What's Q seat/mile cost?

[druglord]

Anyone know what Qantas' seat per mile operating costs are? (domestic operations)

[Cactus Jack]

Sorry Druggo, you are in Oz now, mate! We use the metric system!

Qantas quotes an RPK (Kilometre, not Mile) of A$0.11c. That's mainline of course, Virgin Blue quotes a figure of around eight cents, and it is touted that Jetstar, Qantas' new baby LCC has an RPK of around seven sents.

Hope this helps. How's the weather in NY?

[Going Boeing]

Ben Sandilands gives the following figures in an article in this months Aircraft & Aerospace magazine.

Jetstar: 8.25cents per ASK (B717s)
7.80cents per ASK (A320s)

Virgin Blue: 8.72cents per ASK (from DJ's prospectus)

Qantas: 10.3 cents per ASK (an average of all fleets used in domestic operations)

The article points out that comparison of ASK's in itself is not a good comparison and quoting from his article - By multiplying the distance a jet flies by its ASK you arrive at the minimum average core fare that an airline must collect for each seat to cover its costs before the GST and all taxes and charges are passed on in full to the traveller.

If QF uses a larger widebody such as A330's or B767's the core fare becomes significantly lower and I understand that DJ management was alarmed at the use of the A330 on Cairns and Perth routes.

[OverRun]

And simplistically, the cost per ASK (available seat-km) can be scaled up to average fare by dividing by the load factor. At an assumed system-wide load factor of 70%, the Qantas 10.3 cents per ASK changes to 14.7 cents per RPK (revenue passenger-km). That pays for operating costs.

I wonder how much has to be added to the operating costs for head office, travel agent commissions, profit and marketing. And of course the airport charges and taxes come on top. Going Boeing tipped us off to Ben Sandiland's article in Aircraft & Aerospace magazine, and I'll go buy it to see how he has handled this.

At the least, I suggest adding 25% to the RPK, bringing up the average fare to 18.4 cents before airport charges. For SYD-MEL, 706km distance plus another 45km track kms for routing, that is approximately 750km, and it suggests they should charge an average fare of $138 one way.

Now the SYD-MEL route is a premium route, and it earns more than average, especially when the business people have to fly. So the fares charged will be higher than $138. The fares for 7th May morning one way SYD-MEL Qantas were $112, 190, 314, and $500 business. Based on a typical 737-400 configuration, and 75% load factor (the morning flights are fuller), that is 14.9c/km, 25.3, 45.5 for economy, and 66.7c/km for business class. The average fare over the whole plane is 30.2 cents per km, based on my RM assumptions. I don't envy Qantas the extra fare – it only goes to offset losing flights elsewhere.

Going Boeing noted that DJ were worried if a QF A330 was on the route. The A330 wouldn't have to be too full at an average fare of 30.2 cents/km before the whole flight was paid for. After filling enough seats at the above fares to pay for the flight, that would leave about 140 seats in economy empty. These can be marginally costed (that's economist talk for fire-sale). Let's assume $7.50 per passenger catering marginal cost, plus another $7.50 for ticketing (if not web specials) – say $15 actual cost. QF can throw these seats into the marketplace at anything from $15 upwards and make money. The parallel DJ flight would be looking a bit empty if DJ was still selling seats at their 7th May normal range of $99-199.

[druglord]

thanks for the replies. I was wondering if less competition kept the seat/mile cost up, which may be the case cf to here, but not significantly so. US Air has to get theirs down from 10 to 8 cents/mile to be competitive with Southwest which is currently running on 6 cents/mile. The LLC's are bringing wages down to 58k for left seat on the 170's and the race to the bottom continues.... Anyway the weathers great the industry is going down the gurgler, hope it has a brighter outlook down under.