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Faro
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Revenue Ratio Between Y And J+F On A Given Flight

Sat Dec 06, 2014 10:04 am

Out of curiousity what is the typical, average ratio between i) the gross revenues generated by Y class pax on a 100% full flight and ii) the gross revenues generated by J+F class pax on the same 100% full flight.

What are the extremes that such a ratio may reach and in what operational scenarios would these extreme ratios be realised?

In other words, in gross terms, just how significant is J+F revenue compared to Y?


Faro
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KFlyer
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sat Dec 06, 2014 10:31 am

It could vary highly dependent on the configuration used. But it is always a significant sum and higher than the seat share occupied by J+F pax.
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migair54
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sat Dec 06, 2014 3:06 pm

This is very interesting post, I hope some guys here can share good knowledge about this.

The prizing of different classes and fares are something quite difficult, I once asked to a guy that was flying with me, he works in Revenue management of our airline and he explained me a bit, and it was quite difficult to understand. So many different tarifs for the same seat also, all with letters like O, M, F.

Dates of travel makes the fares tto change also and the popularity (historical load factors) of the route also.
 
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LAXintl
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sat Dec 06, 2014 4:42 pm

On a global scale, per IATA premium class travel accounts to approx 5% of enplanements, and a bit over 22% of revenue.

On a specific carrier example - at recent investor update, Turkish Airlines stated business class clients were 4% of its enplanements, and 18% of revenue.
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airbazar
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sat Dec 06, 2014 4:46 pm

Quoting LAXintl (Reply 3):
On a global scale, per IATA premium class travel accounts to approx 5% of enplanements, and a bit over 22% of revenue.

In other words, without economy class there would be no airline industry, which goes completely against a common misconception. One only has to look at how many premium only airlines there are vs. how many Y only airlines.
 
RDUDDJI
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sat Dec 06, 2014 5:03 pm

Quoting airbazar (Reply 4):
In other words, without economy class there would be no airline industry, which goes completely against a common misconception. One only has to look at how many premium only airlines there are vs. how many Y only airlines.

Absolutely. Using LAXIntl's numbers, my table napkin math shows that a prem pax is generally worth about 5.35 economy pax.

To use an example, say a flight had 100 total seats. 5F/95Y. That same aircraft would presumably bring in the same revenue with 122Y seats.

I think that 5.35x may be true on int'l flights, but it's much lower on domestic (U.S.) flights. Something perhaps WN knows.  
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LAXintl
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sat Dec 06, 2014 5:19 pm

The percentage of premium demand, and revenue it generates varies greatly per region.

Below is from IATA as of Sept. 2014.



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frmrCapCadet
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sat Dec 06, 2014 9:47 pm

And the premium bonus is even smaller if you measure by square footage (or meters). I think an international business seat may be at least the size of 3 economy seats. US domestic much less.
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Faro
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 9:07 am

Quoting LAXintl (Reply 6):
The percentage of premium demand, and revenue it generates varies greatly per region.

Below is from IATA as of Sept. 2014.

Very interesting figures; doing a simple ratio of total premium revenue % divided by total traffic % gives the following regions as having the most lucrative premium markets:

1) EUROPE-AFRICA
2) EUROPE MIDDLE-EAST
3) MID-ATLANTIC (what comprises this region exactly?)
4) NORTH ATLANTIC
5) EUROPE-FAR EAST

Does this make sense? Why on earth is Europe-Africa/Middle East so lucrative?


Faro
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Faro
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 9:13 am

Quoting airbazar (Reply 4):
Quoting LAXintl (Reply 3):
On a global scale, per IATA premium class travel accounts to approx 5% of enplanements, and a bit over 22% of revenue.

In other words, without economy class there would be no airline industry, which goes completely against a common misconception. One only has to look at how many premium only airlines there are vs. how many Y only airlines.

  

Makes one wonder with all the hoopla, hyperbole and marketing dollars lavished on premium class travel whether, taken globally with all premium-specific overheads, the net profit is really worth the effort...I suspect not.

Like in so many luxury businesses, the perception of superlative prestige is often as important as the bottom line...


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waly777
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 9:17 am

Quoting Faro (Reply 8):

Limited competition and high demand on EU-Africa, LOSLHR is one of BA's most lucrative routes.
EU to Middle East....business traffic as there is a lot of ME investment in Europe.
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Faro
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 9:33 am

Quoting waly777 (Reply 10):
Quoting Faro (Reply 8):

Limited competition and high demand on EU-Africa, LOSLHR is one of BA's most lucrative routes.
EU to Middle East....business traffic as there is a lot of ME investment in Europe.

Something fundamentally awry here...why don't carriers add capacity...why don't new entrants join the market to exploit this super-profit?

Always seems wrong -for want of a better word- when the poor guy is made to pay the highest prices...


Faro
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waly777
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 9:39 am

Quoting Faro (Reply 9):

Take into consideration that this is global revenue....don't forget LCC's make up a large % of this figure. A majority of which don't have premium cabins. Excluding LCC's will give a much clearer picture.

To put it simply, without premium cabins, there will be no profit for long haul. Yes, Y generates a lot of revenue but @ 95% of the pax and 77% of the revenue, hopefully you can see why J (and F for 1 or 2 carriers) is important.

Y = 95%

Y Rev = 77% (including LCC's which make a profit on Y only)

I.e. in general, each Y pax brings in less revenue per pax, whilst Premium clearly operates on a huge profit.
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Faro
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 9:59 am

Quoting waly777 (Reply 12):
Take into consideration that this is global revenue....don't forget LCC's make up a large % of this figure. A majority of which don't have premium cabins. Excluding LCC's will give a much clearer picture.

Yes, makes sense, thanx


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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 10:18 am

Quoting waly777 (Reply 12):
ake into consideration that this is global revenue....don't forget LCC's make up a large % of this figure. A majority of which don't have premium cabins. Excluding LCC's will give a much clearer picture.

To put it simply, without premium cabins, there will be no profit for long haul. Yes, Y generates a lot of revenue but @ 95% of the pax and 77% of the revenue, hopefully you can see why J (and F for 1 or 2 carriers) is important.

Y = 95%

Y Rev = 77% (including LCC's which make a profit on Y only)

I.e. in general, each Y pax brings in less revenue per pax, whilst Premium clearly operates on a huge profit.

Sort of put even more simply the back of the bus revenue should cover operating costs +10-12% whilst those up front generate some real profit (however less than the headline figure in many cases as those points "bribes" lounges miles etc... need to be costed in the greater scheme of things)

Eu- Africa routes have constrained capacity limits and archaic bi-latteral treaties leading to easy revenue recovery for those airlines with traffic rights.

Managing capacity is in and of its self an important business tool !
 
okapi
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 10:30 am

Quoting Faro (Reply 8):

In many cases, travellers between Europe and Africa are company senior execs, high ranking officials from various organizations and governments and "stressed" travellers like oil-rigs workers and merchant ships officers who stay away from home for a long time. Hence, their employers agree on paying a higher fare for them. All flights to sub-saharan Africa are considered long-haul and many businesses allow their staff to travel in premium seats.
The lack of direct links between other continents and Africa has also led many travellers originating in north America or Asia to transfer via European hubs like CDG, BRU or LHR/AMS/FRA. This leads to longer travelling times although this tends to change with ET and SA now offering more routes to newer markets.
 
airbazar
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 1:36 pm

Quoting RDUDDJI (Reply 5):
I think that 5.35x may be true on int'l flights, but it's much lower on domestic (U.S.) flights. Something perhaps WN knows.

And EK who just about pioneered the high density Y cabin to subsidize those lavish J and F cabins. In this regard the airline industry is really a microcosm of the rest of the business world in which the vast majority pays for the lavish lifestyle of a small percentage. That is even more true in the U.S. domestic market when you consider that most F passengers don't actually pay for the ticket.

Quoting Faro (Reply 9):
Makes one wonder with all the hoopla, hyperbole and marketing dollars lavished on premium class travel whether, taken globally with all premium-specific overheads, the net profit is really worth the effort...I suspect not.

The simple answer is that both sources of revenue are extremely important to maintain a healthy full service company and those lavish perks are direct result of competition. Take the month of November in the TATL market for example. I suspect that the weight of premium revenue is far greater than say in July or August when Y is far more important.
 
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 4:12 pm

Quoting okapi (Reply 15):
The simple answer is that both sources of revenue are extremely important to maintain a healthy full service company and those lavish perks are direct result of competition. Take the month of November in the TATL market for example. I suspect that the weight of premium revenue is far greater than say in July or August when Y is far more important.

I suspect this is the case. As a first cut I measured on Seat Guru space devoted to Y and space devoted to other classes, in both cases including restrooms and galley areas

Y: 9 1/2 inches
other classes 5 1/2 inches

Other classes are more that 1/3 of the area, and not likely to be producing more that 1/3 of revenue, or are they? Someone on line here is likely able to refine and correct this 'first cut'. I actually have been interested in this for some time. A second question is why airlines are not interested in offering seats with 10% more area for about 15% more costs. People always say it was tried once 35 years ago and didn't work. I don't accept that argument. There are likely others.

edit: Y includes a section of Y+, with about 4 inches of extra legroom.

[Edited 2014-12-07 08:15:38]
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enilria
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 4:28 pm

Quoting Faro (Thread starter):
Out of curiousity what is the typical, average ratio between i) the gross revenues generated by Y class pax on a 100% full flight and ii) the gross revenues generated by J+F class pax on the same 100% full flight.
Quoting Faro (Reply 8):
Why on earth is Europe-Africa/Middle East so lucrative?

Oil and lack of leisure (relatively) to both.

Quoting Faro (Reply 11):
Something fundamentally awry here...why don't carriers add capacity...why don't new entrants join the market to exploit this super-profit?

It isn't free to get front cabin revenue. You have to have a sales force, probably be in an alliance or have your own global network, and spend a lot of money on the product both on the ground and in the air.

Quoting waly777 (Reply 12):
Take into consideration that this is global revenue....don't forget LCC's make up a large % of this figure. A majority of which don't have premium cabins
Quoting airbazar (Reply 16):
And EK who just about pioneered the high density Y cabin to subsidize those lavish J and F cabins.

EK on JFK-DXB is 48% front cabin revenue in the most recent quarter according to data I have access to. That's about the maximum on normal situations to/from the USA. Obviously you can have a plane with nobody in coach and J is full that would skew it, but that is not a normal situation.
 
aviationaware
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RE: Revenue Ratio Between Y And J+F On A Given Flight

Sun Dec 07, 2014 6:57 pm

Looking at the revenue ratio of the classes is not giving away very much.

Airlines generally measure revenue per square meter or square foot of cabin space, which gives a much better indication of how good one class performs in comparison to another - much better than comparing the absolutes which will be skewed due to huge differences between configurations.

And generally, most airlines don't see a big difference in revenue per square meter between Y and J classes. They are often times very similar. A tendency has been observed that Premium Economy classes have for some airlines outperformed both Y and J in this metric, hence the rush of so many airlines to introduce one.

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