Scrolling through the various April traffic reports today and looking at the reported load factors I noted that the lowest reported today was Southwest’s 72.%, which is slightly higher than April 2007. Actually, American Eagle reported a lower load factor than Southwest – 70.8% – but typically regional airlines have lower load factors because their aircraft have fewer seats and a no show on a 50 seat aircraft has a statistically more significant impact than one on a 140 seat aircraft. If we had ever achieved a 70% load factor at Business Express while I was there, well, I’d still be there.
United reported 80.5%, USAirways reported 83.2, Delta was at 81.4%, American reported 80.1, and Alaska was at 75.0 for the month of April. Although the load factors for UA and AA were down year-over-year (-3.6 points for UA and -2.0 for AA), others reported load factors that were unchanged or even slightly higher than April 2007.
Excess capacity? I’m not sure how that is defined, but with many carriers running load factors around 80% it sure doesn’t seem like there are too many seats out there. Heck, nobody’s got any room to accommodate many more passengers. With an average load factor of 80% on all flights, it is safe to say that peak flights are sold out – all the time. Hey – anybody want to start an airline!
Ironically, it is the carrier with that reported the lowest April load factor today, Southwest, that has managed to remain somewhat profitable during these last few months. Hmm……maybe the unprofitable airlines need to fire some of their customers and hire the ones flying on the profitable ones; evidently it takes fewer of them to make a profit.
Of course, I am being facetious, but here’s the point. If you can’t make money with an 80% load factor I am not sure the problem is too much competition. True, the cost of oil is a big factor, and the economic pressures on the consumer are real. But the size of the U.S. domestic airline market isn’t the problem; the problem is finding the profitable customers within that market.
BusEx was my first airline; I left them to go work for a different regional when they were in Ch. 11, which was a mistake as it turned out, but I finally got to a major a couple years ago. I understand BusEx was ultimately absorbed into American Eagle’s operation but they kept their offices up in NH for quite a while.
So long as you price your product at less than it cost to produce it then you will run an eighty percent load factor. The cheapest ticket between DFW-SEA on aa.com between July 15th to July 22nd is $124.00. Now using the same formula go to greyhound.com and you will find the fare at $114.00. Two days on the bus for a lousy ten bucks.
I started there in 1985 and got “purged” by Bryan Bedford in 1994, so I never went to Pease.
Airline pricing is a black art and there are some markets where the demand is fairly inelastic; it stays fairly strong even when fares go up. Since the airline product has turned into a commodity and there is little differentiation between domestic carriers, there seems to be a reluctance to test the elasticity of demand for fear of loss of market share; hence your $124 fare SEA-DFW. However, the real problem isn’t that there is too much capacity.
Bryan seems to keep his own little “team” with him wherever he hangs his hat. He did seem like a very nice and approachable guy to me…now some of the people on his “team” (including my boss) were a different story entirely.
I didn’t start at BusEx until 1995, so they were already at PSM by the time I got there. They later moved up the road about 10 miles to an office complex in Dover. Their PSM office space was being used by Pan Am/Boston-Maine so I presume it’s now available for rent again, or will be soon.