Introduction
The aviation industry has significantly changed as a result of new technologies and the Covid-19 pandemic. Airlines have had to balance between providing secure travel and ensuring the costs do not limit travelers. The Indian airline sector is one of the fastest growing in the world due to a growing economy and a large middle-class population. However, the sector has faced challenges that include poor services, corruption, and poor pay. This paper will analyze the Indian aviation industry and, in particular, focus on IndiGo. The report will also discuss the role of various regulating agencies and the contribution and impact of significant trends and policies.
India’s Aviation Sector
India has one of the fastest-developing aviation markets in the world. It is also projected to become the third-largest aviation market in the world by 2030 (Indian Aviation Industry, 2022). India’s airport capacity is expected to handle 1 billion trips annually by 2023 (Indian Aviation Industry, 2022). Over the past three years, the Indian airline industry has recorded significant growth and has had the largest number of domestic passengers (Indian Aviation Industry, 2022). Low airfares and rising income levels are among the reasons for immense growth. The government has focused significantly on the growth of airports in different regions of the country. Innovations in the sector and investments from the government have enabled the sector to grow in the past 5 years. By 2026, the Indian government expects to invest $1.83 billion in the development of airport infrastructure (Indian Aviation Industry, 2022). The aim is to build 220 new airports by 2025 and increase the number of cargo flights by 30% (Indian Aviation Industry, 2022). The government has promoted connectivity and enhanced affordability, which has favored domestic and foreign travelers. The Indian aviation market is dominated by IndiGo as it has the largest market share. Other market players include Air India, Vistara, AirAsia India, GoAir, Jet Airways, and SpiceJet limited.
IndiGo Airline
IndiGo airline is a publicly listed company that is headquartered in Gurgaon, India. The company has a vision of becoming the largest and fastest-growing airline in the region. The main competitive advantage is that IndiGo offers quality services at a low cost. The organization earned revenues of $2.1 billion in 2021, which was an increase from the previous year (Indian Aviation Industry, 2022). The entity offers air transportation, online booking, pick-up and drop services, mobile booking, special meals, and beverage selections to customers. The airline has implemented cost-saving measures such as reducing staff and aircraft and offering low-cost fares. The airline has also invested heavily in technology and infrastructure, allowing it to offer superior service at competitive prices.
SWOT Analysis
PESTLE Analysis
Analysis
The government has taken several measures that have helped promote and develop the aviation sector. Due to the high growth of the airlines, the government has supported them with incentives and helped them bring up new airports (Agrawal, 2021). Economically, the Indian economy has been growing rapidly over the past few years, thus increasing disposable incomes. Besides that, the Indian economy has increased demand for air travel. The high increase in the number of middle-class households in India has also promoted the growth in Air travel (Singh et al., 2021). Most middle-class clients prefer Air as their mode of travel compared to other methods of travel.
The introduction of technological advancements has promoted the growth of the Aviation sector. For instance, the introduction of e-tickets and mobile booking applications has made It is easier for clients to book a flight with a touch of the screen, which has helped save costs and time. The rule of law has enhanced peace and economic growth and helped protect rights (Agrawal, 2021). The Indian government has implemented several laws and regulations that ensure the safety of passengers. The Aviation sector has been ensuring fewer aircraft emissions and noise levels (Sathe et al., 2021). This has ensured that this mode of transport is environmentally friendly, thus reducing the environmental impact.
IndiGo Business Growth and Strategy
The Indian aviation sector is highly competitive and has many entry barriers due to the presence of established players and government regulation. Air travel is the most efficient mode of transport for long-distance travel, which is an advantage for airlines (Agrawal, 2021). The bargaining power of clients is high due to the presence of several airlines in the market. IndiGo’s strategy is to provide low-cost options for customers traveling within the country. This has enabled the organization to become the market leader in the Indian Aviation Industry. The other business strategy is to provide quality services to all customers. This includes the provision of 24-hour customer service, online booking, and flight meals and snacks. The clients can compare prices between different airlines and choose the most affordable according to their interests. On the other hand, the suppliers have low bargaining power since the major airlines have long-term contracts with the aircraft manufacturers (Agrawal, 2021). Every business has competition as another company may offer similar services or products.
The government has contributed positively to the growth of the sector due to its immense support. The high demand for air travel, technological advancements, and great customer support and loyalty have contributed to its development (Syapsan, 2019). High operational costs are one of the weaknesses that can impact the business strategies of IndiGo. The seasonality in demand and limited access to capital have impacted the airline sector (Agrawal, 2021). Expansion into new markets and increased technology use have created great opportunities for IndiGo. Besides that, the company’s focus on a low-cost strategy has also created significant opportunities for growth (Kar and Khandelwal, 2020). The airline industry faces various threats, including increased fuel prices and stiff competition.
VRIO Analysis
Value: The Indian aviation sector is highly valuable due to the strong growth in Air Travel and the government’s focus on developing regional airports. It is one of the fastest-growing sectors in the country, with a compound annual growth rate of 13.2% over the last 5 years (Indian Aviation Industry, 2022). The sector is also expected to create over 10 million new jobs in the next decade, making it an attractive investment opportunity.
Rarity: The Indian aviation sector is characterized by high barriers to entry, due to the high capital investments required to establish and operate an airline. This has resulted in a highly concentrated market, with three airlines (Air India, IndiGo, and SpiceJet) accounting for over 80% of the total market share (Indian Aviation Industry, 2022). The Indian aviation sector is not rare, as many players are in the market.
Imitability: The technology and processes used by the major airlines in India can be easily imitated by their competitors. It is therefore relatively easy to enter the market as there are no major technological or operational barriers to entry. This has resulted in many new entrants in the market, including low-cost carriers, regional carriers, and cargo airlines.
Organization: The major airlines in India have strong organizational structures and are well-positioned to take advantage of opportunities in the market. Furthermore, the sector is highly organized, with several regulatory and licensing requirements that must be met by airlines. In addition, the sector is highly competitive, with airlines competing on price, services, and loyalty programs.
Role of Regulatory Agencies
The Directorate General of Civil Aviation (DGCA) is the main regulatory body for civil aviation in India. Its main role is to ensure the highest level of safety in the aviation industry by developing and implementing standards and regulations for aircraft design, manufacture, and operation (Amankwah-Amoah et al., 2021). DGCA also works to promote the harmonization of aviation safety standards and regulations within the country to ensure that the aviation industry complies with the highest safety standards. The agency impacts the business of IndiGo as the airline has flights destined for different regions in the country and outside the region. The company has to adhere to the rules set out by DGCA when operating in the Indian airline industry.
The International Air Transport Association (IATA) is an international trade organization that represents and serves the interests of the world’s airlines. Its members are responsible for more than 82% of worldwide scheduled Air traffic (Agrawal, 2021). IATA works to develop and maintain industry standards and best practices, promoting the safety, efficiency, and regularity of air transport. It also represents its members’ interests and supports their efforts to provide a safe, secure, and efficient air transport system. Standards and regulations promote the harmonization of policies across countries. These agencies also assist their member states in developing and implementing safety and security measures. The agencies guide airlines in complying with applicable regulations, including implementing international and regional recommendations and directives (Rathore et al., 2020). These agencies also work to ensure that the aviation industry complies with the highest safety standards and that the Air transport system is efficient and secure (Kolte et al., 2019). The entities represent their members’ interests and support their efforts to provide a safe and efficient air transport system.
One of the most significant policies influencing airlines’ business strategies is the Civil Aviation Authority of India’s (CAAI) Aircraft Acquisition, Finance, and Leasing (AAF&L) regulations. These regulations set out the rules and guidelines for aircraft acquisition, finance, and leasing, as well as the taxation and other financial implications of aircraft acquisitions (Rathore et al., 2020). This policy has had a major impact on Indian airlines’ business strategies as it requires airlines to assess their projected revenues and expenses before making any aircraft acquisitions. This helps airlines evaluate the viability of any proposed aircraft acquisition to ensure that they have sufficient capital and cash flow to cover the cost of the aircraft and any related charges. Another important policy that plays a significant role in airline decision-making is the CAAI’s Air Traffic Rights (ATR) regulations. This policy sets out the rules and guidelines for international air traffic rights and the taxation and other financial implications of such rights. This policy has had a major impact on Indian airlines’ business strategies (Guttikunda et al., 2019). Airlines must assess their projected revenues and expenses before committing to international air traffic rights. This helps airlines evaluate the viability of any proposed air traffic rights in terms of ensuring that they have sufficient capital and cash flow to cover the cost of the rights and any related charges.
Additionally, The CAAI’s Airline Safety and Security regulations have also been influential in shaping Indian airlines’ business strategies. This policy sets out the rules and guidelines for airline safety and security, as well as the taxation and other financial implications of these regulations. This policy has had a major impact on Indian airlines’ business strategies. Airlines must assess their projected revenues and expenses before investing in safety and security (Rathore et al., 2020). This helps airlines evaluate the viability of any proposed safety and security investments to ensure they have sufficient capital and cash flow to cover the cost of such assets and any related charges. The CAAI’s Air Pricing regulations have also affected the direction that Indian airlines take. The policy sets out the rules and guidelines for airfares, as well as the taxation and other financial implications of air pricing (Rathore et al., 2020). This policy affected the strategies of airlines such as IndiGo as it requires airlines to assess their projected revenues and expenses before setting their airfares. This helps airlines evaluate the viability of any proposed airfares and ensure they have sufficient capital and cash flow to cover the cost of the fares and any related charges.
Air Service Agreements and Freedom of the Air
The Air Service Agreement (ASA) and the Freedoms of the Air (FTA) are two key agreements that have enabled the Indian airline industry to expand its services and operations and become more competitive in the global market. ASAs are bilateral agreements between countries allowing certain airlines to fly to and land in another country. The FTA is a multilateral agreement that grants certain rights, such as the right of transit, to airlines of signatory countries. The ASAs and FTAs signed by Indian airlines have enabled them to access lucrative international markets and expand their reach (Kar and Khandelwal, 2020). For instance, IndiGo and other Indian carriers have been able to access Middle Eastern markets by signing ASAs with UAE, Oman, and Qatar. Similarly, the airlines have also been able to access markets in South East Asia, North America, and Europe through FTAs.
Impact of Covid-19 on Indian Airlines
The Covid-19 pandemic has heavily impacted the Indian airline industry. The pandemic has caused a significant reduction in international travel, resulting in a drastic drop in demand for air travel (Rathore et al., 2020). This has significantly reduced the number of flights operated by Indian airlines and has impacted their revenues. Furthermore, the pandemic has disrupted the global supply chain, resulting in higher operating costs for Indian airlines. In response to the pandemic, Indian airlines have implemented various strategies to remain competitive and continue to operate (Rathore et al., 2020). These strategies include cost-cutting measures, such as reducing staff, freezing wages, deferring capital expenditure, and increasing the focus on domestic and regional markets. Indian airlines have been increasing their online presence and leveraging digital technologies to reach potential customers (Dash et al., 2021). Looking to the future, Indian airlines are likely to continue to focus on domestic and regional markets to remain profitable in the short term. In the longer-term, Indian airlines will need to leverage their existing ASAs and FTAs to access international markets and drive growth.
The industry will need to focus on leveraging digital technologies and increasing its online presence to reach out to potential customers. The sector will also need to develop innovative strategies to manage the impact of the pandemic and foster growth and success. The Indian airline benefits both customers and employers as well (Tahanisaz, 2020). They have prioritized maintaining its brand image throughout by offering the best services to its clients. Other than providing top-notch services to their customers, they maintain affordability (Tahanisaz, 2020). In most cases, customers select the best airline to travel with regardless of the price as long as they offer the best services. In recent years air transport has been efficient in transporting people and goods. Air travel ensures that the goods are secure and reach the required destination on time.
Conclusion
In summary, India’s aviation industry has experienced tremendous growth in the past few decades and is expected to continue to expand in the future. This growth has been instrumental in promoting economic growth and connectivity across the country. The government and industry stakeholders must balance safety, cost, and quality to remain an attractive and competitive industry. IndiGo is one of the market leaders in the sector but faces the challenge of maintaining its low-cost approach in a competitive industry.
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