Moderators: richierich, ua900, PanAm_DC10, hOMSaR
evank516 wrote:Doesn't UA fly EWR-KEF also?
klakzky123 wrote:evank516 wrote:Doesn't UA fly EWR-KEF also?
Yup. Icelandair, WOW Air (sometimes with two flights a day) and United all fly from EWR in the Summer. NYC to KEF is a bloodbath.
enilria wrote:klakzky123 wrote:evank516 wrote:Doesn't UA fly EWR-KEF also?
Yup. Icelandair, WOW Air (sometimes with two flights a day) and United all fly from EWR in the Summer. NYC to KEF is a bloodbath.
Yes, but pricing between EWR and JFK is often quite different.
MIflyer12 wrote:The fare pre-tax is $221. Delta has published (and available) fares a comparable distance JFK-LAX at $251 pre-tax. JFK-LAS fares can be $187 pre-tax. DL has a lot of capacity NYC-JFK/LAS. I don't see a problem.
klakzky123 wrote:evank516 wrote:Doesn't UA fly EWR-KEF also?
Yup. Icelandair, WOW Air (sometimes with two flights a day) and United all fly from EWR in the Summer. NYC to KEF is a bloodbath.
lavalampluva wrote:klakzky123 wrote:evank516 wrote:Doesn't UA fly EWR-KEF also?
Yup. Icelandair, WOW Air (sometimes with two flights a day) and United all fly from EWR in the Summer. NYC to KEF is a bloodbath.
If MSP can handle 3 flights a day to KEF in the summer, NYC should be able to easily.
enilria wrote:$153 each way on JFK-KEF in Summer 2019 on DL. Obviously they are losing their shirts. When WOW was in the market I might have understood this, but with only FI left is this really necessary with their costs? If it's still that bad with only two carriers just let FI have it. With the hub in KEF it's going to be very hard to compete with them anyway.
https://slickdeals.net/f/12177175-nonst ... -sept-2019
mmo wrote:DL does not fly routes it can't make money on.
waly777 wrote:It's a solid pricing strategy most airlines utilise. This far out, what's open will mostly be the lowest fare buckets with the tight ticketing restrictions. As we get closer, those will close as bookings come in. The fares open will also depend on the forecasted demand per flight (all cabins included, i imagine they use upgrade/pinching parameters for flights not expected to go full in 1 cabin when setting up flight AU's). International peak demand also tends to be directional.
enilria wrote:mmo wrote:DL does not fly routes it can't make money on.
That's totally false. I would suggest at least 15% of DL's routes lose money. This is very common. There are a number reasons this happens:
1) Competitive reasons. MSP-KEF is the poster child. There's no way that makes money. It's there to defend against FI growing in MSP.
2) Political reasons. MSP-HND. The numbers on this route are improving, but it's still about 10% less full than the other NRT flights and the yield isabout 10% worse than the other flights because there is so little local. Definitely not profitable, but going in the right direction. Probably will take a dive when MSP-ICN starts. They can't drop the route because they need to hold the HND authority for future rounds of HND liberalization.
3) Hope. You don't just drop a route the day it becomes unprofitable. Maybe if you are Frontier. You give a route time to succeed. Sometimes too much time.
4) Operational. A certain number of planes need to overnight at a maintenance base. Not unusual to run junk trips to satisfy maintenance needs.
5) Corporate Contract. This may be the most common type of loser in the DL network. A corporation like P&G says that they will pledge all their corporate traffic to DL if they connect to of their operations centers with a flight. This is VERY common.waly777 wrote:It's a solid pricing strategy most airlines utilise. This far out, what's open will mostly be the lowest fare buckets with the tight ticketing restrictions. As we get closer, those will close as bookings come in. The fares open will also depend on the forecasted demand per flight (all cabins included, i imagine they use upgrade/pinching parameters for flights not expected to go full in 1 cabin when setting up flight AU's). International peak demand also tends to be directional.
That's the way it worked years ago. Doesn't work like that now. In the old days the revenue management system would put in a bookings base at relatively low fares far in advance and then let that simmer for a few months to see what other demand showed up. Now the system is much more based upon demand in past years and DL does not operate like that in it's far out revenue management. If you think about it you can see that selling seats far in advance at deep discounts is really dumb because demand is inherently weak that far out. It's much more effective to discount less (if needed) at a point where demand is stronger.
waly777 wrote:enilria wrote:mmo wrote:DL does not fly routes it can't make money on.
That's totally false. I would suggest at least 15% of DL's routes lose money. This is very common. There are a number reasons this happens:
1) Competitive reasons. MSP-KEF is the poster child. There's no way that makes money. It's there to defend against FI growing in MSP.
2) Political reasons. MSP-HND. The numbers on this route are improving, but it's still about 10% less full than the other NRT flights and the yield isabout 10% worse than the other flights because there is so little local. Definitely not profitable, but going in the right direction. Probably will take a dive when MSP-ICN starts. They can't drop the route because they need to hold the HND authority for future rounds of HND liberalization.
3) Hope. You don't just drop a route the day it becomes unprofitable. Maybe if you are Frontier. You give a route time to succeed. Sometimes too much time.
4) Operational. A certain number of planes need to overnight at a maintenance base. Not unusual to run junk trips to satisfy maintenance needs.
5) Corporate Contract. This may be the most common type of loser in the DL network. A corporation like P&G says that they will pledge all their corporate traffic to DL if they connect to of their operations centers with a flight. This is VERY common.waly777 wrote:It's a solid pricing strategy most airlines utilise. This far out, what's open will mostly be the lowest fare buckets with the tight ticketing restrictions. As we get closer, those will close as bookings come in. The fares open will also depend on the forecasted demand per flight (all cabins included, i imagine they use upgrade/pinching parameters for flights not expected to go full in 1 cabin when setting up flight AU's). International peak demand also tends to be directional.
That's the way it worked years ago. Doesn't work like that now. In the old days the revenue management system would put in a bookings base at relatively low fares far in advance and then let that simmer for a few months to see what other demand showed up. Now the system is much more based upon demand in past years and DL does not operate like that in it's far out revenue management. If you think about it you can see that selling seats far in advance at deep discounts is really dumb because demand is inherently weak that far out. It's much more effective to discount less (if needed) at a point where demand is stronger.
Which was I mentioned the fare buckets open will also vary on the forecasted demand per flight for all cabins. If the demand is low, there's no point restricting availability to structural rbds, there will be a lot of tactical in use to improve volumes.
I disagree on it being dumb having discounted fares in advance. Especially when demand is low.
Just because it is a peak period, does not mean every leg/flight/cabin has high demand for the particular route.
If their forecasting systems are being properly managed and historical forecast accuracy is close to flown, then they can be quite sure of a route/leg/flight demand quite far out and implement appropriate POS/route, inventory and pricing strategies. One strategy does not fit all markets of course.
enilria wrote:waly777 wrote:enilria wrote:That's totally false. I would suggest at least 15% of DL's routes lose money. This is very common. There are a number reasons this happens:
1) Competitive reasons. MSP-KEF is the poster child. There's no way that makes money. It's there to defend against FI growing in MSP.
2) Political reasons. MSP-HND. The numbers on this route are improving, but it's still about 10% less full than the other NRT flights and the yield isabout 10% worse than the other flights because there is so little local. Definitely not profitable, but going in the right direction. Probably will take a dive when MSP-ICN starts. They can't drop the route because they need to hold the HND authority for future rounds of HND liberalization.
3) Hope. You don't just drop a route the day it becomes unprofitable. Maybe if you are Frontier. You give a route time to succeed. Sometimes too much time.
4) Operational. A certain number of planes need to overnight at a maintenance base. Not unusual to run junk trips to satisfy maintenance needs.
5) Corporate Contract. This may be the most common type of loser in the DL network. A corporation like P&G says that they will pledge all their corporate traffic to DL if they connect to of their operations centers with a flight. This is VERY common.
That's the way it worked years ago. Doesn't work like that now. In the old days the revenue management system would put in a bookings base at relatively low fares far in advance and then let that simmer for a few months to see what other demand showed up. Now the system is much more based upon demand in past years and DL does not operate like that in it's far out revenue management. If you think about it you can see that selling seats far in advance at deep discounts is really dumb because demand is inherently weak that far out. It's much more effective to discount less (if needed) at a point where demand is stronger.
Which was I mentioned the fare buckets open will also vary on the forecasted demand per flight for all cabins. If the demand is low, there's no point restricting availability to structural rbds, there will be a lot of tactical in use to improve volumes.
I disagree on it being dumb having discounted fares in advance. Especially when demand is low.
Just because it is a peak period, does not mean every leg/flight/cabin has high demand for the particular route.
If their forecasting systems are being properly managed and historical forecast accuracy is close to flown, then they can be quite sure of a route/leg/flight demand quite far out and implement appropriate POS/route, inventory and pricing strategies. One strategy does not fit all markets of course.
All the revenue management people I know no longer believe in offering rock bottom pricing 180+ days out. Demand is too weak to price into that weakness and generally the more modern strategy is to charge a premium to lock down your plans so far in advance.
waly777 wrote:enilria wrote:waly777 wrote:
Which was I mentioned the fare buckets open will also vary on the forecasted demand per flight for all cabins. If the demand is low, there's no point restricting availability to structural rbds, there will be a lot of tactical in use to improve volumes.
I disagree on it being dumb having discounted fares in advance. Especially when demand is low.
Just because it is a peak period, does not mean every leg/flight/cabin has high demand for the particular route.
If their forecasting systems are being properly managed and historical forecast accuracy is close to flown, then they can be quite sure of a route/leg/flight demand quite far out and implement appropriate POS/route, inventory and pricing strategies. One strategy does not fit all markets of course.
All the revenue management people I know no longer believe in offering rock bottom pricing 180+ days out. Demand is too weak to price into that weakness and generally the more modern strategy is to charge a premium to lock down your plans so far in advance.
This works fine if you have high demand on the flight. If you don't, there is literally no point offering high fares when there is excess capacity (not just you, but your competitors) as you will risk excessive spoilage. You of course don't sell all of them on tactical rbds or you end up spilling more valuable pax closer to departure if the route has such a demand profile.
Even when there is demand, you have to understand the market enough and get the right RBD mix to ensure you don't spill or spoil. Locking up everything and selling high fares works out during super peak periods like the weekends after school close/before Christmas when demand significantly exceeds capacity. You will definitely have little to no spoilage.
enilria wrote:All the revenue management people I know no longer believe in offering rock bottom pricing 180+ days out. Demand is too weak to price into that weakness and generally the more modern strategy is to charge a premium to lock down your plans so far in advance.
mmo wrote:enilria wrote:All the revenue management people I know no longer believe in offering rock bottom pricing 180+ days out. Demand is too weak to price into that weakness and generally the more modern strategy is to charge a premium to lock down your plans so far in advance.
I was going to respond to your first post to me but really couldn't care less. I don't know what your background is but your statement amazes me. I don't know where all the revenue management people you know work but I know plenty of revenue management people who would disagree. Take a look at TATL fares now bookable in the summer and where they are in the summer, they certainly do follow the pricing logic I described. We're going back to the UK on 22 DEC in J and the fare is double what we paid. Evey U2 and FR do the same thing, the longer out the date is the cheaper the fare is.
mmo wrote:We're going back to the UK on 22 DEC in J and the fare is double what we paid. Evey U2 and FR do the same thing, the longer out the date is the cheaper the fare is.
enilria wrote:waly777 wrote:enilria wrote:All the revenue management people I know no longer believe in offering rock bottom pricing 180+ days out. Demand is too weak to price into that weakness and generally the more modern strategy is to charge a premium to lock down your plans so far in advance.
This works fine if you have high demand on the flight. If you don't, there is literally no point offering high fares when there is excess capacity (not just you, but your competitors) as you will risk excessive spoilage. You of course don't sell all of them on tactical rbds or you end up spilling more valuable pax closer to departure if the route has such a demand profile.
Even when there is demand, you have to understand the market enough and get the right RBD mix to ensure you don't spill or spoil. Locking up everything and selling high fares works out during super peak periods like the weekends after school close/before Christmas when demand significantly exceeds capacity. You will definitely have little to no spoilage.
OK, I'll go about it this way. If the market is so weak that they feel the need to trash the market 8 months in advance and as you say it is not a "high demand market", then the market must be a trainwreck they should give up on...and the reason this strategy is out of favor now is because few remaining markets are so weak that this strategy has any shot at a positive impact.
BTW, I don't think WOW even has schedules loaded for EWR for next Summer yet, so that makes it even nuttier.
SCQ83 wrote:mmo wrote:We're going back to the UK on 22 DEC in J and the fare is double what we paid. Evey U2 and FR do the same thing, the longer out the date is the cheaper the fare is.
Definitely this is not the case with FR. I have flown FR dozens of times, and 6-month in advance fares are usually priced higher. Particularly in low-season when 1-2 months in advance (or even less) you can get cheaper fares so FR can sell the inventory and stimulate traffic (city breaks, VFR, etc)
waly777 wrote:Again, what you refer to as "this strategy" is very much in use and i can ask you to look at those same flights by April next year and see what the fares are.
enilria wrote:waly777 wrote:Again, what you refer to as "this strategy" is very much in use and i can ask you to look at those same flights by April next year and see what the fares are.
April is shoulder. We are talking about July. That's the whole point.
waly777 wrote:enilria wrote:waly777 wrote:Again, what you refer to as "this strategy" is very much in use and i can ask you to look at those same flights by April next year and see what the fares are.
April is shoulder. We are talking about July. That's the whole point.
In April... check the July flight prices, they would be far more expensive.
enilria wrote:waly777 wrote:enilria wrote:April is shoulder. We are talking about July. That's the whole point.
In April... check the July flight prices, they would be far more expensive.
I feel like you aren't getting my point. July is supposed to be expensive all the time, not just by the time you get to April.
waly777 wrote:DL's rev man system has to be on point for them to be that profitable, they know what they're doing.
enilria wrote:waly777 wrote:DL's rev man system has to be on point for them to be that profitable, they know what they're doing.
There's no way this route is profitable, though.
enilria wrote:waly777 wrote:DL's rev man system has to be on point for them to be that profitable, they know what they're doing.
There's no way this route is profitable, though.
mmo wrote:enilria wrote:waly777 wrote:DL's rev man system has to be on point for them to be that profitable, they know what they're doing.
There's no way this route is profitable, though.
And you base this on? Are you taking into account belly cargo?
SRQKEF wrote:enilria wrote:waly777 wrote:DL's rev man system has to be on point for them to be that profitable, they know what they're doing.
There's no way this route is profitable, though.
Why have they operated it consistently for 8 years then, going from 3x weekly in deep summer only to almost daily year-round service? While I shared your skepticism back when DL started operating here in 2011, I think they've proved since that they do have a place here. Low fares here and there don't change my opinion on that.
However, I can't see DL making much money on MSP-KEF, without knowing the facts of it. Still, they're returning on that route for the 3rd year running next summer so it must make some sense to keep it.
enilria wrote:waly777 wrote:DL's rev man system has to be on point for them to be that profitable, they know what they're doing.
There's no way this route is profitable, though.
enilria wrote:SRQKEF wrote:enilria wrote:There's no way this route is profitable, though.
Why have they operated it consistently for 8 years then, going from 3x weekly in deep summer only to almost daily year-round service? While I shared your skepticism back when DL started operating here in 2011, I think they've proved since that they do have a place here. Low fares here and there don't change my opinion on that.
However, I can't see DL making much money on MSP-KEF, without knowing the facts of it. Still, they're returning on that route for the 3rd year running next summer so it must make some sense to keep it.
I just looked up their reported average fare. JFK-KEF is about 1/3rd of LHR. Yes, that's hideous. In MSP it's about 60% lower than LHR.
It's the same as AA in DFW-KEF. I believe it is a flawed strategy. They think that by taking a chunk of the local market to KEF they are hurting the ability for FI/WW to stay in the market. It's a fallacy because while the local market is bigger than people think, it is often a stop over. For example, people fly JFK-KEF. Stay a couple of days and then fly KEF-TXL. DL can't offer that. There's no real way to do much damage to a KEF-based carrier. They should give up. It's like trying to run DL out of an ATL market. Not going to happen.
waly777 wrote:enilria wrote:waly777 wrote:DL's rev man system has to be on point for them to be that profitable, they know what they're doing.
There's no way this route is profitable, though.
Well i don't have access to DL's data and neither do you, but DL is not afraid to cut routes that are unprofitable. This is part of a strategy that keeps their numbers on point.
waly777 wrote:The costs to operate out of LHR vs KEF are nowhere close.
enilria wrote:waly777 wrote:enilria wrote:There's no way this route is profitable, though.
Well i don't have access to DL's data and neither do you, but DL is not afraid to cut routes that are unprofitable. This is part of a strategy that keeps their numbers on point.
I absolutely do have access to Delta's data. It's published. I don't have their flight profitability system, but it can be simulated from the published data. People wrongly assume that every route is profitable. That's patently false. Even in the best of times 15-20% of routes lose money on the leg profit metric.waly777 wrote:The costs to operate out of LHR vs KEF are nowhere close.
The CASM on an old narrowbody to KEF is also significantly higher. DL's average fare on JFK-DUB is nearly double the DL fare to KEF. There are no cost items that could offset that sort of variance. The margin on KEF is dramatically lower than other Europe routes. Nobody thinks DUB is turning in 20% profit margins.
waly777 wrote:enilria wrote:waly777 wrote:
Well i don't have access to DL's data and neither do you, but DL is not afraid to cut routes that are unprofitable. This is part of a strategy that keeps their numbers on point.
I absolutely do have access to Delta's data. It's published. I don't have their flight profitability system, but it can be simulated from the published data. People wrongly assume that every route is profitable. That's patently false. Even in the best of times 15-20% of routes lose money on the leg profit metric.waly777 wrote:The costs to operate out of LHR vs KEF are nowhere close.
The CASM on an old narrowbody to KEF is also significantly higher. DL's average fare on JFK-DUB is nearly double the DL fare to KEF. There are no cost items that could offset that sort of variance. The margin on KEF is dramatically lower than other Europe routes. Nobody thinks DUB is turning in 20% profit margins.
You have access to DL's route revenue and cost data? Lol i find that hard to believe as that data does not leave the revenue management and network planning teams where I work.
enilria wrote:You are kidding, right? It's the biggest myth in passenger aviation that cargo significantly impacts passenger airline profitability. In the most recent quarter, only 3.5% of FI revenue was from Cargo. That's not changing anything from bad to good.
mmo wrote:enilria wrote:You are kidding, right? It's the biggest myth in passenger aviation that cargo significantly impacts passenger airline profitability. In the most recent quarter, only 3.5% of FI revenue was from Cargo. That's not changing anything from bad to good.
Really???? Again, I don't know what your background is but I suspect it's not in the commercial aviation industry. Having worked in commercial aviation for over 30 years, I can assure you cargo does impact profitability. Especially, in a market like KEF where fresh fish is a very time sensitive commodity. NW used to run a 747 from MSP-OSL and JFK-OSL and the fresh fish alone paid for the entire cost of the trip. Passenger revenue was all profit.
wave46 wrote:Am I correct in assuming that there's a time point before revenue management really comes into play with tweaking prices? For instance, would a fare for a flight 6 months from now would be relatively static and priced consistently with historical expectations (what prices were seats sold for last year?). Of course, there could be different rules for flights that sell out quickly, seat sales, etc.
I could see the last few weeks before the flight being 'peak season' for revenue management. Am I correct in this assumption?
enilria wrote:waly777 wrote:enilria wrote:I absolutely do have access to Delta's data. It's published. I don't have their flight profitability system, but it can be simulated from the published data. People wrongly assume that every route is profitable. That's patently false. Even in the best of times 15-20% of routes lose money on the leg profit metric.
The CASM on an old narrowbody to KEF is also significantly higher. DL's average fare on JFK-DUB is nearly double the DL fare to KEF. There are no cost items that could offset that sort of variance. The margin on KEF is dramatically lower than other Europe routes. Nobody thinks DUB is turning in 20% profit margins.
You have access to DL's route revenue and cost data? Lol i find that hard to believe as that data does not leave the revenue management and network planning teams where I work.
Route revenue yes from DB1B. It's easily prorated to the leg. We have cost data by equipment by region from Form 41. The only data that is aggregated is the airport cost, but it doesn't vary so dramatically that it would swing anything that much. DIIO and ADI even have it processed and queryable. It's not going to be exact to the internal profitability system, but we aren't talking here about 2% variations. Good and bad markets stand out pretty clearly.
It's required by law to be reported. For example, I know DL had a 13% margin on Transatlatic in the last 12 months.