Here are three headlines from today’s aviation news (07JUN2007):
- “WestJet, Air Canada Flew Fuller Planes in May”
- “Finnair May Passenger Traffic Sharply Up”
- “Air France KLM May Traffic Up 3.9 Percent”
What is your first thought? Are these airlines doing a good job?
We all tend to listen to these headlines and then get the impression and first thought: “Wow, these airlines are doing something really good, more passengers, fuller planes, that’s a good job!” But let’s take some time off and think about this issue twice, not forgetting the fact that the majority of the traditional airlines are still in the red these days…
At first: yes it’s a positive thing that you as an airline fly more passengers safely to their destinations, it means that you fill more seats. It doesn’t necessarily mean that you sell more seats or sell more seats at same (or preferably higher) price. So it sounds good and in general it probably means that you get more revenue as well, therefore you’re doing better. IN GENERAL. But here comes the big question: Are you making a bigger profit from transporting more passengers?? If an airline flies more passengers, but each ticket is sold at a lower price (due to low cost competition, etc.) (or simply given away as a promotion for example), it could be the real situation that the passenger numbers are up 2.5% for example, but the revenues and the profit is actually down, so from a real business perspective: the airline is doing worse, than before!
Therefore the question raises for airline employees: Shall an Airline shoot for the target of full airplanes? Should this be the overall target that drives everything else around the company? In my (and some of my aviation friends’) opinion: not really. If an airline optimizes its operations for a higher load factor, they may as well just lower their losses, or in an extreme situation they may even lose more money… So the focus should be on the revenues, which of course may be generated by more passengers, but much better if generated by higher airfare collected, BEST if generated by more seats sold at higher ticket prices!
So the headlines we all should be looking for shall be something like:
- “WestJet, Air Canada Flew Fuller Planes and Reduced Losses in May”
- “Finnair May Passenger Traffic Sharply Up with Moderate Profit Rise“
- “Air France KLM May Traffic Up 3.9 Percent while Profit jumps“