32 replies to this topic

[Fido]

Thebean, on 27 February 2012 - 08:54 AM, said:

By the way, I'll guarantee you that the CASM on a 777 or A380 flying across the pacific is dramatically lower than any LCC's casm

In many cases you would be wrong.

If the segment is long and the seating density is low then the CASM calculations come very close to each other. We see it many times where a particular airline has 737's (700's and 800's) and long range aircraft like 772-ER.

This business is changing all of the time and what you read 20 years ago does not always pertain to today.
The reasons are:
- The high cost of fuel
- The carry cost of long range flights
- Double flight crews onboard
- Extensive catering and amenities
- Low density of seats on longhaul aircraft

[Thebean]

If the casm of a 777 operating a 10+ hour sector is anywhere close to a 737-800, you better run, not walk to the exits.

Then again, if they were, you'd see all kinds of 737NG's operating YVR-ANC-PKC-NRT and YVR-SFJ-LGW....

Edited by Thebean, 27 February 2012 - 01:36 PM.

[Thebean]

Another one bites the dust...

Launching LCC's is sooooo easy. The successful ones were just a matter of luck...


http://www.news24.co...ounded-20120227

[Don Hudson]

Thebean;

I understand that single fleet domestic operations is cheaper to operate - that is simply logical. Therefore I understand that LCC costs are achieved by design and not by accident. In fact I understand that business is never done "by accident", especially this business. Displacing rationality in favour of gut-feelings would be a quick fiscal end in this business. My original point concerned the operation of a number of multi-fleet, domestic/international carriers which continue to operate successfully throughout the world even though their struggles are different than LCCs. One counterexample is sufficient to alter the argument but there are many examples which reify the original point and question. Further to the point, there are not many successful one-fleet-type, scheduled, international LCC-model carriers by which more realistic comparisons may be made.

Re, "By the way, I'll guarantee you that the CASM on a 777 or A380 flying across the pacific is dramatically lower than any LCC's casm over an asl of about 950 miles. How does that jibe with your theory that the costs of international flying are so much higher than domestic / transborder / medium haul international?"

No disrespect and you may well be right because you know far more about such things than I ever will but a personal guarantee is not an argument nor a source of data.

Regarding the actual point, I don't know any "asl" on the Pacific that a T7 or A380 flies that is "950nm". That's more like Allegiant's or other domestic carriers' scheduled asl's, so is that the point...compare equal stage lengths? If so, are we comparing actual costs over a stage length that these aircraft would normally do, (say, 4000nm asl) and still saying that they would be lower than any LCC's?

The question returns to the observation above regarding the low number of successful single-fleet international LCC carriers and so needs to be clarified to ensure we're talking about the same things: - In your 950nm asl example, are foreign route, airport and navigation costs (along with the usual capital costs, crewing costs, maintenance, taxes etc) built into the CASM?

Thanks,

Don

Edit: Reading the exchange above...fascinating.

Re, "If the casm of a 777 operating a 10+ hour sector is anywhere close to a 737-800, you better run, not walk to the exits.

Then again, if they were, you'd see all kinds of 737NG's operating YVR-ANC-PKC-NRT and YVR-SFJ-LGW...."

I take it you're saying the casm for a B737-800 is higher on a 10hr sector (as per your example) than a B772's? Following on your point then, is there any other reason (other than the difficulty of starting up and sustaining!) that there are so few successful single-fleet international LCC carriers?

Edited by Don Hudson, 27 February 2012 - 04:01 PM.

[Thebean]

There is extensive information available on this subject matter.

There are entire sections written on it in both WestJet's and jetBlues businessness plan. Herb Kelleher has referred to it on countless occasions.

Short haul flying incurs considerably higher unit costs than long haul flying. Conversely, the longer the flight, the lower the unit costs.

A 350 seat B777 operating YVR-SYD will produce 2,714,950 asms. That's a ton of asm's to amortize costs over, but only incur the selling costs of 350 seats and one take off and landing. It's a given that bigger aircraft will burn more fuel per hour, but so too do they carry more passengers and cargo.

By way of comparison, WJ would have to incur the costs of 47 flights between YYC and YVR to generate that many ASM's. 47 take off and landings, 47 landing fees, selling costs on 6,392 seats, 47 passenger loads of glasses of coke, bits and bites, it goes on and on.

We all know that the purchase price / lease cost of a 777 is no where even remotely close to 47 times the cost of $275,000 a month or so for a 737-700NG.

That's why even with fuel surcharges, it's easy to buy a ticket to Australia for a little over 10 cents a mile and the corporation can be quite profitable in doing so, even though it's system wide casm is over 18 cents a mile.

Conversely, Chorus reported its casm last quarter at 26.2 cents, but has an asl of 373 miles. WestJet's was 13.55 cents with an ASL around 975 miles.

The calculation that is most relevant to most people is the Canadian version of what's on page 16 below.

http://www.oliverwym..._2012_FINAL.PDF

Edited by Thebean, 27 February 2012 - 06:41 PM.

[Don Hudson]

Okay, thank you...I'll take a look. Dam poor day when something isn't learnt! - Don

[Fido]

I had read the first link posted before (the one you removed) and the second one is nice to skim read but it does not address my point about longhaul flying that is being severely affected by fuel cost due to the cost of carry (and increased labour costs).

It still remains that it is a waste of time to compare airlines by CASM and doing the average stage length adjustment. Leave it to the academics.

Graphing the change of CASM at a particular airline has real life value and the second article shows that quite well.

[Thebean]

Here's the removed link.


http://www.speednews...&psec=MORE_INFO


Good luck with the buggy whips.

[conehead]

Thebean, on 27 February 2012 - 06:16 PM, said:

A 350 seat B777 operating YVR-SYD will produce 2,714,950 asms. That's a ton of asm's to amortize costs over, but only incur the selling costs of 350 seats and one take off and landing. It's a given that bigger aircraft will burn more fuel per hour, but so too do they carry more passengers and cargo.

I don't claim to know very much about the cargo world, but I've heard it said that on certain routes the cargo carriage earns much more money than the passenger sales. It seems to me that this is being completely ignored in this discussion, and it should be factored in.

Edited by conehead, 28 February 2012 - 10:17 AM.

[Fido]

conehead, on 28 February 2012 - 10:16 AM, said:

I've heard it said that on certain routes the cargo carriage earns much more money than the passenger sales.

Mostly Urban Myth
It can occur if the passenger load is very light (as in no one onboard).

The average passenger is approx 200 pounds in weight and an average fare one way YYZ-LHR might be $800. Then the cargo must pay $4/pound or a 5,000 lb pallet must pay $20,000 to equal what a passenger pays.

Cargo needs to be treated the same as excess baggage charges or duty free sales onboard or selling meals. It is nice to have the extra revenue as long as it does not detract from the prime revenue feed.

[boestar]

Ever watched a Fedex aircraft beibg loaded? That single aircraft probably brings in more revenue for Fedex Then AC could ever come close to. think about it. Pay around $15 to send a Fedex Envelope. They weigh next to nothing and you can put hundreds or more in a container and dozens of containers in the aircraft. That pays. Sure there is more overhead at either end in the handling but the margins are very good. The problem is that if that aircraft takes a delay and those letters don't make their guarantee then millions of $$$ lost in one flight. So yeah Cargo does better and you dont have to feed it, it doesn't need Flight Attendants...

[conehead]

Yeah, I'm thinking of the 777 belly full of lobster I watch get shipped to China every day.... that's gotta make some money...

[Fido]

FedEx is not a good comparison because they offer a lot more service than just the airlift for the high price they charge. Air Canada and every other airline does not get that sort of price for carrying cargo.

Those Lobsters are not giving up $4 or $5 a pound just for the airlift.