IndiGo crisis: Little's Law and bigger travel chaos

The on-going crisis with Indigo's flight cancelations and operational issues should not surprise operations and supply chain managers, as well as academics who apply concepts of operations management to practice. The entire crisis is best understood through classical Little's Law (formulated by professor John D Little of the Massachusetts Institute of Technology, USA). Little's law connects inventory (congestion) with sales (demand or throughput) and processing time. In simple terms, the law states that congestion is the product of demand and processing time. In a deterministic and predictable environment, managing customer service is relatively easy, as the resources are aligned with the rate of demand. This is the hallmark of a low cost context like Indigo, characterized by tight investments in capacity (aircraft, crew) and other aspects of its business model defined by the standardization of service at a high scale. Indigo's moat has been its ability to operate with very high capacity utilization to  sustain its low cost ecosystem. The scale and standardization of Indigo's business model, the largest carrier in the skies of India, are bound to be disrupted if there is any variability in the operating parameters. The model is not designed to handle or absorb any variability. The revision of the crew roster due to Flight Duty Time Limitation (FTDL) rules, weather related disturbances, or any other shocks creates a recipe for disaster for systems that operate with tight capacities, such as the crew to-aircraft ratio and other related operational metrics. This is the 101 of operations management, and clearly the management at Indigo should have anticipated this, as FTDL rules modification is a predictable change, not to be blamed for causing variability.

Another celebrated concept of operations applicable in this chaos is that processes characterized by variability should always be designed with excess or slack capacity for resilience and to absorb demand and supply shocks. The extent of slack is a function of variability. This is a fundamental principle in matching supply with demand and achieving customer delight. Under variability, high capacity utilization is disastrous, as it escalates inventory (congestion) and waiting times at an exponential rate, which is currently happening with Indigo. Managing variability is infeasible for low cost systems like Indigo, which are not designed to handle high variability. This is all the more reason why advance planning and predictability are critical for high capacity utilization systems. The management of Indigo has to admit that they allowed variability to creep in for a system that cannot absorb it.

Incidentally, the inspiration for the Indigo business model comes from the low cost Southwest Airlines, which also experienced a similar meltdown three years ago in December 2022 when weather disruptions rattled the USA airline network. Not surprisingly, Southwest Airlines had the highest number of cancellations and took the longest time to recover, as its systems lacked the operational flexibility to manage variability. These lessons should not be missed, as there is no room to allow variability to kick-in, something that the leadership at Indigo has to recognize. Efficiency must co-exist with resilience; it is not a zero-sum game. The just-in-time models, like Indigo, must work with agility alongside the just-in-case models. Customer delight does not mean serving sandwiches for air travelers on the ground, these should be served on-board.

(Views are personal; the author is a faculty-member at Indian Institute of Management Calcutta in the Operations and Supply Chain area)