ISSUES IN THE INDIGO AIRLINES

Airport Infrastructure: The rapid growth in air traffic over the last few years exposed the deficiencies of airport infrastructure across the country. After decades of neglect, many of India's airports were forced to operate well above design capacity. The resulting congestion in the terminals and on the runways delivered a poor experience for the passenger and a costly, inefficient operating environment for the airlines. However, although a weakness today, it is also fair to say that it is becoming less so, as the airport modernisation program starts to deliver results, with new airports in Bangalore and Hyderabad, and improving facilities

at Delhi and Mumbai. The upgrade of non-metro airports remains behind schedule so it may be another 3-4 years before we see good quality facilities across the country, but there are tangible signs of improvement. Airways Infrastructure: Although congestion on the ground is relatively visible, another current area of weakness is the limited investment that has taken place in improving infrastructure for air traffic management. This too results in expensive aircraft holding patterns, indirect flight paths and sub-optimal use of runways. Deep Pockets: Over the last three years, India's carriers have accumulated billions of dollars in losses and debt. Ironically, a characteristic that would normally be considered a strength namely deep pockets - has resulted in carriers remaining afloat that would perhaps in other circumstances have failed. With the backing of either the government or large corporations, several carriers have been able to access funding that they might have been denied on a strictly commercial basis as standalone airlines. As a result of the intense competition which has been perpetuated, airlines have struggled to raise fares to break even levels. High Cost Structure: India's airlines operate in a relatively high cost environment, primarily due to the punitive taxation structure. The greatest impact is felt in the area of sales taxation on fuel, which can increase the cost to 60% above the international benchmark. The limitations of airport infrastructure also increase costs due to the fact that carriers are unable to schedule fast turnarounds, resulting in reduced aircraft utilisation. In addition, the fact that high quality ancillary services such as MRO and training are not currently available in India, means that aircraft and personnel have to be sent overseas.

Skilled Resources: Domestic air traffic in India tripled in the five years to 2008, while international passengers doubled. This rate of growth far outstripped the capacity to develop skilled technical and management personnel. The gap was partly addressed by employing expatriates, particularly as pilots, and by learning on the fly. This means there is a lack of indepth experience and knowledge at all levels. Furthermore, there is an absence of high quality training infrastructure in-country to deliver the resources to support future growth. This lack of personnel affects the government as well and the FAA has expressed its concern at the shortage of qualified safety inspectors within the Directorate General of Civil Aviation (DGCA). India has been put on notice that unless this issue is addressed, it may be relegated to a Category II nation, which would mean that Indian carriers would not be permitted to increase services to the US Middle East Aviation: The carriers of the Gulf are aggressively expanding in India, with high frequencies from multiple destinations to their hubs, from where passengers can access extensive global networks. The ability for a passenger for example to travel one-stop

from Ahmedabad toHamburg, or multiple daily frequencies from Mumbai to London, connecting at an attractive hub, is a strength which Indian carriers simply cannot match at present. It will take time and the question is how far ahead will the Middle East carriers be by that stage. Terrorism: India has seen frequent terrorist activity in recent years. The country has shown great resilience in bouncing back after each attack, however inbound international traffic in particular is sensitive to such events. Similarly the potential for India to develop as a global traffic and services hub is contingent upon it being seen as a safe and attractive destination.

Other issues:

High operating costs, rising debt and intense competition from unlisted cost-efficient players such as Indigo Airlines have forced investors to exit from the airline stocks. Private airlines in the country are in the dire need of funds for their operations and service upgradation to compete with other global carriers. High crude oil prices and the dollar strengthening in relation to the rupee squeezed its earnings.

The government is not approving applications to fly overseas, Indigo has applied for 30 international departures everyday. Changes in FDI policy in aviation: Amidst differences within the industry, the Finance Ministry has lent its support to the Department of Industrial Policy and Promotions (DIPP) on allowing foreign airlines to pick up up to 26 per cent equity in domestic airlines. It was argued that foreign airlines, with stronger balance sheets, can easily outshine Indian partners. Security concerns were also raised, especially regarding foreign airlines belonging to the Gulf and African regions.

Indigo Airlines Viral marketing

IndiGo Airlines has demonstrated a strong commitment towards using word-of-mouth (WOM) marketing by sending out emails. These emails are simple, easy and contain plain text only to avoid making it look like SPAM. The content also has been carefully crafted. Email 1:

(Click to go to the Actual Link) On clicking over the image you are taken to a flash video (again, neatly designed using the trademark indigo colours purple and white). The video contains a series of texts where IndiGo quotes from surveys and makes BOLD statements in comparison with other airlines Kingfisher, Spice Jet, et al. The strategy clearly has been to attack claims made by competition claims which say that others have better on-time performance, for instance. Low-cost airlines (popularly and colloquially known as LCCs), are often accused of poor levels of customer service and lack of attention to detail with res.pect to hygeine. Both of these have been

adequetely dealt with. In fact, in another of the BOLD statements, IndiGo has this to say about Customer Service: At IndiGo we respect our customers. We dont belittle you, talk you down or insult you. 2 marketing strategy lessons here: 1. Attack false claims (backed by validated research data) 2. USE your loyal customers by spreading word about false competitor claims Email #2: The visual says it all. This did not have a series of statements. Just this image.