Originally Posted by 777Brian

A united 777 seats (International Configuration 1) 10/45/198 (not going to worry about crew rest) for a total of 253 seats. UA’s Cost per available seat mile (CASM) in the 1st Q of 2010 was 11.92 cents per mile. According to the great circle mapper, IAD-PEK is 6,921 miles. With this information you make a rough estimate of UA’s cost to operate the route, 253*.1192*6921. The total one way cost of the route is estimated at $207,895. On a stage length adjusted basis the true cost is probably a little less, but the $207K number is probably a good start (yes CASM has some cash and noncash expenses but should be a good proxy).

Let’s talk about cargo; I bring it up because everyone always talks about how important it is. There is no UA route in the network that exists solely for cargo. Cargo is the icing on the cake that may help the profitability of a route as passenger loads ebb and flow but won't make a flight make financial sense. Money making cargo is heavy and adds to the fuel expense of a flight so a balance between cargo and passengers is required. During the 1st quarter of 2010 UA generated $157 million in cargo revenue. I’m going to assume the 1st quarter has 91(13*7) days, this means each day UA cargo takes in only $1.7 million in revenue (chump change) . I think we can comfortably say that routes like SYD, HKG, NRT, HNL, OGG, PEK, PVG, LHR, KWI, FRA carry the bulk of Cargo, maybe 30 flights. So let’s say the 30 flights split the $1.7 million each day that means the IAD-PEK might be carrying as much as $57K although I bet the actual number is less than 25% of that.

Selling only coach seats you would need to generate $150K in revenue selling only 198 seats (assuming $57K in cargo), that’s $757 each way, $1515 roundtrip. When you take into the consolidator seats that get sold for considerably less that means the seats you’re selling probably run closer to $1,000 each way. If you think UA is able to get a full Y load everyday at those types of yields then their making money. However, one bad day and you ruin your entire week. Without C and F business a flight makes no sense, there is not enough traffic day in and day out. (Yes I know I excluded ancillary revenue like bag fees, drinks, E+, just trying to bring some numbers into the discussion).