Onboard weight means more fuel burned ...

[pms4104]

Got to thinking and wondering about how the airlines might deal with unsold seats when a flight is still a couple of weeks away.

 

If indeed more weight means more fuel burned, would it be in the airlines' best financial interest to fly partially full and, therefore, lighter and burn less fuel ... or to fire-sale off the remaining unsold seats and, in so doing, increase the weight on that flight and burn way more fuel than the revenue generated by that sale?

 

The airlines, of course, like to count beans ... meaning tracking load factors and seat miles ... but, I'm wondering if they actually would lose less money by flying less full. And, would they be willing to put less emphasis on those stats to bleed less red ink?

[paul929207]

The incremental cost of an additional passenger (fuel, food (???), etc.) is a small fraction of the amount charged. The airlines would be much better off filling all the seats.

[nho9504]

The incremental cost of an additional passenger (fuel, food (???), etc.) is a small fraction of the amount charged. The airlines would be much better off filling all the seats.

 

Not at a fire-sale price.

 

You may want to see the CO's weekly "deal list" - the one it has miles + copayment on segments that the planes are not full... ditto for UA's weekly e-fares, or AA's NetSaaver.

 

The fares are hardly bargains.

 

Airlines yield management load factor calculation is a dynamic model - it does factor in the fuel cost into the equation.

[FlyerTalker]

This breaks down into a classic business analysis. For each flight, there are fixed costs that will occur whether or not there are ANY passengers onboard. These include the cost of the airplane (lease payments or debt service on the "mortgage"), labor costs for the crew, airport fees, allocated costs of corporate operations, and most assuredly, the fuel to take the empty airplane plus crew to the next destination.

 

Now, add passengers and freight to the mix. Now you get the variable operating costs. If you add X number of passengers, there's an additional cost of Y dollars for the additional fuel, catering and crew above FAA minimums. Plus any other passenger amenities (dare I say IFE?).

 

So a completely empty plane will obviously lose money (fixed costs vs zero revenue). The question is: at what point does fixed costs + variable costs = revenue received? When fares are dirt low, that break even point may be in the 90% load factor - or higher. At one point, it was determined that one airline (can't remember when) was running flights that had a break-even point of 110%!! Guaranteed to lose money. Call it a loss leader for the purpose of market share.

 

Now that costs (both fixed and variable) are soaring, that break even point becomes even more difficult to reach. Revenue needs to increase, yet you have the economic reality of supply/demand curves which can actually cut revenue if pushed past an equilibrium point.

 

The simple answer to the OP's question: The reduction in revenue for flying with fewer passengers would likely be more than the variable costs of those individuals. So an incorrect business decision.

 

It does become a very interesting business analysis problem - occurring in real time, with ever shifting parameters and S/D curves changing with the public's opinion.

[Globaliser]

If indeed more weight means more fuel burned, would it be in the airlines' best financial interest to fly partially full and, therefore, lighter and burn less fuel ... or to fire-sale off the remaining unsold seats and, in so doing, increase the weight on that flight and burn way more fuel than the revenue generated by that sale?

Not at a fire-sale price.

Exactly: the fire sale price probably wouldn't even pay for the additional costs.

 

In addition to the hard arithmetic that can be done at a first level analysis, you also have to think about the effect on market behaviour if fire sales became commonplace.

 

The airlines' most profitable customers are those who book just before travel, and buy expensive flexible tickets. This is often why the tickets bought just before travel are so expensive - it's to screw as much money as possible out of those who have to travel, usually on business.

 

If an airline became known for selling seats at the last minute at fire-sale prices, you can bet that the really profitable customers will be amongst those who are buying the fire-sale tickets. So having fire-sales could actually reduce the revenue from the flight as a whole, as well as encouraging more weight to come on board.