Passengers Demand Estimate

[iFlysimX]

Can The Demand go up if you have been flying the route for a while? How does it work? Can it go down?

Thanks
Clement

[Sigma]

It grows slowly with worldwide passenger growth figures.

So, if the historical market went up 7%, then your route will go up 7%.  It's not route-specific.  In reality of course some go up and some go down; here it is an average that affects every route the same.  And, aside from large global conditions like post 9-11, the the recent recession, it generally goes up every year.

[Riger]

Additionally,

It is my understanding that a route will deliver as much as 150% of the declared demand under specific conditions.  These conditions include (1) the provision of this number (150%)of seats, (2) a Route Image of 100% and (3) a Company Image of 100%.

I would assume that the range between 100% and 150% is accessed as your Image(s) get closer to 100%.

Hope this helps.

Best Regards

Richard

[Sigma]

Yes, Riger, except for one additional factor -- price.

You can generate additional demand by sufficiently lowering the price.  Simply  having an RI/CI of 100 won't do it on its own, at least not very much.  Perfect CI/RI does make it really easy to get every last bit of that demand on the chart though (when faced with no competition).

And the price thing seems to effect smaller routes moreso than larger ones.  You can't turn a 3000/day route into a 4500/day route no matter how hard you try.  But you can get 250 people to fly on a 200/day route if your pricing is good enough.

You can see this in effect by finding a route where you and a competitor each supply 100% of demand.  Let's say 100/day and you each supply 100 seats -- all else being equal, you split it 50 seats each, so a 50% LF.  You drop pricing by 50% and you get 25 more people, so a 75% LF (you actually aren't likely to see that much, but for this example...).  It should be a 75/25 market-share when you check the pie chart.  But it won't be.  It'll be more like 60/40.  And if you ask the competitor he'll probably tell you that he hasn't noticed any appreciable difference in his LF on the route.  But if the demand was stagnant, he should be at a 25% LF.

Generally speaking, it's just good business to put 150% of demand anyway.  Not so much for the above reason, as that only comes into play with deep discounting, but rather because a supply of 150% is exponentially more of a deterrence to competition than 100%.  It'll cost you more money to fly with a bit more empty seats, but that's better than the alternative of facing competition on the route.

[Riger]

What Sigma said.