bobcat
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Do BA And AF Actually Make A Profit On Concordes?

Fri Sep 20, 2002 11:44 am

Do BA and AF actually make a profit on Concordes ?
...or is it more like a status symbol? (for example, car companies usually want to have at least one sports car in their line-up to attract buyers, but they make most money on the bread & butter middle of the line cars)  Smile

 
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RE: Do BA And AF Actually Make A Profit On Concordes?

Fri Sep 20, 2002 12:32 pm

Despite Concorde is a flagship route, it never made any profit for AF and BA.
 
Rai
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RE: Do BA And AF Actually Make A Profit On Concordes?

Fri Sep 20, 2002 12:44 pm

Someone mentioned that in order to break even on the Concorde, they have to have 35 seats filled. On the BA (not sure about AF) flight, they regularily fill 70 seats per flights. So, yeah, it's very profitable. You'd surprised how much money stupid rich folk would be willing to pay for "convinience".
 
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LN-MOW
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RE: Do BA And AF Actually Make A Profit On Concordes?

Fri Sep 20, 2002 1:43 pm

The Concorde flights are indeed most profitable. Now. But only because all capital costs have been written off ... Until this happened they were big money losers ..
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donder10
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RE: Do BA And AF Actually Make A Profit On Concordes?

Fri Sep 20, 2002 3:20 pm

Despite Concorde is a flagship route, it never made any profit for AF and BA.
Where did you get that from ?Oh,I forgot-BA is a commie airline that only flies routes for prestige.
 
Trident
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RE: Do BA And AF Actually Make A Profit On Concordes?

Fri Sep 20, 2002 7:00 pm

As far as I'm aware, BA have made operational profits for most of the years in which they've been operating Concordes, especially since privatisation in 1987. However, BA (nor Air France) had to pay to BAC/Aerosptiale what should have been the correct capital cost of each aircraft purchased. With a production run of only 15 machines, this would have been probitive. Instead, BA paid a sum closer to what a Concorde should have cost if the production had been in the hundreds. The British and French governments (ie. the taxpayers) picked up the difference. This allowed the annual depreciation costs charged by BA to their profit and loss account to be much lower than would otherwise have been the case thus showing the operation of the aircraft as being more profitable on a year on year basis.
 
artsyman
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RE: Do BA And AF Actually Make A Profit On Concordes?

Fri Sep 20, 2002 7:21 pm

Bigo747 wrote..Despite Concorde is a flagship route, it never made any profit for AF and BA

What a load of....#%%, Concorde is a cash cow for BA and I am assuming that it is for AF too. There are no cheap seats, everyone is paying high fares and it goes out 3/4 full, it brings in like half a million dollars on each trip, and despite being expensive to operate, it isn't THAT expensive to operate

Jeremy
 
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RE: Do BA And AF Actually Make A Profit On Concordes?

Fri Sep 20, 2002 7:29 pm

It wasnt a cash cow for the british goverment who bore a lot of the cost, seeing that concorde appears to make a profit for BA then it must do for air france as well, especially since AF as whetheredthe global downturn better than BA.
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Businessflyer
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RE: Do BA And AF Actually Make A Profit On Concordes?

Fri Sep 20, 2002 8:59 pm

Historically it is believed that both BA and AF have made operating profits from their concordes. The issues raised above about depreciation of development costs are complete red-herrings since the majority of the cost of development was incurred by the respective governments. If my sources are correct (and they might not be of course!), the total development costs reach US$2.63bn in 1975 but the airlines were sold to BOAC and Air France at US$42m each (1971 pricing set by the governments). Consequently, the huge chunk of costs were carried by the respective states. It would of course be interesting to know what US$42m in 1971/2 is worth today - if anyone can do the calculations that would be interesting.

Anyway with respect to operating profits, I found the following on the web:

"... Huge servicing costs meant the plane contributed only 10 to 20 million French francs ($1.4m to $2.8m, £1m to £2m)) to Air France's overall profit of 2.3 billion francs ($318m, £230m) last year ..." BBC, 2000

"... BA mentions a profit of around US$25 million a year thanks to Concorde, Air France less than US$3 million ..." Guardian, 2001

I think if they were not generating profit they would simply be pulled. Not even AF flies planes for prestige!
 
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VapourTrails
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RE: Do BA And AF Actually Make A Profit On Concordes?

Fri Sep 20, 2002 10:19 pm

Well of course they do, after all BA and AF are in business to make a profit, and Concorde flights are a part of that. I doubt IMHO that they'd still be operating them otherwise.

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artsyman
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RE: Do BA And AF Actually Make A Profit On Concordes?

Fri Sep 20, 2002 10:22 pm

Huge servicing costs meant the plane contributed only 10 to 20 million French francs

Is this maybe based on last year ?, if so it would reflect all the extra modifications that had to be done since the Paris crash, and also the lower yields post 9.11

Jeremy
 
gordonroxburgh
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RE: Do BA And AF Actually Make A Profit On Concord

Sat Sep 21, 2002 12:25 am

Both airlines make a profit on concorde services, for BA read considerable, for AF read nice little earner.

....but more importantly they are a very powerful (free) marketing tool.

On a regular basis BA upgrade Biz and First class passengers on 747 and 777 flight to and from NY on to Concorde to encourage brand loyalty. These passengers may even pay full Concorde fare in the future. The current offer of a free upgrade on 1 leg or a NY return for Biz passengers that BA are offereing gives people the incentive to go an book a BA flight to NY rather than or Virgin or United etc.. Again they may decide to keep booking BA or even fly Concorde again at Full Price. Giving a free upgrade does not cost BA any money as they seat would be empty anyway, it just means thay don't make as much money.

The costs of the Concorde development programme in toady's money is roughly as follows.

Initial 9 aircraft bought by airlines for around £23 Million in 1977 ($46Million US dollars). This would equate to around £200 million ($350Million) at today's prices.
The 5 unsold aircraft were sold to the airlines for 1 French franc each in 1979, although they did take on the full Concorde program running costs, which were around £50Million in 1984.



 
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RE: Do BA And AF Actually Make A Profit On Concordes?

Sat Sep 21, 2002 1:31 am

Artsyman:

Stop trying to give out wrong information when you're correcting someones.

I read various articles saying that BA/AF don't make any profits on Concorde flight. The reason why they still operates Concorde is because it's a "flagship, prestige" route. BA/AF still operates them is also because Concorde represents European technology.
 
artsyman
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RE: Do BA And AF Actually Make A Profit On Concordes?

Sat Sep 21, 2002 1:35 am

Bigo747, my closest friend in the world works in accounts at British airways, and what is his job ?, overseeing the accounting on all Longhaul operations at British Airways. We have the conversation numerous times about Concorde and its prestige and economics. I can assure you, Concorde is a cash cow.

Jeremy
 
artsyman
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RE: Do BA And AF Actually Make A Profit On Concordes?

Sat Sep 21, 2002 1:51 am

Rather than take my opinion, or that of the British Airways accounts department, why not apply a little logic.

Current fare on Concorde from LHR>JFK>LHR is averaging out at 7,000ukp (approx $10,500). Some are paying more, some are paying less, and some are using miles, but it averages out

Take 70 people (3/4 full) which is the current load factor for Concorde paying 10,500 each = $735,000

If you are suggesting that the operating costs of Concorde exceed $735,00 per trip, then you need to add up the figures again

Jeremy
 
Banco
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RE: Do BA And AF Actually Make A Profit On Concordes?

Sat Sep 21, 2002 4:30 am

In BA's last full year accounts prior to the Concorde crash in Paris, Concorde was listed as having made a profit of £50,000,000. Now, there are some health warnings with that: the way BA revenue accounts its flights, by straight rate pro-rate, many short haul connecting flights will be disproportionately penalised to Concorde's (and indeed all long haul) advantage. Equally, the cost allocation within BA is, to say the least, somewhat haphazard, and tends to also slaughter shorthaul to the benefit of long haul - particularly high yielding longhaul. Nevertheless, the likelihood is that for BA at least, Concorde is highly profitable. Even prior to the crash, £50 million profit over a relatively small number of flights is very high indeed.
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RE: Do BA And AF Actually Make A Profit On Concordes?

Sat Sep 21, 2002 6:31 am

Bigo747, my closest friend in the world works in accounts at British airways, and what is his job ?, overseeing the accounting on all Longhaul operations at British Airways. We have the conversation numerous times about Concorde and its prestige and economics. I can assure you, Concorde is a cash cow.

Don't forget that sometimes everything he told you may not be true.

He can tell you "oh, this route is doing fine, it's profitable" when the route is actually making a loss.
 
artsyman
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RE: Do BA And AF Actually Make A Profit On Concordes?

Sat Sep 21, 2002 7:01 am

Bigo747, you seem to have another agenda here, you have ignored the BA financial statements supplied, you have ignored fact from the accounting dept, you have ignored logic, and now have suggested that my best friend is trying to mislead me. If I were 15, perhaps I could understand, but I am in my mid 30's.


 
Arsenal@LHR
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RE: Do BA And AF Actually Make A Profit On Concordes?

Sat Sep 21, 2002 8:57 am

Bigo747

Concorde is a significant money-maker for BA, Rai is correct in saying that Concorde needs only 35 seats filled per flight to make a profit, and Concorde is regularly filled with much more than 35 seats.

Believe me, BA do not operate Concorde due to prestige. In the current climate, BA will not be operating any route, however prestigious or not, if it's not making money, maybe in the past they might have done, but not now.

Arsenal@LHR
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gkirk
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RE: Do BA And AF Actually Make A Profit On Concordes?

Sat Sep 21, 2002 9:19 am

Concorde makes loads for BA....Enuff said...
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GDB
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RE: Do BA And AF Actually Make A Profit On Concordes?

Sat Sep 21, 2002 10:55 am

Bigo747, I've worked in the BA Concorde operation for five and a half years, so I've seen both the recent best and worst of times.

However, for the first 5 years of it's operation, Concorde was, despite all the hype, a dirty word at BA.
The then management team, who's sole purpose in life was to extract higher government subsidies while maintaining a hugely bloated organisation, never really wanted the aircraft, they demanded, and got, a subsidy for operating Concorde.

But the recession of the early 80's brought in a new team, they looked at everything, massive cuts occurred. At the same time the government said they would end the operating subsidy, many predicted Concorde's demise.
BA decided to create a Concorde Division, marketing, engineering, flt ops, all were overhauled.
At the same time, the subsidy ended, BA effectively paid it back by buying the first UK production aircraft for spares, the support costs from the manufacturers, plus much of the UK spares holding.

With only profitable scheduled routes in future, extra capacity meant a greatly increased charter programme, profitable, high-profile and great marketing.
Also, the first major cabin upgrade was undertaken.

Concorde soon became BA's highly profitable flagship, spearheading privatisation, ironically exposure to the private sector was the making of Concorde, assuring it's long-term future.

Make no mistake, operating Concorde is highly expensive, and not easy. Today it's far more intergrated with the BA operation, the Concorde Division having served it's purpose.
With very few aircraft, only two operators, costly manufacturer support, it's eats (by comparison to modern subsonics) engineering manhours.

Guess what? We don't do it for the fun of it, our costs are highly scrutinised, we know what an extremely high-profile operation it is.

Today the airline is operating in very difficult conditions, yes Concorde's relaunch last year was a great morale-booster, but the relaunch was a hard-nosed business decision.

As for the mods, the new cabin cost £14 million, but was budgeted several years ago, the return to flight mods cost £17 million, of which about £14 million has been spent.
BA's last full year of Concorde operation made some £20 million, after all the costs were taken out, that figure is a straight profit.

The 'invisibles', like yes prestige, marketing etc, are hard to quantify, but BA see that aspect as being a useful bonus.
Today, with a reduced service, we won't be making that this year, but we expect the full modification costs to have been paid off in about a year from now, that's if the operation does not get up to full scheduled capacity, sooner if it does.

35 full-fare pax make a profit, today's BA001/BA002's were typical of loads now, the BA001 had 88 pax, 58 were full-fare, the other 30 were mostly 'Hotlines' (between £950-£1650), the rest of the non full-fare being other (public) offers, some upgrades with probably the odd staff ID90.
The BA002 had 83 pax, of which 65 were full-fare.
It's not uncommon for Sunday's BA002 to come back full-with 80% of pax being full fare.
The only recent not so busy flight was the BA002 I was on last Monday, 41 pax-of which 36 were full fare, so still worth doing.

So Bigo747, I've got the numbers and the experience to say you are incorrect.


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