When Will SWA have a Regional?

[kevdog]

Does Southwest fly into Tahiti?

 

[PHXFLYR]

Not yet.........


PHXFLYR

 

[Snoopy58]

Tahiti will be announced in 2009 as a codeshare with ATA.

And about 70 years after that, SWA will run out of new places to make money with 737's in domestic service.

 

[kevdog]

and the 787 will have a common type with the 737.

 

[CMonBoard]

Next, FDJ2, RJ's are high cost PER SEAT MILE, they are also high revenue PER SEAT MILE. Which makes more sense, flying a 130 some seat into a market that demands 50 seats, or flying a 50 seat airplane.

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Indypilot, I'm not flaming you, but please tell us how a regional jet is high revenue per seat mile? If you haul 50 pax 500 miles and LUV hauls 137 pax 500 miles and you are each a LCC charging an average ticket price of, say, $80?

My figures may be off slightly, but I just don't see how an airplane that carries 50 people can be profitable without the high fares of days past.

 

[Indypilot]

Next, FDJ2, RJ's are high cost PER SEAT MILE, they are also high revenue PER SEAT MILE. Which makes more sense, flying a 130 some seat into a market that demands 50 seats, or flying a 50 seat airplane.

========
Indypilot, I'm not flaming you, but please tell us how a regional jet is high revenue per seat mile?

Check out the RASM's of any RJ operator. Generally, because of the shorter stage length, the RASM is around .16-.25. That is a HIGH RASM compared to the bigger airlines is it not?

If the average ticket price is $100 (to make the math easy) over the same stage length (500), the equation looks like this.

Revenue/Available Seat Miles

(50*100)/(500*50) = .200

(137*100)/(500*137) = .200

Notice how they are the exact same at full LF.

Generally though, the NB equipment flies further lowering the RASM and the RJ's fly shorted stage lengths. Therefore, RASM averaged out over an airline is higher for the RJ carriers.

But my point was this

If that same market only has demand for 50 people, the equation changes significantly.

(50*100)/(500*50) = .200

(50*100)/(500*137) = .073

Now who has the higher RASM in this market.


Keep in mind a carrier with a RASM/CASM of .04/.04 is in the same place as a carrier with .30/.30, They are breaking even.

 

[Snoopy58]

Now do the math if you're selling 120 tickets... one load on the 737 at 90ish% LF, and 3 loads on the RJs at 80% LF... now what's it look like? Who's got the better deal to move the 120 pax?

If you've always got exactly 50 people to move, a 50-seat jet will probably be the most economical way to do it. If you've always got 137, a 737 will beat the RJ. If you've always got 400 to move, heck, go for the 747! CASM gets lower as the jet gets larger... but you NEVER have exactly X number of people to move on a particular route, as things are just too fluid.

Simple RASM/CASM numbers don't capture all the dynamics of airline economics, because if they did SWA wouldn't fly 737's between SAN and OAK or DAL & HOU... they'd fly 747's or 777's on those routes! But they don't & nobody else does either... even though the number of tickets sold (by itself) would seem to justify a huge jet with super-low CASM as a big competitive advantage.

I don't dispute that RJ's are economically viable in a particular niche, but it's entirely possible to make money without ever having to venture into that niche market. And it's quite common to use the RJ's outside that niche, where their economics aren't nearly so wise.

Although maybe in 2079, SWA will have exhausted all the other options & will need to go in to that niche. Maybe.

 

[Indypilot]

Now do the math if you're selling 120 tickets... one load on the 737 at 90ish% LF, and 3 loads on the RJs at 80% LF... now what's it look like? Who's got the better deal to move the 120 pax?

Yes, that is correct, thank you for proving my point. If demand is there, the RJ is higher cost. The original contention was that RJ's are high Cost / Seat Mile airplanes. That is true, but they are also high Revenue / Seat Mile airplanes. it is a simple cost vs revenue equation. The number of seat miles is obviously stage length dependant. I can fly the RJ for 1500 miles on average and get the CASM way down, but the RASM will go way down as well. All Im saying is that you cant just point at the RJ and scream it's high cost. As you point out it has an economic niche and exploiting that niche is how to make money.

If you've always got exactly 50 people to move, a 50-seat jet will probably be the most economical way to do it. If you've always got 137, a 737 will beat the RJ. If you've always got 400 to move, heck, go for the 747! CASM gets lower as the jet gets larger... but you NEVER have exactly X number of people to move on a particular route, as things are just too fluid.

I agree, you also have to add a second dimension of time into the demand equation. What type of airplane (how many seats) should be flying at what time from point A to point B. If demand at noon is less than at 5pm maybe an RJ would work better. Then there is the frequency argument. Now we have all seen how well this worked for us, so i don't agree with it, but the argument states that the more choices a customer has, the more likely he is to fly you vs the airline that only has 2 flights. Again I don't agree with that argument, but it exists.


Simple RASM/CASM numbers don't capture all the dynamics of airline economics, because if they did SWA wouldn't fly 737's between SAN and OAK or DAL & HOU... they'd fly 747's or 777's on those routes! But they don't & nobody else does either... even though the number of tickets sold (by itself) would seem to justify a huge jet with super-low CASM as a big competitive advantage.

Again, I agree with you. This is just one factor. But this whole discussion started because someone stated only half of the picture. (RJ's are high casm airplanes) The argument you make above is the other half of the picture. RJ's HIGH CASM/RASM. WB LOW CASM/RASM. Each has its place. you cant compare them until you stage length adjust the numbers.

I don't dispute that RJ's are economically viable in a particular niche, but it's entirely possible to make money without ever having to venture into that niche market. And it's quite common to use the RJ's outside that niche, where their economics aren't nearly so wise.

Although maybe in 2079, SWA will have exhausted all the other options & will need to go in to that niche. Maybe.

That was my contention all along, It's not gonna happen anytime soon, but eventually (law of diminishing returns) SW has to run out of places to fly the 73. It might not happen until 2079, but it will eventually happen

 

[Ty Webb]

Airtran tried it, as someone else pointed out, and found that it was more expensive to operate the RJ's, they had a worse completion factor, and dragged the whole system down in terms of operational performance and completion factor.

Sorry, IndyAir, but the 50 seat RJ is on its way out, not in, as far as I can tell.

And, BestPilot, that rumor was definitely floating around the crew room a month ago, but I haven't heard anything to support it. Besides, I'm holding out for Alaska .

 

[FlyBoeingJets]

And, BestPilot, that rumor was definitely floating around the crew room a month ago, but I haven't heard anything to support it. Besides, I'm holding out for Alaska .

Does that mean I should start calling you Capt Webb??

 

[Ty Webb]

Usually, they just call me a taxi, and send me home.

 

[Filkster]

The recent news of SWA expanding at MDW has me wondering when SWA will have it's own brand of feeders.

They already have the feed they need by the pax driving hundreds of miles to fly on SWA. Who needs high cost per seat mile regional feed when your pax will happily drive half way through the next state to catch a 400 mile flight?

RF

 

[FDJ2]

Next, FDJ2, RJ's are high cost PER SEAT MILE, they are also high revenue PER SEAT MILE. Which makes more sense, flying a 130 some seat into a market that demands 50 seats, or flying a 50 seat airplane.

Indypilot, the days of high yield business flyers are over. It's a low cost world and the high cost RJ just doesn't cut it. Look at your own company as an example. Indy is shedding their high cost RJ fleet as fast as possible, they aren't deploying those RJs to the mythical high yield market they were using them in just a year ago.

 

[FDJ2]

Check out the RASM's of any RJ operator.

The RASM of most every RJ operator, with the notable exception of Indy, comes from the fee/departure paid by their mainline partner, not by the actual pasenger revenue on board the aircraft.

 

[Indypilot]

Indypilot, the days of high yield business flyers are over. It's a low cost world and the high cost RJ just doesn't cut it. Look at your own company as an example. Indy is shedding their high cost RJ fleet as fast as possible, they aren't deploying those RJs to the mythical high yield market they were using them in just a year ago.

Yield is a function of TWO things, price and DISTANCE. RJ's are typically used on short DISTANCE flights, hence the higher RELATIVE yields. Even our yield in the HORRIBLE 4th quarter was 17 cents. Show me a major that has that kind of YIELD.

A few years ago in the HIGH YIELD market, The RJ still had a higher yield than the narrowbodies because they fly shorter distances. DO THE MATH, its a simple fraction.

100/250 or 100/1000 which one is less?

Im not saying RJ's are the best thing since sliced bread. All I'm saying is that there is a niche for them. The only reason Indy is getting rid of them is because there are not enough airbusses to justify that many RJ's.

 

[Indypilot]

The RASM of most every RJ operator, with the notable exception of Indy, comes from the fee/departure paid by their mainline partner, not by the actual pasenger revenue on board the aircraft.

Wow, I don't even know where to begin with that statement.

Lets just do the math shall we. The average regional for a major flies at about a 75% LF, and most get around $3000 (which is probably a high estimate) per flight.

That means 37.5 seats per flight are filled. So what does that leave for an average ticket price 3000/37.5=$80

Whether they get FPD or charge an average ticket price of THE EXTREMELY HIGH (note sarcasm) $80, they end up with the same RASM.

The way they get their money doesnt matter, RASM is a function of 3 things, Ticket price, DISTANCE, and LF.

Are you telling me that if delta went away from the FPD contranct that somehow magically their regionals RASM would plumit down? How would that happen, delta still controls pricing, and distance flown. That leaves LF, How in the world would comair and ASA's LF go down because they aren't being paid by FPD anymore. Granted it would go down a bit because they aren't being guaranteed a profit anymore, but it would go from 20 cents to 19.5 cents. The only thing this hinges on is DISTANCE, not how you are paid, or where the money comes from.

If you truely believe that losing the FPD contracts would bring regional RASMs down to the majors level, you need to seek some serious help.

 

[FDJ2]

Yield is a function of TWO things, price and DISTANCE. RJ's are typically used on short DISTANCE flights, hence the higher RELATIVE yields. Even our yield in the HORRIBLE 4th quarter was 17 cents. Show me a major that has that kind of YIELD. Unfortunately, the cost is in the neighborhood of 20 cents making a breakeven load factor over 100%.

A few years ago in the HIGH YIELD market, The RJ still had a higher yield than the narrowbodies because they fly shorter distances. DO THE MATH, its a simple fraction.

100/250 or 100/1000 which one is less? You also have to factor in costs and in todays environment the yield just isn't there to support the high RJ costs in most markets. The RJ bubble burst a couple of years ago. Airtran, to its credit, saw that RJ economics just don't add up and ditched the whole RJ feed concept. Going back to the original topic of this thread,when will SWA use feeders? My guess is no time soon if they want to remain profitable.

Im not saying RJ's are the best thing since sliced bread. All I'm saying is that there is a niche for them. The only reason Indy is getting rid of them is because there are not enough airbusses to justify that many RJ's.

I agree with the last statement. The RJ does have a niche market, unfortunately for both Indy and DAL, the RJ to mainline aircraft ratio is out of whack.

 

[FDJ2]

Wow, I don't even know where to begin with that statement.

Lets just do the math shall we. The average regional for a major flies at about a 75% LF, and most get around $3000 (which is probably a high estimate) per flight.

That means 37.5 seats per flight are filled. So what does that leave for an average ticket price 3000/37.5=$80

Whether they get FPD or charge an average ticket price of THE EXTREMELY HIGH (note sarcasm) $80, they end up with the same RASM.

The way they get their money doesnt matter, RASM is a function of 3 things, Ticket price, DISTANCE, and LF.

Indypilot, you are not factoring in many of the additional costs associated with flying that passenger, such as fuel. Most major partners cover the fuel costs for the fee/departure flights. You also don't factor in security fees, taxes, marketing, distribution etc., get the picture. The $3000 paid for that one hour flight doesn't cover the total costs of getting those passengers onboard and to their destination, which is probably not the hub. So after paying all those cost for the first 200-300 miles of the journey to the hub, how much money is left over from that ticket to cover the costs of the CVG-LAX leg?

 

[Indypilot]

Indypilot, you are not factoring in many of the additional costs associated with flying that passenger, such as fuel. Most major partners cover the fuel costs for the fee/departure flights. You also don't factor in security fees, taxes, marketing, distribution etc., get the picture. The $3000 paid for that one hour flight doesn't cover the total costs of getting those passengers onboard and to their destination, which is probably not the hub. So after paying all those cost for the first 200-300 miles of the journey to the hub, how much money is left over from that ticket to cover the costs of the CVG-LAX leg?

What the crap are you talking about? We are talking about the REVENUE side of things. Nowhere did I mention costs.

YOU said the RJ's high RASM comes from FPD agreements. RASM if you will recall is REVENUE / AVAILABLE SEAT MILES.

Notice how nowhere in that bold print do you see the word cost.

Let me REAL clear about something here. I am not arguing that RJ's are profitable. There is a HUGE difference between what you are arguing and what you think I am saying.

I am by NO means suggesting that RJ's are profitable. All I am saying is that There RASM and CASM are HIGHER than the majors because of the short stage length.

Maybe you are confusing some of the terms here. RASM and CASM are just averages. Profitablility is the difference between those numbers. Yes FPD contracts guarantee profit. But your statement about high RASM coming from FPD contracts is not true. Profit comes from the FPD contract, but not because of the REVENUE side, it is because of the COST side. Regionals, as you just pointed out, have relatively low CASM's (FOR AN RJ) because they don't pay alot of things that the major pays for. But that doesn't mean those costs disappear, they are simply transferred over to the major.

ALL i am arguing is that CASM and RASM is higher for RJ's. I never meant to imply that the difference between the two (profit/loss) is better on an RJ.

 

[FDJ2]

Indypilot, chill out. Step back a second and catch your breath.


Let's talk about RASM. In an earlier post you stated, "RASM is a function of 3 things, Ticket price, DISTANCE, and LF." O.K., but that is not necessarily so for the average RJ operator, since their RASM, as you pointed out, does not have anything to do with ticket price, it only has to do with the fee it is paid for each departure. I think we can agree on that, making the typical RJ route RASM meaningless to SWA, since they are interested in actual inome from the ticket.

Now let's talk about yield. How much money is actully paid by those 37.5 pax to fly that one leg into the hub, not how much the mainline partner compensates the carrier for simply providing the lift. So what is that yield? That's a tough number to break out, but if it were high enough to sustain profitability Indy would be rolling in the cash serving their traditional high yield market. But those passengers don't want to just go to the hub, most want to connect to another destination and they are not willing to pay what they once were. So how much of that now diminished ticket price goes for flying a pax to IAD and how much goes for that IAD-SFO leg? That's a very tough number to break out, but given the current low cost environment, it is probably insufficient for the high cost of the RJ seat.

CASM, the cost to move one available seat one mile can not be ignored when discussing aircraft economics. We all know that the actual CASM of an RJ is significantly higher then most RJ operators publish. That is because traditionally the mainline partners have subsidized the entire RJ operation. But those costs need to be accounted for in any meaningful discussion.

Now the original topic of this thread is when will SWA attain RJ feed, that discussion has to include the Actual Yield, Actual RASM and Actual CASM. You can not ignore those numbers and pick and choose.

My own personal conclusion, given todays economics, SWA would be very foolish indeed to delve into RJ feed if it wants to remain profitable. Given SWA's business philosophy of keeping it simple and keeping the cost down, SWA is also probably not inclined to look for RJ feed anytime soon. So therefore I don't expect SWA to look for RJ feed in the foreseable future.