10 most PROFITABLE routes?
 

I was surfing in another FF forum's discussion boards and I came upon a very interesting question. What are the 10 most PROFITABLE airline routes in the world? There were a number of consensus routes such as LHR-JFK because of the sheer number or daily offerings, but I wonder if LHR-JFK is really one of the most PROFITABLE routes for an airline. I don't have any expertise in route revenue management, but perhaps high frequency routes such as LHR-JFK, LAX-SFO, the east coast shuttle operations etc. have the most frequencies not because it is a very profitable route but because there is passenger demand for it and airlines can't afford to not serve the route due to competitive reasons (ie if AA doesn't offer the flight, the passenger will just go across the terminals to DL etc.) I would think that routes where an an airline doesn't really have competition would be more profitable.

The discussion on the other forum didn't define what profitable meant, but perhaps profit as a percentage of revenue? Largest amount of overall net profit? I guess there is an issue of does an airline want 90% profit margins but on a very small revenue route, or lower profit margins on a very high # of seats route?

Thoughts?

Most profitable route: NYC-DCA. Given the mega-profitability of the US and DL shuttles, I'm almost positive that this route must be at or near the top of the list.

I was once told that Air Canada's most profitable was Toronto-Vancouver. Lotsa weekday business travel at $3000+ for Y.

Dorian



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My understanding and I don't remember where I heard this, but pretty sure it was a special on A&E, Discovery Channel or some such is that LAX-JFK is the most profitable route--this was mentioned in relation to AA, who has 20 non-stops a day; 10 in each direction.

I also remember reading a while ago that the Hawaiian inter-island routes are very profitable...



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DCA-LGA-BOS

The Delta Shuttle and US Airways Shuttle are believed to be the most profitable part of their companies. I say "believed" since they never publish the numbers separately from the regular airline. But there are always tons of people paying lots of money (even with corporate discount) for a short flight.

Also, regional routes (US Express, etc.) tend to be VERY expensive if booked individually, and not a part of a connecting itinerary. I bet this is because the operating airline gets a bigger cut than when the pax is connecting to the mother carrier, so they charge more.

I would think Canada-Asia and UK routes would be doing well especially YYZ-LHR.

I read from some airline magazine, that Houston-Dallas route is one of the most frequent routes, but don't know if they are profitable or not, but Southwest does almost make a living on HOU-DAL routes.

Al

I remember reading that for American, their MAN-ORD route is the most profitable.

I believe LAX-JFK has one of the highest % of paid F class on any route. Guess why? Remember good ole MGM Grand?

What about those trips on AA/CO to Central and South America? I've heard that they make
major bucks - just on the cargo revenue alone - that on these routes generate.

The routes to South America, particularly Brazil and Argentina/Uruguay must generate alot of revenue - look at how expensive they are - higher than Asia. Also, the flights to LHR from ORD must be quite profitable. I believe AA, UA, BA all have at least three flights a day and Virgin Air just got into the mix.

I've been on 20 minute flights on a 17 seat Beechcraft between a regional airport served by only one airline and a hub that added over $100 to the flight cost no matter where you go.. I imagine those flights are very profitable.

I would be very surprised if JFK-LHR is one of the most profitable routes. Ever since the Asian downturn there has been a whole heap of extra capacity on those routes which is just starting to be dissipated (both DL and UA have a few new Asian routes starting April 1, 2001) and there have been crazy sale porices on these routes, eg $228 roundtrip. The fact that the discounts are so low is probably an indication that they're having trouble filling the planes, and thus that the load factors (which govern profitability) are not great. Just a guess though, or course!!!

i would think that lhr-jfk would definitely be one of the most profitable, but not based on what happens in coach. biz and first class airfares are routinely higher out of the uk than most other european countries. the fact that us-uk open skies can't be done because of the fierce battle for slots at lhr also lead me to believe that this route is a gem for those that have it. i'm aa plat, and i usually don't try to upgrade it, as i feel the route is too short to give them 25k for, but i rarely see that biz cabin with any open seats, and there are always people up in first as well.

i also puy jfk-lax on the list, cause i can never get an upgrade as a plat as most of the seats are purchased in biz class by hollywood types.

[This message has been edited by lonman (edited 10-25-2000).]

Profitability of one route in a network is difficult to calculate objectively and is not of much use. A network's value is much more than the sum of its parts (the individual routes).

Sure, something like the NE Shuttle is primarily O&D, where most passengers don't care what kind of network the airline has. But even then, you have to consider the value of the DCA and LGA slots -- i.e., what flights are NOT being flown in order to fly between LGA and DCA (i.e., what is the opportunity cost?)

On the flip side of this discussion, the use in looking for least profitable routes (e.g., to cut costs) can be overused. If TWA, which has been continuously losing money, decided to drop all routes except LAX-JFK, would they stay in business? Maybe so, but I doubt it. For one thing, FF miles would be practically useless on a one-route airline.

Incidentally, TWA has just added a 5th LAX-JFK, after recently adding a fourth.

I've heard that AA's SJC to AUS route is the most profitable due to the last minute business people travelling on these non stop flights.

Any two large population centers will have lots of traffic---this does not mean it is the most profitable. A good example is Dallas and Houston. This is where Southwest got their start. This city pair generates many flights but not high profits.

American has announced new non-stop service between San Jose and CDG and TPE. Reasons cited for the TPE run is currently over 60% of their bookings are in business or First on a similar run. They will be using aircraft with a very high ratio of business/First to coach. This looks like a cash cow to them.

Yes, full airplanes don't equal profits.

Thats an easy question. Minot, ND to anywhere. One of Northworst's monopoly cities. If it were not for their $194 RT 14 day advance purchase special to MSP, there would not be a fare less than $362...(non fare-war fares). And every flight I've been on has been full or nearly full on those crappy old DC-9s. And if you have to purchase a fare on less than 7 days notice, plan on shelling out about $1500 or more. Remember, you have no choice... unless you count amtrak or driving.


[This message has been edited by travelcoupons (edited 10-25-2000).]

Especially when the whole front cabin is occupied by employees. UA!!

If airline behavior is consistent with the models I teach students (in intermediate microeconomics), then airlines should equalize their rate of return on invested capital across all routes they serve. If one route is consistently more profitable than another, then airlines should invest more in the more profitable route (bigger planes, more frequent service) at the expense of the less profitable route.

There are exceptions to this rule. If an airline has monopoly power in a certain market (and no other airline can credibly threaten to enter the market), then rates of return will be permanently higher in that market. Also, rates of return should be higher in slot-controlled airports (LGA, JFK, DCA, ORD in the US) since there are barriers to entry. Similarly, when governments restrict the number of carriers or flights serving a particular market, we expect profits to be higher.

You are all wrong. It's anything mainland to HNL. http://www.flyertalk.com/forum/smile.gif

Re your second paragraph, this would be true at a restricted airport in which sub-leasing is prohibited. However, at slot-controlled airports in the U.S., airlines can (and do) lease their slots to other airlines.

So, if you are an incumbent airline with slots, you have capital invested in the slot (even if you got it for free, you could lease it out). Fares collected are higher than an identical route/airport without slots, but the rate of return is the same since the investment is greater.

Same goes for a new airline, or for an existing airline wishing to expand service at a restricted airport. You lease slots and charge fares high enough to provide the same industry-wide rate of return on the higher capital needed for the restricted airport.

[This message has been edited by JS (edited 10-27-2000).]

That route also connects two major business centers in high-tech. This is a logical kind of route to have high volume. Some US/Canada examples are IAD/YOW (politics), YYC/IAH (oil), and ORD/YWG (commodities). One that surprises a lot of people is BNA/LAX (music).

was told recently by a former SFO-based UA marketing exec that ORD-HKG was one of UA's "most profitable" routes after taking into account all related costs (landing fees, fuel, etc...)

I am not an economist, so please bear with me. I think that the microeconmic theory would be consistent with actual practice if the airlines could move thier resources (planes, people, equipment etc) easily from one route to another. If LAX-JFK is more profitable than LAX-SEA, the airline should move resources from LAX-SEA to LAX-JFK. However, I would think that the airline must also take into account the benefits that accrue from having an extensive route network. Many airlines have tried to just serve the highly profitable routes (MGM Air etc.), but they have failed because travelers (especially high paying business travelers, but also fare conscious leisure travelers) prefer airlines that have a complete route network that can get them from point A to point B, as well as as from B to C. I would think this is part of the theory behind code sharing, as more recently, the airline alliances. United doesn't serve every city on this planet, but through code shares and alliances, they can now "say" they serve many more destinations.

As such, I am not sure if airlines could really equalize their rate of return across all thier invested capital. This would be the "peanut butter" rate of return, where rate of return is equally spread across the whole route. I am sure each airline has a low profit routes that they would love to stop serving, but that they continue due to competitive pressures. The majors would probably want to exit a route where WN enters (and drops ticket prices http://www.flyertalk.com/forum/smile.gif), but can't because that route is maybe a feeder route etc.

just my $.02.

I would venture to say that NRT-JFK is also one of the most profitable international routes in the world with a very high-ratio of premium class passengers. One of the reasons why UA keep flying their old 744OPs with 36F seats and over 120C seats must be that they manage to get those seats full with revenue passengers particularly on weekends. After all, come this sping, DL will be flying non-stop JFK-NRT and AA will be joining this route in 2002. Can you think of any other international routes where all top 5 US carriers will compete? I am also told that JFK-NRT runs generate tons of cargo revenues as well.

Although it seems (sadly) that these frequent widebody (for the most part) flights are always full, I would have to disgree with you that they make airlines that much money. I say this based on the fact that airlines downgrade their level of comfort and service to Hawaii because so many of the passengers our traveling on award tickets or upgrades.