The Red-Eye Capacity Problem

[Cardinal]

Economist Melvin Brenner in 1993, recorded in an unpublished work:

Over-capacity results from...the fact that airlines have very high fixed costs and are therefore incentivized to fly their arcraft as much as possible, even if incremental flying does not produce enough revenue to cover fully allocated costs. Whenever a flight covers variable costs and contributes to overhead, the individual carrier is better off flying rather than not flying, However, the cumulation of the many marginally-justified schedules creates over-capacity for the industry as a whole.

An interesting point to ponder next time you're cruising through the middle of the night with a planeload full of people who paid next to nothing for their ticket, with the sole intention of the airline being to pay for the fuel and maybe chip away at the lease payment.

 

[75M]

Planes on the ground don't make money.

 

[Rogue5]

Given the losses at many of the major airlines in the last few years, planes in the air don't make money either...

 

[ReverseSensing]

Planes on the ground don't make money.

Why couldn't Melvin have just said it your way. You saved, by my count, about 93 syllables.

 

[Cardinal]

Planes on the ground don't make money.

I think the point was missed - They would make more money if everybody just parked them and let those passengers fight amongst themselves for a scarce seat during periods of more normal demand, ie, daylight.

Flying seats around at less than their fully-allocated cost dumps so much capacity on the market that revenues are lowered to the point where the extra flying doesn't close the gap.

 

[ReverseSensing]

I think the point was missed - They would make more money if everybody just parked them and let those passengers fight amongst themselves for a scarce seat during periods of more normal demand, ie, daylight.

Flying seats around at less than their fully-allocated cost dumps so much capacity on the market that revenues are lowered to the point where the extra flying doesn't close the gap.

So planes don't make money on the ground, but airlines do?

 

[Ty Webb]

This isn't just about redeyes, it's a fundamental question . . . . Overcapacity exists for a variety of reasons.

I mean, how about the Legacy practice of increasing frequency to LCC destinations ("to preserve market share") , but then losing money on each flight?

I maintain that if you can't serve that market at the going rate without losing money, then you are dumping seats into the market below your cost, which would be illegal in almost any other commodity business.

So, in short, the overcapacity problem is more than just "redeyes to get incremental use of the aircraft harming the industry". Sounds like the ramblings of another egghead looking for a fellowship.

 

[BLUE BAYOU]

No, in Jetblue's case, it's not about just flying around in the middle of the night... It's about aircraft utilization. That airplane that departed at 8pm East Coast returns for work the next morning around 8am for another day's work...

 

[Ty Webb]

it's not about just flying around in the middle of the night...

No . . . . it's also about getting home in the early morning for "Happy Hour . . . . and Happy Ending". . . followed by a siesta until the kids get home from school. .



.

 

[pilotyip]

You keep missing, the point the LLC leader makes a profit. One of their secrets is they fly more on fewer airplanes and have fewer employees per airplane. Fewer of everything, including pilots, is the key. SWA pilots have near to the highest productivity in the business.

 

[dooork]

Planes on the ground don't make money.

True, but it is possible that a plane in the air could lose you more money than you make.

 

[Peardc10]

Red Eye

I fly the red eye for my company, its a great way to utilize the a/c, keep'em flying thus flying more hours a day, being more productive, lowering overall costs, etc. etc. etc.

My 5cents worth.......

 

[FlyBoeingJets]

I think the point was missed - They would make more money if everybody just parked them and let those passengers fight amongst themselves for a scarce seat during periods of more normal demand, ie, daylight.

Flying seats around at less than their fully-allocated cost dumps so much capacity on the market that revenues are lowered to the point where the extra flying doesn't close the gap.

SWA doesn't do them, Why? Because they don't have to with the mix of long and short haul flying. The pilots and aircraft are already very productive as is. Long haul carriers can't squeeze in enough legs in a day. To be "efficient" they have to do red-eyes or way under utilize crews/aircraft. If 8 hrs/day was increased to 10, I bet the red-eyes would pretty much go away.

 

[TWA Dude]

Redeye trips are more commutable.

 

[Mugs]

The legacy carriers have been flying red-eyes for decades. The number of connections from the West to the first bank out of a place like ORD in the morning is substantial and always has been. Now, after decades of such a practice, it is labled as a "capacity problem." Good grief.

 

[Lear70]

I maintain that if you can't serve that market at the going rate without losing money, then you are dumping seats into the market below your cost, which would be illegal in almost any other commodity business.

Holy crap... we agree on something. I've been saying this for the last several years: if our legislature wants to create a way to stop this bankruptcy cycle the airline industry is in, then create legislation that REQUIRES an airline to price their seats equal to or above THE COST OF OPERATING THEM!!!

If you can't operate that flight profitably, too bad, it doesn't run. I hate this mentality of "we operate flight A at a loss to get pax into the hub to operate flights B and C at a profit". They've been trying that for 3 decades and it doesn't work... you think they'd have figured that out by now.

So, in short, the overcapacity problem is more than just "redeyes to get incremental use of the aircraft harming the industry". Sounds like the ramblings of another egghead looking for a fellowship.

Maybe, but he's also partially correct. Yes, we need redeyes; some business people NEED to be on the East Coast come 8:00 a.m., but running those flights SOLELY to increase utilization yet operating those flights at only a break-even point is foolish. That redeye crew can't do ANYTHING except that one flight and now you've just burnt a crew that COULD be doing 7 hours of flying during the day on a PROFITABLE run.

Here's a news flash: increased utilization doesn't necessarily equal increased profit UNLESS YOU'RE OPERATING THOSE EXTRA FLIGHTS AT A NET GAIN, and NOT just fuel costs, crew costs, and lease payments... those G&A costs are HUGE!

If the flight loses money, cancel it. Business 101. If passengers want those flights so badly, charge more for the tickets. If the loads thin out, cancel the redeye and raise ticket prices during the day.

And yet again, this boils down to ticket price and overcapacity.

 

[mar]

But is the customer *always* right?

And yet again, this boils down to ticket price and overcapacity.

Can I breathe a little life back into this thread? Let's see.

I think one part of the over-capacity problem is the customer himself!

Everyone wants hourly departures from their home airport to their destination.

I'm willing to wager that if someone started serving LAX-JFK with A380s but only had a morning departure and an evening departure they'd go broke...even given the economies of scale!

Why? Because I believe the customer doesn't know what's good for him. He'd rather pay peanuts (no disrespect to SWA, but let's be honest) and have the choice of leaving some satellite airport, making a connection, suffering no service and being crammed in high density seating!

And even though the airline gave him exactly what was demanded he'll complain about it!

It's crazy. And only psychopaths get into airline management. That's all I know. Good luck.

 

[mar]

Well, that about sums it up.

Can I breathe a little life back into this thread?

And that answers that.
G'night!

 

[HAL]

A lesson to be learned here is that there is more than one way to run and airline! Just because SWA does it one way doesn't mean that is the only way to do it.

America West has a very profitable (and very full) redeye bank out of LAS every night, but not one out of PHX. Why? Because that is when the passengers want to leave LAS after a day of gambling. The passengers out of PHX are more business oriented and don't want to leave at 11pm to go to the east coast. The few that do go to LAS to catch a flight there.

If it works, and can make money, do it. If you need to have more planes in position that will earn more revenue in the morning off the east coast and you come out ahead by doing it, then go and fly mostly empty planes on redeyes back to their base.

You have to look at the whole picture before knocking one business plan over another.

HAL

 

[Lear70]

If it works, and can make money, do it. If you need to have more planes in position that will earn more revenue in the morning off the east coast and you come out ahead by doing it, then go and fly mostly empty planes on redeyes back to their base.

You have to look at the whole picture before knocking one business plan over another.

HAL

You're ABSOLUTELY correct. If you're charging A DECENT FARE for those redeyes then, by all means, GO FOR IT!

What the article was saying and what I agree with is this low-ball pricing of redeye flights just to fill seats. Capacity doesn't help when the ticket prices are losers.