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Let's forget about aviation flag carriers and the 'orthodox' legacy US airlines for a moment. How do 'low-cost' airlines make any money, especially in Europe wh

by niftich 10y ago

Let's forget about aviation flag carriers and the 'orthodox' legacy US airlines for a moment. How do 'low-cost' airlines make any money, especially in Europe where they advertise fares for paltry amounts? Even with charging extra for bags, food, early boarding, decent seating, etc., does the money they make per passenger cover fuel costs and landing fees alone or is profitable in any sense of the word? What are the business incentives in entering this market, then? A hypothesis is that low-cost airlines often fly to lesser-known airports further away from popular cities and extensive hub operations; airports which have a difficult time attracting orthodox airlines for these reasons. Therefore, such secondary airports compete against each other to attract carriers, because without a commercial carrier the utility of the airport greatly diminishes for the residents of the immediate area, who may demand to redirect government funds to other expenses. But if an area can retain its airport with commercial service, multiple fringe benefits result: local businesses will be patronized by air travellers even if just to get to the major city of their choice, and the area's profile will be raised on a national level which may make it more attractive to businesses and discretionary residents. Therefore, we can assume that some amount of government subsidy finds its way into the pocket of low-cost airlines that choose to serve a particular airport. I posit that local governments face similar pressures with regard to improving accessibility to metropolitan points-of-interest and a large-network provider like Uber may be able to offer a solution at a price the government is willing to pay. This has already happened in New Jersey [1], and I expect to see more of this in the future. [1] http://www.theverge.com/2016/10/3/13147680/uber-new-jersey-free-ride-parking-lot-train-commute http://www.theverge.com/2016/10/3/13147680/uber-new-jersey-f...

niftich 10y ago
In short: I propose that Uber's long-term business model is to win lucrative government contracts and absorb subsidies, by operating a transportation network big and elastic enough to meet criteria and provide the requisite level-of-service. It's essentially a purpose-made PPP (public-private partnership) company, the transportation equivalent to Skanska, Fluor, Strabag (if you're familiar with large-scale infrastructure projects), or, an automobile-based version of school transportation contractors, charter services, and the like. This is irrespective of whether they have human- or self-driving vehicles.

by niftich 10y ago

niftich 10y ago

In short: I propose that Uber's long-term business model is to win lucrative government contracts and absorb subsidies, by operating a transportation network big and elastic enough to meet criteria and provide the requisite level-of-service. It's essentially a purpose-made PPP (public-private partnership) company, the transportation equivalent to Skanska, Fluor, Strabag (if you're familiar with large-scale infrastructure projects), or, an automobile-based version of school transportation contractors, charter services, and the like. This is irrespective of whether they have human- or self-driving vehicles.