How Much Revenue Can Aa Expect From China Flight?

[FWAAA]

The new ORD-PVG flight in 2006 will bring in significant revenue, but I'd guess it won't be as much as the $215 million mentioned in the article below:

American would generate an estimated $215 million in annual ticket sales, based on fares United charged Feb. 16 for Chicago- Shanghai flights departing Feb. 18 and March 9 and returning a week later. While that's a tiny share of American's $18.6 billion total 2004 revenue, long-haul international flights are more profitable than domestic routes.

http://www.bloomberg.com/apps/news?pid=100...WJTVzk&refer=us

Gotta like the methodology. Multiply the number of seats by the price UA currently charges. $215 million would be $294,521 each way, every day. Is that realistic? Any guesses as to a realistic revenue estimate?

 

[jimntx]

That $215 million probably includes revenue from cargo as well. I wouldn't be surprised if that number were close to the mark. From a business standpoint, Shanghai is the destination of choice. Shanghai is China's New York City/Chicago/Houston. Peking is its Washington, D.C./Disney World--everyone wants to visit on vacation, but no one really wants to do business there.

 

[AA191]

It is not just the revenue. Keep in mind that the price of fuel is VERY low in Asia as the government keeps the prices low. With that said, AA can continue to expect an operational boost from LOW fuel prices in Asia.

 

[JFK777]

AA's Asian route system is finally showing some real reach. I never thought I would say AA has 3 flights from ORD to Asia daily: NRT, PVG & Nagoya, that's an accomplishment. LAX & JFK to NRT and we finally have ASia from the East coast the Midwest and California. The missing piece though is the real gem of the Orient, Hong Kong. I wish AA orders some 777-200LR aircraft and really reaches into Asia. How about Chicago to Bangkok with a 777-200LR? Thai Air is flying BKK-JFK with and A340-500 in June. If they can do so can the Silver Bird.

 

[MAH4546]

How about Chicago to Bangkok with a 777-200LR?

[post="251913"][/post]​

AA is in business to make money, not bleed it.

I agree that it is nice to see AA expand in Asia once again. HNL-NRT is coming up too, and I would not be surprised to see ORD-HKG, MIA-NRT and BOS-NRT in the further out future (2009-2010), and there is no doubt AA will apply in the next round of US-China rights in 2008 (DFW-PEK, anyone?).

 

[Hunter]

That $215 million probably includes revenue from cargo as well. I wouldn't be surprised if that number were close to the mark. From a business standpoint, Shanghai is the destination of choice. Shanghai is China's New York City/Chicago/Houston. Peking is its Washington, D.C./Disney World--everyone wants to visit on vacation, but no one really wants to do business there.

[post="251825"][/post]​

I'd guess the potential, additional revenue at $100 to $125 million.

 

[whlinder]

They are assuming a 100% load factor for the flight, every single day. If that happens, great for AA. Does UA's ORD-PVG flight go out at 100% capacity every day?

294521/224 seats = $1315.00 each way. There is certainly a wide range of fares available on UA in this market, coach is between $400 and $2400 each way, with higher C and F fares. Doesn't take into account corporate discounts, or fares from other connecting points.

 

[eolesen]

They are assuming a 100% load factor for the flight, every single day.  If that happens, great for AA.  Does UA's ORD-PVG flight go out at 100% capacity every day? 

[post="252120"][/post]​

I doubt it goes out at 100% in the back, but business class is typically sold out.

I think the $294,521 per trip is definitely achievable:

1) Business class fares run about $3500 OW on the low side, and F fares are $4500 on the low side. Assuming 30 out of 35 business class seats a day being sold = $105K per departure, or $38M in annual revenue.

2) Transpacific is one of the few places people still buy full F tickets. Assuming just 5 out of the 16 F seats are sold = $22.5K per departure, or $8M in annual revenue

3) Assuming a $800 average fare in the back at a 86% LF = $128,000


Sum so far = $257K

Throw in a couple thousand pounds of cargo for the remaining $50K, and you get to $294K per trip.

This should underscore why we wanted to get into this market so badly...

 

[Fly]

Do you honestly believe that BOTH airlines will run 100% or will they both become 50%??

 

[whlinder]

Wow, does UA really sell that many C seats daily to China? (The rumors are always that everone on UA is an upgrader) Of course I would assume that the China flights perform better than other transpac flights due to the small supply of seats to the country from the US, but to consistently sell out the C cabin?

 

[jcavinato]

I'd like to give American my first class ticket revenue for the two times a year I go to Singapore.

 

[peasant]

Re fuel prices in asia.

(Jet) Fuel prices in Asia aren't low because of govt support. However Jetfuel is cheaper than the US due to having more modern refineries in the region, and closer to the modern ME refineries. In general Asian refineries can produce "lighter" quality products than N.A., which means better supply of jet fuel and lower prices

Note also that for int'l flights, fuel can't be taxed, but it can for domestic

 

[eolesen]

Re fuel prices in asia.

[post="252577"][/post]​

It's also cheaper because it's being purchased in local currencies, and not in USD. As long as the dollar slides compared to the Euro and other currencies, fuel is going to cost more Stateside.

 

[FWAAA]

Throw in a couple thousand pounds of cargo for the remaining $50K, and you get to $294K per trip.

This should underscore why we wanted to get into this market so badly...

[post="252225"][/post]​

Thanks. I would have thought that corporate discounts might trim the expected revenue from the premium class tickets, but of course those are in flux right now with various fare rationalization moves.

Still, your estimates confirm my earlier post about the loss of USPS revenue - the China flight has the potential to generate several times the lost mail revenue (estimated at a mere $50 million for domestic mail).

 

[LaBradford22]

How Much Revenue Can Aa Expect From China Flight?

In 2005, $0.

In 2006, when AA is in bankruptcy, probably somewhere on the order of $100 to $150 million on an annual basis, so pro-rate that for the portion of the year that AA will be flying that route for 2006. 2007 and beyond should be $100 to $150 million.