Are airplanes in it for the profit?

Are airplanes in it for the profit?

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Discussion

jimbo65

752 posts

197 months

Tuesday 13th March 2012
quotequote all
johnfm said:
Heh at all you guys take the p1ss out of Jamie - when lots of evidence of bankrupt airlines suggest that many of them don't make profit.
They may very well go out of business for various reasons, but the original reason they
start the business is to make a profit and make the owners rich.

Eric Mc

121,779 posts

264 months

Tuesday 13th March 2012
quotequote all
Did you mean "are AIRLINES in it for profit?"

New POD

3,851 posts

149 months

Tuesday 13th March 2012
quotequote all
Chrisgr31 said:
As regards 2nd hand planes being worth more than new ones is that one of the ways RYanairs business plan worked? Basically they bought huge numbers of new jets at such a discount that when they sold them they received more than they had paid.
Really? An Irish company with a plan ?



IforB

9,840 posts

228 months

Tuesday 13th March 2012
quotequote all
For a short-haul flight if all the tickets were £40, then the airline would go bust very, very quickly.

However, no-one sells all of the seats on board for £40. Some tickets might be £40, but the majority are a lot more than that.

Trying buying a seat on a busy RYR flight at the last minute and you'll soon learn that the phrase lo-cost has naff all to do with the ticket price. Lo-cost is about reducing the cost within the business, not the cost to the passenger.

Airlines are in business to make money, they are not public services. Well there are the odd routes that are backed by the government. These are known as Public Service Obligation or PSO routes that aren't commercially viable but essential.

Eric Mc

121,779 posts

264 months

Tuesday 13th March 2012
quotequote all
New POD said:
Chrisgr31 said:
As regards 2nd hand planes being worth more than new ones is that one of the ways RYanairs business plan worked? Basically they bought huge numbers of new jets at such a discount that when they sold them they received more than they had paid.
Really? An Irish company with a plan ?
How rude.

IforB

9,840 posts

228 months

Tuesday 13th March 2012
quotequote all
New POD said:
Really? An Irish company with a plan ?
An Irish company that's making an absolute fortune. RYR are a smart bunch of so and so's, no matter what you think of their business practices.


Eric Mc

121,779 posts

264 months

Tuesday 13th March 2012
quotequote all
IforB said:
New POD said:
Really? An Irish company with a plan ?
An Irish company that's making an absolute fortune. RYR are a smart bunch of so and so's, no matter what you think of their business practices.
Absolutely. Michael O'Leary is by no means my favourite business person. He's not far behind a certain Mr Murdoch and a Mr Ecclestone in my "most hated business persons" list. But the one thing you can't accuse him of is not having a plan.

New POD

3,851 posts

149 months

Wednesday 14th March 2012
quotequote all
Eric Mc said:
How rude.
I know. I really meant, how ironic that their economy is in free fall, whilst one company is pissing profit.

I hope I haven't upset no one now.

Mave

8,208 posts

214 months

Wednesday 14th March 2012
quotequote all
As far as I can work out, the only way to become a millionaire owning an airline is to start off as a billionaire....

0000

13,812 posts

190 months

Wednesday 14th March 2012
quotequote all
jamie128 said:
stuttgartmetal said:
No.
They do it for the sts and giggles.
Dont be so sarcastic, i dont think buses/trains make much money its just a service
Oh dear.

Eric Mc

121,779 posts

264 months

Wednesday 14th March 2012
quotequote all
New POD said:
Eric Mc said:
How rude.
I know. I really meant, how ironic that their economy is in free fall, whilst one company is pissing profit.

I hope I haven't upset no one now.
Their economy is NOT in fee fall. There are two main aspects to Ireland's economic woes, both linked to a previous overdependence on the construction industry as a major element of the economy -

government debt (largely due to government guarantee of Irish banks - not brought about by government overspending (unlike the UK and Greece)

massive job losses in the construction industry

In many other areas Ireland is doing rather well. Only last week, a number of hi-tech companies anounced expansion in Ireland and thousands of new jobs.

Ryanair is doing remarkably well and is probably the most profitable airline in Europe, if not the world - despite falling passenger numbers at Irish airports.

Of all the countries in Europe facing dire economic problems, Ireland is by far in the best position to claw itself out of the mire.

Prawo Jazdy

4,944 posts

213 months

Wednesday 14th March 2012
quotequote all
This is very generalised, but the figures i've seen are that on a typical 150 seat aircraft (A319 for example), assuming the flight is full and taking an average ticket price across the aircraft, about three seats represents the profit from that flight. A huge amount of it was fuel, then there is the cost of the aircraft lease, overheads from the airline, route charges, airport charges, maintenance... It really does seem a slim margin if the example I saw was in any way representative.

walm

10,609 posts

201 months

Wednesday 14th March 2012
quotequote all
Prawo Jazdy said:
This is very generalised, but the figures i've seen are that on a typical 150 seat aircraft (A319 for example), assuming the flight is full and taking an average ticket price across the aircraft, about three seats represents the profit from that flight. A huge amount of it was fuel, then there is the cost of the aircraft lease, overheads from the airline, route charges, airport charges, maintenance... It really does seem a slim margin if the example I saw was in any way representative.
For an average airline that may be true.
You can take a real example, in this case the world's "favourite" airline Ryanair.
Using the figures from the March 2011 year end annual report:
Number of flights: 463,460
Adjusted net profit: EUR400.7m

So about EUR865 net profit per flight.

PAX: 72.1m
Total revenues: EUR3,630m

So average passenger pays c.EUR50 per flight (includes all "ancillary" charges).

So EUR865/EUR50 implied that it is the last 17 passengers who make up the entire profit for the flight.

However, none of this escapes the fact that airlines now privatised are run for profit rather than subsidised by the state (e.g. NHS) or non-profit making (e.g. Oxfam).

Indeed fuel costs are the largest line item, at 33.8% of sales and vary wildly having been 42.7% back in 2009.

stuttgartmetal

8,108 posts

215 months

Wednesday 14th March 2012
quotequote all
0000 said:
jamie128 said:
stuttgartmetal said:
No.
They do it for the sts and giggles.
Dont be so sarcastic, i dont think buses/trains make much money its just a service
Oh dear.
What you mean Fella is

oh dear oh dear oh dear.

A follow up question may be perhaps....

Tesco's, are they in it for profit?



Eric Mc

121,779 posts

264 months

Wednesday 14th March 2012
quotequote all
stuttgartmetal might be closer to the truth than you think.

Hard-Drive

4,076 posts

228 months

Wednesday 14th March 2012
quotequote all
Either way, some of them are a bit dumb. I got away from a meeting earlier than expected yesterday so I enquired about changing my BMI flight to one an hour and a half earlier. No problem, £130 please. Clearly there was no way that was going to happen so I sat and drank coffee and went on my scheduled flight.

That is dumb and stupid from a business point of view. My view of BMI is now that they are a load of short sighted, money grabbing, inflexible twunts. £130 to change a flight that was less than that, return, in the first place? For 55mins in the air? FFS. Had they said it was £40, I could have easily justified it, that would have been £40 of pure profit, a very happy customer, and a loyal one at that.

Shame, I will go elsewhere next time. Which is a shame as the 1st officer made the most totally perfect landing I have ever experienced. So if that was you in the right seat on BD091 to LHR last night I salute you.

AstonZagato

12,652 posts

209 months

Wednesday 14th March 2012
quotequote all
I too don't get this. You are at the airport and will free up a seat on a later flight that they might just sell. You're not going to sell the seat on the earlier flight except by some sort of miracle. So the earlier plane leaves with an empty seat, which equates to lost revenue.

Yes it has a utility to me as a user, so charge me. But not some stupid amount that I'm never going to pay. That way nobody wins.

IforB

9,840 posts

228 months

Wednesday 14th March 2012
quotequote all
Hard-Drive said:
Either way, some of them are a bit dumb. I got away from a meeting earlier than expected yesterday so I enquired about changing my BMI flight to one an hour and a half earlier. No problem, £130 please. Clearly there was no way that was going to happen so I sat and drank coffee and went on my scheduled flight.

That is dumb and stupid from a business point of view. My view of BMI is now that they are a load of short sighted, money grabbing, inflexible twunts. £130 to change a flight that was less than that, return, in the first place? For 55mins in the air? FFS. Had they said it was £40, I could have easily justified it, that would have been £40 of pure profit, a very happy customer, and a loyal one at that.

Shame, I will go elsewhere next time. Which is a shame as the 1st officer made the most totally perfect landing I have ever experienced. So if that was you in the right seat on BD091 to LHR last night I salute you.
I shall pass the message on.

May I humbly suggest that you buy a flexible ticket next time. If you had, then you would have been able to change for no cost. That's the point of the flexible economy tickets y'see.

If you buy the cheap ticket and don't read the limitations, then I'm sorry, that's your issue. Buy the full fare ticket and get the benefits, or buy the cheaper one and accept the limitation. Consumer choice innit.


walm

10,609 posts

201 months

Wednesday 14th March 2012
quotequote all
Hard-Drive said:
Either way, some of them are a bit dumb...
While, bro, that was indeed a cool story, I have one point.

Do you honestly think that they randomly pick that £130 from the air?
Is it just within the realms of possibility that they might have done just a little price sensitivity analysis on it?
Are you 100% sure they didn't sell that seat to someone who absolutely HAD to be on that flight for WAY MORE than £130?

In many years of looking at various pricing schemes among different industries I would say that airlines are some of the most sophisticated.
(They have to be as the margins are so thin as the whole point of this thread shows!)

Also, I had to laugh when you suggested that a £40 change would have turned you into a loyal customer!!!
Come on - be honest!
Next time you fly you will probably take the cheapest flight available no matter what airline (budget airlines aside).
Would you really pay MORE to one of their competitors (who might well have "screwed you" for the same amount) for the very slight affront of actually charging you to change seats??

Hard-Drive

4,076 posts

228 months

Wednesday 14th March 2012
quotequote all
OK, I had about 15 mins before the check in closed for the earlier flight. So they were pretty blooming unlikely to be able to sell the seats. If it was the last one on the aircraft, then fair dinkum. If I were making the business decisions, I would have said I had more chance of selling "my" now empty seat on the later flight, at 1730, that was one of the last flights to get you into LHR at a sensible time. The flight was business, booked via a travel portal. I have a choice of flight options when I book, and provided I don't take the piss with first class or similar, I can make my own choices.

However I have just bought tickets for a holiday flight to Barbados in the summer, paid for by me, and I actually chose to fly BA rather than Virgin on account of some great service I have had from BA in the past. Both flying from LGW within about an hour of one another, and yes, the BA was actually a bit more expensive. So yes, I am loyal and won't base every decision on bottom line price.