Profitability
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Profitability
I have just read that the US carriers…. the legacies have announced their 2nd quarter earnings. This is just for 3 months from April 1 to end of June:
AMR $864 million NET profit
DAL $889 million NET profit.
UAL $789 million NET profit.
This is really unbelievable as it's nearly what EK netted in 12 months.
What is completely perplexing about this is how those carriers are able to accomplish such impressive numbers what with their higher fuel costs,
union paid employees, etc compared to EK which has arguably some pretty favorable elements to it's business model.
K
AMR $864 million NET profit
DAL $889 million NET profit.
UAL $789 million NET profit.
This is really unbelievable as it's nearly what EK netted in 12 months.
What is completely perplexing about this is how those carriers are able to accomplish such impressive numbers what with their higher fuel costs,
union paid employees, etc compared to EK which has arguably some pretty favorable elements to it's business model.
K
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Delta pilots have a very lucrative profit sharing scheme. I just bumped into one on a layover here in the UK and he sounded very happy with his total comp package. That's pretty rare these days......
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EK tickets are generally cheap, especially for 2 long-haul transit flights. Their audience are largely low income passengers, versus the relatively wealthy passengers on US airlines.
Whilst they may be filling seats, I can't see much margin at the moment. I always assumed that EK's strategy was to build the brand, build the loyalty whilst still expanding. Then at some point in the future hike the prices.
They are certainly spending huge sums of money on advertising to support the expansion. I'm sure that won't go on forever, and then may be added to the bottom line.
Have the US guys not had their pensions raided though?
Whilst they may be filling seats, I can't see much margin at the moment. I always assumed that EK's strategy was to build the brand, build the loyalty whilst still expanding. Then at some point in the future hike the prices.
They are certainly spending huge sums of money on advertising to support the expansion. I'm sure that won't go on forever, and then may be added to the bottom line.
Have the US guys not had their pensions raided though?
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This Delta pilot mentioned no more pension scheme but instead a very good 401K with generous matching. They also have profit sharing every quarter - and Delta has done quite well.
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Maybe it has to do with how many A380s these US airlines operate .....
( .... was just a joke to make some buddies jump on this forum!)
If you followed the net yield of EK, it dropped continuously throughout the last years. There is the cheap ticket factor, to lure in customers, but the loyalty effect does not materialise. The customer of today is not stuck in the desert, as lots of EK employees. He choses the cheapest fare there is and does not care about the tail painting. Therefore EK is stuck as a low cost LH carrier, and this does not really pay. Most cherished premium seats are occupied by upgrades of almost give-away cheap tickets and by simply adding capacity EK increases that problem. Additionally the T+Cs of the frontline employees have eroded to the point that the motivation and therefore the service followed the downward spiral of the pay, attracting a different clientele, and finally putting off even more premium customers.
How to get out? EK needs to reduce seats, especially the discounted leading to over bookings in Y, and improve the overall service quality if they want to sell C and F tickets to the intended price.
The other path is to go the whole way as a low cost carrier, with all the trimmings. But i guess they know about the abyss waiting in such a case. EY and Qatar are just waiting for the neighbouring giant to stumble .... and they couldn't care less about genuine profits!
( .... was just a joke to make some buddies jump on this forum!)
If you followed the net yield of EK, it dropped continuously throughout the last years. There is the cheap ticket factor, to lure in customers, but the loyalty effect does not materialise. The customer of today is not stuck in the desert, as lots of EK employees. He choses the cheapest fare there is and does not care about the tail painting. Therefore EK is stuck as a low cost LH carrier, and this does not really pay. Most cherished premium seats are occupied by upgrades of almost give-away cheap tickets and by simply adding capacity EK increases that problem. Additionally the T+Cs of the frontline employees have eroded to the point that the motivation and therefore the service followed the downward spiral of the pay, attracting a different clientele, and finally putting off even more premium customers.
How to get out? EK needs to reduce seats, especially the discounted leading to over bookings in Y, and improve the overall service quality if they want to sell C and F tickets to the intended price.
The other path is to go the whole way as a low cost carrier, with all the trimmings. But i guess they know about the abyss waiting in such a case. EY and Qatar are just waiting for the neighbouring giant to stumble .... and they couldn't care less about genuine profits!
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EK ticket cheap !!!!
For the last 5 years , each time I go home ( 3 times a year ) A buy a ticket with any company except EK which is ALWAYS the most expensive.
Example economy ticket DXB-CDG-DXB EK around 4500 Dhrs
KLM , Austrian , Lufthansa around 2400 Dhrs
It is not always the same company which is cheaper but it is always around these numbers and EK has never been cheaper...
For the last 5 years , each time I go home ( 3 times a year ) A buy a ticket with any company except EK which is ALWAYS the most expensive.
Example economy ticket DXB-CDG-DXB EK around 4500 Dhrs
KLM , Austrian , Lufthansa around 2400 Dhrs
It is not always the same company which is cheaper but it is always around these numbers and EK has never been cheaper...
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I guess it depends on your route. Ex-uk they are relatively cheap in every class. Maybe because they have so much capacity to fill.
And to be honest the value is very good, the A380 is great to pax on. Huge selection of schedule to suit. The IFE excellent. Double the service out of the UK compared to other European destinations, much to the dismay of the poor cc.
Usually people do pick the cheapest ticket via an internet search engine, but in this case I would pay more to go on EK, yet they are the cheapest to most destinations.
And UK is one of their richest markets. The problem with the A380 is if you aren't filling the seats, then you have to charge a premium to cover the costs.
It is strange how the US airlines are bankrupt one year, and monstrously profitable the next. But then the vast majority is domestic. Someone is paying for it, if not the employees, then the tax man, customers, airports etc.
Compare the experience with a BA 772, for 20% more...
And to be honest the value is very good, the A380 is great to pax on. Huge selection of schedule to suit. The IFE excellent. Double the service out of the UK compared to other European destinations, much to the dismay of the poor cc.
Usually people do pick the cheapest ticket via an internet search engine, but in this case I would pay more to go on EK, yet they are the cheapest to most destinations.
And UK is one of their richest markets. The problem with the A380 is if you aren't filling the seats, then you have to charge a premium to cover the costs.
It is strange how the US airlines are bankrupt one year, and monstrously profitable the next. But then the vast majority is domestic. Someone is paying for it, if not the employees, then the tax man, customers, airports etc.
Compare the experience with a BA 772, for 20% more...
Last edited by Xulu; 26th Jul 2014 at 08:08.
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When I look for fares on almost any routing where EK might be an option, typically between EU and ZA, they invariably come up as the cheapest or within the bottom three, so I am surprised to see people saying they are expensive. They seem to to have massive capacity and flexibility in their YM system so that they can nearly always undercut other carriers.
I wouldn't fly via DXB if they paid me, but that's another story.
Talking about profitability, I am reminded of the joke about a business owner who was interviewing an accountant. He shortlisted three and asked each of the them a simple mathematical question.
One gave the simplest correct answer.
One gave three possible answers depending on how the question could be interpreted.
One looked over his shoulder and said : "How much do you want it to be?"
You may guess which got the job.
I wouldn't fly via DXB if they paid me, but that's another story.
Talking about profitability, I am reminded of the joke about a business owner who was interviewing an accountant. He shortlisted three and asked each of the them a simple mathematical question.
One gave the simplest correct answer.
One gave three possible answers depending on how the question could be interpreted.
One looked over his shoulder and said : "How much do you want it to be?"
You may guess which got the job.
Last edited by Capetonian; 26th Jul 2014 at 08:12.
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Of the 18 legs I've paxed to/from/in the States in the last 6 months, on 15 they were paying people to get off. Also, the prices have been ticking up (up to 80% dearer) over the last couple of months. Full flights plus high prices = profits.
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After all the consolidation in the US, 4 airlines control 80% of all the traffic here. We essentially have a type of oligopoly, which is the primary reason we are seeing very high earnings. This most likely will not last forever.
