Comparison Study on Indigo Airlines & Spicejet Airlines

Submitted By:

Ketan Bhateja

Introduction (IndiGo Airlines)

IndiGo airlines entered the low cost carrier market in aviation industry in 2006.

It has been able to achieve its break even within two years of its launch.

Despite the decline in the aviation industry and global economic slowdown, IndiGo has accelerated its growth rate.

Also, IndiGo being a new entrant has managed to become a cost leader in its sector.

Introduction (SpiceJet)

SpiceJet, India's leading low cost airline, is a reincarnation of ModiLuft.

It is promoted by Ajay Singh and the Kansagra family.

SpiceJet marked its entry in the Indian skies with Rs. 99 fares for the first 99 days, with 9,000 seats available each day.

Today, Spicejet operates 21 Boeing 737-800/900ER aircraft across 19 destinations and has a 12% share of the Indian market. In 2010, it was ranked India's No. 1 low cost airline in a nation wide survey.

Sector structure/Market size

India is the 9th largest aviation market in the world. According to the Ministry of Civil Aviation, around

29.8 million passengers traveled to/from India during 2008, an increase of 30 per cent on previous year.

It is predicted that international passengers will grow up to 50 million by 2015.

Further, due to enhanced opportunities and international connectivity, 69 foreign airlines from 49 countries are flying into India

Growth Domestic airlines flew 3.67 million passengers in August 2009,

as against 2.92 million in the corresponding period last year—an increase of 26 per cent.

The Centre for Asia Pacific Aviation (CAPA) forecasted that domestic traffic will increase by 25 per cent to 30 per cent till 2010 and international traffic growth by 15 per cent, taking the total market to more than 100 million passengers by 2010

The Centre for Asia Pacific Aviation (CAPA) forecasted that domestic traffic will increase by 25 per cent to 30 per cent till 2010 and international traffic growth by 15 per cent, taking the total market to more than 100 million passengers by 2010.

India ranks fourth after US, China and Japan in terms of domestic passengers volume

Low cost services Kingfisher Airlines and Jet Airways have converted around half

their capacity into low-cost services. While, government carrier Air India plans to launch a low-cost model in the domestic skies.

Jet Airways has also increased the number of low-cost seats in the system by around 50 per cent.

Low cost carriers (LCCs) such as Indigo and Spice Jet have increased the total number of seats by 40 per cent and 53 per cent, respectively, in the past year.

SpiceJet is also working on a plan to start international operations next year, making it the third private Indian carrier after Jet Airways and Kingfisher to fly overseas

Road Ahead Passenger traffic is projected to grow at a CAGR of over 15 per

cent in the next 5 years. The Vision 2020 statement announced by the Ministry of Civil

Aviation, envisages creating infrastructure to handle 280 million passengers by 2020.

Investment opportunities of US$ 110 billion envisaged up to 2020 with US$ 80 billion in new aircraft and US$ 30 billion in development of airport infrastructure.

Associated areas such as maintenance repair and overhaul (MRO) and training offer high investment potential. A report by Ernst & Young says the MRO category in the aviation sector can absorb up to US$ 120 billion worth of investments by 2020.

PEST Analysis

The organization's marketing environment is made up from:

The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc.

The micro-environment e.g. our external customers, agents and distributors, suppliers, our competitors, etc.

The macro-environment e.g. Political (and legal) forces, Economic forces, Socio Cultural forces, and Technological forces. These are known as PEST factors.

Political Factors

You must consider issues such as:

How stable is the political environment? Will government policy influence laws that regulate or tax

your business? What is the government's position on marketing ethics? What is the government's policy on the economy? Does the government have a view on culture and

religion? Is the government involved in trading agreements such

as EU, NAFTA, ASEAN, or

Economic Factors

Marketers need to consider the state of a trading economy in the short and long-terms. You need to look at:

Interest rates The level of inflation Employment level per capita Long-term prospects for the economy Gross

Domestic Product (GDP) per capita, and so on.

Socio-Cultural Factors

The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:

What is the dominant religion? What are attitudes to foreign products and services? Does language impact upon the diffusion of products onto

markets? How much time do consumers have for leisure? What are the roles of men and women within society? How long are the population living? Are the older generations

wealthy? Do the population have a strong/weak opinion on green issues?

Technological Factors

Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:

1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?

2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?

3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?

4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

POLITICAL FACTORS

Open Sky Policy and Deregulations Aviation Policy Abolishment of Taxes Reduction on Excise Duty Landing Charges abolished

SOCIAL FACTORS

Change in Lifestyle Rise in Leisure travel

TECHNOLOGICAL FACTORS

Video Conferencing Internet Surface Transport Investment

ENVIRONMENTAL FACTORS

Rise in global temperatures High ATF charges Available infrastructure

Indigo Airways Indigo is a private, low-cost carrier based in Gurgaon, Haryana. The airline started operations in August 2006 On 17 August 2012, Indigo became the largest airline in India in

terms of market share (27%), dethroning Jet Airways Indigo signed a Memorandum of Understanding for an additional

180 Airbus A320 aircraft including 150 with the New Engine Option (NEO)

To keep fares low, Indigo offers a basic service no in-flight entertainment or complimentary meals although it does have a buy-on board in-flight meal programme

In early 2013, the Centre for Asia Pacific Aviation announced with, along with Indonesian airline Lion Air, Indigo was the second most fastest growing low-cost carrier.

Spicejet Airlines

It is a low-cost airline based in New Delhi, India. Spice Jet’s mission is to become India’s preferred

low cost airline, delivering the lowest air fares with the highest consumer value, to price sensitive consumers.

SpiceJet has chosen a single aircraft type fleet which allows for greater efficiency in maintenance, and supports the low-cost structure.

SpiceJet's new generation fleet of aircraft is backed by cutting edge technology and infrastructure to ensure the highest standards in operating efficiency.

The External Environment

The external environment consists of:

Competitors The economic system The social system The monetary system The political/legal system The environmental system.

PEST Analysis for Indigo Airlines

POLITICAL: Open sky policy. Deregulations in different spheres. Low entry barriers to attract new companies. FDI Limits

49% for Airlines 100% for Airports Extensive airports development plans.

ECONOMIC

Rising Income of middle class. GDP growth of more than 8% & expected

rate in 2 digits. Average salary increase,14% in the World. Growing Tourism Industry.

TECHNOLOGICAL

Modernization of Airports. Better handling of Aircrafts,Passangers &

Cargo. Developing Airports with Corporate

collaboration.

SOCIAL AND ECONOMICAL

Rise in the Middle class flying. Increased Leisure Travelling. Increase in the number of Foreign Tourists. Status symbol to travel by plane.

PEST Analysis for Spicejet Airlines

POLITICAL National & Airport Security. FDI- 49% in Airlines & 100% in Airport. Freedom to determine Prices. Level Playing field. Upgradation of Airport infrastructure &

Facilities.

ECONOMIC

Income of salried class up by 14% to 16% . GDP growth of 8% to 9% . Nil import tariff on Aircraft. Seat inventory pricing. Oligopoly structure of the market.

SOCIAL

Increase in travelling lifestyles. Increase in Business travel. Growing middle class. LCC as mass transport medium. Air travelling from luxury towards necessity.

TECHNOLOGICAL

IT Revolution Online Ticketing Best price shopping services Uniform aircraft types Safety measures