Does Domestic Run at a Huge Loss?

Old Feb 8, 10, 10:12 am
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Does Domestic Run at a Huge Loss?

In this article, http://www.timesonline.co.uk/tol/tra...cle4340518.ece, it was estimated that a flight from Heathrow to Edinburgh cost 60,000 to run.

So my calculation of income would be thus:

Airbus A320 = 156 seats

20 @ 40
20 @ 50
20 @ 60
20 @ 100
20 @ 120
20 @ 150
10 @ 230 (Business UK)

Thats 83% occupancy, with income of just 12700.

So does Domestic cost BA a huge sum of money?
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Old Feb 8, 10, 10:49 am
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I think the income spread looks reasonable - probably not far form what my spread of ticket prices would be I guess.

60k an sector sounds a lot though - I would guess it will be closer 5k given you can rent one for 8.5k an hour and presumably there's a lot of cost in there due to relative low utilisation and scale: http://www.privatefly.com/private-je...hire/A320.html

Even if it's 10k per sector including all BA's overheads that would be a healthy margin of 27%.

I'm just guessing though - sure others will have better insight....
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Old Feb 8, 10, 11:07 am
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You need to consider that some (most?) passengers will be connecting too. Quite how that GBP 6k a passenger connecting at LHR to ORD is allocated to the domestic and the longhaul is not clear.

But if the seat on the ORD would otherwise be unsold and that service is paid for by other passengers you could potentially allocate most of the GBP 6k to the domestic, going a good way towards covering costs for just one passenger.

Since airline costs and revenue are not fully allocatable calculating profit and loss on particular routes from a network perspective presents tricky problems.

You can also allocate part of the domestic costs to the longhaul flight if you like, effectively reducing the domestic costs.

I suspect GBP 60k on LHR-EDI is far from the mark.

Last edited by Sixth Freedom; Feb 8, 10 at 11:13 am
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Old Feb 8, 10, 11:10 am
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There will a lot more Biz UK than 10 seats on the first few flights in a morning.

Way way back when they used to fill a 767 on the first EDI_LHR flight with full fare pax - it was said that this route was one of the most profitable. That was before the loccos though.
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Old Feb 8, 10, 11:30 am
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Originally Posted by edi-traveller View Post
There will a lot more Biz UK than 10 seats on the first few flights in a morning.

Way way back when they used to fill a 767 on the first EDI_LHR flight with full fare pax - it was said that this route was one of the most profitable. That was before the loccos though.
I thought that too but I think accross all flights and days of the week andset1191's guestimate looks reasonable. Mind you, an extra 20 folks paying an extra 100 would be 2,000 which is an extra 20% margin (if 10k per sector costs are realistic).

I too remember the full 767s. Back in those days I (and a lot of others) was always on fully-flex so the profitability must have been tremendous.
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Old Feb 8, 10, 12:05 pm
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About a year ago BA stopped thier LH flights from non London airports and made everyone go domestic to LHR or LGW. The MAN-JFK route is a big loss and it makes European travel on LCC much more attractive (what's the point of transferring through LHR to get to GVA, for example?).

It must be more profitable for BA to operate more domestic and just have long haul through London.
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Old Feb 8, 10, 12:31 pm
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No way it costs 60k unless the cabin crew are all long served CSD's.

As edi-traveller said the GLA and EDI shuttles used to be big money earners till the lowcos came along and spoilt the party. They then started to cut the schedules as pax drifted away.
Closing the bases has certainly helped reduce costs even further so my guess is they are profit making.
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Old Feb 8, 10, 12:32 pm
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Originally Posted by edi-traveller View Post
Way way back when they used to fill a 767 on the first EDI_LHR flight with full fare pax - it was said that this route was one of the most profitable. That was before the loccos though.
It was always my understanding that the EDI/LHR route used vie with LHR/JFK for being the most profitable route on the BA network. That wasn't too many years back!
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Old Feb 8, 10, 12:36 pm
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Something is wrong with the numbers.

BA aren't the only domestic airline, in fact, they're a small player. Ryanair and Easyjet fly loads of domestic routes, and are far more useful if you're travelling within the UK.

BA planes are nearly always have more passengers than Ryanair and Easyjet on the domestic routes I've travelled.

If domestic wasn't worth doing, Ryanair and Easyjet, Flybe, etc, woudn't bother doing them. Ryanair don't keep things that don't make them money.

I doubt domestic routes cost anywhere near that much to operate. If that's what it is costing BA, then BA need to send the little elf for a weeks work-experience with the fat greek.
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Old Feb 8, 10, 12:53 pm
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I'm surprised people are only including the cost of the self loading freight (i.e. passengers). I suspect that the revenue from freight is 1) not inconsiderable 2) less variable in terms of charges and 3) well used on a route like EDI - LHR, although no doubt the recession has had an impact here too.

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Old Feb 8, 10, 12:55 pm
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Originally Posted by andset1191 View Post
In this article, http://www.timesonline.co.uk/tol/tra...cle4340518.ece, it was estimated that a flight from Heathrow to Edinburgh cost 60,000 to run.

JetBlue's accounts show a CASM for their mostly A320 fleet at just under $0.10 / mile. That will vary a little according to flight length, landing fees and the fact the B6 deliberately cut the no. of seats to 150 so they could fly with only 3 flight attendants. All those will push BA's costs up a little for the relatively short 330 miles LHR-EDI, but they still point to a number closer to 6,000 than 60,000!
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Old Feb 8, 10, 1:22 pm
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Originally Posted by jghill View Post
Something is wrong with the numbers.


I doubt domestic routes cost anywhere near that much to operate. If that's what it is costing BA, then BA need to send the little elf for a weeks work-experience with the fat greek.
Why do you think WW and the CC are at loggerheads? The costs of the domestics are just too high! WW knows just what to do - he doesn't need any help!
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Old Feb 8, 10, 1:24 pm
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Originally Posted by bernardd View Post
JetBlue's accounts show a CASM for their mostly A320 fleet at just under $0.10 / mile. That will vary a little according to flight length, landing fees and the fact the B6 deliberately cut the no. of seats to 150 so they could fly with only 3 flight attendants. All those will push BA's costs up a little for the relatively short 330 miles LHR-EDI, but they still point to a number closer to 6,000 than 60,000!
The 60,000 must involve some sort of hypothetical slot cost.
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Old Feb 8, 10, 1:29 pm
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Cargo? That will change the numbers?
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Old Feb 8, 10, 1:29 pm
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Originally Posted by RedVee View Post
I'm surprised people are only including the cost of the self loading freight (i.e. passengers). I suspect that the revenue from freight is 1) not inconsiderable 2) less variable in terms of charges and 3) well used on a route like EDI - LHR, although no doubt the recession has had an impact here too.

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RedV
You make a valid point.

On the last LHR-MAN flight I took, the A319 had a Royal Mail logo on the fuselage.
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