixed, low variable cost business. Specifically, the cost of the planes and various regulatory fees (airport fees, air licenses, etc.) is fixed and these components seem to be fairly big. Therefore, I would have expected the incumbents to have a high utilization, volume strategy but that was not the case. Have they reduced prices or introduced economy brands? If they do, I wonder whether Indigo’s lack of loyalty programs will hurt it in terms of customer retention.

  4. This is a great post which details out the operating and business models of Indigo which clearly disrupted the Indian airline industry. Given my own understanding of Indigo’s operations, I had the following questions.

    1. Flight Routes – How does Indigo’s choice of flight routes impact its cost structure and utilization? Does Indigo only fly the profitable routes to have high utilization and how does it compare with the incumbents? How important a role does utilization play in ensuring that Indigo amortizes down its fixed cost over a large passenger base?
    2. Domestic to International – Indigo has been able to use its operating model to be a successful domestic carrier. As it looks to move into the international space too, what changes do you think Indigo will need to make on its operating model?
    3. Growth – As Indigo has crowded out the profitable domestic routes, where is its future growth going to come from? Will it venture into the non-profitable domestic routes or is the growth driver going to be international routes?
    4. Competition – With low-cost competitors like Air-Asia playing in the India market today, do you think Indigo might need to tweak its business or operating models to better adapt to competitive pressures?

  5. Prerit, this is a great profile of how IndiGo disrupted the air travel market in India. I’m surprised that it’s operating model helped it fend off competition, however. After its competitors began losing market share, I’m surprised they did not try to alter their operating models to achieve even more on-time flights given all the customers that IndiGo captured. One reason must be that IndiGo has only the one type of plane and can be more efficient in ongoing maintenance due to the age of the fleet. Another might be that IndiGo targets the Indian middle class (as TK’s comment pointed out above), and this customer segment does not want the same amenities available on the Jet Airways flights, for example, so IndiGo can accomplish shorter turnaround times for its planes.

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