Saba Neyshabouri Airline of Study United Airlines United Airline is listed as a Legacy carrier Typical characteristics of legacy carriers are that they provide a higher level of services than a lowcost carrier for example a legacy carrier typically offers first class andor business class ID: 565243
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Homework 4 (Airline Cost Analysis-United)
Saba
NeyshabouriSlide2
Airline of Study
United Airlines
United Airline is listed as a Legacy carrier
Typical characteristics of legacy carriers are that they provide a higher level of services than a low-cost carrier; for example, a legacy carrier typically offers first class and/or business class, a frequent-flyer program, airport lounges, and is a member of an airline alliance through which it has partners that agree to provide these services to its passengers as well. Also, there is a higher level of services in the cabin, such as meal service and in-flight entertainment.Slide3
United (NLC)
Operating major hubs
O'Hare International Airport, Chicago, Illinois
George Bush Intercontinental Airport, Houston, Texas
Denver International Airport, Denver, Colorado
Washington Dulles International Airport, Washington, DC
San Francisco International Airport, San Francisco, California
Maintenance hub (MRO) San Francisco International Airport, San Francisco
Los Angeles International Airport, Los Angeles, California
Narita International Airport, Tokyo, Japan
Newark Liberty International Airport, Newark, New Jersey
Cleveland Hopkins International Airport, Cleveland, Ohio
Antonio B. Won Pat International Airport, GuamSlide4
United (NLC)
Serving domestic markets as well as international
Transcontinental
Transatlantic
T
ranspacificSlide5
Definitions
RPMs :
Revenue Passenger Miles= sum of all the paying passengers multiplied by the distance travelled.
ASMs :
Available Seat Miles= sum of all the seat flown (available) multiplied by the distance travelled.
RASM :
Revenue per Available Seat Miles=
It is obtained by dividing operating income by available seat miles (ASM)
.Slide6
Definitions
CASM :
Cost per Available Seat Miles: It is obtained by dividing the operating costs of an airline by available seat miles (ASM)
Yield :
Average
fare paid by passengers, per mile
flown : Revenue per RPM
PRASM :
Passenger Revenue per Available Seat Miles:
It is calculated by dividing passenger revenue by available seat miles. Typically the measure is presented in terms of cents per mile. This measure is equivalent to the product of load factor and yield.Slide7
Definitions
Fuel Consumed :
Sum of all the fuel expenses for all the flights operated.
Fuel Cost per ASM :
Fuel consumed divided by Available Seat Miles (ASM)
Non Fuel
Cost per ASM
:
Total non fuel costs divided by Available Seat Miles (ASM)Slide8
Chart 1 (RPM-ASM-LF)Slide9
Chart 1
In 2002 there has been a drop in ASM and RPM and load factors.
The seasonal behavior of ASM, RPM and subsequently load factor can be seen through the wave motions.
Load factor has been increased while RPM has been approximately held constant after 2004 but ASM has been reduced.Slide10
Chart 2(Income-Expense-Revenue)Slide11
Chart 2
Operating revenue is following costs closely, however it is standing below the cost line for most of the time.
Total operating expenses shows small seasonal changes and has been growing from 2003 to 2008.
Income before taxation is mostly negative and varying small showing some seasonal changes .Slide12
Chart 3(RASM-CASM-Yield per RPM- PRASM)Slide13
Chart 3
RASM shows some growth after some variations in 2001-2003 with small seasonal changes.
CASM also shows the behavior close to RASM.
PRASM is having the same behavior while being smaller than RASM and CASM showing that Passengers are not the only source of revenue and can not cover the costs alone.
Yield per RPM shows some variations in years, but it has generally increased:Slide14
Chart 4 (Fuel vs. Non fuel)Slide15
Chart 4
In United, big chunk of costs are non-fuel operational expenses.
Non-fuel expenses has been some what steady with some peaks.
Fuel costs has been steadily growing until a drop happened at the end of 2008.
In United non-fuel costs are major operating costs and they out weigh fuel costs.Slide16
Chart 5 (Costs per ASM and Fuel Price)Slide17
Chart 5
As non-fuel cost has been some what steady, non-fuel costs per ASM has also been steady with some few peaks and small variations representing the seasonality.
Slide18
Effect of Fuel Price on Expenses
What can be seen from these charts is that fuel price increase has effectively changed the fuel costs.
While RPM has not changed, RASM has increased with slow rate.
Decreasing ASM has helped to keep the costs from growing
Increasing load factors has improved efficiency and keep the costs from growing.
Non-fuel costs are still the major cost for United Slide19
Airline Finance
It can be seen that United has not done very good in terms of business while the most of the time, they have had loss.
Trend shows they have reduced the loss over time but in 2008 they have had major loss (recession)Slide20
Airline Network Structure
Network Load Factor (LF) has been steadily improved with small variations in seasons