Passengers Generate Revenue (& Cost)

[BoeingBoy]

Unisys Scorecard, July, 2004 - an interesting look at the cost of serving the passenger before they get on the plane:

Getting the Transaction Underway…
But there are some costs that cannot be eliminated short of eliminating the
passenger, clearly a non-starter. Seats must be booked, changed and canceled,
important passenger information and preferences should be recorded, frequent
fliers must be noted, arrival at the airport, issuance of travel documents,
acceptance of luggage, and all other flight acceptance and documentation
processes must be completed and each of these steps adds cost.Most also add
value but the relationship between the cost and value added may not always
be immediately apparent.

Scorecard Vol 2, Issue 9, July, 2004

Jim

 

[mweiss]

I found McNamara's comments at the end of the report especially intriguing. He's indirectly saying exactly what I've mentioned here a number of times for the past few months. Focusing on differentiation will win in this space. CRM is a tool to help get there.

The first legacy carrier to get there will be the winner at holding on to a segment of the population that is willing to pay more.

On a related note, isn't it interesting that hotels haven't all lost to Motel 6? People are willing to pay a hefty premium over Motel 6 rates to stay at a Westin. Some are even willing to pay for the Ritz-Carlton. Kinda makes you think, doesn't it?

 

[BoeingBoy]

mweiss,

Sorta fits what I've seen various folks say - a network carrier should be able to get a 10% or more average yield premium over a LCC. To me, that is a combination of pretty much matching fares on competing routes at the bottom but charging some more on the top (some more, not multiples more).

Jim

 

[mweiss]

Honestly, I think they could get 10-20% across the board, from the bottom to the top. Of course, 10-20% at the top fares would be a larger dollar increase than at the bottom, but I bet they could do it.

Of course, the unit costs still have to come down. Legacies are operating at over 20% higher CASM than the LCCs.

 

[BoeingBoy]

Agreed, though some of the legacy's are within 20% of LUV.

Jim