lincoln
Posts: 3133
Joined: Mon Nov 01, 2004 11:22 pm

True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 6:57 am

Hi All,

I was lucky enough to be upgraded to 1st on CO1450 LAX-CLE this morning (Had volunteered to take a later flight and turned out they didn't need it after all).

Even though I was "stuck" in an Asile, the flight was awesome, the service was awesome, and I saw some of the niceset/youngest/most helpful and attentive cabin crew I've encountered on a mainline flight.

While enjoying the premium service (CO narrowbody F class is as good if not better today than NW widebody F class was 6 years ago) I found myself wondering:

What does it cost CO to provide the additional services over Y? Or, to put it another way, at fare X how much less profit do they make on a pax providing "1st class service" vs. "Coach class service"

Thanks,

Lincoln
[Though I was really looking forward to seeing what the leg room in 14F on the 73G was like... Maybe I can get that on CO425 on 02SEP...  Smile]
CO Is My Airline of Choice || Baggage Claim is an airline's last chance to disappoint a customer || Next flts in profile
 
ARGinLON
Posts: 550
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RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 7:10 am

Well the issue here is that a pax will not pay the extra dollars to get that service. As simple as that.

The US domestic market is so competitive that even a couple of dollars difference on the fare will drive pax from one carrier to the other.

While all aviation nuts (including myself) will happily pay the difference, 99% of the market won't.

Although CO tries to differentiate the service in Y as much as possible, it's very difficult due to the reasons listed above.
 
COfaninBOS
Posts: 284
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RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 7:29 am

ARGinLON-

I simply do not agree with you and I am glad that CO doesn't agree with you either. CO was smart. While every other legacy was busy dropping magazines, pretzels, olives out of salads, pillows, meals altogether, and basically any hint of service, CO realized that they should emphasize that they still provide those amenities.

It has worked. I fly between BOS and IAH at least 3 times per month, and mostly at the last minute. I always choose to just pay for the full fare to guarantee a seat upfront and I know I am not alone. By mixing quality service with the right amount of capacity, CO has a winning ingredient. Think of it this way, even if just half of the folks in first have paid full fare on that route, CO is bringing in approximately $10,400 based on the fares I have seen. It would take approximately FORTY TWO people to make that same amount in the back paying the cheapest fares I have seen.

Personally, I think CO is rather smart to be fighting for the business of those 6-8 that pay for first, than to fight for the 42 in the back who will exhibit no loyalty and fly with whomever can get them there the cheapest.
 
Tornado82
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RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 7:36 am

Quoting ARGinLON (Reply 1):

The US domestic market is so competitive that even a couple of dollars difference on the fare will drive pax from one carrier to the other.

Hence the problem with things like Expedia. An example that glares in my mind was a few weeks back when I searched ABE-OKC. CO was $495, a US/AA combo was $493, and UA was $491. Well, considering that US/AA had about 10 different possible routings for that $493, and UA had quite a few for that $491, if I hadn't been specifically looking for CO I would have never found them, because all 20ish options that were a mere $4 cheaper show up before ANY of CO's. Mr. and Mrs. Joe and Jane Traveler are just going to see those cheap few up top because Expedia has engrained into their brains that using the scroll bar to go down will cost them more money (though a mere $4 in this case) and CO will never get looked at. $4 for CO's better service which included a ham and cheese sandwich, side snack of carrot sticks, and a chocolate dessert VS everyone else's pop/pretzels is a no brainer. $4 to avoid PHL/ORD... I regularly pay $40 to avoid those places! (this CO routing was via CLE, not EWR.) Airlines like CO need to buck Expedia a bit so that Expedia's default settings will only show the cheapest fare from each airline first, or something that is more fare to the airline that might be a mere $4 more.
 
acidradio
Crew
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RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 7:49 am

Quoting Tornado82 (Reply 3):
$4 to avoid PHL/ORD...

But you know what you are shopping for, take these routes on a regular basis and know what a nightmare some of those hubs can be! I watched my sister once buy a ticket on US once MSP-CLT-MSY, which has to be as out of the way as I can imagine! Sadly, I'm sure a non-stop direct or "more direct" flight would not have been much more, but it all looks the same to Joe Six-Pack. And does Joe Six-Pack's fare pay much of the fuel bill or aircraft lease payment? Not really...

Quoting COfaninBOS (Reply 2):

Personally, I think CO is rather smart to be fighting for the business of those 6-8 that pay for first, than to fight for the 42 in the back who will exhibit no loyalty and fly with whomever can get them there the cheapest.

Amen!

After all, I don't want to be known as the "cheapest" way to get something done, I want to be the 'best" way to get something done!
Ich haben zwei Platzspielen und ein Microphone
 
ARGinLON
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RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 7:53 am

Let's clarify this.

Y: I don't think provinding pretzels, a hot sandwich (over 4 hrs) or a glass of coke drive customers from one carrier to the other. I assure you if a fare between A and B is not competitive (I am talking about $10 diff.) you just don't get the passengers regardless of the "extras".

F: I am with you here. CO's upfront service is superb from the beginning to the end. That makes CO (probably) the best legacy carrier in mainland US.

All in all, in this very competitive market were all airlines price their seats regardless of what they offer, the extra $ spent by CO (ground service, operations, customer service, etc) makes the whole difference
 
SRT75
Posts: 204
Joined: Wed Jul 27, 2005 2:42 am

RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 7:55 am

Don't know if this is a new thread or not, but isn't the true question: How much does it actually cost to operate the flight?

Hate to switch airlines, but take WN as an example. Average fully refundable fares between LAX and the bay area are between $100 and $125 one way (WN is a nice example because their one way prices are tied to round-trip prices and readily available.) A full 135-seat 737 full of full-fare revenue pax would gross between $13,500 and $16,875.

You have 3 flight attendants, 2 pilots, free sodas, peanuts, fuel, airplane lease/payments, gate rentals, landing fees, ground crew, and corporate overhead. Seems almost impossible that WN would make any money on these routes -- especially with low load factors.

Swithcing back to CO and fare structures in general -- I think most would agree that "legacy" carrier fare structures make no sense.

I personally would happily pay more for an economy ticket if the carrier provided service -- hot meals, IFE, an inch or two more legroom (cheers to AA and UA Econ plus). I guess the carriers think I am in the minority, as it appears to be a race to the bottom as far as service and extras.
 
ARGinLON
Posts: 550
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RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 8:01 am

Quoting Tornado82 (Reply 3):
if I hadn't been specifically looking for CO I would have never found them, because all 20ish options that were a mere $4 cheaper show up before ANY of CO's

That's the way expedia (an the other guys work). Although you were looking for CO, 99 % of pax will not care unless they want the miles for a FFp (although with NW and DL this is not as strong as it used to be)

Quoting Tornado82 (Reply 3):
Airlines like CO need to buck Expedia a bit so that Expedia's default settings will only show the cheapest fare from each airline first, or something that is more fare to the airline that might be a mere $4 more

COs strategy is not to work with Expedia (and similar). They just want pax to book at co.com
 
Cubsrule
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RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 8:07 am

Quoting Acidradio (Reply 4):
watched my sister once buy a ticket on US once MSP-CLT-MSY, which has to be as out of the way as I can imagine! Sadly, I'm sure a non-stop direct or "more direct" flight would not have been much more,

If I had to make a connection (which your sister didn't), I'd pay MORE to make it in CLT instead of, say, ORD or ATL.
I can't decide whether I miss the tulip or the bowling shoe more
 
Tornado82
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Joined: Thu May 26, 2005 10:19 am

RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 8:11 am

Hey ummm SRT75. I realize you must be a member of the WN Praetorian Guard, but I think your thoughts and words must have missed part of this thread:

Quoting SRT75 (Reply 6):


Swithcing back to CO and fare structures in general -- I think most would agree that "legacy" carrier fare structures make no sense.

I personally would happily pay more for an economy ticket if the carrier provided service -- hot meals, IFE, an inch or two more legroom (cheers to AA and UA Econ plus). I guess the carriers think I am in the minority, as it appears to be a race to the bottom as far as service and extras.

Did you not see this part??

Quoting COfaninBOS (Reply 2):
I simply do not agree with you and I am glad that CO doesn't agree with you either. CO was smart. While every other legacy was busy dropping magazines, pretzels, olives out of salads, pillows, meals altogether, and basically any hint of service, CO realized that they should emphasize that they still provide those amenities.

CO gave me a sandwich, carrot sticks as a side, and a chocolate dessert... as well as several servings of soft drinks and peanuts on a CLE-IAH leg, on my way from ABE-OKC. What would WN give me on that routing??

Let me think... first off WN doesn't serve enough markets to come to ABE, nor my 2nd preferable choice of EWR, but we'll put that aside and assume PHL-OKC for their benefit. Secondly, WN from PHL (the same PHL which is notoriously significantly cheaper than ABE) was $100 more than CO from ABE, and $190 more than all others at PHL, AND the best they could get me was a 2 stopper (which was the only 2-stopper from PHL, the rest were single.) And this was after I, against my moral standards, went out of my way to their website to search their flights despite everyone else would spill it out for me on Expedia, etc. Thirdly... I do believe that the ONLY thing I would have gotten on that flight had it been on WN was peanuts and soft drinks, correct??

To take it one step further... 2 friends of mine tried to use WN from PIT to OKC for the same gathering. WN was (are you ready for this?) $205 more than the best competition, in this case AA/NW on tickets purchased a month in advance... and also a 2 stopper VS one stop for AA/NW. While one of the friends was able to book in advance, a last one ended up buying at the last minute and bought through WN for the high fares that anyone can expect buying within 48 hours of departure. Well guess what? Storms rolled in as we were all leaving. Flights into/out of OKC towards Texas were all ground stopped for numerous hours. Myself on CO... reaccomodated away from IAH via NW to DTW and made it home fine (to ABE... an airport with VERY limited flight options). Friend on AA... headed to PIT... likewise... sent to STL to connect to PIT. Friend on WN heard "Sorry sir we don't have interline agreements to do reaccomodations and we can't get a routing combination via other destinations will work for you to get back to PIT tonight. Good luck though!" And since his connections were totally blown to hell by the time flight ops resumed after the weather... he got to spend a night in the lovely MDW airport hotels... on his own dime. Thumbs up to WN!

Moral of the story: LCC's, and ESPECIALLY WN, are NOT the 2nd coming of God regardless of how much canyon-blue favored Kool-aid you all drink.
 
Tornado82
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Joined: Thu May 26, 2005 10:19 am

RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 8:22 am

Quoting ARGinLON (Reply 7):

That's the way expedia (an the other guys work). Although you were looking for CO, 99 % of pax will not care unless they want the miles for a FFp (although with NW and DL this is not as strong as it used to be)



Quoting ARGinLON (Reply 7):

COs strategy is not to work with Expedia (and similar). They just want pax to book at co.com

Yeah... but then CO won't be getting the business from the people who put a  butthead  in those remaining economy seats... and it's better having seats filled with cheapos than empty entirely from a revenue standpoint. I realize I was looking for CO and started out on their website... but when I realized my routing was going to cost $490 (on CO's website) I thought just maybe I could find a cheaper routing via someone else and ventured over to Expedia. Money was a little tight at the time.

Quoting Acidradio (Reply 4):
I watched my sister once buy a ticket on US once MSP-CLT-MSY, which has to be as out of the way as I can imagine!

Yeah... but flying US on that routing will do that to ya. For a better time on that routing try DL (connect in CVG) or your hometown Redtails. US is an east-coast airline no matter what they try to do with HP now, so you had to expect heading back east. Abandoning the PIT hub gave up any last hopes at US ever caring about the Midwest US. I can do ya a few better... some routings on US are now causing EAS station-PIT-PHL/CLT-Midwest (like MSP) routing. Talk about a zig-zag. And to think... PIT used to be a hub just a few moons ago.
 
Tornado82
Posts: 4662
Joined: Thu May 26, 2005 10:19 am

RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 8:24 am

Quoting Cubsrule (Reply 8):

If I had to make a connection (which your sister didn't), I'd pay MORE to make it in CLT instead of, say, ORD or ATL.

You couldn't speak truer words than those! I regularly spend upwards of $50 to avoid PHL and ORD connections.
 
User avatar
EA CO AS
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RE: True "Cost" Of A 1st Class Pax? (Re: CO)

Wed Jul 27, 2005 10:46 am

Quoting Lincoln (Thread starter):
What does it cost CO to provide the additional services over Y?

The main factors to consider are the cost for the differences in amenities as well as the real-estate you're occupying:

Amenities

  • increased cost of enhanced meal service


  • Simple. Obviously, F/C meals tend to be more expensive.


  • lost revenue in form of complimentary IFE (if applicable)


  • CO normally would expect to make some money on renting headsets, but they give 'em out free to F/C customers. This means they're absorbing the cost of refurbishing and repackaging them after use.


  • lost revenue in form of complimentary alcoholic beverages


  • Again, simple. CO normally sells alcoholic beverages to customers, but in F/C they're free.


  • increased cost basis for dedicated F/C cabin flight attendant(s)


  • This one's most easily explained this way - if you have two flight attendants in the main cabin serving 144 customers, but the one extra one up front serves just 12, then technically the one up front is less-productive...and therefore, higher cost to have. This factor increases on aircraft with larger F/C cabins that require more dedicated F/C crew.


    Real-estate

  • increased cost for F/C seat structure


  • The F/C seat you're sitting in likely more expensive on a per-seat basis to build than a coach seat, as it probably involves pricier seat coverings and integrated in-seat IFE. The airline has to pass this added cost along somehow.



  • lost revenue in form of fewer overall seats sold


  • Again, simple. The space occupied by two F/C seats could easily have been occupied by three coach seats. The airline has to make more money on the two remaining seats to offset the cost of losing that extra fare-paying body if they'd had a row of three seats instead.



    Of course all of these factors vary on a cost basis from one flight to the next and one aircraft to the next. Another thing worth mentioning is that this assumes the gulf in fares is the difference between full fare Y and full fare F. Both types of tickets are fully refundable and flexible - but another cost factor to consider (if the ticket is being changed - it's not just an upgrade) the difference is between a deeply-discounted, heavily restricted nonrefundable fare now going up to a fully-refundable, non-restricted fare.

    Airlines charge more for those less-restricted fares because the cost of changes and/or risk of a refund is already built into the fare. On less-expensive fares, the price is lower because there is no risk of a refund or changes without fees being collected.
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