I recently watched “Up in the Air” and could not help but marvel at Ryan Bingham’s (George Clooney’s character) perks as an elite frequent flyer on American Airlines. Out come the Champagne and a visit from the airline’s chief pilot on crossing 10 million miles. While Hollywood has taken its usual liberties with Ryan Bingham, airlines do coddle their most frequent flyers. Dedicated phone numbers, private check-ins, and birthday cakes on the road are all part of the package; in addition to the usual upgrades, lounge access, and priority boarding.
Made me wonder why the airlines go through the trouble – its a few passengers after all. It is really worth, for example, holding a 747 an hour for a Bingham-like passenger to make the connection? What is a frequent flyer loyalty worth to an airline?
Here is one way to look at it. From the following table, you will notice that the average fare paid by a passenger on American Airlines in 2009 is about $281 (see Note 1). From their 2009 financial statements, they made a loss of $2523 on each flight (see Note 2). So on a typical flight, they need nine more passengers each paying the average fare to break even. On the other hand, Southwest Airlines makes a profit of $84 per flight. The average fare on Southwest is $102; so only one passenger on the plane represents profit. Yep, that’s right. If Southwest looses this last passenger each flight, it will make a loss.
The airline industry has high “fixed” costs – you have to buy and maintain the planes, pay the crew, and lease the gates even if you are not filling up the planes. The ticket revenues from most passengers on the plane cover these fixed costs. In the case of the big airlines like American, Delta, Continental, US Airways, Northwest, or United they do not even cover the fixed costs! The good news is that it takes only a few more passengers per flight to become profitable.
For US Airways, just one more passenger each flight and it will be in the black. Bring on the Champagne and caviar and yes, hold that connection – they really want that customer on board.
All numbers are from 2009
|
Airline |
Avg. |
Income/flight |
Income |
|
American |
$281 |
-$2,523 |
-9 |
|
AirTran |
$95 |
$521 |
5 |
|
Continental |
$363 |
-$966 |
-3 |
|
Delta |
$305 |
-$2,235 |
-7 |
|
Frontier |
$111 |
$1,274 |
11 |
|
Hawaiian |
$152 |
$1,818 |
12 |
|
JetBlue |
$162 |
$301 |
2 |
|
Northwest |
$288 |
-$871 |
-3 |
|
Southwest |
$102 |
$84 |
1 |
|
US |
$224 |
-$315 |
-1 |
|
United |
$319 |
-$1,444 |
-5 |
Notes:
1. Average fare is calculated by diving the passenger revenue by total number of departures. For example, American Airlines’ 2009 passenger revenue was $19,898 million. They carried 70,735,000 passengers – so each paid about $281.
2. Income per flight was computed by diving the Net income by number of departures. American Airlines made a net loss of $1476 million and had 585,000 departures in 2009. So each departure made a loss of $2,523.
3. Data Source: http://www.transtats.bts.gov/carriers.asp?pn=1
Individuals, corporations, even governments have adopted carbon emissions as an indicator of our impact on the environment. As part of the Earth Day 2010 series of articles, this article will explore the “carbon footprints” of 5 common products: Tropicana Orange juice, a Big Mac, iPhone 3GS, Patagonia Nano Puff Jacket, and Nika Bottled water.
A carbon footprint of a product measures the total amount of carbon dioxide (CO2) that it produces from “cradle to grave.” This typically includes the amount of CO2 produced in the extended supply chain: from the extraction of raw material, to the manufacture, transport, and use of the product; ending eventually in the disposal and recovery of the product. Read, share, and enjoy (and yes, next time you buy something, take a look at its carbon footprint).
Read MoreWhen President Obama recently announced the opening part of our shores to drill for oil and gas, everybody, both from the left and right, was up in arms. The Sierra Club’s response:
“There’s no reason to drill our coasts. We can achieve real energy independence and economic vitality by investing in clean energy like wind and solar and efficiency. This kind of power creates good, lasting American jobs and positions our nation to become a global leader in the new clean energy economy.”
Made me wonder — how do we get our energy now? NPR recently had a wonderful interactive graphic illustrating how different states in the USA source and distribute energy.
For example, West Virginia (click on different parts of the graphic to learn more) uses coal to generate 98% of its energy needs (no surprise here) while Washington sources 71% of its needs from much cheaper hydro power (the Grand Coulle hydroelectric power plant produces about 20 million Mega Watts (MW) a year). From one perspective, Obama’s decision seems reasonable – simply that we lack the infrastructure and the capacity to satisfy our hunger for power from just renewable sources. As the graphic shows, we are heavily invested in coal, oil, and gas for our power. Would offshore drilling in Obama’s plan (he only opens up Delaware to Florida; some parts of Alaska and possibly the Gulf Coast) go towards short-term energy needs and long-term energy independence? We will have to wait and see.
Even the Solar and Wind energy production and transmission lines proposed for 2030 and beyond (click solar and wind power titles on the graphic) will produce only a fraction of our energy needs.
What is needed – and is easily said than done – is a comprehensive energy plan that is climate-friendly (think wind, solar, hydro, nuclear, & efficient CO2 trapping coal plants) that will address long-term energy needs in a secure and green way. In a previous post, I asked Jim McGlothlin, CEO of United Company (coal was a big part of his business until recently) about how we should meet our energy needs in the future. His solution: Nuclear power + turning coal to liquid fuel to reduce dependence of foreign oil. Is he on to something?
For a larger version of the grid, click here.
Earth Day 2010 is approaching and for the month of April, I am going to feature multiple articles on Sustainability. To kick things off, today’s entry is a short history of Sustainability. The first entry is in 1824, with Fourier first discovering what will later be called the “greenhouse effect.”
You will notice that this is a “guest” post featuring Professor Tonya Boone, Mason School’s sustainability expert. She chose the events in the timeline, I just web-enabled it.
Tonya uses this timeline in her “Sustainable Business” class to introduce sustainability to those who are new to the area. So, learn, share, and enjoy!!
If you want a bigger version of the timeline, point your browser here.
How to interact with the timeline:
When you first see the timeline, a window titled “A brief timeline for sustainability” appears with a “start” button. When you press the “start” button, the timeline defaults to the last event. The blue arrows move the timeline backward or forward one event. You can click on an event and learn more about it. The green arrows pan the timeline backwards and forwards. Finally, the timeline is currently set to a “zoom level” of 43. You can change this up or down (the up and down green arrows) to either expand or contract the timeline.
Legend:
The blue flags on the timeline are international treaties and meetings; the green flags indicate important steps in US Environment law. The red blocks are environmental disasters. The green “+” sign are reports, events, or organizations that have shaped the environmental movement. Finally, the black circles are major advances in how businesses perceive sustainability.