XRlent100 said:
... and you get a price increase of $2.08 per passenger. Not quite the $500 you talk about. Even to give the piss ant F/O the same pay rise is only $4.16 per passenger....NOT VERY MUCH IN MY BOOKS.
The $500 increase I referred to was applicable to the RPT passengers. I very much doubt that all Skippers pilots fly 800 hours per year on RPT, whilst Network do no RPT at all. However, for the purpose of this discussion, I will regard these circumstances as being correct.
Your $4.16 claim is most probably wrong, but that is not surprising given how simplistic your calculation is. Many posters to PPRUNE come up with similar calculations to justify large salary increases for pilots and they all use the same method as yours. The method is remarkable for its simplicity but also remarkable for how many other factors it manages to ignore!
For starters, to get a net $4.16 out of a ticket price hike, considering GST and other taxes and charges that are a percentage of the price, the price rise would have to be near on $10. But, the biggest flaw in your calculation is that it assumes 100% load factors before
and after the price hike.
Do you think you can increase the ticket price by $10 and still get exactly the same number of passengers? On some flights, you will, but for those flights where you don't, the lost revenue that results from having sold 1 or 2 less tickets introduces a major descrepancy to your calculation.
It is an interesting exercise to examine the development and effects of this descrepancy so I will now do that.
Because a few less passengers will fly (due to them no longer being able to afford the ticket that is $10 more expensive), you need to go back and redo your calculation, but when you do, instead of $4.16, you come up with, say, $4.35.
But $4.35 implies, say, a $10.50 gross ticket price hike, but that in turn means you need to redo the calculation
again because even more passengers won't now be buying the ticket. So you need to keep redoing and redoing the calculation, but each time, the price hike gets larger. After a while, it dawns on you that the hike is increasing towards infinity!
For this calculation to
not "run away" towards infinity, the load factor after the hike must be no less than the load factor before. Is that possible in the real world? Yes, but only for hikes that are very very small (or the special case where load factors are 100% with demand so high that, even after the hike, the load factor stays at 100%).
So, the mechanics of this particular calculation method mean that price rises are
impossible, unless they are very very small! But in the real world, we know that largish price rises are possible, so this means that this particular calculation method must be fatally flawed -
it just doesn't work, in other words.
To do this calculation properly, you need to conduct it as a "modelling" exercise. Only that way could you estimate, reasonably accurately, how much of a hike is possible, and over which routes. Such an exercise would also show where price
decreases would ultimately result in increased revenue.