masseybrown
Posts: 4442
Joined: Wed Dec 11, 2002 2:40 pm

Limit To Load Factor Increases?

Thu Jul 06, 2006 2:03 pm

Obviously, they can't go higher than 100%; but what is the practical limit? With airlines reporting LFs in excess 80% on a sustained basis, how much higher can they go without adding capacity? I have to think that mid-80%s is very close to the limit.
 
jetdeltamsy
Posts: 2688
Joined: Tue Nov 14, 2000 11:51 am

RE: Limit To Load Factor Increases?

Thu Jul 06, 2006 2:17 pm

In a perfect world, every airline has always dreamed of 100% loads on all flights. Unfortunately this leave no room for any kind of weather, mechanical or any of hundreds of causes for delays or cancellations. With no capacity for service recovery, we are making A LOT of enemies on a daily basis.

We are aready at that point. If a flight cancels for any reason, it occasionally takes 2 days to get everyone on to their destination.

The number crunchers have determined this is the preferred way to operate and hope for the best.

We have to earn a profit. We need to fill as many seats as possible. But we must have some capacity for service recovery.

It's a nightmare up there.
Tired of airline bankruptcies....EA/PA/TW and finally DL.
 
worldtraveler
Posts: 3417
Joined: Tue Aug 05, 2003 6:18 am

RE: Limit To Load Factor Increases?

Thu Jul 06, 2006 9:48 pm

Good question.

Boeing developed The Boeing Spill Model a number of years ago to show how passengers are turned away as the load factor rises. Many airlines use the model in network forecasting and pricing and manufacturers use it to help an airline justify when it is necessary to add capacity.

Basically, the model says that as load factors rise above about 80%, more and more passengers are turned away until at some point an airline begins losing passengers that are genuinely valued.

Modern revenue management systems do a very good job of considering historical demand and holding out the last few seats on a plane for the highest revenue passengers, even on a connecting basis which is why airlines are able to push system load factors even for a network airline for a month to levels of close to 90%. In reality, the upper limit from a network standpoint is being pushed higher and higher.

There are operational limits as has been noted. An airline’s ability to maintain very high load factors is attributable to its ability to recover from operational difficulties when they arise. In reality, if an airline runs a very reliable operation during non-irregular periods, its system can sustain a certain amount of irregularity. Some customers will always be inconvenienced but there are a lot more options during irregular operations if the non-irregular operation is run reliably.
 
flightopsguy
Posts: 299
Joined: Tue Jan 04, 2005 9:51 am

RE: Limit To Load Factor Increases?

Thu Jul 06, 2006 10:34 pm

LF nearing 90% simply means that most flights are going out full. As stated here, it makes reaccomodation difficult as most flights to popular destinations are full. It doesn't seem to matter what the fares do....people are booking any available seat. Quite amazing for us oldsters who still remember LF's in the 60% range which meant big profits. There are much better irrop recovery tools these days that make recovery the next day much better than even a few years ago.
A300-330 BAC111/146/J31/41 B99/1900 CV580 B707-777 DC8/9/10 L188/1011 FH227/28/100 SB340 DO228 EMB2/170 CR2-900 SH330-60
 
masseybrown
Posts: 4442
Joined: Wed Dec 11, 2002 2:40 pm

RE: Limit To Load Factor Increases?

Fri Jul 07, 2006 12:47 am

Quoting Flightopsguy (Reply 3):
Quite amazing for us oldsters who still remember LF's in the 60% range which meant big profits.

Those 50% break-even points sure made flying in coach much more pleasant. A lot of the present pax dissatisfaction has to be attributable to crowding. Psychologists don't need to use lab rats in a maze for their studies; they can use commercial airliners.

Personally, says the social Darwinist, I think fares need to rise or capacity needs to grow (or both) to a point that drives load factors below 70%. WN's recent fare increase is a start.
 
Tango-Bravo
Posts: 2887
Joined: Sun Jun 17, 2001 1:04 am

RE: Limit To Load Factor Increases?

Fri Jul 07, 2006 1:35 am

Quoting Flightopsguy (Reply 3):
It doesn't seem to matter what the fares do....people are booking any available seat.

The market is simply proving the point that the U.S. legacies' whining and sniveling about having "no pricing power" is just that. The line has been/is nothing more than a lame excuse for their lack of pricing discipline and obsession with market share and load factors above profitable pricing -- which the market would have borne all along. Fact is, customers would have paid fares at today's levels (or even higher) if the legacies had "held the line" (ie, practiced discipline) in their pricing; why should/would customers pay more than the giveaway fares the legacies' duped themselves into throwing at their customers soley in the interest of packing their planes and buying market share? And please don't try to explain away this reality with the overcapacity myth.

[Edited 2006-07-06 18:37:04]
 
flightopsguy
Posts: 299
Joined: Tue Jan 04, 2005 9:51 am

RE: Limit To Load Factor Increases?

Fri Jul 07, 2006 1:48 am

Quoting Tango-Bravo (Reply 5):
Fact is, customers would have paid fares at today's levels (or even higher) if the legacies had "held the line" (ie, practiced discipline) in their pricing;

Amen. Maybe some over-capacity on the east coast when IDE was flying, but otherwise, that is a myth. Interesting that the leading lcc. JBU, upped fares a while back, and stated frankly that they were willing to sacrifice some load factor in the interest of profitability. Fares will continue to rise, and flights will continue to be packed, subject to time of the year influences, imo. Load factors, even in the slow months, seem to average in the 70's for most carriers.
A300-330 BAC111/146/J31/41 B99/1900 CV580 B707-777 DC8/9/10 L188/1011 FH227/28/100 SB340 DO228 EMB2/170 CR2-900 SH330-60
 
worldtraveler
Posts: 3417
Joined: Tue Aug 05, 2003 6:18 am

RE: Limit To Load Factor Increases?

Fri Jul 07, 2006 5:35 am

Remember that the US economy is very strong and we are in the summer. Airlines won’t be reporting these kind of load factors in a couple months and the winter could be very long if fuel prices don’t calm down. The fact that every airline is raising fares says the fear of high fuel concerns everyone; remember that even WN’s hedges are rolling off and they are based on a certain size of the airline – any growth essentially comes at market prices for fuel.

The network airlines all have badly damaged or stretched balance sheets and need about 4 summers in a row in order to begin to repair their financial damage.

And the airlines have acknowledged that they have regained some pricing power for the first time in a long time…. But fall sales will probably start dropping around four weeks, give or take a couple days.
 
baron95
Posts: 1106
Joined: Thu May 25, 2006 10:19 am

RE: Limit To Load Factor Increases?

Fri Jul 07, 2006 5:49 am

I actually don't know how LF is exactly defined.

Say a flight operated by a E190 with 100 all coach seats has 85 passengers with purchased non-refundable, non-changeable tickets. 5 don't show up for the flight and their tickets lose their value. An additional 10 passangers from a flight of the same airline that had mechanical problems get re-acomodated on this flight.

What is the load factor of the flight? 85% (tickets sold)? 80% (tickets sold that boaded)? 90% (number of passangers that actually boarded)? 95% (tickets sold plus reacomodated passangers)?

Obviously in the first definition you can even have LFs above 100%.

Can someone clarify exactly how LFs that are reported are calculated?

Thanks in advance.
Killer Fleet: E190, 737-900ER, 777-300ER
 
CptGermany
Posts: 85
Joined: Sat Feb 25, 2006 7:50 am

RE: Limit To Load Factor Increases?

Fri Jul 07, 2006 7:16 am

Quoting Baron95 (Reply 8):
Can someone clarify exactly how LFs that are reported are calculated?

I am not a specialist, but AFAIK the LF is the percentage of seats that were actually paid for on any given flight.

Furthermore, I want to add that these high load factors on U.S. carriers make non-reving in the U.S. a very unpleasant experience.  Sad
 
flightopsguy
Posts: 299
Joined: Tue Jan 04, 2005 9:51 am

RE: Limit To Load Factor Increases?

Fri Jul 07, 2006 8:25 am

Quoting WorldTraveler (Reply 7):
Remember that the US economy is very strong and we are in the summer. Airlines won’t be reporting these kind of load factors in a couple months and the winter could be very long if fuel prices don’t calm down

Even in the worst of the fall travel cycle, expect LF's to be in the 70-80% range. Look at what the major network and LCC carriers did last October and November prior to the holiday season. I'd be surprised to see any serious US carrier report less than 70%. For those of you looking to travel during the holidays, book now to avoid missing out on the lower price seat inventory. Northeast or Chicago to Florida will be at $350-400 rt this season once the cheap seats are gone.

Non-revving is certainly not pleasant these days. Even getting the cockpit jumpseat is difficult. Easier to buy a ticket or blow some miles if you really gotta get there.
A300-330 BAC111/146/J31/41 B99/1900 CV580 B707-777 DC8/9/10 L188/1011 FH227/28/100 SB340 DO228 EMB2/170 CR2-900 SH330-60
 
CptGermany
Posts: 85
Joined: Sat Feb 25, 2006 7:50 am

RE: Limit To Load Factor Increases?

Fri Jul 07, 2006 9:07 am

Quoting Flightopsguy (Reply 10):
Easier to buy a ticket or blow some miles if you really gotta get there.

The former is exactly what I have been doing recently. But still it's a pity...
 
worldtraveler
Posts: 3417
Joined: Tue Aug 05, 2003 6:18 am

RE: Limit To Load Factor Increases?

Fri Jul 07, 2006 11:14 am

actually, system load factors for US airlines typically fall into 60% in the fall and winter. It will be interesting to see what willl happen this year.

load factor is defined either as RPMS/ASMs or flown revenue seats / flown seats.

Whether a fare is non-refundable does not enter into the LF calculation. Booked but not flown revenue is carried as liabilities on an airline balance sheet and moved as revenue when an airline has established that unflown revenue is moved to the flown revenue category.
 
baron95
Posts: 1106
Joined: Thu May 25, 2006 10:19 am

RE: Limit To Load Factor Increases?

Fri Jul 07, 2006 11:22 am

Quoting WorldTraveler (Reply 12):
load factor is defined either as RPMS/ASMs or flown revenue seats / flown seats.

So in my example in repply number 8, what is the load factor? 80% or 90%? I'm still unsure.

Thanks in advance.
Killer Fleet: E190, 737-900ER, 777-300ER