Any Beancounters in the room?
06-02-2008 | 10:21 AM
#11
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To avoid the $587 million loss AA had this past quarter, they would've had to charge $50 (and change) per roundtrip more. Doesn't sound like much, does it? Well when you consider their average fare over that course of time was right around $200 roundtrip it adds a significant cost to the current fare structure.
Disclaimer: The above was my own number crunching.
Disclaimer: The above was my own number crunching.
06-02-2008 | 10:58 AM
#12
A moment please...
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From: Just passin' thru
06-02-2008 | 10:58 AM
#13
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Joined: Jul 2007
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From: HMMWV in Iraq
The fundamental thing I don't understand is the business model of charging less than the service costs. If almost every carrier lost money last quarter, that says across the board fares need to be raised.
If the fares are raised and the American populace stops flying, well, sad to say, but I guess some companies will go out of business. I certainly don't want to see that happen, but I don't see how they are going to stay in business given the current trends.
On one hand, if the company is losing money because they aren't charging enough to cover expenses, eventually they will most certainly go out of business. That is a given.
On the other hand, if the company raises prices to cover expenses, and some customers may not come back, then the company might go out of business. That is a maybe.
I'm no bean counter, nor did I stay in a Holiday Inn Express last night, but it seems to me like fares need to go up whether or not the American people will pay them.
If the fares are raised and the American populace stops flying, well, sad to say, but I guess some companies will go out of business. I certainly don't want to see that happen, but I don't see how they are going to stay in business given the current trends.
On one hand, if the company is losing money because they aren't charging enough to cover expenses, eventually they will most certainly go out of business. That is a given.
On the other hand, if the company raises prices to cover expenses, and some customers may not come back, then the company might go out of business. That is a maybe.
I'm no bean counter, nor did I stay in a Holiday Inn Express last night, but it seems to me like fares need to go up whether or not the American people will pay them.
06-02-2008 | 11:42 AM
#14
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From: 777 CA
Yes, in simple pilot math, that makes great sense. $7.50 extra "fuel surcharge" should not be that bad.
The airlines argue, that yes, that is all we are adding on the fare. Where they are loosing money is that gas costs $3.22 a gallon now when passengers are actually flying the flights, but it was only $2.22 a gallon 6 months ago, when passengers bought their cheap, advance purchase tickets.
So the airline's argument is "So we have increased the fares $7.50 today," but in 6 months when passengers go to the airport to fly the flight, gas might be $4.22 a gallon when the flight takes off.
In my opinion, still not charging enough, but I'm just a simple pilot, who doesn't know anything. Instead of charging $15 a bag, I would simply say, the ticket costs xxx, but is subject to a fuel surcharge at time of travel. Then the day they actually travel, a $7.50, or $4.50, or $9.50 surcharge is tacked on. (Based on cost of Jet-A at time of departure.)
The airlines argue, that yes, that is all we are adding on the fare. Where they are loosing money is that gas costs $3.22 a gallon now when passengers are actually flying the flights, but it was only $2.22 a gallon 6 months ago, when passengers bought their cheap, advance purchase tickets.
So the airline's argument is "So we have increased the fares $7.50 today," but in 6 months when passengers go to the airport to fly the flight, gas might be $4.22 a gallon when the flight takes off.
In my opinion, still not charging enough, but I'm just a simple pilot, who doesn't know anything. Instead of charging $15 a bag, I would simply say, the ticket costs xxx, but is subject to a fuel surcharge at time of travel. Then the day they actually travel, a $7.50, or $4.50, or $9.50 surcharge is tacked on. (Based on cost of Jet-A at time of departure.)
06-02-2008 | 11:53 AM
#15
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From: Economy Minus
It is an interesting point. And, I am an -ex bean counter, but have no specialization in the airline biz (iow, your opinion is as good as mine on this one).
I fly the Jungle Jet at present. At cruise it burns about 3,000lbs/hr, lets just say 3,500/hr average for the whole profile, which for most of our hops is above average. So with fuel weighing 6.767 lbs/gal, we have 517 gals/hr. Assuming an 80% load factor for us (50 seat jet), 40 people. That is 12 gallons per person to fly for an hour and cover approx 420 miles or so. 420 miles/ 12 gallons gives 35 miles per gallon per seat. Thar rivals any car out there right now, save for a geo or something.
Speaking of money, that is $38.64 in fuel.
Assuming the airplane is full, that turns into 10.3 gals/hour or $33.29/hour or almost 41 miles per gallon per seat.
This is all based on a fifty seater with bad fuel burn.
I believe a 747-400 burns about 19,800lbs/hr in cruise. So, that is 2,926 gallons per hour. Cost of that is $9,422 per hour. Assuming a cabin cfg of 350 people, that is $26.92 per person per hour. Assuming 450 miles per hour, that is 8.36 gallons per hour or 54 miles per gallon!!
In terms of time that means every pax is paying about 6 cents per mile.
To drive my Jeep Wrangler right now costs me almost 22 cents per mile in fuel.
I fly the Jungle Jet at present. At cruise it burns about 3,000lbs/hr, lets just say 3,500/hr average for the whole profile, which for most of our hops is above average. So with fuel weighing 6.767 lbs/gal, we have 517 gals/hr. Assuming an 80% load factor for us (50 seat jet), 40 people. That is 12 gallons per person to fly for an hour and cover approx 420 miles or so. 420 miles/ 12 gallons gives 35 miles per gallon per seat. Thar rivals any car out there right now, save for a geo or something.
Speaking of money, that is $38.64 in fuel.
Assuming the airplane is full, that turns into 10.3 gals/hour or $33.29/hour or almost 41 miles per gallon per seat.
This is all based on a fifty seater with bad fuel burn.
I believe a 747-400 burns about 19,800lbs/hr in cruise. So, that is 2,926 gallons per hour. Cost of that is $9,422 per hour. Assuming a cabin cfg of 350 people, that is $26.92 per person per hour. Assuming 450 miles per hour, that is 8.36 gallons per hour or 54 miles per gallon!!
In terms of time that means every pax is paying about 6 cents per mile.
To drive my Jeep Wrangler right now costs me almost 22 cents per mile in fuel.
06-02-2008 | 11:58 AM
#16
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It might have been, when I calculated those figures I was going off of AA's press release at the time, and I don't remember what the number was and just went off of my faltering short term memory in my post. I was thinking it was $587 but you might be right, that might've been UAL.
The math stands though, AA would've had to generate another $50 per roundtrip to offset their loss in the 1Q. That equates to a 25% fare hike across the board, and that was with Jet-A running $3/gal, not the $4+/gal it is now.
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