OO-VEG From Netherlands, joined Oct 2000, 1081 posts, RR: 1 Posted (12 years 4 months 2 weeks 5 days 1 hour ago) and read 2449 times:
Is it possible to perform long-haul low-cost flights?? I am curious if it is possible. I know there has been an airline aroun 1998 which performed flights from GVA to the US with a 767. They had lower costs than the average airline but they also failed to make profit and finnaly had to quit services.
According to me it should be very hard to save costs as you need to serve food. By flying at night you save some costs of food and drinks and you don't need to have inflight entertainment but would it help??
Toady From United Kingdom, joined Feb 2001, 724 posts, RR: 0 Reply 2, posted (12 years 4 months 2 weeks 4 days 21 hours ago) and read 2397 times:
Just how 'low' is low cost?
Last February, I flew LGW-ATL-LGW with BA. The cost? £200 (+/- US$300). Bearing in mind that £53 of that fare was airport taxes, I consider that to be VERY low cost! £147 to be flown all that way, fed, watered and entertained - BA certainly provided good value for money and it left me wondering how they could do it so cheaply.
Problem is that all these airlines have no hub and spoke, meaning that they don't have any feeder flights.
Therefore they have to start service between 2 big gateways where there's already a lot of heavy competitors....that will soon lower their ticket prices to match them and they are out of business within monthes. Remember also that if there's no high yeld business passengers, better to have your plane completly full if you intend to earn bucks!
In today's mega alliances, there's no way that a single peanut's carrier succeed on the long hauls, just forget it.
Ceilidh From , joined Dec 1969, posts, RR: Reply 8, posted (12 years 4 months 2 weeks 4 days 13 hours ago) and read 2302 times:
OO-VEG - you're thinking of SwissWorld, which lasted about as long as Roots Air.
Whilst the seat costs of operating a large aircraft over long distances might be a lot lower on a per km/mile basis, there are a lot more miles to be covered! Whilst it's true that you can fly from London to New York for less than some fares from London to Paris; the reality is that your overall costs per seat in a B737 from London to Paris are going to be lower than those on a 747 to New York.
So, what you'll see is one of two scenarios:
1) The 'normal' scheduled airline (ie 2/3/4 classes) where the highest fare is usually some ten times that of the lowest. This business model survives on the premium fares - during times of economic depression or recession when business cut back on corporate travel, the resulting drops in premium passengers carried will generally result in disproportionately high losses.
2) The other method is the Skytrain/PEOPLExpress cram them in and provide a bare bones, no frills service. This works on the basis that the cheaper you offer something (travel, in this case) to people, the more people will buy it. (Sir Freddie Laker called this market base "the forgotten man"). Food was sold on board both airlines - or you could bring your own.
As you'll see below, there are many costs that a short haul low fare airline can cut which a long haul one cannot. These include marketing (long haul airlines must invariably use travel agents, for example, as it's unlikely that they'll be as well known - at least initially - outside their home country) and airport passenger charges (the low fare airlines carry literally millions of passengers a year; a long haul one will carry a fraction of that, simply because of aircraft utilisation - this means that the short haul carriers have huge leverage with airports to cut passenger charges whereas longhaul carriers do not). Feed is absolutely essential - point to point operations don't work unless there's a very strong O&D market (eg London-New York).
Short haul carriers operate in a completely different environment to long haul ones; and none of the methods employed by the long haul low fare operators are employed by the short haul ones. Instead, they use:
1) High utilisation: Ryanair, Easyjet and Southwest Airlines can average up to 12 hours utilisation (ie actual time in the air) with each of their 737s. The average shorthaul airline can only manage 6-8 hours. This means that the fixed (overhead) costs are spread over a much higher number of hours.
2) Aircraft size is optimal - almost all of the low fare operators use B737s. Those that have failed here in the UK have used aircraft with high costs, such as the BAC1-11 and BAe146.
3) No interline/feed - this means that there are no delays due to passengers being late. It also means that the revenue is not diluted by interline sales, where other carriers flying passengers further end up with a larger share.
4) Keeping costs to an absolute minimum - this means no expensive TV ads; no expensive airport facilities; online booking; avoiding travel agents if at all possible; no catering (and if passengers want it, or on board shopping, then it's treated as an additional income centre); lower airport passenger charges, often achieved by using secondary airports;
So sure, you can fly from the UK to the States and back for £150 - or less. But the cost of flying your seat there and back will be a lot higher, if the overall costs are divided equally by the number of seats on board. You're just being subsidised by the premium passengers who are paying disproportionately for their space.
Penguinflies - actually, Virgin Atlantic's original transatlantic blueplan was, as British Atlantic, to operate DC10-30s from LGW-JFK with 150 business class seats. It's original original business plan was to operate said DC10s (ex Laker, by the way - along with much of the original start-up team) between London and the Falklands (this being just after the Falklands War in 1982).
Toady From United Kingdom, joined Feb 2001, 724 posts, RR: 0 Reply 9, posted (12 years 4 months 2 weeks 4 days 13 hours ago) and read 2291 times:
Thanks for that posting; it's informative & intelligent - without a hint of the usual petty-minded bickering so often seen here!
Can I extend the topic slightly by asking by how much does freight subsidise passenger fares?
Also, what about vacant seats? The BA flight I mentioned was (I'd estimate) 60% full; is the 40% of lost revenue (albeit at Coach Class prices) simply written off by the airline?
Ceilidh From , joined Dec 1969, posts, RR: Reply 10, posted (12 years 4 months 2 weeks 4 days 4 hours ago) and read 2264 times:
Toady - Freight generally doesn't subsidise passenger fares; rather it's treated as incremental revenue or the 'cream on top'. After all, apart from the cost of fuel, it costs the airlines nothing to carry it. Freight yields - especially transatlantic - are extremely low at the moment with my GSA saying that we can only expect to get an average of three pallets per flight at around 90c/kg LAX-PIK at the moment; FLL one to two pallets at 60c/kg; BWI/YHM/EWR one to two pallets at 50c per kg. This gives an average of US$3,000 per flight in additional revenue - about the same as a single round trip business class ticket.
Multiply that by six flights a day, though, and that's pretty serious money.
As a rule of thumb, if the premium cabins on a long haul flight are 75% full of revenue pax (and we all know that's rarely the case - especially in the States) then the flight is profitable without having to carry a single economy passenger on a discounted ticket.
Incidentally, something I forgot to mention in my analysis of low fare operators is this - most people would be amazed at the amount of 'free money' or 'unearned revenue' they make. Full service airlines will general;y sell you a ticket that is refundable and changeable - and cover their bets by overbooking. The low fare carriers sell you a seat; once you've paid for it, it's yours. You can't change it and you can't get your money back - and they don't overbook because they have the money in the bank - where interest earnings are substantial.
Pax are generally booking direct with the low fare operators either online or via call centres and credit cards are being instantly debited; rather than the traditional airlines which have to wait up to 45 days to be paid via BSP/ARC for bookings made by travel agents and very much longer than that if the ticket has been issued on the paper of another carrier.
Ceilidh From , joined Dec 1969, posts, RR: Reply 12, posted (12 years 4 months 2 weeks 4 days 1 hour ago) and read 2246 times:
Yes he did - Laker Airways, Inc - backed by the owner of Coastal Energy. It was short-lived for a couple of reasons - 1) they took poorly maintained aircraft (DC10-30s) straight out of the desert without investing the cost of a D Check in them with the result that mechanical failures were the order of the day - even for the inaugural flight, which was most embarassing! - and 2) the decided to operate to both MIA and FLL, which split the traffic. FLL had been very successful (and profitable) but when MIA was introduced, both cities made large losses.
His LB Air (Laker Bahamas) is doing very well; and they recently inaugurated FLL-Bahamas services.