BA777300er
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How do airlines chose what routes to open and close?

Thu Oct 04, 2018 3:58 pm

I know that if a route is losing money that will make the airline chose to close it but what about opening routes. For example if the airline looked at the market on a route from A to B and saw that there was the demand to fill a plane but the demand is mostly tourist traffic would the airline chose to open the route or not?
 
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DolphinAir747
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 4:04 pm

Based on the quality and authenticity of the Mexican food in that city.

viewtopic.php?f=3&t=1393121&start=400
 
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Dutchy
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 4:10 pm

I think they look at their network (feeding a new route) and the numbers of passengers between the two cities, competition and the yield. And of course they need a spare plane to operate a route. KLM just killed two African routes in favor of starting Las Vagas.

Yield is a tricky thing of course. Tourist bring less than business.
Many happy landings, greetings from The Netherlands!
 
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Dieuwer
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 4:13 pm

BA777300er wrote:
I know that if a route is losing money that will make the airline chose to close it but what about opening routes. For example if the airline looked at the market on a route from A to B and saw that there was the demand to fill a plane but the demand is mostly tourist traffic would the airline chose to open the route or not?


Not if your name is "Alitalia"... ;)
 
IAHWorldflyer
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 4:18 pm

I think Frontier uses a large dartboard...

On a serious note, I know a guy who works in fleet planning for a large airline. They have sophisticated data analysis that they run on computers using modeling that can tell them the average demand over a 12 month cycle and what percentage of traffic would be O/D and how much is connecting through the hubs. As Dutchy said, much comes down to availability of equipment to fly a new route.
 
airbazar
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 4:20 pm

BA777300er wrote:
I know that if a route is losing money that will make the airline chose to close it

That's not necessarily true. Maybe for LCC's or p-2-p carriers but certainly not for network carriers. Many routes are perennial loss makers but they contribute passengers to the overall network. In other words, profitable routes can make up for the unprofitable ones because what really matters is that the overall result is positive. A hub&spoke carrier needs passengers. Not operating loss making routes goes against that model.
 
SCQ83
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 4:32 pm

I imagine it will be very different IAG opening a new long-haul destination in the Americas or Asia than Ryanair throwing darts into a board.

In any case, opening a route is not any different to other kind of investment. And a lot of outsiders think that investments are very sophisticated and scientific, but there is always a strong bias and subjective views. For instance, how is that three carriers started DFW-KEF the same season. For the third carrier there was no logical analysis other than "the other two started this route so we cannot miss the boat".

DolphinAir747 wrote:
Based on the quality and authenticity of the Mexican food in that city.

viewtopic.php?f=3&t=1393121&start=400


I have a friend who works in a P2P European airline. For VFR routes, they would definitely visit the "destination city" to have a better understanding of the ethnic traffic... and that includes visiting ethnic restaurants.
 
MIflyer12
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 4:35 pm

Dutchy wrote:
I think they look at their network (feeding a new route) and the numbers of passengers between the two cities, competition and the yield. And of course they need a spare plane to operate a route. KLM just killed two African routes in favor of starting Las Vagas.

Yield is a tricky thing of course. Tourist bring less than business.


To that add availability of gates and crew. Availability of sufficient frequencies on international routes where a real, unrestricted Open Skies agreement isn't in place.
 
LatinAirliner
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 4:56 pm

There's a whole department in an airline that is called Network Planning, they do what you are asking.
LatinAirliner - Nickpo
 
dfwjim1
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 6:07 pm

Dutchy wrote:
I think they look at their network (feeding a new route) and the numbers of passengers between the two cities, competition and the yield. And of course they need a spare plane to operate a route. KLM just killed two African routes in favor of starting Las Vagas.

Yield is a tricky thing of course. Tourist bring less than business.


But if tourists were so low yield why do airports like SFO, LAX, MIA and JFK have a greater variety of carriers than DFW, IAH, PHX...etc?
 
jetero
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 6:12 pm

dfwjim1 wrote:
Dutchy wrote:
I think they look at their network (feeding a new route) and the numbers of passengers between the two cities, competition and the yield. And of course they need a spare plane to operate a route. KLM just killed two African routes in favor of starting Las Vagas.

Yield is a tricky thing of course. Tourist bring less than business.


But if tourists were so low yield why do airports like SFO, LAX, MIA and JFK have a greater variety of carriers than DFW, IAH, PHX...etc?


Why do you think tourism and business are mutually exclusive?
 
BoeingGuy
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 8:48 pm

SCQ83 wrote:

DolphinAir747 wrote:
Based on the quality and authenticity of the Mexican food in that city.

viewtopic.php?f=3&t=1393121&start=400


I have a friend who works in a P2P European airline. For VFR routes, they would definitely visit the "destination city" to have a better understanding of the ethnic traffic... and that includes visiting ethnic restaurants.


I understood Dolphin's joke. There was a thread awhile back about new service to a city (ORD, I think) that morphed into a big discussion about how authentic the Mexican restaurants there are.

Actually this is kind of an interesting topic. For example, what criteria does AS or AA use when deciding to start or end a route?
 
SCQ83
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 9:37 pm

BoeingGuy wrote:
I understood Dolphin's joke. There was a thread awhile back about new service to a city (ORD, I think) that morphed into a big discussion about how authentic the Mexican restaurants there are.

Actually this is kind of an interesting topic. For example, what criteria does AS or AA use when deciding to start or end a route?


I know, I remember that thread.

But I just say there is probably some true to that joke. I wouldn't be surprised that if Volaris or Interjet launch a new route to ORD, on top of all the "analytical" stuff made in CDMX or wherever they have their HQ, they send people to Chicago to have a vibe on the ground and eat in those Mexican restaurants. For instance, I imagine that when studying those VFR routes, finding out where exactly those Mexicans in Chicago come from is critical so to launch Guadalajara or Uruapan.

I don't think it will be easy to find statistical data from which state in Mexico those Mexicans in Chicago come from. PDEW data might give some info, but maybe that VFR traffic now goes by car/bus to a bigger city (Mexico, Monterrey, etc) and board there, so no way to track those passengers that now are "missing". So being on the ground, talking to people (a Mexican will find out easy where the people come from because of their accents, etc) will confirm or raise some concerns about the data.
 
tkoenig95
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Re: How do airlines chose what routes to open and close?

Thu Oct 04, 2018 9:59 pm

Like stated above, some airlines use the "dartboard" method and it works perfectly, but other conservative lines have shareholders to adhere to and must propose the new route with specific information with, most likely, the data published from the DOT about O&D travelers and other market research.
 
gunnerman
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Re: How do airlines chose what routes to open and close?

Fri Oct 05, 2018 1:49 pm

I know someone who used to work for Qatar and he told me that their strategy was like this: "If Emirates starts a route then so should we."
 
A380MSN004
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Re: How do airlines chose what routes to open and close?

Sat Oct 06, 2018 8:49 am

gunnerman wrote:
I know someone who used to work for Qatar and he told me that their strategy was like this: "If Emirates starts a route then so should we."


Middle east style!
 
Alias1024
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Re: How do airlines chose what routes to open and close?

Sat Oct 06, 2018 11:50 am

Another factor airlines often take into consideration is economic growth of markets. They are more likely to open a new route and give it a chance to develop in a fast growing city than a stagnant one. A sort of claiming a stake before more competition arrives.
[photoid][/photoid]
A380MSN004 wrote:
gunnerman wrote:
I know someone who used to work for Qatar and he told me that their strategy was like this: "If Emirates starts a route then so should we."


Middle east style!

For a long time that seemed to be how CVS opened pharmacies in the US. Look at where Walgreen’s was building and buy the land across the intersection. Seemed to work.
It is a mistake to think you can solve any major problems with just potatoes.
 
mxaxai
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Re: How do airlines chose what routes to open and close?

Sat Oct 06, 2018 1:05 pm

SCQ83 wrote:
I imagine it will be very different IAG opening a new long-haul destination in the Americas or Asia than Ryanair throwing darts into a board.

In any case, opening a route is not any different to other kind of investment. And a lot of outsiders think that investments are very sophisticated and scientific, but there is always a strong bias and subjective views. For instance, how is that three carriers started DFW-KEF the same season. For the third carrier there was no logical analysis other than "the other two started this route so we cannot miss the boat".

One could also argue that all three carriers used the same statistics and calculations and simultaneously arrived at the same conclusion because some threshold was crossed. Another explanation could be the thought: "they can make money on that route so we probably can too".

There are other similar examples, e. g. all ME3 discovering DFW, or the EU airlines suddenly going to AUS and SAN.

But you're probably right that not every business decision is as rational as you'd hope it is.
Sometimes you make stupid decisions and still make a profit and other times you analyse a situation to death and fail anyway. On A.Net we love to try and explain the actions of our favorite airlines, and discuss the pros and cons of some destination or aircraft, but never really take into account the inherent lack of rationality in the system (because it's always people who decide in the end).
 
BobbyPSP
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Re: How do airlines chose what routes to open and close?

Sat Oct 06, 2018 1:33 pm

I have a friend who works in a P2P European airline. For VFR routes, they would definitely visit the "destination city" to have a better understanding of the ethnic traffic... and that includes visiting ethnic restaurants.[/quote]

WTF?? No, you’re being fed a cock and bull story line . For decades data is out there showing how many passengers per day are traveling between 2 city pairs
 
SCQ83
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Re: How do airlines chose what routes to open and close?

Sat Oct 06, 2018 1:48 pm

BobbyPSP wrote:
WTF?? No, you’re being fed a cock and bull story line . For decades data is out there showing how many passengers per day are traveling between 2 city pairs


Data might work in developed markets. You will get data on how many PDEW there are between Palm Springs and San Francisco. But what about routes where is no competition even connecting?

For instance, Ryanair is starting flights out of Banja Luka (Bosnia) this month to Brussels, Stockholm and Munich. Other than that, Banja Luka has just some connecting flights to Belgrade on Air Serbia (20,000 PAX in 2017). So how do you find PDEW traffic from that area in Bosnia to Belgium or Sweden? That people is probably driving to other airport (Zagreb, Belgrade, Sarajevo) and then flying from there to those countries. So basically there is no way to "track" those passengers from a database.

Also maybe there are statistics that tells you that in Belgium there are XX,XXX Bosnians living. But where are in Bosnia they coming from? What if most of them come from Mostar (at the other end of the country, so Banja Luka is useless?).

There are no decades data for those kind of routes. There is a bigger world there than developed markets in the US.
 
BoeingGuy
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Re: How do airlines chose what routes to open and close?

Mon Oct 08, 2018 12:38 am

gunnerman wrote:
I know someone who used to work for Qatar and he told me that their strategy was like this: "If Emirates starts a route then so should we."


That’s not an unprecedented business strategy. Tully’s Coffee used to open stores across from a Starbucks. Of course we see where that got Tully’s.
 
DBCooper
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Re: How do airlines chose what routes to open and close?

Mon Oct 08, 2018 1:39 pm

 
waly777
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Re: How do airlines chose what routes to open and close?

Mon Oct 08, 2018 3:37 pm

airbazar wrote:
BA777300er wrote:
I know that if a route is losing money that will make the airline chose to close it

That's not necessarily true. Maybe for LCC's or p-2-p carriers but certainly not for network carriers. Many routes are perennial loss makers but they contribute passengers to the overall network. In other words, profitable routes can make up for the unprofitable ones because what really matters is that the overall result is positive. A hub&spoke carrier needs passengers. Not operating loss making routes goes against that model.


Largely true but there are levels to which loss making routes can be tolerated. We are able to calculate segment revenue as well as network revenue contribution. When a route is not able to cover just operational costs, even for a network carrier, that route is ripe for the chopping block. There needs to be a balance between p2p and OD as the latters yields are not as valuable as the former.
The test of first-rate intelligence is the ability to hold 2 opposed ideas in the mind concurrently, and still function
 
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WALmsp
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Re: How do airlines chose what routes to open and close?

Mon Oct 08, 2018 5:02 pm

DBCooper wrote:


Great article! Thanks for sharing!
In memory of my Dad, Robert "Bob" Fenrich, WAL 1964-1979, MSP ONT LAX
 
WPvsMW
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Re: How do airlines chose what routes to open and close?

Mon Oct 08, 2018 8:41 pm

DBCooper wrote:


Bring back MUE (Kamuela)! Would help to keep HA pilots' crosswind skills sharp, and save me from driving from ITO or KOA.

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