Pricing (not a rant)
Oct 22, 2006 | 5:51 pm
#1
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Pricing (not a rant)
okay so you have clicked on my thread and i promise this is not a pricing rant.
Basically, I am curious about the pricing mechanism regarding intl vs domestic flights. I keep hearing airlines complain about how unprofitable domestic operations are and how keen they are on intl. What i don't understand is why this so, if it is true.
I mean lets take a domestic flight eg PHL-DFW. Regular fares are around 300 . the distance is around 2800 miles for a RT. While a PHL-SIN is around 1000 and covers 20K miles. the cost per mile is definitely in favor of domestic. then there's the cost of food, in flight entertainment (however pathetic it may be on UA), hotel, food and other expenses for the crew, higher insurance rates for intl flights making it even more unfavorable. So what exactly am I missing in my analysis? Does intl F and C revenue really compensate for the above?
Basically, I am curious about the pricing mechanism regarding intl vs domestic flights. I keep hearing airlines complain about how unprofitable domestic operations are and how keen they are on intl. What i don't understand is why this so, if it is true.
I mean lets take a domestic flight eg PHL-DFW. Regular fares are around 300 . the distance is around 2800 miles for a RT. While a PHL-SIN is around 1000 and covers 20K miles. the cost per mile is definitely in favor of domestic. then there's the cost of food, in flight entertainment (however pathetic it may be on UA), hotel, food and other expenses for the crew, higher insurance rates for intl flights making it even more unfavorable. So what exactly am I missing in my analysis? Does intl F and C revenue really compensate for the above?
Oct 22, 2006 | 5:58 pm
#2
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more paid C/F?
Oct 22, 2006 | 5:59 pm
#3
Join Date: Jan 2006
Location: Los Angeles
Programs: UA, AA
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Freight, the distribution of fares weighted on cpm, average marginal cost per pax vs average marginal revenue per pax, quantity of pax.
Oct 22, 2006 | 5:59 pm
#4
Join Date: Sep 2004
Location: NYC
Posts: 1,082
One aspect has to do with not paying tax on fuel on international routes. I cannot seem to find the link, but there was an interesting article in The Economist, perhaps three months ago.
Oct 22, 2006 | 6:04 pm
#5
Join Date: Sep 2004
Location: NYC
Posts: 1,082
Originally Posted by UA840
One aspect has to do with not paying tax on fuel on international routes. I cannot seem to find the link, but there was an interesting article in The Economist, perhaps three months ago.
"Yet in other ways, airlines are a fine target. They pay no tax on fuel for international flights, and therefore escape the polluter pays principle even more niftily than other forms of transport. "
Here are the links
http://www.economist.com/research/ar...bjectid=348873
http://www.economist.com/research/ar...bjectid=348873
Oct 22, 2006 | 6:05 pm
#6
Join Date: Sep 2006
Location: LAX
Posts: 1,212
Look at it from the same dates, in similar fare classes.
I don't know where you found PHL-SIN for 1,000 unless it is highly discounted, I ran ORD-SFO and ORD-SIN on 12/22/06:
ORD-SIN
12/22/06
$1484 R/T QPXPXSG (lowest published fare)
ORD-SFO
12/22/06
$428 R/T SE14A1N (lowest published fare)
Sure, ORD-SIN is 16k miles and ORD-SFO is only 3.6k but that extra $1,000 times all those Y seats is incredible. Not to mention C and F that are anywhere from 4k-15k each. The routes are not only more expensive but often sold out, whereas ORD-SFO (or PHL-DFW) are almost never completely sold out everyday.
The extra gas mileage is offset by the number of people, and UA has hotel deals so that FAs can stay for next to nothing.
I'm sure other FTers can explain more, but that's kind of the idea...
I don't know where you found PHL-SIN for 1,000 unless it is highly discounted, I ran ORD-SFO and ORD-SIN on 12/22/06:
ORD-SIN
12/22/06
$1484 R/T QPXPXSG (lowest published fare)
ORD-SFO
12/22/06
$428 R/T SE14A1N (lowest published fare)
Sure, ORD-SIN is 16k miles and ORD-SFO is only 3.6k but that extra $1,000 times all those Y seats is incredible. Not to mention C and F that are anywhere from 4k-15k each. The routes are not only more expensive but often sold out, whereas ORD-SFO (or PHL-DFW) are almost never completely sold out everyday.
The extra gas mileage is offset by the number of people, and UA has hotel deals so that FAs can stay for next to nothing.
I'm sure other FTers can explain more, but that's kind of the idea...
Oct 22, 2006 | 7:23 pm
#7
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Originally Posted by mzkaiser
Look at it from the same dates, in similar fare classes.
I don't know where you found PHL-SIN for 1,000 unless it is highly discounted, I ran ORD-SFO and ORD-SIN on 12/22/06:
ORD-SIN
12/22/06
$1484 R/T QPXPXSG (lowest published fare)
ORD-SFO
12/22/06
$428 R/T SE14A1N (lowest published fare)
Sure, ORD-SIN is 16k miles and ORD-SFO is only 3.6k but that extra $1,000 times all those Y seats is incredible. Not to mention C and F that are anywhere from 4k-15k each. The routes are not only more expensive but often sold out, whereas ORD-SFO (or PHL-DFW) are almost never completely sold out everyday.
The extra gas mileage is offset by the number of people, and UA has hotel deals so that FAs can stay for next to nothing.
I'm sure other FTers can explain more, but that's kind of the idea...
I don't know where you found PHL-SIN for 1,000 unless it is highly discounted, I ran ORD-SFO and ORD-SIN on 12/22/06:
ORD-SIN
12/22/06
$1484 R/T QPXPXSG (lowest published fare)
ORD-SFO
12/22/06
$428 R/T SE14A1N (lowest published fare)
Sure, ORD-SIN is 16k miles and ORD-SFO is only 3.6k but that extra $1,000 times all those Y seats is incredible. Not to mention C and F that are anywhere from 4k-15k each. The routes are not only more expensive but often sold out, whereas ORD-SFO (or PHL-DFW) are almost never completely sold out everyday.
The extra gas mileage is offset by the number of people, and UA has hotel deals so that FAs can stay for next to nothing.
I'm sure other FTers can explain more, but that's kind of the idea...
I have two trips to SIN, one on Tues and another in Nov that were around 1000.
Oct 22, 2006 | 7:28 pm
#8
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International flights are also much more lucritive for carrying cargo (of the non-self-loading variety).
Oct 22, 2006 | 7:31 pm
#9
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Originally Posted by mzkaiser
I don't know where you found PHL-SIN for 1,000 unless it is highly discounted, I ran ORD-SFO and ORD-SIN on 12/22/06
Oct 22, 2006 | 8:21 pm
#10
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Aircraft are more efficient at cruise altidude. The more time spent at 36,000 feet and the less time spent taking off and landing the cheaper the overall flight is. Stage length is a critical factor in profitability. The same aircraft that flies once for 16,000 miles might make 2-3 3,000 mile flights in that same time. That's 2-3 more take offs and landings, 2-3 more landing fees, 2-3 more maintenance walk arounds etc... The numbers add up.