rjpieces
Posts: 6849
Joined: Mon Nov 24, 2003 8:58 am

LoCo Economics

Sat Jul 03, 2004 12:03 pm

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.
"Millions long for immortality who do not know what to do with themselves on a rainy Sunday afternoon"
 
JAL777
Posts: 2453
Joined: Wed Jun 04, 2003 10:13 pm

RE: LoCo Economics

Sat Jul 03, 2004 12:08 pm

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.
 
srbmod
Posts: 15446
Joined: Tue Mar 20, 2001 1:32 pm

RE: LoCo Economics

Sun Jul 04, 2004 1:29 am

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.
 
rjpieces
Posts: 6849
Joined: Mon Nov 24, 2003 8:58 am

RE: LoCo Economics

Sun Jul 04, 2004 1:48 am

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?
"Millions long for immortality who do not know what to do with themselves on a rainy Sunday afternoon"
 
planemaker
Posts: 5411
Joined: Mon Aug 25, 2003 12:53 pm

RE: LoCo Economics

Sun Jul 04, 2004 2:06 am

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
 
rjpieces
Posts: 6849
Joined: Mon Nov 24, 2003 8:58 am

RE: LoCo Economics

Sun Jul 04, 2004 2:10 pm

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?
"Millions long for immortality who do not know what to do with themselves on a rainy Sunday afternoon"
 
planemaker
Posts: 5411
Joined: Mon Aug 25, 2003 12:53 pm

RE: LoCo Economics

Sun Jul 04, 2004 2:40 pm

Yes, as witnessed by their financial track record.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
delta-flyer
Posts: 2631
Joined: Mon Jul 30, 2001 9:47 am

RE: LoCo Economics

Mon Jul 05, 2004 2:08 am

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
"In God we trust, everyone else bring data"
 
mandala499
Posts: 6459
Joined: Wed Aug 29, 2001 8:47 pm

RE: LoCo Economics

Tue Jul 06, 2004 2:50 am

"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 !