First Class Flying: A Solution

[whlinder]

Not always. There is little question that the FFOCUS members posting here would pay more than they are. There is no question that at least one wouldn't leave US for WN at any price. So the net result of offering these low fares is lost revenue from the PineyBobs.

But Piney has admitted to having an upper limit on price. I wonder if he was faced with being forced to take a trip for $1500 on US vs. $400 on WN whether he would swallow hard and learn the tricks of getting an A boarding card.

Is selling two $200 seats a better choice than selling one $400 seat and having an empty? Absolutely not. Not only is there the direct marginal cost of the extra passenger, but there is also a utility cost to the passenger in coach who would otherwise have sat next to an empty middle seat. It spirals out from there.

At the same time, if you can build loyalty by transporting two potential future customers instead of just one, and perhaps instill in them a willingness to pay more for your product in the future, the spiral goes up instead of down. But on a one-time basis, selling the $400 ticket is absolutely better than the two $200 tickets.

Preventing leakage of customers from one demographic to another is one of the more difficult tasks in the industry.

[post="258404"][/post]​

Certainly. In the name of simplicity and in the face of LCCs, the walls erected to separate demographics have been slowly crumbling (Sat. night stays, round-trip fares, fares only offered at certain times of day for flights) to where all that is left is advance purchase restrictions/inventory restrictions.

 

[whlinder]

Also for the record I'm looking at my last five trips and the fares for them totaled $2,175.00 & the total actual miles flown was 12,026 which means my yield was .18 per mile. If you go back to what the folks in revenue planning told us regarding an F/C seat needing to generate 1.7 times cost to be profitable then US is making money on me even if they upgrade me EVERY time. If you take out the one cheapy fare my personal RASM is $.24 per mile.

[post="258408"][/post]​

US got its CASM down to 10 cents?

Assuming CASM is 10 cents, US did not make money on you Bob. You paid 2175. That total includes taxes and fees. Take out the 7.5% excise tax and some other fees and you are below 2000 of real revenue to the company. Now you are down to 16.6 for your personal yield.

 

[whlinder]

You took the 7.5% excise tax in the base fare out?

 

[KCFlyer]

Taxes were deducted already. I saw a CASM number around .10 and besides aren't US's non fuel cost supposed to drop down to the WN level soon?

[post="258416"][/post]​

That might be true, but the FUEL costs will be nowhere near WN's level for quite some time. I took a look at the US annual report and they show that the average price per gallon of fuel was:

2002: .75
2003 .89
2004 1.12

I believe I also read that fuel today is running in the neighborhood of $1.70 a gallon. The US annual report also states that they have no fuel hedge contracts in place. That means that despite the savings in labor, fuel costs are significantly higher than they were even a year ago, and it looks like oil just keeps going up. Also, FWIW, in that same annual report, they showed a mainline CASM of .1134 cents and a mainline RASM of .1069.

 

[longing4piedmont]

FFOCUS: Fighting for your right to upgrade on low fares. But it's ok, we'll give you candy!

[post="258418"][/post]​

Cute. I have to say I laughed out loud at that.

By the way did Washington play last night?

 

[Singleflyer]

The question I need to ask,

What is US doing to attract the flyers who are paying more than $0.68 per mile to fly?

That is the revenue US receive last weeks on my flights after the taxes were deducted. That is more than AA charged for a paid FC Tkt from ORD to DFW. But way less than the $1.35 NW charged for a flight a while back.

The point is I don't expect a five star meal when I fly (on any airline) but at those rates I should get a big seat, good service and maybe some food. Maybe UA 3 class config fon the trascon makes sense.

Since I rarely fly transcon, I have no complaints on the food being served in 1st. But I would expect better.than US now delivers. a few weeks back I got up graded on an AC flight from YYZ to SFO, and that was probably the best service I have had on any airline in NA in the past few years. The made you feel special. And that was on a $350.00 USD ticket, so go figure.

If you want the high rev passenger, give a product that is worth paying for, and my god clean the planes.

 

[BoeingBoy]

Also for the record I'm looking at my last five trips and the fares for them totaled $2,175.00 & the total actual miles flown was 12,026 which means my yield was .18 per mile. If you go back to what the folks in revenue planning told us regarding an F/C seat needing to generate 1.7 times cost to be profitable then US is making money on me even if they upgrade me EVERY time. If you take out the one cheapy fare my personal RASM is $.24 per mile.

[post="258408"][/post]​

Bob,

The problem is that US doesn't make money on that yield, even if you use a 10 cent casm, unless you only look at the cost of moving that one seat you sat in. If you do that, you might as well ignore CASM and talk about marginal cost to move 1 seat and claim US could make money with a $49 transcon fare.

Why? Simple - as someone pointed out, US does not move 1 seat at a time. That brings us to load factor.

Assume an average 80% LF. Even assuming a CASM of 10 cents, that means yield must average 12.5 cents to break even. Throw in your 1.7 factor for the extra cost of putting you in FC and you get a yield of 21.25 cents needed to break even.

Using a more realistic example, let's use a CASM of 11.5 cents with an average LF of 80%. Breakeven yield for coach is 14.38 cents. Again, if the 1.7 factor for FC is accurate, that means breakeven for FC is 24.44 cents.

In other words, US may have come close to breakeven on the cost of moving the seat you were setting in those last 5 trips but on the flights they would have lost money unless the flights were very nearly full or enough other people paid more than you to bring the average yield up.

Jim

 

[TomBascom]

That 1.7x number is being taken out of context. It's the number of coach seats that 1 F seat displaces. Thus in these 80% LF examples you might more accurately say that the incremental revenue needed is 80% of 1.7x -- which is 1.36x which brings your break-even yield to 19.55 cents.

In the specific case of PB you might also want to adjust for stage length since he's talking about trans-cons.

 

[BoeingBoy]

Thanks for the clarification, Tom. As for the stage length adjustment, I just ignored it as something of an offset for the higher fuel prices now vs 4Q04 (at least presumably higher). Just guessing, adjusting for stage length, off the basis of 4Q04 CASM, probably gets close to Bob's 10 cent CASM. What fuel does to that I don't know.

Jim

 

[speedbird86]

First class solution? Eliminate it. Go all coach.

 

[Singleflyer]

And you will eliminate c ustomers like me who pay way more their fair share of the cost. Like it or not upgrades is good for business.

 

[KCFlyer]

And you will eliminate c ustomers like me who pay way more their fair share of the cost. Like it or not upgrades is good for business.

[post="258559"][/post]​

How are they good for business if, as Piney pointed out in another thread, a round trip transcon coach ticket can be had for $450? How is upgrading someone who paid $450 or less better than limiting the upgrades until 2 hours before the flight and offering first class transcon tickets for something like $750?

 

[longing4piedmont]

How are they good for business if, as Piney pointed out in another thread, a round trip transcon coach ticket can be had for $450?  How is upgrading someone who paid $450 or less better than limiting the upgrades until 2 hours before the flight and offering first class transcon tickets for something like $750?

[post="258560"][/post]​

KC

Nice new avitar. But as usual, you don't have a clue. Look closely at the label. It kills small roaches. Any one can tell you that the US cockroaches are huge. It won't work. As usual, you still don't have a clue. But I did think it was cute and a nice try on your part. And it's even a nice tidy bowl blue. reminds me of another color I saw some where last week. humm, if I could only remember where..........

 

[Bear96]

And you will eliminate c ustomers like me who pay way more their fair share of the cost. Like it or not upgrades is good for business.

[post="258559"][/post]​

If you're still hanging around, U management knows they can do whatever they want to and get away with it. If you haven't been driven away yet, you aren't going anywhere.

 

[Art at ISP]

Bear,

Don't be so sure........