Profit Margins a380 vs 747-8

[Ianp83]

There has been a lot on the forum lately re CX new acquisitions and the choice between a380 and 747-8. It got me wondering what the profit margins are on any given 3 class LH flight; for arguments sake LHR to HKG.

How tight are the airlines margins?

I appreciate there are lots of factors involved eg. Cargo, full fare biz pax etc but are the differences between the two aircraft hundreds of pounds per flight or thousands??

[ATNotts]

I am guessing that the question is not so much about profit margins, but operating costs - principally fuel consumption.

After you've established which aircraft is cheaper to operate, then it comes down to how much can be earned from the passenger and cargo uplift, and I believe I read that with a full passenger load (whatever that may be, given a 3 class split) the cargo capacity on a 380 is somewhat limited, though how limited in comparison with a 747-8 I don't know.

[The SSK]

If you look at Lufthansa's configurations - 8/92/262 for the 747-8 and 8/98/420 for the A380 - it is immediately obvious that these are very different aircraft for different markets. Using a 380 in a market for which the 747 is ideally sioted would result in a hell of a lot of empty seats. Using a 747 in a market ideally suited to the 380 would give no or virtually no price leverage in the premium cabins. It is up to the planners to do their job well and assign each aircraft to the appropriate routes.

[PAXboy]

Those people in a company who do know what the margins really are - have been sworn to silence under pain of death!

For carriers, the mix of costs and payback on aircraft purchased is extremely complex and there is the pressure to ensure that the aircraft is (at the very least) seen to be profitable. No matter what the profit margins, not many carriers admit they bought the wrong machine!! :oh:

[Peter47]

I'm afraid that I'm now an outsider but analysis I saw a few years ago showed that airlines lost money in Y but made stacks in J. Obviously its not as simple as that as Y may be profitable during the school holidays and heavily loss making at off peak times such as February on the North Atlantic.

You are also talking about contributions - I've just bought a round trip with KLM from LHR to AMS for £100. They certainly wouldn't make money if everyone paid that fare, but even after APD, airport passenger fees, etc, they are better off carrying me than having an empty seat (assuming that it would be empty). (I could bore you at length with a description of contribution accounting but you wouldn't thank me.)

You might say when not go for all J? Well that's OK with small aircraft (319s from LCY to JFK) but it won't work if you cannot fill J. You could try switching between seats classes - that happens a lot on short haul but is not really practicable in LH. (Many years ago BA had Super Club and would shift the cabin from 9 abreast Y to 6 abreast J. Now days you would have to physically remove one set of seats and install another. Actually I'm surprised that BA doesn't not that seasonally with its 747s but I'm sure they would do if it made sense.)

Actually I did a doodle a couple of years ago and worked out that there was a reasonable correlation between the proportion of J seating (and possibly F - not so sure about that) and the relative profitability of an airline, for example BA tends to have the lowest density out of LHR on the North Atlantic and was the most profitable airline. The operative word is doodle, you would need to know profitability by region and ideally route which you won't get in the public domain.

There's no doubt that its the premium traffic that the airliners are after, you will note that IAG splits out results by premium and other traffic. A number of LH routes from the UK regions have achieved good load factors but been withdrawn because they made a loss due to low yields.

High yield traffic likes frequency. (I'm a low yield passenger & I'm travelling back from ZRH to LHR by LX rather than BA because BA doesn't have a mid afternoon on the day I am flying and I hope(!) to get back for an evening meeting in London.) UA may push this a little far with their single aisle 757s between EWR & LHR but airlines like frequency - the airline with the highest frequency generally gets a disproportionate share of revenue (its called the 'S' curve and I've no idea how VS's model works). CX likes frequency and the 77W may well in any case be cheaper per seat mile than the 748 (I am happy to be corrected on this). I would therefore expect CX to go with the 77W & 350-1000. LHR is so slot constrained and has such a large market that it could well justify the 748 but I wouldn't have thought that that the aircraft makes sense for many other routes.

What I don't know is the relative passenger appeal of the A380 v the B748. Certainly airlines had to have 747s in the early 70s and BOAC made money with the VC10 despite its inferior economics compared with the 707 owing to its greater passenger appeal (or so its fans would say).