United857 wrote:Waterbomber wrote:
Many people tend to focus on unit profit these days, and in the process forget that:
Total profit = unit profit x volume
In finance (yes I am a finance major), while total profit is looked at, another very important metric used is your profit margin. Large profits that are built on razor thin unit profits at high volume are extremely risky for investors because the low unit profit means that a very small change in market dynamics (seasonality, recession, etc.) will immediately put the airline into a loss-making position. What investors really care about is getting a balance between the two, enough volume/market share to generate large total profits, but at a safe profit margin so that changes in market dynamics do not immediately generate massive losses for the airline.
This is why I see more 779 and 787-10 in EK's future.
Profit margins in a good year in aviation are double digits. EK must also subsidize Dubai. I calculate more total profit per 779 flight than A388 flight...
As an enthusiast, I hope this order is recovered. But there is a reason other airlines haven't ordered enough A388s. Unless that dynamic changes (NEO and stretch), it is time to discuss options.
This must be done off cold hard numbers if Dubai is to thrive. A bad decision that puts EK into going forward loss isn't just a company and the employees, it is the viability of the city state.
So this decision is a big one. The EK c-suite must earn their pay.