Yet another aviation thread.

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August 8th, 2017 at 4:50:57 PM permalink
Nareed
Member since: Oct 24, 2012
Threads: 319
Posts: 10858
Quote: Pacomartin
I suppose anything is possible, but charging for a briefcase or a purse may put people off flying completely.

But you never thought you would be charged for selecting a seat or picking up a boarding pass at the airport.


I think if you went back to, oh, 1987 or so, and told people what flying is like today, they'd ask "are you trying to destroy the airline industry?"

Further, if you explained it's in the name of low, low fares, they'd be puzzled. Aren't fares now in 1987 the lowest they've ever been? Don't you know more people are flying now than at any other time in history?

Memory is a stubborn thing.

Now, I don't think any ULCC is contemplating charging for personal items, or by passenger weight. But they might, once they exhaust all other ways of nickel-and-diming their passengers, and they face a revenue down-turn for any reason (fuel prices, weather, regulations, Brexit, etc.)
If Trump where half as smart as he thinks he is, he'd be twice as smart as he really is.
August 14th, 2017 at 12:05:10 PM permalink
Nareed
Member since: Oct 24, 2012
Threads: 319
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Here's another crazy prediction. I've hesitated making it, largely because I don't think it will work. also i don't see it widely adopted, but perhaps one or two ULCCs will try it:

We'll see an airline business model more like that of movie theaters.

Theaters send the bulk of the box office to the studios (or distributors), and make their money selling snacks and drinks, and lately meals, at the concession stand. This is well known.

Airlines do keep the money charged for tickets, naturally. But as they race to the bottom for the lowest possible fare, one or more might decide to price fares so low as to be irresistible, and make up the difference through various fees.

Imagine the following:

Fly Airways (hypothetical airline) prices all flights by block time, starting at $20 for, say, 30 to 90 minutes, then $30 for 120 to 150 minutes, and so on. This won't cover their costs, so they'd charge fees for everything. Buying the ticket online or by phone, carry-on luggage, checked luggage, personal items, fuel surcharges, maybe for boarding the plane (though that might not be legal anywhere given a paid ticket), and they'd sell everything else in flight from snacks to even water, maybe they'd charge to use the lavatory.

Now, past charging for a personal item, ULCCs already do all of this, so maybe they're already at the model I propose, only with realistic fares.
If Trump where half as smart as he thinks he is, he'd be twice as smart as he really is.
August 14th, 2017 at 12:36:04 PM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 705
Posts: 8134
Southwest flies an average stage length of 760 miles and an average trip length of 1001 miles. About 76% of the flights are nonstop. Average number of seats per trip is 147.33 with 16% of them empty. Average one way fare is $149.09 or 14.9 cents per mile.

Their basic plan to improve profitability in 2017 is to retire their 87 older smaller jets and replace them with 67 newer jets in 2017 and 47 jets in 2018. They have no grand plans to increase their network.

Quote: Nareed
Fly Airways (hypothetical airline) prices all flights by block time, starting at $20 for, say, 30 to 90 minutes, then $30 for 120 to 150 minutes, and so on. This won't cover their costs, so they'd charge fees for everything.


Southwest calculates their costs at 11.22 cents per mile. So if Southwest was like your hypothetical airlines, they might charge 11.22 cents per mile as their base price, and then fees for virtually everything would make the airline profitable.

I don't see that business model as being likely. It is too straightforward. The service industry makes money on tricks, not on being transparent. I could hypothetically see them selling a 20,000 mile ticket which must used in 1 year for $3000 with no refunds if you go under 20K miles.

Allegiant Airlines has a base price is often below 10 cents per mile, so it clearly would not be profitable if most people didn't pay fees. But Allegiant has no plane transfers so their trip length and stage length are identical. Their whole business model is built around flying people from small airports to essentially vacation destinations, and hopefully selling them automobile rental and hotel packages.
August 14th, 2017 at 1:16:30 PM permalink
DRich
Member since: Oct 24, 2012
Threads: 18
Posts: 719
Quote: Nareed


Airlines do keep the money charged for tickets, naturally. But as they race to the bottom for the lowest possible fare, one or more might decide to price fares so low as to be irresistible, and make up the difference through various fees.



Does Spirit $9 fares ring a bell? That was something they did on many short flights a few years ago and they averaged about $40 pp in sales of incidentals. Actually, I am going to San Diego in a few weeks and our Spirit tickets were $21.50 each way including the taxes and airport fee. I would guess that ticket was probably about a $9 fare also.
August 14th, 2017 at 1:25:14 PM permalink
Nareed
Member since: Oct 24, 2012
Threads: 319
Posts: 10858
Quote: Pacomartin
Southwest flies an average stage length of 760 miles and an average trip length of 1001 miles. About 76% of the flights are nonstop. Average number of seats per trip is 147.33 with 16% of them empty. Average one way fare is $149.09 or 14.9 cents per mile.


Southwest still allows two complimentary checked bags, and as far as I know has few fees overall.

I really ought to pay more attention when I read, but I got the impression fares are subject to certain taxes that fees are not. Therefore unbundling fares and charging fees for luggage, fuel, online payment, etc. are more profitable (ie have a higher margin) than fares. If so, it makes sense to lower the fares as much as possible, and make up the difference in fees.

The thing is people can get away not paying said fees (I've wondered if there's money in a luggage shipping service; probably not in a country as large as the US).

Quote:
I don't see that business model as being likely. It is too straightforward. The service industry makes money on tricks, not on being transparent.


The thing is there are regulations that say it has to be transparent.
If Trump where half as smart as he thinks he is, he'd be twice as smart as he really is.
August 14th, 2017 at 1:38:18 PM permalink
DRich
Member since: Oct 24, 2012
Threads: 18
Posts: 719
Quote: DRich
Does Spirit $9 fares ring a bell? That was something they did on many short flights a few years ago and they averaged about $40 pp in sales of incidentals. Actually, I am going to San Diego in a few weeks and our Spirit tickets were $21.50 each way including the taxes and airport fee. I would guess that ticket was probably about a $9 fare also.


I just checked my Spirit ticket for San Diego and the fare is $1 per person each segment. I bought it for four people roundtrip and the fare is $8 with with an additional $169.60 in other fees. It is hard to beat $177.60 for four people to fly round trip.
August 14th, 2017 at 1:46:57 PM permalink
Nareed
Member since: Oct 24, 2012
Threads: 319
Posts: 10858
Quote: DRich
I just checked my Spirit ticket for San Diego and the fare is $1 per person each segment. I bought it for four people roundtrip and the fare is $8 with with an additional $169.60 in other fees. It is hard to beat $177.60 for four people to fly round trip.


Thus far. You still have to avoid the buy-on-board traps.

But essentially, i was predicting the past.

you'd think predicting the past would be easier...
If Trump where half as smart as he thinks he is, he'd be twice as smart as he really is.
August 14th, 2017 at 1:55:06 PM permalink
DRich
Member since: Oct 24, 2012
Threads: 18
Posts: 719
Quote: Nareed
Thus far. You still have to avoid the buy-on-board traps.



I do understand, but I guarantee neither my wife nor I will pay for a bag and we won't pay for a seat. Although, it is very likely that my wife will indulge in an overpriced glass of wine. On the other hand, our friends that are going with us will probably check a bag and pay to sit together. That is why I like this model where everything is optional.
August 14th, 2017 at 2:18:26 PM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 705
Posts: 8134
Quote: DRich
It is hard to beat $177.60 for four people to fly round trip.


That is $22.20 per passenger segment.

265 miles * 2 * 4 = 2120 miles
$177.60 /2120 = 8.377 cents per mile


From Spirit annual report
9.11 Total operating revenue per ASM (TRASM) (cents)
7.37 Cost per Available Seat Mile (cents)
5.45 Adjusted Cost per Available Seat Mile excluding fuel (cents) (C)
15.3% Average empty seats (multiply above numbers by 1.153 to account for empty seats)

Spirit may not really be losing significant money on your trip. They certainly aren't making a profit, but if average Sprint cost is 7.37*1.153=8.498 cents per passenger mile, you are almost paying that much.

Average TRASM for spirit is 9.11 cents * 1.153 * 265 = $27.84 which is $5.64 more than what you are paying.

If each of you pays $7 for a beer, wine, or liquor each way they may actually make a real profit. You might be more willing to overpay for beer because you are getting your trip for $22.20 per segment.
August 14th, 2017 at 3:19:55 PM permalink
DRich
Member since: Oct 24, 2012
Threads: 18
Posts: 719
My assumption was that a big chunk of that $177 is going to the Passenger Facility Charge and the September 11th fee. Do you think the costs Spirit quote include those fees? I would have assumed not as I wouldn't think they would want to include those in revenue. Also short flights tend to cost much more per mile than longer flights.
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