Indigo Airlines: Monopolizing Indian Skies

India’s airline industry was an oligopoly, with six major players in the market. IndiGo, launched in 2006, had become India's largest airline and a dominant player, after having taken advantage of market conditions, including a rise in per capita income that led to increased demand for air travel. However, in 2018, after a decade of consistent profitability, IndiGo was experiencing a decline in profits that was affecting its share price. The airline’s management needed to consider how the company could sustain its market-leading position over the long term and even increase profits, while accepting the minimal control it and its competitors had over ticket prices, amid an atmosphere of rising costs for aviation fuel and personnel costs.

This case is intended for a postgraduate managerial economics course, but can also be used in a graduate-level business strategy course for a discussion of alternative strategic decisions in the face of fierce competition or in courses on brand management and the marketing of services. Working through the case will give students the opportunity to<ul><li>understand how pricing decisions are made in oligopolistic market structures and why prices remain sticky for a long period;</li><li>understand the kinked demand curve model of oligopoly where costs escalate over a period of time but prices cannot be increased due to price wars among competitors;</li><li>gain exposure to numerous concepts in managerial economics such as product differentiation, marginal cost and average cost, economies of scale, cross-price elasticity, and price wars under an oligopolistic market structure;</li><li>understand the difference between real and nominal prices, and between real and nominal income, and their significance for consumers' purchasing power; and</li><li>consider how a company can sustain profitability under oligopolistic competition with dynamic pricing models.</li></ul>

• Sticky Price
• Oligopoly
• Dynamic Pricing