After more than a decade of listening to several speakers of all hues and shades, it was an extraordinary experience listening to Aditya Ghosh, the President of Indigo Airline.
Jotted down below is what all i remember from the speech, as he shared the incredible story of India's fastest growing airline. It also is perhaps the smartest in the business (and my favourite too).
(A) Context- India a huge opportunity
1) GDP growth matters, and typically in an airline industry, the passenger growth rate is 2x of GDP growth rate. So a 5% GDP growth rate in India should translate into a 10% growth in the passenger traffic.
2) The number of potential Indian fliers is a fraction of the population, but growing steadily. From ~ 5% (of population) in 2006 to ~ 25% in 2015 to ~ 40% in 2025.
3) Among all major countries in the world, India has lowest airplane departures per capita and has the lowest aircraft density. There are ~ 390 commercial planes in India, while there are ~ 7000 in the US.
(don't bank on the numbers, but the point is that it is a huge difference)
4) The Indian Railways carries 8 Billion passengers per year. All airlines flying in India, put together, carry a total of 60 Million passengers per year.
5) Reinforcement of the hypothesis that India is a huge and growing market
(B) The Indigo story
First flight took off in 2006, more than a year after getting the permissions to do so.
A lot of time spent on preparation.
Driving objective was that Low cost need not be equal to Low Quality.
Focus on lesser routes; get in there, increase depth, increase frequency. Then go to newer routes. (Start A to B. Increase depth of this route. Then start B to C. Increase depth. Then think of connecting A to C. Or D. )
Top 3 things, and the only 3 things they said they will focus on-
- ON TIME
- LOW FARES
- COURTEOUS AND HASSLE FREE SERVICE
These created a strategy around all operations:
- On time did not only imply on time landing or take off. It became a culture of on time everything- salaries, promotions, documentation, meetings, reviews.
- Low fares implied keeping costs under control. But it also meant where one would spend MORE than competition to get a competitive edge. There are things that are beyond control- crude prices, Forex. 55-60% of costs are fuel costs. More efficient the airline, more will be the % of fuel cost in their total cost. It also means innovation. Innovation to create structural advantages (like long term maintenance contracts, supply of planes to capture demand)
- Courteous and hassle free service not just for passengers, but for all employees too. Keeping the whole experience simple was the key.
Ordered a huge number of aircraft (100, to be delivered over a 10 year period. Then again, 180 for the next decade period, the largest order in aviation history. Here, the lead times for supply are several years, 4-5, so early ordering is a competitive advantage) . All same type (A-320). All consistent configuration. Economies of scale. Easier for technical maintenance. Easier for operations. Easier to impart training on.
Invested in long term (15 year) maintenance contracts with manufacturer.
Leased out some of the aircraft to guys like GE, so that keeps cash circulating.
Kept the core on the top 3 things, and doing it again and again, consistently, to make it consistently boring. Leverage the power of CONSISTENCY.
What does the top management track-
Fares, revenues, cost, People
and not stuff like market share
(C) Challenges on the way-
Fuel costs
Ultimate cost of travel to the passenger
Efficiency of the infrastructure, most notably the Air traffic control structure
But the bigger challenge, now that Indigo is the largest airline in India is dealing with COMPLACENCY and ARROGANCE
and most importantly, KEEPING THE EGO UNDER CHECK.
easy to say- go after market share, be the biggest airline, be the best airline. But focus on the stuff which matters, not the ego boosters.
(D) Risks -
- The risk of there being enough demand. In India's case, this seems to be irrelevant, as there is a huge demand, and a massive latent one.
- Technological obsolence- an altogether new tech. of aircrafts comes in, which changes cost structures.
- Re-lease model of planes
(E) Innovation-
Not the one innovation that would give a Billion dollars
BUT
The Billion innovations that would give a dollar each
Examples-
Ramp instead of stairs
Smart branding- 6E, Cut the red tape, Girl Power,
Good, clean food, which itself becomes a USP. Smart names, smart branding on packaging of sandwiches (stories, airwich)
No spend on ads (just smart words / tourists as free models)
(Indigo spend on marketing is <1 11="" against="" as="" kingfisher="" of="" p="" revenues="" s="">
- Driven by a very open to ideas culture. People are never fired, except in the following cases-
a) Wilful negligence
b) Misconduct / Integrity issues
All ideas are met with 'WHY NOT' instead of 'WHY' or 'HOW'
- Driven by a very high focus on Training.
The Air hostesses training of 90 days has only 10 days on customer service. Rest is all on safety and operating proicedures. Every crew has the ability to evacuate a 180 member airplane in 90 seconds in case of water landings. Lot of emphasis on safety and procedures.
This leads to focus on the core.
- HIgh diversity
7200 employees. 40% women. 1/3rd of top leadership women.
Asking every employee the question- what is your dream ? Every one. About themselves. And how hte org can be a medium for enabling it to come true.
- NEVER LETTING EGO COME IN THE WAY OF WISDOM
(F) To summarize-
Have a purpose.
Keep it very very simple.
Relentlessly execute to the extent of having consistency which is BORING.
And
you will suddenly see luck smile on you
:-)
For now, just Go Indigo Go !
