lv From United States of America, joined Jun 2001, 1900 posts, RR: 0 Posted (3 years 5 months 3 days 10 hours ago) and read 2239 times:
Sunday night I flew SMF-LAS and there were only 31 people and 14 bags on the flight (I know the 14 bags because the gate agent came on right before shutting the door and told us "you guys saved about 350 dollars in bag fees"). Today I flew LAS-SMF and there were only about 80 people on the flight. It got me wondering what WN's break even point is. I know there are a lot of different factors in each flight (distance, yield, landing fees, etc) but what is the typical break even point?
Using some very crude figures I would say that looks very reasonable. Just taking Q1 of 2010 the LF was 75.9% and that achieved an operating margin of 2%. OK, we know LF and margin are not directly relational but when comparing Q1 2009 the LF was 69.9% and a negative operating margin of around 2%. There was a 6 point jump in LF in that period and a 11 point jump in revenue during the same period so on the face of it, it looks lke WN could lose money at less than 70% LF and make money at 75%. Of course if the revenue market was stronger it may also be possible for WN to make money at 70%!
(Note: as stated above this is very rough calculations and I know LF and margin do not necessarily go hand in hand, I know it is possible to have 100% LF and still lose money)