Sunday, August 28, 2016

The significant annual hit on profit by giving one free Appy juice drink pack to each passenger on all IndiGo flights [COMPACTIDEA]

Number of planes= 111. Number of daily flights= 818. Flight capacity= 180. Load factor= ~85%. However, since load factor is an average of all planes and all flights, some planes will have 100% load factor while others might have <50%. Hence all planes must carry at least 180 Appy packs.
  • Price of 1 Appy bottle [250 ml]= INR 20
  • Bulk-purchase price [estimated]= INR 15
  • Basic cost of Appy packs used daily= 818*180*0.85*15= INR 18,77,310
  • Annually= INR 68,52,18,150
  • Add cost of extra fuel for carrying/flying these packs, plus costs related to purchasing, loading, refrigeration, distributing, collecting and disposing waste, overall management, etc. [estimated annual]= INR 15 crore
  • IndiGo's annual net profit [2015] = INR 13,04,00,00,000
  • % hit on net profit = ~6.4%
Two other points [not included in above calculation]:
  • Giving free Appy packs will result in a small reduction in revenues from food sold inside flights [some folks will just have the Appy and won't buy anything else - and these folks would've bought something if the Appy hadn't been given].
  • Free Appy packs will have a small positive effect on IndiGo's demand/satisfaction, possibly increasing overall load factor and revenue.
This thought came to me on my recent BLR-IXC flight with IndiGo.

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