10 ms·

Billion-dollar airline routes

marcc 5y ago
Don't forget about taxes and fees. When you look at the price of a domestic (US) ticket, it's surprising how much of this is taxes and fees that the airline is passing through and not directly profit.
- Gravityloss 5y ago
  https://www.airlines.org/dataset/government-imposed-taxes-on-air-transportation/ https://www.airlines.org/dataset/government-imposed-taxes-on... Seems fuel taxes are next to nothing? Not sure how to read this...
  - londons_explore 5y ago
    Aircraft fuel is pretty much untaxed in most countries in the world. Since a plane can easily fly from country to country, any country who taxed airline fuel would simply deter planes from visiting. Probably the biggest climate move that could have happened at COP26 would have been a global agreement on $1/liter aircraft fuel tax. But it didn't happen.
    - wolverine876 5y ago
      The 'race to the bottom' argument against all taxes is mostly insignificant: First, airports, air traffic control, etc. have to be paid for somehow; taxes are how it's done. Second, taxes don't determine profits to that extent. Will an airline discontinue service to the EU because of a gas tax?
      - londons_explore 5y ago
        On many routes, even a small gas tax would just make airlines fill up their tanks at the other end of the journey and carry extra fuel in one direction. Carrying extra weight is bad and causes more CO2.
        wolverine876 5y ago
        That's a bit hard to believe; it would seem to depend on the tax. Do you have any basis for it?
        Gravityloss 5y ago
        Is that true? Airplanes need so much fuel, I think they're always tanked at each destination.
- edwardwatson 5y ago
  Many will also pay a few dollars per booking to a distribution system that makes their inventory available to travel agencies and other resellers https://en.m.wikipedia.org/wiki/Global_distribution_system https://en.m.wikipedia.org/wiki/Global_distribution_system
- bredren 5y ago
  I saw the headline and thought this was about Overflight Fees, which are the fees a country charges just for passing through their airspace. For example, it cost $950 to travel over Afghanistan in 2020. [1] [1] https://simpleflying.com/overflight-fees/ https://simpleflying.com/overflight-fees/ Faa’s fees for the US: https://www.faa.gov/air_traffic/international_aviation/overflight_fees/ https://www.faa.gov/air_traffic/international_aviation/overf...
- wolverine876 5y ago
  Tip on pricing: 'Taxes and fees', etc., are BS. It's just a way of getting consumers to pay more (and to create political pressure to limit such things). They are expenses, and like all expenses they are the business's problem, not yours. Somehow, people are conditioned to think that they should pay the airline's taxes (some of them) and 'fees' for them, and somehow customers mentally remove that from the bottom line price. If only they could get customers to believe they should cover other expenses, like income taxes, fuel (oh yeah, they did that), maintenance, and lunch the other day with the Boeing salesperson, they could itemize those too. And where are the discounts when the expenses are less than expected? When profits are high? Oh, suddenly that's their business, not mine. The pro tip is this, for anything: Just look at the bottom line. Businesses can itemize things however they want, including discounts ('special for you today - 50% off!'), the price of item A can be marked up, the price of item B marked down, it's all meaningless.
filereaper 5y ago
Highly recommend Wendover's videos on Airline economics, this specific one is about the various classes in Airline seats https://www.youtube.com/watch?v=BzB5xtGGsTc https://www.youtube.com/watch?v=BzB5xtGGsTc
deleted 5y ago
[deleted]
paxys 5y ago
So, take a single data point (price for an economy seat 6 months in advance), add on a hundred different assumptions with zero backing data (% capacity filled? Different seat classes? Fluctuation in ticket prices? Connecting routes?), and present it as some deep analysis.
- The-Bus 5y ago
  What I find interesting is that the writer goes through the trouble of answering a question that OAG has already answered[1], and he uses OAG as a source. 1: https://www.oag.com/blog/billion-dollar-route-jewels-in-the-network https://www.oag.com/blog/billion-dollar-route-jewels-in-the-...
blakesterz 5y ago
> I like to board last. I’ve never understood the appeal of being on the plane any longer than I need too (I’m yet to travel in business class). I don't understand that opening at all. We all want to get on so we get space in the overhead bins, don't we? Maybe he just never has a bag, but the reason should be obvious regardless.
- caymanjim 5y ago
  I've flown over 100 times and only once had to gate-check my bag due to insufficient space. I was thankful for the chance because it's free, you get your bag faster on landing, and you don't have to wrangle it down the aisle. I always board as late as possible. Why sit in a hot/cold/stuffy plane while people jostle all around you?
  - jwcacces 5y ago
    Haha, lucky you. I might not fly as much as you, but in my experience the moment a bag leaves my line of sight, the chance it gets lost leaps dramatically. As someone who's had checked bags lost, and gate-checked bags lost, the ability to get on earlier translates directly into peace of mind that my bag will be with me when I land. As for getting my bag faster if it was gate-checked, how does that happen? Every time I've been gate-checked, my luggage ends up down in baggage claim the same as if I had regular-checked it. The only luggage that has met me at the gate has been a stroller. Maybe I'm just flying cheap airlines, but I'll take first on and sitting in a stuffy plane over the chance of disaster and standing in the terminal any day of the week. You're waiting the same amount of time either way wherever you are. But hey, your yin and my yang work great together, so you do you!
  - dllthomas 5y ago
    > Why sit in a hot/cold/stuffy plane while people jostle all around you? Because I can get lost in my book and not worry about missing anything. YMMV (mine does).
  - jwilber 5y ago
    I flew twice a week for years and it really just depends on the route (ie airports, day of week, and time of day) that you’re flying. Popular business routes will always have full overhead bins, so you either check your luggage, bring a week-bag that you can fit under the seat, or get on early and get the overhead space. Personally, I prefer to travel light so always wait until the last second to board. But that also depends on the cabin - if you’re at all above average height it’s absolute hell to fly in general, even worse when your limited leg room has a backpack.
drc500free 5y ago
I don't understand why the cursory math of someone with no domain knowledge, business understanding, or access to accurate data is at all interesting.
- tcskeptic 5y ago
  I had the same reaction -- I don't follow the industry much but know that Business class accounts for an outside proportion of revenue and profit for the airlines... which doesn't seem to be addressed at all.
- deleted 5y ago
  [deleted]
- gist 5y ago
  > I don't understand why the cursory math of someone with no domain knowledge, business understanding, or access to accurate data is at all interesting The post is similar to many things you read online (on HN or other places) it's really just 'infotainment' and it doesn't really matter if it's accurate anymore than a Netflix series might be. Generally even articles by people that have domain knowledge can be just compounding of early errors or assumptions they make. 'Napkin math' though is always interesting because it would lead you to believe that if the numbers you are using don't make sense there is probably something you aren't considering that you need to think about.
_s 5y ago
This is fascinating! A few comments have mentioned the cost to the airline for running the route - the author talks about revenue, not profit - but most, if not all the costs are calculated on time, not distance. Nearly everything in an aircraft has a maintenance window / shelf life measured in minutes / hours / days / months / years. The JFK - LON route could be 7 hours, or 5 hours depending on prevailing winds. That’s an extra 2 hours you have to pay the flight crew, run the engines, maybe even an extra meal for the passengers and so forth. Weather has an astounding affect on how much a given flight will cost, and probably traffic is the next one - hence why landing / gate spots at busy airports are so expensive. Crew are legally mandated to only work X hours in a given time frame (both active and standby), so if you’re held up in the air or on the ground, especially on a long haul flight - you might not be legally clear to make that flight! There’s a whole field of dispatch operations for aviation that handles this, and for the finance folks - the financial model for aviation is just subtly different enough to cause a few headaches if you’re not aware.
csteubs 5y ago
There's still money on the table for airline operators where routes are concerned. It sounds a bit fringe, but most of these flights take off and land at airports in large cities. International airports are often zoned around industrial centers that are typically set off away from the city core. Coupled with the high frequency of inbound and outbound traffic depending on the airport, commercial flights are excellent candidates for capturing high resolution aerial imagery in near-real time. In many cases, those images can be transmitted back down while the plane is in the air thanks to in-flight internet. There have been past attempts to harness the passive residual capabilities of air travel for photography, but none have stuck based on the difficulty of scaling such a system. If successful, crowdsourced aerial photography for cartography could add a layer of temporal resolution we just can't achieve with fewer than 500 imaging satellites currently in orbit, and for 1/10,000th the cost of satellite-based imaging. Add on concerns about LEO crowding and the thousands of use cases near-real-time aerial imaging could provide at a fraction of the cost, it becomes an interesting problem to solve. There are plenty of barriers to this kind of scheme, regulation in particular, that could keep airlines from participating; the first major carrier who does, however, may find themselves with a new multi-billion dollar revenue stream. (Disclosure: Founder @ https://notasatellite.com https://notasatellite.com)
- nradov 5y ago
  Most commercial flights operate in a small number of fairly narrow corridors. Is there really a billion dollar market for aerial imagery of those flight corridors? Seems unlikely.
  - csteubs 5y ago
    Maybe--time will tell. We run revisit estimates with FlightRadar so I can say that there's a good amount of deviation in routes generally, but I also think narrow corridors are the mechanisms that makes rapid revisit even more powerful. When you can achieve minute-level temporal resolution for heavily populated areas using smartphones (to start), the cost is more or less negligible compared to satellite imaging. I know of one market-maker HQ'd in Manhattan that currently pays $16 million/year for two satellite images per day of the oil storage tanks in Cushing, OK. Analysts determine tank volume by looking at the shadows cast by the floating lids on the tanks and use that data to set oil futures prices. There are roughly 1,500 flights over the same area every day. We're very much a hypothesis-become-startup at the moment but I'm optimistic!
enahs-sf 5y ago
I wonder how route profitability comes into play with those airlines running older planes (old 737's, etc) that may break more frequently. AOG (airplane on ground) is essentially a broken plane stuck at a gate getting fined massively by the airport because it is blocking a gate. In this situation, usually price elasticity of demand goes out the window with respect to airplane parts because what you'll pay in markup pales in comparison to what you'll pay in fines. Is it more profitable to get new planes or run older ones into the ground? The answer to this question is beyond my depth. Source: my first job out of school was SQL jockey for an airplane parts distributor running reports for the guys trying to predict which parts would be needed. The company had 4 guys and two vans on standby 24/7 to run parts to the airport. This was a very profitable business segment.
- rtkwe 5y ago
  Broken at a gate should be extremely rare. In the outside case a plane can't move under it's own power there's still tons of tugs available to move the plane around.
otterley 5y ago
(2018)
hfjkdh790sn 5y ago
The author doesn’t know what he’s talking about. Business class revenue is far more than economy revenue. Both by square footage and total absolute $. Then there’s cargo revenue. The reason economy passengers get treated like crap is because economy passengers provide crap revenue.
splonk 5y ago
Not a particularly deep analysis. Note that while I'm not necessarily vouching for OAG's data, they are big players in the travel space and I trust them a lot more than this blog. Here's the OAG report that's sketchily linked to a paywall in the article: https://www.oag.com/hubfs/Free_Reports/Busiest%20Routes/OAG%20Busiest%20Routes%202018-A4.pdf https://www.oag.com/hubfs/Free_Reports/Busiest%20Routes/OAG%... A more current snapshot from OAG: https://www.oag.com/busiest-routes-right-now https://www.oag.com/busiest-routes-right-now And finally, OAG's own blog post on billion dollar routes: https://www.oag.com/blog/billion-dollar-route-jewels-in-the-network https://www.oag.com/blog/billion-dollar-route-jewels-in-the-... Basically it was only JFK-LHR before the pandemic. Most of the other high revenue routes are probably what you should expect, although I didn't expect SYD-MEL to be quite that high. I think maybe it's because the ranking is by airline and route and Qantas might dominate that route more than other airlines would dominate international routes.
airbreather 5y ago
A while ago I had to fly Perth to Kalgoorlie (return), a flight that normally takes a bit over an hour, but I have done in as little as 46 minutes. On the same day I could have flown from Perth to Los Angeles return for $50 less. It was rumoured that the two most profitable routes for Qantas in the world for nearly ten years were Perth to Port Hedland and Perth to Newman return, both Iron Ore mining hubs. At one stage there were 6 flights a day to Newman 7 days a week for many years and never a spare seat. Typical flight times 1 hour 20 minutes, cost of tickets around $1100 and nominal population of Newman is 4500 people... Edit : these are all flights within the state of Western Australia

Don't forget about taxes and fees. When you look at the price of a domestic (US) ticket, it's surprising how much of this is taxes and fees that the airline is passing through and not directly profit.

Gravityloss 5y ago
https://www.airlines.org/dataset/government-imposed-taxes-on-air-transportation/ https://www.airlines.org/dataset/government-imposed-taxes-on... Seems fuel taxes are next to nothing? Not sure how to read this...
- londons_explore 5y ago
  Aircraft fuel is pretty much untaxed in most countries in the world. Since a plane can easily fly from country to country, any country who taxed airline fuel would simply deter planes from visiting. Probably the biggest climate move that could have happened at COP26 would have been a global agreement on $1/liter aircraft fuel tax. But it didn't happen.
  - wolverine876 5y ago
    The 'race to the bottom' argument against all taxes is mostly insignificant: First, airports, air traffic control, etc. have to be paid for somehow; taxes are how it's done. Second, taxes don't determine profits to that extent. Will an airline discontinue service to the EU because of a gas tax?
    - londons_explore 5y ago
      On many routes, even a small gas tax would just make airlines fill up their tanks at the other end of the journey and carry extra fuel in one direction. Carrying extra weight is bad and causes more CO2.
      - wolverine876 5y ago
        That's a bit hard to believe; it would seem to depend on the tax. Do you have any basis for it?
      - Gravityloss 5y ago
        Is that true? Airplanes need so much fuel, I think they're always tanked at each destination.
edwardwatson 5y ago
Many will also pay a few dollars per booking to a distribution system that makes their inventory available to travel agencies and other resellers https://en.m.wikipedia.org/wiki/Global_distribution_system https://en.m.wikipedia.org/wiki/Global_distribution_system
bredren 5y ago
I saw the headline and thought this was about Overflight Fees, which are the fees a country charges just for passing through their airspace. For example, it cost $950 to travel over Afghanistan in 2020. [1] [1] https://simpleflying.com/overflight-fees/ https://simpleflying.com/overflight-fees/ Faa’s fees for the US: https://www.faa.gov/air_traffic/international_aviation/overflight_fees/ https://www.faa.gov/air_traffic/international_aviation/overf...
wolverine876 5y ago
Tip on pricing: 'Taxes and fees', etc., are BS. It's just a way of getting consumers to pay more (and to create political pressure to limit such things). They are expenses, and like all expenses they are the business's problem, not yours. Somehow, people are conditioned to think that they should pay the airline's taxes (some of them) and 'fees' for them, and somehow customers mentally remove that from the bottom line price. If only they could get customers to believe they should cover other expenses, like income taxes, fuel (oh yeah, they did that), maintenance, and lunch the other day with the Boeing salesperson, they could itemize those too. And where are the discounts when the expenses are less than expected? When profits are high? Oh, suddenly that's their business, not mine. The pro tip is this, for anything: Just look at the bottom line. Businesses can itemize things however they want, including discounts ('special for you today - 50% off!'), the price of item A can be marked up, the price of item B marked down, it's all meaningless.

filereaper 5y ago

Highly recommend Wendover's videos on Airline economics, this specific one is about the various classes in Airline seats https://www.youtube.com/watch?v=BzB5xtGGsTc https://www.youtube.com/watch?v=BzB5xtGGsTc

deleted 5y ago

[deleted]

paxys 5y ago

So, take a single data point (price for an economy seat 6 months in advance), add on a hundred different assumptions with zero backing data (% capacity filled? Different seat classes? Fluctuation in ticket prices? Connecting routes?), and present it as some deep analysis.

The-Bus 5y ago
What I find interesting is that the writer goes through the trouble of answering a question that OAG has already answered[1], and he uses OAG as a source. 1: https://www.oag.com/blog/billion-dollar-route-jewels-in-the-network https://www.oag.com/blog/billion-dollar-route-jewels-in-the-...

blakesterz 5y ago

> I like to board last. I’ve never understood the appeal of being on the plane any longer than I need too (I’m yet to travel in business class). I don't understand that opening at all. We all want to get on so we get space in the overhead bins, don't we? Maybe he just never has a bag, but the reason should be obvious regardless.

caymanjim 5y ago
I've flown over 100 times and only once had to gate-check my bag due to insufficient space. I was thankful for the chance because it's free, you get your bag faster on landing, and you don't have to wrangle it down the aisle. I always board as late as possible. Why sit in a hot/cold/stuffy plane while people jostle all around you?
- jwcacces 5y ago
  Haha, lucky you. I might not fly as much as you, but in my experience the moment a bag leaves my line of sight, the chance it gets lost leaps dramatically. As someone who's had checked bags lost, and gate-checked bags lost, the ability to get on earlier translates directly into peace of mind that my bag will be with me when I land. As for getting my bag faster if it was gate-checked, how does that happen? Every time I've been gate-checked, my luggage ends up down in baggage claim the same as if I had regular-checked it. The only luggage that has met me at the gate has been a stroller. Maybe I'm just flying cheap airlines, but I'll take first on and sitting in a stuffy plane over the chance of disaster and standing in the terminal any day of the week. You're waiting the same amount of time either way wherever you are. But hey, your yin and my yang work great together, so you do you!
- dllthomas 5y ago
  > Why sit in a hot/cold/stuffy plane while people jostle all around you? Because I can get lost in my book and not worry about missing anything. YMMV (mine does).
- jwilber 5y ago
  I flew twice a week for years and it really just depends on the route (ie airports, day of week, and time of day) that you’re flying. Popular business routes will always have full overhead bins, so you either check your luggage, bring a week-bag that you can fit under the seat, or get on early and get the overhead space. Personally, I prefer to travel light so always wait until the last second to board. But that also depends on the cabin - if you’re at all above average height it’s absolute hell to fly in general, even worse when your limited leg room has a backpack.

drc500free 5y ago

I don't understand why the cursory math of someone with no domain knowledge, business understanding, or access to accurate data is at all interesting.

tcskeptic 5y ago
I had the same reaction -- I don't follow the industry much but know that Business class accounts for an outside proportion of revenue and profit for the airlines... which doesn't seem to be addressed at all.
deleted 5y ago
[deleted]
gist 5y ago
> I don't understand why the cursory math of someone with no domain knowledge, business understanding, or access to accurate data is at all interesting The post is similar to many things you read online (on HN or other places) it's really just 'infotainment' and it doesn't really matter if it's accurate anymore than a Netflix series might be. Generally even articles by people that have domain knowledge can be just compounding of early errors or assumptions they make. 'Napkin math' though is always interesting because it would lead you to believe that if the numbers you are using don't make sense there is probably something you aren't considering that you need to think about.

_s 5y ago

This is fascinating! A few comments have mentioned the cost to the airline for running the route - the author talks about revenue, not profit - but most, if not all the costs are calculated on time, not distance. Nearly everything in an aircraft has a maintenance window / shelf life measured in minutes / hours / days / months / years. The JFK - LON route could be 7 hours, or 5 hours depending on prevailing winds. That’s an extra 2 hours you have to pay the flight crew, run the engines, maybe even an extra meal for the passengers and so forth. Weather has an astounding affect on how much a given flight will cost, and probably traffic is the next one - hence why landing / gate spots at busy airports are so expensive. Crew are legally mandated to only work X hours in a given time frame (both active and standby), so if you’re held up in the air or on the ground, especially on a long haul flight - you might not be legally clear to make that flight! There’s a whole field of dispatch operations for aviation that handles this, and for the finance folks - the financial model for aviation is just subtly different enough to cause a few headaches if you’re not aware.

csteubs 5y ago

There's still money on the table for airline operators where routes are concerned. It sounds a bit fringe, but most of these flights take off and land at airports in large cities. International airports are often zoned around industrial centers that are typically set off away from the city core. Coupled with the high frequency of inbound and outbound traffic depending on the airport, commercial flights are excellent candidates for capturing high resolution aerial imagery in near-real time. In many cases, those images can be transmitted back down while the plane is in the air thanks to in-flight internet. There have been past attempts to harness the passive residual capabilities of air travel for photography, but none have stuck based on the difficulty of scaling such a system. If successful, crowdsourced aerial photography for cartography could add a layer of temporal resolution we just can't achieve with fewer than 500 imaging satellites currently in orbit, and for 1/10,000th the cost of satellite-based imaging. Add on concerns about LEO crowding and the thousands of use cases near-real-time aerial imaging could provide at a fraction of the cost, it becomes an interesting problem to solve. There are plenty of barriers to this kind of scheme, regulation in particular, that could keep airlines from participating; the first major carrier who does, however, may find themselves with a new multi-billion dollar revenue stream. (Disclosure: Founder @ https://notasatellite.com https://notasatellite.com)

nradov 5y ago
Most commercial flights operate in a small number of fairly narrow corridors. Is there really a billion dollar market for aerial imagery of those flight corridors? Seems unlikely.
- csteubs 5y ago
  Maybe--time will tell. We run revisit estimates with FlightRadar so I can say that there's a good amount of deviation in routes generally, but I also think narrow corridors are the mechanisms that makes rapid revisit even more powerful. When you can achieve minute-level temporal resolution for heavily populated areas using smartphones (to start), the cost is more or less negligible compared to satellite imaging. I know of one market-maker HQ'd in Manhattan that currently pays $16 million/year for two satellite images per day of the oil storage tanks in Cushing, OK. Analysts determine tank volume by looking at the shadows cast by the floating lids on the tanks and use that data to set oil futures prices. There are roughly 1,500 flights over the same area every day. We're very much a hypothesis-become-startup at the moment but I'm optimistic!

enahs-sf 5y ago

I wonder how route profitability comes into play with those airlines running older planes (old 737's, etc) that may break more frequently. AOG (airplane on ground) is essentially a broken plane stuck at a gate getting fined massively by the airport because it is blocking a gate. In this situation, usually price elasticity of demand goes out the window with respect to airplane parts because what you'll pay in markup pales in comparison to what you'll pay in fines. Is it more profitable to get new planes or run older ones into the ground? The answer to this question is beyond my depth. Source: my first job out of school was SQL jockey for an airplane parts distributor running reports for the guys trying to predict which parts would be needed. The company had 4 guys and two vans on standby 24/7 to run parts to the airport. This was a very profitable business segment.

rtkwe 5y ago
Broken at a gate should be extremely rare. In the outside case a plane can't move under it's own power there's still tons of tugs available to move the plane around.

otterley 5y ago

(2018)

hfjkdh790sn 5y ago

The author doesn’t know what he’s talking about. Business class revenue is far more than economy revenue. Both by square footage and total absolute $. Then there’s cargo revenue. The reason economy passengers get treated like crap is because economy passengers provide crap revenue.

splonk 5y ago

Not a particularly deep analysis. Note that while I'm not necessarily vouching for OAG's data, they are big players in the travel space and I trust them a lot more than this blog. Here's the OAG report that's sketchily linked to a paywall in the article: https://www.oag.com/hubfs/Free_Reports/Busiest%20Routes/OAG%20Busiest%20Routes%202018-A4.pdf https://www.oag.com/hubfs/Free_Reports/Busiest%20Routes/OAG%... A more current snapshot from OAG: https://www.oag.com/busiest-routes-right-now https://www.oag.com/busiest-routes-right-now And finally, OAG's own blog post on billion dollar routes: https://www.oag.com/blog/billion-dollar-route-jewels-in-the-network https://www.oag.com/blog/billion-dollar-route-jewels-in-the-... Basically it was only JFK-LHR before the pandemic. Most of the other high revenue routes are probably what you should expect, although I didn't expect SYD-MEL to be quite that high. I think maybe it's because the ranking is by airline and route and Qantas might dominate that route more than other airlines would dominate international routes.

airbreather 5y ago

A while ago I had to fly Perth to Kalgoorlie (return), a flight that normally takes a bit over an hour, but I have done in as little as 46 minutes. On the same day I could have flown from Perth to Los Angeles return for $50 less. It was rumoured that the two most profitable routes for Qantas in the world for nearly ten years were Perth to Port Hedland and Perth to Newman return, both Iron Ore mining hubs. At one stage there were 6 flights a day to Newman 7 days a week for many years and never a spare seat. Typical flight times 1 hour 20 minutes, cost of tickets around $1100 and nominal population of Newman is 4500 people... Edit : these are all flights within the state of Western Australia