Ruchi Thapa

Minor Report on AirAsia - Services and Solution Marketing

Prof. Bala Aryan

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CONTENTS

Introduction to the Topic ............................................................................ 2

Introduction to Indigo ................................................................................. 2

Introduction to AirAsia ................................................................................ 2

AirAsia’s dynamic entry into India .............................................................. 2

Key challenges faced by Indigo ................................................................... 3

AirAsia vs Indigo: a comparison .................................................................. 3

Possible strategies for Indigo ...................................................................... 4

It's all about customer focus ................................................................... 5

Using technology smartly ....................................................................... 6

Pricing Anamoly ...................................................................................... 6

Recommendations ...................................................................................... 7

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INTRODUCTION TO THE TOPIC

In this report, I am assuming the role of an advisor to Indigo who is

analyzing impact of AirAsia’s entry into Indian Market.

INTRODUCTION TO INDIGO

Indigo is the biggest Airline in India offering one class of no-frills service on

a single type of plane. Indigo has chosen to stick to the world’s best-selling

single-aisle aircraft, the Airbus A320. IndiGo boasts of a turnaround time

of less than 30 minutes. A report in the Business Standard had said earlier

that IndiGo's aircraft spend more than 11 hours a day in the sky, compared

to the industry average of 8 or 10 hours.

INTRODUCTION TO AIRASIA

Asia’s leading low-cost airline, AirAsia started its journey as a low-cost

carrier in Malaysia. With a route network that spans through more than 22

countries and 100 destinations.

The company’s competitive advantage is “Cost Reduction” through

innovative solutions like - no frills service, fast turnaround time (25

minutes), cost optimization operations like self-automation, self-check-in,

self-tag your baggage, improved aircraft utilization by using fuel efficient

aircraft – Airbus A320 and Crew efficiency.

AIRASIA’S DYNAMIC ENTRY INTO INDIA

AirAsia the low-cost airline company commenced operations in India with

a Joint Venture with Tata on 12 June, 2014.

The company has a unique LCC model which ensures lowered operational

costs. AirAsia is planning to achieve an aircraft turnaround time of 25

minutes which is very low when compared to the best of airlines in the

world. AirAsia India has announced preliminary operations to 4

destinations in India – Bangalore, Goa, Chennai and Kochi.

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Inaugural Fares Offered: Bangalore to Goa Rs.990; Bangalore to Chennai

Rs.990 and Bangalore to Kochi Rs.500.

KEY CHALLENGES FACED BY INDIGO

The key challenge for IndiGo is to defend its 50% market share from AirAsia

who is starting a price-war with super-low prices like Rs 500 and Rs 990.

AIRASIA VS INDIGO: A COMPARISON

Here is a quick overview of AirAsia (Worldwide) vs. Indigo (India) in the

table below.

AirAsia India has started its operation in India with 4 aircrafts. Based on

new aircraft delivery by 2017, AirAsia will acquire 36 new aircrafts fleet

that will be one third the size of Indigo’s 120 aircrafts fleet. Meanwhile,

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IndiGo has also ordered A-320 Neos aircraft in 2015. These planes are

more fuel efficient and claims to save upto 15% in fuel cost.

Hence, Indigo is not at a disadvantage when it comes to plane technology.

AirAsia has plans to fly to 10 to 12 cities whereas Indigo plans to increase

the destinations to 40+ by 2017. Indigo will have an edge over the number

of routes covered against AirAsia.

POSSIBLE STRATEGIES FOR INDIGO

In Airline industry the capacity constraint is the number of seats on their

aircraft. To manage this constraint the Airline can use strategic approach

to shift demand to match capacity by focusing on to reduce the demand

during peak.

1. Communicate with customers – Inform the peak times when the fares are high and persuade customers to book the tickets at alternative times. For example, Clear trip calendar shows the fares for each day so, the customers know when the ticket fare is high and low. This helps the customer to plan their travel and customer is happy paying low which increases the customer loyalty towards the company.

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2. Offer incentives for non-peak usage - Indigo can communicate to the

customers about day, time or months when the rush is less and persuade them to book the tickets at that point of time by offering extra discounts, early bird discounts, etc

3. Educate the customers -To decrease their operation cost Indigo can educate their customers on how to do check-in online and self-tagging the luggage. If the customers do the check-in online this will help Indigo as they can use less number of staff.

IT'S ALL ABOUT CUSTOMER FOCUS

Customer relationship plays a very vital role in any company’s success.

IndiGo's success model largely relies on consistent low fares, regular

minimal flight cancellations and on-time performance. However, the

airline's biggest edge over others is its customer focus.

Other airlines advertise low fares, marketing or other promotional offers

on their websites, IndiGo only emphasizes on-time performance. Indigo

has continuously built around this image through their advertisements on

television and print media. IndiGo has 86% OTP as compared to 70-80% for

AirAsia.

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USING TECHNOLOGY SMARTLY

To monitor on-time performance for every flight in real time, Indigo is

using Aircraft Communications Addressing and Reporting System (ACARS).

They have an easy-to-navigate website, and features such as queue

busters at most airports, where if you are carrying only cabin luggage, you

need not stand in a check-in queue and these queue busters would print

boarding cards from hand-held machines quickly.

PRICING ANAMOLY

AirAsia advertises low prices but in fact after adding minimum baggage

fees, its price goes higher than the existing competitors. As Indian

customers are very price sensitive, they might be fooled by this pricing

strategy once. But this tactic will surely backfire in getting repeat

customers. So, IndiGo should advertise transparency in airline prices.

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RECOMMENDATIONS

Based on my analysis, IndiGo should counter the price-war by

strengthening its Brand Positioning of On-Time Performance. Customer

Focus and Transparency in Prices. This can be best achieved by educating

the customers by various channels, such as advertising on TV, newspapers,

magazines and websites.