Originally Posted by
EI-BUD
If the 319s filled up on connecting passengers alone, are you suggesting that the service would be unprofitable? I would suggest if BA HQ take that view and dont consider the value of the sales of the onward flights it is a tad foolish. ........However, turn this to a bmi statement, where it only got the portion of revenue on the domestic then fed into partner airlines, that is a different story.
Whether a connecting passenger on a domestic sector is seen as profitable or not depends entirely on how the revenue from their overall journey is distributed between the two flights. At the end of the day there is
no golden accounting method of doing this, because in a network it is entirely arbitrary how the revenue is split between flights. Doing revenue attribution between the two is an accounting convenience but should NOT be used for strategic management decisions.
IATA used to do revenue division on interline fares by dividing the fare paid by the square root of the mileages of the individual sectors. This gives some additional advantage to the short sector compared to doing it just on a mileage basis, where the short domestic sector can just collect small change, notwithstanding that on standard fares alone the two sectors, looking at point to point fares might actually be close to equality. I have certainly bought tickets on BA where a London-Edinburgh return was more than 50% of what I had recently paid for London-Miami. But on a through ticket from Edinburgh to Miami, which would often be pretty much the same as just London to Miami, on a strict mileage basis the domestic leg would get less than 10% of the fare, on the square root basis it gets about 22%.
Now the flight from London to Edinburgh probably doesn't break even on the half load which is point to point, but if it were not for the millions of pounds of connecting revenue that the connection delivers to Heathrow it may well be not worthwhile at all.
So the real benefit is that you get both sets of passengers into one aircraft, and market an overall network from all points to all points. The same effect impacts Lond Haul connecting flights as well. I understand that BA's No 1 intercontinental/intercontinental connection is Mumbai-London-Toronto; the fare for that will, once again, be less than the sum of the two
You are quite right that BA gets the benefit of the whole revenue on most domestic connections, only a minority interline onto other OneWorld carriers, whereas BMI was mainly interlining onto United, Air Canada, Singapore, etc. This was a significant part of the BMI loss.