PPRuNe Forums - View Single Post - No-frills kangaroo ready to hop
View Single Post
Old 25th Oct 2003, 18:38
  #164 (permalink)  
OverRun
Prof. Airport Engineer
 
Join Date: Oct 2000
Location: Australia (mostly)
Posts: 726
Likes: 0
Received 0 Likes on 0 Posts
Not quite sure how Gottliebsen did his calculations, and got "2.5% of the passengers provide about a fifth of the revenue".

Lets take a QF international and a QF domestic example to check it out. First international:

SYD-LHR = 17016 kms great circle; say about 34000 return kms. For simplicity, two classes of pax: business class @ $A8500 return and discount economy @ $1700. BTW it doesn't change much if a more complex mix is used. Gottliebsen had "2.5 per cent of the passengers provide about a fifth of the revenue" which I interpret as 2.5% in business class. Business class runs @ 25 Oz cents per pax-km. Discount economy @ 5 cents per pax-km. So per 100 pax, the 2.5 business pax provide 0.625 cents per km, and the 97.5 economy pax provide 4.870 cents per km. All up, that's 5.495 cents per km, and the business class provides 11%. The figure might be conservative, because when the corporate deals are put in, the business class fare drops to 21-22 cents per pax-km. Maybe my interpretation was wrong, and he meant 2.5% in first class. Well, change the mix to be 2.5% in first class, 70% load factor in business and 85% load factor in Y class; with one of the 14F/79J/265Y 747-438 Longreach aircraft. F is $A12345 return. The 2.5% in first class are still only 12% of the revenue.

Now domestic: SYD-MEL; say about 1410 return kms. Two classes of pax: business class @ $A474 return and various discount economy @ $200. Gottliebsen had "2.5 per cent of the passengers provide about a fifth of the revenue" which I interpret as 2.5% in business class. Business class runs @ 33.6 Oz cents per pax-km. Discount economy @ 14.2 cents per pax-km. So per 100 pax, the 2.5 business pax provide 0.839 cents per km, and the 97.5 economy pax provide 13.810 cents per km. All up, that's 14.649 cents per km, and the business class provides 6%. Again the figure is conservative, because when the corporate deals are put in, the business class fare drops to 26-28 cents per pax-km.

Nowhere is business class (or first class) providing a fifth of the revenue. The business class argument is a smokescreen in Australia for the more complex drivers behind the fundamental business change that Qantas are driving for with the LCC. Possible flight crew cost change is another smokescreen, and IMHO is one that won't be pushed too hard. These aren't the things which are the major cost differentiators between mainline and low-cost operation for any airline, and the QF LCC agenda is focused elsewhere.
OverRun is offline