Analysis | How IndiGo stands to make more money with business class seats

IndiGo has unveiled its business class cabins called ‘IndiGo Stretch’. It will feature 12 business class seats having a spacious pitch of 38 inches and a width of 21.3 inches to provide extra comfort to passengers. This is surely a new territory for IndiGo which has flown as a full economy airline for 18 years.

What calculations could have gone behind foraying into the business segment?

Rough math shows the airline’s revenue per flight stands to increase with the business class on the same aircraft and with fewer seats. IndiGo said it is getting the business class directly configured by Airbus on the new A321-neo planes that it will be receiving in the coming months.

IndiGo’s current A321-neo aircraft has 232 economy seats. The new planes will have 208 economy seats and 12 business class seats. So, 24 economy seats will be replaced by 12 business class seats.

Here’s a straight calculation — 24 fewer economy seats would mean ₹1,20,000, considering an average ticket fare of ₹5,000. And adding 12 seats priced at ₹18,000 would make ₹2,16,000. So the gain comes to ₹96,000.

Now there is another way of looking at this math which will produce the same number. If the airline sells 232 seats at an average fare price of ₹5,000 then it makes ₹11,60,000. But when it sells 208 seats for ₹5,000, it comes to ₹10,40,000 and 12 business class seats for ₹2,16,000, the total comes to ₹12,56,000. When you subtract that from ₹11,60,000 of the 232 economy seats, the gain comes to ₹96,000.

By removing 24 seats and adding 12, the airline will also have 12 fewer passengers and considering an average weight of 60 kg per passenger plus 15 kg of their luggage comes to 900 kg of less weight which the airline can use for extra fuel range or carrying extra cargo.

This is a rough calculation just on the revenue front. We also need to factor in the expenditure the airline will incur for things like separate catering and special services for the business class.

Also Read: Air India vs IndiGo: A new battle of the Business Class in Indian skies