Making MORE money!

[unsaid]

I have a few questions on how to make more money, I am still a newbie and I am too lazy to try some these on my airline and wait for a couple real days.

1. Lets say we have route of 210 pax demand; 195 Y + 15 C. I put there a 757-200, which is 186Y+15C. I have no competitors, I have a CI of 30, plus RI is 100.
a. Should I increase the price of the ticket by 10%?
b. If I do so, how much my LF would decrease?
c. If I had a CI of 70, would I more easily increase the ticket price?

2. I bankrupted once in Air Travel Boom when I had 130 planes. Now I have second company, with
10 X A 300-600R +
35 X B 757 200 and 300s
50 X ATR 72-500s.

I am making about
70 mil per week in revenues,
2 mil  per week marketing,
All planes are leased,
I am making about 6 mil profit per week before taxes and loan payments.
Now is that good?
a. I need a TOP-30 company approach please? I am doing about 9% profit. Do TOP-30 companies make higher profits?
b. even if bigger companies are making higher profit margins, what kind of profit margin do they have when they are at my size? I think the best way to understand how big a company is by looking at available seats/km. Mine is 1455 mil./k at the moment and I am 82. biggest company overall. I am also the 82. at revenue passenger/km.

3. I am spending about 2 mil every week on marketing which is about 3% of my revenue. My CI is 30. I know it is too low but I have too many short routes in this game with 50 X ATR 72-500s. Instead of spending another 4 mil every week to get my CI to 60-70 level, (by the way I am making 6 mil profit every week), I just dont spend any marketing.
a. As long as I dont compete on any routes, I should be fine correct?
b. Lets say we have route of 1000 pax demand. I supply 500 of these, x company supplies 500. His CI is 80, mine is 30. Given the demand is only just fulfilled, do I get lower LF than him?
c. Ultimately, at these early stages of the game, when there is not much competition except some high popularity routes, isn't it better to use the money you would spend on marketing to get more planes? My average lf are: Y: 77.7 C :60.2.

More questions when I think of them.

[yevgeniy]

1. Dont increase prices above suggested especially with a low CI of 30, you really need to get to at least 50.
The higher CI will help you compete against other airlines, but will also attract slightly more passengers (for C class more then Y).

2. The 757's are great, if I were you I would try to replace the A300's with more 757's, and then add B737/MD90/A320 for something below the 757 but above the ATR in terms of routing and range.

[Sigma]

Over my dead-body would I ditch A306s for more 757s.

The main reason you're not "as" profitable as larger airlines is your density.  The A306 is one of the single most profitable planes in the game in terms of it's fairly low operating costs and huge ticket revenues from all its seats; it's an extremely efficient mid-range plane.  Replacing it with 757s would be like replacing an A380 with A320s.  You should ALWAYS fly an A306 over a 757 on a route if its' got the demand density to fill it up.

I'd say you're doing a very good job so far.

Are your margins less than most "Top 30" airlines?  Yes -- by a fairly wide margin  But that's a factor of the operating model you're going down, not so much any bad decisions you've made.  It's just a different business model, there's nothing wrong with that.

Your airline operates 3 models (great) and heavily-reliant on ATRs -- that's fine.  But it's usually going to lower your margins, though it can be very profitable in the Northeast where you are if competition is very low (not likely).  

You fly to a LOT of destinations.  This increases your overhead staff costs in particular, so you're paying a much larger percentage of your revenues to staff costs than someone who's flying to a lot fewer, higher-revenue locations than you are.

Just to give you an idea... Given the two points above (your fleet and destinations) If you flew just A300s to much fewer destinations, you'd have a margin closer to 40%.  That doesn't mean you're doing something wrong though.  You're just doing things differently and building a much more robust airline.

You also lease all your planes (this is a big one) which is fine too at your point in the game.  You can look to buy your planes later when you're not working on establishing your company.  The key is to strike the balance between leasing to get that growth and buying your planes and lowering your costs so you have higher margins and can compete more effectively.  That just comes with experience and also depends on the game -- sometimes you can lease 100% the whole game and be fine.  Other worlds you may find yourself in be more fierce competition and getting out of leasing sooner might help.

[yevgeniy]

Sigma,

I was not saying the A300 is not profitable, I was just talking about fleet commonality.  The 757 can do everything the A300 can do although like you mentioned it will need to fly more, but eliminating the A300 will lead to more commonality space to get something in between a 757 and ATR.

[Sigma]

I would agree if the point was to avoid a 4th group, however at this stage of the game, it's difficult to get something too much in between the two -- namely a 737/320 option.

If I were him, I'd have gotten something a bit larger than 60-some-odd seats though.

Personally I'm partial to the unusual 100/300-seat option at very large airports -- I skip over the uber-popular 150-seat option.  I fly A300s and F100s.  The profitablity of the A300 makes up for the slight inefficiencies of the F100 and, most importantly, it keeps me out of all the most popular aircraft.  I can, by and large, completely avoid any lines for planes.

But, if your airport is dominated by ~200-seat routes, then an A300 isn't the best option for you and the 757 is a better mid-range option.  You're better off with just added frequency on the few dense flights.  I think LGA has the density to justify a large fleet of A300s though.

[unsaid]

well, thanks a lot for your help.

The reason I chose ATR 72-500s is, by the time I started the company there was a huge line at Dash8s, and there were none of them on the used market. Actually, I would say that those 50 small planes made me a lot of money at the beginning. I started my second base 6 months ago, and with the money coming almost exclusively from the ATRs, I could add 25 X 757-300s and 10 X A300-600Rs in 6 months. 
My bases need actually both 200 pax and 300 pax planes. I need a mix of them.
I checked almost all the planes, and mathematically, 757-300s seem to be the most economical plane. They are almost all the same as A300-600Rs but Airbus is more expensive. For example, if A306 is 48% bigger than 753, it is %43 more expensive in maintanence costs, it is 40% more expensive in fuel costs. I don't have them with me right now, but I prepared a fact sheet in excel to compare all the planes.

Anyway, if it is not too much trouble can you tell me your thoughts about my 3rd question, here also:

3. I am spending about 2 mil every week on marketing which is about 3% of my revenue. My CI is 30. I know it is too low but I have too many short routes in this game with 50 X ATR 72-500s. Instead of spending another 4 mil every week to get my CI to 60-70 level, (by the way I am making 6 mil profit every week), I just dont spend any marketing.
a. As long as I dont compete on any routes, I should be fine correct?
b. Lets say we have route of 1000 pax demand. I supply 500 of these, x company supplies 500. His CI is 80, mine is 30. Given the demand is only just fulfilled, do I get lower LF than him?
c. Ultimately, at these early stages of the game, when there is not much competition except some high popularity routes, isn't it better to use the money you would spend on marketing to get more planes? My average lf are: Y: 77.7 C :60.2.

[unsaid]

Also Sigma, considering the fact that I don't have any competition (almost none) on ATR routes, and that I am NOT flying them on routes over 700nm, would you recommend I should leave them when their lease are over? I am really embarrased to have a CI of 30 when my planes are 5 years old on average.

Also, on A306 and 753s; either plane is great. I just get whichever I can find on the used market. I find it rather time consuming to wait for new planes. In the last four weeks, I ordered 20 X 753s. If I ordered these as new ones, I would be waiting another three months while Boeing wastes my cash on space programs. That cash is crucial for me. I am using like 50 mil of loans atm.

Finally, can you guys tell me, how much money should a company which is using let's say three types of planes, but bigger ones, like 753, spend on marketing to get it to 70? I know my spending should be higher than such a company as I have too many small planes and routes, but if I spend 3% to get a CI of 30, would a company like this get 70 CI by spending let's say 5% of revenue on marketing?

[yevgeniy]

I have a CI of 70, and am spending about $3ml weekly on marketing.

One thing is I don't fly any routes with less then 40 demand, but I really thing Venezuela is just so much cheaper then the USA.

[unsaid]

come on people, don't you wanna share your trade secrets?

By the way, I did a through comparison of A300-600R and B757-300

Type                                 A          B        Difference
Capacity (Total HD Pax)      375       280            34%
Maintenance (A)              12125     9610           26%
Personnel                       73400     56400          30%
Fuel                               5270      3640           45%
Price                              137Mil     82,6 Mil       65%

They look about the same, however, if you add the weighted costs as;
My company spends
4% of costs on maintenance
23% of costs on personnel
16% of costs on fuel
12% of costs on leasing,
Then you can see that the fuel and leasing costs(which Airbus is significantly higher) are much more important than maintenance costs.
This leads to 753 is a significantly better plane than A306. Sorry Airbus fans, but this is reality.

Also, personnel costs are calculated as 1 set of pilots+ cabin crew, disregarding their impact on non-fliying personnel. For example, when calculating costs for 753, 2 Pilots wage plus 5 cabin crew wage(also calculating fact that A306 is a very large plane and pilots salary is higher than 753). This comparison is made considering an American carrier.

Also, all compared planes are new and their prices reflect as 15th of May,2006.

[LAS]

Yes youre calculation is correct, but only on the range smaller then 3300. you could use the A306 on distance till 4200 - and they
will make really nice profits

[unsaid]

absolutely, this calculation can only be valid on equal grounds. If you have many routes with 300 pax demand, you shouldn't get a 753. Or, if you have slot problems, A306 is better and so on.

[Sigma]

absolutely, this calculation can only be valid on equal grounds. If you have many routes with 300 pax demand, you shouldn't get a 753. Or, if you have slot problems, A306 is better and so on.

Of course, but there never really is an "equal ground" when you're comparing two aircraft of different size/range.

Of course if the route only has a demand for 250 people, then the 757 is a better plane.  The A306 would have to be a totally kick-butt plane (even more so than it is ) if it could be competitive cost-wise with a 757 even while flying 40% empty.

It'd be like saying, "Sorry Airbus fans, but reality is that the 737 is a significantly better plane than the A380" because the "equal ground" you looked at was a 2000NM route with a demand of 150/day.  Well, duh!

Some airports have mostly demand in the 200-300 range.  The 757 is surely the better plane.  Some airports have pages of airports with demand in the 350-400 range and a dozen or more airports in the 1500-2500+ demand range.  The A306 is a far superior plane in such an airport.  With a lot of airports in the 350+ range, instead of flying twice with a 757 and doubling your costs and having both planes fly at 75%LF instead of 95% decimating your margins (assuming we're talking about a range that a regional jet can't fly to easily), you do it with a single flight.  And remember, there's more than just your direct costs too -- every flight has a huge amount of overhead costs associated with it particularly with personnel; plus the added benefit of having more slots available to make more money somewhere else.  There are huge opportunity costs to avoiding an additional flight somewhere due to increased densities.

[unsaid]

well, this discussion could go on for a while but math doesn't lie. However, you are right, it is very important to factor in load factors. In AWS, you can never get 100% lf, an A300-600R, (with standard seating), with 307 people on board at maximum, will be with 292 people when it has 95% lf. On the other hand, a 753 will have (201 seats at standard), 191 people on board with 95% lf.

So if we have a route of 600 pax(including C class), we can use 2 X A300-600R or 3 X 753.
With Airbus, even if you enjoy almost impossibly high lf, %95 LF, you can transport 584 pax.
With Boeing, even if you enjoy almost impossibly high lf, %95 LF, you can transport 573 pax.
11/573 = 2%. So that makes Boeing another 2% more expensive.

Wait a minute that's not that much. So,

753 ROCKS!!!!

[Sigma]

well, this discussion could go on for a while but math doesn't lie. However, you are right, it is very important to factor in load factors. In AWS, you can never get 100% lf, an A300-600R, (with standard seating), with 307 people on board at maximum, will be with 292 people when it has 95% lf. On the other hand, a 753 will have (201 seats at standard), 191 people on board with 95% lf.

So if we have a route of 600 pax(including C class), we can use 2 X A300-600R or 3 X 753.
With Airbus, even if you enjoy almost impossibly high lf, %95 LF, you can transport 584 pax.
With Boeing, even if you enjoy almost impossibly high lf, %95 LF, you can transport 573 pax.
11/573 = 2%. So that makes Boeing another 2% more expensive.

Wait a minute that's not that much. So,

753 ROCKS!!!!

For one thing, 95% LF isn't "impossibly high" nor is 100% LF "impossible" to get.  I average 95% LF with many of my planes, and that average includes the red-eye flights.  I've got routes that hit 100% LF every single day of the week.

Secondly, your math is... well, it's not saying what you think it is.  All you did there was say that the 2x A306s moved 2% more passengers than 3 x 753s, your math says nothing at all about the "expense" of either.  In such a scenario your paying for 3 planes instead of 2 and flying 3 times instead of twice, you didn't factor any of that in at all.  And even if you factor in the direct route costs as you did a few posts above, you're not factoring in overhead costs at all, which are usually more than direct costs, and the 757 option in such a case is going to have 50% more overhead costs.  You've got 50% more flights, so you need 50% more customer service personnel at your airports, 50% more ground-crew, 50% more mechanics, 50% more HR people, and 50% more people in every single department in your headquarters to manage those extra people you need.  Flying all-A306 vs all-753 (if you had the route demand) would save you a full 30% right off the top in total salaries -- imagine what that fact alone does to your profit margins.  Then you have to consider that you also need 50% more slots with their associated costs.  And then even after couting up all those extra costs, you still have to factor in that with the added slots those 757s require and inevitability of a full airport eventually, you LOSE the ability to fly 50% more flights to somewhere else, and every profit dollar you could make on an added flight comes straight off the bottom-line as a direct cost.

Do all the math all the way through and the 753 pales in comparison to an A306 on dense routes at busy airports.  This isn't magic or some sort of insane bias -- it's a narrow-body versus a wide-body, and there's a very good reason wide-body planes exist.  The same argument would apply if it was a 753 vs a 744.

Here's a route stat from an A306 of mine.  The plane averages 97.4% occupancy over 4 routes, this particular route averages 98.6%.  My F100s often fly even more full, 100% all the way across the entire 2wk chart isn't unheard of.

[Gaius Marius]

I agree with the A306 arguement but how do you get such high LF's?  Are you cherry picking a couple good ones to showcase or do you have some secret?

GM

[Powi]

I get CI 30 with the minimum one can spent for marketing (That is above no marketing) (0,2% of income). There are certain ceilings of CI that need a lot money to push trough. 30% seems to be one, 90% is commonly known one too. If you went to one newspaper base city campaign you would still be at 30%.

[Sigma]

I agree with the A306 arguement but how do you get such high LF's?  Are you cherry picking a couple good ones to showcase or do you have some secret?

GM

Of course not ALL of my planes get above 95%, my point was just that it was "possible" to get above 95% and even the "mythical" 100%.  I do it all the time; if there's no one else on a route, I will fill my planes -- completely.  I do it on routes with 100/day and routes with 3000/day.

And, nope, no secret.  I don't "game the game".  I just throw planes onto routes and my pricing is always Standard cost, I virtually never deviate from it, and I reset my prices to standard on a regular basis.

[schro]

<snip>
On the other hand, a 753 will have (201 seats at standard), 191 people on board with 95% lf.
<snip>

<snarky comment>
I know I'm not in a game right now.... but last I checked the 752 is 15+186=201... and the 753 is in the 230's...
</snarky comment>