5 ms·

"Prodigious Rate" -- To put this in context, the latest numbers I saw is about $125 per min of unscheduled delay. It also doesn't take that many delays to wipe

by __sy__ 7y ago

"Prodigious Rate" -- To put this in context, the latest numbers I saw is about $125 per min of unscheduled delay. It also doesn't take that many delays to wipe profitability to zero.

WalterBright 7y ago
A corollary is that airline operations revolve around maximizing the amount of time their airplanes are flying and loaded to the gills with payload. The word "payload" is not a misnomer :-)
bitexploder 7y ago
Southwest had a really memorable slogan: “wheels up” and the business really rallied around that priority ruthlessly for many years. It was pretty cool and gets used in business analysis as an example a lot about how to achieve big goals.
- sokoloff 7y ago
  One such (very lightweight) analysis: https://www.cnbc.com/id/43768488 https://www.cnbc.com/id/43768488 It really is a great systems thinking story. Set the overall context and goal and then figure out how to optimize for the thing that drives results.
  - ethbro 7y ago
    The How I Built This podcast on Southwest [0] with Kelleher (since deceased) is an amazing episode. Both for trivia and giving context to what it takes to be successful behind the scenes. Kelleher (a lawyer by training) ran a private practice while litigating a 3-year lawsuit against airline incumbents at the time... before Southwest flew its first flight in Texas. And when asked "Why?" As in, why didn't you stop, return to law, or do something easier, he basically said "Because it didn't seem fair. Or right. That they could keep us from flying." I'm sure he had his fair share of sharp business decisions, but he came across as a truly great human being. [0] https://www.stitcher.com/podcast/national-public-radio/how-i-built-this/e/48306996 https://www.stitcher.com/podcast/national-public-radio/how-i...
CalChris 7y ago
A plane sitting on the ground costs revenue. The highest revenue per hour route is JFK to Heathrow at $24,639 [1]. A 787-800 costs about $8000/hr [2]. So that's about $277/min of revenue. Yeah, $125/min sounds about right for an average route. [1] https://www.planestats.com/bhsw_2014sep https://www.planestats.com/bhsw_2014sep [2] https://www.airliners.net/forum/viewtopic.php?t=1398091 https://www.airliners.net/forum/viewtopic.php?t=1398091
- ethbro 7y ago
  Well, expected revenue looks a bit difference when you're leveraged to the hilt and have interest payments scheduled. My understanding is that very few airlines outright own their planes.
  - WalterBright 7y ago
    Even if they own the planes outright, the interest cost of the airplanes remains the same (because the money tied up in the airplane could be otherwise put to use earning interest). For example, conventional wisdom is that owning your own home outright is a Good Thing. But if mortgage interest rates are low, taking out a mortgage and investing in something that pays more than that interest rate is a Better Thing.
    - cesarb 7y ago
      > But if mortgage interest rates are low, taking out a mortgage and investing in something that pays more than that interest rate is a Better Thing. Yes, but there's extra risk that way. That strategy depends on either the investment returning enough every month to pay the mortgage for that month, or another funding source (like a salary) being available every month to do so. If for some reason neither are available on a given month, you risk losing your home.
  - bronco21016 7y ago
    It varies. Some airlines are printing money like it’s their job and have very savvy purchasing teams. Large piles of cash spent on second hand aircraft can really help soften the blow when times get tough. Although in the current market some are even spending cash on NEW airframes which is really kind of crazy. But speaking globally, I would say you’re likely right. The majority of airlines are very heavily leveraged and as soon as the economy softens we’ll see at least a few casualties again.

by __sy__ 7y ago

"Prodigious Rate" -- To put this in context, the latest numbers I saw is about $125 per min of unscheduled delay. It also doesn't take that many delays to wipe profitability to zero.

WalterBright 7y ago

A corollary is that airline operations revolve around maximizing the amount of time their airplanes are flying and loaded to the gills with payload. The word "payload" is not a misnomer :-)

bitexploder 7y ago

Southwest had a really memorable slogan: “wheels up” and the business really rallied around that priority ruthlessly for many years. It was pretty cool and gets used in business analysis as an example a lot about how to achieve big goals.

sokoloff 7y ago
One such (very lightweight) analysis: https://www.cnbc.com/id/43768488 https://www.cnbc.com/id/43768488 It really is a great systems thinking story. Set the overall context and goal and then figure out how to optimize for the thing that drives results.
- ethbro 7y ago
  The How I Built This podcast on Southwest [0] with Kelleher (since deceased) is an amazing episode. Both for trivia and giving context to what it takes to be successful behind the scenes. Kelleher (a lawyer by training) ran a private practice while litigating a 3-year lawsuit against airline incumbents at the time... before Southwest flew its first flight in Texas. And when asked "Why?" As in, why didn't you stop, return to law, or do something easier, he basically said "Because it didn't seem fair. Or right. That they could keep us from flying." I'm sure he had his fair share of sharp business decisions, but he came across as a truly great human being. [0] https://www.stitcher.com/podcast/national-public-radio/how-i-built-this/e/48306996 https://www.stitcher.com/podcast/national-public-radio/how-i...

CalChris 7y ago

A plane sitting on the ground costs revenue. The highest revenue per hour route is JFK to Heathrow at $24,639 [1]. A 787-800 costs about $8000/hr [2]. So that's about $277/min of revenue. Yeah, $125/min sounds about right for an average route. [1] https://www.planestats.com/bhsw_2014sep https://www.planestats.com/bhsw_2014sep [2] https://www.airliners.net/forum/viewtopic.php?t=1398091 https://www.airliners.net/forum/viewtopic.php?t=1398091

ethbro 7y ago
Well, expected revenue looks a bit difference when you're leveraged to the hilt and have interest payments scheduled. My understanding is that very few airlines outright own their planes.
- WalterBright 7y ago
  Even if they own the planes outright, the interest cost of the airplanes remains the same (because the money tied up in the airplane could be otherwise put to use earning interest). For example, conventional wisdom is that owning your own home outright is a Good Thing. But if mortgage interest rates are low, taking out a mortgage and investing in something that pays more than that interest rate is a Better Thing.
  - cesarb 7y ago
    > But if mortgage interest rates are low, taking out a mortgage and investing in something that pays more than that interest rate is a Better Thing. Yes, but there's extra risk that way. That strategy depends on either the investment returning enough every month to pay the mortgage for that month, or another funding source (like a salary) being available every month to do so. If for some reason neither are available on a given month, you risk losing your home.
- bronco21016 7y ago
  It varies. Some airlines are printing money like it’s their job and have very savvy purchasing teams. Large piles of cash spent on second hand aircraft can really help soften the blow when times get tough. Although in the current market some are even spending cash on NEW airframes which is really kind of crazy. But speaking globally, I would say you’re likely right. The majority of airlines are very heavily leveraged and as soon as the economy softens we’ll see at least a few casualties again.