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LoCo Economics  
User currently offlineRjpieces From , joined Dec 1969, posts, RR:
Posted (10 years 3 weeks 6 days 7 hours ago) and read 1171 times:

I was hoping for somebody to clear this up. Why exactly is it that LoCos make more money on shorthaul, high frequency flights? Also, why did B6 decide to expand with a lot of transcon flights rather than building up a shorthaul network?

I hope this question is clear...I'm looking for info related to stage length, fuel burn, etc, and the difference in economics of LoCos between shorthaul flights and longhaul flights.

Regards.

8 replies: All unread, jump to last
 
User currently offlineJAL777 From , joined Dec 1969, posts, RR:
Reply 1, posted (10 years 3 weeks 6 days 7 hours ago) and read 1162 times:

LoCos suceed principally for two reasons:

Low Costs: By keeping the costs side of the equation low, they don't have to charge outrageous fares to break even. A flight can break even at less then 70% capacity usually.

High Frequencies: Planes make no money sitting on the ground... The more time they spend in the air, the more their earning income.

While the margins might be low, the high frequencies guarantees large amounts of margins and, hence, profit.

As for B6's short-haul network, its hard to build a succesful shorthaul network in the Northeast. For those airports that would support multiple daily flights, the cost of operation at those airports is prohibitive. For the smaller airports, its just not worth opening a new station for 1 daily flight.


User currently offlineSrbmod From , joined Dec 1969, posts, RR:
Reply 2, posted (10 years 3 weeks 5 days 18 hours ago) and read 1125 times:

The longer the stage length, the smaller number of flights an a/c can do a day. Some LCCs have a/c that spend 18-20 hours a day in flight doing transcons, while other a/c RON @ airports, but do a lot more cycles a day. Here's an example, ABC Airways has one a/c that flies the following legs on a certain day:

ATL-LGA
LGA-BOS
BOS-MDW
MDW-MSY
MSY-ATL
ATL-MCO
MCO-CLT
CLT-IAD
IAD-LGA (a/c RONs @ LGA)

And another a/c that does these legs that day:
LGA-LAX
LAX-LGA
LGA-LAS
LAS-LGA

An a/c that does the short haul flights ends up doing between 8-10 flights a day, while the a/c that do the transcons usually does about half as many, and don't terminate in many cases (except when the do an operational swap that puts the a/c on a schedule and routing that allows it to RON somewhere for MX checks).

While the transcon a/c may be in flight longer each day than the short haul a/c, they don't offer as many seats per day in the system as the numerous frequencies operated by the a/c operating shorter flight.


User currently offlineRjpieces From , joined Dec 1969, posts, RR:
Reply 3, posted (10 years 3 weeks 5 days 18 hours ago) and read 1108 times:

Thanks for the explanations guys.

So what are the advantages to transcon flights? And why did/does B6 continue to expand heavily with transcons if more money can be made on shorthauls? What advantages and disadvantages do the transcons pose?


User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6122 posts, RR: 34
Reply 4, posted (10 years 3 weeks 5 days 17 hours ago) and read 1102 times:

What advantages and disadvantages do the transcons pose?

CASM decreases as stage length is increased, hence B6's average CASM is quite a bit lower than WN since a much higher % of B6's flights are long haul.



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineRjpieces From , joined Dec 1969, posts, RR:
Reply 5, posted (10 years 3 weeks 5 days 5 hours ago) and read 1065 times:

CASM decreases as stage length is increased, hence B6's average CASM is quite a bit lower than WN since a much higher % of B6's flights are long haul.

So WN is able to make money at a higher CASM by flying shorthaul, high frequency flights?


User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6122 posts, RR: 34
Reply 6, posted (10 years 3 weeks 5 days 5 hours ago) and read 1055 times:

Yes, as witnessed by their financial track record.


Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineDelta-flyer From United States of America, joined Jul 2001, 2676 posts, RR: 7
Reply 7, posted (10 years 3 weeks 4 days 17 hours ago) and read 1027 times:

LoCos are also making relatively high yields because they choose city pairs that are not well served by majors with non-stops.

CASM is kept low my keeping the infrastucture lean - for example, by minimizing the number of stations.

Pete


User currently offlineMandala499 From Indonesia, joined Aug 2001, 6767 posts, RR: 76
Reply 8, posted (10 years 3 weeks 3 days 17 hours ago) and read 949 times:

"CASM is kept low my keeping the infrastucture lean - for example, by minimizing the number of stations."

Or by optimising the station costs by increasing the number of daily flights into that station.

Mandala499



When losing situational awareness, pray Cumulus Granitus isn't nearby !
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