Business Case Studies, Leadership Case Study, Tata Group,Ratan Tata

Code :BSM0052

Year : 2009

Industry : Transportation

Region : India

Teaching Note:Available

Structured Assignment :Available

Abstract: This case is written primarily to raise an interesting debate over a simple, yet, thought-provoking concept - If a distinctive positioning is what gives a company success, should it stick to it, even when other companies with similar positioning are experiencing failure? Indian aviation was revolutionised in 2003, when Air Deccan pioneered the 'low-cost' model that focused on keeping operational costs low. Introducing the concept of discount pricing, offering air tickets for as low as INR 500, Deccan attracted the expanding middle class of the country, carrying nearly 1.3 million passengers by 2005. Following suite, many low-cost airlines like Spice Jet, Go Air and IndiGo entered the Indian skies with the aim of capturing a share of the Low-Cost Carrier (LCC) segment. Each of these players bombarded the aviation arena with their promise of lowest airfares. However, as the booming opportunities prompted players to expand capacity and rising fuel costs and taxation rates, increased the costs, the low-cost players found it difficult to live up to their promise. In their urge to survive, they increased prices, coming almost close to FSCs, added free refreshments and beverages on-board and sought refuge in mergers or by tweaking their business model to add the frills that were contrary to the low-cost dream. However, amidst this aviation turmoil, IndiGo continued to fly high. It endeavoured to consistently maintain low costs by resorting to measures like outsourcing and having a homogeneous fleet. These efforts helped IndiGo to offer its passengers low air fares, keeping the low-cost dream alive. The case explores into how IndiGo could remain profitable when all other airlines struggled.