PPRuNe Forums - View Single Post - Feb 21 - Qantas due to release its first-half results today has been caught off guard
Old 22nd Feb 2013, 01:25
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Romulus
 
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Market share, whilst generally one of my least preferred metrics, is important in the airline business (and any other capital intensive business) because the fixed costs are very high compared to the variable costs.

Even allowing for fuel as a key variable cost (i.e. if you don't fly you don't pay for terribly much fuel - although there will be some for maintenance and other activities so it's not quite zero) the fixed costs associated with aircraft leasing and general organisational structure (salaries must be paid regardless of whether you fly or not etc, there may be some overtime savings by ceasing certain ops) far outweigh the variable ones. Thus market share becomes important as you have the greatest share to spread those essentially fixed costs across.

Of course, it isn't the ONLY metric but it is a key one as at 65% level there is a marked change in profitability. Over 65% and the improvement is gradual, but drop below 65% and your profitability drops very quickly as you spread those costs across a lower market share base.
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