How Airlines Spend Your Airfare

[venture]

WSJ article is pretty interesting...

http://online.wsj.com/article_email/...Tabs%3Darticle

[Just the facts]

In 2000, U.S. airlines burned 28.6 gallons of jet fuel per passenger, according to the Bureau of Transportation Statistics. Last year, that improved to 22.5 gallons per passenger.

From CSX
http://www.csx.com/index.cfm/about-c...el-efficiency/

Trains can move a ton of freight nearly 500 miles on a single gallon of fuel.

If the average person weighs 200 pounds then a ton would be 10 people. Maybe we need to find a new (actually old) way to move people.

As for the seating break down - no wonder I can never use my frequent flyer miles to get a seat. All I can get are upgrades and magazine subscriptions.

[BoulderSooner]

time = money

[Just the facts]

time = money

Yes, but whose time and whose money?

Airline gas mileage has improved over the years, the result of filling more seats on each flight, replacing multiple trips on small planes with fewer trips on larger aircraft and replacing older planes with newer, more fuel-efficient jets.

[Snowman]

Plus the major airlines mostly only fly the largest planes now, several major carriers even gave planes to the regional airlines as part of service contracts so they would not have to deal with the crew and maintenance costs on the planes at/below the razor edge of profitability for them.

[venture]

Plus the major airlines mostly only fly the largest planes now, several major carriers even gave planes to the regional airlines as part of service contracts so they would not have to deal with the crew and maintenance costs on the planes at/below the razor edge of profitability for them.

The biggest problem was the regional jet fad that everyone had to go with. If they would have stayed with the larger turboprops and let those get developed quicker, airlines would be doing much better. It's just sad knowing I can fly a CRJ-700 between like here and Dallas and I'm going to need it to be 80% full to break even in most cases. If I fly a Dash 8 Q400, I only need to fill 50% to break even. To the passengers the only difference is going to be the blades are ducted on one. Trip time, especially on the Q400 is going to be equal to that of the CRJ since it has a higher cruising speed. This is the main reason why we've seen Horizon/Alaska park all the CRJ-700s for the Q400 (except the few leased to SkyWest).

[bombermwc]

So then explain to me now how things are this inefficient in a day where there are fewer and fewer competitors every day and more and more people fly. We're supposed to need thousands upon thousands of new pilots to meet the demands (mostly in these regional links) over the next 20 years. So are airlines that incredibl inefficient that this is the result? U.S. Airways is probably a good example of how so many in the industry do such a poor job of keeping things running well. United, AA, etc....so many have folded over the years while those that do a good job, stay going...Southwest.

I'm sort of feeling the days of the large airline have passed and we'll be seeing more "local" groups than larger ones. The regional folks can control more easily and can keep the focus where it should be rather than in administrative costs. The more people, the more bloat.

[Just the facts]

bomber - the problem is that we can't afford the ticket price the airlines need to stay profitable. It is a reoccuring theme in our economy across many industries. The national economy needs a growing money supply to function and the money supply isn't growing because people are not creating new debt (which is the one of two way the money supply can grow).

[CaptDave]

Seems to me a high speed rail network to replace the short to medium range flights would enable the airlines to concentrate on what they do best. I knew the airlines were under extreme stress to eke out minimal profits but did not realize the margins were this tight. Fuel costs alone would be enough to make most sane people get out of the business.

[OKCTalker]

The biggest problem was the regional jet fad that everyone had to go with. If they would have stayed with the larger turboprops and let those get developed quicker, airlines would be doing much better. It's just sad knowing I can fly a CRJ-700 between like here and Dallas and I'm going to need it to be 80% full to break even in most cases. If I fly a Dash 8 Q400, I only need to fill 50% to break even. To the passengers the only difference is going to be the blades are ducted on one. Trip time, especially on the Q400 is going to be equal to that of the CRJ since it has a higher cruising speed. This is the main reason why we've seen Horizon/Alaska park all the CRJ-700s for the Q400 (except the few leased to SkyWest).

In the regional market, the Q400 turboprop is cheaper to operate than the CRJ regional jet in terms of fuel, crew and fees, but it has comparable speed and capacity. France-based ATR has a three-year, $5 billion order backlog.

In the larger, single-aisle jets (B-737 & A-320s), there is a supply bubble led by cheap financing available to leasing companies, and almost everyone is hopping on board ordering new jets, including American Airlines whose parent (AMR) ordered 460 jets as it was preparing to file for bankruptcy. A rare exception is Southwest which cut their 737 order by 30 aircraft.

Anyone trying to make sense of airline industry economics should first book space in a padded cell.

[Just the facts]

Anyone trying to make sense of airline industry economics should first book space in a padded cell.

Tru-dat. I used to work in San Francisco and Atlanta. My ticket to San Fran was cheaper than my ticket to Atlanta even though I connected through Atlanta on my way to San Fran. I don't know why they can't calculate how much it cost to get from A to B and charge me that price plus some profit. I suspect the hub and spoke system is the root of their pricing problem.

[OKCTalker]

Sure wish that I could walk up to a ticket counter as they're about to close the door, pay $50-100 for an empty seat, and get away for the weekend.

[NoOkie]

I wonder how much profit margin they eke out of the seat upgrades.

I'm 6'7", I always take the premium upgrade when offered(And not hundreds of dollars). I did get a first class upgrade for $50 on my last flight, I suspect I drank away all their margin in free rum and cokes on that one, though.

[venture]

In the larger, single-aisle jets (B-737 & A-320s), there is a supply bubble led by cheap financing available to leasing companies, and almost everyone is hopping on board ordering new jets, including American Airlines whose parent (AMR) ordered 460 jets as it was preparing to file for bankruptcy. A rare exception is Southwest which cut their 737 order by 30 aircraft.

A lot of recent new orders are because they have to. AA is one case of they have no real choice. The MD-80s are starting to reach end of life with so many cycles so they have to do something - hence the large 737/A320 order.

With Southwest they didn't reduce their order for aircraft, they just rescheduled them to be delivered a couple years down the road. The 737-300s need replaced in the WN fleet, but they are able to hang on to them for a couple more years to keep costs down (something hitting WN very hard right now).

Sure wish that I could walk up to a ticket counter as they're about to close the door, pay $50-100 for an empty seat, and get away for the weekend.

Then everyone would do it and there would be no way to break even. It does lead to the point that smarter pricing needs to be rolled out. There is no reason for specific route segments to have anywhere from 10 to 30 different base fares all with random pricing requirements. Kerry isn't too far off when it comes to the hub and spoke system having inefficiencies. Unfortunately many routes couldn't survive without it. I will say if I had the investment funds I would definitely be looking at the a model similar to that of the Southwest, old USAir, Air Wisconsin and other networks prior to the 90s. Point to Point between cities in a region that focus on O&D with 50/70 passenger turboprops. It would put service back into many cities that are forced to go through hubs that could be out of the way.

[ljbab728]

Sure wish that I could walk up to a ticket counter as they're about to close the door, pay $50-100 for an empty seat, and get away for the weekend.

That sounds like the perfect world for the consumer but they won't do that because it would discourage people from booking flights far in advance.

[Just the facts]

That sounds like the perfect world for the consumer but they won't do that because it would discourage people from booking flights far in advance.

They would if they wanted to make sure they had a seat. It is really pretty simple, if the plane has an empty seat they have too much capacity. It would be better for airlines if they took off with 100 full seats and 10 people couldn't find a flight vs taking off with 120 seats, 10 of which are empty. The industry would probably be better off if they dropped 25% of their capacity since they don't make any money flying empty seats.

[ljbab728]

They would if they wanted to make sure they had a seat. It is really pretty simple, if the plane has an empty seat they have too much capacity. It would be better for airlines if they took off with 100 full seats and 10 people couldn't find a flight vs taking off with 120 seats, 10 of which are empty. The industry would probably be better off if they dropped 25% of their capacity since they don't make any money flying empty seats.

I"m not sure you're getting my point, Kerry. It sounds nice to say it should benefit the airline if they can fill up the flights with last minute low fares but they don't look at it that way. They think it discourages people from booking further in advance at higher prices. I promise you they have very intricate load price algorithms that they use to determine their prices and it's being adjusted constantly. I'm not saying it's necessarily working well for them but they're not going to change to allow last minute walkup low prices.

[Just the facts]

I"m not sure you're getting my point, Kerry. It sounds nice to say it should benefit the airline if they can fill up the flights with last minute low fares but they don't look at it that way. They think it discourages people from booking further in advance at higher prices. I promise you they have very intricate load price algorithms that they use to determine their prices and it's being adjusted constantly. I'm not saying it's necessarily working well for them but they're not going to change to allow last minute walkup low prices.

I know and agree that last minute low fares wouldn't work, but the airlines do the exact opposite by raising fares until the plane takes off, thus discouraging last minute flyers. Of course, they do this to stick it to business people who don't have a choice. That was great until we found a choice. Three years ago I had to go to Atlanta every week. Thanks to conference bridges, VPN, netmeeting, and desktop sharing I only have to be there 1 week a month.

Some of the airlines aren't adapting to the new reality and they are paying the price. I fly AirTran to ATL and they have the same price for their tickets if I buy it a month in advance or the night before it leaves and they only have half the flights to ATL that Delta has from Jax, and every flight I take with them is full. When I flew Delta there were always empty seats and sometimes half the plane was empty.

[ljbab728]

I remember a number of years ago when a few major airlines decided they were going to start offering a simplified pricing plan. It had about 3 basic prices and went down the tubes quickly. They lost a ton of money. Unlike now, of course, when they are rolling in money. LOL

[Just the facts]

I remember a number of years ago when a few major airlines decided they were going to start offering a simplified pricing plan. It had about 3 basic prices and went down the tubes quickly. They lost a ton of money. Unlike now, of course, when they are rolling in money. LOL

The best way to make a small fortune in the airline industry is to start with a large one.

[damonsmuz]

If you ever wanna be a millionaire.... be a billionaire first and then buy an airline.