grimey
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Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 4:33 am

What is the amount of passengers that has to be on an aircraft till the airline makes a profit? I would take it that an airline would never have it's breakven point at 100% capacity because not every single flight gets full up, I would be thinking it would be 75% upwards.

Just asking cos I'm a bit bored.

Thanks
Grimey
 
EMBQA
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 4:44 am

Quoting Grimey (Thread starter):
What is the amount of passengers that has to be on an aircraft till the airline makes a profit? I

Every aircraft and airline is different.
"It's not the size of the dog in the fight, but the size of the fight in the dog"
 
Shamrock_747
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 4:44 am

Completely depends on the yields.

For example on a hypothetical BA route, having a 100% load of restricted tkts such as N/V/D/I/A and mileage redemptions may not make any money whilst 50% load with every pax holding a full fare Y/W/J/F class tkt may well be profitable.
 
b6sea
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 4:47 am

Quoting Grimey (Thread starter):
I would take it that an airline would never have it's breakven point at 100% capacity

Tell that to FlyI, but it depends on the airline, some, like flyI are above 100% hence talk of them going under some are quite low. What are SW's and B6's???
 
whitehatter
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 5:58 am

It depends on the route flown, airport charges and so many variables you can't put a figure on it. Fares are just one part.

FR have frequently said that they could potentially fly a route with passengers at zero fare charged and pay for it with incidentals if the business model could be done right. Stuff like inflight sales and hotels/insurance. Other airlines can fly a route with every single seat full and lose money on it if they can't get the yield right.

Some of the lowcosts frequently mention a 70% figure but that's a figure averaged across flights with many variables factored in. Other carriers could possibly turn a buck on a longhaul with all the premium seats full and nobody at all in economy.

See what I mean?
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Avianca
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 6:04 am

Quoting Grimey (Thread starter):
I would be thinking it would be 75% upwards.

I would say the average is lower, as the most airlines including the airlines that are making money in the moment have normally lower load-factors...

regards
Avianca
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Venezuela747
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 6:52 am

Do airlines measure their profit peraircraft or as a whole? It does not make sense....I mean maybe a UA domestic flight on a B757 was really empty and was a loss but they make up for it with a full daily B744 to Asia....does that make sense to anyone?
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HAWK21M
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 4:48 pm

Depending on the type of carrier.An LCC would need a higher Break even point.
other carriers should be 75-80%.
regds
MEL
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snaiks
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 5:03 pm

you also have to take in consideration freight, many airlines can fly completeley empty, and would still make money because they are flying freight to other places, ie. mail, overnight deliveries, etc
 
sidishus
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 5:21 pm

Quoting Grimey (Thread starter):
What is the amount of passengers that has to be on an aircraft till the airline makes a profit? I would take it that an airline would never have it's breakven point at 100% capacity because not every single flight gets full up, I would be thinking it would be 75% upwards.

You are venturing into the complex and murky world of Revenue Management. Master this Black Art (some call it a discipline), and you could make a fair bit of money...Good luck on your journey.

http://www.ima.umn.edu/talks/workshops/12-3-5.2000/van-ryzin/rm.pdf

[Edited 2005-09-12 10:30:57]
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777ER
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 5:40 pm

Break even for each airline doesn't always mean passengers, it also means cargo, a perfect example is EK on the Trans-Tasman (New Zealand - Australia). EKs profits from the Trans-Tasman came mostly from its cargo operation
 
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NZ1
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 6:44 pm

Quoting 777ER (Reply 10):
Break even for each airline doesn't always mean passengers, it also means cargo, a perfect example is EK on the Trans-Tasman (New Zealand - Australia). EKs profits from the Trans-Tasman came mostly from its cargo operation

Thats right. EK still make a profit flying SYD-AKL with only 30pax on board, due to the freight being carried.

NZ1
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sidishus
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 6:47 pm

Quoting Sidishus (Reply 9):
You are venturing into the complex and murky world of Revenue Management. Master this Black Art (some call it a discipline), and you could make a fair bit of money...Good luck on your journey.

http://www.ima.umn.edu/talks/worksho...m.pdf

and if you enjoyed that link...you may want to peruse this bit of light reading....Enjoy  Wink

http://www.optimization-online.org/DB_FILE/2004/12/1025.pdf
the truth: first it is ridiculed second it is violently opposed finally it is accepted as self-evident
 
luvflng
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RE: Whats The Break-even Point For Pax Numbers?

Mon Sep 12, 2005 9:34 pm

Well, the above answers are correct but neither provides the exact formula.

In case you want to find out what the Break Even Load Factor (BELF) is you need this information:
A) Total Operating Expenses
B) Total Operating Expenses
C) ASM - Available Seat Miles (For Europe ASK )
D) RPM - Revenue Passenger Miles (For Europe RPK )
Make sure that you stay either in miles or kilometers

E) CASM = B/C
F) YIELD = A/C
G) BELF = CASM/YIELD = E/F (This will give you the percentage)

Now, you can do that per aircraft fleet, for example find out BELF for the fleet of A 330, however, you would need the A) B) C) and D) information just for that fleet and unless you have access to some specific databases such as O&D or Form 41 for US Airlines (don't think something like that is available in Europe yet) then you can compute the BELF. Airlines for sure do these types of computations as they have the data readily available.

You can plot multiple airlines with the BELF and their current Load factor and see if they are making money. At least in the US for the past 3 years, BELF is higher then their LF (duh) spelling losses for them.

Hope this helps,

luvflng
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