Surprising fare differences between classes...
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Surprising fare differences between classes...
Reading another link to Airline Business, they quoted the following fare yields for BA London-New York Sector (per km):
1.70p in economy, 33.80p in business, and 59.44p in first.
I wonder how airlines got to a position of there being such a massive difference between basic and luxury services.
For example, I can get a cheap economy hotel room in London for £70, but a luxury 5-star hotel room for maybe £280, a factor of 4:1.
Would any hotel business get away with charging £1400 for a hotel room in London, or even £2500, scaled as per the BA fares?
I'm not particularly complaining, in fact quite in admiration of how a business can get away with establishing such differences as "normal". Is there any other service industry which can boast similar factors between basic/luxury products?
Is it a lack of competition on such sectors that enables such massive yields? i.e. LHR slots all sewn up?
1.70p in economy, 33.80p in business, and 59.44p in first.
I wonder how airlines got to a position of there being such a massive difference between basic and luxury services.
For example, I can get a cheap economy hotel room in London for £70, but a luxury 5-star hotel room for maybe £280, a factor of 4:1.
Would any hotel business get away with charging £1400 for a hotel room in London, or even £2500, scaled as per the BA fares?
I'm not particularly complaining, in fact quite in admiration of how a business can get away with establishing such differences as "normal". Is there any other service industry which can boast similar factors between basic/luxury products?
Is it a lack of competition on such sectors that enables such massive yields? i.e. LHR slots all sewn up?
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AKA Supply and Demand. Lots of hotels and beds in this world, not really that many planes.
Not sure about the yields though, would have thought like for like tickets would put Biz class at about 5 times yield to Economy with First maybe 1.3 times over biz. And given the footprint of a club world bed against an economy seat its per inch occupied going to be very close on price.
Not sure about the yields though, would have thought like for like tickets would put Biz class at about 5 times yield to Economy with First maybe 1.3 times over biz. And given the footprint of a club world bed against an economy seat its per inch occupied going to be very close on price.
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The yields I got from Airline Business, but no doubt the LHR-New York sector seems to be extremely profitable. My guess is that there is a lot more competition in the Economy class for this sector as it's not so important to fly from LHR.
Anyone know the cabin space area ratios for the different BA classes? As in how much more area Biz takes up over Economy etc.?
Anyone know the cabin space area ratios for the different BA classes? As in how much more area Biz takes up over Economy etc.?
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Originally Posted by under_exposed
Have you not tried the Royal Suite of the Lanesborough Hotel?, £4,500 per night.
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Originally Posted by manintheback
.... given the footprint of a club world bed against an economy seat its per inch occupied going to be very close on price.
So, if the 1.7p/km is purely for space rented on the plane, you would expect to pay about 4.25p/km in business. Still a bit to go before you get to 33p. I know it isn't made up by the price of the wine, that's easy to find work out. One can get a "BA club class standard" bottle of wine for less than a tenner at Majestic, and often for around a fiver when they are doing their deals
I would say that 1.7p per kilometer in economy must be one of the best travel bargains to be had. 33.8p in business one of the worst.
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Originally Posted by apaddyinuk
Y class doesnt pay enough to create a profit!!! Thats why the airlines concentrate on their club/first loads!
From the same article, 1.70 on BA LHR-NYC is not the cheapest economy price this article mentions. 1.44 on SQ LHR-SYD is yet cheaper.
One assumes that the price of the cheapest seat should be determined by fuel costs. Flying an empty seat rather than filling it at a discount basically burns the fuel needed to deliver the extra payload of one extra passenger.
But if you leave all the seats empty because no one wants a ticket even at the discount price, then you still need to burn a lot of fuel to deliver the empty airframe. Obviously, some passengers should pay more than the marginal cost of delivering them! But who will pay?
If Y class does not create profits and club and first loads pay for the flight then the obvious things to do would be
a) just sell no Y tickets and thereby save fuel
b) then rip out all the Y seats and let your club and first passengers play tennis or have a dance floor or something such there - this way they benefit more than just from their seats
c) give more comfortable accommodation inside the same space, like scatter real full-length mattresses or double beds all across the rear cabin for your club and first passengers
d) save the costs of hauling around the weight and drag of a big airframe, and have a moderate-sized airframe with spacious interior and no Y seats whatever.
It seems that Maxjet and Eos are currently trying d).
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Part of the difference seems to be accounted for by standard journalistic stunts via selective use of numbers. What are they comparing? Base fares only? Do they include surcharges, taxes, etc? What time frame did they price? How many price points did they use for their survey?
For example, the economy class yield seems to be consistent with current sale fares - ie, fares that are well below the normal published lowest economy fares. However, there may have been no sale or deep discount fares available for business class travel, particularly if they were looking at travel in the relatively near future, and the yield appears to reflect a full or fullish fare business class ticket.
If you look further out, you can buy published business class tickets for about half the yield that the article quotes.
This doesn't account for all of it, but a substantially different picture may emerge as the starting point for the analysis if you take a fair comparison between classes.
The other thing to remember is that there may be more business class passengers travelling on deep corporate discounts off the published fare, whereas economy class passengers may be more likely to be paying the actual published fare. If you calculate yield in each cabin based only on the published fares, you may end up substantially overestimating the yield that the airlines actually get from the premium cabins. That could further reduce the actual margin between Y and J yields.
Because frequency is important for the business traveller. Having a full Y class paying the bills means that you can fly that small business class cabin more often, thus improving the attractiveness of your product.
For example, the economy class yield seems to be consistent with current sale fares - ie, fares that are well below the normal published lowest economy fares. However, there may have been no sale or deep discount fares available for business class travel, particularly if they were looking at travel in the relatively near future, and the yield appears to reflect a full or fullish fare business class ticket.
If you look further out, you can buy published business class tickets for about half the yield that the article quotes.
This doesn't account for all of it, but a substantially different picture may emerge as the starting point for the analysis if you take a fair comparison between classes.
The other thing to remember is that there may be more business class passengers travelling on deep corporate discounts off the published fare, whereas economy class passengers may be more likely to be paying the actual published fare. If you calculate yield in each cabin based only on the published fares, you may end up substantially overestimating the yield that the airlines actually get from the premium cabins. That could further reduce the actual margin between Y and J yields.
Originally Posted by chornedsnorkack
Then why have Y class at all?
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F-class pricing is notably 'inelastic' (to use the economist's jargon). Travelling in F is rather like driving a Roller, the point is not cost-justification but to show the rest of the world how rich you are (and I realise that some travellers are on upgrades, spending miles etc.)
My view is supported by the price difference between a basic but practical new car (say £6,000 in the UK), the most expensive car that can be cost-justified in terms of bigger seats, more comfort etc. (I would say £25-30K, your mileage may vary) and the luxury car (£200K up to "how much would sir like to pay?").
My view is supported by the price difference between a basic but practical new car (say £6,000 in the UK), the most expensive car that can be cost-justified in terms of bigger seats, more comfort etc. (I would say £25-30K, your mileage may vary) and the luxury car (£200K up to "how much would sir like to pay?").
I heard in the Far East (CX) a full Y class pays for the operational costs of the flight and the J and F makes up the profit. Not sure if Europe differs.
As Pax says, I think a great deal of F passengers are on upgrades or spending miles as I did this week between HKG and LHR.
As Pax says, I think a great deal of F passengers are on upgrades or spending miles as I did this week between HKG and LHR.
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Originally Posted by MichaelJP59
The yields I got from Airline Business, but no doubt the LHR-New York sector seems to be extremely profitable.
Routes tend to be extremely profitable when you have a monopoly (or near-monopoly) supplier to a relatively popular destination.
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1DC, that certainly paints a different picture. Flights for next month to Sydney work out at about 2p per km in economy, 9p per km in business.
That would go along with the competition/supply and demand argument. There is no effective competitive market out of LHR to NYC, and most of the competition is from the US carriers and their business class service don't command a premium over BA's. So BA can charge a high price.
Out to Australia there is a whole slew of carriers providing one-stop service to Sydney from LHR, and in general their business class products do command a premium over BA. So BA need to cut their prices to get people in their club seats.
About time they totally deregulated Heathrow.
That would go along with the competition/supply and demand argument. There is no effective competitive market out of LHR to NYC, and most of the competition is from the US carriers and their business class service don't command a premium over BA's. So BA can charge a high price.
Out to Australia there is a whole slew of carriers providing one-stop service to Sydney from LHR, and in general their business class products do command a premium over BA. So BA need to cut their prices to get people in their club seats.
About time they totally deregulated Heathrow.
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Originally Posted by slim_slag
1DC, that certainly paints a different picture. Flights for next month to Sydney work out at about 2p per km in economy, 9p per km in business.
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Originally posted by chornedsnorkack
If Y class does not create profits and club and first loads pay for the flight then the obvious things to do would be
a) just sell no Y tickets and thereby save fuel
b) then rip out all the Y seats and let your club and first passengers play tennis or have a dance floor or something such there - this way they benefit more than just from their seats
c) give more comfortable accommodation inside the same space, like scatter real full-length mattresses or double beds all across the rear cabin for your club and first passengers
d) save the costs of hauling around the weight and drag of a big airframe, and have a moderate-sized airframe with spacious interior and no Y seats whatever.
It seems that Maxjet and Eos are currently trying d).
If Y class does not create profits and club and first loads pay for the flight then the obvious things to do would be
a) just sell no Y tickets and thereby save fuel
b) then rip out all the Y seats and let your club and first passengers play tennis or have a dance floor or something such there - this way they benefit more than just from their seats
c) give more comfortable accommodation inside the same space, like scatter real full-length mattresses or double beds all across the rear cabin for your club and first passengers
d) save the costs of hauling around the weight and drag of a big airframe, and have a moderate-sized airframe with spacious interior and no Y seats whatever.
It seems that Maxjet and Eos are currently trying d).
