What routes loses the most money?
#16
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#17
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The reality is that £338 super el cheapo economy ticket doesn't make any money for the airline, hence why WT passengers are processed like cattle. However it is better to fly the seat full for a low fare than empty. However full flex Y tickets can be both hugely expensive and probably very profitable. I do some short haul very last minute travel with tickets over £1K for a 2hour sector. I suspect I was the profit on those flights!
#18
Join Date: Feb 2009
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When discussing airline profitability there are two concepts to consider:
i) Route level = a return-flight-pair where the prorated value (by RPK) of all coupons uplifted for the flight exceeds the operating costs is profitable at the route level
ii) Network level = a return-flight-pair where the total value (including connections) of all tickets used for the flight exceeds the operating costs is profitable at the network level.
The sum of route level profitability across all flights equals the whole airline profitability but the sum of network level profitability is probably much greater than airline profitability. For a loss making airline, the modulus of the network level loss would probably be much greater than the modulus of the route level loss.
I think it unlikely that BA operate any flights that are not profitable at the network level, but there may be some that are not profitable at the route level.
Example
Network
Hub = LHR
Routes = LHR-JFK (3,500 miles) and LHR-BOM (4,500 miles)
Volume
LHR<>JFK = 100 passengers
LHR<>BOM = 100 passengers
BOM<>LHR<>JFK = 100 passengers
Average fare
LHR<>JFK = $1,000
LHR<>BOM = $750
BOM<>LHR<>JFK = $1,100
Revenue
LHR<>JFK = $100,000
LHR<>BOM = $75,000
BOM<>LHR<>JFK = $110,000
Total revenue = $285,000
Prorated revenue
LHR<>JFK = $100,000 + $48,125 = $123,125
LHR<>BOM = $75,000 + $61,875 = $161,875
(the second value is the average of the BOM<>LHR<>JFK weighted by the distance attributable to each sector)
Operating costs
LHR<>JFK = ($100,000)
LHR<>BOM = ($170,000)
Total costs = ($270,000)
Airline profitability
= $285,000 - $270,000 = $15,000
Route profitability
LHR<>JFK = $123,125 - $100,000 = $23,125
LHR<>BOM = $161,875 - $170,000 = ($8,125)
Sum of route profitability = $23,125 - $8,125 = $15,000 = airline profitability
Network profitability
LHR<>JFK = $100,000 + $110,000 - $100,000 = $110,000
LHR<>BOM = $75,000 + $110,000 - $170,000 = $15,000
Sum of network profitability = $110,000 + $15,000 = $125,000 > airline profitability
Note that JFK is profitable at both the network level and the route level, whilst BOM is profitable at the network level but not the route level. Without BOM the airline would break even but not make a profit.
i) Route level = a return-flight-pair where the prorated value (by RPK) of all coupons uplifted for the flight exceeds the operating costs is profitable at the route level
ii) Network level = a return-flight-pair where the total value (including connections) of all tickets used for the flight exceeds the operating costs is profitable at the network level.
The sum of route level profitability across all flights equals the whole airline profitability but the sum of network level profitability is probably much greater than airline profitability. For a loss making airline, the modulus of the network level loss would probably be much greater than the modulus of the route level loss.
I think it unlikely that BA operate any flights that are not profitable at the network level, but there may be some that are not profitable at the route level.
Example
Network
Hub = LHR
Routes = LHR-JFK (3,500 miles) and LHR-BOM (4,500 miles)
Volume
LHR<>JFK = 100 passengers
LHR<>BOM = 100 passengers
BOM<>LHR<>JFK = 100 passengers
Average fare
LHR<>JFK = $1,000
LHR<>BOM = $750
BOM<>LHR<>JFK = $1,100
Revenue
LHR<>JFK = $100,000
LHR<>BOM = $75,000
BOM<>LHR<>JFK = $110,000
Total revenue = $285,000
Prorated revenue
LHR<>JFK = $100,000 + $48,125 = $123,125
LHR<>BOM = $75,000 + $61,875 = $161,875
(the second value is the average of the BOM<>LHR<>JFK weighted by the distance attributable to each sector)
Operating costs
LHR<>JFK = ($100,000)
LHR<>BOM = ($170,000)
Total costs = ($270,000)
Airline profitability
= $285,000 - $270,000 = $15,000
Route profitability
LHR<>JFK = $123,125 - $100,000 = $23,125
LHR<>BOM = $161,875 - $170,000 = ($8,125)
Sum of route profitability = $23,125 - $8,125 = $15,000 = airline profitability
Network profitability
LHR<>JFK = $100,000 + $110,000 - $100,000 = $110,000
LHR<>BOM = $75,000 + $110,000 - $170,000 = $15,000
Sum of network profitability = $110,000 + $15,000 = $125,000 > airline profitability
Note that JFK is profitable at both the network level and the route level, whilst BOM is profitable at the network level but not the route level. Without BOM the airline would break even but not make a profit.
#19
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#20
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I don't think seat pre-assignments tell you much about whether or not a route is losing money.
Plus, PS seems to be a point-to-point carrier on the route (and they did not stop the second daily rotation unlike BA during the summer) as they don't have no connecting pax at LGW, whereas BA carriers many pax onto its longhaul services often in CW/WTP, so we can't really be sure how full a plane must be for BA to break even or make a profit on the route.
#21
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Expertly done Sixth Freedom ^
#22
Join Date: Feb 2009
Programs: Mucci, BA, Hilton.
Posts: 1,158
It is a simplistic view, but in the realms of an all accepted forum, that is quite a complex explanation to prove a point about how airlines can dedicate revenue. Take it with a grain of salt, but know that is the general way in which airlines calculate a value for a route. The figures are not meant to be taken literally.
Expertly done Sixth Freedom ^
Expertly done Sixth Freedom ^
#23
Join Date: Dec 2012
Posts: 3,308
Looking at load factors is very much a low cost point to point modus operandi. CTU appears to be doing quite well. All routes go through cyclic changes in both pax and cargo demand during the course of a year. The costs associated with routes also change. Some short haul stations are slip/non slip (layover) and that changes costs associated, but not always directly attributed to a route, but overall operation. There are winter de-icing costs and delay costs, summer time slot restrictions, changes in winds that mean less/more fuel required etc etc etc. Bums on seats is vastly irrelevant on some hub system routes. Take LHR-MAN/GLA/EDI/NCL. Some point to point fares or returns are vastly greater in price than the connection component of the EDI-LAS fare that was booked. However that is yet again a simplistic look at an assumption of how revenue is allocated. The commercial briefs that crew are made aware of on key routes assumes point to point return fare data with cabins around 75%ish full. The potential revenue earned from bums on seats is interesting, but not an overall realistic assessment of the route nor it's viability. That said, it is interesting to glean which destinations see traffic from key corporate customers. Very useful indeed to cabin colleagues in a more hands on role with the customers.
Cargo revenues are a whole other ball game, from tomatoes and green beans to horse seamen. You name it you probably had some in the hold of your own flights at some point. It all has a price attached in amount (weight/volume) and peculiarity (special handling). Some routes may haemorrhage cash a certain part if the year, only to reap the benefits of persistence, as well as not letting the rights expire, for other parts of the year.
Maximising that benefit is often why aircraft types and cabin availability change throughout the year. But now I am teaching granny to suck eggs
Cargo revenues are a whole other ball game, from tomatoes and green beans to horse seamen. You name it you probably had some in the hold of your own flights at some point. It all has a price attached in amount (weight/volume) and peculiarity (special handling). Some routes may haemorrhage cash a certain part if the year, only to reap the benefits of persistence, as well as not letting the rights expire, for other parts of the year.
Maximising that benefit is often why aircraft types and cabin availability change throughout the year. But now I am teaching granny to suck eggs
#24
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Very confusing! It's like my booking for a trip in May:
11.05.15 BTS-BRU HG
11.05.15 BRU-LHR BA
11.05.15 LHR-MIA BA
12.05.15 MIA-LAX AA
12.05.15 LAX-DFW AA
20.05.15 DFW-PHX US
20.05.15 PHX-LAX US
20.05.15 LAX-LHR BA
21.05.15 LHR-VIE BA
9 flights in economy for £338. How on earth can they make any money from that!??
11.05.15 BTS-BRU HG
11.05.15 BRU-LHR BA
11.05.15 LHR-MIA BA
12.05.15 MIA-LAX AA
12.05.15 LAX-DFW AA
20.05.15 DFW-PHX US
20.05.15 PHX-LAX US
20.05.15 LAX-LHR BA
21.05.15 LHR-VIE BA
9 flights in economy for £338. How on earth can they make any money from that!??
Last edited by Swiss Tony; Jan 6, 2015 at 12:15 pm
#25
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#26
Join Date: Apr 2012
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Very confusing! It's like my booking for a trip in May:
11.05.15 BTS-BRU HG
11.05.15 BRU-LHR BA
11.05.15 LHR-MIA BA
12.05.15 MIA-LAX AA
12.05.15 LAX-DFW AA
20.05.15 DFW-PHX US
20.05.15 PHX-LAX US
20.05.15 LAX-LHR BA
21.05.15 LHR-VIE BA
9 flights in economy for £338. How on earth can they make any money from that!??
11.05.15 BTS-BRU HG
11.05.15 BRU-LHR BA
11.05.15 LHR-MIA BA
12.05.15 MIA-LAX AA
12.05.15 LAX-DFW AA
20.05.15 DFW-PHX US
20.05.15 PHX-LAX US
20.05.15 LAX-LHR BA
21.05.15 LHR-VIE BA
9 flights in economy for £338. How on earth can they make any money from that!??
Where did you hear about the LHR - ICN being switched to 787? I'm quite excited actually since my last experience on BA 17 & 18 wasn't that great on CW. But as others point out, LHR - ICN does have a very light load in CW/F - very few Koreans on the flight to be honest.
Last edited by LDNConsultant; Jan 6, 2015 at 12:28 pm
#27
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Posts: 4,944
#28
Join Date: Nov 2011
Location: London
Programs: BA Gold
Posts: 4,031
As further evidence not to pay too much attention to allocated seats, I'm currently the only person with an allocated one for an LHR-JFK flight on AA in J next month - and I'm pretty certain that's a profitable route!
#29
Join Date: Jun 2010
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This is a difficult one to answer with any certainty- or indeed without getting into the debate of allocating revenue between short-haul and long-haul combination tickets. Therefore I shall take a guess at it, but in two categorizes- SH and LH
For short-haul, I am going to say that routes that BA are required to serve to feed LH that have LCC competition are the ones suffering. These often need to be served more than a few times a day to feed BA's LH network or are there for brand reasons. Therefore my guesses are in this order (which may surprise some):
LGW-GLA
LHR-LBA
BAH-DOH
For Longhaul, it is difficult to speculate. I'm sure BA makes every effort to keep the easily profitable side of its business, profitable. So my speculations are somewhat unfounded but based expected yield from experience, my guesses are:
LHR-HYD
LHR-DXB
LHR-CTU
For short-haul, I am going to say that routes that BA are required to serve to feed LH that have LCC competition are the ones suffering. These often need to be served more than a few times a day to feed BA's LH network or are there for brand reasons. Therefore my guesses are in this order (which may surprise some):
LGW-GLA
LHR-LBA
BAH-DOH
For Longhaul, it is difficult to speculate. I'm sure BA makes every effort to keep the easily profitable side of its business, profitable. So my speculations are somewhat unfounded but based expected yield from experience, my guesses are:
LHR-HYD
LHR-DXB
LHR-CTU
#30
Join Date: Jun 2014
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Posts: 494
BA001/002 when it was on the concorde? I am not sure I believe some of the BA's claimed profits on that route when you factor in all the subsidies that went into that project.
Last edited by muishkin; Jan 6, 2015 at 12:41 pm