Revenue Per Average Seat Mile Sold

[AtlanticBeach]

The chart listed below is from a post on the WN board. It contains the Top 50 PHL O&D domestic destinations in the 3Q04. The final column appears to be the average one way fare.

I graphed this information and then correlated the data using a basic and crude formula of Trip Length in Miles x Average Revenue per Sold Seat in cents= 15,000 (with a floor of 8.6 cents and a ceiling of $1.00 per mile). With an average domestic mainline and express trip length of 750 miles (ballpark) and a 66.7% load, that provides RASM of 13.3 cents. Here are the outliers to this graph, that is, more than 15% from the formulated fare structure.

Destinations with higher average income per revenue seat mile than expectation were PIT, CMB, DTW, CLT, CVG, CLE, DAY, MSP, MEM and DFW. Lower average income per revenue seat mile are flights to/from PVD, MHT, RDU, MCO, TPA, PBI, FLL, LAS and LAX. I don't think there are any real surprises on either list.

The actual formulas that need to be used are far more complex than these calculations. However, this data disputes certain claims on this Board that income is being missed by not providing more flights on specific routes (ex. There was discussion last month about discontinuing EWR-FLL) and indicates that US was/is having a tough time determining yield management on routes where WN provides competition.

Sorry that I can not link to the graphing function on my computer. Here is the chart and the original poster's comments.

Here are the top 50 PHL O&D destinations (3Q2004 USDoT). What is striking is how low PIT is on the list and how high the one-way fare is between the two cities. It seems to reason that PIT should be able to rise to at least the same levels as RDU, PVD and MHT where SW lowered prices and saw O&D numbers go up dramatically.

CityST Passengers/Day One-wayFare LgstCarrier LgstMktShare
LgstOne-WayFare
Chicago, IL 3049.02 113.05 UA 27.04 136.89
Orlando, FL 2799.23 101.85 US 48.83 105.74
Atlanta, GA 2070.32 129.77 DL 62.47 135.08
Los Angeles, CA 2051.63 161.88 US 41.47 165.06
Boston, MA 1887.06 82.84 US 63.19 89.49
Las Vegas, NV 1839.34 137.06 US 49.44 140.92
Ft. Lauderdale, FL 1477.17 103.87 US 49.86 105.99
Raleigh/Durham, NC 1464.34 61.37 US 43.59 68.18
Tampa, FL 1409.45 104.79 US 54.66 107.48
San Francisco, CA 1226.63 221.22 US 41.97 216.97
Providence, RI 1092.93 57.39 WN 63.64 47.84
Dallas/Ft. Worth, TX 1032.06 247.49 AA 56.47 268.95
Denver, CO 1019.13 177.89 US 34.95 167.01
Houston, TX 976.3 157.07 CO 46.37 165.02
Manchester, NH 950 56.53 WN 62.92 46.02
Phoenix, AZ 935.86 153 HP 34.68 163.91
Seattle, WA 767.28 188.61 US 47.3 198.49
San Diego, CA 754.34 177.82 US 44.35 193.62
Minneapolis/St.Paul, MN 736.84 244.16 NW 52.38 288.82
West Palm Beach, FL 721.63 105.3 US 63.2 108.64
Detroit, MI 622.39 230.83 NW 62.29 246.07
St. Louis, MO 541.3 167.47 AA 56.82 172.15
New Orleans, LA 504.78 138.29 US 54.69 141.1
Nashville, TN 465.21 126.91 US 71.44 125.34
Miami, FL 426.08 148.79 AA 48.31 134.92
Jacksonville, FL 422.93 138.91 US 71.78 134.4
Pittsburgh, PA 421.84 265.9 US 86.96 272.51
Kansas City, MO 414.13 155.39 US 64.64 154.07
Indianapolis, IN 403.8 151.98 US 83.31 146.09
Milwaukee, WI 318.8 162.08 YX 45.07 175.48
Salt Lake City, UT 317.39 184.77 DL 75.41 183.11
Charlotte, NC 314.89 328.07 US 83.56 343.84
Ft. Myers, FL 297.17 141.02 US 77.9 139.7
Cincinnati, OH 266.63 225.99 DL 68.89 227.76
Portland, OR 255.65 211.41 UA 30.18 239.3
Columbus, OH 245.43 254.11 US 82.01 260.01
Cleveland, OH 244.78 277.49 US 49.15 258.87
Memphis, TN 214.23 217.43 NW 69.45 225.87
San Jose/Palo Alto, CA 208.15 191.2 UA 26.84 208.47
Sacramento, CA 205.1 186.21 HP 32.11 171.4
Austin, TX 204.45 209.78 AA 36.78 227.53
San Antonio, TX 202.82 192.51 AA 31.29 197.94
Santa Ana, CA 192.6 218.3 HP 34.59 181.37
Albuquerque, NM 179.45 180.48 CO 22.47 144.78
Dayton, OH 164.78 164.24 US 62.13 172.45
Louisville, KY 161.63 170.96 US 75.05 163.53
Oakland/Berkeley, CA 150.76 196.25 WN 34.31 153.54
Savannah, GA 149.02 137.04 US 51.05 137.95
Birmingham, AL 146.63 153.63 US 59.22 151.02
Ontario, CA 129.78 190.23 HP 35.76 183.56

 

[BoeingBoy]

Maybe I misunderstood, but the last column in your list is the average one-way fare for the largest carrier in the market, not the average for the market.

For example:

Chicago, IL 3049.02 113.05 UA 27.04 136.89

$136.89 is UA's average fare for their 27.04% of the market, while $113.05 is the average for the entire market of 3049.02 passengers per day.

Jim

 

[BoeingBoy]

I should have added that your point is well taken, though. If you look at Table 1 of the report (which seems to be the one you're using), there are 18 markets where US and WN are both listed as the carriers - meaning one has the largest market share while the other has the lowest average fare.

Of those 18 markets, WN has a higher average fare on 13 while US has a higher average fare on only 5.

So it appears that US is "buying" market share vis a vis WN with low fares.

Jim

 

[AtlanticBeach]

Maybe I misunderstood, but the last column in your list is the average one-way fare for the largest carrier in the market, not the average for the market.

For example:

Chicago, IL 3049.02 113.05 UA 27.04 136.89

$136.89 is UA's average fare for their 27.04% of the market, while $113.05 is the average for the entire market of 3049.02 passengers per day.

Jim

[post="269699"][/post]​

Jim, you are correct as usual. This creates some other interesting information. However, the re-graphing where US in not market leader is consistent with the prior conclusions.

The Chicago example demonstrates that UA is able to extract 21% more than the average fare for the route and 28% more than the other carriers.

In the top 10 markets, US is the leader in 8 of 10. Nine of those markets demonstrate the leader has a higher average airfare than other carriers. Is this due to loyalty of frequent flyers? More scheduling options? Whatever the reason, how can it be extrapolated to other markets for US Airways' benefit?

There are certain inconsistencies in similar markets. DFW and DEN are similar sized O&D markets and similar trip lengths (1302 vs. 1507). The revenue for DEN, where US is market leader, is 39% less per revenue mile for non-AA to DFW. Is this due to greater competition to DEN? Or, is this an anomoly due to AA's presence at DFW?

Lots of information here. How is it being used to maximize revenue, either by adjusting fares or by stimulating traffic?

 

[BoeingBoy]

The Chicago example demonstrates that UA is able to extract 21% more than the average fare for the route and 28% more than the other carriers.

[post="269704"][/post]​

Pure guess - possibly due to higher yield traffic connecting in ORD (Pacific, Hawaii, etc) or UA just able to get a better mix of fares.

In the top 10 markets, US is the leader in 8 of 10. Nine of those markets demonstrate the leader has a higher average airfare than other carriers. Is this due to loyalty of frequent flyers? More scheduling options? Whatever the reason, how can it be extrapolated to other markets for US Airways' benefit?

[post="269704"][/post]​

Nonstop from our hub vs connections on other carriers, maybe?

There are certain inconsistencies in similar markets. DFW and DEN are similar sized O&D markets and similar trip lengths (1302 vs. 1507). The revenue for DEN, where US is market leader, is 39% less per revenue mile for non-AA to DFW. Is this due to greater competition to DEN? Or, is this an anomoly due to AA's presence at DFW?

[post="269704"][/post]​

Low fare competition to the northeast from DEN - Ted & Frontier - possibly, while there isn't so much from DFW?

Lots of information here. How is it being used to maximize revenue, either by adjusting fares or by stimulating traffic?

[post="269704"][/post]​

Good question....

Jim

 

[whlinder]

Sorry that I can not link to the graphing function on my computer. Here is the chart and the original poster's comments.

[post="269696"][/post]​

There is a way to attach files to posts, at the bottom of the reply box. I'd like to see the graph you made, this is interesting info.