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AM1 Indigo

The document discusses Indigo Airlines' pricing strategies and business model. It notes that 1) prices for economy flights in India have remained stable due to product similarity and price-sensitive customers. 2) Cross-elasticity and income elasticity are important for Indigo's pricing as changes in one product's price can affect demand for another, and middle-class customers are sensitive to income changes. 3) Indigo benefits from economies of scale through bulk aircraft orders, fuel optimization, no free food, and dynamic pricing.

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Sourabh Das
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170 views3 pages

AM1 Indigo

The document discusses Indigo Airlines' pricing strategies and business model. It notes that 1) prices for economy flights in India have remained stable due to product similarity and price-sensitive customers. 2) Cross-elasticity and income elasticity are important for Indigo's pricing as changes in one product's price can affect demand for another, and middle-class customers are sensitive to income changes. 3) Indigo benefits from economies of scale through bulk aircraft orders, fuel optimization, no free food, and dynamic pricing.

Uploaded by

Sourabh Das
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Indigo Case - Oligopoly

Group – AM 1
Abhijeet, Anjali,Preetam,Sourabh,Tapan

1. Why have prices remained sticky for economy-class passengers in the


Indian aviation market?
Due to product homogeneity, consumer dynamics dominate the dynamics of dynamic price
in the Indian civil aviation business. Because they could easily cover the costs, Indian airlines
focused on price acceptance, particularly for economy class service. The aviation market in
India is very competitive, with several businesses providing discounts for their services.
Travellers are consequently influenced to choose low-cost airlines, particularly those
travelling in economy class and if the prices are not sticky and changes quickly than it will
affect their business badly because the Indian people are very prize sensitive and they will
switch when they find the better prize.

2. How are cross elasticity and income elasticity relevant in IndiGo’s


managerial decisions?

In order to develop a more effective pricing strategy, cross and income elasticity are both
crucial to IndiGo's managerial decision-making. When two products are interconnected, the
cost of one might directly affect the cost of the other. Cross elasticity is a measure of how
responsively the quantity of an item is demanded in order to adjust the price. Income
elasticity is the an economic metric used to determine how responsive demand for an item
or service is to changes in income. because indigo mainly depend on the middle-class
segment of the people or we can say economical segment so changes in income will definitely
affect the demand of the airline.

Q 3 what is the source of IndiGo’s economies of scale?

The following factors contribute to IndiGo's economies of scale:

1
Customer focus:

• IndiGo's success model is heavily dependent on maintaining consistently cheap prices,


reliable on-time performance, and few flight cancellations. The airline's focus on
customers, though, gives it the biggest advantage over rivals.
• Bulk orders of aircraft: IndiGo always orders its aircraft in bulk.
• Optimisation of fuel is another important factor behind the success of IndiGo Airlines.
• IndiGo, being a low-cost carrier, does not serve complimentary food on its flights.
• The dynamic prizing strategy of the indigo.
• Clear brand positioning - IndiGo clearly communicates what it exactly stands for, to its
customers. The positioning is based on being a low-cost, no-frills airline with focus on
customer satisfaction

Q 4 How can IndiGo sustain its profitability in the future?

• IndiGo is eyeing to launch new international routes particularly to the markets in Europe
and Africa like Moscow, Barcelona.
• Go all out and project indigo as an future market leader in the Indian aviation industry.
• connect more with the middle-class people because they are their major customer.
• Decrease the operational cost of the company.
• Focus on their main strength and market them.
• Increase the flights on the busiest routes of the India.

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