Some Interesting Statistics

[LaBradford22]

This may be the best thread that I've ever seen in this or any other airline forum. Lots of good facts and well-thought-out analysis. I have plenty of thoughts on this, when I get the time, I'll post my two cents. In the meantime, keep this good discussion going.

 

[mweiss]

You also need to Look at CO's Fleet. They have many many new Generation Aircraft that have yet to see the inside of a hanger for Heavy Maint.

Yup. I also had the same thought, but CO's maintenance costs today are about what they were in 1996/1997 (although lower than 1998-2001). Their margins are much higher now than they were then, even though their overall costs are up about 35% from 1996.

There is one significant cost change that occurred starting in 2001: commissions. They're down an astonishing 72% from 2000 levels! DL has cut theirs by about 60%, and of course NW and US cut theirs by 100% (they simply stopped paying them altogether). AA's commission cost hasn't changed appreciably.

 

[JS]

Thanks for posting this thread, mweiss!

One statistic on which I would like to caution is the labor cost as a percentage of total cost (or of total revenue). This is useful if you are willing to assume that non-labor costs are the same. Otherwise, you're mixing apples and oranges and may make some bad conclusions.

For example, if mis-managed airline A spends 10 cents a mile on non-labor costs and 4 cents a mile on labor, and well-managed airline B spends 3 cents a mile on non-labor costs and the same 4 cents a mile on labor, the labor % of total cost favors mis-managed airline A.

In the real world the differences aren't as huge as my example, but considering the fairly small differences (38%, 41%, etc.), I think that stat should be tossed out as being "contaminated".

 

[mweiss]

JS,

You're right, of course, about the labor numbers I posted; they are subject to much contamination. I'm in the process of collecting ASMs for the same period, so as to have some more axes on which to lay the data.

It'd be even better if I could find average stage length data as well.

 

[mweiss]

I could use some help in determining CASM and RASM appropriately.

For the revenue side, I can use "Passenger revenue" or "Total operating revenues."

For the cost side, things are much more complex. Obviously, I'd want to include labor costs, fuel costs, landing fees, maintenance, etc. But do I include amortization and depreciation? Do I include "Other operating expenses?" "Special charges?" Should I go for the whole banana and use "Total operating expenses?"

Once I get that part right, I'll have the whole financial picture for the industry. Then we can really have some fun. :huh:

 

[Rob]

The 737's have a direct operating CASM about 2 cents lower than the 737's.

Just to confirm: the second "737's" should read Airbuses?

 

[Cosmo]

I could use some help in determining CASM and RASM appropriately.

I would suggest using total operating revenues to calculate RASM and total operating expenses less special charges to calculate CASM. Using the numbers this way gives a good indication of an airline's prospects for its continuing operations, since special charges generally reflect unusual, one-time costs or discontinued operations. In addition, using total operating revenues to calculate RASM reflects the fact that it is nearly impossible to identify and segregate out the costs related to handling cargo, mail and excess baggage, among other things generating revenues besides passengers, thus keeping the RASM/CASM comparision on an apples-to-apples basis.

 

[mweiss]

Well, I checked my RASM and CASM numbers against WN's 2003 annual report and got the same results, so I'm assuming that RASM is based on Total Operating Income and CASM is based on Total Operating Cost.

In a graph of RASM against CASM, the airlines are all relatively near the break-even line, as one might expect. But what's rather interesting is how they fall into three very neat clusters. In the 6-8 CASM range is a cluster of LCCs, with B6 doing the best and F9 doing the worst (F9 was the only carrier on the "loss" side of that line). HP is in this cluster. The second cluster is in the 10.5-11.5 range, and contains AS and all but one of the legacies. Only CO sits above the break-even line. Then, all alone, sits US with a 13.8 CASM and 13.3 RASM.

Naturally, one can attribute some of US's high CASM to the short stage length. US's stage length, while having risen by 50% since 1990, remains below that of all of the other airlines except WN and FL.

However, in looking at the relationship between stage length and CASM, I noticed that the airlines fall into two distinct bands, with three outliers. The low-cost band contains, as you might expect: FL, WN, F9, HP, and TZ. The high-cost band contains no surprises either: DL, NW, AA, CO, and UA. The lowest-cost airline, even accounting for the stage-length effect, is B6. They do better than the other LCCs in this metric. Similarly, AS does far better than the legacies here; they're roughly halfway between the legacy band and the LCC band. Once again, US sits by itself, well above the legacy band. In other words, even taking out the stage-length effect, US still has the highest cost of any airline in the industry. If US were on the legacy band, CASM would be about 1.5 cents lower.

Some other things I've discovered:
- UA has the largest chunk of revenue handed to labor; 50 cents of each dollar they get goes to wages and benefits
- Among the legacies, US has the second-lowest percentage of revenue devoted to labor costs at 39%. Only CO is lower (34.5%), and WN is comparable to US (37.5%).
- FL gives the least of their revenue to employees: 25%.
- Labor's contribution to CASM at US is 5.16 cents. Only DL is higher at 5.27. The lowest are B6 and TZ at 1.95 and 1.96 cents, respectively.
- As a class, legacies pay twice as much per ASM to their employees as LCCs. The lowest of the legacies, CO at 4.02, is still about 30% higher than the highest of the LCCs, WN at 3.09.

- US has the smallest percentage of revenues devoted to fuel of any airline: 9%. The next-lowest is WN at 14%.
- Even looking based on ASM, US's fuel costs aren't out of line at all. US spends 1.2 cents per ASM, very close to WN's 1.15 cents. The best is B6 at 1.08; the worst is FL at 1.77 (though NW is mighty close behind at 1.74).

I'll probably drop some more numbers later, but this should be plenty for now.

 

[mweiss]

I'm bumping this to the top for only one reason. I was just wondering if there's really so little interest in a more rational discussion of the various ways of looking at the whole picture.

Is there really no interest in this topic? If so, I'll just let it die.

 

[BoeingBoy]

I'd only advise that you use the statistics to set the parameters of the tale, not as the tale itself.

For instance, labor cost cited any way you want. DAL and AMR have the predomince of their express feed "in house" so that labor shows up in their consolidated numbers. U has most of the express feed provided thru affiliates, so the labor cost of providing that feed is not included.

In choosing to use WN as a test of your RASM & CASM calculations, you picked the best and worst test. WN has no express, much less affiliates, to make true accounting for cost allocation difficult if not impossible. I pretty much defy anyone to take U's 1st quarter numbers and come up with the reported CASM figure. Then there's the whole problem of allocating cost when all you have is the quarterly report. Are all costs of express operations excluded from the mainline number?

Jim

 

[whlinder]

mweiss, I think this is a great thread, don't let it die.

 

[Light Years]

I think this is a very interesting topic, informative and better than all the posts with the usual arguments.

 

[mweiss]

Thanks for the words of encouragement. It's tough because there has been little contribution of ideas about the meaning behind the numbers. Part of the reason I haven't been putting a story in the numbers posts is that I don't want to just post numbers that match any theories I might have. Rather, I want to see if we can begin a dialog that examines the numbers and derives some possible conclusions.

Better yet, I'd love to see some suggestions as to how to improve them.

I'm still especially intrigued by US's RASM. It's by far the highest in the industry. Does US have more monopoly markets than anyone else? Might that be the cause? Any other suggestions?

Speaking of which, I have picked up market numbers from the US DOT BTS, and am trying to do some analysis of them. It's hard, though, since the data for each quarter takes about 600MB. I'd like to look at entire years at a time, but Access limits me to 2GB, so I'm working to consolidate the data some.

 

[RWerksman]

I really wish some of this information could be broken down by hub.

Otherwise this is an great thread. Possibly the best I have read here.

Good job!

 

[ktflyhome]

Yes, Meweiss, I was just thinking this last week or so, that I haven't seen you on board, and low and behold you show up in the last 24 hours. It is good to have you here again, although, we both know that we have had our disagreements. I am glad all is well and you are with us all once again. I was beginning to worry. I respect your concern and knowlege and input that you give to this forum. Thanks, kt.