Industry Leading Load Factors!

[mweiss]

crushed, there are two different metrics to look at for a ground employee:

1) Dollars per hour paid to an employee
2) Passengers per hour served by that employee

Ultimately, the two need to be combined into a dollars-per-passenger metric to properly compare your job with your LCC counterpart's. If the #1 value is 10% lower than the LCC, but the #2 value is 30% lower, then you're still being paid more than the LCC ground employee by the only metric that matters from the company's perspective. Even though you're being paid less than the LCC ground employee from the only metric that matters from your perspective.

If a company pays $10/hr to you to get $7/hr of value, then you are a liability. If the company pays $10/hr to you to get $13/hr of value, then you are an asset.

In other words, if you want to be paid more, you need to serve more passengers. Interestingly, not more than your LCC counterpart, because US gets more money per passenger than any other airline. You just need to serve more than you currently do.

 

[Ch. 12]

Mr. Weiss, How does "stage length" play into an airlines CASM ? Is it true that Usairways problem with CASM is that it flies shorter routes than it's competitors ? Management's reluctence to address this "stage length problem" UNTIL it gets ANOTHER round of concessions is no secret to employees of this company.

insp89,

Looking at increasing stage lengths to lower the CASM is completely missing the point. There is no such thin as a "stage length problem" b/c even though the CASM would go down over a longer stage length, so would the RASM. That is the point of using CASM and RASM...to factor out the stage length. CASM and RASM should be looked at together, not separately. Basic logic says that manipulating the stage length will lower both CASM and RASM and there would still be the same exact loss.

So...management could work on your perceived "stage length problem", but why? The loss would still be the exact $ amount as it is now (theoretically).

 

[mweiss]

Ch. 12,

The revenue one can obtain from a given flight is strictly a function of demand and competition, not of stage length. This is why fares for short flights are often higher than for longer ones (e.g., PIT-PHL is about $400 right now, while PIT-SFO is $225).

Thus, the RASM has a relationship to stage length only insofar as it is pointless to fly a short route with insufficient demand to pay the higher RASM necessary to exceed the CASM for the flight.

 

[Ch. 12]

mweiss,

I don't really think I stated that the revenue is tied into the stage length and I'm sorry if my post left you thinking that. I understand that the short hauls often have higher fares which is actually a function of market share and not necessarily S&D. These markets don't generally have a large demand and that is why few carriers fly them. The small markets are generally served by one to three carriers with one carrier being extremely dominant and able to command decent fares.

No...my point was that insp89 was ignoring RASM and stating that a longer stage length would cut costs, essentially, b/c CASM would be lower. Stage length does nothing for profitability and that is what I stated. COSTS must be cut rather than diluting CASM by increasing stages. In doing so, RASM is also cut significantly.

I hope this clarifies my point for you...

 

[CaptBud330]

Just curious....if the flights are essentially full now, when we lower the ticket prices, that will only spur demand even more. Where do we put the extra customers without greatly increasing unit utilization or bring planes out of the desert?

 

[7.5victim]

But everyone forgets....

COMAIR is a slave labor camp that operates as a virtual airline for DELTA.

What an ignorant statement.

If any airline is operated like a "Slave labor camp" it would be MAA. Comair pilots and FA's all start at regional-leading rates ('tho the company has asked to reopen contracts). Compared to what I've read here about MAA's pay and lack of benefits, Comair people are living the dream.

 

[TomBascom]

Just curious....if the flights are essentially full now, when we lower the ticket prices, that will only spur demand even more. Where do we put the extra customers without greatly increasing unit utilization or bring planes out of the desert?

Rationalization of fares is about lowering the extortionary "business" fares while either leaving the advance purchase fares alone or raising them slightly. The idea is that by lowering the price of business fares you will actually sell a lot more of them thus increasing your average fare.

It seems to work for others. SWA sells more full fare tickets (as a percentage) than anyone...

 

[mweiss]

Ch. 12, I see your point. It's an interesting perspective. If I understand you correctly, you're saying that they should cure the disease, not mask the symptoms.

FWIW, WN's average stage length is 70% of US Airways', and their CASM is 55% of US's. Sort of reinforces your point.

 

[Ch. 12]

mweiss,

Very interesting figures. I'm sorry if I had confused you earlier, but you have my point now. Until the recent additions of transcons, WN has flown significantly shorter stage lengths b/c they were focused on short-medium haul point to point while the hub-and-spoke networks often had far longer stages. It is interesting that you point out that the CASM for WN is half of U's when isp89's argument was that by increasing stage lengths (that are already longer than WN's by ~42% based on your figures) the CASM issue would be fixed. Based on that argument and the figures you gave...a rough estimate tells me that U would have to increase stage length by 80% to get their CASM down to WN's level. 1) That's impossible and 2) the RASM would also decrease significantly.

Thanks for the supporting data. It is obvious that U still has significant cost cuts in the future if they are going to come in line with WN's fares systemwide therefore having the same RASM (actually somewhat less than WN's based on the stage lengths) than WN. I guess based on U already having a longer stage length...if they are to come in line with WN's fares systemwide, they must cut costs so that they are actually LOWER than WN's. Hmmmm....I'm going to have to scratch my head on this one b/c it just doesn't seem very likely.

 

[mweiss]

Ch. 12, you're welcome.

The analysis I just did yesterday regarding the CASM/stage length relationship suggests that US would still be about 1.5 cents higher than the other legacies, whether at DL's 1,062 stage length or all the way out at UA's 1,579.

Put another way, increasing stage length to UA proportions would save about a penny in CASM, but there's still much more that needs to be saved regardless. And RASM does appear to decrease with increased stage length as well, though again it's hard to tell if that's a factor correlated to stage length or to CASM.

 

[Ch. 12]

Due to the nature of the beast, the RASM will decrease with increased stages just as the CASM will. This is b/c revenue and costs are behave the same way. As stages get longer, the fixed costs are spread out over more miles and the overall CASM decreases. The same goes for revenue, more or less. The fares from JFK-LAX can be $99 each way and the fares from JFK-ORD may also be $99 each way. Therefore, the RASM will be much higher on the shorter flight to ORD than it will be to LAX. In a way...RASM is almost MORE affected by stage length because we do not pay by the mile, but rather supply and demand as you stated earlier. The demand is not proportionate to the length of haul and therefore the RASM is greatly diminished over longer hauls. The CASM also has the operational costs. If these are out of line...as are U's...then adding miles to the stage length dilutes the fixed costs, but operational costs will be higher and CASM will not decrease as much as RASM.

That is why the LCCs are discovering that long hauls are bread and butter for them these days. Their operating costs are still low enough that their CASM is also cut significantly over longer hauls...balancing out the RASM decrease. However...they realize that the legacies are so far out of line with operational costs that they cannot realize the same benefit.