Sponsor Message:
Civil Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
How Do Airlines Gauge Route Performance?  
User currently offlineFlydl2atl From United States of America, joined Aug 2005, 119 posts, RR: 0
Posted (7 years 2 months 4 weeks 23 hours ago) and read 3105 times:

We always here on a.net someone saying route so and so is doing very well....both the load factor and the yield are very high. I was curious how exactly do airlines determine the yield of a given route given there are so many complex variables.

For example, I just bought a ticket on DL for ATL-SFO for $400. So in this particular case I'm bringing in about 10.7 cents of revenue for each mile flown. And if everything was like this I guess revenue managmenet would be pretty easy. However, if I had chosen to fly DCA-ATL-SFO for $600 I would be bringing in around 9.0 cents of revenue for each mile flown. So how does an airline take these numbers and say whether or not DCA-ATL or ATL-SFO is performing well. How do they determine with connecting traffic how much of the revenue goes for the DCA-ATL segment and how much goes for the ATL-SFO segment.

1 replies: All unread, jump to last
 
User currently offlineCommavia From United States of America, joined Apr 2005, 11640 posts, RR: 61
Reply 1, posted (7 years 2 months 4 weeks 23 hours ago) and read 3082 times:

Quoting Flydl2atl (Thread starter):
I was curious how exactly do airlines determine the yield of a given route given there are so many complex variables.

With lots and lots of really smart, really complex computer systems. Airlines have literally invested billions in developing sophisticated algorithms, based on years of historical data that allow them to price specific itineraries -- both nonstop and connections -- at specific levels based on expected demand. This is the "dark art" that has come to be known in the industry as "yield management." It started, at least in its most modern form, with American Airlines' SABRE system in the late 1970s, and today virtually every airline either has their own in-house proprietary system, or an off-the-shelf system from industry-wide vendors like SABRE or Amadeus.

Quoting Flydl2atl (Thread starter):
So how does an airline take these numbers and say whether or not DCA-ATL or ATL-SFO is performing well. How do they determine with connecting traffic how much of the revenue goes for the DCA-ATL segment and how much goes for the ATL-SFO segment.

"Profitability" is, at least in most cases, usually more of a gray area than a hard-and-fast black/white thing. Certain routes simply are profitable, and they just are consistently producing positive returns no matter how you cut it (nonstop, connecting, RASM, yield, etc.). That is routes like AA MIA-EZE or JFK-PAP, United ORD-HKG, etc. These flights can be counted on to make money just about every day. But for most routes, "profit" is more "in the eye of the beholder," and can be defined -- as you point out in your post -- in just about any way the airline wants it to. In some cases, airlines set a fairly high threshold for a flight's profitability, and demand that it make money as a stand-alone flight independent of its connections and the revenue contributions it makes to the rest of the network. Many feel AA has for many years taken this approach with new international flights -- if they aren't runaway profitable successes and can't stand up on their own with 6-12 months, they're gone. On the other hand, some airlines take a more macro, "big picture" view, choosing alternatively to define profitability more in terms of the flight's overall financial contribution to the company, and the flight's positive impact on the company's overall network. Delta and Continental have taken this strategy of late by targeting many new, niche markets that previously did not have direct flights to the U.S. and that probably could not sustain frequent nonstop service to the U.S. without connections. But, for these airlines, they have determined that "profitable" may mean a particular flight (or route) losing money but bringing a large volume of new incremental revenue onto the network.


Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
How Do Airlines Ban Passengers? posted Wed Apr 4 2007 03:08:09 by Nycfuturepilot
How Do Airlines Get Thier Flight Codes..? posted Tue Feb 13 2007 10:52:00 by Sparklehorse12
How Do Airlines Commit To The 350 This Early? posted Thu Jan 18 2007 00:25:07 by SSTsomeday
How Do Airlines Choose A Used Airplane? posted Tue Aug 1 2006 07:39:49 by Jlbmedia
How Do Airlines Make Their Wine Selections? posted Sat May 27 2006 21:14:54 by 777fan
How Do Airlines Come Up With Flight Numbers? posted Wed Sep 21 2005 17:17:36 by RicardoFG
How Do Airlines Recover From The Oil Prices? posted Tue Aug 30 2005 23:39:33 by Slashd0t
How Do Airlines Choose Terminals At JFK? posted Tue Jun 28 2005 06:57:37 by RJpieces
How Do Airlines Choose A Plane? posted Thu May 5 2005 21:39:09 by Erikwilliam
How Do Airlines Operate Ultra-Long-Haul Flights? posted Fri Jan 21 2005 21:29:21 by Ktachiya