IndiGo’s network changes on Bengaluru – Coimbatore sector help study CASK and Trip Cost

IndiGo moved its thrice daily flights on the A320/A321 to Seven daily flights on the ATR 72-600 between Bengaluru and Coimbatore. The change which was to be effective Feb 01, has already been implemented. This came as a shock to many. For me it brought back memories of Jet Airways alternating between 737s and ATRs on its southern network. Since route level profitability is not in the public domain, one cannot really analyse if Jet Airways was successful with these changes.

While IndiGo would have reasons for this change and we would look at it in the last section of this blog, I find this as a perfect time to study two things – Trip Cost and Cost per Available Seat Kilometre (CASK).

CASK, as we know, stands for Cost Per Available Seat Kilometre. It is the cost used to operate each seat for every kilometre. To get the CASK, direct operational cost is divided by the available seat per kilometre (ASK) , where ASK itself is calculated by multiplying the number of seats with the distance (in kms). CASK varies from aircraft type to aircraft type but is generally represented to the outside world as a single number – which is for the airline. 

Trip cost on the other hand primarily includes all the charges which sum up for operating one flight. These would include the landing, route navigation and parking charges; the cost of fuel and in addition to that the proportionate cost of the crew, aircraft rental and maintenance costs are proportioned for the flight hours of this flight. Trip Cost often gets calculated as dividing total operating expenses by total number of departures. This gives lopsided cost for very short and very long sectors.

CASK and Trip Cost – The opposites

Your cost of operating a flight on a particular sector is fixed. At a unit level, it gets divided over the number of seats that you have. More the seats, lower the per seat cost. But it comes with its own challenge of filling up those seats, profitably. Trip cost, on the other hand, is known and irrespective of how you will fill up the plane – you have a number to beat just to breakeven

However, they are opposites, a smaller aircraft has a lower trip cost but because it has a lower number of seats to support – the CASK is higher. Very few airlines report fleet wise costs, but the ones which I could get my hands on – I have noticed that the CASK for an ATR can be as high as double that of A320neo! As the plane gets bigger and bigger, the trip cost increases but since the plane is bigger – it has more seats and the CASK keeps decreasing. Thus effectively in IndiGo’s fleet – the highest trip cost and lowest CASK will be with the A321neo (with 232 seats), while the lowest trip cost and highest CASK will be with the ATR 72-600.

That gets us to the next question – For this specific route (or for that matter any other), how does one balance between the two? It is largely done by looking at the yields where there is no specific number as a breakeven point. One can stimulate the market with lower fares and take the breakpoint higher or hold on to high fares knowing there is demand and achieve breakeven at lower loads but maintain stronger yields.

Network Thoughts

From an early morning, early evening and evening departure to seven departures which are primarily stacked in the morning – the change is considerable. What could be the reasons? Freeing up the A320/A321 for other longer missions due to shortage of aircraft? Adding ATRs in the south during the foggy months in the north to avoid disruption? Playing the frequency game to treat the market as a “shuttle market” and in the process helping with more feeder traffic?

I am assuming that the route maintains the airlines’ average load factor of around 88% and there are three times during the day that the traffic flows. These peaks will now see a spillover. The first departure of the ATR is at the same time as was the A320. There have to be enough passengers willing to fly two hours or four hours later than the first departure. The departures at 0950, 1135 and 1300 hours give an opportunity for additional feeder traffic from places which are not connected to Coimbatore. While incremental feeder traffic is wonderful, planning on the basis of feeder traffic is fraught with challenges. 

The biggest benefit the airline has is this being a monopoly route allowing it to experiment with both pricing and timings. The route is also short and thus if and when an A320 (or B737) operator enters the market the difference in flight duration will not be huge to sway the crowd, though people may move for the comfort, which IndiGo did to Jet Airways once upon a time! 

I feel the airline is also using this route as a ploy to have a good slot portfolio, considering how Akasa Air is expanding – it may then rejig these slots to operate flights to other destinations and strengthen its presence / take on Akasa Air. Afterall, monopoly routes are best to experiment with least fear of the passengers turning their backs at you!

I would sign off with what I keep saying often – What makes money in Excel, often loses money in real life and what does not make money in excel, seldom makes money in real life. I will definitely watch this route close to see if it is for slots and how the capacity peaks are bulldozed. My personal opinion? This route will see a mix of A320/ATR ops in future.

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One thought on “IndiGo’s network changes on Bengaluru – Coimbatore sector help study CASK and Trip Cost

  1. Thank you for this article about our home airport/town CJB.
    As always learned some thing new today and was very informative.
    One update is that:
    7x ATR was Initially planned from FEB 1 but instead will start from JAN 13/14

    Like

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