radonc1

Capital costs (i.e. airplane seats) aside, how much do you really think it costs

Wouldn't the cost of a first class also include the loss of seats due to the fact that you have 12 F seats where you may be able to stuff in 24 Y seats? Isn't that also a revenue losing action?

vincom

Not if you intially planned it that way.

-Vincent

ama208

On an MSNBC Business report,3-30-06, Boeng said it will cost 10 times more for an airline to install a FirstClass seat than an economy one on the 787.

EmailKid

Methinks those will ALL be BusinessFirst seats, hence no FREE UG, so that is a moot point. IF the flight continues somewhere in the US, then some lucky person may get an UG to the said seat, but it will cost miles and/or $ on int'l flights.

EmailKid

vincom

Continental's won't have First Class on thier 787s Not unless they plan on going back to a three cabin configuration...

-Vincent

entropy

According to Larry the cost of a F seat is 2x that of a coach seat, because of the extra galley space, extra width, extra leg room and extra closet space.

Mark Bergsrud told a couple of people at the post-dinner discussion that the riff-raff elites are actually their 'worst' customers in that they cost CO the most to service while they pay very little for it.

However, when they are dealing with a plane (high fixed cost), and a fixed schedule, if they publish cheap fares on T/W/S, where a riff-raff pax can fly SFO-FLL for <$200 RT, they aren't taking a seat from a Y/H/K passenger. While that passenger isn't on an average basis creating 'profit', they are adding revenue that otherwise wouldn't be there (its harder to fill planes on T/W/S). So aside from the additional fuel to transport and feed/liquor a plat, the cost isn't so bad.

By doing the upgrades by fare class, they let the truly valuable fliers (the Y/H/Ks) get a higher upgrade percentage and keep them happy. The riff-raff get them when available (Which is increasingly less these days).

Finally, the 50% EQM is important in controlling costs on the el-cheapo tickets. With the cost of booking at co.com essentially 0, versus about $10 on GDS, on a $200 ticket that's 5%, and quite a big difference. In addition, if you look at fares outside the US, say, EWR-TLV and TLV-EWR, while there are differences in the fare itself, most of the relatively cheap (~1000$) fares out of the US are booked in N class, or U class, with 100% EQM, while the same level fares out of Israel are S/X/W, because travel agents get 9%, that's a huge chunk of money, and so CO has a much bigger interest in getting those sales on co.com. In addition, the dollar amount is bigger but also the mileage is huge.
If you book a T fare TLV-EWR-SFO ($1000) with a travel agent you'll get 8200 EQM, co gets $900.
T fare on CO.com, 16,400 EQM, co keeps the whole $1000.
H fare ($2000) TA/CO.com, 24,500 EQM, CO gets 1800/2000, but still at least $800 more.

ijgordon

Well, if EUAs processed by fare class (sub-Y) within a status level and 50% EQMs on less expensive (but not always "cheap") fares through the required corporate TA aren't two critical "rewards" for spending more money with CO, then I don't know what is...

On AA, fare class does not play into upgrade priority, and (virtually) all fares earn 100% EQM's. The EQP(oint) system which penalizes deep discount fares is only an issue if you are mixing them with high fares (First, Biz, Full coach), in which case its most likely that the discount fares are for personal travel anyway, so the corporation doesn't have anything to worry about.

ContinentalFan

I found discussions on changes to EQM etc. but nothing that was congruent to what I posted.

I am well aware of this change. My position is that it's just not enough. Continental is rewarding people on which the company is losing money; that doesn't make any sense to me. I think the move was a positive one--though it had the potential to hurt me at the time--but I understand why it was done; I just think it's not enough.

I have gone back on this point. I just don't know if it's true. In fact, my instinct tells me that the model would probably work better in the US than in the UK. I think that Continental has a legacy issue with the Elite program it created. It's flying people at a loss and at the same time giving them loads of miles so that they can (decreasingly ) trade for BusinessFirst seats on transatlantic or transpacific lights. If truth be told, one could hit Platinum spending $5k a year, get over 100k miles, then hit Continental with a $5k opportunity cost by flying BF round trip to Europe. Does anyone else not see how absurd this situation is? Then we, the tax payer, get the privilege of bailing airlines out because the business model doesn't work. We get to do it directly as happened after 9/11, or indirectly through the equally ludicrous use of reorganization under bankruptcy ("Chapter 11")

I'll just echo my position that the perks should be lean very heavily in the direction of customers that help the airline generate a profit.

I have too. In years past--public confession--I now realize that I have been a freeloader. In the late 90's, I was paying between 30 to 40 cents a mile; last year, it was under 6 cents; this year it's likely to be close to 20. I take advantage of a Z fare to Europe when I can; I also find I buy H, partially because it's priced a little lower, there's a better chance of an upgrade, plus I have more EQM's. Naturally, my motivation is one of self interest. My concern is that through the current structure of the Elite program, Continental is rewarding behavior that detracts from its ability to run at a profit.

I frankly don't think anything has changed. One still can get 100% EQM through purchasing a ticket online from Continental. The way to fly under cost and still obtain benefits exists. I don't know about the third point, since I don't have information. I know that if I were CEO of Continental (please, no one hold your breath ) heads would fly over the current structure of the Elite program. The more I have looked at it, the crazier it seems to be.

I think my point wasn't clear. My point is that Continental should learn from its CO* program and restructure it's Elite program to recognize and reward people that help the carrier generate a profit.

If truth be told, I would probably hate it too, but I would understand why it's necessary. I just don't buy the argument that it's not for an American carrier.

I will dig through the archives again, but I did see it. Thanks for changing the title. Just to be self-consistent, there's no way I would give Continental free advice on how to be profitable

ContinentalFan

In fairness, I have started to find other discussions that touch on the issue. I don't think that the post was scathing at all. It's clear to me that a lot of people have a treasured relationship with Continental.

I don't think that there would be any tax consequence. The IRS has looked at and decided not to touch frequent flyer miles (though, when you read the tax code, they clearly fall under the definition of income).

ContinentalFan

I am talking only about Continental. Frankly, it's the only major carrier that I care about. I want Continental to be successful, highly profitable and a benchmark for the industry--that helps all of us.

ContinentalFan

The real cost is the opportunity cost. If someone is upgrade 5-days out, as I have been many times, that seat is no longer available for sale. I know that CO has a yield management program in place, but how can they really know the opportunity cost of filling FC a day before the flight?

ContinentalFan

I would do exactly that. I would fly on cheap seats in Northwest or Delta. The full fare folks would stay with Continental. Tightening up on the Continental Elite program would sift out the budget-minded Elite flyers (like me most of the time). Why not? The airline can work harder on targeting higher revenue passengers.

ContinentalFan

Continental needs to think about something like this program. I wonder if the IT system would be a bottleneck. Sounds like adding more dimensions to the Elite program could be a programming nightmare.

ContinentalFan

I take the point on corporate travellers; that's an interesting perspective. I think that Continental would have to be creative in the way it implements a change.

ContinentalFan

I agree with the comment you make. CPM is really a gross average. It certainly depends on equipment and route. However you cut it, the revenue per mile should be higher than the cost per mile.

I am not talking about a price war in the way you seem to suggest. I am talking about a subtle leveraging of the the loyalty of Elite members through driving them to higher (not lower) tickets.