1Q 2016 Data: Fasten Your Air Access Seat Belts
The New Metric For Air Access Planning – Traditional ASD Ignores It.
Run with us for a couple of minutes. This will go where other “quarterly reports” are in the dark.
It also once again shows how traditional “air service development” programs are missing the key drivers of airline planning decisions.
Let’s look again at the basic passenger numbers…
What do we see? On the surface:
The number of passengers was up 7.1 percent, but the average passenger trip – which is a driver of RPMs – was essentially flat, at 0.2%. So, passengers weren’t flying longer trips. Just more passengers with generally the same length of haul.
But do notice that the average ticket yield (the most fundamental metric to gauge consumer costs of flying) was down, 5.7%. This latter statistic has the wolves on Wall Street all in a dither… airlines aren’t getting what they did last year per seat mile tossed into the sky, so they must be adding capacity willy-nilly.
Sloppy conclusion, based on ignorance.
So, next…
Let’s mix in the airline statistics for the first quarter.
Using Aviation DataMiner, here’s where we find the fundamental reasons for the changes in yield amid growth in traffic. We looked at the ten major carriers – which on this table includes G4 and HA.
The growth in RPMs – 6.8% – is consistent with the 7% increase in raw passengers, and the 7% increase in ASMs produced. Load factor pretty much stayed the same. This means that, mostly, the extra seats had tushies in them.
Hint: The Machinery Is Changing – Therefore, So Will Airline Planning
But it’s the numbers under Seats Per Departure that tell the current and future story.
Some of the monkey-hear, monkey-repeat, web-dwelling “financial experts” see an increase in capacity and launch into condemning the “lack of seat discipline” at major US airlines.
It’s another reason that stuffing your money into a Sealy Posturpedic is probably safer than listening to a lot of these financial-world “advisors,” many of whom wouldn’t know an ASM from an ATM.
The real impact for professional airport planners is in the fundamental airline strategy changes that are evolving due to fleet changes.
Note that raw flight departures were up only 2.2%, but the average number of seats per departure (i.e., size of airliner) was up 3.2%.
Result: more seats to sell per flight, and even with sophisticated revenue management programs, there will be downward pressure on overall fare yields. It’s “just” an average of four seats, but the fact is that it’s still 3.2% more seats per departure.
The expansion of some ULCCs, such as Frontier, has some effect. But the main dynamic going forward is the result of fleet plan changes. that the average seats per departure will go up as 50-seaters (and ultimately, some 70-seaters) are pulled from fleets.
This important airline factor is absent from traditional “air service development” programs, which generally assume that just (supposed and sometimes ginned-up) traffic data is all that’s needed to get more service.
It’s planning based on an airline structure that no longer exists. That CSeries at Delta will have not only new traffic requirements, but its presence at airport A can and will affect consumer decisions at airports B and C in the region.
Fleet Forecasting – A BGI Strength
In the future, it will be critical to factor in to any air service planning the changes that will be emerging in airline fleets – this will fundamentally change how carriers make market decisions.
It doesn’t take an MBA from Wharton to figure out that when average size aircraft goes up, the ability of smaller markets to support air service goes down.
The question is, how much insight do you have in regard to the future fleet imperatives at key airline systems? Retirements, additions, airline-specific fleet renewal programs.
Just one example: AA is rapidly retiring its MD-80s. Delta is apparently holding on to their MD-88s, with few retirements over the past year. Another example: Frontier is moving A-319s out of its system replacing them with larger units… it’s this expertise BGI brings to its airport planning client.
Regardless of any other aspects, 50-seat jets are going to be retired – a forecast we alone made, well before the process started, and when the majority of analysts were predicting near-endless demand for these machines.
United: One Example of Future Fleet Evolution. At Boyd Group International, we keep close watch of airline fleet strategies. It’s our business. We’re noting the recent events at United – where the CEO has indicated they’ll be looking at all areas of their feed system. Then factor in the recent order for 737-700s to “replace” lift leased in from outside operators. Just last week, it appears that UA has shifted at least three of these orders to -800s.
Point: United will have a different fleet and different traffic objectives. Delta’s acquisition of 717s, and CSeries aircraft point in the same direction. More seats per departure are in the cards.
The simplistic solution suggestion from the consultant Peanut Gallery that a reduction in frequency will do the trick is nonsense. Flight frequency is critical to consumer support – without, they’re hitting the road to another airport, where even with a 90-minute drive, the total travel time is less than shoehorning an itinerary to fit the two flights left at the local airport.
Fleet Changes Will Be The #1 Factor In Air Access Planning
In air access planning, the fleet strategies of carrier systems is critical. Only Boyd Group International brings airline fleet and demand trends to the table with our clients.
These issues are the reason airport and aviation planners are joining us at the 21st annual Boyd Group International Aviation Forecast Summit, September 18-20 in Reno/Tahoe.
Not only will the airline executives making these strategic decisions be there, but the fleet forecasts presented by all of the major manufacturers – Airbus, Boeing, Embraer, Bombardier and Mitsubishi – as well as Boyd Group International, will deliver additional insight regarding what will be pulling up to Gate 6 in the future.
It will be information and planning intelligence airport planners will need in the months ahead.
Click here to register for the IAFS™ … and don’t forget the optional pre-Summit workshops on Sunday afternoon, September 18. It includes a special “Patton On Air Service Planning” event that will be fun, and valuable, too.
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Southwest Airlines Top 20 Denver Markets
Despite the Wall Street lore, Southwest is now a full network carrier, and the 4th quarter 2015 data at Denver shows it clearly.
This is part of a wider route performance report that our clients in the financial and labor sectors find highly valuable.
Here we review only the local and flow traffic data.
Today, almost 37% of the WN passengers at Denver are now flow traffic. This is not only in “barbell” markets such as SLC-DEN and BNA-DEN, where there are connection banks at each end, but also in highlighted markets such as MSP-DEN, SMF-DEN and PDX-DEN, where nearly half or more of the passengers on the routing are flow traffic over Denver.
The report is highly truncated. Our subscribers to AirlineFinancials.com have access to additional market metrics in this single report, such as full yield analyses (local and thru) and cost per ASM/RPM data.
Revenue/ASM Minus Cost/ASM Is Not “Profitability” There are a wide range of other factors that determine strategic “profitablilty” for an airline. The variance between the costs per ASM and the revenues are also indicated in the full DataMiner report, but we do not label this as “profitability,” as that involves a range of other factors available only to the airline itself.
While some consultants purport to have programs that can compare airline profitability between markets, we’d note that short of hacking into the carriers’ IT systems, these are just amateur spreadsheet programs.
Top 50 US O&D Airports – Full Year 2015
These reports show strictly the domestic O&D generated at the airport. Keep in mind that this metric is stimulated at hubsite airports due to the high levels of hub-supported capacity.
Note the secondary rankings… we include the rank by cost of travel per mile at each airport, as well as the average gross OW fare, including federal fees and taxes.
These are important factors – and ones that the media often mis-reports out of sheer ignorance of the subject matter. Raw BTS rankings of “fares” are actually average ticket spend, which is affected by geographical location of the city, as well as economic and demographic factors.
The cost per mile is one metric to compare airports, but it is affected again by geographic location and the mix of traffic that the market generates – long haul v short haul.
For more information on the Analytical Firepower available from Aviation DataMiner™ and AirlineFinancials.com™ click here and get ahead of the competition.